<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:
/X/ Preliinary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or 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, 10601
April 9, 1999
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., which will be held on the Concourse Level at 1285 Avenue of the
Americas, New York, New York 10019 at 10:00 a.m., Eastern Standard Time, on
Tuesday, May 18, 1999. 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. All stockholders will be
asked to vote on proposals to amend Metromedia Fiber Network's Amended and
Restated Certificate of Incorporation to increase the number of authorized
shares of common stock, par value $.01 per share, from 200,000,000 to
2,680,000,000 consisting of (a) 2,405,000,000 shares of class A common stock and
(b) 275,000,000 shares of class B common stock, to ratify the selection of Ernst
& Young LLP as our independent accountants for the year ending December 31, 1999
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,
/s/ Stephen A. Garofalo
--------------------------------------------------------------
Stephen A. Garofalo
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
<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, 1999
------------------------
TO THE STOCKHOLDERS OF
METROMEDIA FIBER NETWORK, INC.:
WE HEREBY NOTIFY YOU that we will hold the 1999 annual meeting of
stockholders of Metromedia Fiber Network, Inc., a Delaware corporation, on
Tuesday, May 18, 1999, at 10:00 a.m., eastern standard time, on the Concourse
Level, 1285 Avenue of the Americas, New York, New York.
At the annual meeting, we will ask holders of our class A common stock, par
value $.01 per share, to consider and vote as a separate class upon the election
of three members to Metromedia Fiber Network's board of directors to serve a
one-year term as class A directors (Proposal 1). We will also ask holders of our
class A common stock together with holders of our class B common stock, par
value $.01 per share, to consider and vote as a single class upon the amendment
to our Amended and Restated Certificate of Incorporation to increase the number
of authorized shares of common stock from 200,000,000 shares to 2,680,000,000
shares consisting of (a) 2,405,000,000 shares of class A common stock and (b)
275,000,000 shares of class B common stock (Proposal 2), and the ratification of
the selection of Ernst & Young LLP as our independent accountants for the year
ending December 31, 1999 (Proposal 3), and 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 annual meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" PROPOSALS NO. 1, 2 AND 3 TO BE PRESENTED TO STOCKHOLDERS AT THE ANNUAL
MEETING.
Only stockholders of record at the close of business on March 31, 1999, 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 the law offices of Paul Weiss Rifkind Wharton & Garrison, LLP, 1285 Avenue of
the Americas, New York, New York 10019. If you wish to view the list of
stockholders, please contact the Secretary's Office at 201-531-8043.
We hope that you will be able to attend the annual meeting in person.
However, whether or not you plan to attend the annual meeting in person, please
complete, sign, date and mail the enclosed proxy in the return envelope to
assure that your shares are represented and voted at the annual meeting. If you
do attend the annual meeting in person, you may revoke your proxy if you wish
and vote your shares in person. Thank you for your cooperation and continued
support.
By Order of the board of directors,
/s/ Arnold. L. Wadler
------------------------------------------------------------
Arnold L. Wadler
SECRETARY
White Plains, New York
April 9, 1999
<PAGE>
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING REGARDLESS OF
THE NUMBER OF SHARES YOU HOLD IN ORDER THAT WE HAVE A QUORUM, 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 THE SENDER
NEED AFFIX NO POSTAGE IF MAILED WITHIN THE UNITED STATES). IF YOU RECEIVE MORE
THAN ONE PROXY BECAUSE YOUR SHARES ARE REGISTERED IN DIFFERENT NAMES OR
ADDRESSES, YOU SHOULD SIGN AND RETURN EACH SUCH PROXY TO ASSURE THAT YOU VOTE
ALL OF YOUR SHARES. ALL REGISTERED HOLDERS SHOULD SIGN THE PROXY 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, 1999
------------------------
We are furnishing this proxy statement to the holders of shares of class A
common stock, par value $0.01 per share and of class B common stock, par value
$.01 per share of Metromedia Fiber Network, Inc., a Delaware corporation in
connection with the solicitation of proxies by our board of directors for use at
our annual meeting of the stockholders to be held at 10:00 a.m. eastern standard
time on Tuesday, May 18, 1999 on the Concourse Level, 1285 Avenue of the
Americas, New York, New York and any adjournments of the meeting. We are mailing
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, 1998, to the
stockholders of the Company on or about April 12, 1999.
INFORMATION REGARDING THE ANNUAL MEETING
GENERAL. We are furnishing this proxy statement to holders of common stock
in connection with the solicitation of proxies by our board of directors for use
at the annual meeting, and any adjournments thereof. Each copy of this Proxy
Statement being mailed or delivered to our stockholders is accompanied by a
proxy card and the Notice of Annual Meeting of Stockholders. Our Annual Report
to Stockholders and Annual Report on Form 10-K, including financial statements
for the year ended December 31, 1998, accompany but do not constitute part of
this Proxy Statement.
PROPOSALS. We will hold the annual meeting on the Concourse Level at 1285
Avenue of the Americas, New York, New York, on Tuesday, May 18, 1999, beginning
at 10:00 a.m., Eastern Standard Time. At the annual meeting, we will ask holders
of our class A common stock to consider and vote as a separate class upon the
election of three members to our board of directors to serve a one-year term as
class A directors (Proposal 1). We will also ask holders of the class A common
stock together with holders of the class B common stock to consider and vote as
a single class upon an amendment to our Amended and Restated Certificate of
Incorporation increasing the number of authorized shares of our common stock
from 200,000,000 shares to 2,680,000,000 shares consisting of (a) 2,405,000,000
shares of class A common stock and (b) 275,000,000 shares of class B common
stock, (Proposal 2), the ratification of the selection of Ernst & Young LLP as
our independent accountants for the year ending December 31, 1999 (Proposal 3),
and such other matters as may properly come before the annual meeting.
Our board of directors knows of no business that will be presented for
consideration at the annual meeting other than the matters described in this
Proxy Statement.
PROXIES. The proxies named on the accompanying proxy cards will vote the
shares that are subject to all properly executed proxy cards delivered pursuant
to this solicitation and not revoked at the annual meeting in accordance with
the directions given. In voting by proxy with regard to the election of
directors, you may vote in favor of all nominees, withhold your votes as to all
nominees or withhold your votes as to specific nominees. With regard to other
proposals, you may vote in favor of each proposal or against each proposal, or
in favor of some proposals and against others, or you may abstain from voting on
any or all proposals. You should specify your respective choices on the
accompanying proxy card. If you do not give specific instructions with regard to
the matters to be voted upon, the proxies will vote the shares of class A common
stock represented by a signed proxy card "FOR" Proposal 1 and the shares of
common stock represented by a signed proxy card will be voted "FOR" Proposals 2
and 3, each as listed on the proxy card.
<PAGE>
If any other matters properly come before the annual meeting, the 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 our corporate Secretary, 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. You should
address any written notices of revocation and other communications with respect
to revocations of proxies to: Metromedia Fiber Network, Inc., c/o Metromedia
Company, One Meadowlands Plaza, East Rutherford, New Jersey 07073, Attention:
Arnold L. Wadler, Secretary.
We will initially solicit proxies by mail, but directors, officers and
selected employees may solicit proxies from you personally or by telephone,
facsimile or other forms of communication. Such directors, officers and
employees will not receive any additional compensation for such solicitation. We
also will request brokerage houses, nominees, fiduciaries and other custodians
to forward soliciting materials to beneficial owners, and we 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 us.
RECORD DATE; QUORUM. Only holders of record of common stock as of the close
of business on March 31, 1999, 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 77,742,970 shares of class A
common stock outstanding and entitled to vote at the annual meeting, held by
approximately 129 stockholders of record, which number includes nominees for an
indeterminable number of beneficial owners, with each share entitled to one
vote, and 16,884,636 shares of class B common stock outstanding and entitled to
vote at the annual meeting held by three 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 will 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). We will consider shares as to
which a broker indicates it has no discretion to vote and which are not voted as
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, we will disregard and they 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 our 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 three 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(1)
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides you with certain information, as of March 31,
1999, the record date, regarding the beneficial ownership of our voting stock
after giving effect to the stock splits by (i) each of our directors and
director nominees, (ii) each person whom we believe beneficially owns more than
5% of our outstanding voting stock, (iii) each named executive officer and (iv)
all our executive officers and directors as a group. In accordance with the
rules promulgated by the Securities and Exchange 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 through the
exercise of options, warrants or other rights, 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 of the shares beneficially
owned by such person.
