This prospectus
relates to the resale, from time to time of up to 348,000 shares (the “Shares”)
of Class A Common Stock (the “Common Stock”) of Central European Media
Enterprises Ltd., a Bermuda company, all of which are being offered by the
selling shareholders named in this prospectus.
The Shares consist
of shares of Common Stock issuable upon exercise of Common Stock Purchase
Warrants (the “Warrants”) with an exercise price of $5.01 per share issued to
the lenders pursuant to a Senior Secured Credit Agreement dated as of
July 31, 2002. See “Selling Shareholders” at page 16.
Although we will
receive the exercise price of any Warrants exercised by the selling
shareholders, all net proceeds from the sale of the Shares offered by this
prospectus will go to the selling shareholders; we will not receive any proceeds
from such sales. Assuming all of the Warrants are exercised, we would receive
gross proceeds of approximately $1,743,480.
Our Common Stock is
listed on the Nasdaq Stock Market under the ticker symbol "CETV". On April 23,
2003, the last reported sale price of our Common Stock was $12.39 per
share.
---------------------
THE SHARES OFFERED
IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER
THE "RISK FACTORS" BEGINNING ON PAGE 9, IN DETERMINING WHETHER TO PURCHASE
SHARES OF OUR COMMON STOCK.
---------------------
NEITHER THE
SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this
Prospectus is ___________________, 2003.
TABLE
OF CONTENTS
Page
No person has been
authorized to give any information or to make any representations other than
those contained in this prospectus in connection with the offering made hereby,
and if given or made, such information or representations must not be relied
upon as having been authorized by Central European Media Enterprises Ltd., any
selling shareholder or by any other person. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that information herein is correct as of any time subsequent to
the date hereof. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the securities covered
by this prospectus, nor does it constitute an offer to or solicitation of any
person in any jurisdiction in which such offer or solicitation may not lawfully
be made.
WHERE
YOU CAN FIND MORE INFORMATION
We file annual,
quarterly and special reports, proxy statements and other information with the
Securities and Exchange Commission, and we have an internet website address at
http:/www.cetv-net.com. You may read and copy any document we file at the
Securities and Exchange Commission's public reference room located at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the Securities
and Exchange Commission at 1-800-732-0330 for further information on the
operation of such public reference room. You also can request copies of such
documents, upon payment of a duplicating fee, by writing to the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 or obtain
copies of such documents from the Securities and Exchange Commission's web site
at http://www.sec.gov.
The Securities and
Exchange Commission allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information we incorporate by reference is
considered to be part of this prospectus and information that we file later with
the Securities and Exchange Commission automatically will update and supersede
such information. We incorporate by reference the documents listed below and any
future filings we make with the Securities and Exchange Commission under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, prior
to the termination of the offering of the securities covered by this prospectus,
as amended:
(1). .Our Annual Report
on Form 10-K for the fiscal year ended December 31, 2002;
(2). .Our Form 8-K filed
on April 1, 2003;
(3). . Our Form 10-K/A
filed on April 25, 2003; and
(4). .The description of
our Capital Stock contained in our Registration Statement on Form S-3 (File
No. 333-12699), dated October 29, 1996, including any amendment or
report filed for the purpose of updating such information.
You may request a copy of these filings (including exhibits to such filings that
we have specifically incorporated by reference in such filings), at no cost, by
writing or telephoning our offices at the following address:
CENTRAL EUROPEAN
MEDIA ENTERPRISES, LTD.
Clarendon
House
Church Street,
Hamilton
HM CX
Bermuda
(441)
296-1431
You should rely
only on the information provided or incorporated by reference in this prospectus
or any related supplement. We have not authorized anyone else to provide you
with different information. The selling shareholders will not make an offer of
these shares in any state that prohibits such an offer. You should not assume
that the information in this prospectus or any supplement is accurate as of any
date other than the date on the cover page of such documents.
The following
summary is qualified in its entirety by the more detailed information and
financial statements and other information incorporated by reference in this
prospectus or appearing elsewhere in this prospectus.
Central European
Media Enterprises Ltd. (“CME”) is a Bermuda company that, together with its
subsidiaries and affiliates, invests in, and develops and operates national and
regional commercial television stations and networks in Central and Eastern
Europe. All references to the “Company,” “our,” or “we” include CME and its
direct and indirect Subsidiaries, and all references to “subsidiaries” include
each corporation or partnership in which CME has a controlling direct or
indirect equity or voting interest. All references in this prospectus to
"Warrants," refer to the Warrants to purchase shares of our Class A Common
Stock held by the selling shareholders.
The Company’s registered offices are located
at Clarendon House, Church Street, Hamilton HM CX Bermuda, and its telephone
number is 441-296-1431. Certain of the Subsidiaries maintain offices at, 8th
Floor,
Aldwych House, 71-91 Aldwych, London, WC2B 4HN, England, telephone number
44-20-7430-5430/1.
Corporate
Structure
CME was
incorporated on June 15, 1994 under the laws of Bermuda. CME’s assets are
held through a series of Dutch and Netherlands Antilles holding companies. It
operates in collaboration with local partners in all its markets. These local
partners all have shareholdings in the license or operating companies.
Laws, regulations
and policies in some of our markets have historically restricted the level of
direct or indirect interests that any non-local investor such as the Company may
hold in companies holding broadcast licenses. As a result some broadcast
licenses are held by companies majority owned by our local partners and we own
controlling interests in operating companies which provide programming,
advertising and other services to the license holding companies. References to
POP TV, Kanal A, PRO TV, Acasa, Markiza TV and Studio 1+1 in this registration
statement may be to either the license company or the operating companies or
both, as the case may be. We do not own a controlling voting interest in our
Slovak Republic operations but we are entitled to and obligated for 70% of the
economics.
The consolidated
financial statements incorporated by reference in this registration statement
include the accounts of our wholly-owned subsidiaries and the results of the
following entities as consolidated entities and reflect the interests of the
minority owners of these entities for the period presented, as applicable:
Romania (PRO TV and Media Vision), Slovenia (POP TV and Kanal A), Ukraine
(the Studio 1+1 Group), and the Czech Republic (CNTS). The results of operations
in the Slovak Republic (Markiza TV), certain entities in Romania and Slovenia
and certain entities in Ukraine in which we have, or during the periods
presented had, minority or non-controlling ownership interests, are included in
the incorporated consolidated financial statements using the equity method of
accounting.
Continuing
Operations
The following table
shows the key license companies, license expiration date, operating companies,
economic and voting interests of the Company in each of its operations at March
10, 2003.
|
Country
|
License
Expiration
|
TV
License
Company
|
CME
Voting
Interest
|
TV
Operating
Company
|
Economic
Interest
|
CME
Voting
Interest
|
|
|
|
|
|
|
|
|
Romania
(1) |
2003-2008
|
Pro
TV S.R.L. |
49%
|
MPI
|
66%
|
66%
|
| |
|
|
|
|
|
|
|
|
|
Media
Pro S.R.L. |
44%
|
Media
Vision |
70%
|
70%
|
| |
|
|
|
|
|
|
|
Slovenia
|
2012(2)
|
POP
TV |
96.85%(3)
|
Pro
Plus |
96.85%(3)
|
96.85%(3)
|
| |
|
|
|
|
|
|
|
|
2012
|
Kanal
A |
99.7%
|
|
|
|
| |
|
|
|
|
|
|
|
Slovak
Republic |
2007
|
Markiza-Slovakia
s.r.o. |
34%
|
STS
|
70%
(4) |
49%
|
| |
|
|
|
|
|
|
|
Ukraine
|
2006
|
Studio
1+1 |
18%
|
Innova,
IMS, Intermedia |
60%
|
60%
|
(1). On March 21, 2003
we agreed to transfer broadcasting operations in Romania from MPI to Pro TV, to
convert Pro TV to a joint stock company and to increase our equity interest in
Pro TV to 66%. We also agreed to transfer licenses held by Media Pro to Pro TV,
subject to approval by the Romanian Media Council. Licenses which cover 19% of
the Romanian population, including the license for Bucharest, expire beginning
in October 2003. To date, licenses have been renewed as they expired. The
remaining licenses expire on dates ranging from 2004 to 2008.
