Soliciting
Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
CENTRAL
EUROPEAN MEDIA ENTERPRISES LTD.
(Name
of Registrant as Specified In Its
Charter)
(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
Payment
of Filing Fee (Check the appropriate box):
x
No fee
required.
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Fee computed on table below per
Exchange Act Rules 14a-6(i)(1) and
0-11.
(1)
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to which transaction
applies: N/A
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which transaction
applies: N/A
(3)
Per unit price or other
underlying value of transaction computed pursuant to Exchange Act Rule
0-11 (set forth the amount on which the filing fee is calculated and state
how it was
determined): N/A
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of
transaction: N/A
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paid: $0
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materials: N/A
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Check box if any part of the fee
is offset as provided by Exchange Act Rule 0-11(a)(2) and identify
the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule
and the date of its filing.
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EXPLANATORY
NOTE
This
Amendment No. 1 to our Definitive Proxy Statement is being filed to include
amended biographical information for Ann Mather, one of our
directors.
CENTRAL
EUROPEAN MEDIA ENTERPRISES LTD.
NOTICE
OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
The
Annual General Meeting of Shareholders of CENTRAL EUROPEAN MEDIA ENTERPRISES
LTD. (the “Company”), a Bermuda
company, will be held at The Pearman Room (4B), 4th Floor,
Conyers Dill & Pearman, Clarendon House, 2 Church Street, Hamilton, HM 11
Bermuda on June 3, 2008 at 11:00 a.m., for the following purposes:
1.
To
elect eleven directors to serve until the next Annual General Meeting of
Shareholders;
2.
To
amend Bye-law 12(3) to allow the Company to hold treasury
shares;
3.
To
amend Bye-laws 16, 18, 19 and 20 to clarify that shareholders may hold
uncertificated shares and that the Company is not obliged to issue
physical share certificates to
shareholders;
4.
To
amend Bye-laws 58(2) and 88 to conform them to the rules and regulations
promulgated by the Securities and Exchange Commission (the “SEC”) with
respect to shareholder proposals for general meetings and director
nominations;
5.
To
amend Bye-laws 160, 161 and 162 to allow for electronic delivery of
notices, including proxy materials, to shareholders and the receipt of
notices by the Company by electronic delivery and other
means;
6.
To
amend Bye-laws 79, 80 and 81 to permit the Board of Directors to determine
the form of proxy that may be used to attend general
meetings;
7.
To
amend Bye-law 166 to remove the provision with respect to the
indemnification of the independent auditor and to add a provision to
permit the Company to advance defense costs to officers and directors
defending claims;
To
appoint Deloitte & Touche LLP as the independent registered public
accounting firm for the Company in respect of the fiscal year ended
December 31, 2008 and to authorize the directors, acting through the Audit
Committee, to approve their fee.
The
approval and adoption of each matter to be presented to the shareholders is
independent of the approval and adoption of each other matter to be presented to
the shareholders.
Only
shareholders of record at the close of business on April 1, 2008 are entitled to
notice of and to vote at the meeting.
This
Proxy Statement is furnished in connection with the solicitation of proxies by
the Board of Directors of CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. (the “Company”), a Bermuda
company, for use at our Annual General Meeting of Shareholders (the “Meeting”) to be held
at The Pearman Room (4B), 4th Floor,
Conyers Dill & Pearman, Clarendon House, 2 Church Street, Hamilton, HM 11
Bermuda on June 3, 2008, at 11:00 a.m., and at any adjournments
thereof.
Shareholders
may vote their shares by signing and returning the proxy card accompanying this
Proxy Statement. Shareholders who execute proxies retain the right to revoke
them at any time by notice in writing to the Company Secretary, by revocation in
person at the Meeting or by presenting a later-dated proxy. Unless so revoked,
the shares represented by proxies will be voted at the Meeting in accordance
with the directions given therein. Shareholders vote at the Meeting by casting
ballots (in person or by proxy) which are tabulated by a person who is appointed
by the Board of Directors before the Meeting to serve as inspector of election
at the Meeting and who has executed and verified an oath of office. The
presence, in person or by proxy, of shareholders entitled to cast at least a
majority of the total number of votes entitled to be cast on each matter to be
voted upon at the Meeting constitutes a quorum as to each such matter.
Abstentions and broker “non-votes” are included in the determination of the
number of shares present at the Meeting for quorum purposes, but abstentions and
broker “non-votes” are not counted in the tabulations of the votes cast on
proposals presented to shareholders. A broker “non-vote” occurs when a nominee
holding shares for a beneficial owner does not vote on a particular proposal
because the nominee does not have discretionary voting power with respect to
that item and has not received instructions from the beneficial owner or has
discretionary power but elects not to exercise it.
Our
registered office is located at Clarendon House, 2 Church Street, Hamilton, HM
11 Bermuda. A subsidiary of the Company also maintains offices at
Aldwych House, 81 Aldwych, London WC2B 4HN, United Kingdom. The date on which
this Proxy Statement and the enclosed form of proxy will be first sent to
shareholders is on or about May 1, 2008.
Shareholders
of record of our Class A Common Stock, par value $.08 per share, at the close of
business on April 1, 2008, shall be entitled to one vote for each share then
held. Shareholders of record of the Class B Common Stock, par value $.08 per
share, at the close of business on April 1, 2008 shall be entitled to ten votes
for each share then held. The Class A Common Stock and the Class B Common Stock
shall be voted on all matters presented as a single class. There were issued and
outstanding at the close of business on April 1, 2008 36,003,323 shares of Class
A Common Stock and 6,312,839 shares of Class B Common Stock.
1
PROPOSAL
1
ELECTION
OF DIRECTORS
Eleven
directors are to be elected at the 2008 Annual General Meeting to serve until
our next annual general meeting of shareholders. The eleven nominees are listed
below together with brief biographies. All eleven nominees are
incumbents, including Igor Kolomoisky, who was appointed to the Board of
Directors on August 30, 2007. The Board of Directors has determined
that six of the directors qualify as independent under the NASDAQ Marketplace
Rules: Charles Frank, Herbert Granath, Herbert Kloiber, Alfred Langer, Bruce
Maggin and Ann Mather. At this time the Board of Directors knows of no reason
why any nominee might be unable to serve as a director.
Director
Nominees
Ronald S. Lauder, 64, one of
our founders, has served as our non-executive Chairman of the Board since its
incorporation in 1994. Mr. Lauder is a principal shareholder and a
director of The Estée Lauder Companies, Inc. (“Estée Lauder”) and has served
as Chairman of Estée Lauder International and Chairman of Clinique Laboratories,
Inc., divisions of Estée Lauder, since returning to the private sector from
government service in 1987. From 1986 until 1987, Mr. Lauder served
as U.S. Ambassador to Austria. From 1983 to 1986, Mr. Lauder served
as Deputy Assistant Secretary of Defense for European and NATO
Affairs. He is President of the Jewish National Fund, former Chairman
of the Council of Presidents of American Jewish Organizations, a member of the
Board of Governors of the Joseph H. Lauder Institute of Management and
International Studies at the University of Pennsylvania and a member of the
Visiting Committee of the Wharton School at the University of
Pennsylvania. He received his B.S. in International Business from the
Wharton School of the University of Pennsylvania.
Herbert A. Granath, 79, has
served as a Director since 2002 and non-executive Vice Chairman of the Board
since June 2006. Mr. Granath is Chairman Emeritus, ESPN, a cable
sports network, and Senior Content Advisor to Telenet, the largest cable
operator in Belgium. He is Co-Chairman of Crown Media Holdings, which
owns and operates the Hallmark Channel. He is also Chairman and Chief Executive
Officer of Media and Entertainment Holdings, Inc., a special purpose vehicle for
the acquisition of media, entertainment and communications businesses. Mr.
Granath was employed by ABC for over 35 years and was Chairman, Disney/ABC
International (an international broadcasting company) from 1996 to January 1998
where he pioneered many aspects of ABC’s expanding television business,
including its successes in the cable and international programming
arenas. He served as Chairman of the Board of ESPN for 16 years and
Senior Vice President of ABC, Inc. from 1998 until 2001. He also
served as Chairman of the Board of A&E, The History Channel, The Biography
Channel and Lifetime Television, and was a founding partner and Board member of
Eurosport, the largest cable network in Europe. He also served on the Boards of
Telefunf, RTL2 and TM3 networks in Germany, SBS Broadcasting SA and TVA, the
Brazilian pay-TV company. Among the awards Mr. Granath has received
are two Tony awards (along with six Tony nominations), an International Emmy
(Lifetime Achievement in International TV), and a U.S. Emmy (Lifetime
Achievement in Sports Television). He has also been honored by the
National Association of Broadcasters as a Broadcast Pioneer and received the
European Lifetime Achievement Award at the Rose d’Or Festival in Lucerne,
Switzerland.
Michael N. Garin,
61, has served as a Director since December 2003 and Chief Executive
Officer since February 2004. Mr. Garin currently serves as a Director and
Chairman of the Audit Committee of American Media, publisher of the National
Enquirer, Star, Globe and other publications, and since November 2007 he has
been a member of the Executive Committee of the Abu Dhabi Media Company. From
2000 until January 2004, Mr. Garin served as the Chairman of Adcom Information
Services, the leading U.S. cable television viewership data provider. From 1999
to 2001, Mr. Garin was President and Chief Operating Officer of Digital
Convergence Corporation, an Internet technology company. From 1988 to
1999, Mr. Garin served ING Barings (Furman Selz) in various roles, including
Executive Vice President and Member of the Management Committee. As
Global Head of Media, Telecommunications and Information Services Investment
Banking for Furman Selz, he was responsible for building the firm’s investment
banking practice in those areas. Mr. Garin was one of the founders of Lorimar
Telepictures and helped run the company until it was acquired by Warner
Communications in 1988. Mr. Garin received his A.B. degree from
Harvard University and holds a Masters degree in Philosophy and the
Arts.
2
Charles R. Frank, Jr., 70,
has served as a Director since 2001. Mr. Frank currently serves as a
non-executive member of the board of Mittal Steel Galati, the Romanian
subsidiary of Mittal Steel Company N.V. He is a member of the
investment committee of the Darby Converging Europe Mezzanine Fund. From 1997 to
2001, Mr. Frank was First Vice President and twice acting President of the
European Bank for Reconstruction and Development, which makes debt and equity
investments in Central and Eastern Europe and the former Soviet Union. From 1988
to 1997, Mr. Frank was Managing Director of the Structured Finance Group at GE
Capital (a financial services company) and Vice President of GE Capital
Services. Mr. Frank served as Chief Executive Officer of Frank and
Company from 1987 to 1988, and Vice President of Salomon Brothers from 1978
until 1987. Mr. Frank has held senior academic and government
positions, including Deputy Assistant Secretary of State and Chief Economist at
the U.S. Department of State, Senior Fellow at the Brookings Institution,
Professor of Economics and International Affairs at Princeton University, and
Assistant Professor of Economics at Yale University. Mr. Frank
graduated from Rensselaer Polytechnic Institute with a B.S. in mathematics and
economics before completing a Ph.D. in economics at Princeton
University.
Herbert Kloiber, 60, has served as a
Director since 2006. Dr. Kloiber is chairman and majority shareholder of the
media conglomerate TeleMuenchen Group, which was a production company when he
initially acquired it in 1977. He is also a member of the board of Bavarian Film
Funding Organization in Germany. Dr. Kloiber also serves as Chairman
of the Board of CineMedia Film AG, Cinemax AG and ATV+. From April
1998 until August 2005, Dr. Kloiber was a member of the board of SBS
Broadcasting SA. He has received the Directorate Award of the Academy
of Television Arts and Sciences, the Chevalier des Arts et Lettres, the Bavarian
Order of Merit and the Grand Decoration of Honor for Services to
Austria. Dr. Kloiber has a Ph.D in law from the University of
Vienna.
Igor Kolomoisky, 45, has
served as a Director since August 2007. Mr. Kolomoisky is a prominent
international businessman with diversified business interests, including
ownership of significant industrial assets worldwide and particularly in CIS
countries. He is currently a controlling shareholder and Supervisory Board
Member of PrivatBank, one of the largest and best known commercial banks in
Ukraine. Since 2003, he has been a major shareholder and member of the
Supervisory Board of Ukrnafta, Ukraine's largest oil and natural gas extracting,
processing and supplying company with a recent market cap of approximately $3.6
billion. He co-founded oil supplier Sentosa Ltd in 1991 and continues to serve
as Director of the company overseeing a full range of management
responsibilities. Mr. Kolomoisky graduated from Dnipropetrovsk Metallurgical
Institution Ukraine with a degree in Metallurgical Engineering.
Alfred W. Langer, 57, has
served as a Director since 2000. Mr. Langer currently serves as a
consultant to a number of privately held companies, primarily in Germany, in the
areas of mergers and acquisitions, structured financing and organizational
matters. From July 2001 until June 2002, Mr. Langer served as Chief
Financial Officer of Solvadis AG, a German based chemical distribution and
trading company. From October 1999 until May 2001, Mr. Langer served
as Treasurer of Celanese AG, a German listed chemical company. From
June 1997 until October 1999, Mr. Langer served as Chief Financial Officer of
Celanese Corp., a U.S. chemical company. From October 1994 until July
1997, Mr. Langer served as Chief Executive Officer of Hoechst Trevira GmbH, a
producer of synthetic fibers. From 1988 until September 1994, Mr.
Langer served as a member of the Board of Management of Hoechst Holland N.V., a
regional production and distribution company. Mr. Langer received an
M.B.A. degree from the University GH Siegen.
Bruce Maggin, 64, has served
as a Director since 2002. Mr. Maggin has served as Principal of the H.A.M
Media Group, LLC, an international investment and advisory firm specializing in
the entertainment and communications industries since 1997. He is
currently Executive Vice President and Secretary of Media and Entertainment
Holdings, Inc. as well as a member of the Board of Advisors of Jump TV Inc. From
1999 to 2002, Mr. Maggin served as Chief Executive Officer of TDN Media, Inc., a
joint venture between Thomson Multimedia, NBC Television and Gemstar-TV Guide
International. TDN sells advertising on proprietary interactive television
platforms. Mr. Maggin has been a Director of Phillips-Van Heusen
Corporation since 1987 and Chair of its Audit Committee since 1997. Mr. Maggin
is a member of the Board of Trustees of Lafayette College from which he received
a B.A. degree. He also earned J.D. and M.B.A. degrees from Cornell
University.
Ann Mather, 47, has served as
a Director since 2004. Ms. Mather is also a Director and Chair of the Audit
Committee of Google, Inc and a Director and Chair of the Audit Committee of Glu
Mobile Inc. From 1999 to 2004, Ms. Mather was Executive Vice President, Chief
Financial Officer and Secretary of Pixar Animation Studios. Prior to joining
Pixar, she was Executive Vice President and Chief Financial Officer at Village
Roadshow Pictures. From 1993 to 1999, Ms. Mather held various
executive positions at the Walt Disney Company in Los Angeles, including Senior
Vice President of Finance and Administration of its Buena Vista International
Theatrical Division, where she supervised operations in Europe, Asia and Latin
America as well as the start up of distribution operations in several Asian
markets including China, Australia and Malaysia. From 1992 to 1993,
Ms. Mather worked for Disney in Paris, France where she helped establish the
international theatrical distribution arm of Disney in ten European
countries. From 1991 to 1992, she was the European Controller for
Alico, a division of AIG, Inc. From 1989 to 1991 she was the
Director of Finance for Polo Ralph Lauren Europe’s retail operations, and from
1984 to 1988, Ms. Mather was at Paramount Pictures Corporation where she held
various positions in London, Amsterdam and New York. She worked
for KPMG in London, England between 1981 and 1984 covering a broad range of
audit, tax and consulting assignments. She has an M.A. degree from
Cambridge University in England. On April23, 2008, the staff of the Los Angeles office of the Securities and Exchange
Commission advised Ms. Mather that it intends to recommend that the SEC initiate
a civil proceeding against her, alleging violations of the federal securities
laws related to certain stock option transactions involving Pixar Animation
Studios. The staff recommendation arises out of Ms. Mather’s prior
employment at Pixar, and not her service as a director of the
Company.
3
Christian Stahl, 37, has served as a Director
since 2006. He joined Apax Partners in March 1999 as a member of the media and
leveraged transactions teams and is currently a partner. At Apax, he has worked
on various international media transactions including The Stationery Office, TDL
Infomedia, 20 Minuten AG, Telcast Media Group, World Directories and Tommy
Hilfiger as well as the Apax investment in our company. Prior to joining Apax,
he worked at Bain and Company. He attended university in London and Reutlingen
(Germany), graduating with a German and English first class degree in business
administration. He also earned an M.B.A. with distinction from
INSEAD.
Eric Zinterhofer, 36, has
served as a Director since 2004. Mr. Zinterhofer is a partner at
Apollo Management, L.P., and has been with Apollo since 1998. He is a Director
and a member of the Compensation Committee of IPCS Inc. and is a Director of
Affinion Group, Dish TV India Limited and Unity Media. From 1994 to 1996, Mr.
Zinterhofer was a member of the Corporate Finance Department at Morgan Stanley
Dean Witter & Co. From 1993 to 1994, Mr. Zinterhofer was a member
of the Structured Equity Group at J.P. Morgan Investment
Management. Mr. Zinterhofer graduated cum laude from the University
of Pennsylvania with B.A. degrees in Honors Economics and European History and
received his M.B.A. from the Harvard Business School.
