Table of Key Subsidiaries and Affiliates
|
Share of Profits |
|
Voting Interest |
|
Subsidiary / Equity Accounted Affiliate / Investment |
|
TV Network |
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Continuing Operations |
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Romania |
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Operating Companies: |
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Media Pro International S.A. (MPI) |
66% |
|
66% |
|
Subsidiary |
|
PRO TV, ACASA, and PRO TV INTERNATIONAL |
Media Vision S.R.L. (Media Vision) |
70% |
|
70% |
|
Subsidiary |
|
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License Companies: |
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|
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Pro TV S.A. (Pro TV) |
66% |
|
66% |
|
Subsidiary |
|
PRO TV, ACASA, and PRO TV INTERNATIONAL |
Media Pro S.R.L. (Media Pro) |
44% |
|
44% |
|
Equity Accounted Affiliate |
|
PRO TV, ACASA |
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|
|
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|
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Slovenia |
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|
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|
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Operating Company: |
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Produkcija Plus, d.o.o. (Pro Plus) |
96.85% |
|
96.85% |
|
Subsidiary |
|
POP TV and KANAL A |
License Companies: |
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|
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POP TV d.o.o. (Pop TV) |
96.85% |
|
96.85% |
|
Subsidiary |
|
POP TV |
Kanal A d.d. (Kanal A) |
96.85% |
|
96.85% |
|
Subsidiary |
|
KANAL A |
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Slovak Republic |
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Operating Company: |
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Slovenska Televizna Spolocnost, spol. s r.o. (STS) |
70% |
|
49% |
|
Equity Accounted Affiliate |
|
MARKIZA TV |
License Company: |
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|
|
|
|
|
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Markiza-Slovakia s r.o. (Markiza) |
0.1% |
|
34% |
|
Equity Accounted Affiliate |
|
MARKIZA TV |
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Ukraine |
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Operating Companies: |
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Innova Film GmbH (Innova) |
60% |
|
60% |
|
Subsidiary |
|
Studio 1+1 |
International Media Services Ltd. (IMS) |
60% |
|
60% |
|
Subsidiary |
|
Studio 1+1 |
Enterprise "Inter-Media" (Inter-Media) |
60% |
|
60% |
|
Subsidiary |
|
Studio 1+1 |
License Company: |
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|
|
|
|
|
|
Broadcasting Company "Studio 1+1" (Studio 1+1) |
18% |
|
18% |
|
Equity Accounted Affiliate |
|
Studio 1+1 |
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|
|
|
|
|
|
|
Discontinued Operations |
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|
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Czech Republic |
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Operating Company: |
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Ceska Nezavisla Televizni Spolecnost, spol. s r.o. (CNTS) |
93.2% |
|
93.2% |
|
Subsidiary |
|
|
License Company: |
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|
|
|
|
|
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CET 21 spol. s r.o. (CET) |
3.125% |
|
3.125% |
|
Investment |
|
N/A |
Romania
We have a 66% voting interest in the Romanian operating company MPI and are entitled to a 66% share of its profits. Although we have majority voting power in MPI, certain financial and corporate matters require the affirmative vote of either Mr. Sarbu or Mr. Tiriac, the co-shareholders in MPI. Until the completion of the restructuring of our Romanian operations, MPI is responsible for the provision of programming and the sale of advertising for the license-holders of the three networks broadcasting under the brand names: PRO TV, ACASA and PRO TV INTERNATIONAL. Pro TV SA holds 19 of the 22 licenses used by the PRO TV, ACASA and PRO TV INTERNATIONAL networks. The remaining three licenses for the PRO TV network together with the licenses for the PRO FM and PRO AM radio networks are held by Media Pro Srl, in which we hold a 44% voting interest and are entitled to a 44% share of its profits. We own a 70% voting interest in Media Vision, a Romanian production and subtitling company, and are entitled to 70% of its profits.
Slovenia
We have a 96.85% voting interest in Pro Plus, the operating company for our Slovenian operations, and are entitled to a 96.85% share of its profits. Pro Plus has a 100% voting and share of profits interest in the license companies Pop TV and Kanal A, giving us a 96.85% voting interest and share of profits in these companies. Pop TV holds all of the licenses for the operation of the POP TV network and Kanal A holds all licenses for the Kanal A network. Pro Plus has entered into an agreement with each of Pop TV and Kanal A under which Pro Plus provides all programming to the POP TV network and the Kanal A network and sells advertising on behalf of each station.
Slovak Republic
We have a 49% voting interest and are entitled to a 70% share of profits in STS, the operating company for the MARKIZA TV network. We have a 34% voting interest in Markiza, the license holding company for the MARKIZA TV network, and are entitled to a 0.1% share of its profits.
Ukraine
Innova, IMS, Inter-Media and Studio 1+1 comprise "The Studio 1+1 Group" . We have indirectly an 18% share of the profits of the Ukranian license holding company Studio 1+1. We have a 60% voting interest in the operating companies servicing Studio 1+1 (Innova, IMS and Inter-Media) and are entitled to 60% of the profits of the Studio 1+1 Group.
