<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
METRO-GOLDWYN-MAYER INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
[LOGO OF METRO-GOLDWYN-MAYER]
METRO-GOLDWYN-MAYER INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 4, 2000
----------------
To Our Stockholders:
The Annual Meeting of Stockholders of Metro-Goldwyn-Mayer Inc., a Delaware
corporation (the "Company"), will be held at The Regent Beverly Wilshire, 9500
Wilshire Boulevard, Beverly Hills, CA 90212, on May 4, 2000, at 10:00 a.m.,
local time (the "Annual Meeting"), for the following purposes:
1. To elect a Board of Directors;
2. To consider and act upon the approval and ratification of the 2000
Employee Incentive Plan;
3. 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, 2000; and
4. 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 March 20, 2000 (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.
Please date, sign and return the enclosed 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 proxy and detach the admission
ticket to present at the meeting.
PLEASE DATE, SIGN AND MAIL THE ENCLOSED 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
March 31, 2000
<PAGE>
METRO-GOLDWYN-MAYER INC.
2500 Broadway Street
Santa Monica, California 90404
(310) 449-3000
----------------
PROXY STATEMENT
March 31, 2000
----------------
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. to be held at 10:00 a.m., local time,
on May 4, 2000 at The Regent Beverly Wilshire, 9500 Wilshire Boulevard,
Beverly Hills, CA 90212 (the "Annual Meeting") 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 Proxy Statement and accompanying proxy were first mailed to
stockholders on or about March 31, 2000. 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 March 20, 2000 will be
entitled to vote at the Annual Meeting. The authorized capital stock of the
Company presently consists of 500,000,000 shares of the Common Stock and
25,000,000 shares of preferred stock, $.01 par value per share. On March 20,
2000, there were issued and outstanding 201,526,319 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. 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.
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 each other
proposal to be acted upon at the Annual Meeting, 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 the item will be
required for approval.
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
1
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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 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 Common Stock does not have cumulative voting rights.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth the beneficial ownership of the Common Stock as
of March 20, 2000 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(1) Shares(2) of Class
--------------------------------------- ----------- ----------
<S> <C> <C>
The Tracinda Group(3)................................ 179,276,977 89.0%
150 S. Rodeo Drive
Beverly Hills, CA 90212
Alex Yemenidjian(4).................................. 2,006,740 *
Christopher J. McGurk(5)............................. 942,075 *
James D. Aljian...................................... 13,731 *
Francis Ford Coppola(6).............................. 2,000 *
Willie D. Davis(6)................................... 1,532 *
Alexander M. Haig, Jr................................ -- --
Kirk Kerkorian(7).................................... 179,276,977 89.0
150 S. Rodeo Drive
Beverly Hills, CA 90212
Frank G. Mancuso(6)(8)............................... 2,403,229 1.2
Jerome B. York(6).................................... 18,233 *
William A. Jones(9).................................. 155,371 *
Daniel J. Taylor (10)................................ 88,561 *
Robert Brada(11)..................................... 32,275 *
A. Robert Pisano(12)................................. 551,971 *
All directors and Named Executive Officers as a group
(13 persons)........................................ 185,492,695 89.8
</TABLE>
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*Less than 1 percent.
(1) Unless otherwise indicated, the address for the persons listed is 2500
Broadway Street, Santa Monica, CA 90404.
(2) 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 March 20, 2000 and the shares of Common Stock
underlying options that are vested as of March 20, 2000 or that will
become vested within 60 days thereafter 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.
(3) The Tracinda Group refers to, collectively, Tracinda Corporation
("Tracinda") and a Delaware corporation that is principally owned by
Tracinda. 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
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(4) Includes: 2,000,000 shares of the Common Stock underlying options vested
as of March 20, 2000 or that will become vested within 60 days of such
date.
(5) Includes: 600,000 shares of the Common Stock underlying options vested as
of March 20, 2000 or that will become vested within 60 days of such date.
(6) Includes: with respect to Messrs. Coppola, Davis, Mancuso and York 383,
158, 239, and 191 shares, respectively, of the Common Stock, representing
in each case the estimated number of shares of the Common Stock, based on
a per share price of $26.06 as of March 20, 2000, to be issued under the
Director Plan (as defined in "--Director Compensation") within 60 days of
March 20, 2000. See "--Director Compensation."
(7) Mr. Kerkorian is the chief executive officer, president, and sole
stockholder and director of Tracinda. Represents 179,276,977 shares of
the Common Stock owned by the Tracinda Group.
(8) Includes: 1,745,680 shares of the Common Stock underlying options vested
as of March 20, 2000 or that will become vested within 60 days of such
date. Also includes 7,578 shares of the Common Stock owned by Mr.
Mancuso's children and grandchildren as to which Mr. Mancuso disclaims
beneficial ownership.
(9) Includes: 114,369 shares of the Common Stock underlying options vested as
of March 20, 2000 or that will become vested within 60 days of such date,
and 1,002 shares of the Common Stock allocated to Mr. Jones' account in
the Savings Plan (as defined in "Benefit Plans--MGM Savings Plan") as of
March 20, 2000.
(10) Includes: 85,959 shares of the Common Stock underlying options vested as
of March 20, 2000 or that will become vested within 60 days of such date
and 1,072 shares of the Common Stock allocated to Mr. Taylor's account in
the Savings Plan as of March 20, 2000.
(11) Includes: 31,022 shares of the Common Stock underlying options vested as
of March 20, 2000 or that will become vested within 60 days of such date
and 942 shares of the Common Stock allocated to Mr. Brada's account in
the Savings Plan as of March 20, 2000.
(12) Includes: 523,754 shares of the Common Stock underlying options vested as
of March 20, 2000 or that will become vested within 60 days of such date
and 867 shares of the Common Stock allocated to Mr. Pisano's account in
the Savings Plan as of March 20, 2000. Also includes 7,052 shares of the
Common Stock held by the Pisano Children's Trust as to which Mr. Pisano
disclaims beneficial ownership.
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, Metro-Goldwyn-Mayer
Studios Inc. ("MGM Studios"), 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 Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999. 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 Executive pursuant to the 1996 Incentive Plan (as
defined below) to the extent required to realize the "tag-along" rights of
such Executive 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 such
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 continuous basis.
In addition, if the Company proposes to register any of its equity
securities under the Securities Act (other than (a) a registration on Form S-4
or Form S-8 or (b) 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
have agreed, under certain circumstances, 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 the 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.
5
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PROPOSAL 1
ELECTION OF DIRECTORS
The following table sets forth the name of each nominee (the "Nominee") 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
March 20, 2000, 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............ 44 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 a
director of MGM Grand, Inc., a position he
has held since 1989. From July 1995 through
December 1999 Mr. Yemenidjian served as
President of MGM Grand, Inc. 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....... 43 Mr. McGurk has been Vice Chairman of the
Board and Chief Operating Officer of the
Company since April 1999. From November 1996
until joining the Company, Mr. McGurk served
in executive capacities with Universal
Pictures, a division of Universal Studios
Inc., most recently as President and Chief
Operating Officer. Prior to joining
Universal, Mr. McGurk served eight years in
executive capacities 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............. 67 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
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<TABLE>
<CAPTION>
Name Age Principal Occupation and Other Directorships
---- --- --------------------------------------------
<C> <C> <S>
Willie D. Davis............. 65 Mr. Davis has been a director of the Company
since November 1998. Mr. Davis is President
and a 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 serves on the boards of directors of
Sara Lee Corporation, K-Mart Corporation,
Johnson Controls, Inc., Alliance Bank, WICOR
Inc., Dow Chemical Company, Checkers Drive-
In Restaurants, Inc., Strong Fund and
Bassett Furniture Industries, Incorporated.
Alexander M. Haig, Jr. ..... 75 Mr. Haig has been a director of and
consultant to 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., Preferred Employers Holdings, Inc. and
U.S. Technologies, 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
stockholder 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............ 66 Mr. Mancuso has been a director of the
Company since October 1996. Mr. Mancuso was
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
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. Mr. Mancuso serves on the
board of directors of Digital Entertainment
Network, Inc.
Jerome B. York.............. 61 Mr. York has been a director of the Company
since October 1996. Mr. York is Chairman,
President and Chief Executive Officer of
MicroWarehouse, Inc., a reseller of computer
hardware, software and peripheral products.
Mr. York previously served as Vice Chairman
of Tracinda from September 1995 to October
1999. 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,
7
<PAGE>
1999, the Company's officers, directors and 10 percent beneficial owners
complied with all applicable Section 16(a) filing requirements, except for one
late filing by Tracinda relating to a single exempt transaction. See "Certain
Relationships and Related Transactions--Sale of Unregistered Securities."
