<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
METROMEDIA FIBER NETWORK, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
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:
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------------------------------
2) Form, Schedule or Registration No.:
-----------------------------------------------------------------------
3) Filing Party:
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4) Date Filed:
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<PAGE>
[LOGO]
C/O METROMEDIA FIBER NETWORK SERVICES, INC.
ONE NORTH LEXINGTON AVENUE
WHITE PLAINS, NEW YORK, NEW YORK 10601
April 15, 1998
Dear Stockholder:
On behalf of the Board of Directors, I wish to extend to you a cordial
invitation to attend the Annual Meeting of Stockholders of Metromedia Fiber
Network, Inc. ("MFN"), which will be held in the Concourse Level at 1285 Avenue
of the Americas, New York, New York 10019 at 10:00 a.m., New York time, on May
18, 1998. I look forward to greeting as many stockholders as possible at the
Annual Meeting.
At the Annual Meeting, holders of Class A Common Stock will be asked to vote
on proposals to elect three Class A Directors to serve for a term of one year
and until their successors are elected and qualified, and all stockholders will
be asked to vote on proposals to adopt the Metromedia Fiber Network, Inc. 1998
Incentive Stock Plan, to ratify the selection of Ernst & Young LLP as MFN's
independent accountants for the year ending December 31, 1998 and to consider
and vote upon any other matters that may properly come before the Annual
Meeting.
It is important that your shares be represented at the Annual Meeting,
whether or not you are able to attend. Accordingly, you are urged to sign, date
and mail the enclosed proxy promptly. If you later decide to attend the Annual
Meeting, you may revoke your proxy and vote in person.
Thank you.
Sincerely,
Stephen A. Garofalo
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
METROMEDIA FIBER NETWORK SERVICES, INC.
- --------------------------------------------------------------------------------
One North Lexington Ave., 4th Floor, White Plains, NY 10601 Phone:
914.421.6700 Fax: 914.421.6777
<PAGE>
METROMEDIA FIBER NETWORK, INC.
------------------------
C/O METROMEDIA FIBER NETWORK SERVICES, INC.
ONE NORTH LEXINGTON AVENUE
WHITE PLAINS, NEW YORK 10601
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 1998
------------------------
TO THE STOCKHOLDERS OF
METROMEDIA FIBER NETWORK, INC.:
NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders (the "Annual
Meeting") of Metromedia Fiber Network, Inc., a Delaware corporation ("MFN"),
will be held on Monday, May 18, 1998, at 10:00 a.m., local time, in the
Concourse Level, 1285 Avenue of the Americas, New York, New York 10019.
At the Annual Meeting, holders of the Class A Common Stock, par value $.01
per share (the "Class A Common Stock"), will be asked to consider and vote as a
separate class upon the election of three members to MFN's Board of Directors to
serve a one-year term as Class A Directors (Proposal 1).
At the Annual Meeting, holders of Class A Common Stock together with holders
of Class B Common Stock, par value $.01 per share, will be asked to consider and
vote as a single class upon the adoption of the Metromedia Fiber Network, Inc.
1998 Incentive Stock Plan (Proposal 2) and the ratification of the selection of
Ernst & Young LLP as MFN's independent accountants for the year ending December
31, 1998 (Proposal 3) and to vote upon the transaction of such other business as
may properly come before the Annual Meeting or any adjournment thereof. The
Board of Directors is not aware of any other business that will be presented for
consideration at the Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" PROPOSALS NO. 1, 2 AND 3 TO BE PRESENTED TO MFN STOCKHOLDERS AT THE MFN
ANNUAL MEETING.
Only stockholders of record at the close of business on April 1, 1998 (the
"Record Date") will be entitled to notice of and to vote at the Annual Meeting
or any adjournment thereof. The Annual Meeting may be adjourned from time to
time without notice other than by announcement at the Annual Meeting. A list of
stockholders entitled to vote at the Annual Meeting will be available for
inspection by any stockholder, for any reason germane to the Annual Meeting,
during ordinary business hours during the ten days prior to the Annual Meeting
at 110 East 42nd Street, New York, New York 10017.
By Order of the Board of Directors,
Arnold L. Wadler
SECRETARY
White Plains, New York
April 15, 1998
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING REGARDLESS OF
THE NUMBER OF SHARES YOU HOLD IN ORDER THAT A QUORUM MAY BE ASSURED, WHETHER OR
NOT YOU PLAN TO BE PRESENT AT THE MEETING IN PERSON. PLEASE COMPLETE, SIGN, DATE
AND MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING RETURN ENVELOPE (TO WHICH NO
POSTAGE NEED BE AFFIXED BY THE SENDER IF MAILED WITHIN THE UNITED STATES). IF
YOU RECEIVE MORE THAN ONE PROXY BECAUSE YOUR SHARES ARE REGISTERED IN DIFFERENT
NAMES OR ADDRESSES, EACH SUCH PROXY SHOULD BE SIGNED AND RETURNED TO ASSURE THAT
ALL OF YOUR SHARES WILL BE VOTED. THE PROXY SHOULD BE SIGNED BY ALL REGISTERED
HOLDERS EXACTLY AS THE STOCK IS REGISTERED.
<PAGE>
METROMEDIA FIBER NETWORK, INC.
------------------------
C/O METROMEDIA FIBER NETWORK SERVICES, INC.
ONE NORTH LEXINGTON AVENUE
WHITE PLAINS, NY 10601
------------------------
PROXY STATEMENT
FOR AN ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 1998
------------------------
This Proxy Statement is being furnished to the holders of shares of Class A
common stock, par value $0.01 per share (the "Class A Common Stock") and of
Class B common stock, par value $0.01 per share (the "Class B Common Stock" and
together with the Class A Common Stock, the "Common Stock"), of Metromedia Fiber
Network, Inc., a Delaware corporation ("MFN" or the "Company") in connection
with the solicitation of proxies by the Board of Directors of MFN for use at the
Annual Meeting of the Stockholders of MFN to be held at 10:00 a.m. on May 18,
1998 in the Concourse Level, 1285 Avenue of the Americas, New York, New York
10019 (the "Annual Meeting"), and any adjournments of the Meeting. This Proxy
Statement and the accompanying proxy card, along with the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 are being mailed to the
stockholders of the Company on or about April 15, 1998.
INFORMATION REGARDING THE ANNUAL MEETING
GENERAL. This Proxy Statement is being furnished to holders of Common Stock
in connection with the solicitation of proxies by the Board of Directors of MFN
for use at the Annual Meeting, and any adjournments thereof. Each copy of this
Proxy Statement being mailed or delivered to MFN Stockholders is accompanied by
a MFN proxy card and the Notice of Annual Meeting of Stockholders of MFN. MFN's
Annual Report to Stockholders and its Annual Report on Form 10-K, including
financial statements for the year ended December 31, 1997, accompanies but does
not constitute part of this Proxy Statement.
PROPOSALS. The Annual Meeting is scheduled to be held in the Concourse
Level at 1285 Avenue of the Americas, New York, New York 10019, on May 18, 1998,
beginning at 10:00 a.m., local time. At the Annual Meeting, holders of the Class
A Common Stock of MFN will be asked to consider and vote as a separate class
upon the election of three members to MFN's Board of Directors to serve a
one-year term as Class A Directors (Proposal 1), and holders of the Class A
Common Stock together with holders of the Class B Common Stock will be asked to
consider and vote as a single class upon the adoption of the Metromedia Fiber
Network, Inc. 1998 Incentive Stock Plan (Proposal 2) and the ratification of the
selection of Ernst & Young LLP as MFN's independent accountants for the year
ending December 31, 1998 (Proposal 3) and to vote upon such other matters as may
properly come before the Annual Meeting.
The Board of Directors of MFN knows of no business that will be presented
for consideration at the Annual Meeting other than the matters described in this
Proxy Statement.
PROXIES. All properly executed proxy cards delivered pursuant to this
solicitation and not revoked will be voted at the Annual Meeting in accordance
with the directions given. In voting by proxy with regard to the election of
directors, MFN Stockholders may vote in favor of all nominees, withhold their
votes as to all nominees or withhold their votes as to specific nominees. With
regard to other proposals, MFN Stockholders may vote in favor of each proposal
or against each proposal, or in favor of some proposals and against others, or
may abstain from voting on any or all proposals. Stockholders should specify
their respective choices on the accompanying proxy card. If no specific
instructions are given with regard to the matters to be voted upon, the shares
of Class A Common Stock represented by a signed proxy card will be voted "FOR"
Proposal 1 and the shares of Common Stock represented by a signed proxy card
will be voted
<PAGE>
"FOR" Proposals 2 and 3, each as listed on the proxy card. If any other matters
properly come before the Annual Meeting, the persons named as proxies will vote
upon such matters according to their judgment.
All proxy cards delivered pursuant to this solicitation are revocable at any
time prior to the Annual Meeting at the option of the persons executing them by
giving written notice to the Secretary of MFN, by delivering a later dated proxy
card or by voting in person at the Annual Meeting. Attendance at the Annual
Meeting will not in itself constitute revocation of a proxy. All written notices
of revocation and other communications with respect to revocations of proxies
should be addressed to: Metromedia Fiber Network, Inc., c/o Metromedia Company,
One Meadowlands Plaza, East Rutherford, New Jersey 07073, Attention: Arnold L.
Wadler, Secretary.
Proxies will initially be solicited by MFN by mail, but directors, officers
and selected employees may solicit proxies from stockholders personally or by
telephone, facsimile or other forms of communication. Such directors, officers
and employees will not receive any additional compensation for such
solicitation. MFN also will request brokerage houses, nominees, fiduciaries and
other custodians to forward soliciting materials to beneficial owners, and MFN
will reimburse such persons for their reasonable expenses incurred in doing so.
All expenses incurred in connection with the solicitation of proxies will be
borne by MFN.
RECORD DATE; QUORUM. Only holders of record of Common Stock as of the close
of business on April 1, 1998 (the "Record Date") will be entitled to notice of
and to vote at the Annual Meeting (such holders are referred to herein as the
"Stockholders"). As of the Record Date, there were 18,896,899 shares of Class A
Common Stock outstanding and entitled to vote at the Annual Meeting, held by
approximately 102 stockholders of record, which number includes nominees for an
indeterminable number of beneficial owners, with each share entitled to one
vote, and 4,221,159 shares of Class B Common Stock outstanding and entitled to
vote at the Annual Meeting held by two stockholders of record, with each share
entitled to ten votes. The presence, in person or by proxy, of one-third of the
total votes of the outstanding shares of Common Stock is necessary to constitute
a quorum at the Annual Meeting. Except with respect to broker non-votes, the
consequences of which are described below, shares of Common Stock represented by
proxies marked "ABSTAIN" for any proposal presented at the Annual Meeting and
shares of Common Stock held by persons in attendance at the Annual Meeting who
abstain from voting on any such proposal will be counted for purposes of
determining the presence of a quorum but shall not be voted for or against such
proposal. Because of the vote required (see below) to approve the proposals
presented at the Annual Meeting, abstentions will have the effect of a vote
against such proposal (other than Proposal 1). Shares as to which a broker
indicates it has no discretion to vote and which are not voted will be
considered not present at such meeting for purposes of proposals presented at
the Annual Meeting. Because of the vote required to approve the proposals at the
Annual Meeting, broker non-votes will have no effect on the outcome and the vote
on any of such proposals. With respect to the election of directors, abstentions
and broker non-votes will be disregarded and will have no effect on the vote.
VOTE REQUIRED. The affirmative vote of the holders of a plurality of shares
of Class A Common Stock, voting as a separate class, present in person or
represented by proxy at the Annual Meeting will be required to elect each of the
Class A Directors to MFN's Board of Directors. The affirmative vote of the
holders of a majority of shares of Class A Common Stock and Class B Common
Stock, voting as a single class, present in person or represented by proxy at
the Annual Meeting, will be required to approve and adopt each of the matters
identified in this Proxy Statement as being presented to holders of shares of
Common Stock at the Annual Meeting, each of which will be voted upon separately
at the Annual Meeting. In voting on each such matter, holders of Class A Common
Stock are entitled to one vote per share and holders of Class B Common Stock are
entitled to ten votes per share. The two record holders of the outstanding
shares of Class B Common Stock have indicated that they intend to vote in favor
of Proposals 2 and 3, thereby assuring their approval.
2
<PAGE>
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, certain information
regarding the beneficial ownership of the Company's voting stock by (i) each of
the Company's directors and director nominees, (ii) each person believed by the
Company to own beneficially more than 5% of its outstanding voting stock, (iii)
each executive officer named in the Summary Compensation Table under "Executive
Compensation" and (iv) all executive officers and directors of the Company as a
group. In accordance with the rules promulgated by the Commission, such
ownership includes shares currently owned as well as shares which the named
person has the right to acquire beneficial ownership of within 60 days,
including, but not limited to, shares which the named person has the right to
acquire through the exercise of any option, warrant or right, or through the
conversion of a security. Accordingly, more than one person may be deemed to be
a beneficial owner of the same securities. Except as otherwise indicated, each
stockholder listed below has sole voting and investment power with respect to
shares beneficially owned by such person.
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK(a)
----------------------- -----------------------
<S> <C> <C> <C> <C> <C>
NUMBER PERCENT NUMBER PERCENT PERCENT OF
OF SHARES OF CLASS OF SHARES OF CLASS TOTAL VOTING POWER
---------- ----------- ---------- ----------- ---------------------
Stephen A. Garofalo........................ 5,978,781(b) 31.6% -- -- 9.8%
Metromedia Company......................... -- -- 3,932,756 93.2% 64.3%(l)
Howard M. Finkelstein...................... 1,521,000(c) 8.0% -- -- 2.5%
Peter Sahagen.............................. 1,104,030(d) 5.8% -- -- 1.8%
Vincent A. Galluccio....................... 197,730(e) 1.0% -- -- *
John Mahon................................. 136,890(f) * -- -- *
James Urbelis.............................. 136,890(f) * -- -- *
Silvia Kessel.............................. 63,809(g) * -- -- *
John W. Kluge.............................. 253,500(h) 1.3% 3,932,756(i) 93.2% 64.8%
David Rockefeller.......................... 353,638(j) 1.8% -- -- *
Stuart Subotnick........................... 253,500(h) 1.3% 4,221,159(i) 100.0% 69.5%
Arnold L. Wadler........................... 76,918(g) * -- -- *
Leonard White.............................. 5,750(k) * -- -- *
All Directors and Executive Officers as a
group.................................... 8,978,406 47.5% 4,221,159 100.0% 83.8%
</TABLE>
- ------------------------
* less than 1.0%
(a) The shares of Class B Common Stock are convertible into shares of Class A
Common Stock at the rate of one share of Class A Common Stock for each share
of Class B Common Stock and the holders of shares of Class B Common Stock
are entitled to 10 votes per share.
(b) Includes presently exercisable options to purchase 380,250 shares of Class A
Common Stock at an exercise price of $1.97 per share and 291,842 shares of
Class A Common Stock owned by members of Mr. Garofalo's family to which Mr.
Garofalo has been granted a proxy to vote. Mr. Garofalo's address is 1 North
Lexington Avenue, White Plains, New York, New York 10601.
(c) Represents presently exercisable options to purchase 1,521,000 shares of
Class A Common Stock at an exercise price of $1.97 per share. Mr.
Finkelstein's address is 1 North Lexington Avenue, White Plains, New York,
New York 10601.
(d) All of such shares are owned by an entity controlled by Mr. Sahagen. Mr.
Sahagen's address is 3590 South Ocean Blvd., South Palm Beach, FL 33480.
3
<PAGE>
(e) Represents presently exercisable options to purchase 197,730 shares of Class
A Common Stock at an exercise price of $1.97 per share.
(f) Represents presently exercisable options to purchase 136,890 shares of Class
A Common Stock at an exercise price of $1.97 per share.
(g) Includes 50,700 presently exercisable options to acquire shares of Class A
Common Stock at an exercise price of $1.97 held by each of Ms. Kessel and
Mr. Wadler. Does not include shares owned by Metromedia. Ms. Kessel and Mr.
Wadler are employed by Metromedia and disclaim beneficial ownership of the
shares owned by Metromedia.
