As filed with the Securities and Exchange Commission on July 18, 1996
PRELIMINARY COPY
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
__________________
Filed by the Registrant <checked-box>
Filed by a Party other than the Registrant <square>
Check the appropriate box:
<checked-box>Preliminary Proxy Statement
<square>Definitive Proxy Statement
<square>Definitive Additional Materials
<square>Soliciting Material Pursuant to <section> 240.14a-11(c) or <section>
240.14a-12
___________________
METROMEDIA INTERNATIONAL GROUP, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
_____________________
Payment of Filing Fee (Check the appropriate box):
<checked-box>$125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2)
<square>$500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
<square>Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
<square>Fee paid previously with preliminary materials.
<square>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:
4) Date Filed:
<PAGE>
[METROMEDIA INTERNATIONAL GROUP LETTERHEAD]
August __, 1996
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
International Group, Inc. ("MIG"), which will be held in the Concourse Level at
1285 Avenue of the Americas, New York, New York 10019 at 9:00 o'clock a.m., New
York time, on August 29, 1996. I look forward to greeting as many stockholders
as possible at the Annual Meeting.
At the Annual Meeting, you will be asked to vote on proposals:
1. to amend MIG's Restated Certificate of Incorporation to increase
the number of authorized shares of Common Stock from 100,000,000 to
400,000,000;
2. to elect three Class I Directors for a three year term ending in
1999;
3. to approve the Metromedia International Group, Inc. 1996 Incentive
Stock Plan; and
4. to ratify the selection of KPMG Peat Marwick LLP as MIG's
independent accountants for the year ending December 31, 1996.
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,
John D. Phillips
President and
Chief Executive Officer
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
945 EAST PACES FERRY ROAD
SUITE 2210
ATLANTA, GEORGIA 30326
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 29, 1996
TO THE STOCKHOLDERS OF
METROMEDIA INTERNATIONAL GROUP, INC.:
NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders (the
"Meeting") of Metromedia International Group, Inc., a Delaware corporation
("MIG"), will be held on August 29, 1996, at 9:00 a.m., local time, in the
Concourse Level, 1285 Avenue of the Americas, New York, New York 10019 for the
purpose of considering and acting upon the following:
1. A proposal to approve an amendment to MIG's Restated
Certificate of Incorporation to increase the authorized number of shares of
common stock, par value $1.00 per share, to 400,000,000.
2. The election of three members to MIG's Board of Directors to
serve a three-year term as Class I Directors.
3. A proposal to approve and adopt the Metromedia International
Group, Inc. 1996 Incentive Stock Plan.
4. Ratification of the selection of KPMG Peat Marwick LLP as
MIG's independent accountants for the year ending December 31, 1996.
5. The transaction of such other business as may properly come
before the Meeting or any adjournment thereof. The Board of Directors is not
aware of any other business that will be presented for consideration at the
Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" EACH OF THE PROPOSALS TO BE PRESENTED TO MIG STOCKHOLDERS AT THE MIG
ANNUAL MEETING.
Only stockholders of record at the close of business on July 25, 1996
will be entitled to notice of and to vote at the Meeting or any adjournment
thereof. The Meeting may be adjourned from time to time without notice other
than by announcement at the Meeting. A list of stockholders entitled to vote at
the Meeting will be available for inspection by any stockholder, for any reason
germane to the Meeting, during ordinary business hours during the ten days
prior to the Meeting at 215 East 67th Street, New York, New York 10021.
By Order of the Board of Directors.
Arnold L. Wadler
Secretary
New York, New York
August __, 1996
<PAGE>
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD IN ORDER THAT A QUORUM MAY BE
ASSURED, WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE MEETING IN PERSON. PLEASE
COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING RETURN
ENVELOPE (TO WHICH NO POSTAGE NEED BE AFFIXED BY THE SENDER IF MAILED WITHIN
THE UNITED STATES). IF YOU RECEIVE MORE THAN ONE PROXY BECAUSE YOUR SHARES ARE
REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH SUCH PROXY SHOULD BE SIGNED
AND RETURNED TO ASSURE THAT ALL OF YOUR SHARES WILL BE VOTED. THE PROXY SHOULD
BE SIGNED BY ALL REGISTERED HOLDERS EXACTLY AS THE STOCK IS REGISTERED.
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<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
PROXY STATEMENT
FOR AN ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
AUGUST 29, 1996
_____________________________
METROMEDIA INTERNATIONAL GROUP, INC.
This Proxy Statement is being furnished to the holders of shares of
common stock, par value $1.00 per share (the "Common Stock"), of Metromedia
International Group, Inc., a Delaware corporation ("MIG" or the "Company") in
connection with the solicitation of proxies by the Board of Directors of MIG
for use at the Annual Meeting of the Stockholders of MIG to be held at
9:00 a.m. on August 29, 1996 in the Concourse Level, 1285 Avenue of the
Americas, New York, New York 10019 (the "Annual Meeting"), and any adjournments
of the Meeting. This Proxy Statement and the accompanying proxy card are first
being mailed to the stockholders of the Company on or about August __, 1996.
At the Annual Meeting, MIG Stockholders will be asked to vote upon (i) a
proposal to amend MIG's Restated Certificate of Incorporation to increase the
authorized number of shares of Common Stock from 110,000,000 to 400,000,000
(the "Charter Amendment"), (ii) the election of three members to MIG's Board of
Directors to serve a three-year term as Class I Directors, (iii) a proposal to
approve the Metromedia International Group, Inc. 1996 Incentive Stock Plan and
(iv) the ratification of the selection of KPMG Peat Marwick LLP as MIG's
independent accountants for the year ending December 31, 1996.
INFORMATION REGARDING THE ANNUAL MEETING
GENERAL
This Proxy Statement is being furnished to holders of Common Stock in
connection with the solicitation of proxies by the Board of Directors of MIG
for use at the Annual Meeting, and any adjournments thereof. Each copy of this
Proxy Statement which is being mailed or delivered to MIG Stockholders is
accompanied by a MIG proxy card and the Notice of Annual Meeting of
Stockholders of MIG. MIG's Annual Report to Stockholders, including financial
statements for the year ended December 31, 1995, accompanies but does not
constitute part of this Proxy Statement.
All properly executed proxy cards delivered pursuant to this
solicitation and not revoked will be voted at the Annual Meeting in accordance
with the directions given. In voting by proxy with regard to the election of
directors, MIG Stockholders may vote in favor of all nominees, withhold their
votes as to all nominees or withhold their votes as to specific nominees. With
regard to other proposals, MIG Stockholders may vote in favor of each proposal
or against each proposal, or in favor of some proposals and against others, or
may abstain from voting on any or all proposals. Stockholders should specify
their respective choices on the accompanying proxy card. If no specific
instructions are given with regard to the matters to be voted upon, the shares
of Common Stock represented by a signed proxy card will be voted "FOR" each of
the proposals listed on the proxy card. If any other matters properly come
before the Annual Meeting, the persons named as proxies will vote upon such
matters according to their judgment.
<PAGE>
All proxy cards delivered pursuant to this solicitation are revocable at
any time prior to the Annual Meeting at the option of the persons executing
them by giving written notice to the Secretary of MIG, by delivering a later
dated proxy card or by voting in person at the Annual Meeting. All written
notices of revocation and other communications with respect to revocations of
proxies should be addressed to: Metromedia International Group, Inc., c/o
Metromedia Company, One Meadowlands Plaza, East Rutherford, NJ 07073,
Attention: Arnold L. Wadler, Secretary.
Proxies will initially be solicited by MIG by mail, but directors,
officers and selected employees may solicit proxies from stockholders
personally or by telephone, facsimile or other forms of communication. Such
directors, officers and employees will not receive any additional compensation
for such solicitation. MIG also will request brokerage houses, nominees,
fiduciaries and other custodians to forward soliciting materials to beneficial
owners, and MIG 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 MIG.
THE ANNUAL MEETING
The Annual Meeting is scheduled to be held in the Concourse Level at
1285 Avenue of the Americas, New York, New York 10019, on August 29, 1996,
beginning at 9:00 a.m., local time. MIG Stockholders will be asked to vote
upon (i) the Charter Amendment (Proposal No. 1), which amendment would increase
the authorized number of shares of Common Stock from 110,000,000 to
400,000,000, (ii) the election of three persons to serve a three-year term as
Class I Directors of MIG's Board of Directors (Proposal No. 2), (iii) a
proposal to approve the Metromedia International Group, Inc. 1996 Incentive
Stock Plan (Proposal No. 3) and (iv) a proposal to ratify the selection of KPMG
Peat Marwick LLP as MIG's independent accountants for the year ending December
31, 1996 (Proposal No. 4).
The Board of Directors of MIG knows of no business that will be
presented for consideration at the Annual Meeting other than the matters
described in this Proxy Statement.
RECORD DATE; QUORUM. Only holders of record of Common Stock as of the
close of business on July 25, 1996 (the "Record Date") will be entitled to
notice of and to vote at the Annual Meeting. As of the Record Date, there were
________ shares of Common Stock outstanding and entitled to vote at the Annual
Meeting, held by approximately __________ stockholders of record, with each
share entitled to one vote. The presence, in person or by proxy, of a majority
of the outstanding shares of Common Stock is necessary to constitute a quorum
at the Annual Meeting. Except with respect to broker non-votes, the
consequences of which are described below, shares of Common Stock represented
by proxies marked "ABSTAIN" for any proposal presented at the Annual Meeting
and shares of Common Stock held by persons in attendance at the Annual Meeting
who abstain from voting on any such proposal will be counted for purposes of
determining the presence of a quorum but shall not be voted for or against such
proposal. Because of the vote required (see below) to approve the proposals
presented at the Annual Meeting, abstentions will have the effect of a vote
against such proposal (other than the election of directors). Shares as to
which a broker indicates it has no discretion to vote and which are not voted
will be considered not present at such meeting for purposes of determining the
presence of a quorum and as unvoted for purposes of the approval of any
proposal presented at the Annual Meeting. Because of the vote required to
approve the Charter Amendment, broker non-votes with respect to such proposals
will have the effect of a vote against the Charter Amendment and because of the
vote required to approve the other proposals at the Annual Meeting, broker non-
votes will have no effect on the outcome and the vote on any of such other
proposals. With respect to the election of directors, abstentions and broker
non-votes will be disregarded and will have no effect on the vote.
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<PAGE>
VOTE REQUIRED. The affirmative vote of the holders of a majority of
shares of Common Stock 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 (other than the Charter Amendment and the election of
directors), each of which will be voted upon separately at the Annual Meeting.
The affirmative vote of the holders of a majority of all of the issued and
outstanding shares of Common Stock (whether or not represented in person or by
proxy at the Annual Meeting) is required to approve the Charter Amendment. The
affirmative vote of the holders of a plurality of shares of Common Stock
present in person or represented by proxy at the Annual Meeting will be
required to elect each of the Class I Directors to MIG's Board of Directors.
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of the MIG Record Date, certain
information regarding each person (including any "group" as that term is used
in Section 13(d)(3) of the Exchange Act) known (based solely upon filings with
the Commission prior to such date pursuant to Sections 13(d) or 13(g) of the
Exchange Act) to own beneficially (as such term is defined in Rule 13d-3 under
the Exchange Act) more than 5% of the outstanding Common Stock. In accordance
with the rules promulgated by the Commission, such ownership includes shares
currently owned as well as shares which the named person has the right to
acquire beneficial ownership of within 60 days, including, but not limited to,
shares which the named person has the right to acquire through the exercise of
any option, warrant or right, or through the conversion of a security.
Accordingly, more than one person may be deemed to be a beneficial owner of the
same securities.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner NUMBER OF SHARES OF PERCENTAGE OF
COMMON STOCK OUTSTANDING
Beneficially Owned(1) Common Stock
<S> <C> <C>
John W. Kluge, Stuart Subotnick and Metromedia
Company 15,272,128(2) 24.0%
One Meadowlands Plaza
E. Rutherford, NJ 07073
Dietche & Field Advisers, Inc. 3,160,000 5.02%
437 Madison Avenue
New York, New York 10022
</TABLE>
___________________________
(1) Unless otherwise indicated by footnote, the named persons have sole
voting and investment power with respect to the shares of Common Stock
beneficially owned.
(2) Metromedia Company is a Delaware general partnership owned and
controlled by John W. Kluge and Stuart Subotnick, each of whom is a
director of MIG. The amount set forth in the table above includes
12,415,455 shares beneficially owned by Mr. Kluge and Mr. Subotnick
beneficially through Metromedia Company and Met Telcell, Inc. ("Met
Telcell"), a corporation owned and controlled by Messrs. Kluge and
Subotnick, and
3
<PAGE>
2,605,448 and 231,225 shares of Common Stock owned
directly by a trust affiliated with Mr. Kluge and by Mr. Subotnick,
respectively. The amount also includes options issued under the
Metromedia International Group, Inc. 1996 Incentive Stock Plan (the "MIG
1996 Stock Plan") exercisable within 60 days of the date hereof. The
MIG 1996 Stock Plan has not been approved by MIG's stockholders and the
options issued thereunder are subject to forfeiture in the event the MIG
1996 Stock Plan is not approved by MIG's stockholders.
--------------------
The foregoing information is based on a review, as of the MIG Record
Date, by MIG of statements filed with the Commission under Sections 13(d) and
13(g) of the Exchange Act. To the best knowledge of MIG, except as set forth
above, no person owns beneficially more than 5% of the outstanding Common
Stock.
SECURITIES BENEFICIALLY OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of Common Stock
as of the MIG Record Date with respect to (i) each director and director
nominee of MIG, (ii) each executive officer named in the Summary Compensation
Table under "Executive Compensation" and (iii) all directors and executive
officers of MIG as a group.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER NUMBER OF SHARES OF PERCENTAGE OF
COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED(1)(10)
<S> <C> <C> <C>
Frederick B. Beilstein, III 126,825 (2) *
W. Tod Chmar 753,042 (2)(6)(7) 1.2%
Walter M. Grant 62,729 (2)(6) *
John P. Imlay, Jr. 20,000 (2)(12) *
Clark A. Johnson 28,000 (2)(12) *
John W. Kluge 15,030,903 (3)(12) 23.65%
Silvia Kessel 53,085 (12) *
John D. Phillips 1,010,000 (4)(12) 1.6%
Carl E. Sanders 32,097 (2)(8)(12) *
Richard J. Sherwin 912,605 (11) 1.4%
Stuart Subotnick 12,656,680 (5)(12) 19.9%
Arnold L. Wadler 65,416 (12) *
Leonard White 50,000 (12) *
All Directors and Executive
Officers 17,445,702 (9) 27.36%
as a group (13 persons)
</TABLE>
_________________________
*Holdings do not exceed one percent of the total outstanding shares of Common
Stock.
(1) Unless otherwise indicated by footnote, the named individuals have sole
voting and investment power with respect to the shares of Common Stock
beneficially owned.
(2) Includes shares subject to purchase within the next 60 days under MIG's
1989 Stock Option Plan and MIG's 1991 Non-Employee Director Stock Option
Plan.
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<PAGE>
(3) Represents 12,415,455 shares beneficially owned through Metromedia Company
and Met Telcell and 2,605,448 shares of Common Stock owned directly by a
trust affiliated with Mr. Kluge.
(4) Includes 1,000 shares owned by Mr. Phillips directly, 699,000 shares owned
by Renaissance Partners, a Georgia general partnership in which Mr. Philips
is a general partner, and 300,000 shares subject to purchase by Mr. Philips
within the next 60 days pursuant to the exercise of a stock option. Mr.
Phillips disclaims beneficial ownership of the shares owned by Renaissance
Partners except to the extent of his interest in Renaissance Partners.
(5) Represents 12,415,455 shares beneficially owned through Metromedia Company
and Met Telcell and 231,225 shares owned directly by Mr. Subotnick.
(6) Includes shares allocated to the named executive officer's account under
MIG's Employee Stock Purchase Plan as of the date hereof.
(7) Includes 699,000 shares owned by Renaissance Partners, a Georgia general
partnership in which a corporation owned by Mr. Chmar serves as general
partner. Mr. Chmar disclaims beneficial ownership of the shares owned by
Renaissance Partners except to extent of his interest in Renaissance
Partners.
(8) Includes 600 shares subject to purchase by Mr. Sanders within the next 60
days pursuant to the conversion of the $25,000 face amount (less than 1%)
of the Company's 6 1/2% Convertible Subordinated Debentures due 2002
beneficially owned by Mr. Sanders, which are convertible into Common Stock
at a conversion price of $41 5/8 per share.
(9) The number of shares shown for directors and executive officers as a group
includes an aggregate of 1,090,784 shares which are subject to purchase
within 60 days of the date hereof pursuant to stock options.
(10)Does not include options issued under the 1996 Incentive Stock Plan (as
defined below), as such options are not presently exercisable and will not
become exercisable within 60 days of the date hereof.
(11)Includes options to purchase 657,917 shares of Common Stock exercisable
within 60 days of the date hereof.
(12)Includes options issued under the Metromedia International Group, Inc. 1996
Incentive Stock Plan (the "MIG 1996 Stock Plan") exercisable within 60 days
of the date hereof. The MIG 1996 Stock Plan has not been approved by MIG's
stockholders and the options issued thereunder are subject to forfeiture in
the event the MIG 1996 Stock Plan is not approved by MIG's stockholders.
DIRECTORS AND OFFICERS
DIRECTORS OF MIG
The Board of Directors of MIG, which presently consists of ten members, is
divided into three classes. The Class I Directors were initially elected for a
term expiring at the Annual Meeting, the Class II Directors were initially
elected for a term expiring at the annual meeting of stockholders of MIG to be
held in 1997, and the Class III Directors were elected for a term expiring at
the annual meeting of stockholders to be held in 1998. Members of each class
will hold office until their successors are elected and qualified. At each
succeeding annual meeting of the stockholders of MIG, the successors of the
class of directors whose term expires at that meeting shall be elected by a
plurality vote of all votes cast at such meeting and will hold office for a
three-year term. The Class I Directors, whose term expires at the Annual
Meeting, are John W. Kluge, Stuart Subotnick and John P. Imlay, Jr. The Class
II Directors are John D. Phillips, Richard I. Sherwin and Leonard White. The
Class III Directors are Silvia Kessel, Carl E. Sanders, Arnold L. Wadler and
Clark A. Johnson.