Czech Republic
CET is our former partner in the Czech Republic and the broadcast license holder which continues to broadcast the NOVA TV network. CNTS is our operating company in the Czech Republic.
In May 2003, after a prolonged arbitration proceeding with respect to our legal rights to broadcast in the Czech Republic, we collected on a judgment rendered against the Czech Republic in the amount of approximately $359 million. For Dutch tax purposes, we have treated $78.5 million of this amount as restricted cash, in light of our agreement with the Dutch tax authorities that such amount represents the maximum amount of Dutch taxes payable in respect of the arbitration award. The Czech Republic operations have been discontinued as of June 2003. On October 23, 2003 we closed the sale of our Czech Republic operations to PPF group for $53.2 million, including $38.2 million in secured notes from the purchaser.
Operating Environment
Our television stations and networks reach an aggregate of approximately 69 million people in four countries. Our national private television stations and networks in the Slovak Republic and Slovenia had the leading nationwide audience share for 2002 and our television network in Romania had the leading average audience share within its area of broadcast reach for 2002. In Ukraine, for 2002, our national private television station and network had the leading nationwide average audience share for television stations broadcasting in the Ukrainian language.
The market ratings of our stations in their respective markets are reflected below.
Country |
|
Station Network Name |
|
Launch Date |
|
Technical Reach (1) |
|
2002 Audience Share (2) |
|
Market Rank (2) |
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|
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Romania |
|
PRO TV |
|
December 1995 |
|
68% |
|
19.2% |
|
1 |
|
|
ACASA |
|
February 1998 |
|
52% |
|
6.2% |
|
4 |
|
|
PRO TV INTERNATIONAL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Slovenia |
|
POP TV |
|
December 1995 |
|
87% |
|
29.3% |
|
1 |
|
|
KANAL A |
|
October 2000 (3) |
|
80% |
|
11.0% |
|
3 |
|
|
|
|
|
|
|
|
|
|
|
Slovak Republic |
|
MARKIZA TV |
|
August 1996 |
|
96% |
|
48.2% |
|
1 |
|
|
|
|
|
|
|
|
|
|
|
Ukraine |
|
STUDIO 1+1 |
|
January 1997 |
|
95% |
|
22.2% |
|
2 |
(1) |
"Technical Reach" measures the percentage of people in the country who are able to receive the signals of the indicated stations and networks. Each of our stations in the relevant country has estimated its own technical reach based on the location, power and frequency of each of its many transmitters and the local population density and geography around that transmitter. The technical reach calculation is designed to estimate the number of homes that can receive the stations broadcast signal. This is separate from the independent third party measurement that determines viewing shares. Source: Internal estimate, supplied by each station in each country. |
|
|
(2) |
Nationwide all day audience share and rank (except Romania and Ukraine, which is audience share and rank within coverage area). Source: (Romania: Peoplemeters CSOP Gallop/Taylor Nelson Sofres, Slovenia: Peoplemeters AGB Media Services, Slovak Republic: Visio/MVK, Ukraine: ABG Ukraine). There are seven, four, six and six significant stations ranked in Romania, Slovenia, Slovak Republic and Ukraine, respectively. |
|
|
(3) |
Kanal A was originally launched in 1991 and re-launched in October 2000 after we assumed control of the operations, economics and programming of Kanal A. |
The following table sets forth the population, technical reach, number of TV households, per capita GDP and cable penetration for those countries of Central and Eastern Europe where we have broadcast operations.
Country |
|
Population
(in millions) (1) |
Technical Reach
(in millions) (2) |
TV Households
(in millions) (3) |
Per Capita GDP
2002 (4) |
Cable
Penetration (5) |
|
|
|
|
|
|
|
|
|
|
|
|
Romania |
|
|
21.8 |
|
|
15.6 |
|
|
6.5 |
|
$ |
2,096 |
|
|
55 |
% |
Slovak Republic |
|
|
5.4 |
|
|
5.2 |
|
|
2.0 |
|
$ |
4,389 |
|
|
35 |
% |
Slovenia |
|
|
2.0 |
|
|
1.7 |
|
|
0.6 |
|
$ |
10,550 |
|
|
57 |
% |
Ukraine |
|
|
48.7 |
|
|
46.2 |
|
|
17.1 |
|
$ |
850 |
|
|
27 |
% |
Total |
|
|
77.9 |
|
|
|
|
|
26.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Source: World Bank Group, Country Briefs 2003 |
|
|
(2) |
Source: Internal estimates supplied by each station in each country. "Technical Reach" measures the percentage of people in the country who are able to receive the signals of our stations and networks in the indicated country. Each of our stations in the relevant country has estimated its own technical reach based on the location, power and frequency of each of its many transmitters and the local population density and geography around that transmitter. The technical reach calculation is designed to estimate the number of homes that can receive the stations broadcast signal. This is separate from the independent third party measurement that determines viewing shares. |
|
|
(3) |
Source: Eutelsat Survey 2002, www.eutelsat.com. |
|
|
(4) |
Source: World Bank Group, Country Briefs 2003. |
|
|
(5) |
Source: Romania Cable Association presentation: www.ebc2003.com/petric.pdf ; Slovak Republic: Slovak Cable Association presentation: www.sakt.vus.sk/eindex.htm; Slovenia: Slovene Cable Association; Ukraine: Ukrainian Cable Association. Ukraine data refers to Urban only. Penetration refers to the percentage of TV Households who subscribe to cable television. |
Television Advertising Expenditures
The following table sets out the recent levels of television advertising expenditures in those countries where we do business. Note: All figures are our own estimates and are in $US millions.
