AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1996.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
METROMEDIA INTERNATIONAL GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6719 58-0971455
(State or other jurisdiction (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
of incorporation or CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
organization)
</TABLE>
-------------------
945 EAST PACES FERRY ROAD, SUITE 2210
ATLANTA, GEORGIA 30326
PHONE: (404) 261-6190
(Address, including zip code, and telephone number, including area code, of
registrant's principal
executive offices)
-------------------
ARNOLD L. WADLER, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL AND SECRETARY
C/O METROMEDIA COMPANY
ONE MEADOWLANDS PLAZA
EAST RUTHERFORD, NJ 07073
PHONE: (201) 531-8000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------
COPIES TO:
<TABLE>
<S> <C>
JAMES M. DUBIN, ESQ. MEL ZIONTZ, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON ROSENFELD, MEYER & SUSMAN, LLP
1285 AVENUE OF THE AMERICAS 9601 WILSHIRE BOULEVARD, SUITE 444
NEW YORK, NEW YORK 10019-6064 BEVERLY HILLS, CA 90210
(212) 373-3000 (310) 858-7700
</TABLE>
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective and the effective time of the merger (the "Goldwyn Merger") of SGC
Merger Corp. ("SGC Mergerco"), a newly formed, wholly-owned subsidiary of
Metromedia International Group, Inc. ("MIG"), with and into The Samuel Goldwyn
Company ("Goldwyn"), pursuant to the Agreement and Plan of Merger among MIG, SGC
Mergerco and Goldwyn, dated as of January 31, 1996, as amended, attached as
Appendix A to the Proxy Statement/Prospectus forming a part of this Registration
Statement.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
-------------------
CALCULATION OF REGISTRATION FEE
[CAPTION]
<TABLE>
<S> <C> <C> <C> <C>
TITLE OF EACH AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Common Stock, par value per 1,287,344 shares of
$1.00........................... Common Stock(1) N/A $15,200,865(2) $ (2)
</TABLE>
(1) The securities offered hereby are offered in connection with the Goldwyn
Merger, pursuant to which all the shares of the common stock of Goldwyn will
be canceled and Goldwyn stockholders will receive securities offered hereby.
The maximum number of shares of Common Stock to be registered has been
determined based on the product of (a) 3,377,970, which equals (x) the
maximum number of shares of Goldwyn common stock expected to be outstanding
immediately prior to the consummation of the Goldwyn Merger less (y) the
number of shares of Goldwyn common stock owned by certain affiliates of
Goldwyn, and (b) .3811shares of Common Stock issuable for each share of
Goldwyn common stock in the Goldwyn Merger, without giving effect to
possible reduction for the cash settlement of fractional securities.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933, as amended, and
computed in accordance with Rule 457(f) by determining the product of (a)
$4.50, the average of the high and low prices per share of Goldwyn common
stock as reported by the American Stock Exchange on May 28, 1996 and (b)
3,377,970, the maximum number of shares of Goldwyn common stock expected to
be outstanding immediately prior to the consummation of the Goldwyn Merger
computed as described in Note (1) above. The resulting aggregate value of
$15,200,865 was then multiplied by 1/29 of one percent to arrive at an
aggregate registration fee for the securities offered hereby of $5,241.68,
which is offset by the filing fee of $7,428.07 previously paid by MIG in
connection with the filing of preliminary proxy materials on March 1, 1996
pursuant to Section 14(g)(1) of the Securities Exchange Act of 1934, as
amended. Accordingly, there is no fee payable upon the filing of this
Registration Statement.
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
SHARES OF COMMON STOCK TO BE ISSUED IN
CONNECTION WITH THE MERGER
OF SGC MERGER CORP. ("SGC MERGERCO"),
A NEWLY FORMED, WHOLLY-OWNED
SUBSIDIARY OF
METROMEDIA INTERNATIONAL GROUP, INC. ("MIG")
WITH AND INTO
THE SAMUEL GOLDWYN COMPANY ("GOLDWYN")
-------------------
CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B)
OF REGULATION S-K SHOWING THE LOCATION IN THE PROSPECTUS
OF THE INFORMATION REQUIRED BY PART I OF FORM S-4
<TABLE>
<CAPTION>
LOCATION OF CAPTION IN
ITEM OF FORM S-4 PROXY STATEMENT/PROSPECTUS
------------------------------------------- -------------------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus..... Facing Page of the Registration Statement;
Cross Reference Sheet; Outside Front Cover
of Proxy Statement/Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Available Information; Incorporation by
Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.............. Summary Information; Risk Factors; Proposal
No. 1 -- The Goldwyn Merger
4. Terms of Transaction....................... Summary Information; Proposal No. 1 -- The
Goldwyn Merger; Information Regarding
MIG -- Description of MIG Capital Stock, --
Comparison of Rights and Stockholders of
MIG and Goldwyn; Certain Federal Income Tax
Consequences; Appendix A.
5. Pro Forma Financial Information............ Pro Forma Financial Information
6. Material Contacts with the Company Being
Acquired................................... Proposal No. 1 -- The Goldwyn Merger --
Background of the Goldwyn Merger
7. Additional Information Required for
Reoffering by Persons and Parties Deemed to
be Underwriters............................ Not Applicable
8. Interests of Named Experts and Counsel..... Legal Opinions
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants................................ Summary Information; Information Regarding
MIG -- Business of MIG; Available
Information; Incorporation by Reference
11. Incorporation of Certain Information by
Reference.................................. Available Information; Incorporation by
Reference
12. Information with Respect to S-2 or S-3
Registrants................................ Not Applicable
13. Incorporation of Certain Information by
Reference.................................. Not Applicable
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants.......... Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3
Companies.................................. Not Applicable
16. Information with Respect to S-2 or S-3
Companies.................................. Summary Information; Information Regarding
Goldwyn; Available Information;
Incorporation by Reference
17. Information with Respect to Companies Other
than S-3 or S-2 Companies.................. Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited......... Outside Front Cover of Proxy
Statement/Prospectus; Available
Information; Incorporation By Reference;
Information Regarding the Goldwyn Special
Meeting; Proposal No. 1 -- The Goldwyn
Merger-- Interests of Certain Persons in
the Goldwyn Merger; Information Regarding
MIG
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or
in an Exchange Offer....................... Not Applicable
</TABLE>
<PAGE>
[THE SAMUEL GOLDWYN COMPANY LETTERHEAD]
June 3, 1996
Dear Stockholder:
Your Board of the Directors invites you to attend the Special Meeting of
Stockholders of The Samuel Goldwyn Company ("the Company") to be held in the
Concourse Level, 1285 Avenue of the Americas, New York, New York 10019, on July
2, 1996, at 9:00 o'clock a.m., local time.
At the Special Meeting, you will be asked to consider and approve the
Agreement and Plan of Merger, dated as of January 31, 1996, as amended (the
"Merger Agreement"), by and among the Company, Metromedia International Group,
Inc. ("MIG") and SGC Merger Corp., a newly-formed, wholly-owned subsidiary of
MIG ("SGC Mergerco"), pursuant to which, among other things, SGC Mergerco will
merge with and into the Company (the "Merger"). In connection with the Merger,
you will receive common stock of MIG (the "Common Stock") in exchange for your
Goldwyn Common Stock. An application to list such shares of common stock on the
American Stock Exchange will be filed shortly. Any stock options held of record
by you at the consummation of the Merger will be converted into options to
purchase MIG Common Stock.
AT THE DIRECTORS' MEETING HELD TO CONSIDER THE MERGER, YOUR BOARD OF
DIRECTORS CAREFULLY CONSIDERED AND APPROVED THE TERMS OF THE MERGER AGREEMENT AS
BEING IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS. YOUR BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE PROPOSAL
TO APPROVE THE MERGER AGREEMENT.
Your vote is important no matter how large or small your holdings may be. To
assure your representation at the Special Meeting, please complete, sign, date
and return your proxy in the enclosed envelope. If you attend the meeting, you
may revoke your proxy and vote in person if you wish, even if you have
previously returned your proxy. Stockholders should specify their choices on the
accompanying proxy cards. If no specific instructions are given with regard to
the matter to be voted upon, the shares of Goldwyn's common stock represented by
a signed proxy card will be voted "FOR" the proposal listed on the proxy cards.
Stockholders of the Company are not entitled to dissenters' rights of
appraisal or other dissenters' rights under Delaware law with respect to the
Merger or any transactions contemplated by the Merger Agreement.
As is described in the accompanying Proxy Statement, the Merger is
conditioned upon the refinancing or extension of the Company's bank indebtedness
and production indebtedness relating to certain films.
Sincerely,
Samuel Goldwyn, Jr.
Chairman and Chief Executive Officer
<PAGE>
THE SAMUEL GOLDWYN COMPANY
10203 SANTA MONICA BOULEVARD
LOS ANGELES, CALIFORNIA 90067
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 2, 1996
To the Stockholders:
A Special Meeting of Stockholders (the "Meeting") of The Samuel Goldwyn
Company, a Delaware corporation (the "Company"), will be held in the Concourse
Level, 1285 Avenue of the Americas, New York, New York 10019 on July 2, 1996 at
9:00 o'clock a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of January 31, 1996, as amended (the
"Merger Agreement"), by and among Metromedia International Group, Inc., the
Company and SGC Merger Corp. ("SGC Mergerco") and the consummation of the
transactions contemplated thereby, including, without limitation, the merger
(the "Merger") of SGC Mergerco with and into the Company.
2. To transact such other business as may properly come before the
meeting and any adjournments thereof. The Board of Directors is not aware of
any other business that will be presented at the Meeting.
Only stockholders of record at the close of business on May 24, 1996 are
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 the stockholders entitled to vote at the
Meeting will be open for examination by any stockholder, for any reason germane
to the Meeting, during ordinary business hours during the ten days prior to the
Meeting at Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, New York, New York 10019. Stockholders should specify their choices on
the accompanying proxy card. If no specific instructions are given with regard
to the matter to be voted upon, the shares of Goldwyn's common stock represented
by a signed proxy card will be voted "FOR" the proposal listed on the proxy
cards.
Stockholders of the Company are not entitled to dissenters' rights of
appraisal or other dissenters' rights under Delaware law with respect to the
Merger or any transactions contemplated by the Merger Agreement.
As is described in the accompanying Proxy Statement, the Merger is
conditioned upon the refinancing or extension of the Company's bank indebtedness
and production indebtedness relating to certain films.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE PROPOSAL TO ADOPT AND APPROVE THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY.
By Order of the Board of Directors,
HANS W. TURNER
Secretary
Los Angeles, California
June 3, 1996
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING REGARDLESS OF
THE NUMBER OF SHARES YOU HOLD, IN ORDER THAT A QUORUM MAY BE ASSURED. WHETHER OR
NOT YOU PLAN TO BE PRESENT AT THE MEETING IN PERSON, PLEASE COMPLETE, SIGN, DATE
AND MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING RETURN ENVELOPE TO WHICH NO
POSTAGE NEED BE AFFIXED BY THE SENDER IF MAILED WITHIN THE UNITED STATES. IF YOU
RECEIVE MORE THAN ONE PROXY BECAUSE YOUR SHARES ARE REGISTERED IN DIFFERENT
NAMES OR ADDRESSES, EACH SUCH PROXY SHOULD BE SIGNED AND RETURNED TO ASSURE THAT
ALL OF YOUR SHARES WILL BE VOTED. THE PROXY SHOULD BE SIGNED BY ALL REGISTERED
HOLDERS EXACTLY AS THE STOCK IS REGISTERED.
<PAGE>
THE SAMUEL GOLDWYN COMPANY
PROXY STATEMENT
FOR MEETING OF STOCKHOLDERS TO BE HELD ON
JULY 2, 1996
-------------------
METROMEDIA INTERNATIONAL GROUP, INC.
PROSPECTUS
Shares of Common Stock, $1.00 Par Value
This Proxy Statement and Prospectus ("Proxy Statement/Prospectus") is being
furnished to the holders of shares of common stock, par value $.20 per share
(the "Goldwyn Common Stock"), of The Samuel Goldwyn Company, a Delaware
corporation ("Goldwyn"), in connection with the solicitation of proxies by the
Board of Directors of Goldwyn for use at the Special Meeting of the Stockholders
of Goldwyn to be held on July 2, 1996 in the Concourse Level, 1285 Avenue of the
Americas, New York, New York 10019 (the "Goldwyn Special Meeting") and any
adjournments of the Goldwyn Special Meeting.
This Proxy Statement/Prospectus also constitutes a Prospectus of Metromedia
International Group, Inc., a Delaware corporation ("MIG" or the "Company"),
relating to approximately 3,468,145 shares of common stock, par value $1.00 per
share, of MIG (the "Common Stock"), (assuming a Goldwyn Determination Date (as
defined herein) of May 28, 1996 and a MIG-Goldwyn Average Closing Price (as
defined herein) of $13.12) to be offered and, subject to the receipt of certain
approvals sought herein, issued to Goldwyn Stockholders (as defined below)
pursuant to the terms of the Goldwyn Merger Agreement (as defined below), as
described in more detail herein.
Included among the matters described in this Proxy Statement/Prospectus are
matters that relate to approval by the holders of Goldwyn Common Stock ("Goldwyn
Stockholders") of the proposed merger (the "Goldwyn Merger") of SGC Merger
Corp., a Delaware corporation and a recently formed, wholly-owned subsidiary of
MIG ("SGC Mergerco"), with and into Goldwyn pursuant to an Agreement and Plan of
Merger, dated as of January 31, 1996, as amended, by and among MIG, Goldwyn and
SGC Mergerco (the "Goldwyn Merger Agreement").
Subject to the satisfaction or waiver of the conditions set forth in the
Goldwyn Merger Agreement, at the effective time of the Goldwyn Merger (the
"Goldwyn Effective Time"), Goldwyn will become a wholly-owned subsidiary of MIG
and will be renamed "Goldwyn Entertainment Company," and each Goldwyn
Stockholder will receive, for each share of Goldwyn Common Stock, a number of
shares of Common Stock (the "Goldwyn Exchange Ratio") determined by dividing
$5.00 by the average of the last sale prices for the Common Stock as reported on
the AMEX for the last 20 consecutive trading days ending on the date (the
"Goldwyn Determination Date") which is five business days prior to the Goldwyn
Special Meeting (the "MIG-Goldwyn Average Closing Price"); provided, that, if
the MIG-Goldwyn Average Closing Price is below $12.50 it shall be deemed to be
$12.50 and if the MIG-Goldwyn Average Closing Price is greater than $16.50, it
shall be deemed to be $16.50. On May 28, 1996, the last reported closing sale
price for the Common Stock was $12.875 per share, the MIG-Goldwyn Average
Closing Price for the Common Stock for the 20 consecutive trading days
immediately preceding such date was $13.12 and the Goldwyn Exchange Ratio as of
such date would have been .3811. If the MIG-Goldwyn Average Closing Price is
$12.50, the Goldwyn Exchange Ratio would be .4 and if the MIG-Goldwyn Average
Closing Price is $16.50, the Goldwyn Exchange Ratio would be .30303.
In addition, at the Goldwyn Effective Time, each holder of an issued and
outstanding option exercisable for shares of Goldwyn Common Stock (the "Goldwyn
Options") will receive, by virtue of the Goldwyn Merger and without any action
on the part of the holder thereof, options exercisable for shares of Common
Stock with the same terms and conditions as Goldwyn Options immediately prior to
the Goldwyn Effective Time, except that (i) the exercise price and the number of
shares issuable upon
<PAGE>
exercise shall be divided and multiplied, respectively, by the Goldwyn Exchange
Ratio and (ii) all Goldwyn Options, in accordance with their terms, will vest
and become immediately exercisable at the Goldwyn Effective Time. Consummation
of the Goldwyn Merger is subject to various conditions, including (i) the
approval and adoption of the Goldwyn Merger Agreement by the holders of a
majority of the outstanding shares of Goldwyn Common Stock at the Goldwyn
Special Meeting and (ii) the refinancing or extension of Goldwyn's bank
indebtedness and production indebtedness relating to certain films. Goldwyn, as
the surviving corporation of the Goldwyn Merger (sometimes referred to herein as
the "Goldwyn Surviving Corporation"), will continue its business and operations
as a wholly-owned subsidiary of MIG and will be re-named "Goldwyn Entertainment
Company." Pursuant to the terms of a Voting Agreement dated as of January 31,
1996 (the "Voting Agreement") between MIG and The Samuel Goldwyn, Jr. Family
Trust, a grantor trust established by Samuel Goldwyn, Jr., the Chairman and
Chief Executive Officer of Goldwyn (the "Goldwyn Family Trust"), of which Samuel
Goldwyn, Jr. and his wife Peggy Elliott Goldwyn are beneficiaries, the Goldwyn
Family Trust has agreed to vote its shares of Goldwyn Common Stock in favor of
the Goldwyn Merger Agreement. As the Goldwyn Family Trust beneficially owns
approximately 60.2% of the outstanding shares of Goldwyn Common Stock, approval
of the Goldwyn Merger Agreement by the Goldwyn Stockholders is assured.
Upon consummation of the Goldwyn Merger (assuming (i) a Goldwyn
Determination Date of May 28, 1996 and a MIG-Goldwyn Average Closing Price of
$13.12, (ii) the consummation of the Equity Offering (as defined and in
accordance with the assumptions set forth herein), (iii) the exercise of the
Goldwyn Put (as defined below) and (iv) without giving effect to the exercise or
conversion of any options, warrants or convertible securities exercisable for or
convertible into Common Stock, existing stockholders of MIG (the "MIG
Stockholders") will collectively own approximately 70.7% of the outstanding
shares of Common Stock and Goldwyn Stockholders will collectively own
approximately 5.6% of the outstanding shares of Common Stock. Stockholders
purchasing shares of Common Stock in the Equity Offering (as defined herein)
will own the remaining 23.7% of the outstanding shares of Common Stock.
No fractional shares of Common Stock will be issued in connection with the
Goldwyn Merger. Cash will be issued in lieu of fractional shares.
Stockholders of MIG and Goldwyn are not entitled to dissenters' rights of
appraisal or other dissenters' rights under Delaware law with respect to the
Goldwyn Merger or any transactions contemplated by the Goldwyn Merger Agreement.
Holders of Common Stock and holders of options, warrants and convertible
securities exercisable for or convertible into Common Stock will not be required
to exchange, exercise or convert their securities in connection with the Goldwyn
Merger. Holders of options, warrants and convertible securities of MIG will,
upon the exercise or conversion thereof after consummation of the Goldwyn
Merger, be entitled to receive the same number of shares of Common Stock as
though such exercise or conversion occurred prior to the Goldwyn Merger.
GOLDWYN STOCKHOLDERS SHOULD
CONSIDER CAREFULLY THE FACTORS DESCRIBED UNDER THE
HEADING "RISK FACTORS" IN THIS PROXY STATEMENT/
PROSPECTUS. SEE PAGE 24 OF THIS PROXY
STATEMENT/PROSPECTUS.
The Common Stock is listed on the AMEX under the Symbol "MMG." The Goldwyn
Common Stock is listed on the AMEX under the symbol "SG." On May 28, 1996, the
closing sale price for the Common Stock as reported by the AMEX was $12.875 per
share and the closing sale price for the Goldwyn Common Stock as reported by the
AMEX was $4.625 per share.
2
<PAGE>
An application to list the shares of Common Stock to be issued to the
Goldwyn Stockholders in the Goldwyn Merger on the AMEX will be filed shortly.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement/Prospectus and the appropriate accompanying form of
proxy are first being mailed to Goldwyn Stockholders on or about June 3, 1996.
Stockholders should specify their choices on the accompanying proxy cards. If no
specific instructions are given with regard to the matter to be voted upon, the
shares of Goldwyn Common Stock represented by a signed proxy card will be voted
"FOR" the proposal listed on the proxy cards. A stockholder who has given a
proxy to Goldwyn may revoke it at any time prior to its exercise. See
"INFORMATION REGARDING THE GOLDWYN SPECIAL MEETING--General."
Goldwyn's Annual Report on Form 10-K for the fiscal year ended March 31,
1996, including financial statements for such fiscal year, accompanies this
Proxy Statement/Prospectus.
The date of this Proxy Statement/Prospectus is June 3, 1996.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES OFFERED BY THIS
PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION
TO OR FROM ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION OF AN OFFER, OR PROXY SOLICITATION, IN ANY SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR THE ISSUANCE OR SALE
OF ANY SECURITIES HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR
INCORPORATED BY REFERENCE SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
MIG and Goldwyn are each subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the Public
Reference Facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 and at the Commission's regional
offices at 7 World Trade Center, Suite 1300, New York, New York 10048 and at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may be obtained from the Public
Reference Facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The Common
Stock is listed on the AMEX and the Pacific Stock Exchange, and such reports,
proxy statements and other information concerning MIG may be inspected at the
offices of the AMEX, 86 Trinity Place, New York, New York 10006, and the offices
of the Pacific Stock Exchange, 618 South Spring Street, Los Angeles, California
90014 and 310 Pine Street, San Francisco, California 94104. The Goldwyn Common
Stock is listed on the AMEX and such reports, proxy statements, and other
information concerning Goldwyn may be inspected at the offices of the AMEX, 86
Trinity Place, New York, New York 10006. If the Goldwyn Merger is
3
<PAGE>
consummated, the Goldwyn Common Stock will be delisted from the AMEX and MIG
will take steps to terminate the registration of the Goldwyn Common Stock under
Section 12 of the Exchange Act.
MIG has filed with the Commission a Registration Statement on Form S-4 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered hereby. This Proxy
Statement/Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
certain items of which are contained in schedules and exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. Statements made in this Proxy Statement/Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.
Items and information omitted from this Proxy Statement/Prospectus but contained
in the Registration Statement may be inspected and copied at the Public
Reference Facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE CERTAIN DOCUMENTS
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH
DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS THEY ARE SPECIFICALLY
INCORPORATED BY REFERENCE, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING
ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON
WRITTEN OR ORAL REQUEST TO: SECRETARY, METROMEDIA INTERNATIONAL GROUP, INC., C/O
METROMEDIA COMPANY, ONE MEADOWLANDS PLAZA, EAST RUTHERFORD, NEW JERSEY 07073,
TELEPHONE (201) 531-8000 OR TO SECRETARY, THE SAMUEL GOLDWYN COMPANY, 10203
SANTA MONICA BOULEVARD, LOS ANGELES, CALIFORNIA 90067, TELEPHONE (310) 552-2255.
IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE
BY JUNE 17, 1996.
The following documents which have been filed with the Commission are
incorporated by reference into this Proxy Statement/Prospectus:
(1) MIG's Annual Report on Form 10-K for the fiscal year ended December
31, 1995, Form 10-K/A Amendment No. 1 filed on April 29, 1996 amending MIG's
Form 10-K for the fiscal year ended December 31, 1995 and Form 10-K/A
Amendment No. 2 filed on May 30, 1996 amending MIG's Form 10-K for the
fiscal year ended December 31, 1995 (File No. 1-5706);
(2) The description of MIG's Common Stock contained in its Registration
Statement on Form 8-A (as filed with the Commission on November 1, 1995),
including any amendment or report filed for the purpose of amending such
description (File No. 1-5706);
(3) MIG's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996 (File No. 1-5706);
(4) MIG's Current Report on Form 8-K dated January 31, 1996 (File No.
1-5706);
(5) MIG's Current Report on Form 8-K dated April 29, 1996 (File No.
1-5706);
(6) The consolidated financial statements and related schedules of The
Actava Group, Inc. (now known as MIG) included in the Annual Report on Form
10-K for the fiscal year ended December 31, 1994 of The Actava Group, Inc.,
as amended by Form 10-K/A Amendment No. 1 filed on April 28, 1995 and Form
10-K/A Amendment No. 2 filed on July 13, 1995 (File No. 1-5706).
4
<PAGE>
(7) Goldwyn's Annual Report on Form 10-K for the fiscal year ended March
31, 1996 (File No. 1-10935); and
(8) Goldwyn's Current Report on Form 8-K dated April 30, 1996 (File No.
1-10935).
A copy of Goldwyn's Annual Report on Form 10-K for the fiscal year ended
March 31, 1996, including financial statements for such fiscal year, accompanies
this Proxy Statement/Prospectus.
All documents subsequently filed by MIG pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act prior to the date of the Goldwyn Special Meeting
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing such documents. Any statement contained herein or in any
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for the purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed to constitute a part of this Proxy
Statement/Prospectus, except as so modified or superseded.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in the Summary Information and under the captions "Risk
Factors," "Operations After the Goldwyn Merger" and "Refinancing" and elsewhere
in this Proxy Statement/Prospectus constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of MIG or Goldwyn or industry results, to be materially
different from any future results, performance, or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the following: general economic and business conditions, which will, among other
things, impact demand for the Company's or Goldwyn's products and services;
industry capacity, which tends to increase during strong years of the business
cycle; changes in public taste, industry trends and demographic changes, which
may influence the exhibition of films in certain areas; competition from other
entertainment and communications companies, which may affect the Company's or
Goldwyn's ability to generate revenues; political, social and economic
conditions and laws, rules and regulations, particulary in Eastern Europe, the
former Soviet Republics and other emerging markets, which may affect the
Company's results of operations; timely completion of construction projects for
new systems for the joint ventures in which the Company has invested; developing
legal structures in Eastern Europe, the former Soviet Republics and other
emerging markets, which may affect the Company's results of operations;
cooperation of local partners for MIG's communications investments in Eastern
Europe and the former Soviet Republics; exchange rate fluctuations; license
renewals for MIG's communications investments in Eastern Europe and the former
Soviet Republics; the loss of any significant customers (especially in the
Company's communications business); changes in business strategy or development
plans; the significant indebtedness of MIG and Goldwyn including the Company's
and Goldwyn's ability to service its indebtedness and to comply with certain
restrictive covenants; quality of management; availability of qualified
personnel; changes in, or the failure to comply with, government regulations;
and other factors referenced in this Proxy Statement/Prospectus. See "Risk
Factors."
