1) The Debtor has an obligation under Article 2.1(a) of the Shareholders’ Agreement in this Case to take necessary measures such as exercising voting rights of its C shares so that the Creditor may maintain the position of C’s inside director for 5 years from November 2, 2021, at C’s general meeting of shareholders. Therefore, the Debtor has an obligation not to exercise its voting rights in favor of the Agenda in this Case, which would result in the Creditor’s dismissal, at the General Meeting of Shareholders in this Case.

2) The portion of Article 2.1(a) of the Shareholders’ Agreement in this Case stating “unless the Creditor engages in conduct violating the articles of incorporation or laws, or conduct constituting grounds for dismissal of a director under the Commercial Act” constitutes a condition for release of the obligation to exercise voting rights prescribed in that Article. Therefore, even if the Creditor engaged in conduct violating the articles of incorporation or laws, or conduct constituting grounds for dismissal of a director under the Commercial Act (hereinafter “Grounds for Dismissal”), the burden of proving that such conduct occurred lies with the Debtor.

3) As described below, the Creditor did not engage in conduct constituting Grounds for Dismissal under Article 2.1(a) of the Shareholders’ Agreement in this Case.

A) The Creditor did not establish a concrete plan to deprive the Debtor of its control over C or take any action to implement such a plan. Even if the Creditor had done so, this cannot constitute conduct violating laws, etc., such as breach of trust against C, in the relationship with C.

B) The Creditor did not devise or implement any plan to intentionally impair C’s value or to terminate E’s exclusive contract with C. Raising issues such as I copying or plagiarizing E was to prevent the impairment of C’s corporate value and cannot constitute conduct violating laws against C.

C) No property damage to C occurred due to the Creditor’s conduct that the Debtor considers problematic.

D) The information that the Debtor claims was leaked does not constitute C’s ‘trade secrets,’ and no damage to C occurred as a result of the Creditor sending such information externally.

E) C only receives model appearance fees when E appears in advertisements, and the styling expenses (hair, makeup, and wardrobe setup costs; hereinafter “styling service fees”) for advertisement shoots are paid separately by advertisers to external contractors. Therefore, the styling service fees that the Debtor considers problematic could not have been C’s revenue from the outset.

F) The Debtor did not conspire with J and J regarding the sale of the Debtor’s issued shares, and no damage to C occurred because J violated the Financial Investment Services and Capital Markets Act (hereinafter the “Capital Markets Act”) and sold the Debtor’s shares.

4) The Creditor has never engaged in conduct constituting the resignation grounds (hereinafter “Resignation Grounds”) prescribed in Article 2.1(c) of the Shareholders’ Agreement in this Case. Furthermore, the concepts of “dismissal” and “resignation” of a director are clearly distinct, and since Article 2.1 of the Shareholders’ Agreement in this Case also distinguishes between Grounds for Dismissal and Resignation Grounds, the Debtor cannot dismiss the Creditor at the General Meeting of Shareholders in this Case merely because the Creditor has Resignation Grounds. Even if the Debtor proves the Creditor’s failure to resign as a material breach of the Shareholders’ Agreement in this Case, it can only dismiss the Creditor by terminating the Shareholders’ Agreement in this Case pursuant to Article 11.2, so Resignation Grounds cannot be considered meaningless.

5) If the Debtor exercises its voting rights in favor of the Agenda in this Case at the General Meeting of Shareholders in this Case and the Creditor is thereby dismissed, the Creditor will suffer not only direct and indirect property damage but also reputational damage that would be difficult to recover.

1) Considering that C’s articles of incorporation set the director’s term at 3 years, Article 2.1(a) of the Shareholders’ Agreement in this Case merely provides that “the Debtor shall take necessary measures such as exercising voting rights in the direction of consenting to the Creditor’s reappointment when the Creditor’s 3-year term has expired,” and cannot be interpreted as an agreement restricting the Debtor’s exercise of voting rights to dismiss the Creditor from the inside director position.

2) If Article 2.1(a) of the Shareholders’ Agreement in this Case is interpreted as an agreement restricting the Debtor’s authority to dismiss the Creditor, in cases where the Creditor violates Article 2.1(c) of the Shareholders’ Agreement in this Case by failing to fulfill the resignation obligation, the Debtor would be unable to dismiss the Creditor from C’s director position. This would render the resignation provisions of Article 2.1(c) of the Shareholders’ Agreement in this Case meaningless.

