**Execution
Copy**





**SUBSCRIPTION
AGREEMENT**







**THIS
SUBSCRIPTION AGREEMENT,** dated as
of 2 May 2005 (this " Agreement "), is
entered into by and among CENTRAL EUROPEAN MEDIA ENTERPRISES LTD., a corporation
formed under the laws of Bermuda (the " Company "), and
PPF (CYPRUS) LTD., a company formed under the laws of the Republic of Cyprus
(the " Purchaser ").





**RECITALS:**







**WHEREAS** , the
Company, CME Media Enterprises B.V (“ CME
ME ”) and
the Purchaser have entered into a Framework Agreement (the " Framework
Agreement ") on
December 13, 2004 pursuant to which the Company and CME ME have agreed to
purchase, and PPF has agreed to sell, an 85% interest in the TV Nova Group (as
such term is defined in the Framework Agreement) for consideration consisting of
(i) the Total Cash Consideration (as defined in the Framework Agreement) and
(ii) 3,500,000 shares (the " Shares ") of
Class A common stock of the Company, $.08 par value per share (the " Common
Stock ")(such
Shares of Common Stock being referred to herein as the " Share
Consideration ");





**WHEREAS** ,
pursuant to the Framework Agreement, PPF has designated the Purchaser as the
Designated Shareholder (as such term is defined in the Framework Agreement), and
the Purchaser wishes to subscribe for, and the Company wishes to issue to the
Purchaser, upon the terms and subject to the conditions stated in this Agreement
and the Framework Agreement, the Shares, in payment of the Share Consideration
under the Framework Agreement;





**WHEREAS** , the
Company and the Purchaser are executing and delivering this Agreement in
reliance upon the exemptions from registration provided by Regulation D
(" Regulation
D ")
promulgated by the Securities and Exchange Commission (the " SEC ") under
the U.S. Securities Act of 1933, as amended (the " Securities
Act ") and/or
Section 4(2) of the Securities Act;





**WHEREAS** , in
connection with the consummation of the transactions contemplated by this
Agreement and the Framework Agreement, the parties hereto are also entering
into, of even date herewith, a registration rights agreement (the " Registration
Rights Agreement "). This
Agreement and the Registration Rights Agreement are hereinafter collectively
referred to as the " Share
Transaction Documents ".





**NOW,
THEREFORE** , in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:




-1-


**AGREEMENTS:**







1.
    AGREEMENT
      TO SUBSCRIBE; CLOSING




a)
    Share
      Subscription.





Subject
to the terms and conditions set forth herein and in the Framework Agreement, the
Company hereby agrees to issue to the Purchaser, and the Purchaser hereby
subscribes for, the Shares, for an aggregate price equal to the Subscription
Price (as such term is defined in the Framework Agreement).





b)
    Closing.





The
closing of the issuance of the Shares (the " Closing ") will
take place at the place and date of the closing as set forth in the Framework
Agreement. The date of the Closing is referred to herein as the "Closing Date."
At the Closing, the Company will deliver to the Purchaser the Shares in exchange
for the assignment to the Company of the CME Loan Note I in accordance with and
as such term is defined in the transaction memorandum as delivered by CME Ltd.
to the Purchaser on the Closing Commencement Date. The delivery of the Shares
shall constitute full performance by the Company and CME ME of their obligation
to deliver the CME Consideration Shares (as defined in the Framework
Agreement).







2.
    REPRESENTATIONS
      AND WARRANTIES OF THE PURCHASER; ACCESS TO INFORMATION; INDEPENDENT
      INVESTIGATION







The
Purchaser hereby represents and warrants to the Company that:







a)
    Accredited
      Investor.





The
Purchaser is: (i) experienced in making investments of the kind
contemplated by this Agreement; (ii) able, by reason of business and
financial experience, to protect its own interests in connection with the
transactions contemplated by this Agreement; (iii) able to afford the
entire loss of its investment in the Shares; (iv) an "accredited investor" as
that term is defined in Rule 501(a) of Regulation D under the Securities Act;
and (v) not a broker-dealer or an affiliate of a broker-dealer registered
pursuant to Section 15 of the U.S. Securities Exchange Act of 1934, as amended
(the " Exchange
Act ").







b)
    No
      Public Distribution.