5
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................ 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...................................... 4
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.................................... 5
SUMMARY INFORMATION.................................................................. 10
Business of MIG.................................................................... 10
Business of Goldwyn................................................................ 11
Reasons for the Goldwyn Merger..................................................... 11
Combined Organization.............................................................. 11
The Goldwyn Merger................................................................. 12
Merger Consideration............................................................. 12
Exchange of Certificates......................................................... 13
Conditions to the Goldwyn Merger; Termination; Fees and Expenses................. 14
Listing.......................................................................... 15
Refinancing........................................................................ 15
The Goldwyn Special Meeting........................................................ 16
Proxies; Change of Vote.......................................................... 16
Other Information................................................................ 16
Board Recommendation............................................................... 16
Opinions of Financial Advisors..................................................... 17
MIG.............................................................................. 17
Goldwyn.......................................................................... 17
Interests of Certain Persons in the Merger......................................... 17
Certain Federal Income Tax Consequences............................................ 18
Regulatory Filings and Approvals................................................... 19
Accounting Treatment............................................................... 19
Dissenters' Rights................................................................. 19
Comparative Market Price Data...................................................... 20
MIG.............................................................................. 20
Goldwyn.......................................................................... 20
Equivalent Per Share Data.......................................................... 21
Summary Financial Data............................................................. 22
SUMMARY FINANCIAL DATA............................................................... 23
RISK FACTORS......................................................................... 24
MIG and Goldwyn Have Each Incurred Operating Losses................................ 24
No Assurance of Profitability of MIG............................................... 24
Leverage, Holding Company Structure and Debt Service Payments of MIG............... 24
Future Financing Needs............................................................. 24
No Assurance of Successful Integration of Businesses............................... 25
Competitive Industries............................................................. 25
Control of MIG by Metromedia Company Due to Concentration of Share Ownership and
Voting Control....................................................................... 25
Anti-Takeover Provisions in MIG's Charter and By-laws.............................. 26
Environmental Matters.............................................................. 26
Motion Picture Industry Involves a Substantial Degree of Risk...................... 27
Substantial Costs of Motion Pictures............................................... 27
Political, Social and Economic Risks for MITI...................................... 27
General Operating Risks for MITI................................................... 28
Risk to MITI Inherent in Foreign Investment........................................ 28
Developing Legal Structures in MITI's Target Markets............................... 29
Risk Inherent in MITI's Growth Strategy............................................ 30
Approvals and Uncertainty of License Renewals for MITI............................. 30
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Exchange Rate Fluctuations and Inflation Risks in MITI's Target Markets............ 30
Possible Inability to Control Certain of MITI's Joint Ventures..................... 31
Technical Approval of MITI's Telephony Equipment and Reliance on Supplier.......... 31
Technological and Product Obsolescence for MITI.................................... 31
INFORMATION REGARDING THE GOLDWYN SPECIAL MEETING.................................... 32
General............................................................................ 32
The Goldwyn Special Meeting........................................................ 32
Record Date; Quorum.............................................................. 33
Vote Required.................................................................... 33
PROPOSAL NO. 1--THE GOLDWYN MERGER................................................... 34
General............................................................................ 34
Merger Consideration............................................................... 34
Background of the Goldwyn Merger................................................... 35
MIG Board Deliberations.......................................................... 42
Goldwyn Board Deliberations...................................................... 44
Board Recommendation; Reasons for the Goldwyn Merger............................... 44
MIG's Reasons for the Goldwyn Merger............................................. 44
Goldwyn's Reasons for the Goldwyn Merger......................................... 45
Recommendation of Goldwyn's Board of Directors................................... 47
Opinion of Financial Advisors...................................................... 48
MIG.............................................................................. 48
General........................................................................ 48
Film Exhibition Business....................................................... 49
Film and Television Library.................................................... 50
Goldwyn.......................................................................... 52
General........................................................................ 52
Miscellaneous.................................................................. 54
Methodology to Ascertain Fairness.............................................. 54
Analyses Relating to Goldwyn................................................. 54
Analyses Relating to MIG..................................................... 57
Terms and Conditions of the Goldwyn Merger Agreement............................... 62
Conditions to the Goldwyn Merger................................................. 62
Mutual Conditions................................................................ 62
MIG Conditions................................................................... 63
Goldwyn Conditions............................................................... 64
Termination...................................................................... 64
Expenses......................................................................... 65
Agreement Not to Solicit Other Offers............................................ 65
Conduct of Business by Goldwyn Prior to the Merger............................... 66
Forms S-3 and S-8................................................................ 66
Directors' and Officers' Indemnification and Insurance........................... 66
Other Agreements............................................................... 67
Voting Agreement............................................................... 67
Employment Agreements.......................................................... 67
Distribution Agreement......................................................... 68
Option Agreement............................................................... 68
Trademark License Agreement.................................................... 69
Interim Funding................................................................ 69
Productions and Nightlife...................................................... 69
Registration Rights Agreement.................................................. 70
Regulatory Filings and Approvals................................................... 70
Change in Control.................................................................. 70
Accounting Treatment............................................................... 70
Public Trading Market.............................................................. 70
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Dissenters' Rights................................................................. 70
Conversion Of Shares, Procedures For Exchange Of Certificates...................... 70
Fractional Shares.................................................................. 71
Interests of Certain Persons in the Merger......................................... 72
OPERATIONS AFTER THE GOLDWYN MERGER.................................................. 74
Entertainment Group................................................................ 74
Strategies....................................................................... 74
Exploiting the Existing Library................................................ 74
Expanding Motion Picture Production............................................ 75
Enhance to Value of its Theatrical Exhibition Assets........................... 77
Entertainment Group Overview....................................................... 77
Production, Acquisition and Distribution......................................... 77
Exhibition....................................................................... 78
Competition and Seasonality...................................................... 79
The United States Motion Picture Industry Overview................................. 80
Motion Picture Distribution...................................................... 82
Theatrical Distribution.......................................................... 82
Home Video....................................................................... 82
Pay Per-View..................................................................... 83
Pay Television................................................................... 83
Broadcast and Basic Cable Television............................................. 83
Foreign Markets.................................................................. 83
Other Markets.................................................................... 83
Emerging Technologies............................................................ 83
Communications Group............................................................... 84
Strategies......................................................................... 84
Completing Build Out of Existing License Agreements.............................. 84
Pursuing Additional Licenses in Existing Markets................................. 85
Obtaining New Licenses in Attractive Markets..................................... 85
Communications Group Overview...................................................... 85
Markets.......................................................................... 85
Joint Ventures................................................................. 88
Services to and Payment from Joint Ventures.................................... 89
Marketing...................................................................... 89
Development of Communications Systems.......................................... 89
Competition...................................................................... 91
Wireless Cable................................................................. 91
Paging......................................................................... 91
Wireless Telophony............................................................. 92
FM and AM Radio................................................................ 92
Environmental Matters.............................................................. 92
THE REFINANCING...................................................................... 94
General............................................................................ 94
Equity Offering.................................................................... 94
Entertainment Group Credit Facility................................................ 94
Sources and Uses of Funds.......................................................... 96
METROMEDIA INTERNATIONAL GROUP, INC. PRO FORMA COMBINING FINANCIAL STATEMENTS........ 97
Accounting Treatment............................................................... 97
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.............................................. 104
The Goldwyn Merger................................................................. 104
Limitations on Net Operating Loss Carry-Forwards................................... 104
The November 1 Mergers............................................................. 104
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Goldwyn Merger................................................................. 104
INFORMATION REGARDING MIG............................................................ 107
Business of MIG.................................................................... 107
Selected Consolidated Financial Data............................................... 107
Description of MIG Capital Stock................................................... 108
General............................................................................ 108
Common Stock....................................................................... 108
Preferred Stock.................................................................... 108
Transfer Agent and Registrar....................................................... 110
Restrictions on Resale of Common Stock by Affiliates............................... 110
Comparison of the Rights of Stockholders of MIG and Goldwyn........................ 110
General............................................................................ 110
Classification of the Board of Directors........................................... 111
Amendments to By-Laws.............................................................. 111
Removal of Directors............................................................... 111
Power to Call Special Meetings of Stockholders..................................... 111
Action by Written Consent.......................................................... 111
Stockholder Nominations and Proposals.............................................. 112
Stockholder Rights Plan............................................................ 112
Issuance of Rights................................................................. 112
INFORMATION REGARDING GOLDWYN........................................................ 113
Business of Goldwyn................................................................ 113
LEGAL MATTERS........................................................................ 114
EXPERTS.............................................................................. 114
APPENDIX A--Goldwyn Merger Agreement................................................. A-1
APPENDIX B--Fairness Opinion of Donaldson, Lufkin & Jenrette Securities Corporation.. B-1
APPENDIX C--Fairness Opinion of Furman Selz L.L.C.................................... C-1
</TABLE>
9
<PAGE>
SUMMARY INFORMATION
The following summary is qualified by the detailed information and/or
financial statements included elsewhere, attached to or incorporated by
reference in this Proxy Statement/Prospectus. In addition, although not subject
to a vote of MIG's stockholders, MIG has signed a definitive agreement to
acquire (the "MPCA Acquisition") Motion Picture Corporation of America ("MPCA"),
which acquisition is expected to close prior to the consummation of the Goldwyn
Merger. Special Note: Certain statements set forth below under this caption
constitute "forward-looking statements" within the meaning of the Reform Act.
See "Special Note Regarding Forward-Looking Statements" on page 5 for additional
factors relating to such statements.
BUSINESS OF MIG
MIG is a global entertainment, media and communications company with
continuing operations currently in two business groups. Through its
Entertainment Group, MIG is engaged primarily in the development, production,
acquisition, exploitation and worldwide distribution in all media of motion
pictures, television programming and other filmed entertainment product. It has
an extensive film library of over 1,200 titles, including the Academy-Award
winning titles, Dances with Wolves, Silence of the Lambs and Platoon. Through
its Communications Group, MIG owns interests in and participates along with
local partners in the management of joint ventures which operate wireless cable
television systems, radio stations, paging systems, an international toll
calling service and trunked mobile radio services in certain countries in
Eastern Europe and certain of the former Soviet Republics. On May 17, 1996, MIG
entered into an agreement (the "MPCA Acquisition Agreement") to acquire MPCA
(the "MPCA Acquisition"), a producer of successful, low-cost entertainment
product which focuses on producing and acquiring commercially marketable films
featuring popular actors at substantially less than average industry cost. A
recent success produced by MPCA was the film Dumb and Dumber, starring Jim
Carrey. Additionally, MPCA is a supplier of low cost production to major
entertainment companies including Tri-Star Pictures, Turner, MGM/UA, Showtime
Networks and HBO. The acquisition price for MPCA is $27.5 million in Common
Stock (approximately 2,135,922 shares assuming a closing price of $12.875 as
reported by the AMEX on May 28, 1996), up to $5 million of cash in repayment of
loans from MPCA's stockholders to MPCA and the assumption of certain
indebtedness (approximately $10.0 million at March 31, 1996). The stockholders
of MPCA will receive certain demand and "piggyback" registration rights with
respect to the shares of Common Stock to be issued to them pursuant to the MPCA
Acquisition. Consummation of the MPCA Acquisition Agreement remains subject to
certain conditions. See "INFORMATION REGARDING MIG--Business of MIG." MIG also
owns two non-strategic assets: Snapper Power Equipment Company ("Snapper"),
which manufactures and sells lawn and garden equipment and its investment in
Roadmaster Industries Inc. ("Roadmaster"). For accounting purposes, Snapper and
MIG's investment in Roadmaster have been classified as assets held for
disposition. MIG is actively exploring a sale of Snapper. Roadmaster, a
NYSE-listed company is a leading sporting goods manufacturer of which MIG owns
approximately 38% of the outstanding shares. As MIG has disclosed in Amendment
No. 1 to its Schedule 13D relating to Roadmaster filed with the Commission on
March 1, 1996, MIG intends to dispose of its investment in Roadmaster during
1996. MIG had also entered into an Agreement and Plan of Merger dated as of
December 20, 1995 (the "Alliance Merger Agreement") to acquire Alliance
Entertainment Corp. ("Alliance"), the largest full service distributor of
pre-recorded music and music-related products in the United States. As disclosed
in MIG's Current Report on Form 8-K dated April 29, 1996, the Boards of
Directors of MIG and Alliance mutually agreed that due to changing conditions,
the proposed acquisition of Alliance by MIG would not be in the best interests
of their respective stockholders and, accordingly, agreed to terminate the
Alliance Merger Agreement on April 29, 1996.
MIG was organized in 1929 under Pennsylvania law and reincorporated in 1968
under Delaware law. On November 1, 1995, as a result of a series of mergers (the
"November 1 Mergers"), MIG
10
<PAGE>
changed its name from The Actava Group Inc. to Metromedia International Group,
Inc. MIG's principal executive offices are located at 945 East Paces Ferry Road,
Suite 2210, Atlanta, Georgia 30326, telephone: (404) 261-6190.
BUSINESS OF GOLDWYN
Goldwyn is a diversified independent entertainment company engaged in the
production and worldwide distribution of motion pictures and television
programming and in theatrical exhibition. The Goldwyn library is comprised of
over 850 theatrical film and television titles, including recent releases such
as the Academy Award-winning The Madness of King George, Much Ado About Nothing
and Henry V, as well as 73 classic films produced by Mr. Samuel Goldwyn, Sr.
(including Wuthering Heights, The Pride of The Yankees, Guys and Dolls and The
Best Years of Our Lives). The library also includes over 700 episodes from such
television series as the original Flipper, Gentle Ben, The Mothers-in-Law, the
syndicated athletic competition series, American Gladiators, and The New
Adventures of Flipper. In addition, Goldwyn owns and operates a theatre group
with 140 screens in 52 theatres which management believes is the largest
exhibitor of specialized motion pictures and art films in the United States.
Goldwyn's principal executive offices are located at 10203 Santa Monica
Boulevard, Los Angeles, California 90067, telephone: (310) 552-2255.
REASONS FOR THE GOLDWYN MERGER
The Goldwyn Merger is an important step in MIG's plan to continue to build a
leading global entertainment, media and communications company. The acquisition
of Goldwyn by MIG contributes to MIG's existing film library over 850 film and
television titles including a number of recent successful pictures and film
classics produced by Mr. Samuel Goldwyn, Sr. The acquisition of Goldwyn also
adds to the Entertainment Group's assets what management believes to be the
leading circuit of 52 theatres with 140 screens which features specialized
motion pictures and art films. MIG expects to take advantage of synergies
resulting from the Goldwyn Merger by consolidating many of the back office
functions currently performed by each of Goldwyn and MIG's Orion Pictures
Corporation subsidiary ("Orion"). In addition, as a result of the Goldwyn Merger
and the Refinancing (as defined below), MIG will be better positioned to develop
and capitalize on its business strategy for its Communications Group and to
continue its business strategy of production and acquisition of new
entertainment product by its Entertainment Group. As a result of the Goldwyn
Merger and the Refinancing, MIG should also have greater access to the capital
markets and have an enhanced ability to make strategic acquisitions. Finally,
the Goldwyn Merger will create greater liquidity for the Goldwyn Stockholders.
In reaching their decision to approve the Goldwyn Merger Agreement, the
Boards of Directors of MIG and Goldwyn consulted with their respective
management teams and advisors, and independently considered the material factors
described above and elsewhere in this Proxy Statement/Prospectus. See "PROPOSAL
NO. 1--THE GOLDWYN MERGER--Reasons for the Goldwyn Merger; Board
Recommendation." Based upon their independent review of such factors and the
other factors set forth herein, the Board of Directors of each of MIG and
Goldwyn approved the Goldwyn Merger Agreement.
COMBINED ORGANIZATION
MIG is currently a global entertainment, media and communications company
engaged in a combination of businesses which the Company believes are well
positioned to capitalize on the convergence of entertainment, media and
communications businesses worldwide. Upon consummation of the Goldwyn Merger,
Goldwyn will operate as part of MIG's Entertainment Group. The acquisition of
Goldwyn will expand the Entertainment Group by adding a valuable library of over
850 film and television titles, including numerous Hollywood classics and more
recent critically acclaimed films, and
11
<PAGE>
what management believes is the leading specialized theatre circuit with 140
screens in the United States. The acquisition of Goldwyn is an important step in
MIG's plan to continue to build a leading global entertainment, media and
communications company.
John W. Kluge and Stuart Subotnick, Metromedia Company, whose partners are
Messrs. Kluge and Subotnick, and Metromedia Company's affiliate, Met Telcell,
Inc., a corporation owned and controlled by Messrs. Kluge and Subotnick, are
currently and will collectively remain MIG's largest stockholders, and will own
approximately 24.1% of the outstanding shares of Common Stock following
consummation of the Goldwyn Merger, the MPCA Acquisition and the Refinancing
(assuming (i) a Goldwyn Determination Date of May 28, 1996 and a MIG-Goldwyn
Average Closing Price of $13.12, (ii) consummation of the Equity Offering (as
defined and in accordance with the assumptions set forth herein), (iii) the
exercise of the Goldwyn Put (as defined below) and (iv) without giving effect to
the exercise or conversion of any options, warrants or convertible securities
exercisable for or convertible into Common Stock).
The following summarizes MIG's businesses:
<TABLE>
<CAPTION>
-----------------------------------
METROMEDIA INTERNATIONAL
GROUP, INC.
-----------------------------------
<S> <C>
- -------------------------------- -------------------------
ENTERTAINMENT COMMUNICATIONS
GROUP GROUP
- -------------------------------- -------------------------
OPERATING COMPANIES OPERATING COMPANY
- -------------------------------- --------------------------------
Orion Metromedia International
Goldwyn* Telecommunications, Inc.
MPCA* ("MITI")
PRIMARY BUSINESSES PRIMARY BUSINESSES
- -------------------------------- --------------------------------
Motion Picture & Television Wireless Cable
Production and Distribution Paging
Library Exploitation International Toll Call Service
Theatrical Exhibition Trunked Mobile Radio Service
Radio Stations
</TABLE>
- ------------
* Pending acquisition.
Through its individual operating businesses, MIG has established a
significant presence in many aspects of the rapidly evolving entertainment,
media and communications industries. Each of MIG's businesses currently operates
on a stand-alone basis, pursuing distinct business plans designed to capitalize
on the growth opportunities within their individual industries. In addition, as
these industries continue to converge worldwide, MIG expects to be able to
capitalize on synergies resulting from its position as a diversified company
with significant operations in the development and distribution of
entertainment, media and communications services.
THE GOLDWYN MERGER
Merger Consideration
As promptly as practicable after the satisfaction or waiver of the
conditions set forth in the Goldwyn Merger Agreement, SGC Mergerco will merge
with and into Goldwyn, SGC Mergerco's separate corporate existence will
terminate and Goldwyn will continue as the surviving corporation of
12
<PAGE>
the Goldwyn Merger (such corporation being sometimes referred to herein as the
"Goldwyn Surviving Corporation"). The Goldwyn Merger will be consummated by
filing a Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with the DGCL.
At the Goldwyn Effective Time, each share of Goldwyn Common Stock will be
converted into and exchangeable for a number of shares of Common Stock
determined by dividing $5.00 by the MIG-Goldwyn Average Closing Price on the
Goldwyn Determination Date; provided, that, if the MIG-Goldwyn Average Closing
Price is below $12.50, the MIG-Goldwyn Average Closing Price shall be deemed to
be $12.50 and if the MIG-Goldwyn Average Closing Price is greater than $16.50,
the MIG-Goldwyn Average Closing Price shall be deemed to be $16.50. The
MIG-Goldwyn Average Closing Price was $13.12 for the 20 business days ended on
May 28, 1996, and on such date, the Goldwyn Exchange Ratio would have been
.3811. If the MIG-Goldwyn Average Closing Price is $12.50, the Goldwyn Exchange
Ratio would be .4 and if the MIG-Goldwyn Average Closing Price is $16.50, the
Goldwyn Exchange Ratio would be .30303. See "PROPOSAL NO. 1--THE GOLDWYN
MERGER--Merger Consideration." Each share of Goldwyn Common Stock held as
treasury stock of Goldwyn immediately prior to the Goldwyn Effective Time shall
be canceled, retired and cease to exist, and no exchange or payment shall be
made in respect thereof.
Holders of Goldwyn Options will receive by virtue of the Goldwyn Merger and
without any action on the part of the holder thereof, options exercisable for
shares of Common Stock with the same terms and conditions as the Goldwyn Options
immediately prior to the Goldwyn Effective Time except that (i) the exercise
price and the number of shares issuable upon exercise shall be divided and
multiplied, respectively, by the Goldwyn Exchange Ratio and (ii) each Goldwyn
Option, in accordance with its terms, will vest and become immediately
exercisable at the Goldwyn Effective Time.
Exchange of Certificates
MIG has appointed Chemical Mellon Shareholder Services to act as Exchange
Agent for the Goldwyn Merger (the "Exchange Agent"). As soon as practicable
after the Goldwyn Effective Time, MIG shall cause the Exchange Agent to mail
appropriate and customary transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of Goldwyn Common Stock shall pass, only upon
proper delivery of such certificates to the Exchange Agent) to each Goldwyn
Stockholder of record as of the Goldwyn Effective Time advising such holder of
the effectiveness of the Goldwyn Merger and the procedure for surrendering to
the Exchange Agent outstanding certificates formerly evidencing Goldwyn Common
Stock in exchange for new certificates evidencing shares of Common Stock issued
pursuant to the Goldwyn Merger and cash in lieu of fractional shares. Upon
surrender to the Exchange Agent of a certificate formerly representing shares of
Goldwyn Common Stock, together with duly executed transmittal materials, MIG
shall promptly (i) issue or cause to be issued to the persons entitled thereto a
certificate representing the number of whole shares of Common Stock that such
persons are entitled to receive in the Goldwyn Merger and (ii) distribute or
cause to be distributed to the persons entitled thereto cash in lieu of
fractional shares (the Common Stock and cash being collectively referred to as
the "Goldwyn Merger Consideration"). Upon surrender, each certificate
theretofore evidencing Goldwyn Common Stock shall be canceled.
At or promptly after the Goldwyn Effective Time, MIG shall deposit the
Goldwyn Merger Consideration with the Exchange Agent (the "Goldwyn Exchange
Fund"). After the Goldwyn Effective Time, MIG shall, on each payment or
distribution date, tender to the Exchange Agent as an addition to the Goldwyn
Exchange Fund all dividends and other distributions, if any, applicable to
certificates held in the Goldwyn Exchange Fund.
GOLDWYN STOCKHOLDERS SHOULD NOT FORWARD CERTIFICATES FOR GOLDWYN COMMON
STOCK TO THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED
13
<PAGE>
TRANSMITTAL LETTERS. GOLDWYN STOCKHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES
WITH THE ENCLOSED PROXY.
Conditions to the Goldwyn Merger; Termination; Fees and Expenses
Pursuant to the Goldwyn Merger Agreement, the obligation of each of MIG and
Goldwyn to consummate the Goldwyn Merger is subject to various conditions,
including, but not limited to: (i) the receipt of approval of the Goldwyn
Stockholders; (ii) the receipt of certain opinions of counsel with respect to
certain legal matters and as to the qualification of the Goldwyn Merger as a
reorganization within the meaning of Section 368(a) of the Code; (iii) that
since December 31, 1995, no change or event shall have occurred which has or
could reasonably be expected to have a material adverse effect with respect to
MIG or Goldwyn; (iv) the receipt of certain fairness opinions by the Board of
Directors of each of MIG and Goldwyn; (v) that each of the Distribution
Agreement (as defined below), the Trademark License Agreement (as defined below)
and the Amended and Restated Option Agreement (as defined below) shall have been
entered into on terms satisfactory to MIG; (vi) that each of Samuel Goldwyn,
Jr., Chairman and Chief Executive Officer of Goldwyn, and Meyer Gottlieb,
President of Goldwyn, shall have entered into employment agreements with the
Goldwyn Surviving Corporation on terms satisfactory to the parties; (vii) the
refinancing, repayment in full or extension of Goldwyn's indebtedness; (viii)
that Orion shall have provided to Goldwyn up to $5.5 million of interim funding
as an advance for certain distribution rights in six feature films in the manner
provided in a Financing and Distribution Agreement (as defined below) between
Goldwyn and Orion; (ix) that the shares of Common Stock to be issued in the
Goldwyn Merger shall have been authorized for listing on the AMEX or any other
national securities exchange or automated quotation system approved by MIG and
Goldwyn, in each case, subject to official notice of issuance; (x) that a Form
S-3 Registration Statement registering for resale pursuant to Rule 415 under the
Securities Act the shares of Common Stock to be received in the Goldwyn Merger
by Samuel Goldwyn, Jr. and the Goldwyn Family Trust be declared effective by the
Commission prior to the Goldwyn Effective Time; (xi) that a Registration
Statement on Form S-8 permitting resale of the shares of Common Stock to be
issued to MIG Stockholders, who are former Goldwyn Stockholders that held
Goldwyn Options as employee participants in Goldwyn's stock option plan which,
by virtue of the Goldwyn Merger, were converted into options to acquire shares
of Common Stock upon the exercise of such options, be declared effective by the
Commission prior to the Goldwyn Effective Time; and (xii) that the assets of
Productions (as defined herein) and Nightlife (as defined herein) that have been
financed by Goldwyn or otherwise relate to the operations of Goldwyn be
transferred to the Goldwyn Surviving Corporation. For a more detailed
description of the conditions to the consummation of the Goldwyn Merger, see
"PROPOSAL NO. 1--THE GOLDWYN MERGER--Terms and Conditions of the Goldwyn Merger
Agreement."
Pursuant to the Voting Agreement, the Goldwyn Family Trust has agreed to
vote the 60.2% of the Goldwyn Common Stock which it beneficially owns, in favor
of the Goldwyn Merger Agreement, thereby assuring its approval by Goldwyn
Stockholders.
The Goldwyn Merger Agreement may be terminated at any time prior to the
Goldwyn Effective Time, whether before or after approval thereof by the
stockholders of Goldwyn: (i) by the mutual written consent of MIG and Goldwyn,
(ii) unilaterally, by the Board of Directors of MIG or Goldwyn if the Goldwyn
Merger has not been consummated on or before September 30, 1996, (iii) by the
non-breaching party in case of certain material breaches by the other party or
(iv) by the Board of Directors of MIG or Goldwyn if a court of competent
jurisdiction or any other governmental entity shall have issued an order, decree
or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the consummation of the Goldwyn Merger and such order, decree,
ruling or other action shall have become final and non-appealable. The Goldwyn
Merger Agreement may also be terminated by MIG or Goldwyn if the Goldwyn Board
of Directors recommends a Goldwyn Competing Offer (as defined below) or
otherwise modifies or changes, in a manner adverse to MIG, its recommendation
that its stockholders approve the Goldwyn Merger Agreement. Upon any termination
resulting from
14
<PAGE>
circumstances contemplated by the preceding sentence and under certain other
circumstances, the Goldwyn Merger Agreement provides that Goldwyn will pay MIG a
termination fee of $3 million and reimburse MIG for certain of its expenses. See
"PROPOSAL NO. 1--THE GOLDWYN MERGER--Terms and Conditions of the Goldwyn Merger
Agreement--Termination."
Listing
It is a condition to the consummation of the Goldwyn Merger that the shares
of Common Stock to be issued in the Goldwyn Merger be authorized for listing on
the AMEX. An application to list such securities on the AMEX will be filed
shortly.
REFINANCING
Concurrently with the consummation of the Goldwyn Merger, MIG intends to:
(i) consummate a public offering of approximately 15,000,000 shares of Common
Stock, pursuant to a Registration Statement on Form S-3 filed with the
Commission on May 8, 1996, as amended (assuming no exercise of the underwriters'
overallotment option) (the "Equity Offering"), and (ii) cause the Entertainment
Group to enter into an approximately $300.0 million credit facility secured by
substantially all of the Entertainment Group's assets including its film and
television library and the stock of its operating companies, to refinance
certain of MIG's, Orion's and Goldwyn's existing indebtedness, to finance the
production and acquisition of new product and for working capital purposes (the
"Entertainment Group Credit Facility").
Consummation of the Equity Offering and the Entertainment Group Credit
Facility and the use of certain of the proceeds therefrom as described below to
retire certain of MIG's indebtedness are collectively referred to as the
"Refinancing."
The following summarizes the anticipated sources and uses of funds obtained
from the Refinancing (assuming the Refinancing, the MPCA Acquisition and the
Goldwyn Merger occurred on March 31, 1996):
(IN MILLIONS)
<TABLE>
<CAPTION>
SOURCES OF FUNDS USES OF FUNDS
- -------------------------------------------- --------------------------------------------
<S> <C> <C> <C>
Equity Offering(1)................. $193.0 Refinance Existing MIG Credit
Facility.......................... $ 29.0
Entertainment Group Credit Refinance Orion Bank Debt..........
Facility.......................... 215.0 126.0
Refinance Existing Goldwyn Debt.... 73.0
Working Capital.................... 148.0(2)
Refinance Existing MPCA Debt and
Other Miscellaneous Expenses...... 15.0(3)
Transaction Expenses............... 17.0(4)
Total Sources.................. $408.0 Total Uses......................... $408.0
------ ------
------ ------
</TABLE>
- ------------
(1) Based on a closing price of $12.875 on the AMEX on May 28, 1996. Assumes no
exercise of the underwriters' overallotment option.
(2) Approximately $6.2 million of indebtedness outstanding as of May 28, 1996
under a bridge loan agreement between the Communications Group and
Metromedia Company will be repaid with proceeds of the Offering and result
in a reduction of working capital of $6.2 million. In addition, the
Entertainment Group would have $85.0 million available under the
Entertainment Group Credit Facility.
(3) Includes approximately $10.0 million of MPCA indebtedness at March 31, 1996.
(4) Represents estimated aggregate expenses incurred in connection with the
Goldwyn Merger and the Refinancing, including underwriting fees and
expenses.
15
<PAGE>
THE GOLDWYN SPECIAL MEETING
Proxies; Change of Vote
Goldwyn Stockholders who have delivered a proxy to Goldwyn may revoke the
proxy at any time prior to its exercise at the Goldwyn Special Meeting by giving
written notice to the Secretary of Goldwyn, by signing and returning a later
dated proxy card or by voting in person at the Goldwyn Special Meeting. All
written notices of revocation and other communications with respect to
revocations of proxies should be addressed by Goldwyn Stockholders to: The
Samuel Goldwyn Company, 10203 Santa Monica Boulevard, Los Angeles, California
90067, Attention: Hans W. Turner, Secretary. See "INFORMATION REGARDING THE
GOLDWYN SPECIAL MEETING--General."
Other Information
The Goldwyn Special Meeting will be held in the Concourse Level, 1285 Avenue
of the Americas, New York, New York 10019 on July 2, 1996, at 9:00 a.m., local
time. The Goldwyn Special Meeting has been called for the purpose of considering
the approval of the Goldwyn Merger Agreement and the transactions contemplated
thereby, including the merger of SGC Mergerco, a newly formed, wholly-owned
subsidiary of MIG, with and into Goldwyn.