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK(1)
------------------------------- -------------------------------
<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..................... 22,747,756(2) 28.7% -- -- 9.2%
Metromedia Company...................... -- * 15,731,024 93.2% 63.8%(3)
Putnam Investments, Inc................. 14,528,030(4) 18.7% -- -- 5.9%
FMR. Corp............................... 6,672,000(5) 8.6% -- -- 2.7%
Howard M. Finkelstein................... 6,109,000(6) 7.3% -- -- 2.4%
Peter Sahagen........................... 4,616,120(7) 5.9% -- -- 1.9%
Vincent A. Galluccio.................... 715,920(8) * -- -- *
Gerard Benedetto........................ 102,000(9) * -- -- *
Nicholas M. Tanzi....................... 138,440(10) * -- -- *
Silvia Kessel........................... 255,236(11) * -- -- *
John W. Kluge........................... 1,014,000(12) 1.3% 15,731,024(13) 93.2% 63.5%
David Rockefeller....................... 1,414,552(14) 1.8% -- -- *
Stuart Subotnick........................ 1,014,000(12) 1.3% 16,884,636(13) 100.0% 68.5%
Arnold L. Wadler........................ 307,672(11) * -- -- *
Leonard White........................... 23,000(15) * -- -- *
All Directors and Executive Officers as
a Group............................... 33,841,576(16) 43.8% 16,884,636 100.0% 65.5%
</TABLE>
- ------------------------
* less than 1.0%
(1) 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.
(2) Includes presently exercisable options to purchase 1,521,000 shares of class
A common stock at an exercise price of $.49 per share. Mr. Garofalo's
address is One North Lexington Avenue, White Plains, New York 10601.
(3) Metromedia Company's address is One Meadowlands Plaza, East Rutherford, NJ
07073.
(4) Based solely upon the Schedule 13-G, dated February 2, 1999, filed by Putnam
Investments, Inc. The Putnam Investments, Inc. address is One Post Office
Square, Boston, Massachusetts, 02109.
- ------------------------
(1) To be updated as of record date.
3
<PAGE>
(5) Based solely on the Schedule 13-G, dated February 16, 1999 filed by FMR
Corp., Edward C. Johnson III and Abigail P. Johnson. FMR's address is 82
Devonshire Street, Boston, Massachusetts 02109.
(6) Includes presently exercisable options to 6,084,000 shares of class A common
stock at an exercise price of $.49 per share and 25,000 shares of class A
common stock owned by members of Mr. Finkelstein's family. Mr. Finkelstein's
address is One North Lexington Avenue, White Plains, New York 10601.
(7) All of such shares are owned by an entity controlled by Mr. Sahagen. Mr.
Sahagen's address is 3590 South Beech Blvd., South Palm Beach, FL 33480.
(8) Represents presently exercisable options to purchase 640,920 and 75,000
shares of class A common stock at an exercise price of $.49 and $4.00 per
share, respectively.
(9) Includes presently exercisable options to purchase 100,000 shares of class A
common stock at an exercise price of $3.88 per share.
(10) Includes presently exercisable options to purchase 60,840 and 75,000 shares
of class A common stock at an exercise price of $1.91 and $4.00 per share,
respectively. Also, includes 2,600 shares of class A common stock owned by
members of Mr. Tanzi's family to which Mr. Tanzi has been granted a proxy
to vote. Mr. Tanzi's address is One North Lexington Avenue, White Plains,
New York 10601.
(11) Includes 202,800 presently exercisable options to acquire shares of class A
common stock at an exercise price of $.49 per share held by each of Ms.
Kessel and Mr. Wadler. Does not include shares owned by Metromedia Company.
Ms. Kessel and Mr. Wadler are employed by Metromedia Company and disclaim
beneficial ownership of the shares owned by Metromedia Company.
(12) Consists of 1,014,000 presently exercisable options to acquire shares of
class A common stock at an exercise price of $.49 per share 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.
(13) Includes 15,731,024 shares owned by Metromedia Company. Messrs. Kluge and
Subotnick, Directors of Metromedia Fiber Network, are general partners of
Metromedia Company.
(14) Represents 1,394,552 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 20,000
shares of class A common stock at an exercise price of $4.00 per share. 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.
(15) Includes 20,000 presently exercisable options to acquire shares of class A
common stock at an exercise price of $4.00 per share.
(16) Includes presently exercisable options to acquire 10,679,520, 60,840,
100,000 and 190,000 shares of class A common stock at an exercise price of
$.49, $1.91, $3.88 and $4.00 per share, respectively.
4
<PAGE>
DIRECTORS AND OFFICERS
The following table sets forth certain information regarding the directors
and executive officers of Metromedia Fiber Network:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Stephen A. Garofalo.................................. 47 Chairman of the Board and Chief Executive Officer
Howard M. Finkelstein................................ 45 President, Chief Operating Officer and Director
Vincent A. Galluccio................................. 53 Senior Vice President and Director
Gerard Benedetto..................................... 42 Vice President--Chief Financial Officer
Charlotte G. Denenberg............................... 51 Vice President--Chief Technology Officer
Nicholas M. Tanzi.................................... 40 Vice President--Sales
Silvia Kessel........................................ 48 Executive Vice President and Director
John W. Kluge........................................ 84 Director
David Rockefeller.................................... 83 Director
Stuart Subotnick..................................... 56 Director
Arnold L. Wadler..................................... 55 Executive Vice President, General Counsel, Secretary
and Director
Leonard White........................................ 59 Director
</TABLE>
DIRECTORS OF METROMEDIA FIBER NETWORK
The board of directors of Metromedia Fiber Network 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. The directors are elected by a
plurality vote of all votes cast at each annual meeting of stockholders of
Metromedia Fiber Network entitled to vote for such directors. The directors 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.
Galluccio, 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 Metromedia Fiber Network's directors,
including biographical information, see "PROPOSAL NO. 1 ELECTION OF DIRECTORS."
MEETINGS AND CERTAIN COMMITTEES OF THE BOARD
The board of directors held three regular meetings during 1998. In addition,
the board of directors took action by unanimous written consent three times in
1998. 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 except John W. Kluge attended less than 75% of such
meetings.
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 Metromedia Fiber Network'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
Metromedia Fiber Network's independent auditors and Metromedia Fiber Network's
internal auditors, the plan and results of the annual external audit, the
adequacy of Metromedia Fiber Network's internal control systems and the results
of Metromedia Fiber Network's internal audit and (d) reviewing with management
and Metromedia Fiber Network's independent auditors Metromedia Fiber Network's
annual financial statements, financial reporting practices and the results of
such external audit. The Audit Committee held three regular meetings during 1998
and took action by unanimous written consent one time during 1998. 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 Metromedia Fiber Network's
executive officers and other key personnel and to administer Metromedia Fiber
Network's stock option plans. The Compensation Committee held one meeting during
1998 and took action by unanimous written consent ten times during 1998. 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 Metromedia Fiber Network Stockholders follow
procedures specified in Metromedia Fiber Network's By-laws. These procedures
provide that, in order to nominate an individual to the board of directors, a
Metromedia Fiber Network Stockholder must provide timely notice of such
nomination in writing to the Secretary of Metromedia Fiber Network 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 Metromedia Fiber Network 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 Metromedia Fiber Network 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 will 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 Metromedia Fiber Network with the Commission pursuant to
Sections 13, 14 or 15(d) of the Exchange Act. Any such nominations should be
submitted in writing to Metromedia Fiber Network, 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 1998. The current members of the
Nominating Committee are Arnold L. Wadler, Vincent A. Galluccio and Silvia
Kessel.
