EXECUTION COPY
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REORGANIZATION AGREEMENT
between
Central European Media Enterprises Ltd.
and
SBS Broadcasting S.A.
Dated as of March 29, 1999
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TABLE OF CONTENTS
Page
1. The Sale and Closing......................................................2
1.1. Sale and Purchase.........................................2
1.2. Closing...................................................3
1.3. Articles of Incorporation.................................5
1.4. Directors and Officers of the Surviving Company...........5
2. Winding Up and Dissolution of Seller......................................5
3. Representations and Warranties of Seller..................................6
3.1. Organization, Standing and Corporate Power................6
3.2. Acquired Assets...........................................6
3.3. Subsidiaries..............................................7
3.4. Capital Structure.........................................7
3.5. Authority; Noncontravention...............................8
3.6. SEC Documents; Undisclosed Liabilities....................9
3.7. Information Supplied......................................10
3.8. Absence of Certain Changes or Events......................11
3.9. Litigation 11
3.10. Benefit Plans............................................12
3.11. Compliance with Applicable Laws..........................12
3.12. Taxes ...................................................13
3.13. Voting Requirements......................................14
3.14. Brokers .................................................15
3.15. Opinion of Financial Advisor.............................15
3.16. Contracts ...............................................15
3.17. Insurance ...............................................17
3.18. Dissenters' Rights.......................................17
4. Representations and Warranties of the Surviving Company...................17
4.1. Organization, Standing and Corporate Power................17
4.2. Subsidiaries..............................................17
4.3. Capital Structure.........................................18
4.4. Authority; Noncontravention...............................19
4.5. SEC Documents; Undisclosed Liabilities....................20
4.6. Information Supplied......................................21
4.7. Absence of Certain Changes or Events......................22
4.8. Litigation ...............................................22
4.9. Benefit Plans.............................................22
4.10. Taxes ...................................................23
4.11. Voting Requirements......................................25
4.12. Brokers .................................................25
4.13. Compliance with Applicable Laws..........................25
4.14. Contracts ...............................................26
4.15. Insurance ...............................................26
4.16. Opinion of Financial Advisor.............................26
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5. Covenants Relating to Conduct of Business.................................26
5.1. Conduct of Business by the Surviving Company..............26
5.2. Conduct of Business by Seller.............................29
5.3. Other Actions.............................................32
5.4. Advice of Changes.........................................32
6. Additional Agreements.....................................................32
6.1. Preparation of the Form F-4 and the Joint Proxy
Statement......... ..................................32
6.2. Shareholders Meetings.....................................33
6.3. Acquisition Proposals.....................................33
6.4. Letters of the Accountants................................34
6.5. Access to Information; Confidentiality....................34
6.6. Reasonable Efforts........................................35
6.7. Seller Stock Options and Seller SARs......................35
6.8. Certain Employee Arrangements.............................37
6.9. Indemnification, Exculpation and Insurance................37
6.10. Expenses ................................................37
6.11. Public Announcements.....................................38
6.12. Affiliates ..............................................38
6.13. NASDAQ Listing...........................................38
6.14. Stockholder Litigation...................................38
6.15. Tax Treatment............................................38
6.16. Further Assurances.......................................38
6.17. Certain Liquidation......................................39
6.18. Indemnification Pending Completion of the
Liquidation.... .....................................39
6.19. Debt Consent.............................................39
7. Conditions Precedent......................................................40
7.1. Conditions to Each Party's Obligation To Effect the
Sale.. ..............................................40
7.2. Conditions to Obligations of Seller.......................41
7.3. Conditions to Obligations of the Surviving Company........41
8. Termination, Amendment and Waiver.........................................42
8.1. Termination Events........................................42
8.2. Effect of Termination; Termination Fee....................43
8.3. Amendment ................................................44
8.4. Extension; Waiver.........................................44
8.5. Procedure for Termination, Amendment, Extension or
Waiver. .............................................44
9. General Provisions........................................................44
9.1. Nonsurvival of Representations and Warranties.............44
9.2. Notices ..................................................45
9.3. Definitions ..............................................46
9.4. Counterparts..............................................53
9.5. Entire Agreement; No Third-Party Beneficiaries............53
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9.6. Governing Law.............................................53
9.7. Assignment ...............................................53
EXHIBITS
Exhibit 1.2 Form of Seller's Voting Agreement
Exhibit 2 Plan of Winding Up and Dissolution
Exhibit 3 Form of Tax Opinion
Exhibit 4 Form of Officer's Tax Certificates
SCHEDULES
Schedule 1.1 Acquired Assets
Schedule 1.1(a) Assumed Liabilities
Schedule 1.4 Directors and Officers
Schedule 7.1 Required Consents
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REORGANIZATION AGREEMENT, dated March 29, 1999, between
Central European Media Enterprises Ltd., a Bermuda corporation ("Seller"), and
SBS Broadcasting S.A., a Luxembourg corporation (the "Surviving Company").
R E C I T A L S:
WHEREAS, Seller, through its Subsidiaries (as such term and
certain other capitalized terms used are defined in Section 9.3) and affiliates,
is engaged in the business of owning and operating commercial television
broadcasting companies in Central and Eastern Europe, and the Surviving Company
is engaged in the business of owning and operating commercial television and
radio broadcasting companies in Western and Central Europe;
WHEREAS, the Board of Directors of each of Seller and the
Surviving Company deems it advisable and in the best interests of such
corporation and its shareholders that, on the terms and conditions set forth
herein (i) Seller sell to the Surviving Company, and the Surviving Company
acquire from the Seller, all of the assets, business, properties and rights of
Seller and (ii) the Surviving Company assume, pay, honor and discharge any and
all liabilities, obligations and commitments of Seller, in exchange for shares
of common stock, par value $1.50 per share (the "Surviving Company Common
Stock"), of the Surviving Company (such transaction being referred to herein as
the "Sale");
WHEREAS, the Board of Directors of Seller deems it advisable
and in the best interests of Seller and its shareholders that, promptly upon the
consummation of the Sale, Seller, in accordance with The Companies Act 1981 of
Bermuda, as amended (the "BCA"), and as a part of an integrated plan of
reorganization including the Sale, wind up and distribute all of its assets to
its shareholders in accordance with this Agreement and the Plan of Winding Up
and Dissolution set forth in Exhibit 2 hereto (the "Plan of Liquidation," and
such transaction being referred to herein as the "Liquidation") and commence to
dissolve in accordance with the provisions of the BCA;
WHEREAS, the Principal Surviving Company Shareholders are
entering contemporaneously herewith into a Shareholders' Agreement, dated the
date hereof (the "Surviving Company Shareholders' Agreement"), with Seller
providing, among other things, that subject to the terms and conditions thereof
each such shareholder will vote his shares of Surviving Company Common Stock to
approve this Agreement and the transactions contemplated hereby;
WHEREAS, the Principal Seller Shareholders are entering
contemporaneously herewith into a Shareholders' Agreement, dated the date hereof
(the "Seller Shareholders' Agreement", and together with the Surviving Company
Shareholders' Agreement, the "Shareholders' Agreements"), with the Surviving
Company
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providing, among other things, that subject to the terms and conditions
thereof each such shareholder will vote his or its shares of Seller's capital
stock to approve this Agreement and the transactions contemplated hereby; and
WHEREAS, for Federal income tax purposes, it is intended that
the Sale and Liquidation shall qualify as a reorganization under the provisions
of Section 368(a) of the Internal Revenue Code of 1986, as amended, (the
"Code");
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the parties
hereto agree as follows:
A G R E E M E N T:
1. The Sale and Closing.
1.1. Sale and Purchase. Subject to the terms and conditions set
forth herein, at the closing of the Sale (the "Closing") Seller will sell to the
Surviving Company, and the Surviving Company will purchase from Seller, all of
Seller's right, title and interest in and to all of its assets, properties and
rights, whether tangible or intangible and whether accrued, contingent or
otherwise, as the same may exist on the Closing Date, including but not limited
to all the assets set forth on Schedule 1.1 hereto (collectively, the "Acquired
Assets"), for a purchase price consisting of:
(a) the Surviving Company's assumption of and agreement to pay,
honor and discharge any and all liabilities, obligations and commitments (the
"Assumed Liabilities") of Seller prior to or after the Closing, whenever arising
or existing, absolute or contingent, known or unknown, which shall include, but
not be limited to, the liabilities listed on Schedule 1.1(a), subject to the
terms of this Agreement, including without limitation Section 6.18 hereof; and
(b) the issuance and transfer by the Surviving Company of an
aggregate number of shares of Surviving Company Common Stock equal to (i) 0.5
(the "Exchange Ratio") multiplied by (ii) the total number of shares of Seller's
Class A Common Stock, par value $.01 per share ("Class A Shares"), and Seller's
Class B Common Stock, par value $.01 per share ("Class B Shares"), issued and
outstanding immediately prior to the Closing (the "Consideration Shares"), to
Seller, which hereby directs that such Consideration Shares be deposited with
the Custodian (as defined in the Plan of Liquidation) to be held for the benefit
of the holders of the outstanding Class A Shares and Class B Shares as of the
Closing Date pending the distribution of such shares pursuant to the Plan of
Liquidation. Seller and the Surviving Company acknowledge and agree that the
Exchange Ratio has been determined based on the number of shares of Seller
Capital Stock issued and outstanding on the date hereof and the
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number of Seller Stock Options and Seller Warrants outstanding as of the date
hereof. Without limiting any other provision of this Agreement, if at or prior
to the Closing any additional shares of Seller Capital Stock (or rights or
options to acquire additional shares of Seller Capital Stock) are issued after
the date hereof, including, without limitation, pursuant to the Stock Purchase
Agreement, dated as of December 3, 1998, by and between RSL Capital LLC and
Seller, as the same may be amended (the "December Purchase Agreement"), the
Exchange Ratio shall be reduced proportionately with the increase in such number
of shares of Seller Capital Stock.
1.2. Closing. (a) The Closing shall take place at the offices of
the Surviving Company, 00 Xxxx Xxxxxx, Xxxxxx XX0 0XX, at 10:00 a.m. on the
Business Day specified by either party hereto to the other party by notice given
at least five Business Days' after the satisfaction or waiver of the conditions
to Closing set forth in Section 7, which day shall in all events shall be the
last Business Day of a calendar month (the "Closing Date"), unless another time,
date or place is agreed to in writing by the parties hereto. The parties shall
use all reasonable efforts to cause the Closing Date to be the date immediately
preceding the date of the Second Seller Shareholder Meeting.
(b) Subject to the terms and conditions hereof, at the Closing:
(i) Seller shall deliver to the Surviving Company, properly
executed and dated as of the Closing Date, (A) a share transfer
agreement evidencing the transfer of all of the issued and outstanding
capital stock of CME Media Enterprises B.V., a Netherlands company
("CME Media"), to the Surviving Company, accompanied by such
acknowledgments, powers of attorney and waivers as may be necessary in
the Surviving Company's reasonable judgment for execution of a notarial
deed of transfer of such capital stock and (B) a xxxx of sale and such
assignments, endorsements and other good and sufficient instruments of
conveyance and transfer as may be necessary in the Surviving Company's
reasonable judgment to convey and vest in the Surviving Company all
right, title and interest in and to all of the other Acquired Assets;
(ii) Seller and the Surviving Company shall execute an agreement
or agreements of assignment and assumption of liabilities as may be
necessary in Seller's reasonable judgment for the Surviving Company to
assume, and to indemnify Seller in respect of, all of the Assumed
Liabilities, and the Surviving Company will take such other steps as
may be reasonably requested by Seller to perfect such assumption for
the purposes of Bermuda law (without thereby increasing its liability);
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(iii) assuming that (A) the Debt Consent (as defined in Section
6.19 hereof) shall have been obtained or (B) Seller and the Surviving
Company shall have determined that the Debt Consent is not required to
be obtained in order to effect the assumption contemplated by this
Section 1.2(b)(iii) or shall have agreed to take other actions with
respect to the securities issued under the Indentures (as defined
below), in conformity and subject to compliance with the provisions of
the Indentures, dated as of August 20, 1997 (the "Indentures"), between
Seller and the Bankers Trust Company, as Trustee (the "Trustee"), in
respect of Seller's $100,000,000 9-3/8% Senior Notes due 2004 and DM
140,000,000 8-1/8% Senior Notes due 2004, Seller and the Surviving
Company shall execute and deliver or, as the case may be, cause to be
executed and delivered (to the extent within their respective powers),
to the Trustee all supplemental indentures, agreements, opinions of
counsel to Seller, board resolutions, officer's certificates and other
instruments and documents as may be necessary or desirable for the
Surviving Company, pursuant to and in accordance with the Indentures,
to assume expressly all of Seller's liabilities, obligations and
commitments with respect to the Senior Notes issued pursuant to the
Indentures;
(iv) the Surviving Company shall deliver or cause to be
delivered to Seller or, at Seller's written direction, to Seller's
designee for such purpose (i) properly executed and dated as of the
Closing Date a notarial deed evidencing an increase in the issued
capital of the Surviving Company and issuance of the Consideration
Shares to the Seller or Seller's designee, (ii) an excerpt from the
share register of the Surviving Company reflecting ownership of the
Consideration Shares, and (iii) share certificates in definitive form
representing the Consideration Shares, which share certificates shall
be in such denominations as Seller may request in writing not later
than 10 days prior to the Closing Date; and
(v) Seller shall execute and deliver and cause the Custodian to
execute and deliver to the Surviving Company, contemporaneously with
the delivery of the share certificates representing the Consideration
Shares, a Voting Agreement, in the form attached hereto as Exhibit 1.2
(the "Seller Voting Agreement"), with respect to the voting of the
Consideration Shares pending the distribution of such shares of
Surviving Company Common Stock to the shareholders of Seller pursuant
to this Agreement and the Plan of Liquidation.
(c) The resolution of the Board of Directors of the Surviving
Company approving the issuance of the Consideration Shares pursuant to this
Agreement may provide, in accordance with Article 6 of the Statuts Coordonnes of
the Surviving Company, as
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in effect as of the date hereof, that the approval of the Board of Directors
with respect to the ownership and voting of more than 20% of the Surviving
Company's share capital shall be limited to such ownership and voting by Seller
and the Custodian pursuant to this Agreement, the Seller Voting Agreement and
the Plan of Liquidation, and shall not extend to any other Person.
1.3. Articles of Incorporation. Statuts Coordonnes (the
"Articles of Incorporation") of the Surviving Company in effect on the Closing
Date shall be substantially in the form of the Articles of Incorporation of the
Surviving Company as in effect on the date hereof (except for any modifications
thereto as are required to implement the transactions contemplated by this
Agreement) and shall be the Articles of Incorporation of the Surviving Company
until thereafter changed or amended as provided therein or by applicable law.
1.4. Directors and Officers of the Surviving Company. (a) The
board of directors of the Surviving Company immediately upon the occurrence of
the Closing shall consist of those individuals identified in Schedule 1.4 hereto
or such other individuals as may be agreed to in writing by the parties hereto
prior to the Closing. Such individuals shall be the directors of the Surviving
Company until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
(b) The members of the Executive Committee of the Surviving
Company immediately upon the occurrence of the Closing shall consist of those
individuals identified in Schedule 1.4 hereto or such other individuals as may
be agreed to in writing by the parties hereto prior to the Closing. Such
individuals shall be the members of the Executive Committee of the Surviving
Company until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
(c) The officers of the Surviving Company immediately upon the
occurrence of the Closing shall consist of those individuals identified or
designated in accordance with Schedule 1.4 hereto or such other individuals as
may be agreed to in writing by the parties hereto prior to the Closing. Such
individuals shall remain in such offices until the earlier of their resignation
or removal or until their respective successors are duly elected and qualified,
as the case may be.
2. Winding Up and Dissolution of Seller.
On the date immediately preceding the Closing Date, the Seller
shall cause the Declarations (as defined in the Plan of Liquidation) to be
delivered to the Bermuda Registrar of Companies for registration. On the day of
the Closing (but following the consummation of the Sale), or as soon thereafter
as
5
practicable, Seller shall hold the Second Seller Shareholder Meeting and,
subject to such approvals of Seller's shareholders as may be required by the
BCA, Seller shall appoint a liquidator (who shall be reasonably acceptable to
the Surviving Company) to distribute to its shareholders the Consideration
Shares. On the date specified in the last sentence of Section 2(e) of the Plan
of Liquidation, Seller shall transfer to the Surviving Company, for no
additional consideration, all assets, properties and rights of Seller, whether
tangible or intangible and whether accrued, contingent or otherwise, as the same
may exist at such time, and as promptly as practicable thereafter Seller shall
dissolve, all in accordance with the BCA, the bye-laws of Seller ("Seller's
Bye-laws") and this Agreement. The procedures for such winding up (including the
distribution of Consideration Shares to Seller's shareholders) and dissolution
shall be substantially as set forth in the Plan of Liquidation.
3. Representations and Warranties of Seller.
Except as set forth on the Disclosure Schedule delivered by
Seller to the Surviving Company prior to the execution of this Agreement (the
"Seller Disclosure Schedule") (it being agreed that the matters referred to in
the Seller Disclosure Schedule shall be deemed to qualify (i) the specific
representations and warranties which are referred to therein, and (ii) such
other representations and warranties where the substance of the disclosure made
with respect to such matter includes sufficient information and detail to make
clear the nature of such qualification), Seller represents and warrants to the
Surviving Company as follows:
3.1. Organization, Standing and Corporate Power. Seller and each
of its Subsidiaries is duly organized and validly existing under the laws of the
jurisdiction in which it is organized and has the requisite corporate or similar
power and authority to carry on its business as now being conducted. Seller and
each of its Subsidiaries is duly qualified or licensed to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed or to be in
good standing individually or in the aggregate would not have a Material Adverse
Effect on Seller. Seller has made available to the Surviving Company prior to
the date hereof complete and correct copies of its Memorandum of Association and
Seller's Bye-Laws, in each case as amended to the date hereof.
3.2. Acquired Assets. The Acquired Assets include all of the
assets, properties and rights of every type, description, whether tangible,
whether intangible, real personal or mixed and whether accrued, contingent or
otherwise that are necessary for, used or usable in the conduct of the business
of Seller in the manner in which such business has been and is now conducted.
Seller owns good and marketable title to or has valid
6
leasehold interests in all of the Acquired Assets free and clear of all Liens.
3.3. Subsidiaries. As of the date hereof, the Seller Disclosure
Schedule sets forth a true and complete list of each Subsidiary of Seller.
Except as set forth on the Seller Disclosure Schedule, all the outstanding
shares of capital stock of each Subsidiary of Seller have been validly issued
and are fully paid and nonassessable and are owned directly or indirectly by
Seller, free and clear of pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever (collectively, "Liens").
Except as set forth in the Seller Disclosure Schedule and except for the capital
stock of its Subsidiaries, as of the date hereof, Seller does not own, directly
or indirectly, any capital stock or other ownership interest in any corporation,
limited liability company, partnership, joint venture or other Person the loss
of which would have a Material Adverse Effect on Seller. No approval, consent,
authorization or filing of or with any Governmental Entity or other Person shall
be required to be obtained or made in order for the Surviving Company to
acquire, own and obtain the benefits of ownership of Seller's Subsidiaries
pursuant to the terms of this Agreement.