Holders of record of shares of Goldwyn Common Stock at the close of business
on May 24, 1996 (the "Goldwyn Record Date") are entitled to notice of and to
vote at the Goldwyn Special Meeting. On such date, 8,489,231 shares of Goldwyn
Common Stock were outstanding, each of which will be entitled to one vote on
each matter scheduled to be acted upon or which may properly come before the
Goldwyn Special Meeting or any adjournment or postponement thereof. The
presence, in person or by properly executed proxy, at the Goldwyn Special
Meeting of the holders of a majority of the outstanding Goldwyn Common Stock is
necessary to constitute a quorum at the Goldwyn Special Meeting. Approval of the
Goldwyn Merger Agreement and the transactions contemplated thereby will require
the affirmative vote of the holders of a majority of the outstanding shares of
Goldwyn Common Stock. See "INFORMATION REGARDING THE GOLDWYN SPECIAL MEETING."
As of the Goldwyn Record Date, directors, executive officers and affiliates
of Goldwyn were the beneficial owners of an aggregate of 5,419,952 shares of
Goldwyn Common Stock, or approximately 63.8% of the outstanding shares of
Goldwyn Common Stock. Of such shares, 5,111,261 shares, or approximately 60.2%
of the outstanding Goldwyn Common Stock, are beneficially held by The Goldwyn
Family Trust. It is anticipated that all such directors, executive officers and
affiliates, including the Goldwyn Family Trust, which pursuant to the Voting
Agreement has agreed to vote all shares of Goldwyn Common Stock owned by it,
beneficially or otherwise, in favor of the Goldwyn Merger Agreement, will vote
their shares in favor of the Goldwyn Merger Agreement and the transactions
contemplated thereby. Accordingly, because the Goldwyn Family Trust beneficially
owns more than a majority of the outstanding Goldwyn Common Stock, if all shares
held by the Goldwyn Family Trust are voted as contractually obligated, such vote
will be sufficient to assure approval of the Goldwyn Merger Agreement by Goldwyn
Stockholders.
BOARD RECOMMENDATION
THE GOLDWYN BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE GOLDWYN MERGER
AND THE GOLDWYN MERGER AGREEMENT AND RECOMMENDS THAT GOLDWYN STOCKHOLDERS VOTE
"FOR" APPROVAL AND ADOPTION OF THE GOLDWYN MERGER AGREEMENT. For a discussion of
the factors considered by the directors of Goldwyn in reaching their decision,
see "PROPOSAL NO. 1--THE GOLDWYN MERGER-- Background of the Goldwyn Merger" and
"--Reasons for the Goldwyn Merger; Board Recommendation."
16
<PAGE>
OPINIONS OF FINANCIAL ADVISORS
MIG
On February 29, 1996, Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), financial advisor to MIG in connection with the Goldwyn Merger,
delivered its written opinion to the Board of Directors of MIG, to the effect
that on and as of the date of such opinion, and based upon the procedures and
subject to the assumptions described in such opinion, the Goldwyn Merger
Consideration is fair to MIG from a financial point of view (the "February 28,
1996 DLJ Opinion"). DLJ delivered an opinion dated the date of this Proxy
Statement (the "DLJ Proxy Opinion") updating, to the extent deemed necessary,
the analyses it used to render the February 28, 1996 DLJ Opinion. The DLJ Proxy
Opinion is attached as Appendix B to this Proxy Statement/Prospectus and holders
of Common Stock are urged to read this opinion in its entirety. See "PROPOSAL
NO. 1--THE GOLDWYN MERGER--Opinions of Financial Advisors--MIG."
Goldwyn
On January 31, 1996, Furman Selz LLC ("Furman Selz"), financial advisor to
Goldwyn in connection with the Goldwyn Merger, delivered its oral opinion to the
Board of Directors of Goldwyn (the "January 31, 1996 Furman Selz Opinion"),
which was subsequently confirmed in writing, to the effect that on and as of the
date thereof, and based upon the procedures and subject to the assumptions
described therein, the value of the Goldwyn Merger Consideration was fair, from
a financial point of view, to the Goldwyn Stockholders. Furman Selz subsequently
delivered its written opinion to the Board of Directors of Goldwyn dated the
date of this Proxy Statement/Prospectus (the "Furman Selz Proxy Opinion") to the
effect that on and as of the date thereof, and based upon the procedures and
subject to the assumptions described therein, the value of the Goldwyn Merger
Consideration was fair, from a financial point of view, to the Goldwyn
Stockholders. A copy of the Furman Selz Proxy Opinion is attached as Appendix C
to this Proxy Statement/Prospectus and holders of Goldwyn Common Stock are urged
to read the Furman Selz Proxy Opinion in its entirety. See "PROPOSAL NO. 1--THE
GOLDWYN MERGER--Opinions of Financial Advisors--Goldwyn."
INTERESTS OF CERTAIN PERSONS IN THE GOLDWYN MERGER
In connection with the Goldwyn Merger, the Goldwyn Family Trust, of which
Samuel Goldwyn, Jr., the Chairman and Chief Executive Officer of Goldwyn, is
trustee and beneficiary, has agreed to enter into a Distribution Agreement (the
"Distribution Agreement") at the Goldwyn Effective Time, relating to the
distribution by the Goldwyn Surviving Corporation of 73 theatrical motion
pictures (the "Pictures") produced by Samuel Goldwyn, Sr. which are owned by the
Goldwyn Family Trust. Among other things, the terms of the Distribution
Agreement differ from those contained in the distribution agreement between the
Goldwyn Family Trust and Goldwyn currently in effect relating to the Pictures by
(i) extending the term to December 31, 2020 (the current agreement terminates on
December 31, 2003, subject to renewal under certain circumstances) and (ii)
providing for certain minimum and maximum payments to the Goldwyn Family Trust
in respect of accrued participations owed to the Goldwyn Family Trust under the
current agreement (the current agreement contains no limitations with respect to
payments). In addition, the Goldwyn Family Trust will continue to receive 65% of
the net proceeds derived from the distribution of the Pictures through December
31, 1996, after which time and through the remainder of the term of the
Distribution Agreement, the Goldwyn Family Trust will receive 70% of such net
proceeds. See "PROPOSAL NO. 1--THE GOLDWYN MERGER--Terms and Conditions of the
Goldwyn Merger Agreement--Other Agreements." In addition, it is a condition to
the consummation of the Goldwyn Merger that Mr. Goldwyn be employed as Chairman
of the Goldwyn Surviving Corporation and that such corporation have certain
amounts made available to it for the development and production of motion
picture product. Furthermore, it is a condition to MIG's
17
<PAGE>
obligation to consummate the Goldwyn Merger that the Goldwyn Surviving
Corporation shall have entered into an employment agreement with Meyer Gottlieb,
President and a director of Goldwyn, satisfactory to the parties thereto. See
"PROPOSAL NO. 1--the GOLDWYN MERGER--Terms and Conditions of the Goldwyn Merger
Agreement--Other Agreements."
On April 13, 1993, Goldwyn, Samuel Goldwyn, Jr. and the Goldwyn Family Trust
entered into an option agreement (the "Goldwyn Option Agreement"), which among
other things, provides for the issuance, at Goldwyn's option, of up to 875,000
shares of Goldwyn Common Stock to the Goldwyn Family Trust at a price at $6.50
per share in exchange for a dollar-for-dollar reduction of Accrued
Participations (as defined below), payable to the Goldwyn Family Trust (the
"Goldwyn Put"). Goldwyn intends to exercise the Goldwyn Put prior to the Goldwyn
Effective Time (but subsequent to the Goldwyn Record Date), which will result in
the issuance to the Goldwyn Family Trust of 875,000 shares of Goldwyn Common
Stock and the reduction of $5,687,500 in Accrued Participations. The Goldwyn
Family Trust has advised Goldwyn that it intends to sell such shares, after the
conversion thereof into shares of Common Stock pursuant to the Goldwyn Merger,
primarily to satisfy certain tax liabilities incurred in connection with the
exercise of the Goldwyn Put. If the Goldwyn Put remains unexercised, the Goldwyn
Option Agreement will be amended and restated (the "Amended and Restated Option
Agreement") to clarify that the options granted under the Goldwyn Option
Agreement may be exercised utilizing the Common Stock instead of Goldwyn Common
Stock. Under the Amended and Restated Option Agreement, Mr. Goldwyn would retain
certain "piggyback" and demand registration rights with respect to the shares of
Common Stock that may be issued under the Amended and Restated Option Agreement.
MIG has agreed to register for resale pursuant to Rule 415 under the
Securities Act the shares of Common Stock to be received in the Goldwyn Merger
by Mr. Goldwyn and the Goldwyn Family Trust on a Form S-3 Registration Statement
(the "MIG-Goldwyn Shelf Registration Statement"). It is a condition to the
consummation of the Goldwyn Merger that the MIG-Goldwyn Shelf Registration
Statement be declared effective on or prior to the Goldwyn Effective Time. MIG
has further agreed to keep the MIG-Goldwyn Shelf Registration Statement
continuously effective until the earliest of the sale of all such covered
securities, the date all shares not yet sold pursuant to such registration
statement may be sold by the holders of such shares in a single transaction
using Rule 144 promulgated under the Securities Act and three years from the
Goldwyn Effective Time. In addition, MIG has agreed to file a registration
statement on Form S-8 permitting resale of the shares of Common Stock to be
issued to former Goldwyn Stockholders upon exercise of the Goldwyn Options. See
"PROPOSAL NO. 1--THE GOLDWYN MERGER--Terms and Conditions of the Goldwyn Merger
Agreement."
In addition, MIG and 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. See "PROPOSAL NO.
1--THE GOLDWYN MERGER--Interests of Certain Persons in the Goldwyn Merger" and
"--Terms and Conditions of the Goldwyn Merger Agreement-- Directors' and
Officers' Indemnification and Insurance."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Rosenfeld, Meyer & Susman, LLP, counsel to Goldwyn, based
upon the representations relied upon and assumptions set forth in its opinion,
(i) the Goldwyn Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code, (ii) no gain or loss will be recognized by Goldwyn
and (iii) gain or loss will be recognized by the Goldwyn Stockholders only in
respect of cash received in lieu of fractional shares. See "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES--The Goldwyn Merger."
18
<PAGE>
REGULATORY FILINGS AND APPROVALS
The parties have made the appropriate filings required under the Hart-Scott
Rodino Antitrust Improvements Act of 1976, as amended (the "Hart-Scott Act"), in
connection with the transactions contemplated by the Goldwyn Merger Agreement
and the waiting period prescribed by such Act has expired. See "PROPOSAL NO.
1--THE GOLDWYN MERGER--Regulatory Filings and Approvals."
ACCOUNTING TREATMENT
The Goldwyn Merger will be accounted for as a purchase transaction. For
accounting purposes, MIG will be deemed the surviving corporation of the Goldwyn
Merger.
DISSENTERS' RIGHTS
MIG Stockholders and Goldwyn Stockholders are not entitled to dissenters'
rights of appraisal or other dissenters' rights under Delaware law with respect
to the Goldwyn Merger or any transactions contemplated thereby.
19
<PAGE>
COMPARATIVE MARKET PRICE DATA
MIG
Since November 2, 1995, the Common Stock has been listed and traded on the
AMEX and the Pacific Stock Exchange under the symbol "MMG". Prior to November 2,
1995, the Common Stock was listed and traded on both the NYSE and the Pacific
Stock Exchange under the symbol "ACT." The following table sets forth the
quarterly high and low closing sales prices per share for Common Stock according
to the New York Stock Exchange Composite Tape for the period from January 1,
1994 through November 1, 1995 and the quarterly high and low closing sales
prices per share for the Common Stock as reported by the AMEX from November 2,
1995 through the present.
<TABLE>
<CAPTION>
COMMON STOCK
----------------------
<S> <C> <C>
FISCAL QUARTER ENDED HIGH LOW
- ----------------------------------------------------------------------- ---------------- ----------------
1994
March 31............................................................... $ 9 1/4 $ 5 7/8
June 30................................................................ 9 3/8 5 3/4
September 30........................................................... 13 3/4 8 1/4
December 31............................................................ 10 3/8 8 3/8
1995
March 31............................................................... 11 8 3/4
June 30................................................................ 13 3/8 8 5/8
September 30........................................................... 19 1/8 13 1/4
December 31............................................................ 18 7/8 13 3/4
1996
March 31............................................................... 14 1/8 11 1/2
June 30 (through May 28, 1996)......................................... 14 12 1/2
</TABLE>
Goldwyn
The Goldwyn Common Stock is listed and traded on the AMEX under the symbol
"SG". The following table sets forth the quarterly high and low closing sales
prices per share for the Goldwyn Common Stock as reported by the AMEX for the
periods indicated.
<TABLE>
<CAPTION>
GOLDWYN COMMON STOCK
----------------------
HIGH LOW
---------------- -------
<S> <C> <C>
FISCAL YEAR ENDED MARCH 31, 1995
First Quarter.......................................................... $ 9 7/8 $ 7 3/4
Second Quarter......................................................... 7 5/8 5 7/8
Third Quarter.......................................................... 7 7/8 5
Fourth Quarter......................................................... 9 3/4 6 1/2
FISCAL YEAR ENDED MARCH 31, 1996
First Quarter.......................................................... 8 7/8 5 5/8
Second Quarter......................................................... 9 5 1/8
Third Quarter.......................................................... 6 1/16 3
Fourth Quarter......................................................... 4 7/8 4 1/8
FISCAL YEAR ENDED MARCH 31, 1997
First Quarter (through May 28, 1996)................................... 4 3/4 4 5/16
</TABLE>
The closing sales price on December 20, 1995 (the last closing transaction
price available immediately prior to the public announcement of MIG's initial
bid for Goldwyn) reported by the AMEX for the Common Stock was $14.25 and the
closing sales price on December 19, 1995 (the Goldwyn Common Stock did not trade
on December 20, 1995) reported by AMEX for the Goldwyn
20
<PAGE>
Common Stock was $3.875. As of such date (assuming a MIG-Goldwyn Average Closing
Price of $14.25), Goldwyn Stockholders would have received approximately .3509
shares of Common Stock for each share of Goldwyn Common Stock with a value of
$5.00 per share. On May 28, 1996, the closing sales price for the Common Stock
reported by the AMEX was $12.875 and the closing sales price for the Goldwyn
Common Stock on such date was $4.625.
EQUIVALENT PER SHARE DATA
The following tables set forth certain data concerning the historical net
income (loss), dividends and book value per share for MIG and Goldwyn,
respectively, and for combined MIG and Goldwyn on a pro forma basis after giving
effect to the Goldwyn Merger and the Refinancing as if they had occurred at the
beginning of the period presented. The information below should be read in
conjunction with the unaudited Pro Forma Combining Financial Statements of MIG
contained elsewhere in this Proxy Statement/Prospectus and the historical
financial statements of MIG and Goldwyn incorporated herein by reference. The
unaudited pro forma equivalent per share data shows, for each share of Common
Stock and Goldwyn Common Stock before the Goldwyn Merger, its equivalent
position after giving effect to the Goldwyn Merger. Goldwyn Stockholders will
receive approximately .3811 shares of Common Stock (assuming a Goldwyn
Determination Date of May 28, 1996 and a MIG-Goldwyn Average Closing Price of
$13.12) for each share of Goldwyn Common Stock outstanding.
<TABLE>
<CAPTION>
YEAR ENDED
THREE MONTHS -----------------------------------
ENDED
MARCH 31, 1996 MARCH 31, 1996 DECEMBER 31, 1995
-------------- -------------- -----------------
HISTORICAL MIG GOLDWYN MIG
- ----------------------------------------------- -------------- -------------- -----------------
<S> <C> <C> <C>
Net income (loss) before extraordinary item per
common share.................................. $ (.45) $(3.78) $ (3.54)
Cash dividends declared per share.............. -- -- --
Book value per common share
at end of period............................. $ 1.51 $ 2.39 $ 1.95
</TABLE>
<TABLE>
<CAPTION>
EQUIVALENT PER SHARE DATA
------------------------------------------------------------------------------
COMBINED GOLDWYN
------------------ MIG GOLDWYN ------------------
PRO FORMA (1) COMBINED MIN (3) MAX (3) SHARE (2) SHARE (2) MIN (3) MAX (3)
- ------------------------------- -------- ------- ------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) per common
share for the:
Year ended December 31,
1995....................... $(1.97) $ (1.96) $(1.99 ) $ (1.97) $ (0.75) $ (0.79) $(0.60 )
Three months ended March 31,
1996........................ $(0.44) $ (0.44) $(0.45 ) $ (0.44) $ (0.17) $ (0.18) $(0.14 )
Cash dividends declared per
share
Year ended December 31,
1995........................ -- -- -- -- -- -- --
Three months ended March 31,
1996........................ -- -- -- -- -- -- --
Book value per common share
March 31, 1996............... $ 4.78 $ 4.77 $ 4.84 $ 4.78 $ 1.82 $ 1.91 $ 1.47
</TABLE>
- ------------
(1) Reflects pro forma per share data as if the Goldwyn Merger and the
Refinancing occurred as of the beginning of the period presented.
(2) Reflects the unaudited pro forma combined MIG and Goldwyn amounts multiplied
by 1 share of Common Stock, in the case of MIG, and by the exchange ratio of
.3811 shares for Goldwyn Common Stock.
(3) Reflects the unaudited pro forma Combined and Goldwyn amounts and assumes
the amounts are multiplied by the exchange ratios of .40 and .30303 shares
for Goldwyn Common Stock which represent the exchange ratios for the minimum
and maximum closing price respectively.
21
<PAGE>
SUMMARY FINANCIAL DATA
The following tables present selected historical financial data of MIG and
Goldwyn which are derived from the audited financial statements of MIG and
Goldwyn and the unaudited historical financial data for the three month periods
of MIG ended March 31, 1996 and 1995 and selected unaudited pro forma financial
data after giving effect to the Goldwyn Merger and the Refinancing as if they
had occurred at the beginning of the periods presented without giving effect to
the consumation of the MPCA Acquisition. The unaudited financial data is derived
from MIG's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996
which is incorporated by reference herein. The opinion of management of the
Company, the unaudited financial data reflects all adjustments, consisting of
normal recurring adjustments, necessary to present fairly the financial data for
such periods and as of such date. The results for the three month period ended
March 31, 1996 and 1995 are not necessarily indicative of results to be expected
for the full year.
The pro forma data is not necessarily indicative of the results of
operations or the financial condition that would have been reported if the
Goldwyn Merger and the Refinancing had occurred during those periods, or as of
those dates, or that may be reported in the future. The pro forma combined per
share data of Goldwyn gives effect to the exchange of each share of Goldwyn
Common Stock for approximately .3811 shares of Common Stock (assuming a Goldwyn
Determination Date of May 28, 1996 and a MIG-Goldwyn Average Closing Price of
$13.12).
This data should be read in conjunction with the consolidated financial
statements of MIG and Goldwyn (and the related notes thereto) incorporated by
reference herein and the unaudited pro forma financial information appearing
elsewhere in this Proxy Statement/Prospectus. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" and "METROMEDIA INTERNATIONAL GROUP, INC. PRO FORMA
COMBINING FINANCIAL STATEMENTS."
22
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
MIG--HISTORICAL
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED YEARS ENDED FEBRUARY 28/29,
------------------- DECEMBER 31, --------------------------------------------
1996 1995 1995* 1995 1994 1993 1992
-------- -------- ------------ -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues..................... $30,808 $37,678 $138,871 $194,789 $175,713 $222,318 $491,117
Equity in losses of Joint
Ventures.................... 1,783 588 (7,981) (2,257) (777) -- --
Loss from continuing
operations before
extraordinary item.......... (19,141) (20,366) (87,024) (69,411) (132,530) (72,973) (280,832)
Per common share:
(0.45) (0.97) (3.54) (3.43) (7.71) (19.75) (3,052.52)
Total assets................. 567,133 ** 599,638 391,870 520,651 704,356 856,950
Notes and subordinated
debt........................ 304,832 ** 304,643 237,027 274,500 325,158 521,968
</TABLE>
GOLDWYN--HISTORICAL
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues.............................................. $107,784 $91,348 $108,791 $107,820 $61,260
Net income (loss) before extraordinary item........... $(32,869) (20,083) 1,486 1,063 (3,383)
Net income (loss) per share before extraordinary
item................................................. (3.78) (2.37) 0.20 0.18 (0.62)
Total assets.......................................... 111,850 125,947 123,875 131,307 128,378
Total debt............................................ 82,029 67,610 59,819 94,252 91,377
</TABLE>
PRO FORMA--COMBINED
<TABLE>
<CAPTION>
PRO FORMA--COMBINED
-----------------------------------------
THREE MONTHS YEAR ENDED
ENDED MARCH 31, 1996 DECEMBER 31, 1995
-------------------- -----------------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
Revenues................................................ $66,301 $(252,934)
Loss from continuing operations......................... (27,075) (120,608)
Per common share: Primary............................ (0.44) (1.97)
Dividends per common share.............................. -- --
Total assets............................................ 893,849 n/a
Debt.................................................... 353,896 n/a
</TABLE>
- ------------
* The consolidated financial statements for the twelve months ended December
31, 1995 include two months for Orion (January and February 1995) that were
included in the February 28, 1995 consolidated financial statements. The
revenues and net loss for the two month duplicate period are $22.5 and $11.4
million, respectively.
** The accounting survivor of the November 1 Mergers (as defined herein) was
Orion, whose fiscal year prior to the consummation of the November 1 Mergers
ended on February 28. As a result, these numbers for March 31, 1995 are not
available.
23
<PAGE>
RISK FACTORS
Goldwyn Stockholders should consider carefully the following risk factors,
in addition to the other information set forth herein, before voting to approve
the Goldwyn Merger Agreement. Special Note: Certain statements set forth below
under this caption constitute "forward-looking statements" within the meaning of
the Reform Act. See "Special Note Regarding Forward-Looking Statements" on page
5 for additional factors relating to such statements.
MIG AND GOLDWYN HAVE EACH INCURRED OPERATING LOSSES
For the fiscal year ended December 31, 1995 and the quarter ended March 31,
1996, MIG reported a net loss from continuing operations of approximately $(87.0
million) and $(19.1 million), respectively, and a net loss of $(413.0 million)
and $(19.1 million), respectively. In addition, for the fiscal years ended March
31, 1996 and 1995, Goldwyn reported a net loss of $(32.9 million) and $(20.1
million), respectively. In addition to reporting operating losses, Goldwyn's
existing bank credit facility matures on June 28, 1996. Goldwyn has disclosed
that it will not have the liquidity to repay the outstanding indebtedness under
such facility when it becomes due. As a result, Goldwyn's independent
accountants' report on the consolidated financial statements for the year ended
March 31, 1996 states that this condition raises substantial doubt about
Goldwyn's ability to continue as a going concern. It is a condition to the
consummation of the Goldwyn Merger that such bank debt be refinanced, repaid or
extended.
NO ASSURANCE OF PROFITABILITY OF MIG
MIG believes that it will report significant losses for the fiscal year
ended December 31, 1996. In addition, because MIG's Communications Group is in
the early stages of development, MIG expects this group to continue to generate
significant losses as it continues to build out and market its services.
Accordingly, MIG expects to generate consolidated losses for the foreseeable
future.
LEVERAGE, HOLDING COMPANY STRUCTURE AND DEBT SERVICE PAYMENTS OF MIG
MIG and certain of its subsidiaries are highly leveraged companies. Assuming
consummation of the Goldwyn Merger and the Refinancing as if they had occurred
at March 31, 1996, MIG would have had a pro forma consolidated debt to net
tangible equity ratio of 3.6 times.
In addition, following consummation of the Goldwyn Merger, MIG will continue
to operate as a holding company that conducts operations solely through its
subsidiaries. As a result, MIG will continue to rely on dividends from certain
of its subsidiaries and cash on hand to satisfy its obligations, including
funding the debt service payments on its subordinated debt (approximately $15
million of principal in 1997 and approximately $59 million of principal in 1998)
and the operations of its other subsidiaries, which will be substantial. It is
anticipated that the Entertainment Group Credit Facility will contain
substantial restrictions on dividend payments to MIG by such subsidiaries.
Accordingly, in order to be able to meet its cash requirements, MIG may in the
future have to (i) dispose of assets or (ii) obtain additional financing through
a public or private sale of debt or equity securities of MIG. There can be no
assurance that any of the foregoing can be accomplished on reasonably acceptable
terms, if at all. Management of MIG periodically reviews market conditions for
the possible sale of the Company's equity or debt securities. In light of this
review and subject to satisfactory market conditions, in addition to the
Refinancing, MIG may seek additional equity or debt financing during 1996.
FUTURE FINANCING NEEDS
Each of MIG's operating businesses is engaged in an industry which requires
significant cash and capital expenditures prior to the receipt of revenue.
Generally, producers of motion picture product are required to spend significant
capital in order to fund the development, production and distribution costs
associated with such motion picture product prior to its theatrical release or
other distribution and the receipt of any revenues. MIG is attempting to reduce
the risks associated with substantial up-front
24
<PAGE>
production costs by obtaining financing from third party production partners
and/or by "pre-selling" certain rights in films prior to production. There can
be no assurance, however, that MIG will be successful in either pre-selling
rights or obtaining production partners on commercially reasonable terms. The
Communications Group's businesses are similarly capital intensive and require
the investment of significant amounts of capital in order to construct and
develop operational systems and to attract a significant number of subscribers.
As a result, MIG may require additional financing in order to satisfy its
on-going working capital and debt service requirements and to achieve its
long-term business strategies. No assurance can be given that additional
financing will be available to MIG on acceptable terms, if at all. If MIG raises
additional funds by issuing additional equity securities, further dilution to
existing equity holders will result. If adequate additional funds are not
available, MIG may be required to curtail significantly its long term business
objectives and MIG's results from operations may be materially and adversely
affected.
NO ASSURANCE OF SUCCESSFUL INTEGRATION OF BUSINESSES/FUTURE ACQUISITIONS
As a result of the November 1 Mergers (as defined below), the MPCA
Acquisition and the contemplated Goldwyn Merger, MIG has significantly
transformed its business. There can be no assurance that MIG will be able to
establish, maintain or increase the profitability of its acquired businesses or
that such businesses will be successfully integrated into MIG's operations. In
addition, in the future, MIG intends to pursue a strategy of making attractive
acquisitions on a selective basis. There can be no assurance that MIG will be
able to identify and acquire suitable acquisition candidates or that it will be
able to finance significant acquisitions in the future. Furthermore, any
acquisition may initially have an adverse effect on MIG's operating results
while the acquired business is being integrated into MIG's operations.
COMPETITIVE INDUSTRIES
MIG operates in businesses which are highly competitive and such businesses
compete with many other entertainment and communications companies which are
well-known global entertainment, media and communications companies with
substantially greater financial, management and other resources than MIG. The
Entertainment Group competes with many motion pictures companies, including the
"major" motion picture studios, many of which are larger, diversified
entertainment companies and, accordingly, which have other operations to offset
the performance of their motion picture operations. See "OPERATIONS AFTER THE
GOLDWYN MERGER--Entertainment Group--Competition and Seasonality." Similarly,
the Communications Group operates in industries that are highly competitive
worldwide. MIG recognizes that in the future the Communications Group is likely
to encounter significant competition from other entities which may be led by
successful and experienced members of the communications industry and which may
have established operating infrastructures and superior access to financial
resources. The Communications Group also faces potential competition from
competing technologies such as coaxial cable television systems and satellite
master television systems which could emerge over time in Eastern Europe, the
former Soviet Republics and other emerging markets and compete directly with the
Communications Group's cable television operations. Competitive alternatives to
the Communication Group's wireless telephony systems could also stem from other
wireless communications systems, including cellular telephone. In addition, MIG
does not expect to maintain or to be granted exclusive licenses to operate its
communications businesses in any of the markets where it currently provides or
plans to provide its services. See "OPERATIONS AFTER THE GOLDWYN
MERGER--Communications Group--Competition."
CONTROL OF MIG BY METROMEDIA COMPANY DUE TO
CONCENTRATION OF SHARE OWNERSHIP AND VOTING CONTROL
On a pro forma basis after giving effect to the Goldwyn Merger, the MPCA
Acquisition and the Refinancing in accordance with the assumptions set forth
herein (and (i) assuming a Goldwyn Determination Date of May 28, 1996 and a
MIG-Goldwyn Average Closing Price of $13.12, (ii) the
25
<PAGE>
exercise of the Goldwyn Put and (iii) without giving effect to the exercise or
conversion of any options, warrants or convertible securities exercisable for or
convertible into Common Stock), Metromedia Company and its affiliates will
collectively own approximately 24.1% of the outstanding shares of Common Stock
and will be MIG's largest stockholder. In addition, Metromedia Company has
nominated or designated a majority of the members of MIG's Board of Directors.
In accordance with the Restated Certificate of Incorporation and By-laws of MIG
and Delaware law, in the future the majority of the members of MIG's Board of
Directors will nominate the directors for election to MIG's Board of Directors.