(h) Consists of 253,500 presently exercisable options to acquire shares of Class
A Common Stock at an exercise price of $1.97 held by each of Mr. Kluge and
Mr. Subotnick. Mr. Kluge's address is 215 East 67th Street, New York, NY
10021 and Mr. Subotnick's address is 215 East 67th Street, New York, NY
10021.
(i) Includes 3,932,756 shares owned by Metromedia. Messrs. Kluge and Subotnick,
Directors of the Company, are general partners of Metromedia.
(j) Represents 348,638 shares owned by DR & Descendants Partnership, of which
Mr. Rockefeller is a partner and for which he exercises voting and
investment power and presently exercisable options to purchase 5,000 shares
of Class A Common Stock at an exercise price of $16.00. Mr. Rockefeller
disclaims actual beneficial ownership of shares owned by DR & Descendants
Partnership except as to shares attributable to his proportionate interest
in the Partnership.
(k) Includes 5,000 presently exercisable options to acquire shares of Class A
Common Stock at an exercise price of $16.00.
(l) Metromedia Company's address is One Meadowlands Plaza, East Rutherford, NJ
07073
4
<PAGE>
DIRECTORS AND OFFICERS
The following table sets forth certain information regarding the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE OFFICE OR POSITION HELD
- ------------------------------------------ --- -------------------------------------------
<S> <C> <C>
Stephen A. Garofalo....................... 47 Chairman of the Board and Chief Executive
Officer
Howard M. Finkelstein..................... 44 President, Chief Operating Officer and
Director
Vincent A. Galluccio...................... 52 Senior Vice President and Director
Gerard Benedetto.......................... 41 Vice President--Chief Financial Officer
Dennis E. Codlin.......................... 53 Vice President--Legal Affairs and Assistant
Secretary
John S. Mahon............................. 52 Vice President--Network Engineering
John McLeod............................... 40 Vice President--Marketing
Nicholas M. Tanzi......................... 38 Vice President--Sales
James Urbelis............................. 47 Vice President--Easements and Construction
Silvia Kessel............................. 47 Executive Vice President and Director
John W. Kluge............................. 83 Director
David Rockefeller......................... 82 Director
Stuart Subotnick.......................... 55 Director
Arnold L. Wadler.......................... 54 Executive Vice President, General Counsel,
Secretary and Director
Leonard White............................. 58 Director
</TABLE>
DIRECTORS OF MFN
The Board of Directors of MFN presently consists of nine members. Holders of
the Class B Common Stock are entitled to elect 75% of the Board of Directors and
holders of the Class A Common Stock are entitled to vote as a separate class to
elect the remaining directors. Currently six of the nine directors are nominees
of the holders of Class B Common Stock and as a result holders of the Class B
Common Stock are entitled to fill three vacancies on the Board of Directors.
Members of each class of directors will hold office until their successors are
elected and qualified. At each annual meeting of the stockholders of MFN, the
directors shall be elected by a plurality vote of all votes cast at such meeting
entitled to vote for such directors and will hold office for a one-year term.
The Class A Directors, whose term expires at the Annual Meeting are Howard M.
Finkelstein, Stephen A. Garofalo and Vincent A. Gallucio, and the Class B
Directors are Silvia Kessel, John W. Kluge, David Rockefeller, Stuart Subotnick,
Arnold L. Wadler and Leonard White.
For more information regarding each of MFN's directors, including
biographical information, see "PROPOSAL NO. 1--ELECTION OF DIRECTORS."
MEETINGS AND CERTAIN COMMITTEES OF THE BOARD
The Board of Directors held 3 regular meetings and 2 special meetings during
1997. In addition, the Board of Directors took action by unanimous written
consent 10 times in 1997. All directors attended at least 75% of the aggregate
total number of meetings of the Board of Directors and all committees of the
Board of Directors on which they served.
5
<PAGE>
The Board of Directors has delegated certain functions to the following
standing committees:
THE AUDIT COMMITTEE. The Audit Committee is responsible for (a) reviewing
the professional services and independence of MFN's independent auditors and the
scope of the annual external audit recommended by the independent auditors, (b)
ensuring that the scope of the annual external audit is sufficiently
comprehensive, (c) reviewing, in consultation with MFN's independent auditors
and MFN's internal auditors, the plan and results of the annual external audit,
the adequacy of MFN's internal control systems and the results of MFN's internal
audit and (d) reviewing with management and MFN's independent auditors MFN's
annual financial statements, financial reporting practices and the results of
such external audit. The Audit Committee did not meet during 1997. The current
members of the Audit Committee are Ms. Silvia Kessel and Messrs. David
Rockefeller and Leonard White.
THE COMPENSATION COMMITTEE. The Compensation Committee's functions are to
review, approve, recommend and report to the Board of Directors on matters
specifically relating to the compensation of MFN's executive officers and other
key executives and to administer MFN's stock option plans. The Compensation
Committee did not meet during 1997. The current members of the Compensation
Committee are Messrs. Rockefeller and White.
THE NOMINATING COMMITTEE. The Nominating Committee's principal function is
to identify candidates and recommend to the Board of Directors nominees for
membership on the Board of Directors. The Nominating Committee expects normally
to be able to identify from its own resources the names of qualified nominees,
but it will accept from stockholders recommendations of individuals to be
considered as nominees, provided MFN Stockholders follow procedures specified in
MFN's By-laws. These procedures provide that, in order to nominate an individual
to the Board of Directors, a MFN Stockholder must provide timely notice of such
nomination in writing to the Secretary of MFN and a written statement by the
candidate of his or her willingness to serve. Such notice must include the
information required to be disclosed in solicitations for proxies for election
of directors pursuant to Regulation 14A under the Exchange Act, along with the
name, record address, class and number of shares of common stock beneficially
owned by the stockholder giving such notice. To be timely, notice must be
received by MFN not less than 60 days nor more than 90 days prior to the
scheduled date of the annual meeting; provided, however, that if less than 70
days' notice or prior public disclosure of the date of annual meeting is given,
such notice must be received within 10 days following the earlier of (i) public
disclosure by MFN of the date of the annual or special meeting at which
directors are to be elected or (ii) the day on which such notice of the date of
the meeting was mailed. For purposes of this notice requirement, disclosure
shall be deemed to be first made when disclosure of such date of the annual or
special meeting of stockholders is first made in a press release reported by the
Dow Jones News Service, Associated Press or other comparable national news
services, or in a document which has been publicly filed by MFN with the
Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act. Any such
nominations should be submitted in writing to MFN, c/o Metromedia Company, One
Meadowlands Plaza, East Rutherford, New Jersey, 07073, Attention: Secretary. The
Nominating Committee recommends individuals to serve as directors and is
comprised of members who have been elected by the stockholders. The Nominating
Committee did not hold any formal meetings in 1997. The current members of the
Nominating Committee are Arnold L. Wadler, Vincent A. Gallucio and Silvia
Kessel.
COMPENSATION OF DIRECTORS
During 1997, each director of the Company who was not an officer, employee
or affiliate of the Company (the "Non-Employee Directors") received a $20,000
annual retainer plus a separate attendance fee for each meeting of the Board of
Directors or committee of the Board of Directors in which such director
participated. During 1997, the attendance fees were $1,200 for each meeting of
the Board of Directors attended by a Non-Employee Director in person and $500
for each meeting of the Board of Directors in which a Non-Employee Director
participated by conference telephone call. Members of
6
<PAGE>
committees of the Board of Directors are paid $500 for each meeting attended. In
addition, subject to its adoption by the Stockholders, the 1998 Incentive Stock
Plan will entitle any Non-Employee Director who first serves on the Board
subsequent to the adoption of the 1998 Incentive Stock Plan to receive Awards
thereunder with respect to 5,000 shares of Class A Common Stock, each having an
exercise price equal to the fair market value of a share of Class A Common Stock
on the date of grant. Awards to Non-Employee Directors under the 1998 Incentive
Stock Plan will be aggregated with Awards under the 1997 Incentive Stock Plan so
that total Awards under each plan will not exceed 5,000 shares of Class A Common
Stock. For a summary description of the 1998 Incentive Stock Plan, see "PROPOSAL
NO. 2--ADOPTION OF THE METROMEDIA FIBER NETWORK, INC. 1998 INCENTIVE STOCK
PLAN."
Non-Employee Directors are entitled to receive options to purchase 5,000
shares of the Company's Class A Common Stock under the Company's 1997 Incentive
Stock Plan (the "1997 Incentive Stock Plan"). Options to purchase 5,000 shares
of Class A Stock will be granted annually on the day of each annual stockholder
meeting. Each outside director is eligible to receive options to purchase a
maximum of 50,000 shares of Class A Common Stock under the Plan. Under the 1997
Incentive Stock Plan, each Non-Employee Director who was a director of the
Company on October 28, 1997 was granted an option to purchase 5,000 shares of
the Company's Common Stock at an exercise price of $16.00, the price of the
Class A Common Stock on the date of MFN's initial public offering of Class A
Common Stock.
The 1997 Incentive Stock Plan further provides that each person who becomes
a Non-Employee Director of the Company after October 28, 1997 will receive an
option to purchase 5,000 shares of the Company's Class A Common Stock on the day
such director is elected as a director, at an exercise price equal to the
closing price of the Common Stock on the trading day preceding such director's
election. Options granted to these Non-Employee Directors fully vest and become
exercisable as to all 5,000 shares on the date of grant.
In addition, on August 20, 1997, Mr. Kluge and Mr. Subotnick were each
granted options to purchase 253,500 shares of Class A Common Stock at an
exercise price of $1.97 and Mr. Wadler and Ms. Kessel were each granted options
to purchase 50,700 shares of Class A Common Stock at an exercise price of $1.97.
EXECUTIVE OFFICERS
Set forth below is the background of each of the Company's executive
officers other than those who are also directors (for the backgrounds of each of
MFN's directors, including biographical information, see "PROPOSAL NO.
1--ELECTION OF DIRECTORS" below).
GERARD BENEDETTO has been Vice President--Chief Financial Officer since
February, 1998. From July, 1995 to January, 1998, he was Vice President--Chief
Accounting Officer at Metromedia International Telecommunications, Inc. From
October, 1993 to July, 1995 he was Vice President--Chief Financial Officer at
Metromedia Restaurant Group. From February, 1985 to October, 1993, he was Vice
President-- Chief Financial Officer at Metromedia Communications.
DENNIS E. CODLIN has been Vice President of Legal Affairs and Assistant
Secretary since November, 1997. Prior to joining the Company, Mr. Codlin was
employed by Metromedia Company in its Legal Department since 1980, most recently
as Senior Associate General Counsel and Assistant Secretary. Mr. Codlin was also
an Assistant Secretary of Metromedia International Group, Inc.
JOHN S. MAHON has been the Company's Vice President--Network Engineering
since 1994. Prior to joining the Company, Mr. Mahon was employed by NYNEX
(formerly known as New York Telephone Company) from 1965 to 1994 as staff
director for engineering design, construction and maintenance of all
telecommunications infrastructure in New York City.
JOHN MCLEOD has been Vice President--Marketing since June 1997. From October
1995 to June 1997, he served as Vice President--Venture Support at Metromedia
International Telecommunications, Inc.
7
<PAGE>
From January 1994 to October 1995, Mr. McLeod was Vice President--Field Support
at Metromedia Restaurant Group. From September 1986 to January 1994, he was
employed at Metromedia Communications Corporation where his last position was
Vice President and General Manager--National Customer Service Center.
NICHOLAS M. TANZI has been Vice President--Sales since August 1997. From
March 1995 to July 1997, he served as Vice President, Enterprise Networks
Division at Fujitsu Business Communications Systems. From April 1993 to February
1995, Mr. Tanzi was Director of Sales, Eastern Region at Asante Technologies
Inc. Mr. Tanzi was employed in various capacities from November 1979 through
October 1993 at Digital Equipment Corporation.
JAMES URBELIS has been Vice President--Easements and Construction since
March 1993. Mr. Urbelis was formerly employed by F. Garofalo Electric Co., Inc.
as construction manager from 1985 to 1993. Prior to that time he was a civilian
employee of the Army Corps of Engineers engaged in civil works projects.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information on
compensation awarded to, earned by or paid to the Chief Executive Officer and
MFN's four other most highly compensated executive officers whose individual
compensation exceeded $100,000 during the fiscal years ended December 31, 1997
and December 31, 1996 for services rendered in all capacities to MFN and its
subsidiaries. The persons listed in the table below are referred to as the
"Named Executive Officers."
SUMMARY COMPENSATION TABLE
The following table sets forth compensation awarded to, earned by or paid to
the named executive officers for services rendered to MFN and its subsidiaries
during the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
--------------------------
OTHER NUMBER OF ALL
ANNUAL COMPENSATION ANNUAL SECURITIES OTHER
--------------------------------- COMPENSATION UNDERLYING COMPENS.
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) ($)(2) STOCK OPTIONS ($)
- ------------------------------------------- --------- ---------- ---------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Stephen A. Garofalo........................ 1997 295,000 50,000 14,157 380,250(3) --
Chairman and Chief Executive Officer 1996 225,960 -- -- --
Howard M. Finkelstein...................... 1997 196,756 50,000 11,769 1,521,000(5) --
President and Chief Operating Officer(4) 1996 -- -- -- --
Vincent A. Galluccio....................... 1997 181,522 -- -- 272,730(6) --
Senior Vice President 1996 127,087 -- -- --
John Mahon................................. 1997 155,770 -- -- 174,390(7) --
Vice President--Network Engineering(4) 1996 -- -- -- --
Louis Gambino.............................. 1997 155,770 -- -- 52,710(8) --
Former Vice President--Network 1996 -- -- -- --
Operations(4)
</TABLE>
- ------------------------
(1) Bonus amounts for executive officers of the Company for 1997 (other than
Messrs. Garofalo and Finkelstein) will be proposed by the Company's
management and approved by the Compensation Committee of the Board of
Directors during the second quarter of 1998. Such bonuses will not exceed
20% of such officers' respective base salaries.
(2) Includes amounts paid as automobile allowance and as insurance premiums.
(3) Includes presently exercisable options to purchase 380,250 shares of Class A
Common Stock at an exercise price of $1.97 per share.
(4) Compensation information for 1996 is omitted because aggregate compensation
during such fiscal year was less than $100,000.
(5) Includes presently exercisable options to purchase 1,521,000 shares of Class
A Common Stock at an exercise price of $1.97 per share.
8
<PAGE>
(6) Includes presently exercisable options to purchase 197,730 shares of Class A
Common Stock at an exercise price of $1.97 per share and options to purchase
75,000 shares of Class A Common Stock at an exercise price of $16.00 per
share that will become exercisable ratably over a four year period
commencing 10/28/98.
(7) Includes presently exercisable options to purchase 136,890 shares of Class A
Common Stock at an exercise price of $1.97 per share and options to purchase
37,500 shares of Class A Common Stock at an exercise price of $16.00 per
share that will become exercisable ratably over a four year period
commencing 10/28/98.
(8) Includes presently exercisable options to purchase 15,210 shares of Class A
Common Stock at an exercise price of $1.97 per share and options to purchase
37,500 shares of Class A Common Stock at an exercise price of $16.00 per
share that will become exercisable ratably over a four year period
commencing 10/28/98.
During 1997, Mr. Wadler and Ms. Kessel, each of whom serves as an executive
officer of the Company, were employed and paid by Metromedia pursuant to a
management agreement with Metromedia dated as of January 2, 1998 (the
"Management Agreement"). See "Certain Relationships and Related
Transactions--Recent Transactions--Management Agreement." No other amounts were
paid by the Company to such named executive officers during 1997.