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<PAGE>
For more information regarding each of MIG's directors, including
biographical information, see "PROPOSAL NO. 2-ELECTION OF DIRECTORS."
MEETINGS AND CERTAIN COMMITTEES OF THE BOARD
The Board of Directors held five regular meetings and three special
meetings during 1995. Of these meetings, four of the regular meetings and each
of the special meetings were held prior to the consummation of the November 1
Mergers, and one regular meeting was held following the consummation of the
November 1 Mergers. In addition, the Board of Directors took action by
unanimous written consent one time prior to the consummation of the November 1
Mergers and two times following the consummation of the November 1 Mergers. 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.
The Board of Directors has delegated certain functions to the following
standing committees:
THE EXECUTIVE COMMITTEE is authorized to exercise, to the extent permitted
by law, all of the powers of the Board of Directors in the management and
affairs of the Company. Prior to the consummation of the November 1 Mergers,
the Executive Committee held nine meetings. Following such time, the Executive
Committee did not meet. The current members of the Executive Committee are
Messrs. Kluge, Subotnick and Phillips.
THE AUDIT COMMITTEE is responsible for (a) reviewing the professional
services and independence of MIG'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 MIG's independent auditors and MIG's
internal auditors, the plan and results of the annual external audit, the
adequacy of MIG's internal control systems and the results of MIG's internal
audit and (d) reviewing with management and MIG's independent auditors MIG's
annual financial statements, financial reporting practices and the results of
such external audit. The Audit Committee did not meet during 1995. The current
members of the Audit Committee are Messrs. Subotnick, Imlay and Johnson.
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 MIG's executive officers and other key executives and to
administer MIG's stock option plans. The committee held two meetings during
1995, one prior to the consummation of the November 1 Mergers and one
subsequent thereto. The current members of the Compensation Committee are
Messrs. Sanders, Imlay and Johnson.
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 MIG's stockholders follow procedures specified in MIG's By-laws. These
procedures provide that, in order to nominate an individual to the Board of
Directors, a MIG Stockholder must provide timely notice of such nomination in
writing to the Secretary of MIG 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 MIG
not less than 60 days nor more than 90 days prior to the first
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<PAGE>
anniversary of
the date of MIG's annual meeting for the preceding year; PROVIDED, HOWEVER,
that in the event the date of annual meeting of stockholders is advanced by
more than 30 days or delayed by more than 60 days from such anniversary date,
such notice must be received within 10 days following public disclosure by MIG
of the date of the annual or special meeting at which directors are to be
elected. For purposes of this notice requirement, disclosure shall be deemed to
be first made when disclosure of such date of the annual or special meeting of
stockholders is first made in a press release reported by the Dow Jones News
Service, Associated Press or other comparable national news services, or in a
document which has been publicly filed by MIG with the Commission pursuant to
Sections 13, 14 or 15(d) of the Exchange Act. Any such nominations should be
submitted in writing to MIG, c/o Metromedia Company, One Meadowlands Plaza,
East Rutherford, New Jersey 07073, Attention: Secretary. The Nominating
Committee did not hold any formal meetings in 1995. The current members of the
Nominating Committee are Messrs. Subotnick and Wadler and Ms. Kessel.
COMPENSATION OF DIRECTORS
During 1995, each director of the Company who was not employed by the
Company or affiliated with Metromedia Company (the "Non-Employee Directors")
received a $2,000 monthly retainer plus a separate attendance fee for each
meeting of the Board of Directors or committee of the Board of Directors in
which such director participated. During 1995, the attendance fees were $1,200
for each meeting of the Board of Directors attended by a Non-Employee Director
in person and $500 for each meeting of the Board of Directors in which a Non-
Employee Director participated by conference telephone call. Members of
committees of the Board of Directors are paid $500 for each meeting attended.
Prior to December 13, 1995, Non-Employee Directors were entitled to
receive options to purchase shares of the Company's Common Stock under the
Company's 1991 Non-Employee Director Stock Option Plan (as amended, the
"Director Plan"). Under the Director Plan, each Non-Employee Director who was a
director of the Company on August 3, 1992 was granted an option to purchase
10,000 shares of the Company's Common Stock at an exercise price of $11.875,
the closing price of the Common Stock on the trading day immediately preceding
the date of grant. Options granted to these Non-Employee Directors became fully
vested as to all 10,000 shares upon approval of certain amendments to the
Director Plan at the Company's 1993 Annual Meeting of Stockholders.
The Director Plan further provided that each person who became a Non-
Employee Director of the Company after August 3, 1992 would receive an option
to purchase 10,000 shares of the Company's Common Stock on the day such
director is elected as a director, at an exercise price equal to the closing
price of the Common Stock on the trading day preceding such director's
election. Options granted to these Non-Employee Directors became fully vested
and exercisable as to all 10,000 shares on March 31 in the year after the date
the Non-Employee Director was elected, provided the Company had net income for
the year in which the Non-Employee Director was elected or earnings equal to or
better than budgeted results for such year.
All options granted under the Director Plan had a term of ten years. The
Director Plan had originally been scheduled to terminate on June 27, 2001.
However, at a meeting of the Board of Directors held on December 13, 1995, the
Board of Directors terminated the Director Plan. Options outstanding as of
December 13, 1995 are unaffected by the termination of the Director Plan.
In addition to establishing a stock option plan for its Non-Employee
Directors, the Company implemented, during the first quarter of 1992, a group
medical plan for its Non-Employee Directors (the "Non-Employee Director Medical
Plan") which provided medical coverage at group premium rates to active Non-
Employee Directors electing such coverage and to any Non-Employee Director
7
<PAGE>
who
retired from the Board of Directors after attaining age 65 and who either
participated in the plan for the entire period that the individual served as a
director since March 1, 1992 or participated in the plan for the three
consecutive years immediately prior to the individual's retirement as a
director. The medical plan paid for 100% of a Non-Employee Director's single
coverage premium and between 25% and 50% of the dependent coverage premium. At
the meeting of the Board of Directors of the Company held on December 13, 1995,
the Company's Board of Directors terminated the Non-Employee Director Medical
Plan.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information on
compensation awarded to, earned by or paid to the Chief Executive Officer and
MIG's other most highly compensated executive officers during the fiscal years
ended December 31, 1995, December 31, 1994 and December 31, 1993 for services
rendered in all capacities to MIG and its subsidiaries. In addition, the
Summary Compensation Table sets forth similar information for such periods with
respect to Frederick B. Beilstein, III and Walter M. Grant, who would have been
among MIG's four most highly compensated executive officers during 1995 but for
the fact that such persons were not serving as executive officers of MIG at the
end of 1995. The persons listed in the table below are referred to as the
"Named Executive Officers."
SUMMARY COMPENSATION
<TABLE>
<CAPTION>
Long-Term Compensation
Awards
Annual Compensation
<S> <C> <C> <C> <C> <C> <C>
Name and Principal Year Salary ($) Bonus ($) OTHER NUMBER OF ALL OTHER
Position ANNUAL SECURITIES COMPENSATION
COMPENSA- UNDERLYING ($)(2)
tion($)(1) Stock Options (#)
John D. Phillips 1995 $624,984 $750,000 - -0- $15,096
President and 1994(3) $438,289 $438,289 - 300,000 $13,336
Chief Executive 1993 - - - - -
Officer
Frederick B. Beilstein, 1995 $274,992 $137,500 - -0- $ 4,480
III(4) 1994 $274,992 $165,000 - 95,000 $ 4,435
Former Senior Vice 1993 $269,783 $ 41,250 - 19,100 $ 4,390
President,
Treasurer and Chief
Financial Officer
Walter M. Grant(5) 1995 $237,500 $118,750 - -0- $ 9,757
Former Senior Vice 1994 $237,500 $142,500 - 95,000 $12,623
President, 1993(6) $110,048 $ 16,875 - 20,000 $44,645
General Counsel and
Secretary
W. Tod Chmar 1995 $235,000 $235,000 - -0- $ 4,095
Senior Vice 1994(3) $164,801 $ 98,881 - 70,000 6,866
President 1993 - - - - -
</TABLE>
_______________
(1)The Company provides perquisites and other personal benefits to the
executive officers of the Company. The value of the perquisites and benefits
provided to each Named Executive Officer during 1993, 1994 and 1995 did not
exceed the lesser of $50,000 or 10% of such officer's salary plus annual
bonus.
(2)The amounts in this column include (i) premiums paid by the Company on
behalf of its executive officers under life insurance policies providing
death benefits to the designated beneficiaries of the executive officers,
including premium payments of (A) $4,200 in each of 1993, 1994 and 1995 on
behalf of Mr. Beilstein, (B) $1,312 in 1993 and $5,080 in 1994 on behalf of
Mr. Grant, and (C) $2,159 in 1994 and $3,945 in 1995 on behalf of Mr. Chmar;
(ii) a payment of $13,336 made by the Company to Mr. Phillips in 1994 and
payments of $15,096 and $5,080 made by the Company to Mr. Phillips and
Mr. Grant, respectively, in 1995 in lieu of their participation in the life
insurance programs maintained by the Company for its executive officers;
(iii) matching contributions made by the Company under its Employee Stock
Purchase Plan totaling $3,333 in 1993 for the benefit of Mr. Grant, $5,000
and $4,582 in 1994 for the benefit of Messrs. Grant and Chmar, respectively,
and $2,083 in 1995 for the benefit of Mr. Grant; (iv) matching contributions
of $2,310 made by the Company in each of 1994 and 1995 for the benefit of
Mr. Grant under a 401(k) savings plan sponsored by a subsidiary of the
Company; and (v) a relocation allowance of $40,000
8
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provided by the Company
to Mr. Grant in 1993. Under the Company's group universal life insurance
program, each of the Company's executive officers is entitled to own
$500,000 of universal life insurance on which the Company pays the premiums.
In addition to the universal life insurance program, the Company also made
premium payments for term life insurance policies of (1) $190 in 1993, $235
in 1994 and $280 in 1995 on behalf of Mr. Beilstein; (2) $233 in 1994 and
$284 in 1995 on behalf of Mr. Grant; and (3) $125 in 1994 and $150 in 1995
on behalf of Mr. Chmar.
(3)The amounts shown for 1994 reflect less than a full year of compensation for
Messrs. Phillips and Chmar, both of whom were employed by the Company on
April 19, 1994.
(4)Mr. Beilstein served as Senior Vice President, Treasurer and Chief Financial
Officer of the Company from May 31, 1991 until November 1, 1995. Following
November 1, 1995, Mr. Beilstein remained as an employee of the Company until
January 21, 1996. The amounts shown in the table for 1995 reflect all
compensation paid to or accrued for Mr. Beilstein during 1995. Mr. Beilstein
served as a consultant to the Company from January 22, 1996 through March 3,
1996 pursuant to the terms of a Post-Employment Consulting Agreement between
the Company and Mr. Beilstein. See "-Certain Agreements Regarding
Employment-Post-Employment Consulting Agreements with Walter M. Grant and
Frederick B. Beilstein."
(5)Mr. Grant served as Senior Vice President, General Counsel and Secretary of
the Company from July 6, 1993 until the consummation of the November 1
Mergers. Following November 1, 1995, Mr. Grant remained as an employee of
the Company in order to assist in transition activities relating to the
November 1 Mergers. The amounts shown in the table for 1995 reflect all
compensation paid to or accrued for Mr. Grant during 1995. Mr Grant remained
as an employee of the Company until June 15, 1996. He now serves as a
consultant to the Company pursuant to the terms of a Post-Employment
Consulting Agreement between the Company and Mr. Grant. See "-Certain
Agreements Regarding Employment-Post-Employment Consulting Agreements with
Walter M. Grant and Frederick B. Beilstein."
(6)The amounts shown for 1993 reflect less than a full year of compensation for
Mr. Grant, who was employed by the Company on July 6, 1993.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The Company did not grant any stock options or
limited stock appreciation rights ("SARs") to any of the
Named Executive Officers during the fiscal year ended
December 31, 1995. The following table sets forth
information concerning the exercise of options or SARs by
the Named Executive Officers during the 1995 fiscal year
and the number of unexercised options and SARs held by
such officers as of the end of the 1995 fiscal year.
FY End Value-$14.00
AGGREGATED OPTION AND SAR EXERCISES IN 1995 AND FISCAL
YEAR-END OPTION AND SAR VALUES
<TABLE>
<CAPTION>
VALUE REALIZED NUMBER OF SECURITIES
($) (MARKET UNDERLYING UNEXERCISED Value of Unexercise in
Shares PRICE AT OPTIONS/SARS AT FISCAL the Money Options/SARs
acquired on EXERCISE LESS Year End(#) at Fiscal Year End($)
Name exercise(#) EXERCISE price) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
John D. Phillips -0- -0- 300,000 -0- $2,287,500 -0-
Frederick B. 47,000 $417,000 49,825 52,275 $33,425 $272,445
Beilstien, III
Walter M. Grant 46,000 $409,430 16,500 52,500 $88,914 $296,876
W. Tod Chmar -0- -0- 36,542 36,542 $185,938 $185,938
</TABLE>
PENSION PLANS
The Company maintains a qualified defined benefit pension plan and a
nonqualified supplemental pension plan for the benefit of eligible
participants, including certain of the Company's executive officers. The
Company's nonqualified supplemental pension plan provides benefits that
9
<PAGE>
would
otherwise be denied participants by reason of certain limitations under the
Internal Revenue Code on qualified plan benefits and provides certain other
supplemental pension benefits to certain of the Company's executive officers
and highly compensated employees. On December 13, 1995, the Board of Directors
of the Company amended the pension plan and the supplemental pension plan to
cease benefit accruals after December 31, 1995. Accordingly, the only benefits
that will be payable under these plans are those benefits that had accrued as
of December 31, 1995.
A participant's compensation covered by the Company's pension plan and
supplemental pension plan is his or her average annual compensation for the
five consecutive calendar plan years during the last ten years of the
participant's career for which such average is the highest or, in the case of a
participant who has been employed for less than five full calendar years, the
period of his or her employment with the Company and its subsidiaries ("covered
compensation"). A participant's covered compensation generally means the total
taxable compensation required to be reported on the participant's Form W-2 for
income tax purposes, except that this amount (excluding bonuses) is annualized
for periods covering less than a full calendar year. Generally, a participant
earns retirement benefits at the rate of 2% of his covered compensation for the
first 20 years of service and 1% for each additional 20 years of service.
Participants become vested in their retirement benefits after completing at
least five years of servicing or attaining age 50 or upon retirement after age
62 with at least one year of service. The estimated years of service for each
Named Executive Officer as of December 31, 1995 was as follows: Mr. Phillips:
1- 2/3 years; Mr. Beilstein: 4- 1/2 years; Mr. Grant - 2 1/2 Years; and
Mr. Chmar: 1- 2/3 years. Based on these provisions and the number of years of
service completed, the annual vested retirement benefits as of December 31,
1995 were $42,015 for Mr. Phillips and $24,189 for Mr. Grant. Neither Mr.
Beilstein nor Mr. Chmar had vested retirement benefits as of December 31, 1995,
the date as of which MIG ceased benefit accruals under its pension plan and
supplemental pension plan, because neither had completed at least five years of
service with MIG or attained age 50 as of December 31, 1995. These benefits
are based on a straight line annuity beginning at age 62. Mr. Beilstein and
Mr. Chmar did not have a vested retirement benefit as of December 31, 1995, the
date as of which the Company ceased benefit accruals under its pension plans.
Accordingly, neither Mr. Beilstein nor Mr. Chmar is entitled to receive pension
benefits under such plans upon retirement. A participant's covered compensation
for purposes of the pension plan differs from compensation reported in the
Summary Compensation Table (the "Table") in that (i) covered compensation
includes certain taxable employee benefits not required to be reported in the
Table and (ii) covered compensation includes all compensation received by the
executive during the year (regardless of when it was earned), whereas the Table
includes only compensation earned during the year.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MIG'S RELATIONSHIP WITH METROMEDIA COMPANY
MIG is a party to a number of agreements and arrangements with Metromedia
Company ("Metromedia") and its affiliates, the material terms of which are
summarized below.
HISTORICAL RELATIONSHIP
Metromedia and its affiliates are collectively the largest single
stockholder of the Company, owning, as of the Record Date, approximately 24.1%
of the issued and outstanding shares of Common Stock. Prior to the November 1,
1995 mergers of Orion Pictures Corporation ("Orion") and Metromedia
Telecommunications, Inc. ("MITI") with and into subsidiaries of MIG and of MCEG
10
<PAGE>
Sterling Incorporated ("Sterling") with and into MIG (collectively, the
"November 1 Mergers"), Metromedia and its affiliates were the principal
stockholders of Orion and MITI.
Prior to the November 1 Mergers, Orion, MITI and Sterling were party to a
number of material contracts and other arrangements with Metromedia and certain
affiliates of Metromedia pursuant to which Metromedia and certain of its
affiliates made loans or provided financing to, or paid obligations on behalf
of, each of Orion, MITI and Sterling (collectively, the "Metromedia
Obligations"). In connection with the consummation of the November 1 Mergers,
Metromedia Obligations were refinanced, repaid or converted into equity of the
Company.
A portion of the Metromedia Obligations ($20,400,000 owed by Orion,
$34,076,000 owed by MITI and $524,000 owed by Sterling) was financed by
Metromedia through borrowings under a $55 million credit agreement between the
Company (then known as "The Actava Group Inc.") and Metromedia (the "Actava-
Metromedia Credit Agreement"). On November 1, 1995, Orion, MITI and Sterling
each repaid such amounts to Metromedia Company and Metromedia Company repaid
the amounts owed by it to the Company under the Actava-Metromedia Credit
Agreement ($55 million). Because on November 1, 1995, Orion, Sterling and MITI
were merged with the Company, there was no net addition to the assets of the
Company as a result of these transactions.