3.4. Capital Structure. (a) The authorized capital stock of
Seller (the "Seller Capital Stock") consists of 100,000,000 Class A Shares,
15,000,000 Class B Shares and 5,000,000 shares of Preferred Stock, par value
$.01 per share (the "Preferred Shares", and together with the Class A Shares and
the Class B Shares, the "Seller Shares"). As of the date hereof, 18,106,789
Class A Shares, 7,577,329 Class B Shares and no Preferred Shares are issued and
outstanding, 2,100,000 Class A Shares are reserved for issuance pursuant to the
Seller Stock Option Plans (as defined in Section 6.7) and 320,000 Class A Shares
are reserved for issuance pursuant to the Warrants for the Purchase of Shares of
Common Stock, dated as of September 9, 1994 and October 2, 1996 issued by Seller
to RSL or one or more of his affiliates (collectively, the "Seller Warrants").
(b) Except as set forth in the Seller Disclosure Schedule, there
are no outstanding stock appreciation rights or rights to receive shares of
Seller Capital Stock on a deferred basis other than pursuant to the Seller
Incentive Plans. The Seller Disclosure Schedule sets forth a complete and
correct list, as of the date hereof, of the holders of all Seller Stock Options,
Seller SARs or Seller Warrants, the number of shares subject to each such
option, stock appreciation right or warrant and the exercise prices or base
prices thereof. All outstanding shares of capital stock of Seller, and all
shares which may be issued, will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
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(c) There are no bonds, debentures, notes or other Indebtedness
of Seller having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders of
Seller may vote.
(d) Except as set forth above or as otherwise contemplated by
this Agreement, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which Seller is a party or by which it is bound obligating Seller to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of Seller or obligating Seller to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. There are no
outstanding contractual obligations of Seller to repurchase, redeem or otherwise
acquire any shares of capital stock of Seller.
(e) As of the date of this Agreement, the Principal Seller
Shareholders are the record owners of a number of Class A Shares and Class B
Shares that in the aggregate constitutes approximately 69% of the votes entitled
to be cast at the Seller Shareholders Meeting (as defined in Section 6.2).
3.5. Authority; Noncontravention. (a) Seller has all requisite
corporate power and authority to enter into this Agreement and the Seller Voting
Agreement and to consummate the transactions contemplated by this Agreement, the
Seller Voting Agreement and the Plan of Liquidation. The execution and delivery
of this Agreement and the Seller Voting Agreement by Seller and, subject to the
Seller Shareholder Approvals (as defined in Section 3.13) and the actions of the
Seller's Board of Directors contemplated by the Plan of Liquidation, the
consummation by Seller of the transactions contemplated by this Agreement, the
Seller Voting Agreement and the Plan of Liquidation have been duly authorized by
all necessary corporate action on the part of Seller. This Agreement and the
Seller Voting Agreement have been duly executed and delivered by Seller and
constitute valid and binding obligations of Seller, enforceable against Seller
in accordance with their respective terms.
(b) The execution and delivery of this Agreement and the Seller
Voting Agreement do not, and the consummation of the transactions contemplated
by this Agreement, the Seller Voting Agreement and the Plan of Liquidation and
compliance with the provisions of this Agreement, the Seller Voting Agreement
and the Plan of Liquidation by Seller will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time or both) under,
or give rise to a right of termination, cancellation or acceleration of any
obligation or loss of a material benefit under, or result in the creation of any
Lien upon any of the properties or assets of Seller or its Subsidiaries under,
(i) the organizational documents of Seller or
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any of its Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to Seller or any of its Subsidiaries or their
respective properties or assets, (iii) any licenses, franchises, permits,
concessions or other governmental approvals granted to or held by Seller or any
of this Subsidiaries, or (iv) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Seller or any of its
Subsidiaries or their respective properties or assets, other than, in the case
of clauses (ii), (iii), (iv), any such conflicts, violations, defaults, rights
or Liens that individually or in the aggregate would not (x) have a Material
Adverse Effect on Seller, (y) impair the ability of Seller to perform its
obligations under this Agreement in any material respect or (z) delay in any
material respect or prevent the consummation of any of the transactions
contemplated hereby.
(c) Except (i) as set forth in the Seller Disclosure Schedule
and (ii) for such consents, approvals, orders or authorizations the failure of
which to be made or obtained would not reasonably be expected to have a Material
Adverse Effect on Seller, impair the ability of Seller to perform its
obligations under this Agreement in any material respect or delay in any
material respect or prevent the consummation of any of the transactions
contemplated hereby, no consent, approval, order or authorization of, or
registration, declaration or filing with, any national, state, regional or local
government or any court, administrative or regulatory agency or commission or
other governmental authority or agency (a "Governmental Entity") or any other
Person is required by or with respect to Seller or any of its Subsidiaries in
connection with the execution and delivery of this Agreement or the Seller
Voting Agreement or the consummation by Seller of any of the transactions
contemplated by this Agreement, the Seller Voting Agreement or the Plan of
Liquidation, except for those required under or in relation to (i) the
Securities Act of 1933, as amended (the "Securities Act"), (ii) the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (iii) the rules and
regulations of the electronic security market (the "NASDAQ") currently operated
by The NASDAQ Stock Market, Inc. and (iv) the BCA with respect to the
Liquidation (all such consents, approvals, orders and authorizations referred to
in clauses (i) - (iv) above being referred to herein as the "Necessary Seller
Consents"). The Seller Disclosure Schedule sets forth a complete and correct
list of all Necessary Seller Consents.
3.6. SEC Documents; Undisclosed Liabilities. (a) Seller has
timely filed all required reports, schedules, forms, statements and other
documents (including without limitation all exhibits thereto) with the
Securities and Exchange Commission (the "SEC") since January 1, 1996 (together
with Seller's Annual Report on Form 10-K for the year ended December 31, 1998 in
the
9
form previously delivered to the Surviving Company, the "Seller SEC Documents").
As of their respective dates, Seller SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Seller SEC Documents, and none of Seller SEC Documents when
filed contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) The consolidated balance sheets and the related consolidated
statements of operations, shareholders' equity and changes in financial position
(including, without limitation, the notes and schedules thereto) of Seller and
its consolidated subsidiaries to be included in Seller's Annual Report on Form
10-K for the year ended December 31, 1998 in the form previously delivered to
the Surviving Company (the "Seller Financial Statements") or in any other SEC
Document covering periods subsequent to the date of the Seller Financial
Statements comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles in the United States ("GAAP") applied on a consistent basis (except
as may be indicated in the notes thereto) and fairly present in all material
respects the consolidated financial position of Seller and its consolidated
subsidiaries as of the date thereof and the consolidated results of their
operations and cash flows for the periods then ended, subject, in the case of
any unaudited consolidated interim financial statements, to normal year-end
adjustments, and the fact that such interim financial statements were prepared
in accordance with the rules and regulations of the SEC and, therefore, certain
information required by GAAP may have been omitted.
(c) Except as set forth in the Seller Financial Statements,
reflected on financial statements contained in Seller SEC Documents and covering
periods subsequent to the date of the Seller Financial Statements, or as
otherwise set forth in the Seller Disclosure Schedule, neither Seller nor any of
its Subsidiaries has any material liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by generally
accepted accounting principles to be recognized or disclosed on a consolidated
balance sheet of Seller and its consolidated subsidiaries or in the notes
thereto, other than liabilities and obligations incurred in the ordinary course
of business since the date of the Seller Financial Statements that would not
reasonably be expected to have a Material Adverse Effect on Seller.
3.7. Information Supplied. None of the information supplied or
to be supplied by Seller specifically for inclusion
10
or incorporation by reference in (a) the Form F-4, at the time the Form F-4 is
filed with the SEC, at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contains or will contain any untrue
statement of a material fact or will omit to state any material fact required to
be stated therein or necessary to make the statements therein not misleading, or
(b) the Joint Proxy Statement will, at the date the Joint Proxy Statement is
first mailed to Seller's Shareholders or at the time of Seller Shareholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Joint Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation or warranty is made by
Seller with respect to statements made or incorporated by reference therein
based on information supplied by the Surviving Company specifically for
inclusion or incorporation by reference in the Joint Proxy Statement.
3.8. Absence of Certain Changes or Events. Since December 31,
1998, and except as disclosed in the Seller Disclosure Schedule, reflected in
the Seller Financial Statements, or as permitted by this Agreement, (a) there
has been no Material Adverse Change with respect to Seller, (b) Seller has not
paid any dividend or made any distribution (whether in cash, stock or property)
with respect to any of Seller's capital stock, (c) there has been no redemption,
purchase or other acquisition by Seller of any shares of Seller's capital stock,
or any split, combination or classification of any Seller Capital Stock, or any
issuance or authorization of any other securities in respect of, in lieu of or
in substitution for shares of Seller Capital Stock, and (d) Seller has not taken
any action, or allowed any of its Subsidiaries to take any action, that if taken
after the date hereof would constitute a breach of Section 5.2.
3.9. Litigation. Except as set forth in the Seller Disclosure
Schedule, there is no suit, action or proceeding pending or, to the knowledge of
Seller, threatened against or affecting Seller or any of its Subsidiaries that
individually or in the aggregate could reasonably be expected to (a) have a
Material Adverse Effect on Seller, (b) impair the ability of Seller to perform
its obligations under this Agreement in any material respect or (c) delay in any
material respect or prevent the consummation of any of the transactions
contemplated by this Agreement and Seller Shareholders' Agreement, nor is there
any judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Seller or any of its Subsidiaries having, or
which could reasonably be expected to have, any effect referred to in clause
(a), (b) or (c) above.
11
3.10. Benefit Plans. (a) The Seller Disclosure Schedule lists
(i) all Employee Benefit Plans of Seller or any Subsidiary thereof, (ii) all
employment contracts (x) between Seller and any of its employees and (y) between
any Subsidiary of Seller, on the one hand, and its managing director (or person
performing similar functions) or any other employee whose annual compensation
exceeds $150,000, on the other hand, and (iii) all plans and arrangements
pursuant to which the Seller or any of its Subsidiaries is, or may be or become,
obligated to make any payment in excess of $150,000, to confer any material
benefit upon or accelerate the vesting or exercisability of any benefit for any
officer, director, employee or agent of Seller or any of its Subsidiaries as a
result of or in connection with any of the transactions contemplated by this
Agreement; provided, however, that no such disclosure shall be required of any
Employee Benefits Plan that Seller or any of its Subsidiaries is required to
provide under applicable law.
(b) (i) Seller and its Subsidiaries have complied with all laws
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, and collective bargaining except where the
failure so to comply could not reasonably be expected to have a Material Adverse
Effect on Seller, (ii) no labor dispute with employees of Seller exists or, to
the knowledge of Seller, is threatened, except as could not reasonably be
expected to have a Material Adverse Effect on Seller, (iii) each Employee
Benefit Plan conforms in all material respects to, and its administration is in
conformity in all material respects with, all applicable laws, no material
liability has been or is expected to be incurred by Seller with respect to any
Employee Benefit Plan except for benefits payable or contributions due under the
terms of such plans, and full payment has been made of all amounts that Seller
is required to have paid as a contribution to each Employee Benefit Plan, (iv)
Seller has made available to the Surviving Company a true and correct copy of
each of the Employee Benefit Plans and all contracts relating thereto or to the
funding thereof, (v) all Employee Benefit Plans intended to satisfy applicable
tax qualification requirements or other requirements necessary to secure
favorable tax or other legal treatment comply in all material respects with such
requirements and (vi) appropriate accruals for all obligations under the
Employee Benefit Plans are reflected in the financial statements of Seller.
(c) There are no pending or, to the knowledge of Seller,
threatened claims for indemnification by Seller or any of its Subsidiaries in
favor of directors, officers, employees and agents of Seller or any of its
Subsidiaries.
3.11. Compliance with Applicable Laws. Except as set forth in
the Seller Disclosure Schedule or as would not reasonably be expected to have a
Material Adverse Effect on Seller, (a) Seller and its Subsidiaries, or the other
Persons listed in the Seller Disclosure Schedule (the "License Holders"),
12
hold all permits, licenses, authorizations, variances, exemptions, orders and
approvals of all Governmental Entities that are necessary for the operation of
the businesses of Seller and its Subsidiaries (the "Seller Permits"), (b)
Seller, its Subsidiaries and the License Holders are in compliance with the
terms of Seller Permits and (c) the businesses of Seller and its Subsidiaries
are not being conducted in violation of, and Seller has not, and, to Seller's
knowledge, no License Holder has, received any notices of violation with respect
to, any law, ordinance or regulation of any Governmental Entity including,
without limitation, the U.S. Foreign Corrupt Practices Act or similar laws. To
the knowledge of Seller, there are no reasonable grounds to believe that any of
the foregoing Seller Permits will not, in the ordinary course, be renewable upon
their expiration, and neither Seller nor any of its Subsidiaries, nor, to the
knowledge of Seller, any License Holder, has received any notice from any
Governmental Entity giving notice of, or threatening, the cancellation or
non-renewal of same.
3.12. Taxes. For purposes of this Section 3.12, the term
"Seller" shall mean Seller and its Subsidiaries.
(a) Seller has timely filed all Tax Returns (as defined below)
required to be filed by Seller or any affiliated, combined or unitary group of
which Seller is or was a member, and has paid all Taxes (as defined below) shown
thereon to be due, except to the extent that such failures to file or pay
individually or in the aggregate would not have a Material Adverse Effect on
Seller.
(b) Seller has established on its books and records adequate
reserves in accordance with GAAP applied on a consistent basis for the payment
of all Taxes for which it is liable that are not yet due and payable, and with
respect to any such Taxes which have been proposed, assessed or asserted against
them.
(c) Seller has not requested any extension of time within which
to file any Tax Return in respect of any taxable year, which Tax Return has not
since been filed.
(d) There are no outstanding waivers or comparable consents that
have been given by Seller or with respect to any Tax Return of Seller regarding
the application of any statute of limitations with respect to any Taxes or Tax
Returns of Seller.
(e) There are no audits, investigations, administrative
proceedings or court proceedings presently pending, proposed, or, to the
knowledge of Seller, threatened against Seller in any jurisdiction that could
materially affect the liability for Taxes of Seller and no written notification
has been received by Seller that such an audit, investigation or other
proceeding is pending or threatened.
13
(f) Seller is not a party to, is not bound by and does not have
an obligation under any Tax sharing agreement, Tax indemnification agreement or
similar contract or arrangement (including any agreement, contract or
arrangement providing for the sharing or ceding of credits or losses) or have a
potential liability or obligation to any person as a result of or pursuant to
any such agreement, contract, arrangement or commitment.
(g) No closing agreement pursuant to section 7121 of the Code or
any similar provision of any non-U.S. law has been entered into by or on behalf
of Seller in relation to the liability for Tax of Seller.
(h) No jurisdiction where Seller has not filed an income Tax
Return has made a claim that Seller is required to file an income Tax Return in
such jurisdiction.
(i) Seller has not been and is not currently engaged in the
conduct of a trade or business within the United States.
(j) CME Media has its registered office or place of effective
management in the European Union.
(k) To the knowledge of Seller, for the periods January 1, 1998
through December 31, 1998 and January 1, 1999 through the date hereof, (x)
neither the Seller nor any Subsidiary of Seller that would be treated as a
corporation for U.S. federal income tax purposes satisfied the gross income test
of Section 552(a)(1) of the Code (relating to status as a foreign personal
holding company) and (y) Seller was not a passive foreign investment company as
defined in Section 1297(a) of the Code.
(l) For purposes of this Agreement, (i) "Taxes" shall mean all
taxes, charges, fees, levies or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, goods and services, capital, transfer, franchise, profits, license,
withholding, payroll, employment, employer health, excise, severance, stamp,
occupation, real and personal property, social security, estimated, recording,
gift, value assessed, windfall profits or other taxes, customs duties, fees,
assessments or charges of any kind whatsoever, whether computed on a separate,
consolidated, unitary, combined or other basis, together with any interest,
fines, penalties, additions to tax or other additional amounts imposed by any
taxing authority, and (ii) "Tax Return" shall mean any return, declaration,
report, estimate, information or other document (including any documents,
statements or schedules attached thereto) required to be filed with any tax
authority in any jurisdiction with respect to Taxes.
3.13. Voting Requirements. (a) The affirmative votes of the
holders of a majority of the voting power of all
14
outstanding Seller Shares at the Seller Shareholders Meetings (the "Seller
Shareholder Approvals") are the only votes of the holders of any class or series
of Seller's capital stock necessary to approve and adopt this Agreement and the
transactions contemplated hereby.
(b) The Board of Directors of Seller has duly (i) determined
that this Agreement and the transactions contemplated herein the Sale are fair
to and in the best interests of Seller and its shareholders, (ii) approved this
Agreement, the Seller Voting Agreement and the Seller Shareholders' Agreement
and the transactions contemplated herein and therein and (iii) recommended (as
of the date hereof) that the shareholders of Seller approve this Agreement, the
Seller Voting Agreement and the Seller Shareholders' Agreement and the
transactions contemplated herein and therein and directed that such matters be
submitted for consideration by Seller's shareholders at the Seller Shareholders
Meetings.
3.14. Brokers. No broker, investment banker, financial advisor
or other Person, other than Xxxxxx Xxxxxxx & Co., the fees and expenses of which
will be paid in accordance with this Agreement, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement and the Seller
Shareholders' Agreement based upon arrangements made by or on behalf of Seller
or any of its Subsidiaries. Prior to the Closing Date, adequate provision shall
be made in the financial statements of Seller with respect to the payment of all
such fees and expenses as a current expense item. Seller has delivered to the
Surviving Company true and complete copies of all agreements under which any
such fees or expense are payable and all indemnification and other agreements
related to the engagement of the persons to whom such fees are payable.
3.15. Opinion of Financial Advisor. Seller has received an
opinion from Xxxxxx Xxxxxxx & Co. Incorporated, financial advisor to Seller, to
the effect that the consideration to be received by the shareholders of Seller
upon the Liquidation and pursuant hereto is fair, from a financial point of
view, to the shareholders of Seller, as a whole, a copy of which opinion has
been delivered to the Surviving Company.
3.16. Contracts. (a) Except as set forth in the Seller
Disclosure Schedule, none of Seller, any of its Subsidiaries, or to the
knowledge of Seller, any other party is in breach or violation or in default in
the performance or observance of any term or provision of any contract,
agreement, indenture, mortgage, loan agreement, note, lease or other instrument
to which Seller or any such Subsidiary is a party or by which Seller or any such
Subsidiary is bound or to which any of the properties of Seller or any such
Subsidiary is subject, which breach, violation or default would be reasonably
likely to,
15
individually or in the aggregate, have a Material Adverse Effect on
Seller.