OPTION/SAR GRANTS
DURING THE YEAR ENDED DECEMBER 31, 1997
The following table sets forth individual grants of stock options by MFN
pursuant to the Company's 1997 Incentive Stock Plan or otherwise to the Named
Executive Officers during the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF GRANT
SECURITIES % OF TOTAL EXERCISE DATE
UNDERLYING GRANTED TO EMPLOYEES PRICE EXPIRATION VALUATION
NAME OPTIONS GRANTED (#) IN FISCAL YEAR ($/SH) DATE ($)(1)
- ------------------------------- ------------------- ----------------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Stephen A. Garofalo............ 380,250 12.3 1.97 1/6/07 513,337.50
Howard M. Finkelstein.......... 1,521,000 49.1 1.97 4/30/07 2,053,350.00
Vincent A. Gallucio............ 76,050 2.5 1.97 1/6/07 102,667.50
121,680 3.9 1.97 4/21/07 164,268.00
75,000 2.4 16.00 10/28/07 824,250.00
Louis Gambino.................. 15,210 .5 1.97 9/9/07 20,533.50
37,500 1.2 16.00 10/28/07 412,125.00
John Mahon..................... 76,050 2.5 1.97 1/6/07 102,667.50
60,840 2.0 1.97 4/21/07 82,134.00
37,500 1.2 16.00 10/28/07 412,125.00
</TABLE>
- ------------------------
(1) The modified Black-Scholes method of option valuation has been used to
determine grant date present value. The assumptions used in the
Black-Scholes option valuation calculations are (i) an estimated future
annual stock price volatility of 50%; (ii) a ten-year strip rate of 5.92%;
(iii) a future dividend yield of 0%; and (iv) an expected life of ten years.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN 1997
AND FISCAL YEAR-END OPTION AND SAR VALUES
The following table sets forth information concerning the exercise of
options by the Named Executive Officers during the 1997 fiscal year and the
number of unexercised options and SARs held by such officers as of the end of
the 1997 fiscal year.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES VALUE OPTIONS AND SARS IN THE MONEY OPTIONS/SARS
ACQUIRED REALIZED AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
NAME ON EXERCISE ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ------------------------------ --------------- ----------- ----------------------- --------------------------
<S> <C> <C> <C> <C>
Stephen A. Garofalo........... -- -- 380,250/0 6,321,656.25/0
Howard M. Finkelstein......... -- -- 1,521,000/0 25,265,625/0
Vincent A. Gallucio........... -- -- 197,730/75,000 3,287,261.25/1,246,875
John Mahon.................... -- -- 136,890/37,500 2,275,796.25/623,437.50
Louis Gambino................. -- -- 15,210/37,500 252,866.25/623,437.50
</TABLE>
- ------------------------
(1) Calculated based on a closing price for the Class A Common Stock of $16.625
reported by the Nasdaq National Market on December 31, 1997.
10
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
HISTORICAL TRANSACTIONS
As of December 31, 1996, the Company had outstanding approximately $4.9
million of indebtedness due to US ONE Communications of New York, Inc. ("US
ONE"), a lessee of the Company's dark fiber, which was personally guaranteed by
Stephen A. Garofalo. On April 30, 1997, upon consummation of the Metromedia
Investment (as defined below), $1,370,000 of the indebtedness was repaid in cash
from proceeds of the Metromedia Investment while the remainder was converted
into a prepaid lease payment to the Company. Therefore, there is no such
indebtedness currently outstanding.
In February, 1996, the Company entered into a settlement agreement (the
"Katz Settlement Agreement") with Howard Katz, the Company's former Chief
Financial Officer, and Realprop Capital Corp. ("Realprop"), an affiliate of Mr.
Katz, in connection with the termination of Mr. Katz's employment with the
Company. Pursuant to the Katz Settlement Agreement, the Company agreed to pay
Mr. Katz approximately $940,000 over a period of five years, including $90,000
per year pursuant to a consulting agreement (the "Consulting Agreement"). Under
the Consulting Agreement, Realprop was to provide consulting services relating
to Katz's knowledge and understanding of transactions and the conduct of
business in which the Company engaged and to such other areas of consultation as
Katz and the Company mutually agreed upon. On November 12, 1996, Howard Katz,
Lauren Katz, Stephen Katz and Realprop (collectively, the "Katz Group") entered
into an agreement (the "Katz Purchase Agreement") with Peter Sahagen, at the
time Acting Vice Chairman--Finance of the Company, pursuant to which Mr. Sahagen
was granted the right to purchase an aggregate of 264,631 shares of Class A
Common Stock and an option to purchase warrants for the purchase of 207,883
shares of Class A Common Stock (collectively, the "Katz Securities") for an
aggregate purchase price of $640,000. In conjunction with the Katz Purchase
Agreement, in a letter agreement dated December 10, 1996, Howard Katz and
Realprop Capital Corp. agreed to release the Company from all liabilities and
obligations arising out of the Katz Settlement Agreement, and to reduce the term
of the $90,000 per year Consulting Agreement from five years to three years. On
February 11, 1997, Mr. Sahagen entered into a letter agreement with the Company
acknowledging that he was acting as nominee for the Company with respect to the
Katz Purchase Agreement and assigned to the Company all of his rights, title and
interest in and to the Katz Purchase Agreement. The Company agreed to reimburse
Mr. Sahagen for $25,000 in payments made to Mr. Katz for extending Mr. Sahagen's
right to purchase the Katz Securities. On February 11, 1997, the Company entered
into an agreement with the Katz Group, pursuant to which the Company purchased
the Katz Securities for $640,000 and confirmed that the Consulting Agreement may
be terminated by the Company after three years of its term had concluded. The
purchase price was funded with a portion of the proceeds of the Metromedia Loan
(as described below). In March, 1998, the Company entered into an Amendment,
Settlement and Release Agreement with the Katz Group and Evelyn Katz in
connection with the foregoing. Pursuant to the Amendment, Settlement and Release
Agreement, the Company issued to Realprop options to acquire 90,566 shares of
Class A Common Stock and paid an additional purchase price of $400,000 to
Realprop in connection with the purchase of the Katz Securities.
On April 15, 1996, the Company entered into an employment agreement with
Gerald Vento pursuant to which Mr. Vento would serve as Chief Executive Officer
of the Company. On the same day, the Company entered into a stock purchase
agreement and a consulting agreement with Vento & Company of New York, LLC
("VCNY"). Pursuant to the stock purchase agreement, the Company issued 1,521,000
shares of Class A Common Stock to VCNY as consideration for prior services
provided by VCNY. On October 9, 1996, the Company entered into a settlement
agreement with Mr. Vento and VCNY. Pursuant to such settlement agreement, (i)
the Company and Mr. Vento agreed to terminate Mr. Vento's employment agreement,
(ii) VCNY agreed to sell to Stephen A. Garofalo 1,368,900 shares of Class A
Common Stock (the "Vento Shares") and (iii) the Company agreed to pay $112,500
to VCNY on behalf of Mr. Vento. On January 3, 1997, Mr. Garofalo assigned his
right to purchase the Vento Shares to
11
<PAGE>
Mr. Sahagen, who together with other parties on January 13, 1997 purchased the
Vento Shares for $425,000.
On October 28, 1996, the Knobel 1995 Children's Investment Trust (the
"Knobel Trust") granted to Stephen A. Garofalo an option to purchase 399,889
shares of Class A Common Stock of the Company for an aggregate purchase price of
$500,000. By letter dated December 3, 1996, the option was amended to reduce the
number of option shares to 323,839. The option was thereafter assigned by Mr.
Garofalo to the Company. On February 11, 1997, the Company exercised the option
by payment of the sum of $500,000 to the Knobel Trust. Payment of such amount
was funded with a portion of the proceeds of the Metromedia Loan.
On February 11, 1997, the Company entered into an agreement (the "Sahagen
Agreement") with Mr. Sahagen. Pursuant to the Sahagen Agreement, (i) the Company
agreed to pay Mr. Sahagen a fee of $250,000 upon an equity investment in the
Company of at least $10 million, in full and complete payment for all services
rendered by Mr. Sahagen in his capacity as Acting Vice Chairman--Finance of the
Company and in facilitating the Metromedia Investment and for any fees or
compensation due to Mr. Sahagen pursuant to any prior agreements with the
Company, (ii) Mr. Sahagen agreed to release the Company from any claims against
the Company, subject to payments required by the Sahagen Agreement, (iii) the
Company agreed to designate Mr. Sahagen or a suitable designee selected by Mr.
Sahagen as a Director of the Company for a term of six months and (iv) the
Company granted Mr. Sahagen certain "piggyback" registration rights. In
connection with the Metromedia Investment, the Company paid the $250,000 fee to
Mr. Sahagen.
On December 13, 1996, the Company issued and sold to Penny Lane Partners,
L.P. ("Penny Lane"), for aggregate cash consideration of $2,025,000, (i) 150,000
shares of 10% cumulative convertible preferred stock (the "Series A Preferred
Stock") bearing dividends at a rate of $1.35 per share per annum, (ii) warrants
to purchase 114,075 shares of Class A Common Stock at an exercise price of $4.93
per share (the "Penny Lane Warrants") and (iii) a contingent stock subscription
warrant to purchase a number of shares of Class A Common Stock (such number to
be determined based on certain future events) at an exercise price of $0.02 per
share (the "Contingent Warrants"). In connection with the Metromedia Investment,
Penny Lane agreed to permit the Series A Preferred Stock and the Contingent
Warrants to be redeemed at an aggregate redemption price of $2,115,000 (which
includes accrued but unpaid dividends on the Series A Preferred Stock) and in
connection therewith the number of shares underlying the Penny Lane Warrants was
increased from 114,075 to 228,150.
RECENT TRANSACTIONS
METROMEDIA INVESTMENT. On February 10, 1997, Metromedia agreed to loan
$2,000,000 to the Company. See "Principal Stockholders." Pursuant to an
agreement dated March 6, 1997, Metromedia agreed to loan to the Company up to an
additional $6,000,000, subject to certain conditions (together with the loan on
February 10, the "Metromedia Loan"). On April 30, 1997, the Metromedia Loan was
repaid with a portion of the proceeds from the Metromedia Investment. The
Metromedia Loan was funded in two installments: (i) $1,140,000 on February 10,
1997 and (ii) $860,000 on February 14, 1997, and provided for a revolving loan
of up to an additional $6,000,000. The Metromedia Loan was scheduled to mature
on August 31, 1997 and bore interest at the prime rate announced by The Chase
Manhattan Bank. The proceeds from the first installment of the Metromedia Loan
were used to fund an escrow account which repurchased on behalf of the Company
588,470 shares of Class A Common Stock and warrants to purchase 207,883 shares
of Class A Common Stock (the "Repurchased Securities"). Pursuant to an escrow
arrangement, the Repurchased Securities were pledged to Metromedia as security
for the Metromedia Loan. The proceeds from the other installments of the
Metromedia Loan were used for working capital. On April 30, 1997, the Company
entered into an agreement (the "Metromedia Agreement"), pursuant to which the
Company sold to Metromedia, Mr. Subotnick, Mr. Wadler and Ms. Kessel shares of
the Series B Convertible Preferred Stock, par value $.01 per share (the "Series
B Preferred Stock") (which constituted
12
<PAGE>
100% of such series), for $32,500,000. The shares of the Series B Preferred
Stock were exchanged for 4,221,159 shares of Class B Common Stock pursuant to
the Series B Reclassification (as defined below). The proceeds from this
transaction were used to redeem the Series A Preferred Stock and Contingent
Warrants ($2,115,000), to repay the Metromedia Loan and accrued interest thereon
($4,058,126), to repay indebtedness to US ONE ($1,370,000), to repay
indebtedness to Sterling Capital LLC ("Sterling") ($555,000), and the balance
for working capital. Upon repayment of the Metromedia Loan, the Repurchased
Shares were released from escrow and delivered to the Company.
METROMEDIA LEASE. In March 1997, the Company entered into an agreement to
lease approximately 5,300 square feet of office space in Manhattan from an
affiliate of Metromedia. The lease commenced on April 1, 1997. Aggregate monthly
rent payments are approximately $127,800 for the one year term of the lease. In
June 1997, the Company entered into another agreement with the same affiliate of
Metromedia to lease approximately 1,146 additional square feet of office space
in the same building. The lease commenced on June 20, 1997. Aggregate monthly
rent payments are approximately $27,504 for the one year term of the lease. The
Company believes that the terms of the leases are fair to the Company and
comparable to those which have been obtained in arm's-length negotiations with
unaffiliated third parties. In September 1997, the Metromedia affiliate disposed
of its interest in this office building.
TRADEMARK LICENSE AGREEMENT. MFN is a party to a license agreement with
Metromedia (the "Metromedia License Agreement"), pursuant to which Metromedia
has granted a non-exclusive, non-transferable, non-assignable right and license,
without the right to grant sublicenses, to use the trade name, trademark and
corporate name "Metromedia" in the United States and worldwide, royalty-free for
a term of 10 years. The Metromedia License Agreement can be terminated by
Metromedia upon one month's prior written notice in the event that (i)
Metromedia or its affiliates own less than 20% of the Common Stock; (ii) a
Change in Control of MFN (as defined below) occurs; or (iii) any of the stock or
all or substantially all of the assets of any of the subsidiaries of MFN are
sold or transferred, in which case, the Metromedia License Agreement shall
terminate with respect to such subsidiary. A Change in Control of MFN is defined
as (a) a transaction in which a person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act) not in existence at the time of the execution of
the Metromedia License Agreement becomes the beneficial owner of stock entitling
such person or group to exercise 50% or more of the combined voting power of all
classes of stock of MFN; (b) a change in the composition of MFN's Board of
Directors whereby a majority of the members thereof are not directors serving on
the Board at the time of the Metromedia License Agreement or any person
succeeding such director who was recommended or elected by such directors; (c) a
reorganization, merger or consolidation where following consummation thereof,
Metromedia would hold less than 20% of the combined voting power of all classes
of MFN stock; (d) a sale or other disposition of all or substantially all of the
assets of MFN; or (e) any transaction the result of which would be that the
Common Stock would not be required to be registered under the Exchange Act and
the holders of Common Stock would not receive common stock of the survivor to
the transaction which is required to be registered under the Exchange Act.
In addition, Metromedia has reserved the right to terminate the Metromedia
License Agreement in its entirety immediately upon written notice to MFN if, in
Metromedia's sole judgment, MFN's continued use of "Metromedia" as a trade name
would jeopardize or be detrimental to the good will and reputation of
Metromedia.
Pursuant to the Metromedia License Agreement, MFN has agreed to indemnify
and hold harmless Metromedia against any and all losses, claims, suits, actions,
proceedings, investigations, judgments, deficiencies, damages, settlements,
liabilities and reasonable legal expenses (and other expenses related thereto)
arising in connection with the Metromedia License Agreement.
MODIFICATION AGREEMENT. On October 28, 1997, the Company entered into a
Modification Agreement with Metromedia, Mr. Wadler, Ms. Kessel and Mr. Garofalo
pursuant to which the Metromedia Agreement was modified and Metromedia, Mr.
Wadler, Ms. Kessel and Mr. Garofalo agreed to vote all of their
13
<PAGE>
shares of Series B Preferred Stock, Common Stock and Class A Common Stock to
approve of the adoption of the Company's Amended and Restated Certificate of
Incorporation, the reclassification of the Common Stock into Class A Common
Stock and of the Series B Preferred Stock into Class B Common Stock and the
reverse stock-split of shares of the Class A Common Stock and shares of the
Class B Common Stock, as more fully described below.
SHARE RECLASSIFICATION AND EXCHANGES. On September 23, 1997, in connection
with MFN's initial public offering of Class A Common Stock, the Company approved
of a reverse stock split pursuant to which each share of the old common stock,
par value $.01 per share, was converted into .507 shares of the old common
stock. On October 28, 1997, the Company approved of two share exchanges pursuant
to which 9,564,940 shares of the old common stock, par value $.01 per share,
were exchanged for the same number of shares of Class A Common Stock and a total
of 8,403.25 shares of the Series B Convertible Preferred Stock, par value $.01
per share of the Company held by Metromedia Company, Stuart Subotnick, Arnold
Wadler and Silvia Kessel were exchanged for 4,260,486 shares of the Company's
Class B Common Stock (the "Series B Reclassification"). Messrs. Kluge, Subotnick
and Wadler and Ms. Kessel are directors of the Company and Messrs. Kluge and
Subotnick are general partners of Metromedia. Immediately thereafter, Mr. Wadler
and Ms. Kessel converted an aggregate of 39,327 shares of Class B Common Stock
into an equivalent number of shares of Class A Common Stock. These exchanges
were exempt from registration under the Securities Act of 1933, as amended, by
virtue of Section 3(a)(9) thereof.