Information Regarding the Board of Directors and Certain Committees
Board Meetings. The Board of Directors held four meetings and acted three
times by written consent during 1999. All directors during 1999 attended at
least 82 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, Coppola, 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 thirteen meetings
and acted four times by written consent during 1999.
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 four times during 1999.
Finance Committee. The Finance Committee of the Board of Directors of the
Company (the "Finance Committee") was established on November 12, 1998 and was
discontinued in July 1999. It consisted of Messrs. Aljian, McGurk, Yemenidjian
and York (Chairman). The Finance Committee exercised 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
five times during 1999.
Compensation Committee; Subcommittees. 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 met once during 1999 and acted by
written consent 14 times.
In April 1999, the Company formed the Performance-Based Compensation and
Section 16 Subcommittees of the Compensation Committee (the "Section 162(m)
Subcommittee" and "Section 16 Subcommittee," respectively.) The Section 162(m)
Subcommittee is responsible for granting awards under the Company's incentive
plans and granting other compensation that is potentially subject to Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). See
"Proposal 2--Approval and Ratification of the 2000 Employee Incentive Plan."
The Section 162(m) Subcommittee currently consists of Messrs. Davis and York.
The Section 16 Subcommittee acts on awards under the Company's 1996 Incentive
Plan (as defined below) and other grants of stock-based compensation that are
potentially subject to Section 16 of the Securities Exchange
8
<PAGE>
Act of 1934, as amended (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 held
no meetings during 1999 and acted by written consent three times in the case
of the Section 162(m) Subcommittee and twice in the case of the Section 16
Subcommittee.
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 as the Compensation Committee. The Bonus
Plan Committee, which is responsible for administering the Senior Management
Bonus Plan (as defined below), met once and acted by written consent twice
during 1999.
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 Director Plan
Committee were held during 1999. See "--Director Compensation."
Director Compensation
Each director of the Company who is not a full-time employee of the Company
(a "Non-Employee Director"), currently seven persons, is 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 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 Director Plan,
subject to certain limitations. For the 1999 plan year, commencing the day
immediately following the 1999 annual meeting and ending on the date of the
Annual Meeting, four Non-Employee Directors elected to participate in the
Director Plan: Messrs. Coppola, Davis, Mancuso and York, and elected to
receive 100%, 50%, 100% and 50%, respectively, of their annual compensation as
a director in shares of the Common Stock. As of March 20, 2000, the Company
had issued an aggregate of 7,499 shares of the Common Stock under the Director
Plan as follows: 1,759 shares were issued to Mr. Aljian, 1,452 shares were
issued to Mr. Coppola, 1,120 shares were issued to Mr. Davis, 907 shares were
issued to Mr. Mancuso, and 2,261 shares were issued to Mr. York.
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, 1999, 1998 and 1997, 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 until April
1999; (iii) the other three most highly compensated executive officers of the
Company who were serving as executive officers on December 31, 1999 (together
with Messrs. Yemenidjian and McGurk, the "Current Executive Officers"); and
(iv) one person who would have been among the four most highly compensated
executive officers in 1999 but for the fact that he was no longer serving as
an executive officer of the Company on December 31, 1999 (together with Mr.
Mancuso, the "Former Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------- -----------------------
Securities
Bonus Underlying
Other Annual Interests Options All Other
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) (#)(1) (#)(2) Compensation ($)
--------------------------- ---- ---------- --------- ---------------- --------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current Executive Officers
Alex Yemenidjian(3).......... 1999 $1,576,923 $ -- $ -- -- 10,000,000 $ 164,670(4)
Chairman of the Board and
Chief Executive Officer
Christopher J. McGurk(5)..... 1999 1,238,462 -- -- -- 3,000,000 9,012,500(6)
Vice Chairman of the
Board and Chief Operating
Officer
William A. Jones............. 1999 644,927 -- -- -- -- 27,595(7)
Senior Executive Vice 1998 598,325 -- -- -- 159,584 27,595
President and Secretary 1997 546,626 -- -- 74,209 159,584 34,309
Daniel J. Taylor(8).......... 1999 774,254 -- -- -- -- 6,400(10)
Senior Executive Vice 1998 573,161 45,333 -- 29,292(9) 179,168 69,293
President and Chief 1997 153,192 41,667 -- 54,042 116,250 67,539
Financial Officer
Robert Brada(11)............. 1999 444,738 -- -- -- -- 6,400(13)
Executive Vice President and 1998 327,301 50,000 -- 40,584(12) 87,292 6,400
General Counsel
Former Executive Officers
Frank G. Mancuso(14)......... 1999 2,315,331 -- -- -- 1,745,680(17) 2,965,186(18)
Chairman of the Board and 1998 2,020,400 -- 3,000,000(15) -- -- 122,185
Chief Executive Officer 1997 2,020,400 -- 5,780,769(16) 811,756 1,745,680 168,228
A. Robert Pisano(19)......... 1999 760,388 -- -- -- -- 3,932,936(20)
Vice Chairman of the 1998 965,600 750,000 -- -- 523,754 17,085
Board 1997 965,600 750,000 -- 243,544 523,754 17,085
</TABLE>
- --------
(1) Except as otherwise footnoted, such number represents, with respect to
1997, the number of Bonus Interests (as such term is defined below)
granted pursuant to the Senior Management Bonus Plan after giving effect
to (i) the cancellation in November 1997 of the bonuses which had been
granted under the predecessor plan and (ii) 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
10
<PAGE>
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." Pursuant to a
consulting agreement between the Company and Mr. Mancuso (the "Mancuso
Consulting Agreement") effective as of August 20, 1999, the trigger and
ceiling prices of 811,756 Bonus Interests granted to Mr. Mancuso were
reduced. See "--Employment Agreement--Frank G. Mancuso."
(2) Except as otherwise footnoted, (i) 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
(ii) with respect to 1998, such number includes (without double counting)
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. See "--Incentive and Bonus Plans--1996 Incentive Plan" and
"Incentive and Bonus Plans--October 1998 Repricings."
(3) Mr. Yemenidjian was appointed as Chairman of the Board and Chief
Executive Officer of the Company effective April 26, 1999. Accordingly,
the amounts shown in the table above with respect to "Annual
Compensation" for 1999 are for a period of less than a full year.
(4) Includes $138,670 in moving allowance and reimbursement of moving
expenses incurred by Mr. Yemenidjian in connection with his relocation to
Los Angeles and $26,000 in fees paid to Mr. Yemenidjian in 1999 for
service on the Board of Directors and its committees prior to his
appointment as Chairman and Chief Executive Officer.
(5) Mr. McGurk was appointed as Vice Chairman of the Board and Chief
Operating Officer of the Company on April 28, 1999. Accordingly, the
amounts shown in the table above with respect to "Annual Compensation"
for 1999 are for a period of less than a full year.
(6) Includes, pursuant to his employment agreement, (i) $7,312,500,
representing the dollar value of 500,000 shares of the Common Stock
awarded to Mr. McGurk on April 30, 1999 and (ii) a one-time signing bonus
of $1,700,000. See "--Employment Agreements--Christopher J. McGurk."
(7) 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."
(8) 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.
(9) 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 Interest Amendment, and
is only payable in certain circumstances. See "--Employment Agreements--
Daniel J. Taylor."
(10) Represents 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."
(11) 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 Exchange Act.
(12) 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 Interest Amendment, and is only payable in certain
circumstances. See "--Employment Agreements--Robert Brada."
11
<PAGE>
(13) 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."
(14) Mr. Mancuso resigned as Chairman of the Board and Chief Executive Officer
effective April 26, 1999.
(15) 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. See "--
Employment Agreements--Frank G. Mancuso."
(16) Includes (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. See "--Employment Agreements--Frank G. Mancuso."
(17) Pursuant to the Mancuso Consulting Agreement, effective as of August 20,
1999, 872,840 Series A Options and 872,840 Series B Options granted to
Mr. Mancuso in 1997 were canceled and regranted (the "Mancuso Options
Repricing"). With respect to 1999, such number includes (without double
counting) the number of options regranted pursuant to the Mancuso
Consulting Agreement.
(18) Includes (i) $3,000,000 paid as consulting fees pursuant to the Mancuso
Consulting Agreement and (ii) a refund of $34,814 previously paid by the
Company as life insurance premiums for the benefit of Mr. Mancuso. See
"--Employment Agreements--Frank G. Mancuso."
(19) Mr. Pisano resigned as Vice Chairman and as a member of the Board of
Directors effective April 26, 1999. Accordingly, the amounts shown in the
table above with respect to "Annual Compensation" for 1999 are for a
period of less than a full year.
