<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[x] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as Permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
METRO-GOLDWYN MAYER INC.
- - - - - - - - - - - - - - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- - - - - - - - - - - - - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF METRO-GOLDWYN-MAYER INC.]
METRO-GOLDWYN-MAYER INC.
----------------
AMENDED NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 13, 1999
----------------
To Our Stockholders:
On March 31, 1999, Metro-Goldwyn-Mayer Inc., a Delaware corporation (the
"Company"), sent proxy materials to stockholders of record for the Annual
Meeting of the Company's Stockholders, which was originally scheduled to be
held on May 11, 1999. Subsequent to the date of those proxy materials, Frank
G. Mancuso resigned as the Chairman of the Board of Directors and Chief
Executive Officer and A. Robert Pisano resigned as the Vice Chairman of the
Board of Directors and as a director, respectively, of the Company. Alex
Yemenidjian, who has served on the Board of Directors of the Company since
November 1997, is the new Chairman and Chief Executive Officer and Christopher
J. McGurk is the new Vice Chairman and Chief Operating Officer. As a result of
these changes, Mr. McGurk will replace Mr. Pisano as a nominee for election to
the Board of Directors. All other nominees for election to the Board remain
unchanged.
In light of these developments, the Company elected to postpone the Annual
Meeting, which will now be held on July 13, 1999, at 10:00 a.m., local time,
in the Main Theatre at the Company's executive offices located at 2450
Broadway Street, Santa Monica, CA 90404-3061 for the following purposes:
1.To elect a Board of Directors;
2. To consider and act upon the approval and ratification of the
repricing of stock options granted pursuant to the Amended and
Restated 1996 Stock Incentive Plan;
3. To consider and act upon the approval and ratification of a proposal
to amend the Amended and Restated 1996 Stock Incentive Plan to
increase the aggregate number of shares of the common stock of the
Company issuable thereunder from 8,125,065 to 28,000,000 and to set
a maximum number of shares that any one participant may be awarded
under the plan at 15,000,000;
4. To consider and act upon the approval and ratification of the
amendment of the Bonus Interest Agreements entered into pursuant to
the Senior Management Bonus Plan;
5. To consider and act upon the approval of an amendment to the
Company's Amended and Restated Certificate of Incorporation to
increase the total number of shares of common stock authorized from
250,000,000 to 500,000,000;
6. To consider and act upon the approval and ratification of the
issuance of options to purchase shares of the common stock of the
Company to Mr. Yemenidjian pursuant to his employment agreement;
7. To consider and act upon the approval and ratification of the
issuance of options to purchase shares of the common stock of the
Company to Mr. McGurk pursuant to his employment agreement;
<PAGE>
8. To consider and act upon the ratification of the selection of Arthur
Andersen LLP as independent auditors of the Company for the fiscal
year ending December 31, 1999; and
9. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Stockholders of record at the close of business on June 15, 1999 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting. A list of
such stockholders will be available for examination by any stockholder, during
ordinary business hours, at the Company's executive offices for a period of 10
days prior to the meeting date.
The Company's Annual Report on Form 10-K for 1998 (the "10-K"), which
contains all the information required by Rule 14a-3 under the Securities
Exchange Act of 1934, and Annual Report to Stockholders ("Annual Report") were
previously distributed to the Company's stockholders of record at the close of
business on March 19, 1999 (the "Original Record Date"). Along with the amended
proxy materials, we are distributing the 10-K to the stockholders of record on
the Record Date who were not stockholders of record on the Original Record
Date. If you require an additional copy of the 10-K, or a copy of the Annual
Report, please contact the Company at 2500 Broadway Street, Santa Monica,
California 90404, or call (310) 449-3000, attention: Corporate Secretary.
Enclosed is a blue proxy. The white proxy which accompanied the prior proxy
materials to stockholders of record on the Original Record Date is null and
void. Therefore, even if you returned the white proxy, your votes will not be
recorded unless you return the blue proxy or attend the Annual Meeting in
person.
Please date, sign and return the enclosed blue proxy whether or not you plan
to attend the Annual Meeting. If you plan to attend the Annual Meeting, please
also check the appropriate box on the enclosed blue proxy and detach the
admission ticket to present at the meeting.
PLEASE DATE, SIGN AND MAIL THE ENCLOSED BLUE PROXY.
Use the enclosed envelope which requires no postage for mailing in the United
States.
By Order of the Board of Directors
/s/ William Allen Jones
William Allen Jones
Senior Executive Vice President
and Secretary
Santa Monica, California
June , 1999
2
<PAGE>
METRO-GOLDWYN-MAYER INC.
2500 Broadway Street
Santa Monica, California 90404
(310) 449-3000
----------------
AMENDED PROXY STATEMENT
Dated June , 1999
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 13, 1999
----------------
General
The accompanying form of proxy and the persons named therein as proxies have
been approved by, and this solicitation is made on behalf of, the Board of
Directors of Metro-Goldwyn-Mayer Inc. in connection with the Annual Meeting of
Stockholders of Metro-Goldwyn-Mayer Inc. (the "Annual Meeting") to be held at
10:00 a.m., local time, on July 13, 1999 in the Main Theatre at the Company's
executive offices located at 2450 Broadway Street, Santa Monica, CA 90404-
3061, and at any and all postponements and adjournments thereof. Metro-
Goldwyn-Mayer Inc., together with its direct and indirect subsidiaries, is
hereinafter referred to as the "Company," unless the context indicates
otherwise.
This Amended Proxy Statement and accompanying blue proxy were first mailed
to stockholders on or about June , 1999, and replace the proxy statement and
white proxy first mailed on or about March 31, 1999 to stockholders of record
on March 19, 1999 (the "March Proxy Statement").
The costs of solicitation of proxies will be paid by the Company. In
addition to soliciting proxies by mail, the Company's officers, directors and
other regular employees, without additional compensation, may solicit proxies
personally or by other appropriate means. The Company will reimburse brokers,
banks, fiduciaries and other custodians and nominees holding the common stock,
$.01 par value per share, of the Company (the "Common Stock") in their names
or in the names of their nominees for their reasonable out-of-pocket charges
and expenses in forwarding proxies and proxy materials to the beneficial
owners of the Common Stock.
Voting Rights and Outstanding Shares
Only stockholders of record of the Common Stock as of June 15, 1999 will be
entitled to vote at the Annual Meeting. The authorized capital stock of the
Company presently consists of 250,000,000 shares of the Common Stock and
25,000,000 shares of preferred stock, $.01 par value per share. On June 1,
1999, there were issued and outstanding 151,163,571 shares of the Common
Stock, which constitutes all of the outstanding voting securities of the
Company entitled to vote at the Annual Meeting. Each share of the Common Stock
is entitled to one vote on all matters to come before the Annual Meeting. In
addition, as of June 1, 1999, there were 139,515 shares of the Common Stock
held by the Company as treasury shares, which shares are not entitled to vote
at the Annual Meeting. No shares of the Company's preferred stock are issued
and outstanding.
The presence, in person or by proxy, of the holders of at least a majority
of the total number of outstanding shares of the Common Stock entitled to vote
is necessary to constitute a quorum at the Annual Meeting. Abstentions and
broker non-votes (i.e. shares held by brokers or nominees as to which
instructions have not been received from beneficial owners or persons entitled
to vote that the broker or nominee does not have discretionary power to vote
on a particular matter) are counted for the purpose of determining the
presence or absence of a quorum for the transaction of business. In the event
that there are not sufficient votes for a quorum at the time of the Annual
Meeting, the Annual Meeting may be adjourned in order to permit the further
solicitation of proxies.
<PAGE>
Directors will be elected by a plurality of the votes of the shares of the
Common Stock present in person or represented by proxy. For Proposals 3, 6, 7
and 8 the affirmative vote of the holders of a majority of the outstanding
shares of the Common Stock represented in person or by proxy and entitled to
vote on each such proposal will be required for approval. For Proposal 5, the
affirmative vote of the holders of a majority of the outstanding shares of the
Common Stock entitled to vote on such proposal will be required for approval.
For Proposals 2 and 4 the affirmative vote of the holders of at least 75
percent of the outstanding shares of the Common Stock represented in person or
by proxy and entitled to vote on each such proposal will be required for
approval. Tracinda Corporation ("Tracinda"), which owned approximately 79.3
percent of the outstanding shares of the Common Stock as of June 1, 1999, has
agreed to vote its shares in favor of the approval of Proposal 2. See
"Proposal 2--Options Repricing." Tracinda, together with a Delaware
corporation that is principally owned by Tracinda, are collectively referred
to herein as the "Tracinda Group."
With regard to the election of directors, votes may be cast in favor of or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on proposals other than the
election of directors and will be counted as present for purposes of the
proposal on which the abstention is voted. Therefore, such abstentions will
have the effect of a negative vote. Broker non-votes are not counted for
purposes of determining whether a proposal has been approved and, therefore,
have the effect of reducing the number of affirmative votes required to
achieve a majority of the votes cast for such proposal.
Proxies must be written, signed by the stockholder and returned to the
Secretary of the Company. Any stockholder who signs and returns a proxy may
revoke it at any time before it is voted by filing with the Secretary of the
Company a written revocation or a duly executed proxy bearing a date later
than the date of the proxy being revoked. Any stockholder attending the Annual
Meeting in person may withdraw such stockholder's proxy and vote such
stockholder's shares. The accompanying blue proxy replaces a white proxy which
was distributed with the March Proxy Statement to stockholders of record at
the close of business on March 19, 1999. The white proxy is null and void,
even if it was previously returned by a stockholder. Only the blue proxy can
be used by a stockholder to direct the voting of shares of the Common Stock.
Thus, a stockholder who previously returned a white proxy must also return the
blue proxy to direct the voting of shares of the Common Stock.
The Common Stock does not have cumulative voting rights.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth the beneficial ownership of the Common Stock as
of June 1, 1999 of (i) each director of the Company, (ii) the "Named Executive
Officers" (as defined in "Executive Compensation" below), (iii) the directors
and Named Executive Officers of the Company as a group and (iv) each person
who at such time, to the Company's knowledge, beneficially owned more than
five percent of the outstanding shares of the Common Stock of the Company.
<TABLE>
<CAPTION>
Number of Percentage
Name and Address of Beneficial Owner Shares(1) of Class
------------------------------------ ----------- ----------
<S> <C> <C>
The Tracinda Group(2)................................ 134,997,723 89.2%
150 S. Rodeo Drive
Beverly Hills, CA 90212
Alex Yemenidjian(3).................................. 5,000 *
Christopher J. McGurk(4)............................. 360,485 *
James D. Aljian(3)................................... 14,145 *
Francis Ford Coppola................................. -- --
Willie D. Davis(3)................................... 860 *
Alexander M. Haig, Jr.(3)............................ -- --
Kirk Kerkorian(3)(5)................................. 134,997,723 89.2
Frank G. Mancuso(6).................................. 1,645,622 1.1
Jerome B. York(3).................................... 13,326 *
William A. Jones(7).................................. 129,930 *
Daniel J. Taylor (8)................................. 60,747 *
Robert Brada(9)...................................... 8,391 *
A. Robert Pisano(10)................................. 338,315 *
Michael G. Corrigan(11).............................. 180,168 *
David G. Johnson(12)................................. 193,071 *
All Directors and Named Executive Officers as a group
(15 persons)........................................ 137,947,783 90.0
</TABLE>
- - - - - - - - - - - - - - --------
* Less than 1 percent.
(1) The number of shares shown includes shares over which the person named
has either sole or shared voting or investment power and shares as to
which certain directors and executive officers disclaim beneficial
ownership. The shares of the Common Stock which a person has the right
to acquire within 60 days of June 1, 1999 and the shares of Common Stock
underlying options that are vested as of June 1, 1999 or that will
become vested within 60 days are deemed to be outstanding for the
purpose of calculating the beneficial ownership of the holder of such
options or other rights, but are not deemed to be outstanding for the
purpose of computing the beneficial ownership of any other person. As a
result, the aggregate percentage ownership of the Common Stock shown
above may exceed 100 percent.
(2) Includes: 156,251 shares of the Common Stock issuable at a price of
$6.41 per share pursuant to a presently exercisable stock option which
expires on October 10, 2002 and 16,208,463 shares of the Common Stock
acquired from Seven Network Limited ("Seven") on September 1, 1998 for
aggregate consideration of $389 million. All of the shares of the Common
Stock held by the Tracinda Group are pledged to a group of banks to
secure a syndicated credit facility to the Tracinda Group.
(3) Each of Messrs. Aljian, Kerkorian and York is an employee of, and,
together with Mr. Yemenidjian, was nominated to the Board of Directors
of the Company by, Tracinda. Each of Messrs. Aljian, Davis, Haig,
Kerkorian, Yemenidjian and York is a director of, and Mr. Yemenidjian is
also an executive officer of, MGM Grand, Inc., an affiliate of Tracinda.
Includes: with respect to Messrs. Aljian, Davis and York 414, 284, and
345 shares of the Common Stock, representing in each case the estimated
number of shares of the Common Stock (based on a per share price of
$14.56 as of June 1, 1999) to be issued under the Director Plan (as
defined in "--Director Compensation") within 60 days of June 1, 1999.
See "--Director Compensation."
3
<PAGE>
(4) Includes: 107,000 shares of the Common Stock granted to Mr. McGurk
pursuant to his Employment Agreement that will be issued to Mr. McGurk
within 60 days of June 1, 1999.
(5) Mr. Kerkorian is the Chief Executive Officer, President, and sole
shareholder and director of, and was nominated to the Board of Directors
of the Company by, Tracinda. Represents 134,997,723 shares of the Common
Stock beneficially owned by the Tracinda Group.
(6) Includes: 989,219 shares of the Common Stock underlying options vested
as of June 1, 1999 or that will become vested within 60 days of such
date. Also includes 7,578 shares of the Common Stock which are owned by
Mr. Mancuso's children and grandchildren and as to which Mr. Mancuso
disclaims beneficial ownership.
(7) Includes: 90,431 shares of the Common Stock underlying options vested as
of June 1, 1999 or that will become vested within 60 days of such date,
and 499 shares of the Common Stock allocated to Mr. Jones' account in
the Savings Plan (as defined in "Benefit Plans--MGM Savings Plan") as of
June 1, 1999.
(8) Includes: 59,084 shares of the Common Stock underlying options vested as
of June 1, 1999 or that will become vested within 60 days of such date
and 511 shares of the Common Stock allocated to Mr. Taylor's account in
the Savings Plan as of June 1, 1999.
(9) Includes: 7,713 shares of the Common Stock underlying options vested as
of June 1, 1999 or that will become vested within 60 days of such date
and 447 shares of the Common Stock allocated to Mr. Brada's account in
the Savings Plan as of June 1, 1999.
(10) Includes: 296,794 shares of the Common Stock underlying options vested
as of June 1, 1999 or that will become vested within 60 days of such
date and 593 shares of the Common Stock allocated to Mr. Pisano's
account in the Savings Plan as of June 1, 1999. Also includes 7,052
shares of the Common Stock which are held by the Pisano's Children's
Trust and as to which Mr. Pisano disclaims beneficial ownership.
(11) Includes: 179,168 shares of the Common Stock underlying options vested
and exercisable as of June 1, 1999 and 361 shares of the Common Stock
allocated to Mr. Johnson's account in the Savings Plan as of June 1,
1999.
(12) Includes: 179,168 shares of the Common Stock underlying options vested
and exercisable as of June 1, 1999.
Shareholders Agreement
The following is a summary description of the material terms of the Amended
and Restated Shareholders Agreement (the "Shareholders Agreement") dated as of
August 4, 1997, as amended, by and among the Company, the Tracinda Group and
the current and former executives specified on the signature pages thereto
(such specified persons, collectively, "Executives"). This summary description
does not purport to be complete and is subject to and qualified in its
entirety by reference to the definitive Shareholders Agreement, a copy of
which is filed as an exhibit to the 10-K. For purposes of the Shareholders
Agreement, any shares of the Common Stock beneficially owned, directly or
indirectly, by any member of the Tracinda Group will be deemed to be owned by
Tracinda.