MANAGEMENT AGREEMENT. The Company is a party to the Management Agreement
pursuant to which Metromedia provides the Company with consultation and advisory
services relating to legal matters, insurance, personnel and other corporate
policies, cash management, internal audit and finance, taxes, benefit plans and
other services as may be reasonably requested by the Company. The Management
Agreement terminates on December 31, 1998, and is automatically renewed for
successive one year terms unless either party terminates upon 60 days prior
written notice. The management fee under the Management Agreement is $500,000
per year, payable monthly at a rate of $41,667 per month. The Company is also
obligated to reimburse Metromedia all its out-of-pocket costs and expenses
incurred and advances paid by Metromedia in connection with the Management
Agreement. Pursuant to the Management Agreement, the Company has agreed to
indemnify and hold Metromedia harmless from and against any and all damages,
liabilities, losses, claims, actions, suits, proceedings, fees, costs or
expenses (including reasonable attorneys' fees and other costs and expenses
incident to any suit, proceeding or investigation of any kind) imposed on,
incurred by or asserted against Metromedia in connection with the Management
Agreement. In fiscal 1997, Metromedia received no money for its out-of-pocket
costs and expenses or for interest on advances extended by it to the Company
pursuant to the Management Agreement.
CERTAIN AGREEMENTS REGARDING EMPLOYMENT
The Company has entered into employment agreements with Messrs. Garofalo and
Finkelstein.
GAROFALO EMPLOYMENT AGREEMENT. Mr. Garofalo's employment agreement, dated
as of February 26, 1997, has a five year term and provides for a base salary of
$295,000 for the first year, $335,000 for the second year, $375,000 for the
third year, $415,000 for the fourth year and $455,000 for the fifth year. Mr.
Garofalo is also entitled to receive an annual incentive bonus to be determined
by the Compensation Committee. The incentive bonus will not be less than
$100,000 per year. Mr. Garofalo's employment agreement also provides for other
employee benefits such as a car allowance, life insurance and health care, in
addition to certain disability and death benefits. In addition, pursuant to Mr.
Garofalo's employment agreement he was granted options to purchase 380,250
shares of Class A Common Stock at an exercise price of $1.97 per share, which
options are immediately exercisable and expire 10 years from their grant. The
Company is required to register the shares of Class A Common Stock underlying
the options under the Securities Act upon the consummation of the Offerings.
Except in the case of disability, the Company may terminate Mr. Garofalo's
employment only for cause upon which termination Mr. Garofalo
14
<PAGE>
shall have no right to receive any compensation or benefit from the Company. If
the agreement is terminated without cause, or if Mr. Garofalo terminates
employment for good reason, the Company is obligated to pay Mr. Garofalo an
amount equal to the greater of (i) his monthly base salary as then in effect
multiplied by the number of months remaining in term of his employment as of
such termination date and (ii) $1,000,000. "Good reason" includes (i) a
reduction in the nature or scope of Mr. Garofalo's titles, authorities, powers,
duties or responsibilities; (ii) a change in the method or formula for
determining the bonus which results in a decrease in the amount of bonus payable
to Mr. Garofalo; (iii) removal of Mr. Garofalo as a member of the Board of the
Company, unless such removal occurs after termination of Mr. Garofalo's
employment for cause; (iv) a sale of all or substantially all of the ownership
interests or assets of the Company or a merger or consolidation of the Company
with any other corporation; (v) a change in control of the Company defined as
any person or entity becoming a beneficial owner as defined in Rule 13d-3 of the
Securities Exchange Act of 1934 (the "Exchange Act") directly or indirectly of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities; or (vi) the Company's materially
breaching its affirmative or negative covenants or undertakings in the
employment agreement and failing to remedy within 15 days. Pursuant to the
agreement, Mr. Garofalo has agreed not to compete with the Company for a period
of one year following termination of the agreement. During such non-compete
period, Mr. Garofalo shall be entitled to receive an amount equal to his base
salary as in effect on the date of termination provided that the agreement was
not terminated prior to the expiration of the term by either party.
FINKELSTEIN EMPLOYMENT AGREEMENT. Mr. Finkelstein's employment agreement,
dated as of April 30, 1997, has a three year term and provides for a base salary
of $295,000 for the first year, $335,000 for the second year and $375,000 for
the third year. Mr. Finkelstein is also entitled to receive an annual incentive
bonus to be determined by the Compensation Committee. The incentive bonus will
not be less than $100,000 for each year. Mr. Finkelstein's employment agreement
also provides for other employee benefits such as a car allowance, life
insurance and health care, in addition to certain disability and death benefits.
In addition, pursuant to Mr. Finkelstein's employment agreement, as amended, he
was granted options to purchase 1,521,000 shares of Class A Common Stock at an
exercise price of $1.97 per share, which options are immediately exercisable and
expire 10 years from their grant. The Company is required to register such
shares of Class A Common Stock under the Securities Act on Form S-8 upon the
consummation of the Offerings. Except in the case of disability, the Company may
terminate Mr. Finkelstein's employment only for cause upon which termination Mr.
Finkelstein shall have no right to receive any compensation or benefit from the
Company. If the agreement is terminated without cause or if Mr. Finkelstein
terminates employment for good reason, the Company is obligated to pay to Mr.
Finkelstein his base salary, bonus and benefits that are accrued and unpaid as
of the date of termination as well as an amount equal to one and a half times
his base salary as then in effect. "Good reason" includes (i) a reduction in the
nature or scope of Mr. Finkelstein's titles, authorities, powers, duties or
responsibilities; (ii) a change in the method or formula for determining the
bonus which results in a decrease in the amount of bonus payable to Mr.
Finkelstein; (iii) removal of Mr. Finkelstein as a member of the Board of the
Company, unless such removal occurs after termination of Mr. Finkelstein's
employment for cause; (iv) a sale of all or substantially all of the ownership
interests or assets of the Company or a merger or consolidation of the Company
with any other corporation; (v) a change in control of the Company defined as
any person or entity (other than Stephen Garofalo) becoming a beneficial owner
as defined in Rule 13d-3 of the Exchange Act directly or indirectly of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities; or (vi) the Company's materially
breaching its affirmative or negative covenants or undertakings in the
employment agreement and failing to remedy within 15 days. Pursuant to the
agreement, Mr. Finkelstein has agreed not to compete with the Company for a
period of one year following termination of the agreement. During such
non-compete period, Mr. Finkelstein shall be entitled to receive an amount equal
to his base salary as in effect on the date of termination provided that the
agreement was not terminated prior to the expiration of the term by either
party.
15
<PAGE>
1997 INCENTIVE STOCK PLAN
The Company has adopted the 1997 Incentive Stock Plan pursuant to which key
employees, officers and directors (including independent directors and members
of the Option Committee) of the Company and its subsidiaries who have
substantial responsibility in the direction of the Company and its subsidiaries,
and others whom the Option Committee determines provide substantial and
important services to the Company may be granted (i) incentive stock options
("ISOs") and/or (ii) non-qualified stock options ("NQSOs" and together with
ISOs, "Stock Options" and "Awards"). The aggregate number of shares of the Class
A Common Stock that may be the subject of Awards under the 1997 Incentive Stock
Plan is 1,000,000 and the maximum number of shares of Class A Common Stock
available with respect to Awards granted to any one grantee is 100,000 shares.
The exercise price of all ISOs is the fair market value of the Class A
Common Stock on the date of grant (or 110% of such fair market value with
respect to ISOs granted to persons who own stock possessing more than 10% of the
voting rights of MFN's capital stock) and the exercise price of all NQSOs is
determined by the Option Committee, although the initial awards will be made at
fair market value of the Class A Common Stock on the date of grant. Stock
Options vest and become exercisable over a period of years and have a term not
to exceed ten years, as determined by the Compensation Committee.
If a grantee's employment with the Company or a subsidiary is terminated
because of the grantee's death, or the grantee's retirement on or after
attaining the age which the Company may from time to time establish as the
retirement age for any class of its employees or the age specified in the
employment agreement with such grantee prior to the date when the Stock Option
is by its terms exercisable, the Stock Option shall be immediately exercisable
as of the date of the termination of the grantee's employment, subject to the
other terms of the 1997 Incentive Stock Plan. Upon a "change in control" of the
Company (as defined in the 1997 Incentive Stock Plan) each holder of a Stock
Option shall have the right to exercise the Stock Option in full without regard
to any waiting period, installment period or other limitation or restriction
thereon. Upon a grantee's termination of employment from the Company or a
subsidiary on account of disability, the grantee or the legal representative of
the grantee, shall have the right for a period of one year following the date of
such termination to exercise an Award to the extent such award is exercisable
and to the extent such Award has not yet expired. In the event the grantee's
employment with the Company or a subsidiary is terminated for any reason other
than disability, death or retirement, the grantee may exercise an Award within
three months after his or her termination of employment.
INDEMNIFICATION AGREEMENTS
MFN has entered into indemnification agreements (the "Indemnification
Agreements") with certain officers and directors of MFN. The Indemnification
Agreements provide for indemnification of such directors and officers to the
fullest extent authorized or permitted by law. The Indemnification Agreements
also provide for (i) advancement by MFN of expenses incurred by the director or
officer in defending certain litigation, (ii) the appointment in certain
circumstances of an independent legal counsel to determine whether the director
or officer is entitled to indemnification and (iii) the continued maintenance by
MFN of directors' and officers' liability insurance (which currently consists of
$25 million of primary coverage).
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires MFN's directors and executive
officers, and persons who beneficially own more than 10% of the outstanding
Common Stock, to file with the Commission initial reports of ownership and
reports of changes in ownership of the Common Stock. Such officers, directors
and greater than 10% stockholders are required by the regulations of the
Commission to furnish MFN with copies of all reports that they file under
Section 16(a). To MFN's knowledge, based solely on a review of the copies of
such reports furnished to MFN and written representations that no other reports
were
16
<PAGE>
required, all Section 16(a) filing requirements applicable to MFN's officers,
directors and greater than 10% beneficial owners were complied with by such
persons during the fiscal year ended December 31, 1997, except Vincent A.
Gallucio inadvertently failed to file, when due, a Form 4 or Form 5 relating to
one transaction during the fiscal year ended December 31, 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Rockefeller and White. None
of the members of the Compensation Committee served as an officer or employee of
MFN or any of its subsidiaries during fiscal 1997. There were no material
transactions between the Company and any of its members of the Compensation
Committee during fiscal 1997.
COMPENSATION COMMITTEE REPORT ON COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is comprised entirely of independent directors and is responsible
for developing and making recommendations to the Board with respect to MFN's
executive compensation policies.
The following report of the Compensation Committee discusses MFN's executive
compensation policies and the basis of the compensation paid to MFN's executive
officers in 1997.
In general, the Compensation Committee seeks to link the compensation
paid to each executive officer to the performance of such executive officer.
Within these parameters, the executive compensation program attempts to
provide an overall level of executive compensation that is competitive with
companies of comparable size and with similar market and operating
characteristics.
There are three elements in the Company's executive total compensation
program, all determined by individual and corporate performance as specified
in the various employment agreements:
- Base salary
- Annual incentive
- Long-term incentive
BASE SALARY
Amounts earned during 1997 by MFN's executive officers are shown in the
Summary Compensation Table. The base compensation of such executive officers
is set by the terms of the employment agreement entered into with each such
executive officer. Base salaries were established by the Company prior to
the Company's initial public offering for each of the executive employment
agreements.
ANNUAL INCENTIVES
Each executive officer is entitled to an annual incentive bonus as
determined by the Compensation Committee. The cash bonuses awarded to MFN's
Chief Executive Officer and President in 1997 were determined based on
provisions of their employment agreements.
LONG-TERM INCENTIVES
Long-term incentive awards are intended to align a significant portion
of the executive compensation program with shareholder interests. Executives
of the company are eligible to participate in the 1997 Incentive Stock Plan.
CHIEF EXECUTIVE OFFICER COMPENSATION. Amounts earned during 1997 by
MFN's Chairman and Chief Executive Officer, Stephen A. Garofalo, are shown
in the Summary Compensation Table. The
17
<PAGE>
base compensation of the Chief Executive Officer is set by the terms of the
employment agreement entered into with such executive officer. The
Compensation Committee may adjust his respective annual incentive bonus
(although to not less than $100,000) based on an assessment of his past
performance, increases in the Company's revenue and market penetration, as
well as an improvements in operating efficiencies.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). One of the
factors the Compensation Committee considers in connection with compensation
matters is the anticipated tax treatment to the Company and to the
executives of the compensation arrangements. The deductibility of certain
types of compensation depends upon the timing of an executive's vesting in,
or exercise of, previously granted rights. Moreover, interpretation of, and
changes in, the tax laws and other factors beyond the Compensation
Committee's control also affect the deductibility of compensation.
Accordingly, the Compensation Committee will not necessarily limit executive
compensation to that deductible under Section 162(m) of the Code. The
Compensation Committee will consider various alternatives to preserving the
deductibility of compensation payments and benefits to the extent consistent
with its other compensation objectives.
The foregoing report of the Compensation Committee shall not be deemed
to be incorporated by reference into any filing of MFN under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
except to the extent that the Company specifically incorporates such
information by reference, and shall not otherwise be deemed filed under such
Acts.
Submitted by the
Compensation
Committee of MFN's Board of
Directors as of March 30,
1997
David Rockefeller
Leonard White
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<PAGE>
PERFORMANCE GRAPH
The following graph sets forth MFN's total stockholder return on the
Company's Class A Common Stock as compared to the Nasdaq Stock Market Composite
Index, a broad based capitalization-weighted index of all NASDAQ National
Smallcap Stocks, and the NASDAQ Telecommunications Stock Index, a
capitalization-weighted index designed to measure the performance of all NASDAQ
stocks in the telecommunications sector, for the period commencing on October
29, 1997 (the date of the Company's initial public offering of Class A Common
Stock) and ending December 31, 1997 (the "Measuring Period"). The total
stockholder return assumes $100 invested at the beginning of the Measuring
Period in MFN's Class A Common Stock, the Nasdaq Stock Market Composite Index
and the NASDAQ Telecommunications Stock Index.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
METROMEDIA FIBER NETWORK, INC., NASDAQ STOCK MARKET COMPOSITE
INDEX AND NASDAQ TELECOMMUNICATIONS STOCK INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLAR
<S> <C> <C> <C>
Metromedia Fiber Network, Inc. NASDAQ Composite Index NASDAQ Telecom Index
29-Oct-97 100 100 100
31-Dec-97 104 98 104
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 29, 1997 DECEMBER 31, 1997
------------------- ---------------------
<S> <C> <C>
Metromedia Fiber Network, Inc................................................ 100 104
NASDAQ Stock Market Composite Index.......................................... 100 98
NASDAQ Telecommunications Stock Index........................................ 100 104
</TABLE>
- ------------------------
* Total return assumes $100 investment on October 29, 1997, the date of the
initial public offering, in Metromedia Fiber Network, Inc. and select
indices, and reinvestment of dividends.
19
<PAGE>
PROPOSAL NO. 1--ELECTION OF CLASS A DIRECTORS
The following table sets forth certain information with respect to the
members of MFN's Board of Directors, including the incumbent Directors (Messrs.
Finkelstein, Garofalo and Gallucio) who have been nominated by the Board of
Directors for re-election as Class A Directors at the Annual Meeting.
The Board of Directors knows of no reason why any of its nominees will be
unable or will refuse to accept election. If any nominee becomes unable or
refuses to accept election, the Board of Directors will either reduce the number
of directors to be elected or select a substitute nominee. If a substitute
nominee is selected, proxies will be voted in favor of such nominee.
The affirmative vote of the holders of a plurality of shares of Class A
Common Stock present in person or represented by proxy at the Annual Meeting
will be required to elect each of the three Class A Directors to MFN's Board.
<TABLE>
<CAPTION>
CLASS OF DIRECTOR
NAME, PRINCIPAL OCCUPATION FOR PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS AGE DIRECTORS SINCE
- --------------------------------------------------------------------------------------- --- ----------- -----------
<S> <C> <C> <C>
Stephen A. Garofalo.................................................................... 47 Class A 1993
Mr. Garofalo founded the Company in April 1993, and has been serving as Chairman of the
Board since the Company's inception and as Chief Executive Officer since October 1996
and served as President from 1993 to 1996 and as Secretary from 1993 to 1997. From 1979
to 1993 Mr. Garofalo served as president and chief executive officer of F. Garofalo
Electric Co., Inc., an electrical contractor.