Accordingly, it is likely that directors designated or nominated by Metromedia
Company will continue to constitute a majority of the members of MIG's Board of
Directors. As such, Metromedia Company will likely control the direction of
future operations of MIG, including decisions regarding acquisitions and other
business opportunities, the declaration of dividends and the issuance of
additional shares of MIG's capital stock and other securities. Such
concentration of ownership may also have the effect of delaying, deferring or
preventing a change of control of MIG pursuant to a transaction which might
otherwise be beneficial to stockholders.
ANTI-TAKEOVER PROVISIONS IN MIG'S CHARTER AND BY-LAWS
MIG's Restated Certificate of Incorporation and By-laws contain provisions
that could delay, defer or prevent a change in control without the approval of
its incumbent Board of Directors. These provisions, among other things, (i)
divide the Board of Directors into three classes, with members of each class to
be elected in staggered three-year terms, (ii) prohibit stockholder action by
written consent in lieu of a meeting, (iii) limit the right to call special
meetings of stockholders to the Chairman or Vice Chairman of MIG's Board of
Directors and (iv) authorize the Board of Directors to issue preferred stock in
one or more classes or series without any action on the part of stockholders.
Such provisions could limit the price that investors might be willing to pay in
the future for shares of Common Stock and significantly impede the ability of
the holders of Common Stock to replace management. In addition, the MIG Board of
Directors intends during 1996 to adopt a stockholder rights plan which will have
certain anti-takeover effects. MIG does not intend to solicit stockholder
approval with respect to its stockholder rights plan. Although the exact terms
of such rights plan have not been determined, it is anticipated that such rights
plan will cause substantial dilution to a person or group that attempts to
acquire MIG on terms not approved by MIG's Board of Directors. Provisions and
agreements that inhibit or discourage takeover attempts could reduce the market
value of the Common Stock.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local laws, regulations and
ordinances that (i) govern activities or operations that may have adverse
environmental effects, such as discharges to air and water, as well as handling
and disposal practices for solid and hazardous wastes, and (ii) impose liability
for the costs of cleaning up, and certain damages resulting from, sites of past
spills, disposals or other releases of hazardous substances (together,
"Environmental Laws"). The Company, through its predecessors, has been in
operation since 1929 and, over the years, has operated in diverse industries,
including, various equipment, sporting goods and furniture manufacturing, sheet
metal processing, and trucking. With the exception of Snapper and the Company's
interest in Roadmaster, the Company has divested itself of all
non-entertainment, media and communications-related operations. However, in the
course of certain such divestitures, the Company has retained certain
indemnification obligations for environmental cleanup matters, and in one case a
contaminated parcel at which the Company has undertaken cleanup activities. See
"OPERATIONS AFTER THE GOLDWYN MERGER--Environmental Matters." In other cases,
particularly for operations that were divested in the past, the Company could
incur unanticipated environmental cleanup obligations, to the extent they may
exist or arise in the future, as a result, at least in part, of changes in legal
requirements that have occurred since such divestitures. At the present time,
the Company is not aware of any environmental liabilities related to any such
divestitures that the Company believes would have a material adverse effect on
its results of operations or financial condition. However, because some
divestitures may have occurred many years
26
<PAGE>
ago, there can be no assurance that environmental matters will not arise in the
future that could have such an effect.
MOTION PICTURE INDUSTRY INVOLVES A SUBSTANTIAL DEGREE OF RISK
MIG, through Orion and MPCA, and Goldwyn are engaged in the exploitation of
their film libraries and other assets and the distribution and production of
theatrical motion pictures. The motion picture industry is unpredictable and
involves a substantial degree of risk. The success of MIG's and Goldwyn's motion
picture product is heavily dependent on public taste, which is both
unpredictable and susceptible to change. Accordingly, there can be no assurance
as to the financial success of any motion picture.
SUBSTANTIAL COSTS OF MOTION PICTURES
The motion picture business in which MIG and Goldwyn are engaged requires
substantial outlays of capital. The costs of producing and marketing motion
pictures have only increased in recent years, and may continue to increase in
the future, thereby increasing the costs to MIG of the motion pictures it
produces or with respect to which it acquires distribution rights. Consequently,
MIG may be subject to substantial financial risks relating to the production,
completion and release of motion pictures. Moreover, there can be no assurance
that MIG will be able to obtain additional financing if it is required. See
"RISK FACTORS--Future Financing Needs."
POLITICAL, SOCIAL AND ECONOMIC RISKS FOR MITI
MIG's operations may be materially and adversely affected by significant
political, social and economic uncertainties in Eastern Europe, the former
Soviet Republics and in other emerging markets where it conducts or may in the
future conduct business. Political stability in many of MITI's (a wholly-owned
subsidiary of MIG and the parent company of the Communications Group) markets
has been affected by political tensions between different branches of
government. The impending presidential elections in the Russian Federation could
result in a change in the policies of such government with respect to the
Communications Group's operations. In addition, internal military conflicts have
occurred in certain regions of some of the countries in which MITI has made
investments. There are also concerns about potential civil unrest fueled by,
among other things, economic and social crises in certain of MITI's markets.
Moreover, political tensions between national and local governments in certain
of MITI's markets could have a material adverse effect on MITI's operations in
such areas. MITI's operations may also be materially and adversely affected by
bureaucratic infighting between government agencies with unclear and overlapping
jurisdictions.
The governments in MITI's markets exercise substantial influence over many
aspects of the private sector. The governments in these areas have been
attempting to a varying degree to implement economic reform policies and
encourage private economic activity. However, these reforms have been only
partially successful to date. The economies in many of MITI's markets are still
characterized by high unemployment, high inflation, high foreign debt, weak
currencies and the possibility of widespread bankruptcies. Moreover, in some of
MITI's markets, the governments have continued to reserve large sectors of the
economy for state ownership and have not dismantled all portions of the command
economy system. Important infrastructure and utility sectors, such as certain
sectors of the telecommunications industry, of some of the economies in which
MITI conducts or plans to conduct business are still primarily state-owned and
operated and are subject to pervasive regulatory control. Despite some success
in implementing reform policies and developing the private sector, there can be
no assurance that the pursuit of economic reforms by any of these governments
will continue or prove to be ultimately effective, especially in the event of a
change in leadership, social or political disruption or other circumstances
affecting economic, political or social conditions.
27
<PAGE>
GENERAL OPERATING RISKS FOR MITI
MITI's operating results are dependent upon the sale of commercial
advertising time; the ability to attract subscribers to its cable, paging and
telephony systems and its ability to control operating expenses. The sale of
commercial advertising time and the ability to attract subscribers are dependent
on the general economic conditions in the market where each radio station, cable
system, paging system and telephony system is located, the relative popularity
of the programming of MITI's radio stations and cable systems, the demographic
characteristics of the audience of MITI's radio stations and cable systems, the
technical attractiveness of the equipment and service of MITI's existing and
proposed telephony systems to customers, the activities of competitors and other
factors which may be outside of MITI's control.
MITI relies heavily in many of the countries in which it operates upon the
availability and accessibility of government owned broadcast and transmission
facilities for distribution of its signal throughout its license areas. Most of
the joint ventures in which MITI makes investments often require substantial
construction of new systems and additions to the physical plant of existing
systems. Construction projects are adversely affected by cost overruns and
delays not within the control of MITI or its subcontractors, such as those
caused by governmental action or inaction. Delays also can occur as a result of
design changes and material or equipment shortages or delays in delivery of
material or equipment. The failure to complete construction of a communications
system on a timely basis could jeopardize the franchise or license for such
system or provide opportunities to MITI's competitors.
RISKS TO MITI INHERENT IN FOREIGN INVESTMENT
MITI has invested substantial resources in operations outside of the United
States and, in the ordinary course of its business, plans to make additional
international investments in the near future. Risks inherent in foreign
operations include loss of revenue, property and equipment from expropriation,
nationalization, war, insurrection, terrorism and other political risks, risks
of increases in taxes and governmental royalties and involuntary modifications
of contracts with or licenses issued by foreign governments or their affiliated
commercial enterprises. While MITI has obtained political risk insurance from
the Overseas Private Investment Corporation ("OPIC") for some of its projects,
such insurance does not cover many of these risks. In addition, there can be no
assurance that MIG will elect to obtain or be able to obtain OPIC insurance for
any of its additional systems or renew existing policies. See "OPERATIONS AFTER
THE MERGER--Communications Group Overview."
MITI is also vulnerable to the risk of changes in foreign and domestic laws
and policies that govern operations of overseas-based companies. Exchange
control regulations currently in place or which could be enacted in many of
MITI's markets could create substantial barriers to the conversion or
repatriation of funds, and such restrictions could adversely affect MITI's and
MIG's ability to pay overhead expenses, meet any of their respective debt
obligations and to continue and expand its communications businesses. Tax laws
and regulations may also be amended or differently interpreted and implemented,
thereby adversely affecting the profitability after tax of MITI's ventures. In
addition, criminal organizations in certain of the countries in which MITI
operates threaten and intimidate businesses. While MITI has thus far not
experienced widespread difficulties with criminal organizations in these
countries, there can be no assurance that such pressures from criminal
organizations will not increase in the future and have a material adverse effect
on MIG and its operations.
There is significant uncertainty as to the extent to which local parties and
entities, particularly government authorities, in MITI's markets will respect
the contractual and other rights of foreign parties, such as MITI, and also the
extent to which the "rule of law" has taken hold and will be upheld in each of
these countries. Although the general legal framework and the governments'
strategy in some of MITI's markets currently encourage foreign trade and
investments, relevant laws of the countries in which MITI has invested may not
be enforced in accordance with their terms or implemented in
28
<PAGE>
countries in which they do not now exist. Laws in MITI's markets affecting
foreign investment, trade and communications activities often change and create
uncertainty and confusion. Additionally, foreign investment and sales may be
materially and adversely affected by conflicting and restrictive administrative
regulations in many of MITI's markets.
MIG may also be materially and adversely affected by laws restricting
foreign investment in the field of communications. Certain countries have
extensive restrictions on foreign investment in the communications field and
MITI is attempting to structure its prospective projects in order to comply with
such laws. However, there can be no assurance that such legal and regulatory
restrictions will not increase in the future or, as currently promulgated, will
not be interpreted in a manner giving rise to tighter restrictions, and thus
have a material adverse effect on MIG's prospective projects in that country.
Legislation passed in the Republic of Latvia in September 1995 will limit to 20%
the interest which a foreign person is permitted to own in entities engaged in
certain communication businesses, such as radio, cable television and other
systems of broadcasting. The legislation could require MITI to reduce to 20% or
otherwise restructure its existing ownership interests in joint ventures which
operate a wireless cable television system and an FM radio station in Riga,
Latvia by September 1996. In 1995, the Russian Federation legislature proposed
legislation that would limit to 35% the interest which a foreign person is
permitted to own in entities holding broadcasting licenses. While such proposed
legislation was not made into law, it is possible that such legislation could be
reintroduced and enacted in Russia and/or that other countries in Eastern Europe
and the former Soviet Republics may enact similar legislation which could have a
material adverse effect on the business, operations, financial condition or
prospects of MIG. Such legislation could be similar to United States federal law
which limits the foreign ownership in entities owning broadcasting licenses.
There is no way of predicting whether foreign ownership limitations will be
enacted in any of MITI's markets, or whether any such law, if enacted, will
force MITI to reduce or restructure its ownership interest in any of the
ventures in which MITI currently has an ownership interest. If foreign ownership
limitations are enacted in any of MITI's markets and MITI is required to reduce
or restructure its ownership interests in any ventures, it is unclear how such
reduction or restructuring would be implemented, or what impact such reduction
or restructuring would have on MITI.
DEVELOPING LEGAL STRUCTURES IN MITI'S TARGET MARKETS
As a result of recent political, economic and social changes in Eastern
Europe, the countries of the former Soviet Union and in other emerging markets,
the bodies of commercial and corporate laws in MITI's markets are, in most
cases, in their formative stages. Despite the fact that many of these areas have
undergone radical changes in recent years, commercial and corporate laws in
these markets are still significantly less developed or clear than comparable
laws in the United States and countries of Western Europe and are subject to
frequent changes, preemption and reinterpretation by local or administrative
regulations, by administrative officials and, in the case of Eastern Europe and
countries of the former Soviet Union, by new governments. Such lack of
development or clarity makes it difficult for MITI's businesses to plan
operations and maintain compliance with administrative interpretations of the
law. No assurance can be given that the uncertainties associated with the
existing and future laws and regulations in MITI's markets will not have a
material adverse effect on MIG's ability to conduct its business and to generate
profits.
In addition, the courts in many of MITI's markets often do not have the
experience, resources or authority to resolve significant economic disputes and
enforce their decisions. In some cases courts are not insulated from political
considerations and other outside pressures and sometimes do not function in an
independent manner. Enforcement of legal rights in these areas is also affected
in some cases by political discretion and lobbying. This creates particular
concerns for MITI because the licenses held by MITI's businesses or the
contracts providing such businesses access to the airwaves or other rights
essential for operations may be significantly modified, revoked or canceled
without justification, and legal redress may be substantially delayed or even
unavailable in such cases.
29
<PAGE>
RISK INHERENT IN MITI'S GROWTH STRATEGY
MITI has grown rapidly since its inception. Many of MITI's ventures are
either in developmental stages or have only recently commenced operations. MITI
has incurred significant operating losses to date. MITI is pursuing additional
investments in a variety of communications businesses in both its existing
markets and additional markets. This growth strategy entails the risks inherent
in assessing the strength and weaknesses of development opportunities, in
evaluating the costs and uncertain returns of developing and constructing the
facilities for operating systems and in integrating and managing the operations
of existing and additional systems. MIG's growth strategy requires MIG to expend
significant capital in order to enable MITI to continue to develop its existing
operations and to invest in additional ventures. There can be no assurance that
MIG will have the funds necessary to support the capital needs of MITI's current
investments or any of MITI's additional investment opportunities or that MITI
will be able to obtain financing from third parties. If such financing is
unavailable, MITI may not be able to further develop its existing ventures and
the number of additional ventures in which it invests may be significantly
curtailed.
APPROVALS AND UNCERTAINTY OF LICENSE RENEWALS FOR MITI
MITI's operations are subject to governmental regulation in its markets and
its operations require certain governmental approvals. There can be no assurance
that MITI will obtain necessary approvals to operate additional wireless cable
television, wireless telephony or paging systems or radio broadcast stations in
any of the markets in which it is seeking to establish its businesses.
The licenses pursuant to which MITI's businesses operate are issued for
limited periods. Certain of these licenses expire over the next several years.
Specifically, during 1996 and 1997, licenses utilized by seven of MIG's 19
operating joint ventures will expire or require reissuance. No statutory or
regulatory presumption exists for renewal by the current license holder, and
there can be no assurance that such licenses will be renewed upon the expiration
of their current terms. MITI's partners in these ventures have not advised MITI
of any reason such licenses would not be renewed. The failure of such licenses
to be renewed may have a material adverse effect on MIG.
Additionally, certain of the licenses pursuant to which the Communications
Group's businesses operate contain network build-out milestones. The failure to
satisfy such milestones could result in the loss of such licenses which may have
a material adverse effect on MIG.
EXCHANGE RATE FLUCTUATIONS AND INFLATION RISKS IN MITI'S TARGET MARKETS
In most cases, MITI's local joint ventures set the prices for their services
in U.S. dollars but receive some payments from their customers in local
currencies. Accordingly, a change in the value of these currencies against the
U.S. dollar will result in corresponding changes in the price and affordability
of the services provided to such customers which could have a material adverse
impact on MIG's business, financial condition and results of operations.
Moreover, if the exchange rate relative to the U.S. dollar of a currency in
which a local joint venture receives income declines between the time of a joint
venture's receipt of such income and the time it distributes earnings in U.S.
dollars to MITI, the amount of such earnings in U.S. dollars would decrease and
MIG's results of operations would be adversely impacted. MITI does not currently
hedge against foreign currency exchange risks. In addition, the economies of
certain of MITI's target markets have experienced significant and in some
periods extremely high rates of inflation over the past few years. Inflation and
rapid fluctuation in exchange rates have had and may continue to have negative
effect on these economies and may have a material adverse impact on MIG's
business, financial condition and results of operations.
30
<PAGE>
POSSIBLE INABILITY TO CONTROL CERTAIN OF MITI'S JOINT VENTURES
MITI has invested in virtually all of its joint ventures with local
partners. Although MITI exercises significant influence in the management and
operations of the joint ventures in which it has an ownership interest and
intends to invest in the future only in joint ventures in which it can exercise
significant influence in management, the degree of its voting power and the
voting power and veto rights of its joint venture partners may limit MITI from
effectively controlling the operations, strategies and financial decisions of
the joint ventures in which it has an ownership interest. In certain markets
where MITI conducts or may in the future conduct business, increases in the
capitalization of a joint venture require not only the consent of all joint
venture partners, but also government approval, thereby creating a risk that a
venture may not be able to obtain additional capital without cooperation of the
joint venture partner and government approval. MITI is dependent on the
continuing cooperation of its partners in the joint ventures and any significant
disagreements among the participants could have a material adverse effect on any
such venture. In addition, in most instances, MITI's partners in a joint venture
include a governmental entity or an affiliate of a governmental entity. The
presence of a governmental entity or affiliate thereof as a partner poses a
number of risks, including the possibility of decreased governmental support or
enthusiasm for the venture as a result of a change of government or government
officials, a change of policy by the government and perhaps most significantly
the ability of the governmental entities to exert undue control or influence
over the project in the event of a dispute or otherwise. In addition, if the
joint ventures become profitable and generate sufficient cash flows in the
future, there can be no assurance that the joint ventures will pay dividends or
return capital at any time. Moreover, the equity interests of MITI in these
investments generally are not freely transferable. Therefore, there can be no
assurance of MIG's ability to realize economic benefits through the sale of
MITI's interests in its joint ventures.
TECHNICAL APPROVAL OF MITI'S TELEPHONY EQUIPMENT
Many of MITI's proposed wireless telephony operations are dependent upon
approval of MITI's wireless telephony equipment by the communications
authorities in the markets where MITI and its ventures plan to operate. While
MITI believes that such equipment will be type approved, there is no assurance
that this will occur and the failure to obtain such type approvals could have a
materially adverse effect on many of MITI's proposed telephony operations. In
addition, while MITI believes that it will be able to acquire sufficient amounts
of wireless telephony equipment from its supplier on a timely basis, there can
be no assurance that this will be the case or that MITI would be able to procure
alternative equipment.
TECHNOLOGICAL AND PRODUCT OBSOLESCENCE FOR MITI
The communications industry has been characterized in recent years by rapid
and significant technological changes and frequent new product introductions.
New market entrants could introduce new or enhanced products with features which
would render MITI's technology obsolete or significantly less marketable. The
ability of MITI to compete successfully will depend to a large extent on its
ability to respond quickly and adapt to technological changes and advances in
its industry. There can be no assurance that MITI will be able to keep pace, or
will have the financial resources to keep pace, with the technological demands
of the marketplace.
31
<PAGE>
INFORMATION REGARDING THE GOLDWYN SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to Goldwyn Stockholders
in connection with the solicitation of proxies by the Board of Directors of
Goldwyn for use at the Goldwyn Special Meeting and any adjournments thereof.
Each copy of this Proxy Statement/Prospectus which is being mailed or delivered
to Goldwyn Stockholders is accompanied by a Goldwyn proxy card and the Notice of
Special Meeting of Stockholders of Goldwyn.
This Proxy Statement/Prospectus is also being furnished by MIG to Goldwyn
Stockholders as a prospectus in connection with the proposed issuance by MIG of
shares of Common Stock upon the consummation of the Goldwyn Merger. This Proxy
Statement/Prospectus, the Letter to Stockholders, the Notice relating to the
Goldwyn Special Meeting and the proxy cards are being first mailed to Goldwyn
Stockholders on or about June 3, 1996.
A copy of Goldwyn's Annual Report on Form 10-K for the fiscal year ended
March 31, 1996, including financial statements for such fiscal year, accompanies
this Proxy Statement/Prospectus.
All properly executed proxy cards delivered pursuant to these solicitations
and not revoked will be voted at the Goldwyn Special Meeting in accordance with
the directions given. Stockholders should specify their choices on the
accompanying proxy cards. If no specific instructions are given with regard to
the matter to be voted upon, the shares of Goldwyn Common Stock represented by a
signed proxy card will be voted "FOR" the proposal listed on the proxy cards. If
any other matters properly come before the Goldwyn Special Meeting the persons
named as proxies will vote upon such matters according to their judgment.
All proxy cards delivered pursuant to this solicitation are revocable at any
time prior to the Goldwyn Special Meeting at the option of the persons executing
them by giving written notice to the Secretary of Goldwyn, by delivering a later
dated proxy card or by voting in person at the Goldwyn Special Meeting. All
written notices of revocation and other communications with respect to
revocations of proxies should be addressed by Goldwyn Stockholders to: The
Samuel Goldwyn Company, 10203 Santa Monica Boulevard, Los Angeles, California
90067, Attention: Hans W. Turner, Secretary.
GOLDWYN STOCKHOLDERS ARE EACH REQUESTED TO COMPLETE, DATE AND SIGN THE
ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY TO GOLDWYN IN THE ACCOMPANYING
POSTAGE-PAID ENVELOPE.
Goldwyn will bear its own costs of soliciting proxies. Proxies will
initially be solicited by Goldwyn by mail, but directors, officers and selected
employees of Goldwyn may solicit proxies from stockholders personally or by
telephone, telecopy or other forms of communication. Such directors, officers
and employees will not receive any additional compensation for such
solicitation. Goldwyn also will request brokerage houses, nominees, fiduciaries
and other custodians to forward soliciting materials to beneficial owners, and
Goldwyn will reimburse such persons for their reasonable expenses incurred in
doing so.
THE GOLDWYN SPECIAL MEETING
The Goldwyn Special Meeting is scheduled to be held in the Concourse Level,
1285 Avenue of the Americas, New York, New York 10019 on July 2, 1996, at 9:00
a.m., local time. At the Goldwyn Special Meeting, Goldwyn Stockholders will
consider and vote upon a proposal to approve and adopt the Goldwyn Merger
Agreement and the transactions contemplated thereby. The Board of Directors of
Goldwyn knows of no business that will be presented for consideration at the
Goldwyn Special Meeting other than the matters described in this Proxy
Statement/Prospectus.
32
<PAGE>
Record Date; Quorum
Only Goldwyn Stockholders of record as of the close of business on the
Goldwyn Record Date will be entitled to notice of and to vote at the Goldwyn
Special Meeting. As of the Goldwyn Record Date, there were 8,489,231 shares of
Goldwyn Common Stock outstanding and entitled to vote at the Goldwyn Special
Meeting, with each share entitled to one vote. The presence, in person or by
proxy, of a majority of the outstanding shares of Goldwyn Common Stock is
necessary to constitute a quorum at the Goldwyn Special Meeting. The shares of
Goldwyn Common Stock represented by proxies marked "ABSTAIN" for any proposal at
the Goldwyn Special Meeting and shares of Goldwyn Common Stock held by persons
in attendance at the Goldwyn Special Meeting who have abstained 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. 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 the Goldwyn Merger
Agreement. Because of the vote required to approve the Goldwyn Merger Agreement
(see below), abstentions and non-votes will have the effect of a vote against
the Goldwyn Merger Agreement.
Vote Required
The affirmative vote of the holders of a majority of all of the issued and
outstanding shares of Goldwyn Common Stock (whether or not represented in person
or by proxy at the Goldwyn Special Meeting) is required to approve the Goldwyn
Merger Agreement.
As of the Goldwyn Record Date, directors, executive officers and affiliates
of Goldwyn were the beneficial owners of an aggregate of 5,419,952 shares of
Goldwyn Common Stock, or approximately 63.8% of the outstanding shares of
Goldwyn Common Stock. Of such shares, 5,111,261 shares, or approximately 60.2%
of the outstanding Goldwyn Common Stock are beneficially held by The Goldwyn
Family Trust. It is anticipated that all such directors, executive officers and
affiliates, including the Goldwyn Family Trust, which pursuant to the Voting
Agreement has agreed to vote all shares of Goldwyn Common Stock owned by it,
beneficially or otherwise, in favor of the Goldwyn Merger Agreement, will vote
their shares in favor of the Goldwyn Merger Agreement and the transactions
contemplated thereby. Accordingly, because the Goldwyn Family Trust beneficially
owns more than a majority of the outstanding Goldwyn Common Stock, if all shares
held by the Goldwyn Family Trust are voted as contractually obligated, its vote
will be sufficient to assure approval of the Goldwyn Merger Agreement by the
Goldwyn Stockholders.
33
<PAGE>
PROPOSAL NO. 1--THE GOLDWYN MERGER
GENERAL
Subject to the terms and conditions set forth therein, the Goldwyn Merger
Agreement provides for the merger of SGC Mergerco with and into Goldwyn.
Consummation of the Goldwyn Merger is subject to various conditions, including
(i) the approval and adoption of the Goldwyn Merger Agreement by the holders of
a majority of the outstanding shares of Goldwyn Common Stock at the Goldwyn
Special Meeting and (ii) the refinancing or extension of Goldwyn's bank
indebtedness and production indebtedness relating to certain films. Goldwyn, as
the surviving corporation of the Goldwyn Merger, will be renamed "Goldwyn
Entertainment Company" and will continue the business and operations of Goldwyn
as a wholly-owned subsidiary of MIG.
Holders of Common Stock and holders of options, warrants, and convertible
securities exercisable for or convertible into Common Stock will not be required
to exchange, exercise or convert their securities in connection with the Goldwyn
Merger. Holders of options, warrants and convertible securities of MIG will,
upon the exercise or conversion thereof after consummation of the Goldwyn
Merger, be entitled to receive the same number of shares of Common Stock as
though such exercise or conversion occurred prior to the Goldwyn Merger.
Following consummation of the Goldwyn Merger (assuming (i) a Goldwyn
Determination Date of May 28, 1996 and a MIG-Goldwyn Average Closing Price of
$13.12, (ii) the consummation of the Refinancing in accordance with the
assumptions described herein, (iii) the exercise of the Goldwyn Put and (iv)
without giving effect to the exercise or conversion of any options, warrants or
convertible securities exercisable for or convertible into Common Stock,
existing MIG Stockholders will collectively own approximately 70.7% of the
outstanding shares of Common Stock and Goldwyn Stockholders will collectively
own approximately 5.6% of the outstanding shares of Common Stock. Stockholders
purchasing shares of Common Stock in the Equity Offering will own the remaining
23.7% of the outstanding shares of Common Stock.
MERGER CONSIDERATION
Pursuant to the terms of the Goldwyn Merger Agreement, each Goldwyn
Stockholder will be entitled to receive the number of whole shares of Common
Stock equal to the number of shares of Goldwyn Common Stock owned by such holder
immediately prior to the Goldwyn Effective Time multiplied by the Goldwyn
Exchange Ratio, plus cash in lieu of fractional shares. As set forth in the
Goldwyn Merger Agreement, if the MIG-Goldwyn Average Closing Price is between
$12.50 and $16.50, the Goldwyn Exchange Ratio shall be equal to a fraction, the
numerator of which is $5.00 and the denominator of which is the MIG-Goldwyn
Average Closing Price; provided, that if the MIG-Goldwyn Average Closing Price
is less than $12.50, the MIG-Goldwyn Average Closing Price shall be deemed to be
$12.50 and if the MIG-Goldwyn Average Closing Price is greater than $16.50, the
MIG-Goldwyn Average Closing Price shall be deemed to be $16.50. Accordingly, if
the MIG-Goldwyn Average Closing Price is less than or equal to $12.50, the
Goldwyn Exchange Ratio shall be equal to .4 and if the MIG-Goldwyn Average
Closing Price is greater than or equal to $16.50, the Goldwyn Exchange Ratio
shall be equal to .3030. The MIG-Goldwyn Average Closing Price was $13.12 for
the 20 business days ended on May 28, 1996, and on such date, the Goldwyn
Exchange Ratio would have been .3811.
Holders of options to purchase Goldwyn Common Stock (the "Goldwyn Options")
will receive by virtue of the Goldwyn Merger and without any action on the part
of the holder thereof, options exercisable for shares of Common Stock with the
same terms and conditions as Goldwyn Options immediately prior to the Goldwyn
Effective Time except that (i) the exercise price and the number of shares
issuable upon exercise shall be divided and multiplied, respectively, by the
Goldwyn Exchange
34
<PAGE>
Ratio and (ii) all Goldwyn Options, in accordance with their terms, will vest
and become immediately exercisable at the Goldwyn Effective Time. Each share of
Goldwyn Common Stock held in treasury by Goldwyn immediately prior to the
Goldwyn Effective Time shall, by virtue of the Goldwyn Merger, be canceled and
retired and cease to exist, without any conversion thereof.