3) The non-existence of Grounds for Dismissal prescribed in Article 2.1(a) of the Shareholders’ Agreement in this Case is a precondition for restricting the Debtor’s voting rights. Therefore, the Creditor bears the burden of proving that “Grounds for Dismissal do not exist.”

4) The Creditor engaged in the following conduct violating laws and articles of incorporation in order to appropriate C, established with the Debtor’s investment, and its core asset E:

A) The Creditor attempted to terminate C’s exclusive contract with E or incited E members’ legal representatives to harbor dissatisfaction with C and the Debtor and raise issues, creating an appearance of seeking to harm C or intentionally diminish C’s value—a series of violations of the duty of care and duty of loyalty.

B) The Creditor engaged in a series of violations of the duty of care and duty of loyalty by using the media and investors, etc. against the Debtor to pressure and attempt to seize control of C from the Debtor.

C) The Creditor conspired with K, the head of the Styling Directing Team, to commit occupational breach of trust to enable K to receive revenue that should have belonged to C.

D) The Creditor leaked C’s trade secrets externally, including the fact that ‘E entered into a brand ambassador agreement,’ unpublished 2023 performance information for C, emails regarding L issues between C and the Debtor’s department (Brand Synergy Business Unit), and ‘content of negotiations regarding the Shareholders’ Agreement in this Case.’

E) The Creditor conspired with J, C’s Vice President M, to commit fraudulent unfair trading in violation of Article 178 of the Capital Markets Act.

F) The Creditor engaged in conduct such as defamation against the Debtor’s management and its affiliates.

5) The Creditor bears the obligation to resign from C’s inside director position under Article 2.1(c) of the Shareholders’ Agreement in this Case for the following reasons. A Creditor who bears such a resignation obligation cannot seek an injunction against the exercise of voting rights to dismiss the Creditor at the General Meeting of Shareholders in this Case.

A) As a result of the Creditor’s violations of laws and articles of incorporation described in 4) above, the Debtor’s market capitalization declined by more than 1 trillion KRW, and the relationship with E, C’s asset, regarding the exclusive contract became unstable. As a result, the Creditor caused damage of more than 1 billion KRW to C. This constitutes Resignation Grounds under Article 2.1(c), Item 1 of the Shareholders’ Agreement in this Case.

B) The Creditor violated the confidentiality obligation prescribed in Article 12.9 of the Shareholders’ Agreement in this Case, and by making false claims regarding ‘differential treatment, album push, and plagiarism’ issues, caused damage to the Debtor and its affiliates of a magnitude difficult to recover, thereby violating the representations and warranties under Article 10.3(a) of the Shareholders’ Agreement in this Case. Accordingly, the Creditor materially breached the Shareholders’ Agreement in this Case. This constitutes Resignation Grounds under Article 2.1(c), Item 2 of the Shareholders’ Agreement in this Case.

C) The Creditor engaged in breach of trust conduct in connection with C’s operations, conduct violating Article 178 of the Capital Markets Act, and conduct defaming the Debtor and its affiliates, and this constitutes Resignation Grounds under Article 2.1(c), Item 3 of the Shareholders’ Agreement in this Case.

D) The Creditor relies on outsiders for major management decisions, has inappropriate perception of oneself, and has shown behavior of excessively pursuing self-interest, thereby destroying the relationship of trust with the Debtor. Therefore, material grounds for disqualification exist that affect the Creditor’s performance of duties as C’s Representative Director. This constitutes Resignation Grounds under Article 2.1(c), Item 4 of the Shareholders’ Agreement in this Case.

1) Interpretation of Article 2.1(a) of the Shareholders’ Agreement in this Case

A) ① Article 2.1(a) of the Shareholders’ Agreement in this Case clearly provides for the Debtor’s exercise of voting rights at C’s general meeting of shareholders by stating “the Debtor shall exercise voting rights of its shares held so that the Creditor may maintain the position of C’s inside director until November 1, 2026”; ② Article 2.1(a) of the Shareholders’ Agreement in this Case specifies “Grounds for Dismissal” as an exception to such voting obligation by stating “unless the Creditor engages in conduct violating the articles of incorporation or laws, or conduct constituting grounds for dismissal of a director under the Commercial Act”; ③ Article 2.1(a) of the Shareholders’ Agreement in this Case appears to be a provision intended to guarantee the Creditor, who bears the obligation to remain employed at C for 5 years under Article 10.3(e) of the Shareholders’ Agreement in this Case, the position of C’s Representative Director during such employment period. Considering these factors together, it is reasonable to interpret Article 2.1(a) of the Shareholders’ Agreement in this Case as an agreement that “restricts the Debtor’s exercise of voting rights to dismiss the Creditor from the inside director position at C’s general meeting of shareholders unless Grounds for Dismissal exist.” Such agreement regarding voting rights is valid between the contracting parties, the Creditor and the Debtor, as it does not harm the rights of other shareholders or otherwise appear unfair. Therefore, the Debtor bears a contractual obligation not to exercise its voting rights in favor of the agenda item dismissing the Creditor at C’s general meeting of shareholders unless Grounds for Dismissal exist with respect to the Creditor.