Howard M. Finkelstein.................................................................. 44 Class A 1997
Mr. Finkelstein has been President, Chief Operating Officer and a Director of the
Company since April 1997. Prior to joining the Company, Mr. Finkelstein was employed by
various affiliates of Metromedia for 16 years. His most recent position was as
Executive Vice President and Chief Operating Officer of Metromedia International
Telecommunications, Inc. From 1984 to 1993, Mr. Finkelstein served as President of
Metromedia Communications Corporation, a national long distance telecommunications
carrier. In addition, Mr. Finkelstein served as Executive Vice President and Chief
Operating Officer of Metromedia Restaurant Group from 1993 to 1995. Mr. Finkelstein is
a Director of Multimedia Medical Systems, Incorporated, a privately held company.
Vincent A. Galluccio................................................................... 52 Class A 1997
Mr. Galluccio has been a Director of the Company since February 1997 and has served as
a Senior Vice President since December 1995. From January 1992 to October 1994, Mr.
Galluccio was employed by British Telecommunications Plc. as a global sales manager for
network outsourcing operations. Prior to joining British Telecommunications plc, Mr.
Galluccio spent 25 years with International Business Machines Corporation in various
sales, marketing and business development positions and was involved in both domestic
and world trade assignments.
Silvia Kessel.......................................................................... 47 Class B 1997
Ms. Kessel has served as a Director of the Company since July 1997 and as Executive
Vice President since October 1997. Ms. Kessel has served as Chief Financial Officer and
Treasurer of Metromedia International Group, Inc. ("MMG") since 1995 and Executive Vice
President of MMG since 1996. In addition, Ms. Kessel served as Executive Vice President
of Orion Pictures Corporation ("Orion"), a motion picture production and distribution
company, from January 1993 through July 1997, Senior Vice President of Metromedia since
1994 and President of Kluge & Company since January 1994. Prior to that time, Ms.
Kessel served as Senior Vice President and a Director of Orion from June 1991 to
November 1992 and Managing Director of Kluge & Company from April 1990 to January 1994.
Ms. Kessel is Executive Vice President and a member of the Board of Directors of Big
City Radio, Inc. ("YFM"), an American Stock Exchange listed company that operates radio
stations in New York, Los Angeles and Chicago, and of MMG.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
CLASS OF DIRECTOR
NAME, PRINCIPAL OCCUPATION FOR PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS AGE DIRECTORS SINCE
- --------------------------------------------------------------------------------------- --- ----------- -----------
<S> <C> <C> <C>
John W. Kluge.......................................................................... 83 Class B 1997
Mr. Kluge has been a Director of the Company since July 1997. Mr. Kluge has been the
President and Chairman of Metromedia and its predecessor-in-interest, Metromedia, Inc.
for over five years. Mr. Kluge has been the Chairman of the Board of MMG since 1995. In
addition, Mr. Kluge has been Chairman of the Board and a Director of Orion Pictures
Corporation from 1992 until July 1997. He also serves as a Director of Conair
Corporation and Occidental Petroleum Corporation.
Stuart Subotnick....................................................................... 55 Class B 1997
Mr. Subotnick has been a Director of the Company since July 1997. Mr. Subotnick has
been the Vice Chairman of the Board of MMG since 1995 and President and Chief Executive
Officer of MMG since December 1996. In addition, Mr. Subotnick served as Vice Chairman
of the Board of Orion from 1992 until July 1997. Mr. Subotnick has served as Executive
Vice President of Metromedia, its predecessor-in-interest, Metromedia, Inc., and MMG
for over five years. Mr. Subotnick is also a Director of Carnival Cruise Lines, Inc.
and Chairman of the Board of YFM.
David Rockefeller...................................................................... 82 Class B 1997
Mr. Rockefeller has served as a Director of the Company since October 1997. He
currently serves as Chairman of The Chase Manhattan Bank's International Advisory
Committee, as Chairman of Rockefeller Center Properties, Inc. (since 1995) and as a
Director of Rockefeller & Co., Inc. (since 1994), a privately owned investment
management firm. From 1961 to 1981, Mr. Rockefeller served as Chairman of The Chase
Manhattan Corporation and The Chase Manhattan Bank, N.A. From 1981 to 1995, he served
as Chairman of Rockefeller Group, Inc.
Arnold L. Wadler....................................................................... 54 Class B 1997
Mr. Wadler has served as Secretary of the Company and Executive Vice President since
October 1997 and has served as a Director of the Company since July 1997. Mr. Wadler
has served as Executive Vice President, General Counsel and Secretary of MMG since
August 29, 1996 and, from November 1, 1995 until that date, as Senior Vice President,
General Counsel and Secretary of MMG and as the Executive Vice President, General
Counsel, Secretary and Director of YFM since December 1997. In addition, Mr. Wadler
serves as a Director of MMG and has served as a Director of Orion from 1991 until July
1997 and as Senior Vice President, Secretary and General Counsel of Metromedia, and its
predecessor-in-interest, Metromedia, Inc., for over five years.
Leonard White.......................................................................... 58 Class B 1997
Mr. White has served as a Director of the Company since October 1997. Mr. White has
served as President and Chief Executive Officer of Rigel Enterprises since July 1997.
Mr. White served as President and Chief Executive Officer of Orion Pictures Corporation
from 1992 until 1997 and as President and Chief Executive Officer of Orion Home
Entertainment Corporation from 1987 to 1992. Mr. White also serves as a director of
MMG, YFM and American Film Technologies, Inc.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT HOLDERS OF CLASS A COMMON STOCK VOTE
"FOR" THE ELECTION OF MESSRS. FINKELSTEIN, GAROFALO, AND GALLUCIO AS DIRECTORS
OF MFN.
21
<PAGE>
PROPOSAL 2--ADOPTION OF THE METROMEDIA FIBER NETWORK, INC.
1998 INCENTIVE STOCK PLAN
The Board of Directors has approved the Metromedia Fiber Network, Inc. 1998
Incentive Stock Plan (the "1998 Incentive Stock Plan"), subject to its adoption
by the Stockholders holding Class A Common Stock and Class B Common Stock,
voting as a single class. As Metromedia Company and Mr. Stuart Subotnick, the
holders of all outstanding shares of Class B Common Stock, have indicated that
they intend to vote in favor of the adoption of the 1998 Incentive Stock Plan,
such adoption is therefore assured. Once adopted at the Annual Meeting, the 1998
Incentive Stock Plan will be effective as of March 30, 1998, the date of Board
approval.
The following is a summary of the material features contained in the 1998
Incentive Stock Plan. A complete copy of the 1998 Incentive Stock Plan is
attached as Appendix A to this Proxy Statement.
The purpose of the 1998 Incentive Stock Plan is to give MFN a significant
advantage in retaining key employees, officers and directors, and to provide an
incentive to selected key employees, officers and directors of MFN who have
substantial responsibility in the direction of MFN, and others whom the Option
Committee determines provide substantial and important services to MFN, to
acquire a proprietary interest in MFN, to continue as employees, officers an
directors or in their other capacities, and to increase their efforts on behalf
of MFN.
TYPES OF AWARDS
The types of awards that may be granted pursuant to the 1998 Incentive Stock
Plan include (i) incentive stock options ("ISOs") and (ii) non-qualified stock
options ("NQSOs" and together with ISOs, "Stock Options" and "Awards"). ISOs are
intended to be treated as incentive stock options within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). NQSOs are, in
general, options which do not have the special income tax advantages associated
with ISOs. Stock Option grants will consist of the maximum number of ISOs that
may be granted to a particular grantee under applicable law with the balance of
the Stock Options being NQSOs.
ADMINISTRATION OF THE PLAN
The 1998 Incentive Stock Plan will be administered by the Compensation
Committee of the Board (the "Committee"). Members of the Committee will be
eligible to receive certain Awards (other than ISOs) under the 1998 Incentive
Stock Plan.
Subject to the terms and conditions of the 1998 Incentive Stock Plan and the
formula awards for Independent Directors (as defined below), the Committee is
authorized to grant Awards, to determine which employees, officers, directors or
other individuals may be granted Awards, to determine the type and number of
Awards to be granted, to determine the term of such Awards, to determine the
exercise price of any Award, to determine the terms of any agreement pursuant to
which Awards are granted, to interpret and construe the 1998 Incentive Stock
Plan, and to determine any other matters delegated to it under the 1998
Incentive Stock Plan or necessary for the proper administration of the 1998
Incentive Stock Plan.
SHARES OF CLASS A COMMON STOCK SUBJECT TO THE 1998 INCENTIVE STOCK PLAN
Subject to certain exceptions set forth in the 1998 Incentive Stock Plan,
the aggregate number of shares of the Class A Common Stock that may be the
subject of Awards under the 1998 Incentive Stock Plan is 2,500,000. The maximum
number of shares of Class A Common Stock available with respect to Awards
granted to any one grantee shall not exceed, in the aggregate, 150,000. Shares
of Class A Common Stock granted under the 1998 Incentive Stock Plan may either
be authorized but unissued shares of Class A Common Stock not reserved for any
other purpose or shares of Class A Common Stock held in or acquired for the
treasury of MFN.
22
<PAGE>
Shares of Class A Common Stock subject to an Award which terminates
unexercised may again be the subject of an Award under the 1998 Incentive Stock
Plan. In addition, shares of Class A Common Stock surrendered to MFN in payment
of the exercise price or applicable taxes upon exercise or settlement of an
Award may also be used thereafter for additional Awards.
ELIGIBILITY
Any key employee, officer and director, including a director who is not an
employee and a director who serves on the Committee, of MFN and its subsidiaries
who has substantial responsibility in the direction of MFN and its subsidiaries
and anyone else whom the Committee determines provides substantial and important
services to MFN is eligible to receive Awards.
Any Independent Director who first serves on the Board subsequent to the
date the 1998 Incentive Stock Plan was adopted shall be entitled to receive
Awards under the 1998 Incentive Stock Plan with respect to 5,000 shares of Class
A Common Stock, each having an exercise price equal to the fair market value of
a share of Class A Common Stock on the date of grant. Awards to Independent
Directors under the 1998 Incentive Stock Plan will be aggregated with Awards
under the 1997 Incentive Stock Plan so that the total Awards under the 1997
Incentive Stock Plan and the 1998 Incentive Stock Plan will not exceed 5,000
shares of Class A Common Stock. For purposes hereof, "Independent Directors"
shall mean any member of the Board who during his entire term as a director was
not employed by MFN and its subsidiaries, within the meaning of Section 424(f)
of the Internal Revenue Code of 1986, as amended (the "Code"), and who also
satisfies the criteria for "outside director" under Section 162(m) of the Code.
TERMS AND CONDITIONS OF STOCK OPTIONS
The exercise price of all ISOs granted under the 1998 Incentive Stock Plan
is the fair market value of the Class A Common Stock on the date of grant. The
exercise price of all NQSOs granted under the 1998 Incentive Stock Option Plan
will be determined by the Committee, although the initial awards will be made at
the fair market value of the Class A Common Stock on the date of grant. The term
of each Stock Option granted under the 1998 Incentive Stock Plan will be
determined by the Committee but will in no event be greater than ten years from
the date of grant.
With respect to ISOs granted to a grantee who owns stock possessing more
than 10% of the voting rights of MFN's outstanding capital stock on the date of
grant, the exercise price of the ISO shall be equal to 110% of the fair market
value of the Class A Common Stock subject to the ISO on the date of grant and
the ISO may not be exercisable more than five years after the date of grant.
Stock Options shall vest and become exercisable over a period of years as
determined by the Committee.
The exercise price of a Stock Option must be paid in cash. At the discretion
of the Committee, the exercise price may be paid with shares of Class A Common
Stock already owned by, and in possession of, the grantee or in a combination of
cash or shares of Class A Common Stock.
The aggregate fair market value of the Class A Common Stock (determined on
the date of grant) for which ISOs granted under the 1998 Incentive Stock Plan
and any other plan of MFN or a subsidiary may be exercisable for the first time
by any grantee during any calendar year cannot exceed $100,000 or such other
amount as may be prescribed under the Code or applicable regulations and rulings
from time to time.
ACCELERATION OF VESTING AND EXERCISABILITY
If a grantee's employment with MFN is terminated because of the grantee's
death, the grantee's retirement on or after attaining the age which MFN may from
time to time establish as the retirement age for any class of employees or in
accordance with the age specified in any employment agreement with the
23
<PAGE>
grantee or a Change in Control prior to the date of the Stock Option is by its
terms exercisable, the Stock Option shall be immediately exercisable (and the
restrictions thereof, if any, shall lapse) as of the date of the termination of
the grantee's employment, subject to the other terms of the 1998 Incentive Stock
Plan.
Upon a Change in Control of MFN, (i) each holder of a Stock Option shall
have the right to exercise the Stock Option in full without regard to any
waiting period, installment period or other limitation or restriction thereon
and (ii) each holder of a Stock Option shall have the right, exercisable by
written notice to MFN within sixty days after the Change in Control, to receive,
in exchange for the surrender of the Stock Option or any portion thereof to the
extent the Stock Option is then exercisable in accordance with clause (i), an
amount of cash equal to the difference between the fair market value of the
Class A Common Stock on the date of exercise and the exercise price of the Stock
Option.
In general, under the 1998 Incentive Stock Plan, a "Change in Control" of
MFN shall be deemed to have occurred as of the first day any one or more of the
following four conditions have been satisfied: (i) any event whereby a Person
(other than (a) MFN or an affiliate, as defined in the Exchange Act or (b) any
employee benefit plan or trust sponsored or maintained by MFN or an affiliate,
as defined in the Exchange Act (x) acquires 35% or more of MFN's outstanding
voting securities, (y) acquires securities of MFN bearing a majority of voting
power with respect to the election of directors of MFN or (z) acquires all or
substantially all of MFN's assets, whether by sale, lease, exchange or other
transfer (in one transaction or in a series of related transactions); (ii) a
change in the composition of the Board such that at any time a majority of the
Board shall not have been members of the Board for twenty-four months; provided,
however, that directors who were appointed or nominated for election by at least
two-thirds of the directors who were directors at the beginning of such
twenty-four month period (or deemed to be such directors under this clause (ii))
shall be deemed to be directors at the beginning of such twenty-four month
period for the purposes of this clause (ii); (iii) the stockholders of MFN
approve any plan or proposal for the liquidation or dissolution of MFN; or (iv)
any consolidation or merger of MFN, other than a merger or consolidation of MFN
in which the voting securities of MFN outstanding immediately prior thereto
continue to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 50% of the combined
voting power of the voting securities of MFN or such surviving entity
outstanding immediately after such merger or consolidation. "Person" shall have
the same meaning as ascribed to such term in Section 3(a)(9) of the Exchange Act
and used in Section 13(d) thereof.
ADJUSTMENT PROVISIONS
The total number and character of shares of Class A Common Stock subject to
Awards and the number and character of shares of Class A Common Stock subject to
outstanding Awards and/or the exercise price of such shares will be
appropriately adjusted by the Committee if the shares of Class A Common Stock
are changed into or exchanged for a different number or kind of shares of stock
or other securities of MFN or of another corporation (whether by reason of
merger, consolidation, recapitalization, reclassification, split, reverse split,
combination of shares, or otherwise). The Committee may also make appropriate
adjustments in the event of a merger, consolidation or other transaction or
event having a similar event.
AMENDMENT AND TERMINATION OF THE 1998 INCENTIVE STOCK PLAN
Unless terminated earlier by action of the Board of MFN, the 1998 Incentive
Stock Plan will terminate on the tenth anniversary of its adoption, and no
additional grants under the 1998 Incentive Stock Plan will be made after that
date.