In addition, prior to the November 1 Mergers, Metromedia and John W. Kluge,
the Chairman and Chief Executive Officer of Metromedia, had guaranteed (the
"Orion Guarantee") certain amounts owed by Orion under its then existing credit
facility and certain amounts owed to Sony Pictures Entertainment Corp. by
Orion. Metromedia and Mr. Kluge collectively were majority stockholders of
Orion and issued these guarantees in 1991 as part of its bankruptcy
reorganization plan. As consideration for the guarantees and the contribution
to Orion by Metromedia and Mr. Kluge of $15 million in cash and certain film
rights, Metromedia and Mr. Kluge received a total of 10,020,000 shares of Orion
common stock, which shares were converted into MIG Common Stock in connection
with the November 1 Mergers. Pursuant to the Orion Guarantee, Metromedia made
payments on behalf of Orion to the banks under its then existing credit
facility and to Sony in the aggregate amount of $59,592,446 during 1994 and
1995. Under a Reimbursement Agreement between Orion and Metromedia, Orion was
required to reimburse Metromedia in full for all payments made by Metromedia on
Orion's behalf pursuant to the Orion Guarantee. At the effective time of the
November 1 Mergers, Orion repaid Metromedia $63,296,514 pursuant to the
Reimbursement Agreement. Of the payments made by Metromedia on behalf of Orion
and repaid by Orion to Metromedia pursuant to the Reimbursement Agreement,
$20,400,000 was financed by borrowings by Metromedia under the Actava-
Metromedia Credit Agreement described above.
Prior to the November 1 Mergers, Metromedia, through an affiliate, provided
Orion and its affiliates with non-recourse financing (which was not financed by
Metromedia pursuant to the Actava-Metromedia Credit Agreement) to acquire
certain theatrical and home video product (the "MetProductions Indebtedness").
Pursuant to a Contribution Agreement entered into in connection with the
November 1 Mergers, the MetProductions Indebtedness ($10,426,552 at November 1,
1995, including accrued interest) was converted into 993,005 shares of Common
Stock at the effective time of the November 1 Mergers. In addition, Metromedia,
through its affiliates, provided MITI and its affiliates with certain loans
(which were not financed by Metromedia pursuant to the Actava-Metromedia Credit
Agreement) to fund MITI's operations and repay certain of its indebtedness (the
"MITI Indebtedness"). Pursuant to the Contribution Agreement, the MITI
Indebtedness ($26,641,744 at November 1, 1995, including accrued interest) was
converted into 2,537,309 shares of Common Stock at the effective time of the
November 1 Mergers.
11
<PAGE>
RELATIONSHIPS WITH THE COMPANY FOLLOWING THE NOVEMBER 1 MERGERS
ORION CREDIT FACILITY. On November 1, 1995, Orion entered into a Credit,
Security and Guaranty Agreement (the "Old Credit Agreement") with Chemical Bank
("Chemical") and a syndicate of lenders (the "Lenders"), under which Chemical
and the Lenders provided Orion with a five-year $185 million secured credit
facility (the "Old Credit Facility") to finance Orion's development,
production, acquisition and worldwide distribution and exploitation of motion
pictures, video product and made-for-television product. On June 27, 1996,
Orion, its subsidiaries and Chemical amended and restated the Old Credit
Agreement, increasing the amount available under the Old Credit Facility to a
$300 million facility, consisting of a $200 million term loan and a $100
million revolving credit facility (the "Amended Credit Facility"). Orion's
obligations under the Amended Credit Facility are guaranteed on a joint and
several basis by all of Orion's active subsidiaries (including recently
acquired Goldwyn Entertainment Company ("Goldwyn") and Motion Picture Corp. of
America ("MPCA") and their respective subsidiaries). In addition, in order
further to induce Chemical and the other Lenders to provide the revolving
portion of the Amended Credit Facility, John W. Kluge and Metromedia Company
each guaranteed the due and punctual payment of all funds due under the
revolving credit loan portion of such credit facility, including all related
costs and attorneys' fees, up to a maximum amount of the lesser of (i) $100
million and (ii) the amount, if any, by which Orion's outstanding obligations
under the revolver exceed the amount by which the borrowing base under the
Amended Credit Facility exceeds the term loan portion of such credit facility.
As of the MIG Record Date, Orion owed $__ million under the revolving portion
of the Amended Credit Facility, of which $___ million was reserved for
outstanding letters of credit. Neither Mr. Kluge nor Metromedia received any
consideration for guaranteeing Orion's obligations under the Amended Credit
Facility. Their guarantees were, however, a condition to Chemical's agreeing
to provide the revolving portion of such Facility. In addition, Metromedia had
guaranteed the payment by Orion to Chemical of certain fees payable in
connection with the execution of the commitment letter with Chemical for the
Old Credit Facility. All such fees were paid by Orion on January 1, 1996.
Furthermore, Metromedia guaranteed the payment of certain third party accounts
receivable owed to Orion so that the entire face amount of such accounts could
be included in the borrowing base for the Old Credit Facility. Neither
Mr. Kluge nor Metromedia received any consideration for providing such
guarantees.
MIG CREDIT FACILITY. Mr. Kluge had guaranteed the payment by the Company of
the difference between the amount outstanding under the Company's $35 million
revolving credit facility with Chemical Bank and the maximum available amount
permitted to be outstanding under such credit facility, which was based on a
percentage of the market value of the shares of the common stock of Roadmaster
Industries Inc. held by the Company. All amounts outstanding under this Credit
Agreement were repaid on July 2, 1996.
MITI BRIDGE LOAN AGREEMENT. Metromedia, pursuant to the terms of a Bridge
Loan Agreement between Metromedia and MITI, had made available to MITI up to
$15 million of revolving credit in order to satisfy its commitments and working
capital requirements. Amounts outstanding under the Bridge Loan Agreement,
plus interest at the rate of LIBOR plus 2%, were repaid in full on July 2, 1996
in accordance with the terms of the Bridge Loan Agreement.
MANAGEMENT AGREEMENT. The Company is a party to a management agreement with
Metromedia dated November 1, 1995 (the "Management Agreement"), pursuant to
which Metromedia provides the Company with management services, including
legal, insurance, payroll and financial accounting systems and cash management,
tax and benefit plans. The Management Agreement terminates on October 31,
1996, and is automatically renewed for successive one year terms unless either
party terminates upon 60 days prior written notice. The management fee under
the Management Agreement is $1.5 million per year, payable monthly at a rate of
$125,000 per month.
12
<PAGE>
The Company is also obligated to reimburse Metromedia all
its out-of-pocket costs and expenses incurred and advances paid by Metromedia
in connection with the Management Agreement. Pursuant to the Management
Agreement, the Company has agreed to indemnify and hold Metromedia harmless
from and against any and all damages, liabilities, losses, claims, actions,
suits, proceedings, fees, costs or expenses (including reasonable attorneys'
fees and other costs and expenses incident to any suit, proceeding or
investigation of any kind) imposed on, incurred by or asserted against
Metromedia in connection with the Management Agreement. In fiscal 1995,
Metromedia received no money for its out-of-pocket costs and expenses or for
interest on advances extended by it to the Company pursuant to the Management
Agreement.
TRADEMARK LICENSE AGREEMENT. The Company is a party to a license agreement
with Metromedia (the "Metromedia License Agreement"), dated November 1, 1995,
pursuant to which Metromedia has granted the Company a non-exclusive, non-
transferable, non-assignable right and license, without the right to grant
sublicenses, to use the trade name, trademark and corporate name "Metromedia"
in the United States and, with respect to MITI, worldwide, royalty-free for a
term of 10 years. The Metromedia License Agreement can be terminated by
Metromedia upon one month's prior written notice in the event (i) Metromedia or
its affiliates own less than 20% of the Common Stock; (ii) of a Change in
Control of the Company (as defined below); or (iii) any of the stock or all or
substantially all of the assets of any of the subsidiaries of the Company are
sold or transferred, in which case, the Metromedia License Agreement shall
terminate with respect to such subsidiary. A Change in Control of the Company
is defined as (a) a transaction in which a person or "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) not in existence at the time
of the execution of the Metromedia License Agreement becomes the beneficial
owner of stock entitling such person or group to exercise 50% or more of the
combined voting power of all classes of stock of the Company; (b) a change in
the composition of the Company's Board of Directors whereby a majority of the
members thereof are not directors serving on the board at the time of the
Metromedia License Agreement or any person succeeding such director who was
recommended or elected by such directors; (c) a reorganization, merger or
consolidation whereby, following the consummation thereof, Metromedia would
hold less than 20% of the combined voting power of all classes of the Company's
stock; (d) a sale or other disposition of all or substantially all of the
assets of the Company; or (e) any transaction the result of which would be that
the Common Stock would not be required to be registered under the Exchange Act
and the holders of Common Stock would not receive common stock of the survivor
of the transaction which is required to be registered under the Exchange Act.
In addition, Metromedia has reserved the right to terminate the Metromedia
License Agreement in its entirety immediately upon written notice to the
Company if, in Metromedia's sole judgment, the Company's continued use of
"Metromedia" as a trade name would jeopardize or be detrimental to the goodwill
and reputation of Metromedia.
Pursuant to the Metromedia License Agreement, the Company has agreed to
indemnify and hold harmless Metromedia against any and all losses, claims,
suits, actions, proceedings, investigations, judgments, deficiencies, damages,
settlements, liabilities and reasonable legal (and other expenses related
thereto) arising in connection with the Metromedia License Agreement.
The Company believes that the terms of each of the transactions described
above were no less favorable to the Company then could have been obtained from
non-affiliated parties.
IMAGE OUTPUT AGREEMENT. Mr. Kluge beneficially owns more than 10% of the
common stock of Image Investors Co., a Delaware corporation. Image Investors
owns approximately 40% of the common stock of Image Entertainment, Inc.
("Image"). OHEC was a party to an output license agreement with Image which
terminated on December 31, 1995 pursuant to which OHEC granted to
13
<PAGE>
Image the
rights to manufacture, market and sell on laserdiscs for private in-home use
certain feature length programs released by Orion on videocassette for a period
of three years from the date of first release by Image on laserdisc in
consideration of a royalty payment payable with respect to each program. For
the year ended December 31, 1995, Image paid to Orion approximately $719,310
under the agreement. Orion, OHEC and Image are currently negotiating the terms
of a new output agreement. Since December 31, 1995, the parties have been
operating as if the old output agreement is still in effect.
WORLDCOM. Orion is a customer of WorldCom, Inc. (formerly known as LDDS
Metromedia Communications), which provides long distance telephone services to
Orion ("Worldcom"). Mr. Kluge, the Chairman of the Company, is Chairman of the
Board of WorldCom; Mr. Subotnick, the Vice Chairman of the Board of the
Company, is a Director of WorldCom; and Silvia Kessel, a Senior Vice President
and Director of the Company, serves on WorldCom's Board of Directors. For the
fiscal year ended December 31, 1995, Orion paid $164,583 to WorldCom for long
distance services rendered.
AGREEMENTS ENTERED INTO IN CONNECTION WITH THE GOLDWYN MERGER
DISTRIBUTION AGREEMENT
In connection with the acquisition of Goldwyn by MIG on July 2, 1996 (the
"Goldwyn Merger"), the Samuel Goldwyn, Jr. Family Trust (the "Goldwyn Trust")
and Goldwyn entered into a distribution agreement (the "Distribution
Agreement") for the worldwide distribution in all media of 75 classic motion
pictures owned by the Goldwyn Trust for a term ending on December 31, 2020.
The Goldwyn Trust was the majority stockholder of Goldwyn and immediately
following the Goldwyn Merger owned 1,996,418 shares of Common Stock. Mr.
Samuel Goldwyn, Jr. is a trustee of the Goldwyn Trust and serves as Chairman of
Goldwyn, an indirect wholly-owned subsidiary of MIG. Under the Distribution
Agreement, Goldwyn has the sole and exclusive right and license to distribute,
license and otherwise exploit the Pictures in any and all versions and
languages in all media throughout the world. In addition, so long as Mr.
Goldwyn remains Chairman of Goldwyn, Goldwyn shall have the exclusive right of
first refusal to produce any remake or sequel rights which the Goldwyn Trust
elects to exploit; provided, that, in the event that Mr. Goldwyn no longer
serves as Chairman, other than as a result of termination for "cause," such
rights shall terminate; and, provided further, that if he is terminated for
"cause," such rights shall terminate on the seventh anniversary of the date of
the Distribution Agreement.
Under the Distribution Agreement, until December 31, 1996, Goldwyn is
entitled to receive a distribution fee of 35% of the proceeds derived from the
distribution of the Pictures and shall be reimbursed for all costs incurred in
connection with such distribution. From January 1, 1997 through the remainder
of the term of the Distribution Agreement, Goldwyn will receive a distribution
fee of 30% of the proceeds received from the distribution of the Pictures, and
shall be reimbursed for all costs relating to such distribution.
In addition, certain participations payable owed by Goldwyn to the Goldwyn
Trust have accrued under an existing distribution agreement between the Company
and the Goldwyn Trust relating to the Pictures (the "Accrued Participations")
and have not been paid as a result of limitations set forth in the Company
credit facility with its bank group. Pursuant to the Distribution Agreement,
the Goldwyn Trust will receive a minimum of $800,000 per year until the amount
of Accrued Participations has been reduced to zero. The Distribution Agreement
limits the amount of money that the Goldwyn Trust can receive in respect of
Accrued Participations and future participations owed to
14
<PAGE>
the Goldwyn Trust to a
maximum amount per year escalating from $1.25 million to $1.5 million over a
four-year period.
TRADEMARK LICENSE AGREEMENT
Pursuant to a trademark license agreement entered into in connection with
the Goldwyn Merger, Mr. Samuel Goldwyn, Jr. agreed to license the trademark
"Samuel Goldwyn" to Goldwyn in perpetuity, royalty-free for use in connection
with presently existing film and television product and has agreed to a non-
exclusive license to use the name "Goldwyn" in perpetuity, royalty-free in
connection with the film and television product of Goldwyn that is consistent
with the high quality standards established by Mr. Goldwyn.
PRODUCTIONS AND NIGHTLIFE
Samuel Goldwyn Productions ("Productions") is a California corporation
wholly owned by Mr. Goldwyn which is involved in the acquisition and
development of literary properties for production as motion pictures and
television programs. In connection with the consummation of the Goldwyn
Merger, certain of Productions' assets which had been financed by Goldwyn or
that otherwise related to the operations of Goldwyn were transferred to
Goldwyn. Neither MIG nor Goldwyn paid any consideration for the transfer of
these assets.
Nightlife, Inc. ("Nightlife") is a California corporation wholly owned by
Meyer Gottlieb, President and Chief Operating Officer of Goldwyn, which has
been involved in the production of motion pictures and television programs. In
connection with the consummation of the Goldwyn Merger, the assets of Nightlife
which had been financed by Goldwyn or that otherwise related to the operations
of Goldwyn were transferred to Goldwyn. Neither MIG nor Goldwyn received any
consideration for the transfer of these assets.
REGISTRATION RIGHTS AGREEMENT
Concurrently with the consummation of the Goldwyn Merger, the Commission
declared effective a shelf registration statement which registers for resale
all of the shares of Common Stock received by Mr. Goldwyn or the Goldwyn
Family Trust pursuant to the Goldwyn Merger. MIG has agreed to keep such Form
S-3 effective until the earlier of (i) the date all shares of Common Stock
registered on such Form S-3 have been sold by Mr. Goldwyn or the Goldwyn Family
Trust, (ii) the date all shares of Common Stock registered on such Form S-3 may
be immediately sold by Mr. Goldwyn or the Goldwyn Family Trust in a single
transaction using Rule 144 promulgated under the Securities Act and (iii) three
years from the effective time of the Goldwyn Merger.
OTHER
Steven A. Gilula, Chief Operating Officer of Goldwyn's Theatre Group, is a
general partner of and owns a one-third interest in Uptown Associates, a
California general partnership whose partnership's assets consist of the Uptown
Theatre located in Minneapolis, Minnesota. The partnership leases such real
property and improvements to Landmark Theatre Corporation ("Landmark"), a
subsidiary of Goldwyn, pursuant to a 10-year lease that expires on April 30,
2003, with a 10-year renewal option. During the 12-month period ended March
31, 1996, Landmark paid or accrued a total of $93,520 to Uptown Associates
pursuant to this lease.
15
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CERTAIN AGREEMENTS REGARDING EMPLOYMENT
PHILLIPS EMPLOYMENT AGREEMENT
Mr. Phillips and the Company are parties to an employment agreement dated as
of April 19, 1994, as amended on November 1, 1995 (the "Phillips Employment
Agreement"), under which the Company has agreed to employ Mr. Phillips as its
President and Chief Executive Officer reporting directly to the Vice Chairman
of the Company. The Phillips Employment Agreement provides that Mr. Phillips
will be entitled to receive a base salary at an annual rate of $625,000 per
year. Mr. Phillips also is entitled to participate in any bonus plans
maintained by the Company for its senior executive officers and to receive
other benefits provided by the Company to its senior corporate officers. Both
the Company and Mr. Phillips have the right to terminate the Phillips
Employment Agreement at any time. If the Company terminates the Phillips
Employment Agreement without cause (as defined in the Phillips Employment
Agreement) or by request for resignation by the Chairman or Vice Chairman of
the Company or if Mr. Phillips terminates the Phillips Employment Agreement for
good reason (as defined in the Phillips Employment Agreement), the Company will
be required to continue to pay Mr. Phillips' base salary and other benefits and
to provide Mr. Phillips with an office and a secretary designated by the
Company for one year following such termination. If the Company terminates the
Phillips Employment Agreement with cause or if Mr. Phillips terminates the
Phillips Employment Agreement without good reason, Mr. Phillips will be
entitled to receive his base salary and other benefits only through the date of
termination.