Tag-Along Rights. The Tracinda Group has agreed to be bound by certain "tag-
along" restrictions with respect to certain transfers of its shares of the
Common Stock. Subject to certain exceptions, if any member of the Tracinda
Group desires to transfer shares of the Common Stock beneficially owned by it,
directly or indirectly, in whole or in part (a "Tag-Along Sale"), then each
Executive shall have the right but not the obligation, (i) to exercise certain
options held by such Executives pursuant to the 1996 Incentive Plan to the
extent required to realize the "tag-along" rights of such Executives and (ii)
to elect that such member of the Tracinda Group be obligated to require, as a
condition to such Tag-Along Sale, that the proposed purchaser purchase from
each such electing Executive a proportional number of shares.
4
<PAGE>
Registration Rights. Subject to certain exceptions and conditions, the
Tracinda Group and the Executives have the right to make up to three requests,
in the case of the Tracinda Group, and up to two requests with respect to all
of the Executives, for registration ("Demand Registration") under the
Securities Act of 1933, as amended (the "Securities Act") of all or part of
the Common Stock or certain other securities (the "Registrable Securities")
held by them. Any request for a Demand Registration must include Registrable
Securities with an estimated value of no less than $50 million. Demand
Registration requests may be for shelf registrations (covering sales on a
delayed or contingent basis).
In addition, if the Company proposes to register any of its equity
securities under the Securities Act (other than (i) a registration on Form S-4
or Form S-8 or (ii) a registration in connection with a pro rata distribution
of rights to subscribe for shares of the Common Stock), whether or not for
sale for its own account, then, subject to certain exceptions and conditions,
each member of the Tracinda Group and each of the Executives shall be entitled
to request that the Registrable Securities of the same class beneficially
owned by such party be included in such registration (a "Piggyback
Registration").
The Company will pay all of the expenses of any Demand or Piggyback
Registration, including the fees and expenses of a single counsel retained by
the selling stockholders; however, each selling stockholder will be
responsible for the underwriting discounts and commissions and transfer taxes
in connection with shares sold by such stockholder. Each selling stockholder
and the underwriters through whom shares are sold on behalf of a selling
stockholder will be entitled to customary indemnification from the Company
against certain liabilities, including liabilities under the Securities Act.
Certain Holdback Agreements. The Tracinda Group and each of the Executives
has agreed, if requested by the Company or any managing underwriters of a
registration of securities of the Company, not to effect any public sale or
distribution (including sales pursuant to Rule 144 under the Securities Act)
of equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for equity securities, for a period not to exceed
the period commencing with the date seven days prior to and ending with the
date 180 days after the effective date of any underwritten registration by the
Company of its securities (except as part of such underwritten registration).
The Company has agreed to a similar restriction (except as part of such
underwritten registration or pursuant to registrations on Form S-4 or Form S-8
or any successor forms) and to use its best efforts to cause certain holders
of its capital stock (other than in a registered public offering) to so agree.
Investors Shareholder Agreement
The Company, Tracinda and Frank G. Mancuso, a director and the former
Chairman of the Board and Chief Executive Officer of the Company, are parties
to and have proposed to terminate the Amended and Restated Investors
Shareholder Agreement dated as of August 4, 1997, as amended September 1, 1998
(the "Investors Shareholder Agreement"). The Investors Shareholder Agreement
includes, among other provisions, an agreement under which the parties agree
to vote their respective shares of the Common Stock as a group with respect to
certain matters, including, but not limited to, certain corporate governance
matters and the election of the Board of Directors of the Company. A copy of
the definitive Investors Shareholder Agreement is filed as an exhibit to the
10-K.
5
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The following table sets forth the names of each nominee (the "Nominees")
for election as a director of the Company and provides information concerning
such Nominee's principal occupation for at least the past five years, age as
of June 15, 1999, and certain other matters. Directors of the Company hold
office until the next annual meeting of stockholders, until their respective
successors are duly qualified or until their earlier resignation or removal.
The Nominees are all current members of the Board of Directors. All proxies
received by the Board of Directors will be voted for such Nominees, unless
directions to the contrary are given. In the event that any Nominee is unable
to or declines to serve, an event that is not anticipated, the proxies will be
voted for the election of another nominee designated by the Board of Directors
or, if none is so designated, will be voted according to the judgment of the
person or persons voting the proxy.
The Board of Directors recommends that stockholders vote "FOR" the Nominees.
<TABLE>
<CAPTION>
Name Age Principal Occupation and Other Directorships
---- --- --------------------------------------------
<C> <C> <S>
Alex Yemenidjian........ 43 Mr. Yemenidjian has been Chairman of the Board
and Chief Executive Officer of the Company since
April 1999 and has been a director of the Company
since November 1997. Mr. Yemenidjian currently
serves as the President of MGM Grand, Inc., a
position he has held since July 1995, and has
served as a director of MGM Grand, Inc. since
1989. Mr. Yemenidjian has also served MGM Grand,
Inc. in other capacities during such period,
including as Chief Operating Officer from June
1995 until April 1999 and as Chief Financial
Officer from May 1994 to January 1998. In
addition, Mr. Yemenidjian served as an executive
of Tracinda from January 1990 to January 1997 and
from February 1999 to April 1999.
Christopher J. McGurk... 42 Mr. McGurk has been Vice Chairman of the Board of
Directors and Chief Operating Officer of the
Company since April 1999. From 1996 until
joining the Company, Mr. McGurk was President and
Chief Operating Officer of Universal Pictures, a
division of Universal Studios. Prior to joining
Universal, Mr. McGurk spent eight years at The
Walt Disney Company, including as President,
Motion Pictures Group, Walt Disney Studios from
1994 to 1996, and as Executive Vice President and
Chief Financial Officer from 1990 to 1994.
James D. Aljian......... 66 Mr. Aljian has been a director of the Company
since October 1996. Mr. Aljian has served as an
executive of Tracinda since October 1987. In
addition, Mr. Aljian serves on the board of
directors of MGM Grand, Inc. and on the
shareholders' committee of DaimlerChrysler AG.
Francis Ford Coppola.... 60 Mr. Coppola has been a director of the Company
since January 1998. Since 1993 Mr. Coppola has
been the owner, Chairman and President of
American Zoetrope, a film company based in San
Francisco. Mr. Coppola is also a five-time Oscar-
winning director, writer and producer. Mr.
Coppola previously served on the board of
directors of Metro-Goldwyn-Mayer Studios Inc.
("MGM Studios") from December 1993 to October
1996.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Name Age Principal Occupation and Other Directorships
---- --- --------------------------------------------
<C> <C> <S>
Willie D. Davis......... 64 Mr. Davis has been a director of the Company
since November 1998. Mr. Davis is President and
Director of All-Pro Broadcasting, Inc., an AM and
FM radio broadcasting company. Mr. Davis has
served on the board of directors of MGM Grand,
Inc. since 1989 and is director of Sara Lee
Corporation, K-Mart Corporation, Johnson
Controls, Inc., Alliance Bank, WICOR, Dow
Chemical Company, Rally's Hamburgers, Inc.,
Strong Fund and Bassett Furniture Industries,
Incorporated.
Alexander M. Haig, Jr... 74 Mr. Haig has been a director of the Company since
November 1998. Mr. Haig is Chairman of Worldwide
Associates Inc., an international business
advisory firm. In addition, Mr. Haig has served
on the board of directors and as a consultant to
MGM Grand, Inc. since 1990 and serves on the
boards of directors of America Online, Inc.,
Interneuron Pharmaceuticals, Inc. and Preferred
Employers Holdings, Inc.
Kirk Kerkorian.......... 82 Mr. Kerkorian has been a director of the Company
since October 1996 and has had a professional
relationship with MGM Studios and its
predecessors for over 25 years. Mr. Kerkorian has
served as Chief Executive Officer, President and
sole director and shareholder of Tracinda for
more than the past five years. In addition, Mr.
Kerkorian serves on the board of directors of MGM
Grand, Inc.
Frank G. Mancuso........ 65 Mr. Mancuso has been a director of the Company
since October 1996. Mr. Mancuso was the Chairman
of the Board and Chief Executive Officer of the
Company from October 1996 to April 1999 and was
the Chairman of the Board and Chief Executive
Officer of MGM Studios from July 1993 to April
1999. Prior to joining MGM Studios, Mr. Mancuso
was the Chairman and Chief Executive Officer of
Paramount Pictures Corporation from September
1984 to May 1991, having served Paramount in
numerous other capacities beginning in 1963.
Jerome B. York.......... 60 Mr. York has been a director of the Company since
October 1996. Mr. York has served as the Vice
Chairman of Tracinda since September 1995. Prior
to joining Tracinda, Mr. York served as Senior
Vice President and Chief Financial Officer of IBM
Corporation from May 1993 to September 1995 and
as a director of IBM Corporation from January
1995 to September 1995. Prior thereto, Mr. York
served as Executive Vice President-Finance and
Chief Financial Officer of Chrysler Corporation
from May 1990 to May 1993 and as a director of
Chrysler Corporation from April 1992 to May 1993.
In addition, Mr. York serves on the boards of
directors of MGM Grand, Inc., Apple Computer,
Inc. and Waste Management, Inc.
</TABLE>
Section 16(a) Beneficial Ownership Reporting Compliance
To the Company's knowledge (based solely upon a review of the copies of
Section 16(a) reports furnished to the Company and representations that no
other reports were required), during the year ended December 31, 1998, the
Company's officers, directors and 10 percent beneficial owners complied with
all applicable Section 16(a) filing requirements, except that Mr. A. Robert
Pisano, the former Vice Chairman and director of the Company, in filing one of
his monthly reports on Form 4, inadvertently omitted to include a purchase of
2,000 shares by an Individual Retirement Account of which he is the
beneficiary. Upon learning of the omission, Mr. Pisano promptly filed an
amended Form 4.
7
<PAGE>
Information Regarding the Board of Directors and Certain Committees
Board Meetings. The Board of Directors held six meetings and acted once by
written consent during 1998. During 1998 all directors attended at least 75
percent of the meetings of the Board of Directors and committees on which they
served (held during the period for which they served). The Board of Directors
does not have a standing nominating committee. The candidates for election at
this Annual Meeting were nominated by the Board of Directors.
Executive Committee. The Executive Committee of the Board of Directors of
the Company (the "Executive Committee") was established on December 16, 1997
and currently consists of Messrs. Aljian, Kerkorian, McGurk, Yemenidjian
(Chairman) and York. The Executive Committee exercises all the powers and
authority of the Board of Directors during intervals between meetings of the
Board of Directors, except as limited by the Delaware General Corporation Law
(the "DGCL"). The Executive Committee held seven meetings and acted twice by
written consent during 1998.
Audit Committee. The Audit Committee of the Board of Directors of the
Company (the "Audit Committee") was established on October 10, 1996 and
currently consists of Messrs. Davis and Haig (Chairman). The function of the
Audit Committee is to: (i) review and approve the selection of, and all
services performed by, the Company's independent auditors; (ii) meet and
consult with, and receive reports from, the Company's independent auditors,
its financial and accounting staff and its internal audit department regarding
internal controls; and (iii) review and act with respect to the scope of audit
procedures, accounting practices and internal accounting and financial
controls of the Company. The Audit Committee is comprised exclusively of
directors who are not salaried employees of the Company and who are, in the
opinion of the Board of Directors, free from any relationship which would
interfere with the exercise of independent judgment as a committee member. The
Audit Committee met once during 1998.
Finance Committee. The Finance Committee of the Board of Directors of the
Company (the "Finance Committee") was established on November 12, 1998 and
currently consists of Messrs. Aljian, McGurk, Yemenidjian and York (Chairman).
The Finance Committee exercises all the powers and authority of the Board of
Directors with respect to the financial affairs of the Company during
intervals between meetings of the Board of Directors or the Executive
Committee, except as limited by the DGCL. The Finance Committee met once
during 1998.
Compensation Committee; Subcommittees; Compensation Committee Interlocks and
Insider Participation. The Compensation Committee of the Board of Directors of
the Company (the "Compensation Committee") was established on November 7, 1997
and currently consists of Messrs. Davis, Haig and York (Chairman). The
Compensation Committee is responsible for administering the Company's stock
incentive plans and monitoring, reviewing, approving and making
recommendations to the Board of Directors with respect to the Company's
compensation policies, including the granting of awards under the incentive
plans. See "Compensation Committee Report on Executive Compensation." The
Compensation Committee held one meeting and acted by written consent six times
during 1998.
The Company has recently formed the Performance-Based Compensation
Subcommittee of the Compensation Committee (the "Section 162(m)
Subcommittee"). The Section 162(m) Subcommittee is responsible for granting
Awards (as defined below) under the Company's incentive plans and granting
other compensation that is potentially subject to Section 162(m) under the
Internal Revenue Code of 1986, as amended (the "Code"). The Section 162(m)
Subcommittee currently consists of Messrs. Davis and York. The Company has
also recently formed the Section 16 Subcommittee of the Compensation Committee
(the "Section 16 Subcommittee"). The Section 16 Subcommittee acts on Awards
under the Company's incentive plans and other grants of compensation that are
potentially subject to Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder. The Section 16 Subcommittee currently
consists of Messrs. Davis and Haig. The Section 162(m) and Section 16
Subcommittees were formed in 1999 and, therefore, held no meetings
during 1998.
8
<PAGE>
Mr. York is an employee of Tracinda and, along with Messrs. Davis and Haig,
is a director of MGM Grand, Inc., an affiliate of Tracinda. Prior to April 28,
1999, Mr. Coppola was a member of the Compensation Committee. Prior to April
26, 1999, Mr. Yemenidjian was also a member of the Compensation Committee.
Mr. Coppola is the brother of the sole shareholder of Taliafilm, Inc., with
which the Company has entered into an agreement. See "Certain Relationships
and Related Transactions." In addition, Mr. Pisano, who was an executive
officer of the Company during 1998, serves on the compensation committee of
Mr. Coppola's family trust.
Bonus Plan Committee. The Bonus Plan Committee of the Board of Directors of
the Company (the "Bonus Plan Committee") was established on November 7, 1997
and is comprised of the same members of, and holds its meetings at the same
time as, the Compensation Committee. The Bonus Plan Committee is responsible
for administering the Senior Management Bonus Plan (as defined below). See
"Proposal 4--Bonus Interest Amendment."
Non-Employee Director Plan Committee. The Non-Employee Director Plan
Committee of the Board of Directors of the Company (the "Director Plan
Committee") is comprised of the Messrs. McGurk and Yemenidjian (Chairman). The
Director Plan Committee is responsible for administering the 1998 Non-Employee
Director Stock Plan (the "Director Plan"). No meetings of the committee were
held during 1998. See "--Director Compensation."
Director Compensation
Each director of the Company who is not a full-time employee of the Company
or its subsidiaries (a "Non-Employee Director"), currently seven persons, will
be paid (i) $25,000 per annum for serving as a director of the Company, (ii)
$15,000 per annum additional if such Non-Employee Director is a member of the
Executive Committee, (iii) $2,000 per meeting (up to a maximum of $8,000 per
annum) for attendance at Audit Committee meetings if such Non-Employee
Director is a member of the Audit Committee, and (iv) $1,000 per meeting (up
to a maximum of $4,000 per annum) for attendance at Compensation Committee and
Bonus Plan Committee meetings if such Non-Employee Director is a member of the
Compensation Committee or Bonus Plan Committee, as applicable. No additional
compensation is paid for attendance at meetings of the Finance Committee,
Section 162(m) Subcommittee or Section 16 Subcommittee.
Mr. Haig, a member of the Board of Directors of the Company, renders
consulting services to the Company for which he receives fees at the rate of
$50,000 per annum.