The Board may amend or terminate the 1998 Incentive Stock Plan at any time
except that approval of the holders of a majority of the outstanding stock of
MFN is required (i) to decrease the minimum exercise price for ISOs; (ii) to
extend the term of the 1998 Incentive Stock Plan beyond ten years, (iii) to
extend the maximum terms of the Awards granted beyond ten years, (iv) to
withdraw the administration of the 1998
24
<PAGE>
Incentive Stock Plan from the Committee, (v) to change the class of eligible
employees, officers, directors and other grantees, (vi) to increase the
aggregate number of shares of Class A Common Stock authorized to be issued, and
(vii) to otherwise require stockholder approval to comply with Rule 16b-3 or any
other applicable law, regulation, or listing requirement or to qualify for an
exemption or characterization that is deemed desirable by the Board. No
amendment or termination of the 1998 Incentive Stock Plan shall, without written
consent of the grantee, alter the terms of Awards already granted and such
Awards shall remain in full force and effect as if the 1998 Incentive Stock Plan
had not been terminated.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS
Under the Code and Treasury regulations and administrative pronouncements
thereunder, a grantee will not realize taxable income by reason of either the
grant or the exercise of an ISO, and MFN will not receive an income tax
deduction at either such time. However, any appreciation in share value
following the date of grant will be taken into consideration at the time of
exercise in determining liability for the alternative minimum tax. If a grantee
exercises an ISO and delivers shares of Common Stock as payment for part or all
of the exercise price of the Class A Common Stock received upon exercise of the
ISO ("Payment Stock"), no gain or loss will be recognized with respect to the
Class A Common Stock delivered and no tax will be payable with respect to the
Payment Stock or the Class A Common Stock received upon exercise of the ISO. The
holding period of such Class A Common Stock received will include the holding
period of the Payment Stock. To the extent the number of shares received exceeds
the number of shares tendered, the grantee's basis in the additional shares of
Class A Common Stock received upon exercise of the ISO is zero and these shares
have a holding period that commences on the date of exercise of the ISO.
However, if the Payment Stock was acquired pursuant to the exercise of an ISO
and the required holding period in order to obtain favorable tax treatment with
respect to such Class A Common Stock is not met as of the date such Class A
Common Stock is delivered, the grantee will be treated as having sold the
Payment Stock in a disqualifying disposition and will be subject to the rules
described below for disqualifying dispositions. The grantee's basis in the Class
A Common Stock that he or she receives upon exercise of the ISO in exchange for
the Payment Stock is the same as his or her basis in the Payment Stock increased
by any amount included in gross income as ordinary income due to any
disqualifying disposition and any cash paid on the exercise. The holding period
of such Class A Common Stock commences on the date of exercise of the ISO.
If a grantee exercises an ISO and does not dispose of the shares of Class A
Common Stock within two years from the date of grant and one year from the date
of exercise, the entire gain, if any, realized upon disposition will be taxable
to the grantee as long term capital gain, and MFN will not be entitled to any
deduction. If, however, a grantee disposes of shares of Class A Common Stock
prior to the expiration of the holding periods described in the previous
sentence (a so-called "disqualifying disposition"), the grantee will generally
realize ordinary income in, and tax withholding may be required upon, an amount
equal to the difference between the exercise price and the fair market value of
such Shares of Class A Common Stock on the date of exercise. MFN will be
entitled to a deduction equal to the amount recognized as ordinary income by the
grantee. Any additional appreciation will be treated as a capital gain (long
term or short term depending on how long the grantee held the shares of Class A
Common Stock prior to disposition) and MFN will not be entitled to any further
deductions for federal income tax purposes. If the amount realized by the
grantee is less than the value of the shares of Class A Common Stock upon
exercise, then the amount of ordinary income and the corresponding MFN deduction
is equal to the excess of the amount realized over the exercise price.
NON-QUALIFIED STOCK OPTIONS
As to the NQSOs, there will be no federal income tax consequences to either
the grantee or MFN on the grant of the option because the NQSO does not have a
"readily ascertainable fair market value" as
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required by Section 83 of the Code. Additionally, if a grantee exercises a NQSO
and delivers shares of Class A Common Stock as payment for part or all of the
exercise price of the Class A Common Stock purchased, no gain or loss will be
recognized with respect to the Class A Common Stock delivered. To the extent a
grantee receives more shares of Class A Common Stock pursuant to the exercise of
the option than shares of Class A Common Stock delivered, the fair market value
of this excess, less any cash paid by the grantee, will be taxed as ordinary
income and will be subject to applicable tax withholding.
On the exercise of an NQSO, the grantee (except as described below)
recognizes taxable ordinary income equal to the difference between the exercise
price of the NQSO and the fair market value of such Shares of Class A Common
Stock on the date of exercise. MFN will be entitled to a tax deduction in an
amount equal to the grantee's taxable ordinary income if it provides the grantee
with a timely Form W-2 or Form 1099, as appropriate.
Upon disposition of the Class A Common Stock by the grantee, he or she will
recognize long term or short term capital gain or loss, as the case may be,
equal to the difference between the amount realized on such disposition and his
or her basis for the Class A Common Stock, which will include the amount
previously recognized by him or her as ordinary income. The holding period for
capital gains purposes will commence on the day the optionee acquires the shares
of Class A Common Stock pursuant to the NQSO. None of the appreciation on NQSOs
is subject to the alternative minimum tax.
SECTION 280G
Under Section 280G of the Code, amounts payable to officers and highly
compensated individuals that are contingent upon a change in the ownership or
effective control of a corporation or of a substantial portion of its assets may
be subject to a 20% excise tax and may not be deductible by the corporate payor
if they exceed a "basic amount" allocated to such payment (so-called "excess
parachute payments"). The acceleration of the right to exercise otherwise
non-vested NQSOs, when considered in connection with other payments to officers
and highly compensated individuals of MFN, may give rise to excess parachute
payments. In that event, the affected grantee will be subject to a 20% excise
tax, and MFN will lose its deduction.
SECTION 162(M)
Under Section 162(m) of the Code, the income tax deduction of
publicly-traded corporations may be limited to the extent total compensation
(including base salary, annual bonus, stock option exercises and non-qualified
benefits paid in 1994 and thereafter) for certain executive officers exceeds
$1,000,000 (less the amount of any "excess parachute payments" as defined in
Section 280G of the Code) in any one year. However, under Section 162(m) of the
Code, the deduction limit does not apply to certain "performance-based"
compensation established by an independent compensation committee which is
adequately disclosed to, and approved by, stockholders. In particular, Awards
will satisfy the performance-based exception if the Awards are made by a
qualifying compensation committee, the plan sets the maximum number of shares
that can be granted to any particular grantee within a specified period and the
compensation is based solely on an increase in the stock price after the date of
grant (i.e., the option exercise price is equal to or greater than the fair
market value of the Class A Common Stock subject to the Award on the grant
date). MFN intends to consider fully the implications of the Section 162(m) of
the Code on the deductibility of compensation in making awards under the 1998
Incentive Stock Plan.
The foregoing federal income tax information is a summary only and does not
purport to be a complete statement of the relevant provisions of the Code.
MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS
The Committee may, within the limitations of the 1998 Incentive Stock Plan,
modify, extend or renew outstanding Awards granted under the 1998 Incentive
Stock Plan, or accept the surrender of outstanding
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Awards and authorize the granting of new Awards in substitution therefor. No
modification may, without the consent of the grantee, alter or impair any rights
or obligations under any Award theretofore granted to the grantee nor shall any
modification adversely affect the status of an ISO under Section 422 of the
Code.
TRANSFERABILITY OF AWARDS AND OTHER PROVISIONS
An ISO granted to a grantee shall be transferable only by will or the laws
of descent and distribution and are exercisable, during the lifetime of the
grantee, only by the grantee or by the guardian or legal representative of the
grantee acting in a fiduciary capacity on behalf of the grantee under state law
or court supervision. A NQSO granted to a grantee shall be transferable to an
inter-vivos trust, as well as by will or the laws of descent and distribution
and shall be exercisable during the grantee's lifetime only by the grantee, by
the trustee of an inter-vivos trust, or by the guardian or legal representative
of the grantee acting in a fiduciary capacity on behalf of the grantee under
state law or court supervision. An Award is not subject, in whole or in part, to
attachment, execution or levy of any kind.
RIGHTS UPON TERMINATION OF EMPLOYMENT
If the grantee dies while an employee or when no longer an employee but
while he or she still has the right to exercise an Award, the grantee's estate
shall have the right for a period of one year following the date of death or the
date of termination of employment to exercise the Award to the extent such Award
is exercisable and to the extent such Award has not yet expired.
Upon a grantee's retirement from MFN or a subsidiary on or after attaining
the age which MFN may from time to time establish as the retirement age for any
class of employees or in accordance with the age specified in any employment
agreement with the grantee, the grantee shall have the right for a period of
three months following the date of retirement to exercise an Award to the extent
such Award is exercisable and to the extent such Award has not yet expired.
Upon a grantee's termination of employment from MFN on account of
disability, the grantee or the legal representative of the grantee, shall have
the right for a period of one year following the date of such termination to
exercise an Award to the extent such Award is exercisable and to the extent such
Award has not yet expired.
In the event the grantee's employment with MFN or a subsidiary is terminated
for any reason other than disability, death or retirement, the grantee may
exercise an Award within three months after his or her termination of
employment.
RIGHTS AS STOCKHOLDER
No grantee of any Stock Option has any rights as a stockholder with respect
to any shares of Common Stock subject to his or her Stock Option prior to the
date on which he or she is recorded as the holder of such shares of Class A
Common Stock on the records of MFN.
NO RIGHT TO CONTINUED EMPLOYMENT
The 1998 Incentive Stock Plan is not a contract of employment, and the terms
of employment of any grantee shall not be affected in any way by the 1998
Incentive Stock Plan or related instruments except as specifically provided
therein. The establishment of the 1998 Incentive Stock Plan shall not be
construed as conferring any legal rights upon any grantee for a continuation of
employment, nor shall it interfere with the right of MFN or any subsidiary to
discharge any grantee and to treat him or her without regard to the effect such
treatment might have upon him or her as a grantee.
The 2,500,000 shares of Class A Common Stock which would be available under
the 1998 Incentive Stock Plan represent approximately 10.8% of the shares
outstanding on the Record Date.
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The Committee has made grants of Awards under the 1998 Incentive Stock Plan
to the following persons, subject to stockholder approval of the 1998 Incentive
Stock Plan, in the following amounts:
1998 INCENTIVE STOCK PLAN BENEFITS
<TABLE>
<CAPTION>
DOLLAR NUMBER OF
NAME AND POSITION VALUE ($) UNITS(2)
- ------------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Stephen A. Garofalo........................................................................ -- --
Chairman and Chief Executive Officer
Howard M. Finkelstein...................................................................... -- --
President and Chief Operating Officer
Vincent A. Galluccio....................................................................... -- --
Senior Vice President
John Mahon................................................................................. -- --
Vice President--Network Engineering
Louis Gambino.............................................................................. -- --
Former Vice President--Network Operations
Executive Group............................................................................ -- --
Non-Executive Director Group............................................................... -- --
Non-Executive Officer Employee Group....................................................... (1) 165,500
</TABLE>
- ------------------------
(1) All options have been or will be granted at an exercise price equal to the
fair market value of the underlying shares of Class A Common Stock on the
date of the grant. Any option granted will only have value if the market
value of the Class A Common Stock rises subsequent to the date of such
grant.
(2) In addition to the grants shown herein, the 1998 Incentive Stock Plan
provides for future grants of Awards pursuant to the terms of the 1998
Incentive Stock Plan summarized above. See "PROPOSAL NO. 2--ADOPTION OF THE
METROMEDIA FIBER NETWORK, INC. 1998 INCENTIVE STOCK PLAN."
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ADOPTION
OF THE 1998 INCENTIVE STOCK PLAN.
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PROPOSAL NO. 3--RATIFICATION OF
THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of MFN has appointed the firm of Ernst & Young LLP,
independent auditors, to audit the consolidated financial statements of MFN and
its subsidiaries for the fiscal year ending December 31, 1998, subject to
ratification by the MFN Stockholders.
A partner of Ernst & Young LLP is expected to be present at the Annual
Meeting and to be provided with an opportunity to make a statement if such
partner desires to do so and to be available to respond to appropriate questions
from stockholders.
If the stockholders do not ratify the appointment Ernst & Young LLP as
independent auditors for the forthcoming fiscal year, such appointment will be
reconsidered by the Audit Committee and the Board of Directors.
In September 1996, the Company decided to engage a "big six" accounting firm
and engaged Ernst & Young LLP ("Ernst & Young") to serve as its independent
auditors. Stephen A. Garofalo, majority stockholder, approved the dismissal of
M.R. Weiser & Co. LLP, Certified Public Accountants ("Weiser"), the Company's
former independent auditors, and the engagement of Ernst & Young. At no time
during the periods in which Weiser served as the Company's independent auditors
were there any disagreements between the Company and Weiser regarding any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedures. Weiser included in its opinions on the Company's
financial statements a separate paragraph stating that there was substantial
doubt about the Company's ability to continue as a going concern. Ernst &
Young's report on the Company's consolidated financial statements for the years
ended December 31, 1997 and December 31, 1996 does not contain a similar
statement
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT AUDITORS OF MFN'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
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ANNUAL REPORT; INCORPORATION BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997 (which contains the Company's audited consolidated financial
statements) is being mailed to stockholders together with this Proxy Statement.
To the extent this Proxy Statement has been or will be specifically incorporated
by reference into any filing by the Company under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, the sections of the
Proxy Statement entitled "Option Committee Report on Compensation" and
"Performance Graph" shall not be deemed to be so incorporated unless
specifically otherwise provided in any such filing.
UPON THE ORAL OR WRITTEN REQUEST OF ANY STOCKHOLDER OF RECORD ON THE RECORD
DATE, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1997 (EXCLUDING EXHIBITS), AS FILED WITH THE COMMISSION, WILL
BE SUPPLIED WITHOUT CHARGE. REQUESTS SHOULD BE DIRECTED TO METROMEDIA FIBER
NETWORK, INC., C/O METROMEDIA COMPANY, ONE MEADOWLANDS PLAZA, EAST RUTHERFORD,
NEW JERSEY 07073, ATTENTION: SECRETARY.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any stockholder of MFN who wishes to present a proposal at the 1999 Annual
Meeting of Stockholders of MFN, and who wishes to have such proposal included in
MFN's proxy statement for that meeting, must deliver a copy of such proposal to
MFN, c/o Metromedia Company, One Meadowlands Plaza, East Rutherford, New Jersey
07073, Attention: Secretary, no later than December 10, 1998; provided, however,
that if the 1999 Annual Meeting of Stockholders is held on a date more than 30
days before or after the corresponding date of the 1998 Annual Meeting of
Stockholders, any stockholder who wishes to have a proposal included in MFN's
proxy statement for that meeting must deliver a copy of the proposal to MFN a
reasonable time before the proxy solicitation is made. MFN reserves the right to
decline to include in MFN's proxy statement any stockholder's proposal which
does not comply with the rules of the Commission for inclusion therein.
OTHER BUSINESS
The Board of Directors does not intend to bring any other business before
the meeting and it is not aware that anyone else intends to do so. If any other
business comes before the meeting, it is the intention of the persons named in
the enclosed form of proxy to vote as proxies in accordance with their best
judgment.
PLEASE EXERCISE YOUR RIGHT TO VOTE BY PROMPTLY COMPLETING, SIGNING AND
RETURNING THE ENCLOSED PROXY FORM. You may later revoke the proxy and, if you
are able to attend the meeting, you may vote your shares in person.
By Order of the Board of Directors,
Arnold L. Wadler
SECRETARY
April 15, 1998
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APPENDIX A
METROMEDIA FIBER NETWORK, INC.
1998 INCENTIVE STOCK PLAN
1. PURPOSE. The purposes of the Metromedia Fiber Network, Inc. Incentive
Stock Plan are, in general, to give the Company a significant advantage in
retaining key employees, officers and directors, and to provide an incentive to
selected key employees, officers and directors of the Company and its
subsidiaries, within the meaning of Code Section 424(f), who have substantial
responsibility in the direction of the Company and its subsidiaries, and others
whom the Committee determines provide substantial and important services to the
Company, to acquire a proprietary interest in the Company, to continue as
employees, officers and directors or in their other capacities, and to increase
their efforts on behalf of the Company.
2. DEFINITIONS. Unless the context clearly indicates to the contrary, the
following terms, when used in the Plan, shall have the meanings set forth in
this Section 2.