Country |
|
1998 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
Romania |
|
87 |
|
69 |
|
69 |
|
63 |
|
66 |
|
|
|
|
|
|
|
|
|
|
|
Slovenia |
|
51 |
|
49 |
|
47 |
|
47 |
|
48 |
|
|
|
|
|
|
|
|
|
|
|
Slovak Republic |
|
56 |
|
43 |
|
42 |
|
42 |
|
47 |
|
|
|
|
|
|
|
|
|
|
|
Ukraine |
|
65 |
|
32 |
|
35 |
|
50 |
|
60 |
In Romania, the television advertising market grew by 5% in 2002 over 2001, reversing earlier trends. In Slovenia television advertising revenues remained constant in 2002 expressed in local currency terms. In the Slovak Republic television advertising revenues increased by 3% in 2002 over 2001, expressed in local currency terms. Further, the Slovenian tolar appreciated by 2% and the Slovak koruna appreciated by 7% against the dollar in 2002. Therefore, television advertising expenditures in US Dollar terms increased by 2% in Slovenia in 2002 and 11% in the Slovak Republic. In Ukraine, television advertising revenues continued their recent trend with a significant increase of 20% in 2002 over 2001 in US Dollar terms. In 2003, these trends have continued, with further strong growth particularly in the Romanian advertising market. However, in Ukraine, the growth rate appears to have declined to about 10% in the first half of 2003 compared to the first half of 2002.
The European Union
If any Central or Eastern European country in which we operate becomes a member of the European Union (the "EU"), our broadcast operations in such country would be subject to relevant legislation of the EU, including programming content regulations. Slovenia, the Slovak Republic and the Czech Republic are expected to be admitted to the EU in the first wave of the enlargement process in 2004. It is currently anticipated that Romania will be admitted some time after 2007.
The EUs Television Without Frontiers directive (the "EU Directive") sets forth the legal framework for television broadcasting in the EU. It requires broadcasters, where "practicable and by appropriate means," to reserve a majority proportion of their broadcast time for "European works." Such works are defined as originating from an EU member state or a signatory to the Council of Europes Convention on Transfrontier Television, as well as written and produced mainly by residents of the EU or Council of Europe member states. In addition, the EU Directive provides for a 10% quota or either broadcast time or programming budget for programs made by European producers who are independent of broadcasters. News, sports, games, advertising, teletext services and teleshopping are excluded from the calculation of these quotas. Further, the EU Directive provides for regulations on advertising, including limits on the amount of time that may be devoted to advertising spots, including direct sales advertising. The necessary legislation in Romania, Slovenia and the Slovak Republic is now in line with the EU Directive and it has had no material adverse effect on our operations.
Council of Europe
Our broadcast operations are located in countries which are members of the Council of Europe, a supranational body through which international conventions are negotiated. In 1990, the Council of Europe adopted a Convention on Transfrontier Television, which provides for European programming content quotas similar to those in the EU Directive. This Convention has been ratified by some of the countries in which we operate, but all countries in which we operate have already implemented its principles into their national media legislation.
Related Party Matters
We have had issues arising in several of the countries in which we operate, where the interests of our fellow shareholders and our interests have differed. For purposes of the description below, a "related" party is one in which we have determined that a shareholder has direct control or influence; a "connected" party is one in which we are aware of a family or business connection to a shareholder.
Slovak Republic
In the Slovak Republic, following elections on September 20, 2002, the ANO political party, founded by Mr. Pavol Rusko, a shareholder in Markiza (the license holding company), obtained a number of seats in the national parliament. On November 1, 2002, Mr. Rusko was appointed a deputy chairman of the parliament. In order to comply with Slovak conflict of interest rules, Mr. Rusko has resigned from his position as an executive of STS (the operating company) and of Markiza. In addition, following receipt of our approval, Mr. Rusko has transferred his indirect 17% ownership interest in Markiza to a third party. We do not believe that the resignation of Mr. Rusko will have a significant impact on our Slovak operations.