Pursuant to the Director Plan, each Non-Employee Director is entitled to
elect to receive all or a portion of the compensation received as a director
("Election Amount") in the form of shares of the Common Stock. Shares are
issued under the Director Plan in equal quarterly installments (based on the
Election Amount) and the actual number of shares of the Common Stock to be
received by a Non-Employee Director will be determined based on the fair
market value of the Common Stock on the date of issuance. Up to 100,000 shares
of the Common Stock, subject to certain adjustments, have been reserved for
issuance under the Director Plan. The Director Plan is administered by the
Director Plan Committee, which has the power to amend the Plan, subject to
certain limitations. For the 1998 plan year, commencing the day immediately
following the 1998 annual meeting and ending on the date of the Annual
Meeting, three Non-Employee Directors elected to participate in the Director
Plan: Messrs. Aljian, Davis and York elected to receive 60, 50 and 50 percent
of their respective annual compensation as a director in shares of the Common
Stock. As of June 1, 1999, the Company had issued an aggregate of 3,871 shares
of the Common Stock under the Director Plan as follows: 1,759 shares were
issued to Mr. Aljian, 1,536 shares were issued to Mr. York and 576 shares were
issued to Mr. Davis.
On May 18, 1998 the Company filed a registration statement on Form S-8 with
the Securities and Exchange Commission (the "Commission") (which registration
statement became effective upon filing) with respect to the shares of the
Common Stock authorized to be issued pursuant to the Director Plan.
In addition, Non-Employee Directors receive reimbursement for out-of-pocket
expenses in attending meetings of the Board of Directors and any committees
thereof on which they serve. See "Certain Relationships and Related
Transactions" for a description of certain transactions involving directors or
their affiliates and the Company.
9
<PAGE>
EXECUTIVE COMPENSATION
Executive Compensation Summary
Compensation Summary. The following table sets forth the cash and other
compensation (including cash bonuses) paid or awarded by the Company for the
fiscal years ended December 31, 1998, 1997 and 1996, as applicable, to the
"Named Executive Officers," consisting of: (i) Messrs. Yemenidjian and McGurk,
who became executive officers of the Company in April 1999; (ii) Mr. Mancuso,
who served as Chairman of the Board and Chief Executive Officer during 1998,
and Mr. Pisano, who served as Vice Chairman of the Board during 1998 (Messrs.
Mancuso and Pisano ceased being executive officers in April 1999); (iii) the
other three most highly compensated executive officers of the Company who were
serving as executive officers on December 31, 1998 (together with Messrs.
Yemenidjian and McGurk, the "Current Executive Officers"); and (iv) such
persons who would have been among the four most highly compensated executive
officers in 1998 but for the fact that they were no longer serving as
executive officers of the Company on December 31, 1998 (together with Messrs.
Mancuso and Pisano, the "Former Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
---------------------------------- --------------------------
Bonus Securities
Name and Principal Other Annual Interests Underlying All Other
Position Year Salary($) Bonus($) Compensation($) (#)(1) Options(#)(2) Compensation($)
- - - - - - - - - - - - - - ---------------------------- ---- --------- -------- --------------- --------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current Executive Officers
Alex Yemenidjian(3).................. 1998 $ -- $ -- $ -- -- -- $ 42,000
Chairman of the Board
and Chief Executive Officer
Christopher J. McGurk(4)............. 1998 -- -- -- -- -- --
Vice Chairman of the Board
William A. Jones..................... 1998 598,325 -- -- -- 159,584 27,595(5)
Senior Executive Vice 1997 546,626 -- -- 74,209 159,584 34,309
President and Secretary 1996 467,238 -- -- -- -- 1,051,476
Daniel J. Taylor(6).................. 1998 573,161 45,333 -- 29,292(7) 179,168 69,293(8)
Senior Executive Vice............... 1997 153,192 41,667 -- 54,042 116,250 67,539
President and Chief Financial
Officer
Robert Brada(9)...................... 1998 327,301 50,000 -- 40,584(10) 87,292(11) 6,400(12)
Executive Vice
President and General Counsel
Former Executive Officers
Frank G. Mancuso(13)................. 1998 2,020,400 -- 3,000,000(14) -- -- 122,185(17)
Chairman of the Board and 1997 2,020,400 -- 5,780,769(15) 811,756 1,745,680 168,228
Chief Executive Officer 1996 2,691,408 750,000 576,923(16) -- -- 17,228,129
A. Robert Pisano(18)................. 1998 965,600 750,000 -- -- 523,754 17,085(19)
Vice Chairman of the Board 1997 965,600 750,000 -- 243,544 523,754 17,085
1996 816,984 -- -- -- -- 1,800,706
Michael G. Corrigan(20). 1998 362,762 -- -- -- -- 2,616,968(21)
Senior Executive Vice 1997 328,185 -- -- 83,334 179,168 104,845
President and Chief
Financial Officer
David G. Johnson(22)................. 1998 426,592 -- -- -- -- 2,468,579(23)
Senior Executive Vice 1997 573,483 100,000 -- 83,334 179,168 5,946
President and General Counsel 1996 482,893 122,692 -- -- -- 538,858
</TABLE>
10
<PAGE>
- - - - - - - - - - - - - - --------
(1) Except as otherwise footnoted: (i) with respect to 1996, the bonuses
granted under the predecessor plan to the Senior Management Bonus Plan
were canceled in connection with the adoption of the Senior Management
Bonus Plan in November 1997 and (ii) with respect to 1997, such number
represents the number of Bonus Interests (as such term is defined below)
granted pursuant to the Senior Management Bonus Plan after giving effect
to (A) the cancellation in November 1997 of the bonuses which had been
granted under the predecessor plan and (B) the Bonus Interest Amendment
(as such term is defined below). Each Bonus Interest entitles the
participant to receive up to $24.00 under certain circumstances. In
connection with the Bonus Interest Amendment, the trigger and ceiling
prices (as such terms are defined below) of 243,544, 74,209 and 54,042
Bonus Interests granted to Messrs. Pisano, Jones and Taylor,
respectively, were reduced. See "--Incentive and Bonus Plans--Senior
Management Bonus Plan."
(2) Except as otherwise footnoted: (i) with respect to 1996, options granted
under the predecessor plan to the 1996 Incentive Plan (as defined below)
were canceled in connection with the amendment and restatement of the
1996 Incentive Plan in November 1997 as follows: 872,840, 261,877,
79,792, 58,125 and 89,584 Series A Options and 958,549, 287,502, 87,876,
63,959 and 98,334 Series B Options granted to Messrs. Mancuso, Pisano,
Jones, Taylor and Johnson, respectively; (ii) with respect to 1997,
certain options granted under the 1996 Incentive Plan were canceled and
regranted in connection with the Options Repricing (as such term is
defined below) and (iii) with respect to 1998, such number includes the
number of options re-granted pursuant to the 1996 Incentive Plan in
connection with the Options Repricing as follows: 261,877, 79,792,
121,043 and 26,000 Series A Options and 261,877, 79,792, 58,125 and 0
Series B Options granted to Messrs. Pisano, Jones, Taylor and Brada,
respectively, but does not double count options which were granted in
1998 prior to the Options Repricing and were canceled and regranted in
connection with the Options Repricing. See "--Incentive and Bonus Plans--
1996 Incentive Plan."
(3) Mr. Yemenidjian was appointed as Chairman of the Board and Chief
Executive Officer of the Company effective April 26, 1999. Accordingly,
Mr. Yemenidjian received no compensation from the Company prior to April
26, 1999 other than $42,000 in fees for serving as a member of the Board
of Directors of the Company and its committees in 1998.
(4) Mr. McGurk was appointed as Vice Chairman of the Board of Directors and
Chief Operating Officer of the Company on April 28, 1999. Accordingly,
Mr. McGurk received no compensation from the Company prior to April 28,
1999.
(5) Includes: a matching contribution of $6,400 paid by the Company for the
benefit of Mr. Jones under the Savings Plan and $21,195 in life insurance
premiums paid by the Company for the benefit of Mr. Jones. See "--
Employment Agreements--William A. Jones."
(6) Mr. Taylor was hired by the Company as Executive Vice President-Corporate
Finance in August 1997 and was appointed as Senior Executive Vice
President and Chief Financial Officer on June 15, 1998. Accordingly, the
amounts shown in the table above with respect to "Annual Compensation"
for 1997 are for a period of less than a full year.
(7) In connection with his appointment as Senior Executive Vice President and
Chief Financial Officer on June 15, 1998, Mr. Taylor was granted the
Taylor Additional Bonus (as defined below), which is equivalent to 29,292
Bonus Interests, after giving effect to the Bonus Interests Repricing,
and is only payable in certain circumstances. See "--Employment
Agreements--Daniel J. Taylor."
(8) Includes: $62,893 in moving allowance and reimbursement of moving
expenses incurred by Mr. Taylor in connection with his relocation to Los
Angeles and a matching contribution of $6,400 paid by the Company for the
benefit of Mr. Taylor under the Savings Plan. See "--Employment
Agreements--Daniel J. Taylor."
(9) Mr. Brada was hired by the Company in June 1995. On January 8, 1999, Mr.
Brada was determined by the Board of Directors to be an "executive
officer" of the Company, as such term is defined in the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
11
<PAGE>
(10) In connection with his appointment as Executive Vice President on June 1,
1998 and as Executive Vice President and General Counsel on August 21,
1998, Mr. Brada was granted the Brada Additional Bonus (as defined
below), which is equivalent to 40,584 Bonus Interests, after giving
effect to the Bonus Interests Repricing, and is only payable in certain
circumstances. See "--Employment Agreements--Robert Brada."
(11) Includes: 30,646 Series A and 30,646 Series B Options granted to Mr.
Brada on October 26, 1998. See "--Employment Agreements--Robert Brada."
(12) Represents a matching contribution of $6,400 paid by the Company for the
benefit of Mr. Brada under the Savings Plan. See "--Employment
Agreements--Robert Brada."
(13) Mr. Mancuso resigned as Chairman of the Board and Chief Executive Officer
effective on April 26, 1999.
(14) Represents the annual stock purchase payment paid in advance in 1998 for
the period of November 18, 1998 to November 17, 1999 to Mr. Mancuso
pursuant to his employment agreement, out of the after-tax proceeds of
which he was required to purchase shares of the Common Stock at a
purchase price equal to the fair market value of such shares.
(15) Represents (i) the portion of the annual stock purchase payment for the
period of January 1, 1997 to November 17, 1997 and (ii) the annual stock
purchase payment paid in advance in 1997 for the period of November 18,
1997 to November 17, 1998 to Mr. Mancuso pursuant to his employment
agreement, out of the after-tax proceeds of which he was required to
purchase shares of the Common Stock at a purchase price of $24.00 per
share.
(16) Represents the portion of the annual stock purchase payment paid to Mr.
Mancuso for the period of October 10, 1996 to December 31, 1996 pursuant
to his employment agreement, out of the after-tax proceeds of which he
was required to purchase shares of the Common Stock at a purchase price
of $24.00 per share.
(17) Represents life insurance premiums paid by the Company for the benefit of
Mr. Mancuso.
(18) Mr. Pisano resigned as Vice Chairman and as a Board member effective on
April 26, 1999.
(19) Includes: a matching contribution of $6,400 paid by the Company for the
benefit of Mr. Pisano under the Savings Plan and $10,685 in life
insurance premiums paid by the Company for the benefit of Mr. Pisano.
(20) Mr. Corrigan was appointed Senior Executive Vice President and Chief
Financial Officer of the Company in July 1997 and ceased to be employed
by the Company on June 15, 1998. Accordingly, the amounts shown in the
table above with respect to "Annual Compensation" are for periods of less
than one year. All of Mr. Corrigan's options and Bonus Interests became
vested and exercisable upon the cessation of his employment with the
Company and are not subject to the Options Repricing or the Bonus
Interest Amendment.
(21) Represents the amount paid to Mr. Corrigan in connection with the
termination of his employment agreement in July 1998.
(22) Mr. Johnson resigned from the Company effective August 20, 1998.
Accordingly, the amounts shown in the table above with respect to "Annual
Compensation" for 1998 are for a period of less than one year. All of Mr.
Johnson's options and Bonus Interests became vested and exercisable upon
his resignation from the Company and are not subject to the Options
Repricing or the Bonus Interest Amendment.
(23) Represents a matching contribution of $6,400 paid by the Company for the
benefit of Mr. Johnson under the Savings Plan and $2,462,179 paid to Mr.
Johnson in connection with the termination of his employment agreement in
August 1998.
12
<PAGE>
Option Grants and Long Term Incentive Awards. The following table sets forth
information with respect to grants of employee stock options issued by the
Company to the Named Executive Officers for the fiscal year ended December 31,
1998. See "--Incentive and Bonus Plans--1996 Incentive Plan."
Option Grants in Fiscal Year Ended December 31, 1998
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------
Potential Realizable
Value at Assumed
Percent of Annual Rates of
Shares Total Options Stock Price
Underlying Granted to Exercise Appreciation For
Options Employees in or Base Option Term ($)(2)
Granted Fiscal Year Price Expiration --------------------
Name (#) (%)(1) ($/sh) Date 0% 5% 10%
- - - - - - - - - - - - - - ---- ---------- ------------- -------- ---------- -- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Current Executive
Officers
Alex Yemenidjian........ -- -- % $ -- -- $-- $-- $ --
Christopher J. McGurk... -- -- -- -- -- -- --
William A. Jones........ 159,584(3) 2.7 14.90 10/9/2006 -- -- 709,350
Daniel J. Taylor........ 116,250(3) 2.0 14.90 7/31/2007 -- -- 696,810
62,918(4) 1.1 14.90 8/2/2008 -- -- 509,729
Robert Brada............ 15,600(3) 0.3 14.90 11/11/2007 -- -- 102,393
10,400(4) 0.2 14.90 7/12/2008 -- -- 82,947
61,292 1.0 14.90 10/25/2008 -- -- 527,821
Former Executive
Officers
Frank G. Mancuso........ -- -- -- -- -- -- --
A. Robert Pisano........ 523,754(3) 8.9 14.90 10/9/2006 -- -- 2,328,084
Michael G. Corrigan..... -- -- -- -- -- -- --
David G. Johnson........ -- -- -- -- -- -- --
</TABLE>
- - - - - - - - - - - - - - --------
(1) Based on a total of 5,900,396 stock options granted pursuant to the 1996
Incentive Plan during the fiscal year ended December 31, 1998, including
the 5,352,504 options that were canceled and regranted in connection with
the Options Repricing, but without double counting options which were
granted in 1998 prior to the Options Repricing and were canceled and
regranted in connection with the Options Repricing.
(2) As of December 31, 1998. The closing sale price per share of the Common
Stock on the New York Stock Exchange ("NYSE"), as reported by the Dow
Jones News Retrieval, on October 26, 1998, the date of the Options
Repricing, was $9.06. Potential gains, if any, are net of exercise price,
but before taxes associated with exercise. The 0 percent, 5 percent and
10 percent assumed compounded annual rates of stock price appreciation
are mandated by rules of the Commission. There can be no assurance
provided to any Named Executive Officer or any other holder of the
Company's securities that the actual stock price appreciation over the
remaining option term will be at the assumed 0 percent, 5 percent and 10
percent levels or at any other defined level.
(3) These options were initially granted prior to 1998 and were canceled and
regranted in connection with the Options Repricing in October 1998. See
"--Incentive and Bonus Plans--1996 Incentive Plan."
(4) These options were granted in 1998 prior to the Options Repricing and
were canceled and regranted in connection with the Options Repricing. See
"--Incentive and Bonus Plans--1996 Incentive Plan."
13
<PAGE>
The following table sets forth information with respect to the ownership and
value of options as of December 31, 1998 held by the Named Executive Officers.
No Named Executive Officer exercised any options during the fiscal year ended
December 31, 1998.