(2). . On July 15, 2002
the Slovenian Media Council agreed to extend all licenses held by POP TV and
Kanal A until August 2012.
(3). . As of January 30,
2003, POP TV became a subsidiary of Pro Plus; the change in ownership is subject
to registration.
(4). On January 18,
2002, we entered into an interest participation transfer agreement to acquire a
34% interest in Markiza. As a result of this acquisition, we are entitled to 70%
of STS' profits as opposed to 80% prior to the acquisition.
Operating
Environment
Our television stations and networks reach an aggregate of
approximately 69 million people in four countries. Our national private
television stations and networks in the Slovak Republic and Slovenia had the
leading nationwide audience share for 2002 and our television network in Romania
had the leading average audience share within its area of broadcast reach for
2002. In Ukraine, for 2002, our national private television station and network
had the leading nationwide average audience share for television stations
broadcasting in the Ukrainian language.
The market ratings of our stations in their respective
markets are reflected below.
|
Country |
CME Station
and Networks |
Launch Date |
Technical
Reach (1)
|
2001
Audience
Share (2) |
Market
Rank (2) |
| |
|
|
|
|
|
|
Romania |
PRO TV |
December 1995 |
68% |
19.2% |
1 |
| |
Acasa |
February 1998 |
52% |
6.2% |
4 |
|
|
|
|
|
|
|
Slovenia |
POP TV |
December 1995 |
87% |
29.3% |
1 |
| |
Kanal A |
October 2000 (3) |
80% |
11.0% |
3 |
|
|
|
|
|
|
|
Slovakia |
Markiza TV |
August 1996 |
96% |
48.2% |
1 |
| |
|
|
|
|
|
|
Ukraine |
Studio 1+1 |
January 1997 |
95% |
22.2% |
2 |
(1). “Technical Reach” measures the percentage of people in the
country who are able to receive the signals of the indicated stations and
networks. Source: CME stations.
(2). .Nationwide all day audience share and rank (except Romania
and Ukraine, which is audience share and rank within coverage area). Source:
(Romania: Peoplemeters CSOP Gallop/Taylor Nelson Sofres, Solvenia: Peoplemeters
AGB Media Services, Slovak Republic: Visio/MVK, Ukraine: ABG Ukraine).
(3).
.. Kanal A was originally launched in 1991 and re-launched in
October 2000 after CME assumed control of the operations, economics and
programming of Kanal A.
The following table sets forth the population, technical
reach, number of TV households, per capita GDP and cable penetration for those
countries of Central and Eastern Europe where we have broadcast
operations.
|
Country |
Population
(in
Millions)
(1) |
Technical
Reach
(in
Millions)
(2) |
TV
Households
(in
Millions)
(3) |
Per Capita
GDP 2000 (4) |
Cable
Penetration (5)
|
| |
|
|
|
|
|
|
Romania |
22.4 |
15.3 |
7.6 |
$1,695 |
51% |
| |
|
|
|
|
|
|
Slovenia |
2.0 |
1.7 |
0.7 |
$9,780 |
52% |
| |
|
|
|
|
|
|
Slovak Republic |
5.4 |
5.2 |
1.9 |
$3,804 |
28% |
| |
|
|
|
|
|
|
Ukraine |
49.1 |
46.6 |
18.6 |
$766 |
27% |
| |
|
|
|
|
|
|
Total |
78.9 |
68.8 |
28.8 |
|
|
(1).
.. Source: World Bank Group, 2001.
(2).
.. Source: CME Stations.
(3).
.. Source: Kagan World Media, European Television 2001. A TV
household is a residential dwelling with one or more television sets.
(4).
.. Source: World Bank Group 2001.
(5).
.. Source: IP European Key Facts: Romania and Slovak Republic:
Informa Media Group, European Television 6th Edition 2002. Slovenia and Ukraine: IP European Key
Facts, Television 2001.
Ukraine data refers to Urban only. Penetration refers to
the percentage of TV households connected to cable television.
Television Advertising Expenditures
The following table sets out the recent levels of
television advertising expenditures in those countries where we do business.
Note: All figures are our own estimates and are in $US millions.
|
Country |
1998 |
1999 |
2000 |
2001 |
2002 |
| |
|
|
|
|
|
|
Romania |
87 |
69 |
69 |
63 |
66 |
| |
|
|
|
|
|
|
Slovenia |
51 |
49 |
47 |
47 |
48 |
| |
|
|
|
|
|
|
Slovak Republic |
56 |
43 |
42 |
42 |
47 |
| |
|
|
|
|
|
|
Ukraine |
65 |
32 |
35 |
50 |
60 |
In Romania, the television advertising market grew by 5% in
2002 reversing earlier trends. In Slovenia television advertising revenues
remained constant in 2002 expressed in local currency terms. In the Slovak
Republic television advertising revenues increased by 3% in 2002 over 2001,
expressed in local currency terms. Further, the Slovenian tolar appreciated by
2% and the Slovak koruna appreciated by 7% against the dollar in 2002.
Therefore, television advertising expenditures in US Dollar terms increased by
2% in Slovenia in 2002 and 11% in the Slovak Republic. In Ukraine, television
advertising revenues continued their recent trend with a significant increase of
20% in 2002 over 2001 in US Dollar terms.
The European Union
If any Central or Eastern European country in which we
operate becomes a member of the European Union (the “EU”), our broadcast
operations in such country would be subject to relevant legislation of the EU,
including programming content regulations. Slovenia, the Slovak Republic and the
Czech Republic are expected to be admitted to the EU in the first wave of the
enlargement process in 2004. It is currently anticipated that Romania will be
admitted some time after 2007.
The EU’s Television Without Frontiers directive (the “EU
Directive”) sets forth the legal framework for television broadcasting in the
EU. It requires broadcasters, where “practicable and by appropriate means,” to
reserve a majority proportion of their broadcast time for “European works.” Such
works are defined as originating from an EU member state or a signatory to the
Council of Europe’s Convention on Transfrontier Television, as well as written
and produced mainly by residents of the EU or Council of Europe member states.
In addition, the EU Directive provides for a 10% quota or either broadcast time
or programming budget for programs made by European producers who are
independent of broadcasters. News, sports, games, advertising, teletext services
and teleshopping are excluded from the calculation of these quotas. Further, the
EU Directive provides for regulations on advertising, including limits on the
amount of time that may be devoted to advertising spots, including direct sales
advertising. The necessary legislation in Romania, Slovenia and the Slovak
Republic is now in line with the EU Directive and it has had no material adverse
effect on our operations.
