D.G. Jewelry Inc. Mediation With ShopNBC has Broken Off; D.G. Jewelry Inc. Alleges ShopNBC Breached Duty of ``Good Faith''.

Business Editors

TORONTO--(BUSINESS WIRE)--Sept. 4, 2002

D.G. Jewelry Inc. (Nasdaq:DGJL) announced today that mediation of disputes with ShopNBC (Nasdaq:VVTV), a cable television home shopping network, has failed.

In 2001, disputes between the parties had arisen as a result of actions believed taken by ShopNBC and its senior executives, including Gene McCaffery, Chairman and CEO, Richard Barnes, COO and CFO, Steven Goldsmith, Senior Vice President and General Manager, and Nathan Fagre, Senior Vice President and General Counsel, which D.G. Jewelry Inc. believed to be illegal and in breach of ShopNBC's duties to its own shareholders and which D.G. Jewelry therefore resisted and refused to participate in. D.G. Jewelry claims that the dispute then escalated when ShopNBC engaged in a retaliatory campaign against the Company for its refusal to participate in these wrongful actions.

In an effort to salvage its business position in the face of this campaign, the Company entered into negotiations in the summer and fall of 2001, believing in ShopNBC's expressions of good faith and fair dealing, and these negotiations culminated in December 2001 in agreements to settle which provided amongst other things for significant airtime for the Company, and promises of non-discriminatory treatment, in return for an exchange of releases.

However, by July, 2002, D.G. Jewelry Inc. asserted that ShopNBC had been in material breach of the agreements for settlement and threatened to sue to rescind those agreements and the release given in them, based upon D.G. Jewelry's claim that ShopNBC had entered into those agreements in bad faith, appearing to negotiate and settle, but only to obtain the release. Nevertheless, D.G. Jewelry said, the campaign against it had continued.

ShopNBC and the Company had been engaged in an effort to mediate their differences, which failed, when ShopNBC launched a defensive lawsuit against the Company, its CEO, Jack Berkovits, and its Executive Vice President, Ben Berkovits, seeking to pre-empt D.G.'s threatened legal action. The suit brought by ShopNBC in U.S. District Court in Minnesota seeks a declaratory judgment confirming that the parties' December 2001 agreement of settlement and release is valid and binding and, therefore, bars the claims that D.G. Jewelry Inc. has been threatening to assert. In addition, ShopNBC's lawsuit seeks damages, claiming that the Company and the Berkovitses have interfered with the relationship between ShopNBC and its employees. The Company and its principals intend to vigorously defend these allegations, which the Company considers to be false, outrageous and defamatory.

The Company's products have been featured on three ShopNBC programs, "Brilliante," "Diamond Jack" and "Trader Jack" and sales to ShopNBC, as reported by the Company in its most recent annual report, represented approximately 46% of the Company's gross revenues in 2001.

As a result of this rupture of the relationship with ShopNBC, the Company's revenues will be significantly adversely affected and the Company will be required to take substantial write-downs on its assets. Such write-downs will cause the Company to be in breach of its bank covenants and may cause the bank to take steps to realize on their security. Depending on the nature, extent and timing of such actions, should they occur, the Company's assets may require even further write-downs. In addition, should the Company's bankers take any action requiring the Company to find alternate financing, there is no guarantee or likelihood that the Company would be successful.

D.G. Jewelry Inc. is primarily engaged in the design, merchandising and distribution of stone-set jewelry for department stores, mass merchants, catalog showrooms, television shopping networks and other high-volume retailers and other major discounters in the U.S., Canada and Europe. For more information, please visit us at www.dgjewelry.com.

Except for the historical information contained herein, the matters discussed in this release include forward-looking statements that may involve a number of risks and uncertainties. The Company cannot be assured that its claims against ShopNBC will be successfully established or that it will recover all damages suffered from ShopNBC, or that it will be successful in defending the claims brought by ShopNBC. Further there can be no assurance that any portion of the Company's previous relationship and sales levels to ShopNBC will be restored, or that the Company will be able to replace these levels of sales elsewhere. Actual results may vary significantly based on a number of factors, including, but not limited to, risks in product demand, the impact of competitive products and pricing, changing economic conditions, both here and abroad, release and sales of new products, other risk factors detailed in the company's most recent annual report and filings with the Securities and Exchange Commission.