Following the Goldwyn Effective Time, each Goldwyn Stockholder will be
required to surrender to Chemical Mellon Shareholder Services, the Exchange
Agent, the stock certificate(s) representing the shares of Goldwyn Common Stock
which have been converted into shares of Common Stock pursuant to the Goldwyn
Merger. The Exchange Agent will then issue to each of the holders of Goldwyn
Common Stock who surrender their certificates, stock certificates evidencing the
shares of Common Stock to which such stockholder is entitled. See "PROPOSAL NO.
1--THE GOLDWYN MERGER-- Conversion of Shares, Procedures For Exchange of
Certificates." No fractional shares of Common Stock will be issued in any of the
conversions, but cash will be paid in lieu of such fractional shares. See
"PROPOSAL NO. 1--THE GOLDWYN MERGER--Fractional Shares." The shares of Common
Stock to be issued pursuant to the Goldwyn Merger will be freely transferable
except by certain stockholders of Goldwyn who are deemed "affiliates" of
Goldwyn. The shares of Common Stock issued to such affiliates will be restricted
in their transferability in accordance with rules and regulations promulgated by
the Commission. See "INFORMATION REGARDING MIG--Restrictions on Resale of Common
Stock by Affiliates."
BACKGROUND OF THE GOLDWYN MERGER
Beginning in 1994 and continuing into early 1995, Goldwyn endeavored to
generate long-term capital and/or equity or locate a strategic partner to
finance its theatrical operations and its television production and distribution
activities at expanded levels. Such efforts included exploration of an
underwritten offering of subordinated notes and engagement of an investment
banking firm, Wertheim Schroder & Co., regarding a possible sale of a minority
equity interest in Goldwyn. Such efforts were unsuccessful.
During its fiscal year ended March 31, 1995, Goldwyn incurred a net
operating loss of approximately $20 million and experienced a significant
decrease in working capital. As a result, Goldwyn was unable to refinance its
bank loan (which was scheduled to mature on April 30, 1995) for a period
extending beyond one year or in an amount sufficient to support its planned
level of film production and distribution. Accordingly, on April 28, 1995,
Goldwyn entered into a new credit facility with its bank group (the "Goldwyn
Bank Group") which provided for limited availability of additional borrowings.
The principal and all accrued interest under such facility (the "Goldwyn Bank
Debt") was scheduled to mature on April 30, 1996 and on April 26, 1996, the
maturity date was extended to June 28, 1996.
In the spring of 1995, Goldwyn's liquidity problem was exacerbated, due
primarily to significant writedowns relating to the less than anticipated
performance of the motion picture films The Perez Family, Oleanna and To Live,
as well as other feature films released during the year, and the canceled
television series Wild West Showdown and Why Didn't I Think of That?
Accordingly, in May 1995, the Board of Directors of Goldwyn met to review
and discuss with Goldwyn's management issues relating to Goldwyn's standing
under its credit agreement, its short term and long term cash requirements and
related issues. The Board of Directors of Goldwyn discussed various alternative
courses of action that Goldwyn could pursue and their impact on Goldwyn, its
stockholders and creditors. The Board discussed, among other strategies, its
continuing efforts to secure a significant equity infusion or a strategic
partner.
On June 22, 1995, Goldwyn filed its Annual Report on Form 10-K for the
fiscal year ended March 31, 1995 (the "Goldwyn 10-K"), in which Goldwyn stated
that, in the absence of alternative
35
<PAGE>
financing, Goldwyn would have insufficient liquidity to repay the Goldwyn Bank
Debt upon maturity. The Goldwyn 10-K also reported that Goldwyn might not have
sufficient liquidity, in the absence of alternative financing, to meet the
required repayments of Goldwyn Bank Debt that were due at December 29, 1995 and
March 29, 1996, and thus Goldwyn could face liquidity shortfalls during the
year.
In the Goldwyn 10-K, Goldwyn also stated that it was currently not in
default with respect to the Goldwyn Bank Debt but that it was possible,
depending upon the results of operations of future quarters, that Goldwyn could
violate certain financial ratio covenants with respect to the Goldwyn Bank Debt
for the quarters ended June 30, September 30 and December 31, 1995. Goldwyn
stated that the likelihood of financial ratio covenant violations would increase
to the extent that Goldwyn incurred losses during fiscal 1996, and that any such
financial ratio covenant violations could, unless waived by the Goldwyn Bank
Group, trigger the default provisions with respect to the Goldwyn Bank Debt.
Furthermore, the audit report of Goldwyn's independent accountants for the
fiscal year ended March 31, 1995, as contained in the Goldwyn 10-K, stated that
the inability to extend the credit facility beyond one year caused substantial
doubt about Goldwyn's ability to continue as a going concern.
The Goldwyn 10-K also reported that management was taking a number of
actions to address these issues, including reducing overhead and arranging
sources of capital to restructure the Goldwyn Bank Debt and to provide for the
continued growth of Goldwyn. Further, Goldwyn stated that it had retained
investment bankers to advise it regarding strategic alternatives that were
available to accomplish these objectives. In a press release dated July 7, 1995,
Goldwyn announced it had retained the investment banking firm of Furman Selz to
advise and represent Goldwyn regarding strategic alternatives, including a
possible sale of all or a part of Goldwyn.
Furman Selz, in conjunction with certain of Goldwyn's executive officers,
developed and explored strategic alternatives, including preparing a list of
companies that were considered possible purchasers of certain of Goldwyn's
assets or candidates for a merger with Goldwyn. Furman Selz advised Goldwyn's
management and Board that a merger of Goldwyn with and into another company
would likely present the best opportunity for maximizing shareholder value.
During July 1995, Furman Selz, together with Goldwyn management, prepared
confidential information packages describing Goldwyn's operations. In order to
investigate further the alternatives of selling certain assets or the entire
company, Goldwyn and Furman Selz began to contact and to solicit preliminary
indications of interest from a number of entities which Furman Selz and Goldwyn
considered to be possible purchasers. Furman Selz provided a copy of the
confidential information packages to each entity or individual which expressed
an interest in purchasing all or a part of Goldwyn and which signed a
confidentiality agreement.
Accordingly, in late July 1995, and continuing thereafter, Furman Selz began
to attempt to solicit firm proposals from certain parties. The procedure
included (1) investigations by the interested parties of certain information
regarding Goldwyn's assets and operations; (2) circulation of Goldwyn's proposed
form of merger agreement, and (3) receipt and evaluation of purchase prices the
interested parties were prepared to pay for Goldwyn or certain of its assets.
On August 9, 1995, the Board of Directors of Goldwyn held a meeting at which
representatives of Furman Selz reported to the Board on certain developments
concerning a potential sale of Goldwyn. Furman Selz reported that its activities
included initiating telephone contact with 40 entities, sending confidential
information packages to 17 companies and arranging on-site due diligence
investigations for six companies. As of such time, indications of interest had
been received from three entities, which indications, as discussed below, ranged
from a proposed merger with Goldwyn to the purchase of either The Samuel Goldwyn
Theatre Group (the "Theatre Group") or the distribution rights to Goldwyn's film
and television library (the "Library Rights"). Turner Broadcasting System, Inc.
("Turner")
36
<PAGE>
indicated a price range for a proposed merger that was higher than other
indications of interest received by Goldwyn.
On August 17, 1995, the Board of Directors of Goldwyn held a meeting at
which representatives of Furman Selz discussed with the Board various historical
and other financial information regarding Goldwyn and described certain
preliminary analyses being performed by Furman Selz with respect to Goldwyn's
valuation, including segment sale, comparable companies, discounted cash flow,
liquidation and discounted share price analyses. Furman Selz's representatives
next discussed with the Board certain historical and current financial and stock
information regarding Turner. Because the Board of Directors of Goldwyn believed
that an acquisition of Goldwyn was the transaction that would maximize
shareholder value, and because of the difference between the amount of Turner's
proposal and all other price indications received during the process, the Board
of Directors of Goldwyn authorized management to begin negotiating with Turner.
Throughout the remainder of August and mid-September, significant
negotiations continued with Turner. Goldwyn and Turner discussed a
stock-for-stock merger pursuant to which Goldwyn would merge with a wholly owned
subsidiary of Turner, and Goldwyn stockholders would receive Turner common stock
worth in the range of $8 to $9 for each share of Goldwyn Common Stock. In mid-
September, however, Turner terminated negotiations with Goldwyn because of
Turner's announced intention to merge with Time Warner Communications, Inc.
("Time Warner"). Though at the time of such announcement representatives of
Turner expressed to Goldwyn an interest in resuming merger discussions after
completing its transaction with Time Warner, the Time Warner transaction has not
been completed and no negotiations with Turner have subsequently taken place.
On September 19, 1995, the Board of Directors of Goldwyn met with Furman
Selz to review the existing proposals for either a merger with or the purchase
of certain assets of Goldwyn. Because in the Goldwyn Board's judgment there were
no merger proposals that warranted further negotiations, the Goldwyn Board
authorized management to pursue the sale of either the Theatre Group or the
Library Rights. Management reported on ongoing discussions with PolyGram Filmed
Entertainment, Inc. ("PolyGram") for the sale of the Library Rights. The Goldwyn
Board also discussed certain covenant deadlines with the Goldwyn Bank Group. If
in the near term no forbearance or additional funding was to be provided by the
Goldwyn Bank Group and no significant transaction had been entered into, Goldwyn
would have no viable alternative other than to sell the Theatre Group, the
Library Rights or both in order to pay down the Goldwyn Bank Debt. In this
regard, the Goldwyn Board instructed Furman Selz to continue soliciting cash
proposals for the Theatre Group and the Library Rights.
During early October 1995, Goldwyn's management met with representatives of
PolyGram and held exploratory discussions with several other parties, including
Buena Vista Pictures Distribution, Inc. ("Buena Vista"), a subsidiary of The
Walt Disney Company. During October and November, Furman Selz also received
several indications of interest to purchase the Theatre Group, as described
below, for prices in the range of $45 to $50 million.
During October and through early November, Goldwyn's management was engaged
in discussions with several parties for the sale of the Theatre Group, including
Reading Cinemas, Inc. ("Reading"). Goldwyn also received proposals to purchase
the Theatre Group from Act III, Inc., Hoyts Pty. Ltd. and Village Road Show
Pictures (USA), Inc., which proposals the Board determined to be unacceptable
because, in the Board's judgment, the ultimate purchase price to be paid in each
such proposal would be below that being negotiated with Reading. During the time
of Goldwyn's negotiations with Reading, Goldwyn continued to discuss a possible
sale of the Library Rights and received proposals from, among others, PolyGram
and Buena Vista. Near the end of November, negotiations between Goldwyn and
Reading terminated for a variety of reasons, including the failure of the
parties to reach agreement on the purchase price, the duration of
representations and warranties, the security for such representations and
warranties and the timing of the transaction.
37
<PAGE>
In November 1995, the Board of Directors of Goldwyn discussed recent
negotiations between Goldwyn management and representatives of PolyGram
regarding the sale of the Library Rights, the principal terms of the proposed
transaction, and the nature of Goldwyn's operations thereafter. The Board agreed
that management should continue to pursue the PolyGram transaction. The Board
discussed the Buena Vista proposal which provided for Buena Vista's purchase of
certain of the Library Rights at a price of $40 million (subject to adjustment),
of which $35 million was payable to Goldwyn at closing and the balance payable
to Goldwyn on the first anniversary date of the closing. Because the Board
determined that Buena Vista's proposed purchase price was too low and would fail
to discharge a sufficient amount of the Goldwyn Bank Debt, the Goldwyn Board
found no reasonable basis for further negotiations with Buena Vista.
On December 13, 1995, the Goldwyn Board of Directors met to discuss, among
other things, recent letters received from an investor regarding a potential
recapitalization proposal, pursuant to which such investor offered to provide
$25 million of common stock equity in a new entity to be merged into Goldwyn
together with $25 million of junior debt to be raised in a privately-placed
transaction in exchange for ownership of approximately 80% to 89% of the fully
diluted equity of Goldwyn. The Board determined that the proposal, for a variety
of substantial reasons including the proposal did not appear to discharge the
Goldwyn Bank Debt, was conditional on financing and placed a low residual value
on the equity of Goldwyn, was less favorable than the proposed sale of the
Library Rights to PolyGram then under discussion and provided no reasonable
basis for negotiations. Management reported on negotiations with PolyGram
regarding the sale of the Library Rights and a proposed letter of intent (the
"Letter of Intent").
Because Goldwyn had no outstanding firm proposals for a merger or other
outstanding firm proposals for a sale of Library Rights and in view of the need
to generate proceeds to be applied against the Goldwyn Bank Debt upon maturity,
the Board of Directors of Goldwyn agreed unanimously on December 19, 1995 to the
Letter of Intent.
On that date, Goldwyn and PolyGram entered into the Letter of Intent setting
forth the basic terms for the purchase by PolyGram of the Library Rights, which
generally provided, among other things, (i) for PolyGram to acquire the Library
Rights for $62,000,000 in cash (subject to adjustment); (ii) that Goldwyn and
PolyGram would diligently negotiate in good faith and use their best efforts to
reach agreement on a definitive agreement by January 22, 1996; (iii) that
Goldwyn would conduct its business only in the ordinary course; and (iv) if,
notwithstanding PolyGram's reasonable good faith efforts, a definitive agreement
was not entered into by January 22, 1996, then Goldwyn would pay PolyGram all of
its costs and expenses associated with the transaction and a $2 million break-up
fee if, on or before May 15, 1996, Goldwyn agreed to sell all or any material
portion of the Library Rights to a third party. The Goldwyn Bank Group consented
to the PolyGram transaction subject to certain conditions, including the
condition that the Goldwyn Bank Group would receive as proceeds from the
transaction not less than $55 million. The Goldwyn Bank Group also consented to
waive certain financial covenants of Goldwyn to the maturity date of the Goldwyn
Bank Debt subject to certain conditions, including the condition that by January
22, 1996, Goldwyn and PolyGram execute final acquisition agreements or within
ten business days of such date deliver to the Goldwyn Bank Group an executed
agreement evidencing an alternative transaction acceptable to the Goldwyn Bank
Group.
On December 20, 1995, Goldwyn and PolyGram issued a joint press release
announcing the material terms of their proposed transaction. On December 28,
1995, a shareholder derivative suit against Goldwyn and its directors was filed
in Delaware State Court, Kinder v. The Samuel Goldwyn Company, et al., C.A. No.
14751. In the complaint, plaintiff alleged that the Letter of Intent with
PolyGram was not in the best interests of the stockholders of Goldwyn and thus
constituted, among other things, a breach of the directors' fiduciary duties to
Goldwyn's stockholders. Plaintiffs have sought various forms of relief,
including damages.
38
<PAGE>
MIG had previously disclosed that it intended to make strategic acquisitions
of companies whose business and/or assets complemented MIG's entertainment and
communications assets. During December 1995, as part of its attempt to find a
buyer for Goldwyn, Furman Selz contacted senior management of MIG to determine
whether MIG would be interested in a possible transaction with Goldwyn. As a
result, during early December 1995, senior management of MIG and Furman Selz and
senior management of Orion and Goldwyn held separate preliminary discussions
regarding a potential transaction. Goldwyn and Furman Selz indicated that they
were interested in a sale of all of Goldwyn, rather than a sale of certain of
its assets. Goldwyn and Furman Selz also supplied MIG with certain financial
information regarding Goldwyn, and MIG commenced its preliminary financial due
diligence review of Goldwyn.
Subsequent to the issuance of the December 20, 1995 joint press release by
Goldwyn and PolyGram, MIG sent to Goldwyn a confidential proposal indicating
that MIG was prepared to negotiate the terms of a definitive merger agreement
pursuant to which MIG would acquire all of the outstanding Goldwyn Common Stock,
at a price equal to $5.00 per share, payable in cash or in Common Stock, at
MIG's election. On December 21, 1995, Goldwyn, in response to press inquiries,
issued a press release confirming that Goldwyn had received a proposal for the
acquisition of Goldwyn by MIG, that the Goldwyn Board of Directors would
consider the proposal as soon as practicable and that under such circumstances,
disclosure of the terms of such proposal would be premature. Following the
delivery of the proposal by MIG, MIG continued its due diligence review of
Goldwyn.
On January 3, 1996, the Goldwyn Board of Directors met to discuss MIG's
proposal. The Goldwyn Board reviewed the terms of the proposal as well as
preliminary background material on MIG provided by Furman Selz. Representatives
of Furman Selz reported that they had begun preliminary due diligence on MIG.
The Goldwyn Board instructed management to pursue discussions with MIG and to
continue to permit MIG to engage in due diligence. The Goldwyn Board also agreed
that in light of Goldwyn's signed agreement with PolyGram and the fact that, at
that point, the likelihood of a firm acceptable proposal from MIG was uncertain,
Goldwyn should continue to proceed to resolve definitive documentation with
PolyGram. The Board also discussed a recent letter received by Furman Selz from
Broadway Video Enterprises, Inc. regarding a potential recapitalization proposal
which provided for a "reverse merger" of a Broadway Video entity into Goldwyn.
Broadway Video proposed a purchase price of $95 million for a majority ownership
of Goldwyn calculated on a debt-free basis, which purchase price would be
comprised of $20 million in cash and the balance in contributed assets. In view
of the limitations in evaluating the proposal, including the lack of (i) a firm
proposal, (ii) unconditional financing, and (iii) financial information about
Broadway Video, as well as the prospective debt load of the offeror, the Goldwyn
Board instructed Furman Selz to immediately communicate such concerns in writing
to representatives of Broadway Video, after which no further discussions with
Broadway Video took place. Between January 3 and January 22, 1996,
representatives of Goldwyn and PolyGram met numerous times to negotiate
definitive documents.
On January 6 and 7, 1996, senior executives of MIG and Goldwyn met to
discuss MIG's offer and the operations of the Entertainment Group following
consummation of the Goldwyn Merger, including how Goldwyn's production and
distribution operations would fit into the Entertainment Group's infrastructure.
As a result of such meetings, MIG intensified its legal and financial due
diligence review of Goldwyn. On January 19, 1996 senior executives of Goldwyn
and MIG met again to discuss the terms of MIG's acquisition of Goldwyn and
further discussed the manner in which Goldwyn's existing assets and operations
would be integrated into the Entertainment Group. As a result of such meeting,
MIG instructed its counsel to commence drafting and negotiating the necessary
documentation for the Goldwyn Merger.
In the course of its discussion with MIG in January 1996, Goldwyn provided
MIG and its financial advisor with certain business and financial information
which Goldwyn and MIG believe was not
39
<PAGE>
publicly available. Such information included, among other things, certain
financial projections for calendar 1996 through calendar 1998 prepared by
management of Goldwyn as a long-range plan (the "Projections"). The Projections,
as noted below, were not prepared with a view for inclusion in this Proxy
Statement/Prospectus and the Projections do not take into account any of the
potential effects of the transactions contemplated by the Goldwyn Merger
Agreement. Goldwyn did not make any representations or warranties to MIG in the
Goldwyn Merger Agreement with respect to the Projections.
Set forth below is a summary of the Projections.
THE SAMUEL GOLDWYN COMPANY PROJECTIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1996 1997 1998
-------- -------- --------
Total Revenues............................. $134,063 $143,628 $168,337
Pre-Tax Income (Loss)...................... (3,620) 6,858 11,707
Net Income (Loss).......................... (1,991) 3,772 6,438
-------- -------- --------
Earnings (Loss) per share.................. $ (0.23) $ 0.44 $ 0.76
-------- -------- --------
-------- -------- --------
The Projections were predicated upon a number of general assumptions many of
which were beyond the control of Goldwyn management and have not materialized
since the time the Projections were prepared and, accordingly, whether or not
the Goldwyn Merger is consummated, Goldwyn's financial performance is expected
to fail by a substantial margin to meet the Projections. In particular, the
Projections were based on the following assumptions:
1. that there will be sufficient capital, either externally provided or
internally generated, to undertake the acquisition and/or construction of
two new multi-plex theater complexes in each of 1997 and 1998;
2. that Goldwyn will be able to acquire approximately 5 films and
produce approximately 5 films in each of 1997 and 1998; and
3. that there will be no interest expense allocable to Goldwyn.
THE PROJECTIONS SET FORTH ABOVE WERE NOT PREPARED WITH A VIEW TO PUBLIC
DISCLOSURE OR COMPLIANCE WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE
GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS. THE PROJECTIONS ARE INCLUDED IN THIS PROXY STATEMENT/PROSPECTUS
ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO MIG AND ITS FINANCIAL
ADVISORS. THE PROJECTIONS DO NOT TAKE INTO ACCOUNT ANY OF THE POTENTIAL
EFFECTS OF THE TRANSACTIONS CONTEMPLATED BY THE GOLDWYN MERGER AGREEMENT NOR
DO THEY REFLECT MIG'S INTENTIONS WITH RESPECT TO THE ENTERTAINMENT GROUP.
NONE OF MIG, SGC MERGERCO, GOLDWYN, DLJ, FURMAN SELZ OR ANY OTHER PERSON
ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OF SUCH INFORMATION. WHILE
PRESENTED WITH NUMERICAL SPECIFICITY, THESE PROJECTIONS ARE BASED UPON A
VARIETY OF ASSUMPTIONS (CERTAIN OF WHICH ARE SET FORTH ABOVE) RELATING TO
THE BUSINESS OF GOLDWYN. ALTHOUGH SUCH PROJECTIONS AND ASSUMPTIONS WERE
CONSIDERED REASONABLE BY GOLDWYN AT THE TIME THEY WERE PREPARED, THE
PROJECTIONS ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY
OF WHICH ARE BEYOND THE
40
<PAGE>
CONTROL OF GOLDWYN. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE
PROJECTIONS WILL BE REALIZED, AND ACTUAL RESULTS HAVE VARIED AND ARE
EXPECTED TO CONTINUE TO VARY MATERIALLY FROM THOSE SHOWN. THE INCLUSION OF
SUCH PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT MIG,
SGC MERGERCO, GOLDWYN, DLJ, FURMAN SELZ OR ANY OTHER PERSON WHO RECEIVED ANY
SUCH INFORMATION CONSIDERS IT AN ACCURATE PREDICTION OF FUTURE EVENTS.
STOCKHOLDERS SHOULD NOT RELY ON THESE PROJECTIONS AS AN INDICATION OF FUTURE
PERFORMANCE OF THE ENTERTAINMENT GROUP OR THE COMPANY. NONE OF MIG, SGC
MERGERCO, GOLDWYN, DLJ, FURMAN SELZ OR ANY OTHER PARTY INTENDS PUBLICLY TO
UPDATE OR OTHERWISE PUBLICLY REVISE THE PROJECTIONS SET FORTH ABOVE.
THE INDEPENDENT ACCOUNTANTS FOR GOLDWYN AND MIG HAVE NOT EXAMINED OR
COMPILED THESE PROJECTIONS AND ACCORDINGLY DO NOT EXPRESS AN OPINION OR ANY
OTHER FORM OF ASSURANCE WITH RESPECT TO THEM.
THE PROJECTED FINANCIAL INFORMATION SET FORTH ABOVE CONSTITUTES A
"FORWARD-LOOKING STATEMENT" WITHIN THE MEANING OF THE REFORM ACT. FOR A
DISCUSSION OF FACTORS REGARDING SUCH FORWARD-LOOKING STATEMENTS, SEE
"SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" ON PAGE 5.
On January 22, 1996, the Board of Directors of Goldwyn met to discuss the
various proposed transactions. The Goldwyn Board discussed certain financial due
diligence issues raised by PolyGram and their accountants and the impact of such
issues on the purchase price as well as issues relating to indemnification
regarding representations and warranties. The Goldwyn Board also discussed
developments regarding MIG's proposal, including the comparative values of the
Common Stock, the Goldwyn Common Stock, the Goldwyn Exchange Ratio and
adjustments thereto and the need for a binding agreement, interim funding for
Goldwyn and arrangements satisfactory to the Goldwyn Bank Group regarding the
April 30, 1996 maturity of the Goldwyn Bank Debt. The Goldwyn Board then
discussed certain advantages and disadvantages of each proposal, particularly
with respect to maximizing shareholder value. See "PROPOSAL NO. 1--THE GOLDWYN
MERGER--Background of the Goldwyn Merger--Goldwyn Board Deliberations." Because
there was no definitive documentation evidencing the MIG proposal, the Goldwyn
Board instructed management to continue negotiations with both PolyGram and MIG
with a view toward receiving acceptable proposals.
At a meeting held on January 24, 1996, the Goldwyn Board of Directors
discussed the proposed PolyGram and MIG transactions and the advantages and
disadvantages of each proposal. In evaluating PolyGram's proposal, Goldwyn's
management reported that in recent negotiations PolyGram had raised certain
issues of asset valuation in the context of a purchase price adjustment which
would likely reduce the net cash proceeds of the purchase price below the $55
million floor required by the Goldwyn Bank Group. The Board further noted that
in view of PolyGram's unwillingness to agree to limitations on further
adjustments to the purchase price, it was difficult to assess the true monetary
value of the PolyGram proposal. The Goldwyn Board noted that significant
interest payments on the Goldwyn Bank Debt were due by January 31, 1996 and the
PolyGram proposal would not provide the interim funding necessary for Goldwyn to
make such payments. The Goldwyn Board also noted that the PolyGram transaction
provided no direct value to Goldwyn Stockholders, and that the entire proceeds
of such transaction would be used to pay down the Goldwyn Bank Debt. The Board
also discussed MIG's proposal and MIG's apparent willingness to consider
providing up to $5.5 million in interim funding to Goldwyn. The Goldwyn Board
also noted that the MIG transaction provided value directly to Goldwyn's
stockholders and for the payment in full of the Goldwyn Bank Debt as a condition
to any
41
<PAGE>
merger. The Goldwyn Board noted that it did not yet have sufficient
documentation from MIG to approve a transaction at that time. The Goldwyn Board
instructed Goldwyn's management to continue negotiations with MIG and advise
representatives of PolyGram that the Goldwyn Board was not in a position to
approve the PolyGram proposal in its then present form and that the Goldwyn
Board required a definitive proposal which addressed the many open issues raised
by the parties in the negotiations.
By letter dated January 29, 1996, PolyGram informed Goldwyn that it was
withdrawing all its proposals for the acquisition of the Library Rights.
As a result of negotiations with MIG, on January 31, 1996, the Goldwyn Board
of Directors approved the Goldwyn Merger and the parties entered into the
Goldwyn Merger Agreement to merge Goldwyn with a wholly-owned subsidiary of MIG,
SGC Mergerco.
On February 13, 1996, the Goldwyn Bank Group and Goldwyn agreed to amend
certain provisions of the credit facility applicable to the Goldwyn Bank Debt
and the Goldwyn Bank Group agreed that the Goldwyn Merger Agreement was an
acceptable alternative transaction for purposes of satisfying certain conditions
contained in its prior consent and waiver in connection with the Letter of
Intent.
As a result of the Goldwyn Merger Agreement, Goldwyn is obligated to pay
PolyGram a break-up fee of $2 million plus PolyGram's costs and fees associated
with the PolyGram proposal immediately following the closing of the Goldwyn
Merger.
On May 20, 1996, a purported class action lawsuit against Goldwyn and its
directors was filed in the Superior Court of the State of California for the
County of Los Angeles, Michael Shores v. Samuel Goldwyn Company, et. al., BC
150360. In the complaint, plaintiff alleged that Goldwyn's Board of Directors
breached its fiduciary duties to Goldwyn Stockholders by agreeing to sell
Goldwyn to MIG at no premium, yet providing Mr. Goldwyn, the Goldwyn Family
Trust and Mr. Gottlieb with benefits, and sought to enjoin consummation of the
Goldwyn Merger. The time to answer the complaint has not yet expired. Goldwyn
intends to vigorously defend such action. Based on their review of the
complaint, management of MIG and Goldwyn do not believe that this lawsuit will
have a material adverse impact on the Goldwyn Merger.
On May 29, 1996 MIG and Goldwyn amended the Goldwyn Merger Agreement to
clarify that the Goldwyn Determination Date would be the date which is five
business days prior to the Goldwyn Special Meeting and for MIG to acknowledge
that approval of the Goldwyn Merger by its stockholders is not required.
