<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/_/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
/_/ Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rule 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
N/A
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2) Aggregate number of securities to which transaction applies:
N/A
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
N/A
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4) Proposed maximum aggregate value of transaction:
N/A
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5) Total fee paid:
$0
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/_/ Fee paid previously with preliminary materials: N/A
/_/ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration No.
--------------------------------------
3) Filing party:
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4) Date filed:
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<PAGE>
Preliminary Copies
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
The Annual General Meeting of Shareholders of CENTRAL EUROPEAN MEDIA
ENTERPRISES LTD. (the "Company"), a Bermuda company, will be held at the offices
of Conyers Dill & Pearman, Clarendon House, 2 Church Street, Hamilton HM 11,
Bermuda, on December 14, 1999 at 10:00 A.M., for the following purposes:
1. To elect seven directors to serve until the next Annual General
Meeting of Shareholders;
2. To consider and act upon an amendment to the Company's Bye-laws
to effect a one-for-eight reverse stock split of the Company's
Class A Common Stock, Class B Common Stock and Preferred Stock,
and in connection with the reverse stock split, to increase the
authorized share capital of the Company;
3. To consider and act upon an amendment to the Company's Bye-laws
permitting the Board of Directors to (i) set the maximum number
of directors to serve on the Board of Directors and (ii) fill
vacancies on the Board of Directors;
4. To receive and adopt the financial statements of the Company for
the Company's fiscal year ended December 31, 1998, together with
the auditors' report thereon; and
5. To appoint Arthur Andersen & Co. as auditors for the Company and
to authorize the directors to approve their fee.
The approval and adoption of each matter to be presented to the
shareholders is independent of the approval and adoption of each other matter to
be presented to the shareholders.
Only shareholders of record at the close of business on October 29,
1999 are entitled to notice of and to vote at the meeting.
By order of the Board of Directors,
NICOLAS G. TROLLOPE
Secretary
Hamilton, Bermuda
November 17, 1999
IMPORTANT: The prompt return of proxies will ensure that your shares will be
voted. A self-addressed envelope is enclosed for your convenience.
<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
-----------------------------
PROXY STATEMENT FOR ANNUAL GENERAL MEETING OF SHAREHOLDERS
December 14, 1999
-----------------------------
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
(the "Company" or "CME"), a Bermuda company, for use at the Annual General
Meeting of Shareholders of the Company (the "Meeting") to be held at the offices
of Conyers, Dill & Pearman, Clarendon House, 2 Church Street, Hamilton HM 11,
Bermuda, on December 14, 1999, at 10:00 A.M., and at any adjournments thereof.
Shareholders may vote their shares either by signing and returning the
proxy card accompanying this Proxy Statement or by touch-tone telephone.
Instructions for telephone voting are set forth on the accompanying proxy card.
Shareholders who execute proxies retain the right to revoke them at any time by
notice in writing to the Secretary of the Company, by revocation in person at
the Meeting or by presenting a later-dated proxy. Unless so revoked, the shares
represented by proxies will be voted at the Meeting in accordance with the
directions given therein. Shareholders vote at the Meeting by casting ballots
(in person or by proxy) which are tabulated by a person who is appointed by the
Board of Directors before the Meeting to serve as inspector of election at the
Meeting and who has executed and verified an oath of office. The presence, in
person or by proxy, of shareholders entitled to cast at least a majority of the
total number of votes entitled to be cast on each matter to be voted upon at the
Meeting constitutes a quorum as to each such matter. Abstentions and broker
"non-votes" are included in the determination of the number of shares present at
the Meeting for quorum purposes, but abstentions and broker "non-votes" are not
counted in the tabulations of the votes cast on proposals presented to
shareholders. A broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power with respect to that item and has not
received instructions from the beneficial owner or has discretionary power but
elects not to exercise it.
The registered office of the Company is located at Clarendon House,
Church Street, Hamilton HM CX, Bermuda. Certain subsidiaries of Central European
Media Enterprises Ltd. also maintain offices at Swan House, 52 Poland Street,
London W1V 3DF, England. The date on which this Proxy Statement and the enclosed
form of proxy will be first sent to shareholders is on or about November 17,
1999.
Shareholders of record of the Class A Common Stock, par value $.01 per
share, of the Company (the "Class A Common Stock") at the close of business on
October 29, 1999 shall be entitled to one vote for each share then held.
Shareholders of record of the Class B Common Stock, par value $.01 per share, of
the Company (the "Class B Common Stock") at the close of business on October 29,
1999 shall be entitled to ten votes for each share then held. The Class A Common
Stock and the Class B Common Stock shall be voted on all matters presented as a
single class. There were issued and outstanding at the close of business on
October 29, 1999, 18,506,849 shares of Class A Common Stock and 7,177,269 shares
of Class B Common Stock.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 29,
1999 with respect to the beneficial ownership of the Company's Class A Common
Stock and Class B Common Stock and also sets forth certain information with
respect to voting power and percentage of ownership as of October 29, 1999, by
(i) each shareholder known by the Company to beneficially own more than 5% of
any class of the Company's outstanding voting securities, (ii) each director and
nominee for director of the Company, (iii) the Chief Executive Officer, the two
former Chief Executive Officers and the other executive officer of the Company
and (iv) all directors and executive officers of the Company as a group. Except
as otherwise noted below, each of the shareholders identified in the table has
sole voting and investment power over the shares beneficially owned by such
person.
<TABLE>
<CAPTION>
Beneficial Ownership of Beneficial Ownership of Common Stock
Class A Common Class B Common ---------------------
Stock (a) Stock % of %
---------------------- ------------------------ Voting Owner-
Name of Beneficial Owner Number Percent Number Percent Power(b) Ship(b)
- ------------------------ ------ ------- ------ ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Ronald S. Lauder(1)(13)............ 331,000(23) 1.8% 7,313,095(30) 91.0% 71.5% 28.4%
Frederic T. Klinkhammer............ 191,000(24) 1.0 -- -- * *
Peter R. Goldscheider.............. -- -- -- -- -- --
Robert R. Grusky................... -- -- -- -- -- --
Herbert S. Schlosser............... 94,000(25) * -- -- * *
Nicolas G. Trollope(2)............. 1,700 * -- -- * *
John A. Schwallie.................. 171,667(26) * -- -- * *
All directors and executive
officers as a group (7 persons).. 789,367(27) 4.1 7,313,095(30) 91.0 71.5 29.7
Jacob Z. Schuster.................. -- -- -- -- -- --
Marie-Monique Steckel.............. -- -- -- -- -- --
Michel Delloye (3) ................ 87,500(28) * -- -- * *
Leonard M. Fertig(4)............... 325,000(29) 1.7 -- -- * 1.2
Vladimir A. Goussinsky(5).......... 4,166,318 22.5 -- -- 4.6 16.2
Mercury Asset Management plc(6).... 2,169,950 11.7 -- -- 2.4 8.4
Warburg, Pincus Asset Management,
Inc.(7).......................... 2,042,600 11.0 -- -- 2.3 8.0
Stephen L. Farley(8)(14)........... 1,830,750 9.9 -- -- 2.0 7.1
Labrador Partners L.P.(8)(15) ..... 1,600,000 8.6 -- -- 1.8 6.2
ValueVest Management Company,
LLC(9)(16)....................... 1,251,000 6.8 -- -- 1.4 4.9
Capital Research and Management
Company(10)(17).................. 1,235,000 6.7 -- -- 1.4 4.8
SMALLCAP World Fund, Inc.(10)(18).. 1,170,000 6.3 -- -- 1.3 4.6
ValueVest Partners, L.P.(9)(19).... 1,076,000 5.8 -- -- 1.2 4.2
Mark A. Reily(11)(20).............. 942,200 5.1 -- -- 1 3.7
Leonard A. Lauder(12)(21) ......... -- -- 1,368,568 19.1 15.2 5.3
EL/RSLG Media, Inc.(1)(22)......... -- -- 646,895 9.0 7.2 2.5
</TABLE>
- ----------------------
* Less than 1.0%
(a) Does not include 7,177,269 shares of Class A Common Stock issuable upon
conversion of shares of Class B Common Stock. Shares of Class B Common
Stock are convertible at any time into shares of Class A Common Stock for
no additional consideration on a share-for-share basis.
(b) Represents the percentage of total voting power and the percentage
ownership of the Class A Common Stock and the Class B Common Stock
currently beneficially owned by each identified shareholder and all
directors and executive officers as a group. The Class A Common Stock and
the Class B Common Stock are the only authorized classes of the Company's
capital stock with shares outstanding.
(1) The address of each of the shareholders indicated is Suite 4200, 767 Fifth
Avenue, New York, New York 10153.
(2) These shares are owned beneficially by the Proverbs Trust of which Mr.
Trollope and his wife are co-trustees and beneficiaries.
(Footnotes continued on next page)
2
<PAGE>
(Footnotes continued from previous page)
(3) Resigned as President, Chief Executive Officer and a director of the
Company on March 23, 1999. Mr. Delloye is no longer required to file
Section 16 reports with the Securities and Exchange Commission in
connection with his beneficial ownership of the Company's securities. The
Company is not aware of any shares of its stock beneficially owned by Mr.
Delloye other than those set forth herein.
(4) Resigned as President and Chief Executive Officer of the Company on March
26, 1998 and as a director of the Company on May 1, 1998. Mr. Fertig is no
longer required to file Section 16 Reports with the Securities and Exchange
Commission in connection with his beneficial ownership of the Company's
securities. The Company is not aware of any shares of its stock
beneficially owned by Mr. Fertig other than those set forth herein.
(5) Information in respect of the beneficial ownership of Mr. Vladimir A.
Goussinsky (other than percentage ownership) is based upon a statement on
Schedule 13D, dated October 22, 1999, filed jointly by Mr. Goussinsky,
Elemental Limited, Media Most Limited, Media Most B.V., Zao Media Most and
Dr. Andre V. Tsimailo. The address of Mr. Goussinsky, Zao Media Most and
Dr. Andre V. Tsimailo is ulitsa Novy Arbat 36, Moscow 121205 Russian
Federation. The address of Elemental Limited and Media Most Limited is
57/63 Line Wall Road, Gibraltar. The address of Media Most B.V. is
Locatellikade 1, 1076 AZ, Amsterdam, Netherlands.
(6) Information in respect of the beneficial ownership of Mercury Asset
Management plc (other than percentage ownership) is based upon a statement
on Schedule 13D, dated December 3, 1997, filed by such person. The address
of Mercury Asset Management plc is 33 King William Street, London, EC4R
9AS, England.
(7) Information in respect of the beneficial ownership of Warburg, Pincus Asset
Management, Inc. (other than its percentage ownership) is based upon a
statement on Schedule 13G filed by such person. The address of Warburg,
Pincus Asset Management, Inc. is 466 Lexington Avenue, New York, New York
10017.
(8) Information in respect of the beneficial ownership of Stephen L. Farley and
Labrador Partners L.P. (other than percentage ownership) is based upon a
statement on Schedule 13G filed jointly by such persons. The address of Mr.
Farley and Labrador Partners L.P. is 655 Third Avenue, Suite 2520, New
York, New York 10017.
(9) Information in respect of the beneficial ownership of ValueVest Management
Company, LLC and ValueVest Partners, L.P. (other than percentage ownership)
is based upon a statement on Schedule 13G filed jointly by such persons.
The address of ValueVest Management Company, LLC and ValueVest Partners,
L.P. is One Sansome Street, 39th Floor, San Francisco, California 94104.
(10) Information in respect of the beneficial ownership of Capital Research and
Management Company and SMALLCAP World Fund, Inc. (other than percentage
ownership) is based upon a statement on Schedule 13G filed jointly by such
persons. The address of both Capital Research and Management Company and
SMALLCAP World Fund, Inc. is 333 South Hope Street, Los Angeles, California
90071. Capital Research and Management Company is an investment adviser
which advises SMALLCAP World Fund, Inc., an investment company.
(11) Information in respect of the beneficial ownership of Mark A. Reily (other
than percentage ownership) is based upon a statement on Schedule 13G filed
by such person. The address of Mr. Reily is 260 Broadway, Suite 2-D, New
York, New York 10013.
(12) Information in respect of the beneficial ownership of Leonard A. Lauder
(other than his percentage ownership) is based upon a statement on Schedule
13D, dated January 25, 1996, filed by such person. The address of Mr.
Leonard Lauder is c/o The Estee Lauder Companies Inc., 767 Fifth Avenue,
New York, New York 10153.