Council of Europe
Our broadcast operations are located in countries which are
members of the Council of Europe, a supranational body through which
international conventions are negotiated. In 1990, the Council of Europe adopted
a Convention on Transfrontier Television, which provides for European
programming content quotas similar to those in the EU Directive. This Convention
has been ratified by some of the countries in which we operate, but all
countries in which we operate have already implemented its principles into their
national media legislation.
Operations by Country
Czech Republic
See Part I, Item 3, “Legal Proceedings” in our
Form 10-K, as amended by Form 10-K/A, for the fiscal year ended
December 31, 2002 (our “2002 10-K”) for a discussion on the ongoing dispute
between our subsidiary in the Czech Republic, CNTS, and CET in connection with
Nova TV. On March 14, 2003 a final award in the amount of $269,814,000 plus
interest at 10% from February 23, 2000 was determined in our favor in the
arbitration proceedings under the 1991 Bilateral Treaty between the Netherlands
and the Czech Republic. Our ability to collect this award determination from the
Czech Republic will have a material impact on our ability to continue operating.
The Czech Republic has filed a collateral challenge to the final partial award
(the liability determination by the arbitration tribunal) in the Swedish courts.
The hearing in Stockholm, Sweden ended on April 3, 2003, and the Swedish court
has informed the parties it will render its decision by May 15, 2003.
On March 31, 2003 we reached an agreement with the Czech
Republic providing that the Czech Republic pay the full amount of the final
award, plus interest at 10%, into an interest bearing escrow account no later
than April 28, 2003, with the money to be paid to us by the escrow agent within
two business days if the Swedish court upholds the partial final award in our
favor. The Czech government has since signed the escrow agreement and deposited
the requisite funds (approximately $355,000,000) into escrow. If the Swedish
court rules in the Czech Republic’s favor and does not uphold the partial final
award, the money will be returned to the Czech Republic. Separately, for Dutch
tax purposes, we have agreed to treat 35% of any amount that we collect from the
Czech Republic as restricted cash until the issue of the taxability of the award
for Dutch tax purposes is resolved by the courts or by mutual agreement with the
Dutch tax authorities. For more information, reference is made to our Form 8-K
filed with the SEC on April 1, 2003.
Romania
We own 66% of Media Pro International S.A. (“MPI”) through
which PRO TV, ACASA and Pro TV International are operated. MPI provides
programming to and sells advertising for the stations which comprise the PRO TV,
ACASA and Pro TV International networks.
We own 49% of the equity of PRO TV s.r.l. which holds 19 of
the 22 licenses for the stations that comprise the PRO TV, ACASA and PRO TV
International networks. A further three active television licenses and the
licenses for PRO FM and PRO AM radio networks are held by Media Pro s.r.l., a
company 44% owned by us.
Pursuant to a restructuring on March 21, 2003, we increased
our ownership interest in Pro TV to 66%. Following registration of that
increased interest, MPI will transfer broadcasting operations to Pro TV. In
addition, licenses held by Media Pro will be transferred to Pro TV following
receipt of approval from the Romanian Media Council.
Slovenia
We have an 96.85% equity and economic interest (subject to
Commercial Registry registration) in Pro Plus which provides all programming to
the broadcast license holders POP TV d.o.o. and Kanal A and sells all of
their advertising.
Pro Plus owns 100% of the equity of POP TV d.o.o. POP TV
holds all of the licenses for the Slovenian operations apart from those
effectively held by Kanal A. We control the operations, economics and the
programming of Kanal A, which is the second leading commercial television
broadcaster in Slovenia. 90% of the equity interest in Kanal A is being held by
Superplus Holding d.d. which is owned by individuals who are holding the share
of Superplus in trust for us. As of January 30, 2003, Pro Plus owns the
remaining 10% of Kanal A.
Slovak Republic
We have a 34% voting interest in Markiza-Slovenia s.r.o.
(“Markiza”) the license holding company for the Markiza TV license, and we have
a 49% voting interest and are entitled to 70% of the economic rights in
Slovenska Televizna Spolocnost s.r.o. (“STS”), the operating company for
Markiza.
Following elections in the Slovak Republic on
September 20, 2002, the ANO political party, founded by Mr. Pavol Rusko, a
shareholder in Markiza, obtained a number of seats in the national parliament.
On November 1, 2002, Mr. Rusko was appointed a deputy chairman of the
parliament. In order to comply with Slovak conflict of interest rules, Mr. Rusko
has resigned from his position as an executive of STS and of Markiza. In
addition, following receipt of our approval, Mr. Rusko has transferred his
indirect 17% ownership interest in Markiza to a third party. We do not believe
that the resignation of Mr. Rusko will have a significant impact on our Slovak
operations.
Ukraine
The Studio 1+1 Group consists of several entities in which
we hold direct or indirect interests. We own a 60% equity interest in the
operating companies servicing the license holding company, Studio 1+1. We have
an 18% indirect interest ownership in Studio 1+1. Studio 1+1 is involved in a
lawsuit challenging certain aspects of the granting of its television
broadcasting license. (For further discussion see Part I, Item 3
“Legal Proceedings” in our 2002 10-K.)
Investors in the securities offered hereby should consider
carefully the following significant risk factors, in addition to all of the
other information appearing or incorporated by reference in this Prospectus, in
connection with an investment in our Common Stock.
Risks Relating to Our US$100 million 9 3/8% and Euro 71.6 million 8 1/8% (approximately US$75 million) Senior Notes Due
in 2004
We may not be able to repay our US$100 million and Euro
71.6 million (approximately US$75 million) Senior Notes Due in 2004 .
In 1997 we issued Senior Notes, denominated in part in U.S.
dollars and in part in Euros. These Senior Notes, aggregating approximately $175
million in principal amount at December 31, 2002, are due on August 15,
2004. We do not expect cash on hand at December 31, 2002 plus revenues
which may be generated from operations between such date and August 15, 2004 to
be sufficient to fund the payment of
the Senior Notes at maturity. Our ability to refinance or
repay the Senior Notes will depend upon the outcome of pending litigation
concerning our former Czech Republic operations (see Part I, Item 3,
“Legal Proceedings” in our 2002 10-K and our Form 8-K filed on April 1, 2003)
and/or our ability to attract equity investors. If we are unsuccessful in these
respects and are not able to repay or refinance the Senior Notes, we are
unlikely to be able to continue operations.
Alternative sources of financing may include public or
private debt or equity financings, sale of assets or other financing
arrangements. Any additional equity or equity-linked financing may dilute our
common shares. In addition, such additional financing may or may not be
available or available on acceptable terms. Any future credit agreement or other
debt agreement may limit our ability to incur additional debt. These limits
could adversely affect our ability to finance our business plan.
. .
Our leverage, debt service obligations and debt instrument
restrictions could adversely affect our business
We are highly leveraged. As of December 31, 2002, we had
total consolidated debt of $205 million and shareholders' deficit of $96
million. Our consolidated interest expense for the year ended December 31, 2002
was $15.3 million. Our operating income for the year ended December 31, 2002 was
$13.4 million.
Our level of debt could have important consequences for our
business, including the following:
|
|
- we may have difficulty borrowing money in the
future for working capital, capital expenditures, acquisitions, general
corporate purposes or other purposes; |
|
|
- the payment of principal and interest on debt
reduces the amount of cash available to finance our operations and other
business activities; and |
|
|
- our debt level makes us more vulnerable to economic
downturns and adverse developments in our business.
|
The indenture for the Senior Notes restricts our ability
to, among other things, incur additional debt and make investments. In addition,
our subsidiaries' ability to incur debt beyond a certain amount is limited by
the indenture. These restrictions may impede our ability to finance programming
expenditures, acquisitions and other business opportunities.