MIG Board Deliberations
Following MIG's delivery of its confidential proposal to Goldwyn, senior
management of MIG kept its Board of Directors informed as to the status of the
Goldwyn Merger. The MIG Board of Directors met on January 31, 1996 to consider,
among other things, the Goldwyn Merger. At the January 31, 1996 meeting of MIG's
Board of Directors, Stuart Subotnick, Vice Chairman of MIG, made a presentation
to MIG's Board of Directors regarding the proposed acquisition by MIG of
Goldwyn. Mr. Subotnick described Goldwyn's business and noted that Goldwyn is a
producer and leading distributor of specialized motion pictures and art films,
which appeal primarily to sophisticated audiences. Mr. Subotnick noted that
Goldwyn's films were consistent with the Entertainment Group's strategy of
producing films which are substantially less expensive to produce and distribute
than films produced by major studios for wide release. Mr. Subotnick noted some
of the films released by Goldwyn in recent years, including the
critically-acclaimed Wild at Heart and Much Ado About Nothing and Academy
Award-winning The Madness of King George and Henry V, as well as the
well-received feature films The Wedding Banquet and Eat, Drink, Man, Woman. In
addition, Mr. Subotnick discussed Goldwyn's
42
<PAGE>
television division which produces original programming for the first-run
syndication market and distributes feature films and other television
programming worldwide. Mr. Subotnick noted that Goldwyn's television division
has had success producing and syndicating the athletic competition series
American Gladiators and was currently marketing a television series based upon
the Flipper series. Mr. Subotnick then noted that Goldwyn also owns the leading
speciality or "art house" theatre circuit in the United States, with 52 theatres
and 140 screens, which would give MIG its first theatre assets. Mr. Subotnick
then informed the directors that one of the significant aspects of the
transaction with Goldwyn was the extension to the year 2020 of Goldwyn's license
with the Goldwyn Family Trust for the distribution of approximately 73 film
classics such as Wuthering Heights, The Pride of the Yankees, Guys and Dolls and
The Best Years of Our Lives produced by Samuel Goldwyn, Sr. Mr. Subotnick also
discussed the advantages of adding the Goldwyn library and the combined
experience and expertise of Messrs. Goldwyn and Gottlieb to MIG's Film Division,
and described the economic terms of the transaction set forth in the Goldwyn
Merger Agreement and noted that while Goldwyn had publicly disclosed that it
would not be able to repay the Goldwyn Bank Debt when it matured, the Goldwyn
Merger Agreement was subject to the condition precedent that Goldwyn's
indebtedness be refinanced.
Counsel to MIG then reviewed the terms of the Goldwyn Merger Agreement as
well as the terms of the ancillary agreements to be entered into at the Goldwyn
Effective Time. The MIG Directors were given the opportunity to ask questions
regarding the Goldwyn Merger Agreement and the transactions contemplated thereby
and a general discussion of the transaction took place. Clark A. Johnson then
asked a question relating to whether the refinancing of Goldwyn's indebtedness,
which is a condition to the consummation of the Goldwyn Merger, could be
expected to be accomplished prior to the time of the Goldwyn Merger. Mr. Kluge
and Ms. Kessel indicated that they expected that such refinancing could be
accomplished. A question was asked by one of the directors as to whether the
break-up fee to PolyGram would be payable by Goldwyn as a result of the Goldwyn
Merger Agreement, which was answered in the affirmative by counsel to MIG.
Following such discussion, the Board of Directors approved the Goldwyn Merger
Agreement, subject to receipt of a fairness opinion from MIG's financial
advisor.
The Executive Committee of MIG's Board of Directors met on February 28,
1996. At this meeting, DLJ presented to MIG's Executive Committee its oral
opinion (which was later confirmed in writing) regarding the fairness to MIG
from a financial point of view of the Goldwyn Merger Consideration and the
financial analyses DLJ had undertaken with respect to Goldwyn. For a description
of such analyses, see "PROPOSAL NO. 1--THE GOLDWYN MERGER--Opinion of Financial
Advisors--MIG." Following such presentation by DLJ, a general discussion ensued
among the directors and DLJ regarding Goldwyn.
43
<PAGE>
Goldwyn Board Deliberations
The Goldwyn Board of Directors held four separate meetings to consider the
terms of the Goldwyn Merger as provided for in the Goldwyn Merger Agreement.
These matters are described as follows:
At a meeting held on January 3, 1996, the Board of Directors met to discuss
the letter proposal from MIG to acquire all of the shares of Goldwyn Common
Stock. See "PROPOSAL NO. 1--THE GOLDWYN MERGER--Background of the Goldwyn
Merger."
At a meeting held on January 22, 1996, the Board of Directors discussed the
proposed PolyGram and MIG transactions. See "PROPOSAL NO. 1--THE GOLDWYN
MERGER--Background of the Goldwyn Merger."
At a meeting held on January 24, 1996, the Board of Directors discussed the
proposed PolyGram and MIG transactions and the advantages and disadvantages of
each proposal. See "PROPOSAL NO. 1--THE GOLDWYN MERGER--Background of the
Goldwyn Merger."
The Board of Directors of Goldwyn held a meeting on January 31, 1996 which
was attended by Goldwyn's counsel and telephonically by Furman Selz, its
financial advisor. At this meeting, Goldwyn's counsel reviewed in detail the
terms and conditions of the Goldwyn Merger Agreement. Members of the Goldwyn
Board asked questions and engaged in a thorough discussion regarding the terms
of the Goldwyn Merger Agreement, including the terms of proposed interim funding
arrangements with MIG. Furman Selz presented its oral opinion (which later was
confirmed in writing) regarding the fairness from a financial point of view of
the Goldwyn Merger Consideration to holders of Goldwyn Common Stock and
summarized the valuation analyses Furman Selz had undertaken with respect to the
parties to the Goldwyn Merger Agreement. The Goldwyn Board of Directors
discussed the valuations performed by Furman Selz as well as the financial
alternatives that might be available to Goldwyn in the absence of the proposed
transaction, including the impact on its ability to meet its payment obligations
with respect to the Goldwyn Bank Debt. The Directors of Goldwyn asked Furman
Selz to note with particularity which factors weighed heavily in Furman Selz's
opinion. Furman Selz noted the following factors: (1) the PolyGram proposal
provided no consideration directly to the Goldwyn Stockholders and did not
otherwise alleviate Goldwyn's financial problems, while the Goldwyn Merger would
provide the Goldwyn Stockholders with $5.00 worth of Common Stock per share of
Goldwyn Common Stock and discharge the Goldwyn Bank Debt; (2) Goldwyn had been
publicly "shopped" for approximately seven months and no other viable and
satisfactory proposals for the entire company had been forthcoming; (3) MIG was
prepared to immediately provide Goldwyn with up to $5.5 million in interim
funding; and (4) although MIG was undergoing considerable change in view of its
recent formation and potential merger with Alliance, which made valuation of the
Common Stock somewhat difficult, Mr. Kluge had a strong reputation in the
financial and banking communities and he and Mr. Subotnick would own
approximately 25% of the combined company. The Board of Directors of Goldwyn, by
unanimous vote, approved the Goldwyn Merger Agreement at the January 31, 1996
meeting.
BOARD RECOMMENDATION; REASONS FOR THE MERGER
MIG's Reasons for the Goldwyn Merger
In reaching its decision to recommend and approve the Goldwyn Merger
Agreement, the MIG Board of Directors consulted with its advisors and considered
the material factors described below. Based upon its review of such factors and
the review of the business and operations of Goldwyn, the Board of Directors of
MIG approved the Goldwyn Merger Agreement.
The MIG Board of Directors considered the following factors in reaching the
conclusion to approve the Goldwyn Merger Agreement:
. Goldwyn has established itself in both the motion picture and
television industries and has developed a valuable niche within the motion
picture industry with its production, development and
44
<PAGE>
distribution of specialty films. MIG believes that the acquisition of
Goldwyn will enhance MIG's presence in the entertainment industry.
. Goldwyn's over 850-title film and television library, including its
classics library, will enhance the Entertainment Group's film library to
over 2000 films and will present new marketing opportunities to MIG.
. Goldwyn's Theatre Group, with 140 screens in 52 theatres, showcasing
specialized motion pictures and art films, generates stable revenues and
cash flow and presents opportunities to make selective acquisitions to
expand the circuit.
. MIG believes that it should be able to realize certain synergies
resulting from the Goldwyn Merger by combining certain of the back office
functions of Goldwyn and the Entertainment Group and in distributing the
existing Entertainment Group's film and television library and the Goldwyn
film and television library through a single distribution infrastructure.
. The opinion of DLJ that the Goldwyn Merger Consideration is fair to
MIG from a financial point of view.
The MIG Board of Directors also considered the following risks and
uncertainties associated with the Goldwyn Merger and the business of Goldwyn:
. That absent the refinancing of the Goldwyn Bank Debt, Goldwyn faces a
possibility of a near-term default and foreclosure on substantially all of
its assets.
. Goldwyn had in the recent past acquired certain films which had not
been commercially successful, which had contributed to the financial
difficulties Goldwyn was currently experiencing.
In analyzing the Goldwyn Merger and related transactions and in its
deliberations regarding the recommendation of the Goldwyn Merger Agreement, the
MIG Board of Directors also considered a number of other factors, including (i)
its knowledge of the business, operations, properties, assets, financial
condition and operating results of Goldwyn and MIG; (ii) judgments as to
Goldwyn's and MIG's future prospects; (iii) the terms of the Goldwyn Merger
Agreement, which were the product of extensive arm's length negotiations; (iv)
the historical trading prices and trading activity for the Goldwyn Common Stock
and the Common Stock; (v) the compatibility of the respective business
philosophies of Goldwyn and MIG; and (vi) the potential for enhanced stockholder
value due to a larger revenue base. The MIG Board of Directors did not find it
practical to and did not quantify or attempt to attach relative weight to any of
the specific factors considered by it. The MIG Board of Directors concluded that
the opportunities for growth related to the acquisition of Goldwyn outweighed
the risks.
Notwithstanding expectations of MIG's management regarding the benefits to
be realized from the addition of Goldwyn to MIG's Entertainment Group, no
assurance can be given that MIG will be able to realize such benefits or compete
effectively against certain other competitors which possess significantly
greater resources and marketing capabilities than it. See "RISK FACTORS."
Because the transactions contemplated by the Alliance Merger Agreement and
the Goldwyn Merger were not conditioned on each other, when the Board of
Directors of MIG considered the Goldwyn Merger it considered such merger
independently of its consideration of the Alliance Merger and concluded that the
Goldwyn Merger was in the best interests of the MIG Stockholders regardless if
the Alliance Merger was consummated.
Goldwyn's Reasons for the Goldwyn Merger
In reaching its decision to approve the Goldwyn Merger Agreement and to
recommend that Goldwyn Stockholders vote for approval and adoption of the
Goldwyn Merger Agreement, the Board of Directors of Goldwyn consulted with their
advisors and considered the material factors described below.
45
<PAGE>
Based upon its independent review of such factors, the Board of Directors of
Goldwyn approved the Goldwyn Merger Agreement.
The Board of Directors of Goldwyn considered the following favorable factors
in reaching the conclusion to approve the Goldwyn Merger Agreement:
. The Board of Directors of Goldwyn concluded that Goldwyn did not have
sufficient financial resources to continue on a stand-alone basis to support
its operations or meet its obligations with respect to the Goldwyn Bank
Debt. As a result of the Goldwyn Merger, it is expected that the combined
enterprise will have greater operational flexibility and greater financial
resources than Goldwyn now possesses to meet Goldwyn's obligations.
. Unlike the PolyGram transaction, which provided no direct value to
Goldwyn Stockholders because the entire proceeds of such transaction would
be used to pay down the Goldwyn Bank Debt, the MIG transaction provides
value directly to the Goldwyn Stockholders and for the payment in full of
the Goldwyn Bank Debt. Further, after approximately seven months of actively
soliciting purchasers of Goldwyn with the assistance of Furman Selz, MIG's
was the only current firm proposal for the acquisition of the entire
company.
. Without interim funding provided by MIG in connection with the Goldwyn
Merger, Goldwyn may have been unable to make its interest payment due
January 31, 1996 under the Goldwyn Bank Debt. An event of default under such
Goldwyn Bank Debt would give the Goldwyn Bank Group the right to accelerate
payment and foreclose on its collateral, which consists of substantially all
of the assets of Goldwyn.
. As a result of the Goldwyn Merger, the Goldwyn Stockholders will hold
equity interests in a company with substantially larger annual revenues,
greater financial resources and greater access to capital markets than those
of Goldwyn as a separate entity.
. In addition, the Board of Directors of Goldwyn considered the opinion
of Furman Selz that the consideration to be received by the Goldwyn
Stockholders in connection with the Goldwyn Merger is fair from a financial
point of view to Goldwyn Stockholders and the analyses performed by Furman
Selz in connection with such opinion. A more complete description of the
financial analyses performed by Furman Selz is set forth below in "PROPOSAL
NO. 1--THE GOLDWYN MERGER--Opinions of Financial Advisors--Goldwyn."
. The experience and management expertise of John W. Kluge, Chairman of
the Board of MIG, and Stuart Subotnick, Vice Chairman of the Board of MIG.
Notwithstanding expectations of Goldwyn's management regarding the benefits
to be realized from the combination of Goldwyn and MIG, no assurance can be
given that the Goldwyn Surviving Corporation will be able to realize such
benefits or to compete effectively against certain other competitors which
possess significantly greater resources and marketing capabilities than it. See
"METROMEDIA INTERNATIONAL GROUP, INC. PRO FORMA COMBINING FINANCIAL STATEMENTS"
and "RISK FACTORS."
The Board of Directors of Goldwyn also recognized certain risks and
uncertainties associated with the Goldwyn Merger and the business of MIG,
including the following:
. Certain of MIG's businesses are highly speculative and capital
intensive and its Communications Group is essentially a start-up operation.
. MIG's Communications Group operates in an area of the world where
political, economic and social instability can lead to substantial business
risks.
. MIG's stock price is difficult to evaluate because of the unknown
impact of MIG's very recent past acquisitions and proposed acquisitions,
including the then contemplated Alliance Merger, on the business of MIG.
46
<PAGE>
Although the Board of Directors of Goldwyn considered such factors to be
significant, the Directors, after due consideration and discussion of such
factors, determined that in light of the fact that MIG's proposal would provide
Goldwyn Stockholders with $5.00 worth of Common Stock per Goldwyn share and
discharge the Goldwyn Bank Debt, that no other viable and satisfactory proposals
for the entire company had been forthcoming and that MIG would provide Goldwyn
with up to $5.5 million of interim funding, the positive factors of the Goldwyn
Merger substantially outweighed the negative factors.
In analyzing the proposed transactions and in its deliberations regarding
its recommendation of the Goldwyn Merger Agreement, the Board of Directors of
Goldwyn considered a number of other factors in addition to the advantages and
disadvantages set forth above, including Goldwyn's current financial condition
and prospects as a stand-alone company and the advantages of the Goldwyn Merger
to the Goldwyn Stockholders, such as potentially enhanced stockholder value
arising from the combined entity due to its larger revenue base and potential
for improved earnings per share. In this process, the Board of Directors of
Goldwyn reviewed information provided by the management of MIG concerning the
financial performance, condition, business operations and prospects of MIG, and
the substantial future capital requirements related to such operations. The
Board of Directors of Goldwyn concluded that the opportunities related to these
businesses outweighed the risks. In addition, the Board of Directors of Goldwyn
considered the proposed structure of the transactions and the terms of the
Goldwyn Merger Agreement and other documents to be executed in connection with
the Goldwyn Merger.
The Board of Directors of Goldwyn considered the fact that the price offered
under MIG's proposal did not represent a premium over historical per share
market value of Goldwyn Common Stock; the weighted average trading price of
Goldwyn Common Stock for the last three years was approximately $6.80 per share.
However, in view of the significant decline in Goldwyn's financial condition
during the last year, the Board of Directors of Goldwyn did not view the lack of
a premium to be a material negative factor.
The Board of Directors of Goldwyn also considered the fact that the Goldwyn
Bank Debt imposes substantial restrictions on Goldwyn's operations; that as a
result of the Goldwyn Merger and the refinancing of the Goldwyn Bank Debt, the
combined enterprise is expected to have greater operational flexibility and
greater financial resources than Goldwyn now possesses; that, absent the
refinancing of the Goldwyn Bank Debt, Goldwyn faces the possibility of a
near-term payment acceleration and foreclosure on substantially all of its
assets in connection with the Goldwyn Bank Debt; that the Goldwyn Merger would
provide Goldwyn Stockholders with the opportunity to maintain a continuing
ownership interest in Goldwyn's existing businesses while at the same time
participating in a broader based enterprise with entertainment, media and
communications businesses; that while certain of MIG's businesses present risks,
they also present opportunities. The Board of Directors of Goldwyn did not find
it practical to and did not quantify or attempt to attach relative weight to any
of the specific factors considered by it.
Recommendation of Goldwyn's Board of Directors
At the meeting of Goldwyn's Board of Directors held to consider the Goldwyn
Merger, the Board of Directors of Goldwyn unanimously approved the Goldwyn
Merger Agreement as being in the best interests of Goldwyn and Goldwyn
Stockholders. FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF DIRECTORS OF GOLDWYN
UNANIMOUSLY APPROVED THE GOLDWYN MERGER AGREEMENT AND RECOMMENDS THAT GOLDWYN
STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE GOLDWYN MERGER AGREEMENT AND ALL
OTHER MATTERS RELATING TO THE GOLDWYN MERGER AGREEMENT TO BE PRESENTED FOR THE
CONSIDERATION AND VOTE OF THE GOLDWYN STOCKHOLDERS.
47
<PAGE>
OPINION OF FINANCIAL ADVISORS
MIG
General
MIG engaged DLJ to act as its exclusive financial advisor in connection with
the acquisition of Goldwyn, and DLJ was requested to render an opinion to the
MIG Board of Directors as to the fairness from a financial point of view to MIG
of the consideration to be paid by MIG per share of Goldwyn Common Stock in the
Goldwyn Merger. On February 28, 1996, DLJ delivered its oral opinion, which was
confirmed by delivery of its written opinion dated February 28, 1996 (the
"February 28, 1996 DLJ Opinion"), to the effect that, based upon and subject to
the assumptions, limitations and other matters described therein, as of such
date, the Goldwyn Merger Consideration was fair to MIG from a financial point of
view. DLJ subsequently delivered to the Board of Directors of MIG an opinion,
dated the date of this Proxy Statement (the "DLJ Proxy Opinion"), to the effect
that, based upon and subject to the assumptions, limitations and other matters
described therein, as of such date, the Goldwyn Merger Consideration was fair to
MIG from a financial point of view.
A COPY OF THE DLJ PROXY OPINION, WHICH INCLUDES THE ASSUMPTIONS MADE,
MATTERS CONSIDERED AND CERTAIN LIMITATIONS ON THE SCOPE OF REVIEW, IS ATTACHED
TO THIS PROXY STATEMENT/PROSPECTUS AS APPENDIX B. STOCKHOLDERS ARE URGED TO READ
THE DLJ PROXY OPINION IN ITS ENTIRETY. THE DLJ PROXY OPINION AND THE FEBRUARY
28, 1996 DLJ OPINION ARE DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT
OF VIEW, OF THE GOLDWYN MERGER CONSIDERATION TO MIG AND DO NOT CONSTITUTE A
RECOMMENDATION TO ANY INDIVIDUAL GOLDWYN STOCKHOLDER AS TO HOW SUCH STOCKHOLDER
SHOULD VOTE AT THE GOLDWYN SPECIAL MEETING. THE SUMMARY OF THE DLJ PROXY OPTION
SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION.
The assumptions made, matters considered and limitations on the review
undertaken in the February 28, 1996 DLJ Opinion were substantially the same as
those contained in the DLJ Proxy Opinion. Although the Alliance Merger Agreement
existed at the time of the February 28, 1996 DLJ Opinion, the proposed merger
with Alliance was not a factor in DLJ's analysis leading to such opinion.
Therefore, the decision of MIG and Alliance to terminate the Alliance Merger
Agreement does not change or alter either the February 28, 1996 DLJ Opinion or
the DLJ Proxy Opinion.
DLJ did not make any recommendation as to the form or amount of
consideration to be paid by MIG in the Goldwyn Merger. Such consideration was
determined by arm's-length negotiation between MIG and Goldwyn. DLJ's opinion
does not constitute an opinion as to the prices at which the Common Stock will
actually trade at any time, including the Goldwyn Effective Time. No
restrictions or limitations were imposed by MIG upon DLJ with respect to the
investigations made or the procedures followed by DLJ in rendering its opinion.
In rendering its opinion, DLJ, among other things: (i) analyzed certain
publicly available financial statements and other information of Goldwyn and
MIG; (ii) reviewed certain financial projections, prepared by management of
Goldwyn, for each of Goldwyn's business segments; (iii) reviewed certain
financial projections for MIG, prepared by management of MIG; (iv) discussed on
a limited basis the past and current operations and financial condition and the
prospects of each of Goldwyn's business segments with senior executives of
Goldwyn; (v) reviewed historical reported prices and trading volumes in the
Common Stock and in Goldwyn Common Stock; (vi) reviewed publicly available
financial data and stock market performance data of certain comparable publicly
traded companies; (vii) reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions; (viii) participated
in discussions among representatives of MIG, Goldwyn and their financial and
legal advisors; (ix) reviewed the Goldwyn Merger Agreement and certain related
documents; and (x) performed such other financial studies, analyses and
investigations as it deemed appropriate.
48
<PAGE>
In addition, DLJ, with the consent of the MIG Board of Directors, relied
upon and assumed the accuracy, completeness and fairness of the financial and
other information that was available to it from public sources, that was
provided to it by Goldwyn, MIG or their respective representatives or that was
otherwise reviewed by DLJ. DLJ also assumed that the financial projections
prepared by management of Goldwyn and MIG were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the future
operating and financial performance of Goldwyn and MIG, respectively. DLJ was
not asked to assume, and did not assume, any responsibility for making any
independent evaluation or appraisal of the assets or liabilities of MIG or
Goldwyn, nor was it furnished with any such appraisal. DLJ, with the consent of
the MIG Board of Directors, did not assume any responsibility for making an
independent verification of any information reviewed by it in connection with
arriving at its opinion, and DLJ did not independently verify any of such
information.
DLJ's opinion was necessarily based on economic, market and other conditions
as in effect on, and the information made available to it as of, the date
thereof. Although subsequent developments may affect its opinion, DLJ does not
have any obligation to update, revise or reaffirm its opinion. DLJ relied as to
all legal matters with respect to MIG or Goldwyn upon the advice of counsel to
MIG.
The following is a summary of certain factors considered and principal
financial analyses performed by DLJ to arrive at the DLJ Proxy Opinion and does
not purport to be a complete description of the analyses performed by DLJ. Such
analyses are based on a number of assumptions, including, among other things,
the projected operating and financial performance of Goldwyn prepared by
management of Goldwyn. DLJ noted that Goldwyn's business consisted of two
distinct segments: (a) the operation of movie theaters and (b) the production
and distribution of film and television content; accordingly, DLJ applied
different financial analyses to each segment. DLJ assumed, with the consent of
the MIG Board of Directors and solely for the purposes of analysis in connection
with rendering its fairness opinion, that the MIG-Goldwyn Average Closing Price
would be the closing price of the Common Stock on the AMEX on May 28, 1996 of
$12.88 per share. DLJ reviewed on a limited basis with senior executives of MIG
and Goldwyn the assumptions upon which DLJ's analyses were based.
Premium Analysis. DLJ performed a comparison of the premium represented by
the Goldwyn Merger Consideration to premiums offered in 94 acquisitions of
publicly traded companies, two of which are in the same industry as Goldwyn
("Comparable Acquisitions"), of $50.0 million to $200.0 million in size for the
year to date ended December 31, 1995. The Goldwyn Merger Consideration
represented: a 33.3% premium to the trading price one day prior to announcement,
as compared to mean premiums for the Comparable Acquisitions of 30.6%; a premium
of 14.3% to the trading price one week prior to the announcement, as compared to
mean premiums for the Comparable Acquisitions of 35.8%; and a 21.2% premium to
the trading price four weeks prior to the announcement, as compared to mean
premiums for the Comparable Acquisitions of 44.1%. DLJ drew no specific
conclusion from this analysis but subjectively factored its observations from
this analysis into its qualitative assessment of the relevant facts and
circumstances.
Film Exhibition Business
Discounted Cash Flow Analysis. DLJ performed a discounted cash flow analysis
for the five-year period ending with the fiscal year ending December 31, 2000 on
the stand-alone free cash flows of the Goldwyn theatre exhibition business,
based upon financial projections for the theatre exhibition business prepared by
management of Goldwyn. DLJ assumed that the financial projections prepared by
management of Goldwyn were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future operating and
financial performance of Goldwyn's theatre exhibition business. Free cash flows
were calculated as the after-tax operating earnings of the Goldwyn theatre
business, plus depreciation and amortization and other non-cash items, plus (or
minus) net changes in non-cash working capital, minus projected capital
expenditures. DLJ selected a range of terminal exit multiples of 6.0x to 8.0x
theatre cash flow and a range of discount rates of 11.0% to 15.0%.
49
<PAGE>
The terminal exit multiples represent an estimate of the price a buyer would be
willing to pay for the Goldwyn theatre business' free cash flows at the end of
the five-year period covered by management of Goldwyn's projections. The
terminal exit multiples and discount rates selected were based upon DLJ's
subjective judgment about, among other things, the capital markets, the Goldwyn
theatre exhibition business' prospects and the film exhibition industry. The
free cash flows and terminal values were then discounted to the present
resulting in an estimated range of values for the Goldwyn theatre exhibition
business of $83.0 million to $124.3 million. DLJ believes that mathematical
analysis (such as determining the mean or median) is not itself a meaningful
method of using discounted cash flow data. DLJ drew no specific conclusion from
this analysis but subjectively factored its observations from this analysis into
its qualitative assessment of the relevant facts and circumstances.
Comparable Companies Valuation. DLJ reviewed the market valuation of a
subjectively selected sample of publicly traded companies engaged in the theatre
exhibition business (collectively, the "Theatre Comparables"). The Theatre
Comparables are comprised of Cineplex Odeon Corporation, AMC Entertainment Inc.,
Regal Cinemas Inc., Carmike Cinemas Inc. and GC Companies Inc. DLJ noted that
none of the Theatre Comparables is directly comparable to Goldwyn's film
exhibition business. DLJ calculated the ratio of enterprise value to each of LTM
(i) revenue, (ii) theatre cash flow, (iii) EBITDA (income before interest,
income taxes, depreciation and amortization) and (iv) EBIT. Enterprise value is
defined as the market value of the outstanding common equity plus the book value
of a company's debt and preferred stock less cash. Theatre cash flow is defined
as net exhibition revenues less costs of operating the theaters (excluding
depreciation and amortization). This analysis resulted in the following
multiples for the Theatre Comparables: (i) enterprise value to LTM revenue of
0.4x to 4.7x, (ii) enterprise value to LTM theatre cash flow of 4.0x to 17.5x,
(iii) enterprise value to LTM EBITDA of 4.9x to 20.3x and (iv) enterprise value
to LTM EBIT of 9.9x to 26.3x.
No company utilized in the comparable companies analysis is identical to
Goldwyn or Goldwyn's theatre exhibition business. Accordingly, DLJ's analysis of
the results of the foregoing necessarily involved complex considerations and
judgments concerning differences in financial and operating characteristics of
Goldwyn and its theatre exhibition business and other factors that could affect
the value of the companies to which it is being compared. DLJ drew no specific
conclusion from this analysis but subjectively factored its observations from
this analysis into its qualitative assessment of the relevant facts and
circumstances. The results of the analysis of the Theatre Comparables cannot be
directly compared to Goldwyn's film exhibition business since Goldwyn's film
exhibition business does not separately trade and the analysis of the Theatre
Comparables is based upon the market value of the outstanding common equity of
the Theatre Comparables.
Comparable Mergers and Acquisitions Analysis. DLJ reviewed the valuation of
a subjectively selected sample of merger and acquisition transactions involving
publicly traded companies engaged in the theatre exhibition business
(collectively, the "Theatre Acquisitions"). DLJ noted, however, that none of
these transactions is directly comparable to the Goldwyn Merger. The Theatre
Acquisitions are comprised of Carmike Cinemas, Inc./Cinema World, Inc., Regal
Cinemas, Inc./Litchfield Theatres, Inc., Carmike Cinemas, Inc./Westwynn
Theatres, Inc., Oscar I Corp./United Artists Theatre Circuit, Inc. and Carmike
Cinemas, Inc./selected theatres of Cineplex Odeon Corporation. DLJ evaluated the
multiples of (i) revenues, (ii) theatre cash flow, (iii) EBITDA and (iv) EBIT
implied by the consideration paid in the Theatre Acquisitions. This analysis
resulted in the following ratios for the Theatre Acquisitions: (i) enterprise
value to LTM revenue of 1.1x to 2.0x, (ii) enterprise value to LTM Theatre Cash
Flow of 6.0x to 8.0x, (iii) enterprise value to LTM EBITDA of 6.1x to 12.2x and
(iv) enterprise value to LTM EBIT of 12.7x to 19.6x.