(Footnotes continued on next page)
3
<PAGE>
(Footnotes continued from previous page)
(13) 120,034 of these shares of Class B Common Stock are owned directly by
Ronald S. Lauder, 3,385,417 of these shares of Class B Common Stock are
owned beneficially by RSL Investments Corporation, 1,515,000 of these
shares of Class B Common Stock are owned beneficially by RSL Capital LLC
and 577,788 of these shares of Class B Common Stock are owned beneficially
by Duna Investments, Inc., all of which are owned by Mr. Lauder. 210,461 of
these shares of Class B Common Stock are held by RAJ Family Partners L.P.
and beneficially owned by Mr. Lauder, and 646,895 of these shares of Class
B Common Stock are held by EL/RSLG Media, Inc., of which 50% of the common
stock outstanding is beneficially owned by the 1995 Estee Lauder RSL Trust
and beneficially owned by Mr. Lauder.
(14) 1,600,000 of these shares are also included in the shares reported as being
beneficially owned by Labrador Partners L.P. Mr. Farley is the managing
general partner of Labrador Partners L.P.
(15) These shares are also included in the shares reported as being beneficially
owned by Stephen L. Farley, the managing general partner of Labrador
Partners L.P.
(16) 1,076,000 of these shares are also included in the shares reported as being
beneficially owned by ValueVest Partners, L.P. ValueVest Management
Company, LLC is the general partner of ValueVest Partners, L.P.
(17) 1,170,000 of these shares are also included in the shares reported as being
beneficially owned by SMALLCAP World Fund, Inc., which is advised by
Capital Research and Management Company.
(18) These shares are also included in the shares reported as being beneficially
owned by Capital Research and Management Company, which advises SMALLCAP
World Fund, Inc.
(19) These shares are also included in the shares reported as being beneficially
owned by ValueVest Management Company, LLC, the general partner of
ValueVest Partners, L.P.
(20) 81,000 of these shares are owned directly by Mark A. Reily, 32,000 of these
shares are owned by an IRA F/B/O Reily, 10,000 shares are owned by a SEP
IRA F/B/O Reily, 693,000 shares are owned by Media Group Partners, L.P.
which has a sole general partner, Media Group Management, Inc., of which
Mark A. Reily is a 75% shareholder, and 125,300 shares of Common Stock
owned by Media Group Investments, Ltd., which has as its investment advisor
Vercingetorix Corp., of which Mark A. Reily is a 50% shareholder.
(21) 285,239 of these shares of Class B Common Stock are owned directly by
Leonard A. Lauder. 646,895 of these shares of Class B Common Stock are held
by EL/RSLG Media, Inc., of which 50% of the common stock outstanding is
beneficially owned by the 1995 Estee Lauder LAL Trust, of which Leonard A.
Lauder is a co-trustee and beneficiary. 436,434 of these shares of Class B
Common Stock are held by LWG Family Partners L.P., a partnership whose
managing partner is a corporation which is one-third owned by Mr. Lauder.
(22) These shares are also included in the shares reported as being beneficially
owned by Ronald S. Lauder and Leonard A. Lauder.
(23) Represents shares of Class A Common Stock underlying (i) warrants which are
currently exercisable at exercise prices per share of $16.10 and $30.25 on
250,000 and 70,000 shares of Class A Common Stock, respectively and which
expire on September 9, 2000 and October 2, 2001, respectively, (ii) 10,000
shares of Class A Common Stock underlying options which are currently
exercisable at $23.00 per share and which expire on August 1, 2007, and
(iii) 1,000 shares of Class A Common Stock underlying options which are
currently exercisable, which had an initial exercise price equal to
$22.325, which exercise price increases on the first day of each calendar
quarter by one quarter of 5.57% and which expire on June 8, 2008. Does not
include 9,000 shares of Class A Common Stock underlying options which are
not currently
(Footnotes continued on next page)
4
<PAGE>
(Footnotes continued from previous page)
exercisable and which will not become exercisable within 60 days, but which
had an initial exercise price of $22.325 per share, which exercise price
increases on the first day of each calendar quarter by one-quarter of 5.57%
and which expire on June 8, 2008.
(24) Includes 190,000 shares of Class A Common Stock underlying options which
are currently exercisable at exercise prices per share of $8.3125, $24.00,
and $23.3125 on 150,000, 26,666 and 13,334 shares of Class A Common Stock,
respectively and which expire on March 23, 2009, January 18, 2008 and
February 23, 2008, respectively. Does not include 260,000 shares of Class A
Common Stock underlying options which are not currently exercisable and
which will not become exercisable within 60 days, but of which (i) options
for 26,667 shares have an exercise price of $24.00 per share and expire on
January 19, 2008; (ii) options for 46,667 shares had an initial exercise
price of $24.00 per share, which exercise price increases on each January 1
by 5.55%, compounded annually and which expire on January 19, 2005; (iii)
options for 13,333 shares have an exercise price of $23.3125 per share and
expire on February 23, 2008; (iv) options for 23,333 shares had an initial
exercise price of $23.3125 per share, which exercise price increases on
each January 1 by 5.55%, compounded annually and which expire on February
23, 2005; and (v) options for 150,000 shares have an exercise price of
$8.3125 per share and expire on March 23, 2009.
(25) Includes 90,000 shares of Class A Common Stock underlying options which are
currently exercisable at exercise prices per share of $14.00, $14.63,
$24.50, $21.75 and $23.00 on 10,000, 25,000, 10,000, 25,000 and 20,000
shares of Class A Common Stock, respectively and which expire on October
12, 2004, August 2, 2005, October 17, 2005, August 1, 2006 and August 1,
2007, respectively, and 1,000 shares of Class A Common Stock underlying
options which are currently exercisable, which had an initial exercise
price equal to $22.325, which exercise price increases on the first day of
each calendar quarter by one quarter of 5.57% and which expire on June 8,
2008. Does not include 9,000 shares of Class A Common Stock underlying
options which are not currently exercisable and which will not become
exercisable within 60 days, but which had an initial exercise price of
$22.325 per share, which exercise price increases on the first day of each
calendar quarter by one-quarter of 5.57% and which expire on June 8, 2008.
(26) Represents 165,000 shares of Class A Common Stock underlying options which
are currently exercisable at exercise prices per share of $14.00, $14.63,
$20.75 and $23.00 on 10,000, 50,000, 25,000 and 80,000 shares of Class A
Common Stock, respectively and which expire on October 12, 2004, August 3,
2005, August 14, 2005 and August 1, 2007, respectively, and 6,667 shares of
Class A Common Stock underlying options which are currently exercisable,
which had an initial exercise price equal to $11.438, which exercise price
increases on the first day of each calendar quarter by one quarter of 4.91%
and which expire on August 1, 2003. Does not include 93,333 shares of Class
A Common Stock underlying options which are not currently exercisable and
which will not become exercisable within 60 days, but of which (i) options
for 13,333 shares had an initial exercise price of $11.4375 per share,
which exercise price increases on the first day of each calendar quarter by
one-quarter of 4.91%, and which expire on August 1, 2003; and (ii) options
for 80,000 shares have an exercise price of $13.00 per share and expire on
August 1, 2006.
(27) Includes 457,000 shares of Class A Common Stock underlying options which
are currently exercisable or which will become exercisable within 60 days
and 320,000 shares of Class A Common Stock underlying warrants which are
currently exercisable. Does not include 291,333 shares of Class A Common
Stock underlying options which are not currently exercisable and which will
not become exercisable within 60 days.
(28) Represents 87,500 shares of Class A Common Stock underlying options which
are currently exercisable at an exercise price of $24.563 per share and
which expire on March 23, 2008. Pursuant to Mr. Delloye's severance
agreement with the Company and one of its wholly-owned subsidiaries, all of
Mr. Delloye's other options were terminated. See page 16 hereof for a more
detailed description of the severance agreement.
(Footnotes continued on next page)
5
<PAGE>
(Footnotes continued from previous page)
(29) Represents shares of Class A Common Stock underlying options which are
currently exercisable at exercise prices per share of $14.00, $19.13,
$21.75 and $23.00 on 25,000, 200,000, 50,000 and 50,000 shares of Class A
Common Stock, respectively and which expire on August 10, 2000.
(30) Includes (i) 100,000 shares of Class B Common Stock underlying options
which are currently exercisable at an exercise price of $23.927 per share
and which expire on August 1, 2007, and (ii) 757,500 shares of Class B
Common Stock which, pursuant to a Stock Purchase Agreement (the "RSL
Capital Stock Purchase Agreement"), dated as of December 3, 1998, between
the Company and RSL Capital LLC, Mr. Lauder will receive without additional
consideration, if the last reported trading price of a share of the
Company's Class A Common Stock does not equal or exceed $15.00 on the
Nasdaq Stock Market for at least 20 consecutive trading days during the
year ending November 12, 1999 (so that the effective purchase price for the
shares under the RSL Capital Stock Purchase Agreement will be $10.00 per
share). The Company will issue the additional 757,500 shares to Mr. Lauder
on November 12, 1999.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers, directors and persons who
beneficially own greater than 10% of a registered class of the Company's equity
securities to file certain reports ("Section 16 Reports") with the Securities
and Exchange Commission with respect to ownership and changes in ownership of
the Common Stock and other equity securities of the Company. Based solely on the
Company's review of the Section 16 Reports furnished to the Company and written
representations from certain reporting persons, the Company believes that,
during the fiscal year ended December 31, 1998, all filing requirements under
Section 16(a) applicable to its officers, directors and greater than 10%
beneficial owners were complied with on a timely basis, except that Robert R.
Grusky filed a late Form 3 upon becoming a director of the Company in June 1998.
6
<PAGE>
ELECTION OF DIRECTORS
Seven directors will be elected at the Meeting to serve until the
Company's next annual general meeting of shareholders. The election of directors
requires the affirmative vote of a majority of the votes cast, in person or by
proxy, at the Meeting, provided that a quorum is present in person or by proxy.
Abstentions and broker non-votes will be included in determining the presence of
a quorum, but are not counted as votes cast. Unless otherwise indicated, the
accompanying form of proxy will be voted FOR the persons listed below. At this
time, the Board of Directors knows of no reason why any nominee might be unable
to serve. There is no arrangement or understanding between any director and any
other person pursuant to which such person was selected as a director.
<TABLE>
<CAPTION>
Year
Became a
Name of Nominee Principal Occupation Age Director
- --------------- -------------------- --- --------
<S> <C> <C> <C>
Ronald S. Lauder............... Nonexecutive Chairman of the Board of the Company;
Chairman of RSL Communications, Ltd. 55 1994
Frederic T. Klinkhammer........ President, Chief Executive Officer and Director 54 1999
Peter R. Goldscheider.......... Managing Partner of European Privatization and
Investment Corporation 54 1998
Robert R. Grusky............... President, RSL Investments Corporation 42 1998
Nicolas G. Trollope............ Partner, Conyers Dill & Pearman 52 1994
Jacob Z. Schuster.............. President, RSL Management Corporation 50 Nominee for initial election
Marie-Monique Steckel.......... Consultant to Ronald S. Lauder 60 Nominee for initial election
</TABLE>
Ronald S. Lauder, a founder of the Company, has served as nonexecutive
Chairman of the Board of the Company since its incorporation in 1994. He is also
the co-founder and has served as the Chairman of RSL Communications, Ltd. ("RSL
Communications"), an international telecommunications company, since 1994. Mr.
Lauder is a principal shareholder of The Estee Lauder Companies Inc. ("Estee
Lauder") and has served as Chairman of Estee Lauder International and Chairman
of Clinique Laboratories, Inc., divisions of Estee Lauder, since returning to
the private sector from government service in 1987. From 1986 until 1987, Mr.
Lauder served as U.S. Ambassador to Austria. From 1983 to 1986, Mr. Lauder
served as Deputy Assistant Secretary of Defense for European and NATO Affairs.
Mr. Lauder currently is a director of Estee Lauder. He is Chairman of the Board
of Trustees of the Museum of Modern Art, Chairman of the Council of Presidents
of American Jewish Organizations, President of the Jewish National Fund,
Chairman of the International Public Committee of the World Jewish Restitution
Organization, Treasurer of the World Jewish Congress, a member of the Board of
Governors of the Joseph H. Lauder Institute of Management and International
Studies at the University of Pennsylvania and a member of the Visiting Committee
of the Wharton School at the University of Pennsylvania. He received his B.S. in
International Business from the Wharton School of the University of
Pennsylvania.