(20) Includes (i) $3,915,851 paid to Mr. Pisano in connection with the
termination of his employment agreement, (ii) a matching contribution of
$6,400 paid by the Company for the benefit of Mr. Pisano under the
Savings Plan and (iii) $10,685 in life insurance premiums paid by the
Company for the benefit of Mr. Pisano. See "--Employment Agreements--A.
Robert Pisano."
12
<PAGE>
Option Grants and Long Term Incentive Awards. The following table sets forth
information with respect to grants of employee stock options issued by the
Company to the Named Executive Officers for the fiscal year ended December 31,
1999. See "--Incentive and Bonus Plans--1996 Incentive Plan."
Option Grants in Fiscal Year Ended December 31, 1999
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------
Percent of Potential Realizable Value at
Shares Total Options Assumed Annual Rates of Stock
Underlying Granted to Exercise Price Appreciation For Option
Options Employees in or Base Term ($)(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........ 5,000,000 27.9% $14.90 4/29/09 $ -- 39,500,000 l07,050,000
5,000,000(3) 27.9 30.00 4/29/09 -- 31,550,000
Christopher J. McGurk... 1,500,000 8.4 14.90 4/29/09 -- 11,850,000 32,115,000
1,500,000(3) 8.4 30.00 4/29/09 -- -- 9,465,000
William A. Jones........ -- -- -- -- -- -- --
Daniel J. Taylor........ -- -- -- -- -- -- --
Robert Brada............ -- -- -- -- -- -- --
Former Executive
Officers
Frank G. Mancuso........ 1,745,680(4) 9.7 14.90 10/9/06 3,456,446 13,773,415 24,195,125
A. Robert Pisano........ -- -- -- -- -- -- --
</TABLE>
- --------
(1) Based on a total of 17,944,630 stock options granted pursuant to the 1996
Incentive Plan during the fiscal year ended December 31, 1999, including
the 1,745,680 options that were canceled and regranted in connection with
the Mancuso Consulting Agreement.
(2) The fair market value of the Common Stock was (i) $14.00 per share at the
time of the option grants to Messrs. Yemenidjian and McGurk and (ii)
$16.88 at the time of the Mancuso Options Repricing, in each case based on
the closing sale price per share of the Common Stock on the New York Stock
Exchange (as reported by the Dow Jones News Retrival) on April 29, 1999
and August 20, 1999, respectively. Potential gains, if any, are net of
exercise price, but before taxes associated with exercise. The 0 percent,
5 percent and 10 percent assumed compounded annual rates of stock price
appreciation are mandated by rules of the Securities and Exchange
Commission (the "Commission"). There can be no assurance provided to any
Named Executive Officer or any other holder of the Company's securities
that the actual stock price appreciation over the remaining option term
will be at the assumed 0 percent, 5 percent and 10 percent levels or at
any other defined level.
(3) These options are premium-priced options with an exercise price that was
approximately 214% of the fair market value of the underlying shares of
Common Stock at the time of grant.
(4) These options were initially granted prior to 1999 and were canceled and
regranted in connection with the Mancuso Consulting Agreement in August
1999. See "--Employment Agreements--Frank G. Mancuso." At the time of the
Mancuso Options Repricing, the fair market value of the underlying shares
of Common Stock was above the new exercise price.
13
<PAGE>
The following table sets forth information with respect to the ownership and
value of options as of December 31, 1999 held by the Named Executive Officers.
No Named Executive Officer exercised any options during the fiscal year ended
December 31, 1999.
Aggregated Option Exercises in Fiscal Year Ended December 31, 1999
and Option Values as of December 31, 1999
<TABLE>
<CAPTION>
Securities Underlying Unexercised Value of Unexercised In-The-Money
Options at December 31, 1999(1) Options at December 31, 1999(2)
--------------------------------- ---------------------------------
Name Exercisable (#) Unexercisable (#) Exercisable ($) Unexercisable ($)
---- --------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
Current Executive
Officers
Alex Yemenidjian........ -- 10,000,000(3) $ -- $43,300,000
Christopher J. McGurk... -- 3,000,000(3) -- 12,990,000
William A. Jones........ 50,527 109,059 437,547 944,451
Daniel J. Taylor........ 43,903 135,265 380,200 1,171,395
Robert Brada............ 16,598 70,694 143,739 612,210
Former Executive
Officers
Frank G. Mancuso........ 1,745,680 -- 15,117,589 --
A. Robert Pisano........ 523,754 -- 4,535,710 --
</TABLE>
- --------
(1) Represents the total number of options granted to the Named Executive
Officers under the 1996 Incentive Plan. Unless otherwise indicated, all
options listed above are exercisable at $14.90 per share of the Common
Stock, after giving effect to the Options Repricing and the Mancuso
Options Repricing. Such options generally vest over a period of five
years. See "--Incentive and Bonus Plans--October 1998 Repricings" and "--
Employment Agreements--Frank G. Mancuso."
(2) The closing sale price of the Common Stock on the NYSE, as reported by the
Dow Jones News Retrieval, on December 31, 1999 was $23.56 per share.
Pursuant to the Options Repricing and the Mancuso 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" and "--Employment
Agreements--Frank G. Mancuso."
(3) Fifty percent of the options represented hereby are exercisable at $14.90
per share and fifty percent at $30.00 per share.
Ten-Year Option Repricings
<TABLE>
<CAPTION>
Length of
Closing Market Option
Shares Price of Common Term
Underlying Stock on Date Remaining
Options of Repricing Old Exercise New Exercise on Date of
Name Date Repriced (#) ($) Price ($) Price ($)(1) Repricing
---- -------- ------------ --------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Current Executive
Officers
Alex Yemenidjian........ -- -- -- -- --
Christopher J. McGurk... -- -- -- -- --
William A. Jones........ 10/26/98 159,584 $ 9.06 $24.00 $14.90 96 Months
Daniel J. Taylor........ 10/26/98 116,250 9.06 24.00 14.90 106 Months
62,918 9.06 24.00 14.90 118 Months
Robert Brada............ 10/26/98 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........ 8/20/99 1,745,680 16.88 24.00 14.90 86 Months
A. Robert Pisano........ 10/26/98 523,754 9.06 24.00 14.90 96 Months
</TABLE>
- --------
(1) The exercise price of the options granted in connection with the Options
Repricing and the Mancuso 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.
14
<PAGE>
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, 1999 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, 1999
<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................ -- --
Robert Brada.................... -- --
Former Executive Officers
Frank G. Mancuso................ 811,756 24 Months
A. Robert Pisano................ -- --
</TABLE>
- --------
(1) Represents the number of Bonus Interests granted in 1997, the terms of
which were amended in August 1999 pursuant to the Mancuso Consulting
Agreement to lower the trigger price from $24.00 to $14.90 and the ceiling
price from $48.00 to $29.80, while maintaining the maximum value of each
Bonus Interest at $24.00.
(2) As of December 31, 1999. Bonus Interests generally vest over a period of
five years and are only payable in certain circumstances. See "--Incentive
and Bonus Plans--Senior Management Bonus Plan."
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 Company also has entered into the
MGM Supplemental Executive Retirement Agreement dated April 22, 1996, as
amended and restated as of July 18, 1997 (the "Supplemental Executive
Retirement Agreement"), with Mr. Pisano. See "--Employment Agreements--A.
Robert Pisano." 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........................... 24,688 32,918 41,147 49,377 57,606
150,000........................... 38,938 51,918 64,897 77,877 90,856
160,000........................... 41,788 55,718 69,647 83,577 97,506
200,000........................... 41,788 55,718 69,647 83,577 97,506
</TABLE>
- --------
(1) As of March 20, 2000, Messrs. Yemenidjian, McGurk, Jones, Taylor and Brada
were credited with 0, 0, 17, 8, 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.
(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 ($72,600 for 1999), 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 $170,000 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
15
<PAGE>
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.
An aggregate of 8,125,065 shares of the Common Stock was originally reserved
and authorized for issuance under the 1996 Incentive Plan. An additional
21,874,935 shares (for an aggregate of 30,000,000 shares) were subsequently
reserved and authorized for issuance under the 1996 Incentive Plan. As of
December 31, 1999, 500,000 shares of the Common Stock had been issued pursuant
to Awards (of which 177,500 were subsequently reacquired by the Company as
treasury shares) and options to purchase 23,141,987 shares of the Common Stock
were outstanding. Of the outstanding options, 21,005,261 are held by the Named
Executive Officers and certain other current and former senior employees (the
"Executive Options") and 2,136,726 are held by approximately 390 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. In addition, 1,0l9,818 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, 12,722,575 are exercisable at $14.90, 7,750,000
are exercisable at $30.00, 358,336 are exercisable at $24.00, 25,600 are
exercisable at $17.13, 125,000 are exercisable at $15.63 and 23,750 are
exercisable at $15.50. Of the Employee Options, 1,663,226 are exercisable at
$14.90, 115,400 are exercisable at $17.88, 69,600 are exercisable at $17.06,
73,400 are exercisable at $15.50 and 215,100 are exercisable at $11.38. As of
December 31, 1999, 5,444,676 Executive Options were vested (or would vest
within 60 days), of which 4,826,911 Executive Options were exercisable (or
would become exercisable within 60 days), and 542,376 Employee Options were
vested and exercisable (or would vest and become exercisable within 60 days).