6
<PAGE>
COMPENSATION OF DIRECTORS
During 1998, each director of Metromedia Fiber Network who was not an
officer, employee or affiliate of Metromedia Fiber Network will be entitled to
receive a $20,000 annual retainer plus a separate attendance fee of $1,200 for
each meeting of the board of directors attended a in person or $500 for each
meeting of the board of directors in which this non-employee director
participated by conference telephone call. Members of committees of the board of
directors are paid $500 for each meeting attended. In addition, Metromedia Fiber
Network's 1997 and 1998 Incentive Stock Plans entitle any non-employee director
who meets the criteria for "outside director" under Section 162(m) of the
Internal Revenue Code ("Independent Directors") and who first serves on the
board of directors after the adoption of the 1997 or 1998 Incentive Stock Plan
to receive awards under such plan of 20,000 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 will not exceed 20,000 shares of Class
A Common Stock. Under the 1997 Incentive Stock Plan, each non-employee Director
who was a director of Metromedia Fiber Network on October 28, 1997 was granted
an option to purchase 20,000 shares of Metromedia Fiber Network's common stock
at an exercise price of $4.00, the price of the Class A Common Stock on the date
of our initial public offering. Options granted to these non-employee outside
directors fully vested and became exercisable as to all 20,000 shares on the
date of grant.
In addition, on August 20, 1997, Metromedia Fiber Network granted to each of
Mr. Kluge and Mr. Subotnick options to purchase 1,014,000 shares of Class A
Common Stock at an exercise price of $.49 per share and to each of Mr. Wadler
and Ms. Kessel options to purchase 202,800 shares of Class A Common Stock at an
exercise price of $.49 per share.
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
Metromedia Fiber Network'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 Corporation.
CHARLOTTE G. DENENBERG has served as Vice President-Chief Technology Officer
since December 1998. Prior to joining Metromedia Fiber Network, Ms. Denenberg
was employed by Southern New England Telecommunications Corporation ("SNET"),
since 1987 in a variety of positions. Ms. Denenberg held the position of Chief
Technology Officer for SNET from 1994 to November 1998. Before SNET, Ms.
Denenberg was employed by ITT Corporation as Director-Technology Evaluation.
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.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information on
compensation awarded to, earned by or paid to the Chief Executive Officer and
Metromedia Fiber Network's four other most highly compensated executive officers
whose individual compensation exceeded $100,000 during the years ended
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December 31, 1998, December 31, 1997 and December 31, 1996 for services rendered
in all capacities to Metromedia Fiber Network's and its subsidiaries. The
persons listed in the table below are referred to as the "named executive
officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------------- ---------------------------------
NUMBER OF
SHARES
OTHER ANNUAL UNDERLYING ALL OTHER
COMPENSATION STOCK COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) OPTIONS(2) ($)
- ---------------------------------------- ---- --------- -------- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Stephen A. Garofalo..................... 1998 328,385 100,000 23,301 -- --
Chairman and Chief 1997 295,000 50,000 14,157 1,521,000(3) --
Executive Officer 1996 225,000 -- -- -- --
Howard M. Finkelstein................... 1998 321,462 100,000 24,074 -- --
President and Chief 1997 196,756 50,000 11,769 6,084,000(5) --
Operating Officer(4) 1996 -- -- -- -- --
Vincent A. Galluccio.................... 1998 183,400 15,000 1,673 150,000(6) --
Senior Vice President 1997 181,522 -- -- 1,240,920(7) --
1996 127,087 -- -- -- --
Gerard Benedetto........................ 1998 181,423 -- 3,355 550,000(9) --
Vice President-Chief 1997 -- -- -- -- --
Financial Officer(8) 1996 -- -- -- -- --
Nicholas M. Tanzi....................... 1998 158,000 65,000 2,819 150,000(6) --
Vice President-Sales(10) 1997 -- -- -- 360,840(11) --
1996 -- -- -- -- --
</TABLE>
- ------------------------
(1) Includes amounts paid as automobile allowance, insurance premiums and 401(k)
matching funds.
(2) This information gives effect to our stock splits.
(3) Includes presently exercisable options to purchase 1,521,000 shares of class
A common stock at an exercise price of $.49 per share.
(4) Officer was hired by Metromedia Fiber Network during 1997, thus preceding
year's compensation is not applicable.
(5) Includes presently exercisable options to purchase 6,084,000 shares of class
A common stock at an exercise price of $.49 per share.
(6) Includes options to purchase 150,000 shares of class A common stock at an
exercise price of $10.50 per share that will become exercisable ratably over
a four year period commencing August 31, 1999.
(7) Includes presently exercisable options to purchase 640,920 shares of class A
common stock at an exercise price of $.49 per share and the options to
purchase 150,000 shares of class A common stock which the officer exercised
during 1998. Also, includes options to purchase 300,000 shares of class A
common stock at an exercise price of $4.00 per share that will become
exercisable ratably over a four year period commencing October 28, 1998.
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<PAGE>
(8) Officer was hired by Metromedia Fiber Network during 1998, thus preceding
years' compensation is not applicable.
(9) Includes options to purchase 400,000 and 150,000 shares of class A common
stock at an exercise price of $3.88 and $10.50 per share that will become
exercisable ratably over a four year period commencing January 6, 1999 and
August 31, 1999, respectively.
(10) Officer was hired by Metromedia Fiber Network during 1997, thus preceding
year's compensation is not applicable. Compensation information for 1997 is
omitted because aggregate compensation during such fiscal year was less
than $100,000.
(11) Includes presently exercisable options to purchase 60,840 shares of class A
common stock at an exercise price of $1.91 per share and options to
purchase 300,000 shares of class A common stock at an exercise price of
$4.00 per share that will become exercisable ratably over a four year
period commencing October 28, 1998.
During 1998 and 1997, Mr. Wadler and Ms. Kessel, each of whom serves as an
executive officer of Metromedia Fiber Network, were employed and paid by
Metromedia Company pursuant to a management agreement with Metromedia Company
dated as of January 2, 1998. Please refer to the section in this Proxy Statement
entitled "Certain Relationships and Related Transactions-Recent
Transactions-Management Agreement." Metromedia Fiber Network did not pay any
other amounts to the named executive officers during 1998 or 1997.
OPTION/SAR GRANTS
DURING THE YEAR ENDED DECEMBER 31, 1998
The following table sets forth individual grants of stock options by
Metromedia Fiber Network pursuant to the Company's 1997 and 1998 Incentive Stock
Plans or otherwise to the named executive officers during the fiscal year ended
December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL GRANT
SECURITIES GRANTED TO EXERCISE DATE
UNDERLYING EMPLOYEES PRICE EXPIRATION VALUATION
NAME OPTIONS GRANTED (#) IN FISCAL YEAR ($/SH) DATE ($)(1)
- ---------------------------------------------- ------------------- --------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Stephen A. Garofalo........................... -- -- -- -- --
Howard M. Finkelstein......................... -- -- -- -- --
Vincent A. Galluccio.......................... 150,000 2.9 10.50 8/31/08 1,083,000
Gerard Benedetto.............................. 400,000 7.8 3.88 1/6/08 1,064,000
150,000 2.9 10.50 8/31/08 1,083,000
Nicholas M. Tanzi............................. 150,000 2.9 10.50 8/31/08 1,083,000
</TABLE>
- ------------------------
(1) The modified Black-Scholes method of option valuation has been used to
determine grant date present value. The assumptions used in the
Black-Scholes option valuation calculations are (i) an estimated future
annual stock price volatility of 50%; (ii) a ten-year strip rate of 5.92%;
(iii) a future dividend yield of 0%; and (iv) an expected life of ten years.
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<PAGE>
AGGREGATED OPTION EXERCISES IN 1998
AND FISCAL YEAR-END OPTION AND SAR VALUES
The following table sets forth information concerning the exercise of
options by the named executive officers during the 1998 fiscal year and the
number of unexercised options and SARs beneficially held by such officers as of
the end of the 1998 fiscal year.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES VALUE OPTIONS AND SARS IN THE MONEY OPTIONS/SARS
ACQUIRED REALIZED AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
NAME ON EXERCISE ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ------------------------------- ----------- -------------- ----------------------- --------------------------
<S> <C> <C> <C> <C>
Stephen A. Garofalo............ -- -- 1,521,000/0 50,953,500/ -
Howard M. Finkelstein.......... -- -- 6,084,000/0 203,814,000/ -
Vincent A. Gallucio............ 300,000 2,331,631 715,920/375,000 23,983,320/12,562,500
Gerard Benedetto............... -- -- 100,000/450,000 3,350,000/15,075,000
Nicholas M. Tanzi.............. -- -- 135,840/375,000 4,550,640/12,562,500
</TABLE>
- ------------------------
(1) Calculated based on a closing price for the Class A Common Stock of $33.50
per share reported by the Nasdaq National Market on December 31, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
HISTORICAL TRANSACTIONS
As of December 31, 1996, we had outstanding approximately $4.9 million of
indebtedness due to US ONE Communications of New York, Inc., a lessee of our
dark fiber, which was personally guaranteed by Stephen A. Garofalo. On April 30,
1997, upon completion of the investment in Metromedia Fiber Network by
Metromedia Company, $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 us. Therefore, there is no such indebtedness currently
outstanding.