The
Purchaser is acquiring the Shares for its own account, for investment purposes
only, and not with a present view towards the public sale or distribution
thereof, except pursuant to a sale or sales that are registered under the
Securities Act or exempt from such registration. The Purchaser has not been
organized for the purpose of investing in securities of the Company, although
such investment is consistent with its purposes.


-2-





c)
    Subsequent
      Offers and Sales.


Except as
provided in Section 4(a) below, the Purchaser may not sell, offer for sale,
assign or otherwise transfer the Shares other than pursuant to an effective
registration statement under the Securities Act or in accordance with the
provisions of Section 4 below.







d)
    Accuracy
      of Purchaser’s Representations and Warranties.





The
Purchaser understands that the Shares are being offered and sold to it in
reliance upon exemptions from the registration requirements of the United States
federal securities laws, and that the Company is relying upon the truth and
accuracy of the Purchaser’s representations and warranties contained in the
Share Transaction Documents and any ancillary documents thereto, as applicable,
and the Purchaser’s compliance with the Share Transaction Documents and any
ancillary documents thereto, in order to determine the availability of such
exemptions and the eligibility of the Purchaser to acquire the Shares in
accordance with the terms and provisions of the Share Transaction Documents.







e)
    Financial
      Information.





The
Purchaser: (i) has been provided with and has reviewed all requested information
concerning the business of the Company, including, without limitation, the
Company’s audited financial statements for the fiscal year ended December 31,
2003, the Company’s unaudited financial statements for the nine months ended
September 30, 2004, and any periodic report filed by the Company with the SEC
since September 30, 2004; and (ii) has had all requested access to the
management of the Company and has had the opportunity to ask questions of the
management of the Company.







f)
    Capacity
      and Authority.





The
Purchaser has the requisite capacity and authority to execute, deliver and
perform each of the Share Transaction Documents and any and all ancillary
documents thereto and to consummate the transactions contemplated thereby.







g)
    Due
      Execution.





This
Agreement and the other Share Transaction Documents, and any ancillary documents
thereto and the transactions contemplated hereby and thereby that have been
executed and delivered by the Purchaser, have been duly and validly authorized
by the Purchaser and such agreements, when executed and delivered by each of the
other parties thereto will each be a valid and binding agreement of the
Purchaser, enforceable against the Purchaser in accordance with their respective
terms, except to the extent that enforcement of such agreements may be limited
by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors’ rights
generally and to general principles of equity.


-3-





h)
    Brokers.




The
Purchaser has not employed, engaged or retained, or otherwise incurred any
liability to, any person as a broker, finder, agent or other intermediary in
connection with the transactions contemplated herein.







i)
    No
      General Solicitation.





The
Purchaser has not learned of the investment in the Shares as a result of any
public advertising or general solicitation.





j)
    Residency.





The
Purchaser has its principal place of business in the jurisdiction set forth
below the Purchaser’s name on the signature page hereto.







3.
    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY







The
Company hereby makes the representations and warranties contained in Appendix A
attached hereto to the Purchaser.







4.
    CERTAIN
      COVENANTS AND ACKNOWLEDGMENTS






a)
    Transfer
      Restrictions.