The operating company in the Slovak Republic, STS, has loaned us approximately $4.8 million, the full amount of a loan facility with us. We have a 49% voting interest in STS and, by agreement with Markiza, the license holding company, are entitled to a 70% share of the profits of STS. The loan is repayable by us on December 1, 2005 and bears interest at a rate of BRIBOR+2.2% (BRIBOR as at June 30, 2003 was 6.15%), which rate we believe is comparable to independently negotiated third party rates.
STS has a number of contracts with companies connected to Jan Kovacik, a shareholder in Markiza and indirectly STS, for the provision of TV programs. Many of these contracts are for the production of programs such as "Millionaire" that require specialist studios and specific broadcast rights. STS also sells advertising time through an advertising agency controlled by Jan Kovacik. The total 2002 advertising sales of STS placed through Mr. Kovaciks advertising agency were $2,123,000 (2001: $1,940,000), and the total amount due to STS from this agency at December 31, 2002 and December 31, 2003 was $1,819,000 and $2,375,000, respectively. The outstanding balance due STS at December 31, 2001 was repaid in full only by the end of 2002; likewise the outstanding balance at December 31, 2002 was repaid in full only by December 2003.
Romania
Mr. Adrian Sarbu, the General Director and minority shareholder in our Romanian operations, has extensive business interests in Romania, particularly in the media sector. Due to the limited local market for many specialist television services in Romania, companies related or connected to Mr. Sarbu were often the sole or primary supplier of the services that MPI (our Romanian operating subsidiary) required, and much of the Romanian business was developed based on services supplied by Mr. Sarbus companies.
In 1995 we loaned Inter Media srl $1.3 million to purchase an interest in the building in which Pro TV operates. At the time of the loan Mr. Sarbu owned Inter Media srl and we believe he continues to have an economic interest in such company. This interest in the building was to be sold to MPI at a fair market valuation that was to be determined. In 2002 an independent valuation of the building was obtained by us. This valuation was substantially less than Mr. Sarbus view of the buildings value and the transaction could not therefore be concluded. Mr. Sarbu argues that in anticipation of the sale of the building to MPI, his affiliated company charged a substantially lower rental fee to MPI and is now claiming the difference and intends to offset the outstanding rental fee against the loan. MPI in anticipation of the sale made substantial improvements to the building that would normally be done at the cost of the building owner. As a result we, Pro TV, and Mr. Sarbu (via his affiliated company) are in negotiation regarding the amount of monies that may be outstanding to unwind this transaction. We have accrued $600,000 as a potential liability on our December 31, 2002 balance sheet.
We, Mr. Sarbu, and Mr. Tiriac are all shareholders in MPI (the operating company), Pro TV and Media Pro (the operating and license holding companies). In Romania, the Cooperation Agreement between us, Mr. Sarbu and Mr. Tiriac governs this relationship and specifically requires that related party transactions be approved by the shareholders. The approval process for related party transactions was performed verbally for the period from 1997 to late 2001. Beginning in 2002 formal, written records have been required and review of related party transactions have been performed and approvals made at local MPI board and shareholder meetings.
In 2002, the shareholders of MPI decided to review related party transactions, bring services in-house where possible and place additional controls over the remaining related party transactions.
The total purchases from companies related or connected with Mr. Sarbu in 2002 were approximately $4.4 million (2001: $11.1 million). The total sales to companies related or connected with Mr. Sarbu in 2002 were approximately $1.0 million (2001: $1.8 million). At December 31, 2002 companies connected but not related to Mr. Sarbu had an outstanding balance due to us of $2,687,000 (2001: $2,807,000). Companies related to Mr. Sarbu had an outstanding balance due to us of $2,188,940 (2001: $3,646,372), of which $739,870 was more than 360 days old (2001: $1,403,626).
Historically, companies in which Mr. Sarbu has an interest have paid MPI more slowly than have independent third parties, while amounts due to these companies were paid promptly by MPI. This combination resulted in a decrease in cash flow to MPI to the detriment of its stockholders, including us.
In March 2002, as a result of the increasing amount and age of the related and connected party receivables in Romania, our Audit Committee commissioned an investigation into the related party transactions occurring in our Romanian operations. A report was provided to the Committee by independent accountants (not our auditors) which confirmed that a number of transactions entered into by our subsidiaries in Romania with parties related to Mr. Sarbu had not been properly approved by the shareholders of the subsidiaries. Further, related party receivables of the subsidiaries were significantly in arrears while related party payables were paid promptly. Additionally, a number of transactions not declared as related party transactions may have been related party transactions. As a result the Committee recommended strict controls to prevent future occurrences of any such irregularities and to improve the collection of receivables, credit management and authorization of related party transactions in the Romanian operations. To implement this, the shareholders of MPI have unanimously approved resolutions requiring a higher level of review and control over related party transactions, credit control and collection of receivables.
During 2002, we included an amount of $671,000 for related party barter in exchange for programming rights from Mr. Sarbus companies in our revenue and expenses for our Romanian operations.