There is
no arrangement or understanding between any director and any other person
pursuant to which such person was selected as a director other than Christian
Stahl, who was nominated by Apax pursuant to the terms of a partnership
agreement among Ronald Lauder, certain parties related to Ronald Lauder and an
Apax investment vehicle, and Igor Kolomoisky, who was nominated pursuant to the
terms of a subscription agreement between him and the Company.
Vote
Required; Recommendation
The
election of the Board of Directors requires a majority of the votes cast, in
person or by proxy, at the Meeting, provided that a quorum is
present. Abstentions and broker non-votes will be included in
determining the presence of a quorum, but are not counted as votes
cast. Unless
otherwise indicated, the accompanying form of Proxy will be voted FOR election
of the eleven named nominees to the Company’s Board of
Directors.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE ELECTION OF THE
ELEVEN NAMED NOMINEES TO THE COMPANY’S BOARD OF DIRECTORS.
Corporate
Governance
We abide
by the corporate governance principles outlined below to ensure that the Board
of Directors is independent from management, that the Board of Directors
adequately performs its function as the overseer of management and that the
interests of the Board of Directors and management are aligned with those of
shareholders.
On an
annual basis, directors and executive officers complete questionnaires that are
used to establish the independence of independent directors, to confirm the
qualifications of the members of our Audit Committee and to disclose any
transaction with us and our subsidiaries in which a director or executive
officer (or any member of his or her immediate family) has a direct or indirect
material relationship with us.
4
Director
Independence
The
NASDAQ Marketplace Rules require that a majority of the directors be
“independent directors”. For a director to be considered independent,
the Board must determine that the director (and in some cases, members of a
director’s immediate family) does not have, or in the past three years has not
had, certain direct or indirect material relationships with us, our external
auditors or other persons doing business with us. The Board has affirmatively
determined that six of our eleven directors have no material direct or indirect
relationship with us and qualify as independent directors pursuant to the
corporate governance standards of NASDAQ as well as an evaluation of factors
specific to each director. The independent directors are Charles Frank, Herbert
Granath, Herbert Kloiber, Alfred Langer, Bruce Maggin and Ann
Mather.
In the
course of the determination by the Board regarding the independence of each
non-employee director, it considered the beneficial ownership of such director
or his or her affiliates in our company as well as any transactions or
arrangements that each director has with us. In particular, the Board
evaluated for Dr. Kloiber the amount of sales to us by a company of which he is
the controlling shareholder and serves as an executive officer and determined
that the amount of sales by such company was below one percent of the annual
revenues of such company during the current year and for any of the past three
fiscal years.
Independent
Director Meetings
Our
independent directors meet separately from the other directors in regularly
scheduled executive sessions. The chairman of the Corporate
Governance/Nominating Committee presides over the meetings of the independent
directors. During 2007, the independent directors held five
meetings.
Code
of Conduct and Ethics
All of
our directors, officers and employees are required to act in accordance with our
Code of Conduct and Ethics. The Code of Conduct and Ethics complies with NASDAQ
and the SEC requirements and incorporates our Whistleblower Policy. The
Whistleblower Policy contains procedures for the anonymous, confidential
submission by employees or others of any complaints or concerns about us or our
accounting, internal accounting controls or auditing matters. The Whistleblower
Policy prohibits retaliation against employees who avail themselves of the
policy. Both the Code of Conduct and Ethics and the Whistleblower Policy are
available on our website at www.cetv-net.com and
can be accessed by clicking on “About CME” and then on “Company Policies”. They
are also available in print to any shareholder on request.
Director
Nominating Process
The
Corporate Governance/Nominating Committee will consider candidates for
membership on the Board of Directors who are recommended by qualifying
shareholders. Under the Corporate Governance/Nominating Committee charter, a
qualifying shareholder is any shareholder who has provided evidence that he has
been the beneficial owner of at least 5% of any class of our outstanding stock
for at least one year. In order to be considered for membership, candidates must
meet the criteria and qualifications specified by the Corporate
Governance/Nominating Committee from time to time, including having relevant
professional experience; possessing a knowledge of our business; being eligible
under standards established by the SEC, NASDAQ or relevant law. These criteria
apply to all nominees, whether recommended by a shareholder, another Director,
management or otherwise. Recommendations must be in writing and addressed to the
Chairman of the Corporate Governance/Nominating Committee in care of the Company
Secretary, CME Development Corporation, Aldwych House, 81 Aldwych, London WC2B
4HN, United Kingdom. A copy of the Corporate Governance/Nominating
Committee charter is available on our website at www.cetv-net.com and
can be accessed by clicking on “About CME” and then on “Company Charters”. It is
also available in print to any shareholder on request.
Information
shall include the name, address and relationship to the Company of the nominee
and the proposing shareholder, and such information with respect to the nominee
as would be required under the rules and regulations of the SEC to be included
in our proxy statement if such proposed nominee were to be included therein. The
shareholder shall include a statement to the effect that the proposed nominee
has no direct or indirect business conflict of interest with us and otherwise
meets our published criteria for consideration as a nominee for
director. To be considered for inclusion in our proxy statement for
an Annual General Meeting, the Corporate Governance/Nominating Committee charter
stipulates that recommendations must be received by us at least 120 calendar
days prior to the anniversary date of our proxy statement for the prior year’s
Annual General Meeting and include all required information to be considered. In
the case of the 2009 Annual General Meeting, this deadline is January 1,2009.
5
Shareholder
Communications and Proposals
The
Corporate Governance/Nominating Committee charter provides a process by which
shareholders may communicate with the Company or the Board of Directors.
Shareholders may submit such communications in writing to the Chairman of the
Corporate Governance/Nominating Committee in the care of the Company Secretary,
CME Development Corporation, Aldwych House, 81 Aldwych, London WC2B 4HN, United.
The Company Secretary shall determine, in his discretion, considering the
identity of the submitting shareholder and the materiality and appropriateness
of the communication, whether, and to whom within the Company, to forward the
communication. The Corporate Governance/Nominating Committee charter
stipulates that proposals for inclusion in our Annual General Meeting Proxy
Statement must be in writing and received at least 120 days prior to the
anniversary date of our proxy statement for the prior year’s annual general
meeting. In the case of the 2009 Annual General Meeting, this deadline is
January 1, 2009. In addition, the shareholder shall include the form of proposal
to be included in the Company’s proxy statement and a brief description as to
why the passing of the proposal is beneficial to the Company.
Meetings
of the Board of Directors
The Board
of Directors currently consists of eleven members. During the fiscal year ended
December 31, 2007, the Board of Directors met, or acted by unanimous consent, on
twenty-three occasions. All members of the Board of Directors (other
than Igor Kolomoisky) attended at least 75% of the aggregate number of meetings
of the Board of Directors and the Committees of the Board of Directors on which
they served during the periods that they served. Mr. Kolomoisky
attended 14% of such meetings.
We are
incorporated in Bermuda and have held our annual general meetings in Bermuda
since incorporation. Senior members of management have been present
by teleconference at each annual general meeting to meet shareholders and answer
any questions. Historically, shareholder attendance has been
extremely limited, which we attribute to our policy of regular and detailed
communication with our shareholders and investors through regular meetings with
management, quarterly earnings calls, an annual investor conference and other
investor relations activities. Last year’s annual general meeting was attended
by one employee director. In view of the fact that shareholders have
not historically attended annual general meetings, we have not adopted a
specific policy regarding the attendance of directors at the annual general
meeting. Attendance is left to the discretion of individual
directors.
Committees
of the Board of Directors
Audit
Committee. The Audit Committee is composed of Messrs. Frank
and Langer (Chairman) and Ms. Mather. The current members of the
Audit Committee satisfy the independence and expertise requirements set forth in
the NASDAQ Marketplace Rules. In addition, the Board has determined
that Mr. Langer, Ms. Mather and Mr. Frank qualify as “audit committee financial
experts”. The responsibilities of the Audit Committee include (i)
selecting and overseeing the independent registered public accounting firm to be
retained by us; (ii) approving the engagement of the independent
registered public accounting firm for audit, audit-related, tax-related and
other services; (iii) reviewing with the independent registered public
accounting firm the scope and results of these engagements; (iv) overseeing our
financial reporting activities and internal controls and procedures; and (v)
conducting other reviews relating to compliance by us and our employees with our
policies and any applicable laws. During the fiscal year ended December 31,2007, the Audit Committee met, or acted by unanimous consent, on ten
occasions.
The Audit
Committee acts under a written charter first adopted and approved by the Board
of Directors in June 2000. An amended and restated Audit Committee
charter was subsequently adopted by the Board of Directors on November 20, 2002
and amended March 27, 2003, April 6, 2004, February 2, 2006 and February 14,2007. The Audit Committee charter is available on our website at
www.cetv-net.com and
can be accessed by clicking on “About CME” and then on “Company Charters”. It is
also available in print to any shareholder on request.
6
Corporate Governance/Nominating
Committee. The Corporate Governance/Nominating Committee is
composed of Messrs. Granath (Chairman), Langer, Maggin and Kloiber.
The members of the Corporate Governance/Nominating Committee satisfy the
independence requirements set forth in the NASDAQ Marketplace
Rules. The Corporate Governance/Nominating Committee is responsible
generally for ensuring that the Board and its committees are appropriately
constituted in order to conform with applicable legal
requirements. Responsibilities of the Corporate Governance/Nominating
Committee include selecting, or recommending to the Board, candidates for the
Board of Directors and committees of the Board. During the fiscal year ended
December 31, 2007, the Corporate Governance/Nominating Committee met on two
occasions.
The
Corporate Governance/Nominating Committee acts pursuant to a written charter
adopted by the Board of Directors in April 2004 and amended on February 2, 2006
and February 4, 2008. A copy of the Corporate Governance/Nominating Committee
charter is available on our website at www.cetv-net.com and
can be accessed by clicking on “About CME” and then on “Company Charters”. It is
also available in print to any shareholder on request.
Related Party Transactions
Committee. In February 2007, the Board created a Related Party
Transactions Committee and appointed Messrs. Frank (Chairman), Granath, Kloiber
and Langer and Ms. Mather to it. The members of the Related Party
Transactions Committee satisfy the independence requirements set forth in the
NASDAQ Marketplace Rules. The Related Party Transactions Committee, which
operates pursuant to a written procedure, is responsible for reviewing,
ratifying or approving our related party transactions that are subject to review
or approval under relevant SEC regulations and the NASDAQ Marketplace
Rules.
Compensation
Committee. The Compensation Committee is composed of Messrs.
Frank, Granath and Maggin (Chairman). Mr. Frank joined the
Compensation Committee on June 27, 2007. Ms. Mather served on the Compensation
Committee until February 14, 2007. The members of the Compensation Committee
satisfy the independence requirements set forth in the NASDAQ Marketplace
Rules. During the fiscal year ended December 31, 2007, the
Compensation Committee met, or acted by unanimous consent, on twelve
occasions.
Our
executive compensation policies are established, reviewed and approved by the
Compensation Committee. Compensation for this purpose means all forms of
remuneration, including salaries, bonuses, annual and long-term incentive
compensation, equity-based compensation, benefits, perquisites and severance pay
or payments made on a change of control. The responsibilities of the
Compensation Committee include (i) reviewing and determining (in consultation
with the other independent directors) the compensation of the CEO; (ii) in
consultation with the CEO, reviewing and determining the compensation of the
named executive officers listed in the Summary Compensation Table as well as
other senior executives who report to the CEO; (iii) reviewing annually the
performance of the CEO; (iv) reviewing and making recommendations to the Board
of Directors in respect of non-employee director compensation; and (v)
administering our 1995 Amended and Restated Stock Incentive Plan (the “1995 Plan”),
including granting options as well as other forms of equity
compensation and setting the terms thereof pursuant to the 1995
Plan. Additional information on compensation policies and
consideration of executive compensation is included in the Compensation
Discussion and Analysis below.
The
Compensation Committee acts pursuant to a written charter adopted by the Board
of Directors on February 13, 2003 and amended on April 6, 2004 and February 14,2007. The charter is available on our website at www.cetv-net.com and
can be accessed by clicking on “About CME” and then on “Company
Charters”. It is also available in print to any shareholder on
request.
7
MANAGEMENT
Set forth
below is certain information describing members of our management team,
including named executive officers. Biographical information for Michael Garin,
our CEO, may be found under “Proposal 1—Election of Directors”
above.
Named
Executive Officers
Wallace Macmillan, 50, was
appointed Chief Financial Officer in March 2003. From 2001 until joining us, Mr.
Macmillan consulted for both Bertelsmann and EMI. From 1992 until 2001 Mr.
Macmillan held several positions at EMI. From 1999 until 2001, he was employed
as VP Finance for the Recorded Music Division. Between 1997 and 1999,
he was CFO for EMI’s Virgin Sector and Latin American and South East Asian
regions. From 1992 until 1997 he worked as Finance Director first of
Virgin Records, United Kingdom and Ireland and later of EMI records, United
Kingdom, following the acquisition of Virgin Music Group by Thorn-EMI. Between
1990 and 1992 he was the International Financial Controller for Virgin Music
Group in the United Kingdom. From 1988 to 1990 Mr. Macmillan worked as Director
of Group Reporting for Bertelsmann Music Group in New York. From 1983 through
1987 he worked for the Bertelsmann Group in Germany in a variety of financial
roles. Mr. Macmillan obtained his qualification as a Chartered Accountant while
at Price Waterhouse from 1976 to 1983.
Adrian Sarbu, 52, was
appointed as our Chief Operating Officer in October 2007. From February
2006 until October 2007, Mr. Sarbu was Regional Director of Central and Eastern
Europe. Mr. Sarbu has been the General Director and President of the Board of
Pro TV in Romania since 1995 when this channel, the first of our Romanian
operations, was launched. In addition to holding the position of COO, Mr.
Sarbu has also been a shareholder in Pro TV since its launch. In
1990, Mr. Sarbu founded the Media Pro Group, which is engaged in film and
television production (Media Pro Studios, the largest movie studio in Central
and Eastern Europe), distribution (Media Pro Distribution), the theatrical
exhibition business (Cinema Pro), news syndication (Mediafax), radio (Pro FM),
printing and publishing (Publimedia) and internet (Media Pro
Interactive). Four companies in which Mr. Sarbu directly or
indirectly held a controlling interest are in involuntary bankruptcy proceedings
initiated in 2002 (Alfa Serv Srl), 2004 (Media Com 95 Srl and Pro For) and 2005
(Agentia de drepturi sportive). The proceedings with respect to Pro
For closed in 2007. Mr. Sarbu has also established a charitable foundation
named Fundatia Pro in 1997 that is focused on education, including the launching
and management of The Media University in 1999 that offers students the
opportunity to study journalism and other media related disciplines. Mr. Sarbu
was a film director until 1989. He received his university degree
from the Academy of Cinema and Theatre, currently named The
National University of Theatrical and Cinematography Arts "Ion
Luca Caragiale".
Marina Williams, 42, has
served as Executive Vice President since November 2004. From 2003
until joining us, Ms. Williams served as Vice President and Managing Director of
Newscorp with responsibility for the development of Fox channels in Central and
Eastern Europe. From 1998 to 2003, she served as Managing Director
for Central and Eastern Europe and Executive Director, TV Channels for Fox Kids
Europe and was responsible for launching and managing channels and for
pan-European advertising and sponsorship. From 1991 to 1998, Ms.
Williams served as regional manager and later Vice President for European
Business Development for Turner Broadcasting in London, England and was
responsible for developing CNN and the Cartoon Network in Eastern Europe. She
received an M.A. degree from St. Petersburg University in St. Petersburg,
Russia.
Other
Members of Management
Marijan Jurenec, 50, was
appointed as Director, Adriatic Region on April 12, 2005. He is responsible for
our expansion strategy in the former Yugoslavia as well as supervision of our
television networks in Slovenia and Croatia. He is also General Director of Pro
Plus and Kanal A, our two channels in Slovenia, and chief executive officer of
Nova TV in Croatia. Mr. Jurenec assumed managerial responsibility for Pro Plus
in July 1995 and Nova TV in April 2005. Prior to entering the Slovenian
television industry, he was responsible for export activities at the TAM
Company. He previously served as a financial consultant in the founding of
several international companies. Mr. Jurenec also authored a financial
analytical study on which the foundation of the international partnership at Pro
Plus was based. He was a partner and director of the private local television
station Tele 59 from 1992 to 1994. He graduated from the University in Maribor,
specializing in the study of Economics and International Business
Affairs.
8
Daniel Penn, 42, joined the
Company in 2002 and has served as General Counsel since May 2004 and Company
Secretary since June 2004. Prior to joining CME, he served as general counsel
and head of developments/business affairs in an internet publishing business and
in a multinational telecommunications company. He began his career in private
practice with Mayer Brown, where he worked in their offices in New York, London
and Tashkent, Uzbekistan. Mr. Penn graduated from Princeton University with a
B.A. from the Woodrow Wilson School of Public and International Affairs and a
Certificate of Achievement in Russian Studies. He received a J.D. from the
Columbia University School of Law, where he served as Editor-in-Chief of the
Columbia Law
Review.
Romana Tomasova, 40, has
served as Director of Corporate Communications since October 2005. Prior to
joining us, Ms. Tomasova was Director of Marketing and Communications of PPF
Group, which is the largest private financial group in the Czech Republic.
Prior to the PPF Group, she worked as a public relations manager for the
pharmaceutical company AstraZeneca in the Czech Republic. Between 1999 and
2003, Ms. Tomasova worked as Head of Corporate Communication of the Czech
alternative telecommunications operator Contactel. Between 1995 and 1999, she
worked for the Czech telco incumbent Czech Telecom in different managerial
positions involving public relations, communications and government relations.
