EXECUTION COPY
SBS SHAREHOLDERS' AGREEMENT
SBS SHAREHOLDERS' AGREEMENT dated as of March 29, 1999, among
SBS Broadcasting S.A., a Luxembourg corporation ("SBS"), Central European Media
Enterprises Ltd., a Bermuda corporation ("CME"), and Harry Sloan, Michael
Finkelstein and Howard A. Knight (collectively, the "Shareholders").
WHEREAS, the Shareholders desire that CME and SBS enter 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 CME to Luxco of all the assets, business, properties and
rights of CME, and the assumption by SBS of any and all liabilities of CME, in
exchange for shares of Common Stock, par value $1.50 per share, of SBS ("SBS
Common Stock"), and the subsequent liquidation of CME, all upon the terms and
conditions set forth in the Reorganization Agreement; and
WHEREAS, the Shareholders are executing this Agreement as an
inducement to CME and SBS to execute and deliver the Reorganization Agreement.
NOW THEREFORE, in consideration of the execution and delivery
by CME and SBS of the Reorganization Agreement and 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
Shareholders represents and warrants to CME as follows:
(a) Such Shareholder is the record and beneficial owner of the
number of SBS Common Stock (together with any shares of SBS Common
Stock which such Shareholder acquires after the date hereof, the
"Shares"), as set forth on Exhibit A hereto (which Exhibit shall be
amended after the date hereof to include any shares of SBS Common Stock
which such Shareholder acquires after the date hereof). Except for such
number of Shares and except for Shares, issuable in
connection with any SBS stock options outstanding as of the date
hereof, which are separately set forth on Exhibit A hereto, such
Shareholder does not own, beneficially or of record, any shares of SBS
Common Stock.
(b) Such Shareholder 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.
(c) This Agreement has been duly executed and delivered by
such Shareholder and, assuming due execution and delivery thereof by
SBS and CME, constitutes the legal, valid, and binding obligation of
such Shareholder enforceable against such Shareholder 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).
(d) The execution, delivery, and performance of this Agreement
by such Shareholder will not (i) result in the breach of or constitute
a default under any contract to which such Shareholder is subject, (ii)
constitute a violation of any law applicable or relating to such
Shareholder or (iii) result in the creation of any Lien.
(e) Except for this Agreement, there are no voting trusts or
other agreements or understandings, including, without limitation, any
proxies, in effect governing the voting of the Shares beneficially
owned by such Shareholder.
(f) Such Shareholder does not hold, and has not issued, any
proxies, or securities convertible into or exchangeable for or any
options, warrants, or other rights to purchase or subscribe for any
shares of SBS Common Stock.
(g) The Shares and the certificates representing such Shares
are now and until the Closing Date will be held by such Shareholder, or
by a nominee or custodian for the benefit of such Shareholder, free and
clear of all Liens, proxies, voting trusts or agreements,
understandings or arrangements or any other encumbrances whatsoever
other than as created by this Agreement.
-2-
(h) Such Shareholder understands and acknowledges that CME is
entering into the Reorganization Agreement in reliance upon such
Shareholder's execution and delivery of this Agreement.
SECTION 3. Voting Agreement. Each Shareholder agrees with, and
covenants to, CME as follows:
(a) At the Surviving Company Shareholders Meeting 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
of the transactions contemplated by the Reorganization Agreement, such
Shareholder 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
favor of each of the transactions contemplated by the Reorganization
Agreement.
(b) Each Shareholder represents and warrants to CME that any
proxies heretofore given in respect of the Shares are not irrevocable,
and that any such proxies are hereby revoked, to the extent in conflict
with this Agreement.
SECTION 4. Covenants of the Shareholder.
(a) Each Shareholder agrees with, and covenants to, CME that
such Shareholder shall not, prior to the Closing Date, (i) sell, assign, pledge,
transfer or otherwise dispose of (a "Transfer") 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,
except under or in accordance or not in conflict with this Agreement, 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.
(b) Each Shareholder hereby irrevocably grants to, and
appoints, CME and Frederic P. Klinkhammer, in his capacity as Chief Executive
Officer of CME, and any individual who shall hereafter succeed to any such
office of CME, and each of them individually, such Shareholder's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of such Shareholder, 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 the laws of Luxembourg, in favor of any of the transactions
contemplated by
-3-
the Reorganization Agreement. The foregoing proxy shall terminate automatically
upon the termination of this Agreement under Section 8. It is understood that
such Shareholder retains its voting rights except to the extent specifically set
forth in this Section 4(b). Each Shareholder hereby affirms that the irrevocable
proxy set forth in this Section 4(b) is given in connection with the execution
of the Reorganization Agreement, and that such irrevocable proxy is given to
secure the performance of the duties of such Shareholder under this Agreement.