Aggregated Option Exercises in Fiscal Year Ended December 31, 1998
and Option Values as of December 31, 1998
<TABLE>
<CAPTION>
Securities Underlying Unexercised Value of Unexercised In-The-Money
Options at December 31, 1998(1) Options at December 31, 1998(2)
--------------------------------- ---------------------------------
Name Exercisable (#) Unexercisable (#) Exercisable ($) Unexercisable ($)
---- --------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
Current Executive
Officers
Alex Yemenidjian........ -- -- $-- $--
Christopher J. McGurk... -- -- -- --
William A. Jones........ -- 159,584 -- --
Daniel J. Taylor........ -- 179,168 -- --
Robert Brada............ -- 87,292 -- --
Former Executive
Officers
Frank G. Mancuso........ 378,231 1,367,449 -- --
A. Robert Pisano........ -- 523,754 -- --
Michael G. Corrigan..... 179,168 -- -- --
David G. Johnson........ 179,168 -- -- --
</TABLE>
- - - - - - - - - - - - - - --------
(1) Represents the total number of options granted to the Named Executive
Officers under the 1996 Incentive Plan after giving effect to the Options
Repricing. With respect to Messrs. Pisano, Jones, Taylor and Brada, each
option listed above is exercisable at $14.90 per share of the Common
Stock, after giving effect to the Options Repricing, and, with respect to
Messrs. Mancuso, Corrigan and Johnson, each option listed above is
exercisable at $24.00 per share of the Common Stock. Such options
generally vest over a period of five years. See "--Incentive and Bonus
Plans--1996 Incentive Plan."
(2) The closing sale price of the Common Stock on the NYSE, as reported by the
Dow Jones News Retrieval, on December 31, 1998 was $13.19 per share, which
was less than the exercise prices of all of the options then outstanding
to the Named Executive Officers under the 1996 Incentive Plan after giving
effect to the Options Repricing. Pursuant to the Options Repricing, the
exercise price of certain options was reduced from $24.00, $21.50 or
$20.00 to $14.90. See "--Incentive and Bonus Plans--1996 Incentive Plan."
14
<PAGE>
In October 1998 the Compensation Committee approved, and the entire Board of
Directors, the Section 162(m) Subcommittee and the Section 16 Subcommittee
subsequently affirmed and ratified, the Options Repricing. The Options
Repricing is subject to approval of the stockholders of the Company. Tracinda,
which owns approximately 79.3 percent of the outstanding shares of the Common
Stock as of June 1, 1999, has agreed to vote in favor of the approval of the
Options Repricing. The following table sets forth information with respect to
the participation of the Named Executive Officers in the Options Repricing.
See "--Incentive and Bonus Plans--1996 Incentive Plan."
Option Repricing on October 26, 1998
<TABLE>
<CAPTION>
Shares Closing Market Length of Option
Underlying Price of Common Term Remaining
Options Stock on Date of Old Exercise New Exercise on Date of
Name Repriced (#) Repricing ($) Price ($) Price ($)(1) Repricing (2)
- - - - - - - - - - - - - - ---- ------------ ---------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Current Executive
Officers
Alex Yemenidjian........ -- $-- $ -- $ -- --
Christopher J. McGurk... -- -- -- -- --
William A. Jones........ 159,584 9.06 24.00 14.90 96 Months
Daniel J. Taylor........ 116,250 9.06 24.00 14.90 106 Months
62,918 9.06 24.00 14.90 118 Months
Robert Brada............ 15,600 9.06 20.00 14.90 109 Months
10,400 9.06 21.50 14.90 117 Months
Former Executive
Officers
Frank G. Mancuso........ -- -- -- -- --
A. Robert Pisano........ 523,754 9.06 24.00 14.90 96 Months
Michael G. Corrigan..... -- -- -- -- --
David G. Johnson........ -- -- -- -- --
</TABLE>
- - - - - - - - - - - - - - --------
(1) The exercise price of the options granted in connection with the Options
Repricing was determined by the Compensation Committee of the Board of
Directors of the Company and subsequently approved by each of the
subcommittees thereof.
(2) As of October 26, 1998.
The following table sets forth information with respect to grants of Bonus
Interests under the Senior Management Bonus Plan and other long term incentive
compensation for the fiscal year ended December 31, 1998 to the Named
Executive Officers. See "--Incentive and Bonus Plans--Senior Management Bonus
Plan."
Long-Term Incentive Plans--Awards in Fiscal Year Ended December 31, 1998
<TABLE>
<CAPTION>
Number of Shares, Performance or Other
Units or Other Period Until
Name Rights (#)(1) Maturation or Payout(2)
- - - - - - - - - - - - - - ---- ----------------- -----------------------
<S> <C> <C>
Current Executive Officers
Alex Yemenidjian...................... -- --
Christopher J. McGurk................. -- --
William A. Jones...................... -- --
Daniel J. Taylor(3)................... 29,292 44 months
Robert Brada(4)....................... 40,584 34 months
Former Executive Officers
Frank G. Mancuso...................... -- --
A. Robert Pisano...................... -- --
Michael G. Corrigan................... -- --
David G. Johnson...................... -- --
</TABLE>
15
<PAGE>
- - - - - - - - - - - - - - --------
(1) Does not include the number of Bonus Interests granted in prior years,
the terms of which were amended in October 1998 pursuant to the Bonus
Interest Amendment (which is subject to stockholder approval) as follows:
243,544, 74,209 and 54,042 Bonus Interests to Messrs. Pisano, Jones and
Taylor, respectively.
(2) As of December 31, 1998. Bonus Interests and the Taylor Additional Bonus
and Brada Additional Bonus generally vest over a period of five years and
are only payable in certain circumstances. See "--Incentive and Bonus
Plans--Senior Management Bonus Plan."
(3) Represents the Taylor Additional Bonus, which is equivalent to 29,292
Bonus Interests, after giving effect to the Bonus Interests Repricing,
and is only payable in certain circumstances. See "--Employment
Agreements--Daniel J. Taylor."
(4) Represents the Brada Additional Bonus, which is equivalent to 40,584
Bonus Interests, after giving effect to the Bonus Interests Repricing,
and is only payable in certain circumstances. See "--Employment
Agreements--Robert Brada."
Pension Plans. The Company maintains a retirement plan (the "MGM Retirement
Plan"), which covers substantially all of the employees of the Company. See
"Benefit Plans--MGM Retirement Plan." The following table sets forth estimated
annual benefits payable upon retirement with regard to the MGM Retirement
Plan.
Pension Plan Table
<TABLE>
<CAPTION>
Years of Service(1)
---------------------------------------
Remuneration(2) 15 20 25 30 35
--------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 50,000........................... $11,625 $15,500 $19,375 $23,250 $27,125
100,000........................... 24,909 33,212 41,515 49,818 58,121
150,000........................... 39,159 52,212 65,265 78,318 91,371
160,000........................... 42,009 56,012 70,015 84,018 98,021
200,000........................... 53,409 71,212 89,015 106,818 124,621
</TABLE>
- - - - - - - - - - - - - - --------
(1) As of June 1, 1999, Messrs. Yemenidjian, McGurk, Jones, Taylor and Brada
were credited with 0, 0, 16, 7, and 4 years of service, respectively. On
April 26, 1999, the date of their respective resignations, Messrs.
Mancuso and Pisano were each credited with 5 years of service. As of the
dates of their respective terminations of employment with the Company,
neither Mr. Corrigan nor Mr. Johnson was credited with five years or more
of service.
(2) The compensation covered by the MGM Retirement Plan includes base salary
only. The pension to which a participant is entitled is an annual amount
equal to (i) 1.55 percent of annual base salary up to the Social Security
wage base ($68,400 for 1998), plus 1.9 percent of annual base salary
above the Social Security wage base up to the maximum allowable under the
MGM Retirement Plan (currently $160,000 per year) for each year of
credited service up to 35 years, plus (ii) 1.55 percent of total annual
base salary up to the maximum allowable under the MGM Retirement Plan for
each year of service in excess of 35. Benefits become vested upon
completion of five years of service. For each of the Named Executive
Officers currently employed by the Company, the current compensation
covered by the MGM Retirement Plan is the maximum allowable under the MGM
Retirement Plan, which is substantially less than the annual compensation
for each such Named Executive Officer listed in the "Salary" column of
the Summary Compensation Table.
Incentive and Bonus Plans
1996 Incentive Plan. The Company has an Amended and Restated 1996 Stock
Incentive Plan (the "1996 Incentive Plan"). Awards under the 1996 Incentive
Plan are generally not restricted to any specific form or structure and may
include, without limitation, qualified or non-qualified stock options,
incentive stock options, restricted stock awards and stock appreciation rights
(collectively, "Awards"). Awards may be conditioned on continued employment,
have various vesting schedules and accelerated vesting and exercisability
provisions in the event of, among other things, a change in control of the
Company. The 1996 Incentive Plan is administered by the Compensation
Committee, which has broad authority to amend the plan.
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<PAGE>
An aggregate of 8,125,065 shares of the Common Stock were originally
reserved and authorized for issuance under the 1996 Incentive Plan. As of June
1, 1999, 393,000 shares of the Common Stock had been issued pursuant to Awards
(of which 139,515 shares of the Common Stock were subsequently reacquired and
are held by the Company as treasury shares) and options to purchase 7,724,225
shares of the Common Stock were outstanding. Of the outstanding options,
5,395,912 are held by the Named Executive Officers and certain other current
senior employees (the "Executive Options") and 2,328,313 are held by
approximately 375 other employees of the Company (the "Employee Options"). All
of the outstanding options generally vest over a period of five years and are
not exercisable unless vested; provided that, notwithstanding anything to the
contrary contained in the 1996 Incentive Plan or the agreements pursuant
thereto, the options which were regranted pursuant to the Options Repricing
are not exercisable until stockholder approval of the Options Repricing is
obtained. In addition, 2,474,329 of the Executive Options cannot be exercised
until December 31, 2001 (subject in each case to early vesting and, depending
on the circumstances, early exercisability in certain events, including the
death or permanent disability of the optionee, termination of the optionee's
employment under certain circumstances or a "Designated Change in Control" of
the Company (as defined in the 1996 Incentive Plan)).
Of the Executive Options, 3,291,896 are exercisable at $14.90, after giving
effect to the Options Repricing, and 2,104,016 are exercisable at $24.00. Of
the Employee Options, 2,053,713 are exercisable at $14.90, after giving effect
to the Options Repricing, and 274,600 are exercisable at $11.38. As of June 1,
1999, 3,039,223 Executive Options were vested (or would vest within 60 days),
of which 1,708,928 Executive Options were exercisable (or would become
exercisable within 60 days), and 405,353 Employee Options were vested and
exercisable (or would vest and become exercisable within 60 days).
In May 1998 the Company filed a registration statement on Form S-8 with the
Commission (which registration statement became effective upon filing) with
respect to the shares of the Common Stock underlying the options granted or
authorized to be granted under the 1996 Incentive Plan.
Due to the decline in the market price of the Common Stock in 1998, the
Compensation Committee and the Board of Directors determined that the purpose
of the 1996 Incentive Plan was not being achieved. Therefore, in order more
closely to realign the exercise price of the options with the market price of
the Common Stock and thereby better enable the Company to attract, retain and
motivate its employees, effective on October 26, 1998 (subject to certain
conditions) the Company canceled and regranted at a reduced exercise price
certain of the options theretofore granted under the 1996 Incentive Plan
(collectively, the "Options Repricing"). The effect of the Options Repricing
was to:
(i) adjust the exercise price of options granted to Messrs. Pisano,
Jones, Taylor and Brada (with respect to the Named Executive Officers) and
certain other senior employees of the Company (collectively, "Executive
Repricing Participants") as of October 26, 1998 from (a) $24.00 to $14.90
(3,164,604 options) with respect to the Executive Repricing Participants
other than Mr. Brada, and (b) from $20.00 (15,600 options) and $21.50
(10,400 options) to $14.90 with respect to Mr. Brada (see "Executive
Compensation Summary--Option Grants and Long Term Incentive Awards--Options
Repricing on October 26, 1998"); and
(ii) adjust the exercise price of the Employee Options outstanding as of
October 26, 1998 to $14.90 (a) from $20.00, with respect to 2,027,900
options, (b) from $22.00, with respect to 10,400 options, (c) from $21.50,
with respect to 103,800 options, and (d) from $19.63, with respect to
19,800 options.
No changes were made to the vesting schedule or expiration date of such
options; provided that, notwithstanding anything to the contrary contained in
the 1996 Incentive Plan or the agreements pursuant thereto, the options which
were subject to the Options Repricing are not exercisable until the later of
(i) the date stockholder approval of the Options Repricing is obtained and
(ii) the applicable date of exercise set forth in the respective option
agreement. The Options Repricing is subject to approval by the stockholders of
the Company. See Proposal 2--"Options Repricing." If the Options Repricing is
not approved by the holders of at least 75 percent of the outstanding shares
of the Common Stock, the Options Repricing will be null and void and the
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<PAGE>
options outstanding as of October 26, 1998, except to the extent otherwise
terminated or modified, will be reinstated. Tracinda, which owned
approximately 79.3 percent of the outstanding shares of the Common Stock as of
June 1, 1999, has agreed to vote its shares in favor of the approval of the
Options Repricing.
The Board of Directors has approved, subject to stockholder approval and
ratification, an increase in the aggregate number of shares of the Common
Stock issuable under the 1996 Incentive Plan from 8,125,065 shares of the
Common Stock to 28,000,000 shares of the Common Stock. See Proposal 3--
"Amendment to 1996 Stock Incentive Plan."
Shortly after the Annual Meeting, the Company intends to grant 100 shares of
the Common Stock to approximately 450 employees of the Company who have not
been granted options under the 1996 Incentive Plan.
The foregoing description of the 1996 Incentive Plan and the Options
Repricing is qualified in all respects by the actual provisions of the 1996
Incentive Plan and the form of Executive Options Exchange Agreement which are
filed as exhibits to the 10-K.
Senior Management Bonus Plan. The Company has a Senior Management Bonus Plan
(the "Senior Management Bonus Plan") under which 2,420,685 bonus interests
("Bonus Interests") have been granted to 18 present or former executives and
senior employees of the Company. The Senior Management Bonus Plan is
administered and may be amended by the Bonus Plan Committee of the Board of
Directors; provided, however, that the Senior Management Bonus Plan may only
be amended with the consent of the Board of Directors of the Company and
persons then holding a majority in interest of the outstanding Bonus
Interests.
Subject to certain vesting and other requirements, including approval of the
Bonus Interest Amendment described below by the stockholders of the Company,
each Bonus Interest, held by an Executive Repricing Participant entitles the
holder to receive a cash payment if (i) the sum of the average closing price
of the Common Stock during the 20 trading days plus, in certain circumstances,
per share distributions on the Common Stock (together, the "Price") preceding
a Determination Date (defined below) is greater than (ii) $14.90 (i.e., the
"trigger price") and less than $29.80 (i.e., the "ceiling price") (adjusted
for stock splits, reverse stock splits and similar events). With respect to
Bonus Interests held by all others, each Bonus Interest entitles the holder to
receive a cash payment if the Price preceding a Determination Date is greater
than $24.00 and less than $48.00 (adjusted for stock splits, reverse stock
splits and similar events). The cash payment will be equal to (A) the vested
portion of the Bonus Interests on the Determination Date multiplied by (B) the
amount by which the Price on the Determination Date is less than $29.80, with
respect to Executive Repricing Participants, or $48.00, with respect to all
others, multiplied by (C) 1.61, with respect to the Executive Repricing
Participants only. In each case, a maximum of $24.00 per Bonus Interest may be
received by the holder thereof. Once a payment is made in respect of the
vested portion of a Bonus Interest, no further payment is due in respect of
that portion. If at any Determination Date the Price equals or exceeds $29.80,
with respect to Executive Repricing Participants, or $48.00, with respect to
all others, no payment will thereafter be due in respect of any then-vested
portion of a Bonus Interest.
"Determination Dates" occur on June 30 and December 31 of each year,
commencing December 31, 2001 and ending December 31, 2006 and will also occur
upon a "Designated Change in Control" (as defined in the Senior Management
Bonus Plan) or the taking of any action for the dissolution or liquidation of
the Company (each a "Special Circumstance"). In addition, with respect to the
applicable officer only, a Determination Date shall occur in the event of a
termination of such officer's employment due to death or "Permanent
Disability" (as defined in the Senior Management Bonus Plan"), if such death
or Permanent Disability shall have occurred prior to December 31, 2001, by the
Company for "Cause" or by such officer without "Good Reason" (each, as defined
in the Senior Management Bonus Plan).