The
Purchaser acknowledges that, except as provided in the Registration Rights
Agreement, none of the Shares has been, or is being, registered under the
Securities Act, and such Shares may not be sold, transferred or assigned
unless subsequently registered thereunder, except as provided in this
Section 4. More specifically, the Purchaser agrees for a period of 24 months
from the Closing Date not to avail itself of any exemption from registration
under the Securities Act in connection with any sale, transfer or assignment of
the Shares, and thereafter only in an amount not to exceed 1% of the Company's
outstanding Common Stock during any calendar quarter; provided that the total
number of Shares held by the Purchaser and not previously registered under the
Securities Act pursuant to the Registration Rights Agreement at such time does
not exceed 1,000,000, and provided, further, that the Purchaser may transfer the
Shares to an affiliate (as such term is defined under the Securities Act) with
the prior written consent of the Company, such consent not to be unreasonably
withheld. The provisions of Sections 4(a) and 4(b) hereof, together with the
rights and obligations of the Purchaser under the Share Transaction Documents,
shall be binding upon any transferees of the Shares not previously registered
under the Securities Act or sold in accordance with this Section
4(a).






b)
    Restrictive
      Legend.





The
Purchaser acknowledges and agrees that, until such time as the Shares shall have
been registered under the Securities Act in accordance with the terms of the
Registration Rights Agreement or sold in accordance with Section 4(a), the
Shares shall bear a restrictive legend in substantially the following
form:


-4-





THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR, IF PERMITTED
UNDER THE TERMS OF THE SUBSCRIPTION AGREEMENT DATED AS OF 2 MAY 2005, PURSUANT
TO AN EXEMPTION FROM REGISTRATION SPECIFIED IN AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY.


The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Share upon which it is
stamped, if such Share is registered for sale under an effective registration
statement filed under the Securities Act pursuant to the Registration Rights
Agreement or if such Shares are proposed to be sold pursuant to an exemption
from registration as provided in this Agreement and the Company receives an
opinion of counsel with respect to compliance with such exemption. The Purchaser
agrees to sell all Shares, including those represented by a certificate(s) from
which the legend has been removed, in compliance with applicable prospectus
delivery requirements, if any.







c)
    Reporting
      Status; Eligibility to Use Form S-3.





The
Company’s Common Stock is registered under Section 12(b) of the Exchange Act. So
long as the Purchaser beneficially owns any of the Shares, the Company shall
timely file all reports required to be filed with the SEC pursuant to the
Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination. The Company
currently meets, and will take commercially reasonable steps to continue to
meet, the "registrant eligibility" requirements set forth in the general
instructions to Form S-3 applicable to both "primary" and "resale" registrations
on Form S-3 during the Registration Period (as defined in the Registration
Rights Agreement).





d)
    Listing.





The
Company shall promptly secure the listing of the Shares upon the Nasdaq, and
each other national securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official notice of
issuance) and, so long as any of the Purchaser owns any of the Shares, shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing.







5.
    CONDITIONS
      TO THE COMPANY’S OBLIGATION TO ISSUE THE
SHARES







The
Purchaser understands that the Company’s obligation to issue the Shares to the
Purchaser pursuant to this Agreement is conditioned upon the satisfaction by the
Purchaser or the waiver by the Company of each of the following
conditions:


-5-





(i)
    The
      accuracy of the representations and warranties of the Purchaser contained
      in this Agreement and the performance by the Purchaser of all covenants
      and agreements of the Purchaser contained in the Share Transaction
      Documents and required to be performed on or before the Closing Date,
      including, but not limited to, the assignment by the Purchaser to the
      Company of the CME Loan Note I on or before the Closing
    Date.






(ii)
    The
      absence or inapplicability of any and all laws, rules or regulations
      prohibiting or restricting the transactions contemplated hereby, or
      requiring any consent or approval which shall not have been
      obtained.






(iii)
    The
      Purchaser shall have executed each of the Share Transaction Documents and
      any and all ancillary documents thereto and delivered the same to the
      Company.






(iv)
    The
      Company shall have received from the Purchaser such other certificates and
      documents as it or its representatives, if applicable, shall reasonably
      request, and all proceedings taken by the Purchaser in connection with
      this Agreement and the other Share Transaction Documents and all documents
      and papers relating to such Share Transaction Documents shall be
      reasonably satisfactory to the Company.