Each Shareholder hereby further affirms that the irrevocable proxy is coupled
with an interest and may under no circumstances be revoked. Each Shareholder
hereby ratifies and confirms all that such irrevocable proxy may lawfully do or
cause to be done by virtue hereof.
(c) During the period commencing on the Closing Date and
ending on the earlier of (i) the second anniversary of the Closing Date and (ii)
180 days after the date such Shareholder is no longer a director of SBS, each
Shareholder agrees, as to himself and not any other Shareholder, not to Transfer
any shares of SBS Common Stock beneficially owned by such Shareholder without
the prior written consent of the Board of Directors of SBS, except (x) in
connection with any merger, business combination or similar transaction to which
SBS may be a party or (y) for any Transfers to an "Affiliate" of the type
described in clause (ii)(x) of the definition thereof set forth below, provided
such Affiliate agrees in writing to be bound by the provisions of this Agreement
applicable to the Transferring Shareholder with respect to the shares so
Transferred.
(d) During the period ending on the fifth anniversary of the
Closing Date, (i) each Shareholder shall give SBS at least five business days'
prior written notice of any proposed Transfer of any shares of SBS Common Stock
beneficially owned by such Shareholder and (ii) such Shareholder shall not, and
shall cause his or its Affiliates not to, without the prior written consent of
the Board of Directors of SBS,
(A) acquire beneficial ownership (as defined in Rule 13d-3 of
the Exchange Act) of any SBS Common Stock, if after giving effect to
such acquisition, such Shareholder, together with the other
Shareholders, would beneficially own, in the aggregate, 20% or more of
the SBS Common Stock; provided, that, (x) the foregoing covenant shall
not be deemed to be breached as a result of any repurchase by SBS of
any of its outstanding shares of SBS Common Stock, (y)
-4-
nothing contained herein shall be deemed a waiver or other approval on
the part of the Board of Directors of SBS with respect to the
applicability, at any time after the Closing Date, of the provisions of
Article 6 of the Statuts Coordonnes of SBS as in effect any time and
(z) such Shareholder shall be entitled to rely conclusively on
information given to such Shareholder as to the beneficial ownership of
any shares of SBS Common Stock by the other Shareholders (which
information shall be provided by SBS to such Shareholder promptly
following a request therefor);
(B) directly or indirectly, participate in, encourage or
support any solicitation of proxies in opposition to any proposal made
by the Board of Directors of SBS in connection with any shareholders'
meeting of SBS; or
(C) sell to any person or group of related persons in a
privately negotiated transaction (or series of related privately
negotiated transactions) shares of SBS Common Stock representing, at
the time of any such proposed sale, 5% or more of the outstanding
shares of SBS Common Stock.
As used herein, the term "Affiliate" shall mean (i) when used with reference to
a specified Person, any Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with the
specified Person, and (ii) when used with respect to a particular Shareholder,
shall also include (x) his spouse or any of his minor children and (y) any
Person in which any one or more of such Shareholder, his spouse or his minor
children (individually or collectively) beneficially own, directly or
indirectly, more than 25% of the voting stock. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise. The term "beneficially own"
shall have the meaning set forth in Rule 13d-3 of the Exchange Act.
(e) Each Shareholder, as to himself and not any other
shareholder, covenants to SBS that, in respect of any election of directors of
SBS for which SBS has nominated for election to its Board of Directors
designee(s) of Ronald S. Lauder ("RSL") as contemplated by the CME Shareholders'
Agreement of even date herewith among SBS and the "Shareholders" named therein
(the "Other Shareholders' Agreement"), such Shareholder agrees to vote, and to
cause his Affiliates to vote, any shares of SBS
-5-
Common Stock beneficially owned by them in favor of the RSL designee(s) to the
Board of Directors of SBS who are nominated by SBS as contemplated by the Other
Shareholders' Agreement. The agreements set forth in this Section 4(e) shall,
unless terminated earlier in accordance with the provisions hereof, terminate on
the fifth anniversary of the Closing Date.