Bonus Interests generally vest 20 percent on the first anniversary of the
date of their grant and approximately 1.67 percent each month thereafter. The
Senior Management Bonus Plan provides for accelerated vesting and
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<PAGE>
payment in the event of a Special Circumstance (with payment at discounted
present value in the event payment is made in connection with a Designated
Change in Control which occurs prior to December 31, 2001), accelerated
vesting in the event of termination of employment in certain circumstances and
payment at discounted present value, for the officer involved, in the event of
death or Permanent Disability.
Due to the decline in the market price of the Common Stock in 1998, the
Bonus Plan Committee and the Board of Directors determined that the purpose of
the Senior Management Bonus Plan was not being achieved. Therefore, in order
more closely to realign the value of the Bonus Interests with the market price
of the Common Stock and thereby better enable the Company to provide an
incentive to its senior management, effective on October 26, 1998 (subject to
certain conditions) the Company amended the terms of the Bonus Interests (or
certain bonus arrangements based on the value of the Bonus Interests) of the
Executive Repricing Participants to reduce the trigger and ceiling prices of
the Bonus Interests granted to such Executive Repricing Participants (or on
which their bonuses were based) (the "Bonus Interest Amendment").
Specifically, the trigger price was adjusted from $24.00 per Bonus Interest to
$14.90, the ceiling price was adjusted from $48.00 per Bonus Interest to
$29.80 and a multiplier of 1.61 per Bonus Interest was included in order for
the maximum amount receivable with respect to each Bonus Interest to remain at
$24.00. No changes were made to the vesting schedule or expiration date or any
other provision of the Bonus Interests. The Bonus Interest Amendment is
subject to approval by the stockholders of the Company. See Proposal 4--"Bonus
Interest Amendment." If the Bonus Interest Amendment is not approved by the
holders of at least 75 percent of the outstanding shares of the Common Stock,
the Bonus Interest Amendment will be null and void and the terms of the Bonus
Interest Agreements which existed as of October 26, 1998, except to the extent
otherwise terminated or modified, will be reinstated.
The foregoing description of the Senior Management Bonus Plan and the Bonus
Interest Amendment is qualified in all respects by the actual provisions of
the Senior Management Bonus Plan and the form of Bonus Interest Amendment
which are filed as exhibits to the 10-K.
In addition, the Company has granted the Taylor Additional Bonus and Brada
Additional Bonus (each as defined below), each of which is based on the value
of Bonus Interests and is only payable in certain circumstances.
Employment Agreements
Alex Yemenidjian. The Company entered into an employment agreement with Mr.
Yemenidjian effective as of April 26, 1999, which provides that he will serve
as Chairman of the Board of Directors and Chief Executive Officer of the
Company for an initial term that ends on April 30, 2004. Pursuant to the
agreement, Mr. Yemenidjian is entitled to a current annual salary of
$2,500,000 and an annual discretionary bonus. Subject to approval of the
shareholders (see Proposal 6--"Approval and Ratification of Stock Option Grant
to Alex Yemenidjian"), Mr. Yemenidjian also received options under the 1996
Incentive Plan to purchase 10,000,000 shares of the Common Stock, consisting
of 5,000,000 shares with an exercise price of $14.90 per share and 5,000,000
shares with an exercise price of $30.00 per share. Twenty percent of the
options vest to Mr. Yemenidjian on April 30 of each year beginning April 30,
2000. If Mr. Yemenidjian's employment is terminated without cause by the
Company or if he terminates the agreement for "good reason" or in the event of
a "Designated Change of Control," his options under the 1996 Incentive Plan
will vest immediately and he will be entitled to continue to receive his
annual salary and all other benefits for the remainder of the term of the
employment agreement.
Christopher J. McGurk. The Company entered into an employment agreement with
Mr. McGurk effective as of April 28, 1999, which provides that he will serve
as Vice Chairman of the Board of Directors and Chief Operating Officer of the
Company for an initial term which ends on April 30, 2004. Pursuant to the
agreement, Mr. McGurk is entitled to a current annual salary of $2,000,000,
which will increase by $75,000 in April each year for four years, and an
annual discretionary bonus. In addition, Mr. McGurk received a one-time
signing bonus of $1,700,000 and an award of 500,000 shares of Common Stock.
Subject to approval of the shareholders (see Proposal 7--"Approval and
Ratification of Stock Option Grant to Christopher J. McGurk"), Mr. McGurk also
received options under the 1996 Incentive Plan to purchase 3,000,000 shares of
the Common Stock, consisting of 1,500,000 shares with an exercise price of
$14.90 per share and 1,500,000 shares with an exercise
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<PAGE>
price of $30.00 per share. Twenty percent of the options vest to Mr. McGurk on
April 30 of each year beginning April 30, 2000. If Mr. McGurk's employment is
terminated without cause by the Company or if he terminates the agreement for
"good reason" or in the event of a "Designated Change of Control," his options
under the 1996 Incentive Plan will vest immediately and he will be entitled to
continue to receive his annual salary and all other benefits for the remainder
of the term of the employment agreement.
William A. Jones. The Company entered into an employment agreement with Mr.
Jones effective as of October 10, 1996, which provides that he will serve as
Senior Executive Vice President of the Company for an initial term which ends
on October 9, 2001. Pursuant to the agreement, Mr. Jones is entitled to a
current annual salary of $625,000, subject to adjustment as determined by the
Company, and an annual discretionary bonus. The Company is also obligated to
maintain a term life insurance policy in the face amount of $2 million on
Mr. Jones' life for his benefit. If Mr. Jones' employment is terminated
without cause by the Company or if he terminates the agreement for "good
reason," his options and Bonus Interests under the 1996 Incentive Plan and
Senior Management Bonus Plan will vest immediately and he will be entitled to
receive the net present value of the sum of the annual salary through the
entire remaining term of the employment agreement and all insurance benefits
for the remainder of the term of the employment agreement. As of December 31,
1998, the amount payable to Mr. Jones in the event of such circumstances would
be approximately $1.6 million.
Daniel J. Taylor. The Company entered into an employment agreement with Mr.
Taylor effective as of August 1, 1997, as amended as of June 15, 1998, which
provides that he will serve as Senior Executive Vice President and Chief
Financial Officer of the Company for an initial term which ends on June 14,
2003. Pursuant to the agreement, as amended, Mr. Taylor is entitled to a
current annual salary of $750,000, which will increase by $50,000 in October
each year for four years, and an annual discretionary bonus. In addition, Mr.
Taylor may receive an additional bonus (the "Taylor Additional Bonus"),
payable only in the event of a Designated Change in Control of the Company (as
defined in the 1996 Incentive Plan). The amount of the Taylor Additional Bonus
will be determined as of the day before, and will be payable within five
business days from and after, a Designated Change in Control and will
otherwise be equivalent to the amount which would have been received with
respect to 29,292 Bonus Interests on such date, after giving effect to the
Bonus Interests Repricing, had such Bonus Interests been granted to Mr. Taylor
in August 1997. See "--Incentive and Bonus Plans--Senior Management Bonus
Plan." If Mr. Taylor's employment is terminated without cause by the Company
or if he terminates the agreement for "good reason," his options and Bonus
Interests under the 1996 Incentive Plan and Senior Management Bonus Plan will
vest immediately and he will be entitled to receive the net present value of
the sum of the annual salary through the entire remaining term of the
employment agreement and all insurance benefits for the remainder of the term
of the employment agreement. As of December 31, 1998, the amount payable to
Mr. Taylor in the event of such circumstances would be approximately $3.4
million.
Robert Brada. The Company entered into an employment agreement with Mr.
Brada effective as of June 1, 1995, as amended as of June 1, 1998 and as of
August 21, 1998, which provides that he will serve as Executive Vice President
and General Counsel of the Company for an initial term which ends on May 31,
2001. Pursuant to the agreement, as amended, Mr. Brada is entitled to a
current annual salary of $425,000, subject to increase as determined by the
Company on August 21 of each year and an annual discretionary bonus. In
addition, Mr. Brada will receive a bonus (the "Brada Additional Bonus"),
payable only in the event of a Designated Change in Control of the Company (as
defined in the 1996 Incentive Plan) or certain other major corporate events.
The amount of the Brada Additional Bonus shall be determined as of the day
before, and shall be payable within five business days from and after, a
Designated Change in Control or other major corporate event and shall
otherwise be equivalent to the amount which would have been received with
respect to 40,584 Bonus Interests on such date, after giving effect to the
Bonus Interest Repricing had such Bonus Interests been granted to Mr. Brada in
October 1996. See "--Incentive and Bonus Plans--Senior Management Bonus Plan."
If Mr. Brada's employment is terminated without cause by the Company or if he
terminates the agreement for "good reason," his options and Bonus Interests
under the 1996 Incentive Plan and, under certain circumstances, the Brada
Additional Bonus, will vest immediately and he will be entitled to continue to
receive the salary through the entire remaining term of the employment
agreement. As of December 31, 1998, the amount payable to Mr. Brada in the
event of such circumstances would be approximately $968,000.
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<PAGE>
Each of the above named executives also is entitled to receive certain other
benefits, which may include a car allowance, medical insurance, participation
in the benefit plans and any other similar plan or program which the Company
provides for its senior officers generally.
The employment agreements of each of Messrs. Yemenidjian, McGurk, Jones and
Taylor also contain: (i) certain nondisclosure provisions which are effective
for the term of such individual's employment with the Company and for an
indefinite period thereafter; (ii) with the exception of Mr. Yemenidjian's
employment agreement, certain noninterference and non-competition provisions,
which are in effect for the term of such individual's employment with the
Company and one year thereafter; and (iii) together with Mr. Brada's
employment agreement, a provision prohibiting the solicitation for employment
and employment of certain Company employees, or making public statements
concerning the Company, for a period of one year following termination of
employment.
Limitation of Liability and Indemnification Matters
As permitted by applicable provisions of the DGCL, the Company's Amended and
Restated Certificate of Incorporation, as amended to date, contains a
provision whereunder the Company will indemnify each of the officers and
directors of the Company (or their estates, if applicable), and may indemnify
any employee or agent of the Company (or their estates, if applicable), to the
fullest extent permitted by the DGCL as it exists or may in the future be
amended.
In addition, the Company has entered into indemnification agreements with
its directors, its executive officers and certain other officers providing for
indemnification by the Company, including under circumstances in which
indemnification is otherwise discretionary under Delaware law. These
agreements constitute binding agreements between the Company and each of the
other parties thereto, thus preventing the Company from modifying its
indemnification policy in a way that is adverse to any person who is a party
to such an agreement.
The Company currently maintains insurance on behalf of its officers and
directors against certain liabilities that may be asserted against any such
officer or director in his or her capacity as such, subject to certain
customary exclusions. The amount of such insurance is deemed by the Board of
Directors to be adequate to cover such liabilities.
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<PAGE>
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The following report of the Compensation Committee and the performance graph
that appears immediately after such report shall not be deemed to be
soliciting material or to be filed with the Commission under the Securities
Act or the Exchange Act or incorporated by reference in any document so filed.
Compensation
The Compensation Committee of the Board of Directors was established in
November 1997 and, together with its subcommittees, is responsible for
administering the Company's incentive plans and monitoring, reviewing,
approving and/or making recommendations to the Board of Directors with respect
to the Company's compensation policies. The Compensation Committee believes
that the most effective executive compensation program is one that provides
incentives to achieve both current and long-term strategic management goals of
the Company, with the ultimate objective of enhancing stockholder value. In
this regard, the Compensation Committee believes executive compensation
should: (i) be effective in attracting, motivating and retaining key
executives; (ii) correlate with the performance of the Company as a whole and
the executive's individual performance; and (iii) provide the executives with
a financial interest in the Company similar to the interests of the Company's
stockholders.
The Company's executives are compensated through a combination of salary,
bonuses and long-term incentive arrangements (where appropriate), including
grants of stock options and other stock-based awards under the 1996 Incentive
Plan and Bonus Interests under the Senior Management Bonus Plan. Annual
salaries of the Named Executive Officers are set forth in such executive's
employment agreements. The Compensation Committee believes the salaries of the
Company's executives to be competitive with the salaries paid by companies
with which the Company competes.
Discretionary bonuses, where appropriate, are generally determined by the
Chief Executive Officer of the Company with the concurrence of the
Compensation Committee after the end of the Company's fiscal year and are
based on an assessment of the Company's results and the level of a particular
individual's performance for that year. In its review of bonuses for the
Company's senior executives, the Compensation Committee may consider the
following: improvement in the financial performance of the Company (including
improvements in cash flow, operating income and return on equity); the
executives' levels of responsibility and performance (based upon evaluations
and the recommendation of the Chief Executive Officer as to proposed bonuses
for executives other than himself); and the other components of their
compensation. Mr. Brada received a discretionary bonus in February 1998 in the
amount of $50,000 for the 1997 fiscal year. No discretionary bonuses were
awarded to the Named Executive Officers for 1998.
The Compensation Committee believes that a significant component of the
compensation paid to the Company's executives over the long-term should be
derived from stock options and other stock-based awards. The Compensation
Committee strongly believes that stock ownership in the Company is a valuable
incentive to executives and that the grant to them of stock options and other
stock-based awards serves to align their interests with the interests of the
stockholders as a whole and encourages them to manage the Company in a way
that endeavors to maximize its long-term profitability. Long-term incentive
arrangements are considered on a case-by-case basis, and may be determined as
part of an overall compensation package in conjunction with demonstrable
enhancements to stockholder values. The Compensation Committee and/or the
subcommittees thereof determines whether to grant stock options and other
stock-based awards, as well as the amount of the grants, by taking into
account the proposed recipient's past and prospective value to the Company;
the performance of the proposed recipient (based upon evaluations and the
recommendation of the Chief Executive Officer as to proposed grants for
executives other than himself); and the amount of stock options or other
stock-based awards previously granted.
In connection with his appointment as Senior Executive Vice President and
Chief Financial Officer on June 15, 1998, Mr. Taylor was granted 62,918
options. Mr. Brada was granted 10,400 options in July 1998 in
22
<PAGE>
connection with his promotion to Executive Vice President and 61,292 options
in October 1998 in connection with his appointment as Executive Vice President
and General Counsel. See "Executive Compensation--Executive Compensation
Summary" and "Executive Compensation--Incentive and Bonus Plans." The
Compensation Committee and/or a subcommittee thereof may grant additional
options or other stock-based awards to the Named Executive Officers in the
future.
In addition, in connection with his appointment as Senior Executive Vice
President and Chief Financial Officer on June 15, 1998, Mr. Taylor was granted
the Taylor Additional Bonus, which is equivalent to 29,292 Bonus Interests.
Mr. Brada was granted the Brada Additional Bonus, which is equivalent to
40,584 Bonus Interests in August 1998 in connection with his promotion to
Executive Vice President and General Counsel. Each of the Taylor Additional
Bonus and the Brada Additional Bonus is payable only in certain circumstances.
See "Executive Compensation--Employment Agreements--Daniel J. Taylor" and "--
Robert Brada," "Executive Compensation--Executive Compensation Summary,"
"Executive Compensation--Incentive and Bonus Plans" and "Proposal 4--Bonus
Interest Amendment."
The Compensation Committee intends to review the compensation arrangements
of the Company's senior executives from time to time and to make
recommendations where appropriate.
Repricing of Stock Options and Bonus Interests
In connection with the Company's October 1998 rights offering (the "Rights
Offering"), the Compensation Committee approved, and the entire Board of
Directors, the Section 162(m) Subcommittee and the Section 16 Subcommittee
subsequently affirmed and ratified, the Options Repricing and the Bonus
Interest Amendments which included (i) the cancellation of stock options
previously granted to Messrs. Pisano, Jones, Taylor and Brada at exercise
prices between $20.00 and $24.00 per share and the grant of new stock options
at an exercise price of $14.90 per share and (ii) the amendment of the Taylor
Additional Bonus, the Brada Additional Bonus and the Bonus Interest Agreements
of Messrs. Pisano, Jones and Taylor to lower the trigger and ceiling payment
thresholds from $24.00 and $48.00 per share, respectively, to $14.90 and
$29.80 per share, while maintaining the maximum value of each Bonus Interest
(or bonus equivalent) at $24.00. The closing price of the Common Stock on the
NYSE, as reported by the Dow Jones News Retrieval, on the date of the
Compensation Committee action was $9.06 per share. Both the Options Repricing
and the Bonus Interest Amendment (collectively, the "Repricings") are subject
to stockholder approval. See "Proposal 2--Repricing of Options" and "Proposal
4--Bonus Interest Amendment."