Ms. Tomasova graduated from the Charles University in Prague where she
studied psychology and later translation and interpreting. She is fluent in
Czech, English and Russian. She received her M.B.A. at the University of
Chicago, Graduate School of Business.
Mark Wyllie, 44, joined
us as Finance Director in September 2000. In 2001 he became a Vice
President of the Company. Mr.
Wyllie, a Chartered Certified Accountant, served in various finance
roles within United Biscuits from September 1988 until July 2000. In
1998 Mr. Wyllie was Finance Director for Asia and Central and Eastern
Europe in charge of operations in Poland, Hungary and Romania as well as the Far
East. From 1986 to 1988 he served as a consultant with Metapraxis Ltd, a
small, financially-oriented software consultancy. Mark received
his B.A. honors degree in Engineering Science, Economics and Management
from Oxford University.
9
COMPENSATION
DISCUSSION AND ANALYSIS
Philosophy
and Objectives of Compensation Programs
General
Philosophy
We
believe the total compensation of our executive officers should support the
following objectives:
·
Attract
and retain executives with the experience and expertise to drive us to
achieve our objectives. This means that we provide significant
compensation opportunities to executives who are able to deliver
competitive results.
·
Reward
executives for creating shareholder value. This means that our
long-term incentive programs are equity-based and that these equity-based
programs represent a significant percentage of the total compensation
opportunity for our executives.
·
Create
a mix of short-term and long-term compensation to achieve a balance
between current income and long-term incentive opportunities that promote
attention to both annual and multi-year business
objectives. The mix between short-term and long-term is also
designed to reflect the roles and responsibilities of the
individual. This means that senior executives have a higher
percentage of their total potential compensation tied to variable (versus
fixed) pay, and long-term (versus short-term)
pay.
·
Create
a strong culture that rewards results. This means that
incentive plans reward a combination of our overall results through the
achievement of specific financial goals and individual performance through
the use of specific goals and
objectives.
·
Compensation
is appropriate in light of our profile, strategy and anticipated
performance. This means that while the Compensation Committee
considers competitive practice in its decision-making, it places
significant emphasis on our specific strategy, financial situation and
performance in the ultimate determination of compensation
decisions.
Compensation Design and Elements of
Compensation
Our
executive compensation program consists of the following
components:
Base
Salary
Salary
levels for each of our Named Executive Officers are set forth in their
employment contracts. The Compensation Committee may review these
salary levels each year to determine whether any adjustment is
appropriate. Key considerations in establishing base salary levels
and subsequent increases include the overall level of responsibility of a given
Named Executive Officer; the importance of the role; and the experience,
expertise and specific performance of the individual. We consider
current base salary levels for each of our Named Executive Officers to be
consistent with these objectives.
For our
current Named Executive Officers, base salaries for 2007 accounted for 21% of
total direct compensation. (Total direct compensation consists of salary, bonus
and annual option grant value). This means our Named Executive
Officers have 79% of their total direct compensation tied to short- and
long-term incentive pay.
Annual
Incentive Plans
Across
the entire group, approximately 2,700 employees were eligible to receive annual
incentives through various incentive plans. Award opportunities vary
by position and level in the organization. Incentive opportunities for the Named
Executive Officers are specified in their employment contracts, with targets
generally ranging from 33 1/3% to 100% of salary. The basis for bonus
awards vary for specific Named Executive Officers and are awarded for the
achievement of a combination of financial and strategic goals. The Compensation
Committee also approves on an annual basis a specific EBITDA threshold for
purposes of defining target as well as minimum and maximum financial performance
criteria for bonus awards at the corporate level. Management approves
EBITDA thresholds as well as minimum and maximum financial performance
criteria for bonus awards to employees in the operating
companies.
10
Actual
bonus awards may exceed target amounts if financial performance criteria and, in
the case of the CEO, qualitative criteria are exceeded. The
Compensation Committee may also establish other performance criteria for
purposes of creating additional incentives for the achievement of specific
objectives. For 2007, actual bonus awards for the Named Executive
Officers ranged from 67% to 492% of salary. The higher range of bonus awards
occurred in instances where performance substantially exceeded
targets.
In
respect of the CEO’s compensation, the Compensation Committee considers many
factors, both qualitative and quantitative; however, none of the factors are
given specific weights. Key among the factors considered by the Compensation
Committee in 2007 were the following achievements:
·
We
reported consolidated revenues of $840.0 million for the year ended
December 31, 2007, a 39% increase over consolidated net revenues for the
year ended December 31, 2006.
·
We
reported Segment EBITDA1 of $319.7 million
for the year ended December 31, 2007, a 46% increase over
Segment EBITDA for the year ended December 31, 2006 and a 19% increase
over target EBITDA for bonus
purposes.
·
The
successful management of the implementation of a new transparent
advertising strategy in the Czech Republic delivered exceptional
results.
·
We
bought out our partners in the Slovak Republic and achieved a 51% increase
in revenues and a 100% increase in Segment EBITDA in our operations there
compared to 2006.
·
Following
the redemption of our Euro 125 million floating rate senior notes, we
successfully raised approximately Euro 150 million in May 2007 through the
issuance of new floating rate senior notes bearing interest at a
substantially lower margin.
·
Active
management of our new media strategy has significantly increased our
digital footprint in our markets.
·
Proactive
investor relations has resulted in us receiving additional analyst
coverage and has contributed to growth of approximately 58% in our share
price during 2007.
Our Chief
Operating Officer received an incentive award in 2007 that is based on the
combined performance of the Czech Republic and Slovak Republic operations over a
two-year period (as described below in the Summary Compensation Table) in
addition to an award based on the achievement of the maximum financial
performance criteria by our Romanian operations. The remaining Named Executive
Officers received annual incentive awards equal to two times the applicable
target bonus percentage (as described below in the Summary Compensation Table)
for the achievement of Segment EBITDA on a company-wide basis that exceeded by
19% target EBITDA established by the Compensation Committee.
Long-Term
Equity Incentive Program (LTIP)
We
believe sustained long-term growth in our share price, achieved through growing
revenues, operating income and, to a lesser extent, earnings, is the primary
responsibility of management. Long-term incentives in the form of
stock options are the most effective way to link the interests of management and
shareholders, and to incentivize management to strive for continued shareholder
value creation. Therefore, we have used stock options as an integral
part of our compensation programs.
________________________
1
For
a quantitative reconciliation of non-GAAP financial measures to the most
directly comparable financial measurements in accordance with GAAP, see
the Company’s Annual Report on Form 10-K for the year ended December 31,2007 accompanying this Proxy
Statement.
11
Each
year, the Compensation Committee reviews and approves annual option grants to a
group of employees. In 2007, 83 employees, including the Named
Executive Officers, received option awards. Annual grant levels are
determined based on a number of factors, including the individual’s position,
the role the individual plays in setting and achieving long-term company goals,
the size of prior equity awards, the overall dilution represented by equity
grants and the cost of such grants as reflected in our financial
statements.
Historically,
regular annual grants to Named Executive Officers have occurred at the time of
our annual general meeting, when non-employee directors are entitled to receive
an annual grant under the terms of the 1995 Plan. Annual grants to other
employees have historically occurred near the end of each calendar year. In
2007, grants were made to Named Executive Officers at the time other employees
received grants. The dates and values of these grants are included in the Grants
of Plan-Based Awards table below. As described below under “Equity
Granting Policy”, the Compensation Committee approves all option grants to Named
Executive Officers and other employees and the exercise price of all grants is
equal to the closing price of our shares on the date of
grant. Consistent with general market practice, options to employees
are currently granted with a life of eight to ten years and vest over four
years.
Other
Benefits and Perquisites
Our Named
Executive Officers are eligible to participate in employee benefits programs
established by the subsidiaries employing them. These benefits generally consist
of medical insurance for the Named Executive Officers and their dependants and
life and disability insurance. The value of these amounts is included
in the Summary Compensation Table.
Stock
Ownership Guidelines
We
encourage stock ownership by executives and directors but do not have formal
stock ownership guidelines.
Severance
As is
customary in our markets, all of our Named Executive Officers have employment
agreements with us or one of our subsidiaries and these agreements provide for
compensation in the event of involuntary termination. These
termination payments, which are typically defined by local practice and are
generally derived from the notice period or term of the corresponding employment
agreement, were negotiated between us and each Named Executive Officer
individually and do not conform to a single policy. The basis for and
value of these termination payments is further described and quantified under
“Potential Payments Upon Termination or Change of
Control” below.
Compensation
and Management Consultants
The
Compensation Committee engaged Pearl Meyer & Partners (“PM&P”) to serve
as its independent advisor on executive compensation matters as well as programs
and policies that are subject to the review or approval of the Compensation
Committee. In addition, the Compensation Committee engaged the
consulting firm Right Management to conduct an assessment of the CEO that was
used by the Compensation Committee and the other members of the Board in
evaluating the CEO’s overall performance in 2007. Both PM&P and Right
Management were retained by, and reported directly to, the Compensation
Committee. All of the work performed by such consultants was at the
request of the Compensation Committee and neither consultant did any other work
for the Company. Both PM&P and Right Management worked with
management as was necessary in order to collect and prepare information for the
Compensation Committee’s review. Neither PM&P nor Right
Management is currently conducting any work under their engagements by the
Compensation Committee.
Role
of Executives in Establishing Compensation
Our COO,
CFO and General Counsel have participated in the development and implementation
of certain executive compensation programs, particularly the annual incentive
and long-term incentive programs. Once formulated, these programs are
reviewed by our CEO and submitted to the Compensation Committee for its review
and approval. From time to time, certain executives, including the
CEO, may be invited to attend meetings of the Compensation
Committee. The General Counsel attends meetings in his capacity as
Company Secretary. While these executives may be asked to provide
input and perspective, only Compensation Committee members vote on executive
compensation matters. These votes take place in executive session,
when no members of management are in attendance.
12
Equity
Granting Policy
Recognizing
the importance of adhering to appropriate practices and procedures when granting
equity awards, we formalized an equity granting policy in early 2007 to
memorialize the practices and processes we use in granting such awards. The
policy establishes the following practices:
·
Decisions
to award equity grants shall only be taken during a period when trading in
our shares is permitted in accordance with our Insider Trading
Policy.
·
All
grants to Section 16 officers, including grants to new hires, must be
approved at a meeting of the Compensation Committee, including telephonic
meetings, and may not occur through action by unanimous written
consent.
·
The
grant date of any equity awards approved at a meeting of the Compensation
Committee shall be the date of such meeting or, in connection with an
anticipated hire or an award to be granted in several installments, a
future date established by the Compensation Committee at such meeting,
subject to employment commencing.
·
The
exercise price for all option awards shall not be less than the closing
price of our shares on the date of
grant.
Impact
of Tax and Accounting on Compensation Decisions
As a
general matter, the Compensation Committee takes into consideration the various
tax and accounting implications of compensation vehicles employed by
us. When determining amounts of long-term incentive compensation to
executives and employees, the Compensation Committee examines the accounting
cost associated with the grants. Under Statement of Financial Accounting
Standards, No. 123 (revised 2004), grants of stock options, restricted stock and
restricted stock units permitted pursuant to the 1995 Plan result in an
accounting charge. The accounting charge is equal to the fair value of the
instruments being issued for options expected to vest. For stock options, the
cost is equal to the fair value of the option on the date of grant using a
Black-Scholes option pricing model multiplied by the number of options expected
to vest. For restricted stock, the cost is equal to the fair value of the stock
on the date of grant multiplied by the number of shares or units granted. This
expense is amortized over the requisite service or vesting period.
The
Compensation Committee also considers the tax implications of its programs, both
to us and to the participants. It is the Compensation Committee’s
policy to maximize the effectiveness of our executive compensation plans in this
regard. However, the Compensation Committee believes that
compensation and benefits decisions should be primarily driven by the needs of
the business rather than by tax policy. Therefore, the Compensation
Committee may make pay decisions that result in certain tax
inefficiencies.
COMPENSATION
COMMITTEE REPORT
We have
reviewed and discussed the Compensation Discussion and Analysis with management,
and based on our review and discussions, we recommend to the Board of Directors
that the Compensation Discussion and Analysis be included in this proxy
statement.
Submitted
by:
Charles
Frank
Bruce
Maggin
Herbert
A. Granath
Members
Of The Compensation committee
13
NAMED
EXECUTIVE OFFICERS
Our Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer and our
Executive Vice President were the only individuals who served as executive
officers at the end of the fiscal year ended December 31, 2007 and are therefore
our only named executive officers (together, the “Named Executive
Officers”). There is no arrangement or understanding between any
Named Executive Officer and any other person regarding selection as an Named
Executive Officer. Named Executive Officers serve pursuant to their employment
agreements as described herein.
SUMMARY
COMPENSATION TABLE
The
following table summarizes all plan and non-plan compensation awarded to, earned
by, or paid to the Named Executive Officers, for services rendered in all
capacities to us and our subsidiaries for our last two fiscal years. No stock
awards and no non-equity incentive plan compensation or non-qualified deferred
compensation was awarded to any employees in 2006 or 2007.
Year
Salary
($)
Bonus
($)
Option
awards
($)(6)
All
Other Compensation ($)
Total
Compensation ($)
Michael
Garin
Chief
Executive Officer
2007
745,462
(1)
2,500,000
1,167,164
192,600
(7)
4,605,226
2006
625,000
1,400,000
913,055
152,012
(7)
3,090,067
Adrian
Sarbu
Chief
Operating Officer
2007
1,139,819
(2)
5,611,781
(5)
133,158
3,290
(8)
6,888,048
2006
924,887
426,887
86,982
2,630
(8)
1,441,386
Wallace
Macmillan
Chief
Financial Officer
2007
561,353
(3)
596,353
252,321
20,415
(8)
1,430,443
2006
436,950
297,774
188,226
3,763
(8)
926,713
Marina
Williams
Executive
Vice President
2007
468,004
(4)
312,002
379,384
12,041
(8)
1,171,432
2006
402,454
1,021,575
276,738
3,736
(8)
1,704,503
____________________
(1) Mr.
Garin’s annual salary was increased from $625,000 to $1,200,000 on October 17,2007 in connection with an amendment to his employment agreement.
(2) On
October 17, 2007, Mr. Sarbu was appointed Chief Operating Officer and his
aggregate annual salary was increased to $1,200,000, half of which is payable in
Romanian lei (“RON”) and half of
which is payable in Euros.
(3) With
effect from April 1, 2007, Mr. Macmillan’s annual salary was increased from
£250,000 (approximately $501,841) to £290,000 (approximately
$582,135).
(4) On
April 1, 2007, Ms. Williams annual salary increased from £225,000 (approximately
$451,657) to £236,250 (approximately $474,240) pursuant to the terms of her
employment agreement.
(5) See
the summary below for additional information on Mr. Sarbu’s 2007
bonus.
(6) These
amounts reflect the dollar amount recognized for financial statement reporting
purposes for the fiscal years ended December 31, 2007 and December 31, 2006 in
accordance with FAS 123(R) of awards pursuant to the 1995 Plan, which includes
amounts from awards granted in and prior to 2007. Assumptions used in the
calculation of this amount are included in Item 8, Note 16 to our audited
financial statements, included in our Annual Report on Form 10-K for the year
ended December 31, 2007 accompanying this Proxy Statement.
(7) As part of his
employment arrangement, Mr. Garin is deemed to be based in Westchester County,
New York, where he maintains a home, and is entitled to reimbursement for
expenses incurred by him, his travel companion and his family for travel
(including ground transportation costs), accommodation, meals and related costs
while travelling on personal business. During 2007 such expenses included
approximately $23,000 for life and health insurance benefits paid by us,
approximately $126,000 for travel costs (including ground transportation costs),
approximately $29,900 for meals, approximately $10,700 for accommodation and
approximately $3,000 for miscellaneous expenses. For 2006, approximately $24,000
represents life and health insurance benefits paid by us, approximately $85,000
represents travel costs (including ground transportation costs), approximately
$25,000 was for meals and approximately $10,000 for accommodation.
(8)
Represents life and health insurance benefits paid by us.
14
Amounts
of salary and bonus earned by each Named Executive Officer in the Summary
Compensation Table in a currency other than US dollars have been translated
using the average exchange rate for 2007 or 2006, as applicable. Foreign
currency amounts set out below and those in respect of “Potential Payments Upon
Termination or Change of Control” described below have been translated using the
exchange rate prevailing at December 31, 2007.
Michael Garin
Michael
Garin has an employment agreement dated as of March 30, 2004 with one of our
wholly-owned subsidiaries. On July 28, 2006, he entered into an
amendment to this agreement, pursuant to which his term as Chief Executive
Officer was extended from January 31, 2008 to January 31, 2010. On
October 17, 2007, he entered into a second amendment to this agreement pursuant
to which annual salary was increased with effect from that date and the terms of
his annual bonus have been amended with effect from the 2008 fiscal year. Under
his amended employment agreement, Mr. Garin is entitled to receive an aggregate
annual salary of $1,200,000, which may be increased annually at the
discretion of the Compensation Committee. Prior to this amendment,
his annual salary was $625,000.