No transaction utilized in the comparable mergers and acquisitions analysis
is identical to the Goldwyn Merger. Accordingly, DLJ's analysis of the results
of the foregoing necessarily involved complex considerations and judgments
concerning differences in financial and operating characteristics of Goldwyn and
other factors that could affect the acquisition value of the companies to which
it is being
50
<PAGE>
compared. DLJ drew no specific conclusion from this analysis but subjectively
factored its observations from this analysis into its qualitative assessment of
the relevant facts and circumstances.
Film and Television Library
Discounted Cash Flow Analysis. DLJ performed a discounted cash flow analysis
for the five-year period ending with the fiscal year ending December 31, 2000 on
the pretax cash flows of the Goldwyn film and television library, based upon
financial projections for the Goldwyn film and television library prepared by
management of Goldwyn. DLJ also assumed that the financial projections prepared
by management of Goldwyn were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future operating and
financial performance of Goldwyn's film and television library. Pretax cash
flows were calculated as the sum of (i) management of Goldwyn's projected
revenues from distribution of the film titles in Goldwyn's film library and (ii)
management of Goldwyn's projected revenues from the syndication of the
programming in Goldwyn's television library less (iii) management of Goldwyn's
projections of the expenses of distributing the titles in the film and
television library. DLJ selected estimates of terminal exit values based upon
7.7x and 9.1x annual pretax cash flows and discount rates of 11.0% and 13.0%.
The terminal exit multiple represents an estimate of the price a buyer would be
willing to pay for the pretax cash flows generated by the Goldwyn film and
television library at the end of the five-year period covered by management of
Goldwyn's projections. The terminal exit multiple and discount rates selected
were based upon DLJ's subjective judgment about, among other things, the capital
markets, the prospects of exploiting the Goldwyn film and television library and
the television and motion picture industries. The pretax cash flows and terminal
value were then discounted to the present resulting in an estimated range of
values for the Goldwyn film and television library of $76.3 million to $91.1
million. DLJ believes that mathematical analysis (such as determining the mean
or median) is not itself a meaningful method of using discounted cash flow data.
DLJ drew no specific conclusion from this analysis but subjectively factored its
observations from this analysis into its qualitative assessment of the relevant
facts and circumstances.
The summary set forth above does not purport to be a complete description of
the analyses performed and factors considered by DLJ. The preparation of a
fairness opinion is a complex process and is not necessarily susceptible to a
partial analysis or summary description. DLJ believes that its analyses must be
considered as a whole and that selecting portions of its analyses, without
considering the entirety of the analyses, would create an incomplete view of the
process underlying its opinion. DLJ did not attribute any particular weight to
any analysis or factor considered by it but rather made subjective and
qualitative judgments as to the significance and relevance of each analysis and
factor.
In performing its analyses, DLJ made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of MIG and Goldwyn. The analyses
performed by DLJ are not necessarily indicative of actual values, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as a part of DLJ's analysis of the fairness from a
financial point of view to MIG of the consideration to be paid by MIG per share
of Goldwyn Common Stock pursuant to the Goldwyn Merger Agreement and were
reviewed with the MIG Board of Directors in connection with the delivery of
DLJ's opinion. The analyses do not purport to be appraisals or to reflect the
prices at which Goldwyn might actually be sold. In addition, as described above,
DLJ's opinion and the information provided by it to the MIG Board of Directors
were two of many factors taken into consideration by the MIG Board of Directors
in making its determination to approve the Goldwyn Merger. Consequently, DLJ's
methods of analysis described above should not be viewed as determinative of the
MIG Board of Directors' or management of MIG's opinion with respect to the value
of Goldwyn or as to whether the MIG Board of Directors or management of MIG
would have been willing to agree to different consideration.
51
<PAGE>
MIG selected DLJ as its financial advisor based upon DLJ's qualifications,
expertise and national reputation, including the fact that DLJ, as part of its
investment banking business, is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive bidding, secondary distributions of listed
and unlisted securities, private placements and valuations for corporate and
other purposes. DLJ provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of Goldwyn and/or MIG for its own account and for the accounts of
customers.
Pursuant to the terms of an engagement letter, MIG has agreed, as
compensation for DLJ's services as financial advisor, including the rendering of
its fairness opinion to MIG in connection with its acquisition of Goldwyn, (i)
to pay DLJ a fee of $250,000 at the time DLJ notified the MIG Board that it was
prepared to deliver an opinion as to the fairness of the Goldwyn Merger
Consideration to MIG from a financial point of view and (ii) upon the request by
DLJ from time to time, to reimburse DLJ promptly for all out-of-pocket expenses
(including the reasonable fees and expenses of counsel) and to indemnify DLJ
against certain liabilities and expenses in connection with its engagement,
including certain liabilities under the federal securities laws. DLJ became
entitled to the foregoing fees as a result of the delivery to the MIG Board of
Directors the February 28, 1996 DLJ Opinion. In addition, DLJ will be entitled
to an additional fee upon consummation of the Goldwyn Merger. The terms of the
fee arrangement with DLJ, which DLJ and MIG believe are customary in
transactions of this nature, were negotiated at arm's length between MIG and
DLJ, and the MIG Board of Directors was made aware of such arrangement,
including the fact that a significant portion of DLJ's fee is contingent upon
consummation of the Goldwyn Merger. DLJ has performed investment banking and
financial advisory services for MIG and its affiliates for which it has received
customary fees and is currently performing other investment banking and
financial advisory fees for MIG and its affiliates, including acting as
representative for the underwriters in connection with the Equity Offering, for
which it will receive customary compensation. DLJ may render investment banking
and financial advisory services to MIG and its affiliates in the future.
Goldwyn
General
Furman Selz was retained by the Board of Directors of Goldwyn to render an
opinion to the Board of Directors of Goldwyn as to the fairness, from a
financial point of view, to the holders of Goldwyn Common Stock of the
consideration to be received pursuant to the Goldwyn Merger. Furman Selz is a
nationally recognized investment banking firm with substantial experience and
expertise in the entertainment industry. As part of its investment banking
business, Furman Selz is regularly engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and other
purposes.
On January 31, 1996, Furman Selz delivered to the Board of Directors of
Goldwyn the January 31, 1996 Furman Selz Opinion, to the effect that, as of the
date thereof and based upon the assumptions made, matters considered and limits
of review set forth therein, the consideration to be received by the holders of
Goldwyn Common Stock in the Goldwyn Merger was fair, from a financial point of
view, to the holders of Goldwyn Common Stock. Furman Selz subsequently delivered
to the Board of Directors of Goldwyn the Furman Selz Proxy Opinion to the effect
that on and as of the date thereof, and based upon the procedures and subject to
the assumptions described therein, the value of the Goldwyn Merger Consideration
was fair, from a financial point of view, to the holders of Goldwyn Common
Stock.
A COPY OF THE FURMAN SELZ PROXY OPINION, WHICH INCLUDES THE ASSUMPTIONS
MADE, MATTERS CONSIDERED AND CERTAIN LIMITATIONS ON THE SCOPE OF REVIEW, IS
ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS APPENDIX C. GOLDWYN STOCKHOLDERS
ARE URGED TO READ THE FURMAN SELZ PROXY OPINION IN ITS ENTIRETY. THE
52
<PAGE>
OPINIONS OF FURMAN SELZ ARE DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL
POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF GOLDWYN
COMMON STOCK IN THE GOLDWYN MERGER AND DO NOT CONSTITUTE A RECOMMENDATION TO ANY
GOLDWYN STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE. THE SUMMARY OF THE
OPINIONS OF FURMAN SELZ SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE FURMAN SELZ PROXY
OPINION.
For purposes of its opinions, Furman Selz, among other things: (i) reviewed
the Goldwyn Merger Agreement and the Voting Agreement; (ii) reviewed certain
publicly available financial information concerning Goldwyn and MIG and MIG's
significant predecessor companies; (iii) reviewed certain non-public
information, including financial forecasts, relating to the business, earnings,
cash flow, assets and prospects of Goldwyn and MIG, furnished by Goldwyn and
MIG; (iv) conducted discussions with certain members of senior management of
Goldwyn and MIG concerning their respective businesses and operations, assets,
present condition and future prospects; (v) reviewed the historical market
prices and trading activity for Goldwyn Common Stock and Common Stock and
compared them with that of certain publicly traded companies which Furman Selz
deemed to be reasonably similar to Goldwyn and MIG, respectively; (vi) compared
the results of operations of Goldwyn and MIG with those of certain companies
which Furman Selz deemed to be reasonably similar to Goldwyn and MIG,
respectively; (vii) compared the proposed financial terms of the Goldwyn Merger
with the financial terms of certain other mergers and acquisitions Furman Selz
deemed to be relevant; (viii) participated in discussions and negotiations among
representatives of Goldwyn and MIG and their financial and legal advisors; and
(ix) reviewed such other financial studies and analyses and performed such other
investigations and took into account such other matters, including Furman Selz's
assessment of general economic, market and monetary conditions, as Furman Selz
deemed necessary.
In arriving at its opinions, Furman Selz relied on the accuracy and
completeness of all information supplied or otherwise made available to it by
Goldwyn and MIG, and did not undertake any responsibility or obligation to
verify such information or to conduct a physical inspection of the assets,
properties or facilities of Goldwyn, or undertake any independent evaluation or
appraisal of the assets or liabilities of Goldwyn or MIG nor was Furman Selz
furnished with any such evaluations or appraisals. With respect to the financial
forecasts furnished by Goldwyn and MIG, Furman Selz assumed that they were
reasonably prepared and reflected the best currently available estimates and
judgment of the management of Goldwyn or MIG as to the expected future financial
performance of Goldwyn or MIG, as the case may be. Furman Selz assumed no
responsibility for and expressed no view as to such forecasts or estimates or
the assumptions on which they were based. Furman Selz also assumed that the
Goldwyn Merger will be a tax-free transaction for the stockholders of Goldwyn.
In arriving at the January 31, 1996 Furman Selz Opinion, Furman Selz was not
provided with historical or projected pro forma financial statements reflecting
the operations of MIG assuming the consummation of (i) the then contemplated
Alliance Merger, (ii) the MPCA Acquisition or (iii) the Goldwyn Merger. In
preparing its opinions, Furman Selz did not conduct any discussions with the
senior management of Alliance or MPCA. In preparing its opinions, Furman Selz
considered the financial condition of Goldwyn, including Goldwyn's near-term
liquidity and capital requirements, and the corresponding effect on Goldwyn's
projected financial results. In arriving at the Furman Selz Proxy Opinion,
Furman Selz reviewed and considered historical pro forma financial statements
reflecting the operations of MIG assuming the consummation of the Goldwyn
Merger, and, accordingly, the January 31, 1996 Furman Selz Opinion was updated
to that extent. In arriving at the Furman Selz Proxy Opinion, Furman Selz was
not provided with projected pro forma financial statements reflecting the
operations of MIG assuming consummation of the MPCA Acquisition or the Goldwyn
Merger. Each of the January 31, 1996 Furman Selz Opinion and the Furman Selz
Proxy Opinion necessarily is based upon conditions as they existed, and could be
evaluated, on the date such opinion was rendered, and does not represent an
opinion as to what the trading value of the Common Stock will be when the
Goldwyn Merger is consummated.
53
<PAGE>
Miscellaneous
Goldwyn entered into an engagement letter with Furman Selz on July 7, 1995
(the "Engagement Letter"), pursuant to which Goldwyn agreed to pay Furman Selz
the following: (i) a $100,000 advisory fee payable upon execution of the
engagement letter, which fee has not yet been paid in light of Goldwyn's cash
needs; (ii) a $400,000 fee for rendering its opinion in connection with a
transaction involving Goldwyn; (iii) a cash fee at the closing of any such
transaction, which fee is consequently dependent upon approval of the Goldwyn
Merger by the Goldwyn Stockholders, equal to the sum of 1.5% of the Aggregate
Consideration (as defined below) up to and including $125 million, plus 2.5% of
the Aggregate Consideration in excess of $125 million, less any fees previously
paid to Furman Selz. Aggregate Consideration is defined as the fair market value
(on the date of payment) of securities receivable by the Goldwyn Stockholders in
connection with the Goldwyn Merger and the indebtedness of Goldwyn at the time
of closing including notes payable and participations payable to the Goldwyn
Stockholders or others. It is estimated that such fee will be approximately $1.9
million.
Goldwyn has agreed to reimburse Furman Selz for its out-of-pocket expenses,
including fees and disbursements of counsel, which shall not exceed $40,000
without Goldwyn's written consent. Goldwyn has also agreed to indemnify Furman
Selz and its directors, officers, agents and employees and each person, if any,
controlling Furman Selz against certain liabilities, including liabilities under
the federal securities laws and expenses related thereto.
Furman Selz, in the past, has provided financial advisory and investment
banking services to Goldwyn and has received fees for the rendering of such
services. Furman Selz may, in the future, provide financial advisory and
investment banking services to MIG and receive customary fees for the rendering
of such services. In the ordinary course of its business, Furman Selz may
actively trade the securities of both Goldwyn and MIG for its own account and
for the account of its customers and, accordingly, may at any time have a long
or short position in securities of Goldwyn and MIG.
Methodology to Ascertain Fairness
The following is a brief summary of the material aspects of the analyses
performed by Furman Selz in connection with the January 31, 1996 Furman Selz
Opinion. In connection with the Furman Selz Proxy Opinion, Furman Selz performed
certain procedures, including each of the financial analyses described below, to
update its analyses performed in connection with the January 31, 1996 Furman
Selz Opinion, and reviewed the financial information on which such analyses were
based and other factors including the current financial results of Goldwyn and
MIG. Specifically, in connection with the Furman Selz Proxy Opinion, Furman Selz
updated the segment sale analysis, analysis of selected comparable publicly
traded companies, discounted cash flow analysis and discounted share price
analysis described below with respect to Goldwyn, and the analysis of selected
comparable publicly traded companies, analysis of selected mergers and
acquisitions and discounted cash flow analysis described below with respect to
MIG. In connection with the Furman Selz Proxy Opinion, Furman Selz did not
update its analyses to reflect the fact that Goldwyn's financial performance is
expected to fail by a substantial margin to meet Goldwyn's projections; however,
such failure does not change the conclusion contained in the Furman Selz Proxy
Opinion. These updated analyses were delivered to the Board of Directors of
Goldwyn. The Furman Selz Proxy Opinion confirmed the January 31, 1996 Furman
Selz Opinion and thus continued to provide support for the recommendation of the
Board of Directors of Goldwyn that the Goldwyn Stockholders adopt and approve
the Goldwyn Merger Agreement and the transactions contemplated thereby.
Analyses Relating to Goldwyn. The summary set forth below does not purport
to be a complete description of the analyses performed by Furman Selz. In
arriving at its opinions, Furman Selz performed a variety of financial analyses,
the material portions of which are summarized below. In addition, Furman Selz
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and of the factors considered by it, without
considering all such factors and
54
<PAGE>
analyses, could create a misleading view of the process underlying its opinions.
In performing its analyses, Furman Selz made numerous macroeconomic, operating
and financial assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond Goldwyn's or
MIG's control. Any estimates incorporated in the analyses performed by Furman
Selz are not necessarily indicative of actual past or future results or values,
which may be significantly more or less favorable than such estimates. Estimated
values do not purport to be appraisals and do not necessarily reflect the prices
at which businesses or companies may be sold in the future, and such estimates
are inherently subject to uncertainty. The preparation of a fairness opinion is
a complex process not necessarily susceptible to partial or summary description.
Segment Sale Analysis. In order to estimate, based on Furman Selz's
reasonable judgment, an overall implied value per share at which Goldwyn's
segments could be sold on an individual basis in private market transactions,
using projections provided by Goldwyn management, Furman Selz prepared a segment
sale analysis. Furman Selz estimated the private market value of Goldwyn's
segments based on (i) offers Goldwyn received from bidders for the Theatre Group
and the Goldwyn film and television libraries, (ii) unleveraged discounted cash
flow analysis for the Theatre Group and the Goldwyn film and television
libraries and (iii) comparable transactions analysis for each segment.
For the discounted cash flow analysis of the Theatre Group, Furman Selz
calculated terminal values by multiplying projected EBITDA for 2000 by a range
of exit multiples from 5 to 7 times, and applied discount rates reflecting
weighted average costs of capital in the range of 10% to 14% to the terminal
values and projected unleveraged free cash flows in the forecast. Furman Selz
also performed a discounted cash flow analysis in which it reduced the Theatre
Group projections by 35% in order to account for the severe financial liquidity
issues at Goldwyn and the potential impact of these issues on the projected
expansion of the Theatre Group from 140 screens in 1996 to 220 screens in 2000.
In performing the DCF Analysis of the Goldwyn film and television libraries,
Furman Selz calculated terminal values by multiplying projected free cash flow
for 2005 by a range of exit multiples from 7 to 9 times, and applied discount
rates reflecting weighted average costs of capital in the range of 11% to 15% to
the terminal values and projected unleveraged free cash flows in the forecast.
Using publicly available information, Furman Selz analyzed the purchase
prices and multiples paid in selected merger or acquisition transactions in the
theatrical exhibition industry and the film and television production and
distribution industry. Transactions analyzed in the theatrical exhibition
industry included: Virgin Group/MGM Cinemas, Regal Cinemas/Litchfield Theatres,
Hellman Friedman/Hoyts Cinemas, Regal Cinemas/National Theatre Holdings and
Merrill Lynch Capital Partners/United Artists Theatre Circuit. Furman Selz
computed enterprise value as a multiple of LTM revenues, EBITDA and theatre cash
flow (EBITDA plus general and administrative expense). The enterprise value as a
multiple of LTM revenues for the selected companies was in the range of 0.73 to
1.67 times, with a mean and median of 1.15 times and 1.01 times, respectively.
The enterprise value as a multiple of LTM EBITDA for the selected companies was
in the range of 4.4 to 15.9 times, with a mean and median of 8.9 times and 8.7
times, respectively. The enterprise value as a multiple of LTM theatre cash flow
for the selected companies was in the range of 3.7 to 9.3 times, with a mean and
median of 6.6 times and 6.8 times, respectively.
Transactions analyzed in the film and television production and distribution
industry included: Turner Broadcasting/New Line Cinema, Turner
Broadcasting/Castle Rock Entertainment, Blockbuster Entertainment/Spelling
Entertainment, Blockbuster Entertainment/Republic Pictures, Hallmark Cards/RHI
Entertainment, Turner Broadcasting/Hanna Barbera and Pathe Communications/MGM/UA
Communications. Furman Selz computed enterprise value as a multiple of LTM
revenues, operating cash flow (operating income plus depreciation and non-film
cost amortization) and operating income (EBIT). The enterprise value as a
multiple of LTM revenues for the selected companies was in the range of 0.92 to
3.18 times, with a mean and median of 1.95 times and 1.83 times, respectively.
The enterprise value as a multiple of LTM operating cash flow for the selected
companies was in the range of 8.9 to 24.0 times, with a mean and median of 13.5
times and 11.0 times, respectively. The enterprise value as a multiple of LTM
operating income for the selected companies was in the range of 11.2 to 28.6
times, with a mean and median of 17.0 times and 13.7 times, respectively.
55
<PAGE>
Such analysis resulted in an implied total enterprise value range of $86.6
million to $130.5 million. In order to derive equity value per share of Goldwyn
Common Stock, Furman Selz subtracted from the implied total enterprise value the
estimated net debt and other liabilities of Goldwyn at December 31, 1995 to
yield an implied pre-tax per share equity value range of $0.52 to $6.63. In
addition, Furman Selz performed a segment sale analysis assuming Goldwyn's
business segments were sold pursuant to a plan of liquidation. In this analysis,
the segments were assumed to be sold in separate taxable transactions (including
application of net operating loss carryforwards) and the repayment of net debt
and other liabilities, including estimated severance and other transaction
costs. This analysis resulted in an implied after-tax per share equity value
range of $0.00 to $2.13.
Analysis of Selected Comparable Publicly Traded Companies. Using publicly
available information, Furman Selz compared the financial, market and operating
performances of selected publicly traded film and television production and
distribution, diversified media and theatrical exhibition companies to Goldwyn.
Film and television production and distribution companies analyzed by Furman
Selz included: Kushner-Locke, dick clark productions, All American
Communications, Spelling, King World and Savoy Pictures. Furman Selz calculated
enterprise value as a multiple of LTM and estimated 1996 revenues, EBITDA and
EBITA. The enterprise value as a multiple of LTM and estimated 1996 revenues for
the selected companies was in the range of 0.81 to 3.66 times and 0.79 to 0.95
times, respectively, with means of 2.06 times and 0.87 times, respectively, and
medians of 1.84 times and 0.87 times, respectively. The enterprise value as a
multiple of LTM and estimated 1996 EBITDA for the selected companies was in the
range of 6.2 to 23.3 times and 5.6 to 11.9 times, respectively, with means of
11.2 times and 8.0 times, respectively, and medians of 7.6 times and 6.7 times,
respectively. The enterprise value as a multiple of LTM and estimated 1996 EBITA
for the selected companies was in the range of 6.3 to 28.1 times and 5.6 to 12.2
times, respectively, with means of 13.4 times and 8.6 times, respectively, and
medians of 9.5 times and 8.0 times, respectively.
Diversified media companies analyzed by Furman Selz in connection with this
analysis included: Time Warner, Disney, News Corporation, Viacom and New World
Communications. Furman Selz calculated enterprise value as a multiple of LTM,
estimated 1996 and estimated 1997 revenues, EBITDA and EBITA. The enterprise
value as a multiple of LTM, estimated 1996 and estimated 1997 revenues for the
selected companies was in the range of 1.81 to 4.57 times, 1.60 to 3.61 times
and 1.45 to 2.32 times, respectively, with means of 2.84 times, 2.47 times and
2.00 times, respectively, and medians of 2.51 times, 2.42 times and 2.11 times,
respectively. The enterprise value as a multiple of LTM, estimated 1996 and
estimated 1997 EBITDA for the selected companies was in the range of 11.6 to
19.4 times, 10.5 to 11.6 times and 9.0 to 10.3 times, respectively, with means
of 14.0 times, 11.1 times and 9.6 times, respectively, and medians of 12.7
times, 11.1 times and 9.6 times, respectively. The enterprise value as a
multiple of LTM, estimated 1996 and estimated 1997 EBITA for the selected
companies was in the range of 12.5 to 30.6 times, 11.8 to 14.1 times and 10.5 to
11.9 times, respectively, with means of 17.7 times, 13.1 times and 11.1 times,
respectively, and medians of 13.8 times, 13.3 times and 11.1 times,
respectively.
Theatrical exhibition companies analyzed by Furman Selz in connection with
this analysis included: Carmike Cinemas, AMC Entertainment, Regal Cinemas,
Cineplex Odeon and GC Companies. Furman Selz calculated enterprise value as a
multiple of LTM and estimated 1996 revenues, EBITDA and theatre cash flow. The
enterprise value as a multiple of LTM and estimated 1996 revenues for the
selected companies was in the range of 0.29 to 3.37 times and 0.29 to 3.04
times, respectively, with means of 1.43 times and 1.24 times, respectively, and
medians of 1.22 times and 0.93 times, respectively. The enterprise value as a
multiple of LTM and estimated 1996 EBITDA for the selected companies was in the
range of 3.5 to 16.1 times and 3.5 to 13.4 times, respectively, with means of
8.8 times and 6.9 times, respectively, and medians of 6.8 times and 5.6 times,
respectively. The enterprise value as a multiple of LTM and estimated 1996
theatre cash flow for the selected companies was in the
56
<PAGE>
range of 2.1 to 13.7 times and 2.0 to 11.6 times, respectively, with means of
7.0 times and 5.6 times respectively, and medians of 6.3 times and 4.4 times,
respectively.
Such analysis resulted in an implied total enterprise value range of $100.3
million to $133.8 million. In order to derive equity value per share of Goldwyn
Common Stock, Furman Selz subtracted from the implied total enterprise value the
estimated net debt and other liabilities of Goldwyn at December 31, 1995 to
yield an implied per share equity value range of $1.98 to $5.55.
Discounted Cash Flow Analysis. Furman Selz conducted an unleveraged
discounted cash flow analysis based upon financial information for Goldwyn
provided by Goldwyn management. In light of the substantial financial liquidity
constraints at Goldwyn and the resulting inability of Goldwyn to execute its
business plan and realize its projections, absent the Goldwyn Merger, Furman
Selz reduced Goldwyn's projections by 25% in preparing its discounted cash flow
analyses. Furman Selz calculated a range of net present values of the projected
unleveraged free cash flows in the forecast using various discount rates
reflecting weighted average costs of capital in the range of 11% to 15%, and
combined such values with terminal values for Goldwyn calculated by multiplying
projected EBITDA for 2000 by a range of exit multiples from 6 to 10 times and
using the same range of discount rates as those utilized for the unleveraged
free cash flows. The net present value of free cash flow, when combined with the
terminal values, yielded an implied total enterprise value in the range of $81.2
million to $136.2 million. In order to derive equity value per share of Goldwyn
Common Stock, Furman Selz subtracted from the implied total enterprise value the
estimated net debt and other liabilities of Goldwyn at December 31, 1995 to
yield an implied per share equity value range of $0.00 to $5.81.
Discounted Share Price Analysis. Furman Selz analyzed the potential future
public market trading values of Goldwyn Common Stock using Goldwyn management's
net income forecasts, reduced by 25% due to the financial liquidity constraints
discussed above, applying multiples of 7 to 13 times net income to 1998 earnings
per share and discounting the result at a 13% discount rate. This analysis
generated implied per share present values of potential future trading values
ranging from $2.50 to $4.65.
Analyses Relating to MIG. In assessing the value, and corresponding per
share value, of MIG, Furman Selz considered that MIG, as it is currently
configured, was created pursuant to the November 1 Mergers. Furman Selz further
considered that the proposed acquisition of MPCA by MIG is pending. In light of
these considerations and the unavailability of recent consolidated financial
statements or projections for MIG, or pro forma consolidated financial
information reflecting the pending MPCA Acquisition, Furman Selz derived the
value of MIG by calculating the sum of the values of each of MIG's business
segments. The following is a brief summary of the principal aspects of the
analyses performed by Furman Selz with respect to MIG.
Analysis of Selected Comparable Publicly Traded Companies.
Orion. Using publicly available information, Furman Selz compared certain
financial, market and operating information of selected publicly traded film and
television production and distribution companies to Orion. Companies analyzed by
Furman Selz in connection with this analysis included: Kushner-Locke, dick clark
productions, All American Communications, Spelling, King World and Savoy
Pictures. The enterprise value as a multiple of LTM and projected 1996 revenues
for the selected companies was in the range of 0.81 to 3.66 times and .79 to .95
times, respectively, with means of 2.06 times and 0.87 times, respectively, and
medians of 1.84 times and .87 times, respectively. Enterprise value as a
multiple of LTM and projected 1996 EBITDA for the selected companies ranged from
6.2 to 23.3 times and 5.6 to 11.9 times, respectively, with means of 11.2 times
and 8.0 times, respectively, and medians of 7.6 times and 6.7 times,
respectively. Enterprise value as a multiple of LTM and projected 1996 EBITDA
for the selected companies ranged from 6.3 to 28.1 times and 5.6 to 12.2 times,
57
<PAGE>
respectively, with means of 13.4 times and 8.6 times, respectively, and medians
of 9.5 times and 8.0 times, respectively. Such analysis resulted in an implied
total enterprise value range for Orion of $213.7 million to $256.4 million.
MITI. Using publicly available information, Furman Selz analyzed certain
financial, market and operating information of selected publicly traded
companies in the five segments where MITI's joint ventures currently operate or
intend to operate in the future. These segments are wireless cable, paging,
radio broadcasting, fixed-wireless telephony and international long distance
telephony.
Companies analyzed by Furman Selz in the wireless cable industry included:
American Telecasting, CAI Wireless Systems, Heartland Wireless and People's
Choice TV. Wireless cable companies are in an early stage of development;
therefore, Furman Selz analyzed enterprise value as a multiple of LTM and
projected 1996 revenues. Enterprise value as a multiple of LTM and projected
1996 revenues for the selected companies ranged from 9.61 to 17.65 times and
5.21 to 8.65 times, respectively, with means of 12.45 times and 7.02 times,
respectively, and medians of 11.27 times and 7.21 times, respectively.
Companies analyzed by Furman Selz in the paging industry included: A+
Network, American Paging, Arch Communications, Mobile Telecommunications
Technologies, Metrocall, Paging Network and ProNet. Furman Selz analyzed
enterprise value as a multiple of LTM and projected 1996 revenues and EBITDA.