At the end of 2002, our year end internal audit process detected that some advertising time had been bartered to businesses related to Mr. Sarbu, in excess of amounts that had been approved. The most significant barter arrangement was with a programming provider related to Mr. Sarbu which sold advertising spots in exchange for programming. We do not believe we experienced any monetary loss as a result of this unauthorized barter because otherwise unsold airtime was used in this barter. This sale of airtime was brought in-house from January 1, 2003 and since then airtime spot sales have been made directly to clients rather than bartered for programming supplied by Mr. Sarbus company.
It is difficult to determine whether we received fair value in these transactions due to the limited local market for many specialist television services in Romania and the fact that many of the companies providing these services are related or connected to Mr. Sarbu. Since the value of this barter is shown as both revenue and expense in our financial statements but the impact on our net income is zero, we do not believe the related party nature of these barter transactions has had a significant effect on our financial statements.
Our internal controls detected these unauthorized related party transactions, and further review has led us to implement new internal controls at MPI and at our head office to discourage repetition of related party barter by ensuring discovery in a more timely manner. These include improved local controls over the reconciliation of invoicing to the actual advertising spots shown on TV as well as a quarterly review by our corporate staff of advertising sales figures to ensure that all airtime is correctly invoiced. However, no control can prevent an executive manager from exceeding his authority.
These unapproved related party barter transactions were in violation of the Co-operation Agreement and Mr. Sarbus employment agreement. Mr. Sarbu has been informed, orally and in writing, and through a Board resolution passed by the local MPI Board, that disciplinary action will result from further unauthorized related party transactions. We believe that the local board resolution has impressed upon Mr. Sarbu the importance of strict and formal adherence to our internal control framework.
In the nine months prior to September 2003 the net amounts due to our Romanian operations from companies related and connected to Mr. Sarbu has been significantly reduced. At September 30, 2003 $1,508,564 was due to our Romanian operations from related parties and $1,143,542 was due from connected parties. However, our Romanian operations now have outstanding payables to parties related to Mr. Sarbu of $1,017,091 with the result that the net balance due to our Romanian operations from parties related to Mr. Sarbu was $491,473 at September 30, 2003.
Slovenia
In connection with the restructuring of our Slovenian operations, we have entered into a put/call arrangement with the general director of Pro Plus, Marijan Jurenec, who owns the remaining 3.15% voting and profits interests of Pro Plus (the operating company). Under the terms of the agreement, Mr. Jurenec generally has the right to put his interest to us for approximately one year beginning on December 31, 2004 at a price that consists of a fixed component and a variable component based on station segment EBITDA. We have the right to call the interest held by Mr. Jurenec at any time until December 31, 2006 at a price that is the same as the put price until the end of the put period and is fixed during the remainder of 2006, after which the call expires.
Ukraine
We contract in Ukraine with Contact Film Studios for the production of certain TV programs. This is a company connected to the minority shareholder and joint Managing Director of Innova Film GmbH, Boris Fuchsmann. Innova Film Gmbh is one of the Ukraine operating companies. Our total purchases from Contact Film Studios in 2001 and 2002 were $104,942 and $1,324 respectively. No outstanding balances are owed to us.
In 1998 we made a loan to Mr. Fuchsmann with a total balance outstanding of $3,417,000 at June 30, 2003, an interest rate of 10% and a final due date of November 2006.
We will not receive any of the proceeds from the sale of the Shares offered by this prospectus. All proceeds from the sale of the Shares covered by this prospectus will be for the account of the selling shareholders named below. See "Selling Shareholders" and "Plan of Distribution." However, assuming all of the Warrants are exercised by the selling shareholders, and that the selling shareholders do not utilize any of the "cashless exercise" provisions contained in the Warrants, we would receive approximately $1,753,480 in gross proceeds from those exercises. Any such proceeds will be used for working capital purposes.
The shares covered by this prospectus will be issued upon the exercise of the Warrants. The number of Shares that may be actually sold by the selling shareholders will be determined by such selling shareholders.
The selling shareholders are the persons and/or entities listed in the table below who own Warrants to purchase Shares. We are registering for the ten selling shareholders named herein, an aggregate of 696,000 Shares (reflecting a two-for-one stock split which occurred on November 4, 2003) .
Pursuant to a Senior Secured Credit Agreement dated July 31, 2002 (the "Agreement") among CME Media Enterprises BV, our wholly-owned subsidiary, Golden Tree Asset Management LLC and its affiliates and/or other noteholders, we issued $15,000,000 principal amount of 12% Senior Secured Notes due June 15, 2004 and Warrants to purchase an aggregate of 696,000 Shares at an initial exercise price of $2.505 per share (as adjusted for two subsequent two-for-one stock splits). On May 29, 2003 we prepaid the outstanding amounts due under this facility and terminated the facility itself.
No commissions are payable by us or the holders of the Warrants in connection with a conversion or exercise.