Our $30 million financing agreement with GoldenTree Asset
Management contains negative covenants, including those restricting our ability
to incur additional debt, make new investments, pledge assets or sell assets
other than in the normal course of business. Security has been provided in the
form of guarantees and pledges. Guarantees have been provided by CME and Central
European Media Enterprises N.V. Pledges, which are exerciseable in the event of
default, secure the shares of CME Media Enterprises B.V., CME Ukraine B.V., CME
Slovenia B.V. and CME Romania B.V. These entities function as holding companies
for our operations.
Risks Relating to the Company
We have a history of losses and may not be profitable in
the future
We have incurred net losses since inception and we may
incur additional net losses for the next several years. As of December 31,
2002, we had an accumulated deficit of $452 million.
Our future ability to generate operating profits and net
profits will be dependent upon a number of factors that are difficult to
predict, such as our ability to:
|
|
- retain and renew licenses; |
|
|
- attract and maintain audiences; |
|
|
- generate advertising revenues; |
|
|
- develop additional revenue streams; and
|
|
|
- control costs in all areas, but particularly
programming costs. |
There are also a number of external factors over which we
have no control, such as the level of economic growth and consumer and
advertising spending in our markets.
We and our subsidiaries have a number of tax contingencies
that may be material
We have accrued tax liabilities and interest and penalties
on overdue tax liabilities, in the aggregate, of $23.3 million in our
December 31, 2002 balance sheet. Included in accrued tax liabilities is a
provision for $3 million related to our agreement with the Dutch tax
authorities. The Dutch tax authorities have agreed that payment of this amount
is to be made from any amount collected from the Czech Republic pursuant to the
Netherlands-Czech Bilateral Investment Treaty arbitration proceedings (See
Part I, Item 3 “Legal Proceedings” in our 2002 10-K). We have agreed
with the Dutch tax authorities that the question of taxability of any award
against the Czech Republic shall be determined by the Dutch tax courts based
upon an agreed statement of fact. Until that court decision, we have agreed with
the Dutch tax authorities to deposit 35% of the net proceeds of any amount
collected from the Czech Republic pursuant to the Netherlands-Czech Bilateral
Investment Treaty arbitration proceedings in a nominated bank account. Any such
deposit will be treated as restricted cash. The major portion of estimated
interest and penalties on overdue tax liabilities relate to the outstanding tax
liability at our Romanian subsidiaries. A recent agreement with the Romanian tax
authorities has reduced and re-scheduled a portion of these interest and penalty
charges in return for specific deposits and an agreed repayment schedule.
Penalties of up to $5 million may be imposed if the repayment schedule and the
conditions of the agreement are not met. Should the Romanian tax authorities
demand immediate payment of all potential tax liabilities, our Romanian
operations would experience difficulties in continuing to operate.
Our holding company structure limits our access to cash
flow
. .
We conduct all of our operations through subsidiaries and
affiliated companies. Accordingly, our primary internal source of cash and our
ability to service debt are dependent upon the earnings of our subsidiaries and
affiliated companies and the distribution of those earnings to, or upon loans or
other payments of funds by those subsidiaries to, CME. We may not be able to
compel certain of our subsidiaries and affiliated companies to make
distributions to service the Senior Notes and other CME obligations. Our ability
to obtain dividends or other distributions is subject to, among other things,
restrictions on dividends under applicable local laws and foreign currency
exchange regulations of the jurisdictions in which our subsidiaries operate. The
subsidiaries’ or affiliated companies ability to make distributions to CME is
also subject to their having sufficient funds from their operations legally
available for the payment thereof which are not needed to fund their operations,
obligations or other business plans and, in some cases, the approval of the
other partners, stockholders or creditors of these entities. The laws under
which our operating subsidiaries and affiliated companies are organized provide
generally that dividends may be declared by the partners or shareholders out of
yearly profits subject to the maintenance of registered capital and required
reserves and after the recovery of accumulated losses. If our subsidiaries or
affiliated companies are unable or unwilling to make distributions to CME and we
are
unable to obtain additional debt or equity financing, we
may be unable to continue to service the Senior Notes.
We do not have sole management control of our
unconsolidated affiliates
We own certain subsidiaries and affiliated companies
jointly with various strategic partners. We have management control over the
subsidiaries in which we have a majority interest. However, we are not able to
control the operations, strategies and financial decisions of affiliated
companies such as Markiza TV in the Slovak Republic in which we are a minority
shareholder. Therefore, without the consent of the relevant partners, we may be
unable to cause these subsidiaries and affiliated companies to distribute funds,
to implement strategies or to make programming decisions that we might
favor.
We are subject to risks relating to fluctuations in
exchange rates
Our reporting currency is the US dollar but a significant
portion of our consolidated revenues and costs are in other currencies,
including programming rights expenses and interest on debt. Changes, mainly in
the value of the Euro as compared to the US dollar, may have an adverse effect
on our reported results of operations and financial condition.
We are also exposed to risks related to non-US dollar
borrowings, particularly our Euro 71.6 million ($75 million) Senior Note debt.
As the net position of our unhedged foreign currency transactions may fluctuate,
our earnings may be negatively affected.
For a detailed analysis of our exposure to exchange rate
risk, see Part II, Item 7A “Quantitative and Qualitative Disclosure about Market
Risk” and “Foreign Currency” in Part II, Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” both in our 2002
10-K.
Risk Factors Relating to Our Operating Environment
We face legal and regulatory challenges in several
jurisdictions in which we operate
Ukraine
In 2001 AITI, a television station in Ukraine, commenced a
second court action in Ukraine against the Ukraine Media Council challenging
certain aspects of the granting to Studio 1+1 of its television broadcast
license in Ukraine. Studio 1+1 is involved in this litigation as a third party
acting together with the Ukraine Media Council. The claim is almost identical to
one which was previously brought by AITI and was dismissed on April 5, 2001 by
the Supreme Arbitration Court of Ukraine.
AITI’s allegations are that Studio 1+1 has, in effect, been
granted two licenses by the Ukraine Media Council, entitling it to in excess of
32 hours of broadcast time a day on Ukraine's nationwide Channel N2 (UT-2).
Further, AITI alleged that Studio 1+1 never paid the required license fee. (See
Part I, Item 3 “Legal Proceedings” in our 2002 10-K). If the decision in the
Ukraine court system is ultimately unfavorable, it could result in a loss of the
broadcast license of Studio 1+1.
Romania
We were involved in a dispute with a minority shareholder
in MPI, Mr. Tiriac, during 2002. As part of this dispute, Mr. Tiriac and his
representatives commenced three court actions against MPI. At the request of Mr.
Tiriac’s lawyers all of these cases were suspended towards the end of 2002 and
are in the process of being formally withdrawn. The withdrawal of these court
actions was part of an overall
agreement reached between Mr. Tiriac and Mr. Sarbu (another
MPI minority shareholder) under which Mr. Tiriac agreed to sell his shareholding
in MPI and the Romanian license holding companies in exchange for a multi-year
series of payments from Mr. Sarbu.