Mr. Garin
has the opportunity to earn an annual cash bonus with a target amount equal to
his annual base salary. For the 2006 and 2007 fiscal years, one-half
of such target was based on objective criteria and one-half was based on
subjective criteria established by the Compensation Committee. The Compensation
Committee has the discretion to adjust the bonus award in excess of the target
based on actual performance. Beginning in 2008 Mr. Garin is entitled to an
annual bonus based on our meeting certain quantitative performance targets
based on EBITDA set forth in our approved budget in respect of such financial
year. In the event such targets are reached, Mr. Garin shall be entitled to
receive a bonus equal to Euro 846,000 (approximately $1,245,397),
which is equivalent to 100% of his annual base salary at the time of the most
recent amendment of his employment agreement. In the event such targets are
exceeded by at least 5%, Mr. Garin is entitled to a further bonus equal to 50%
of such amount.
Pursuant
to Mr. Garin’s employment agreement, we are required to procure that Mr. Garin
is named to the Board of Directors and the Board of Directors is required to
nominate Mr. Garin for election to the Board of Directors for so long as he
remains employed by us.
If Mr.
Garin serves through the end of the term provided in the amended agreement, we
will retain him as a consultant for a one-year period following the expiration
of such term. Under the terms of the consultancy, Mr. Garin may be required to
devote up to 30 hours per month of service at our request and he will be
entitled to receive an aggregate fee of $300,000 payable in equal monthly
installments. During the period, he will continue to be provided with health
insurance, an assistant and office space.
Adrian
Sarbu
Mr. Sarbu
was appointed Chief Operating Officer on October 17, 2007. In
connection with this appointment, he has entered into an employment agreement
with CME Development Corporation (the “UK employment
agreement”) that expires on December 31, 2009. Pursuant to the UK
employment agreement, he is entitled to receive an annual salary of Euro 423,000
(approximately $622,698) beginning in the 2008 fiscal year as well as an amount
in respect of 2007 equal to the difference between his salary entitlement
arising from his appointment as Chief Operating Officer and the amounts he
received under his previous employment agreements (described below). In
addition, Mr. Sarbu will continue to serve as the President of the Board of our
Romanian subsidiary, Pro TV SA, and has entered into an agreement for the
performance of such office with Pro TV SA that expires on April 23, 2011 (the
“2007 Pro TV
agreement”). Under the 2007 Pro TV agreement, Mr. Sarbu is entitled to
receive annual remuneration of RON 1,440,000 (approximately
$586,224).
15
Under the
terms of the UK employment agreement, beginning in 2008 Mr. Sarbu is entitled to
an annual bonus based on our meeting certain quantitative performance
targets based on EBITDA set forth in our approved budget in respect of such
financial year. In the event such targets are reached, Mr. Sarbu shall be
entitled to receive a bonus under the UK employment agreement equal to 100% of
his annual base salary. In the event such targets are exceeded by at least 5%,
Mr. Sarbu is entitled to a further bonus equal to 50% of his annual base salary.
Under the terms of the 2007 Pro TV agreement, beginning in 2008 so long as Mr.
Sarbu remains our COO he will also be eligible to receive an annual bonus of up
to RON 2,160,000 (approximately $879,336), payable on the same basis under the
UK employment agreement. If Mr. Sarbu is no longer our COO but
remains as President of the Board of Pro TV, under the terms of the 2007 Pro TV
agreement he will be eligible to receive an annual bonus equal to 100% of his
annual base salary in the event we achieve certain quantitative performance
targets based on EBITDA. In the event such targets are exceeded by at least 5%,
Mr. Sarbu is entitled to a further bonus equal to 50% of his annual base
salary.
The UK
employment agreement and the 2007 Pro TV agreement replace the previous
employment arrangements between us and Mr. Sarbu, except that the bonus paid to
Mr. Sarbu in 2007 was calculated pursuant to his previous employment
agreements. Those previous employment agreements consist of a
Contract for the Performance of the Office with our Czech subsidiary CET 21
spol. s.r.o. dated August 1, 2006 (as amended, the “CET 21 agreement”)
and an employment agreement with Pro TV SA dated January 1, 2006 (the “2006 Pro TV
agreement”). Mr. Sarbu entered into the CET 21 agreement in connection
with his appointment as a regional director to oversee our operations
in the Czech and Slovak Republics, which was formalized on August 1, 2006. The
CET 21 agreement was for a fixed term and expired on December 31, 2007. Under
the CET 21 agreement, Mr. Sarbu was entitled to receive an annual salary of
$500,000. Under the 2006 Pro TV agreement, Mr. Sarbu was entitled to
receive an annual aggregate salary of RON 1,431,660 (approximately
$582,829).
Under the
CET 21 agreement, Mr. Sarbu had the opportunity to earn a cash bonus of
$1,000,000 at the end of 2007 if the combined EBITDA results reported for both
the Czech and Slovak Republic operations were equal to the aggregate EBITDA
target of at least $273,300,000 for the 2006 and 2007 fiscal years
for those operations. In the event the aggregate combined EBITDA
exceeded $273,300,000, Mr. Sarbu was entitled to receive a bonus
equal to 10% of the amount of such excess, to a total amount of $5,000,000
(including the $1,000,000 payable in the event these EBITDA targets are
achieved). Under the 2006 Pro TV employment agreement, Mr. Sarbu was entitled to
an annual cash bonus of 50% of his annual salary if the EBITDA results reported
for the Romanian operations equal the annual EBITDA target for the applicable
fiscal year and was subject to an increase to an amount representing
100% of his annual salary if the EBITDA results reached or exceeded an approved
threshold above the annual target.
Wallace
Macmillan
Wallace
Macmillan has an amended and restated employment agreement dated October 6, 2006
with one of our wholly-owned subsidiaries. In April 2007, Mr.
Macmillan’s aggregate annual salary was increased from £250,000 (approximately
$501,841) to £290,000 (approximately $582,135), and such salary may be
increased annually at the discretion of the Compensation Committee.
Mr. Macmillan is also entitled to participate in an annual discretionary bonus
scheme. Under the scheme in effect in 2006 and 2007, the qualitative performance
criteria based on EBITDA for determining the amount of such bonus were
determined by the Chief Executive Officer and approved by the Compensation
Committee. Following an amendment to his employment agreement effective April 1,2006, such bonus is based upon a target representing 50% of Mr. Macmillan’s
gross annual salary and may be increased to a maximum of twice that amount in
the event the Company’s EBITDA reaches or exceeds an approved threshold above
the annual target. Prior to such amendment, Mr. Macmillan’s bonus was based on a
target representing 33 1/3% of his gross annual salary.
Marina
Williams
Marina
Williams has an employment agreement dated October 5, 2006 with a wholly-owned
subsidiary of our company. Under her employment agreement, Ms.
Williams is entitled to receive an aggregate annual salary of £225,000
(approximately $451,657), subject to an increase of 5% on April 1 of each year.
From April 1, 2007, her annual salary was £236,250 (approximately
$474,240).
Ms.
Williams is also entitled to participate in an annual discretionary bonus
scheme. Under the scheme in effect in 2006 and 2007, the qualitative performance
criteria based on EBITDA for determining the amount of such bonus were
determined by the Chief Executive Officer and approved by the Compensation
Committee. Such bonus is based on a target representing not less than
33 1/3% of Ms. Williams’ gross annual salary and may be increased to a maximum
of twice that amount in the event the Company’s EBITDA reaches or exceeds an
approved threshold aove the annual target. With effect from April 1, 2006, Ms.
Williams is also entitled to a bonus in respect of our Ukrainian operations, in
the amount of 50% of her gross annual salary should the EBITDA results of the
Ukrainian operations reported in our Annual Report on Form 10-K be equal to the
annual aggregate EBITDA target for that fiscal year. If the EBITDA results
exceed the annual aggregate EBITDA target for that fiscal year, Ms. Williams is
entitled to receive an additional amount equal to 10% of her gross annual basic
salary in respect of the relevant year for each 5% increment by which the EBITDA
results exceed the corresponding EBITDA target. In addition, in 2006 Ms.
Williams received a cash bonus of $500,000, a portion of which was awarded
following an agreement to extend her employment agreement and the remainder
following the successful extension of the main broadcasting license of our
Ukrainian subsidiary Studio 1+1 LLC.
16
GRANTS
OF PLAN BASED AWARDS
The
following table sets forth information with respect to grants of options to
purchase shares of Class A Common Stock granted to the Named Executive Officers
during the fiscal year ended December 31, 2007. We have not granted any equity
or non-equity incentive awards or any stock awards during the year ended
December 31, 2007.
Grant
Date
All
Other Option Awards: Number of Securities Underlying
Options
Exercise
/ Base Price of Option Awards ($/Sh)
Grant
Date Fair Value of Stock and Option Award
($)(3)
Michael
Garin
-
-
-
-
Adrian
Sarbu
12/05/2007
30,000
(1)
113.56
1,307,490
Wallace
Macmillan
12/05/2007
12,500
(1)
113.56
544,788
Marina
Williams
04/02/2007
12,500
(2)
87.91
528,113
_____________________
(1) This
grant reflects an annual grant of options made to certain Named Executive
Officers. The exercise price is equal to the closing price of our shares of
Class A Common Stock on December 5, 2007, the date such grant was made. Such
options become exercisable in four equal installments on each anniversary of the
grant date and expire on December 4, 2015.
(2) In
connection with an amendment to Ms. Williams’ employment agreement in 2006, Ms.
Williams was granted options on April 2, 2007 to purchase 12,500 shares of Class
A Common Stock at an exercise price equal to the closing price of our shares of
Class A Common Stock on that day which are exercisable in four equal
installments on each anniversary of the grant and expire on April 1, 2017.
Pursuant to this amendment, Ms. Williams is entitled to receive a grant of
options to purchase 12,500 shares of Class A Common Stock on April 1 (or the
next succeeding business day) of each year of the remaining term of her
employment agreement (which expires on March 31, 2010). The exercise price of
such options will be the closing price of our shares of Class A Common Stock on
the date of grant and these options will become exercisable in four equal
installments on each anniversary of the grant date. Accordingly, on April 1,2008, Ms. Williams was awarded options to purchase 12,500 shares of our Class A
Common Stock at an exercise price of $88.51 per share. Such options become
exercisable in four equal annual installments on each of the first four
anniversaries of the date of grant and expire on March 31, 2016.
(3) Grant
date fair value was determined using the methodology provided by FAS 123(R). For
a discussion of the assumptions underlying the valuation of employee stock
compensation, see Item 8, Note 16 of our Annual Report on Form 10-K for the year
ended December 31, 2007 accompanying this Proxy Statement.
The
following table sets forth information with respect to options to purchase
shares of Class A Common Stock granted to the Named Executive Officers
outstanding at December 31, 2007. We have not made any stock awards
and there are no unearned options.
Option
Awards
Grant
Date
Number
of Securities Underlying Unexercised Options (#)
Exercisable
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
Option
Exercise Price
($)
Option
Expiration Date
Michael
Garin
180,000
110,000
02/02/2004(1)
160,000
-
19.49
01/31/2014
06/02/2005(1)
15,000
15,000
44.50
06/01/2015
06/08/2006(1)
5,000
15,000
56.42
06/07/2016
07/28/2006
-
80,000(2)
60.64
07/27/2016
Adrian
Sarbu
10,000
40,000
11/18/2004(1)
6,000
2,000
32.99
11/17/2014
12/21/2005(1)
2,000
2,000
57.00
12/20/2015
06/08/2006(1)
2,000
6,000
56.42
06/07/2016
12/05/2007(1)
-
30,000
113.56
12/04/2015
Wallace
Macmillan
35,125
32,875
05/29/2003
5,000
-
10.37
05/28/2013
05/05/2004
20,000
-
18.93
05/04/2014
06/02/2005(1)
5,000
5,000
44.50
06/01/2015
06/08/2006(1)
2,000
6,000
56.42
06/07/2016
12/14/2006(1)
3,125
9,375
72.05
12/13/2016
12/05/2007(1)
-
12,500
113.56
12/04/2015
Marina
Williams
14,794
29,375
11/22/2004
6,667
-
32.80
11/21/2014
06/02/2005(1)
5,000
7,500
44.50
06/01/2015
05/01/2006(1)
3,125
9,375
64.81
04/30/2016
04/02/2007(1)
-
12,500
87.91
04/01/2017
______________________________
(1) These
options vest in four equal installments on each anniversary of the date of
grant.
(2)
Pursuant to an amendment to Mr. Garin’s employment agreement in 2006, Mr. Garin
has been granted options to acquire 80,000 shares of Class A Common Stock. Such
options become exercisable in three annual installments: as to 32,000 shares on
January 31, 2009, as to 64,000 shares on January 31, 2010 and as to 80,000
shares on January 31, 2011.
18
OPTION
EXERCISES AND STOCK VESTED
The
following table sets forth information with respect to each exercise of stock
options during the fiscal year ended December 31, 2007 by the Named Executive
Officers and the value realized on exercise. There are no stock
awards held by any Named Executive Officer, any other employee or any
director.
Option
Awards
Number
of Shares Acquired on Exercise
Value
Realized on Exercise
($)(2)
Michael
Garin
-
-
Adrian
Sarbu
-
-
Wallace
Macmillan
-
-
Marina
Williams
15,833(1)
813,126
____________________
(1) On
March 16, 2007, Ms. Williams exercised options to purchase 8,500 shares of Class
A Common Stock that were granted on November 22, 2004, realizing a gain on
exercise of $418,540. On June 14, 2007, Ms. Williams exercised
options to purchase 4,833 shares of Class A Common Stock that were granted on
November 22, 2004 and 2,500 shares of Class A Common Stock that were granted on
June 2, 2005, realizing a gain on exercise of $279,340 and $115,246,
respectively.
(2) The
value realized at exercise represents the difference between the market price on
the date of exercise and the exercise price of the options
exercised.
19
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
Set out
below is information reflecting compensation that may be payable to each of the
Named Executive Officers in the event of the termination of such executive
officer’s employment. The amount of compensation payable upon voluntary
termination, involuntary termination (other than for cause) or termination for
cause is described below. We do not have any severance agreement or any
agreement providing for any specific payments upon a change of control. The
amounts shown below assume that such termination was effective as of December31, 2007. The amounts do not include salary earned through such period (which is
reflected in the Summary Compensation Table) but do include bonuses awarded to
Named Executive Officers in respect of the year ended December 31, 2007
that were paid after such date. The numbers presented below are for
illustrative purposes. Actual amounts that may be payable or will be
paid can only be determined at the time of separation of a Named Executive
Officer from our company. Foreign currency amounts set out below have been
translated using the exchange rate prevailing at December 31, 2007.
Michael Garin
Michael
Garin has an amended employment agreement with a fixed term that expires on
January 31, 2010. Mr. Garin may voluntarily terminate the agreement at any time
on 90 days’ notice without further entitlement. We may elect to make payment in
lieu of notice and pay him the portion of his gross salary payable for the
period of notice on the date of the notice of termination, subject to deductions
for social security and other withholdings. If we were to elect to
make payment in lieu of notice, Mr. Garin would be entitled to receive $295,890.
Any options that have become exercisable as of such voluntary termination date
may be exercised for a period of 90 days following such date.
We may
terminate the employment agreement at any time prior to the expiration of the
term. If such early involuntary termination is due to a reason other than for
cause or death or disability, Mr. Garin is entitled to seek any loss of
compensation or loss of other contractual entitlements that may be available as
a matter of law. The actual entitlement may vary from current unpaid
amounts of salary to unpaid salary and other entitlements through the remaining
period of the employment agreement. It has been assumed solely for purposes of
quantifying a potential entitlement of Mr. Garin in the event of such
involuntary termination that such entitlement would not exceed base salary for
the period from the date of termination through January 31,2010. Under this example, the amount of such payment would be
$4,900,000 (which includes the actual bonus awarded to him in 2007), subject to
deductions for social security and other withholdings. In the event of such
termination, the options awarded to Mr. Garin under the amendment to his
employment agreement and those awarded under his initial employment agreement
shall become vested and shall be exercisable for a period of 90 days from the
date of such early termination. Any other options vested and exercisable at the
date of termination shall remain exercisable for a period of 90 days following
termination.
In the
event we terminate Mr. Garin’s employment agreement due to cause, he is not
entitled to receive any additional remuneration. In addition, any options
awarded to Mr. Garin, including those that have become exercisable, shall
immediately terminate on the date of such termination.
In the
event Mr. Garin’s employment is terminated due to his death, disability or
retirement at or after age 65, he is not entitled to any additional
remuneration. All options granted under the initial employment agreement, the
amendment to his employment agreement or otherwise will automatically become
exercisable for a period of one year following his termination on such
grounds.
Mr.
Garin’s employment agreement also contains non-competition provisions applicable
for a one-year period following termination and a prohibition on the use of
confidential information.
Adrian
Sarbu
UK
Employment Agreement
Mr.
Sarbu’s UK employment agreement is for a fixed term, expiring on December 31,2009. Under the terms of the UK employment agreement, we or Mr. Sarbu may
terminate his employment (other than for cause) on 12 months’ notice. We may
elect to make payment in lieu of notice, and pay him the portion of his gross
salary payable for the period of notice on the date of the notice of
termination. Under this example, if we were to elect to make payment in lieu of
notice, Mr. Sarbu would be entitled to receive $6,234,479 (which includes Euro
423,000 (approximately $622,698) payable under his notice provisions as well as
the actual bonus awarded to him in 2007), subject to deductions for social
insurance and other withholdings.
20
2007
Pro TV Agreement
Mr.
Sarbu’s 2007 Pro TV agreement is for a fixed term and expires in April 2011.