(v)
    All
      conditions to the closing of the Framework Agreement shall have been
      satisfied and the Purchaser shall have obtained in writing or made all
      consents, waivers, approvals, orders, permits, licenses and authorizations
      of, any registrations, declarations, notices to and filings and
      applications with, any governmental authority or any other person or
      entity (including, without limitation, securityholders and creditors of
      the Purchaser) required to be obtained or made in order to enable the
      Purchaser to observe and comply with all its obligations under this
      Agreement, the Framework Agreement and the other Share Transaction
      Documents and to consummate the transactions contemplated
      hereby.






6.
    CONDITIONS
      TO THE PURCHASER’S OBLIGATIONS TO TAKE UP ITS SUBSCRIPTION FOR THE
      SHARES







The
Company understands that the Purchaser’s obligations to take up its subscription
for the Shares on the Closing Date is conditioned upon the satisfaction by the
Company or the waiver by the Purchaser of each of the following
conditions:






(i)
    The
      accuracy of the representations and warranties of the Company contained in
      this Agreement and the performance by the Company, on or before the
      Closing Date, of all covenants and agreements of the Company contained in
      the Share Transaction Documents and required to be performed on or before
      the Closing Date.


-6-




(ii)
    The
      Company shall have executed the Share Transaction Documents and any and
      all ancillary documents thereto and delivered same to the Purchaser.






(iii)
    The
      Purchaser shall have received a certificate of the Secretary of the
      Company, dated the Closing Date, as to the continued and valid existence
      of the Company and its operating subsidiaries, certifying the attached
      copy of the By-laws of the Company, the authorization of the execution,
      delivery and performance of the Share Transaction Documents, and the
      resolutions adopted by the Board authorizing the actions to be taken by
      the Company contemplated by the Share Transaction
    Documents.






(iv)
    The
      Purchaser shall have received from the Company such other certificates and
      documents as they or their representatives, if applicable, shall
      reasonably request, and all proceedings taken by the Company in connection
      with the Share Transaction Documents contemplated by this Agreement and
      the other Share Transaction Documents and all documents and papers
      relating to such Share Transaction Documents shall be reasonably
      satisfactory to the Purchaser.






(v)
    No
      injunction, order, investigation, claim, action or proceeding before any
      court or governmental body shall be pending or threatened wherein an
      unfavorable judgment, decree or order would restrain, impair or prevent
      the carrying out of this Agreement or the other Share Transaction
      Documents or any of the transactions contemplated hereby or thereby,
      declare unlawful the transactions contemplated by this Agreement or the
      other Share Transaction Documents or cause any such transaction to be
      rescinded.






(vi)
    The
      Company shall have obtained in writing or made all consents, waivers,
      approvals, orders, permits, licenses and authorizations of, any
      registrations, declarations, notices to and filings and applications with,
      any governmental authority or any other person or entity (including,
      without limitation, securityholders and creditors of the Company) required
      to be obtained or made in order to enable the Company to observe and
      comply with all its obligations under this Agreement and the other Share
      Transaction Documents and to consummate the transactions contemplated
      hereby.






7.
    INDEMNIFICATION






a)
    Indemnification
      of Purchaser by the Company.


-7-


The
Company hereby agrees to indemnify and hold harmless the Purchaser, its
affiliates, and each of their respective officers, managers, members, directors,
partners, shareholders, and employees (collectively, the "Purchaser’s
Indemnitees"), from and against any and all losses, claims, damages, judgments,
penalties, liabilities and deficiencies (collectively, " Losses "), and
agrees to reimburse the Purchaser’s Indemnitees for all out-of-pocket expenses
(including the reasonable fees and expenses of legal counsel), in each case
promptly as incurred by the Purchaser’s Indemnitees and to the extent arising
out of or in connection with:






(i)
    a
      misrepresentation, omission of fact or breach of any of the Company’s
      representations or warranties contained in this Agreement (or the other
      Share Transaction Documents), the annexes, schedules or exhibits hereto or
      any instrument, agreement or certificate entered into or delivered by the
      Company pursuant to this Agreement (or the other Share Transaction
      Documents); or






(ii)
    a
      failure by the Company to perform any of its covenants, agreements,
      undertakings or obligations set forth in this Agreement (or the other
      Share Transaction Documents), the annexes, schedules or exhibits hereto or
      any instrument, agreement or certificate entered into or delivered by the
      Company pursuant to this Agreement (or the other Share Transaction
      Documents).






b)
    Indemnification
      of the Company by Purchaser.