Frederic T. Klinkhammer has served as President and Chief Executive
Officer of the Company since March 1999. Mr. Klinkhammer has also served as
President and Chief Executive Officer of CME Development Corporation since March
1999. From January 1998 until March 1999, Mr. Klinkhammer served as Chief
Operating Officer and Executive Vice President of the Company and as Chief
Operating Officer, Executive Vice President and Managing Director of CME
Development Corporation. From July 1992 to December 1997, Mr. Klinkhammer
operated an international broadcasting and telecommunications consulting
practice. Mr. Klinkhammer was founding Chief Executive Officer of MediaLinx, the
multimedia arm of BCE Inc., from March 1993 to August 1996 and was responsible
for the creation of Sympatico, Canada's largest internet service provider. Mr.
Klinkhammer was President and Chief Executive Officer of IMAX Corporation from
August 1990 to June 1992, during which time that company produced its first two
feature length films. From March 1984 to August 1990, Mr. Klinkhammer
7
<PAGE>
served as President and Chief Executive Officer of First Choice, Canada's
largest pay television company. From March 1983 to March 1984, Mr. Klinkhammer
served as Chief Executive Officer of Cablenet Ltd., a multi system cable
operator with operations in the U.S. and Canada. From January 1974 to March
1983, Mr. Klinkhammer served as Vice President-Finance and later Vice President
and General Manager of Citytv in Toronto, Canada. Mr. Klinkhammer, a certified
Management Accountant, is a graduate of Ryerson Polytechnical Institute in
Business.
Peter R. Goldscheider has been co-owner, Managing Partner and Chairman
of the Board of European Privatization and Investment Corporation ("EPIC"), an
investment and merchant bank, since 1991. From March to December 1990, Mr.
Goldscheider co-owned and managed Landerbank Business Development Ges.b.b.H.,
EPIC's predecessor. From March 1977 to February 1987, Mr. Goldscheider was
President for marketing and sales and a Member of the Board of Zurich Kosmos
Insurance Company, an Austrian company. Prior to joining Zurich Kosmos Insurance
Company, Mr. Goldscheider served in a number of executive positions with
International Business Machines Corp. Austria, including Marketing Manager for
Finance (Banking and Insurance). Mr. Goldscheider also serves as Chairman of the
Board of Directors of EPIC Russia (formerly Sector Capital Development Company);
Chairman of the Supervisory board of I. EPIC Holdings, Prague; and President of
the Board of KINTO, Kiev.
Robert R. Grusky has been President of RSL Investments Corporation
since April 1998 and Senior Advisor to Ronald S. Lauder since April 1997. Mr.
Grusky was with Goldman, Sachs & Co., an international investment banking firm,
from 1985 to 1997, with a one-year leave of absence commencing in 1990 during
which he was appointed a White House Fellow by President Bush and served as
Assistant to the then Secretary of Defense Dick Cheney. At Goldman, Sachs, Mr.
Grusky was a member of the Mergers and Acquisitions Department, and later in the
Principal Investment Area. Mr. Grusky is a graduate of the Harvard Business
School, where he received an M.B.A. degree, with distinction, and a graduate of
Union College. He is a member of the Board of Trustees of the Hackley School and
a member of the Board of the Multiple Myeloma Foundation. Mr. Grusky is a
director of International Trading and Investments Holdings S.A. and
deltathree.com, Inc.
Jacob Z. Schuster has been President and Treasurer of RSL Management
Corporation ("RSL Management") since November 1995 and Executive Vice President
of RSL Investments Corporation since March 1994. Mr. Schuster has been Executive
Vice President and Assistant Secretary of RSL Communications since 1994 and
served as the Treasurer of RSL Communications from 1994 through 1998 and as
Chief Financial Officer of RSL Communications from February 1997 until December
1998. From 1986 to 1992, Mr. Schuster was a General Partner and the Treasurer of
Goldman, Sachs & Co. Mr. Schuster is a director of RSL Communications and
deltathree.com, Inc. Mr. Schuster received a B.S. degree from Johns Hopkins
University and an M.B.A. degree from Baruch College.
Marie-Monique Steckel has served as a consultant to Ronald S. Lauder
since September 1999. From 1979 to September 1999, Ms. Steckel served as the
President of France Telecom North America. Ms. Steckel serves as a director of
Lepercq-Istel Fund. Ms. Steckel received a political science degree from the
Institut d'Etudes Politiques in Paris and did graduate work at Yale and Harvard
Business School.
Nicolas G. Trollope has served as Vice President and Secretary of the
Company since January 1997. Mr. Trollope has been a partner with the law firm of
Conyers, Dill & Pearman, Hamilton, Bermuda, since 1991. Mr. Trollope serves as a
director of RSL Communications and Delphi International Ltd., an insurance
company. Mr. Trollope received an LL.B. degree from London University.
Committees of the Board
The Board of Directors has an Audit Committee which is composed of
Messrs. Goldscheider, Lauder and Herbert S. Schlosser, a current director who is
retiring from the Board of Directors. Prior to the 1998 Annual General Meeting
of Shareholders, the Audit Committee was composed of Messrs. Lauder and
Schlosser and Andrew Gaspar (who did not stand for re-election to the Board of
Directors in June 1998). Robert A. Rayne served on the Audit Committee following
the Company's 1998 Annual General Meeting of Shareholders until his resignation
from the Company's Board of Directors on September 28, 1998. The Audit Committee
is responsible for recommending annually to the Board of Directors the
independent auditors to be retained by the Company, reviewing with the
independent auditors the scope and results of the audit engagement and
establishing and monitoring the Company's financial policies and control
procedures. During the fiscal year ended December 31, 1998, the Audit Committee
met on one occasion.
8
<PAGE>
The Board of Directors has a Compensation Committee which is composed
of Messrs. Lauder and Trollope. Prior to the Company's 1998 Annual General
Meeting of Shareholders, the Compensation Committee was composed of Messrs.
Lauder, Gaspar and Rayne. Mr. Rayne served on the Compensation Committee until
his resignation from the Company's Board of Directors on September 28, 1998. Mr.
Grusky served on the Compensation Committee beginning immediately following the
Company's 1998 Annual General Meeting of Shareholders for the remainder of 1998.
The Compensation Committee is responsible for determining executive compensation
policies and guidelines and for administering the Company's 1994 Stock Option
Plan (the "1994 Stock Option Plan") and the Company's 1995 Stock Option Plan
(the "1995 Stock Option Plan"; collectively, the 1994 Stock Option Plan and the
1995 Stock Option Plan may be referred to as the "Stock Option Plans"),
including granting options and setting the terms thereof pursuant to such plans.
In addition, the Compensation Committee is responsible for the administration of
the Company's Director, Officer and Senior Executive Co-Investment Plan and for
reviewing and approving significant employment agreements. During the fiscal
year ended December 31, 1998, the Compensation Committee met on three occasions.
The Board of Directors has a Nominating Committee which is composed of
Messrs. Lauder, Goldscheider, Schlosser and Trollope. The Nominating Committee
is responsible for reviewing qualifications of candidates for Board membership,
recommending to the Board of Directors candidates for membership on the Board
and the annual slate of nominees for director, and recommending to the Board of
Directors criteria for Board membership, composition of the Board, tenure of
directors and fees to be paid to directors. The Nominating Committee does not
consider nominees recommended by shareholders. The Nominating Committee did not
meet during the fiscal year ended December 31, 1998.
During the fiscal year ended December 31, 1998, the Board of Directors
met, or acted by unanimous consent, on 14 occasions. Each member of the Board of
Directors attended at least 75% of the aggregate number of meetings of the Board
of Directors and the Committees of the Board on which they served during the
periods that they served.
There is no family relationship among any directors or executive
officers of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE
ELECTION OF THE SEVEN NOMINEES TO THE COMPANY'S BOARD OF DIRECTORS.
DIRECTOR NOT STANDING FOR RE-ELECTION
Herbert S. Schlosser, age 73, who has served on the Board of Directors
since 1994, is not standing for re-election. Mr. Schlosser is a Senior Advisor
to Schroder & Co. Inc., an international investment banking firm.
EXECUTIVE OFFICER
Set forth below is certain information describing the Company's
executive officer who is not a nominee for director:
John A. Schwallie, age 36, has served as Vice President-Finance and
Chief Financial Officer of the Company since August 1995. Mr. Schwallie, a
certified public accountant, served as Financial Director of CNTS, the Company's
Czech Republic subsidiary, from 1994 until August 1995. From 1992 until 1993,
Mr. Schwallie served as the Advisor to the Financial Director of Prague
Breweries, the second largest brewery in the Czech Republic. During 1991, he
served as the assistant to the Regional Director of General Atlantic, a London
based multi-billion dollar privately held conglomerate, operating retail outlets
in Prague. Mr. Schwallie received his B.S. degree from Skidmore College and his
M.B.A. degree from Cornell University.
There is no arrangement or understanding between any executive officer
and any other person regarding selection as an executive officer.
9
<PAGE>
OTHER SIGNIFICANT EMPLOYEE
Set forth below is certain information describing an additional
significant employee of the Company:
Erik T. Moe, age 41, has served as General Counsel and Vice President
for Business Affairs of the Company since October 1999. From July 1997 until
October 1999, Mr. Moe served as Director of the Company's Legal Department. From
1993 through May 1997, Mr. Moe worked as an associate at the law firm of
Shearman & Sterling in New York City in the firm's International Financial
Group. From 1991 through 1992, Mr. Moe worked in the Legal Department of the
Inter-American Development Bank in Washington, D.C. From 1989 to 1991, he worked
as an associate at the law firm of Arnold & Porter in Washington, D.C. Mr. Moe
worked as a judicial clerk in the U.S. District Court in the District of Puerto
Rico during 1988 and 1989. Mr. Moe received his B.A. from the American
University and his Juris Doctor degree from Georgetown University Law Center.
10
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes all plan and non-plan compensation
awarded to, earned by, or paid to the Company's present and two former Chief
Executive Officers and its other executive officer (together, the "Named
Executive Officers") who either served as executive officers during, or were
serving as executive officers at the end of, the last completed fiscal year
ended December 31, 1998, for services rendered in all capacities to the Company
and its subsidiaries for each of the Company's last three fiscal years.
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
Awards
Annual Compensation ----------------------
-------------------------------------------- Securities
Other Annual Restricted Underlying All Other
Name and Salary Bonus Compensation Award(s) Options Compensation
Principal Position Year $ $ $ $ # $
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Frederic T. Klinkhammer 1998 300,000 200,000 74,700(4) -- 150,000 504(9)
President and Chief
Officer(1)....................
John A. Schwallie 1998 235,417 80,000 39,843(5) -- 20,000 1,008(9)
Vice President-Finance 1997 210,417 75,000 -- -- 80,000 --
and Chief Financial Officer... 1996 184,375 50,000 -- -- -- 696(9)
Michel Delloye 1998 271,943 -- 254,125(4) -- 225,000 60(9)
Former President and Chief
Executive Officer (2).........
Leonard M. Fertig 1998 182,341 -- 59,769(6) -- -- 774,682(10)
Former President and Chief 1997 334,821 150,000 67,562(7) -- 50,000 --
Executive Officer (3)......... 1996 309,840 150,000 64,358(8) -- 50,000 --
</TABLE>
- ----------------------
(1) Mr. Klinkhammer served as Chief Operating Officer and Executive Vice
President of the Company from January 1, 1998 until he was promoted to
President and Chief Executive Officer of the Company on March 23, 1999. Mr.
Klinkhammer entered into a revised employment agreement with the Company on
March 23, 1999 (see pages 14 and 15).
(2) Mr. Delloye served as President and Chief Executive Officer of the Company
from March 26, 1998 until his resignation on March 23, 1999. Mr. Delloye
entered into a severance agreement with the Company and one of its
wholly-owned subsidiaries, dated as of July 27, 1999. See page 16 for a
discussion of the terms of such severance agreement and various payments
made to Mr. Delloye by the Company in 1999.
(3) Mr. Fertig resigned as President and Chief Executive Officer of the Company
on March 26, 1998. Thereafter, Mr. Fertig received a salary as an employee
of the Company and other compensation as a consultant to the Company
pursuant to a severance agreement (see pages 16 and 17).
(4) Represents an expatriate premium paid by the Company pursuant to the terms
of an employment agreement.
(5) Represents a living allowance paid by the Company pursuant to the terms of
an employment agreement.
(6) Represents housing costs paid by the Company.
(7) Of this amount, $59,004 represents housing costs paid by the Company and
$8,558 represents use of a Company automobile.
(8) Of this amount, $55,800 represents housing costs paid by the Company and
$8,558 represents use of a Company automobile.
(9) Represents life insurance benefits paid by the Company.