In connection with his employment, Mr. Phillips also received from the
Company an option (the "Phillips Option") to purchase 300,000 shares of Common
Stock at a price of $6.375 per share. The Phillips Option may be exercised at
any time through April 18, 2001. Mr. Phillips has the right to transfer the
Phillips Option in whole or in part at any time. The Company has also entered
into a Registration Rights Agreement with Mr. Phillips pursuant to which the
Company has agreed to register with the Commission any shares purchased upon
the exercise of the Option.
POST-EMPLOYMENT AGREEMENTS WITH WALTER M. GRANT AND FREDERICK B. BEILSTEIN
In 1995, the Company entered into Post-Employment Consulting Agreements (the
"Post-Employment Agreements") with two former officers, Frederick B. Beilstein,
III, former Senior Vice President and Chief Financial Officer, and Walter M.
Grant, former Senior Vice President and General Counsel. The Post-Employment
Agreements provide that if an executive's employment with the Company is
terminated by the Company (other than for cause) or if the executive's
employment is terminated by the executive for "good reason," then the Company
will retain the executive as a consultant for a period of two years following
the date of termination of his employment. An executive may terminate his
employment for "good reason" in the event of (i) a reduction in his base salary
or benefits other than an across-the-board reduction involving similarly
situated employees; (ii) the relocation of his full-time office to a location
greater than 50 miles from the Company's current corporate office; or (iii) a
reduction in his corporate title. The Post-Employment Agreements provide that
the Company, in exchange for the executive's post-employment consulting
services, will pay a monthly consulting fee to the executive in an amount equal
to the executive's monthly base salary at the time of the termination of his
employment. The Post-Employment Agreements also provide for the continuation of
certain medical and other employee benefits during the two-year consulting
period. In connection with its approval of the November 1 Mergers, the Board of
Directors of the Company agreed that Mr. Beilstein and Mr. Grant would each be
permitted to terminate his employment with the Company and receive the payments
and other benefits due under his Post-Employment Agreement if he did not wish
to remain with the Company following the consummation of the November 1
Mergers.
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<PAGE>
Mr. Grant terminated his employment with the Company on June 15, 1996 and
accordingly, his consulting period under his Post-Employment Agreement began on
that date. Mr. Grant's Post-Employment Agreement was terminated on June 17,
1996 when Mr. Grant accepted employment with another company. On July 2, 1996,
the Company paid Mr. Grant $237,500 under his Post-Employment Agreement in
satisfaction of the Company's obligations under such agreement.
Mr. Beilstein's employment with the Company was terminated on January 21,
1996, and his consulting period under his Post-Employment Agreement began on
that date. Mr. Beilstein's Post-Employment Agreement was terminated on March
3, 1996 when Mr. Beilstein accepted employment with another company. The
amount paid by the Company to Mr. Beilstein to satisfy the Company's obligation
to Mr. Beilstein under his Post-Employment Agreement totaled $291,263.44.
MISCELLANEOUS. During 1995, Orion reimbursed Metromedia $95,000 for the
services of Silvia Kessel, Senior Vice President of Metromedia who also serves
as Executive Vice President of Orion.
Mr. Phillips is the sole stockholder of JDP Aircraft II, Inc., a Georgia
corporation ("JDP Aircraft"). On October 21, 1994, the Company and JDP Aircraft
entered into a lease agreement under which JDP Aircraft provides the Company
with the use of a Citation Jet owned by JDP Aircraft. The lease agreement can
be terminated by either party by giving 30 days' notice to the other party. The
Company paid $298,367 to JDP Aircraft under the lease agreement for services
provided during 1995.
On April 19, 1994, Mr. Phillips was elected President and Chief Executive
Officer of the Company. He was elected to the Board of Directors of the Company
on the same date. At the same time, Renaissance Partners in which Mr. Phillips
serves as a general partner, purchased 700,000 shares of Common Stock from the
Company for $4,462,500, representing a price of $6.375 per share. This price
represents the last sale price of the Common Stock on the New York Stock
Exchange (on which the Common Stock was traded prior to the November 1 Mergers)
on April 11, 1994, the date before the Company announced that it had received
an investment proposal from Mr. Phillips. The Company also entered into a
Registration Rights Agreement with Renaissance Partners pursuant to which the
Company agreed to register with the Commission the 700,000 shares of Common
Stock purchased by Renaissance Partners. Such shares were registered with the
Commission in November 1995.
Mr. Sanders is Chairman of Troutman Sanders, a law firm which provided legal
services to the Company.
INDEMNIFICATION AGREEMENTS
MIG has entered into indemnification agreements (the "Indemnification
Agreements") with certain officers and directors of MIG. The Indemnification
Agreements provide for indemnification of such directors and officers to the
fullest extent authorized or permitted by law. The Indemnification Agreements
also provide for (i) advancement by MIG of expenses incurred by the director or
officer in defending certain litigation, (ii) the appointment in certain
circumstances of an independent legal counsel to determine whether the director
or officer is entitled to indemnification and (iii) the continued maintenance
by MIG of directors' and officers' liability insurance (consisting of
$5 million of primary coverage and an excess policy providing $5 million of
additional coverage). These Indemnification Agreements were approved by the
stockholders of MIG at its 1993 Annual Meeting of Stockholders.
17
<PAGE>
In addition, MIG and Mr. Goldwyn have reached certain agreements with
respect to indemnification and insurance arrangements and other matters which
MIG will assume or has agreed to provide after the Goldwyn Merger.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires MIG's directors and executive
officers, and persons who beneficially own more than 10% of the outstanding
Common Stock, to file with the Commission and the AMEX initial reports of
ownership and reports of changes in ownership of the Common Stock. Such
officers, directors and greater than 10% stockholders are required by the
regulations of the Commission to furnish MIG with copies of all reports that
they file under Section 16(a). To MIG's knowledge, based solely on a review of
the copies of such reports furnished to MIG and written representations that no
other reports were required, all Section 16(a) filing requirements applicable
to MIG's officers, directors and greater than 10% beneficial owners were
complied with by such persons during the fiscal year ended December 31, 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to June 7, 1995, the Compensation Committee consisted of John E.
Aderhold, John P. Imlay, Jr., J.M. Darden, III and Richard Nevins. On June 7,
1995, Mr. Darden resigned as a member of the Board of Directors. Mr. Darden's
letter of resignation did not provide reasons for his resignation. On
September 15, 1995, Clark A. Johnson was appointed by the Board of Directors to
replace Mr. Darden, effective September 15, 1995. Following the November 1
Mergers, the Compensation Committee consists of Messrs. Sanders, Inlay and
Johnson.
COMPENSATION COMMITTEE REPORT ON COMPENSATION
The
Compensation Committee of the Board of Directors (the "Compensation Committee")
is comprised entirely of independent directors and is responsible for
developing and making recommendations to the Board with respect to MIG's
executive compensation policies. Prior to June 7, 1995, the Compensation
Committee consisted of John E. Aderhold, John P. Imlay, Jr., J.M. Darden, III
and Richard Nevins. On June 7, 1995, Mr. Darden resigned as a member of the
Board of Directors. Mr. Darden's letter of resignation did not provide reasons
for his resignation. Clark A. Johnson was appointed by the Board of Directors
to the Compensation Committee to replace Mr. Darden, effective September 15,
1995.
The following report of the Compensation Committee discusses MIG's executive
compensation policies generally and, specifically, the relationship of MIG's
performance in 1995 to the compensation by MIG of its executive officers.
In general, the Compensation Committee seeks to link the compensation paid
to MIG's executive officers to the performance of MIG and that of the
individual 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.
An executive officer's compensation consists of a base salary, a
discretionary bonus and the right to participate in certain benefit plans
generally available to MIG's employees, including MIG's health, disability and
life insurance programs, with executive officers provided more life insurance
than other employees in order to attract and retain strong senior management.
In addition, executive
18
<PAGE>
officers of the Company historically have been eligible
to participate in the Company's lifetime defined benefit pension plan and its
nonqualified supplemental pension plan. On December 13, 1995, the Board of
Directors amended both the pension plan and the supplemental pension plan to
cease benefit accruals after December 31, 1995. See "EXECUTIVE
COMPENSATION-Pension Plans."
BASE SALARY. An executive's base salary is based primarily on job content
and market comparisons. The Compensation Committee believes that base salaries
at least equal to the market average are essential to retaining good
performers. During 1994, the Compensation Committee, with the assistance of
outside consultants, reviewed total officer compensation, including base
salaries, against a market comparison group of approximately 200 companies in
the consumer goods industry (the "Comparison Group") to assess the current
competitiveness of the base salaries of MIG's executive officers. Using the
Comparison Group as a frame of reference, the Compensation Committee considered
MIG's executive compensation in view of MIG's size, number of operating units,
and the roles and scope of responsibilities of MIG's executive officers. No
executive officers received increases in their base salaries for 1995 because
the total compensation paid by MIG in 1994 to its Chief Executive Officer and
its four most highly compensated officers was at the high end of the range paid
by companies in the Comparison Group to their respective Chief Executive
Officers and four most highly compensated executives. In comparing the
compensation of its executives with that of executives of companies in the
Comparison Group, the Compensation Committee considered the competitiveness of
MIG's entire compensation package and did not limit its determination solely to
an evaluation of salary, bonus or other items of compensation.
BONUS. In 1995, MIG did not maintain a bonus plan with established
performance criteria, but rather awarded bonuses on a discretionary basis based
upon the recommendations of the Compensation Committee. Bonuses were awarded
in 1995 to reward MIG's executive officers for their efforts in helping to
consummate the November 1 Mergers. As the Board disclosed in connection with
its approval of the November 1 Mergers, such transactions repositioned MIG's
assets into the converging entertainment, media and communications industries.
The Compensation Committee believes that the November 1 Mergers will provide
MIG Stockholders with long-term growth opportunities previously unavailable to
them and that its executives should be rewarded for identifying and securing
this opportunity on behalf of the stockholders.
The Compensation Committee's decision to award bonuses to MIG's executive
officers in 1995 was also based on the performance of the Common Stock during
1995. On January 3, 1995 (the first trading day of 1995), the closing sale
price of the Common Stock on the New York Stock Exchange (on which the Common
Stock was then traded) was $9-3/4. On September 15, 1995, the date on which
1995 bonuses were awarded to MIG's executive officers, the closing sale price
of the Common Stock was $17-3/8, an increase of 78.2%. In comparison, the
Standard and Poor's 500 Index grew by 27.1% over the same period.
Based on these factors, the Compensation Committee recommended 1995 bonuses
of $750,000 for Mr. Phillips and $235,000 for Mr. Chmar, and bonuses equaling
50% of the base salaries for each of Messrs. Beilstein and Grant. The
distinction between the bonuses awarded to Messrs. Phillips and Chmar and the
bonuses awarded to Messrs. Beilstein and Grant reflect the fact that both
Messrs. Beilstein and Grant had entered into post-employment consulting
agreements with MIG entitling them to two years compensation at their
respective base salaries following their departure from MIG. The Compensation
Committee also took into account that Messrs. Phillips and Chmar would continue
to hold executive positions with MIG following consummation of the November 1
Mergers, whereas Messrs. Beilstein and Grant would not. In addition, the
Compensation Committee felt it necessary to express MIG's appreciation for the
diligence, conscientiousness and professionalism exhibited by both Messrs.
Beilstein and Grant in the months leading up to the
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<PAGE>
November 1 Mergers,
particularly after it became clear that they would not retain their executive
positions following such mergers. The Compensation Committee believes that the
bonuses paid to MIG's executive officers in 1995 are justified and consistent
with MIG's policy of linking compensation with performance. The Compensation
Committee considered a number of factors in determining the level of bonuses to
award to MIG's executive officers for 1995 and did not quantify the extent to
which such bonuses were based upon the performance of MIG's Common Stock or the
extent to which they were based upon other factors.
CHIEF EXECUTIVE OFFICER COMPENSATION. Amounts earned during 1995 by MIG's
President and Chief Executive Officer, John D. Phillips, are shown in the
Summary Compensation Table. Mr. Phillips' base salary was established in April
1994, at the time he became the CEO, at the same amount earned by his
predecessor. This amount has remained unchanged since February 1991. In
determining to award Mr. Phillips a $750,000 bonus for 1995, the Compensation
Committee considered the same factors it did in awarding bonuses to MIG's other
executive officers and, in addition, his leadership in repositioning MIG's
assets.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). One of the factors
the Compensation Committee considers in connection with compensation matters is
the anticipated tax treatment to the Company and to the executives of the
compensation arrangements. The deductibility of certain types of compensation
depends upon the timing of an executive's vesting in, or exercise of,
previously granted rights. Moreover, interpretation of, and changes in, the
tax laws and other factors Beyond the Compensation Committee's control also
affect the deductibility of compensation. Accordingly, the Compensation
Committee will not necessarily limit executive compensation to that deductible
under Section 162(m) of the Code. The Compensation Committee will consider
various alternatives to preserving the deductibility of compensation payments
and benefits to the extent consistent with its other compensation objectives.
The foregoing report of the Compensation Committee shall not be deemed to be
incorporated by reference into any filing of MIG under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, except to
the extent that the Company specifically incorporates such information by
reference, and shall not otherwise be deemed filed under such Acts.
Submitted by the Compensation
Committee of MIG's Board of
Directors as of September 15, 1995
John E. Aderhold
John P. Imlay, Jr.
Clark A. Johnson
Richard Nevins
PERFORMANCE GRAPH
The following graph sets forth MIG's total stockholder return as compared
to the Standard & Poor's 500 Index and the Standard & Poor's Consumer Goods
Index (the "Consumer Goods Index") for the five-year period from January
1, 1991 through December 31, 1995. The total stockholder return assumes $100
invested at the beginning of the period in MIG's Common Stock, the Standard &
Poor's 500 Index and the Consumer Goods Index.
20
<PAGE>
<TABLE>
<CAPTION>
GRAPH
<S> <C> <C> <C>
DATE MIG S&P 500 CONSUMER GOODS INDEX
12/31/90 $100.00 $100.00 $100.00
12/31/91 130.90 126.31 135.83
12/31/92 120.14 131.95 145.85
12/31/93 76.31 141.26 144.61
12/31/94 92.84 139.09 144.35
12/31/95 142.44 186.53 191.27
</TABLE>
The companies included in the Consumer Goods Index for purposes of analyzing
the performance of MIG's Common Stock during 1995 are not identical to the 200
consumer goods companies whose compensation policies were reviewed by the
Compensation Committee in 1994 in assessing the competitiveness of the base
salaries of MIG's executive officers. Nevertheless, MIG believes that the
cross-section of companies included in the Consumer Goods Index and the
Comparison Group are sufficiently similar and provide a reasonable basis for
the Compensation Committee to develop justified compensation policies and for
an investor to evaluate the performance of MIG's Common Stock.
CHANGE IN CONTROL
The consummation on November 1, 1995 of the mergers of Orion Pictures
Corporation ("Orion") and Metromedia International Telecommunications, Inc.
("MITI") with and into newly-formed subsidiaries of MIG (then known as The
Actava Group Inc.) and the merger of MCEG Sterling Incorporated with and into
MIG (collectively, the "November 1 Mergers") effected a "change in control" of
MIG. Metromedia Company and its affiliates, MetProductions, Inc., Met
International, Inc. and Met Telcell, Inc., as stockholders of Orion and MITI,
were issued 15,252,128 shares of Common Stock in connection with the November 1
Mergers and related transactions, which, at the time, represented approximately
35.9% of the outstanding shares of Common Stock. Also, pursuant to the November
1 Mergers, Metromedia Company and its affiliates were entitled to appoint, and
did appoint, six of the ten members of MIG's Board of Directors. As of the
Record Date, Metromedia Company and its affiliates beneficially own
approximately 24.1% of the outstanding Common Stock.
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<PAGE>
PROPOSAL NO. 1-THE CHARTER AMENDMENT
On June 10, 1996, the Board of Directors of MIG unanimously approved an
amendment to Article FOURTH of MIG's Restated Certificate of Incorporation to
increase the authorized number of shares of Common Stock to 400,000,000,
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 the MIG Record Date, MIG had authorized (i) 110,000,000 shares of
Common Stock, of which __________ were issued and outstanding, with _____
reserved for issuance upon the exercise of options, warrants and convertible
securities and (ii) 70,000,000 shares of Preferred Stock, none of which are
issued and outstanding. The Board of Directors believes it is desirable to have
additional shares of Common Stock available for future financings, potential
acquisitions and the payment of stock dividends. Having shares of Common Stock
available for issuance provides MIG 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 MIG and its stockholders of the ability
to effectively benefit from the opportunity. In addition, MIG's Board of
Directors could consider the issuance of Common Stock as a means of protecting
MIG's stockholders in the face of a proposal relating to a change in control of
MIG that the Board determined was not in the best interests of MIG 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 of MIG 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
measure by MIG's Board of Directors. 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 OF MIG RECOMMENDS THAT MIG STOCKHOLDERS VOTE "FOR" THE
PROPOSAL TO APPROVE THE CHARTER AMENDMENT.
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<PAGE>
PROPOSAL NO. 2-ELECTION OF DIRECTORS
The following table sets forth certain information with respect to the
members of MIG's Board of Directors, including the three incumbent Class I
Directors (Messrs. Kluge, Subotnick, and Imlay) who have been nominated by the
Board of Directors for re-election as Class I 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 Common Stock
present in person or represented by proxy at the Annual Meeting will be
required to elect each of the three Class I Directors to MIG's Board.
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION FOR PAST FIVE YEARS AND Age CLASS OF DIRECTOR
CERTAIN DIRECTORSHIPS Directors Since
<S> <C> <C> <C>
John P. Imlay, Jr. 59 Class I 1993
Served since 1990 as Chairman of Dun & Bradstreet
Software Services, Inc., an application software
company located in Atlanta, Georgia. Mr. Imlay is
the former Chairman of Management Science America,
a mainframe applications software company.
Management Science America was acquired by Dun &
Bradstreet Software Services, Inc. in 1990.