In September 2002, the Romanian Media Council notified all
television stations in Romania that they would like to see their operations
restructured by January 2003 so that the license holding companies become the
main operators of the broadcasting licenses they hold. The Romanian Media
Council has given some guidance on how it interprets the new audio-visual law in
relation to this restructuring. At a formal meeting on September 19, 2002 the
Council expressed their view that exclusive operating agreements, such as exists
between our subsidiary MPI and the two Romanian license holding companies, are
not permissible under the new law. On March 21, 2003, we agreed with our
partners to transfer broadcasting operations from MPI to Pro TV, to convert Pro
TV to a joint stock company and to increase our equity interest in Pro TV to
66%. It was also agreed with our partners that the secondary license holding
company, Media Pro SRL, would apply to the Romanian Media Council to transfer
the licenses it owns to Pro TV SRL, as this is also permitted under the new
audio-visual law. We are in the process of commencing the legal and regulatory
steps required in order to complete this restructuring procedure.
As at December 31, 2002, 33% of the Romanian subsidiaries’
accounts receivable balance was more than 360 days old. On our Consolidated
Balance Sheet, the total provision for bad debt is $7,481,000, of which the
provision for Romanian bad debts is $5,733,000. The total gross accounts
receivable in respect to our Romanian operations is $15,544,000 (included in
“Accounts Receivable” in the Consolidated Balance Sheet - see Part II, Item 8 of
our 2002 10-K). While there has been improvement in 2002 in both the percent of
total receivables represented by Romanian receivables and in the “aging” of the
receivables, they still represent a disproportionately large part of our total
receivables in both categories.
Risks Relating to Our Industry
Our licenses may not be renewed
The licenses to operate our broadcast operations are
effective for the following periods:
|
Slovenia |
The licenses of our operations in Slovenia expire in
2012 |
|
Slovak Republic |
The license of our partner in the Slovak Republic
expires in 2007 |
|
Ukraine |
The license to provide programming and sell
advertising to UT-2 in Ukraine expires in 2006 |
|
Romania |
Licenses which cover 19% of the Romanian population,
including the license for Bucharest, expire beginning in October 2003. To
date, licenses have been renewed as they expired. The remaining licenses
expire on dates ranging from 2004 to 2008 |
In Romania, the Slovak Republic and Slovenia, local
regulations do contain a qualified presumption for extensions of broadcast
licenses. However, licenses in these countries may nevertheless not be renewed
upon the expiration of their current terms. The failure of any such licenses to
be renewed may have a material adverse effect on our operations.
Our operating results are dependent on the sale of
commercial advertising time in developing markets
Our business relies on advertising revenues, which depends
partly upon prevailing general economic conditions. Our advertising revenues
depend on our stations' broadcast reach, television
viewing levels, the relative popularity of our programming
and the pricing of advertising time. Furthermore, increases in advertising
spending have generally corresponded to economic recoveries, while decreases
have generally corresponded to general economic downturns and recessions.
Advertising spending in 2002 decreased in the United States of America and most
European countries but not in the countries in which we operate. Advertising
spending or advertising spending growth in our markets may decline in the
future. If our television audience shares decline for any reason, we may not be
able to maintain our current levels of advertising income or the rates we can
charge advertisers. We must also compete for advertising revenues with other
forms of advertising media, such as radio, newspapers, magazines, outdoor
advertising, transit advertising, telephone directory advertising, on-line
advertising and direct mail. Any decline in advertising revenues may adversely
affect our results.
Risks Relating to the Markets in Which We Operate
Our operations are in developing markets
Our revenue generating operations are located in Central
and Eastern Europe, namely Romania, the Slovak Republic, Slovenia and Ukraine,
and have a country risk as follows:
|
Country |
Rating |
Detail of Rating |
|
|
|
|
Slovenia |
A2 |
Default probability is still weak even in the case
when one country's political and economic environment or the payment
record of companies are not as good as A1-rated countries.
|
| |
|
|
|
Slovak Republic |
A4 |
An already patchy payment record could be further
worsened by a deteriorating political and economic environment.
Nevertheless, the probability of a default is still acceptable.
|
| |
|
|
|
Romania |
B |
An unsteady political and economic environment is
likely to affect further an already poor payment record.
|
| |
|
|
|
Ukraine |
D |
The high risk profile of a country's economic and
political environment will further worsen a generally very bad payment
record. |
Source : Coface USA. Country ratings issued by the Coface
Group measure the average default risk on corporate payments in a given country
and indicate to what extent a company's financial commitments are affected by
the local business, financial and political outlook. Coface continuously
monitors 140 countries using a spectrum of indicators incorporating political
factors; risk of currency shortage and devaluation; ability to meet financial
commitments abroad; risk of a systemic crisis in the banking sector; cyclical
risk; and payment behavior for short term transactions.
These markets have economic and legal systems, standards of
corporate governance and business practices which continue to develop. This may
cause us difficulties in exercising our shareholder and economic rights.
Although the general trend in the markets in which we operate and intend to
operate has been toward more open markets and trade policies and the fostering
of private economic activity, the governments in the region may not continue to
pursue such policies and such policies could be altered significantly,
especially in the event of a change in leadership, social or political
disruption or unforeseen circumstances affecting economic, political or social
life. Accordingly, social unrest, political instability, economic distress or
other factors beyond our control in any such Central or Eastern European country
could have a material adverse effect on our business.
We are subject to a high level of government
regulation
Our broadcast operations are subject to extensive
government regulation as to the issuance, renewal, transfer and ownership of
station licenses, as well as the timing and content of programming and the
timing, content and amount of commercial advertising permitted. At the present
time, of the countries in which we operate, only Ukraine’s regulatory system
restricts the amount of direct interest which we may hold in television
stations. However, in all our markets, there are restrictions on our ability to
own an equity interest in more than one broadcaster. In Ukraine and in countries
where we do not control the license holding companies, we have arrangements to
provide programming, advertising and other services (including management
services) to the station. These arrangements may be subject to regulatory review
in the future which may limit our influence with respect to our local broadcast
partners and/or deny us the opportunity to profit from our investment. There are
also regulations requiring that certain percentages of programming be produced
or originated in local markets. The cost of programming could also increase as a
result of political initiatives taken by the European Union to increase the
amount of European-produced programming broadcast. In addition, broadcast
regulations and license conditions in our markets impose operating conditions
relating, for example, to required amounts of broadcasting and the content and
quantity of advertising which may be broadcast. While we believe that we and our
subsidiaries and affiliated companies are in compliance in all material respects
with applicable laws, rules, regulations and licenses, more restrictive laws,
rules, regulations or enforcement policies may be adopted in the future which
could make compliance more difficult or expensive or otherwise adversely affect
our business or prospects.
Enforcement of civil liabilities and judgments may be
difficult
CME is a Bermuda company, and substantially all of our
assets and all of our operations are located, and all of our revenues are
derived, outside the United States of America. However, it may not be possible
for investors to enforce outside the United States of America judgments against
CME obtained in the United States of America in any civil actions, including
actions predicated upon the civil liability provisions of the United States of
America federal securities laws. In addition, certain of our directors and
officers are non-residents of the United States of America, and all or a
substantial portion of the assets of such persons are or may be located outside
the United States of America. As a result, it may not be possible for investors
to effect service of process within the United States of America upon such
persons, or to enforce against them judgments obtained in the United States of
America courts, including judgments predicated upon the civil liability
provisions of the United States of America federal securities laws. There is
uncertainty as to whether the courts of the countries in which we operate would
enforce (i) judgments of United States of America courts obtained against us or
such persons predicated upon the civil liability provisions of the United States
of America federal and state securities laws or (ii) in original actions brought
in such countries, as applicable, liabilities against us or such persons
predicated upon the United States of America federal and state securities laws.