In February, 1996, we entered into a settlement agreement with Howard Katz,
Metromedia Fiber Network former Chief Financial Officer, and Realprop Capital
Corp., an affiliate of Mr. Katz, in connection with the termination of Mr.
Katz's employment with us. Pursuant to the settlement agreement, we agreed to
pay Mr. Katz approximately $940,000 over a period of five years, including
$90,000 per year pursuant to a consulting agreement. Under the consulting
agreement, Realprop Capital was to provide consulting services relating to
Katz's knowledge and understanding of transactions and the conduct of business
in which we engaged and to such other areas of consultation as Katz and we
mutually agreed upon. On November 12, 1996, Howard Katz, Lauren Katz, Stephen
Katz and Realprop Capital entered into operational agreement with Peter Sahagen,
at the time Acting Vice Chairmann-Finance of Metromedia Fiber Network. The
purchase agreement granted Mr. Sahagen the right to purchase an aggregate of
1,058,524 shares of class A common stock and an option to purchase warrants for
831,532 shares of class A common stock for an aggregate purchase price of
$640,000. In conjunction with the purchase agreement, in a letter agreement
dated December 10, 1996, Howard Katz and Realprop Capital agreed to release us
from all liabilities and obligations arising out of the 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 us acknowledging that he was acting as nominee for us with
respect to the purchase agreement and assigned to us all of his rights, title
and interest in and to the purchase agreement. We agreed to reimburse Mr.
Sahagen for $25,000 in payments made to Mr. Katz for extending Mr. Sahagen's
right to purchase the securities. On February 11, 1997, we entered into an
agreement with Howard Katz, Lauren Katz, Stephen Katz and Realprop Capital,
under which we purchased the securities for $640,000 and confirmed that the
consulting agreement may be terminated by us after three years of its term had
concluded. The purchase price was funded with a portion of the proceeds of the
loan made by Metromedia Company. In March, 1998, we entered into an
10
<PAGE>
amendment, settlement and release agreement with Howard Katz, Lauren Katz,
Stephen Katz and Realprop Capital, and Evelyn Katz in connection with the
foregoing.
On April 15, 1996, we entered into an employment agreement with Gerald Vento
under which Mr. Vento would serve as Chief Executive Officer of Metromedia Fiber
Network. On the same day, we entered into a stock purchase agreement and a
consulting agreement with Vento & Company of New York, LLC. Under the stock
purchase agreement, we issued 6,084,000 shares of class A common stock to Vento
& Company as consideration for prior services provided by Vento & Company. On
October 9, 1996, we entered into a settlement agreement with Mr. Vento and Vento
& Company. In this settlement agreement,
- we agreed to terminate Mr. Vento's employment agreement,
- Vento & Company agreed to sell to Stephen A. Garofalo 5,475,600 shares of
class A common stock and
- we agreed to pay $112,500 to Vento & Company on behalf of Mr. Vento.
On January 3, 1997, Mr. Garofalo assigned his right to purchase the Vento
shares to Mr. Sahagen. On January 13, 1997, Mr. Sahagen and other parties
purchased the Vento shares for $425,000. Please refer to the section of this
prospectus entitled "Businessn-Legal Proceedings."
On October 28, 1996, the Knobel 1995 Children's Investment Trust granted to
Stephen A. Garofalo an option to purchase 1,599,556 shares of class A common
stock 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 1,295,356.
Mr. Garofalo thereafter assigned this option to us. On February 11, 1997, we
exercised this option by payment of the sum of $500,000 to the Knobel Trust. We
paid such amount with a portion of the proceeds of the loan made by Metromedia
Company.
On February 11, 1997, we entered into an agreement with Mr. Sahagen. In this
agreement, we agreed to pay Mr. Sahagen a fee of $250,000 upon an equity
investment in Metromedia Fiber Network of at least $10 million, in full and
complete payment for all services rendered by Mr. Sahagen in his capacity as
Acting Vice Chairmann-Finance of Metromedia Fiber Network and in facilitating
the investment in Metromedia Fiber Network by Metromedia Company and for any
fees or compensation due to Mr. Sahagen pursuant to any prior agreements with
us. Mr. Sahagen agreed to release us from any claims against us, subject to
payments required by the agreement. We agreed to designate Mr. Sahagen or a
suitable designee selected by Mr. Sahagen as a Director of Metromedia Fiber
Network for a term of six months. We also granted Mr. Sahagen certain piggyback
registration rights. In connection with the investment in Metromedia Fiber
Network by Metromedia Company, we paid the $250,000 fee to Mr. Sahagen.
On December 13, 1996, we issued and sold to Penny Lane Partners, L.P., for
aggregate cash consideration of $2,025,000:
- 600,000 shares of 10% cumulative convertible preferred stock, the series A
preferred stock bearing dividends at a rate of $.34 per share per annum,
- warrants to purchase 456,300 shares of class A common stock at an exercise
price of $1.24 per share and
- 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 $0.01 per share.
In connection with the investment in Metromedia Fiber Network by Metromedia
Company, Penny Lane allowed 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 the
number of shares underlying the Penny Lane warrants from 456,300 to 912,600. In
11
<PAGE>
January 1998, Penny Lane made a cashless exercise of all its warrants and the
number of its shares issuable upon exercise was reduced by the number of shares
at the closing on the day of exercise having a value equal to the aggregate
exercise price. Accordingly, we issued Penny Lane 1,382,048 shares for all its
warrants.
RECENT TRANSACTIONS
METROMEDIA INVESTMENT. On February 10, 1997, Metromedia Company agreed to
loan us $2,000,000. Please refer to the section in this prospectus entitled
"Security Ownership." In an agreement dated March 6, 1997, Metromedia Company
agreed to loan to us up to an additional $6,000,000, subject to certain
conditions. On April 30, 1997, we repaid Metromedia Company the money it loaned
to us on February 10, 1997, and March 6, 1997 with a portion of the proceeds
from the investment in Metromedia Fiber Network by Metromedia Company. The loan
made by Metromedia Company was funded in two installments: (1) $1,140,000 on
February 10, 1997 and (2) $860,000 on February 14, 1997. It provided for a
revolving loan of up to an additional $6,000,000. The loan made by Metromedia
Company was scheduled to mature on August 31, 1997, and bore interest at the
prime rate announced by The Chase Manhattan Bank. We used the proceeds from the
first installment of the loan made by Metromedia Company to fund an escrow
account which repurchased on our behalf 2,353,880 shares of class A common stock
and warrants to purchase 831,532 shares of class A common stock. We pledged
these repurchased securities to Metromedia Company as security for the loan made
by Metromedia Company. We used the proceeds from the other installments of the
loan made by Metromedia Company for working capital. On April 30, 1997, we
entered into an agreement, in which we sold to Metromedia Company, Mr.
Subotnick, Mr. Wadler and Ms. Kessel shares of series B convertible preferred
stock, par value $.01 per share, the series B preferred stock, which constituted
100% of such series, for $32,500,000. The shares of the series B preferred stock
were exchanged for 16,884,636 shares of class B common stock pursuant to the
series B reclassification. We used the proceeds from this transaction to redeem
the series A preferred stock and contingent warrants, $2,115,000, to repay the
loan made by Metromedia Company and accrued interest thereon, $4,058,126, to
repay indebtedness to US ONE Communications of New York, $1,370,000, to repay
indebtedness to Sterling Capital LLC, $555,000, and used the balance for working
capital. Upon repayment of the loan made by Metromedia Company, the repurchased
shares were released from escrow and delivered to us.
MODIFICATION AGREEMENT. On October 28, 1997, we entered into a modification
agreement with Metromedia Company, Mr. Subotnick, Mr. Wadler, Ms. Kessel and Mr.
Garofalo under which the agreement with Metromedia Company was modified and
Metromedia Company, Mr. Subotnick, Mr. Wadler, Ms. Kessel and Mr. Garofalo
agreed to vote all of their shares of series B preferred stock, common stock and
class A common stock to approve of the adoption of our 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.