Due to the decline in the market price of the Common Stock in 1998, the
Compensation Committee, the Bonus Plan Committee and the entire Board of
Directors determined that the purposes of the 1996 Incentive Plan and the
Senior Management Bonus Plan were not being achieved. In particular, the
market value of the Common Stock had fallen significantly below the exercise
price of the stock options and the trigger payment threshold of the Bonus
Interests, thereby greatly reducing their value and frustrating the purposes
for which the 1996 Incentive Plan and Senior Management Bonus Plan were
adopted--namely, to attract, retain and motivate executives and employees by
(i) providing for or increasing their proprietary interest in the Company (in
the case of the stock options) and (ii) providing performance incentives
through the opportunity to receive cash bonuses (in the case of the Bonus
Interests). By more closely realigning the value of the stock options and
Bonus Interests with the market price of the Common Stock, the Compensation
Committee believes that the Company will be better able to motivate its senior
management to achieve the long-term strategic business objectives of the
Company with the ultimate objective of enhancing stockholder value.
Moreover, the completion of the Rights Offering had the effect of lowering
the average cost of the shares of Common Stock held by many of the
stockholders who participated therein, including the Company's principal
stockholders, the Tracinda Group. The Compensation Committee believes that the
motivational value of the stock options and Bonus Interests will be greatly
enhanced if the exercise price of the stock options and the base payment
threshold of the Bonus Interests are more closely aligned with the average
price of the shares held by the Company's principal stockholders and other
stockholders who participated in the Rights Offering.
23
<PAGE>
In light of the foregoing, the Compensation Committee does not expect the
Repricings to have any material impact on future compensation policy with
respect to the Named Executives Officers. See "Executive Compensation
Summary--Option Grants and Long Term Incentive Awards--Option Repricing on
October 26, 1998."
Compensation Awarded to Mr. Mancuso, the Former Chief Executive Officer
Mr. Mancuso was Chairman of the Board and Chief Executive Officer of the
Company during 1998. Mr. Mancuso was eligible to participate in the same
executive compensation plans and to receive the same benefits generally
available to the Company's other senior executives except that Mr. Mancuso did
not participate in the Repricings. Pursuant to the terms of his employment
agreement, which was entered into in 1996, Mr. Mancuso's annual base salary
was $2 million, plus an annual stock purchase payment of $3 million, and the
Company maintains a five-year reducing term life insurance policy in the
initial face amount of $25 million for Mr. Mancuso's benefit. Mr. Mancuso was
not granted any additional options or Bonus Interests in 1998. Mr. Mancuso did
not receive a discretionary bonus with respect to 1998. See "Executive
Compensation--Executive Compensation Summary" and "Executive Compensation--
Incentive and Bonus Plans."
Tax Considerations
During 1998, the Compensation Committee's policy was generally to structure
the performance-based portion of the compensation of its Named Executive
Officers in a manner that complies with Section 162(m) of the Internal Revenue
Code whenever, in the judgment of the Compensation Committee, doing so was
consistent with the objectives of the compensation plan under which the
compensation would be payable. However, the Compensation Committee has the
authority to award non-deductible compensation as it deems appropriate and in
the best interests of the Company. See "Certain Federal Income Tax
Consequences."
Compensation Committee:
/s/ Jerome B. York
-------------------------------------
Jerome B. York
(Chairman)
/s/ Willie D. Davis
-------------------------------------
Willie D. Davis
/s/ Alexander M. Haig, Jr.
-------------------------------------
Alexander M. Haig, Jr.
24
<PAGE>
Company Stock Price Performance Graph
The following graph compares the Company's cumulative total stockholder
return with those of Standard & Poor's 500 Composite Stock Price Index and the
Standard & Poor's Entertainment Group Index for the period commencing November
13, 1997 (the first day of trading of the Common Stock on the NYSE) and ending
December 31, 1998, including the reinvestment of any dividends. No dividends
were paid in respect of the Company's securities during the period.
COMPARISON OF CUMULATIVE TOTAL RETURNS
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
S&P
Entertainment S&P
Measurement Date Company Group Index 500 Index
---------------- ------- ------------- ---------
<S> <C> <C> <C>
November 13, 1997.......................... $100.00 $100.00 $100.00
December 31, 1997.......................... $ 95.24 $118.11 $106.43
December 31, 1998.......................... $ 62.80 $160.02 $136.84
</TABLE>
25
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Certain federal income tax consequences relating to options granted under
the 1996 Incentive Plan and Bonus Interests granted under the Senior
Management Bonus Plan and the Repricings are described below.
Options
Under the 1996 Incentive Plan, the Company may grant stock options that
qualify under Section 422 of the Internal Revenue Code ("Incentive Options")
as well as options that do not so qualify ("Non-Qualified Options").
There are generally no federal income tax consequences to the optionee upon
exercise of an Incentive Option, except that the amount by which the fair
market value of the shares of the Common Stock at the time of exercise exceeds
the option exercise price is a tax preference item possibly giving rise to
alternative minimum tax. If the shares of the Common Stock acquired on the
exercise of an Incentive Option are not disposed of within two years from the
date the Incentive Option was granted and within one year after the shares are
transferred to the optionee, any gain or loss realized upon the subsequent
disposition of the shares will be characterized as long-term capital gain or
loss. If the optionee disposes of such shares before the two holding periods
described above are satisfied, the optionee will generally recognize ordinary
income equal to the lesser of (i) the fair market value of the shares on the
date of exercise minus the optionee exercise price or (ii) the amount realized
on disposition minus the option exercise price (except for certain "wash"
sales, gifts or sales to related persons), and the Company will be entitled to
a corresponding deduction, subject to the limitations of Section 162(m) of the
Code as described below. Any gain in excess of this amount will be
characterized as long-term capital gain if the optionee held the shares of the
Common Stock for more than one year.
Upon the exercise of a Non-Qualified Option, the optionee will recognize
ordinary income in the amount by which the then fair market value of the
shares of the Common Stock acquired exceeds the option exercise price, and the
Company will be entitled to a deduction in an equal amount, subject to the
limitations of Section 162(m) of the Code as described below. Provided the
shares of the Common Stock are held as a capital asset, upon the subsequent
disposition of the shares of the Common Stock the optionee will recognize
capital gain or loss in an amount equal to the difference between the proceeds
received upon disposition and his or her basis for the shares. The basis will
be equal to the sum of the price paid for the shares and the amount of income
realized upon exercise of the option. Any capital gain or loss to the optionee
will be characterized as long-term or short-term, depending upon whether his
or her holding period for tax purposes exceeds one year.
The taxable income recognized upon the exercise of a Non-Qualified Option is
subject to the applicable employment taxes and withholding for federal income
tax purposes.
The Options Repricing, involving the cancellation and regranting at a
reduced exercise price of certain options granted under the 1996 Incentive
Plan, will not be a taxable event to the optionees or the Company.
Bonus Interests
Payments made pursuant to the Bonus Interests will be taxable to holders
thereof as ordinary income and deductible by the Company, subject to the
limitations of Section 162(m) of the Code as described below. Such payments
will be subject to the applicable employment taxes and withholding for federal
income tax purposes.
The Bonus Interests Amendment will not be a taxable event to the holders
thereof or the Company.
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to a publicly-held corporation for compensation in excess of $1
million paid in any fiscal year to certain executive officers. Section 162(m)
further provides, however, that compensation will not be subject to the
deduction limit if certain
26
<PAGE>
conditions are met and the compensation qualifies as "performance-based
compensation." In addition, in the case of a privately-held corporation that
undergoes an initial public offering, the Treasury Regulations under Section
162(m) provide that the deduction limit does not apply to any compensation
paid, during a specified "reliance period," pursuant to a plan or agreement
that existed while the corporation was privately held, if the corporation
complied with certain disclosure requirements. The reliance period terminates
with respect to a given plan or agreement on the earliest to occur of (i) the
expiration of the plan or agreement, (ii) the material modification of the
plan or agreement, (iii) the issuance of all stock and other compensation
allocated under the plan and (iv) the first meeting of the stockholders at
which directors are to be elected that occurs after the close of the third
calendar year following the calendar year in which the initial public offering
occurs. In the case of stock options, the reliance period applies to the date
of grant and not to the date of exercise.
The Company believes that any compensation paid or options granted pursuant
to the Company's incentive plans or agreements which were in place or entered
into prior to the Company's initial public offering in November 1997 during
the reliance period will not be subject to the deduction limit of Section
162(m). However, compensation paid and options granted after the reliance
period or under a plan or agreement established or entered into after the date
of the initial public offering to the chief executive officer of the Company
or to the then four most highly compensated officers of the Company (other
than the chief executive officer of the Company) will be subject to the
limitations of Section 162(m) unless such compensation or option grants
qualify as performance-based compensation. The proposed amendment to the 1996
Incentive Plan (See Proposal 3--"Amendment to 1996 Stock Incentive Plan") may
constitute a "material modification" of the 1996 Incentive Plan, resulting in
the termination of the reliance period with respect to the 1996 Incentive
Plan. In such case, any compensation paid or options granted pursuant to the
1996 Incentive Plan subsequent to this amendment may be subject to the
limitations of Section 162(m) unless they qualify as performance-based
compensation.
In general, any salary paid after the termination of a reliance period,
including salary paid pursuant to the employment agreements, will not qualify
as performance-based compensation and will be subject to Section 162(m).
The Company believes that stock options and Bonus Interests previously
granted, other than the Taylor Additional Bonus and Brada Additional Bonus,
were structured to qualify as performance-based compensation. However, because
of ambiguities and uncertainties as to the application and interpretation of
Section 162(m) and the Treasury Regulations issued thereunder, no assurance
can be given that compensation intended by the Company to satisfy the
requirements for deductibility under Section 162(m) will so qualify.
27
<PAGE>
BENEFIT PLANS
MGM Retirement Plan
The MGM Retirement Plan is a defined benefit plan under which all
contributions are made by MGM Studios. Employees of the Company who have
completed at least one year of service are eligible to participate in the plan
and become vested upon completion of five years of service. Participants, or
their beneficiaries, are entitled to receive benefits which have vested under
the plan upon their normal, early or deferred retirement or upon the total and
permanent disability, death or other termination of such participant's
employment and after attaining normal or early retirement age. The
compensation covered by the MGM Retirement Plan includes base salary only, and
not bonus or other amounts.
The Company has the right to amend or terminate the MGM Retirement Plan at
any time. If the plan is terminated, the available assets held in trust will
be used to pay benefits to participants. If termination occurs when the plan's
assets are not sufficient to pay all benefits accrued to the date of the
termination, the assets held in trust under the plan will be allocated among
participants in accordance with the provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). The Company is not liable
for the payment of MGM Retirement Plan benefits from its own assets. Upon full
satisfaction of the MGM Retirement Plan's liability to employees and their
beneficiaries, any amount remaining in the plan will be returned to the
Company.
The Internal Revenue Code requires certain provisions for benefit accruals
if a defined benefit plan becomes "top heavy," that is, if the value of
accrued benefits for "key employees" is more than 60 percent of the total
value of all accrued benefits. While the Company believes that it is unlikely
that the MGM Retirement Plan will ever become top heavy, in such an event, it
may become necessary to amend the MGM Retirement Plan to conform it to the
applicable Internal Revenue Code requirements.
MGM Savings Plan
Employees of the Company who have completed one year of service may
participate in the MGM Savings Plan (the "Savings Plan"), which is managed by
CIGNA Retirement and Investment Services. Participants may contribute a
portion of their pre-tax compensation (up to a maximum of $10,000) and after-
tax compensation (subject to certain limitations) into the Savings Plan and
direct the investment of such contributions. The Company matches 100 percent
of such employee contributions up to four percent of such employee's eligible
compensation. Effective January 1, 1998, the Savings Plan was amended to allow
the matching contributions to be made in cash or in shares of the Common
Stock. The employee contributions to the Savings Plan and the earnings thereon
are always 100 percent vested. The matching contributions and the earnings
thereon vest 20 percent for each full year of service and employees become 100
percent vested (i) after five years of service, (ii) upon their total and
permanent disability or (iii) upon their death.
As of June 1, 1999, the Company had contributed an aggregate of 132,993
shares of the Common Stock to the Savings Plan. On August 7, 1998 the Company
filed a registration statement on Form S-8 with the Commission (which
registration statement became effective upon filing) with respect to up to one
million shares of the Common Stock authorized to be issued pursuant to the
Savings Plan.
28
<PAGE>
PROPOSAL 2
OPTIONS REPRICING
Due to the decline in the market price of the Common Stock in 1998, the
Compensation Committee and the Board of Directors determined that the purpose
of the 1996 Incentive Plan was not being achieved. Therefore, in order more
closely to realign the exercise price of the options with the market price of
the Common Stock and thereby better enable the Company to attract, retain and
motivate its employees, effective on October 26, 1998 (subject to certain
conditions), the Compensation Committee approved, and the entire Board of
Directors, the Section 162(m) Subcommittee, and the Section 16 Subcommittee
subsequently affirmed and ratified, the Options Repricing whereby the Company,
pursuant to Option Exchange Agreements, canceled and regranted at a reduced
exercise price certain of the options theretofore granted under the 1996
Incentive Plan.
Under the Company's 1996 Incentive Plan, options and other Awards
representing 8,117,225 shares of the Common Stock have been granted to
executives and other employees of the Company as of June 1, 1999. The 1996
Incentive Plan is administered by the Compensation Committee, which has broad
authority to amend the plan. The terms of the 1996 Incentive Plan and the
options currently granted thereunder and the Options Repricing are described
in more detail under the headings "Executive Compensation--Incentive and Bonus
Plans--1996 Incentive Plan" and "Certain Federal Income Tax Consequences."
The following table sets forth information with respect to the number of
options subject to the Options Repricing, if any, that have been granted to:
(i) the Named Executive Officers, individually and as a group; (ii) the
directors of the Company who are not Named Executive Officers, as a group; and
(iii) employees of the Company other than the Named Executive Officers, as a
group, in connection with the Options Repricing.
1996 Stock Incentive Plan
<TABLE>
<CAPTION>
Dollar Number of Options
Name Value($)(1) Repriced(#)(2)
---- ----------- -----------------
<S> <C> <C>
Current Executive Officers
Alex Yemenidjian............................. -- --
Christopher J. McGurk........................ -- --
William A. Jones............................. -- 159,584
Daniel J. Taylor............................. -- 179,168
Robert Brada................................. -- 26,000
Former Executive Officers
Frank G. Mancuso............................. -- --
A. Robert Pisano............................. -- 523,754
Michael G. Corrigan.......................... -- --
David G. Johnson............................. -- --
Named Executive Officers as a Group.......... -- 888,506
Non-Executive Director Group................. -- --
Non-Executive Officer Employee Group......... -- 4,463,998
</TABLE>
- - - - - - - - - - - - - - --------
(1) The closing sale price of the Common Stock on the NYSE, as reported by the
Dow Jones News Retrieval, on October 26, 1998, the date of the Option
Repricing, was $9.06, which was less than the exercise price of the
options granted under the 1996 Incentive Plan in connection with the
Options Repricing. See "--Incentive and Bonus Plans--1996 Incentive Plan."
(2) Represents the number of options that were canceled and regranted in
connection with the Options Repricing.
29
<PAGE>
Copies of the 1996 Incentive Plan and the form of Executive Option Exchange
Agreement are filed as exhibits to the 10-K.
The Options Repricing is subject to approval of the Company's stockholders.