There is no treaty in effect between the United States and Bermuda providing for
the enforcement of United States judgments in Bermuda, and there are grounds
upon which Bermuda courts may decline to enforce the judgments of the United
States courts. The question whether a United States judgment would be
enforceable in Bermuda against us or our affiliates, directors, officers or
experts depends upon whether the United States Court that entered such judgment
is recognized by the Bermuda Court as having jurisdiction over the judgment
debtor, as determined by reference to Bermuda conflict of law rules. In
addition, certain remedies available under the laws of United States
jurisdictions, including certain remedies available under the United States
federal securities laws, may not be allowed or enforceable in Bermuda courts to
the extent that they are penal or contrary to Bermuda’s public policy. No
original claim may be brought in Bermuda against us, or our affiliates,
directors, officers or experts for violation of the United States federal
securities laws because these laws have no extraterritorial jurisdiction under
Bermuda law and do not have force of law in Bermuda. A Bermuda court may,
however, impose civil liability on us, or our affiliates, directors, officers or
experts if the facts alleged in a complaint constitute or give rise to a cause
of action under Bermuda law.
Risks Relating to Our Common Shares
The price of our common shares is likely to remain
volatile
The market price of our common shares is likely to be
volatile. Events that could cause future volatility may include, among other
things:
|
|
- the results of the collateral challenge to the
Czech award; and |
|
|
- conditions or trends in Europe and our
markets. |
These and other factors, some or all of which may be beyond
our control, may materially adversely affect the market price of our common
shares, regardless of future operating performance.
We will not receive any of the proceeds from the sale of
the Shares offered by this prospectus. All proceeds from the sale of the Shares
covered by this prospectus will be for the account of the selling shareholders
named below. See “ Selling Shareholders” and “Plan of Distribution.” However,
assuming all of the Warrants are exercised by the selling shareholders, and that
the selling shareholders do not utilize any of the “cashless exercise”
provisions contained in the Warrants, we would receive approximately $1,753,480
in gross proceeds from those exercises. Any such proceeds will be used for
working capital purposes.
The shares covered by this prospectus will be issued upon
the exercise of the Warrants. The number of Shares that may be actually sold by
the selling shareholders will be determined by such selling shareholders.
The selling shareholders are the persons and/or entities
listed in the table below who own Warrants to purchase Shares. We are
registering for the eleven selling shareholders named herein, an aggregate of
348,000 Shares.
Pursuant to a Senior Secured Credit Agreement dated
July 31, 2002 (the “Agreement”) among CME Media Enterprises BV, our
wholly-owned subsidiary, Golden Tree Asset Management LLC and its affiliates
and/or other noteholders, we issued $15,000,000 principal amount of 12% Senior
Secured Notes due June 15, 2004 and Warrants to purchase an aggregate of
348,000 Shares at an initial exercise price of $5.01 per share (as adjusted for
two subsequent two-for-one stock splits). Under the Agreement, we have an option
to draw down an additional $15 million, in which case warrants to purchase
348,000 additional shares of our Class A Common Stock will be issuable by us. In
the event of early repayment of the Senior Secured Notes, we, at our option, may
make a cash payment or issue additional warrants, to a maximum of Warrants to
purchase an additional 348,000 shares of our Class A Common Stock (per
$15,000,000 of Senior Secured Notes issued), so that a 40% annual rate of
return, inclusive of interest, of 12% is achieved by the lenders. At maturity we
may, to meet our obligations, make a cash payment or issue additional warrants,
to a maximum of 348,000 shares of our Class A Common Stock (per $15,000,000 of
Senior Secured Notes issued).
The Agreement contains negative covenants, including those
restricting our ability to incur additional debt, make new investments, pledge
assets or sell assets other than in the normal course of business.
Security has been provided in the form of guarantees and
pledges. Guarantees have been provided by CME and Central European Media
Enterprises N.V. Pledges, which are exerciseable in the event of default, secure
the shares of CME Media Enterprises B.V., CME Ukraine B.V., CME Slovenia B.V.
and CME Romania B.V., which entities function as holding companies for our
operations in their respective jurisdictions.
No commissions are payable by us or the holders of the
Warrants in connection with a conversion or exercise.
The following table sets forth, as of March 20, 2003:
(1) the name of each selling shareholder, (2) the number of Shares beneficially
owned by each selling shareholder, including the number of Shares purchasable
upon exercise of warrants, (3) the maximum number of Shares which the selling
shareholders can sell pursuant to this prospectus and (4) the number of Shares
that the selling shareholders would own if they sold all their Shares registered
by this prospectus. Each selling shareholder will receive all of the net
proceeds from the sale of its Shares offered by this prospectus.
Because the selling shareholders may sell all or part of
their Shares pursuant to this prospectus and this offering is not being
underwritten on a firm commitment basis, we cannot be certain of the number and
percentage of Shares that the selling shareholders will hold in the aggregate at
the end of the offering covered by this prospectus.
|
Name of Selling Shareholder |
Number of Shares
of Class A
Common Stock
Owned before
Offering |
Number of
Shares of
Class A
Common Stock
being Registered
by this Prospectus |
Number of
Shares of
Class A
Common Stock
to be Owned
after this
Offering |
| |
|
|
|
|
Stephen Adams Living Trust |
5,045 |
5,045 |
0 |
|
Alpha U.S. Subfund II, LLC |
4,872 |
4,872 |
0 |
|
DB Structured Products, Inc. |
14,268 |
14,268 |
0 |
|
Broad Foundation |
2,320 |
2,320 |
0 |
|
B&W Master Tobacco Retirement Trust
|
8,700 |
8,700 |
0 |
|
The University of Chicago |
7,831 |
7,831 |
0 |
|
Eli Broad |
2,320 |
2,320 |
0 |
|
Goldentree High Yield Value Master Fund, L.P.
|
9,164 |
9,164 |
0 |
|
Goldentree High Yield Master Fund, Ltd.
|
177,480 |
177,480 |
0 |
|
Goldentree High Yield Opportunities I, L.P.
|
81,200 |
81,200 |
0 |
|
Goldentree High Yield Opportunities II, L.P.
|
34,800 |
34,800 |
0 |
The selling shareholders may from time to time offer and
sell their Shares offered by this prospectus. We have registered their shares
for resale to provide them with freely tradable securities. However,
registration does not necessarily mean that they will offer and sell any or all
of their Shares.
Offer and Sale of Shares
The selling shareholders, or their pledgees, donees,
transferees or other successors-in-interest who receive shares offered hereby
from a selling shareholder as a gift, pledge, partnership distribution or other
non-sale related transfer, may offer and sell their Shares in the following
manner:
The selling shareholders, or their pledgees, donees,
transferees or other successors-in-interest, may sell their Shares in one or
more of the following types of transactions:
From time to time, a selling shareholder may transfer,
pledge, donate or assign its shares of common stock to lenders or others and
each of such persons will be deemed to be a “selling shareholder” for purposes
of this prospectus. The number of Shares beneficially owned by a selling
shareholder may decrease as and when it takes such actions. The plan of
distribution for the selling shareholder’s Shares sold under this prospectus
will otherwise remain unchanged, except that the transferees, pledgees, donees
or other successors will be a selling shareholder hereunder.