The following table sets forth, as of December 31, 2003: (1) the name of each selling shareholder, (2) the number of Shares beneficially owned by each selling shareholder, including the number of Shares purchasable upon exercise of warrants, (3) the maximum number of Shares which the selling shareholders can sell pursuant to this prospectus and (4) the number of Shares that the selling shareholders would own if they sold all their Shares registered by this prospectus. Each selling shareholder will receive all of the net proceeds from the sale of its Shares offered by this prospectus. Because the selling shareholders may sell all or part of their Shares pursuant to this prospectus and this offering is not being underwritten on a firm commitment basis, we cannot be certain of the number and percentage of Shares that the selling shareholders will hold in the aggregate at the end of the offering covered by this prospectus.
Name of Selling Shareholder
|
Number of Shares of Class A Common Stock Owned before Offering(1)
|
Number of Shares of Class A Common Stock being Registered by this Prospectus
|
Number of Shares of Class A Common Stock to be Owned after this Offering
|
Alpha U.S. Subfund II, LLC |
9,744 |
9,744 |
0 |
DB Structured Products, Inc. |
28,536 |
28,536 |
0 |
Broad Foundation |
4,640 |
4,640 |
0 |
B&W Master Tobacco Retirement Trust |
17,400 |
17,400 |
0 |
The University of Chicago |
15,660 |
15,660 |
0 |
Eli Broad |
4,640 |
4,640 |
0 |
Goldentree High Yield Value Master Fund, L.P. |
18,328 |
18,328 |
0 |
Goldentree High Yield Master Fund, Ltd. |
365,052 |
365,052 |
0 |
Goldentree High Yield Opportunities I, L.P. |
162,400 |
162,400 |
0 |
Goldentree High Yield Opportunities II, L.P. |
69,600 |
69,600 |
0 |
(1) |
Assumes exercise of Warrants. |
The selling shareholders may from time to time offer and sell their Shares offered by this prospectus. We have registered their shares for resale to provide them with freely tradable securities. However, registration does not necessarily mean that they will offer and sell any or all of their Shares.
Offer and Sale of Shares
The selling shareholders, or their pledgees, donees, transferees or other successors-in-interest who receive shares offered hereby from a selling shareholder as a gift, pledge, partnership distribution or other non-sale related transfer, may offer and sell their Shares in the following manner:
|
l |
in the over-the-counter market or otherwise at prices and at terms then prevailing or at prices related to the then current market price; |
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at fixed prices, which may be changed; or |
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in privately negotiated transactions. |
The selling shareholders, or their pledgees, donees, transferees or other successors-in-interest, may sell their Shares in one or more of the following types of transactions:
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a block trade in which the broker-dealer so engaged may sell the Shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction; |
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a broker-dealer may purchase as principal and resell such Shares for its own account pursuant to this prospectus; |
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an exchange distribution in accordance with the rules of the exchange; |
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a securities or quotation system sale in accordance with the rules of the quotation system; |
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the writing of options relating to such Shares; |
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ordinary brokerage transactions or transactions in which the broker solicits purchasers; |
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a privately negotiated transaction; and |
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any combination of the foregoing, or any other available means allowable under law. |
From time to time, a selling shareholder may transfer, pledge, donate or assign its shares of common stock to lenders or others and each of such persons will be deemed to be a "selling shareholder" for purposes of this prospectus. The number of Shares beneficially owned by a selling shareholder may decrease as and when it takes such actions. The plan of distribution for the selling shareholders Shares sold under this prospectus will otherwise remain unchanged, except that the transferees, pledgees, donees or other successors will be a selling shareholder hereunder.
A selling shareholder may enter into hedging, derivative or short sale transactions with broker-dealers in connection with sales or distributions of the shares or otherwise. In these transactions, broker-dealers may engage in short sales of the Shares in the course of hedging the positions they assume with the selling shareholder. A selling shareholder also may sell Shares short and redeliver the Shares to close out short positions and engage in derivative or hedging transactions. A selling shareholder may enter into option or other transactions with broker-dealers which require the delivery to the broker-dealer of the Shares. The broker-dealer may then resell or otherwise transfer the shares under this prospectus. A selling shareholder also may loan or pledge the Shares to a broker-dealer. The broker-dealer may sell the loaned Shares or upon a default the broker-dealer may sell the pledged Shares under this prospectus.
Selling Through Broker-Dealers
The selling shareholders may select broker-dealers to sell their Shares. Broker-dealers that the selling shareholders engage may arrange for other broker-dealers to participate in selling such Shares. The selling shareholders may give such broker-dealers commissions or discounts or concessions in amounts to be negotiated immediately before any sale. In connection with such sales, these broker-dealers, any other participating broker-dealers, and the selling shareholders and certain pledgees, donees, transferees and other successors in interest, may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act of 1933 in connection with the sale of the Shares. Accordingly, any such commission, discount or concession received by them and any profit on the resale of the Shares purchased by them may be deemed to be underwriting discounts or commissions under the Securities Act
of 1933. Because the selling shareholders may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act of 1933, the selling shareholders will be subject to the prospectus delivery requirements of the Securities Act of 1933. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 promulgated under the Securities Act of 1933 may be sold under Rule 144 rather than pursuant to this prospectus. The selling shareholders have advised us that they will not enter into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their securities without written notice to us. There is no underwriter or coordinating broker acting in connection with the proposed sale of Shares by the selling shareholders.