The
Purchaser hereby agrees to indemnify and hold harmless the Company, its
affiliates and their respective officers, directors, partners and members
(collectively, the "Company Indemnitees"), from and against any and all Losses,
and agrees to reimburse the Company Indemnitees for all out-of-pocket expenses
(including the reasonable fees and expenses of legal counsel), to the extent
arising out of or in connection with any misrepresentation, omission of fact or
breach of any of the Purchaser’s representations, warranties or covenants
contained in this Agreement or the Registration Rights Agreement and any failure
by the Purchaser to perform any of its covenants, agreements, undertakings or
obligations set forth in this Agreement, or the Registration Rights Agreement.
Notwithstanding anything to the contrary in this Agreement, the aggregate
payments for indemnification (including the reasonable fees and expenses of
legal counsel) made by the Purchaser to the Company pursuant to this Section
7(b) shall not exceed the Subscription Price.






c)
    Third
      Party Claims.


-8-


Promptly
after receipt by either party hereto seeking indemnification pursuant to this
Section 7 (an “ Indemnified
Party ") of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a " Claim "), the
Indemnified Party promptly shall notify the party against whom indemnification
pursuant to this Section 7 is being sought (the " Indemnifying
Party ") of the
commencement thereof; but the omission to so notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party and the Indemnifying
Party reasonably shall have concluded that representation of the Indemnified
Party and the Indemnifying Party by the same legal counsel would not be
appropriate due to actual, or, as reasonably determined by legal counsel to the
Indemnified Party, potentially, differing interests between such parties in the
conduct of the defense of such Claim, or if there may be legal defenses
available to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party, or (z) the Indemnifying Party shall
have failed to employ legal counsel reasonably satisfactory to the Indemnified
Party within a reasonable period of time after notice of the commencement of
such Claim. If the Indemnified Party employs separate legal counsel in
circumstances other than as described in clauses (x), (y) or (z) above, the
fees, costs and expenses of such legal counsel shall be borne exclusively by the
Indemnified Party. Except as provided above, the Indemnifying Party shall not,
in connection with any Claim in the same jurisdiction, be liable for the fees
and expenses of more than one firm of legal counsel for the Indemnified Party
(together with appropriate local counsel). The Indemnifying Party shall not,
without the prior written consent of the Indemnified Party (which consent shall
not unreasonably be withheld) settle or compromise any Claim or consent to the
entry of any judgment that does not include an unconditional release of the
Indemnified Party from all liabilities with respect to such Claim or
judgment.






8.
    EXPENSES




Each of
the parties hereto agree that they shall each be responsible for and pay their
own expenses and fees, including all legal, accounting and other professional
fees, associated with the transactions contemplated by Share









9.
    SURVIVAL







The
representations and warranties of the Company and the Purchaser shall survive
the Closing until twelve (12) months following the Closing Date. The Company
makes no representations or warranties in any oral or written information
provided to the Purchaser, other than the representations and warranties
included herein or in the Share Transaction Documents.






10.
    MISCELLANEOUS






a)
    Governing
      Law; Jurisdiction.





This
Agreement shall be governed by and interpreted in accordance with the internal
laws of the State of New York, without giving effect to conflicts of laws
issues. Each of the parties submits to the jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the state courts
of the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement or any of the transactions contemplated
hereby, and hereby waives, to the maximum extent permitted by law, any
objection, including any objections based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.


-9-




b)
    Counterparts.







This
Agreement may be signed in two or more counterparts, each of which shall be
deemed an original.






c)
    Headings.