TRADEMARK LICENSE AGREEMENT. We are a party to a license agreement with
Metromedia Company, pursuant to which Metromedia Company has granted us a
nonexclusive, nontransferable, nonassignable 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 license agreement with Metromedia Company can be terminated by
Metromedia Company upon one month's prior written notice in the event that:
(1) Metromedia Company or its affiliates own less than 20% of the common
stock;
(2) a change in control of Metromedia Fiber Network occurs; or
(3) any of the stock or all or substantially all of the assets of any of our
subsidiaries are sold or transferred, in which case, the license
agreement with Metromedia Company will terminate with respect to such
subsidiary.
12
<PAGE>
A change in control of Metromedia Fiber Network is defined as:
- a transaction in which a person or group, within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, 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 Metromedia
Fiber Network;
- a change in the composition of board of directors whereby a majority of
the members thereof are not directors serving on the board of directors at
the time of the license agreement with Metromedia Company or any person
succeeding such director who was recommended or elected by such directors;
- a reorganization, merger or consolidation where following consummation
thereof, Metromedia Company would hold less than 20% of the combined
voting power of all classes of Metromedia Fiber Network stock;
- a sale or other disposition of all or substantially all of the assets of
Metromedia Fiber Network; or
- any transaction the result of which would be that the common stock would
not be required to be registered under the Securities Exchange Act of 1934
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
Securities Exchange Act of 1934.
In addition, Metromedia Company has reserved the right to terminate this
trademark license agreement in its entirety immediately upon written notice to
us if, in Metromedia Company's sole judgment, our continued use of Metromedia as
a trade name would jeopardize or be detrimental to the good will and reputation
of Metromedia Company.
We have agreed to indemnify Metromedia Company and hold it harmless against
any and all losses, claims, suits, actions, proceedings, investigations,
judgments, deficiencies, damages, settlements, liabilities and reasonable legal
expenses, and other related expenses, arising in connection with the license
agreement with Metromedia Company.
SHARE RECLASSIFICATION AND EXCHANGES. On September 23, 1997, in connection
with our initial public offering, we 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, we
approved 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 Metromedia Fiber
Network held by Metromedia Company, Stuart Subotnick, Arnold Wadler and Silvia
Kessel were exchanged for 4,260,486 shares of our class B common stock, without
giving effect to the stock splits, the series B reclassification. Messrs. Kluge,
Subotnick and Wadler and Ms. Kessel are directors of Metromedia Fiber Network
and Messrs. Kluge and Subotnick are general partners of, and Mr. Wadler and Ms.
Kessel are executive officers of, Metromedia Company. 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, by virtue of
Section 3(a)(9) of such Act.
MANAGEMENT AGREEMENT. We are a party to the management agreement under
which Metromedia Company provides us 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 we may reasonably request. The management agreement terminated on
December 31, 1998, and is automatically renewed for successive one year terms
unless either party terminates upon 60 days prior written notice. Pursuant to an
amendment to the management agreement dated as of January 1, 1999 the management
fee under the management agreement has been increased from $500,000
13
<PAGE>
to $1,000,000 per year, payable monthly at a rate of $83,333.33 per month. We
are also obligated to reimburse Metromedia Company all its out-of-pocket costs
and expenses incurred and advances paid by Metromedia Company in connection with
the management agreement. In this agreement, we have agreed to indemnify
Metromedia Company and hold it 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 Company in connection with the
management agreement. In 1997, Metromedia Company received no money for its
out-of-pocket costs and expenses or for interest on advances extended by it to
us under the management agreement. For the year ended December 31, 1998, we
incurred $500,000 to Metromedia Company under this agreement.
STOCK SPLITS. On July 23, 1998, the executive committee of the board of
directors approved a two-for-one stock split of the shares of class A common
stock and class B common stock in the form of a 100% stock dividend. The stock
dividend was issued to stockholders of record as of the close of business on
August 7, 1998. As of September 30, 1998, adjusted for the effect of such stock
split, we had 38,730,226 shares of class A common stock outstanding and
8,442,318 shares of class B common stock outstanding. On December 3, 1998, the
executive committee of the board of directors approved a two-for-one stock split
of the shares of class A common stock and class B common stock in the form of a
100% stock dividend. The stock dividend was issued to stockholders of record as
of the close of business on December 8, 1998. As of January 8, 1999, adjusted
for the effect of the stock splits, we had 77,605,110 shares of class A common
stock outstanding and 16,884,636 shares of class B common stock outstanding.
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CERTAIN AGREEMENTS REGARDING EMPLOYMENT
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with each of the following named
executive officers.
GAROFALO EMPLOYMENT AGREEMENT. Mr. Garofalo's employment agremeent, dated as
of February 26, 1997, has a five-year term. It provides Mr. Garofalo 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 of the board of directors. 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, health care and certain disability and death
benefits. In addition, Mr. Garofalo was granted options to purchase 1,521,000
shares of class A common stock at an exercise price of $.49 per share. These
options are immediately exercisable and expire 10 years from their grant. We
registered the shares of class A common stock underlying the options under the
Securities Act upon the consummation of our initial public offering.
Except in the case of disability, we may terminate Mr. Garofalo's employment
only for cause upon which termination Mr. Garofalo will have no right to receive
any compensation or benefit from us. If the agreement is terminated without
cause, or if Mr. Garofalo terminates employment for good reason, we will be
obligated to pay Mr. Garofalo an amount equal to the greater of:
- his monthly base salary as then in effect multiplied by the number of
months remaining in the term of his employment as of such termination date
and
- $1,000,000.
Good reason includes:
- a reduction in the nature or scope of Mr. Garofalo's titles, authorities,
powers, duties or responsibilities;
- 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;
- the removal of Mr. Garofalo as a member of the board of directors, unless
such removal occurs after termination of Mr. Garofalo's employment for
cause;
- a sale of all or substantially all of the ownership interests or assets of
Metromedia Fiber Network or a merger or consolidation of Metromedia Fiber
Network with any other corporation;
- a change in control of Metromedia Fiber Network, defined as any person or
entity becoming a beneficial owner as defined in Rule 13d-3 of the
Securities Exchange Act of 1934 directly or indirectly of securities of
Metromedia Fiber Network representing 50% or more of the combined voting
power of Metromedia Fiber Network's then outstanding securities; or
- a material breach by Metromedia Fiber Network of its affirmative or
negative covenants or undertakings in the employment agreement and a
failure to remedy such breach within 15 days.
Mr. Garofalo has agreed not to compete with Metromedia Fiber Network for a
period of one year following termination of his employment agreement. During
this non-compete period, Mr. Garofalo will be entitled to receive an amount
equal to his base salary as in effect on the date of termination so long as 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. It provides Mr. Finkelstein
with 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
15
<PAGE>
receive an annual incentive bonus to be determined by the compensation committee
of the board of directors. 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, health care, and
certain disability and death benefits. In addition, Mr. Finkelstein was granted
options to purchase 6,084,000 shares of class A common stock at an exercise
price of $.49 per share, which options are immediately exercisable and expire 10
years from their grant. We registered such shares of class A common stock under
the Securities Act on Form S-8 upon the consummation of our initial public
offering.
Except in the case of disability, we may terminate Mr. Finkelstein's
employment only for cause upon which termination Mr. Finkelstein will have no
right to receive any compensation or benefit from us. If the agreement is
terminated without cause or if Mr. Finkelstein terminates employment for good
reason, we will be 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:
- a reduction in the nature or scope of Mr. Finkelstein's titles,
authorities, powers, duties or responsibilities;
- 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;
- the removal of Mr. Finkelstein as a member of the board of directors,
unless such removal occurs after termination of Mr. Finkelstein's
employment for cause;
- a sale of all or substantially all of the ownership interests or assets of
Metromedia Fiber Network or a merger or consolidation of Metromedia Fiber
Network with any other corporation;
- a change in control of Metromedia Fiber Network, defined as any person or
entity, other than Mr. Garofalo, becoming a beneficial owner as defined in
Rule 13d-3 of the Securities Exchange Act of 1934 directly or indirectly
of securities of Metromedia Fiber Network representing 50% or more of the
combined voting power of Metromedia Fiber Network's then outstanding
securities; or
- a material breach by Metromedia Fiber Network of its affirmative or
negative covenants or undertakings in the employment agreement and a
failure to remedy such breach within 15 days.