Under the terms of the 2007 Pro TV agreement, we or Mr. Sarbu may terminate his
employment (other than for cause) at any time on 12 months’ notice. We may elect
to make payment in lieu of notice. Under this example, if we were to elect to
make payment in lieu of notice, Mr. Sarbu would receive RON 1,440,000
(approximately $586,224), subject to deductions for social insurance and other
withholdings.
Any
options that have become exercisable as of a voluntary termination date of
either the UK employment agreement or the 2007 Pro TV agreement may be exercised
for a period of 90 days following such date, unless the other agreement is still
in effect.
In the
event Mr. Sarbu is terminated for gross misconduct under the UK employment
agreement or for cause under the 2007 Pro TV agreement, he is not entitled to
receive any notice or additional remuneration. Any options awarded to Mr. Sarbu,
including those that have become exercisable, shall immediately terminate on the
date of such termination.
Mr.
Sarbu’s employment contracts also contain non-competition provisions that are
applicable for a one-year period following termination and a prohibition on the
use of confidential information.
Wallace
Macmillan
Wallace
Macmillan has an employment agreement for an indefinite term. He is entitled to
terminate his employment agreement at any time on 90 days’ notice. We may elect
to make payment in lieu of notice, and pay him the portion of his gross salary
payable for the period of notice on the date of the notice of termination. If we
were to elect to make payment in lieu of notice, Mr. Macmillan would be entitled
to receive an amount equal to £71,507 (approximately $145,629), subject to
deductions for social security and other withholdings. Any options that have
become exercisable as of such voluntary termination date may be exercised for a
period of 90 days following such date.
Mr.
Macmillan may also terminate his employment agreement on five days’ notice for
good reason. Good reason includes a material breach by us of his
employment agreement or a reduction in his compensation, title, position or
duties. In the event of such termination or in the event we elect to
terminate his employment (other than for cause), Mr. Macmillan is entitled to
receive an amount equal to his annual base salary, subject to deductions for
social insurance and other withholdings. Any options that have become
exercisable as of such termination date may be exercised for a period of 90 days
following such date.
We may
terminate Mr. Macmillan’s employment agreement on 12 months’ notice. We may
elect to make payment in lieu of notice and pay him the portion of his gross
salary payable for the period of notice on the date of the notice of
termination, subject to deductions for social security and other withholdings.
Under this example, if we were to elect to make payment in lieu of notice, Mr.
Macmillan would be entitled to receive £570,000 (approximately $1,160,845)
(which includes the actual bonus awarded to him in 2007), subject to deductions
for social insurance and other withholdings. Any options that have
become exercisable as of such termination date may be exercised for a period of
90 days following such date.
In the
event we terminate Mr. Macmillan’s employment agreement due to cause, he is not
entitled to receive any additional remuneration. In addition, any options
awarded to Mr. Macmillan, including those that have become exercisable, shall
immediately terminate on the date of such termination.
Mr.
Macmillan’s employment agreement also contains non-competition provisions
applicable for a one-year period following termination and a prohibition on the
use of confidential information.
21
Marina
Williams
Marina
Williams has an employment agreement with a fixed term that expires on March 31,2010. Ms. Williams may voluntarily terminate her employment agreement at any
time on six months’ notice. We may elect to make payment in lieu of notice, and
pay her the portion of his gross salary payable for the period of notice on the
date of the notice of termination. If we were to elect to make payment in lieu
of notice, Ms. Williams would be entitled to receive an amount equal to £121,078
approximately $243,048), subject to deductions for social insurance and other
withholdings. Any options that have become exercisable as of such
voluntary termination date may be exercised for a period of 90 days following
such date.
If we
elect to terminate her employment agreement (other than for cause) at any time
prior to the expiration of the term, Ms. Williams is entitled to receive an
amount equal to her base salary for the remaining term of her employment
agreement, subject to deductions for social insurance and other
withholdings. Under this example, if we were to elect to make payment in
lieu of notice, Ms. Williams would be entitled to receive an amount equal to
£723,216 (approximately $1,451,756) (which includes the actual bonus awarded to
her in 2007), subject to deductions for social insurance and other
withholdings. Any options that have become exercisable as of such
voluntary termination date may be exercised for a period of 90 days following
such date.
In the
event we terminate Ms. Williams’ employment agreement due to cause, she is not
entitled to receive any additional remuneration. In addition, any options
awarded to Ms. Williams, including those that have become exercisable, shall
immediately terminate on the date of such termination.
Ms.
Williams’ employment agreement also contains non-competition provisions
applicable for a six-month period following termination and a prohibition on the
use of confidential information.
22
DIRECTOR
COMPENSATION
The
following table sets forth information in respect of compensation paid to
non-employee directors for the year ended December 31, 2007 and the number of
options to purchase shares of Common Stock outstanding as at December 31, 2007.
We use a combination of cash and stock options to compensate non-employee
directors. We do not have any non-equity incentive compensation plans,
non-qualified deferred compensation earnings and directors received no other
compensation.
Name
of Director
Fees
Earned or Paid in Cash ($)
Option Awards
($)(4)
Total
Compensation ($)
Ronald
Lauder
-
210,288(5)
210,288
Herbert
Granath
90,000
214,976
304,976
Charles
Frank
69,500(2)
214,976
284,476
Herbert
Kloiber
60,000
115,018
175,018
Igor
Kolomoisky(1)
-
-
-
Alfred
Langer
72,000
214,976
286,976
Bruce
Maggin
60,000
214,976
274,976
Ann
Mather
67,625(3)
196,510
264,135
Christian
Stahl
-
-
-
Eric
Zinterhofer
-
196,510
196,510
__________________________
(1) Mr.
Kolomoisky was appointed to the Board of Directors on August 30,2007. Frank Ehmer resigned from the Board on August 30,2007. He did not receive any fees, option awards or other
compensation during 2007.
(2) In
2007 Mr. Frank served on the Audit Committee and the Related Party Transactions
Committee, and served on the Compensation Committee from June 27,2007.
(3) In
2007 Ms. Mather served on the Audit Committee and the Related Party Transactions
Committee, and served on the Compensation Committee until February 14,2007.
(4) These
amounts reflect the dollar amount recognized for financial statement reporting
purposes for the fiscal year ended December 31, 2007 in accordance with FAS
123(R) of awards pursuant to the 1995 Plan, which includes amounts from awards
granted in and prior to 2007. Assumptions used in the calculation of this amount
are included in Item 8, Note 16 of our Annual Report on Form 10-K for the year
ended December 31, 2007 accompanying this Proxy Statement.
(5)
Ronald Lauder was awarded an option to purchase 5,000 shares of Class B Common
Stock at the date of the 2007 Annual General Meeting; each of the remaining
directors elected at the 2007 Annual General Meeting was awarded an
option to purchase 5,000 shares of Class A Common Stock as further described
below (other than Christian Stahl who declined the award).
Directors’
Fees
We pay a
cash fee to each of our independent directors of $50,000 per
annum. We reimburse each director for expenses in connection with
attending meetings of the Board of Directors. Members of the Audit Committee are
paid an additional annual cash fee of $12,000. The members of the
Audit Committee are Messrs. Langer and Frank and Ms. Mather. Members
of each of the Compensation Committee, the Corporate Governance/Nominating
Committee and the Related Party Transactions Committee receive an additional
annual cash fee of $5,000. The members of the Compensation Committee during 2007
were Messrs. Maggin and Granath; in addition, Mr. Frank served on the
Compensation Committee from June 27, 2007 and Ms. Mather served until February14, 2007. The members of the Corporate Governance/Nominating
Committee were Messrs. Granath, Kloiber, Langer and Maggin. The members of the
Related Party Transactions Committee were Messrs. Frank, Granath, Kloiber and
Langer and Ms. Mather. In addition, Mr. Granath received $25,000 as Vice
Chairman. Michael Garin, who is the only director who is also an employee, does
not receive any additional compensation for service as a
director.
23
Automatic
Equity Grant
Pursuant
to our 1995 Plan, on the date of each annual general
meeting, each non-employee director who has served as a director since the last
annual general meeting of shareholders or who has been otherwise approved by the
Board although having served a shorter term is eligible to receive either (i)
non-incentive stock options to purchase shares of Class A Common Stock (or in
the case of the Chairman, Class B Common Stock if eligible under our bye-laws
and if such grant is approved by the Board of Directors) or (ii) a combination
of non-incentive stock options, restricted stock and restricted stock units
whose aggregate value is equal to the value of the equivalent number of
non-incentive stock options on the date of grant. In the event options are
awarded, the exercise price of such options will be the closing price of a share
of Class A Common Stock on the date of grant (and 105% of the fair market value
of a share of Class A Common Stock in the case of an option to acquire Class B
Common Stock).
The
Compensation Committee has discretion to determine the components of the annual
automatic grant to non-employee directors within the limitation on the aggregate
value described above. For purposes of determining the U.S. dollar value of
non-incentive stock options to purchase shares of Common Stock under the
automatic grant, the Compensation Committee shall calculate a U.S. dollar amount
using the methodology that is employed by us for valuing options in our most
recent annual financial statements. For purposes of determining the number of
shares of any restricted stock or restricted stock units, the U.S. dollar amount
allocated to such award shall be divided by the fair market value of a share of
our Class A Common Stock on the date of grant.
The Board
of Directors amended the 1995 Plan on April 25, 2007 to reduce the
automatic grant to (i) non-incentive stock options to purchase 5,000 shares of
Class A Common Stock (in the case of the Chairman, Class B Common Stock if
eligible under our bye-laws and if such grant is approved by the Board) or (ii)
a combination of non-incentive stock options, restricted stock and restricted
stock units whose aggregate value is equal to the value of the 5,000
non-incentive stock options. The 1995 Plan provides the Compensation Committee
with the authority to stipulate the vesting period for all automatic awards,
whether options, restricted stock or restricted stock units. At the
time of the 2007 Annual General Meeting, the Compensation Committee determined
that the automatic grant should consist solely of options and the vesting period
would be one year and the term of the options granted would be five
years.
Compensation
Committee Interlocks and Insider Participation
None of
the members of the Compensation Committee has been an officer of the Company or
of any of our subsidiaries, or had any relationship with us other than serving
as a director. In addition, none of our executive officers served as a director
or member of the compensation committee of any other entity one of whose
executive officers serves as one of our directors or as a member of the
Compensation Committee. None of the members of the Compensation Committee has
any relationship that is required to be disclosed under this caption pursuant to
SEC rules and regulations.
There
were no interlocks or other relationships among our executive officers and
directors that are required to be disclosed under applicable executive
compensation disclosure requirements.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information as of April 1, 2008 with respect
to the beneficial ownership of shares of our Class A Common Stock and Class B
Common Stock and also sets forth certain information with respect to voting
power and percentage of ownership as of April 1, 2008, by (i) each shareholder
known by us to beneficially own more than 5% of any class of our outstanding
voting securities, (ii) each director, (iii) the Chief Executive Officer and the
other named executive officers, and (iv) all directors and named executive
officers as a group. Except as otherwise noted below, each of the
shareholders identified in the table has sole voting and investment power over
the shares beneficially owned by such person.
24
Beneficial
Ownership of
Class
A Common
Stock(a)
Beneficial
Ownership
of
Class
B Common
Stock
Common
Stock
%
of
Voting
Power
(b)
%
Ownership
(b)
Name
of Beneficial Owner
Number
Percent
Number
Percent
Ronald
S. Lauder (1)(6)
60,000
*
6,371,339
(22)
100
%
63.95
%
15.18
%
Michael
N. Garin
180,000
(9)
*
—
—
*
*
Charles
R. Frank, Jr.
15,700
(10)
*
—
—
*
*
Herbert
A. Granath
3,200
(11)
*
—
—
*
*
Herbert
Kloiber
(12)
*
—
—
*
*
Igor
Kolomoisky
1,620,537
(13)
4.50
%
—
—
1.63
%
3.83
%
Alfred
W. Langer
29,300
(14)
*
—
—
*
*
Bruce
Maggin
16,500
(15)
*
—
—
*
*
Ann
Mather
4,500
(16)
*
—
—
*
*
Christian
Stahl
—
—
—
—
—
—
Eric
Zinterhofer
16,500
(17)
*
—
—
*
*
Wallace
Macmillan
35,712
(18)
*
—
—
*
*
Adrian
Sarbu (2)
10,000
(19)
*
—
—
*
*
Marina
Williams
21,042
(20)
*
—
—
*
*
All
directors and executive officers as
a group (15 persons)
2,012,991
(21)
5.54
%
6,371,339
100
%
64.07
%
15.84
%
Eric
Semler (3)(7)
3,182,090
8.84
%
—
—
3.21
%
7.52
%
Apax
Partners Europe Managers Limited (4)(8)
60,000
*
6,312,839
100
%
63.74
%
15.06
%
Apax
Europe VI GP Co. Ltd.(4)(8)
60,000
*
6,312,839
100
%
63.74
%
15.06
%
Testora
Ltd (5)
3,500,000
9.72
%
—
—
3.53
%
8.27
%
________________________
*
Less
than 1.0%
(a)
Does
not include 6,387,839 shares of Class A Common Stock issuable upon
conversion of shares of Class B Common Stock. Shares of Class B
Common Stock are convertible at any time into shares of Class A Common
Stock for no additional consideration on a share-for-share
basis.
(b)
Represents
the percentage of total voting power and the percentage ownership of the
Class A Common Stock and the Class B Common Stock currently beneficially
owned by each identified shareholder and all directors and executive
officers as a group. The Class A Common Stock and the Class B
Common Stock are the only authorized classes of our capital stock with
shares outstanding.
(c)
None
of the shares of the directors or executive officers are pledged, except
as provided in footnote 13 below.
1.
The
address of Ronald S. Lauder is Suite 4200, 767 Fifth Avenue, New York, NewYork10153.
2.
On
October 17, 2007, Adrian Sarbu was appointed as Chief Operating
Officer.
25
3.
Information
in respect of the beneficial ownership of Eric Semler (other than
percentage ownership) is based upon a statement on Schedule 13G/A filed by
him on February 14, 2008.
4.
Information
in respect of the beneficial ownership of Apax Partners Europe Managers
Limited and Apax Europe VI GP Co. Limited (other than percentage
ownership) is based upon a statement on Schedule 13D jointly filed by them
on September 6, 2006. The address of Apax Partners Europe Managers Limited
is 15 Portland Place, London, England W1B 1PT, United Kingdom. The
address of Apax Europe VI GP Co. Limited is 13-15 Victoria Road,
St. Peter Port, Guernsey, Channel Islands GYI 3ZD. Shares are
jointly held as described in footnote 6 below.
5.
Information
in respect of the beneficial ownership of Testora Limited (other than
percentage ownership) is based upon a statement on Schedule 13G filed by
it on January 11, 2006. The address of Testora Limited is
Grigori Afxentiou, 8, El.Pa. Livadioti, Flat/Office 401, P.C. 6023,
Larnaca, Cyprus.
6.
In
a Schedule 13D/A filed by Mr. Lauder on September 8, 2006, Mr. Lauder
reported that he, RSL Investments Corporation (“RIC”), RSL Investment LLC
(“RIL”) and CME Holdco, L.P. each have joint beneficial ownership with
Apax Partners Europe Managers Limited and Apax Europe VI G.P. Limited of
6,312,839 shares of Class B Common Stock and 60,000 shares of Class A
Common Stock. RIC is a holding company for various investments of Mr.
Lauder. Mr. Lauder is the sole shareholder of RIC. Mr. Lauder is the sole
Director and Chairman of RIC. RIC is the sole member of RIL. Mr. Lauder is
President of RIL. RIL is sole general partner of CME Holdco, L.P. On
August 28, 2006, Mr. Lauder, RIC, RIL and certain others entered into a
purchase agreement with Adele Guernsey L.P. Pursuant to that agreement,
Mr. Lauder, RIC, RIL and others contributed all 6,312,839 outstanding
shares of Class B Common Stock and 60,000 shares of Class A Common Stock
to CME Holdco, acquiring 100% of the partnership interest therein. Mr.
Lauder and such other persons subsequently sold limited partnership
interests to Adele Guernsey L.P, aggregating approximately 49.72% of the
total partnership interests in CME Holdco. In addition, Mr. Lauder
directly owns currently exercisable options to purchase 58,500 shares of
Class B Common Stock.
7.
Mr.
Semler has sole power to vote and to dispose of these shares which consist
of (i) 3,162,690 shares held for the account of TCS Capital GP, LLC; and
(ii) 1,996,053 shares held for the account of TCS Capital Investments,
L.P.
8.
Apax
Partners Europe Managers Limited (“Apax”), a company organized under the
laws of England, owns all of the issued share capital of APAX WW Nominees
Limited (“Apax WW Nominees”) and APAX WW No. 2 Nominees Limited (“Apax WW
No. 2 Nominees”). Apax WW Nominees and Apax WW No. 2 Nominees are the
registered owners of 100% of the share capital of Adele (Guernsey) GP
Limited (“Adele GP”). Apax Europe VI GP Co. Limited, a Guernsey company,
is the general partner of Apax Europe VI GP, L.P. Inc. Apax Europe VI GP,
L.P. Inc is the general partner of Apax Europe VI-A, L.P. and Apax Europe
VI-1, L.P (“the Europe VI Funds”). The Europe VI Funds are collectively
the beneficial owner of 100% of Adele GP. Adele GP is the general partner
of Adele (Guernsey) L.P. In the Schedule 13D filed by Apax on September 6,2006, Apax and Apax Europe VI GP Co. Limited are reported as having shared
voting power over 60,000 shares of Class A Common Stock and 6,312,839
shares of Class B Common Stock. These shares are jointly held as described
in footnote 6 above.