The
headings of this Agreement are for convenience of reference only and shall not
form part of, or affect the interpretation of, this Agreement.






d)
    Severability.





If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
unenforceability of this Agreement in any other jurisdiction.






e)
    Successors
      and Assigns.





This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns. Neither the Company nor the Purchaser shall assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the other.






f)
    Amendments.





This
Agreement may be amended or provisions hereof may be waived only with the
written consent of the Company and the Purchaser.






g)
    Merger.





This
Agreement, together with the other Share Transaction Documents, supersedes all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof.






h)
    Notices.





Any
notice required or permitted hereunder shall be given in writing (unless
otherwise specified herein) and shall be effective upon personal delivery, via
facsimile (upon receipt of confirmation of error-free transmission) or two
business days following deposit of such notice with an internationally
recognized courier service, with postage prepaid and addressed to each of the
other parties thereunto entitled at the following addresses, or at such other
addresses as a party may designate by five days advance written notice to each
of the other parties hereto.






-10-


Company:
    Central
      European Media Enterprises, Ltd.8thFloor, Aldwych House71-91
      Aldwych, LondonWC2B
      4HN, ENGLANDATTENTION:
      General CounselTel:
      +44-20-7430-5430Fax:
      +44-20-7430-5402with
      a copy to:Katten
      Muchin Zavis Rosenman575
      Madison AvenueNew
      York, NY 10022ATTENTION:
      Robert L. Kohl, Esq.Tel:
      +1-212-940-6380Fax:
      +1-212-940-8776Purchaser:
    PPF
      (CYPRUS) LIMITEDArch.
      Makeriou III, 2-4Capital
      Center, 9th FloorPC
      1505NicosiaCyprusATTENTION:
      Miroslav HorkyTel:
      +357 22 66 01 83Fax:
      +357 22 66 01 87with
      a copy to:PPF
      CONSULTING a.s.Na
      Pankráci 1658/121140
      00 Praha 4 - PankrácCzech
      RepublicATTENTION:
      Tomáš BrzobohatýTel:
      +420 224 559 072Fax:
      +420 224 559 229




-11-


****


**IN
WITNESS WHEREOF,** this
Agreement has been duly executed by each of the undersigned.





**COMPANY:**





CENTRAL
EUROPEAN MEDIA ENTERPRISES LTD.











By:
    s/s
      Ana SljivicName:
      Ana SljivicTitle:
      Authorised signatory







****


**PURCHASER** :








PPF
(CYPRUS) LTD.











By:
    s/s
      Miroslav HorskyName:
      Miroslav HorskyTitle:
      Director





Principal
place of business of Purchaser:





Arch.
Makariou III, 2-4, Capital Center, 9th Floor, PC 1505, Nicosia,
Cyprus


____________________________________





-12-


**APPENDIX
A**





Representations
and Warranties.





I. Definitions.
The following terms used in this Appendix shall have the following
meanings:





" Capital
Stock " means,
with respect to any Person, any and all shares, interests, participations or
other equivalents (however designated, whether voting or non-voting) in the
equity of such Person, whether now outstanding or issued after the Closing Date,
including, without limitation, all Common Stock and Preferred Stock.





" GAAP " means
generally accepted accounting principles in the United States of America as in
effect as of the Closing Date, including, without limitation, those set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as are approved by a significant segment of the
accounting profession. All ratios and computations contained or referred to in
this Agreement shall be computed in conformity with GAAP applied on a consistent
basis, except that calculations made for purposes of determining compliance with
the terms of the covenants and with other provisions of this Agreement shall be
made without giving effect to (i) the amortization of any expenses incurred in
connection with the execution of this Agreement and (ii) except as otherwise
provided, the amortization of any amounts required or permitted by Accounting
Principles Board Opinion No. 16 or other accounting literature related
thereto.





" Governing
Document " means
the certificate or articles of incorporation or association, bylaws, partnership
agreements, shareholders' agreements or other similar document which regulates
the operation and existence of any Person.