(b) The Seller Disclosure Schedule sets forth a true and correct
list of (i) all contracts or agreements between or among Seller or any
Subsidiary of Seller, one the one hand, and any other Person, on the other hand,
which are terminable or which contain any provision that would be triggered as a
result of the consummation of any of the transactions contemplated by this
Agreement, (ii) all contracts or agreements between Seller or any Subsidiary of
Seller, on the one hand, and Xxxxxx X. Xxxxxx or any of his affiliates, on the
other hand, (collectively, the "RL Agreements"), (iii) all capital stock or
ownership interests directly or indirectly owned by Seller in any Persons owning
or operating commercial television broadcasting companies or owning any licenses
with respect thereto (the "Seller Broadcast Properties") and (iv) all material
contracts or agreements with, or other commitments to, any other shareholder,
partner, joint venturer or Person owning an interest in any Seller Broadcast
Property or licenses pertaining thereto (collectively, the "Seller Broadcast
Contracts"). Except as disclosed in the Seller Disclosure Schedule or as would
not have a Material Adverse Effect on Seller, the interests referred to in
clause (iii) of the immediately preceding sentence, together with the Seller
Broadcast Contracts, are sufficient to ensure the continued enjoyment, after the
Closing Date, by the Surviving Company of the businesses owned and operated by
the Seller Broadcast Properties.
(c) The Seller Broadcast Contracts have been duly executed and
delivered and constitute valid and binding obligations of the parties thereto,
enforceable against the parties thereto in accordance with their respective
terms except to the extent any lack of enforceability would not be reasonably
likely to, individually or in the aggregate, have a Material Adverse Effect on
Seller.
(d) Seller has disclosed to the Surviving Company all written
communications between any Person having an interest in the broadcast license
with respect to NOVA TV or any regulatory authority having jurisdiction over the
operations of NOVA TV, on the one hand, and Seller or any Subsidiary of Seller,
on the other hand, with respect to Seller's interest in NOVA TV.
(e) Except as set forth in the Seller Disclosure Schedule,
neither Seller nor any Subsidiary is a party to, or is otherwise subject to, any
agreement or commitment (i) granting registration rights, including piggyback
rights, to any Person, or (ii) containing any non-competition or similar
agreement which restricts the businesses which may be engaged in by Seller or
any affiliate thereof in any geographic location.
16
3.17. Insurance. Seller and its Subsidiaries are insured with
reputable insurers against such risks and in such amounts as are prudent in
accordance with industry practices.
3.18. Dissenters' Rights. The consummation of the transactions
contemplated by this Agreement shall not give rise to dissenters' rights in
favor of any shareholder of Seller pursuant to the provisions of Section 210 of
the BCA.
4. Representations and Warranties of the Surviving Company.
Except as set forth on the Disclosure Schedule delivered by the
Surviving Company to Seller prior to the execution of this Agreement (the
"Surviving Company Disclosure Schedule") (it being agreed that the matters
referred to in the Surviving Company Disclosure Schedule shall be deemed to
qualify (i) the specific representations and warranties which are referred to
therein, and (ii) such other representations and warranties where the substance
of the disclosure made with respect to such matter includes sufficient
information and detail to make clear the nature of such qualification), the
Surviving Company represents and warrants to Seller as follows:
4.1. Organization, Standing and Corporate Power. The Surviving
Company and each of its Subsidiaries is duly organized, validly existing under
the laws of the jurisdiction in which it is organized and has the requisite
corporate power and authority to carry on its business as now being conducted.
The Surviving Company and each of its Subsidiaries is duly qualified or licensed
to do business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed or to be in good standing individually or in the aggregate would not
have a Material Adverse Effect on the Surviving Company. The Surviving Company
has made available to Seller prior to the date hereof complete and correct
copies of its Statuts Coordonnes, as amended to the date hereof.
4.2. Subsidiaries. As of the date hereof, the Surviving Company
Disclosure Schedule sets forth a true and complete list of each Subsidiary of
the Surviving Company. Except as set forth in the Surviving Company Disclosure
Schedule, all the outstanding shares of capital stock of each Subsidiary of the
Surviving Company have been validly issued and are fully paid and nonassessable
and are owned directly or indirectly by the Surviving Company, free and clear of
all Liens. Except as set forth in the Surviving Company Disclosure Schedule and
except for the capital stock of its Subsidiaries, as of the date hereof, the
Surviving Company does not own, directly or indirectly, any capital stock or
other ownership interest in any corporation, limited liability company,
partnership, joint venture or other
18
Person, the loss of which would have a Material Adverse Effect on the Surviving
Company.
4.3. Capital Structure. (a) The authorized capital stock of the
Surviving Company consists of 75,000,000 shares of common stock, par value $1.50
per share (the "Surviving Company Common Stock"). As of the date hereof,
14,858,720 shares of Surviving Company Common Stock are issued and outstanding,
45,000 shares of Surviving Company Common Stock are held in treasury, 4,408,963
shares of Surviving Company Common Stock are reserved for issuance pursuant to
Employee Stock Options as defined in clause (b) below), and 1,000,000 shares of
Surviving Company Common Stock were reserved for issuance upon exercise of all
outstanding warrants of the Surviving Company (the "Surviving Company
Warrants").
(b) Other than options (the "Employee Stock Options") to acquire
Surviving Company Common Stock held as of the date hereof by present and former
employees of the Surviving Company and its Subsidiaries, there are no
outstanding stock appreciation rights or rights to receive shares of Surviving
Company Common Stock on a deferred basis. The Surviving Company Disclosure
Schedule sets forth a complete and correct list, as of the date hereof, of the
holders of all Employee Stock Options, the number of shares subject to each such
option and the exercise prices thereof. All outstanding shares of capital stock
of the Surviving Company are, and all shares which may be issued will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights.
(c) Other than the Surviving Company's $155,250,000 7.25%
Convertible Notes due 2005 and $75,000,000 7% Convertible Notes due 2004, there
are no bonds, debentures, notes or other Indebtedness of the Surviving Company
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which shareholders of the Surviving
Company may vote.
(d) Except as set forth above, and except for options that may
be granted as permitted under Section 5.1(c), there are no outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Surviving Company or any
of its Subsidiaries is a party or by which any of them is bound obligating the
Surviving Company or any of its Subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock or other
voting securities of the Surviving Company or of any of its Subsidiaries or
obligating the Surviving Company or any of its Subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no outstanding
contractual obligations of the Surviving Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Surviving
18
Company or any of its Subsidiaries. There are no outstanding contractual
obligations of the Surviving Company to vote or to dispose of any shares of the
capital stock of any of its Subsidiaries.
(e) As of the date hereof, the Principal Surviving Company
Shareholders are the beneficial owners of an aggregate of 971,133 shares of
Surviving Company Common Stock, which constitute as of the date hereof
approximately 6.5% of the votes entitled to be cast at the Surviving Company
Shareholders Meeting (as defined in Section 6.2).
4.4. Authority; Noncontravention. (a) The Surviving Company has
all requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Surviving Company and, subject to the Surviving Company
Shareholder Approval (as defined in Section 4.11), the consummation by the
Surviving Company of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Surviving
Company. This Agreement has been duly executed and delivered by the Surviving
Company and constitutes a valid and binding obligation of the Surviving Company,
enforceable against the Surviving Company in accordance with its terms.
(b) The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, conflict with, result in any
violation of or default (with or without notice or lapse of time or both) under,
give rise to a right of termination, cancellation or acceleration of any
obligation or loss of a material benefit under, or result in the creation of any
Lien upon any of the properties or assets of the Surviving Company or any of its
Subsidiaries under, (i) the organizational documents of the Surviving Company or
any of its Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to the Surviving Company or any of its
Subsidiaries or their respective properties or assets, (iii) any licenses,
franchises, permits, concessions or other governmental approvals granted to or
held by the Surviving Company or any of its Subsidiaries, or (iv) subject to the
governmental filings and other matters referred to in the following sentence,
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Surviving Company or any of its Subsidiaries or their
respective properties or assets, other than in the case of clauses (ii), (iii)
and (iv) any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate would not (x) have a Material Adverse Effect on
the Surviving Company, (y) impair the ability of the Surviving Company to
perform its obligations under this Agreement in any material respect or (z)
delay in any material
19
respect or prevent the consummation of any of the transactions contemplated
hereby.
(c) Except (i) as set forth in the Surviving Company Disclosure
Schedule and (ii) for such consents, approvals, orders or authorizations the
failure of which to be made or obtained would not reasonably be expected to have
a Material Adverse Effect on the Surviving Company, impair the ability of the
Surviving Company to perform its obligations under this Agreement in any
material respect or delay in any material respect or prevent the consummation of
any of the transactions contemplated hereby, no consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity or other Person is required by or with respect to the Surviving Company
or any of its Subsidiaries in connection with the execution and delivery of this
Agreement by the Surviving Company or the consummation by the Surviving Company
of the transactions contemplated by this Agreement, except for those required
under or in relation to (i) the Securities Act, (ii) the Exchange Act, (iii)
rules and regulations of NASDAQ, and (iv) the requirements of Luxembourg law
with respect to registration of the issuance of the Consideration Shares with
the Luxembourg tax authorities, filing of the notarial deed evidencing such
issuance with the Luxembourg Company Register and publication of same in the
Luxembourg Official Gazette (all such consents, approvals, orders and
authorizations referred to in clauses (i)-(iv) above being referred to herein as
the "Necessary Surviving Company Consents"). The Surviving Company Disclosure
Schedule sets forth a complete and correct list of all Necessary Surviving
Company Consents.
4.5. SEC Documents; Undisclosed Liabilities. (a) The Surviving
Company has timely filed all required reports, schedules, forms, statements and
other documents (including without limitation all exhibits thereto) with the SEC
since January 1, 1996 (the "Surviving Company SEC Documents"). As of their
respective dates, the Surviving Company SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Surviving Company SEC Documents, and none of the Surviving
Company SEC Documents when filed contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) The consolidated balance sheets and the related consolidated
statements of operations, shareholders' equity and changes in financial position
(including, without limitation, the notes and schedules thereto) of the
Surviving Company and its consolidated subsidiaries for the year ended December
31, 1998 in the form previously delivered to Seller (the "Surviving Company
Financial Statements") or in any other SEC Document covering
20
periods subsequent to the date of the Surviving Company Financial Statements
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP applied on a consistent
basis (except as may be indicated in the notes thereto) and fairly present in
all material respects the consolidated financial position of the Surviving
Company and its consolidated subsidiaries as of the date thereof and the
consolidated results of their operations and cash flows for the periods then
ended, subject, in the case of unaudited consolidated interim financial
statements, to normal year-end adjustments, and the fact that such interim
financial statements were prepared in accordance with the rules and regulations
of the SEC and, therefore, certain information required by GAAP may have been
omitted.
(c) Except as set forth in the Surviving Company Financial
Statements, as reflected in financial statements contained in Surviving Company
SEC Documents and covering periods subsequent to the date of the Surviving
Company Financial Statements, or as otherwise set forth in the Surviving Company
Disclosure Schedule, neither the Surviving Company nor any of its Subsidiaries
has any material liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by generally accepted accounting
principles to be recognized or disclosed on a consolidated balance sheet of the
Surviving Company and its consolidated subsidiaries or in the notes thereto,
other than liabilities and obligations incurred in the ordinary course of
business since the date of the Surviving Company Financial Statements that would
not reasonably be expected to have a Material Adverse Effect on the Surviving
Company.
4.6. Information Supplied. None of the information supplied or
to be supplied by the Surviving Company specifically for inclusion or
incorporation by reference in (a) the Form F-4 will, at the time the Form F-4 is
filed with the SEC, at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contains or will contain any untrue
statement of a material fact or will omit to state any material fact required to
be stated therein or necessary to make the statements therein not misleading or
(b) the Joint Proxy Statement (as defined in Section 6.1) will, at the date it
is first mailed to the Surviving Company's shareholders or at the time of the
Surviving Company Shareholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Form F-4 and the
Joint Proxy Statement will comply as to form in all material respects with the
requirements of the Securities Act and the Exchange Act, as applicable, and the
respective rules and regulations promulgated thereunder, except that no
representation or warranty is made by the Surviving Company with respect to
statements made or
21
incorporated by reference therein based on information supplied by Seller
specifically for inclusion or incorporation by reference in the Form F-4 or the
Joint Proxy Statement.
4.7. Absence of Certain Changes or Events. Since December 31,
1998, and except as disclosed in the Surviving Company Disclosure Schedule or as
permitted by this Agreement, (a) there has been no Material Adverse Change with
respect to the Surviving Company, (b) the Surviving Company has not paid any
dividend or made any distribution (whether in cash, stock or property) with
respect to any of the Surviving Company's capital stock, (c) there has been no
redemption, purchase or other acquisition by the Surviving Company of any shares
of the Surviving Company's capital stock, or any split, combination or
classification of any Surviving Company Common Stock, or any issuance or
authorization of any other securities in respect of, in lieu of or in
substitution for shares of Surviving Company Common Stock and (d) the Surviving
Company has not taken any action, or allowed any of its Subsidiaries to take any
action, that if taken after the date hereof would constitute a breach of Section
5.1.
4.8. Litigation. Except as set forth in the Surviving Company
Disclosure Schedule, there is no suit, action or proceeding pending or, to the
knowledge of the Surviving Company, threatened against or affecting the
Surviving Company or any of its Subsidiaries that individually or in the
aggregate could reasonably be expected to (a) have a Material Adverse Effect on
the Surviving Company, (b) impair the ability of the Surviving Company to
perform its obligations under this Agreement in any material respect or (c)
delay in any material respect or prevent the consummation of any of the
transactions contemplated by this Agreement and the Surviving Company
Shareholders' Agreement, nor is there any judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding against the Surviving
Company or any of its material Subsidiaries having, or which could reasonably be
expected to have, any effect referred to in clause (a), (b) or (c) above.
4.9. Benefit Plans. (a) The Surviving Company Disclosure
Schedule lists (i) all Employee Benefit Plans of the Surviving Company or
Subsidiary thereof, (ii) all employment contracts (x) between the Surviving
Company and any of its employees and (y) between any Subsidiary of the Surviving
Company, on the one hand, and its managing director (or person performing
similar functions) or any other employee whose annual compensations exceeds
$150,000, on the other hand, and (iii) all plans and arrangements pursuant to
which the Surviving Company or any of its Subsidiaries is, or may be or become,
obligated to make any payment in excess of $150,000, to confer any material
benefit upon or accelerate the vesting or exercisability of any benefit for any
officer, director, employee or agent of the Surviving Company or any of its
Subsidiaries as a result of or in connection with any of the transactions
contemplated by this
22
Agreement; provided, however, that no such disclosure shall be required of any
Employee Benefits Plan that the Surviving Company or any of its Subsidiaries is
required to provide under applicable law.
(b) (i) The Surviving Company and its Subsidiaries have complied
with all laws relating to the employment of labor, including provisions thereof
relating to wages, hours, equal opportunity and collective bargaining except
where the failure so to comply could not reasonably be expected to have a
Material Adverse Effect on the Surviving Company, (ii) no labor dispute with
employees of the Surviving Company exists or, to the knowledge of the Surviving
Company, is threatened, except as could not reasonably be expected to have a
Material Adverse Effect on the Surviving Company, (iii) each Employee Benefit
Plan conforms in all material respects to, and its administration is in
conformity in all material respects with, all applicable laws, no material
liability has been or is expected to be incurred by the Surviving Company with
respect to any Employee Benefit Plan except for benefits payable or
contributions due under the terms of such plans, and full payment has been made
of all amounts that the Surviving Company is required to have paid as a
contribution to each Employee Benefit Plan, (iv) the Surviving Company has made
available to Seller a true and correct copy of each of the Employee Benefit
Plans and all contracts relating thereto or to the funding thereof, (v) all
Employee Benefit Plans intended to satisfy applicable tax qualification
requirements or other requirements necessary to secure favorable tax or other
legal treatment comply in all material respects with such requirements and (vi)
appropriate accruals for all obligations under the Employee Benefit Plans are
reflected in the financial statements of the Surviving Company.
(c) There are no pending or, to the knowledge of the Surviving
Company, threatened claims for indemnification by the Surviving Company or any
of its Subsidiaries in favor of directors, officers, employees and agents of the
Surviving Company or any of its Subsidiaries.
4.10. Taxes. (a) Surviving Company has timely filed all Tax
Returns (as defined below) required to be filed by the Surviving Company or any
affiliated, combined or unitary group of which the Surviving Company is or was a
member, and has paid all Taxes (as defined below) shown thereon to be due,
except to the extent that such failures to file or pay individually or in the
aggregate would not have a Material Adverse Effect on the Surviving Company.
(b) The Surviving Company has established on its books and
records adequate reserves in accordance with GAAP applied on a consistent basis
for the payment of all Taxes for which it is liable that are not yet due and
payable, and with respect to any such Taxes which have been proposed, assessed
or asserted against them.
23
(c) The Surviving Company has not requested any extension of
time within which to file any Tax Return in respect of any taxable year, which
Tax Return has not since been filed.
(d) There are no outstanding waivers or comparable consents that
have been given by the Surviving Company or with respect to any Tax Return of
the Surviving Company regarding the application of any statute of limitations
with respect to any Taxes or Tax Returns of the Surviving Company.
(e) There are no audits, investigations, administrative
proceedings or court proceedings presently pending, proposed, or, to knowledge
of the Surviving Company, threatened against the Surviving Company in any
jurisdiction that could materially affect the liability for Taxes of the
Surviving Company and no written notification has been received by the Surviving
Company that such an audit, investigation or other proceeding is pending or
threatened.
(f) The Surviving Company is not a party to, is not bound by and
does not have an obligation under any Tax sharing agreement, Tax indemnification
agreement or similar contract or arrangement (including any agreement, contract
or arrangement providing for the sharing or ceding of credits or losses) or have
a potential liability or obligation to any person as a result of or pursuant to
any such agreement, contract, arrangement or commitment.
(g) No closing agreement pursuant to section 7121 of the Code or
any similar provision of any non-U.S. law has been entered into by or on behalf
of the Surviving Company in relation to the liability for Tax of the Surviving
Company.
(h) No jurisdiction where the Surviving Company has not filed an
income Tax Return has made a claim that the Surviving Company is required to
file an income Tax Return in such jurisdiction.
(i) To the knowledge of the Surviving Company as of each day of
the period commencing January 1, 1999, up to the date hereof, (x) neither more
than 50 percent of the total combined voting power of all classes of stock of
the Surviving Company entitled to vote nor more than 50 percent of the total
value of the stock of the Surviving Company (A) was owned by or for not more
than five individuals who are citizens or residents of the United States (taking
into account the rules of Section 554 of the Code relating to stock ownership)
or (B) was owned (taking into account the rules of Section 958 of the Code
relating to stock ownership) by "United States shareholders" within the meaning
of Section 951(b) of the Code and (y) the Surviving Company would not be a
"passive foreign investment company" (within the meaning of Section 1297(a) of
the Code) for the current taxable year if such taxable year began on January 1,
1999 and ended on the date hereof.