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 Option Exchange Agreement which are
filed as exhibits to the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
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 ("Bonus Interest Participants"). 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, each Bonus Interest held
by a Bonus Interest Participant whose Bonus Interests have been repriced (a
"Bonus Interest Repricing Participant") entitles the holder to receive a cash
payment if the average of the closing prices of the Common Stock during the 20
trading days
16
<PAGE>
plus, in certain circumstances, per share distributions on the Common Stock
(together, the "Price") preceding a Determination Date (defined below) is
greater than $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 Bonus Interest
Repricing Participants, or $48.00, with respect to all others, multiplied by
(C) 1.61, with respect to the Bonus Interest 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
Bonus Interest 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 Bonus Interest Repricing Participant only, a Determination Date
shall occur in the event of a termination of such Bonus Interest Repricing
Participant'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 Bonus Interest Repricing Participant 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 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 Bonus Interest Repricing Participant involved, in the
event of death or Permanent Disability.
The foregoing description of the Senior Management Bonus Plan 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 for the fiscal year ended December 31, 1998.
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.
October 1998 Repricings. In October 1998, the Compensation and Bonus Plan
Committees approved, and the Section 162(m) Subcommittee, the Board of
Directors and the Company's stockholders subsequently affirmed and ratified,
the Options Repricing and an amendment to the Bonus Interest Agreements (the
"Bonus Interest Amendment," collectively, with Options Repricing, the "October
1998 Repricings"), which included (i) the cancellation of stock options
previously granted to Messrs. Pisano, Jones, Taylor and Brada (with respect to
the Named Executive Officers) at exercise prices between $20.00 and $24.00 per
share and to certain other executives and employees of the Company at various
prices from $19.63 to $24.00 and the grant of new stock options at an exercise
price of $14.90 per share and (ii) the amendment of the terms of the Bonus
Interests (or certain bonus arrangements based on the value of the Bonus
Interests) of the Bonus Interest Repricing Participants to reduce 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. No changes were made to the
vesting schedule or expiration date or any other provision of such stock
options or Bonus Interests.
17
<PAGE>
Employment Agreements
Current Executive Officers
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 and Chief Executive Officer 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, an annual discretionary bonus until
the adoption of the 2000 Employee Incentive Plan and thereafter an annual
performance-based bonus determined in accordance with the 2000 Employee
Incentive Plan. See "Proposal 2--Approval and Ratification of the 2000
Employee Incentive Plan." 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 stock
options vest on April 30, 2000 and vest thereafter at the rate of
approximately 1.67 percent per month until fully vested. If Mr. Yemenidjian's
employment is terminated without cause, if he terminates the agreement for
"good reason" or in the event of a "Designated Change in Control," his stock
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 and Chief Operating Officer 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 of each year for four years, an annual discretionary bonus
until the adoption of the 2000 Employee Incentive Plan and thereafter an
annual performance-based bonus determined in accordance with the 2000 Employee
Incentive Plan. See "Proposal 2--Approval and Ratification of the 2000
Employee Incentive Plan." In addition, Mr. McGurk received a one-time signing
bonus of $1,700,000 and an award of 500,000 shares of the Common Stock.
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 price
of $30.00 per share. Twenty percent of the stock options vest on April 30,
2000 and vest thereafter at the rate of approximately 1.67 percent per month
until fully vested. If Mr. McGurk's employment is terminated without cause or
if he terminates the agreement for "good reason" or in the event of a
"Designated Change in Control," his stock 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, as amended as of July 16, 1999, which
provides that he will serve as Senior Executive Vice President for an initial
term which ends on October 9, 2001. The Company has an option exercisable on
or before six months prior to the expiration of the initial term to extend the
term of the agreement for three additional years. Pursuant to the agreement,
as amended, Mr. Jones is entitled to a current annual salary of
$650,000, 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 or if he
terminates the agreement for "good reason," his stock options and Bonus
Interests under the 1996 Incentive Plan and Senior Management Bonus Plan will
vest immediately and he will be entitled to receive all insurance benefits for
the remainder of the term of the employment agreement plus (1) if the option
has been timely exercised at the time of such termination, the net present
value of the sum of the annual salary through the entire remaining term of the
employment agreement or (2) if the option has not been timely exercised at the
time of such termination, a liquidated sum equal to the amount he would have
been entitled to receive had such termination occurred as of June 30, 1999. As
of December 31, 1999, the amount payable to Mr. Jones in the event of such
circumstances would be $1,349,799.
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
18
<PAGE>
President and Chief Financial Officer 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 $800,000, which will increase by $50,000 in October
of each year for three 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 (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 Interest
Amendment, had such Bonus Interests been granted to Mr. Taylor in August 1997.
If Mr. Taylor's employment is terminated without cause by the Company or if he
terminates the agreement for "good reason," his stock 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, 1999, the amount payable to
Mr. Taylor in the event of such circumstances would be approximately
$2,754,184.
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 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 $446,250, subject to increase as determined by the Company on or about
August 2, 2000 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 (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 Amendment, had such Bonus Interests been
granted to Mr. Brada in October 1996. If Mr. Brada's employment is terminated
without cause or if he terminates the agreement for "good reason," his stock
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.
Each of the above named executives also is entitled to receive certain other
benefits, which may include medical insurance and participation in the benefit
plans which the Company provides for its senior officers generally.
Former Executive Officers
Frank G. Mancuso. The Company entered into an employment agreement with
Frank G. Mancuso effective as of October 10, 1996, as amended as of August 4,
1997, which provided that he would serve as Chairman of the Board and Chief
Executive Officer for an initial term ending on October 10, 2001.
The employment agreement entitled Mr. Mancuso to an annual base salary of $2
million, subject to increase at the discretion of the Board of Directors, and
an annual stock purchase payment of $3 million (payable annually in advance),
out of the after tax proceeds of which he was required to purchase shares of
the Common Stock. Such purchases were at a price of $24.00 per share until
November 17, 1998. Thereafter, such purchases were at the fair market value of
such shares. In addition, Mr. Mancuso was entitled to receive certain other
benefits, including a car allowance, medical insurance, participation in the
Company's 1996 Incentive Plan, Senior Management Bonus Plan, Savings Plan, MGM
Retirement Plan and any other similar plan or program which the Company
provided for its senior officers generally, and other benefits customarily
afforded to executives of similar stature in the motion picture industry. The
Company was also obligated to maintain a five-year, reducing-term life
insurance policy in the initial face amount of $25 million on Mr. Mancuso's
life for his benefit. Pursuant to his employment agreement, Mr. Mancuso
holds stock options to purchase shares of the Common Stock and Bonus
Interests. In part to induce him to enter into his employment agreement, in
October 1996 Mr. Mancuso received 63,751 shares
19
<PAGE>
of the Common Stock and $1,020,000 in cash. Mr. Mancuso resigned as Chairman
of the Board and Chief Executive Officer on April 26, 1999 but remained as a
director.
Effective as of August 20, 1999, the Company and Mr. Mancuso entered into
the Mancuso Consulting Agreement, which provides that Mr. Mancuso will serve
as a non-exclusive consultant for a term commencing May 1, 1999 and ending
October 10, 2001. Mr. Mancuso is entitled to an annual base consulting fee of
$2 million and additional payments of $3 million on November 18, 1999 and
$2,688,525 on November 18, 2000, all such amounts subject to acceleration and
payment of the net present value of the remaining payments in a lump sum in
certain circumstances. The Mancuso Consulting Agreement also provides for a
repricing of Mr. Mancuso's stock options from $24.00 to $14.90 per share, all
of which became fully vested and immediately exercisable, and Bonus Interests,
the trigger price of which was reduced from $24.00 per bonus interest to
$14.90 and the ceiling price from $48.00 to $29.80 (while maintaining the
maximum value of each bonus interest at $24.00), all of which became fully
vested. Mr. Mancuso will be entitled to receive certain benefits during the
term of the Mancuso Consulting Agreement, including medical and disability
insurance. The Company will not be obligated to maintain the reducing-term
life insurance policy previously provided for Mr. Mancuso.