(Footnotes continued on next page)
11
<PAGE>
(Footnotes continued from previous page)
(10) Of this amount, $600,000 represents payments made to Mr. Fertig by the
Company because he was unable to sell his shares of Class A Common Stock at
certain minimum prices pursuant to a severance agreement entered into
between Mr. Fertig and the Company and two of its wholly-owned
subsidiaries, $10,000 represents payments made to Mr. Fertig by the Company
for legal expenses in connection with negotiation of the severance
agreement, and $164,682 represents payments made to Mr. Fertig and a
company owned by Mr. Fertig for consulting services provided to the Company
and the two subsidiaries pursuant to the severance agreement. See pages 16
and 17 for a discussion of the terms of such severance agreement and
various payments made to Mr. Fertig by the Company.
No stock appreciation rights or long-term incentive plan awards (all as
defined in the proxy regulations of the Securities and Exchange Commission) were
awarded to, earned by, or paid to the Named Executive Officers during the time
periods described above.
Option Grants In Last Fiscal Year
The following table sets forth information with respect to grants of
options to purchase shares of Class A Common Stock granted to the Named
Executive Officers during the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------- Potential Realizable
Percent of Value at Assumed Annual
Number of Total Rates of Stock Price
Securities Options Appreciation
Underlying Granted to for Option Term (7)
Options Employees Exercise ------------------------
Granted In Fiscal Price Expiration 5% 10%
Name (#)(6) Year ($/sh) Date ($) ($)
- ---- --- ---- ------ ---- --- ---
<S> <C> <C> <C> <C> <C> <C>
Frederic Klinkhammer........... 53,333 9.36 24.0000 1/19/08 805,000 2,040,000
46,667 8.19 (1) 1/19/05 704,000 1,785,000
26,667 4.68 23.3125 2/23/08 391,000 991,000
23,333 4.09 (2) 2/23/05 342,000 867,000
John A. Schwallie.............. 20,000 3.51 (3) 8/1/03 144,000 365,000
Michel Delloye................. 175,000(4) 30.70 24.5630 3/23/08 2,703,000 6,851,000
50,000(4) 8.77 (5) 3/23/05 772,000 1,957,000
Leonard M. Fertig.............. 0 0.00 -- -- -- --
</TABLE>
- ----------------------
(1) The initial exercise price of such options was equal to $24.00 per share
and increases on each January 1 by 5.55%.
(2) The initial exercise price of such options was equal to $23.3125 per share
and increases on each January 1 by 5.55%.
(3) The initial exercise price of such options was equal to $11.4375 per share
and increases on the first day of each calendar quarter by 25% of 4.91%,
compounded annually.
(4) Pursuant to Mr. Delloye's severance agreement with the Company and one of
its wholly-owned subsidiaries (see page 16), all of these options, other
than options as to 87,500 shares of Class A Common Stock with an exercise
price equal to $24.563 per share, were terminated.
(5) The initial exercise price of such options was equal to $24.563 per share
and was to increase each calendar quarter by 25% of 5.63%, compounded
annually.
(Footnotes continued on next page)
12
<PAGE>
(Footnotes continued from previous page)
(6) See - "Executive Compensation - Employment Agreements, Termination of
Employment and Changes-in-Control Arrangements" on pages 14-17 for
information on dates of exercisability for these options.
(7) The values reflected in these columns assume an appreciation of the
Company's stock price from the applicable exercise price for the options.
The chart below shows the value of unexercised options as of December 31,
1998 based on the difference between the applicable exercise price for
options and the Company's closing stock price on such date.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth information with respect to each
exercise of stock options during the fiscal year ended December 31, 1998 by the
Named Executive Officers and the value at December 31, 1998 of unexercised stock
options held by the Named Executive Officers.
<TABLE>
<CAPTION>
Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
Shares Acquired Value Fiscal Year-end Fiscal Year-End(1)
On Exercise Realized (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- --- --- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Frederic Klinkhammer... 0 0 0/150,000 0/0
John A. Schwallie...... 0 0 125,000/60,000 0/0
Michel Delloye......... 0 0 0/225,000(2) 0/0
Leonard M. Fertig...... 0 0 325,000/0 0/0
</TABLE>
- -----------------
(1) Fair market value of securities underlying the options at fiscal year end
minus the exercise price of the options.
(2) Pursuant to Mr. Delloye's severance agreement with the Company and one of
its wholly-owned subsidiaries (see page 16), all of these options, other
than options as to 87,500 shares of Class A Common Stock with an exercise
price equal to $24.5630 per share, were terminated.
Compensation of Directors
The Company pays a cash fee to each of its non-employee directors of
$10,000 per annum. In addition, on the first business day following each annual
general meeting of the Company's shareholders during the term of the 1995 Stock
Option Plan, each non-employee director of the Company (other than Mr. Trollope
who declines such options, but including for these purposes the Chairman) who
has served as a director since the last annual general meeting of shareholders
will be granted options to purchase 10,000 shares (or, in the case of the
Chairman, such higher number as the Board of Directors shall determine) of Class
A Common Stock (in the case of the Chairman, Class B Common Stock). For the
non-employee directors, the exercise price of the options will equal the average
of the closing price of a share of Class A Common Stock for the 10 business days
following the annual meeting (105% of the fair market value of a share of Class
A Common Stock in the case of an option to acquire Class B Common Stock) plus a
premium reflecting the risk-free rate of return based on the life of the option.
The options will vest over the five year period from the date of grant and will
expire 10 years from the date of grant.
The Company reimburses each director for expenses in connection with
attending meetings of the Board of Directors. Mr. Trollope is a partner in the
law firm of Conyers Dill & Pearman, Hamilton, Bermuda, which served as the
Company's Bermuda counsel for the fiscal year ended December 31, 1998 and has
continued to serve as the Company's Bermuda counsel in 1999. For the fiscal year
ended December 31, 1998, the Company paid fees of $148,852 to Conyers, Dill &
Pearman, which includes the services of Mr. Trollope as a director. No separate
compensation is paid to any director for serving on committees. Directors who
are also employees of the Company receive no additional compensation for service
as a director.
On August 1, 1996, the Company and Mr. Schlosser entered into a
consulting agreement which expired in accordance with its terms on July 31,
1999. Under the consulting agreement, Mr. Schlosser served as a consultant to
the Company and, at the request of the Company's management, performed general
consulting services relating to
13
<PAGE>
the Company's broadcast operations. Pursuant to the agreement, the Company paid
Mr. Schlosser at the rate of $100,000 per annum through July 31, 1999, initially
granted Mr. Schlosser 10 year options to purchase 15,000 shares of Class A
Common Stock at an exercise price equal to $21.75 per share, and on August 1,
1997 granted Mr. Schlosser additional 10 year options to purchase 10,000 shares
of Class A Common Stock at an exercise price equal to $23.00 per share. Such
options are in addition to those granted separately to Mr. Schlosser for serving
as a director.
The Board of Directors adopted a set of principles on March 11, 1998
(the "Compensation Principles") for the compensation of the Company's executives
and other key employees, as well as the Company's non-employee directors. As the
Compensation Principles apply to directors, they express the Company's belief
that it is important for non-employee directors to have a meaningful equity
interest in the Company and to have the bulk of their compensation paid in
equity-related items. In order to encourage the Company's non-employee directors
to increase their ownership of the Company's Common Stock, under the
Compensation Principles (as they apply to non-employee directors), the Board
will, under the 1995 Stock Option Plan, grant to any person who is not currently
a director of the Company and who becomes a non-employee director of the
Company, an option to acquire a share of Class A Common Stock (or Class B Common
Stock if such person is eligible to hold Class B Common Stock under the
Company's Bye-Laws) for each share of Common Stock that he or she purchases
within 90 days of his or her first election to the Board of Directors, up to a
maximum of 25,000 shares. If a current non-employee director purchases a number
of shares of Common Stock at least equal to the number of shares underlying
options that have previously been granted to such non-employee director, in his
capacity as a director, the Board will, under the 1995 Stock Option Plan, grant
an option to acquire a share of Class A Common Stock (or Class B Common Stock if
such person is eligible to hold Class B Common Stock under the Company's
Bye-Laws) for each share of Common Stock purchased within 90 days thereafter, up
to a maximum of 25,000 shares. Any such option granted to a non-employee
director will generally become exercisable as to 10% on the first anniversary of
the grant date, an additional 15% on each of the second and third anniversaries
of the grant date, an additional 25% on the fourth anniversary of the grant date
and an additional 35% on the fifth anniversary of the grant date and will expire
on the earlier of (a) 30 days after the recipient ceases to serve as a director
for any reason other than death or disability, (b) one year following the date
the recipient ceases to serve as a director as a result of his or her death or
disability and (c) the tenth anniversary of the date of grant. Under the
Company's Director, Officer and Senior Executive Co-Investment Plan,
non-employee directors are permitted to purchase such shares directly from the
Company (but non-employee directors are not eligible to receive loans from the
Company under the Director, Officer and Senior Executive Co-Investment Plan). No
director took advantage of the share purchase plan in 1998. While not required,
all directors are encouraged to hold their shares of the Company's Common Stock,
or options convertible into shares of the Company's Common Stock, as long as
they serve as directors (other than making charitable gifts, transfers for
estate planning purposes or sales for tax reasons relating to the exercise of
stock options).
Employment Agreements, Termination of Employment and Change-in-Control
Arrangements
Frederic T. Klinkhammer
Frederic T. Klinkhammer has entered into employment agreements dated as
of January 1, 1998 and amended as of March 23, 1999 with the Company and a
wholly-owned subsidiary of the Company. The employment agreements provide that
Mr. Klinkhammer will serve as President and Chief Executive Officer of the
Company and such subsidiary. Prior to March 23, 1999, under the employment
agreements, Mr. Klinkhammer served as Executive Vice President and Chief
Operating Officer of the Company and Executive Vice President, Managing Director
and Chief Operating Officer of such subsidiary. Pursuant to Mr. Klinkhammer's
employment agreement with the Company, as amended, the Company was required to
name Mr. Klinkhammer to its Board of Directors and the Board is required to
nominate Mr. Klinkhammer for election and re-election to the Board of Directors
of the Company during his term of employment with the Company. Under the
employment agreements, Mr. Klinkhammer will be entitled to receive a base salary
of $350,000 per year which will be increased annually, commencing on March 23,
2000, by 5% or such greater amount determined at the option and sole discretion
of the Compensation Committee, and an expatriate premium of UK (pound)104,000
per annum (plus an additional amount based on the increase in the consumer price
index in the London metropolitan area). The employment agreements provide for an
annual cash bonus opportunity of 75% of base salary if performance is at 100% of
target performance goals established by the Compensation Committee for such year
and up to 100% of his base salary if performance is at or above 150% of such
target. For the 1998 year, Mr. Klinkhammer was given a cash bonus of $200,000.
The employment agreements also provide that Mr. Klinkhammer will receive an
additional one time bonus of $1,000,000 if he is employed by the Company or any
successor corporation to the Company on December 31, 2003
14
<PAGE>
and if the price of the Company's Class A Common Stock has increased from its
price as of March 22, 1999 (i.e., $8.3125 per share) and the percentage increase
exceeds that of the Nasdaq Composite Index for such period.
Under the amendment to Mr. Klinkhammer's employment agreement with the
Company, on his being named Chief Executive Officer on March 23, 1999 he was
awarded options to acquire 300,000 shares of the Company's Class A Common Stock
at an exercise price equal to $8.3125 per share, the mean between the high and
low trading prices of the Company's Class A Common Stock on the date of grant.
As to 150,000 of such options, the options became exercisable on March 23, 1999
and as to the remaining 150,000 options, such options will become exercisable in
five equal installments on each of the first five anniversaries of the date of
grant, provided that Mr. Klinkhammer is employed by the Company on each such
anniversary date. All 300,000 of such options are fixed price, that is the
exercise price does not increase over time, and will expire on March 23, 2009
(10 years). Under Mr. Klinkhammer's employment agreement with the Company, at
the time he was first hired as Executive Vice President and Chief Operating
Officer, he was also awarded in 1998 options to acquire, in the aggregate,
150,000 shares of the Company's Class A Common Stock. The initial exercise price
of 100,000 of these options is $24.00 per share and the initial exercise price
of 50,000 of these options is $23.3125 per share. In each case, this was the
mean between the high and low trading prices of the Company's Class A Common
Stock on the date of grant. As to 80,000 of such options, the options will
generally become exercisable in equal installments on each of the first two
anniversaries of the date of grant and will generally remain exercisable for ten
years (40,000 of these options are currently exercisable). As to 70,000 of such
options, the options will generally become exercisable in equal annual
installments on the third and fourth anniversaries of the grant date and on
December 31, 2002, will generally expire on the seventh anniversary of the grant
date, and the exercise price per share will be increased on each January 1 by
5.55% (per annum), the rate at the time of grant for 7 year U.S. Treasury
securities. All options granted to Mr. Klinkhammer will become exercisable in
the event that Mr. Klinkhammer's employment is terminated by the Company as a
result of a change in control of the Company or in the event of a merger,
reorganization or consolidation in which the Company is not the surviving
corporation. The timing and amount of any subsequent option awards will be at
the discretion of the Compensation Committee and approved by the Board of
Directors, and will be commensurate with Mr. Klinkhammer's position with the
Company and taking into account option awards made to other executives of the
Company.