24
4.11. Voting Requirements. (a) The affirmative vote of the
holders of a majority of the voting power of all outstanding shares of the
Surviving Company Common Stock, voting as a single class, at the Surviving
Company Shareholders Meeting (the "Surviving Company Shareholder Approval") is
the only vote of the holders of any class or series of the Surviving Company's
capital stock necessary to approve and adopt this Agreement and the transactions
contemplated hereby.
(b) The Board of Directors of the Surviving Company has duly (i)
determined that this Agreement and the transactions contemplated herein are fair
to and in the best interests of the Surviving Company and its shareholders, (ii)
approved this Agreement and the Surviving Company Shareholders' Agreement and
the transactions contemplated herein and therein and (iii) recommended (as of
the date hereof) that the shareholders of the Surviving Company approve this
Agreement and the Surviving Company Shareholders' Agreement and the transactions
contemplated herein and therein and directed that such matters be submitted for
consideration by the Surviving Company's shareholders at the Surviving Company
Shareholders Meeting.
4.12. Brokers. No broker, investment banker, financial advisor
or other Person, other than Bear, Xxxxxxx & Co., the fees and expenses of which
will be paid by the Surviving Company, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement and the Surviving Company
Shareholders' Agreement based upon arrangements made by or on behalf of the
Surviving Company or any of its Subsidiaries. The Surviving Company has
delivered to the Seller true and complete copies of all agreements under which
any such fees or expense are payable and all indemnification and other
agreements related to the engagement of the persons to whom such fees are
payable.
4.13. Compliance with Applicable Laws. Except as set forth in
the Surviving Company Disclosure Schedule or as would not reasonably be expected
to have a Material Adverse Effect on the Surviving Company, (a) the Surviving
Company and its Subsidiaries hold all permits, licenses, authorizations,
variances, exemptions, orders and approvals of all Governmental Entities that
are necessary for the operation of the business of the Surviving Company and its
Subsidiaries (the "Surviving Company Permits"), (b) the Surviving Company and
its Subsidiaries are in compliance with the terms of the Surviving Company
Permits and (c) the business of the Surviving Company and its Subsidiaries is
not being conducted in violation of, and neither the Surviving Company nor any
of its Subsidiaries has received any notices of violation with respect to, any
law, ordinance or regulation of any Governmental Entity, including, without
limitation, the U.S. Foreign Corrupt Practices Act or similar laws. To the
knowledge of the Surviving Company, there is no reasonable grounds to believe
that any of the foregoing Surviving
25
Company Permits will not, in the ordinary course, be renewable upon their
expiration, and neither the Surviving Company nor any of its Subsidiaries has
received any notice from any Governmental Entity giving notice of, or
threatening, the cancellation or non-renewal of same.
4.14. Contracts. Except as set forth in the Surviving Company
Disclosure Schedule, none of the Surviving Company, any of its Subsidiaries, or
to the best knowledge of the Surviving Company, any other party is in breach or
violation or in default in the performance or observance of any term or
provision of any contract, agreement, indenture, mortgage, loan agreement, note,
lease or other instrument to which the Surviving Company or any such Subsidiary
is bound or to which any of the properties of the Surviving Company or any such
Subsidiary is subject, which breach, violation or default would be reasonably
likely to, individually or in the aggregate, have a Material Adverse Effect on
the Surviving Company.
4.15. Insurance. The Surviving Company and its Subsidiaries are
insured with reputable insurers against such risks and in such amounts as are
prudent in accordance with industry practices.
4.16. Opinion of Financial Advisor. The Surviving Company has
received an opinion from Bear Xxxxxxx & Co., financial advisor to the Surviving
Company, to the effect that the Exchange Ratio is fair, from a financial point
of view to the holders of Seller's Shares, a copy of which opinion has been
delivered to Seller.
5. Covenants Relating to Conduct of Business.
5.1. Conduct of Business by the Surviving Company. During the
period from the date of this Agreement and continuing until the Closing Date,
the Surviving Company agrees as to itself and its Subsidiaries that (except as
expressly contemplated or permitted by this Agreement or the Surviving Company
Disclosure Schedule or as required by a Governmental Entity of competent
jurisdiction or to the extent that Seller otherwise agrees in writing, which
consent shall not be unreasonably withheld or delayed):
(a) The Surviving Company and its Subsidiaries shall carry on
their respective businesses in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted and in
compliance in all material respects with all applicable laws and
regulations.
(b) The Surviving Company shall not, and except in the ordinary
course of business shall not permit any of its Subsidiaries to, (i)
declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than
dividends and distributions by
26
a direct or indirect Subsidiary of the Surviving Company to its
shareholders in accordance with their respective interests, (ii) split,
combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (iii) purchase, redeem
or otherwise acquire any shares of capital stock of the Surviving
Company or any of its subsidiaries or any other securities thereof or
any rights, warrants or options to acquire any such shares or other
securities.
(c) The Surviving Company shall not, and except in the ordinary
course of business, shall not permit any of its Subsidiaries to, issue,
deliver, sell, pledge or otherwise encumber any shares of its capital
stock, any other voting securities or any securities convertible into,
or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities (other than (w) the issuance of
Surviving Company Common Stock, upon the exercise of Employee Stock
Options outstanding on the date of this Agreement and in accordance
with their present terms and (x) the issuance of Surviving Company
Common Stock upon the exercise of warrants of the Surviving Company
outstanding on the date of this Agreement and in accordance with their
present terms).
(d) The Surviving Company shall not, and shall not permit any of
its Subsidiaries to, knowingly take any action that would jeopardize
qualification of the Sale and Liquidation as a reorganization within
the meaning of Section 368(a) of the Code.
(e) The Surviving Company shall use reasonable efforts to cause
its officers to furnish such representations to Seller's and the
Surviving Company's counsel as may reasonably be requested to enable
such counsel to deliver the opinions described in Sections 7.2(c) and
7.3(d).
(f) Other than acquisitions disclosed on the Surviving Company
Disclosure Schedule and acquisitions for cash in existing or related
lines of business of the Surviving Company the fair market value of the
total consideration (including the value of Indebtedness acquired or
assumed) for which does not exceed the amount specified in the
aggregate for all such acquisitions in Section 5.1(f) of the Surviving
Company Disclosure Schedule, the Surviving Company shall not, and shall
not permit any of its Subsidiaries to, acquire or agree to acquire by
merging or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any other
manner, any business or any Person or division thereof or otherwise
acquire or agree to acquire any assets (other than the acquisition of
assets used in the operations
27
of the business of the Surviving Company and its Subsidiaries in the
ordinary course); provided, that the foregoing shall not prohibit
internal reorganizations or consolidations involving existing
Subsidiaries of the Surviving Company or the creation of new
subsidiaries of the Surviving Company to conduct or continue activities
otherwise permitted by this Agreement.
(g) Other than (i) internal reorganizations or consolidations
involving existing subsidiaries of the Surviving Company, and (ii)
dispositions referred to in Surviving Company SEC Reports filed prior
to the date of this Agreement the Surviving Company shall not, and
shall not permit any of its Subsidiaries, except in the ordinary course
of business to, sell, lease or encumber or otherwise dispose of, or
agree to sell, lease, encumber or otherwise dispose of, any of its
assets (including capital stock of Subsidiaries of the Surviving
Company) the fair market value of the total consideration (including
the value of the Indebtedness acquired or assumed) for which does not
exceed the amount specified in the aggregate for all such dispositions
in Section 5.1(g) of the Surviving Company Disclosure Schedule.
(h) Other than in connection with actions permitted by clause
(c) above, the Surviving Company shall not, and shall not permit any of
its Subsidiaries to, (i) make any loans, advances or capital
contributions to, or investments in, any other Person (other than (w)
in accordance with normal cash management or treasury functions, (x) by
the Surviving Company or a Subsidiary thereof to or in the Surviving
Company or a Subsidiary thereof, (y) pursuant to any contract or other
legal obligation of the Surviving Company or any of its Subsidiaries
existing as of the date of this Agreement, or (z) in the ordinary
course of business consistent with past practice in an aggregate amount
not in excess of the aggregate amount specified in Section 5.1(h) of
the Surviving Company Disclosure Schedule), or (ii) create, incur,
assume or suffer to exist any Indebtedness, issuances of debt
securities, guarantees, loans or advances not in existence as of the
date of this Agreement except pursuant to the credit facilities,
indentures and other arrangements in existence on the date of this
Agreement or in the ordinary course of business consistent with past
practice, in each case as such credit facilities, indentures and other
arrangements may be amended, extended, modified, refinanced, renewed or
refinanced after the date of this Agreement.
(i) The Surviving Company shall not, and shall not permit its
Subsidiaries to, take any action or omit to take any action that could
reasonably be expected to (i) constitute, or be likely to result in, a
breach of any of the representations and warranties set forth in
Section 4 or
28
(ii) have a Material Adverse Effect on the Surviving Company's ability
to consummate the transactions contemplated herein.
(j) The Surviving Company shall not, and shall not permit its
Subsidiaries to, enter into or modify any employment, severance or
similar agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination pay to, any officers, directors or
employees, or adopt or amend any bonus, profit sharing, compensation,
stock option, pension, retirement, deferred compensation or other
employee benefit plan, agreement, trust, fund or arrangement for the
benefit or welfare of any officer, director or employee other than (A)
in the ordinary course of business or (B) to the extent required by
law.
(k) The Surviving Company shall not, and shall not permit its
Subsidiaries to, implement any material change in accounting
principles, practices or methods, other than as may be required by
GAAP.
(l) The Surviving Company shall not, and shall not permit its
Subsidiaries to, authorize or enter into any agreement or understanding to take
any of the actions referred to in this Section 5.1.
5.2. Conduct of Business by Seller. During the period from the
date of this Agreement and continuing until the Closing Date, Seller agrees as
to itself and its Subsidiaries that (except as expressly contemplated or
permitted by this Agreement or Seller Disclosure Schedule or as required by a
Governmental Entity of competent jurisdiction or to the extent that Surviving
Company otherwise agrees in writing, which consent shall not be unreasonably
withheld or delayed):
(a) Seller and its Subsidiaries shall carry on their respective
businesses in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted and in compliance in all
material respects with all applicable laws and regulations.
(b) Seller shall not, and except in the ordinary course of
business shall not permit any of its Subsidiaries to, (i) declare, set
aside or pay any dividends on, or make any other distributions in
respect of, any of its capital stock, other than dividends and
distributions by a direct or indirect Subsidiary to its shareholders in
accordance with their respective interests, (ii) split, combine or
reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (iii) purchase, redeem or otherwise
acquire any shares of capital stock of Seller or any of its
subsidiaries or any
29
other securities thereof or any rights, warrants or options to acquire
any such shares or other securities.
(c) Seller shall not, and except in the ordinary course of
business shall not permit any of its Subsidiaries to, issue, deliver,
sell, pledge or otherwise encumber any shares of its capital stock, any
other voting securities or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting
securities or convertible securities (other than the issuance of Seller
Capital Stock upon the exercise of Stock Options outstanding on the
date of this Agreement and in accordance with their present terms).
(d) Seller shall not, and shall not permit any of its
Subsidiaries, to knowingly take any action that would jeopardize
qualification of the Sale and Liquidation as a reorganization within
the meaning of Section 368(a) of the Code.
(e) Seller shall use reasonable efforts to cause its officers to
furnish such representations to Seller's and the Surviving Company's
counsel as may be reasonably requested to enable such counsel to
deliver the opinions described in Sections 7.2(c) and 7.3(d).
(f) Other than acquisitions disclosed on Seller Disclosure
Schedule and acquisitions for cash in existing or related lines of
business of Seller the fair market value of the total consideration
(including the value of Indebtedness acquired or assumed) for which
does not exceed the amount specified in the aggregate for all such
acquisitions in Section 5.2(f) of Seller Disclosure Schedule, Seller
shall not, and shall not permit any of its Subsidiaries to, acquire or
agree to acquire by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets
of, or by any other manner, any business or any Person or division
thereof or otherwise acquire or agree to acquire any assets (other than
the acquisition of assets used in the operations of the business of
Seller and its Subsidiaries in the ordinary course): provided, that the
foregoing shall not prohibit internal reorganizations or consolidations
involving existing Subsidiaries of Seller or the creation of new
Subsidiaries of Seller to conduct or continue activities otherwise
permitted by this Agreement.
(g) Other than (i) internal reorganizations or consolidations
involving existing subsidiaries of Seller, and (ii) dispositions
referred to in Seller SEC Reports filed prior to the date of this
Agreement, except in the ordinary course of business, Seller shall not,
and shall not permit any of its Subsidiaries to, sell, lease or
encumber
30
or otherwise dispose of, or agree to sell, lease, encumber or otherwise
dispose of, any of its assets (including capital stock of Subsidiaries
of Seller) the fair market value of the total consideration (including
the value of the Indebtedness acquired or assumed) for which does not
exceed the amount specified in the aggregate for all such dispositions
in Section 5.2(g) of Seller Disclosure Schedule.
(h) Other than in connection with actions permitted by clause
(c) above, Seller shall not, and shall not permit any of its
Subsidiaries to (i) make any loans, advances or capital contributions
to, or investments in, any other Person (other than (x) by Seller or a
Subsidiary thereof to or in Seller or a Subsidiary thereof, (y)
pursuant to any contract or other legal obligation of Seller or any of
its Subsidiaries existing as of the date of this Agreement, or (z) in
the ordinary course of business consistent with past practice in an
aggregate amount not in excess of the aggregate amount specified in
Section 5.2(h) of Seller Disclosure Schedule), or (ii) create, incur,
assume or suffer to exist any Indebtedness, issuances of debt
securities, guarantees, loans or advances not in existence as of the
date of this Agreement except pursuant to the credit facilities,
indentures and other arrangements in existence on the date of this
Agreement or in the ordinary course of business consistent with past
practice, in each case as such credit facilities, indentures and other
arrangements may be amended, extended, modified, refinanced, renewed or
refinanced after the date of this Agreement.
(i) Seller shall not, and shall not permit its Subsidiaries to,
take any action or omit to take any action that could reasonably be
expected to (i) constitute, or be likely to result in, a breach of any
of the representations and warranties set forth in Section 3 or (ii)
have a Material Adverse Effect on Seller's ability to consummate the
transactions contemplated herein.
(j) Seller shall not, and shall not permit its Subsidiaries to,
enter into or modify any employment, severance or similar agreements or
arrangements with, or grant any bonuses, salary increases, severance or
termination pay to, any officers, directors or employees, or adopt or
amend any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation or other employee benefit plan,
agreement, trust, fund or arrangement for the benefit or welfare of any
officer, director or employee other than (A) in the ordinary course of
business or (B) to the extent required by law.
(k) Seller shall not and shall not permit its Subsidiaries to
modify in any material respect any of the Seller Broadcast Contracts
and shall consult with the Surviving Company on any material
developments or proposed
31
modifications with respect to the Seller Broadcast Contracts.
(l) Seller shall not, and shall not permit its Subsidiaries to,
implement any material change in accounting principles, practices or
methods, other than as may be required by GAAP.
(m) Seller shall not, and shall not permit its Subsidiaries to,
authorize or enter into any agreement or understanding to take any of
the actions referred to in this Section 5.2.
5.3. Other Actions. The Surviving Company and Seller shall not,
and shall not permit any of their respective Subsidiaries to, take any action
that would, or that could reasonably be expected to, result in (a) any of the
representations and warranties of such party set forth in this Agreement that
are qualified as to materiality becoming untrue, (b) any of such representations
and warranties that are not so qualified becoming untrue in any material respect
or (c) any of the conditions to the Sale set forth in Section 7 not being
satisfied.
5.4. Advice of Changes. The Surviving Company and Seller shall
promptly advise the other party orally and in writing of (a) any representation
or warranty made by it contained in this Agreement or, in the case of Seller,
the Seller Voting Agreement, becoming untrue or inaccurate in any material
respect, (b) the failure by it to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by it
under this Agreement or, in the case of Seller, the Seller Voting Agreement or
(c) the occurrence of any change or event having, or which could reasonably be
expected to have a Material Adverse Effect on the ability of the conditions set
forth in Section 7 to be satisfied.
6. Additional Agreements.
6.1. Preparation of the Form F-4 and the Joint Proxy Statement.
As promptly as reasonably possible following the date hereof, Seller and the
Surviving Company shall prepare and file with the SEC proxy materials which
shall constitute the Joint Proxy Statement (such proxy statement, and any
amendments or supplements thereto, the "Joint Proxy Statement") and the
Surviving Company shall prepare and file a registration statement on Form F-4,
in which the Joint Proxy Statement shall be included as a prospectus, with
respect to the issuance of the Consideration Shares (the "Form F-4"). Each of
the Surviving Company and Seller shall use all reasonable efforts to have the
Form F-4 declared effective under the Securities Act as promptly as practicable
after such filing. The Surviving Company will use all reasonable efforts to
cause the Joint Proxy Statement to be mailed to the Surviving Company's
shareholders, and Seller will
32
use all reasonable efforts to cause the Joint Proxy Statement to be mailed to
Seller's shareholders, in each case as promptly as practicable after the Form
F-4 is declared effective under the Securities Act. The Surviving Company shall
also take any action (other than qualifying to do business in any jurisdiction
in which it is not now so qualified or to file a general consent to service of
process) required to be taken under any applicable state securities laws in
connection with the issuance of the Consideration Shares, and Seller shall
furnish all information concerning Seller and its shareholders as may be
reasonably requested in connection with any such action.
6.2. Shareholders Meetings. (a) The Surviving Company will, as
soon as practicable following the date of this Agreement, duly call, give notice
of, convene and hold a meeting of its shareholders (the "Surviving Company
Shareholders Meeting") for the purpose of obtaining the Surviving Company
Shareholder Approval; provided that, the Surviving Company may delay the date
of, or adjourn, such meeting in its discretion.
(b) Seller will, as soon as practicable following the date of
this Agreement, (i) duly call, give notice of, convene and hold a meeting of its
Shareholders (the "First Seller Shareholders Meeting") for the purpose of
obtaining Seller Shareholder Approval to adopt this Agreement and approve the
transactions contemplated hereby and (ii) duly call and give notice of a meeting
of its Shareholders (the "Second Seller Shareholders Meeting" and, together with
the First Seller Shareholders Meeting, the "Seller Shareholders Meetings") for
the purpose of obtaining Seller Shareholder Approval to wind up Seller and
appoint a liquidator. Seller will, on the day following the Closing or as soon
as practicable thereafter, convene and hold the Second Seller Shareholders
Meeting.
(c) Without limiting the effect of the proviso to Section
6.2(a), Seller and the Surviving Company will use reasonable efforts to hold the
Surviving Company Shareholders Meeting and First Seller Shareholders Meeting on
the same date and as soon as practicable after the date hereof. Seller will use
reasonable efforts to hold the Second Seller Shareholders Meeting on the date of
(but following) the Closing.