Mr. Finkelstein has agreed not to compete with Metromedia Fiber Network for
a period of one year following termination of his employment agreement. During
this non-compete period, Mr. Finkelstein will be entitled to receive an amount
equal to his base salary as in effect on the date of termination so long as the
agreement was not terminated prior to the expiration of the term by either
party.
GALLUCCIO EMPLOYMENT AGREEMENT. Mr. Galluccio's employment agreement, dated
as of August 31, 1998, has a one year term. It provides Mr. Galluccio with a
base salary of $183,400. Mr. Galluccio is also entitled to receive an annual
incentive bonus, which is dependent upon Metromedia Fiber Network's performance,
to be determined by the compensation committee of the board of directors. If
approved by the compensation committee, the incentive bonus has a target of 20%
of Mr. Galluccio's base salary. Mr. Galluccio's employment agreement also
provides for other employee benefits such as the right to participate in all
group health and insurance programs. In addition, Mr. Galluccio was granted
options to purchase 150,000 shares of class A common stock at an exercise price
of $10.50 per share. These shares have been registered under the Securities Act
on Form S-8.
Except in the case of disability or a change of control, we may terminate
Mr. Galluccio's employment only for cause upon which termination Mr. Galluccio
will have no right to receive any compensation or benefit from us. If Mr.
Galluccio's employment is terminated for any reason other than for cause or in
the event that there is a change of control of Metromedia Fiber Network and Mr.
Galluccio is requested in
16
<PAGE>
connection with such change of control to perform his duties under this
agreement on a regular, full-time basis at a location further than 75 miles from
Mr. Galluccio's current principal office location, Mr. Galluccio, in his sole
and absolute discretion, may deem this agreement to be terminated by Metromedia
Fiber Network without cause. Upon such termination, Mr. Galluccio will be
entitled to receive his base salary for the remaining term of his employment
agreement, all previously earned and accrued entitlements and benefits from us
and our employee benefit plans and an amount equal to 25% of Mr. Galluccio's
base salary. Mr. Galluccio has agreed not to compete with Metromedia Fiber
Network or any affiliated company for a period of two years following the
termination of his employment agreement.
BENEDETTO EMPLOYMENT AGREEMENT. Mr. Benedetto's employment agreement, dated
as of August 31, 1998, has a three and one-half year term. It provides Mr.
Benedetto with a minimum base salary of $200,000 for each year. Mr. Benedetto is
also entitled to receive an annual incentive bonus, which is dependent upon
Metromedia Fiber Network's performance, to be determined by the compensation
committee of the board of directors. If approved by the compensation committee,
the incentive bonus has a target of 20% of Mr. Benedetto's base salary. Mr.
Benedetto's employment agreement also provides for other employee benefits such
as the right to participate in all group health and insurance programs. In
addition, Mr. Benedetto was granted options to purchase 150,000 shares of class
A common stock at an exercise price of $10.50 per share. These shares have been
registered under the Securities Act on Form S-8.
Except in the case of disability or a change of control, we may terminate
Mr. Benedetto's employment only for cause upon which termination Mr. Benedetto
will have no right to receive any compensation or benefit from us. If Mr.
Benedetto's employment is terminated for any reason other than for cause or in
the event that there is a change of control of Metromedia Fiber Network and Mr.
Benedetto is requested in connection with such change of control to perform his
duties under this agreement on a regular, full-time basis at a location further
than 75 miles from Mr. Benedetto's current principal office location, Mr.
Benedetto, in his sole and absolute discretion, may deem this agreement to be
terminated by Metromedia Fiber Network without cause. Upon such termination, Mr.
Benedetto will be entitled to receive his base salary for the remaining term of
his employment agreement, all previously earned and accrued entitlements and
benefits from us and our employee benefit plans and an amount equal to 25% of
Mr. Benedetto's base salary. Mr. Benedetto has agreed not to compete with
Metromedia Fiber Network or any affiliated company for a period of two years
following termination of his employment agreement.
TANZI EMPLOYMENT AGREEMENT. Mr. Tanzi's employment agreement, dated as of
August 31, 1998, has a two year term. It provides Mr. Tanzi with a minimum base
salary of $175,000 for each year. Mr. Tanzi is also entitled to receive an
annual incentive bonus, which is dependent upon Metromedia Fiber Network's
performance, to be determined by the compensation committee of the board of
directors. If approved by the compensation committee, the incentive bonus has a
target of 40% of Mr. Tanzi's base salary. Mr. Tanzi's employment agreement also
provides for other employee benefits such as the right to participate in all
group health and insurance programs. In addition, Mr. Tanzi was granted options
to purchase 150,000 shares of class A common stock at an exercise price of
$10.50 per share. These shares have been registered under the Securities Act on
Form S-8.
Except in the case of disability or change of control, we may terminate Mr.
Tanzi's employment only for cause upon which termination Mr. Tanzi will have no
right to receive any compensation or benefit from us. If Mr. Tanzi's employment
is terminated for any reason other than for cause or in the event that there is
a change of control of Metromedia Fiber Network and Mr. Tanzi is requested in
connection with such change of control to perform his duties under this
agreement on a regular, full-time basis at a location further than 75 miles from
Mr. Tanzi's current principal office location, Mr. Tanzi, in his sole and
absolute discretion, may deem this agreement to be terminated by Metromedia
Fiber Network without cause. Upon such termination, Mr. Tanzi will be entitled
to receive his base salary for the remaining term of his employment agreement,
all previously earned and accrued entitlements and benefits from us and our
employee benefit plans and an amount equal to 25% of Mr. Tanzi's base salary.
Mr. Tanzi has agreed not to
17
<PAGE>
compete with Metromedia Fiber or any affiliated company for a period of two
years following termination of his employment agreement.
1997 AND 1998 INCENTIVE STOCK PLANS
Metromedia Fiber Network has adopted the 1997 Incentive Stock Plan and the
1998 Incentive Stock Plan (the "Incentive Stock Plans") pursuant to which key
employees, officers and directors (including independent directors and members
of the compensation committee) of Metromedia Fiber Network and its subsidiaries
who have substantial responsibility in the direction of Metromedia Fiber Network
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"). The aggregate number of shares of the
class A common stock that may be the subject of Stock Options under the
Incentive Stock Plans is 14,000,000 (4,000,000 under the 1997 Incentive Stock
Plan and 10,000,000 under the 1998 Incentive Stock Plan) and the maximum number
of shares of class A common stock available with respect to Stock Options
granted to any one grantee is 1,000,000 (400,000 under the 1997 Incentive Stock
Plan and 600,000 under the 1998 Incentive Stock Plan) 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 Metromedia Fiber Network's capital stock) and the exercise
price of all NQSOs is determined by the Compensation 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 Metromedia Fiber Network 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 Incentive Stock Plans. Upon a "change in control" of
Metromedia Fiber Network (as defined in the Incentive Stock Plans) 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 the right, exercisable by written notice within 60 days
after the change in control, to receive in exchange for the surrender of an
option 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. For options granted under the 1998 Incentive Stock Plan on or
after November 13, 1998, in the event of a change in control, the board of
directors may in its sole discretion determine (i) that each holder of such 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/or (ii) each holder of such a Stock Option shall have
the right, exercisable by written notice within 60 days after the change of
control, to receive in exchange for the surrender of a Stock Option 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.
Alternatively, the board of directors may in its sole discretion determine to
take neither action. Upon a grantee's termination of employment from Metromedia
Fiber Network 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 a Stock Option to the extent
such award is exercisable and to the extent such Stock Option has not yet
expired. In the event the grantee's employment with Metromedia Fiber Network or
a subsidiary is terminated for any reason other than disability, death or
retirement, the grantee may exercise a Stock Option within three months after
his or her termination of employment.
18
<PAGE>
INDEMNIFICATION AGREEMENTS
We have entered into indemnification agreements with certain officers and
directors. 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 that
(1) we will advance all expenses incurred by the director or officer in
defending certain litigation,
(2) we will appoint in certain circumstances an independent legal counsel to
determine whether the director or officer is entitled to indemnification
and
(3) we will continue to maintain directors' and officers' liability
insurance, which currently consists of $25.0 million of primary coverage.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires Metromedia Fiber Network's
directors and executive officers, and persons who beneficially own more than 10%
of the outstanding common stock, to file with the Securities and Exchange
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 Securities and Exchange Commission to furnish
Metromedia Fiber Network with copies of all reports that they file under Section
16(a). To Metromedia Fiber Network's knowledge, based solely on a review of the
copies of such reports furnished to Metromedia Fiber Network and written
representations that no other reports were required, all Section 16(a) filing
requirements applicable to Metromedia Fiber Network's officers, directors and
greater than 10% beneficial owners were complied with by such persons during the
fiscal year ended December 31, 1998, except Vincent A. Galluccio inadvertently
failed to file, when due, a Form 4 relating to one transaction during the fiscal
year ended December 31, 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee consists of Messrs. Rockefeller and White.