"Act" shall mean the Securities Act of 1933, as amended.
"Award" means any stock option.
"Board" means the Board of Directors of the Company.
"Change in Control" means an event that shall be deemed to have occurred as
of the first day any one or more of the following have been satisfied:
(a) any event whereby a Person (other than (i) the Company or an
affiliate, as defined in the Exchange Act, or (ii) any employee benefit plan
or trust sponsored or maintained by the Company or an affiliate, as defined
in the Exchange Act) (x) acquires 35% or more of the Company's outstanding
voting securities, or (y) acquires securities of the Company bearing a
majority of voting power with respect to the election of the Board; or (z)
acquires all or substantially all of the Company's assets, whether by sale,
lease, exchange or other transfer in one transaction or in a series of
related transactions). "Person" shall have the same meaning as ascribed to
such term in Section 3(a)(9) of the Exchange Act and used in Section 13(d)
thereof;
(b) a change in the composition of the Board such that at any time a
majority of the Board shall not have been members of the Board for
twenty-four (24) months; provided, however, that directors who were
appointed or nominated for election by at least two-thirds of the directors
who were directors at the beginning of such twenty-four (24) month period
(or deemed to be such directors under this subparagraph) shall be deemed to
be directors at the beginning of such twenty-four (24) month period for the
purposes of this subparagraph;
(c) the stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; or
(d) any consolidation or merger of the Company, other than a merger or
consolidation of the Company in which the voting securities of the Company
outstanding immediately prior thereto continue to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the Committee described in Section 11 of the Plan.
"Common Stock" means Class A Common Stock of the Company.
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"Company" shall mean Metromedia Fiber Network, Inc. or any successor company
thereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Fair Market Value" shall mean the closing price of publicly traded Common
Stock on the national securities exchange on which the Common Stock is listed
(if the Common Stock is so listed) or on the NASDAQ National Market System (if
the Common Stock is regularly quoted on the NASDAQ National Market System), or,
if not so listed or regularly quoted, the mean between the closing bid and asked
prices of publicly traded Common Stock in the over-the-counter market, or, if
such bid and asked prices shall not be available, as reported by any nationally
recognized quotation service selected by the Company, or as determined by the
Committee in a manner consistent with the provisions of the Code.
"Grantee" shall mean any key employee, officer or director of the Company
and its subsidiaries, within the meaning of Code Section 424(f), as determined
by the Committee, who has substantial responsibility in the direction of the
Company and its subsidiaries, and anyone else whom the Committee determines
provides substantial and important services to the Company who is granted an
Award under the Plan.
"Incentive Stock Option" or "ISO" shall mean any stock option as defined in
Code Section 422.
"Independent Directors" shall mean any member of the Board who during his
entire term as a director was not employed by the Company and its subsidiaries
within the meaning of Code Section 424(f) and who also satisfies the criteria
for "outside director" under Code Section 162(m).
"Non-Qualified Stock Option" or "NQSO" shall mean an option other than an
Incentive Stock Option.
"Option" shall mean ISOs and NQSOs, collectively.
"Plan" shall mean the Metromedia Fiber Network, Inc. 1998 Incentive Stock
Plan.
"Reporting Person" shall mean any person subject to the reporting
requirements of Section 16(a) of the Exchange Act with respect to equity
securities of the Company.
"Rule 16b-3" means Rule 16b-3 of the Exchange Act, or any successor thereto,
that excepts transactions under employee benefit plans, as in effect from time
to time.
3. TYPES OF AWARDS. The Plan provides for Incentive Stock Options and
Non-Qualified Stock Options. Except as provided herein, a particular form of
Award may be granted either alone or in addition to other grants hereunder. The
provisions of the particular forms of grants need not be the same with respect
to each recipient.
ISOs may be awarded to employees of the Company and its subsidiaries, within
the meaning of Code Section 424(f), including employees who are officers and
directors, but shall not be issued to directors or others who are not employees.
NQSOs may be awarded to employees and directors, including directors who are
not employees of the Company and its subsidiaries (including, without
limitation, members of the Committee), within the meaning of Code Section
424(f), and anyone whom the Committee administering the Plan pursuant to Section
11 determines provides substantial and important services to the Company.
Options will consist of the maximum number of ISOs that may be issued to a
Grantee under applicable law, with the balance (if any) of the Options being
NQSOs.
Independent Directors who first serve on the Board subsequent to the date of
adoption of the Plan shall receive Awards with respect to 5,000 shares of Common
Stock, each having an exercise price equal to the Fair Market Value on the date
of grant. Notwithstanding the above, if any of the Independent Directors are
eligible to receive Awards under the Metromedia Fiber Network, Inc. 1997
Incentive Stock Plan (the "Prior Plan") or any subsequent or future incentive
stock plan maintained by the Company
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(collectively, the "Prior and Future Plans"), then such Independent Directors
shall be eligible to receive Awards under this Plan only to the extent that: (i)
the aggregate number of shares of Common Stock which can be issued under the
Prior Plan has been attained, and (ii) the Awards under the Plan would not in
the aggregate with Awards under the Prior and Future Plans, either at the time
of the Award or at any time thereafter, exceed an overall total of 5,000 shares
of Common Stock.
4. TERM OF PLAN.
(a) EFFECTIVE DATE. This Plan shall become effective as of the date of
adoption thereof by the Board; provided, however, that the Plan shall be
submitted for approval by the stockholders of the Company no earlier than twelve
(12) months prior to, and no later than twelve (12) months after, the date of
adoption of the Plan by the Board.
(b) Termination Date. This Plan shall terminate on the earliest of:
(i) the tenth anniversary of the effective date as determined under this
Section 4;
(ii) the date when all shares of the Common Stock reserved for issuance
under the Plan, shall have been acquired through exercise of any Awards
granted under the Plan; or
(iii) Such earlier date as the Board may determine. Any Award
outstanding under the Plan at the time of its termination shall remain in
effect in accordance with its terms and conditions and those of the Plan,
but no additional Awards will be made after the date of termination.
5. THE STOCK. Subject to adjustment as provided in Section 9, the aggregate
number of shares of Common Stock which may be issued under the Plan shall be
2,500,000 shares; provided, however, that the maximum number of shares of Common
Stock available with respect to the Awards granted by the Committee to any one
Grantee under the Plan, in the aggregate, shall not exceed 150,000. Such number
of shares of Common Stock may be set aside out of the authorized but unissued
shares of Common Stock not reserved for any other purpose or out of shares of
Common Stock held in or acquired for the treasury of the Company. The Company,
during the term of the Plan, will at all times reserve and keep available such
number of shares of Common Stock as shall be sufficient to satisfy the
requirements of the Plan. All or any shares of Common Stock subjected under this
Plan to an Award which, for any reason, terminates unexercised as to such
shares, may again be subjected to an Award under the Plan. In addition to the
foregoing, shares surrendered to the Company by, or on behalf of, a Grantee in
payment of the exercise price or applicable taxes upon exercise may also be used
thereafter for additional Awards.
6. STOCK OPTIONS.
(a) GRANTS. Options may be granted by the Committee at any time and from
time to time prior to the termination of the Plan. Each Option granted under the
Plan shall be evidenced by an agreement in a form approved by the Committee. The
terms and conditions of such Option agreement need not be identical with respect
to each Grantee, but each Option agreement will evidence on its face whether it
is an ISO, a NQSO, or both. For purposes of this Section, an Option shall be
deemed granted on the date the Committee selects an individual to be a Grantee,
determines the number of shares to be issued pursuant to such Option and
specifies the terms and conditions of the Option. Except as hereinafter
provided, Options granted pursuant to the Plan shall be subject to the following
terms and conditions set forth in this Section 6.
(b) PRICE AND EXERCISE. The purchase price of the shares of Common Stock
upon exercise of an ISO shall be no less than the Fair Market Value of the
shares of Common Stock at the time of grant of an ISO; provided, however, if an
ISO is granted to a person owning either directly (or through application of the
attribution rules under Code Section 318) shares of Common Stock of the Company
possessing more than 10% of the total combined voting power of all classes of
shares of Common Stock of the Company as defined in Code Section 422 ("10%
Stockholder"), the purchase price shall be equal to 110% of the Fair
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Market Value of the shares of Common Stock. The purchase price of the shares of
Common Stock upon exercise of a NQSO may be any price set by the Committee.
The purchase price shall be paid in United States dollars in cash or by
certified or cashier's check payable to the order of the Company at the time of
purchase. At the discretion of the Committee, the purchase price may be paid
with: (i) shares of Common Stock already owned by, and in the possession of, the
Grantee; or (ii) any combination of United States dollars or shares of Common
Stock of the Company. Any required withholding tax shall be paid by the Grantee
in full in accordance with the provisions of Section 12. Shares of Common Stock
of the Company used to satisfy the purchase price of an Option shall be valued
at their Fair Market Value. The purchase price shall be subject to adjustment,
but only as provided in Section 9 hereof.
Any vested Option may be exercised in full at one time by giving written
notice to the Company, which notice shall be signed and dated by the Grantee and
shall state the number of shares of Common Stock with respect to which the
Option is being exercised. The notice of the exercise of any Option shall be
accompanied by payment in full of the purchase price. If required by the
Company, such notice of exercise of an Option shall be accompanied by the
Grantee's written representation in accordance with Section 21. Upon such
demand, delivery of such representation prior to the delivery of any Common
Stock issued upon exercise of an Option shall be a condition precedent to the
right of the Grantee or such other person to purchase any shares of Common
Stock.
(c) VESTING. Options shall vest in accordance with the schedule
established for each Grantee; provided, however, that all Options awarded to a
Grantee shall vest immediately upon said Grantee's death or retirement as
defined herein or, upon any Change in Control as defined herein. The Committee
may accelerate the vesting schedule of any Award other than in the event of a
Change in Control.
(d) ADDITIONAL RESTRICTIONS ON EXERCISE OF AN ISO. The aggregate Fair
Market Value of Common Stock (determined at the time an ISO is granted) for
which an ISO is exercisable for the first time by a Grantee during any calendar
year (under all plans of the Company and its subsidiaries or parent) shall not
exceed $100,000. To the extent that the aggregate Fair Market Value of Common
Stock (determined at the time an ISO is granted) with respect to Options
designated as ISOs exercisable for the first time by a Grantee during any
calendar year (under all plans of the Company and its subsidiaries or parent)
exceeds $100,000, such Options shall be treated as NQSOs. The foregoing shall be
applied by taking Options into account in the order in which they were granted.
(e) DURATION OF OPTIONS. Options may be granted for terms of up to but not
exceeding ten (10) years from the effective date the particular Option is
granted; provided, however, that an ISO granted to a 10% Stockholder may be
granted for a term not exceeding five (5) years from the effective date the
particular ISO is granted.
If the stockholders of the Company have not approved the adoption of the
Plan prior to the end of one (1) year from the date the Plan is approved by the
Board, any Option granted under the Plan prior to such date shall be null and
void and the Company shall rescind the issuance of any shares of Common Stock
issued upon the exercise of such Options by a Grantee prior to such date. In the
event of such rescission, the Company shall refund the price paid per share of
Common Stock by the Grantee upon exercise of the Options upon receipt of the
certificate representing such shares.
(f) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the terms
and conditions and within the limitations of the Plan, the Committee may modify,
extend or renew outstanding Options granted under the Plan, or accept the
surrender of outstanding Options (up to the extent not theretofore exercised)
and authorize the granting of new Options in substitution therefor (up to the
extent not theretofore exercised). In addition to the limitations set forth in
Section 15, the Committee shall not, however, with respect to ISOs, modify any
outstanding Award so as to specify a lower Award price or accept the surrender
of outstanding Awards and authorize the granting of new Awards in substitution
therefor
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specifying a lower price. Notwithstanding the foregoing or anything herein, no
modification of an Award shall, without the consent of the Grantee, alter or
impair any rights or obligations under any Award theretofore granted under the
Plan nor shall any modification be made which shall adversely affect the status
of an ISO under Code Section 422.
(g) OTHER TERMS AND CONDITIONS. Awards may contain such other provisions,
which shall not be inconsistent with any of the foregoing terms, as the
Committee shall deem appropriate.
7. TERMINATION OF EMPLOYMENT. Upon the termination of a Grantee's
employment with the Company, any Award then held by such Grantee or Grantee's
estate may only be exercised as follows:
(a) RETIREMENT. If the Grantee's employment is terminated because he
or she has attained the age which the Company may from time to time
establish as the retirement age for any class of its employees, or in
accordance with the age specified in an employment agreement with a Grantee,
he or she may within three (3) months following such termination, exercise
the Award to the extent such Award is otherwise exercisable. However, in the
event of his or her death prior to the end of the three (3) month period
after the aforesaid termination of his or her employment, his or her estate
shall have the right to exercise the Award within one (1) year (but in no
event after the scheduled expiration of the term of the Award) following
such termination with respect to all or any part of the stock subject
thereto, to the extent such Award is exercisable.
(b) DEATH. If the Grantee's employment with the Company is terminated
by death, his or her estate shall have the right to exercise the Award
within one (1) year (but in no event after the scheduled expiration of the
term of the Award) following such termination with respect to all or any
part of the stock subject thereto, to the extent such Award is exercisable.
(c) DISABILITY. If the Grantee's employment with the Company is
terminated by disability, as defined in Code Section 22(e)(3), he or she, or
his or her legal representative shall have the right for a period of one (1)
year (but in no event after the scheduled expiration of the term of the
Award) following the date of such termination of employment to exercise any
Award with respect to all or any part of the stock subject thereto, to the
extent such Award is exercisable.
(d) OTHER REASONS. If the Grantee's employment with the Company is
terminated for any reason other than those provided above under
"Retirement", "Death" or "Disability", the Grantee or Grantee's estate in
the event of his or her death shall have the right for a period of three (3)
months (but in no event after the scheduled expiration of the term of the
Award) following the date of such termination of employment to exercise any
Award, with respect to all or any part of the stock subject thereto, to the
extent such Award is exercisable.
For purposes of this Section 7, "termination of employment" shall mean the
termination of a Grantee's employment with the Company or a subsidiary or a
parent within the meaning of Code Section 424. A Grantee employed by a
subsidiary shall also be deemed to have a termination of employment if the
subsidiary ceases to be a subsidiary of the Company, and the Grantee does not
immediately thereafter become an employee of the Company or of a subsidiary or
of a parent. A Grantee who is a member of the Board but who is not also an
employee of the Company shall be considered to have terminated his or her
employment at such time as he or she is no longer a member of the Board. Any
other Grantee who is not otherwise an employee of the Company shall be
considered to have terminated employment when substantial services, as
determined by the Committee, are no longer provided to the Company by the
Grantee.
Also for purposes of this Section 7, a Grantee's "estate" shall mean his or
her legal representatives upon his or her death or any person who acquires the
right to exercise an Award by reason of the Grantee's death. The Committee may
in its discretion require the transferee of a Grantee to supply it with written
notice of the Grantee's death or disability and to supply it with a copy of the
will (in the case of the
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Grantee's death) or such other evidence as the Committee deems necessary to
establish the validity of the transfer of an Option.
If a Grantee's employment with the Company is terminated after a Change in
Control, the provisions of Section 8 shall supersede the provisions of this
Section 7.
8. CHANGE IN CONTROL. In the event of a Change in Control (i) each Grantee
with an outstanding Option shall have the right at any time thereafter to
exercise the Option in full notwithstanding any waiting period, installment
period or other limitation or restriction in any agreement or in the Plan; and
(ii) each holder of an Option shall have the right, exercisable by written
notice to the Company, within sixty days after the Change in Control, to receive
in exchange for the surrender of the Option or any portion thereof to the extent
the Option is exercisable in accordance with clause (i) an amount of cash equal
to the difference between the Fair Market Value of the Common Stock on the date
of exercise and the exercise price of the Option.
9. ADJUSTMENT OF THE CHANGES IN THE STOCK.
(a) The total number and character of shares of Common Stock subject to
Awards, the number and character of shares of Common Stock subject to
outstanding Awards and/or the exercise price of such shares will be
appropriately adjusted by the Committee if the shares of Common Stock are
changed into or exchanged for a different number or kind of shares of stock or
other securities of the Company or of another corporation (whether by reason of
merger, consolidation, recapitalization, reclassification, split, reverse split,
combination of shares, or otherwise. The Committee may also make appropriate
adjustments in the event of a merger, consolidation, or other transaction or
event having a similar effect.