A. Robert Pisano. The Company entered into an employment agreement with Mr.
Pisano effective as of October 10, 1996, which provided that he would serve as
Vice Chairman for an initial term ending on October 9, 2001. The agreement
entitled Mr. Pisano to an annual salary of $950,000, an annual guaranteed
bonus of $750,000 and an annual discretionary bonus. In addition, Mr. Pisano
was entitled to receive certain other benefits, including a car allowance,
medical insurance, participation in the 1996 Incentive Plan, Senior Management
Bonus Plan, Savings Plan, MGM Retirement Plan and any other similar plan or
program which the Company provided for its senior officers generally. The
Company is also obligated to maintain a term life insurance policy in the face
amount of $5 million on Mr. Pisano's life for his benefit. Under the 1996
Incentive Plan and the Senior Management Bonus Plan, Mr. Pisano holds options
to purchase shares of the Common Stock and Bonus Interests, respectively. In
part to induce him to enter into his employment agreement, Mr. Pisano received
15,000 shares of the Common Stock and $235,343 in cash.
Additionally, pursuant to a previous employment agreement and in place of
certain benefits under a pension plan maintained for Mr. Pisano's benefit by a
prior employer (the "Prior Plan") which Mr. Pisano forfeited when he joined
MGM in 1993, the Company entered into the Supplemental Executive Retirement
Agreement with Mr. Pisano. The Supplemental Executive Retirement Agreement
provides Mr. Pisano with an annual benefit equal to $150,000, less an amount
equal to the benefit Mr. Pisano is entitled to receive under the Prior Plan
and subject to certain adjustments, payable in the form of a single life
annuity commencing on the date Mr. Pisano attains age 60. The minimum
aggregate amount payable to Mr. Pisano or his beneficiaries will be $900,000,
less all benefits to which Mr. Pisano is entitled under the Prior Plan. All
benefits under the Supplemental Executive Retirement Agreement are fully
vested. After payments have commenced under the Supplemental Executive
Retirement Agreement, the benefit amount shall be increased effective each
January 1 by the adjustment factor applied to retiree payments for the
calendar year under the Prior Plan. If Mr. Pisano is unmarried on the date
benefits commence, the benefit shall be payable monthly for Mr. Pisano's life
("life only" basis). If, however, Mr. Pisano is married on the date benefits
commence, he may elect to have the benefits to which he is entitled payable on
the life only basis or have the actuarial equivalent of the life only form
payable in equal monthly payments to him during his lifetime with an amount
equal to 50 percent or 100 percent of such payments to continue after his
death to his spouse for the remainder of his spouse's life.
Mr. Pisano resigned on April 26, 1999. Effective as of August 20, 1999, the
Company entered into a consulting agreement with Mr. Pisano, providing for his
services as an exclusive full-time consultant from May 1, 1999 until July 31,
1999 (the "Initial Term") and thereafter as a non-exclusive consultant until
October 9, 2001. Pursuant to the consulting agreement, Mr. Pisano received a
base consulting fee at an annual rate of $950,000 during the Initial Term and
on August 20, 1999 a lump sum payment equal to the net present value of the
difference between $8.5 million and all amounts theretofore paid to him as
salary and guaranteed bonuses pursuant to the employment agreement and as base
consulting fees pursuant to the consulting agreement. Pursuant to the
consulting agreement, all of Mr. Pisano's stock options became fully vested
and immediately
20
<PAGE>
exercisable and all of his Bonus Interests became fully vested. Mr. Pisano
will be entitled to receive certain benefits during the term of the consulting
agreement, including medical and disability insurance and the $5 million term
life insurance policy referred to above, until such benefits are provided by a
third-party employer.
The employment agreements of each of Messrs. Yemenidjian, McGurk, Jones,
Taylor, Brada, Mancuso and Pisano also contain: (a) certain nondisclosure
provisions which are effective for the term of such individual's employment
with the Company and for an indefinite period thereafter and (b) a provision
prohibiting the solicitation for employment and employment of certain Company
employees, or making derogatory 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. Pursuant to the Mancuso
Consulting Agreement, the Company is required to maintain such insurance in a
mutually acceptable amount, with Mr. Mancuso as a named insured thereunder, to
the extent available at reasonable cost.
21
<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, except to
the extent the Company specifically incorporates such report or the performance
graph by reference therein.
Compensation
Compensation Philosophy. The Compensation Committee of the Board of
Directors, together with its subcommittees, is responsible for establishing and
administering a comprehensive compensation program for the Company's
executives, consisting of three key elements:
. Base salary;
. Annual performance-based bonus; and
. Periodic grants of stock options and other stock-based awards.
The Compensation Committee believes this three-part approach to executive
compensation best serves the interests of the Company and its stockholders by
(a) providing incentives to achieve both current and long-term strategic
management goals of the Company, with the ultimate objective of enhancing
stockholder value; (b) enabling the Company to be effective in attracting,
motivating and retaining key executives; (c) correlating the performance of the
Company as a whole with individual performance; and (d) providing executives
with a financial interest in the Company similar to the interests of the
Company's stockholders. The Compensation Committee operates pursuant to a
charter that can only be amended by the Board of Directors or its Executive
Committee.
Base Salary. The annual salaries of executives of the Company are generally
determined by management and are set forth in such executives' employment
agreements, except that approval of the Compensation Committee is required with
respect to the hiring, compensation and discharge of, and the terms of any
employment agreement or separation arrangement with, any executive serving in a
staff position with a title of Executive Vice President or higher (or any
similar position with comparable responsibilities) or any executive (line or
staff) receiving an annual base salary or aggregate severance package, as the
case may be, of $500,000 or more. Any increase in the base salary or other key
elements of compensation of such executives, other than as set forth in such
employment agreements, requires the approval of the Compensation Committee.
Annual Performance-Based Bonus. On March 10, 2000, the Compensation Committee
and the Section 162(m) Subcommittee approved the adoption of the 2000 Employee
Incentive Plan (the "2000 Incentive Plan") for eligible employees
("Participants"), subject to Board ratification and stockholder approval.
See "Proposal 2--Approval and Ratification of 2000 Employee Incentive Plan." In
the case of the Named Executive Officers, bonus awards are determined solely by
the Section 162(m) Subcommittee as follows: (A) objective performance goals,
bonus targets and performance measures are (i) pre-established by the
Section 162(m) Subcommittee at a time when the actual performance relative to
the goal remains substantially uncertain and (ii) based on such objective
business criteria as the Section 162(m) Subcommittee shall determine, including
film performance and earnings before interest, taxes, depreciation and non-film
amortization ("EBITDA"), among others; (B) the Section 162(m) Subcommittee may
exercise discretion to reduce an award to a Named Executive Officer by up to
25% so long as such reduction does not result in an increase in the amount of
the bonus of any other Participant; and (C) prior to the payment of any bonus
to any of the Named Executive Officers, the Section 162(m) Subcommittee will
certify to the Board of Directors or the Executive Committee that the objective
pre-established performance goals upon which such bonus is based have been
attained and that the amount of each bonus has been determined solely on the
basis of the attainment of such goals (subject to the exercise of the negative
discretion discussed above). While certain employment agreements (including
those of
22
<PAGE>
the Named Executive Officers) provide for an annual discretionary bonus, it is
the intention of the Compensation Committee, in determining the
appropriateness of any discretionary bonus, to consider, among other factors,
the performance-based measures used in the 2000 Incentive Plan. Any revisions
to the 2000 Incentive Plan or any new performance-based compensation plans
require the approval of the Compensation Committee and, where appropriate, the
Section 162(m) Subcommittee.
Stock Options and Other Stock-Based Awards. 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 that
(i) serves to align their interests with the interests of the stockholders as
a whole and (ii) encourages them to manage the Company in a way that seeks to
maximize its long-term profitability. The grant of stock options and other
stock-based awards is considered on a case-by-case basis as part of an overall
compensation package 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. Grants of stock
options and other stock-based awards pursuant to the 1996 Incentive Plan are
determined by the Compensation Committee and (in the case of the Named
Executive Officers) by the Section 162(m) Subcommittee and Section 16
Subcommittee based on the recommendations of management.
In connection with his appointment as Chairman of the Board and Chief
Executive Officer in April 1999 and pursuant to the terms of his employment
agreement, Mr. Yemenidjian was granted 10,000,000 stock options. Mr. McGurk,
in connection with his appointment as Vice Chairman of the Board and Chief
Operating Officer and pursuant to the terms of his employment agreement, was
granted 3,000,000 stock options and was awarded 500,000 shares of the Common
Stock. Fifty percent of the stock options granted to Messrs. Yemenidjian and
McGurk are exercisable at $14.90 per share (which exceeded the fair market
value of the Common Stock at the time of grant) and fifty percent are
exercisable at $30.00. See "Executive Compensation--Executive Compensation
Summary" and "Executive Compensation--Incentive and Bonus Plans." No other
stock options were awarded to the Named Executive Officers in 1999.