Neither member of the compensation committee served as an officer or employee of
Metromedia Fiber Network or any of its subsidiaries during fiscal 1998. There
were no material transactions between Metromedia Fiber Network and any of its
members of the Compensation Committee during fiscal 1998.
COMPENSATION COMMITTEE REPORT ON COMPENSATION
The compensation committee of the board of directors 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 1998.
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
19
<PAGE>
BASE SALARY
The Summary Compensation Table shows amounts earned during 1998 by
Metromedia Fiber Network's executive officers. The base compensation of such
executive officers is set by the terms of the employment agreement entered into
with each such executive officer. Metromedia Fiber Network established base
salaries prior to its initial public offering in 1997 for Mr. Finkelstein's and
Mr. Garofalo's executive employment agreements the base salaries for the other
executive employment agreements were established by the company in August of
1998.
ANNUAL INCENTIVES
Each executive officer is entitled to an annual incentive bonus as
determined by the compensation committee. The cash bonuses awarded to Metromedia
Fiber Network's chief executive officer, president, senior vice president and
vice president-sales in 1998 were determined based on provisions of their
employment agreements.
LONG-TERM INCENTIVES
Metromedia Fiber Network grants long-term incentive awards to align a
significant portion of the executive compensation program with shareholder
interests. Executives of the company are eligible to participate in the 1997 and
1998 Incentive Stock Plans. On January 6, 1998 the compensation committee
approved and the company granted to the vice president--chief financial officer
stock options to purchase 400,000 shares of class A common stock at an exercise
price of $3.88 which was the fair market value of such shares on the date of
grant. Also, on August 31, 1998 the compensation committee approved and the
company granted to each of the senior vice president, vice president-chief
financial officer and vice president-sales stock options to purchase 150,000
shares of class A common stock at an exercise price of $10.50 per share which
was the fair market value of such shares of class A common stock on the date of
grant.
CHIEF EXECUTIVE OFFICER COMPENSATION. The Summary Compensation Table shows
amounts earned during 1998 by Metromedia Fiber Network's Chairman and Chief
Executive Officer, Stephen A. Garofalo. Mr. Garofalo's employment agreement sets
his base compensation. 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 Metromedia Fiber Network's
revenue and market penetration and 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 Metromedia Fiber Network 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 Metromedia Fiber Network 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, 1999
David Rockefeller
Leonard White
20
<PAGE>
PERFORMANCE GRAPH
The following graph sets forth the total stockholder return on our class A
common stock as compared to the Nasdaq Stock Market Composite Index, a broad
based capitalization-weighted index of all NASDAQ National Market and 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 and
ending December 31, 1998. The total stockholder return assumes $100 invested
October 29, 1997 in Metromedia Fiber Network'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>
10/29/97 12/31/97 12/31/98
<S> <C> <C> <C>
Metromedia Fiber Network, Inc. 100 104 627
NASDAQ Composite Index 100 98 137
NASDAQ Telecomm Index 100 104 170
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 29, 1997 DECEMBER 31, 1997 DECEMBER 31, 1998
------------------- --------------------- ---------------------
<S> <C> <C> <C>
Metromedia Fiber Network, Inc............................. 100 104 627
NASDAQ Stock Market Composite Index....................... 100 98 137
NASDAQ Telecommunications Stock Index..................... 100 104 170
</TABLE>
- ------------------------
* Total return assumes $100 investment on October 29, 1997 in Metromedia Fiber
Network, Inc. and select indices, and reinvestment of dividends.
21
<PAGE>
PROPOSAL NO. 1 ELECTION OF CLASS A DIRECTORS
The following table sets forth certain information with respect to the
members of our board of directors, including the incumbent directors (Messrs.
Finkelstein, Garofalo and Galluccio) 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 Metromedia
Fiber Network'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................................................................... 48 Class A 1993
Mr. Garofalo founded Metromedia Fiber Network in April 1993, has been serving as
chairman of the board since Metromedia Fiber Network'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................................................................. 45 Class A 1997
Mr. Finkelstein has been president, chief operating officer and a director of
Metromedia Fiber Network since April 1997. Prior to joining the Company, Mr.
Finkelstein was employed by various affiliates of Metromedia Company and its
predecessor 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.................................................................. 53 Class A 1997
Mr. Galluccio has been a director of the Company since February 1997 and has served
as president of our International Optical Network joint ventures since February 1998
and 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.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
CLASS OF DIRECTOR
NAME, PRINCIPAL OCCUPATION FOR PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS AGE DIRECTORS SINCE
- -------------------------------------------------------------------------------------- --- ---------- -----------
<S> <C> <C> <C>
Silvia Kessel......................................................................... 48 Class B 1997
Ms. Kessel has served as a director of Metromedia Fiber Network 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. since 1995
and executive vice president of Metromedia International Group since 1996. In
addition, Ms. Kessel served as executive vice president of Orion Pictures
Corporation, 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., an
American Stock Exchange listed company that operates radio stations in New York, Los
Angeles and Chicago, and of Metromedia International Group.
John W. Kluge......................................................................... 84 Class B 1997
Mr. Kluge has been a director of Metromedia Fiber Network the Company since July
1997. Mr. Kluge has been the President and Chairman of Metromedia Company and its
predecessor-in-interest, Metromedia, Inc. for over five years. Mr. Kluge has been
the chairman of the board of Metromedia International Group since 1995. In addition,
Mr. Kluge has been chairman of the board and a director of Orion from 1992 until
July 1997. He also serves as a director of Conair Corporation and Occidental
Petroleum Corporation.
Stuart Subotnick...................................................................... 56 Class B 1997
Mr. Subotnick has been a director of Metromedia Fiber Network since July 1997. Mr.
Subotnick has been the vice chairman of the board of Metromedia International Group
since 1995 and president and chief executive officer of Metromedia International
Group 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
Metromedia International Group for over five years. Mr. Subotnick is also a director
of Carnival Cruise Lines, Inc. and chairman of the board of Big City Radio.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
CLASS OF DIRECTOR
NAME, PRINCIPAL OCCUPATION FOR PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS AGE DIRECTORS SINCE
- -------------------------------------------------------------------------------------- --- ---------- -----------
<S> <C> <C> <C>
David Rockefeller..................................................................... 83 Class B 1997
Mr. Rockefeller has served as a director of Metromedia Fiber Network 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 and its parent corporation, Rockefeller Financial
Services, Inc. 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...................................................................... 55 Class B 1997
Mr. Wadler has served executive vice president, general counsel and secretary of the
Company since October 1997 and has served as a director of Metromedia Fiber Network
since July 1997. Mr. Wadler has served as executive vice president, general counsel
and secretary of Metromedia International Group since August 29, 1996 and, from
November 1, 1995 until that date, as senior vice president, general counsel and
secretary of Metromedia International Group and as the executive vice president,
general counsel, secretary and director of Big City Radio since December 1997. In
addition, Mr. Wadler serves as a director of Metromedia International Group and
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......................................................................... 59 Class B 1997
Mr. White has served as a director of Metromedia Fiber Network 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
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
Metromedia International Group, Big City Radio 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 GALLUCCIO AS CLASS A
DIRECTORS OF METROMEDIA FIBER NETWORK.
24
<PAGE>
PROPOSAL NO. 2--THE CHARTER AMENDMENT
On March 30, 1999, the board of directors approved an amendment to Article
THIRD, Section 4.1 of Metromedia Fiber Network's Amended and Restated
Certificate of Incorporation to increase the authorized number of shares of our
capital stock to 2,700,000,000 shares consisting of (a) 2,405,000,000 shares of
Class A common stock, (b) 275,000,000 shares of Class B common stock, and (c)
20,000,000 shares of preferred stock, subject to stockholder approval. The
following summary description of the charter amendment is qualified in its
entirety by the text thereof contained in Appendix A hereto.