Mr. Klinkhammer's employment agreements also contain noncompetition
provisions applicable during the term of the employment agreement and for a two
year period thereafter, prohibit Mr. Klinkhammer from using confidential
information of the Company during the term of the employment agreements and
thereafter, and specify certain benefits and perquisites that Mr. Klinkhammer
shall be entitled to receive. The term of the employment agreements generally
expire on March 22, 2004. The employment agreements provide that if Mr.
Klinkhammer's employment agreements are not extended at the expiration of the
five year term, he will serve as a part-time consultant for two years following
such expiration, for which he will be paid $250,000 per annum.
John A. Schwallie
John A. Schwallie, Vice President-Finance and Chief Financial Officer
of the Company, has employment agreements dated as of August 1, 1999 with the
Company and a wholly-owned subsidiary of the Company. Under the employment
agreements, Mr. Schwallie will receive an aggregate annual salary of $250,000.
In addition, under such agreements Mr. Schwallie receives a monthly living
allowance of UK (pounds)3,333.33 for each calendar month during which he
maintains a principal residence in the Greater London metropolitan area. Mr.
Schwallie's salary and monthly living allowance will be increased annually
commencing on August 1, 2000 to reflect the increase in the consumer price index
in the London metropolitan area for the previous calendar year. Mr. Schwallie
will have the opportunity to earn an annual cash bonus for each full year of his
employment of up to a maximum of 33% of his annual base salary if 100% of the
projected EBITDA approved by the Board of Directors for the Company is achieved.
Mr. Schwallie may receive a bonus less than the maximum amount, provided, that
the Company achieves at least 80% of projected EBITDA. For 1999, Mr. Schwallie
will receive a payment from the Company equal to 50% of his base salary if the
Company or any subsidiary or affiliate obtains a television broadcast license in
the Czech Republic, or enters into an exclusive services agreement with a holder
of a broadcast license in the Czech Republic. Such payments would be in lieu of
any other bonus payments available to Mr. Schwallie in 1999. Mr. Schwallie, who
had previously been granted options to purchase 185,000 shares of Class A Common
Stock, 171,667 of which are currently exercisable, has been granted 7 year
options under his current agreements to purchase an additional 80,000 shares of
Class A Common Stock at an exercise price of $13.00 per share. In the event of a
merger, reorganization or consolidation in which the Company is not the
surviving corporation, then all options which have been granted to Mr. Schwallie
shall become immediately exercisable. The employment agreements
15
<PAGE>
contain a confidentiality covenant and a non-compete covenant which has a term
of two years after the termination of Mr. Schwallie's employment. The terms of
the employment agreements generally expire on July 31, 2002.
Termination of Employment
Michel Delloye
The Company and one of its wholly-owned subsidiaries entered into a
severance agreement, dated as of July 27, 1999, with Michel Delloye, who
resigned as President, Chief Executive Officer, and a director of the Company on
March 23, 1999. Pursuant to the severance agreement, most of the provisions of
certain employment agreements between Mr. Delloye, the Company and its
subsidiary were terminated. Under the severance agreement, the Company and its
subsidiary agreed to pay Mr. Delloye lump sum severance payments of $846,000 and
UK(pounds)275,000, respectively, offset by an amount equal to UK(pounds)63,365,
which amount had been advanced by the Company and its subsidiary to Mr. Delloye
in connection with the acquisition of a house and related costs. In addition,
under the severance agreement, the Company agreed to pay to Mr. Delloye's
lawyers the sum of $25,000 for legal expenses in connection with the
representation of Mr. Delloye in connection with his relationship with the
Company and its subsidiary.
Under the employment agreements, Mr. Delloye had been granted options
to purchase 225,000 shares of Class A Common Stock. Under the severance
agreement, 87,500 options became exercisable immediately prior to Mr. Delloye's
resignation on March 23, 1999, and will remain exercisable until March 23, 2000.
The remaining options were terminated as of March 23, 1999.
Mr. Delloye continues to be subject to provisions in the employment
agreements with regard to noncompetition and a prohibition on the use of
confidential information, except that the noncompetition provisions will expire
as of January 1, 2000.
Leonard M. Fertig
The Company and two of its wholly-owned subsidiaries entered into a
severance agreement, dated as of March 25, 1998, with Leonard M. Fertig, who
resigned as the Company's President and Chief Executive Officer on March 26,
1998. Mr. Fertig also resigned as a director of the Company on May 1, 1998.
Pursuant to the severance agreement, certain employment and consulting
agreements between Mr. Fertig, a company owned by Mr. Fertig, and the Company
and these subsidiaries were terminated. Under the severance agreement, Mr.
Fertig continued as an employee and his consulting company continued its
consulting arrangements on a full-time basis until May 1, 1998, and thereafter
on a part time basis through August 10, 1998. After August 10, 1998, Mr. Fertig
continued to serve as a consultant and his consulting company continued to
provide consulting services until August 10, 1999. From March 26, 1998 until
August 10, 1999, Mr. Fertig received a base salary (prior to August 10, 1998)
and consulting fee (after August 10, 1998) of $300,000 per year, and his
consulting company received a fee of $50,000 per year.
Until August 10, 1999, Mr. Fertig received an expatriate payment of UK
(pounds)3,000 per month.
Pursuant to the severance agreement, in September 1998, Mr. Fertig
purchased from the Company for $4,658 (the book value) the automobile which had
been available for his use in the Netherlands and the Company paid Mr. Fertig
$10,000 for legal expenses in connection with the negotiation of the severance
agreement.
The severance agreement provided for Mr. Fertig to be paid a bonus of
$150,000 for services performed during 1997.
Under previous agreements, Mr. Fertig had been granted options to
purchase 325,000 shares of Class A Common Stock, 225,000 of which were
exercisable at the time of his resignation from the Company's Board of Directors
on May 1, 1998. Under the severance agreement, the remaining unexercisable
options became exercisable on May 1, 1998. All 325,000 options will generally
remain exercisable until the one year anniversary of the date on which Mr.
Fertig ceased to be an employee of, or consultant to, the Company.
16
<PAGE>
Under the severance agreement, Mr. Fertig agreed not to sell more than
50,000 shares of the Company's Class A Common Stock prior to August 1, 1998, the
three month anniversary of the date on which he ceased to be a member of the
Board of Directors of the Company. In addition, the Company agreed that if Mr.
Fertig was not able to sell his shares of Class A Common Stock at certain
minimum prices, the Company would make certain additional payments to Mr. Fertig
up to a maximum of $600,000 in the aggregate. On September 2, 1998, Mr. Fertig
was paid such $600,000 maximum by the Company.
Mr. Fertig continues to be subject to a confidentiality covenant. Under
the severance agreement, Mr. Fertig converted all of his shares of Class B
Common Stock of the Company into shares of Class A Common Stock of the Company.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee at the end of the fiscal year
ended December 31, 1998 were Ronald S. Lauder and Nicolas G. Trollope, who is
the Secretary and a Vice President of the Company. Prior to the 1998 Annual
General Meeting of Shareholders, the Compensation Committee was composed of
Messrs. Lauder, Gaspar (who did not stand for re-election to the Board of
Directors in June 1998) and Rayne. Mr. Rayne continued to serve on the
Compensation Committee until his resignation from the Board of Directors of the
Company on September 28, 1998. Mr. Grusky served on the Compensation Committee
beginning immediately following the Company's 1998 Annual General Meeting of
Shareholders for the remainder of 1998. See "Compensation of Directors" and
"Certain Relationships and Related Transactions."
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<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's compensation programs for its officers, select operating
managers of the Company's principal subsidiaries and station managers are
administered by the Compensation Committee, which also administers the Company's
Stock Option Plans and its Director, Officer and Senior Executive Co-Investment
Plan. This report sets forth the Board of Directors' Compensation Principles and
how the Compensation Committee applied the Principles to the compensation of the
Company's executive officers during the 1998 fiscal year, and details how those
policies were applied in determining the compensation of the Company's former
Chief Executive Officer, Michel Delloye, with respect to such fiscal year.
Compensation for Leonard Fertig, the Company's former Chief Executive Officer,
was formulated under previous policies.
Compensation Philosophy
The Company seeks highly motivated individuals who are self starters.
To attract and retain such individuals, the Company's base compensation may be
somewhat less than might otherwise be available to an employee in light of his
or her experience and position, but the Company will provide significant
opportunities in the form of bonuses, stock options and incentives to acquire
stock in the Company for excellent performance by the employee that advances the
interests of shareholders, such that an employee's total compensation may fall
within a comparative range (determined by the Compensation Committee) of
compensation offered by outstanding media companies.
Annual Bonus for Executives and Officers
The Company has implemented an annual bonus plan for officers of the
Company, CEOs of principal subsidiaries and station managers that provides
participants an opportunity to earn bonuses equal to a specified percentage of
their salaries. A portion of the bonus (determined by the Compensation
Committee) will be based on the achievement of company-wide financial objectives
(such as attributable revenue and EBITDA) established by the Compensation
Committee, and the remainder will be based on an evaluation of personal
performance submitted by management and approved by the Compensation Committee.
The annual bonus plan is not applicable to employees who were employed by the
Company prior to March 11, 1998 and who then had an agreement providing for a
different bonus opportunity.
Co-investment Opportunity
The Board of Directors believes that it is in the best interests of the
Company and its shareholders for the Company's most senior executives to hold a
meaningful amount of their liquid net worth in Common Stock of the Company, and
to bear risk of loss, as well as upside, with respect to the Company's Common
Stock. This will encourage the executives to think as owners of the Company, and
further align their interests with those of the Company and its shareholders.
Accordingly, the Board of Directors has established the Director, Officer and
Senior Executive Co-Investment Plan which was approved by the shareholders of
the Company at its 1998 Annual General Meeting of Shareholders. Under the
Director, Officer and Senior Executive Co-Investment Plan, the Company is
authorized to make matching non-recourse loans (or recourse loans), on a
dollar-for-dollar basis, to eligible senior executives of the Company and key
station managers who purchase Company Common Stock (other than through exercise
of options). The financed shares shall be pledged as security for such loans,
and may not be sold until the executive's employment is terminated or after
seven years, whichever period is shorter. The aggregate amount of such loans at
any time outstanding to all senior executives may not exceed $2,000,000. Any
such loans will bear interest at the rate specified in the plan. At any time,
the maximum amount of any such loans to a particular executive that may be
outstanding may not exceed such executive's annual base salary. Any such loan
shall be come due at the earlier of (a) the expiration of 7 years, (b)
termination of employment for any reason other than death or disability, (c) one
year after termination of employment by reason of death or disability and (d)
sale of the non-financed shares (in which case the loan shall become due on a
pro rata basis with the non-financed shares sold). A participant shall be
required to apply 25% of his or her annual cash bonus to repay the principal of
any such loan. To encourage further ownership of Company Common Stock, the
Compensation Committee may match share purchases with grants of options to
acquire Class A Common Stock under the 1995 Stock Option Plan. In addition, to
facilitate purchases of Class A Common Stock, the Company is authorized to sell
shares of Class A Common Stock to a participant in the Director, Officer and
Senior Executive Co-Investment Plan, although shares eligible for matching loans
may (to the extent permitted by applicable laws and regulations) also be
purchased on the open market.
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<PAGE>
Key executives and senior managers are encouraged to hold Company
Common Stock having a value at least equal to their base salaries.
Stock Options
Corporate Officers, CEOs of Principal Subsidiaries and Station
Managers. Stock options under the 1995 Stock Option Plan may but need not be
granted annually, depending on individual and Company performance. Except in
unusual situations approved in advance by the Compensation Committee, option
grants will be limited to non-employee directors, corporate officers, CEOs of
principal subsidiaries and key station managers. To continue the Company's
culture of broad equity ownership, thereby aligning the interests of employees
with those of the Company's shareholders, but to avoid excess dilution of the
Company's shareholders, the Company may grant phantom equity or other similar
equity-linked incentives to employees other than those specified above who
formerly might have been awarded stock options. Phantom equity and other similar
incentives will, most likely, increase the Company's U.S. GAAP reported
compensation expense compared to issuing fixed-price options, but the Company
believes that it may more accurately reflect the Company's costs.