6.3. Acquisition Proposals. Seller agrees that it will not, and
will cause its Subsidiaries not to, and will use its best efforts to cause the
respective officers, directors, employees and investment bankers, attorneys or
other agents retained by it or any of its Subsidiaries ("Representatives") not
to, (i) initiate or solicit, directly or indirectly, any inquiries or the making
of any Acquisition Proposal (as defined in Section 9.3) or (ii) engage in
negotiations or discussions with, or furnish any information or data to, any
third party relating to an Acquisition Proposal (other than the transactions
contemplated hereby). Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in
33
the preceding sentence by any Representative shall be deemed to be a breach of
this Section 6.3. by Seller.
6.4. Letters of the Accountants. The Surviving Company shall use
all reasonable efforts to cause to be delivered to Seller a letter of Ernst &
Young, the Surviving Company's independent public accountants, dated a date
within two Business Days before the date on which the Form F-4 shall become
effective and a letter of Ernst & Young dated a date within two Business Days
before the Closing Date, each addressed to Seller, in form and substance
reasonably satisfactory to Seller and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Form F-4. With respect to any information
relating to Seller or any Subsidiary of Seller supplied or to be supplied by
Seller specifically for inclusion or for incorporation by reference in the Form
F-4, Seller shall use all reasonable efforts to cause to be delivered to the
Surviving Company a letter of Xxxxxx Xxxxxxxx & Co., Seller's independent public
accountants, dated a date within two Business Days before the date on which the
Form F-4 shall become effective and a letter of Xxxxxx Xxxxxxxx & Co. dated a
date within two Business Days before the Closing Date, each addressed to the
Surviving Company, in form and substance reasonably satisfactory to the
Surviving Company and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Form F-4.
6.5. Access to Information; Confidentiality. Subject to the
Confidentiality Agreements, each of the parties shall, and shall cause each of
its respective Subsidiaries to, afford to the other party and to the officers,
employees, accountants, counsel, financial advisors and other representatives of
such other party, reasonable access during normal business hours during the
period prior to the Closing Date to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, each of
the Surviving Company and Seller shall, and shall cause each of its respective
Subsidiaries to, furnish promptly to the other party (a) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of the U.S. federal or state, Bermuda or
Luxembourg securities laws and (b) all other information concerning its
business, properties and personnel as such other party may reasonably request.
Each of the Surviving Company and Seller will hold, and will cause its
respective officers, employees, accountants, counsel, financial advisors and
other representatives and affiliates to hold, any nonpublic information in
accordance with the terms of the respective Confidentiality Agreements, dated as
of November 12, 1998, executed by each of the Surviving Company and Seller (the
"Confidentiality Agreements").
34
6.6. Reasonable Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Sale and the other transactions
contemplated by this Agreement, the Seller Voting Agreement and the
Shareholders' Agreements including (a) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings (including filings with
Governmental Entities, including those referred to in Sections 3.5(c) and
4.4(c), and the taking of all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (b) the obtaining of all necessary consents, approvals or
waivers from third parties, (c) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement, the
Seller Voting Agreement or the Shareholders' Agreements or the consummation of
any of the transactions contemplated by this Agreement, the Seller Voting
Agreement or the Shareholders' Agreements, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (d) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement, the Seller Voting Agreement and
the Shareholders' Agreements; provided, however, that a party shall not be
obligated to take any action pursuant to the foregoing if the taking of such
action or the obtaining of any waiver, consent, approval or exemption is
reasonably likely to be materially burdensome to such party and its Subsidiaries
taken as a whole or to impact in a materially adverse manner the economic or
business benefits of the transactions contemplated by this Agreement so as to
render inadvisable the consummation of such transactions.
6.7. Seller Stock Options, Seller SARs and Seller Warrants. (a)
In accordance with the terms of the Seller's 1994 Stock Option Plan, as amended
and Seller's 1995 Stock Option Plan, as amended (collectively, the "Seller Stock
Option Plans") and Seller's Stock Appreciation Rights Plan (the "Seller SAR
Plan" and, together with the Seller Stock Option Plans, the "Seller Incentive
Plans"), each outstanding option to purchase shares of Seller Capital Stock
granted under the Seller Stock Option Plans (each, a "Seller Stock Option" and
collectively, the "Seller Stock Options"), and each stock appreciation right
granted under the Seller SAR Plan (each a "Seller SAR" and collectively, the
"Seller SARs") shall immediately prior to the Closing Date, become exercisable.
The terms of the Seller Stock Options and Seller SARs shall be adjusted as
necessary to provide that, at the Closing, each Seller Stock Option and Seller
SAR outstanding immediately prior to the Closing Date shall be deemed
35
to constitute an option to acquire, or a stock appreciation right with respect
to, such number of shares of Surviving Company Common Stock as shall result from
multiplying the Exchange Ratio by the number of shares of Seller Capital Stock
heretofore issuable upon exercise of such Seller Stock Option or covered by such
Seller SAR, for a price per share of Surviving Company Common Stock or base
price (as the case may be) equal to (x) the exercise price under Seller Stock
Option or base price under the Seller SAR (as the case may be) divided by (y)
the Exchange Ratio (each, as so adjusted, an "Adjusted Award"), provided that
any fractional share of Surviving Company Common Stock resulting from an
aggregation of all of the shares of a holder subject to Seller Stock Options or
Seller SARs shall be rounded to the nearest whole share, and provided further
that, for any Seller Stock Option to which Section 421 of the Code applies by
reason of its qualification under any of Sections 422 through 424 of the Code,
the option price, the number of shares purchasable pursuant to such option and
the terms and conditions of exercise of such option shall be determined in order
to comply with Section 424 of the Code. Each such Adjusted Award, to the extent
permissible under Section 425(a) of the Code, shall thereafter be exercisable
until the end of the period during which the Seller Stock Option or Seller SAR
(as the case may be) was exercisable and shall otherwise have terms no less
favorable to the holder thereof than the original Seller Stock Option or Seller
SAR (as the case may be). Seller shall use reasonable best efforts to obtain any
consents from holders of Seller Stock Options or Seller SARs granted under
Seller Incentive Plans and make any amendments to the terms of such stock
option, stock appreciation right or plan that are necessary to give effect to
the transactions contemplated by this Section prior to the Closing.
(b) The Surviving Company shall take such actions as are
necessary for the assumption of Seller Stock Options and Seller SARs pursuant to
this Section 6.7, including the reservation, issuance and listing of Surviving
Company Common Stock as is necessary to effectuate the transactions contemplated
by this Section 6.7. The Surviving Company shall prepare and file with the SEC a
registration statement on an appropriate form, or a post-effective amendment to
a registration statement previously filed under the Securities Act, with respect
to the shares of Surviving Company Common Stock subject to the Adjusted Awards
and, where applicable, shall use its reasonable best efforts to have such
registration statement declared effective as soon as practicable following the
Closing Date and to maintain the effectiveness of such Adjusted Awards (and to
maintain the current status of the prospectus contained therein) for so long as
such Adjusted Awards remain outstanding. With respect to those individuals, if
any, who, subsequent to the Closing, will be subject to the reporting
requirements under Section 16(a) of the Exchange Act, where applicable, the
Surviving Company shall use its reasonable efforts to administer Seller Stock
Options assumed pursuant to this Section 6.7 in a manner that complies with Rule
16b-3 promulgated under the Exchange Act.
36
(c) With respect to each Seller Warrant outstanding immediately
prior to the Closing Date, from and after the Closing Date, the holder thereof
shall have the right, by exercising such Seller Warrant, to purchase a number of
shares of Surviving Company Common Stock that such holder would have received,
based upon the Exchange Ratio, had such Seller Warrant been exercised
immediately prior to the Closing Date, provided that any fractional share of
Surviving Company Common Stock resulting from such calculation shall be rounded
to the nearest whole share.
6.8. Certain Employee Arrangements. As of the Closing Date, the
Surviving Company will, and will cause its Subsidiaries to, recognize the
service of any employee of Seller or any of its Subsidiaries with Seller or any
such Subsidiary completed prior to the Closing Date for all purposes of
eligibility to participate and vesting in all applicable benefit plans.
6.9. Indemnification, Exculpation and Insurance. All rights to
indemnification and exculpation from liabilities for acts or omissions occurring
at or prior to the Closing Date now existing in favor of the current and former
directors and officers of Seller as provided in its certificate of
incorporation, Seller's Bye-laws, and indemnification agreements shall be
assumed by the Surviving Company pursuant to Section 1.1(a). In furtherance of
such assumption and for the exclusive and enforceable benefit of such current
and former directors and officers of Seller, Seller may purchase, prior to the
Closing Date, a policy for insurance and indemnification of Seller's directors
and officers providing coverage for events occurring prior to the Closing Date
("D&O Insurance"), for all Persons who are directors and officers of Seller on
the date of this Agreement, for a period of not less than six years from the
date of the First Seller Shareholder Meeting, so long as the total cost therefor
would not be in excess of $600,000. Adequate provision shall be made prior to
the Closing Date in the financial statements of Seller for the entire cost of
such D&O Insurance as a current expense item. To the knowledge of Seller, after
due inquiry from its directors, as of the date hereof, no claim is pending or
threatened against any such director or officer of a type covered by Seller's
existing director's and officer's insurance, nor, to the knowledge of Seller,
does a basis therefor exists.
6.10. Expenses. If the Sale is not consummated each party shall
be solely responsible for Expenses incurred by it in connection with this
Agreement and the transactions contemplated herein, provided that all expenses
incurred in connection with the filing, printing and mailing of the Joint Proxy
Statement and Form F-4 shall be shared equally by Seller and the Surviving
Company. All unpaid Expenses (as defined in Section 9.3) of Seller incurred in
connection with this Agreement and the transactions contemplated hereby shall be
assumed by the Surviving Company pursuant to Section 1.1(a).
37
6.11. Public Announcements. Seller and the Surviving Company
will consult with each other before issuing, and provide each other the
opportunity to review, comment upon and concur with, any press release or other
public statements with respect to the transactions contemplated by this
Agreement, including the Sale, and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange. The parties agree that
the initial press release to be issued with respect to the transactions
contemplated by this Agreement, the Seller Voting Agreement and the
Shareholders' Agreements shall be in the form heretofore agreed to by the
parties.
6.12. Affiliates. Prior to the Closing Date, Seller shall
deliver to the Surviving Company a letter identifying all Persons who are, at
the time the Sale is submitted for approval to the Board of Directors of Seller,
"affiliates" of Seller for purposes of Rule 145 under the Securities Act. Seller
shall use reasonable efforts to cause each such Person to deliver to the
Surviving Company on or prior to the Closing Date a written agreement in a form
reasonably acceptable to the Surviving Company, acknowledging that such Person
is subject to the provisions of Rule 145(d) promulgated under the Securities
Act. Notwithstanding anything to the contrary herein, no Consideration Shares or
cash shall be delivered to a Person who may be deemed an "affiliate" of Seller
for purposes of Rule 145 under the Securities Act and applicable rules and
regulations of the SEC until such Person has executed and delivered such an
agreement.
6.13. NASDAQ Listing. Surviving Company shall use all reasonable
efforts to cause the shares of Surviving Company Common Stock to be issued in
the Sale and issued to holders of Seller Stock Options to be approved for
listing on NASDAQ, subject to official notice of issuance, as soon as
practicable and in any event prior to the Closing Date.
6.14. Stockholder Litigation. Each of Seller and the Surviving
Corporation shall give the other prompt notice of any stockholder litigation
against Seller or the Surviving Company, as applicable, and its directors
relating to the transactions contemplated by this Agreement.
6.15. Tax Treatment. Each of Seller and the Surviving
Corporation shall use reasonable efforts to cause the Reorganization to qualify
as a reorganization under the provisions of Section 368(a) of the Code.
6.16. Further Assurances. From time to time, each of the parties
shall execute, acknowledge and deliver, or cause to be executed, acknowledged
and delivered, within a reasonable period of time, such further documents and
instruments and take
38
such further action as may be reasonably necessary to effectuate the
consummation of the transactions contemplated hereby.
6.17. Certain Liquidation. Seller shall use all reasonable
efforts to liquidate, prior to the Closing Date, Central European Media
Enterprises N.V., a Netherlands Antilles company, and cause it to distribute all
of its assets, consisting primarily of shares of CME Media, to Seller.
6.18. Indemnification Pending Completion of the Liquidation. The
procedures set forth in this Section 6.18 shall apply to any claim for payment,
indemnification, reimbursement or any similar claim which may be asserted after
the Closing Date by Seller (or any Person acting on its behalf (a "Claiming
Party") with respect to any Assumed Liabilities (an "Indemnification Claim").
Each Claiming Party shall give notice to the Surviving Company promptly after
such Claiming Party has knowledge of any matter as to which an Indemnification
Claim may be sought, and the Surviving Company shall have the right to assume
and control the defense of any such claim with counsel of its own choosing. The
Surviving Company shall have the right to compromise or settle any such claim in
its sole and absolute discretion and consent to entry of any judgment with
respect thereto. Each Claiming Party shall furnish such information regarding
itself or the claim in question as the Surviving Company may request and as
shall be required in connection with the defense of such claim and shall
otherwise cooperate with the Surviving Company in the defense of any such claim.
The failure of the Claiming Party to comply with the procedures set forth herein
shall relieve the Surviving Company of its obligations with respect to any such
Assumed Liability asserted after the Closing Date to the extent the Surviving
Company is prejudiced by such failure.
6.19. Debt Consent. As promptly as practicable after the date
hereof, and taking into account the requirements of the Indentures relating to
the assumption of the indebtedness governed thereby, Seller and the Surviving
Company shall determine whether the assumption contemplated by Section
1.2(b)(iii) of this Agreement may take place without any consent or waiver being
obtained from the holders of the Notes (as defined in the respective
Indentures). Unless Seller and the Surviving Company shall conclude that such
consent or waiver is not required to be obtained or Seller and the Surviving
Company agree to take other actions with respect to the Notes, Seller and the
Surviving Company shall use all reasonable efforts to obtain from the holders of
the Notes such consents or waivers as are necessary to permit the assumption
contemplated by Section 1.2(b)(iii) of this Agreement (such consents or waivers,
collectively, the "Debt Consent"). If the Debt Consent is to be obtained, (i)
Seller shall prepare and mail to the holders of the Notes a consent solicitation
statement and all necessary supporting documentation with respect to the Debt
Consent; (ii) the Surviving Company shall have the right to participate in the
preparation of all such materials, and no such materials shall be
39
mailed to the holders of the Notes unless the Surviving Company shall have
approved the form and substance of such materials; (iii) the Surviving Company
and its representatives shall have the right to participate in, and receive
prior notice of, any discussions or negotiations with holders of Notes, it being
expressly agreed that the Surviving Company shall have the right to approve, in
advance, any inducement offered to the holders of the Notes in connection with
obtaining the Debt Consent, such approval not to be unreasonably withheld; and
(iv) the Surviving Company shall provide to Seller such information as may be
reasonably required in connection with obtaining the Debt Consent.
7. Conditions Precedent.
7.1. Conditions to Each Party's Obligation To Effect the Sale.
The respective obligation of each party to effect the Sale is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Shareholder Approvals. The Surviving Company Shareholder
Approval and Seller Shareholder Approval shall have been obtained.
(b) No Injunctions or Restraints. No statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered, promulgated,
enforced or issued by any court of competent jurisdiction or other
Governmental Entity or other legal restraint or prohibition preventing
the consummation of the Sale and Liquidation shall be in effect.
(c) Form F-4. The Form F-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order, and the Surviving Company shall have
received all state securities or "blue sky" authorizations necessary to
issue the Surviving Company Common Stock issuable pursuant to this
Agreement.
(d) NASDAQ Listing. The Consideration Shares issuable (i) to
Seller and subsequently to be distributed to its shareholders pursuant
to this Agreement, and (ii) to holders of Seller Stock Options shall
have been approved for listing on the NASDAQ, subject to official
notice of issuance.
(e) Third Party Approvals. The approvals listed on Schedule 7.1
hereto shall have been obtained and shall be in full force and effect.
(f) Liquidation of Antilles Company. Seller shall have
liquidated Central European Media Enterprises N.V., a
40
Netherlands Antilles company, and caused it to distribute all of its
assets, consisting primarily of shares of CME Media, to Seller.
7.2. Conditions to Obligations of Seller. The obligations of
Seller to effect the Sale and Liquidation are subject to satisfaction or waiver
of the following additional conditions:
(a) Representations and Warranties. The representations and
warranties of Surviving Company set forth in this Agreement shall have
been true and correct when made and shall be true and correct at and as
of the Closing Date (other than those representations and warranties
that speak of a specific time or date, which shall be true and correct
as of such time and date), except where the failure of such
representations and warranties (disregarding any qualifications as to
materiality contained therein) to be true and correct would not have,
and have not had, a Material Adverse Effect on the Surviving Company.
(b) Performance of Obligations of the Surviving Company. The
Surviving Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or
prior to the Closing Date, and Seller shall have received a certificate
signed on behalf of the Surviving Company by the Chairman or the
Vice-Chairman of its Board of Directors to such effect.
(c) Tax Opinion. Seller shall have received from Debevoise &
Xxxxxxxx, counsel to Seller, an opinion in substantially the form
attached hereto as Exhibit 3, dated on or about the date of the mailing
of the Joint Proxy Statement, which opinion shall be reconfirmed on the
Closing Date, substantially to the effect that the Sale and Liquidation
should be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code. In rendering such
opinion, counsel for Seller shall be entitled to request and rely upon
representations contained in certificates of officers of Seller, and
the Surviving Company, which certificates are in substantially the form
attached hereto as Exhibit 4.
(d) Material Adverse Change. Since the date hereof, there has
been no Material Adverse Change with respect to the Surviving Company.
7.3. Conditions to Obligations of the Surviving Company. The
obligation of the Surviving Company to effect the Sale is further subject to
satisfaction or waiver of the following additional conditions:
41
(a) Representations and Warranties. The representations and
warranties of Seller set forth in this Agreement shall have been true
and correct when made and shall be true and correct at and as of the
Closing Date (other than those representations and warranties that
speak of a specific time or date, which shall be true and correct as of
such time and date), except where the failure of such representations
and warranties (disregarding any qualifications as to materiality
contained therein) to be true and correct would not have, and have not
had, a Material Adverse Effect on Seller.
(b) Performance of Obligations of Seller. Seller shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date,
and the Surviving Company shall have received a certificate signed on
behalf of Seller by an executive officer of Seller to such effect.
(c) Letters from Affiliates. The Surviving Company shall have
received from each Person identified in the letter referred to in
Section 6.12 an executed copy of an agreement in a form reasonably
acceptable to the Surviving Company.
(d) Tax Opinion. The Surviving Company shall have received from
Xxxxxxx Xxxx & Xxxxxxxxx, counsel to the Surviving Company, an opinion
in substantially the form attached hereto as Exhibit 3, dated on or
about the date of the mailing of the Joint Proxy Statement, which
opinion shall be reconfirmed on the Closing Date, substantially to the
effect that the Sale and Liquidation should be treated for Federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Code. In rendering such opinion, counsel for the
Surviving Company shall be entitled to request and rely upon
representations contained in certificates of officers of Seller, and
the Surviving Company, which certificates are in substantially the form
attached hereto as Exhibit 4.