If the Options Repricing is not approved by the holders of at least 75 percent
of the outstanding shares of the Common Stock, the Options Repricing will be
null and void and the options outstanding as of October 26, 1998, except to
the extent otherwise terminated or modified, will be reinstated. Tracinda,
which owned approximately 79.3 percent of the outstanding shares of the Common
Stock as of June 1, 1999, has agreed to vote its shares in favor of the
approval of the Options Repricing.
The Board of Directors recommends that stockholders vote "FOR" Proposal 2.
30
<PAGE>
PROPOSAL 3
AMENDMENT TO 1996 STOCK INCENTIVE PLAN
The Board of Directors and the Compensation Committee have proposed, subject
to stockholder approval, an increase in the aggregate number of shares of
Common Stock issuable under the 1996 Incentive Plan from 8,125,065 shares of
the Common Stock to 28,000,000 shares of the Common Stock.
The purpose of the amendment is to provide additional shares of the Common
Stock for Awards under the 1996 Incentive Plan, such as those made to Messrs.
Yemenidjian and McGurk (see Proposals 6 and 7). In addition, shortly after the
Annual Meeting, the Company intends to grant 100 shares of the Common Stock to
approximately 450 employees of the Company who have not been granted options
under the 1996 Incentive Plan, in order to provide incentive for employees of
the Company and increase their personal interest in the continued success and
progress of the Company. The Board of Directors and the Compensation Committee
believe that long-term growth is dependent upon obtaining qualified personnel
and that the granting of Awards under the 1996 Incentive Plan is and has been
an important aid in attracting and retaining individuals of exceptional
ability and in providing additional incentive for them in performing services
to the Company. All employees of the Company are eligible to receive a grant
of an Award under the 1996 Incentive Plan. For a description of the Awards
heretofore granted under the 1996 Incentive Plan, see "Executive
Compensation--Incentive and Bonus Plans--1996 Incentive Plan" and "Certain
Federal Income Tax Consequences."
To effect the increase in the number of shares issuable under the 1996
Incentive Plan, the Board of Directors proposes to amend and restate Sections
4(a) and 4(b) of the 1996 Incentive Plan. Sections 4(a) and 4(b) of the 1996
Incentive Plan are proposed to be amended and restated as follows:
"(a) The aggregate number of Common Shares that may be issued pursuant to
all Incentive Stock Options granted under this Plan may not exceed 28
million, and the aggregate number of Common Shares that may be issued
pursuant to all Incentive Stock Options granted to any one Participant
under this Plan may not exceed 15 million during the life of the Plan,
subject in each case to adjustment as provided in Section 7 of this Plan.
(b) The aggregate number of Common Shares and Derivative Securities
issued and issuable pursuant to all Awards (including all Incentive Stock
Options) granted under this Plan may not at any time exceed 28 million, and
the aggregate number of Common Shares and Derivative Securities issued and
issuable pursuant to all Awards (including Incentive Stock Options) granted
to any one Participant under this Plan may not at any time exceed 15
million during the life of the Plan, subject to in each case adjustment as
provided in Section 7 of this Plan."
Other than the Awards to Messrs. Yemenidjian and McGurk, which are the
subjects of Proposals 6 and 7, respectively, and the intended grant of 100
shares of the Common Stock to approximately 450 employees of the Company who
have not been granted options under the 1996 Incentive Plan, the benefits or
amount of additional Awards, if any, that will be received by or allocated to:
(i) the Named Executive Officers, individually and as a group; (ii) the
directors of the Company, as a group, who are not Named Executive Officers;
and (iii) the employees of the Company, as a group, other than the Named
Executive Officers, as a result of the amendment to the 1996 Stock Incentive
Plan is not determinable and would not have been determinable if the 1996
Incentive Plan, as amended, had been in effect during the fiscal year ended
December 31, 1998.
As of June 1, 1999, the closing price of the Common Stock on the NYSE, as
reported by the Dow Jones News Retrieval, was $14.56.
A copy of the 1996 Incentive Plan is filed as an exhibit to the 10-K.
31
<PAGE>
The affirmative vote of the holders of at least a majority of the shares of
the Common Stock represented in person or by proxy and entitled to vote on
this proposal is required to approve the amendment to the 1996 Incentive Plan.
The Board of Directors recommends that stockholders vote "FOR" Proposal 3.
32
<PAGE>
PROPOSAL 4
BONUS INTEREST AMENDMENT
Due to the decline in the market price of the Common Stock in 1998, the
Bonus Plan Committee and the Board of Directors determined that the purpose of
the Senior Management Bonus Plan was not being achieved. Therefore, in order
more closely to realign the value of the Bonus Interests with the market price
of the Common Stock and thereby better enable the Company to provide an
incentive to its senior management, effective on October 26, 1998 (subject to
certain conditions), the Bonus Plan Committee approved, and the entire Board
of Directors, Section 162(m) Subcommittee and Section 16 Subcommittee
subsequently affirmed and ratified, the Bonus Interest Amendment, whereby the
Company amended the terms of the Bonus Interests (and certain bonus
arrangements based on the value of the Bonus Interests) of the Executive
Repricing Participants to reduce the trigger and ceiling prices of the Bonus
Interests (and bonus arrangements based on the value thereof) granted to such
Executive Repricing Participants.
Under the Company's Senior Management Bonus Plan 2,420,685 Bonus Interests
have been granted to an aggregate of 18 current or former senior employees of
the Company. No additional Bonus Interests will be granted under the Senior
Management Bonus Plan. However, the Company has granted Mr. Taylor and
Mr. Brada the Taylor Additional Bonus and Brada Additional Bonus,
respectively, which are based on the value of the Bonus Interests and are only
payable in certain circumstances. See "Employment Agreements--Daniel J.
Taylor" and "--Robert Brada." The terms of the Bonus Interests, the Senior
Management Bonus Plan and the Bonus Interest Amendment are described in more
detail under the headings "Executive Compensation--Incentive and Bonus Plans--
Senior Management Bonus Plan" and "Certain Federal Income Tax Consequences."
The following table sets forth information with respect to the number of
Bonus Interests under the Senior Management Bonus Plan and the Taylor
Additional Bonus and Brada Additional Bonus subject to the Bonus Interest
Amendment and granted to: (i) the Named Executive Officers, individually and
as a group; (ii) the directors of the Company, as a group, other than the
Named Executive Officers; and (iii) the employees of the Company, as a group,
other than the Named Executive Officers.
<TABLE>
<CAPTION>
Dollar Number of
Value($)(1) Units(#)
Name ----------- ---------
<S> <C> <C>
Current Executive Officers
Alex Yemenidjian.................................. -- --
Christopher J. McGurk............................. -- --
William A. Jones.................................. -- 74,209(2)
Daniel J. Taylor.................................. -- 83,334(3)
Robert Brada...................................... -- 40,584(4)
Former Executive Officers
Frank G. Mancuso.................................. -- --
A. Robert Pisano.................................. -- 243,544(2)
Michael G. Corrigan............................... -- --
David G. Johnson.................................. -- --
Named Executive Officers as a Group............... -- 441,671(5)
Non-Executive Director Group...................... -- --
Non-Executive Officer Employee Group.............. -- 1,237,134(2)
</TABLE>
- - - - - - - - - - - - - - --------
(1) As of October 26, 1998, the effective date of the Bonus Interest
Amendment, and December 31, 1998, the Price (as defined above) was lower
than the minimum level necessary to entitle a participant in the Senior
Management Bonus Plan to any payment with respect to the Bonus Interests.
As described under "--Incentive and Bonus Plans--Senior Management Bonus
Plan," the maximum amount payable is $24.00 per Bonus Interest in the
event the Price equaled $14.90 per share, with respect to Executive
Repricing
33
<PAGE>
Participants, or $24.00, with respect to all others, on a Determination
Date. The amount receivable for each Bonus Interest would decline to zero
as the Price increased up to $29.80 per share, with respect to Executive
Repricing Participants, or $48.00 per share, with respect to all others.
(2) Represents the number of Bonus Interests which are subject to the Bonus
Interest Amendment.
(3) Includes 54,042 Bonus Interests granted pursuant to the Senior Management
Bonus Plan and the Taylor Additional Bonus, which is equivalent to 29,292
Bonus Interests, each of which is subject to the Bonus Interest
Amendment.
(4) Represents the Brada Additional Bonus, which is equivalent to 40,584
Bonus Interests and subject to the Bonus Interest Amendment.
(5) Includes 371,795 Bonus Interests granted pursuant to the Senior
Management Bonus Plan, the Taylor Additional Bonus and the Brada
Additional Bonus.
As of June 1, 1999, the closing price of the Common Stock on the NYSE, as
reported by the Dow Jones News Retrieval, was $14.56.
Copies of the Senior Management Bonus Plan, the form of Bonus Interest
Amendment, and the employment agreements of Messrs. Taylor and Brada are filed
as exhibits to the 10-K.
The Bonus Interest Amendment is subject to approval of the Company's
stockholders. If the Bonus Interest Amendment is not approved by the holders
of at least 75 percent of the outstanding shares of the Common Stock, the
Bonus Interest Amendment will be null and void and the terms of the Bonus
Interest Agreements which existed as of October 26, 1998, except to the extent
otherwise terminated or modified, will be reinstated.
The Board of Directors recommends that stockholders vote "FOR" Proposal 4.
34
<PAGE>
PROPOSAL 5
AMENDMENT OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
The Board of Directors has proposed, subject to stockholder approval, that
the Company's Amended and Restated Certificate of Incorporation be amended to
increase the authorized number of shares of the Company's Common Stock from
250,000,000 shares to 500,000,000 shares (the "Amendment"). This proposed
amendment will not affect the number of authorized shares of preferred stock
of the Company.
If this proposal is adopted, Section 1 of the Amended and Restated
Certificate of Incorporation will be amended to read as follows:
"The total number of shares which the Corporation shall have authority to
issue is Five Hundred Twenty-Five Million (525,000,000); the total number
of shares of Preferred Stock shall be Twenty-Five Million (25,000,000), and
each such share shall have a par value of one cent ($0.01); and the total
number of shares of Common Stock shall be Five Hundred Million
(500,000,000), and each such share shall have a par value of one cent
($0.01)."
The Amendment is designed to ensure that the Company will have enough
authorized shares to allow for other future issuances of the Common Stock by
the Company, including possible future public or private equity offerings,
acquisitions or stock splits. The Company announced on April 27, 1999 that it
intends to seek approximately $500 million of additional equity capital,
possibly in the form of a rights offering. Shortly after the Annual Meeting,
the Company also intends to grant 100 shares of the Common Stock to
approximately 450 employees of the Company who have not been granted options
under the 1996 Incentive Plan.
The terms of the additional shares of the Common Stock for which
authorization is sought will be identical with the terms of the shares of the
Common Stock now authorized and outstanding, and the Amendment will not affect
the terms, or the rights of holders of, those shares. If approved by the
stockholders, a certificate authorizing the increased number of shares of the
Common Stock will immediately thereafter be filed with the Secretary of State
of the State of Delaware.
As of June 1, 1999, after giving effect to (i) the 28,000,000 shares
reserved for issuance under the 1996 Incentive Plan (assuming the approval of
Proposal 3), (ii) the 312,502 shares reserved for issuance under other
outstanding options, (iii) the 1,000,000 shares reserved for issuance under
the Savings Plan, (iv) the 100,000 shares reserved for issuance under the
Director Plan, and (v) the 350,000 shares reserved for issuance pursuant to
the employment agreement with Mr. Mancuso, the Company had approximately
69,000,000 shares of the Common Stock available for issuance.
Although the Board of Directors of the Company will authorize the issuance
of additional shares of the Common Stock based on its judgment as to the best
interests of the Company and its stockholders, the issuance of shares of the
Common Stock could have a dilutive effect on the earnings per share, book
value per share and the equity and voting power of existing holders of Common
Stock. Holders of Common Stock are not now and will not be entitled to
preemptive rights to purchase shares of any authorized capital stock of the
Company.
The affirmative vote of the holders of at least a majority of the
outstanding shares of the Common Stock is required to approve the amendment to
the Amended and Restated Certificate of Incorporation.
The Board of Directors recommends that stockholders vote "FOR" Proposal 5.
35
<PAGE>
PROPOSAL 6
APPROVAL AND RATIFICATION OF STOCK OPTION
GRANT TO ALEX YEMENIDJIAN
As an inducement to retain his services as Chairman of the Board of
Directors and Chief Executive Officer of the Company, the Executive Committee
of the Board of Directors and the Compensation Committee approved the entry by
the Company into the employment agreement with Alex Yemenidjian described
above in "Executive Compensation--Employment Agreements--Alex Yemenidjian."
The Board of Directors is requesting stockholder approval of the provisions of
the employment agreement with Mr. Yemenidjian that provide for a grant of
options to purchase shares of the Common Stock.
The employment agreement provides for, among other things, a grant of
options under the 1996 Incentive Plan to purchase 10,000,000 shares of the
Common Stock, subject to stockholder approval, consisting of options to
purchase 5,000,000 shares with an exercise price of $14.90 per share and
options to purchase 5,000,000 shares with an exercise price of $30.00 per
share. The option was granted on April 30, 1999, with twenty percent of the
options vesting to Mr. Yemenidjian on April 30 of each year beginning April
30, 2000. If Mr. Yemenidjian's employment is terminated without cause by the
Company or if he terminates the agreement for "good reason" or in the event of
a "Designated Change of Control," his options under the 1996 Incentive Plan
will vest immediately. Each of the Compensation Committee, the Section 162(m)
Subcommittee and the Section 16 Subcommittee has approved the grant of options
to Mr. Yemenidjian. See "Executive Compensation--Employment Agreements--Alex
Yemenidjian."
The closing price of the Common Stock on the NYSE, as reported by the Dow
Jones News Retrieval, was (i) $14.68 per share on April 29, 1999, the day
prior to the date of grant, and (ii) $14.56 per share on June 1, 1999.
Stockholder approval of the grant is required under Section 312.03 of the
NYSE's Listed Company Manual because Mr. Yemenidjian is a "Related Party"
under that section, and because the total number of options to purchase shares
granted to him exceed one percent of the number of shares of Common Stock
outstanding.
The affirmative vote of the holders of at least a majority of the shares of
the Common Stock represented in person or by proxy and entitled to vote on
this proposal is required to approve and ratify the grant of options to
purchase shares of the Common Stock to Mr. Yemenidjian.
The Board of Directors recommends that stockholders vote "FOR" Proposal 6.
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PROPOSAL 7
APPROVAL AND RATIFICATION OF STOCK OPTION
GRANT TO CHRISTOPHER J. MCGURK
As an inducement to retain his services as Vice Chairman of the Board of
Directors and Chief Operating Officer of the Company, the Executive Committee
of the Board of Directors and the Compensation Committee approved the entry by
the Company into the employment agreement with Christopher J. McGurk described
above in "Executive Compensation--Employment Agreements--Christopher J.
McGurk." The Board of Directors is requesting stockholder approval of the
provisions of the employment agreement with Mr. McGurk that provide for a
grant of options to purchase shares of the Common Stock.
The employment agreement provides for, among other things, a grant of
options under the 1996 Incentive Plan to purchase 3,000,000 shares of the
Common Stock, subject to stockholder approval, consisting of options to
purchase 1,500,000 shares with an exercise price of $14.90 per share and
options to purchase 1,500,000 shares with an exercise price of $30.00 per
share. The option was granted on April 30, 1999, with twenty percent of the
options vesting to Mr. McGurk on April 30 of each year beginning April 30,
2000. If Mr. McGurk's employment is terminated without cause by the Company or
if he terminates the agreement for "good reason" or in the event of a
"Designated Change of Control," his options under the 1996 Incentive Plan will
vest immediately. Each of the Compensation Committee, the Section 162(m)
Subcommittee and the Section 16 Subcommittee has approved the grant of options
to Mr. McGurk. See "Executive Compensation--Employment Agreements--Christopher
J. McGurk."
The closing price of the Common Stock on the NYSE, as reported by the Dow
Jones News Retrieval, was (i) $14.68 per share on April 29, 1999, the day
prior to the date of grant, and (ii) $14.56 per share on June 1, 1999.