Mr. Imlay is also a director of the Atlanta
Falcons, a National Football League team, and The
Gartner Group. Mr. Imlay is a member of the Audit
Committee and the Compensation Committee.
John W. Kluge 81 Class I 1995
Chairman of the Board of Directors of the Company
since November 1, 1995. Chairman of the Board and
a director of Orion Pictures Corporation since
1992. Chairman and President of Metromedia and its
predecessor-in-interest, Metromedia, Inc. for over
five years. Director of The Bear Stearns
Companies, Inc., WorldCom, Inc., Conair
Corporation and Occidental Petroleum Corporation.
Mr. Kluge is Chairman of the Executive Committee.
Stuart Subotnick 54 Class I 1995
Vice Chairman of the Board of Directors of the
Company since November 1, 1995. Vice Chairman of
the Board and a director of Orion Pictures
Corporation since 1992. Executive Vice President
of Metromedia and its predecessor-in-interest,
Metromedia, Inc., for over five years. Director of
Carnival Cruise Lines, Inc. and WorldCom, Inc.
Mr. Subotnick is Chairman of the Audit Committee
and a member of the Executive and Nominating
Committees.
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<PAGE>
John D. Phillips 53 Class II 1994
President and Chief Executive Officer of the
Company since April 19, 1994. Elected to the Board
of Directors of the Company and to the Executive
Committee on the same date. Mr. Phillips served as
Chief Executive Officer of Resurgens
Communications Group, Inc. from May 1989 until
Resurgens was merged with Metromedia
Communications Corporation and LDDS
Communications, Inc. (now known as WorldCom, Inc.)
in September 1993. He is a director of Restor
Industries, Inc. and Roadmaster Industries, Inc.
Richard J. Sherwin 52 Class II 1995
Co-President of MITI. Mr. Sherwin has served as
Co-President and director of MITI and its
predecessor companies since October 1990. Prior to
that, Mr. Sherwin served as the Chief Operating
Officer of Graphic Scanning Corp., a paging and
wireless telecommunications company.
Leonard White 56 Class II 1992
President and Chief Executive Officer of Orion.
Mr. White has served in this capacity from March
1992 through November 1, 1995. Interim President
and Chief Executive Officer of Orion from March
1992 until November 1992. Chairman of the Board
and Chief Executive Officer of Orion Home
Entertainment Corporation, a subsidiary of Orion
("OHEC"), from March 1991 until March 1992.
President and Chief Operating Officer of Orion
Home Video division of OHEC from March 1987 until
March 1991.
Clark A. Johnson 64 Class III 1990
Director of the Company since April 27, 1990. He
has served as chairman and Chief Executive Officer
of Pier One Imports, Inc., a specialty retailer of
decorative home furnishings, since August 1988.
Mr. Johnson is a director of Albertson's, Inc.,
Anacomp, Inc., Heritage Media Corporation,
InterTAN, Inc. and Pier One Imports, Inc. Mr.
Johnson is a member of the Compensation and Audit
Committees.
Silvia Kessel 45 Class III 1995
Senior Vice President, Chief Financial Officer and
Treasurer of the Company since the November 1,
1995. Executive Vice President and a director of
Orion Pictures Corporation since January 1993.
Senior Vice President of Orion from June 1991 to
November 1992. Senior Vice President of Metromedia
since January 1994. President of Kluge & Company
from January 1994. Managing Director of Kluge &
Company (and its predecessor) from April 1990 to
January 1994. Director of WorldCom, Inc.
Ms. Kessel is a member of the Nominating
Committee.
24
<PAGE>
Carl E. Sanders 70 Class III 1967
Engaged in the private practice of law as Chairman
of Troutman Sanders, a law firm located in
Atlanta, Georgia. Director of the Company since
1967, except for a one-year period from April 1970
to April 1971. Former Governor of the State of
Georgia and a director of Carmike Cinemas, Inc.,
Norrell Corporation, Healthdyne, Inc., and
Roadmaster Industries, Inc. Mr. Sanders is
Chairman of the Compensation Committee.
Arnold L. Wadler 52 Class III 1995
Senior Vice President, General Counsel and
Secretary of the Company since November 1, 1995.
Senior Vice President, Secretary and General
Counsel of Metromedia and its predecessor-in-
interest, Metromedia, Inc., for over five years.
Director of Orion Pictures Corporation since 1992.
Mr. Wadler is Chairman of the Nominating
Committee.
</TABLE>
On December 11 and 12, 1991 (the "Filing Date"), Orion and certain of its
subsidiaries filed voluntary bankruptcy petitions under Chapter 11 of the
United States Bankruptcy Code. The United States Bankruptcy Court for the
Southern District of New York confirmed Orion's Modified Third Amended Joint
Consolidated Plan of Reorganization (the "Plan") on October 10, 1992 and the
Plan was consummated on November 5, 1992. Silvia Kessel and Leonard White,
current directors of the Company, each served as Executive Officers of Orion on
the Filing Date.
25
<PAGE>
PROPOSAL NO. 3-PROPOSAL TO APPROVE THE
ADOPTION OF THE METROMEDIA INTERNATIONAL
GROUP, INC. 1996 INCENTIVE STOCK PLAN
On January 31, 1996, the Board of Directors of MIG approved, subject to the
approval of MIG's stockholders, the Metromedia International Group, Inc. 1996
Incentive Stock Plan (as amended, the "1996 Incentive Stock Plan"). See
"-Shares of Common Stock subject to the 1996 Incentive Stock Plan." The purpose
of the 1996 Incentive Stock Plan is to give MIG a significant advantage in
retaining key employees, officers and directors, and to provide an incentive to
selected key employees, officers and directors of MIG who have substantial
responsibility in the direction of MIG, and others whom the Committee (as
defined below) determines provide substantial and important services to MIG, to
acquire a proprietary interest in MIG, to continue as employees, officers and
directors or in their other capacities, and to increase their efforts on behalf
of MIG.
DESCRIPTION OF THE 1996 INCENTIVE STOCK PLAN
The following summary of the 1996 Incentive Stock Plan is qualified in its
entirety by the full text of the 1996 Incentive Stock Plan, a copy of which is
attached hereto as Appendix B. The following is a brief description of the
material provisions of the 1996 Incentive Stock Plan.
TYPES OF AWARDS
The types of awards that may be granted pursuant to the 1996 Incentive Stock
Plan include (i) incentive stock options ("ISOs"), (ii) non-qualified stock
options ("NQSOs" and together with ISOs, "Stock Options"), and (iii) tandem
stock appreciation rights ("Tandem SARs" and together with Stock Options,
"Awards"). ISOs are intended to be treated as incentive stock options within
the meaning of Section 422 of the Code. NQSOs are, in general, options which do
not have the special income tax advantages associated with ISOs. Tandem SARs
are rights granted in conjunction with Stock Options that, upon exercise,
entitle the holder to receive an amount equal to the excess of the fair market
value of a share of Common Stock on the date of exercise (the "Closing Price")
over the exercise price of the related Stock Option, in cash or in stock, as
determined by MIG.
Stock Option grants will consist of the maximum number of ISOs that may be
granted to a particular grantee under applicable law with the balance of the
Stock Options being NQSOs. Tandem SARs will be granted in connection with Stock
Options.
ADMINISTRATION OF THE PLAN
The 1996 Incentive Stock Plan will be administered by the Compensation
Committee of the Board of Directors (the "Committee"). The Committee will
consist of two or more members of the Board of Directors each of whom shall be
an "outside director" as defined under Section 162(m) of the Code, and the
regulations and interpretations thereunder. Members of the Committee will be
eligible to receive certain Awards (other than ISOs) under the 1996 Incentive
Stock Plan.
Subject to the terms and conditions of the 1996 Incentive Stock Plan and the
formula awards for the Independent Directors (as defined below) discussed
below, the Committee is authorized to grant Awards, to determine which
employees, officers, directors or other individuals may be granted Awards, to
determine the type and number of Awards to be granted, to determine the term of
such
26
<PAGE>
Awards, to determine the exercise price of any Award, to determine the
terms of any agreement pursuant to which Awards are granted, to interpret and
construe the 1996 Incentive Stock Plan, and to determine any other matters
delegated to it under the 1996 Incentive Stock Plan or necessary for the proper
administration of the 1996 Incentive Stock Plan.
SHARES OF COMMON STOCK SUBJECT TO
THE 1996 INCENTIVE STOCK PLAN
Subject to certain exceptions set forth in the 1996 Incentive Stock Plan,
the aggregate number of shares of the Common Stock that may be the subject of
Awards under the 1996 Incentive Stock Plan is 8,000,000. The maximum number of
shares of Common Stock available with respect to Awards granted to any one
grantee shall not exceed, in the aggregate, 250,000. Shares of Common Stock
granted under the 1996 Incentive Stock Plan may either be authorized but
unissued shares of Common Stock not reserved for any other purpose or shares of
Common Stock held in or acquired for the treasury of MIG.
Shares of Common Stock subject to an Award which terminates unexercised may
again be the subject of an Award under the 1996 Incentive Stock Plan. In
addition, shares of Common Stock surrendered to MIG in payment of the exercise
price or applicable taxes upon exercise or settlement of an Award may also be
used thereafter for additional Awards.
ELIGIBILITY
Any key employee, officer and director, including a director who is not an
employee and a director who serves on the Committee, of MIG and its
subsidiaries who has substantial responsibility in the direction of MIG and its
subsidiaries and anyone else whom the Committee determines provides substantial
and important services to MIG is eligible to receive Awards.
Independent Directors who serve on the Board of Directors on the date the
1996 Incentive Stock Plan is adopted shall be entitled to receive Awards under
the 1996 Incentive Stock Plan with respect to 50,000 shares of Common Stock,
each having an exercise price equal to the fair market value of a share of
Common Stock on the date of grant. Any other Independent Director who first
serves on the Board of Directors subsequent to the date the 1996 Incentive
Stock Plan was adopted shall be entitled to receive Awards under the 1996
Incentive Stock Plan with respect to 50,000 shares of Common Stock, each having
an exercise price equal to the fair market value of a share of Common Stock on
the date of grant. For purposes hereof, "Independent Directors" shall mean any
member of the Board of Directors who during his entire term as a director was
not employed by MIG and its subsidiaries, within the meaning of Section 424(f)
of the Code, and who also satisfies the criteria for "outside director" under
Section 162(m) of the Code.
TERMS AND CONDITIONS OF STOCK OPTIONS
The exercise price of all ISOs granted under the 1996 Incentive Stock Plan
is the fair market value of the Common Stock on the date of grant. The exercise
price of all NQSOs granted under the 1996 Incentive Stock Option Plan will be
determined by the Committee, although the initial awards
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<PAGE>
will be made at fair
market value of the Common Stock on the date of grant. The term of each Stock
Option granted under the 1996 Incentive Stock Plan will be determined by the
Committee but will in no event be greater than ten years from the date of
grant.
With respect to ISOs granted to a grantee who owns stock possessing more
than 10% of the voting rights of MIG's outstanding capital stock on the date of
grant, the exercise price of the ISO shall be equal to 110% of the fair market
value of the Common Stock subject to the ISO on the date of grant and the ISO
may not be exercisable more than five years after the date of grant.
On the date of grant, 20% of the Stock Options shall immediately vest.
Thereafter, the Stock Options shall vest and become exercisable at a rate equal
to 20% per annum over a period of four years beginning on the first anniversary
date of the date of grant.
Subject to the following sentence, upon the exercise of a Stock Option, the
grantee must pay the exercise price in cash. At the discretion of the
Committee, the exercise price may be paid with shares of Common Stock already
owned by, and in possession of, the grantee or in a combination of cash or
shares of Common Stock.
The aggregate fair market value of the Common Stock (determined on the date
of grant) for which ISOs granted under the 1996 Incentive Stock Plan and any
other plan of MIG or a subsidiary may be exercisable for the first time by any
grantee during any calendar year cannot exceed $100,000 or such other amount as
may be prescribed under the Code or applicable regulations and rulings from
time to time.
TERMS AND CONDITIONS OF TANDEM STOCK APPRECIATION RIGHTS
Tandem SARs provide optionees with an alternative means of realizing the
benefits of Stock Options. A Tandem SAR is the right to receive an amount equal
to the excess of the fair market value of a share of Common Stock on the date
of exercise over the exercise price of the related Stock Option (the "Spread").
This amount will be paid in cash, or in the discretion of the Committee, in
shares of Common Stock or in a combination of cash or shares of Common Stock.
The Committee will only grant Tandem SARs under the 1996 Incentive Stock Plan
at the time Stock Options are granted.
The exercise of either a Tandem SAR or a Stock Option will constitute a
surrender of the Stock Option or Tandem SAR, respectively. Thus, the exercise
of a Stock Option will result in the cancellation of the corresponding Tandem
SAR and the exercise of the Tandem SAR will result in a cancellation of the
corresponding Stock Option. A Tandem SAR terminates upon the termination of the
related Stock Option and is only exercisable at such times and to the extent
the related Stock Option is exercisable. If the Tandem SAR is exercised in cash
by a person subject to Section 16(a) of the Exchange Act (a "Reporting
Person"), it will be subject to additional restrictions.
ACCELERATION OF VESTING AND EXERCISABILITY
If a grantee's employment with MIG is terminated because of the grantee's
death, the grantee's retirement on or after attaining age sixty-five or a
Change in Control prior to the date the Stock Option is by its terms
exercisable, the Stock Option shall be immediately exercisable (and the
restrictions thereof, if any, shall lapse) as of the date of the termination of
the grantee's employment, subject to the other terms of the 1996 Incentive
Stock Plan.
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<PAGE>
Upon a Change in Control of MIG, (i) each holder of a Stock Option shall
have the right to exercise the Stock Option in full without regard to any
waiting period, installment period or other limitation or restriction thereon
and (ii) each holder of a Stock Option shall have the right, exercisable by
written notice to MIG within sixty days after the Change in Control, to
receive, in exchange for the surrender of the Stock Option or any portion
thereof to the extent the Stock Option is then exercisable in accordance with
clause (i), an amount of cash equal to the difference between the fair market
value of the Common Stock on the date of exercise and the exercise price of the
Stock Option.
Upon a Change in Control of MIG, each grantee with an outstanding Tandem SAR
shall have the right to the Spread as soon as practicable, without regard to
any limitations or restrictions thereon.
In general, under the 1996 Incentive Stock Plan, a "Change in Control" of
MIG shall be deemed to have occurred as of the first day any one or more of the
following four conditions have been satisfied: (I) any event whereby a Person
(other than (i) MIG or an affiliate, as defined in the Exchange Act, (ii) any
employee benefit plan or trust sponsored or maintained by MIG or an affiliate,
as defined in the Exchange Act, or (iii) either John W. Kluge or Stuart
Subotnick) (x) acquires 35% or more of MIG's outstanding voting securities, (y)
acquires securities of MIG bearing a majority of voting power with respect to
election of directors of MIG or (z) acquires all or substantially all of MIG's
assets, whether by sale, lease, exchange or other transfer (in one transaction
or in a series of related transactions); (II) a change in the composition of
the Board of Directors such that at any time a majority of the Board of
Directors shall not have been members of the Board of Directors for twenty-four
months; provided, however, that directors who were appointed or nominated for
election by at least two-thirds of the directors who were directors at the
beginning of such twenty-four month period (or deemed to be such directors
under this condition II) shall be deemed to be directors at the beginning of
such twenty-four month period for the purposes of this condition II; (III) the
stockholders of MIG approve any plan or proposal for the liquidation or
dissolution of MIG; or (IV) any consolidation or merger of MIG, other than a
merger or consolidation of MIG in which the voting securities of MIG
outstanding immediately prior thereto continue to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 50% of the combined voting power of the voting
securities of MIG or such surviving entity outstanding immediately after such
merger or consolidation. "Person" shall have the same meaning as ascribed to
such term in Section 3(a)(9) of the Exchange Act and used in Section 13(d)
thereof.
ADJUSTMENT PROVISIONS
The total number and character of shares of Common Stock subject to Awards
and the number and character of shares of Common Stock subject to outstanding
Awards and/or the exercise price of such shares will be appropriately adjusted
by the Committee if the shares of Common Stock are changed into or exchanged
for a different number or kind of shares of stock or other securities of MIG or
of another corporation (whether by reason of merger, consolidation,
recapitalization, reclassification, split, reverse split, combination of
shares, or otherwise). The Committee may also make appropriate adjustments in
the event of a merger, consolidation or other transaction or event having a
similar effect.
AMENDMENT AND TERMINATION OF THE 1996 INCENTIVE STOCK PLAN
Unless terminated earlier by action of the Board of Directors of MIG, the
1996 Incentive Stock Plan will terminate on January 31, 2006, and no additional
grants under the 1996 Incentive Stock Plan will be made after that date.
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<PAGE>
The Board of Directors may amend or terminate the 1996 Incentive Stock Plan
at any time, but may not, without the written consent of the grantee, make any
such alteration which would impair the rights of a holder of an outstanding
Award. Furthermore, the 1996 Incentive Stock Plan may not be amended without
the approval of the holders of a majority of the outstanding stock of MIG (i)
to decrease the minimum exercise price for ISOs or Tandem SARs; (ii) to extend
the term of the 1996 Incentive Stock Plan beyond ten years, (iii) to extend the
maximum terms of the Awards granted beyond ten years, (iv) to withdraw the
administration of the 1996 Incentive Stock Plan from the Committee, (v) to
change the class of eligible employees, officers, directors and other grantees,
(vi) to increase the aggregate number of shares of Common Stock authorized to
be issued, and (vii) to otherwise require stockholder approval to comply with
Rule 16b-3 or any other applicable law, regulation, or listing requirement or
to qualify for an exemption or characterization that is deemed desirable by the
Board of Directors.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS
Under the Code and Treasury regulations and administrative pronouncements
thereunder, a grantee will not realize taxable income by reason of either the
grant or the exercise of an ISO, and MIG will not receive an income tax
deduction at either such time. However, any appreciation in share value
following the date of grant will be taken into consideration at the time of
exercise in determining liability for the alternative minimum tax. If a grantee
exercises an ISO and delivers shares of Common Stock as payment for part or all
of the option price of the Common Stock purchased ("Payment Stock"), no gain or
loss will be recognized with respect to the Common Stock delivered and no tax
will be payable with respect to the Payment Stock or the Common Stock
purchased. The holding period of such new ISO stock will include the holding
period of the Payment Stock. To the extent the number of shares received
exceeds the number of shares tendered, the grantee's basis in the additional
new shares received upon exercise of the ISO is zero and these shares have a
holding period that commences on the date of exercise of the ISO. However, if
the Payment Stock was acquired pursuant to the exercise of an ISO and the
required holding period in order to obtain favorable tax treatment with respect
to such Common Stock is not met as of the date such Common Stock is delivered,
the grantee will be treated as having sold the Payment Stock in a disqualifying
disposition and will be subject to the rules described below for disqualifying
dispositions with respect to the Payment Stock. The grantee's basis in such new
ISO stock that he or she receives upon exercise of the option in exchange for
the Payment Stock is the same as his or her basis in the Payment Stock
increased by any amount included in gross income as ordinary income due to any
disqualifying disposition and any cash paid on the exercise. The holding period
of such new ISO stock commences on the date of exercise of the ISO.