(e) Material Adverse Change. Since the date hereof, there has
been no Material Adverse Change with respect to Seller.
(f) Termination of RL Agreements. Except as expressly
contemplated by this Agreement, the December Purchase Agreement shall
have been terminated without any liability to Seller or any Subsidiary
of Seller.
8. Termination, Amendment and Waiver.
8.1. Termination Events. This Agreement may be terminated at any
time prior to the Closing Date, whether before
42
or after the Surviving Company Shareholder Approval and Seller Shareholder have
been obtained:
(a) by mutual written consent of Seller and the Surviving
Company;
(b) by either Seller or the Surviving Company:
(i) if, upon a vote at a duly held Surviving Company
Shareholders Meeting or any adjournment thereof at which the Surviving
Company Shareholder Approval shall have been voted upon, the Surviving
Company Shareholder Approval shall not have been obtained;
(ii) if, upon a vote at a duly held Seller Shareholders Meeting
or any adjournment thereof at which Seller Shareholder Approval shall
have been voted upon, Seller Shareholder Approval shall not have been
obtained;
(iii) if the Sale shall not have been consummated on or before
December 31, 1999, unless the failure to consummate the Sale is the
result of a material breach of this Agreement by the party seeking to
terminate this Agreement;
(iv) if any Governmental Entity shall have issued an order,
injunction, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Sale and such
order, injunction, decree, ruling or other action shall have become
final and nonappealable; or
(v) in the event of a material breach by the other party of any
representation, warranty, covenant or other agreement contained in this
Agreement that cannot be or has not been cured within 30 days after the
giving of written notice to the breaching party of such breach (a
"Material Breach") (provided that the terminating party is not then in
Material Breach of any representation, warranty, covenant or other
agreement contained in this Agreement); or
(c) by the Surviving Company in the event of any material breach
by any Principal Seller Shareholder of the terms of the Seller
Shareholders' Agreement.
8.2. Effect of Termination; Termination Fee. (a) In the event of
termination of this Agreement pursuant to Section 8.1, this Agreement shall
terminate and henceforth have no effect, without any liability or obligation on
the part of either party hereto, except that the provisions of the last sentence
of Section 6.5 (Confidentiality), Section 6.10 (Fees and Expenses), this Section
8.2 and Section 9 shall remain in full force and effect, and except that no such
termination shall relieve any
43
party from liability for breach of this Agreement or failure by it to perform
its obligations hereunder.
(b) Each party hereby agrees that it (the "Responsible Party")
shall pay to the other party hereto a termination fee (the "Termination Fee")
equal to $15 million if this Agreement is terminated due to the failure of the
shareholders of the Responsible Party to have approved this Agreement and the
transactions contemplated hereby at the applicable shareholders meeting or any
adjournment thereof on or prior to December 31, 1999. Any Termination Fee
payable hereunder shall be paid on demand in same day funds.
8.3. Amendment. This Agreement may be amended by the parties at
any time before or after the Surviving Company Shareholder Approval; provided,
however, that after any such approval, there shall not be made any amendment
that by law requires further approval by the shareholders of the Surviving
Company or the shareholders of Seller without the further approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
8.4. Extension; Waiver. Either party may at any time (a) extend
the time for the performance of any of the obligations or other acts of the
other party, (b) waive any inaccuracies in the representations and warranties of
the other party contained in this Agreement or in any document delivered
pursuant to this Agreement or (c) subject to the proviso of Section 8.3, waive
compliance by the other party with any of the agreements or conditions contained
in this Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
8.5. Procedure for Termination, Amendment, Extension or Waiver.
A termination of this Agreement pursuant to Section 8.1, an amendment of this
Agreement pursuant to Section 8.3 or an extension or waiver pursuant to Section
8.4 shall, in order to be effective, require in the case of Seller or the
Surviving Company, action by its Board of Directors or, with respect to any
amendment to this Agreement, the duly authorized designee of its Board of
Directors.
9. General Provisions.
9.1. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Closing Date.
44
9.2. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by written
notice):
(a) if to Seller, to
Central European Media Enterprises, Ltd.
c/o CME Development Corporation
00 X'Xxxxxx Xxxxxx
Xxxxxx X0X 0XX
Xxxxxx Xxxxxxx
Telephone No.: (00) 000 000 0000
Telecopy No.: (00) 000 000 0000
Attention: Legal Department
with a copy to:
Debevoise & Xxxxxxxx
000 Xxxxx Xxx.
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxx, Esq.
(b) if to the Surviving Company, to
SBS Broadcasting S.A.
000 Xxxx Xxxxxx
Xxxxxx XX0 0XX
Telephone No.: 00 000 000 0000
Telecopy No.: 44 171 590 3601
Attention: Corporate Secretary
with a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
with a copy to:
Ashurst Xxxxxx Xxxxx
Xxxxxxxxx Xxxxx
0 Xxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Telephone No.: (00) 000 000 0000
Telecopy No.: (00) 000 000 0000
45
Attention: Xxxxxxx Xxxx, Esq.
9.3. Definitions. (a) For purposes of this Agreement, the
following terms shall have the meanings assigned below:
"Acquired Assets" has the meaning assigned to such term in
Section 1.1.
"Acquisition Proposal" means, with respect to Seller, any
proposal made by a third party to acquire (A) beneficial ownership (as
defined under Rule 13(d) of the Exchange Act) of a 20% or greater
equity interest in Seller pursuant to a merger, consolidation or other
business combination, sale of shares of capital stock, tender offer or
exchange offer or similar transaction involving such party including,
without limitation, any single or multi-step transaction or series of
related transactions which is structured to permit such third party to
acquire beneficial ownership of a 20% or greater equity interest in
Seller, (B) all or a substantial portion of the business or assets of
Seller and its Subsidiaries (on a consolidated basis) (other than the
transactions contemplated by this Agreement) or (C) any direct or
indirect interest in any Seller Broadcast Property, unless such
disposition is permitted by Section 5.2(g) hereof.
"Adjusted Award" has the meaning assigned to such term in
Section 6.7.
"Affiliate" means, with respect to any Person, another Person
that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such first
Person.
"Assumed Liabilities" has the meaning assigned to such term in
Section 1.1.
"BCA" has the meaning assigned to such term in the recitals.
"Business Day" means any day on which banks are not required or
authorized to close in the City of New York, Bermuda or Luxembourg.
"Claiming Party" has the meaning assigned to such term in
Section 6.18.
"Class A Shares" has the meaning assigned to such term in
Section 3.4(a).
"Class B Shares" has the meaning assigned to such term in
Section 3.4(a).
46
"Closing" has the meaning assigned to such term in Section 1.1.
"Closing Date" has the meaning assigned to such term in Section
1.1.
"CME Media" has the meaning assigned to such term in Section
1.2(b)(i).
"Code" has the meaning assigned to such term in the recitals.
"Confidentiality Agreements" has the meaning assigned to such
term in Section 6.5.
"Consideration Shares" has the meaning assigned to such term in
Section 1.1.
"Custodian" has the meaning assigned to such term in the Plan of
Liquidation.
"D&O Insurance" has the meaning assigned to such term in
Section 6.9.
"Debt Consent" has the meaning assigned to such term in Section
6.19.
"December Purchase Agreement" has the meaning assigned to such
term in Section 1.1(b).
"Employee Benefit Plan" means, with respect to any party, each
benefit plan maintained or contributed to by it or any of its
subsidiaries, or with respect to which it or any of its subsidiaries
may have any liability, which provides (or is intended to provide)
benefits to its employees, officers, directors or independent
contributors or those of its subsidiaries, including each pension,
retirement or deferred compensation plan, incentive compensation plan,
stock plan, unemployment compensation plan, vacation pay, severance
pay, bonus or benefit arrangement, insurance, medical or
hospitalization program, sickness, accident, disability or death
benefit program or any other fringe benefit.
"Employee Stock Options" has the meaning assigned to such term
in Section 4.3(b).
"Exchange Act" has the meaning assigned to such term in Section
3.5(c).
"Exchange Ratio" has the meaning assigned to such term in
Section 1.1.
47
"Expenses" means, with respect to any party hereto, all
out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by such
party in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and the
transactions contemplated hereby.
"First Seller Shareholders Meeting" has the meaning assigned to
such term in Section 6.2(b).
"Form F-4" has the meaning assigned to such term in Section 6.1.
"GAAP" has the meaning assigned to such term in Section 3.6(b).
"Governmental Entity" has the meaning assigned to such term in
Section 3.5(c).
"Indebtedness" with respect to any Person means, at any time,
without duplication, (i) its liabilities for borrowed money, (ii) its
liabilities for the deferred purchase price of property acquired by
such Person (excluding accounts payable arising in the ordinary course
of business but including all liabilities created or arising under any
conditional sale or other title retention agreement with respect to any
such property), (iii) all liabilities appearing on its balance sheet in
respect of a lease with respect to which the lessee is required
concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP, (iv) all liabilities
for borrowed money secured by any Lien with respect to any property
owned by such Person (whether or not it has assumed or otherwise become
liable for such liabilities), (v) all its liabilities in respect of
letters of credit, performance bonds or instruments serving a similar
function issued or accepted for its account by banks and other
financial institutions (whether or not representing obligations for
borrowed money), but excluding reimbursement obligations under this
Agreement, (vi) swaps of such Person, and (vii) any guaranty or similar
obligation of such Person with respect to liabilities of a type
described in any of clauses (i) through (vi) above.
"Indemnification Claim" has the meaning assigned to such term in
Section 6.18.
"Indentures" has the meaning assigned to such term in Section
1.2.
"Joint Proxy Statements" has the meaning assigned to such term
in Section 6.1.
48
"License Holders" has the meaning assigned to such term in
Section 3.16.
"Liens" has the meaning assigned to such term in Section 3.3.
"Liquidation" has the meaning assigned to such term in the
recitals.
"Material Adverse Change" means, with respect to each party
hereto, any change, effect, event or occurrence that is reasonably
likely to be materially adverse to the business, properties, assets,
condition (financial or otherwise), results of operations or prospects
of such party and its Subsidiaries taken as a whole, other than any
change, effect, event or occurrence arising after the date hereof
resulting from or relating to (i) conditions or circumstances generally
affecting the financial markets or the economies in which such party
operates, (ii) conditions or circumstances generally affecting the
industries in which such party operates that are not the result of acts
or omissions of such party or (iii) in the case of Seller, the
contractual arrangements in effect as of the date hereof between, on
the one hand, any affiliate of Seller and, on the other hand, any other
Person owning an interest in the broadcast licenses through which Nova
TV is operated in the Czech Republic, or to such Nova TV broadcast
licenses.
"Material Adverse Effect" means, with respect to each party
hereto, any change, effect, event or occurrence that is reasonably
likely to be materially adverse to the business, properties, assets,
condition (financial or otherwise), results of operations or prospects
of such party and its Subsidiaries taken as a whole, other than, in the
case of Seller, any change, effect, event or occurrence resulting from
or relating to the contractual arrangements in effect as of the date
hereof between, on the one hand, any affiliate of Seller and, on the
other hand, any other Person owning an interest in the broadcast
licenses through which Nova TV is operated in the Czech Republic, or to
such Nova TV broadcast licenses.
"Material Breach" has the meaning assigned to such term in
Section 8.1.
"NASDAQ" has the meaning assigned to such term in Section
3.5(c).
"Necessary Seller Consents" has the meaning assigned to such
term in Section 3.5(c).
"Necessary Surviving Company Consents" has the meaning assigned
to such term in Section 4.4(c).
49
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
"Plan of Liquidation" has the meaning assigned to such term in
the recitals.
"Preferred Shares" has the meaning assigned to such term in
Section 3.4(a).
"Principal Seller Shareholders" means Xxxxxx X. Xxxxxx, RSC
Investment Corporation, RSL Capital LLC and Duna Investments, Inc.
"Principal Surviving Company Shareholders" means Xxxxx Xxxxx,
Xxxxxx X. Xxxxxx and Xxxxxxx Xxxxxxxxxxx.
"RL Agreements" has the meaning assigned to such term in Section
3.16.
"Sale" has the meaning assigned to such term in the recitals.
"SEC" has the meaning assigned to such term in Section 3.6(a).
"Second Seller Shareholders Meeting" has the meaning assigned to
such term in Section 6.2(b).
"Securities Act" has the meaning assigned to such term in
Section 3.5(c).
"Seller" means the company referred to as the "Seller" in the
heading hereto.
"Seller Broadcast Contract" has the meaning assigned to such
term in Section 3.16.
"Seller Broadcast Properties" has the meaning assigned to such
term in Section 3.16(b).
"Seller Capital Stock" has the meaning assigned to such term in
Section 3.4.
"Seller Disclosure Schedule" has the meaning assigned to such
term in Section 3.
"Seller Financial Statements" has the meaning assigned to such
term in Section 3.6(b).
"Seller Incentive Plans" has the meaning assigned to such term
in Section 6.7.
50
"Seller Permits" has the meaning assigned to such term in
Section 3.11.
"Seller SAR" has the meaning assigned to such term in Section
6.7.
"Seller SAR Plan" has the meaning assigned to such term in
Section 6.7.
"Seller SEC Documents" has the meaning assigned to such term in
Section 3.6(a).
"Seller Shares" has the meaning assigned to such term in Section
3.4(a).
"Seller Shareholder Approval" has the meaning assigned to such
term in Section 3.13(a).
"Seller Shareholders' Agreement" shall mean the CME Shareholders
Agreement dated as of the date hereof and shall have the meaning
assigned to such term in the recitals.
"Seller Shareholders Meetings" has the meaning assigned to such
term in Section 6.2(b).
"Seller Stock Option" has the meaning assigned to such term in
Section 6.7.
"Seller Stock Option Plans" has the meaning assigned to such
term in Section 6.7.
"Seller Voting Agreement" has the meaning assigned to such term
in Section 1.2(b).
"Seller Warrants" has the meaning assigned to such term in
Section 3.4(a).
"Seller's Bye-laws" has the meaning assigned to such term in
Section 2.
"Shareholders' Agreements" has the meaning assigned to such term
in the recitals.
"Subsidiary" means, with respect to any Person, any corporation
or other organization, whether incorporated or unincorporated, (i) of
which such Person or any other Subsidiary of such Person is a general
partner (excluding partnerships, the general partnership interests of
which held by such Person or any Subsidiary of such Person do not have
50% or more of the voting interests in such partnership) or (ii) 50% or
more of the securities or other interests of which having by their
terms ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions with respect to
such
51
corporation or other organization is owned or controlled directly or
indirectly (including through one or more of its Subsidiaries) by such
Person or (iii) 50% or more of the economic interest of which is owned
directly or indirectly (including through one or more of its
Subsidiaries) by such Person.
"Surviving Company" means the company referred to as the
"Surviving Company" in the heading hereto.
"Surviving Company Common Stock" has the meaning assigned to
such term in Section 4.3(a).
"Surviving Company Disclosure Schedule" has the meaning assigned
to such term in Section 4.
"Surviving Company Financial Statements" has the meaning
assigned to such term in Section 4.5(b).
"Surviving Company Permits" has the meaning assigned to such
term in Section 4.13.
"Surviving Company SEC Documents" has the meaning assigned to
such term in Section 4.5(a).
"Surviving Company Shareholder Approval" has the meaning
assigned to such term in Section 4.11.
"Surviving Company Shareholders' Agreement" shall mean the SBS
Shareholders' Agreement dated as of the date hereof and shall have the
meaning assigned to such term in the recitals.
"Surviving Company Shareholders Meetings" has the meaning
assigned to such term in Section 6.2.
"Surviving Company Warrants" has the meaning assigned to such
term in Section 4.3(a).
"Tax" has the meaning assigned to such term in Section 3.12(l).
"Tax Return" has the meaning assigned to such term in Section
3.12(l).
"Termination Fee" has the meaning assigned to such term in
Section 8.2.
"Trustee" has the meaning assigned to such term in Section 1.2.
(b) When a reference is made in this Agreement to a Section, Schedule
or Exhibit, such reference shall be to a Section of, or a Schedule or Exhibit
to, this Agreement unless
52
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well reorg as the plural forms of such terms
and to the masculine as well as to the feminine and neuter genders of such term.
Any agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns and, in
the case of an individual, to his heirs and estate, as applicable. All
references herein to dollars or "$" mean U.S. dollars.
9.4. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
9.5. Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein) and the
Confidentiality Agreements (a) constitute the entire agreement, and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter of this Agreement and (b) except for
the provisions of Section 2 (Liquidation and Dissolution of Seller), Section 6.7
(Stock Options) and Section 6.9 (Indemnification; Exculpation; Insurance), are
not intended to confer upon any Person other than the parties any rights or
remedies.
9.6. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
any other laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
9.7. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or
53
otherwise by any of the parties without the prior written consent of the other
parties. Any assignment in violation of the preceding sentence shall be void.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
54
IN WITNESS WHEREOF, the parties have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
date first written above.
CENTRAL EUROPEAN MEDIA
ENTERPRISES LTD.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chairman
By: /s/ Xxxxxxxx X. Xxxxxxxxxxx
-------------------------------------
Name: Xxxxxxxx X. Xxxxxxxxxxx
Title: President and
Chief Operating Officer
SBS BROADCASTING S.A.
By: /s/ Xxxxx X. Xxxxx
-------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chairman of the Board and
Chief Executive Officer
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice Chairman and
Chief Operating Officer
55
Exhibit 1.2 to the
Reorganization Agreement
SELLER VOTING AGREEMENT
SELLER VOTING AGREEMENT dated as of [________], 1999, among
SBS Broadcasting S.A., a Luxembourg corporation ("SBS"), Central European Media
Enterprises Ltd., a Bermuda corporation (the "Company"), and
[_________________].
WHEREAS, the Company and SBS have entered into a
Reorganization Agreement dated as of the date hereof (as the same may be amended
from time to time, the "Reorganization Agreement"), which provides, among other
things, for the sale by the Company to SBS of all the assets, business,
properties and rights of the Company, and the assumption by SBS of any and all
liabilities of the Company, in exchange for shares of common stock of SBS
(together with any shares or other securities issued in exchange for or in
replacement of such shares, the "Shares"), and the subsequent liquidation of the
Company, all upon the terms and conditions set forth in the Reorganization
Agreement; and
WHEREAS, the liquidation of the Company will be carried out in
accordance with a Plan of Winding Up and Dissolution (the "Plan of Liquidation")
as set forth in the Reorganization Agreement; and
WHEREAS, the Reorganization Agreement provides for the
execution and delivery of this Agreement in connection with the issuance of the
Shares pursuant to the Reorganization Agreement.
NOW THEREFORE, in consideration of the mutual covenants,
conditions and agreements contained therein and herein, the parties hereto agree
as follows:
SECTION 1. Defined Terms. Terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Reorganization Agreement.