9.
Consists
of (i) 160,000 shares of Class A Common Stock underlying options which are
currently exercisable, or will become exercisable within 60 days, at an
exercise price of $19.49 per share and expire on February 1, 2014; (ii)
15,000 shares of Class A Common Stock underlying options which are
currently exercisable, or will become exercisable within 60 days, at an
exercise price of $44.50 per share and expire on June 1, 2015; and (iii)
5,000 shares of Class A Common Stock underlying options which are
currently exercisable, or will become exercisable within 60 days, at an
exercise price of $56.42 per share and expire on June 7, 2016. Does not
include (i) 15,000 shares of Class A Common Stock underlying options with
an exercise price of $44.50 per share which are not currently exercisable
and will not become exercisable within 60 days and expire on June 1, 2015;
(ii) 15,000 shares of Class A Common Stock underlying options with an
exercise price of $56.42 per share which are not currently exercisable and
will not become exercisable within 60 days and expire on June 7, 2016; and
(iii) 80,000 shares of Class A Common Stock underlying options with an
exercise price of $60.64 per share which are not currently exercisable and
will not become exercisable within 60 days and expire on July 27,2016.
26
10.
Consists
of (i) 3,200 shares of Class A Common Stock underlying options which are
currently exercisable, or will become exercisable within 60 days, at an
exercise price of $10.897 per share and expire on May 21, 2013; (ii) 8,000
shares of Class A Common Stock underlying options which are currently
exercisable, or will become exercisable within 60 days, at an exercise
price of $22.11 per share and expire on June 1, 2014; (iii) 3,000 shares
of Class A Common Stock underlying options which are currently
exercisable, or will become exercisable within 60 days, at an exercise
price of $44.50 per share and expire on June 1, 2015; and (iv) 1,500
shares of Class A Common Stock underlying options which are currently
exercisable, or will become exercisable within 60 days, at an exercise
price of $58.85 per share and expire on June 6, 2016. Does not
include (i) 4,000 shares of Class A Common Stock underlying options with
an exercise price of $22.11 per share which are not currently exercisable
and will not become exercisable within 60 days and expire on June 1, 2014; (ii) 3,000
shares of Class A Common Stock underlying options with an exercise price
of $44.50 per share which are not currently exercisable and will not
become exercisable within 60 days and expire on June 1, 2015;
(iii) 4,500 shares of Class A Common Stock underlying options with an
exercise price of $58.85 per share which are not currently exercisable and
will not become exercisable within 60 days and expire on June 6, 2016; and
(iv) 5,000 shares of Class A Common Stock underlying options with an
exercise price of $89.79 per share which are not currently exercisable and
will not become exercisable within 60 days and expire on June 4,2012.
11.
Consists
of 3,200 shares of Class A Common Stock underlying options which are
currently exercisable, or will become exercisable within 60 days, at an
exercise price of $10.897 per share and expire on May 21,2013. Does not include (i) 4,000 shares of Class A Common Stock
underlying options with an exercise price of $22.11 per share which are
not currently exercisable and will not become exercisable within 60 days
and expire on June 1, 2014; (ii) 3,000 shares of Class A Common Stock
underlying options with an exercise price of $44.50 per share which are
not currently exercisable and will not become exercisable within 60 days
and expire on June 1, 2015; (iii) 4,500 shares of Class A Common Stock
underlying options with an exercise price of $58.85 per share which are
not currently exercisable and will not become exercisable within 60 days
and expire on June 6, 2016; and (iv) 5,000 shares of Class A Common Stock
underlying options with an exercise price of $89.79 per share which are
not currently exercisable and will not become exercisable within 60 days
and expire on June 4, 2012.
12.
Does
not include (i) 4,500 shares of Class A Common Stock underlying options
with an exercise price of $58.85 per share which are not currently
exercisable and will not become exercisable within 60 days and expire on
June 6, 2016; and (ii) 5,000 shares of Class A Common Stock underlying
options with an exercise price of $89.79 per share which are not currently
exercisable and will not become exercisable within 60 days and expire on
June 4, 2012.
13.
Consists
of (i) 1,275,227 shares of Class A Common Stock held directly by Mr.
Kolomoisky; (ii) 341,710 shares of Class A Common Stock owned by Mr.
Kolomoisky and pledged in connection with a repurchase arrangement with a
third party; and (iii) 3,600 shares of Class A Common Stock owned by
Athina Investments Limited.
14.
Consists
of (i)12,800 shares of Class A Common Stock underlying options which are
currently exercisable, or will become exercisable within 60 days, at an
exercise price of $10.897 per share and expire on May 21, 2013; (ii)
12,000 shares of Class A Common Stock underlying options which are
currently exercisable, or will become exercisable within 60 days, at an
exercise price of $22.11 per share and expire on June 1, 2014; (iii) 3,000
shares of Class A Common Stock underlying options which are currently
exercisable, or will become exercisable within 60 days, at an exercise
price of $44.50 per share and expire on June 1, 2015; and (iv) 1,500
shares of Class A Common Stock underlying options which are currently
exercisable, or will become exercisable within 60 days, at an exercise
price of $58.85 per share and expire on June 6, 2016. Does not include (i)
4,000 shares of Class A Common Stock underlying options with an exercise
price of $22.11 per share which are not currently exercisable and will not
become exercisable within 60 days and expire on June 1, 2014; (ii) 3,000
shares of Class A Common Stock underlying options with an exercise price
of $44.50 per share which are not currently exercisable and will not
become exercisable within 60 days and expire on June 1, 2015; (iii) 4,500
shares of Class A Common Stock underlying options with an exercise price
of $58.85 per share which are not currently exercisable and will not
become exercisable within 60 days and expire on June 6, 2016; and (iv)
5,000 shares of Class A Common Stock underlying options with an exercise
price of $89.79 per share which are not currently exercisable and will not
become exercisable within 60 days and expire on June 4,2012.
27
15.
Consists
of (i) 8,000 shares of Class A Common Stock underlying options which are
currently exercisable, or will become exercisable within 60 days, at an
exercise price of $10.897 per share and expire on May 21, 2013; (ii) 4,000
shares of Class A Common Stock underlying options which are currently
exercisable, or will become exercisable within 60 days, at an exercise
price of $22.11 per share and expire on June 1, 2014; (iii) 3,000 shares
of Class A Common Stock underlying options which are currently
exercisable, or will become exercisable within 60 days, at an exercise
price of $44.50 per share and expire on June 1, 2015; and (iv) 1,500
shares of Class A Common Stock underlying options which are currently
exercisable, or will become exercisable within 60 days, at an exercise
price of $58.85 per share and expire on June 6, 2016. Does not
include (i) 4,000 shares of Class A Common Stock underlying options with
an exercise price of $22.11 per share which are not currently exercisable
and will not become exercisable within 60 days and expire on June 1, 2014;
(ii) 3,000 shares of Class A Common Stock underlying options with an
exercise price of $44.50 per share which are not currently exercisable and
will not become exercisable within 60 days and expire on June 1, 2015;
(iii) 4,500 shares of Class A Common Stock underlying options with an
exercise price of $58.85 per share which are not currently exercisable and
will not become exercisable within 60 days and expire on June 6, 2016; and
(iv) 5,000 shares of Class A Common Stock underlying options with an
exercise price of $89.79 per share which are not currently exercisable and
will not become exercisable within 60 days and expire on June 4,2012.
16.
Consists
of (i) 3,000 shares of Class A Common Stock underlying options which are
currently exercisable, or will become exercisable within 60 days, at an
exercise price of $44.50 per share and expire on June 1, 2015; and (ii)
1,500 shares of Class A Common Stock underlying options which are
currently exercisable, or will become exercisable within 60 days, at an
exercise price of $58.85 per share and expire on June 6,2016. Does not include (i) 4,000 shares of Class A Common Stock
underlying options with an exercise price of $22.11 per share which are
not currently exercisable and will not become exercisable within 60 days
and expire on June 1, 2014; (ii) 3,000 shares of Class A Common Stock
underlying options with an exercise price of $44.50 per share which are
not currently exercisable and will not become exercisable within 60 days
and expire on June 1, 2015; (iii) 4,500 shares of Class A Common Stock
underlying options with an exercise price of $58.85 per share which are
not currently exercisable and will not become exercisable within 60 days
and expire on June 6, 2016; and (iv) 5,000 shares of Class A Common Stock
underlying options with an exercise price of $89.79 per share which are
not currently exercisable and will not become exercisable within 60 days
and expire on June 4, 2012.
17.
Consists
of (i) 12,000 shares of Class A Common Stock underlying options which are
currently exercisable, or will become exercisable within 60 days, at an
exercise price of $22.11 per share and expire on June 1, 2014; (ii) 3,000
shares of Class A Common Stock underlying options which are currently
exercisable, or will become exercisable within 60 days, at an exercise
price of $44.50 per share and expire on June 1, 2015; and (iii) 1,500
shares of Class A Common Stock underlying options which are currently
exercisable, or will become exercisable within 60 days, at an exercise
price of $58.85 per share and expire on June 6, 2016. Does not
include (i) 4,000 shares of Class A Common Stock underlying options with
an exercise price of $22.11 per share which are not currently exercisable
and will not become exercisable within 60 days and expire on June 1, 2014;
(ii) 3,000 shares of Class A Common Stock underlying options with an
exercise price of $44.50 per share which are not currently exercisable and
will not become exercisable within 60 days and expire on June 1, 2015;
(iii) 4,500 shares of Class A Common Stock underlying options with an
exercise price of $58.85 per share which are not currently exercisable and
will not become exercisable within 60 days and expire on June 6, 2016; and
(iv) 5,000 shares of Class A Common Stock underlying options with an
exercise price of $89.79 per share which are not currently exercisable and
will not become exercisable within 60 days and expire on June 4,2012.
18.
Consists
of (i) 587 shares of Class A Common Stock; (ii) 5,000 shares of Class A
Common Stock underlying options which are currently exercisable, or will
become exercisable within 60 days, at an exercise price of $10.365 per
share and expire on May 21, 2013; (iii) 20,000 shares of Class A Common
Stock underlying options which are currently exercisable, or will become
exercisable within 60 days, at an exercise price of $18.93 per share and
expire on May 4, 2014; (iv) 5,000 shares of Class A Common Stock
underlying options which are currently exercisable, or will become
exercisable within 60 days, at an exercise price of $44.50 per share and
expire on June 1, 2015; (v) 2,000 shares of Class A Common Stock
underlying options which are currently exercisable, or will become
exercisable within 60 days, at an exercise price of $56.42 per share and
expire on June 7, 2016; and (vi) 3,125 shares of Class A Common Stock
underlying options which are currently exercisable, or will become
exercisable within 60 days, at an exercise price of $72.05 per share and
expire on December 13, 2016. Does not include (i) 5,000 shares of Class A
Common Stock underlying options with an exercise price of $44.50 per share
which are not currently exercisable and will not become exercisable within
60 days and expire on June 1, 2015; (ii) 6,000 shares of Class A Common
Stock underlying options with an exercise price of $56.42 per share which
are not currently exercisable and will not become exercisable within 60
days and expire on June 7, 2016; (iii) 9,375 shares of Class A Common
Stock underlying options with an exercise price of $72.05 per share which
are not currently exercisable and will not become exercisable within 60
days and expire on December 13, 2016; and (iv) 12,500 shares of Class A
Common Stock underlying options with an exercise price of $113.56 per
share which are not currently exercisable and will not become exercisable
within 60 days and expire on December 4,2015.
28
19.
Consists
of (i) 6,000 shares of Class A Common Stock underlying options which are
currently exercisable, or will become exercisable within 60 days, at an
exercise price of $32.99 per share and expire on November 17, 2014; (ii)
2,000 shares of Class A Common Stock underlying options which are
currently exercisable, or will become exercisable within 60 days, at an
exercise price of $57.00 per share and expire on December 20, 2015; and
(iii) 2,000 shares of Class A Common Stock underlying options which are
currently exercisable, or will become exercisable within 60 days, at an
exercise price of $56.42 per share and expire on June 7, 2016. Does not
include (i) 2,000 shares of Class A Common Stock underlying options with
an exercise price of $32.99 per share which are not currently exercisable
and will not become exercisable within 60 days and expire on November 17,2014; (ii) 2,000 shares of Class A Common Stock underlying options with an
exercise price of $57.00 per share which are not currently exercisable and
will not become exercisable within 60 days and expire on December 20,2015; (iii) 6,000 shares of Class A Common Stock underlying options with
an exercise price of $56.42 per share which are not currently exercisable
and will not become exercisable within 60 days and expire on June 7, 2016;
and (iv) 30,000 shares of Class A Common Stock underlying options with an
exercise price of $113.56 per share which are not currently exercisable
and will not become exercisable within 60 days and expire on December 4,2012.
20.
Consists
of (i) 6,667 shares of Class A Common Stock underlying options which are
currently exercisable, or will become exercisable within 60 days, at an
exercise price of $32.80 per share and expire on November 21, 2014; (ii)
5,000 shares of Class A Common Stock underlying options which are
currently exercisable, or will become exercisable within 60 days, at an
exercise price of $44.50 per share and expire on June 1, 2015; (iii) 6,250
shares of Class A Common Stock underlying options which are currently
exercisable, or will become exercisable within 60 days, at an exercise
price of $64.81 per share and expire on April 30, 2016; and (iv) 3,125
shares of Class A Common Stock underlying options which are currently
exercisable, or will become exercisable within 60 days, at an exercise
price of $87.91 per share and expire on April 1, 2017. Does not
include (i) 7,500 shares of Class A Common Stock underlying options with
an exercise price of $44.50 per share which are not currently exercisable
and will not become exercisable within 60 days and expire on June 1, 2015;
(ii) 6,250 shares of Class A Common Stock underlying options with an
exercise price of $64.81 per share which are not currently exercisable and
will not become exercisable within 60 days and expire on April 30, 2016;
and (iii) 9,375 shares of Class A Common Stock underlying options with an
exercise price of $87.91 per share which are not currently exercisable and
will not become exercisable within 60 days and expire on April 1,2017.
21.
Includes
2,012,991 shares of Class A Common Stock underlying options which are
currently exercisable or will become exercisable within 60
days. Does not include 331,000 shares of Class A Common Stock
underlying options which are not currently exercisable and will not become
exercisable within 60 days.
22.
Includes
(i) 2,000 shares of Class B Common Stock underlying options which are
currently exercisable, or will become exercisable within 60 days, at an
exercise price of $0.26 per share and 8,000 shares of Class B Common Stock
underlying options which are currently exercisable, or will become
exercisable within 60 days at an exercise price of $0.308 per share and
expire on May 18, 2011; (ii) 16,000 shares of Class B Common Stock
underlying options which are currently exercisable, or will become
exercisable within 60 days, at an exercise price of $2.0558 per share and
expire on May 15, 2012; (iii) 16,000 shares of Class B Common Stock
underlying options which are currently exercisable, or will become
exercisable within 60 days, at an exercise price of $11.44 per share and
expire on May 21, 2013; (iv) 12,000 shares of Class B Common Stock
underlying options which are currently exercisable, or will become
exercisable within 60 days, at an exercise price of $23.22 per share and
expire on June 1, 2014; (v) 3,000 shares of Class B Common
Stock underlying options which are currently exercisable, or will become
exercisable within 60 days, at an exercise price of $46.725 per share and
expire on June 1, 2015; and (vi) 1,500 shares of Class B Common Stock
underlying options which are currently exercisable, or will become
exercisable within 60 days, at an exercise price of $61.79 per share and
expire on June 6, 2016. Does not include (i) 4,000 shares of
Class B Common Stock underlying options with an exercise price of $23.22
per share which are not currently exercisable and will not become
exercisable within 60 days and expire on June 1, 2014; (ii) 3,000 shares
of Class B Common Stock underlying options with an exercise price of
$46.725 per share which are not currently exercisable and will not become
exercisable within 60 days and expire on June 1, 2015; (iii) 4,500 shares
of Class B Common Stock underlying options with an exercise price of
$61.79 per share which are not currently exercisable and will not become
exercisable within 60 days and expire on June 6, 2016; and (iv) 5,000
shares of Class B Common Stock underlying options with an exercise price
of $94.28 per share which are not currently exercisable and will not
become exercisable within 60 days and expire on June 4,2012.
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our officers,
directors and persons who beneficially own greater than 10% of a registered
class of our equity securities to file certain reports (“Section 16 Reports”)
with the SEC with respect to ownership and changes in ownership of shares of our
common stock and other equity securities. Based solely on our review of the
Section 16 Reports furnished to us and written representations from certain
reporting persons, we believe that, during the fiscal year ended December 31,2007, all filing requirements under Section 16(a) applicable to our officers,
directors and greater than 10% beneficial owners were complied with
on a timely basis except that Adrian Sarbu and Wallace Macmillan did not file
until December 21, 2007 a Statement on Changes of Beneficial Ownership on Form 4
with respect to the acquisition of options to purchase shares of our Class A
Common Stock on December 5, 2007.
Certain
Relationships and Related Party Transactions
Review and Approval of Related Party
Transactions. All transactions in which we and our directors
and executive officers or members of their immediate families are participants
that are subject to review, ratification or approval by us under relevant SEC
regulations and NASDAQ Marketplace Rules are reviewed to determine whether such
persons have a direct or indirect material interest. Management is
primarily responsible for the development and implementation of processes and
controls to obtain information from the directors and executive officers in
respect of such related party transactions and for determining, based on the
facts and circumstances, whether we or a related party has a direct or indirect
material interest in the transaction. Pursuant to relevant SEC
regulations, transactions that are determined to be directly or indirectly
material to us or a related person are disclosed in our Proxy
Statement.