If a grantee exercises an ISO and does not dispose of the shares of Common
Stock within two years from the date of grant and one year from the date of
exercise, the entire gain, if any, realized upon disposition will be taxable to
the grantee as long term capital gain, and MIG will not be entitled to any
deduction. If, however, a grantee disposes of shares of Common Stock prior to
the expiration of the holding periods described in the previous sentence, the
grantee will generally realize ordinary income in, and tax withholding may be
required upon, an amount equal to the difference between the exercise price and
the Closing Price. MIG will be entitled to a deduction equal to the amount
recognized as ordinary income by the grantee. Any additional appreciation will
be treated as a capital gain (long term or short term depending on how long the
grantee held the shares of Common Stock prior to disposition) and MIG will not
be entitled to any further deductions for federal income tax purposes. If the
amount realized by the grantee is less than the value of the shares of Common
Stock
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<PAGE>
upon exercise, then the amount of ordinary income and the corresponding
MIG deduction is equal to the excess of the amount realized over the option
price.
NON-QUALIFIED STOCK OPTIONS
As to the NQSOs, there will be no federal income tax consequences to either
the grantee or MIG on the grant of the option because the NQSO does not have a
"readily ascertainable fair market value" as required by Section 83 of the
Code. Additionally, if a grantee exercises a NQSO and delivers shares of Common
Stock as payment for part or all of the option price of the Common Stock
purchased, no gain or loss will be recognized with respect to the Common Stock
delivered. To the extent a grantee receives more shares of Common Stock
pursuant to the exercise of the option than shares of Common Stock delivered,
the fair market value of this excess, less any cash paid by the grantee, will
be taxed as ordinary income and will be subject to applicable tax withholding.
On the exercise of an NQSO, the grantee (except as described below)
recognizes taxable ordinary income equal to the difference between the exercise
price of the shares of Common Stock and the Closing Price. MIG will be entitled
to a tax deduction in an amount equal to the grantee's taxable ordinary income
if it provides the grantee with a timely Form W-2 or Form 1099, as appropriate.
Upon disposition of the Common Stock by the grantee, he or she will
recognize long term or short term capital gain or loss, as the case may be,
equal to the difference between the amount realized on such disposition and his
or her basis for the Common Stock, which will include the amount previously
recognized by him or her as ordinary income. The holding period for capital
gains purposes will commence on the day the optionee acquires the shares of
Common Stock pursuant to the NQSO. None of the appreciation on NQSOs is subject
to the alternative minimum tax.
TANDEM SARS
A grantee generally does not recognize income upon the grant of a Tandem SAR
or upon the appreciation of the underlying shares of Common Stock. The exercise
of a Tandem SAR will result in ordinary income to the holder in the year the
Tandem SAR is exercised. The amount of income recognized will be equal to the
total value of all cash and the fair market value of the Common Stock received
pursuant to the exercise of the Tandem SAR. MIG will be entitled to a
corresponding income tax deduction equal to such amount. The arrangement is not
a non-qualified deferred compensation plan, and is therefore not subject to
FICA withholding.
SECTION 280G
Under Section 280G of the Code, amounts payable to officers and highly
compensated individuals that are contingent upon a change in the ownership or
effective control of a corporation or of a substantial portion of its assets
may be subject to a 20% excise tax and may not be deductible by the corporate
payor if they exceed a "basic amount" allocated to such payment (so-called
"excess parachute payments"). The acceleration of the right to exercise
otherwise non-vested NQSOs, when considered in connection with other payments
to officers and highly compensated individuals of MIG, may give rise to excess
parachute payments. In that event, the affected grantee will be subject to a
20% excise tax, and MIG will lose its deduction.
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SECTION 162(M)
Under Section 162(m) of the Code, the income tax deduction of publicly-
traded companies may be limited to the extent total compensation (including
base salary, annual bonus, stock option exercises and non-qualified benefits
paid in 1994 and thereafter) for certain executive officers exceeds $1,000,000
(less the amount of any "excess parachute payments" as defined in Section 280G
of the Code) in any one year. However, under Section 162(m) of the Code, the
deduction limit does not apply to certain "performance-based" compensation
established by an independent compensation committee which is adequately
disclosed to, and approved by, stockholders. In particular, Awards will satisfy
the performance-based exception if the Awards are made by a qualifying
compensation committee, the plan sets the maximum number of shares that can be
granted to any particular grantee within a specified period and the
compensation is based solely on an increase in the stock price after the date
of grant (I.E., the option exercise price is equal to or greater than the fair
market value of the stock subject to the Award on the grant date). MIG intends
to consider fully the implications of the Section 162(m) of the Code on the
deductibility of compensation in making awards under the 1996 Incentive Stock
Plan.
The foregoing federal income tax information is a summary only and does not
purport to be a complete statement of the relevant provisions of the Code.
MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS
The Committee may, within the limitations of the 1996 Incentive Stock Plan,
modify, extend or renew outstanding Awards granted under the 1996 Incentive
Stock Plan, or accept the surrender of outstanding Awards and authorize the
granting of new Awards in substitution therefor. No modification may, without
the consent of the grantee, alter or impair any rights or obligations under any
Award theretofore granted to the grantee nor shall any modification adversely
affect the status of an ISO under Section 422 of the Code.
TRANSFERABILITY OF AWARDS AND OTHER PROVISIONS
The rights of a grantee with respect to the Awards granted pursuant to the
1996 Incentive Stock Plan are not transferable other than by will or the laws
of descent and distribution and are exercisable, during the lifetime of the
grantee, only by the grantee or by the guardian or legal representative of the
grantee acting in a fiduciary capacity on behalf of the grantee under state law
or court supervision. An Award is not subject, in whole or in part, to
attachment, execution or levy of any kind.
RIGHTS UPON TERMINATION OF EMPLOYMENT
If the grantee dies while an employee or when no longer an employee but
while he or she still has the right to exercise an Award, the grantee's estate
shall have the right for a period of one year following the date of death to
exercise the Award to the extent such Award is exercisable and to the extent
such Award has not yet expired.
Upon a grantee's retirement from MIG or a subsidiary on or after attaining
age sixty-five, the grantee shall have the right for a period of three months
following the date of retirement to exercise an Award to the extent such Award
is exercisable and to the extent such Award has not yet expired.
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Upon a grantee's termination of employment from MIG on account of
disability, the grantee or the legal representative of the grantee, shall have
the right for a period of one year following the date of such termination to
exercise an Award to the extent such Award is exercisable and to the extent
such Award has not yet expired.
In the event the grantee's employment with MIG or a subsidiary is terminated
for any reason other than disability, death or retirement on or after attaining
age sixty-five, the grantee may exercise an Award within three months after his
or her termination of employment.
RIGHTS AS STOCKHOLDER
No grantee of any Stock Option has any rights as a stockholder with respect
to any shares of Common Stock subject to his or her Stock Option prior to the
date on which he or she is recorded as the holder of such shares of Common
Stock on the records of MIG.
RIGHT TO CONTINUED EMPLOYMENT
The 1996 Incentive Stock Plan is not a contract of employment, and the terms
of employment of any grantee shall not be affected in any way by the 1996
Incentive Stock Plan or related instruments except as specifically provided
therein. The establishment of the 1996 Incentive Stock Plan shall not be
construed as conferring any legal rights upon any grantee for a continuation of
employment, nor shall it interfere with the right of MIG or any subsidiary to
discharge any grantee and to treat him or her without regard to the effect
which such treatment might have upon him or her as a grantee.
NEW PLAN BENEFITS
The Committee has made grants of Awards under the 1996 Incentive Stock Plan
to the following persons, subject to stockholder approval of the 1996 Incentive
Stock Plan, in the following amounts:
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<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value At Assumed Annual Rates
Of Stock Price Appreciation for Option Term(1)
5%($) 10%($)
<S> <C> <C> <C> <C>
NAME Number of Securities Exercise Price (20.78 Stock (33.02 Stock
Underlying Stock ($/SH) (2) PRICE) PRICE)
OPTIONS/SARS GRANTED
(a) (b) (c) (d) (e)
John D. Phillips 50,000 12.75 401,500 1,013,500
Chief Executive Officer
Frederick B. Beilstein, III 0
Former Senior Vice
President, Treasurer and
Chief Financial Officer
Walter M. Grant 0
Former Senior Vice
President, General
Counsel and Secretary
W. Tod Chmar 0
Senior Vice President
Executive Officer Group 725,000 12.75 5,821,750 14,695,750
(Total six individuals)
Non-Executive Director Group 400,000 12.75 3,212,000 8,108,000
(Total four individuals)
Non-Executive Director Group 1,473,221 12.75 11,829,965 29,862,190
(Total thirty-six
individuals)
</TABLE>
________________________
(1) As required by rules of the Commission, the dollar amounts under
columns (d) and (e) represent the hypothetical gain or "option spread" that
would exist for the Stock Options held based on assumed 5% and 10% annual
compounded rate of stock price appreciation over the full option term.
These assumed rates would result in a Common Stock price on January 31,
2006 of $20.78 and $33.02, respectively. If these price appreciation
assumptions are applied to all of MIG's outstanding shares of Common Stock
on January 31, 1996, such shares would appreciate in the aggregate by
approximately $341,275,000 and $861,475,000 respectively, over the ten-year
period ending on January 31, 2006. These prescribed rates are not intended
to forecast possible future appreciation, if any, of the Common Stock. It
is important to note that Stock Options have value to its recipients only
if the stock price exceeds the exercise price.
(2) For purposes of this table, the assumed price per share is $12.75.
VOTE REQUIRED
The affirmative vote of holders of a majority of the shares of Common
Stock present, or represented by proxy and actually voting on the matter at the
Annual Meeting is required for approval of the adoption of the 1996 Incentive
Stock Plan. In order to qualify the 1996 Incentive Stock Plan under Rule 16b-3
of the Exchange Act, the proposal to approve the 1996 Incentive Stock Plan must
be adopted by the affirmative vote of a majority of the shares of Common Stock
present in person or
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represented by proxy and entitled to vote at the Annual
Meeting. All properly executed proxies will be voted as specified in the proxy,
or if not specified, will be voted FOR the proposal to adopt the 1996 Incentive
Stock Plan.
As of the MIG Record Date, directors and Named Executive Officers of MIG
who have been designated to receive Awards under the Incentive Stock Plan
beneficially owned an aggregate of 17,256,148 shares of Common Stock, or
approximately 27.1% of the outstanding shares of Common Stock. It is
anticipated that all such directors and executive officers will vote their
shares of Common Stock in favor of the proposal to approve the Incentive Stock
Plan.
THE BOARD OF DIRECTORS OF MIG RECOMMENDS THAT MIG STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE METROMEDIA INTERNATIONAL GROUP, INC. 1996 INCENTIVE STOCK PLAN.
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PROPOSAL NO. 4-RATIFICATION OF
THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of MIG has appointed the firm of KPMG Peat Marwick
LLP, independent auditors, to audit the consolidated financial statements of
MIG and its subsidiaries for the fiscal year ending December 31, 1996, subject
to ratification by MIG's stockholders.
On November 1, 1995, the Board of Directors of MIG approved the engagement
of KPMG Peat Marwick LLP as its independent auditors for the fiscal years ended
December 31, 1995 and December 31, 1996 to replace Ernst & Young LLP, who was
dismissed as auditors of MIG effective November 1, 1995.
In connection with the audit of MIG's financial statements for the fiscal
years ended December 31, 1994 and December 31, 1993, and in the subsequent
interim period, there did not exist any disagreements between MIG and Ernst &
Young LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
the satisfaction of Ernst & Young, would have caused Ernst & Young LLP to have
referred to the subject matter of disagreement in its report.
Prior to the engagement of KPMG Peat Marwick LLP, no member of that firm
was consulted by MIG (i) for the purpose of obtaining a written report or oral
advice with regard to the application of accounting principles to a specified
transaction of MIG, either completed or proposed, (ii) regarding an inquiry as
to the type of audit opinion that may be rendered on MIG's financial statements
or (iii) regarding any matter that was the subject of a disagreement with
Ernst & Young LLP or which constituted a "reportable event" pursuant to
Item 304(a)(1)(v) of Regulation S-K.
A partner of KPMG Peat Marwick 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 KPMG Peat Marwick LLP as
MIG's 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 KPMG PEAT MARWICK LLP AS THE INDEPENDENT AUDITORS OF
MIG'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDING DECEMBER 31,
1996.
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<PAGE>
ANNUAL REPORT; INCORPORATION BY REFERENCE
THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
(WHICH CONTAINS THE COMPANY'S AUDITED CONSOLIDATED FINANCIAL STATEMENTS) IS
BEING MAILED TO STOCKHOLDERS TOGETHER WITH THIS PROXY STATEMENT. TO THE EXTENT
THIS PROXY STATEMENT HAS BEEN OR WILL BE SPECIFICALLY INCORPORATED BY REFERENCE
INTO ANY FILING BY THE COMPANY UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THE SECTIONS OF THE PROXY
STATEMENT ENTITLED "BOARD OF DIRECTORS REPORT ON COMPENSATION" AND "PERFORMANCE
GRAPH" SHALL NOT BE DEEMED TO BE SO INCORPORATED UNLESS SPECIFICALLY OTHERWISE
PROVIDED IN ANY SUCH FILING.
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STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any stockholder of MIG who wishes to present a proposal at the 1997 Annual
Meeting of Stockholders of MIG, and who wishes to have such proposal included
in MIG's proxy statement for that meeting, must deliver a copy of such proposal
to MIG at 945 East Paces Ferry Road, Suite 2210, Atlanta, Georgia 30326,
Attention: Corporate Secretary, no later than , 1997; provided,
however, that if the 1997 Annual Meeting of Stockholders is held on a date more
than 30 days before or after the corresponding date of the 1996 Annual Meeting,
any stockholder who wishes to have a proposal included in MIG's proxy statement
for that meeting must deliver a copy of the proposal to MIG a reasonable time
before the proxy solicitation is made. MIG reserves the right to decline to
include in MIG's proxy statement any stockholder's proposal which does not
comply with the rules of the Commission for inclusion therein.
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OTHER BUSINESS
The Board of Directors does not intend to bring any other business before
the meeting and it is not aware that anyone else intends to do so. If any
other business comes before the meeting, it is the intention of the persons
named in the enclosed form of proxy to vote as proxies in accordance with their
best judgment.
PLEASE EXERCISE YOUR RIGHT TO VOTE BY PROMPTLY COMPLETING, SIGNING AND
RETURNING THE ENCLOSED PROXY FORM. YOU MAY LATER REVOKE THE PROXY AND, IF YOU
ARE ABLE TO ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON.
BY ORDER OF THE BOARD OF DIRECTORS,
Arnold L. Wadler
Senior Vice President,
General Counsel and Secretary
August __, 1996
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APPENDIX A
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
METROMEDIA INTERNATIONAL GROUP, INC.
(Pursuant to Section 242 of the Delaware General Corporation Law)
The undersigned, Silvia Kessel and Arnold L. Wadler, Senior Vice
President and Secretary, respectively, of Metromedia International Group,
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 International Group,
Inc.
2. This Certificate of Amendment to the Restated Certificate of
Incorporation amends the Restated Certificate of Incorporation of the
Corporation to increase the authorized number of shares of the
Corporation's Common Stock, par value $1.00 per share (the "Common
Stock").
3. The Restated Certificate of Incorporation of the Corporation is
hereby amended by replacing the first sentence of Article Fourth thereof
in its entirety and by substituting in its place the following:
"The total number of shares of stock which the Corporation
shall have authority to issue is 470,000,000, divided as follows:
70,000,000 shares of Preferred Stock, of the par value of $1.00 per
share (the "Preferred Stock"), and
<PAGE>
400,000,000 shares of Common Stock, of the par value of $1.00 per
share (the "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
Restated Certificate of Incorporation be approved and declaring the
adoption of this Amendment to the 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 ______________, 1996.
METROMEDIA INTERNATIONAL GROUP INC.
By:_____________________________
Name:Silvia Kessel
Title:Senior Vice President
Attest:
______________________________
Name: Arnold L. Wadler
Title: Secretary
2
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APPENDIX B
METROMEDIA INTERNATIONAL GROUP, INC.
1996 INCENTIVE STOCK PLAN
1. PURPOSE. The purposes of the Metromedia International Group,
Inc. 1996 Incentive Stock Plan are, in general, to give the Company a
significant advantage in retaining employees, officers and directors, and
to provide an incentive to selected key employees, officers and directors
of the Company and its subsidiaries, within the meaning of Code Section
424(f), who have substantial responsibility in the direction of the
Company and its subsidiaries, and others whom the Committee determines
provide substantial and important services to the Company, to acquire a
proprietary interest in the Company, to continue as employees, officers
and directors or in their other capacities, and to increase their efforts
on behalf of the Company.