Furthermore, since the content of such obligation is specific and clear, it is reasonable to conclude that the Creditor may seek specific performance of such obligation.

B) Furthermore, since Grounds for Dismissal under Article 2.1(a) of the Shareholders’ Agreement in this Case constitute an exception that allows the Debtor to be released from the above voting obligation, and proving the non-existence of a certain ground is virtually impossible, it is reasonable that the Debtor bears the burden of proving that “Grounds for Dismissal prescribed in Article 2.1(a) of the Shareholders’ Agreement in this Case or Resignation Grounds prescribed in Article (c) of the same Article exist with respect to the Creditor.”

2) Whether Grounds for Dismissal Exist with Respect to the Creditor

A) Relevant Legal Principles

When there is a material fact of misconduct relating to duties or violation of laws or articles of incorporation with respect to a director, if the general meeting of shareholders rejects the dismissal, shareholders holding shares representing at least 3/100 of the total issued shares may petition the court for the dismissal of that director (Commercial Act Article 385, Paragraph 2). Here, “misconduct relating to duties” refers to conduct by a director that intentionally causes damage to the company in violation of their duties, and mere negligent breach of duty is not included in the grounds for a petition for dismissal. “Material fact of violation of laws or articles of incorporation” means cases where a director intentionally and gravely violates laws or articles of incorporation, thereby neglecting the duty of loyalty to the company and causing damage.

B) Specific Determination

In light of the following circumstances established through the facts established by prima facie evidence and the entire purport of the records and examination, it is difficult to conclude that the existence of Grounds for Dismissal with respect to the Creditor has been sufficiently established based solely on the Debtor’s arguments and evidence submitted to date.

(1) While the Creditor expressed dissatisfaction with the content of the Shareholders’ Agreement in this Case from late 2023 and demanded modifications, and on the other hand, appeared to have explored together with C’s Vice President M ways to weaken the Debtor’s control over C by having the Debtor sell its C shares in a way that would enable the Creditor to independently control C while pressuring the Debtor to sell. However, based solely on the evidence submitted to date, it has not been established that the Creditor proceeded beyond such exploration or planning stage to implement concrete actions, and it is difficult to view such conduct by the Creditor as “misconduct relating to duties” or “conduct violating laws” that constitutes a betrayal of the Debtor, even if it could potentially cause damage to C.

(2) Considering that ① opinions were presented among the public around I’s debut that I’s concept, choreography, wardrobe, etc. were similar to those of E, ② the exclusive contract between C and E members provided that C shall take necessary measures to remove any infringement or interference by third parties on E’s entertainment activities under Article 5, Paragraph 4, and that E members may terminate the above contract if C violates the above obligation under Article 15, Paragraph 1 of the contract, ③ the Creditor, as C’s inside director and Representative Director, bears the duty of care or duty of loyalty to take necessary measures to protect the value of E, which is C’s core asset, ④ the evidence that E’s legal representatives submitted to this Court, including the petition, is insufficient to support a finding that they “demanded that the Creditor take measures regarding the I and E plagiarism issue,” claiming that the Creditor incited E’s legal representatives to raise issues with the Debtor, ⑤ the Creditor’s sending of an email to the Debtor raising the issue of I’s similarity to E may be viewed as fulfilling the notification obligation under Article 10.3(c) of the Shareholders’ Agreement in this Case—considering all these factors together, it is difficult to view the Creditor’s conduct of raising issues regarding “I’s plagiarism of E,” etc. with the Debtor as breach of trust conduct against C.

(3) The evidence is insufficient to establish that the Creditor’s conduct that the Debtor considers problematic caused damage to C or diminished C’s value.