Option grants will generally take any of the following three forms, at
the discretion of the Compensation Committee.
<TABLE>
<CAPTION>
Expiry Vesting Schedule (Years)
- --------------------------------------------------------------------------------------------------------------------
1 2 3 4 5
<S> <C> <C> <C> <C> <C> <C>
Two-year options................ 5 years 33% 67%
Three-year options.............. 7 years 25% 30% 45%
Five-year options............... 10 years 10% 15% 15% 25% 35%
</TABLE>
The exercise price of each option on shares of Class A Common Stock
will not be less than the fair market value on the date the grant is approved by
the Compensation Committee. The Company will not, as a matter of principle,
reprice options downward. The Compensation Committee may set the exercise price
of options:
o at a fixed price plus a premium tied to a risk-free rate of
return;
o at a price which escalates over time tied to a risk-free rate of
return;
o at a price which is indexed to the stock performance of a peer
group or stock market average; or
o at a price based on such other mechanisms as the Compensation
Committee thinks appropriate to reflect carrying costs, and to
incentivize holders.
Options will expire on the earlier of their stated expiration date or
one year after termination of an executive's employment, except that options
terminate immediately following a termination for cause and 90 days following a
voluntary termination by the executive. If there is a Change in Control of the
Company, options generally will become exercisable if an executive is thereafter
terminated by the Company other than for cause, or if the executive terminates
for good reason. Options that have not vested at the time of termination of
employment cannot be exercised.
Directors. Under the 1995 Stock Option Plan, on the first business day
following each annual general meeting of the Company's shareholders during the
term of the 1995 Stock Option Plan, each non-employee director of the Company
(including for these purposes the Chairman) who has served as a director since
the last annual general meeting of shareholders will be granted options to
purchase 10,000 shares (or, in the case of the Chairman, such higher number as
the Board of Directors shall determine) of Class A Common Stock (in the case of
the Chairman, Class B Common Stock). Under the 1995 Stock Option Plan, the
exercise price of the options will not be less than the fair market value of the
Class A Common Stock on the date of grant (105% of the fair market value of the
Class A Common Stock in the case of an option to acquire Class B Common Stock)
for the 10 business days following the date of grant. In the case of any such
options granted immediately following the Meeting, the Board has determined that
the exercise price will be fixed at a price equal to the fair market value of
the Class A Common Stock on the date of grant (105% of the fair market value of
the Class A Common Stock in the case of an option to acquire Class B Common
Stock) for the 10 business days following the date of grant plus a premium
reflecting the risk-free rate of return based on the life of the option. The
options will be exercisable as to 10% on the first
19
<PAGE>
anniversary of the grant date, an additional 15% on each of the second and third
anniversaries of the grant date, an additional 25% on the fourth anniversary of
the grant date and an additional 35% on the fifth anniversary of the grant date
and will otherwise be subject to the general terms of the 1995 Stock Option
Plan.
Director Co-Investment and Stock Retention Policy
The Company believes that it is important for non-employee directors to
have a meaningful (to them) equity interest in the Company and to have the bulk
of directors' compensation paid in equity-related items. In order to encourage
the Company's non-employee directors to increase their ownership of the
Company's Common Stock, under the Compensation Principles (as they apply to
non-employee directors) the Board will, under the 1995 Stock Option Plan, grant
to any person who is not currently a director of the Company and who becomes a
non-employee director of the Company an option to acquire a share of Class A
Common Stock (or Class B Common Stock if such person is eligible to hold Class B
Common Stock under the Company's Bye-Laws) for each share of Common Stock that
he or she purchases within 90 days of his or her first election to the Board of
Directors, up to a maximum of 25,000 shares. If a current non-employee director
purchases a number of shares of Common Stock at least equal to the number of
shares underlying options that have previously been granted to such non-employee
director, the Board will, under the 1995 Stock Option Plan, grant an option to
acquire a share of Class A Common Stock (or Class B Common Stock if such person
is eligible to hold Class B Common Stock under the Company's Bye-Laws) for each
share of Common Stock purchased within 90 days thereafter, up to a maximum of
25,000 shares. Any such option granted to a non-employee director will have the
same general terms as those described above for the automatic annual grants to
non-employee directors. In addition, under the Company's Director, Officer and
Senior Executive Co-Investment Plan, non-employee directors are permitted to
purchase such shares directly from the Company (but non-employee directors are
not eligible to receive loans from the Company under the Director, Officer and
Senior Executive Co-Investment Plan) to facilitate such purchases.
While not required, all directors are encouraged to hold shares of the
Company's Common Stock, or options convertible into shares of the Company's
Common Stock, as long as they serve as directors (other than the making of
charitable gifts, transfers for estate planning purposes or sales for tax
reasons relating to the exercise of stock options).
Fiscal Year 1998
Compensation of the Former Chief Executive Officers
Michel Delloye
Michel Delloye served as the Company's Chief Executive Officer
beginning in March 1998 through the remainder of 1998. He resigned as Chief
Executive Officer on March 23, 1999. During 1998, Mr. Delloye had employment
agreements which were to expire in March 2003. They provided:
Salary
An initial base salary of $350,000 per year with $10,000 increases in
base salary per year provided during the term of the agreements and an
expatriate premium of UK(pounds)202,500 per year (plus an additional amount
based on an increase in the consumer price index in the London metropolitan
area).
Stock Options
During 1998, Mr. Delloye was granted options to purchase 225,000 shares
of Class A Common Stock, at an exercise price of $24.563 per share. 175,000 of
the options vested equally after the first and second anniversaries of their
grant and were to generally remain exercisable for ten years, and 50,000 of the
options were to vest equally after the third, fourth and fifth anniversaries of
their grant and were to generally remain exercisable for seven years.
In setting Mr. Delloye's compensation package, a number of factors were
considered, including: (i) the unique skills and experience of Mr. Delloye, (ii)
total compensation of key executives at other media companies, and (iii) the
importance of Mr. Delloye, at the time such package was set, to the continued
growth and success of the Company and the need to provide him with a significant
incentive to motivate and retain his services for a five year
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<PAGE>
period starting in 1998. In addition to these factors, Mr. Delloye's
compensation package was designed to be consistent with the Compensation
Principles.
Severance Agreement
See - "Executive Compensation - Employment Agreements, Termination of
Employment and Change-in-Control Arrangements - Termination of Employment" on
page 16 for a description of the severance agreement between Mr. Delloye and the
Company.
Leonard M. Fertig
Leonard M. Fertig served as the Company's Chief Executive Officer until
his resignation on March 26, 1998. During 1998, Mr. Fertig had employment
agreements which were to expire in August 1998, but which terminated on March
26, 1998 upon his resignation as Chief Executive Officer of the Company. They
provided:
Salary
An initial base salary of $250,000 per year with $25,000 increases in
base salary per year provided during the term of the agreements. Under these
agreements, the annual base salary was $300,000 after August 10, 1997. In
addition, pursuant to a consulting agreement with a wholly-owned subsidiary of
the Company, a consulting company owned by Mr. Fertig was paid $50,000 per year.
Stock Options
Mr. Fertig did not receive any options to purchase shares of the
Company's Common Stock in connection with his employment with the Company for
fiscal year 1998.
In setting Mr. Fertig's compensation package, a number of factors were
considered, including: (i) the skills and experience of the former Chief
Executive Officer, (ii) total compensation of key executives at other media
companies, and (iii) the importance of the former Chief Executive Officer, at
the time such package was set, to the continued growth and success of the
Company and the need to provide him with a significant incentive to motivate and
retain his services.
Severance Agreement
See - "Executive Compensation - Employment Agreements, Termination of
Employment and Change-in-Control Arrangements - Termination of Employment" on
pages 16 and 17 for a description of the severance agreement between Mr. Fertig
and the Company.
Summary
The Compensation Committee will continue to evaluate the Company's
executive compensation programs on an ongoing basis to assure that the Company's
compensation philosophies and practices are consistent with the objective of
enhancing shareholder value.
Compensation Committee
RONALD S. LAUDER
NICOLAS G. TROLLOPE
21
<PAGE>
PERFORMANCE GRAPH
The following performance graph is a line graph comparing the change in
the cumulative shareholder return of the Class A Common Stock against the total
cumulative total return of the Nasdaq Composite Index and the Dow Jones World
Cable and Broadcasting Index between October 13, 1994 (the first day on which
the Class A Common Stock commenced trading on the Nasdaq National Market) and
December 31, 1998.
[GRAPH]
DOW JONES
NASDAQ World Cable
Composite and
Date CETV Index Broadcasting Index(1)
- ----- ------- --------- ---------------------
10/94 100.00 100.00 100.00
12/94 100.00 98.04 93.03
12/95 146.43 137.17 113.27
12/96 226.79 168.32 114.18
12/97 180.36 204.74 143.48
12/98 46.88 285.88 209.33
Value of $100 invested at October 13, 1994 as of December 31, 1998: (2)
Central European Media Enterprises Ltd....................$46.88
NASDAQ Composite Index...................................$285.88
Dow Jones World Cable and Broadcasting Index(1)..........$209.33
- ----------------
(1) This index includes 20 companies, many of which are non-U.S. based.
Accordingly, the Company believes that the inclusion of this index is
useful in understanding the stock performance of the Company against
companies in the television broadcast and cable industry.
(2) In its Proxy Statement for the Company's 1998 Annual General Meeting, the
Company also used the Dow Jones U.S. Cable and Broadcasting Index. The
Company no longer believes that this index provides a useful comparison for
the stock performance of the Company because the index consists of five
large U.S. firms (Cablevisions Systems Corp., CBS Corp., ComCast Corp.,
Tele-Communications, Inc. (which has been acquired by AT&T Corp.) and U.S.
West Media Group (which is being acquired by AT&T Corp)). However, such
Index would show that the value of $100 invested in such Index at October
13, 1994 was $282.52 as of December 31, 1998.
22
<PAGE>
AMENDMENT TO THE COMPANY'S BYE-LAWS TO EFFECT A ONE-FOR-EIGHT REVERSE
STOCK SPLIT OF THE COMPANY'S CLASS A COMMON STOCK, CLASS B COMMON STOCK AND
PREFERRED STOCK
The Board of Directors has determined that it is in the best interests
of the Company and its shareholders to amend the Company's Bye-laws to effect a
one-for-eight reverse stock split (the "Reverse Split") of the issued and
outstanding shares of the Company's Class A Common Stock, Class B Common Stock
and Preferred Stock. A proposed amendment to Bye-law 3(1), as set forth in
Exhibit A hereto, would: (i) increase the par value of the Company's Class A
Common Stock, Class B Common Stock and Preferred Stock from $0.01 to $0.08 per
share; (ii) increase the authorized share capital of the Company's Class A
Common Stock by $7,000,000; (iii) increase the authorized share capital of the
Company's Class B Common Stock by $1,050,000; and (iv) increase the authorized
share capital of the Company's Preferred Stock by $350,000, but would not change
the number of authorized shares of the Company's Class A Common Stock, Class B
Common Stock or Preferred Stock.
Purposes of the Proposed Reverse Split
The Board of Directors unanimously approved the amendment to the
Company's Bye-law 3(1) to effect the Reverse Split in order to continue the
listing of the Class A Common Stock on the Nasdaq National Market if the daily
closing price of the Class A Common Stock on Nasdaq continues below $5 per
share. If the shareholders fail to approve this amendment, the Class A Common
Stock could be subject to delisting by the Nasdaq National Market System as
early as December 16, 1999.
The Board of Directors concluded that the delisting of the Class A
Common Stock:
o would have an adverse effect on the liquidity of the Class A
Common Stock;
o would force many investors who are not permitted to hold unlisted
securities to sell their shares of Class A Common Stock,
resulting in selling pressures on the Class A Common Stock for a
significant time period; and
o would hinder any future attempts by the Company to engage in
significant corporate transactions.
The Board of Directors advises shareholders that notwithstanding
approval by shareholders of the Reverse Split, the Class A Common Stock may in
the future be delisted if the Company fails to satisfy Nasdaq's continued
listing criteria, including minimum public float and minimum market
capitalization, the satisfaction of which may be beyond the control of the
Company. In addition, the Reverse Split may have the effect of creating odd lots
of stock for some shareholders, and such odd lots may be more difficult to sell
or have higher brokerage commissions associated with the sale of such odd lots.