Repricing of Options and Bonus Interests of Mr. Mancuso, the Former Chief
Executive Officer
Mr. Mancuso was Chairman of the Board and Chief Executive Officer of the
Company until April 26, 1999 but did not participate in the October 1998
Repricings. See "Executive Compensation--Executive Compensation Summary--
Option Grants and Long-Term Incentive Awards--Ten-Year Option Repricing" and
"Executive Compensation--Incentive and Bonus Plans." In connection with the
Mancuso Consulting Agreement, and as an inducement for Mr. Mancuso to enter
into such agreement, effective as of August 20, 1999, an aggregate of
1,745,680 stock options and 811,756 Bonus Interests held by him were repriced
on the same terms as the October 1998 Repricings, resulting in (i) the
cancellation of the existing stock options at an exercise price of $24.00 per
share and the grant of new stock options at an exercise price of $14.90 per
share; and (ii) the lowering of the trigger and ceiling payment thresholds of
the Bonus Interests 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 at $24.00. See "Executive Compensation--Employment Agreements--Frank
G. Mancuso." The closing price of the Common Stock on the NYSE, as reported by
the Dow Jones News Retrieval, on the effective date of the Mancuso Consulting
Agreement was $16.88 per share.
Compensation Awarded to the Chief Executive Officer
Mr. Yemenidjian became Chairman of the Board and Chief Executive Officer of
the Company in April 1999. He is eligible to participate in the same executive
compensation plans and to receive the same benefits generally available to the
Company's other senior executives. Pursuant to the terms of his employment
agreement, Mr. Yemenidjian's annual base salary is $2.5 million and he was
granted an aggregate of 10,000,000
23
<PAGE>
stock options under the 1996 Incentive Plan, 50% of which have an exercise
price of $14.90 and 50% of which have an exercise price of $30.00. Mr.
Yemenidjian has not been granted any additional stock options nor did he
receive a discretionary bonus with respect to 1999. See "Executive
Compensation--Executive Compensation Summary," "Executive Compensation--
Incentive and Bonus Plans" and "Executive Compensation--Employment
Agreements--Alex Yemenidjian."
Tax Considerations
The Compensation Committee's policy is 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 of 1986, as amended
("Section 162(m)") whenever, in the judgment of the Compensation Committee,
doing so would be 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. In addition, 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 Compensation Committee and the
Section 162(m) Subcommittee to satisfy the requirements for deductibility
under Section 162(m) will so qualify.
Compensation Committee:
Jerome B. York (Chairman)(1)
Willie D. Davis(1)(2)
Alexander M. Haig, Jr.(2)
- --------
(1) Member of the Section 162(m) Subcommittee
(2) Member of the Section 16 Subcommittee
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, 1999, 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
[PERFORMANCE 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
December 31, 1999.......................... $112.20 $187.24 $165.64
</TABLE>
25
<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. 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 March 20, 2000, the Company had contributed an aggregate of 201,812
shares of the Common Stock to the Savings Plan.
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PROPOSAL 2
APPROVAL AND RATIFICATION OF THE
2000 EMPLOYEE INCENTIVE PLAN
On March 10, 2000, the Compensation Committee and the Performance-Based
Compensation Subcommittee (the "Section 162(m) Subcommittee") of the Board of
Directors adopted, and the Board of Directors subsequently ratified, the 2000
Employee Incentive Plan (the "2000 Incentive Plan") for eligible employees
("Participants"), the full text of which is set forth in Appendix A to this
Proxy Statement. All regular employees of the Company are eligible to
participate in the 2000 Incentive Plan. Implementation of the 2000 Incentive
Plan is subject to the approval of the Company's stockholders.
Under the 2000 Incentive Plan, which is designed to satisfy the requirements
for performance-based compensation within the meaning of Section 162(m),
annual bonuses are awarded to Participants upon the attainment of certain
performance goals established in advance by the Compensation Committee on the
recommendation of management. The amount of a Participant's bonus is a
function of several factors, including (i) the bonus target for such
Participant based upon title and level of responsibility and expressed as a
percentage of base salary, (ii) the percentage of the bonus target allocated
to certain corporate and divisional performance measures, (iii) the
achievement of the pre-established goals with respect to the relevant
performance measures, and (iv) the exercise of management discretion with
respect to up to 25% of the bonus target. For bonus-eligible employees other
than the Named Executive Officers, final bonus awards are determined by the
Chairman and Chief Executive Officer and the Vice Chairman and Chief Operating
Officer based on the recommendation of management.
In the case of the Named Executive Officers, final bonus awards are
determined solely by the Section 162(m) Subcommittee as follows: (A) objective
performance goals, bonus targets and performance measures (i) are pre-
established by the Section 162(m) Subcommittee at a time when the actual
performance relative to the goal remains substantially uncertain and (ii) may
be based on such objective business criteria as the Section 162(m)
Subcommittee may determine, including film performance (as such term is
defined below) and EBITDA, among others; (B) the Section 162(m) Subcommittee
may exercise discretion to reduce an award to a Named Executive Officer by up
to 25% so long as such reduction does not result in an increase in the amount
of the bonus of any other Participant; and (C) prior to the payment of any
bonus to any of the Named Executive Officers, the Section 162(m) Subcommittee
will certify to the Board of Directors or the Executive Committee that the
objective pre-established performance goals upon which such bonus is based
have been attained and that the amount of each bonus has been determined
solely on the basis of the attainment of such goals (subject to the exercise
of the negative discretion discussed above). Under the 2000 Incentive Plan,
the maximum bonus payable to any Participant for any fiscal year may not
exceed $5 million. Since the 2000 Incentive Plan requires performance goals to
be selected for each fiscal year, it is not determinable what benefits, if
any, would have been paid to any Named Executive Officer if the 2000 Incentive
Plan had been in effect for fiscal year 1999.
The 2000 Incentive Plan will be administered by the Compensation Committee
and (with respect to the Named Executive Officers) the Section 162(m)
Subcommittee. The 2000 Incentive Plan may from time to time be amended,
suspended or terminated, in whole or in part, by the Board of Directors, the
Compensation Committee or (in the case of the Named Executive Officers) the
Section 162(m) Subcommittee; provided, however, that no amendment shall become
effective without the approval of the Board of Directors and/or the
stockholders of the Company, if such approval is required to comply with the
applicable rules under Section 162(m).
The Section 162(m) Subcommittee established the fiscal year 2000 performance
goals for the Named Executive Officers based upon the ultimate revenue-to-cost
ratio of motion pictures released during the fiscal year ("film performance")
and EBITDA. The Compensation Committee believes that the specific performance
goals constitute confidential business information, the disclosure of which
could adversely affect the Company.
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The foregoing description of the 2000 Incentive Plan is qualified in all
respects by the actual provisions of such plan attached to this Proxy
Statement as Appendix A. The Board of Directors believes, in general, that it
is desirable and in the best interests of the Company and its stockholders to
enable the Company's executive compensation plans to comply with the
requirements of Section 162(m). The Board further believes that the 2000
Incentive Plan is consistent with the Company's existing policies that
correlate the performance of the Company on a whole with employee
compensation. The 2000 Incentive Plan also serves the Company's interests by
granting to the Compensation Committee and, in the case of the Named Executive
Officers, the Section 162(m) Subcommittee discretion in determining the
performance goals, bonus targets and the business criteria by which
performance is to be measured.
For the foregoing reasons, the Board of Directors recommends that stockholders
vote "FOR" Proposal 2.
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PROPOSAL 3
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, 2000. 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 3.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Sale of Unregistered Securities
Pursuant to a Stock Option Agreement entered into as of October 10, 1996
between Tracinda and the Company, on October 14, 1999, Tracinda exercised in
full its option to purchase 156,251 shares of the Common Stock at an exercise
price of $6.41 per share and an aggregate exercise price of $1,001,569.
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
In connection with the rights offering in October 1999, 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 44,279,254 shares of the Common Stock,
for an aggregate purchase price of approximately $642,049,183. In addition,
the Tracinda Group agreed to purchase any shares of the Common Stock which
were not otherwise subscribed for in such 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. ("MGM Grand") 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 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, a predecessor-in-interest to the Company 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, 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 does not receive any monetary compensation for these licenses.
The Company periodically 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 MGM Grand's
hotels. For the year ended December 31, 1999, the Company recognized revenues
of approximately $20,000 for the sale of certain merchandise to Grand Hotel.
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 could be
obtained from unrelated parties. For the year ended December 31, 1999, the
aggregate of the payments made to Tracinda for the use of such aircraft was
approximately $149,000.
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The Company had an exclusive producer overhead arrangement with FGM
Entertainment ("FGM") for the services of Frank Mancuso, Jr., the son of Mr.