SECTION 2. Representations and Warranties. Each of the parties hereto
(a "Party") represents and warrants to the other Parties hereto as follows:
(a) Such Party has the authority to execute, deliver and perform
this Agreement without the necessity of obtaining any third party consent,
approval, authorization or waiver, or giving of any notice or otherwise, except
for such consents as have been obtained, are unconditional and are in full force
and effect.
(b) This Agreement has been duly executed and delivered by such
Party and, assuming due execution and delivery thereof by other Parties hereto,
constitutes the legal, valid, and binding obligation of such Party enforceable
against such Party in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (whether enforcement is sought by proceedings in
equity or at law).
(c) The execution, delivery, and performance of this Agreement
by such Party will not constitute a violation of any law applicable or relating
to such Party.
SECTION 3. Voting Agreement. [___________] agrees with, and covenants
to, SBS that, at each meeting of shareholders of SBS or at any adjournment
thereof or in any other circumstances upon which a vote, consent or other
approval will be held or solicited with respect to any matter submitted to
shareholders of SBS, [________] shall vote (or cause to be voted) or shall
consent, execute a consent or cause to be executed a consent in respect of the
Shares in the same proportion as votes are cast (or consents given) by the other
shareholders of SBS voting on (or providing a consent with respect to) any such
matter]. In order to effectuate the foregoing, [_________] hereby irrevocably
grants to, and appoints, Xxxxx Xxxxx, Xxxxxx Xxxxxx and Xxxxxxx Xxxxxxxxxxx, and
each of them individually, [________]'s proxy and attorney-in-fact (with full
power of substitution), for and in the name, place and stead of [_________], to
vote all Shares for which it has or shares the power to vote, or grant a consent
or approval in respect of such Shares in any manner permitted by law.
SECTION 4. Covenants. [__________] agrees with, and covenants to, SBS
that it shall not, except as provided in the Plan of Liquidation, (i) transfer
(which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge, encumbrance or other disposition), or consent
to any transfer of, any or all the Shares or any interest therein, (ii) grant
any proxy, power-of-attorney or other authorization in or with respect to such
Shares, or (iii) deposit such Shares into a voting trust, enter into a voting
agreement or arrangement with respect to such Shares or otherwise limit such
Shareholder's power to vote his or its Shares in a manner that conflicts with
this Agreement.
SECTION 5. [Intentionally Omitted.]
SECTION 6. Further Assurances. [___________] shall, upon request of
SBS, execute and deliver any additional documents and take such further actions
as may reasonably be deemed by SBS to be necessary or desirable to carry out the
provisions hereof.
2
SECTION 7. Termination. This Agreement, and all rights and obligations
of the parties hereunder, shall terminate upon the date upon which the Shares
are distributed to the shareholders of the Company in accordance with the Plan
of Liquidation.
SECTION 8. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be sufficiently given if sent by
registered or certified mail, postage prepaid, or overnight air courier service,
or telecopy or facsimile transmission (with hard copy to follow) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice): (i) if to SBS or the Company, to their respective
addresses set forth in Section 9.2 of the Reorganization Agreement; and (ii) if
to [__________], to [________________________].
SECTION 9. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10. Counterparts; Effectiveness. This Agreement may be executed
in two or more counterparts, all of which shall be considered one and the same
agreement.
SECTION 11. Entire Agreement. This Agreement (including the documents
and instruments referred to herein) constitutes the entire agreement, and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof.
SECTION 12. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to any applicable conflicts of law principles of such State.
SECTION 13. Successors and Assigns. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by any of the parties without the prior written consent of the
other parties. Any assignment in violation of the foregoing shall be void.
SECTION 14. Enforcement. [____________] agrees that irreparable damage
would occur and that SBS would not have any adequate remedy at law in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that SBS shall be entitled to an injunction or injunctions to prevent breaches
by the other party hereto of this Agreement and to enforce specifically the
terms and provisions of this Agreement in any court of the United States located
in the State of New York or in New York State court, this being in addition to
any other remedy to which SBS is entitled at law or in equity. In addition,
[__________] (i) consents to submit such party to the personal jurisdiction of
any Federal court located in the
3
State of New York or any New York State court in the event any dispute arises
out of this Agreement or any of the transactions contemplated hereby and (ii)
agrees that [_________] will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court.
SECTION 15. Severability. If any term or provision hereof, or the
application thereof to any circumstance, shall, to any extent, be held by a
court of competent jurisdiction to be invalid or unenforceable with respect to
such jurisdiction, and only to such extent, and the remainder of the terms and
provisions hereof, and the application thereof to any other circumstance, shall
remain in full force and effect, shall not in any way be affected, impaired or
invalidated, and shall be enforced to the fullest extent permitted by law, and
the parties hereto shall reasonably negotiate in good faith a substitute term or
provision that comes as close as possible to the invalidated or unenforceable
term or provision, and that puts each party in a position as nearly comparable
as possible to the position each such party would have been in but for the
finding of invalidity or unenforceability, while remaining valid and
enforceable.
SECTION 16. Amendment; Modification; Waiver. No amendment, modification
or waiver in respect of this Agreement shall be effective against any party
unless it shall be in writing and signed by such party.
4
IN WITNESS WHEREOF, SBS , the Company and [__________] have
caused this Agreement to be duly executed and delivered as of the date first
written above.
CENTRAL EUROPEAN MEDIA
ENTERPRISES LTD.
By:
--------------------------------------
Name: Xxxxxxxx X Xxxxxxxxxxx
Title: President and Chief
Operating Officer
SBS BROADCASTING S.A.
By:
--------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chairman of the Board and
Cheif Executive Officer
By:
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice Chairman and
Chief Operating Officer
5
Exhibit 2 to the
Reorganization Agreement
PLAN OF WINDING UP AND DISSOLUTION
Reference is made to the Reorganization Agreement between
Central European Media Enterprises Ltd. and SBS Broadcasting S.A. (the
"Reorganization Agreement") to which this Plan of Winding Up and Dissolution
(the "Plan") is attached. Defined terms used in this Plan without definition
shall have the meaning given to such terms in the Reorganization Agreement.
This Plan sets out the procedures to be used for winding-up
and dissolving Seller following the Closing and the Second Seller Shareholder
Meeting.
1. Appointment of Custodian; Deposit of Consideration Shares.
As of the Closing Date, Seller shall enter into an agreement
(the "Custodian Agreement") with a bank or trust company nominated by Seller
(the "Custodian") which shall provide for the deposit with the Custodian as of
the Closing Date certificates representing the Consideration Shares. On the
Closing Date the Surviving Company shall deposit the certificates for the
Consideration Shares with the Custodian as directed by Seller.
2. Procedures for Winding Up and Dissolution.
(a) Immediately prior to the Closing, Seller shall hold a
meeting of its Board of Directors for the purpose of making statutory
declarations (the "Declarations"). The Declarations shall be made by the
majority of the Seller's Directors and shall state that each such Director has
made a full inquiry into the affairs of Seller and has formed the opinion that
Seller will be able to pay its debts in full within a period of 12 months of the
commencement of the winding up of Seller. The Declaration may include a
statement to the effect that the opinion of the majority of the Directors was
based on an indemnity and undertaking by the Surviving Company made in favor of
Seller in respect of its liabilities. On the day immediately preceding the
Closing Date, the Declarations shall be delivered to the Bermuda Registrar of
Companies (the "Registrar") for registration.
(b) On the Closing Date, or as soon as practicable thereafter,
the Second Seller Shareholders Meeting shall be held for the purpose of passing
resolutions to (i) wind up Seller in accordance with the BCA, the Seller's
Bye-laws, the Reorganization Agreement and this Plan, (ii) appoint an
1
individual nominated by the Seller's Board of Directors to act as a liquidator
(the "Liquidator"), and (iii) deliver to the Registrar all necessary filings and
publish notices as required by the BCA. The winding up of Seller shall be deemed
to commence at the time of the passing at the Second Seller Shareholders Meeting
of the resolution to wind up Seller.
(c) On the Closing Date, or as soon as practicable thereafter,
the Liquidator shall distribute the Consideration Shares to the shareholders of
Seller as of the Closing Date. The Liquidator shall proceed to settle any
outstanding claims against Seller in reliance upon the assumption of liabilities
and indemnity provided by the Surviving Company.
(d) As soon as practicable following the adjournment of the
Second Seller Shareholders Meeting (i) notice of the resolution to wind up
Seller, together with a notice from the Liquidator of his or her appointment,
shall be published in an appointed newspaper in Bermuda and delivered to the
Registrar, (ii) the Liquidator shall publish in an appointed newspaper in
Bermuda a notice to all Persons calling for submission of any claims against
Seller and informing them to submit any such claims and proofs thereof within 14
days from the date such notice is first published, and (iii) the Liquidator
shall send notice to all persons appearing from the books and records of Seller
to be its creditors advising them that any claim against Seller they may have
must be submitted to the Liquidator within 14 days from the date of the notice.
(e) If any Person makes any claim against Seller, the
Liquidator shall evaluate whether such claim is valid. If in the Liquidator's
reasonable judgment such claim is valid, the Liquidator shall arrange for
payment or satisfaction of such claim in accordance with the BCA. Immediately
upon the later of (i) the fifteenth day after the date of publication or mailing
of the notices provided pursuant to Section 2(c) hereof and (ii) the date of
payment or other satisfaction in full of all valid claims of creditors of Seller
timely presented to the Liquidator, the Liquidator shall distribute any
remaining capital and surplus of Seller in accordance with the Reorganization
Agreement.
(f) The Liquidator shall schedule a Final General Meeting of
Seller ("FGM") for such date as all claims against Seller have been paid or
otherwise satisfied in full in accordance with the BCA, the Seller's Bye-laws,
the Reorganization Agreement and this Plan. At the FGM the Liquidator shall
present his or her account of the winding up of Seller to the Seller's members
and propose that the Seller's members approve resolutions to dissolve Seller
immediately upon the conclusion of the FGM and to dispose of the books and
records of Seller in such manner as the Seller's Board of Directors shall advise
the Liquidator. In accordance with the BCA, Seller shall be dissolved on the
date on which the FGM is convened notwithstanding the absence of a quorum at
such meeting. As soon
2
as practicable after the FGM, and in any case within one week after the FGM, the
Liquidator shall notify the Registrar that Seller has been dissolved.
3. Distribution of Assets of Seller.
3.1. Distribution of Consideration. (a) Not later than ten
days following the Closing Date, Seller shall provide to the Custodian a list of
each holder of record of capital stock of Seller as of the Closing Date (each a
"Distributee"), together with a calculation of each Distributee's pro rata share
of the Consideration Shares calculated in accordance with the BCA, Seller's
Bye-laws, the Reorganization Agreement and this Plan.
(b) On the second Business Day following receipt of the
information described in clause (a), the Custodian shall mail or cause to be
mailed to each Distributee a notice as to the number of Consideration Shares to
be distributed to each Distributee and instructions for use in effecting the
delivery of Consideration Shares to Distributees.
(c) Upon presentation of evidence of ownership of shares of
capital stock of Seller by or on behalf of each Distributee after the Second
Seller Shareholder Meeting, together with such other documents as may reasonably
be required by the Custodian or its agent for such purpose, each Distributee
shall be entitled to receive, net of any required withholding tax, (i) one or
more certificates representing that number of Consideration Shares that such
Distributee has a right to receive under pursuant to the BCA, Seller's Bye-laws,
Reorganization Agreement and this Plan and (ii) a check in the amount of any
cash in lieu of any fractional interest in Consideration Shares to which such
Distributee is entitled pursuant to Section 3.4 of this Plan plus any dividends
or other distributions on the Consideration Shares to which such Distributee is
entitled pursuant to Section 3.2 of this Plan. No interest will be paid or will
accrue on any cash payable to Distributees pursuant to the provisions of this
Plan. In the event of a transfer of ownership of capital stock of Seller which
is not registered in the transfer records of Seller, a certificate representing
the proper number of Consideration Shares may be issued to a Person other than
the Person in whose name the ownership of such capital stock of Seller is
registered, if evidence of such ownership shall be properly endorsed or
otherwise be in proper form for transfer and the Person requesting such payment
shall pay any transfer or other taxes required by reason of the distribution of
Consideration Shares to a Person other than the registered holder of such
Certificate or establish to the satisfaction of Custodian or its agent that such
tax has been paid or is not applicable.
3.2. Distributions with Respect to Unexchanged Shares. Until
such time as the Consideration Shares have been distributed to a Distributee in
accordance herewith, no dividends or other distributions with respect to
Consideration Shares having a
3
record date prior to the date of the distribution of such Consideration Shares
shall be paid directly by the Surviving Company to such Distributee, no cash
payment in lieu of fractional interests in Consideration Shares shall be paid to
any Distributee pursuant to Section 3.4 of this Plan, and all such dividends,
and other distributions shall be paid by the Surviving Company to the Custodian
and shall be held and invested by the Custodian and shall be paid to the
Distributees in proportion to their pro rata interests in Seller upon the
Liquidation.
3.3. No Further Ownership Rights in Seller Capital Stock.
Distributees shall have no further rights with respect to Seller Capital Stock
in connection with the transactions contemplated in this Plan other than the
right to receive their proportional share of whole Consideration Shares upon the
winding up of Seller in accordance herewith and the right to receive cash
payments in respect of dividends, other distributions and fractional interests
in Consideration Shares in the manner provided herein.
3.4. No Fractional Shares. (a) No certificates or scrip
representing fractional interests in Consideration Shares shall be distributed
to Distributees, no dividend or distribution of the Surviving Company shall
relate to such fractional share interests and such fractional share interests
will not entitle the owner thereof to vote or to exercise any rights of a
shareholder of the Surviving Company.
(b) As promptly as practicable following the Second Seller
Shareholder Meeting, the Custodian shall determine the excess of (i) the number
of whole shares of Consideration Shares delivered to the Custodian pursuant to
Section 3.1 of this Plan over (ii) the aggregate number of whole Consideration
Shares to be distributed to Distributees pursuant to Section 3.1 hereof (such
excess being herein called the "Excess Shares"). Promptly following the Second
Seller Shareholder Meeting, the Custodian shall, on behalf of Distributees, sell
the Excess Shares at then-prevailing prices on the NASDAQ, all in the manner
provided in Section 3.4(c) of this Plan.
(c) The sale of the Excess Shares by the Custodian shall be
executed on the NASDAQ through one or more member firms of the NASDAQ and shall
be executed in round lots to the extent practicable. Seller shall cause the
Custodian to use reasonable efforts to complete the sale of the Excess Shares as
promptly following the Second Seller Shareholder Meeting as, in the Custodians
sole judgment, is practicable consistent with obtaining the best execution of
such sales in light of prevailing market conditions. Until the net proceeds of
such sale or sales have been distributed to the Distributees, the Custodian
shall hold such proceeds in trust for such Distributees (the "Common Stock
Trust"). All commissions, transfer taxes and other out-of-pocket transactional
costs, including the expenses and compensation of the Custodian incurred in
connection with such
4
sale of the Excess Shares shall be subtracted from the assets of the Common
Stock Trust. The Custodian shall determine the portion of the Common Stock Trust
to which each Distributee is entitled, if any, by multiplying the amount of the
aggregate net proceeds comprising the Common Stock Trust by a fraction, the
numerator of which is the amount of the fractional share interest to which such
Distributee is entitled (after taking into account all shares of Common Stock
held on the day of the Second Seller Shareholder Meeting by such Distributee)
and the denominator of which is the aggregate amount of fractional share
interests to which all Distributees are entitled.
3.5. No Liability. Neither the Liquidator, Surviving Company,
Seller nor the Custodian shall be liable to any Person in respect of any share
of Consideration Shares or any cash from the Common Stock Trust delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
3.6. Investment of Common Stock Trust. The Custodian shall
invest any cash included in the Common Stock Trust, on a daily basis in money
market instruments. Any interest and other income resulting from such
investments shall be deposited in the Common Stock Trust and held pending
distribution thereof to Distributees in accordance with the BCA, Seller's
Bye-laws, the Reorganization Agreement and this Plan.
4. Amendment of Memorandum of Seller.
Immediately following the Closing, the Memorandum of Seller
shall be amended to be in the form attached as Schedule A to this Plan. In
accordance with the amended Memorandum, from the Closing to the final
dissolution of Seller, Seller shall conduct no business or other activities
except those necessary or useful in order to defend, resolve and satisfy any
outstanding claims and liabilities and to complete the winding up and
dissolution of Seller in accordance herewith.
5. Final Dissolution of Seller.
As soon as possible following the Second Seller Shareholder
Meeting and the satisfaction of all of Seller's outstanding liabilities and the
resolution of any outstanding claims against Seller, Seller shall be finally
dissolved in accordance with the BCA and thenceforth shall cease to exist.
5
Exhibit 3 to the
Reorganization Agreement
Form of Tax Opinion
A. Form of Debevoise & Xxxxxxxx Tax Opinion
[D&P LETTERHEAD]
[Date]
Central European Media Enterprises Ltd.
00 X'Xxxxxx Xxxxxx
Xxxxxx X0X 0XX
Xxxxxxx
Ladies and Gentlemen:
We have acted as special counsel to Central European Media
Enterprises Ltd., a Bermuda corporation ("Seller"), in connection with the Sale
of Seller's assets to Scandinavian Broadcasting Systems S.A., a Luxembourg
corporation ("Acquiring"), and the Liquidation of the Seller (collectively, the
"Reorganization") contemplated by the Reorganization Agreement, dated as of
March 29, 1999, by and between Seller and Acquiring and the exhibits thereto
(collectively, the "Reorganization Agreement"). The delivery of an opinion in
substantially the form hereof, and the reconfirmation of such opinion on the
Closing Date, are conditions to the obligation of Seller to consummate the
Reorganization pursuant to Section 7.2(c) of the Reorganization Agreement. All
capitalized terms used herein, unless otherwise specified, shall have the
meanings ascribed to them in the Reorganization Agreement.
In rendering our opinion, we have examined and relied upon the
accuracy and completeness of the facts, information, covenants, statements and
representations con-
1
Central European Media Enterprises, Ltd. 2 March __, 1999
tained in originals or copies, certified or otherwise identified to our
satisfaction, of the Reorganization Agreement, the letters of representation of
Seller and Acquiring dated __________________ provided to Debevoise & Xxxxxxxx
and Xxxxxxx Xxxx & Xxxxxxxxx and attached hereto (the "Tax Representation
Letters")[, the Joint Proxy Statement] and such other documents as we have
deemed necessary or appropriate as a basis for the opinion set forth below. Our
opinion is expressly conditioned upon, among other things, the accuracy as of
the date hereof, and the continuing accuracy, of all of such facts, information,
covenants, statements and representations up to and including the Closing Date,
and we have assumed that the facts, information, covenants, statements and
representations contained in the Tax Representation Letters will be reconfirmed
as of the Closing Date.
In our examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such documents. We have also assumed the
following for purposes of our opinion:
1. The Reorganization will be consummated in the manner contemplated
in the [Joint Proxy Statement] and in accordance with the
Reorganization Agreement.