A selling shareholder may enter into hedging, derivative or
short sale transactions with broker-dealers in connection with sales or
distributions of the shares or otherwise. In these transactions, broker-dealers
may engage in short sales of the Shares in the course of hedging the positions
they assume with the selling shareholder. A selling shareholder also may sell
Shares short and redeliver the Shares to close out short positions and engage in
derivative or hedging transactions. A selling shareholder may enter into option
or other transactions with broker-dealers which require the delivery to the
broker-dealer of the Shares. The broker-dealer may then resell or otherwise
transfer the shares under this prospectus. A selling shareholder also may loan
or pledge the Shares to a broker-dealer. The broker-dealer may sell the loaned
Shares or upon a default the broker-dealer may sell the pledged Shares under
this prospectus.
Selling Through Broker-Dealers
The selling shareholders may select broker-dealers to sell
their Shares. Broker-dealers that the selling shareholders engage may arrange
for other broker-dealers to participate in selling such Shares. The selling
shareholders may give such broker-dealers commissions or discounts or
concessions in amounts to be negotiated immediately before any sale. In
connection with such sales, these broker-dealers, any other participating
broker-dealers, and the selling shareholders and certain pledgees, donees,
transferees and other successors in interest, may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act of 1933 in connection
with the sale of the Shares. Accordingly, any such commission, discount or
concession received by them and any profit on the resale of the Shares purchased
by them may be deemed to be underwriting discounts or commissions under the
Securities Act of 1933. Because the selling shareholders may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act of
1933, the selling shareholders will be subject to the prospectus delivery
requirements of the Securities Act of 1933. In addition, any securities covered
by this prospectus which qualify for sale pursuant to Rule 144 promulgated under
the Securities Act of 1933 may be sold under Rule 144 rather than pursuant to
this prospectus. The selling shareholders have advised us that they will not
enter into any agreements, understandings or arrangements with any underwriters
or broker-dealers regarding the sale of their securities without written notice
to us. There is no underwriter or coordinating broker acting in connection with
the proposed sale of Shares by the selling shareholders.
Supplemental Prospectus Regarding Material
Arrangements
If and when a selling shareholder notifies us that it has
entered into a material arrangement with a broker-dealer for the sale of its
Shares offered by this prospectus through a block trade, special offering,
exchange or secondary distribution or a purchase by a broker-dealer, we will
file a supplemental prospectus, if required, pursuant to Rule 424(c) under the
Securities Act of 1933.
Expenses of Selling Shareholders
We will bear all costs, expenses and fees in connection
with the registration of the Shares. We have agreed to indemnify and hold the
selling shareholders harmless against certain liabilities under the Securities
Act that could arise in connection with the sale by the selling shareholders of
the Shares. The
selling shareholders will bear all commissions and
discounts, if any, attributable to the sales of the Shares. The selling
shareholders may agree to indemnify any broker-dealer or agent that participates
in transactions involving sales of the Shares against certain liabilities,
including liabilities arising under the Securities Act.
Compliance with State Securities Laws
We have not registered or qualified the shares of Common
Stock offered by this prospectus under the laws of any country, other than the
United States. In certain states in the United States, the selling shareholders
may not offer or sell their Shares unless (1) we have registered or qualified
such Shares for sale in such states; or (2) we have complied with an available
exemption from registration or qualification. Also, in certain states, to comply
with such states' securities laws, the selling shareholders must offer and sell
their Shares only through registered or licensed broker-dealers.
Limitations Imposed by Exchange Act of 1934 Rules and
Regulations
Certain provisions of the Securities Exchange Act of 1934,
and related rules and regulations, will apply to the selling shareholders and
any other person engaged in a distribution of Shares. Such provisions may (1)
limit the timing of purchases and sales of any of the Shares by the selling
shareholders or such other person; (2) affect the marketability of such Shares;
and (3) affect the broker-dealers' market-making activities with respect to such
Shares.
Suspension of this Offering
We may suspend the use of this prospectus if we learn of
any event that causes this prospectus to include an untrue statement of material
fact or omit to state a material fact required to be stated in the prospectus or
necessary to make the statements in the prospectus not misleading in light of
the circumstances then existing. If this type of event occurs, a prospectus
supplement or post-effective amendment, if required, will be distributed to the
selling shareholders.
American Stock Transfer & Trust Company, located at 59
Maiden Lane, Plaza Level, New York, New York 10038, is the transfer agent and
registrar for our Class A Common Stock.
Certain legal matters with respect to the validity of the
issuance of the shares of Common Stock offered by this prospectus have been
passed upon on behalf of the Company by Conyers Dill & Pearman, Hamilton,
Bermuda.
The financial statements and the related financial
statements schedule incorporated in this prospectus by reference from Central
European Media Enterprises Ltd.’s Annual Report on Form 10-K, as amended by Form
10-K/A, for the year ended December 31, 2002 have been audited by Deloitte &
Touche, independent auditors, as stated in their reports (which reports express
unqualified opinions and include: i) with respect to Central European Media
Enterprises Ltd., an explanatory paragraph regarding the Company’s change in
accounting for goodwill and other intangible assets upon adoption of Statement
of Financial Accounting Standards No. 142, “Goodwill and Other Intangible
Assets” and Deloitte & Touche’s audit procedures with respect to the related
disclosures added to revise the fiscal 2000 and 2001 consolidated financial
statements that were audited by other auditors who have ceased operations and
for which Deloitte & Touche have expressed no opinion or other form of
assurance other than with respect to
such disclosures; ii) with respect to Super Plus Holdings
d.d., an explanatory paragraph relating to Super Plus Holdings d.d.’s, ability
to continue as a going concern), which are incorporated herein by reference, and
have been so incorporated in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
Our financial statements as of and for each of the two
years in the period ended December 31, 2001 incorporated by reference in this
prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen, independent public accountants, as indicated in their reports
with respect thereto, and are incorporated by reference herein in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
reports.
On July 31, 2002, we announced that we engaged Deloitte
& Touche to replace Arthur Andersen as our independent auditors. During each
of the fiscal years in the two year period ended December 31, 2001 and the
subsequent interim periods preceding the change of auditors, we had no
disagreements with Arthur Andersen on any matter of accounting principles or
practices, financial statement disclosures or auditing scope or procedures
which, if not resolved to Arthur Andersen’s satisfaction, would have caused it
to make reference to the disagreement in connection with its report.
We have not been able to obtain, after reasonable efforts,
the written consent of Arthur Andersen to our naming it in this prospectus as
having certified our consolidated financial statements for the two years ended
December 31, 2001, as required by Section 7 of the Securities Act. Accordingly,
we have dispensed with the requirement to file its consent in reliance upon Rule
437a of the Securities Act. Because Arthur Andersen has not consented to the
inclusion of its report in this prospectus, you may have no effective remedy
against Arthur Andersen under Section 11 of the Securities Act for any untrue
statements of a material fact contained in the financial statements audited by
Arthur Andersen, or any omissions to state a material fact required to be stated
therein. In addition, the ability of Arthur Andersen to satisfy any claims
(including claims arising from its provision of auditing and other services to
us) may be limited as a practical matter due to recent events regarding Arthur
Andersen.
CENTRAL EUROPEAN MEDIA ENTERPRISES, LTD.
348,000 Shares
Common Stock
_________________________
PROSPECTUS
_________________________
______________, 2003
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and
Distribution.