Stockholder approval of the grant is required under Section 312.03 of the
NYSE's Listed Company Manual because Mr. McGurk is a "Related Party" under
that section, and because the total number of options to purchase shares
granted to him exceed one percent of the number of shares of Common Stock
outstanding.
The affirmative vote of the holders of at least a majority of the shares of
the Common Stock represented in person or by proxy and entitled to vote on
this proposal is required to approve and ratify the grant of options to
purchase shares of the Common Stock to Mr. McGurk.
The Board of Directors recommends that stockholders vote "FOR" Proposal 7.
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<PAGE>
PROPOSAL 8
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The Company's Board of Directors, with the concurrence of the Audit
Committee, has selected Arthur Andersen LLP as the Company's independent
auditors for the fiscal year ending December 31, 1999. Although the
appointment of Arthur Andersen LLP is not required to be submitted to a vote
of the stockholders, the Board of Directors and the Audit Committee believe it
appropriate as a matter of policy to request that the stockholders ratify the
appointment for the current fiscal year. In the event a majority of the votes
cast at the meeting are not voted in favor of the appointment, the Board of
Directors and the Audit Committee will reconsider their selection. Proxies
solicited by the Board will be voted in favor of the appointment unless
stockholders specify otherwise in such proxies.
A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting with the opportunity to make a statement if he or she so
desires and to respond to appropriate questions.
The Board of Directors recommends that stockholders vote "FOR" Proposal 8.
38
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Sales of Securities to Mr. Mancuso
Pursuant to Mr. Mancuso's employment agreement, Mr. Mancuso received an
annual stock purchase payment of $3 million (payable annually in advance in
November of each year), out of the after tax proceeds of which he is required
to purchase shares of the Common Stock. For the year ended December 31, 1998,
Mr. Mancuso purchased 159,082 of the Common Stock for aggregate consideration
of approximately $3.0 million. See footnotes 14, 15, and 16 to "--Executive
Compensation--Summary Compensation Table."
Shareholders Agreement
The Tracinda Group, the Company, and certain current and former executives
and employees of the Company are parties to the Shareholders Agreement, which
provides for certain rights relating to the shares of the Common Stock,
including registration rights and transfer restrictions. See "Ownership of
Voting Securities--Shareholders Agreement."
Other Transactions With Tracinda and its Affiliates
In connection with the Rights Offering in October 1998, the Tracinda Group
entered into a standby agreement with the Company pursuant to which it
exercised all of the subscription rights (the "Rights") distributed to it in
the Rights Offering, thus purchasing 75,933,009 shares of Common Stock, for an
aggregate purchase price of approximately $626,447,000. In addition, the
Tracinda Group agreed to purchase any shares of the Common Stock which were
not otherwise subscribed for in the Rights Offering. Because the Rights
Offering was oversubscribed, the Tracinda Group was not obliged to purchase
any additional shares of the Common Stock.
In February 1980 a predecessor-in-interest to the Company granted to a
predecessor-in-interest to MGM Grand Inc. an exclusive open-ended royalty-free
license, which was amended in 1992 and further amended in 1998. Pursuant to
the license, as amended, MGM Grand, Inc. has the right to use certain
trademarks that include the letters "MGM," as well as logos and names
consisting of or related to stylized depictions of a lion, in its resort hotel
and/or gaming businesses and other businesses that are not related to filmed
entertainment. In 1986 MGM granted MGM Grand Air, Inc. ("Grand Air") an
exclusive open-ended royalty-free license to use one of its logos consisting
of a stylized depiction of a lion in Grand Air's airline business. The Company
did not receive any monetary compensation for these licenses. Tracinda owns a
majority of the outstanding common stock of MGM Grand, Inc., the parent of
both MGM Grand Hotel ("Grand Hotel") and Grand Air. Additionally, the Company
and affiliates of Tracinda occasionally conduct cross-promotional campaigns,
in which the Company's motion pictures and the affiliates' hotels are promoted
together; however, the Company believes that the amounts involved are
immaterial.
The Company and Grand Hotel have an ongoing relationship whereby Grand Hotel
can utilize key art, still photographs of artwork and one minute film clips
from certain of the Company's motion picture releases on an as-needed basis.
The Company did not receive any monetary compensation for these licenses.
The Company sells to Grand Hotel and certain of its affiliates, on a
wholesale basis, videocassettes and other merchandise such as baseball caps,
clothing, keychains and watches bearing the Company's trademarks and logos for
resale to consumers in retail shops located within Grand Hotel's hotels. Grand
Hotel currently is the Company's largest wholesale customer of the Company's
merchandise and, consequently, receives customary volume discounts from the
Company. For the year ended December 31, 1998, the Company recognized revenues
of $24,000 for such videocassettes and merchandise.
From time to time, the Company uses aircraft owned by Tracinda for use in
the Company's business. The Company believes that the terms of such
arrangements are no less favorable to the Company than those that
39
<PAGE>
could be obtained from unrelated parties. For the year ended December 31,
1998, the aggregate of the payments made to Tracinda for the use of such
aircraft was approximately $29,000.
Other Transactions
The Company has an exclusive producer overhead arrangement with FGM
Entertainment for the services of Frank Mancuso, Jr., the son of Mr. Mancuso,
which expires on July 31, 2002. FGM Entertainment, a company wholly owned by
Mr. Mancuso, Jr., receives $400,000 each year, subject to five to ten percent
annual increases, for overhead expenses, as well as a development fund and a
production fund to pay for the costs of developing and producing projects. FGM
Entertainment must submit all projects that it wishes to produce or develop to
the Company and receives a producing fee, as well as certain participations
and royalties, for each picture that is produced under the arrangement. For
the year ended December 31, 1998, these fees, participations and royalties
(paid to Mr. Mancuso, Jr. for movies produced by him such as Species, Fled,
Hoodlum and Ronin) totaled approximately $2.4 million. The Company has the
right to acquire the domestic or worldwide rights to each picture produced
under the arrangement and controls all remake, sequel and television rights.
In connection with the commencement of Mr. Taylor's employment with the
Company and to assist Mr. Taylor with his relocation to the Los Angeles area,
the Company entered into an agreement with Mr. Taylor pursuant to which the
Company agreed to purchase, if Mr. Taylor requested, Mr. Taylor's former
residence for the amount of $390,000. The residence was sold to a third party
in November 1998. Pursuant to the Company's relocation policies, until the
sale of the residence closed, the Company reimbursed Mr. Taylor for the
mortgage payments on the residence in the amount of $2,473 per month and was
responsible for the cost of maintaining the residence. For the year ended
December 31, 1998, such payments aggregated $33,760. In addition, the Company
had made an unsecured non-recourse interest-free loan in the principal amount
of $130,000 in order to assist Mr. Taylor in the purchase of a residence in
the Los Angeles area, which amount has been settled in accordance with the
terms of such loan.
In 1998 the Company acquired all of the interest of Taliafilm, Inc.
("Taliafilm"), a company wholly owned by the sister of Mr. Coppola, in the
motion picture Never Say Never Again for $2.5 million and approximately 20
percent of the adjusted gross receipts received by the Company from the
exploitation of the film. In addition, the Company assumed certain obligations
of Taliafilm relating to such film.
In 1995 the Company licensed to a subsidiary of Seven, a former beneficial
owner of more than five percent of the Company's Common Stock, the right to
distribute certain motion picture and television product in the Australian
free television market. This agreement was amended on September 9, 1997. The
product licensed includes certain Library pictures and theatrical motion
pictures and television series, miniseries and made-for-television movies
produced or distributed by the Company during the term of the agreement. The
license fees for the Library product are at a rate which the Company believes
is arm's-length. The term of the output portion of the agreement is 15 years.
The license fees for output product television series, television movies and
television mini-series are on a "most favored nations" basis with prices paid
by the Seven subsidiary for comparable programming. For the year ended
December 31, 1998, the Company recognized revenues of $5.6 million under this
agreement.
In 1994, in connection with the formation of MovieVision, a joint venture in
which the Company and a subsidiary of Seven have non-controlling interests,
the Company licensed to the joint venture certain of its current theatrical
and television motion pictures, as well as a number of Library pictures, for
distribution on Australian pay and basic cable television. The agreement
expires on June 30, 2000, with all motion pictures covered by the agreement
reverting to the Company within one year after that date, but both the Company
and MovieVision have the right to extend the license for a further five years.
The Company receives a license fee for each picture that is based on the
number of MovieVision's subscribers. For the year ended December 31, 1998, the
Company recognized revenues of $3.6 million under this license agreement. The
Company believes that the terms of the agreement are no less favorable to the
Company than those contained in its licenses with unaffiliated licensees.
40
<PAGE>
Seven has agreed to reimburse the Company for losses that the Company may
incur in connection with the distribution of Joey, an Australian film with
respect to which the Company has acquired distribution rights from an unrelated
third party.
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR THE 2000 ANNUAL MEETING
Under Rule 14a-8 of Regulation 14A of the Exchange Act, any stockholder
intending to submit to the Company a proposal that qualifies for inclusion in
the Company's proxy statement and proxy relating to the annual meeting of
stockholders to be held in 2000 must submit such proposal so that it is
received by the Company no later than February 18, 2000 and must satisfy the
other requirements of Rule 14a-8. All such stockholder proposals should be
submitted to the Secretary of the Company.
Separately, under Rule 14a-4 of Regulation 14A, the Company may exercise
discretionary voting authority under proxies it solicits to vote on a proposal
made by a stockholder that the stockholder does not seek to include in the
Company's proxy statement and proxy for such meeting pursuant to Rule 14a-8,
unless the Company is notified about the proposal before May 3, 2000 and the
stockholder satisfies the other requirements of Rule 14a-4(c).
OTHER MATTERS
While the Amended Notice of Annual Meeting of Stockholders calls for the
transaction of such other business as may properly come before the meeting, the
Board of Directors has no knowledge of any matters to be presented for action
by the stockholders other than as set forth above. The enclosed proxy gives
discretionary authority to the proxies, however, to consider and vote upon any
additional matters that may be presented.
ANNUAL REPORT TO STOCKHOLDERS AND ANNUAL REPORT ON FORM 10-K
The Company's 10-K, which contains all the information required by Rule 14a-3
under the Securities Exchange Act of 1934, and Annual Report to Stockholders
(the "Annual Report"), were previously distributed to the Company's
stockholders of record at the close of business on March 19, 1999 (the
"Original Record Date"). Along with these proxy materials, we are distributing
the 10-K to the stockholders of record on June 15, 1999 who were not
stockholders of record on the Original Record Date. If you require an
additional copy of the 10-K, or a copy of the Annual Report, please contact the
Company at 2500 Broadway Street, Santa Monica, California 90404, or call (310)
449-3000, attention: Corporate Secretary.
Stockholders are urged to immediately mark, date, sign and return the
enclosed proxy in the envelope provided, to which no postage need be affixed if
mailed in the United States.
By order of the Board of Directors,
/s/ William Allen Jones
William Allen Jones
Senior Executive Vice President and
Secretary
Santa Monica, California
June , 1999
41
<PAGE>
METRO-GOLDWYN-MAYER INC.
Amended Proxy for Annual Meeting of Stockholders
July 13, 1999
Solicited on Behalf of the Board of Directors
The undersigned hereby appoints WILLIAM A. JONES, DANIEL J. TAYLOR and
ROBERT BRADA, and each of them, Proxies, with full power of substitution, to
represent and vote all shares of the common stock, $.01 par value per share,
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Stockholders of Metro-Goldwyn-Mayer Inc. to be held in the
Main Theatre at the Company's executive offices located at 2450 Broadway
Street, Santa Monica, California on July 13, 1999, at 10:00 a.m., and at any
adjournments thereof, upon any and all matters which may properly be brought
before said meeting or any adjournments thereof. The undersigned hereby
revokes any and all proxies heretofore given with respect to such meeting.
This amended proxy replaces and supersedes the white proxy previously
distributed on or about March 31, 1999.
The Board of Directors recommends a vote FOR all proposals.
(Continued and to be SIGNED on the other side)
- - - - - - - - - - - - - - --------------------------------------------------------------------------------
X FOLD AND DETACH HERE X
METRO-GOLDWYN-MAYER INC.
Annual Meeting of Stockholders
Tuesday, July 13, 1999
10:00 a.m.
Main Theatre
MGM Plaza
2450 Broadway Street
Santa Monica, California
ADMISSION TICKET
This ticket must be presented at the door for entrance to the meeting.
<PAGE>
<TABLE>
<CAPTION>
Please mark [X]
your votes as
indicated in
this example
This Proxy when properly executed will be voted in the manner directed herein by the undersigned stockholder. Unless otherwise
directed, or if no direction is given, this Proxy will be voted FOR all of the nominees in Proposal 1, FOR each of the other
Proposals and in accordance with the best judgment of the proxy holders or any of them on any other matters which may properly come
before the meeting or any adjournment or postponement thereof.
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C>
1. Election of Directors 2. Approval of options repricing [_] [_] [_]
FOR all nominees named
(except as marked Withhold Authority 3. Approval of amendment to [_] [_] [_]
to the contrary) for all nominees named Amended and Restated 1996
[_] [_] Stock Incentive Pan
4. Approval of bonus interest [_] [_] [_]
Names of Nominees: James D. Aljian, Francis Ford Coppola, Willie D. Davis, amendment
Alexander M. Haig, Jr., Kirk Kerkorian, Frank G. Mancuso, Christopher J.
McGurk, Alex Yemenidjian, Jerome B. York.................................. 5. Approval of amendment of [_] [_] [_]
Amended and Restated
(INSTRUCTION: To withhold authority to vote for any individual nominee, Certificate of Incorporation
write that nominee's name on the following line.)
- - - - - - - - - - - - - - ------------------------------------------------------------------------- 6. Approval and ratification [_] [_] [_]
of stock option grant to
Alex Yeminidjian
7. Approval and ratification [_] [_] [_]
of stock option grant
to Christopher J. McGurk
8. Ratification of the [_] [_] [_]
selection of independent
auditors
-------------- I plan to attend the meeting [_]
|
|
| Dated:__________________________________________________________________ , 1999
-------------------------------------------------------------------------------
Signature
-------------------------------------------------------------------------------
Signature if held jointly
Please sign your name exactly as it appears hereon. In the case of joint
owners, each should sign. If signing as executor, trustee, guardian or in any
other representative capacity or as an officer of a corporation, please
indicate your full title as such.
</TABLE>
- - - - - - - - - - - - - - -------------------------------------------------------------------------------
<PAGE>
ADMISSION TICKET
Annual Meeting
of
Metro-Goldwyn-Mayer Inc.
Tuesday, July 13, 1999
10:00 a.m.
Main Theatre
MGM Plaza
2450 Broadway Street
Santa Monica, California
===============================================================================
Agenda
1. To elect a Board of Directors.
2. To consider and act upon the approval and ratification of the
repricing of stock options granted pursuant to the Amended and
Restated 1996 Stock Incentive Plan.
3. To consider and act upon the approval and ratification of a proposal
to amend the Amended and Restated 1996 Stock Incentive Plan to
increase the aggregate number of shares of the common stock of the
Company issuable thereunder from 8,125,065 to 28,000,000 and to set a
maximum number of shares that any one participant may be awarded under
the plan at 15,000,000.
4. To consider and act upon the approval and ratification of the
amendment of the Bonus Interest Agreements entered into pursuant to
the Senior Management Bonus Plan.
5. To consider and act upon the approval of an amendment to the Company's
Amended and Restated Certificate of Incorporation to increase the
total number of shares of common stock authorized from 250,000,000 to
500,000,000.
6. To consider and act upon the approval and ratification of the issuance
of options to purchase shares of the common stock of the Company to
Mr. Yemenidjian pursuant to his employment agreement.
7. To consider and act upon the approval and ratification of the issuance
of options to purchase shares of the common stock of the Company to
Mr. McGurk pursuant to his employment agreement.
8. To consider and act upon the ratification of the selection of Arthur
Andersen LLP as independent auditors for the fiscal year ending
December 31, 1999.
9. To transact such other business as may properly come before the
meeting or any adjournments thereof.
================================================================================