" Material
Adverse Effect " means a
material adverse effect upon the business, operations, properties, assets or
condition (financial or otherwise) of a Person, taken as a whole.





" Person " means
an individual, a corporation, a partnership, an association, a trust or any
other entity or organization, including a government or political subdivision or
an agency or instrumentality thereof.





" Securities " means
any stock, shares, partnership interests, voting trust certificates,
certificates of interest or participation in any profit sharing agreement or
arrangement, bonds, debentures, options, warrants, notes, or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or otherwise, or
in general any instruments commonly known as "securities" or any certificates of
interest, shares or participations in temporary or interim certificates for the
purchase or acquisition of, or any right to subscribe to, purchase or acquire,
any of the foregoing.





" Subsidiary " means,
with respect to any Person, any corporation, association or other business
entity (a) of which more than 50% of the voting power of the outstanding common
stock is owned, directly or indirectly, by such Person and one or more other
Subsidiaries of such Person, or (b) which is consolidated in such Person's
consolidated financial statements under GAAP, PROVIDED HOWEVER that any
corporation or business entity acquired by the Company pursuant to the Framework
Agreement shall not be considered to be a Subsidiary of the Company for the
purposes of this Appendix.


-13-


" Taxes " means
all taxes, assessments, fees, levies, imposts, duties, penalties, deductions,
liabilities, withholdings or other charges of any nature whatsoever, including
interest and penalties, from time to time or at any time imposed by any Law or
any Tribunal.





" Tribunal " means
any government, any arbitration panel, any court or any governmental department,
commission, board, bureau, agency, authority or instrumentality of the United
States or any state, province, commonwealth, nation, territory, possession,
county, parish, town, township, village or municipality, whether now or
hereafter constituted and/or existing.





II.
    The
      Company represents and warrants to the Purchaser as
    follows:





2.1.
    Organization
      and Good Standing; Capitalization





(a) Each of
the Company and its Subsidiaries is a corporation duly organized and existing
and in good standing (or a local equivalent thereof, if any) under the laws of
its jurisdiction of incorporation and is not in violation of the terms of its
Governing Documents. Each of the Company and its Subsidiaries has the corporate
power and authority to own and operate its properties and to carry on its
business as now conducted and is duly qualified as a foreign corporation and in
good standing (or a local equivalent thereof, if any) in all jurisdictions in
which it is doing business, except where failure to be so qualified or in good
standing, singly or in the aggregate, has not had and will not have a Material
Adverse Effect.





(b) The
Shares are duly authorized, validly issued, fully paid and nonassessable, free
and clear of any liens imposed by or through the Company, will not be subject to
preemptive rights, and will not subject the holder thereof to personal liability
by reason of being such a holder.





2.2
    Authorization
      and Power





The
Company has the corporate power and requisite authority, and has taken all
corporate action necessary, to execute, deliver and perform its obligations
under the Share Transaction Documents and each other document and instrument to
be delivered in connection with the Share Transaction Documents and to issue the
Shares.





2.3
    No
      Conflicts or Consents





(a) The
execution and delivery of this Agreement and each other Share Transaction
Document, the consummation of each of the transactions herein contemplated, the
compliance with each of the terms and provisions hereof, and the issuance,
delivery and performance of this Agreement by the Company do not and will not
(i) violate any provision of any law or any governmental rule or regulation
applicable to any of the Company and its Subsidiaries, the Governing Documents
of any of them or any order, judgment or decree of any court or other agency of
government binding on any of them, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
contractual obligation of any of the Company and its Subsidiaries which could
reasonably be expected to result in a Material Adverse Effect, (iii) result in
or require the creation or imposition of any Lien upon any of the properties or
assets of any of the Company and its Subsidiaries, (iv) require any approval of
stockholders or any approval or consent of any Person under any contractual
obligation of any of the Company or its Subsidiaries except for such approvals
or consents the failure to obtain which could not reasonably be expected to
singly or in the aggregate result in a Material Adverse Effect.