Supplemental Prospectus Regarding Material Arrangements
If and when a selling shareholder notifies us that it has entered into a material arrangement with a broker-dealer for the sale of its Shares offered by this prospectus through a block trade, special offering, exchange or secondary distribution or a purchase by a broker-dealer, we will file a supplemental prospectus, if required, pursuant to Rule 424(c) under the Securities Act of 1933.
Expenses of Selling Shareholders
We will bear all costs, expenses and fees in connection with the registration of the Shares. We have agreed to indemnify and hold the selling shareholders harmless against certain liabilities under the Securities Act that could arise in connection with the sale by the selling shareholders of the Shares. The selling shareholders will bear all commissions and discounts, if any, attributable to the sales of the Shares. The selling shareholders may agree to indemnify any broker-dealer or agent that participates in transactions involving sales of the Shares against certain liabilities, including liabilities arising under the Securities Act.
Compliance with State Securities Laws
We have not registered or qualified the shares of Common Stock offered by this prospectus under the laws of any country, other than the United States. In certain states in the United States, the selling shareholders may not offer or sell their Shares unless (1) we have registered or qualified such Shares for sale in such states; or (2) we have complied with an available exemption from registration or qualification. Also, in certain states, to comply with such states' securities laws, the selling shareholders must offer and sell their Shares only through registered or licensed broker-dealers.
Limitations Imposed by Exchange Act of 1934 Rules and Regulations
Certain provisions of the Securities Exchange Act of 1934, and related rules and regulations, will apply to the selling shareholders and any other person engaged in a distribution of Shares. Such provisions may (1) limit the timing of purchases and sales of any of the Shares by the selling shareholders or such other person; (2) affect the marketability of such Shares; and (3) affect the broker-dealers' market-making activities with respect to such Shares.
Suspension of this Offering
We may suspend the use of this prospectus if we learn of any event that causes this prospectus to include an untrue statement of material fact or omit to state a material fact required to be stated in the prospectus or necessary to make the statements in the prospectus not misleading in light of the circumstances then existing. If this type of event occurs, a prospectus supplement or post-effective amendment, if required, will be distributed to the selling shareholders.
American Stock Transfer & Trust Company, located at 59 Maiden Lane, Plaza Level, New York, New York 10038, is the transfer agent and registrar for our Class A Common Stock.
Certain legal matters with respect to the validity of the issuance of the shares of Common Stock offered by this prospectus have been passed upon on our behalf by Conyers Dill & Pearman, Hamilton, Bermuda.
The financial statements and the related financial statements schedule incorporated in this prospectus by reference from Central European Media Enterprises Ltd.s Annual Report on Form 10-K, as amended by Forms 10-K/A, for the year ended December 31, 2002 have been audited by Deloitte & Touche L.L.P., independent auditors, as stated in their reports (which reports express unqualified opinions and include: i) with respect to Central European Media Enterprises Ltd., an explanatory paragraph regarding our change in accounting for goodwill and other intangible assets upon adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" and Deloitte & Touche L.L.P.s audit procedures with respect to the related disclosures added to revise the fiscal 2000 and 2001 consolidated financial statements that were audited by other auditors who have ceased operations and for which Deloitte & Touche L.L.P. have expressed no opinion or other form of assurance other than with respect to such disclosures; ii) with respect to Super Plus Holdings d.d., an explanatory paragraph relating to Super Plus Holdings d.d.s, ability to continue as a going concern), which are incorporated herein by reference, and have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
Our financial statements as of and for each of the two years in the period ended December 31, 2001 incorporated by reference in this prospectus and elsewhere in the Registration Statement have been audited by Arthur Andersen, independent public accountants, as indicated in their reports with respect thereto, and are incorporated by reference herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports.
On July 31, 2002, we announced that we engaged Deloitte & Touche L.L.P. to replace Arthur Andersen as our independent auditors. During each of the fiscal years in the two year period ended December 31, 2001 and the subsequent interim periods preceding the change of auditors, we had no disagreements with Arthur Andersen on any matter of accounting principles or practices, financial statement disclosures or auditing scope or procedures which, if not resolved to Arthur Andersens satisfaction, would have caused it to make reference to the disagreement in connection with its report.
We have not been able to obtain, after reasonable efforts, the written consent of Arthur Andersen to our naming it in this prospectus as having certified our consolidated financial statements for the two years ended December 31, 2001, as required by Section 7 of the Securities Act. Accordingly, we have dispensed with the requirement to file its consent in reliance upon Rule 437a of the Securities Act. Because Arthur Andersen has not consented to the inclusion of its report in this prospectus, you may have no effective remedy against Arthur Andersen under Section 11 of the Securities Act for any untrue statements of a material fact contained in the financial statements audited by Arthur Andersen, or any omissions to state a material fact required to be stated therein. In addition, the ability of Arthur Andersen to satisfy any claims (including claims arising from its provision of auditing and other services to us) may be limited as a practical matter due to recent events regarding Arthur Andersen.