(f) Each Shareholder agrees that each certificate representing
the shares of SBS Common Stock held by them shall be stamped or otherwise
imprinted with a legend substantially in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AND TO THE OTHER TERMS SET FORTH IN THAT
CERTAIN SBS SHAREHOLDERS' AGREEMENT, DATED AS OF MARCH 29, 1999,
BETWEEN SBS BROADCASTING S.A., CENTRAL EUROPEAN MEDIA
ENTERPRISES, LTD. AND CERTAIN SHAREHOLDERS PARTY THERETO, A COPY
OF WHICH AGREEMENT HAS BEEN FILED WITH THE SECRETARY OF SBS
BROADCASTING S.A. AND IS AVAILABLE UPON REQUEST."
SECTION 5. Certain Events. In the event of any stock split,
stock dividend, merger, reorganization, recapitalization or other change in the
capital structure of SBS affecting the SBS Common Stock, or the acquisition of
additional shares of SBS Common Stock or other voting securities of SBS by such
Shareholder, the number of Shares set forth in Section 2(a) hereof shall be
adjusted appropriately and this Agreement and the obligations hereunder shall
attach to any additional shares of Luxco Common Stock or other voting securities
of Luxco issued to or acquired by such Shareholder.
SECTION 6. Shareholder Capacity. No person executing this
Agreement who is or becomes a director of SBS makes any agreement or
understanding herein in his or her capacity as such director. Each Shareholder
signs solely in such Shareholder's capacity as the record and beneficial owner
of the Shares.
SECTION 7. Further Assurances. Each Shareholder shall, upon
request, prior to the Closing Date, of CME, and, after the Closing Date, of SBS,
execute and deliver any additional documents and take such further actions as
may reasonably be deemed by CME or SBS, as applicable, to be necessary or
desirable to carry out the provisions hereof.
SECTION 8. Termination. This Agreement, and all rights and
obligations of the parties hereunder, shall terminate
-6-
upon the date on which the Reorganization Agreement is terminated in accordance
with its terms, except that no Shareholder shall be relieved of any liability
for breach of this Agreement by such Shareholder prior to such termination.
SECTION 9. 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 CME, to their respective addresses
set forth in Section 9.2 of the Reorganization Agreement; and (ii) if to any
Shareholder, to the address set forth opposite such Shareholder's name on
Exhibit A hereto.
SECTION 10. 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 11. Counterparts; Effectiveness. This Agreement may be
executed in two or more counterparts, all of which shall be considered one and
the same agreement and shall become effective as to any Shareholder when one or
more counterparts have been signed by SBS, CME and such Shareholder and
delivered to SBS, CME and such Shareholder.
SECTION 12. 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 13. 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 14. 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.
-7-
SECTION 15. Enforcement. Each Shareholder agrees that
irreparable damage would occur and that SBS and CME 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 and CME shall be entitled to an injunction or
injunctions to prevent breaches by the other parties 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 or CME is
entitled at law or in equity. In addition, each Shareholder (i) consents to
submit such party to the personal jurisdiction of any Federal court located in
the 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 such Shareholder will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court.
SECTION 16. 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 17. 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.
SECTION 18. Third Party Beneficiary. SBS hereby agrees that,
to the extent any Shareholder breaches the terms of Sections 4(c), 4(d) or 4(e)
hereof and SBS shall have failed, within 45 days after receipt of written notice
from RSL, to take actions to enforce the provisions of such Section(s) against
the
-8-
breaching Shareholder, RSL shall be entitled to enforce the provisions of such
Section(s) in respect of such breach against the breaching Shareholder.
IN WITNESS WHEREOF, SBS, CME and the Shareholders have caused this Agreement to
be duly executed and delivered as of the date first written above.
SBS BROADCASTING S.A.
By: /s/ Harry E. Sloan
-------------------------------------
Name: Harry E. Sloan
Title: Chairman of the Board and
Chief Executive Officer
CENTRAL EUROPEAN MEDIA
ENTERPRISES LTD.
By: /s/ Frederic T. Klinkhammer
-------------------------------------
Name: Frederic T. Klinkhammer
Title: President and
Chief Operating Officer
SHAREHOLDERS:
/s/ Harry E. Sloan
----------------------------------------
Harry E. Sloan
/s/ Michael Finkelstein
----------------------------------------
Michael Finkelstein
-9-
/S/ Howard A. Knight
----------------------------------------
Howard A. Knight
-10-