2. DEFINITIONS. Unless the context clearly indicates to the
contrary, the following terms, when used in the Plan, shall have the
meanings set forth in this Section 2.
"Act" shall mean the Securities Act of 1933, as amended.
"Award" means any stock option or stock appreciation right.
"Base Price" means the price to be used as the basis for
determining the Spread upon the exercise of a SAR, as hereinafter defined
in Section 7.
"Board" means the Board of Directors of the Company.
<PAGE>
"Change in Control" shall be deemed to have occurred as of the
first day any one or more of the following have been satisfied:
. any event whereby a Person (other than (i) the
Company or an affiliate, as defined in the Exchange
Act, (ii) any employee benefit plan or trust
sponsored or maintained by the Company or an
affiliate, as defined in the Exchange Act, or (iii)
either John W. Kluge or Stuart Subotnick) (x)
acquires 35% or more of the Company's outstanding
voting securities, or (y) acquires securities of the
Company bearing a majority of voting power with
respect to election of directors of the Company, or
(z) acquires all or substantially all of the
Company's assets, whether by sale, lease, exchange or
other transfer (in one transaction or in a series of
related transactions). "Person" shall have the same
meaning as ascribed to such term in Section 3(a)(9)
of the Exchange Act and used in Section 13(d)
thereof;
. a change in the composition of the Board such that at
any time a majority of the Board shall not have been
members of the Board for twenty-four (24) months;
provided, however, that directors who were appointed
or nominated for election by at least two-thirds of
the directors who were directors at the beginning of
such twenty-four (24)
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month period (or deemed to be
such directors under this subparagraph (b)) shall be
deemed to be directors at the beginning of such
twenty-four (24) month period for the purposes of
this subparagraph;
. the stockholders of the Company approve any plan or
proposal for the liquidation or dissolution of the
Company;
. any consolidation or merger of the Company, other
than a merger or consolidation of the Company in
which the voting securities of the Company
outstanding immediately prior thereto continue to
represent (either by remaining outstanding or by
being converted into voting securities of the
surviving entity) at least 50% of the combined voting
power of the voting securities of the Company or such
surviving entity outstanding immediately after such
merger or consolidation.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Committee" means the Committee described in Section 12 of the
Plan.
"Common Stock" means $.01 par value common stock of the
Company.
"Company" shall mean the Metromedia International Group, Inc.
or any successor company thereto.
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"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"Fair Market Value" shall mean the closing price of publicly
traded Common Stock on the national securities exchange on which the
Common Stock is listed (if the Common Stock is so listed) or on the
NASDAQ National Market System (if the Common Stock is regularly quoted on
the NASDAQ National Market System), or, if not so listed or regularly
quoted, the mean between the closing bid and asked prices of publicly
traded Common Stock in the over-the-counter market, or, if such bid and
asked prices shall not be available, as reported by any nationally
recognized quotation service selected by the Company, or as determined by
the Committee in a manner consistent with the provisions of the Code.
"Grantee" shall mean any key employee, officer and director of
the Company and its subsidiaries, within the meaning of Code Section
424(f), as determined by the Committee, who have substantial
responsibility in the direction of the Company and its subsidiaries, and
anyone else whom the Committee determines provides substantial and
important services to the Company who is granted an Award under the Plan.
"Incentive Stock Option" or "ISO" shall mean any stock option
as defined in Code Section 422.
"Non-Qualified Stock Option" or "NQSO" shall mean an option
other than an Incentive Stock Option.
"Option" shall mean ISOs and NQSOs, collectively.
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"Plan" shall mean the Metromedia International Group, Inc. 1996
Incentive Stock Plan.
"Reporting Person" shall mean any person subject to the
reporting requirements of Section 16(a) of the Exchange Act with respect
to equity securities of the Company.
"Rule 16b-3" means Rule 16b-3 of the Exchange Act, or any
successor thereto, that excepts transactions under employee benefit
plans, as in effect from time to time.
"Spread" shall mean the amount by which the Fair Market Value
per share of Common Stock on the date when the SAR is exercised exceeds
the option price for the related Option.
"Stock Appreciation Right" or "SAR" shall mean the right of the
holder thereof to receive, pursuant to the terms of the SAR, either cash
or stock, at the discretion of the Company, based on the increase in the
value of the number of shares specified in the SAR.
3. TYPES OF AWARDS. The Plan provides for incentive stock
options, non-qualified stock options, and stock appreciations rights.
Except as provided herein, a particular form of Award may be granted
either alone or in addition to other grants hereunder. The provisions of
the particular forms of grants need not be the same with respect to each
recipient. Attached hereto as Exhibit A is a list of specific Awards
hereunder to specific individuals. If any future grants require
shareholder approval to satisfy the requirements of Rule 16b-3, then
Exhibit A shall be amended to include such subsequent grants.
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<PAGE>
ISOs may be awarded to employees of the Company and its
subsidiaries, within the meaning of Code Section 424(f), including
employees who are officers and directors, but shall not be issued to
directors or others who are not employees.
NQSOs may be awarded to employees and directors, including
directors who are not employees of the Company and its subsidiaries,
within the meaning of Code Section 424(f), and anyone whom the Committee
administering the Plan pursuant to Section 12 determines provides
substantial and important services to the Company. To the extent that
any Option is not designated as an ISO, or if so designated it does not
qualify as an ISO, it shall be treated as a NQSO.
SARs in tandem with Options may be awarded to employees and
directors, including directors who are not employees of the Company and
its subsidiaries and anyone whom the Committee administering the Plan
pursuant to Section 12 determines provides substantial and important
services to the Company.
4. TERM OF PLAN.
(A) EFFECTIVE DATE. This Plan shall become effective as of
the date of adoption thereof by the Board; provided, however, that the
Plan shall be submitted for approval by the stockholders of the Company
no earlier than twelve (12) months prior to, and no later than twelve
(12) months after, the date of adoption of the Plan by the Board.
(B) TERMINATION DATE. This Plan shall terminate on the
earliest of:
(i) The tenth anniversary of the effective date as
determined under this Section 4;
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(ii) The date when all shares of the Common Stock reserved
for issuance under the Plan, shall have been acquired through exercise of
any Awards granted under the Plan; or
(iii)Such earlier date as the Board may determine.
Any Award outstanding under the Plan at the time of its termination shall
remain in effect in accordance with its terms and conditions and those of
the Plan.
5. THE STOCK. Subject to adjustment as provided in Section 10,
the aggregate number of shares of Common Stock which may be issued under
the Plan shall be 8,000,000 shares; provided, however, that the maximum
number of shares of Common Stock available with respect to the Awards
granted by the Committee to any one Grantee under the Plan, in the
aggregate, shall not exceed 250,000. Such number of shares of Common
Stock may be set aside out of the authorized but unissued shares of
Common Stock not reserved for any other purpose or out of shares of
Common Stock held in or acquired for the treasury of the Company. All or
any shares of Common Stock subjected under this Plan to an Award which,
for any reason, terminates unexercised as to such shares, may again be
subjected to an Award under the Plan.
6. STOCK OPTIONS.
(A) GRANTS. Options may be granted by the Committee at any
time and from time to time prior to the termination of the Plan. Each
Option granted under the Plan shall be evidenced by an agreement in a
form approved by the Committee. The terms and conditions of such Option
agreement need not be identical with respect to each Grantee, but each
Option agreement will evidence on its face whether it is an
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<PAGE>
ISO, a NQSO,
or both. For purposes of this Section, an Option shall be deemed granted
on the date the Committee selects an individual to be a Grantee,
determines the number of shares to be issued pursuant to such Option and
specifies the terms and conditions of the Option. Except as hereinafter
provided, Options granted pursuant to the Plan shall be subject to the
following terms and conditions set forth in this Section 6.
Notwithstanding the foregoing, Independent Directors who serve
on the Board on the date the Plan is adopted shall be entitled to receive
Options under the Plan with respect to 50,000 shares of Common Stock of
the Company, each having an exercise price equal to the Fair Market Value
of a share of Common Stock of the Company on the date of grant. Any
other Independent Director who first serves on the Board subsequent to
the date the Plan is adopted shall be entitled to receive Options under
the Plan with respect to 50,000 shares of Common Stock of the Company,
each having an exercise price equal to the Fair Market Value of a share
of Common Stock of the Company on the date of grant. For purposes
hereof, "Independent Directors" shall mean any member of the Board who
during his entire term as a director was not employed by the Company and
its subsidiaries, within the meaning of Code Section 424(f).
(B) PRICE AND EXERCISE. The purchase price of the shares of
Common Stock upon exercise of an ISO or a SAR granted in tandem with an
ISO shall be no less than the Fair Market Value of the shares of Common
Stock at the time of grant of an ISO; provided, however, if an ISO is
granted to a person owning either directly (or through application of the
attribution rules under Code Section 318) shares
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<PAGE>
of Common Stock of the
Company possessing more than 10% of the total combined voting power of
all classes of shares of Common Stock of the Company as defined in Code
Section 422 ("10% Stockholder"), the purchase price shall be equal to
110% of the Fair Market Value of the shares of Common Stock. The
purchase price of the shares of Common Stock upon exercise of a NQSO may
be any price set by the Committee.
The purchase price shall be paid in United States dollars in
cash or by certified or cashier's check payable to the order of the
Company at the time of purchase. At the discretion of the Committee, the
purchase price may be paid with: (i) shares of Common Stock already owned
by, and in the possession of, the Grantee; or (ii) any combination of
United States dollars or shares of Common Stock of the Company. Any
required withholding tax shall be paid by the Grantee in full in
accordance with the provisions of Section 13. Shares of Common Stock of
the Company used to satisfy the purchase price of an Option shall be
valued at their Fair Market Value. The purchase price shall be subject
to adjustment, but only as provided in Section 10 hereof.
Any vested Option may be exercised in full at one time by
giving written notice to the Company exercising the Option, which notice
shall be signed and dated by the Grantee and shall state the number of
shares of Common Stock with respect to which the Option is being
exercised. The notice of the exercise of any Option shall be accompanied
by payment in full of the Option price. If required by the Company, such
notice of exercise of an Option shall be accompanied by the Grantee's
written representation in accordance with Section 22. Upon such
demand, delivery of such
9
<PAGE>
representation prior to the delivery of any
stock issued upon exercise of an Option shall be a condition precedent to
the right of the Grantee or such other person to purchase any shares of
Common Stock.
(C) VESTING. Options shall vest in accordance with the
schedule established for each Grantee; provided, however, that all
Options awarded to a Grantee shall vest immediately upon said Grantee's
death or retirement as defined herein or upon any Change in Control as
defined herein.
(D) ADDITIONAL RESTRICTIONS ON EXERCISE OF AN ISO. The
aggregate Fair Market Value of Common Stock (determined at the time an
ISO is granted) for which an ISO is exercisable for the first time by a
Grantee during any calendar year (under all plans of the Company and its
subsidiaries or parent) shall not exceed $100,000. To the extent that
the aggregate Fair Market Value of Common Stock (determined at the time
an ISO is granted) with respect to Options designated as ISOs exercisable
for the first time by a Grantee during any calendar year (under all plans
of the Company and its subsidiaries or parent) exceeds $100,000, such
Options shall be treated as NQSOs. The foregoing shall be applied by
taking Options into account in the order in which they were granted.
(E) DURATION OF OPTIONS. Options may be granted for terms of
up to but not exceeding ten (10) years from the effective date the
particular Option is granted; provided, however, that an ISO granted to a
10% Stockholder may be granted for a term not exceeding five (5) years
from the effective date the particular ISO is granted.
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<PAGE>
If the stockholders of the Company have not approved the
adoption of the Plan prior to the end of one (1) year from the date the
Plan is approved by the Board, any Option granted under the Plan prior to
such date shall be null and void and the Company shall rescind the
issuance of any shares of Common Stock issued upon the exercise of such
Options by a Grantee prior to such date. In the event of such
rescission, the Company shall refund the price paid per share of Common
Stock by the Grantee upon exercise of the Options upon receipt of the
certificate representing such shares.
(F) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject
to the terms and conditions and within the limitations of the Plan, the
Committee may modify, extend or renew outstanding Options granted under
the Plan, or accept the surrender of outstanding Options (up to the
extent not theretofore exercised) and authorize the granting of new
Options in substitution therefor (up to the extent not theretofore
exercised). In addition to the limitations set forth in Section 16, the
Committee shall not, however, with respect to ISOs, modify any
outstanding Award so as to specify a lower Award price or accept the
surrender of outstanding Awards and authorize the granting of new Awards
in substitution therefor specifying a lower price. Notwithstanding the
foregoing or anything herein, no modification of an Award shall, without
the consent of the Grantee, alter or impair any rights or obligations
under any Award theretofore granted under the Plan nor shall any
modification be made which shall adversely affect the status of an ISO
under Code Section 422; provided, however, that any such provision shall
remain in effect with respect to other Awards, and there shall be no
further effect on the Plan.
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<PAGE>
(G) OTHER TERMS AND CONDITIONS. Awards may contain such other
provisions, which shall not be inconsistent with any of the foregoing
terms, as the Committee shall deem appropriate.
7. STOCK APPRECIATION RIGHTS.
(A) The Committee may grant SARs in tandem with Options. If
a SAR is granted in tandem with an Option, the SAR may be exercised
whenever the related Option may be exercised. A tandem SAR must also
meet the following requirements:
(A) the SAR must expire no later than the expiration
of the underlying Option;
(B) the SAR may be for no more than 100% of the
difference between the exercise price of the Option
and the market price of the stock subject to the
Option at the time the SAR is exercised;
(C) the SAR may only be transferred when the
underlying Option is transferable and subject to the
same conditions;
(D) the SAR may only be exercised when the
underlying Option may be exercised;
(E) the SAR may only be exercised when the market
price of the stock exceeds the exercise price of the
Option.
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<PAGE>
(B) A SAR shall be a right of a Grantee to receive from the
Company an amount, which shall be determined by the Committee and shall
be expressed as a percentage (not exceeding 100%) of the Spread at the
time of the exercise of the SAR.
(C) To the extent the tandem SAR is exercised, a corresponding
number of shares of Common Stock subject to the related Option will be
canceled. To the extent the related Option is exercised, a corresponding
number of tandem SARs will be canceled.
(D) The form of settlement of a SAR shall be in cash or stock,
or any combination thereof, at the Company's discretion.
(E) If the stockholders of the Company have not approved the
adoption of the Plan prior to the end of one (1) year from the date the
Plan is approved by the Board, any SAR granted under the Plan prior to
such date shall be null and void.
(F) Subject to the terms and conditions and within the
limitations of the Plan, the Committee may modify, extend or renew
outstanding SARs granted under the Plan, or authorize the granting of new
SARs in substitution therefor.
(G) Any grant of a SAR may specify (i) a waiting period or
periods before SARs shall become exercisable and (ii) the permissible
dates or periods on or during which SARs shall be exercisable.
8. TERMINATION OF EMPLOYMENT.
Upon the termination of a Grantee's employment with the
Company, his or her right to exercise an Award then held by such Grantee
or Grantee's estate shall be only as follows:
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<PAGE>
(i) RETIREMENT. If the Grantee's employment is
terminated because he or she has attained the age which the
Company may from time to time establish as the retirement age
for any class of its employees, or in accordance with the age
specified in an employment agreement with a Grantee, he or she
may within three (3) months following such termination,
exercise the Award to the extent such Award is otherwise
exercisable. However, in the event of his or her death prior
to the end of the three (3) month period after the aforesaid
termination of his or her employment, his or her estate shall
have the right to exercise the Award within one (1) year (but
in no event after the scheduled expiration of the term of the
Award) following such termination with respect to all or any
part of the stock subject thereto, to the extent such Award is
exercisable.
(ii) DEATH. If the Grantee's employment with the
Company is terminated by death, his or her estate shall have
the right to exercise the Award within one (1) year (but in no
event after the scheduled expiration of the term of the Award)
following such termination with respect to all or any part of
the stock subject thereto, to the extent such Award is
exercisable.
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<PAGE>
(iii) DISABILITY. If the Grantee's employment
with the Company is terminated by disability, as defined in
Code Section 22(e)(3), he or she shall have the right for a
period of one (1) year (but in no event after the scheduled
expiration of the term of the Award) following the date of such
termination of employment to exercise any Award, to the extent
such Award is exercisable.
(iv) OTHER REASONS. If the Grantee's employment
with the Company is terminated for any reason other than those
provided above under "Retirement", "Death" or "Disability", the
Grantee or Grantee's estate in the event of his or her death
shall have the right for a period of ninety (90) days (but in
no event after the scheduled expiration of the term of the
Award) following the date of such termination of employment to
exercise any Award, to the extent such Award is exercisable.
All other Awards may be exercised within such other period of
time as determined by the Committee in its sole discretion.
For purposes of this Section 8, "termination of employment"
shall mean the termination of a Grantee's employment with the Company or
a subsidiary or a parent within the meaning of Code Section 424,
provided, however, that solely for
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<PAGE>
purposes of this Section, "30%" shall
be substituted for "50%" in Code Section 424(f). A Grantee employed by a
subsidiary shall also be deemed to have a termination of employment if
the subsidiary ceases to be a subsidiary of the Company, and the Grantee
does not immediately thereafter become an employee of the Company or of a
subsidiary or of a parent. A Grantee who is a member of the Board but
who is also not an employee of the Company shall be considered to have
terminated his or her employment at such time as he or she is no longer a
member of the Board. Any other Grantee who is not otherwise an employee
of the Company shall be considered to have terminated employment when
substantial services, as determined by the Committee, are no longer
provided to the Company by the Grantee.
Also for purposes of this Section 8, a Grantee's "estate" shall
mean his or her legal representatives upon his or her death or any person
who acquires the right to exercise an Award by reason of the Grantee's
death. The Committee may in its discretion require the transferee of a
Grantee to supply it with written notice of the Grantee's death or
disability and to supply it with a copy of the will (in the case of the
Grantee's death) or such other evidence as the Committee deems necessary
to establish the validity of the transfer of an Option.