Effects of the Reverse Split
The Reverse Split will become effective immediately upon approval by
the shareholders of the proposed amendment to Bye-law 3(1) (the "Effective
Date"). If the Reverse Split is approved by the shareholders: (i) each share of
(a) Class A Common Stock, par value $0.01 per share, of the Company issued and
outstanding immediately prior to the Effective Date (the "Old Class A Common
Stock") and (b) Class B Common Stock, par value $0.01 per share, of the Company
issued and outstanding immediately prior to the Effective Date (the "Old Class B
Common Stock") will automatically and without any action on the part of the
holder thereof, be changed into one-eighth of one share of Class A Common Stock
or Class B Common Stock, as the case may be, par value $0.08 per share, which
the Company shall be authorized to issue immediately subsequent to the Effective
Date (the "New Class A Common Stock" and "New Class B Common Stock"). Cash will
be issued in lieu of fractional shares.
All outstanding shares of Old Class A Common Stock and Old Class B
Common Stock will, without further action on the part of the holders thereof, be
deemed to represent shares of New Class A Common Stock or New Class B Common
Stock, as the case may be, and accordingly do not need to be replaced.
Consequently, it will not be necessary for a holder of a certificate or
certificates which immediately prior to the Effective Date represented
outstanding shares of Old Class A Common Stock or Old Class B Common Stock (the
"Old Certificates") to submit Old Certificates for exchange. If the Reverse
Split is approved, Old Certificates will be deemed to
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<PAGE>
represent that number of shares of New Class A Common Stock or New Class B
Common Stock into which such shares of Old Class A Common Stock and Old Class B
Common Stock are changed. Upon the sale or transfer of shares of Old Class A
Common Stock and Old Class B Common Stock, New Certificates will be issued by
the Company's transfer agent. However, each holder of Old Certificates will,
from and after the Effective Date, be entitled to receive upon surrender of such
Old Certificates to the Company's transfer agent for cancellation, a certificate
or certificates (the "New Certificates") representing the shares of New Class A
Common Stock or New Class B Common Stock into which the shares of Old Class A
Common Stock and Old Class B Common Stock formerly represented by such Old
Certificates so surrendered are reclassified under the terms hereof.
The shares of New Class A Common Stock and New Class B Common Stock
into which the shares of Old Class A Common Stock or Old Class B Common Stock,
as the case may be, are changed on the Effective Date will be fully paid and
nonassessable.
If the Reverse Split is effected, the Company will have outstanding
approximately 2,313,356 shares of New Class A Common Stock, replacing 18,506,849
shares of Old Class A Common Stock and approximately 897,158 shares of New Class
B Common Stock replacing 7,177,269 shares of Old Class B Common Stock. The
authorized share capital of the Company's Class A Common Stock will be increased
by $7,000,000, the authorized share capital of the Company's Class B Common
Stock will be increased by $1,050,000, and (iii) the authorized share capital of
the Company's Preferred Stock will be increased by $350,000. Consummation of the
Reverse Split will not alter the number of authorized shares of the Company's
capital stock, which will remain at 100,000,000 shares of Class A Common Stock,
15,000,000 shares of Class B Common Stock and 5,000,000 shares of Preferred
Stock. The Reverse Split will not alter any shareholder's proportionate
ownership interest in the Company (subject to cash being issued in lieu of
fractional shares). The shareholder's equity accounts of the Company will not
change as a result of the Reverse Split.
With the possible exception of cash distributed to shareholders in lieu
of fractional shares, the Company believes that the Reverse Split will result in
no gain or loss or realization of taxable income to holders of the Company's
capital stock under existing United States Federal income tax laws, and that the
tax basis and holding period of the Old Class A Common Stock and the Old Class B
Common Stock will carry over to the New Class A Common Stock and the New Class B
Common Stock.
Vote Required; Recommendation
Approval of this proposal requires the affirmative vote of a majority
of the votes cast, in person or by proxy, at the Meeting, provided that a quorum
is present in person or by proxy. Abstentions and broker non-votes will be
included in determining the presence of a quorum but are not counted as votes
cast. Unless otherwise indicated, the accompanying form of proxy will be voted
FOR the approval of this proposal.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE IN
FAVOR OF AMENDING THE COMPANY'S BYE-LAWS TO EFFECT A ONE-FOR-EIGHT REVERSE STOCK
SPLIT OF THE COMPANY'S CLASS A COMMON STOCK, CLASS B COMMON STOCK AND PREFERRED
STOCK AND, IN CONNECTION WITH THE REVERSE STOCK SPLIT, TO INCREASE THE
AUTHORIZED SHARE CAPITAL OF THE COMPANY.
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<PAGE>
AMENDMENTS TO THE COMPANY'S BYE-LAWS CONCERNING THE ABILITY OF THE
BOARD OF DIRECTORS TO (i) SET THE MAXIMUM NUMBER OF DIRECTORS AND (ii) FILL
VACANCIES ON THE BOARD OF DIRECTORS
The Companies Act, 1981 of Bermuda recently has been amended to permit
the Board of Directors to set the maximum number of directors. Previously, under
Bermuda law, the Company was required to seek shareholder approval at each
annual general meeting of shareholders to set a maximum number of directors in
excess of the number of directors elected at the annual general meeting of
shareholders. The Board of Directors believes that it is in the best interests
of the Company and its shareholders that the Company have independent directors
with outstanding achievement in their personal careers, broad experience and
skills, an understanding of the Company's business environment, an ability to
make independent analytical inquiries and who can provide the Company with the
benefit of their insights and devote adequate time to Board duties.
In order to take advantage of the change in Bermuda law described above
and to give the Board of Directors the flexibility to appoint additional
directors of outstanding accomplishment who may become available at a time after
the annual general meeting, the Board of Directors has determined that it is in
the best interests of the Company and its shareholders to amend Bye-laws 86(1),
86(2), 86(5) and 86(6), as set forth in Exhibit B hereto, which would permit the
Board of Directors to set the maximum number of directors without annual
shareholder authorization (and to fill any vacancies thus created). The Board of
Directors also believes that these amendments would make the process for
selection of directors by the Company more consistent with comparable public
companies organized under the laws of the United States.
Vote Required; Recommendation
Approval of this proposal requires the affirmative vote of a majority
of the votes cast, in person or by proxy, at the Meeting, provided that a quorum
is present in person or by proxy. Abstentions and broker non-votes will be
included in determining the presence of a quorum but are not counted as votes
cast. Unless otherwise indicated, the accompanying form of proxy will be voted
FOR the approval of this proposal.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE IN
FAVOR OF AMENDING THE COMPANY'S BYE-LAWS CONCERNING THE ABILITY OF THE BOARD OF
DIRECTORS TO (i) SET THE MAXIMUM NUMBER OF DIRECTORS AND (ii) FILL VACANCIES ON
THE BOARD OF DIRECTORS.
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ADOPTION OF FINANCIAL STATEMENTS
The Audit Committee of the Board of Directors has approved the audited
financial statements for the Company's fiscal year ended December 31, 1998 (the
"Financial Statements") for presentation to the shareholders at the Annual
General Meeting of Shareholders. Under Bermuda law, the shareholders are
requested to adopt financial statements; under Bermuda law, the adoption of the
Financial Statements by the shareholders does not affect any rights that the
shareholders may have with respect to the Financial Statements. The Financial
Statements are included in the Company's Annual Report on Form 10-K, which is
being circulated together with this Proxy Statement.
Vote Required; Recommendation
The adoption of the Financial Statements requires the affirmative vote
of a majority of the votes cast, in person or by proxy, at the Meeting, provided
that a quorum is present in person or by proxy. Abstentions and broker non-votes
will be included in determining the presence of a quorum, but are not counted as
votes cast. Unless otherwise indicated, the accompanying form of proxy will be
voted FOR adoption of the Financial Statements and the auditors' report thereon.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE
ADOPTION OF THE FINANCIAL STATEMENTS AND THE AUDITORS' REPORT THEREON.
26
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SELECTION OF AUDITORS
At the recommendation of the Audit Committee, the Board of Directors
recommends to the shareholders that Arthur Andersen & Co., Victoria Hall,
Hamilton, Bermuda, be appointed to serve as the independent auditors of the
Company until the conclusion of the Company's next annual general meeting of
shareholders. In addition, the Board of Directors recommends to the shareholders
that the shareholders authorize the Board of Directors to approve the auditors'
fee.
Representatives of Arthur Andersen & Co. are expected to be present at
the Meeting, will have an opportunity to make a statement if they so desire and
will be available to respond to appropriate questions from shareholders.
Vote Required; Recommendation
The appointment of Arthur Andersen & Co. to serve as the independent
auditors of the Company and the authorization of the Board of Directors to
approve the auditors' fee requires the affirmative vote of a majority of the
votes cast, in person or by proxy, at the Meeting, provided that a quorum is
present in person or by proxy. Abstentions and broker non-votes will be included
in determining the presence of a quorum, but are not counted as votes cast.
Unless otherwise indicated, the accompanying form of Proxy will be voted FOR the
appointment of Arthur Andersen & Co. as the Company's auditors and FOR the Board
of Directors to approve the auditors' fee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE
APPOINTMENT OF ARTHUR ANDERSEN & CO. AS THE COMPANY'S AUDITORS AND A VOTE IN
FAVOR OF AUTHORIZING THE BOARD OF DIRECTORS TO APPROVE THE AUDITORS' FEE.
27
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 11, 1998, the Company sold (the "TVN Sale") its interests
in its TVN television operations in Poland to International Trading and
Investments Holdings S.A. ("ITI"), a company publicly traded on the Luxembourg
Stock Exchange and the Company's partner in the TVN operations. Ronald S.
Lauder, the non-executive Chairman of the Board of Directors of the Company,
owns a non-controlling indirect minority interest in ITI, and Robert R. Grusky,
a director of the Company, is a member of the board of directors of ITI. The TVN
Sale was effected pursuant to a Sale and Purchase Agreement dated December 10,
1998. Mr. Lauder and Mr. Grusky did not participate in the vote of the Board of
Directors on the ITI transaction. Prior to the TVN Sale, the Company and ITI
were partners in the TVN television operations such that certain indirect wholly
owned subsidiaries of the Company owned 33% of the outstanding shares of TVN Sp.
z o.o. ("TVN") and 50% of the outstanding shares of Federacja Sp. z o.o.
("Federation"). In addition, certain indirect wholly owned subsidiaries of the
Company owned 49% of the outstanding shares of Neovision Holding B.V.
("Neovision") and 10% of the outstanding shares of ITI Media. Details of the TVN
Sale are as follows: the Company caused its subsidiaries to transfer to ITI and
certain of its affiliates all of their above listed interests in TVN,
Federation, Neovision and ITI Media together with certain outstanding
receivables in exchange for $10 million in cash, a note (the "ITI Note") in a
principal amount of $40 million bearing interest at a rate of 5% per annum and
generally maturing on December 10, 2001 that is convertible into equity
securities of ITI and exchangeable into similar debt securities of ITI, the
release of a $10 million bank guarantee and the assumption by ITI of various
obligations of the Company and its subsidiaries in respect of programming and
satellites relating to the TVN operations. Pursuant to the terms of the Sale and
Purchase Agreement and the ITI Note, between September 10, 2001 and the maturity
date of the ITI Note, the Company will be able to convert, at its option, all or
any portion of the principal amount of the ITI Note plus all interest accrued
and unpaid thereon (the "Conversion Amount") into an amount of equity securities
of ITI (the "ITI Ordinary Shares") equal to the Conversion Amount divided by 80%
of the average of the daily closing price of one share of the publicly traded
ITI Ordinary Shares during the twelve month period immediately preceding the
time that the Company gives notice of its intention to convert on whichever of
the Warsaw Stock Exchange or the Luxembourg Stock Exchange has the largest
average daily trading volume. As a result of the TVN Sale, the Company recorded
a write-down of approximately $25 million in its fourth quarter 1998 financial
results.
On December 22, 1998, RSL Capital, a company wholly-owned by Ronald S.
Lauder, the non-executive Chairman of the Company's Board of Directors, made an
equity investment of $22.725 million in the Company in exchange for 1,515,000
shares of the Company's Class B Common Stock, which is a price equal to $15.00
per share, pursuant to the terms of a Stock Purchase Agreement, dated as of
December 3, 1998, between the Company and RSL Capital (the "Stock Purchase
Agreement"). Pursuant to the Stock Purchase Agreement, if the last reported
daily trading price of the Class A Common Stock on the Nasdaq Stock Market does
not equal or exceed $15.00 for at least 20 consecutive trading days during the
period that commenced on November 13, 1998 and ends on November 12, 1999 (the
"Measurement Period"), the Company will issue additional shares of Class B
Common Stock to RSL Capital for no additional consideration so that the average
per share price for the shares of Class B Common Stock acquired by RSL Capital
pursuant to the Stock Purchase Agreement will equal the average last reported
daily trading price of the Class A Common Stock during the Measurement Period,
provided, that, in no event shall the average price per share for the shares of
Class B Common Stock acquired by RSL Capital be less than $10.00 per share. Such
additional shares will be issued.