CENTRAL EUROPEAN MEDIA ENTERPRISES, LTD.
696,000 Shares
Common Stock
PROSPECTUS
_________________, 2004
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
Expenses to be paid by us in connection with the issuance and distribution of the securities being registered are as follows:
|
Registration Fees |
|
$ |
350 |
|
|
Legal Fees and Expenses |
|
|
150,000 |
* |
|
Accounting Fees and Expenses |
|
|
400,000 |
* |
|
Miscellaneous |
|
|
2,150 |
* |
|
|
|
|
|
|
Total |
|
$ |
552,500 |
|
|
|
|
|
|
|
_______________ |
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|
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*Estimated |
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|
The selling shareholders will pay none of the expenses incident to the registration of the selling shareholders shares, except for their own legal fees and for any selling discounts or commissions paid to brokers or dealers engaged by the selling shareholders.
ITEM 15. Indemnification of Directors and Officers.
Under Bermuda law and our Memorandum of Association and Bye-laws, the Directors, Secretary and other officers (such term to include any person appointed to any committee by the Board) for the time being and each such person who is or was or had agreed to become a Director or officer of Central European Media Enterprises Ltd. and each such person who is or was serving or who had agreed to serve as an employee or agent of Central European Media Enterprises Ltd. or as a Director, officer, employee or agent of another company, corporation, partnership, joint venture, trust or other enterprise in which Central European Media Enterprises Ltd. is or was engaged acting in relation to any of the affairs of the Company and every auditor for the time being of Central European Media Enterprises Ltd. and the liquidator or trustees (if any) for the time being acting in relation to any of the affairs of Central European Media Enterprises Ltd. and every one of them, and their heirs, executors and administrators, are indemnified and secured harmless out of the assets and profits of Central European Media Enterprises Ltd. from and against all actions, costs, charges, losses, damages and expenses which they or any of them, their heirs, executors or administrators, shall or may incur or sustain by or by reason of any act done, purported to be done, concurred in or omitted in or about the execution of their duty, or supposed duty, or in their respective offices or trusts, or on behalf of Central European Media Enterprises Ltd. or purportedly on behalf of Central European Media Enterprises Ltd., or for any other loss, misfortune or damage which may happen in the execution of their respective offices or trusts, or in relation thereto, PROVIDED THAT such indemnity does not extend to any matter in respect of any fraud or dishonesty which may attach to any of said persons.
ITEM 16. Exhibits.
Exhibit Number |
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Description |
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23.2 |
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23.3 |
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23.4 |
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23.5 |
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Item 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or its most recent post-effective amendment) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered), and any deviation from the low or high end of the estimated maximum offering range, may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement;
(iii) to include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement;
provided, however, that the undertakings set forth in paragraphs (a)(i) and (a)(ii) above do not apply if the information required with or furnished to the Securities and Exchange Commission to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Securities and Exchange Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in this Registration Statement.
(b) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof.
(c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(d) That, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions referred to in Item 15 of this Registration Statement, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
(f) For the purposes of determining liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and it has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of London, England on this 16th day of January 2004.
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CENTRAL EUROPEAN MEDIA ENTERPRISES, LTD. |
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Date: |
By: |
/s/ Wallace Macmillan |
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Wallace Macmillan |
|
Vice President - Finance |
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE |
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TITLE |
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DATE |
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/s/ Frederic T. Klinkhammer * |
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Executive Officer and Director |
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Frederic T. Klinkhammer |
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/s / Wallace Macmillan |
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Vice President Finance, |
|
January 16, 2004 |
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Chief Financial and
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Wallace Macmillan |
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/s/ Charles R. Frank, Jr. * |
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Charles R. Frank, Jr. |
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/s/ Herbert A. Granath * |
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Herbert A. Granath |
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/s/ Alfred W. Langer * |
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Director |
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Alfred W. Langer |
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/s/ Mark Wyllie * |
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*By Mark Wyllie, Attorney in Fact |
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SIGNATURE |
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TITLE |
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DATE |
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/s/ Ronald S. Lauder * |
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Ronald S. Lauder |
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/s/ Bruce Maggin * |
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Bruce Maggin |
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/s/ Jacob Z. Schuster * |
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Jacob Z. Schuster |
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/s/ Marie-Monique Steckel * |
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January 16, 2004 |
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Marie-Monique Steckel |
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/s/ Mark Wyllie |
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*By Mark Wyllie, Attorney in Fact |
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EXHIBIT INDEX
Exhibit Number |
|
Description |
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|
23.2 |
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23.3 |
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23.4 |
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23.5 |
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