If a Grantee's employment with the Company is terminated after
a Change in Control, the provisions of Section 9 shall supersede the
provisions of this Section 8.
9. CHANGE IN CONTROL.In the event of a Change in Control:
(A) Each Grantee with an outstanding Option (i) shall have the
right at any time thereafter to exercise the Option in full notwithstanding
any waiting period,
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<PAGE>
installment period or other
limitation or restriction in any Option certificate or in the Plan, and
(ii) shall have the right, exercisable by written notice to the Company
within sixty (60) days after the Change in Control, to receive, in
exchange for the surrender of the Option or any portion thereof to the
extent the Option is then exercisable in accordance with clause (i), an
amount of cash equal to the difference between the Fair Market Value on
the date of exercise of the Common Stock covered by the Option or portion
thereof which is so surrendered and the purchase price of such Common
Stock under the Option, provided that the right described in this clause
(ii) shall be exercisable only if a positive amount would be payable to
the Grantee pursuant to the formula specified in this clause (ii).
(B) Each Grantee with an outstanding SAR shall have the right
to the Spread as soon as practicable, without regard to any limitations
or restrictions thereon.
10. ADJUSTMENT OF THE CHANGES IN THE STOCK.
(A) In the event the shares of Common Stock, as presently
constituted, shall be changed into or exchanged for a different number or
kind of shares of stock or other securities of the Company or of another
corporation (whether by reason of merger, consolidation,
recapitalization, reclassification, split, reverse split, combination of
shares, or otherwise) or if the number of such shares of Common Stock
shall be increased through the payment of a stock dividend, then there
shall be substituted for or added to each share of Common Stock
theretofore appropriated or thereafter subject or which may become
subject to an Award under this Plan, the number and kind of shares of
stock or other securities into which each outstanding share of Common
Stock shall be so changed, or for which each such share of Common
17
<PAGE>
Stock
shall be exchanged, or to which each such share shall be entitled, as the
case may be. Moreover, in accordance with Section 9, the Committee may
on or after the date of grant provide in the agreement evidencing any
Award that the holder of the Award may elect to receive an equivalent
Award in respect of securities of the surviving entity of any merger,
consolidation or other transaction or event having a similar effect, or
the Committee may provide that the holder will automatically be entitled
to receive such an equivalent Award. Outstanding Awards shall also be
appropriately amended as to price and other terms as may be necessary to
reflect the foregoing events. In the event there shall be any other
change in the number or kind of the outstanding shares of the Common
Stock, or of any stock or other securities into which such shares of
Common Stock shall have been changed, or for which it shall have been
exchanged, then, if the Board shall, in its sole discretion, determine
that such change equitably requires an adjustment in any Award
theretofore granted or which may be granted under the Plan, such
adjustments shall be made in accordance with such determination.
(B) The Company shall not be required to issue any fractional
shares of Common Stock pursuant to the Plan. Fractional shares resulting
from any adjustment in Awards pursuant to this Section 10 may be settled
in cash or otherwise as the Committee shall determine.
(C) Notice of any adjustment shall be given by the Company to
each holder of an Award which shall have been so adjusted and such
adjustment (whether or not such notice is given) shall be effective and
binding for all purposes of the Plan.
(D) If another corporation is merged into the Company or the
Company otherwise acquires another corporation, the Committee may elect
to assume
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<PAGE>
under the Plan any or all outstanding stock options or other
awards granted by such corporation under any stock option or other plan
adopted by it prior to such acquisition. Such assumptions shall be on
such terms and conditions as the Committee may determine; provided,
however, that the awards as so assumed do not contain any terms,
conditions or rights that are inconsistent with the terms of this Plan.
Unless otherwise determined by the Committee, such awards shall not be
taken into account for purposes of the limitations contained in Section 5
of the Plan.
11. TRANSFERABILITY OF AWARDS. An Award shall be transferable only
by will or the laws of descent and distribution and shall be exercisable
during the Grantee's lifetime only by the Grantee or by the guardian or
legal representative of the Grantee acting in a fiduciary capacity on
behalf of the Grantee under state law and court supervision. An Award is
not subject, in whole or in part, to attachment, execution or levy of any
kind.
12. ADMINISTRATION.
(A) The Plan shall be administered by the Committee appointed
by the Board which shall be composed of not less than two (2) members of
the Board, each of whom shall be an "outside director" within the meaning
of Proposed Treasury Regulation Section 1.162-27(e)(3) or such other
regulations as may be issued in proposed, temporary or final form under
Code Section 162(m).
(B) The Committee shall act by a majority of its members at
the time in office and eligible to vote on any particular matter, and
such action may be taken either by a vote at a meeting or in writing
without a meeting.
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<PAGE>
(C) Subject to the provisions of the Plan, the Committee shall
from time to time and at its discretion take the following actions:
(i) grant Awards;
(ii) determine which employees, officers, directors and
other individuals performing substantial and important services
may be granted Awards under the Plan;
(iii) determine whether any Option shall be an ISO or
NQSO;
(iv) determine the number of shares subject to each Award;
(v) determine the term of each Award granted under the
Plan;
(vi) determine the date or dates on which the Award
granted shall be exercisable;
(vii) determine the exercise price of any Award granted;
(viii) determine the Fair Market Value of the Common Stock
subject to the Awards granted;
(ix) determine the terms of any agreement pursuant to
which Awards are granted;
(x) amend any such agreement with the consent of the
Grantee;
(xi) establish performance-based goals within the meaning
of Code Section 162(m);
(xii) establish such procedures as it deems appropriate
for a recipient of an Award hereunder to designate a
beneficiary to whom any benefits payable in the event of his or
her death are to be made; and
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<PAGE>
(xiii) determine any other matters specifically delegated
to it under the Plan or necessary for the proper administration
of the Plan.
The Committee shall also have the final authority and
discretion to interpret and construe the terms of the Plan and of any
Award granted and such interpretation and construction by the Committee
shall be final, binding and conclusive upon all persons including,
without limitation, the Company, stockholders of the Company or any
subsidiary, the Plan, and all persons claiming an interest in the Plan.
Notwithstanding anything contained in this Section to the contrary, no
term of the Plan relating to ISOs shall be interpreted, nor shall any
discretion or authority of the Committee be exercised, so as to
disqualify the Plan under Code Section 422 or, without the consent of the
Grantee, to disqualify any ISO under Code Section 422 or in a manner
inconsistent with Rule 16b-3.
(D) No member of the Committee or director shall be liable for
any action, interpretation or construction made in good faith with
respect to the Plan or any Award granted hereunder.
13. TAX WITHHOLDING. The Company shall have the right to deduct
from any cash payment made under the Plan any federal, state or local
income or other taxes required by law to be withheld with respect to such
payment. It shall be a condition to the obligation of the Company to
deliver shares or securities of the Company upon exercise of an Award,
that the Grantee of such Award pay to the Company such amount as may be
requested by the Company for the purpose of satisfying any liability for
such withholding taxes. Any grant issued under the Plan may provide by
the grant that the Grantee of such Award may elect, in accordance with
any applicable
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<PAGE>
regulations of the authority issuing such regulations, to
pay a portion or all of the amount of such minimum required or additional
permitted withholding taxes in shares. The Grantee shall authorize the
Company to withhold, or shall agree to surrender back to the Company, on
or about the date such withholding tax liability is determinable, shares
previously owned by such Grantee or a portion of the shares that were or
otherwise would be distributed to such Grantee pursuant to such Award
having a Fair Market Value equal to the amount of such required or
permitted withholding taxes to be paid in shares.
14. SECURITIES LAW REQUIREMENTS.
(A) No Award granted pursuant to this Plan shall be
exercisable in whole or in part, nor shall the Company be obligated to
acquire or sell any shares of Common Stock subject to any such Option or
pay any shares of Common Stock in settlement of a SAR, if such exercise,
acquisition and sale would, in the opinion of counsel for the Company,
violate the Act (or other federal or state statutes having similar
requirements), as it may be in effect at that time. In this regard, the
Committee may demand the representations described in Sections 6(b) and
22.
(B) Each Award shall be subject to the further requirement
that, if at any time the Committee shall determine in its discretion that
the listing or qualification of the shares of Common Stock subject to
such Award under any securities exchange requirements or under any
applicable law, or the consent or approval of any governmental regulatory
body, is necessary as a condition of, or in connection with, the granting
of such Award or the issue of shares thereunder, such Award may not be
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exercised in whole or in part, unless such listing, qualification,
consent or approval shall have been affected or obtained free of any
conditions not acceptable to the Board.
(C) No person who acquires shares of Common Stock under the
Plan may, during any period of time that such person is an affiliate of
the Company within the meaning of the rules and regulations of the
Securities and Exchange Commission under the Act, sell such shares of
Common Stock, unless such offer and sale is made (i) pursuant to an
effective registration statement under the Act, which is current and
includes the shares to be sold, or (ii) pursuant to an appropriate
exemption from the registration requirement of the Act, such as that set
forth in Rule 144 promulgated under the Act.
(D) With respect to any Reporting Person, transactions under
the Plan are intended to comply with all applicable conditions of Rule
16b-3. To the extent any provision of the Plan or any action by an
authority under the Plan fails to so comply, such provision or action
shall, without further action by any person, be deemed to be
automatically amended to the extent necessary to effect compliance with
Rule 16b-3, provided that if such provision or action cannot be amended
to effect such compliance, such provision or action shall be deemed null
and void, to the extent permitted by law and deemed advisable by the
appropriate authority. Each Award to a Reporting Person under the Plan
shall be deemed issued subject to the foregoing qualification.
15. FOREIGN PARTICIPANTS.In order to facilitate the making of an
Award and to foster and promote achievement of the purposes of the Plan,
the Committee may provide for such special terms for Awards to Grantees
who are foreign nationals, or who are employed by the Company outside of
the United States of
23
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America, as the Committee may consider necessary or
appropriate to accommodate differences in local law, tax policy or
custom. Moreover, the Committee may approve such supplements to, or
amendments, restatements or alternative versions of, this Plan as in
effect for any other purpose, and the Secretary or other appropriate
officer of the Company may certify any such document as having been
approved and adopted in the same manner as the Plan; provided, however,
that no such supplements, amendments, restatements or alternative
versions shall include any provisions that are inconsistent with the
terms of the Plan, as then in effect, unless the Plan could have been
amended to eliminate the inconsistency without further approval by the
shareholders of the Company.
16. AMENDMENT OR TERMINATION OF THE PLAN.
The Board may amend or terminate the Plan at any time, except
that approval of the holders of a majority of the outstanding voting
stock of the Company is required for amendments which:
(i)decrease the minimum exercise price for ISOs or tandem
SARs;
(ii)extend the term of the Plan beyond ten (10) years;
(iii)extend the maximum terms of the Awards granted hereunder
beyond (10) ten years;
(iv) withdraw the administration of the Plan from the Committee
appointed pursuant to Section 12;
(v) change the class of eligible employees, officers,
directors and other Grantees;
(vi) increase the aggregate number of shares of Common Stock
which may be issued pursuant to the provisions of the
Plan;
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(vii)otherwise require stockholder approval to comply with Rule
16b-3 or any other applicable law, regulation, or listing
requirement or to qualify for an exemption or
characterization that is deemed desirable by the Board.
Notwithstanding the foregoing, the Board may, without the need
for stockholders' approval, amend the Plan in any respect to qualify ISOs
as incentive stock options under Code Section 422.
Any Award that may be made pursuant to an amendment to the Plan
that shall have been adopted without the approval of the stockholders of
the Company shall be null and void as to persons subject to Section 16(a)
of the Act if it is subsequently determined that such approval was
required in order for the Plan to continue to satisfy the applicable
conditions of Rule 16b-3.
Furthermore, technical or clarifying amendments shall be made
by the Committee, not the Board.
17. NO OBLIGATION TO EXERCISE OPTION OR SAR. The granting of an
Award shall impose no obligation upon the Grantee (or upon a transferee
of a Grantee) to exercise such Award.
18. NO LIMITATION ON RIGHTS OF THE COMPANY. The grant of any Award
shall not in any way affect the right or power of the Company to make
adjustments, reclassification, or changes in its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
19. PLAN NOT A CONTRACT OF EMPLOYMENT. The Plan is not a contract
of employment, and the terms of employment of any recipient of any Award
hereunder shall not be affected in any way by the Plan or related
instruments except as
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specifically provided therein. The establishment
of the Plan shall not be construed as conferring any legal rights upon
any recipient of any Award hereunder for a continuation of employment,
nor shall it interfere with the right of the Company or any subsidiary to
discharge any recipient of any Award hereunder and to treat him or her
without regard to the effect which such treatment might have upon him or
her as the recipient of any Award hereunder.
20. EXPENSES OF THE PLAN. All of the expenses of the Plan shall be
paid by the Company.
21. FUNDING. The Plan shall be unfunded and shall not create (or
be construed to create) a trust or a separate fund or funds. The Plan
shall not establish any fiduciary relationship between the Company and
any Grantee or other person. To the extent any person holds any rights
by virtue of an Award granted under the Plan, such rights shall be no
greater than the rights of an unsecured general creditor of the Company.
22. COMPLIANCE WITH APPLICABLE LAW. Notwithstanding anything
herein to the contrary, the Company shall not be obligated to cause to be
issued or delivered any certificates for shares of Common Stock pursuant
to the exercise of an Option, unless and until the Company is advised by
its counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental
authority and the requirements of any exchange upon which shares of
Common Stock are traded. The Company shall in no event be obligated to
register any securities pursuant to the Act (as now in effect or as
hereafter amended) or to take any other action in order to cause the
issuance and delivery of such certificates to comply with
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any such law,
regulation or requirement. The Committee may require, as a
condition of the issuance and delivery of such certificates and in order
to ensure compliance with such laws, regulations and requirements, that
the recipient of any Award hereunder make such covenants, agreements and
representations as the Committee, in its sole discretion, deems necessary
or desirable, including, without limitation, a written representation
from a stockholder that the stock is being purchased for investment and
not for distribution, acknowledging that such shares have not been
registered under the Act, as amended and agreeing that such shares may
not be sold or transferred unless there is an effective Registration
Statement for them under the Act, or, in the opinion of counsel to the
Company, that such sale or transfer is not in violation of the Act.
23. EFFECT UPON OTHER COMPENSATION. Nothing contained herein shall
prevent the Company or any subsidiary from adopting other or additional
compensation arrangements for its employees or directors. The effect
under any other benefit plan of the Company of an inclusion in income by
virtue of an Award hereunder shall be determined under such other plan.
24. GRANTEE TO HAVE NO RIGHTS AS A STOCKHOLDER. No Grantee of any
Option shall have any rights as a stockholder with respect to any shares
subject to his or her Option prior to the date on which he or she is
recorded as the holder of such shares on the records of the Company. No
Grantee of any Option shall have the rights of a stockholder until he or
she has paid in full the Option price.
25. NOTICE. Notice to the Committee shall be deemed given if in
writing and mailed to Arnold L. Wadler, Esq., c/o Metromedia Company, One
Meadowlands
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Plaza, East Rutherford, New Jersey 07073-2137 by first class,
certified mail. Notice to the Grantee or the Grantee's estate, if
applicable, shall be given by registered mail to such person's last known
address.
26. GOVERNING LAW. Except to the extent preempted by federal law,
this Plan and all Option agreements and SAR agreements entered into
pursuant thereto shall be construed and enforced in accordance with, and
governed by, the laws of the State of New York, determined without regard
to its conflict of law rules.
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<PAGE>
PROXY
METROMEDIA INTERNATIONAL GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS,
AUGUST 29, 1996
The undersigned hereby appoints Silvia Kessel, Arnold L.
Wadler and Robert A. Maresca, and each of them, with full power of
substitution, the true and lawful attorneys in fact, agents and proxies
of the undersigned to vote at the annual meeting (the "Annual Meeting")
of Stockholders of Metromedia International Group, Inc. ("MIG"), to be
held on August 29, 1996, commencing at 9:00 a.m., local time, in the
Concourse Level, 1285 Avenue of the Americas, New York, New York 10019,
and any and all adjournments thereof, all of the shares of common stock,
par value $1.00 per share, of MIG ("Common Stock") according to the
number of votes which the undersigned would possess if personally
present, for the purposes of considering and taking action upon the
following, as more fully set forth in the Proxy Statement of MIG, dated
__________, 1996.
[End of front of Proxy Card]
1. To approve and adopt an amendment to MIG's Restated
Certificate of Incorporation to increase the authorized number of shares
of Common Stock to 400,000,000 shares.
FOR <square> AGAINST <square> ABSTAIN <square>
2. To elect three Class I directors to serve until the 1999
Annual Meeting of Stockholders of MIG and until their respective
successors are elected and qualified.
_______ GRANT AUTHORITY to vote for all nominees (except as
otherwise
specified below).
_______ WITHHOLD AUTHORITY to vote for all nominees.
Director Nominees: John P. Imlay, Jr., John W. Kluge and Stuart
Subotnick.
(INSTRUCTIONS: To withhold authority to vote for any nominees print
the name of such nominee on the space provided below.)
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<PAGE>
__________________________________________________________________
3. To approve and adopt the Metromedia International Group,
Inc. 1996 Incentive Stock Plan.
FOR <square> AGAINST <square> ABSTAIN <square>
4. To ratify the appointment by the MIG Board of Directors of
KPMG Peat Marwick LLP as MIG's independent auditors for the fiscal year
ending December 31, 1996.
FOR <square> AGAINST <square> ABSTAIN <square>
5. To transact such other business as may properly come
before the Annual Meeting or any adjournment thereof.
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THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS
GIVEN HEREIN, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1-5 LISTED ABOVE.
Dated:_______________, 1996
----------------------
Signature
-----------------------
Signature if held jointly
Please sign exactly as name(s) appear on this
Proxy Card. When Shares are held by joint
tenants, both should sign. When signing as
attorney-in-fact, executor, administrator,
personal representative, trustee, or guardian,
please give full title as such. If a
corporation, please sign in full corporate name
by President or other authorized officer. If a
partnership, please sign in partnership name by
authorized person.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