(b) The Company shall not be required to issue any fractional shares of
Common Stock pursuant to the Plan. Fractional shares resulting from any
adjustment in Awards pursuant to this Section 9 may be settled in cash or
otherwise as the Board shall determine.
(c) Notice of any adjustment shall be given by the Company to each holder of
an Award which shall have been so adjusted and such adjustment (whether or not
such notice is given) shall be effective and binding for all purposes of the
Plan.
(d) If another corporation is merged into the Company or the Company
otherwise acquires another corporation, the Board may elect to assume under the
Plan any or all outstanding stock options or other awards granted by such
corporation under any stock option or other plan adopted by it prior to such
acquisition. Such assumptions shall be on such terms and conditions as the
Committee may determine; provided, however, that the awards as so assumed do not
contain any terms, conditions or rights that are inconsistent with the terms of
this Plan. Unless otherwise determined by the Board, such awards shall not be
taken into account for purposes of the limitations contained in Section 5 of the
Plan.
10. TRANSFERABILITY OF AWARDS. An ISO shall be transferable only by will or
the laws of descent and distribution and shall be exercisable during the
Grantee's lifetime only by the Grantee or by the guardian or legal
representative of the Grantee acting in a fiduciary capacity on behalf of the
Grantee under state law and court supervision. A NQSO shall be transferable to
an inter-vivos trust, as well as, by will or the laws of descent and
distribution and shall be exercisable during the Grantee's lifetime only by the
Grantee, by the trustee of an inter-vivos trust, or by the guardian or legal
representative of the Grantee acting in a fiduciary capacity on behalf of the
Grantee under state law and court supervision. An Award is not subject, in whole
or in part, to attachment, execution or levy of any kind.
11. ADMINISTRATION.
(a) The Plan shall be administered by the Compensation Committee of the
Board which shall be composed of not less than two (2) members of the Board,
each of whom shall be an "outside director" within the meaning of Code Section
162(m) and the regulations and interpretations thereunder.
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(b) The Committee shall act by a majority of its members at the time in
office and eligible to vote on any particular matter, and such action may be
taken either by a vote at a meeting or in writing without a meeting.
(c) Subject to the provisions of the Plan, the Committee shall from time to
time and at its discretion take the following actions:
(i) grant Awards;
(ii) determine which employees, officers, directors and other
individuals performing substantial and important services may be granted
Awards under the Plan;
(iii) determine the type of Awards to be granted;
(iv) determine the number of shares subject to each Award;
(v) determine the term of each Award granted under the Plan;
(vi) determine the date or dates on which the Award granted shall be
exercisable;
(vii) determine the exercise price of any Award granted;
(viii) determine the Fair Market Value of the Common Stock subject to
the Awards granted;
(ix) determine the terms of any agreement pursuant to which Awards are
granted;
(x) amend any such agreement with the consent of the Grantee;
(xi) extend the exercise period of any Award;
(xii) accelerate the vesting period of any Award except in the event of
a Change in Control;
(xiii) establish performance-based goals within the meaning of Code
Section 162(m);
(xiv) establish such procedures as it deems appropriate for a recipient
of an Award hereunder to designate a beneficiary to whom any benefits
payable in the event of his or her death are to be made; and
(xv) determine any other matters specifically delegated to it under the
Plan or necessary for the proper administration of the Plan.
The Committee shall also have the final authority and discretion to
interpret and construe the terms of the Plan and of any Award granted and such
interpretation and construction by the Committee shall be final, binding and
conclusive upon all persons including, without limitation, the Company,
stockholders of the Company or any subsidiary, the Plan, and all persons
claiming an interest in the Plan. Notwithstanding anything contained in this
Section to the contrary, no term of the Plan relating to ISOs shall be
interpreted, nor shall any discretion or authority of the Committee be
exercised, so as to disqualify the Plan under Code Section 422 or, without the
consent of the Grantee, to disqualify any ISO under Code Section 422 or in a
manner inconsistent with Rule 16b-3.
(d) No member of the Committee or director shall be liable for any action,
interpretation or construction made in good faith with respect to the Plan or
any Award granted hereunder.
12. TAX WITHHOLDING. The Company shall have the right to deduct from any
cash payment made under the Plan any federal, state or local income or other
taxes required by law to be withheld with respect to such payment. It shall be a
condition to the obligation of the Company to deliver shares or securities of
the Company upon exercise of an Award, that the Grantee of such Award pay to the
Company such amount as may be requested by the Company for the purpose of
satisfying any liability for such withholding taxes. The Committee may, in its
sole discretion, permit the Grantee of an Award, in accordance with any
applicable regulations of the authority issuing such regulations, to pay a
portion or all of the amount of such
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minimum required or additional permitted withholding taxes in shares. At the
Committee's sole discretion, the Grantee shall be permitted to authorize the
Company to withhold, or shall agree to surrender back to the Company, on or
about the date such withholding tax liability is determinable, shares previously
owned by such Grantee or a portion of the shares that were or otherwise would be
distributed to such Grantee pursuant to such Award having a Fair Market Value
equal to the amount of such required or permitted withholding taxes to be paid
in shares.
13. SECURITIES LAW REQUIREMENTS.
(a) No Award granted pursuant to this Plan shall be exercisable in whole or
in part, nor shall the Company be obligated to acquire or sell any shares of
Common Stock subject to any such Option, if such exercise, acquisition and sale
would, in the opinion of counsel for the Company, violate the Act (or other
federal or state statutes having similar requirements), as it may be in effect
at that time. In this regard, the Committee may demand the representations
described in Sections 6(b) and 21.
(b) Each Award shall be subject to the further requirement that, if at any
time the Committee shall determine in its discretion that the listing or
qualification of the shares of Common Stock subject to such Award under any
securities exchange requirements or under any applicable law, or the consent or
approval of any governmental regulatory body, is necessary as a condition of, or
in connection with, the granting of such Award or the issue of shares
thereunder, such Award may not be exercised in whole or in part, unless such
listing, qualification, consent or approval shall have been affected or obtained
free of any conditions not acceptable to the Board.
(c) No person who acquires shares of Common Stock under the Plan may, during
any period of time that such person is an affiliate of the Company within the
meaning of the rules and regulations of the Securities and Exchange Commission
under the Act, sell such shares of Common Stock, unless such offer and sale is
made (i) pursuant to an effective registration statement under the Act, which is
current and includes the shares to be sold, or (ii) pursuant to an appropriate
exemption from the registration requirement of the Act, such as that set forth
in Rule 144 promulgated under the Act.
(d) With respect to any Reporting Person, transactions under the Plan are
intended to comply with all applicable conditions of Rule 16b-3. To the extent
any provision of the Plan or any action by an authority under the Plan fails to
so comply, such provision or action shall, without further action by any person,
be deemed to be automatically amended to the extent necessary to effect
compliance with Rule 16b-3, provided that if such provision or action cannot be
amended to effect such compliance, such provision or action shall be deemed null
and void, to the extent permitted by law and deemed advisable by the appropriate
authority. Each Award to a Reporting Person under the Plan shall be deemed
issued subject to the foregoing qualification.
14. FOREIGN PARTICIPANTS. In order to facilitate the making of an Award and
to foster and promote achievement of the purposes of the Plan, the Committee may
provide for such special terms for Awards to Grantees who are foreign nationals,
or who are employed by the Company outside of the United States of America, as
the Committee may consider necessary or appropriate to accommodate differences
in local law, tax policy or custom. Moreover, the Committee may approve such
supplements to, or amendments, restatements or alternative versions of this Plan
as in effect for any other purpose, and the Secretary or other appropriate
officer of the Company may certify any such document as having been approved and
adopted in the same manner as the Plan; provided, however, that no such
supplements, amendments, restatements or alternative versions shall include any
provisions that are inconsistent with the terms of the Plan, as then in effect,
unless the Plan could have been amended to eliminate the inconsistency without
further approval by the stockholders of the Company.
15. AMENDMENT OR TERMINATION OF THE PLAN. The Board may amend or terminate
the Plan at any time, except that approval of the holders of a majority of the
outstanding voting stock of the Company is required for amendments which:
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(i) decrease the minimum exercise price for ISOs;
(ii) extend the term of the Plan beyond ten (10) years;
(iii) extend the maximum terms of the Awards granted hereunder beyond
(10) ten years;
(iv) withdraw the administration of the Plan from the Committee
appointed pursuant to Section 11;
(v) change the class of eligible employees, officers, directors and
other Grantees;
(vi) increase the aggregate number of shares of Common Stock which may
be issued pursuant to the provisions of the Plan; and
(vii) otherwise require stockholder approval to comply with Rule 16b-3
or any other applicable law, regulation, or listing requirement or to
qualify for an exemption or characterization that is deemed desirable by the
Board.
Notwithstanding the foregoing, the Board may, without the need for
stockholders' approval, amend the Plan in any respect to qualify ISOs as
incentive stock options under Code Section 422.
No amendment or termination of the Plan shall, without the written consent
of the Grantee, alter the terms of Options already granted and such options
shall remain in full force and effect as if the Plan had not been terminated.
Any Award that may be made pursuant to an amendment to the Plan that shall
have been adopted without the approval of the stockholders of the Company shall
be null and void as to persons subject to Section 16(a) of the Act if it is
subsequently determined that such approval was required in order for the Plan to
continue to satisfy the applicable conditions of Rule 16b-3.
Furthermore, technical or clarifying amendments shall be made by the
Committee, not the Board.
16. NO OBLIGATION TO EXERCISE OPTION. The granting of an Award shall impose
no obligation upon the Grantee (or upon a transferee of a Grantee) to exercise
such Award.
17. NO LIMITATION ON RIGHTS OF THE COMPANY. The grant of any Award shall
not in any way affect the right or power of the Company to make adjustments,
reclassification, or changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
18. PLAN NOT A CONTRACT OF EMPLOYMENT. The Plan is not a contract of
employment, and the terms of employment of any recipient of any Award hereunder
shall not be affected in any way by the Plan or related instruments except as
specifically provided therein. The establishment of the Plan shall not be
construed as conferring any legal rights upon any recipient of any Award
hereunder for a continuation of employment, nor shall it interfere with the
right of the Company or any subsidiary to discharge any recipient of any Award
hereunder and to treat him or her without regard to the effect which such
treatment might have upon him or her as the recipient of any Award hereunder.
19. EXPENSES OF THE PLAN. All of the expenses of the Plan shall be paid by
the Company.
20. FUNDING. The Plan shall be unfunded and shall not create (or be
construed to create) a trust or a separate fund or funds. The Plan shall not
establish any fiduciary relationship between the Company and any Grantee or
other person. To the extent any person holds any rights by virtue of an Award
granted under the Plan, such rights shall be no greater than the rights of an
unsecured general creditor of the Company.
21. COMPLIANCE WITH APPLICABLE LAW. Notwithstanding anything herein to the
contrary, the Company shall not be obligated to cause to be issued or delivered
any certificates for shares of Common Stock
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pursuant to the exercise of an Option, unless and until the Company is advised
by its counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental authority and
the requirements of any exchange upon which shares of Common Stock are traded
including, without limitation, any legends that are required on such stock
certificates. The Company shall in no event be obligated to register any
securities pursuant to the Act (as now in effect or as hereafter amended) or to
take any other action in order to cause the issuance and delivery of such
certificates to comply with any such law, regulation or requirement.
The Committee may require, as a condition of the issuance and delivery of
such certificates and in order to ensure compliance with such laws, regulations
and requirements, that the recipient of any Award hereunder make such covenants,
agreements and representations as the Committee, in its sole discretion, deems
necessary or desirable, including, without limitation, a written representation
from a stockholder that the stock is being purchased for investment and not for
distribution, acknowledging that such shares have not been registered under the
Act, as amended and agreeing that such shares may not be sold or transferred
unless there is an effective Registration Statement for them under the Act, or,
in the opinion of counsel to the Company, that such sale or transfer is not in
violation of the Act.
22. EFFECT UPON OTHER COMPENSATION. Nothing contained herein shall prevent
the Company or any subsidiary from adopting other or additional compensation
arrangements for its employees or directors. The effect under any other benefit
plan of the Company of an inclusion in income by virtue of an Award hereunder
shall be determined under such other plan.
23. GRANTEE TO HAVE NO RIGHTS AS A STOCKHOLDER. No Grantee of any Option
shall have any rights as a stockholder with respect to any shares subject to his
or her Option prior to the date on which he or she is recorded as the holder of
such shares on the records of the Company. No Grantee of any Option shall have
the rights of a stockholder until he or she has paid in full the Option price.
24. NOTICE. Notice to the Committee shall be deemed given if in writing and
mailed to Howard Finkelstein, President, c/o Metromedia Fiber Network Services,
Inc., One North Lexington Avenue, White Plains, New York 10601 by first class,
certified mail. Notice to the Grantee or the Grantee's estate, if applicable,
shall be given by registered mail to such person's last known address.
25. GOVERNING LAW. Except to the extent preempted by federal law, this Plan
and all Option agreements entered into pursuant thereto shall be construed and
enforced in accordance with, and governed by, the laws of the State of New York
determined without regard to its conflict of law rules.
26. SUCCESSORS AND ASSIGNS. The Plan shall be binding on and inure to the
benefit of the Company and the employees to whom an Award is granted hereunder,
and such employees' heirs, executors, administrators, legatees, trustees,
personal representatives, assignees and transferees (where permitted).
27. DELIVERY OF THE PLAN. A copy of this Plan shall be delivered to the
Secretary of the Company and shall be shown by him to each eligible person
making reasonable inquiry concerning it. A copy of this Plan also shall be
delivered to each Grantee at the time his or her Award is granted.
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PROXY
METROMEDIA FIBER NETWORK, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS, MAY 18, 1998
The undersigned hereby appoints Gerard Benedetto, Dennis E. Codlin and
Arnold L. Wadler, and each of them, with full power of substitution, the true
and lawful attorneys in fact, agents and proxies of the undersigned to vote at
the annual meeting (the "Annual Meeting") of the Stockholders of Metromedia
Fiber Network, Inc. ("MFNX"), to be held on May 18, 1998, commencing at 10:00
a.m., local time, in the Concourse Level, 1285 Avenue of the Americas, New York,
New York 10019, and any and all adjournments thereof, all the shares of Class A
common stock, par value $.01 per share, of MFNX ("Class A Common Stock")
according to the number of votes which the undersigned would possess if
personally present, for the purposes of considering and taking action upon the
following, as more fully set forth in the Proxy Statement of MFNX, dated April
8, 1998.
(PLEASE DATE AND SIGN ON THE REVERSE SIDE)
<PAGE>
/X/ Please mark your votes as indicated on this sample
<TABLE>
<S> <C> <C>
1. Election of Director--Nominees: Howard M. Finkelstein, Stephen A. Garofalo and
Vincent A. Galluccio
FOR all nominees (except as noted to the
contrary). / / WITHHOLD AUTHORITY to vote for all
nominees. / /
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE ABOVE LIST.)
Nominee Exception
2. The adoption of the Metromedia Fiber Network, Inc 1998 Incentive Stock Plan.
/ / FOR / / AGAINST / / ABSTAIN
<CAPTION>
1.
(I
2.
<CAPTION>
</TABLE>
<TABLE>
<S> <C> <C>
3. The ratification of the appointment of Ernst & Young, LLP as independent auditors
for the year ending December 31, 1998
/ / FOR / / AGAINST / / ABSTAIN
<CAPTION>
3.
<CAPTION>
</TABLE>
<TABLE>
<S> <C>
Date: , 1998
- -------------------------------------------------------------------
Signature
- -------------------------------------------------------------------
Please Print Name Here
- -------------------------------------------------------------------
Signature
- -------------------------------------------------------------------
Please Print Name Here
IMPORTANT: Please sign exactly as name appears on this card. Each
joint owner should sign. Executors, administrators, trustees, etc.
should give the full title.
</TABLE>
THIS PROXY WHEN PROPERLY EXECUTED WILL VOTE IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE ELECTION OF THE NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2 AND 3. IN THEIR
DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT THEREOF.