In
February 2007, the Board of Directors constituted a Related Party Transaction
Committee consisting of the current members of the Audit Committee and Messrs.
Granath and Kloiber, all independent directors, to review, approve or ratify
relevant related party transactions in accordance with a written
procedure. In the course of its review, approval or ratification of
related party transactions, the Related Party Transactions Committee has
considered: the nature of the related party’s interest in the transaction; the
material terms of the transaction; the nature of our participation in the
transaction; whether the transaction would impair the judgment of the related
party to act in our best interests; and such other matters as are considered
appropriate.
Any
member of the Related Party Transaction Committee who is a related party in
respect of a transaction under review may not participate in the deliberations
or vote for an approval or ratification of such transaction.
Related Party
Transactions
Herbert
Kloiber
We
contract with Concorde Media Beteiligungsgesellschaft mbH, acting as the agent
of Tele München Fernseh GmbH & Co. Produktionsgesellschaft, for the purchase
of program rights. Both companies are wholly-owned by our director Dr. Kloiber.
Our total purchases from Tele München Fernseh GmbH & Co.
Produktionsgesellschaft through Concorde Media Beteiligungsgesellschaft mbH
during 2007 were approximately $0.3 million.
Adrian
Sarbu
The total
purchases from companies related or connected with Adrian Sarbu, our COO, in
2007 were approximately $29.2 million of which Mr. Sarbu’s economic interest
represents approximately $23.9 million. The purchases were mainly for
programming rights and for various technical, production and administrative
related services. The total sales to companies related or connected with
Mr. Sarbu in 2007 were approximately $3.1 million of which Mr. Sarbu’s economic
interest represents approximately $2.2 million. At December 31,2007, companies connected to Mr. Sarbu had an outstanding balance due to us of
$6.7 million. At December 31, 2007, companies related to Mr. Sarbu had an
outstanding balance due to them of $0.9 million.
On May16, 2007 we purchased an additional 5% of Pro TV and MPI and 20% of Media Vision
from Mr. Sarbu for consideration of $51.6 million. On February 17, 2006, we
purchased an additional 5% of Pro TV, MPI and Media Vision from Mr. Sarbu for
consideration of $27.2 million. Under a put option agreement with Mr. Sarbu
entered into in July 2004, Mr. Sarbu has the right to sell his remaining
shareholding in Pro TV and MPI to us at a price, to be determined by an
independent valuation and is subject to a floor price of $1.45 million for each
1% interest sold. This put is exercisable from November 12, 2009 for a
twenty-year period thereafter.
30
In
addition, on April 17, 2008 we acquired certain radio broadcasting assets
of Compania de Radio Pro s.r.l. (“Radio Pro”), which owns the
two leading radio channels in Romania. Radio Pro is a 100% subsidiary of
Media Pro, in which we hold an 8.7% interest and Mr. Sarbu holds the remaining
interest. The purchase price, based on an independent valuation, was
RON 47.2 million (approximately $20.6 million), of which Mr. Sarbu’s economic
interest represents RON 43.1 million (approximately $18.8 million).
Igor
Kolomoisky
On
October 30, 2007, we entered into a purchase agreement (the “October Agreement”)
with Igor Kolomoisky, a member of our Board of Directors, in order to allow us
to acquire a 21.665% interest in each of International Media Services Ltd. and
Innova Film GmbH and a 15.164% interest in Studio 1+1 LLC (in each of which we
currently hold a 60.0% interest) (collectively, the “Optioned
Interests”). Under the terms of the purchase agreement, we
agreed to acquire 100.0% of Torcensta Holding Ltd. ("Torcensta") from Mr.
Kolomoisky following its becoming the owner of the Optioned Interests and
the satisfaction of other conditions to closing for consideration equal to the
lesser of (i) $140 million and (ii) 4% of the number of outstanding shares of
our Class A Common Stock at the time Torcensta has acquired all of the Optioned
Interests (using a weighted average trading price), provided, that in the event
the lesser amount is $140 million, Mr. Kolomoisky will have the option of
receiving his consideration in cash or shares of our Class A Common Stock (using
the weighted average trading price).
On
January 31, 2008, we entered into an assignment agreement with Mr. Kolomoisky
pursuant to which Mr. Kolomoisky has assigned his right to acquire the Optioned
Interests to us for the consideration described above. We are not obligated to
pay this consideration to Mr. Kolomoisky prior to the acquisition of the certain
other interests from our other partners in our Ukrainian operations. The October
Agreement shall terminate following the completion of this transaction. For
additional information, please see notes 13 and 23 to the financial statements
included in our Annual Report on Form 10-K for the year ended December 31, 2007
accompanying this Proxy Statement.
31
AUDIT
COMMITTEE REPORT
To
Our Shareholders:
We have
reviewed and discussed with management our audited consolidated financial
statements for the fiscal year ended December 31, 2007.
We have
discussed with Deloitte & Touche LLP, our independent registered public
accounting firm, the matters required to be discussed by the Statements on
Auditing Standards No. 61, Communications With Audit
Committees, as amended.
We have
also received the written disclosures and the letter from Deloitte & Touche
LLP required by Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees, as amended, and have discussed with Deloitte & Touche LLP
its independence.
Based on
the reviews and discussions referred to above, we recommended to the Board of
Directors that the audited financial statements referred to above be included in
our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 filed
with the Securities and Exchange Commission.
Submitted
by:
Alfred
W. Langer
Charles
R. Frank, Jr.
Ann mather
Members
of the Audit Committee
32
AMENDMENTS
TO THE BYE-LAWS
The Board
of Directors has approved the amendments to our Bye-laws set forth below, and is
recommending each of these amendments to shareholders for approval. In the
description of each proposal below, the Bye-laws are presented after giving
effect to the relevant proposal. References to (i) the Act are to the Bermuda
Companies Act 1981, as amended and (ii) Members are to shareholders. Pursuant to
our Bye-laws, any amendment proposed under Proposals 2 through 9 require the
affirmative vote of a majority of the votes cast, in person or by proxy, at the
Meeting, provided that a quorum in present in person or by proxy. Abstentions
and broker non-votes will be included in determining the presence of a quorum,
but are not counted as votes cast.
PROPOSAL
2
Amendment
to Bye-law 12(3)
Bermuda
exempt companies are now permitted to repurchase shares to be held as treasury
shares following an amendment to the Act. Prior to the adoption of
this amendment, any shares reacquired by the Company were subject to
cancellation. The availability of treasury shares would, among other things,
permit the Company to more easily repurchase shares as well as to avoid costs
associated with the cancellation of shares aquired by the Company.
Shares
12(3).The Company may
purchase its own shares for cancellation or acquire them as Treasury Shares in
accordance with the Act on such terms as the Board may from time to time
determine. All rights attaching to Treasury Shares shall be suspended and shall
not be exercised by the Company while it holds such Treasury Shares and, except
where required by the Act, all Treasury Shares shall be excluded from the
calculation of any percentage or fraction of the share capital, or shares, of
the Company. For the purposes of these Bye-Laws, “Treasury
Share” shall mean a share of the Company that was or is treated as having been
acquired and held by the Company and has been continuously held by the Company
since it was so acquired and has not been cancelled.
Unless
otherwise indicated, the accompanying form of proxy will be voted FOR adoption
of this proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THIS
PROPOSAL.
PROPOSAL 3
Amendments
to Bye-laws 16, 18, 19 and 20
Following
the SEC’s approval of proposed a rule change in the NASDAQ Marketplace Rules,
the Company is now required to ensure that its listed securities are eligible
for participation in the direct registration system mandated by NASDAQ. While
under Bermuda law shareholders must remain entitled to receive certificated
shares, the addition to Bye-law 16 confirms the right of shareholders
to request and receive uncertificated shares. The amendments to Bye-laws 18, 19
and 20 clarify that a shareholder shall receive uncertificated shares unless
such shareholder requests a share certificate from the Company. In addition, the
former requirement that a shareholder formally refuse a physical share
certificate has been deleted from Bye-law 19 in order to permit the Company to
more easily issue uncertificated shares.
Share
Certificates
16. The
shares of the Company’s stock may be certificated or uncertificated, as provided
under the Act. Every share certificate shall be issued under the Seal or a
facsimile thereof and shall specify the number and class and distinguishing
numbers (if any) of the shares to which it relates, and the amount paid up
thereon and may otherwise be in such form as the Directors may from time to time
determine. No certificate shall be issued representing shares of more
than one class. The Board may by resolution determine, either generally or in
any particular case or cases, that any signatures on any such certificates (or
certificates in respect of other securities) need not be autographic but may be
affixed to such certificates by some mechanical means or may be printed thereon
or that such certificates need not be signed by any person.
33
18. Every
person whose name is entered, upon an allotment of shares, as a Member in the
Register shall be entitled, without payment, to receive one certificate for all
such shares of any one class or several certificates each for one or more of
such shares of such class upon request in writing to the Company and upon
payment for every certificate after the first of such reasonable out-of-pocket
expenses as the Board from time to time determines. A shareholder who does not
submit such a request in writing to the Company shall receive uncertificated
shares.
19. Share
certificates requested pursuant to Bye-Law 18 shall be issued in the case of an
issue of shares within twenty-one (21) days (or such longer period as the terms
of the issue provide) after such a request or in the case of a transfer of fully
or partly paid shares within twenty-one (21) days after such a request following
the lodgement of a transfer with the Company, not being a transfer which the
Company is for the time being entitled to refuse to register and does not
register.
20. Upon
every transfer of certificated shares, the certificate held by the transferor
shall be given up to be cancelled, and shall forthwith be cancelled accordingly,
and if requested by the tranferee pursuant to Bye-Law 18 a new certificate shall
be issued to the transferee in respect of the shares transferred to
him. If any of the shares included in the certificate so given up
shall be retained by the transferor a new certificate for the balance shall be
issued to him if so requested by the transferor pursuant to Bye-law
18.
Unless
otherwise indicated, the accompanying form of proxy will be voted FOR adoption
of this proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THIS
PROPOSAL.
PROPOSAL 4
Amendments
to Bye-laws 58(2) and 88
The
amendment to Bye-law 58(2) conforms the Company’s Bye-laws to the requirements
set forth in the rules and regulations promulgated by the SEC with respect to
shareholders proposals, including director nominations, to be acted on at
special and annual general meetings of the Company. In addition to clarifying
the contents and timing of a shareholder proposal, the revised Bye-law 58(2)
permits shareholders who have held a significant interest in the Company for a
meaningful period of time to nominate candidates to serve as directors. The
conforming amendment to Bye-law 88 eliminates an inconsistency with regard to
the timing of and requirements for the submission of director
nominations.
General
Meetings
58(2). Member
may raise business, including the nomination of a candidate for election as a
Director, to be considered at annual and special general meetings of the
Company, provided, however, that in order to be brought before a general meeting
Member proposals must (i) be a proper matter for Member action under the Act and
the rules and regulations promulgated by the U.S. Securities and Exchange
Commission (the “Rules and Regulations”), (ii) comply with the requirements of
this Bye-law 58 and (iii) with respect to Director nominees, the Member
submitting such proposal shall have beneficially owned at least five percent of
any class of the Company’s outstanding stock for a period of at least one year.
Where a Member proposal is to be considered at an annual general meeting, notice
of such Member proposal must be received by the Secretary not less than 120 days
prior to the anniversary date of the prior year’s annual general meeting proxy
statement. Where a Member proposal is to be considered at a special
general meeting, such notice must be received not later than five (5) days
following the earlier of the date on which notice of the special general meeting
was given to Members in accordance with these Bye-laws or the date on which
public disclosure of the date of the special general meeting was
made. Any notice of a Member proposal shall contain (i) the name,
address and relationship to the Company of the proposing Member and, with
respect to director nominations, the proposed nominee, (ii) with respect to
director nominations, a statement to the effect that the proposed nominee has no
direct or indirect business conflict of interest with the Company, (iii) with
respect to director nominations, a statement to the effect that the proposed
nominee meets the Company’s published minimum criteria for consideration as a
nominee for director of the Company, (iv) the form of resolution to be included
in the proxy statement, (v) a brief description as to why the passing of the
resolution is beneficial to the Company and (vi) any such other information as
would be required under the rules and regulations of the U.S. Securities and
Exchange Commission to be included in the Company’s proxy statement if such
proposal were to be included therein. Notwithstanding the foregoing, in order to
include information with respect to a Member proposal in the Company’s proxy
statement and form of proxy for a general meeting, such Member must provide
notice as required by, and otherwise comply with, the Act and the Rules and
Regulations. The Company may exclude a Member’s proposal from the Company’s
proxy statement and form of proxy in accordance with the Act and the Rules and
Regulations.
34
Retirement of
Directors
88. No person
other than a Director retiring at the meeting shall, unless recommended by the
Directors for election or nominated by a Member pursuant to Bye-Law 58(2), be
eligible for election as a Director at any general meeting.
Unless
otherwise indicated, the accompanying form of proxy will be voted FOR adoption
of this proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THIS
PROPOSAL.
PROPOSAL 5
Amendments
to Bye-laws 160, 161 and 162
The SEC
has recently adopted amendments to the rules governing the delivery of proxy
information. Pursuant to these amendments, the Company can now deliver certain
types of proxy materials electronically, provided that they are delivered in
accordance with the new notice and access rules. Proposed Bye-laws
160, 161 and 162 would permit the Company to use electronic means to deliver
notices, including such types of proxy materials, by the means permitted under
the recently promulgated SEC notice and access rules .
Notices
160.
(1)
Any
Notice from the Company to a Member may be
given:
(a)
by
delivering it to such Member in person;
or
(b)
by
sending it by letter mail or courier to such Member's address in the
Register of Members; or
(c)
if
consented to by the Member to whom such notice is given, by transmitting
it by electronic means (including facsimile and electronic mail, but not
telephone) in accordance with such directions as may be given by such
Member to the Company for such purpose;
or
(d)
if
consented to by the Member to whom such notice is given, by posting on an
electronic network together with a separate notice to the Member of the
specific posting; or
(e)
if
consented to by the Member to whom such notice is given, by any other form
of electronic transmission.
(2) Any
consent given by a Member with respect to a method of notice set forth in
Bye-laws 160 (1)(c)-(e) above may be given by letter mail, courier, or any form
of electronic transmission and shall be revocable by the Member by notice to the
Company given by letter mail, courier, or any form of electronic transmission.
Any such consent shall be deemed revoked if the Company is unable to deliver
three consecutive notices in accordance with such consent or when such inability
to deliver notice becomes known to the Company’s secretary or transfer agent or
other person responsible for the giving of notice.
35
(3) Any
Notice from a Member to the Company may be given in accordance with such
directions as may be given by the Company for such purpose on its website or
otherwise.
161. (1) Any
notice delivered in accordance with Bye-laws 160(1)(a) or 160(1)(b) shall be
deemed to have been served at the time when the same would be delivered in the
ordinary course of transmission and, in proving such service, it shall be
sufficient to prove that the notice was properly addressed and prepaid, if
posted, and the time when it was posted or delivered to the
courier.
(2) Any
notice delivered in accordance with Bye-law 160(1)(c) shall be deemed to have
been served when directed to a number or an electronic mail address at which the
Member has consented to receive notice.
(3) Any
notice delivered in accordance with Bye-laws 160(1)(d) or 160(1)(e) shall be
deemed to have been served upon the later of (i) the notification of the Member
in accordance with such Bye-law; and (ii) the publication of the information or
document on the electronic network.
162. Any
notice required to be given to a Member shall, with respect to any shares held
jointly by two or more persons, be given to whichever of such persons is named
first in the Register of Members and notice so given shall be sufficient notice
to all the holders of such shares.
Unless
otherwise indicated, the accompanying form of proxy will be voted FOR adoption
of this proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THIS
PROPOSAL.
PROPOSAL 6
Amendments
to Bye-laws 79, 80 and 81
Proposed
Bye-laws 79, 80 and 81 would allow the Board of Directors flexibility in
determining the form of proxy to be distributed to shareholders in connection
with general meetings. The proposed Bye-laws work in conjunction with the
proposed amendments to the notice provisions in Proposal 5. The
revisions would allow the Board of Directors to provide, at its discretion, a
telephonic, electronic or other form of proxy, in addition to the standard
written form of proxy. These amendments will allow the Company to increasingly
rely on new technologies to facilitate shareholder participation at general
meetings.
Proxies
79. If
an instrument appointing a proxy is in writing, it shall be under the hand of
the appointor or of his attorney duly authorised in writing or, if the appointor
is a corporation, either under its seal or under the hand of an officer,
attorney or other person authorised to sign the same. In the case of
an instrument of proxy in writing purporting to be signed on behalf of a
corporation by an officer thereof it shall be assumed, unless the contrary
appears, that such officer was duly authorised to sign such instrument of proxy
on behalf of the corporation without further evidence of the fact.