2. On the Closing Date, or as soon as practicable thereafter, and as
part of a single integrated transaction including the Sale, Seller
will distribute to its shareholders the Consideration Shares as
well as all of its other assets except for its corporate charter
and the agreement described in Section 1.2(b)(ii) of the
Reorganization Agreement.
3. The notification requirements set forth in the U. S. Treasury
Regulations with respect to Section 367(b) of the U.S. Internal
Revenue Code of 1986, as amended (the "Code") will be satisfied.
4. Seller will file an election, effective as of the day following the
Closing Date, pursuant to U. S. Treasury Regulations Section
301.7701-3 to classify Seller as a partnership for U. S. federal
income tax purposes. Following the effective date of such election,
Seller will not be treated as a corporation pursuant to Section
7704(b) of the Code because it will qualify for the exception set
forth in Section 7704(c) of the Code.
In rendering our opinion, we have considered the applicable
provisions of the Code, the Treasury Regulations promulgated thereunder,
pertinent judicial authorities, interpretive rulings of the Internal Revenue
Service and such other authorities as we have considered relevant. Statutes,
regulations, judicial decisions and administrative
Central European Media Enterprises, Ltd. 3 March __, 1999
interpretations are subject to change at any time and, in some circumstances,
with retroactive effect. A material change in the authorities or the facts,
information, covenants, statements, representations or assumptions upon which
our opinion is based could affect our conclusions. In addition, there can be no
assurance that the Internal Revenue Service would not take a position contrary
to that which is stated in this opinion.
Subject to the foregoing and to the qualifications and limitations
set forth herein, we are of the opinion that for U.S. federal income tax
purposes:
The Reorganization should qualify as a reorganization pursuant to
Section 368(a) of the Code.
Our opinion is limited to the foregoing U.S. federal income tax
characterization of the Reorganization.
We are delivering this opinion to you and, without our prior
written consent, no other person is entitled to rely on this opinion. This
opinion is expressed as of the date hereof, and we disclaim any undertaking to
advise you of any subsequent changes in the matters stated, represented or
assumed herein, or of any subsequent changes in applicable law.
Very truly yours,
B. Form of Xxxxxxx Xxxx & Xxxxxxxxx Tax Opinion
[WF&G LETTERHEAD]
[Date]
SBS Broadcasting S.A.
0-00 xxx Xxxxxxx Xxxxx, X-0000
Xxxxxxxxxx, Xxxxxxxxxx
Ladies and Gentlemen:
We have acted as counsel for SBS Broadcasting S.A., a Luxembourg corporation
("Acquiring"), in connection with the proposed Sale of the assets of Central
European Media Enterprises, Ltd., a Bermuda corporation ("Seller"), to Acquiring
for shares of the common stock of Acquiring, and the subsequent Liquidation of
Seller (collectively, the "Reorganization"), pursuant to a Reorganization
Agreement dated as of March 29, 1999 and the exhibits thereto (the
"Reorganization Agreement"). All capitalized terms used herein, unless otherwise
specified, have the meanings assigned to them in the Reorganization Agreement.
In that connection, you have requested our opinion regarding the treatment of
the Reorganization as a reorganization defined in Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). In providing our opinion, we have
examined the Reorganization Agreement, the Joint Proxy Statement and such other
documents and corporate records as we have deemed necessary or appropriate for
purposes of our opinion. In addition, we have assumed that:
a. The Reorganization will be consummated in the manner
contemplated by the Joint Proxy Statement and in accordance
with the provisions of the Reorganization Agreement.
b. On the Closing Date, or as soon as practicable thereafter, and
as part of a single integrated transaction including the Sale,
Seller will distribute to its shareholders the Consideration
Shares as well as all of its other assets except for its
corporate charter and the agreement described in Section
1.2(b)(ii) of the Reorganization Agreement.
c. The notification requirements set forth in U.S. Treasury
Regulations Section 7.367(b)-1(c) will be satisfied.
1
d. Seller will make a valid election, effective the day following
the Closing Date, pursuant to U.S. Treasury Regulations
Section 301.7701-3, to classify Seller as a partnership for
Federal income tax purposes. Following the effective date of
such election, Seller will not be treated as a corporation
pursuant to Section 7704(b) of the Code because it will
qualify for the exception set forth in Section 7704(c) of the
Code.
e. The representations made to us by Acquiring and Seller in
their respective certificates to us dated _______, and
delivered to us for purposes of this opinion are accurate and
complete.
Based upon the foregoing, in our opinion, for Federal income tax purposes, the
Reorganization should qualify as a reorganization within the meaning of Section
368(a) of the Code.
The opinion expressed herein is based upon existing statutory, regulatory and
judicial authority, any of which may be changed at any time with retroactive
effect. In addition, our opinion is based solely on the documents that we have
examined, the additional information that we have obtained, the statements
contained in the certificates from Acquiring and Seller referred to above, and
the additional assumptions set forth above, which we have assumed will be true
and complete as of the effective time of the Reorganization. Our opinion cannot
be relied upon if any of the facts pertinent to the Federal income tax treatment
of the Reorganization stated in such documents or in such additional information
is, or later becomes, inaccurate or incomplete, or if any of the statements
contained in the certificates from Acquiring and Seller referred to above or any
of the assumptions set forth above are, or later become, inaccurate or
incomplete. Finally, our opinion is limited to the tax matter specifically
covered, and we have not been asked to address, nor have we addressed, any other
tax consequences of the Reorganization or any other transactions. In particular,
no opinion is expressed concerning (i) the amount includible in the income of
any shareholder of Seller pursuant to U.S. Treasury Regulations Section
7.367(b)-7(c) (relating to the requirement that the Section 1248 amount be
included in income by an exchanging U.S. shareholder) or (ii) whether any 5
percent or greater U.S. shareholder of Seller is required to enter into a gain
recognition agreement pursuant to U.S. Treasury Regulations Section
1.367(a)-3(c)(1)(iii)(B) as a condition of obtaining tax-free treatment in the
Reorganization.
This opinion is not to be used, circulated, quoted or otherwise referred to for
any purpose without our express written permission. Notwithstanding the previous
sentence, we hereby consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the [Registration Statement on Form S-4
of Acquiring, of which the Joint Proxy Statement is also a part, and to the
reference to our firm under the heading
2
"THE REORGANIZATION -- Certain Federal Income Tax Consequences"]. In giving such
consent, we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended.
Very truly yours,
3
Exhibit 4 to the
Reorganization Agreement
FORM OF OFFICER'S TAX CERTIFICATE
A. Form of Seller Officer's Tax Certificate
[CENTRAL EUROPEAN MEDIA ENTERPRISES, LTD. LETTERHEAD]
[Date]
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Reorganization Agreement dated as of March 29, 1999
(the "Reorganization Agreement") between
Central European Media Enterprises, Ltd. ("Seller") and
SBS Broadcasting S.A. ("Acquiring")
Dear Sirs:
We are furnishing the following representations to you to enable you to prepare
and deliver your tax opinions in accordance with Sections 7.2(c) and 7.3(d) of
the Reorganization Agreement. We understand that you will be relying on such
representations in rendering your tax opinions. Unless otherwise defined herein,
capitalized terms have the meanings assigned to them in the Reorganization
Agreement.
1. The Sale by Seller of the Acquired Assets to Acquiring and Liquidation of the
Seller (collectively, the "Reorganization") will be carried out, insofar as such
Reorganization pertains to Seller, as set forth in the Reorganization Agreement.
2. The facts relating to the contemplated Reorganization pursuant to the
Reorganization Agreement and the documents executed in connection therewith and
pursuant thereto (the "Reorganization Documents") [Joint Proxy Statement and
other documents to be listed], are, insofar as such facts pertain to Seller,
true, correct and complete in all material respects.
1
3. Neither Seller nor any related person (within the meaning of Treas. Reg.
Section 1.368-1T(e)(2)(ii)) has acquired any shares of Seller Capital Stock in
contemplation of the Reorganization, or otherwise as part of a plan of which the
Reorganization is a part.
4. No distribution with respect to Seller Capital Stock has or will be made
prior to and in connection with the Reorganization.
5. Seller is not and has not been engaged in a trade or business within the
United States.
6. Seller is not and has never been a passive foreign investment company as
defined in Section 1297(a) of the Code.
7. In the Reorganization, Acquiring will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair market value
of the gross assets that the Seller held immediately prior to the
Reorganization. For purposes of this representation, assets of Seller used to
pay its reorganization expenses and all redemptions and distributions (except
for regular, normal dividends) made by Seller immediately preceding, or in
contemplation of, the Reorganization will be included as assets of Seller prior
to the Reorganization.
8. The Liquidation will occur promptly following the Closing Date. In the
Liquidation, Seller will distribute the Consideration Shares and its other
properties (except for its corporate charter and the agreement described in
Section 1.2(b)(ii) of the Reorganization Agreement).
9. Following the distribution of the Consideration Shares by Seller to the
shareholders of Seller and pending dissolution of Seller under Bermuda law,
Seller shall conduct no business or other activities except those necessary or
useful to defend, resolve and satisfy any outstanding claims and liabilities and
to complete the winding up and dissolution of Seller.
10. Seller will make a valid election, effective the day following the Closing
Date, pursuant to Treas. Reg. Section 301.7701-3 to classify Seller as a
partnership for U.S. federal income tax purposes.
11. The Assumed Liabilities of Seller assumed by Acquiring were incurred by the
Seller in the ordinary course of its business.
12. Subject to paragraph 13 below, Acquiring, Seller, and the shareholders of
Seller will pay their respective expenses, if any, incurred in connection with
the Reorganization.
13. Acquiring will be required to pay or assume only those expenses of Seller
that are solely and directly related to the
2
Reorganization in accordance with the guidelines established in Revenue Ruling
73-54, 1973-1 C.B. 187.
14. Seller is not an investment company as defined in Section 368(a)(2)(F)(iii)
and (iv) of the Code.
15. Seller will not take, and Seller is not aware of any plan or intention on
the part of any Seller shareholder to take, any position on any Federal, state
or local income or franchise Tax Return, or any other Tax Return, or take any
other Tax reporting position, that is inconsistent with the treatment of the
Reorganization as a reorganization within the meaning of Section 368(a) of the
Code.
16. None of the compensation received by any stockholder-employee of Seller in
respect of periods that end on or prior to the Closing Date represents separate
consideration for, or is allocable to, any of such stockholder-employee's Seller
Capital Stock. None of the Surviving Company Common Stock (for purposes of this
document, "Acquiring Common Stock") that will be received by any Seller
stockholder-employee in the Reorganization represents separately bargained-for
consideration that is allocable to any employment agreement or arrangement. The
compensation paid to any stockholder-employee will be for services actually
rendered and will be determined by bargaining at arm's-length.
17. There is no intercorporate indebtedness existing between Acquiring and
Seller that was issued or acquired, or will be settled, at a discount.
18. The Seller is not under the jurisdiction of a court in a Title 11 or similar
case within the meaning of Section 368(a)(3)(A) of the Code.
19. The Reorganization Agreement and the Reorganization Documents represent the
entire understanding of Seller and Acquiring with respect to the Reorganization.
20. The Consideration Shares and Assumed Liabilities represent the sole
bargained-for consideration to be received by Seller for the Acquired Assets.
The information in this certificate is provided in connection with the
preparation of your tax opinion. We understand that your opinion will be
premised on the basis that all of the facts, representations and assumptions on
which you are relying, whether contained herein or in the documents referred to
herein, are accurate and complete and will be accurate and complete as of the
Closing. We further understand that your opinion will be based in part upon the
assumptions stated, and will be subject to the qualifications and limitations
set forth, in your opinion letters.
3
Very truly yours,
Central European Media
Enterprises Ltd.
By:
---------------------------------
Name:
Title:
4
B. Form of the Surviving Company Officer's Tax Certificate
[SBS BROADCASTING S.A. LETTERHEAD]
[Date]
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Reorganization Agreement dated as of March 29, 1999
(the "Reorganization Agreement") between
Central European Media Enterprises, Ltd. ("Seller") and
SBS Broadcasting S.A. ("Acquiring")
Dear Sirs:
We are furnishing the following representations to you to enable you to prepare
and deliver your tax opinions in accordance with Sections 7.2(c) and 7.3(d) of
the Reorganization Agreement. We understand that you will be relying on such
representations in rendering your tax opinions. Unless otherwise defined herein,
capitalized terms have the meanings assigned to them in the Reorganization
Agreement.
1. The Sale by Seller of the Acquired Assets to Acquiring and Liquidation of the
Seller (collectively, the "Reorganization") will be carried out, insofar as such
Reorganization pertains to Acquiring, as set forth in the Reorganization
Agreement.
2. Neither Acquiring nor any "related person" (within the meaning of Treas. Reg.
Section 1.368-1(e)(3)) has any plan or intention to redeem or otherwise acquire
Surviving Company Common Stock (for purposes of this certificate, "Acquiring
Common Stock") issued in the Reorganization other than through a stock purchase
program permitted under Treas. Reg. Section 1.368-1(e)(6). All Acquiring stock
purchase programs will be suspended for a 30-day period following the Closing
Date.
2
3. The facts relating to the contemplated Reorganization pursuant to the
Reorganization Agreement and the documents executed in connection therewith and
pursuant thereto (the "Reorganization Documents") [Joint Proxy Statement and
other documents to be listed] are, insofar as such facts pertain to Acquiring,
true, correct and complete in all material respects.
4. Acquiring has no plan or intention to sell or otherwise dispose of
(including, without limitation, pursuant to any transfer described in Section
368(a)(2)(C) of the Code) any of the Acquired Assets or the assets held directly
or indirectly by CME Media, except for dispositions made in the ordinary course
of business. No transfer of Acquired Assets to any controlled corporation (as
defined in Section 368(c)) shall take place for at least one year following the
Reorganization unless an opinion is provided by tax counsel of recognized
national standing to the effect that such transfer does not cause the
Reorganization to be an indirect acquisition within the meaning of Treas. Reg.
Section 1.367(a)-3(d)(1)(v).
5. Acquiring, Seller, and the shareholders of Seller will pay their respective
expenses, if any, incurred in connection with the Reorganization.
6. There is no intercorporate indebtedness existing between Acquiring and Seller
that was issued, acquired, or will be settled at a discount.
7. Neither Acquiring nor any Affiliate of Acquiring owns, directly or
indirectly, or has owned during the past five years, directly or indirectly, any
stock of the Seller, except for 232,000 Class A Shares which were disposed of
for cash on March 26, 1999 pursuant to the agreement between Acquiring and Bear,
Xxxxxxx & Co. Inc., dated March 28, 1999, a true, correct and complete copy of
which is attached to this certificate. Neither Acquiring nor any Affiliate of
Acquiring has entered into any agreement to protect the purchaser of said Class
A Shares against loss or that would permit or require Acquiring to reacquire
such Class A Shares.
8. Following the Reorganization, Acquiring will continue the historic business
of Seller or use a significant portion of its historic business assets in a
business.
9. Acquiring is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
10. Acquiring will not take any position on any Tax Return or take any other Tax
reporting position that is inconsistent with the treatment of the Reorganization
as a reorganization within the meaning of Section 368(a) of the Code.
11. None of the compensation received by any stockholder-employee of Seller in
respect of the period after the Closing
2
Date represents separate consideration for, or is allocable to, any of such
stockholder-employee's Seller Capital Stock. None of the Acquiring Common Stock
that will be received by any Seller stockholder-employee in the Reorganization
represents separately bargained-for consideration that is allocable to any
employment agreement or arrangement. The compensation paid to any
stockholder-employee will be for services actually rendered and will be
determined by bargaining at arm's-length.
12. The Reorganization Agreement and Reorganization Documents represent the
entire understanding of Seller and Acquiring with respect to the Reorganization.
13. The Consideration Shares and Assumed Liabilities represent the sole
bargained-for consideration to be received by Seller for the Acquired Assets.
14. Aside from the Statuts Cordonnes of Acquiring and the Seller Voting
Agreement, there are no agreements between Acquiring and any shareholder of
Acquiring that limit the right to vote the Consideration Shares.
15. Acquiring has no present plan or intention to pay dividends or distributions
after the Closing to former Seller shareholders, other than regular or normal
dividend distributions made with regard to all shares of Acquiring stock. The
information in this certificate is provided in connection with the preparation
of your tax opinion. We understand that your opinion will be premised on the
basis that all of the facts, representations and assumptions on which you are
relying, whether contained herein or in the documents referred to herein, are
accurate and complete and will be accurate and complete as of the Closing. We
further understand that your opinion will be based in part upon the assumptions
stated, and will be subject to the qualifications and limitations set forth, in
your opinion letters.
Very truly yours,
SBS Broadcasting S.A.
By:
------------------------------------
Name:
Title:
3
Schedule 1.1 to the
Reorganization Agreement
ACQUIRED ASSETS
1. All of the issued and outstanding capital stock of CME Media
Enterprises B.V.
2. All cash on hand.
3. All bank accounts.
1
Schedule 1.1(a) to the
Reorganization Agreement
ASSUMED LIABILITIES
1. US$100,000,000 Senior Notes due 2004.
2. DM140,000,000 Senior Notes due 2004.
3. US$5,000,000 Guarantee in favor of Creditanstalt dated as of April 16,
1998.
4. US$15,000,000 Guarantee in favor of ING Bank N.V. dated as of February
26, 1999.
5. Employment Contracts of the Seller set forth in Schedule 3.10.
6. A proposed guarantee in favor of Columbia Tristar International
Television on the terms disclosed to the Surviving Company by Seller.
7. Consulting Agreement dated December 23, 1998 with Xxxxxxxx Xxxxxxx.
8. All liabilities of Seller with respect to the Perekhid lititagation
described in Schedule 3.9.
1
Schedule 1.4 to the
Reorganization Agreement
DIRECTORS AND OFFICERS
A. Board of Directors
Xxxxx Xxxxx -- Co-Chairman
Xxxxxx X. Xxxxxx -- Co-Chairman
Xxxxxxx X. Xxxxxxxxx
Xxxxxxxx X. Xxxxxxxxxxx
One additional director to be designated by Seller
Xxxxxx X. Xxxxxx
Xxxxxxx Xxxxxxxxxxx
Eight additional directors to be designated by the Surviving
Company
B. Executive Committee
Xxxxxxx Xxxxxxxxxxx -- Chairman
Xxxxxx X. Xxxxxx -- Co-Chairman
Xxxxx Xxxxx -- Co-Chairman
C. Officers
Xxxxx Xxxxx -- Chief Executive Officer
Xxxxxx X. Xxxxxx -- Vice Chairman and Chief Operating Officer
Other officers to be determined by the Chief Executive Officer in
consultation with the Executive Committee.
1
Schedule 7.1 to the
Reorganization Agreement
REQUIRED CONSENTS
1. All consents and approvals of regulatory bodies or authorities in any
jurisdiction in which Seller or the Surviving Company conducts broadcast
operations, if such consents or approvals are required in order for the
Surviving Company, on and after the Closing Date, to continue to operate the
businesses operated by the Surviving Company and Seller prior to the Closing
Date.
2. The Debt Consent, to the extent required to be obtained as provided in
Section 6.19 of the Agreement.
1