(4) ① Considering the structure of advertising contracts, the payment C receives as E’s agency is E’s model appearance fee, and styling service fees for advertisement shoots are paid separately by advertisers to external contractors. Since there is no evidence to establish that C paid K separately for E’s advertisement styling, it is difficult to see that C’s revenue or profit decreased even if K received styling service fees through C’s Board of Directors’ permission for K’s concurrent position at an external contractor. ② No evidence has been submitted to establish that C’s employees provided labor to generate the styling service fees that K received for advertisement shoots. ③ Considering the Debtor’s argument that the styling service fees received by K themselves constitute C’s loss—taken together, it is difficult to conclude that C’s Board of Directors, including the Creditor, permitting K’s concurrent position at a styling external contractor and K receiving styling service fees from E’s advertisement shoots constitutes occupational breach of trust conduct by the Creditor against C.

(5) It is difficult to determine that the information the Creditor allegedly leaked externally constitutes C’s ‘trade secrets,’ and there is no evidence to confirm specifically what property damage occurred to C as a result of the Creditor sending such information to third parties.

(6) It is difficult to conclude that the Creditor engaged in stock trading in violation of the Capital Markets Act merely because C’s inside director J sold approximately 200 million KRW worth of the Debtor’s shares that J had been holding on April 15, 2024. It is also difficult to view that the Creditor’s conduct of damaging the reputation of the Debtor’s management or the Debtor’s affiliates constitutes conduct causing property damage to C.

3) Whether Resignation Grounds Exist with Respect to the Creditor

In light of the following circumstances established through the facts established by prima facie evidence and the entire purport of the records and examination, it is also difficult to conclude that Resignation Grounds exist with respect to the Creditor based solely on the Debtor’s arguments and evidence submitted to date.

A) It is difficult to conclude that damage of more than 1 billion KRW naturally occurred to C, which is a non-listed company in which the Debtor holds an 80% stake, merely because the Debtor’s market capitalization declined by more than 1 trillion KRW. The evidence establishing the circumstances that the relationship with E, C’s asset, regarding the exclusive contract became unstable is also insufficient, and even assuming such circumstances, there is no evidence to establish that the resulting damage amounts to 1 billion KRW or more.

B) Considering that ① the content and degree of the Shareholders’ Agreement in this Case mentioned by the Creditor at the April 25, 2024 press conference, ② the fact that the Creditor was the source of the content of the Shareholders’ Agreement in this Case reported in the media thereafter has not been confirmed, ③ the content of the Shareholders’ Agreement in this Case mentioned in the Creditor’s May 2 statement appears to have been mentioned in the process of rebutting the Debtor’s April 26 statement—taken together, it is difficult to conclude that the Creditor materially violated the confidentiality obligation prescribed in Article 12.9 of the Shareholders’ Agreement in this Case.

Furthermore, considering the circumstances described in B) of 2) above, as well as the fact that the Creditor’s demands for remediation of the Debtor’s differential treatment of E, the Debtor’s affiliated artists’ album push issue, etc. cannot be said to be entirely without basis, even taking into account that it is difficult to conclude that the Debtor intentionally or through gross negligence engaged in conduct that could cause damage to C or the Debtor, or materially breached an obligation not to engage in such conduct.

C) The Debtor argues that “the Creditor engaged in breach of trust conduct and conduct violating laws as C’s Representative Director and inside director against C, thereby constituting Article 2.1(c), Item 3 of the Shareholders’ Agreement in this Case.” However, the insufficiency of viewing that the Creditor engaged in breach of trust conduct or other illegal conduct as C’s Representative Director and inside director against C is as examined in 3., A., 2), B) above.

D) Considering the circumstances argued by the Debtor, including C’s business performance examined earlier, it is difficult to conclude that material grounds for disqualification exist that should prohibit the Creditor from performing duties as C’s Representative Director, and there is no other evidence to establish this.

4) Sub-conclusion

As described above, whether Grounds for Dismissal or Resignation Grounds exist with respect to the Creditor requires determination through thorough investigation of evidence and careful deliberation on the merits, and it cannot be concluded based solely on the arguments and evidence submitted to date that Grounds for Dismissal or Resignation Grounds sufficiently exist with respect to the Creditor. Therefore, pursuant to Article 2.1(a) of the Shareholders’ Agreement in this Case, the Debtor bears the obligation not to exercise its voting rights in favor of the agenda item dismissing the Creditor from the inside director position at C’s general meeting of shareholders. The existence of the right to be preserved for this application has been established.