80. Subject
to the Act, the instrument appointing a proxy, whether in writing or in any
other form as may be approved by the Board, and (if required by the Board) the
power of attorney or other authority (if any) under which it is signed, or a
certified copy of such power or authority, shall be delivered or otherwise
submitted or communicated to the Company in such form and manner or to such
place or one of such places (if any) as may be specified for that purpose in or
by way of note to or in any document accompanying the notice convening the
meeting (or, if no place is so specified for instruments in writing, at the
Registration Office or the Office, as may be appropriate) not less than
forty-eight (48) hours before the time appointed for holding the meeting or
adjourned meeting at which the person named in the instrument proposes to vote
or, in the case of a poll taken subsequently to the date of a meeting or
adjourned meeting, not less than twenty-four (24) hours before the time
appointed for the taking of the poll and in default the instrument of proxy
shall not be treated as valid. No instrument appointing a proxy shall
be valid after the expiration of twelve (12) months from the date named in it as
the date of its execution, if such instrument is in writing, or the date it is
submitted or communicated to the Company, if such instrument is in a form other
than in writing, except at an adjourned meeting or on a poll demanded at a
meeting or an adjourned meeting in cases where the meeting was originally held
within twelve (12) months from such date. Delivery, submission or
communication, as the case may be, of an instrument appointing a proxy shall not
preclude a Member from attending and voting in person at the meeting convened
and in such event, the instrument appointing a proxy shall be deemed to be
revoked.
36
81. Instruments
of proxy shall be in any common form or in such other form as the Board may
approve (provided that this shall not preclude the use of the two-way form) and
the Board may, if it thinks fit, send out or provide access to with the notice
of any meeting forms of instrument of proxy for use at the
meeting. The instrument of proxy shall be deemed to confer authority
to demand or join in demanding a poll and to vote on any amendment of a
resolution put to the meeting for which it is given as the proxy thinks
fit. The instrument of proxy shall, unless the contrary is stated
therein, be valid as well for any adjournment of the meeting as for the meeting
to which it relates.
Unless
otherwise indicated, the accompanying form of proxy will be voted FOR adoption
of this proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THIS
PROPOSAL.
PROPOSAL 7
Amendments
to Bye-law 166
Proposed
Bye-law 166 would remove the provision of a mandatory indemnity to the
independent auditor pursuant to the Company’s corporate documents. Indemnity of
the auditor may still be the subject of negotiation in the course of the
engagement of the independent auditor. The remaining provisions of
Bye-law 166 will otherwise remain as currently in effect, with the exception of
Bye-law 166(5) where, following an amendment to the Act, a provision has been
added to permit the Company to advance to officers or directors (each as defined
in the Bye-laws), costs in defending civil or criminal claims against them. Such
costs would be subject to reimbursement in the event that an allegation of fraud
or dishonesty is proven.
Indemnity
166. (1) The
Directors, Secretary and other officers (such term to include, for the purposes
of this Bye-law 166 any person appointed to any committee by the Board) for the
time being and each such person who is or was or had agreed to become a Director
or officer of the Company and each such person who is or was serving or who had
agreed to serve as an employee or agent of the Company or as a Director,
officer, employee or agent of another company, corporation, partnership, joint
venture, trust or other enterprise in which the Company is or was engaged acting
in relation to any of the affairs of the Company and the liquidator or trustees
(if any) for the time being acting in relation to any of the affairs of the
Company and every one of them, and their heirs, executors and administrators,
shall be indemnified and secured harmless out of the assets and profits of the
Company from and against all actions, costs, charges, losses, damages and
expenses which they or any of them, their heirs, executors or administrators,
shall or may incur or sustain by or by reason of any act done, purported to be
done, concurred in or omitted in or about the execution of their duty, or
supposed duty, or in their respective offices or trusts, or on behalf of the
Company or purportedly on behalf of the Company, and none of them shall be
answerable for the acts, receipts, neglects or defaults of the others of them or
for joining in any receipts for the sake of conformity, or for any bankers or
other persons with whom any moneys or effects belonging to the Company shall or
may be lodged or deposited for safe custody, or for insufficiency or deficiency
of any security upon which any moneys of or belonging to the Company shall be
placed out on or invested, or for any other loss, misfortune or damage which may
happen in the execution of their respective offices or trusts, or in relation
thereto, PROVIDED THAT this indemnity shall not extend to any matter in respect
of any fraud or dishonesty which may attach to any of said
persons. Subject to the provisions of the Act and without limiting
the generality or the effect of the foregoing, the Company may enter into one or
more agreements with any person which provide for indemnification greater or
different than that provided in this Bye-law.
37
(2) Each
Member agrees to waive and release any claim or right of action such Member
might have, whether individually or by or in the right of the Company, against
any Director or officer on account of any act done, purported to be done,
concurred in or omitted in or about the execution of their duty, or supposed
duty, or in their respective offices or trusts by such Director or officer, or
the failure of such Director or officer to take any action in the performance of
his duties with or for the Company, PROVIDED THAT such waiver shall not extend
to any matter in respect of any fraud or dishonesty which may attach to such
Director or officer.
(3) The
indemnity provided by Bye-law 166(1) above shall extend, as a matter of contract
between each Member and each former Director and officer of the Company and
their heirs, executors and administrators, to any act done, purported to be
done, concurred in or omitted in or about the execution of their duty, or
supposed duty, or in their respective offices or trusts by the former Directors
and officers of the Company. The waiver of claims or right of action
by each Member provided by Bye-law 166(2) above shall extend, as a matter of
contract between each Member and each former Director and officer of the Company
and their heirs, executors and administrators, to any act done, purported to be
done, concurred in or omitted in or about the execution of their duty, or
supposed duty, or in their respective offices or trusts by the former Directors
and officers of the Company.
(4) Any
repeal or modification of this Bye-law 166 shall not adversely affect any right
or protection existing under this Bye-law 166 immediately prior to such repeal
or modification.
(5) The
Company may advance moneys to an individual who is indemnified pursuant to
Bye-law 166(1) above for the costs, charges and expenses incurred by such
individual in defending any civil or criminal proceedings against them, on
condition that such individual shall repay the advance if any allegation of
fraud or dishonesty is proved against them.
Unless
otherwise indicated, the accompanying form of proxy will be voted FOR adoption
of this proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THIS
PROPOSAL.
38
PROPOSAL
8
RECEIPT
OF FINANCIAL STATEMENTS
The Audit
Committee of the Board of Directors has approved our audited financial
statements for the fiscal year ended December 31, 2007 (the “Financial
Statements”)
for presentation to the shareholders at the Annual General Meeting of
shareholders. Under Bermuda law, the shareholders are entitled to
have financial statements for the Company laid before them at a general meeting;
the receipt of the Financial Statements by the shareholders does not affect any
rights that the shareholders may have with respect to the Financial
Statements. The Financial Statements are included in our Annual
Report on Form 10-K for the year ended December 31, 2007 accompanying this Proxy
Statement.
Vote
Required; Recommendation
The
receipt of the Financial Statements requires the affirmative vote of a majority
of the votes cast, in person or by proxy, at the Meeting, provided that a quorum
is present in person or by proxy. Abstentions and broker non-votes
will be included in determining the presence of a quorum, but are not counted as
votes cast. Unless
otherwise indicated, the accompanying form of proxy will be voted
FOR receipt of the Financial Statements and the auditors’ report
thereon.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE RECEIPT OF THE
FINANCIAL STATEMENTS AND THE AUDITORS’ REPORT THEREON.
39
PROPOSAL
9
SELECTION
OF AUDITORS
At the
recommendation of the Audit Committee, the Board of Directors recommends to the
shareholders that Deloitte & Touche LLP be appointed to serve as our
independent registered public accounting firm for 2008. In addition,
the Board of Directors recommends to the shareholders that the shareholders
authorize the Board of Directors, acting through the Audit Committee, to approve
the auditors’ fee.
Representatives
of Deloitte & Touche LLP will be invited to attend the Meeting in order to
have an opportunity to make a statement if they so desire and be available to
respond to appropriate questions from shareholders.
Audit
Fees
Deloitte
& Touche LLP’s audit fees for auditing our annual consolidated financial
statements for the year ended December 31, 2007 and reviewing of our interim
financial statements included in our filings on Forms 10-Q were $2,688,000
(2006: $2,196,000).
Audit-Related
Fees
Deloitte
& Touche LLP’s audit-related fees for the year ended December 31, 2007 were
$218,000 (2006: $1,111,000). Audit-related fees in 2007 were incurred in respect
of a debt financing as well as the interpretation of certain newly issued
accounting standards. Audit-related fees in 2006 were incurred in respect of
performing a Sarbanes-Oxley Act Section 404 “dummy” attestation for our Czech
Republic and Slovak Republic operations as well as in respect of services
provided in connection with our 2006 equity offering and responding to an SEC
comment letter.
Tax
Fees
We
incurred no tax fees with Deloitte & Touche LLP for the year ended December31, 2007. Tax fees of $18,000 were incurred in 2006 for advice in respect of the
implementation of recently enacted accounting standars.
Policy
on Pre-Approval of Services Provided by Deloitte & Touche LLP
The Audit
Committee of the Board of Directors has considered whether the provision of the
services in respect of Audit-Related Fees, Tax Fees and All Other Fees is
compatible with maintaining Deloitte & Touche LLP’s independence prior to
the incurrence of such Fees in accordance with the Charter of the Audit
Committee. All engagements of the auditors are approved in advance by
the Audit Committee. At the beginning of the fiscal year, management
presents for approval by the Audit Committee a range of services to be provided
by the auditors and estimated fees for such services for the current
year. Any services to be provided by the auditors that are not
included within such range of services are approved on a case-by-case basis by
the Audit Committee. Management provides reports to the Audit
Committee on at least a quarterly basis on the status of the services provided
and the level of fees incurred in respect of each service. We did not approve
the incurrence of any fees pursuant to the exceptions to the pre-approval
requirements set forth in 17 CFR 210.2-01(c)(7)(i)(C).
Vote
Required; Recommendation
The
appointment of Deloitte & Touche LLP to serve as our independent registered
public accounting firm in respect of the fiscal year ended December 31, 2008 and
the authorization of the Board of Directors, acting through the Audit Committee,
to approve the auditors’ fee requires the affirmative vote of a majority of the
votes cast, in person or by proxy, at the Meeting, provided that a quorum is
present in person or by proxy. Abstentions and broker non-votes will
be included in determining the presence of a quorum, but are not counted as
votes cast. Unless
otherwise indicated, the accompanying form of Proxy will be voted FOR the
appointment of Deloitte & Touche LLP as the Company’s independent registered
public accounting firm in respect of the fiscal year ended December 31, 2008 and
for the Board of Directors, acting through the Audit Committee, to approve the
auditors’ fee.
40
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE APPOINTMENT OF
DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM IN RESPECT OF THE FISCAL YEAR ENDED DECEMBER 31, 2008 AND A VOTE
IN FAVOR OF AUTHORIZING THE BOARD OF DIRECTORS, ACTING THROUGH THE AUDIT
COMMITTEE, TO APPROVE THE AUDITORS’ FEE.
41
SHAREHOLDER
PROPOSALS
Shareholder
proposals must be received by us at our principal executive office
by January 1, 2009 in order to be considered for inclusion in proxy
materials distributed in connection with the 2009 annual general meeting of
shareholders. The proxy or proxies designated by us will have
discretionary authority to vote on any matter properly presented by a
shareholder for consideration at the 2009 Annual General Meeting of Shareholders
but not submitted by the date specified above for inclusion in the proxy
materials for such meeting, provided, that notice of the matter is received by
us at our principal executive office at least 90 days but not more than 120 days
prior to the date of the 2009 Annual General Meeting.
MISCELLANEOUS
Under
Bermuda law, no matter or business other than those set forth in the
accompanying Notice of Annual General Meeting of Shareholders is permitted to be
presented at the Meeting unless the provisions of the Bermuda Companies Act
1981, as amended, are complied with.
We will
bear the cost of preparing, assembling and mailing the enclosed form of proxy,
this Proxy Statement and other material which may be sent to shareholders in
connection with this solicitation. Officers and regular employees may
solicit proxies by mail, telephone, telegraph, electronic mail and personal
interview, for which no additional compensation will be paid. In
addition, Georgeson Inc. has been engaged by us to act as proxy solicitors and
will receive fees of $6,500 plus expenses. We may reimburse persons
holding shares in their names or in the names of nominees for their reasonable
expenses in sending proxies and proxy material to their principals.
To obtain
directions to be able to attend the meeting and vote in person, please contact
the Assistant Secretary, Central European Media Enterprises Ltd. in care of
Conyers Dill & Pearman, Clarendon House, 2 Church Street, Hamilton, HM 11
Bermuda.
Our
Annual Report on Form 10-K for the year ended December 31, 2007 is being
delivered to shareholders together with this Proxy Statement.
Important
Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting
to be held on June 3, 2008. Our proxy statement and annual report on Form 10-K
are available on our website at www.cetv-net.com.
Please
detach along perforated line and mail in the envelope provided.
■
21133030303303300000
2
060308
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS AND
“FOR” PROPOSALS 2 THROUGH 9. PLEASE
SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
FOR
AGAINST
ABSTAIN
1.
ELECTION
OF DIRECTORS: The election of eleven directors nominated by the
Board of Directors to serve until the next Annual General Meeting of
Shareholders:
2.
The
amendment of Bye-law 12(3) to allow the Company to hold treasury
shares.
o
o
o
Nominees
o
FOR
ALL NOMINEES
m
RONALD S. LAUDER
m HERBERT A.
GRANATH
m MICHAEL
GARIN
m
CHARLES R. FRANK, JR.
m
HERBERT KLOIBER
m IGOR
KOLMOISKY
m
ALFRED W. LANGER
m BRUCE
MAGGIN
m ANN
MATHER
m CHRISTIAN
STAHL
m ERIC
ZINTERHOFER
3.
The
amendment of Bye-laws 16, 18, 19 and 20 to clarify that shareholders may
hold uncertificated
shares and that the Company is not obliged to issue physical share
certificates
to shareholders.
o
o
o
o
WITHHOLD
AUTHORITY
FOR ALL
NOMINEES
o
FOR
ALL EXCEPT
(See
instructions below.)
4.
The
amendment of Bye-laws 58(2) and 88 to conform them to the rules and
regulations promulgated
by the Securities and Exchange Commission with respect to shareholder
proposals
for general meetings and director nominations.
o
o
o
5.
The
amendment of Bye-laws 160, 161 and 162 to allow for electronic delivery of
notices,
including proxy materials, to shareholders and the receipt of notices by
the Company
by electronic delivery and other means.
o
o
o
6.
The
amendment of Bye-laws 79, 80 and 81 to permit the Board of Directors
to determine the form of proxy
that may be used to attend general meetings.
o
o
o
INSTRUCTIONS:
To
withhold authority to vote for any individual nominee(s), mark “FOR
ALL EXCEPT” and
fill in the circle next to each nominee you wish to withhold, as shown
here: ●
7.
The
amendment of Bye-law 166 to remove the provision with respect to the
indemnification of
the independent auditor and to add a provision to permit the Company
to advance
defense costs to officers and directors defending claims.
The appointment of
Deloitte & Touche LLP as the independent registered public
accounting
firm of the Company in respect of the fiscal year ending December 31, 2008
and
the authorization of the Board of Directors, acting through the Audit
Committee, to
approve their fee.
o
o
o
Shares
cannot be voted unless this proxy card is signed and returned or shares
are voted in person at the Annual General
Meeting.
To
change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted via
this method.
o
The
undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders to be held on June 3, 2008, and the Proxy Statement, dated
May 1, 2008, prior to the signing of this
proxy.
Signature
of Shareholder
Date:
Signature
of Shareholder
Date:
■
Note: Please sign
exactly as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the
signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.
■
43
CENTRAL
EUROPEAN MEDIA ENTERPRISES LTD.
PROXY
FOR ANNUAL GENERAL MEETING OF SHAREHOLDERS – JUNE 3,2008
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned hereby constitutes and appoints Michael Garin, Nicolas G. Trollope,
Michael Ashford, and Scott Davis, or any of them acting singly, with the power
of substitution in any of them, the proxies of the undersigned to vote with the
same force and effect as the undersigned all shares of Common Stock of Central
European Media Enterprises Ltd. (the "Company") held of record by the
undersigned on April 1, 2008 at the Annual General Meeting of Shareholders to be
held at The Pearman Room (4B), 4th Floor, Conyers Dill & Pearman, Clarendon
House, 2 Church Street, Hamilton HM 11, Bermuda, on June 3, 2008, at 11:00 A.M.
and at any adjournment or adjournments thereof, hereby revoking any proxy or
proxies heretofore given and ratifying and confirming all that said proxies may
do or cause to be done by virtue thereof with respect to the following
matters:
This
proxy, when properly executed, will be voted as directed. If no direction is
indicated, the proxy will be voted (i) FOR the election of the eleven named
individuals as directors, (ii) FOR the amendment to Bye-law 12(3), (iii) FOR the
amendment to Bye-laws 16, 18, 19 and 20, (iv) FOR the amendment to Bye-laws
58(2) and 88, (v) FOR the amendment to Bye-laws 160, 161 and 162, (vi) FOR the
amendment to Bye-laws 79, 80 and 81, (vii) FOR the amendment to Bye-law 166,
(viii) FOR the receipt of the financial statements of the Company and the
auditors' report thereon for the Company's fiscal year ended December 31, 2007,
and (ix) FOR the appointment of Deloitte & Touche LLP as the independent
registered public accounting firm of the Company in respect of the fiscal year
ending December 31, 2008 and the authorization of the Board of Directors, acting
through the Audit Committee, to approve their fee.
CONTINUED
AND TO BE SIGNED ON REVERSE SIDE
14475
44
Dates Referenced Herein and Documents Incorporated by Reference