Expenses to be paid by us in connection with the
issuance and distribution of the securities being registered are as follows:
|
Registration Fees |
|
$ |
350
|
|
|
Legal
Fees and Expenses |
|
|
30,000
|
* |
|
Accounting Fees and Expenses |
|
|
10,000
|
* |
|
Miscellaneous |
|
|
2,150
|
* |
| |
|
|
|
|
Total
|
|
$ |
42,500
|
|
| |
|
|
|
|
_________________ |
|
|
|
|
|
*Estimated |
|
|
|
|
The selling shareholders will pay none of the expenses
incident to the registration of the selling shareholders’ shares, except for
their own legal fees and for any selling discounts or commissions paid to
brokers or dealers engaged by the selling shareholders.
ITEM 15. Indemnification of Directors and Officers.
Under Bermuda law and the Company’s Memorandum of
Association and Bye-laws, the Directors, Secretary and other officers (such term
to include 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 every auditor for the time
being 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, are 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, 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 such indemnity does not extend to any matter in respect of any
fraud or dishonesty which may attach to any of said persons.
ITEM 16. Exhibits.
|
Exhibit Number
|
Description
|
| |
|
|
4.1 |
Form of Class A Common Stock certificate
(1)
|
|
4.2 |
Common Stock Registration Rights Agreement dated as
of July 31, 2002 (2)
|
|
4.3 |
Common Stock Purchase Warrant Agreement dated August,
2002 (3) |
|
4.4 |
Memorandum of Association (4)
|
|
4.5 |
Bye-Laws (5)
|
|
4.6 |
Amendments to Bye-Laws (6) |
|
5.1 |
Opinion of Conyers Dill & Pearman regarding the
validity of the Class A Common Stock being registered
|
|
23.1 |
Consent of Conyers Dill & Pearman (contained in
Exhibit 5.1) |
|
23.2 |
Consent of Deloitte & Touche – London
|
|
23.3 |
Consent of Deloitte & Touche – Slovak
Republic |
|
23.4 |
Consent of Deloitte & Touche – Slovenia
|
|
23.5 |
Consent of Deloitte & Touche – Slovenia
|
|
23.6 |
We have attempted and have been unable to obtain from
Arthur Andersen (“Andersen”) a consent for the reissuance of their report
on our financial statements as of and for the period December 31, 2001 and
December 31, 2000. As such, we have included a copy of Andersen’s prior
audit report in our Form 10-K, as amended by Form 10-K/A, for the fiscal
year ended December 31, 2002 (incorporated by reference into this
Registration Statement) and prominently disclose the fact that the report
is a copy and that it has not been reissued by Andersen. We do not include
a consent from Andersen but include disclosure in this filing of the
limitations on recovery by investors posed by the lack of Andersen’s
consent. |
|
24.1 |
Form of Power of Attorney
|
_______________
(1). Incorporated herein by reference to Exhibit 4.01 to
Amendment No. 1 to our Registration Statement on Form S-1 (file No. 33-80344)
filed with the Commission on August 19, 1994.
(2).
.. Incorporated herein by reference to Exhibit 10.48 to
our Quarterly Report on Form 10-Q filed with the Commission on August 7,
2002.
(3).
.. Incorporated herein by reference to Exhibit 10.49 to our
Quarterly Report on Form 10-Q filed with the Commission on August 7,
2002.
(4).
.. Incorporated herein by reference to Exhibit 3.01 to our
Registration Statement on Form S-1 (file No. 33-80344) filed with the Commission
on June 19, 1994.
(5).
.. Incorporated by reference to Exhibit 3.02 to our Annual
Report on Form 10-K for the fiscal year ended December 31, 2000.
(6).
.. Incorporated by reference to Exhibits A, B and C to our
definitive Proxy Statement dated and filed with the Commission on April 18,
2002.
Item 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a).
.. To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i). . to include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii). .to reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or its most recent
post-effective amendment) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in this Registration Statement. Notwithstanding the
foregoing, any increase or decrease in the volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered), and any deviation from the low or high end of the estimated maximum
offering range, may be reflected in the form of prospectus filed with the
Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii). .to include any material information with respect to the
plan of distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that the undertakings set forth in
paragraphs (a)(i) and (a)(ii) above do not apply if the information required
with or furnished to the Securities and Exchange Commission to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Securities and Exchange Commission by the
Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this Registration Statement.
(b).
..That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
BONA FIDE offering thereof.
(c).
..To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(d).
..That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act that is incorporated by reference in
this Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(e).
..Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referred to in Item 15 of
this Registration Statement, or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(f).
..For the purposes of determining liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b) (1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
SIGNATURES
Pursuant to the requirements of the
Securities Act of 1933, as amended, the Registrant certifies that it has
reasonable grounds to believe that it meets all of the requirements for filing
on Form S-3 and it has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of London,
England on this 25 th day of April 2003.
| |
|
|
| |
CENTRAL EUROPEAN MEDIA ENTERPRISES,
LTD. |
|
|
|
|
|
/s/ Frederic T. Klinkhammer
|
| |
|
|
By: |
Frederic T. Klinkhammer |
| |
Chief Executive Officer
|
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
|
SIGNATURE
|
TITLE |
DATE |
| |
|
|
|
/s/ Frederic T.
Klinkhammer |
|
|
|
Frederic T. Klinkhammer |
Chief Executive Officer |
April 25, 2003 |
|
|
|
|
| |
|
|
| |
|
|
|
/s/ Wallace Macmillan
|
|
|
|
Wallace Macmillan |
Vice President – Finance, |
April 25, 2003 |
|
|
Chief Financial and |
|
|
|
Accounting Officer |
|
| |
|
|
| |
|
|
|
/s/ Charles R. Frank,
Jr.* |
|
|
|
Charles R. Frank, Jr. |
Director |
April 25, 2003 |
| |
|
|
| |
|
|
|
/s/ Herbert A.
Granath* |
|
|
|
Herbert A. Granath |
Director |
April 25, 2003 |
| |
|
|
|
|
|
|
|
/s/ Alfred W.
Langer* |
Director |
April 25, 2003 |
|
Alfred W. Langer |
|
|
|
|
|
|
|
|
|
|
|
/s/ Mark Wyllie*
|
|
|
|
*By Mark Wyllie, Attorney in Fact |
|
|
|
|
|
|
|
SIGNATURE
|
TITLE |
DATE |
| |
|
|
|
/s/ Ronald S.
Lauder* |
|
|
|
Ronald S. Lauder |
Director |
April 25, 2003 |
| |
|
|
| |
|
|
|
/s/ Bruce Maggin*
|
|
|
|
Bruce Maggin |
Director |
April 25, 2003 |
| |
|
|
| |
|
|
|
/s/ Jacob Z.
Schuster* |
|
|
|
Jacob Z. Schuster |
Director |
April 25, 2003 |
| |
|
|
| |
|
|
|
/s/ Marie-Monique
Steckel* |
|
|
|
Marie-Monique Steckel |
Director |
April 25, 2003 |
/s/ Mark Wyllie
*By Mark Wyllie, Attorney in Fact
EXHIBIT INDEX
|
Exhibit Number
|
Description
|
| |
|
|
5.1 |
Opinion of Conyers Dill & Pearman
|
|
23.2 |
Consent of Deloitte & Touche – London
|
|
23.3 |
Consent of Deloitte & Touche – Slovak
Republic |
|
23.4 |
Consent of Deloitte & Touche – Slovenia
|
|
23.5 |
Consent of Deloitte & Touche – Slovenia
|
|
24.1 |
Form of Power of Attorney
|