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(b) Other
than the filing of one or more registration statements with the SEC, as
contemplated by the Registration Rights Agreement, and the receipt by the
Company of approval from the SEC for such registration statement to be declared
effective, no consent, approval, authorization or order of any Tribunal or other
Person is required in connection with the execution, delivery and performance by
the Company or any of its Subsidiaries of the Share Transaction Documents or the
consummation of the transactions contemplated thereby, other than any such
consent, approval, authorization or order which has been obtained and remains in
full force and effect or the failure to obtain which would not prohibit the
disposition by the Purchaser of the Shares as contemplated by the Registration
Rights Agreement or, singly or in the aggregate, otherwise have a Material
Adverse Effect.





2.4
    Enforceable
      Obligations





Each of
the Share Transaction Documents has been duly authorized, executed and delivered
by the Company, and constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws affecting the enforcement of creditors’ rights
generally or by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).





2.5
    Financial
      Condition; SEC filings





The
audited consolidated balance sheets of the Company and its Subsidiaries as at
December 31, 2004 and 2003 and the related consolidated statements of
operations, common stockholders’ capital deficiency and cash flows of the
Company and its Subsidiaries for the three-year period ended December 31, 2004,
certified by the Company’s independent certified public accountants and included
in the Company’s Annual Report on Form 10-K for the year ended December 31,
2004, copies of which have been delivered to the Purchaser, were prepared in
accordance with GAAP, have been prepared from, and are consistent with, the
books and records of the Company and its Subsidiaries and fairly present the
consolidated financial position of the Company and its Subsidiaries as at the
respective dates thereof and the consolidated results of operations and cash
flows of the Company and its Subsidiaries for the periods then ended. None of
the Company or any of its Subsidiaries had at December 31, 2004 any material
contingent liabilities, liabilities for Taxes or long-term leases, unusual
forward or long-term commitments or unrealized or unanticipated losses from any
unfavorable commitments in each case either (i) of a type required by GAAP to be
disclosed in the audited consolidated financial statements of the Company and
its Subsidiaries as of December 31, 2004 and not so disclosed or (ii) except as
are described in Schedule 2.5 attached hereto.


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2.6
    Full
      Disclosure; SEC Filings.


The
Company has filed, and as of the Closing will have filed, all required
registration statements, prospectuses, reports, schedules, forms, statements and
other documents (including exhibits and all other information incorporated by
reference) required to be filed by it with the SEC since January 1, 2003. The
Company has made available to the Purchaser all such registration statements,
prospectuses, reports, schedules, forms, statements and other documents in the
form filed with the SEC. All such required registration statements,
prospectuses, reports, schedules, forms, statements and other documents
(including those that the Company may file subsequent to the date of this
Agreement), as amended, are referred to herein as the " SEC
Reports ." As of
their respective dates, the SEC Reports (i) were prepared in accordance and
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such SEC Reports, and (ii) did not at the time they
were filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except to the extent corrected prior to the date of this
Agreement by a subsequently filed SEC Report.





2.7
    Private
      Offering.





Subject
to the accuracy of the Purchaser’s representations and warranties set forth in
Article 2 of the Subscription Agreement to which this Appendix is attached, the
issuance of the Shares, as contemplated by this Agreement, is exempt from the
registration requirements of the Securities Act. Prior to the effectiveness of
any registration statement contemplated by the Registration Rights Agreement,
the Company agrees not to take any action that would render the issuance of such
Shares subject to the registration requirements of the Securities Act. The
Company has not offered the Shares by any form of general solicitation or
general advertising, as such terms are used in Rule 502(c) under the Securities
Act.







2.8
    NASDAQ
      Compliance.





The
issuance of the Shares will not contravene Rule 4350(i) of the National
Association of Securities Dealers, Inc. or require a vote of shareholders of the
Company. The Company is in compliance with all material requirements of NASDAQ
in respect of the listing of its Common Stock.




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**Schedule
2.5**





**List
of liabilities to be described pursuant to Section 2.5(ii) of Appendix
A**








**None**





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