R.S. Lauder, Gaspar & Co., LP ("RSLAG"), which has completed the
liquidation of its holdings, performed administrative services for CME Media
Enterprises B.V. ("CME BV"), a subsidiary of the Company, pursuant to a services
agreement dated as of April 1, 1994 (and subsequently extended) (the "Services
Agreement"). Under the Services Agreement, CME BV had agreed to reimburse RSLAG
for its costs (including the costs of employees) incurred in providing
administrative services to the Company. The costs of such services that could
have been requested from time to time by the Company pursuant to the Services
Agreement were at a rate that could reasonably have been expected to be charged
by an unaffiliated third party. During the fiscal year ended December 31, 1998,
the Company paid $15,013 to RSLAG under the Services Agreement. The Services
Agreement was not negotiated on an arm's length basis. The Company believes,
however, that the terms of the Services Agreement were at least as favorable to
the Company as those it could have negotiated with unrelated parties. Andrew
Gaspar, a former director of the Company, was the president of the corporate
general partner of RSLAG, and Ronald S. Lauder was a limited partner, but held a
majority of the economic interests in RSLAG. The Services Agreement is no longer
in effect.
28
<PAGE>
Mr. Gaspar had a services agreement with the Company which expired in
October 1998. Pursuant to the agreement, the Company paid $125,000 per year to a
corporation owned by Mr. Gaspar and members of his family for services performed
by him outside of the United States. The agreement contained prohibitions on the
disclosure of confidential information and a non-compete covenant which has a
term of two years after its termination.
SHAREHOLDER PROPOSALS
Shareholder proposals must be received by the Company at its principal
executive office a reasonable time before the Company begins to print and mail
its proxy material for the next annual general meeting of shareholders in order
to be considered for inclusion in proxy materials distributed in connection with
such meeting.
The proxy or proxies designated by the Company will have discretionary
authority to vote on any matter properly presented by a shareholder for
consideration at the next annual general meeting of shareholders but not
submitted for inclusion in the proxy materials for such meeting unless notice of
the matter is received by the Company at its principal executive office a
reasonable time before the Company mails its proxy materials for such meeting
and certain other conditions of the applicable rules of the Securities and
Exchange Commission are satisfied.
MISCELLANEOUS
Under Bermuda law, no matter or business other than those set forth in
the accompanying Notice of Annual Meeting of Shareholders is permitted to be
presented at the Meeting.
The Company will bear the cost of preparing, assembling and mailing the
enclosed form of proxy, this Proxy Statement and other material which may be
sent to shareholders in connection with this solicitation. Officers and regular
employees may solicit proxies by mail, telephone, telegraph and personal
interview, for which no additional compensation will be paid. In addition,
Georgeson Shareholder Communications Corporation has been engaged by the Company
to act as proxy solicitors and will receive fees of $3,000, plus expenses. The
Company may reimburse persons holding shares in their names or in the names of
nominees for their reasonable expenses in sending proxies and proxy material to
their principals.
The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 is being mailed to shareholders simultaneously with this Proxy
Statement.
By order of the Board of Directors,
NICOLAS G. TROLLOPE
Secretary
Hamilton, Bermuda
November 17, 1999
29
<PAGE>
EXHIBIT A
PROPOSED AMENDMENTS TO THE COMPANY'S BYE-LAWS TO EFFECT A ONE-FOR-EIGHT
REVERSE STOCK SPLIT OF THE COMPANY'S CLASS A COMMON STOCK,
CLASS B COMMON STOCK AND PREFERRED STOCK
Bye-law 3(1), proposed to be amended, currently provides as follows:
Bye-law 3(1)
3.(1) The capital of the Company shall be divided into three
classes of shares, namely:
(a) 100,000,000 Shares of Class A Common Stock, par value $.01
per share ("Class A Shares");
(b) 15,000,000 Shares of Class B Common Stock, par value $.01
per share ("Class B Shares"); and
(c) 5,000,000 Shares of Preferred Stock, par value $.01 per
share ("Preferred Shares")
The Class A shares and the Class B Shares are together referred
to as the "Common Shares".
If the proposal is adopted, Bye-law 3(1), in its entirety would provide
as follows:
Bye-law 3(1)
3.(1) The capital of the Company shall be divided into three
classes of shares, namely:
(a) 100,000,000 Shares of Class A Common Stock, par value $0.08
per share ("Class A Shares");
(b) 15,000,000 Shares of Class B Common Stock, par value $0.08
per share ("Class B Shares");
(c) 5,000,000 Shares of Preferred Stock, par value $0.08 per
share ("Preferred Shares").
The Class A Shares and the Class B shares are together referred
to as the "Common Shares".
<PAGE>
EXHIBIT B
PROPOSED AMENDMENTS TO THE COMPANY'S BYE-LAWS CONCERNING
THE ABILITY OF THE DIRECTORS TO (i) SET THE MAXIMUM NUMBER OF
DIRECTORS AND (ii) FILL VACANCIES ON THE BOARD OF DIRECTORS
Bye-laws 86(1), 86(2), 86(5) and 86(6) proposed to be amended, currently provide
as follows:
Bye-law 86(1)
Bye law 86(1) currently provides:
86. (1) Unless otherwise determined by the Company in general
meeting, the number of Directors shall not be less than three
(3). At all times, at least two (2) Directors shall be
independent directors. There shall be no maximum number of
Directors. The Directors shall be elected or appointed by
ordinary resolution in the first place at the statutory
meeting of Members and thereafter at each annual general
meeting of the Company subject to Bye-law 87 and shall hold
office until the next appointment of Directors or until their
successors are elected or appointed. Any general meeting may
authorise the Board to fill any vacancy in their number left
unfilled at a general meeting.
If amended, as proposed, the new Bye-law 86(1) would read as follows:
86. (1) Unless otherwise determined by the Board of Directors,
the number of Directors shall not be less than three (3). At
all times, at least two (2) Directors shall be independent
directors. The Directors shall be elected or appointed by
ordinary resolution in the first place at the statutory
meeting of Members and thereafter at each annual general
meeting of the Company subject to Bye-law 87 and shall hold
office until the next appointment of Directors or until their
successors are elected or appointed.
Bye-law 86(2)
By-law 86(2) currently provides:
86. (2) The Directors shall have the power from time to time
and at any time to appoint any person as a Director either to
fill a casual vacancy on the Board or as an addition to the
existing Board but so that the number of Directors so
appointed shall not exceed any maximum number determined from
time to time by the Members in general meeting. Any Director
so appointed by the Board shall hold office only until the
next following annual general meeting of the Company and shall
then be eligible for re-election at that meeting.
If amended, as proposed, the new Bye-law 86(2) would read as follows:
86. (2) The Directors shall have the power from time to time
and at any time to appoint any person as a Director either to
fill a casual vacancy on the Board or as an addition to the
existing Board but so that the number of Directors so
appointed shall not exceed any maximum number determined from
time to time by the Board of Directors. Any Director so
appointed by the Board shall hold office only until the next
following annual general meeting of the Company and shall then
be eligible for re-election at that meeting.
<PAGE>
Bye-law 86(5)
By-law 86(5) currently provides:
86. (5) A vacancy on the Board created by the removal of a
Director under the provision of subparagraph (4) above may be
filled by the election or appointment by the Members at the
meeting at which such Director is removed to hold office until
the next appointment of directors or until their successors
are elected or appointed or, in the absence of such election
or appointment such general meeting may authorise the Board to
fill any vacancy in the number left unfilled.
If amended, as proposed, the new Bye-law 86(5) would read as follows:
86. (5) A vacancy on the Board created by the removal of a
Director under the provisions of subparagraph (4) above may be
filled by the election or appointment by the Members at the
meeting at which such Director is removed to hold office until
the next appointment of Directors or until their successors
are elected or appointed or, in the absence of such election
or appointment the Board of Directors may fill any vacancy in
the number left unfilled.
Bye-law 86(6)
By-law 86(6) currently provides:
86. (6) The Company may from time to time in general meeting
by ordinary resolution increase or reduce the number of
Directors but so that the number of Directors shall never be
less than two (2).
If amended, as proposed, the new Bye-law 86(6) would read as follows:
86. (6) The Board of Directors may from time to time increase
or reduce the number of Directors but so that the number of
Directors shall never be less than two (2).
<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
PROXY FOR ANNUAL GENERAL MEETING OF SHAREHOLDERS--DECEMBER 14, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Nicolas G. Trollope,
Michael Ashford, Anthony Whaley and Kevin Butler, or any of them acting singly,
with the power of substitution in any of them, the proxies of the undersigned to
vote with the same force and effect as the undersigned all shares of Common
Stock of Central European Media Enterprises Ltd. (the "Company") held of record
by the undersigned on October 29, 1999 at the Annual General Meeting of
Shareholders to be held at the offices of Conyers Dill & Pearman, Clarendon
House, Church Street, Hamilton HM CX, Bermuda on Tuesday, December 14, 1999, at
10:00 A.M. and at any adjournment or adjournments thereof, hereby revoking any
proxy or proxies heretofore given and ratifying and confirming all that said
proxies may do or cause to be done by virtue thereof with respect to the
following matters:
1. The election of seven directors nominated by the Board of Directors to
serve until the next Annual General Meeting of Shareholders:
|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY to vote for
(except as indicated below) the nominees listed below
RONALD S. LAUDER, FREDERIC T. KLINKHAMMER, PETER R. GOLDSCHEIDER, ROBERT R.
GRUSKY, NICOLAS G. TROLLOPE, JACOB Z. SCHUSTER, AND MARIE-MONIQUE STECKEL
INSTRUCTION: to withhold authority to vote for any individual nominee, write
that nominee's name on this line:
-----------------------------------------------------------------
2. The approval of a proposal to amend the Company's Bye-laws to effect a
one-for-eight reverse stock split of the Company's Class A Common
Stock, Class B Common Stock and Preferred Stock, and in connection with
the reverse stock split, to increase the authorized share capital of
the Company.
|_| FOR |_| AGAINST |_| ABSTAIN
3. The approval of a proposal to amend the Company's Bye-laws to permit
the Board of Directors to (i) set the maximum number of directors to
serve on the Board of Directors and (ii) fill vacancies on the Board of
Directors.
|_| FOR |_| AGAINST |_| ABSTAIN
4. The adoption of the financial statements of the Company and the
auditors' report thereon for the Company's fiscal year ended December
31, 1998.
|_| FOR |_| AGAINST |_| ABSTAIN
<PAGE>
5. The appointment of Arthur Andersen & Co. as independent auditors of the
Company and the authorization of the Board of Directors to approve the
auditors' fee.
|_| FOR |_| AGAINST |_| ABSTAIN
This proxy, when properly executed, will be voted as directed. If no
direction is indicated, the proxy will be voted (i) FOR the election of the
SEVEN named individuals as directors, (ii) FOR the approval of the proposal to
amend the Company's Bye-laws to effect a one-for-eight reverse stock split of
the Company's Class A Common Stock, Class B Common Stock and Preferred Stock,
and in connection with the reverse stock split, to increase the authorized share
capital of the Company, (iii) FOR the approval of the proposal to permit the
Board of Directors to (a) set the maximum number of directors to serve on the
Board of Directors and (b) fill vacancies on the Board of Directors, (iv) FOR
the adoption of the financial statements of the Company and the auditors' report
thereon for the Company's fiscal year ended December 31, 1998, and (v) FOR the
appointment of Arthur Andersen & Co. as independent auditors of the Company for
the 1999 fiscal year and the authorization of the Board of Directors to approve
the auditors' fee.
Shares cannot be voted unless this proxy card is signed and returned or
shares are voted by telephone or in person at the Annual General Meeting.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders to be held on December 14, 1999, and the Proxy
Statement, dated November 17, 1999 prior to the signing of this proxy.
Dated _____________________ , 1999
Please sign your name exactly as it appears hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title as it appears hereon. When signing as joint tenants, all parties in the
joint tenancy must sign. When a proxy is given by a corporation, it should be
signed by an authorized officer and the corporate seal affixed. When a proxy is
given by a partnership, it should be signed in the partnership name by an
authorized person.
PLEASE SIGN, DATE AND MAIL THIS PROXY IMMEDIATELY IN THE ENCLOSED ENVELOPE.