As of March 31, 1999, we have authorized 220,000,000 shares of capital
stock, consisting of (i) 180,000,000 shares of class A common stock, of which
77,742,970 are issued and outstanding, (ii) 20,000,000 shares of class B common
stock, of which 16,884,636 are issued and outstanding and (iii) 20,000,000
shares of preferred stock, none of which are issued and outstanding. The board
of directors believes it is desirable to have additional shares of class A
common stock and class B common stock available for future financings, potential
acquisitions and the payment of stock dividends. Having shares of common stock
available for issuance provides us with greater flexibility should opportunities
arise that require prompt action as it will allow such shares to be issued
without the delay and expense of obtaining stockholder approval at the time,
which could otherwise deprive Metromedia Fiber Network and its stockholders of
the ability to effectively benefit from the opportunity. In addition, our board
of directors could consider the issuance of common stock as a means of
protecting our stockholders in the face of a proposal relating to a change in
control of Metromedia Fiber Network that the board determined was not in the
best interests of Metromedia Fiber Network and its stockholders.
The charter amendment is not intended to have an anti-takeover effect.
However, as a result of the increase in the number of shares of authorized
common stock, the board of directors could, with certain restrictions, issue
additional shares of common stock without any further stockholder action. The
issuance of such shares of common stock could be used as an anti-takeover
effect. Accordingly, the charter amendment may have an anti-takeover effect.
Approval by the affirmative vote of the holders of a majority of the
outstanding shares of common stock is required for approval of the charter
amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE PROPOSAL
TO APPROVE THE CHARTER AMENDMENT.
25
<PAGE>
PROPOSAL NO. 3 RATIFICATION OF
THE APPOINTMENT OF INDEPENDENT AUDITORS
The board of directors has appointed the firm of Ernst & Young LLP,
independent auditors, to audit our consolidated financial statements for the
year ending December 31, 1999, subject to ratification by our 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT AUDITORS OF
METROMEDIA FIBER NETWORK'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDING
DECEMBER 31, 1999.
26
<PAGE>
ANNUAL REPORT; INCORPORATION BY REFERENCE
We our mailing our annual report on Form 10-K for the fiscal year ended
December 31, 1998 (which contains the Company's audited consolidated financial
statements) 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 "Compensation 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, we will supply a copy of the Company's annual report on Form 10-K for the
year ended December 31, 1998 (excluding exhibits), as filed with the Commission,
without charge. You should direct requests to Metromedia Fiber Network, Inc.,
c/o Metromedia Company, One Meadowlands Plaza, East Rutherford, New Jersey
07073, Attention: Secretary.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Any stockholder who wishes to present a proposal at the 2000 annual meeting
of stockholders, and who wishes to have such proposal included in our proxy
statement for that meeting, must deliver a copy of such proposal to Metromedia
Fiber Network, c/o Metromedia Company, One Meadowlands Plaza, East Rutherford,
New Jersey 07073, Attention: Secretary, no later than December 10, 1999;
provided, however, that if the 2000 annual meeting of stockholders is held on a
date more than 30 days before or after the corresponding date of the 1999 annual
meeting of stockholders, any stockholder who wishes to have a proposal included
in our proxy statement for that meeting must deliver a copy of the proposal to
us a reasonable time before the proxy solicitation is made. We reserve the right
to decline to include in our proxy statement any stockholder's proposal, which
does not comply with the rules of the Securities and Exchange 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,
/s/ Arnold L. Wadler
---------------------------------------------------------
Arnold L. Wadler
SECRETARY
April 9, 1999
27
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APPENDIX A
CERTIFCATE OF AMENDMENT
TO THE
AMENDED RESTATED CERTIFICATE OF INCORPORATION
OF
METROMEDIA FIBER NETWORK, INC.
(Pursuant to Section 242 of the Delaware General Corporation Law)
The undersigned, Silvia Kessel and Arnold L. Wadler, Executive Vice
President and Secretary, respectively, of Metromedia Fiber Network, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
"Corporation"), do hereby certify as follows:
1. The name of the corporation is Metromedia Fiber Network, Inc.
2. This Certificate of Amendment to the Amended and Restated Certificate of
Incorporation amends the Amended and Restated Certificate of
Incorporation of the Corporation to increase the authorized number of
shares of the Corporation's Common Stock, par value $.01 per share (the
"Common Stock") and to change the par value of such shares.
3. The Amended and Restated Certificate of Incorporation of the Corporation
is hereby amended by replacing the first sentence of Article THIRD,
Section 4.1 thereof in its entirety and by substituting in its place the
following:
"The total number of shares of stock which the Corporation shall have
the authority to issue is 2,700,000,000, consisting of (i) 20,000,000
shares of Preferred Stock, the par value of $0.01 per share (the
"Preferred Stock"), (ii) 2,405,000,000 shares of Class A Common Stock,
par value $0.01 per share (the "Class A Common Stock), and (iii)
275,000,000 shares of Class B Common Stock, par value of $0.01 per share
(the "Class B Common Stock")."
4. The Board of directors of the Corporation duly adopted resolutions
pursuant to Section 242 of the Delaware General Corporation Law (the
"DGCL") proposing that this Certificate of Amendment to the Amended and
Restated Certificate of Incorporation be approved and declaring the
adoption of this Amendment to the Amended and Restated Certificate of
Incorporation to be advisable, and the stockholders of the Corporation
duly approved this Certificate of Amendment to the Restated Certificate
of Incorporation in accordance with Sections 211 and 242 of the DGCL.
Dated and attested to as of May , 1999.
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<S> <C> <C>
METROMEDIA FIBER NETWORK, INC.
By:
-----------------------------------------
Name: Silvia Kessel
Title: Executive Vice President
</TABLE>
<TABLE>
<S> <C>
Attest:
- -------------------------------------------
Name: Arnold L. Wadler
Title: Secretary
</TABLE>
28
<PAGE>
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PROXY PROXY
METROMEDIA FIBER NETWORK, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 1999
The undersigned hereby appoints Gerard Benedeto, Dennis E. Codlin and
Arnold L. Wadler, and each of them, as proxies each with the power to appoint
his substitute, and hereby authorizes them to represent and to vote as
designated on the reverse side at the annual meeting of the stockholders of
Metromedia Fiber Network, Inc., to be held on May 18, 1999, at 10:00 a.m.,
local time, on the Concourse Level, 1285 Avenue of the Americas, New York,
New York 10019, and any and all adjournments thereof, all of the shares of
common stock, par value $.01 per share, of Metromedia Fiber Network, Inc.,
according to the number of votes which the undersigned would possess if
personally present, for the purposes of considering and taking action upon
the proposals set forth on the reverse side, as more fully set forth in the
Proxy Statement, dated April 9, 1999.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF
THE LISTED PROPOSALS
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
(Please date and sign on the reverse side)
- -----------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
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METROMEDIA FIBER NETWORK, INC. Please mark your vote
as in this example /X/
using dark ink only
<S> <C> <C>
1. Election of Directors--Nominees: 2. The adopter of the amendment to the 3. The ratification of the appointment
Howard M. Finkelstein, Stephen Metromedia Fiber Network, Inc. of Ernst & Young, LLP as Independent
A. Carolalo and Vincent A. Amended and Released Certificate auditors for the year ending
Gelluucia of Incorporation December 31, 1999
For all nominees
except as marked
to the contrary
below
Withhold Authority FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / / / / / /
/ / / / / / / / / / / / / / / /
/ / / / / / / / / / / / / / / /
</TABLE>
<TABLE>
<S> <C>
_________________________________________________ IMPORTANT: Please sign exactly as name appears on
Nominees Exception this card. Each joint owner should sign. Executors,
INSTRUCTIONS: to withhold authority to vote for administrators, trustees, etc., should give full
any individual nominee, strike a line through name.
the nominee's name in the above list.
Date:___________________________________________ 1999
_____________________________________________________
Signature
_____________________________________________________
Please Print Name Here
_____________________________________________________
Signature
_____________________________________________________
Please Print Name Here
THIS PROXY WHEN PROPERLY EXECUTED SHALL VOTE IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE 'FOR' PROPOSALS NO. 1, 2 AND 3, 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 ON ANY ADJOURNMENT THEREOF.
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FOR AND DETACH HERE
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