Mancuso, which was terminated in August 1999. Under the agreement which had a
term ending on July 31, 2002, FGM, a company wholly owned by Mr. Mancuso, Jr.,
was entitled to receive $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
was required to submit all projects that it wished to produce or develop to
the Company and received a producing fee, as well as certain participations
and royalties, for each picture that was produced under the arrangement. For
the year ended December 31, 1999 these fees, participations and royalties,
paid to FGM for movies such as Species, Fled, Hoodlum and Ronin, totaled
approximately $1,043,000. The Company has the right to acquire the domestic or
worldwide rights to each picture produced under the arrangement and control
all remake, sequel and television rights. Pursuant to the termination
agreement, the Company's obligation to fund overhead has ceased and FGM
acquired "Mary Jane's Last Dance" for $3 million and has the right to acquire
the remainder of the projects it developed pursuant to a turnaround
arrangement.
In March 2000, the Company entered into an agreement in principle with a
subsidiary of American Zoetrope ("Zoetrope"), a production company owned by
Mr. Coppola, a director of the Company and a member of the Executive
Committee, for the financing and distribution in the U.S. and Canada of lower
budget theatrical motion pictures to be produced by Zoetrope over a three-year
period. Under the agreement, the Company has an exclusive "first look" on
projects developed by Zoetrope with a budget (or anticipated budget) of less
than $12 million and, subject to certain conditions being met, the Company
will acquire distribution rights in the U.S. and Canada as well as certain
other ancillary rights on up to ten qualifying pictures produced by Zoetrope
in exchange for an amount equal to no more than $2.5 million per picture. In
addition, the Company has agreed to spend a minimum of between approximately
$1 million to $2.25 million per qualifying picture in marketing and release
costs.
In December 1999, in exchange for creative services provided by Mr. Coppola
in connection with certain of the Company's film product, the Company agreed
to provide Zoetrope certain office space and office furnishings/equipment at
no charge for a two-year period.
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR THE 2001 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 2001 must submit such proposal so that it is
received by the Company no later than November 29, 2000 and must satisfy the
other requirements of Rule 14a-8. All such stockholder proposals should be
submitted to the Secretary of the Company. 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 a reasonable time before the date the Company mails its proxy
materials for such meeting and the stockholder satisfies the other
requirements of Rule 14a-4(c).
31
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OTHER MATTERS
While the 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 Annual Report to Stockholders and Annual Report on Form 10-K
(without exhibits thereto) for the year ended December 31, 1999 accompany this
Proxy Statement. Exhibits to the Annual Report on Form 10-K may be obtained
from the Company upon request. To obtain any such exhibits, contact the
Corporate Secretary of the Company at 2500 Broadway Street, Santa Monica, CA
90404, or call (310) 449-3000.
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
March 31, 2000
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APPENDIX A
METRO-GOLDWYN-MAYER INC.
2000 EMPLOYEE INCENTIVE PLAN
ARTICLE 1
PURPOSE
The 2000 Employee Incentive Plan (the "Plan") is a short-term incentive plan
designed to (i) promote the continued growth, development and financial
success of the Company with the ultimate objective of enhancing stockholder
value; (ii) enable the Company to be more effective in attracting, motivating
and retaining employees; (iii) provide to employees who participate in the
Plan an opportunity to receive bonus incentives tied to the achievement of
certain pre-established performance goals; and (iv) meet the requirements for
performance-based compensation within the meaning of Section 162(m) of the
Code (as defined below).
ARTICLE 2
DEFINITIONS
For the purposes of the Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:
2.1 "Annual Incentive Award" or "Award" means the compensation payable under
this Plan, in cash, to a Participant pursuant to the terms, conditions,
restrictions, and limitations established by the Committee and this Plan.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Bonus Target" means the percentage of base compensation (as determined
by the Committee or the Subcommittee) to be awarded as an Annual Incentive
Award if the Performance Goal for the applicable Performance Measure is met.
2.4 "Code" means the Internal Revenue Code of 1986, as amended, together
with the published rulings, regulations, and interpretations promulgated
thereunder.
2.5 "Committee" means the Compensation Committee appointed or designated by
the Board to administer the Plan in accordance with Article 3 of this Plan.
2.6 "Company" means Metro-Goldwyn-Mayer Inc., a Delaware corporation, and
any successor entity, whether by merger, ownership of all or substantially all
of the assets thereof, or otherwise.
2.7 "Named Executive Officer" means a Participant who is a "covered
employee" as defined in Section 162(m) of the Code or who the Committee
believes will be such a covered employee during a Performance Period.
2.8 "Participant" means an eligible employee who is selected to participate
in the Plan.
2.9 "Performance Goal" means one or more objective goals pre-established by
the Committee or the Subcommittee for the purpose of determining Awards under
the Plan.
2.10 "Performance Measure" means one or more business and/or financial
criteria as the Committee or the Subcommittee shall determine for the purpose
of setting Performance Goals for each Performance Period.
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2.11 "Performance Period" means the consecutive 12-month period that
constitutes the Company's fiscal year.
2.12 "Plan" means the Metro-Goldwyn-Mayer Inc. 2000 Employee Incentive Plan,
effective as of January 1, 2000, as amended from time to time.
2.13 "Section 162(m)" means Section 162(m) of the Code and the rules and
regulations promulgated thereunder.
2.14 "Subcommittee" means the Performance-Based Compensation Subcommittee
appointed by the Board to review and approve, with respect to the Named
Executive Officers, any compensation that may qualify as performance-based
compensation within the meaning of Section 162(m).
ARTICLE 3
ADMINISTRATION
3.1 Composition of Committee and Subcommittee. The Plan shall be
administered by the Committee or (with respect to the Named Executive
Officers) by the Subcommittee. The Committee shall consist of at least three
members of the Board who are not eligible to participate in the Plan. The
Subcommittee shall consist of at least two members of the Committee who are
"outside directors" within the meaning of Section 162(m).
3.2 Interpretation of Plan. The Committee or the Subcommittee, as the case
may be, shall (i) interpret the Plan; (ii) prescribe, amend, and rescind any
rules and regulations necessary or appropriate for the administration of the
Plan; and (iii) make such other determinations and take such other action as
it deems necessary or advisable in the administration of the Plan. Any
interpretation, determination, or other action made or taken by the Committee
or the Subcommittee shall be final, binding, and conclusive on all interested
parties.
3.3 Powers of Committee and Subcommittee. The Committee or (with respect to
the Named Executive Officers) the Subcommittee shall have the sole authority
to (i) establish and administer the Performance Goals; (ii) determine the
Performance Measures to be used in establishing the Performance Goals; (iii)
set the Bonus Targets and the Percentage Allocation (as defined below) for
each class of Participants; (iv) certify to the Board that one or more
Performance Goals have been met; and (v) determine the amount of any Awards
made to the Named Executive Officers.
3.4 Section 162(m) Conditions. It is the intention of the Committee that the
Awards qualify as "performance-based compensation" within the meaning of
Section 162(m). With respect to restrictions in the Plan that are based on the
requirements of Section 162(m) or any other applicable law, rule or
regulation, to the extent that any such restrictions are no longer required
thereby, the Committee or the Subcommittee, as the case may be, shall have the
discretion and authority to make Awards hereunder that are no longer subject
to such restrictions.
3.5 Requisite Action. A majority (but not fewer than two) of the members of
the Committee or the Subcommittee, as the case may be, shall constitute a
quorum. The vote of a majority of those present at a meeting at which a quorum
is present or the unanimous written consent of the members thereof shall
constitute action by the Committee or the Subcommittee.
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ARTICLE 4
ELIGIBILITY
Any regular employee (including an employee who is also a director of the
Company) is eligible to participate in the Plan. Notwithstanding the
foregoing, it is the intention of the Committee that Awards generally not be
made to any employee who is a participant in any sales incentive or other cash
bonus plan of the Company or who receives a guaranteed bonus pursuant to his
or her employment agreement with the Company. The Committee shall determine,
on the recommendation of management, which employees shall participate in the
Plan during any Performance Period, and such determination may be made
selectively among eligible employees. An employee must be a Participant in the
Plan for a minimum of six months during the Performance Period to be eligible
for an Award for such Performance Period.
ARTICLE 5
PERFORMANCE GOALS AND MEASUREMENT
5.1 Performance Goals. Performance Goals shall be established in writing by
the Committee or the Subcommittee, as the case may be, not later than 90 days
after commencement of the applicable Performance Period (provided that the
outcome thereof is substantially uncertain at such time) and shall be based on
such Performance Measures as the Committee or the Subcommittee shall
determine.
5.2 Bonus Targets. Bonus Targets shall be established by the Committee or
the Subcommittee in writing for each class of Participants (determined
principally by title and level of responsibility) at the same time as the
Performance Goals are established and shall be allocated to one or more
Performance Measures in such proportion (the "Percentage Allocation") as the
Committee or the Subcommittee shall determine.
5.3 Performance Measures. For each Performance Period, the Committee or the
Subcommittee, as the case may be, shall select the business and/or financial
criteria to be used in establishing the Performance Goals. Such criteria may
include (without limitation) one or more of the following:
(a) Film performance
(b) Earnings before interest, taxes, depreciation and amortization (EBITDA)
(c) Net profit contribution by division
(d) Pre-tax or after-tax profit levels, including: net income, earnings per
share, earnings before interest and taxes, and operating income
(e) Cash flow return on investment and return on equity
(f) Levels of operating expense or other expense items as reported on the
income statement
The Performance Measures for a Performance Period may be identical for all
Participants or, at the discretion of the Committee or the Subcommittee, may
be different to reflect more appropriate measures of performance in individual
cases.
5.4 Adjustments for Extraordinary Items. Subject to any express limitations
of the Plan and the requirements of Section 162(m), the Committee shall be
authorized to make adjustments in the method of calculating attainment of
Performance Goals in recognition of: (i) extraordinary or non-recurring items;
(ii) changes in tax laws; (iii) changes in generally accepted accounting
principles or changes in accounting policies; (iv) charges related to
restructured or discontinued operations; (v) restatement of prior period
financial results; and (vi) any other unusual, non-recurring gain or loss that
is separately identified and quantified in the Company's financial statements.
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ARTICLE 6
ANNUAL INCENTIVE AWARDS
6.1 Timing of Awards. As soon as practicable following the completion of the
Performance Period, the Committee shall review the prior year's performance in
relation to the Performance Goals and determine whether and to what extent
Awards will be granted under the Plan. Notwithstanding the attainment of one
or more Performance Goals, the Board may determine that no Awards be made with
respect to a Performance Period if it determines that the making of such
Awards is not in the best interests of the Company.
6.2 Determination of Awards. The payment of any Award shall be contingent
upon the attainment of one or more Performance Goals as certified to the Board
in writing by the Committee and the Subcommittee. The Subcommittee shall
calculate the amount of each Award to be made to the Named Executive Officers
based upon the applicable Performance Goals, Performance Measures, Bonus
Targets and Percentage Allocation established pursuant to Article 5 above. The
Subcommittee may not exercise any discretion to increase any Award to a Named
Executive Officer, but may exercise discretion to reduce an Award by up to 25
percent so long as such reduction does not result in an increase in the amount
of the Award of any other Participant. The amount of individual Awards made to
all other Participants shall be determined by management based upon the
attainment of the Performance Goals and in accordance with the Performance
Measures, Bonus Targets, Percentage Allocation and discretionary elements
approved in advance by the Committee.
6.3 Range of Awards. Provided the relevant Performance Goal shall have been
attained, as determined by the Committee or the Subcommittee, as the case may
be, and certified to the Board, the range of Awards as to each Performance
Measure shall be based on percentages of base salary as determined by the
Committee or the Subcommittee, as the case may be.
6.4 Maximum Individual Award. Notwithstanding any other provision hereof,
the maximum Award that may be made to any Participant under the Plan for any
Performance Period shall be $5 million.
ARTICLE 7
WITHHOLDING TAXES AND DEDUCTIONS
The Company shall have the right to deduct from any payment to be made
pursuant to the Plan (i) the amount of any taxes required by law to be
withheld with respect to such payments and (ii) any amounts owed by
Participant to the Company or any or its subsidiaries.
ARTICLE 8
NO RIGHT TO CONTINUED EMPLOYMENT OR AWARDS
No employee shall have any claim or right to receive an Award, and the
making of an Award shall not be construed as giving a Participant the right to
be retained in the employ of the Company or any of its subsidiaries. Further,
the Company and its subsidiaries expressly reserve the right at any time to
terminate the employment of any Participant free from any liability under the
Plan; except that a Participant who meets or exceeds the Performance Goals for
the Performance Period and was actively employed for the full term of the
Performance Period, will be eligible for an Award even though the Participant
is not an active employee of the Company at the time Awards are made.
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ARTICLE 9
NO FUNDING OF PLAN
The Plan shall constitute an "unfunded" plan of the Company, and nothing
contained herein shall require the Company to fund or otherwise aggregate any
cash or other assets for payment to Participants under the Plan. The Company
shall not be deemed by any provision of the Plan to be a trustee of any
property.
ARTICLE 10
NONTRANSFERABILITY
Except as otherwise provided by law or by the Committee or Subcommittee, no
Award shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution or
levy of any kind, either voluntary or involuntary. Awards under the Plan shall
be payable from the general assets of the Company, and no Participant shall
have any claim with respect to any specific assets of the Company.
ARTICLE 11
AMENDMENT, MODIFICATION, SUSPENSION, OR TERMINATION
The Board may at any time and from time to time, without the consent of the
Participants, alter, amend, revise, suspend, or discontinue the Plan in whole
or in part; provided, however, that no amendment which requires stockholder
approval in order for the Plan and Awards under the Plan to continue to comply
with Section 162(m) shall be effective unless such amendment shall be approved
by the requisite vote of the stockholders of the Company entitled to vote
thereon.
ARTICLE 12
GOVERNING LAW
The place of administration of the Plan shall be the State of California.
Notwithstanding the foregoing, the validity, construction and effect of the
Plan and actions taken with respect thereto, as well as any rights relating
thereto or arising therefrom, shall be determined solely in accordance with
the laws of the State of Delaware and applicable federal law.
ARTICLE 13
EFFECTIVE DATE
This Plan shall be effective as of January 1, 2000. Notwithstanding the
foregoing, the adoption of this Plan is expressly conditioned upon approval by
the Company's stockholders at the annual meeting of the Company's stockholders
held in 2000. Subject to earlier termination pursuant to Article 11 hereof,
the Plan shall have a term of five years from its effective date.
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ARTICLE 14
INDEMNIFICATION
No member of the Board or the Committee, nor any officer or employee of the
Company acting on behalf of the Board or the Committee, shall be personally
liable for any action, determination, or interpretation taken or made in good
faith with respect to the Plan, and all members of the Board or the Committee
and each officer or employee of the Company acting on their behalf shall, to
the extent permitted by law, be fully indemnified and protected by the Company
in respect of any such action, determination, or interpretation.
ARTICLE 15
INTERPRETATION
The Plan is designed to comply with Section 162(m), and all provisions
hereof shall be construed in a manner consistent with that intent.
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METRO-GOLDWYN-MAYER INC.
Proxy for Annual Meeting of Stockholders
May 4, 2000
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 at The
Regent Beverly Wilshire located at 9500 Wilshire Boulevard, Beverly Hills,
California on May 4, 2000, 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.
The Board of Directors recommends a vote FOR Items 1, 2 and 3.
(Continued and to be SIGNED on the other side)
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- FOLD AND DETACH HERE -
METRO-GOLDWYN-MAYER INC.
Annual Meeting of Stockholders
Thursday, May 4, 2000
10:00 a.m.
The Regent Beverly Wilshire
9500 Wilshire Boulevard
Beverly Hills, California
ADMISSION TICKET
This ticket must be presented at the door for entrance to the meeting.
<PAGE>
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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.
1. Election of Directors
FOR all nominees named
(except as marked Withhold Authority
to the contrary) for all nominees named
[_] [_]
Names of Nominees: James D. Aljian, Francis Ford Coppola, Willie D. Davis,
Alexander M. Haig, Jr., Kirk Kerkorian, Frank G. Mancuso, Christopher J.
McGurk, Alex Yemenidjian, Jerome B. York.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the following line.)
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2. Approval of 2000 Employee Incentive Plan
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Ratification of the selection of independent auditors
FOR AGAINST ABSTAIN
[_] [_] [_]
I plan to attend the meeting [_]
Dated:__________________________________________________________________ , 2000
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Signature
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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.
<PAGE>
ADMISSION TICKET
Annual Meeting
of
Metro-Goldwyn-Mayer Inc.
Thursday, May 4, 2000
10:00 a.m.
The Regent Beverly Wilshire
9500 Wilshire Boulevard
Beverly Hills, California
Agenda
1. To elect a Board of Directors.
2. To consider and act upon the approval and
ratification of the 2000 Employee Incentive
Plan.
3. To consider and act upon the ratification of
the selection of Arthur Andersen LLP as
independent auditors of Metro-Goldwyn-Mayer
Inc. for the fiscal year ending December 31,
2000.
4. To transact such other business as may
properly come before the meeting or any
adjournments thereof.