This analysis resulted in ranges of multiples of LTM and projected 1996 revenues
from 2.21 to 5.82 times and 1.96 to 4.21 times, respectively, with means of 3.68
times and 2.80 times, respectively, and medians of 2.77 times and 2.80 times,
respectively. Enterprise value as a multiple of LTM and projected 1996 EBITDA
ranged from 9.8 to 123.4 times and 7.9 to 16.6 times, respectively, with means
(excluding certain extraordinary values) of 14.0 times and 10.9 times,
respectively, and medians (excluding certain extraordinary values) of 13.0 times
and 9.2 times, respectively.
Companies analyzed by Furman Selz in the radio broadcasting industry
included: Citicasters, Clear Channel Communications, Emmis Broadcasting,
Evergreen Media, EZ Communications, Heftel Broadcasting, Infinity Broadcasting,
Jacor Communications, Saga Communications and SFX Broadcasting. Furman Selz
analyzed enterprise value as a multiple of LTM revenues and LTM and projected
1996 EBITDA. This analysis resulted in ranges of multiples of LTM revenues from
2.98 to 10.70 times, with a mean and median (excluding certain extraordinary
values) of 4.69 times and 5.01 times, respectively. Enterprise value as a
multiple of LTM and projected 1996 EBITDA ranged from 10.2 to 24.4 times and 9.1
to 18.0 times, respectively, with means of 15.5 and 10.4 times, respectively,
and medians of 14.3 times and 10.4 times, respectively.
For the fixed-wireless telephony segment, Furman Selz analyzed companies
which provide local loop telephone service, primarily on a regional basis,
including: Alltel, C-Tec, Century Telephone, Cincinnati Bell, Frontier, Lincoln
Telecom, Southern New England Telecom and Telephone & Data Systems. Furman Selz
analyzed enterprise value as a multiple of LTM revenues and LTM and projected
1996 EBITDA. This analysis resulted in ranges of multiples of LTM revenues from
1.99 to 3.82 times, with a mean of 2.95 times and a median of 2.79 times.
Enterprise value as a multiple of LTM and projected 1996 EBITDA ranged from 5.9
to 10.6 times and 5.2 to 8.8 times, respectively, with means of 8.1 times and
7.2 times, respectively, and medians of 7.6 times and 6.9 times, respectively.
In the international long-distance telephony segment, Furman Selz analyzed
Petersburg Long Distance. Furman Selz calculated enterprise value as a multiple
of LTM and estimated 1996 revenues and EBITDA. This analysis resulted in
multiples of LTM and projected 1996 revenues of 6.93 and 1.68 times,
respectively. Enterprise value as a multiple of LTM and projected 1996 EBITDA
was 44.5 and 3.5 times, respectively.
58
<PAGE>
Based on this analysis and the discounted cash flow value of MITI overhead
and joint venture management fees, Furman Selz derived an implied total
enterprise value range for MITI of $141.2 million to $307.0 million.
Snapper. Using publicly available information, Furman Selz compared certain
actual and estimated financial, market and operating information of selected
publicly traded lawn and garden equipment companies to Snapper. Companies
analyzed by Furman Selz in connection with this analysis included: Toro, Black &
Decker, Deere, Lesco and Alamo Group. Furman Selz compared total enterprise
value as a multiple of LTM and projected 1996 revenues, EBITDA and EBITA. This
analysis resulted in ranges of multiples of LTM and projected 1996 revenues from
0.56 to 1.62 times and 0.54 to 1.52 times, respectively, with means of 1.00
times and 0.92 times, respectively, and medians of 1.00 and 0.98 times,
respectively. Enterprise value as a multiple of LTM and projected 1996 EBITDA
ranged from 6.8 to 12.6 times and 5.5 to 11.2 times, respectively, with means of
9.6 times and 8.0 times, respectively, and medians of 8.2 times and 7.4 times,
respectively. Ranges of multiples of LTM and projected 1996 EBITA were from 8.4
to 16.9 times and 6.8 to 14.1 times, respectively, with means of 12.2 times and
9.9 times, respectively, and medians of 10.6 times and 9.3 times, respectively.
Such analysis resulted in an implied total enterprise value range for Snapper of
$174.7 million to $224.6 million.
Based on the above analyses, Furman Selz derived an implied total enterprise
valuation range for MIG of $529.6 million to $788.1 million. In order to derive
equity value per share of Common Stock, Furman Selz subtracted from the implied
total enterprise value the estimated net debt of MIG at December 31, 1995 and
added the current market value of MIG's investment in Roadmaster to yield an
implied per share equity value range for MIG of $5.01 to $11.08.
Analysis of Selected Mergers and Acquisitions.
Orion. Using publicly available information, Furman Selz analyzed the
purchase prices and multiples paid in selected merger or acquisition
transactions in the film and television production and distribution industry.
Transactions analyzed in the film and television production and distribution
industry included: Turner Broadcasting/New Line Cinema, Turner Broadcasting/
Castle Rock Entertainment, Blockbuster Entertainment/Spelling Entertainment,
Blockbuster Entertainment/Republic Pictures, Hallmark Cards/RHI Entertainment,
Turner Broadcasting/Hanna Barbera and Pathe Communications/ MGM/UA
Communications. Furman Selz computed enterprise value as a multiple of LTM
revenues, operating cash flow (operating income plus depreciation and non-film
cost amortization) and operating income (EBIT). Enterprise value as a multiple
of LTM revenues for the selected companies ranged from 0.92 to 3.18 times, with
a mean and median of 1.95 times and 1.83 times, respectively. Enterprise value
as a multiple of LTM operating cash flow for the selected companies ranged from
8.9 to 24.0 times, with a mean and median of 13.5 times and 11.0 times,
respectively. Enterprise value as a multiple of LTM operating income for the
selected companies ranged from 11.2 to 28.6 times, with a mean and median of
17.0 times and 13.7 times, respectively. Such analysis resulted in an implied
total enterprise value range for Orion of $235.1 million to $299.2 million.
MITI. Using publicly available information, Furman Selz analyzed the
purchase prices and multiples paid in selected merger or acquisition
transactions in the various segments where MITI's joint ventures currently
operate or intend to operate in the future.
Transactions analyzed in the wireless cable television industry included:
CAI Wireless Systems/ACS Enterprises, Peoples Choice TV/Preferred Entertainment,
CAI Wireless Systems/Microband Companies, American Telecasting/Antenna Vision,
American Telecasting/People's Cable, American Telecasting/Family Entertainment
Network and Wireless Entertainment Network, ACS Enterprises/MetroTen and MetSat
and American Telecasting/ TVCN Denver Wireless Cable
59
<PAGE>
Operations. Furman Selz analyzed enterprise value as a multiple of LTM revenues
and number of subscribers. Enterprise value as a multiple of LTM revenues for
the selected companies ranged from 2.43 to 49.50 times, with a mean and median
of 6.86 times and 5.87 times, respectively. Enterprise value as a multiple of
number of subscribers for the selected companies ranged from $1,231 to $8,031
per subscriber, with a mean and median of $2,267 per subscriber and $1,830 per
subscriber, respectively.
Furman Selz analyzed more than thirty recent transactions in the paging
industry including: Arch Communications/Westlink Holdings, ProNet/AGR
Electronics and AGR Beepers, ProNet/Paging and Cellular of Texas,
ProNet/Americom Paging, Arch Communications/USA Mobile Communications, A+
Communications/Network Paging, Arch Communications/Beta Telepage, Teletouch
Communications/Dial-A-Page and Arch Communications/Beeper Company of America.
Furman Selz computed enterprise value as a multiple of LTM revenues and EBITDA.
Enterprise value as a multiple of LTM revenues for the selected companies ranged
from 0.99 to 6.20 times, with a mean and median of 2.82 times and 2.64 times,
respectively. Enterprise value as a multiple of LTM EBITDA for the selected
companies ranged from 7.1 to 35.5 times, with a mean and median (excluding
certain extraordinary values) of 11.1 times and 9.4 times, respectively.
Furman Selz analyzed more than fifty recent transactions in the radio
broadcasting industry. Furman Selz computed enterprise value as a multiple of
LTM revenues and broadcast cash flow. Enterprise value as a multiple of LTM
revenues for the selected companies ranged from 2.05 to 5.68 times, with a mean
and median of 3.91 times and 3.90 times, respectively. Enterprise value as a
multiple of LTM broadcast cash flow for the selected companies ranged from 5.7
to 13.2 times, with a mean and median of 10.1 times and 10.1 times,
respectively.
In determining the appropriate multiples for MITI's telephony ventures,
Furman Selz analyzed transactions involving the sale of long distance and fixed
local access lines on a local or regional scale including: Citizens
Utilities/ALLTEL, AT&T/Alascom, LDDS Communications/Williams Telecommunications
Group, LDDS Communications/IDB Communications and Pacific Telecom/US WEST
Colorado Access Lines. Furman Selz calculated enterprise value as a multiple of
LTM revenues, which ranged from 1.42 times to 3.20 times with a mean of 2.40
times and a median of 2.71 times.
Based on this analysis and the discounted cash flow value of MITI overhead
and joint venture management fees, Furman Selz derived an implied total
enterprise value range for MITI of $190.9 million to $396.6 million.
Snapper. Using publicly available information, Furman Selz analyzed the
purchase prices and multiples paid in selected merger or acquisition
transactions in the lawn and garden equipment industry. Transactions analyzed in
the lawn and garden equipment industry included: Alamo Group/M&W Gear, Clark
Equipment/Club Car, Alamo Group/Tiger Corporation, Deere & Company/Homelite
Division of Textron, Alamo Group/Bomford Turner, Barefoot, Inc./Ever-Green Lawns
and Scotts Co./Republic Tool and Manufacturing. Furman Selz computed enterprise
value as a multiple of LTM revenues, EBITDA and EBITA. Enterprise value as a
multiple of LTM revenues for the selected companies ranged from .42 to 1.39
times, with a mean and median of .84 times and .80 times, respectively.
Enterprise value as a multiple of LTM EBITDA for the selected companies ranged
from 5.3 to 10.9 times, with a mean and median of 8.2 times and 8.8 times,
respectively. Enterprise value as a multiple of LTM EBITA for the selected
companies ranged from 6.5 to 12.9 times, with a mean and median of 11.2 times
and 12.3 times, respectively. Such analysis resulted in an implied total
enterprise value range for Snapper of $199.7 million to $249.6 million.
Based on the above analyses, Furman Selz derived an implied total enterprise
valuation range for MIG of $625.6 million to $945.3 million. In order to derive
equity value per share of Common Stock, Furman Selz subtracted from the implied
total enterprise value the estimated net debt of MIG at
60
<PAGE>
December 31, 1995 and added the current market value of MIG's investment in
Roadmaster to yield an implied per share equity value range for MIG of $7.26 to
$14.78.
Discounted Cash Flow Analysis.
Orion. Furman Selz conducted an unleveraged discounted cash flow analysis
based upon financial information for Orion provided by management of MIG. Furman
Selz calculated a range of net present values of the projected unleveraged free
cash flows in the forecast using various discount rates reflecting weighted
average costs of capital in the range of 12% to 16%, and combined such values
with terminal values for Orion calculated by multiplying projected EBITDA for
2000 by a range of exit multiples from 8 to 12 times and using the same range of
discount rates as those utilized for the unleveraged free cash flows. The net
present value of free cash flow, when combined with the terminal values, yielded
an implied total enterprise value for Orion in the range of $263.1 million to
$367.6 million.
MITI. Furman Selz conducted an unleveraged discounted cash flow analysis on
each of MITI's ventures and on MITI overhead and joint venture management fees
based upon financial information provided by management of MIG. Due to the fact
that MITI's ventures are all in very early stages of development or have not
begun operating, Furman Selz reduced MIG's projections for these businesses by
50% for purposes of this analysis. Furman Selz calculated a range of net present
values of the projected unleveraged free cash flows in the forecast using
various discount rates reflecting weighted average costs of capital in the range
of 20% to 30%, and combined such values with terminal values calculated by
multiplying either projected revenue or projected EBITDA for 2000 by a range of
exit multiples from 4.00 to 6.00 times or 6.0 to 10.0 times, respectively and
using the same range of discount rates as those utilized for the unleveraged
free cash flows. The net present value of free cash flow, when combined with the
terminal values, yielded an implied total enterprise value for MITI in the range
of $144.6 million to $368.0 million.
Snapper. Furman Selz conducted an unleveraged discounted cash flow analysis
based upon financial information for Snapper provided by management of MIG.
Furman Selz calculated a range of net present values of the projected
unleveraged free cash flows in the forecast using various discount rates
reflecting weighted average costs of capital in the range of 10% to 14%, and
combined such values with terminal values for Snapper calculated by multiplying
projected EBITDA for 2000 by a range of exit multiples from 5 to 7 times and
using the same range of discount rates as those utilized for the unleveraged
free cash flows. The net present value of free cash flow, when combined with the
terminal values, yielded an implied total enterprise value for Snapper in the
range of $192.7 million to $283.4 million.
Based on the above analyses, Furman Selz derived an implied total enterprise
valuation range for MIG of $600.4 million to $1,019.0 million. In order to
derive equity value per share of Common Stock, Furman Selz subtracted from the
implied total enterprise value the estimated net debt of MIG at December 31,
1995 and added the current market value of MIG's investment in Roadmaster to
yield an implied per share equity value range for MIG of $6.67 to $16.51.
61
<PAGE>
TERMS AND CONDITIONS OF THE GOLDWYN MERGER AGREEMENT
Set forth below is a description of the principal terms and conditions of
the Goldwyn Merger Agreement. The description is qualified in its entirety to
reference to the Goldwyn Merger Agreement, a copy of which is attached hereto as
Appendix A.
Conditions to the Goldwyn Merger
Mutual Conditions
The obligations of MIG and Goldwyn to consummate the Goldwyn Merger are
subject to the satisfaction or waiver of certain mutual conditions, including
the following. Each of the following conditions, except for the stockholder
approvals, may be waived by either party:
1. The Goldwyn Merger Agreement shall have been approved and adopted by
the requisite vote of Goldwyn Stockholders;
2. The Registration Statement shall have been declared effective by the
Commission;
3. MIG shall have received all state securities or "Blue Sky" permits and
other authorizations necessary to issue the shares of Common Stock;
4. All material consents or approvals required in connection with the
Goldwyn Merger shall have been obtained;
5. The shares of Common Stock to be issued in connection with the Goldwyn
Merger shall have been authorized for listing on the AMEX or any other
national securities exchange or automated quotation system approved by
both parties, in each case, subject to official notice of issuance;
6. No injunction, order, decree or stay is in effect which restrains or
prevents the consummation of the Goldwyn Merger;
7. All waiting periods under the Hart Scott Act shall have expired or
been terminated (which waiting period has expired);
8. Samuel Goldwyn, Jr., Chairman and Chief Executive of Goldwyn, shall
have entered into an employment agreement with the Goldwyn Surviving
Corporation;
9. All amounts outstanding under Goldwyn's bank credit facility (or any
refinancing, renewal or extension thereof) shall have been repaid or
refinanced in full; and
10. Orion shall have provided up to $5.5 million of interim funding to
Goldwyn in the manner specified in the Financing and Distribution
Agreement (as defined below).
MIG Conditions
MIG's obligation to consummate the Goldwyn Merger is subject to the
satisfaction or waiver of certain other conditions, including the following:
1. The representations and warranties of Goldwyn made in the Goldwyn
Merger Agreement must be true and correct in all material respects
when made and as of the Goldwyn Effective Time; all covenants and
conditions required to be performed by Goldwyn prior to the Goldwyn
Effective Time shall have been performed in all material respects and
MIG shall have received an officer's certificate from Goldwyn stating
the foregoing;
2. Since December 31, 1995, no change or event shall have occurred which
has had or could reasonably be expected to have a material adverse
effect with respect to Goldwyn;
3. MIG shall have received a customary legal opinion of counsel to
Goldwyn, reasonably satisfactory to MIG, regarding certain legal
matters relating to Goldwyn;
4. MIG shall have received a fairness opinion that the Goldwyn Merger
Consideration is fair to MIG from a financial point of view and such
opinion shall not have been amended, modified or withdrawn;
62
<PAGE>
5. MIG shall have received from affiliates of Goldwyn letters regarding
certain matters applicable to such holders under the federal
securities laws. The letter to be signed by Samuel Goldwyn, Jr. and
the Goldwyn Family Trust will contain a lockup provision with MIG's
lead underwriter for the Equity Offering providing that Mr. Goldwyn
and the Goldwyn Family Trust agree not to sell their shares of Common
Stock received in the Goldwyn Merger (other than the shares of Common
Stock issued in exchange for the Goldwyn Common Stock received by the
Goldwyn Family Trust pursuant to exercise of the Goldwyn Put) for a
period of 180 days from the Goldwyn Effective Time.;
6. The Distribution Agreement between the Goldwyn Surviving Corporation
and the Goldwyn Family Trust shall have been entered into on terms
satisfactory to MIG;
7. The Trademark License Agreement (as defined below) between the Goldwyn
Surviving Corporation and Samuel Goldwyn, Jr. relating to the use of
certain trademarks shall have been entered into on terms satisfactory
to MIG;
8. The Amended and Restated Option Agreement among the Goldwyn Surviving
Corporation, Mr. Goldwyn and the Goldwyn Family Trust shall have been
entered into on terms satisfactory to MIG;
9. MIG shall be satisfied that certain of Goldwyn's contractual
obligations under an output agreement relating to the home video
rights to motion picture product produced by Goldwyn shall not apply
to MIG and its affiliates;
10. Mr. Gottlieb shall have entered into an employment agreement with the
Goldwyn Surviving Corporation on terms mutually satisfactory to the
parties; and
11. The maturity date for all amounts outstanding under Goldwyn's
production indebtedness relating to certain films (approximately
$3,679,000 at March 31, 1996) shall have been extended beyond the
Goldwyn Effective Time.
Goldwyn Conditions
Goldwyn's obligation to consummate the Goldwyn Merger is subject to the
satisfaction or waiver of certain other conditions, including the following:
1. The representations and warranties of MIG made in the Goldwyn Merger
Agreement must be true and correct in all material respects when made
and as of the Goldwyn Effective Time; all covenants and conditions
required to be performed by MIG prior to the Goldwyn Effective Time
shall have been performed in all material respects and Goldwyn shall
have received an officer's certificate from MIG stating the foregoing;
2. Since December 31, 1995, no change or event shall have occurred which
has had or could reasonably be expected to have a material adverse
effect with respect to MIG;
3. Goldwyn shall have received a customary legal opinion of counsel to
MIG, reasonably satisfactory to Goldwyn, regarding certain legal
matters relating to MIG, and an opinion from its counsel regarding
material federal income tax consequences to Goldwyn and the Goldwyn
Stockholders of the Goldwyn Merger, which latter opinion is, pursuant
to a side agreement among MIG and Goldwyn, a non-waiveable condition;
4. Goldwyn shall have received a fairness opinion that the consideration
to be received by Goldwyn Stockholders in the Goldwyn Merger is fair
to the Goldwyn Stockholders from a financial point of view and such
opinion shall not have been amended, modified or withdrawn; and
5. The MIG-Goldwyn Shelf Registration Statement registering the shares of
Common Stock to be received by Samuel Goldwyn, Jr. and the Goldwyn
Family Trust in the
63
<PAGE>
Goldwyn Merger and the registration statement(s) on Form S-8
permitting resale of the shares of Common Stock to be received by
former Goldwyn Stockholders upon exercise of the Goldwyn Options shall
have each been declared effective by the Commission.
Termination
The Goldwyn Merger Agreement may be terminated at any time prior to the
Goldwyn Effective Time (whether before or after approval by the Goldwyn
Stockholders ):
(i) by mutual written consent of MIG and Goldwyn;
(ii) by either MIG or Goldwyn in the event of a material breach of any
representation, warranty, covenant or agreement contained in the Goldwyn
Merger Agreement (subject to a 10 business day cure period in the event of a
non-wilful breach) (the "Goldwyn Material Breach Termination Right");
(iii) by MIG or Goldwyn if the Goldwyn Merger shall not have been
consummated before September 30, 1996 unless the party wishing to terminate
on such date, due to its material breach of the Goldwyn Merger Agreement,
was the cause of the failure to consummate the Goldwyn Merger;
(iv) by either MIG or Goldwyn if the Goldwyn Stockholders fail to
approve and adopt, by the requisite vote, the Goldwyn Merger Agreement; or
(v) by either MIG or Goldwyn if a court of competent jurisdiction or
other governmental body shall have issued an order or taken any other action
preventing or restraining the consummation of the Goldwyn Merger and such
order or such other action shall have become final and non-appealable.
In addition, either MIG or Goldwyn may terminate the Goldwyn Merger
Agreement if (i) the Board of Directors of Goldwyn shall modify or change its
recommendation that the Goldwyn Stockholders approve and adopt the Goldwyn
Merger Agreement (the "Goldwyn Recommendation") in a manner adverse to MIG or
shall have resolved to do any of the foregoing; (ii) the Board of Directors of
Goldwyn shall have recommended to Goldwyn Stockholders a material corporate
transaction the consummation of which would or could reasonably be expected to
impede, interfere with, prevent or materially delay the Goldwyn Merger; (iii) a
tender offer (including a self-tender offer) or exchange offer for shares of
capital stock of Goldwyn, which would result in the beneficial ownership by any
Person or any "group" (as defined in Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder) of more than 50% of the
outstanding shares of any class of capital stock of Goldwyn, is commenced and
the Board of Directors of Goldwyn recommends that Goldwyn Stockholders tender
their shares in such tender or exchange offer; or (iv) any Person shall have
acquired beneficial ownership or the right to acquire beneficial ownership of,
or any "group" shall have been formed which beneficially owns, or has the right
to acquire "beneficial ownership" of, more than 50% of the then outstanding
shares of any class of capital stock of Goldwyn (the occurrence of any of
(i)-(iv) above shall be referred to as a "Goldwyn Competing Offer").
Expenses
The Goldwyn Merger Agreement provides that each party will bear their
respective expenses incurred in connection with the preparation, execution and
performance of the Goldwyn Merger Agreement and the transactions contemplated
thereby; provided, however, that if the Goldwyn Merger Agreement is terminated
(i) as a result of a Goldwyn Competing Offer or (ii) upon the exercise by MIG of
its Goldwyn Material Breach Termination Right and in the case of clause (ii),
within six months after the date of such termination, a Goldwyn Business
Combination (as defined below) shall have occurred or Goldwyn shall have entered
into a definitive agreement providing for a Goldwyn Business Combination,
Goldwyn shall pay MIG $3 million and reimburse MIG for all of MIG's fees and
expenses, including all of its reasonable legal, accounting and investment
banking fees and expenses.
64
<PAGE>
A Goldwyn Business Combination means (i) a merger, consolidation, share
exchange, business combination or similar transaction involving Goldwyn; (ii) a
sale, lease, exchange, transfer or other disposition of 50% or more of the
assets of Goldwyn and its subsidiaries taken as a whole, in a single transaction
or series of transactions; or (iii) the acquisition by any person or "group" (as
defined in Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of "beneficial ownership" of 50% or more of Goldwyn Common Stock,
whether by a tender offer, exchange offer or otherwise.
In addition, if the Goldwyn Merger Agreement is terminated (i) by MIG
pursuant to the Goldwyn Material Breach Termination Right, Goldwyn shall
reimburse all of MIG's fees and expenses including all of its reasonable legal,
accounting and investment banking fees and expenses relating to the Goldwyn
Merger or (ii) by Goldwyn pursuant to the Goldwyn Material Breach Termination
Right, MIG shall reimburse all of Goldwyn's fees and expenses, including all of
its reasonable legal, accounting and investment banking fees and expenses
relating to the Goldwyn Merger.
Any payment required to be made pursuant to the foregoing shall be made as
promptly as practicable but not later than two business days after termination
of the Goldwyn Merger Agreement and shall be made by wire transfer of
immediately available funds to an account designated by MIG or Goldwyn, as the
case may be. Any payment to be made as a result of the occurrence of a Business
Combination shall be made as promptly as practicable but not later than two
business days after the earlier to occur of the Business Combination or the
execution of the definitive agreement providing for such Business Combination.
Agreement Not to Solicit Other Offers
Neither Goldwyn nor any of its subsidiaries shall, nor shall it or any of
its subsidiaries authorize or permit any of their respective agents to, (i)
solicit, initiate, encourage (including by way of furnishing information) or
take any other action to facilitate, any inquiry or the making of any proposal
which constitutes, or may reasonably be expected to lead to, any acquisition or
purchase of a substantial amount of assets of, or any equity interest in,
Goldwyn or any of its subsidiaries or any tender offer (including a self tender
offer) or exchange offer, merger, consolidation, business combination, sale of
substantially all assets, sale of securities, recapitalization, liquidation,
dissolution or similar transaction involving Goldwyn or any of its subsidiaries
(other than the transactions contemplated or permitted by the Goldwyn Merger
Agreement) or any other transaction the consummation of which would or could
reasonably be expected to impede, interfere with, prevent or which would or
could reasonably be expected to materially delay the Goldwyn Merger
(collectively, "Goldwyn Transaction Proposals") or agree to or endorse any
Goldwyn Transaction Proposal or (ii) propose, enter into or participate in any
discussions or negotiations regarding any of the foregoing, or furnish to any
other person any information with respect to its business, properties or assets
or any of the foregoing, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing; provided, however, that the foregoing
clauses (i) and (ii) shall not prohibit Goldwyn from (A) furnishing information
pursuant to any appropriate confidentiality letter concerning Goldwyn and its
businesses, properties or assets to a third party who the Board of Directors of
Goldwyn has a reasonable basis for determining is likely to make a Goldwyn
Qualified Transaction Proposal (as defined below), (B) engaging in discussions
or negotiations with such a third party who has made a Goldwyn Qualified
Transaction Proposal or (C) following receipt of a Goldwyn Qualified Transaction
Proposal, taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) under the Exchange Act or changing the Goldwyn Merger
Recommendation, but in each case referred to in the foregoing clauses (A)
through (C) only after the Goldwyn Board of Directors concludes in good faith
following receipt of a written opinion addressed to Goldwyn from outside counsel
that such action is reasonably necessary for the Goldwyn Board of Directors to
comply with its fiduciary obligations to stockholders under applicable law. If
the Goldwyn Board of Directors receives a Goldwyn Transaction Proposal, then
Goldwyn shall immediately inform MIG of the terms and conditions of such
proposal and the identity of the person making it and shall keep MIG fully
informed of the status and details of any such Goldwyn Transaction Proposal and
of all steps it is taking in
65
<PAGE>
response to such Goldwyn Transaction Proposal. The term "Goldwyn Qualified
Transaction Proposal" shall mean a Goldwyn Transaction Proposal that the Goldwyn
Board of Directors determines in good faith, after consultation with its outside
financial advisor, is reasonably capable of being consummated and is not subject
to any material contingencies relating to financing.
Conduct of Business by Goldwyn Prior to the Goldwyn Merger
Except as otherwise provided in the Goldwyn Merger Agreement, the Goldwyn
Merger Agreement provides that Goldwyn shall, and shall cause its subsidiaries
to, carry on their businesses in the usual, regular and ordinary course in
substantially the same manner conducted in the past and use their best efforts
to preserve intact their respective business organizations, keep available the
services of their respective officers and employees and preserve their
respective relationships with customers, suppliers, contractors, distributors,
licensors, licensees and others with whom they have business dealings to the end
that their respective goodwill and ongoing businesses shall not be impaired in
any material respect at the Goldwyn Effective Time. The Goldwyn Merger Agreement
also contains customary restrictions on Goldwyn's ability to declare dividends,
authorize or issue capital stock, purchase its own capital stock, amend its
organizational documents, alter its corporate structure, dispose of any of its
material properties or assets or incur any indebtedness, outside of that
permitted under Goldwyn's credit facilities, prior to the Goldwyn Effective
Time. In addition, in connection with the Goldwyn Merger, Orion has entered into
the Financing and Distribution Agreement (as defined herein) pursuant to which
Orion has provided Goldwyn with an advance of up to $5.5 million for the
acquisition of Goldwyn's distribution rights in six feature films.
Forms S-3 and S-8
MIG has agreed to, as promptly as practicable, prepare and file with the
Commission the MIG-Goldwyn Shelf Registration Statement registering for resale
the Common Stock to be received by the Goldwyn Family Trust and Mr. Goldwyn in
the Goldwyn Merger and a registration statement(s) on Form S-8 permitting the
resale of the shares of Common Stock to be issued to former Goldwyn Stockholders
upon exercise of the Goldwyn Options.
Directors' and Officers' Indemnification and Insurance
Pursuant to the Goldwyn Merger Agreement, (i) for a period of four years
after the Goldwyn Effective Time, MIG has agreed to maintain in effect policies
of directors' and officers' liability insurance for the Goldwyn Surviving
Corporation in substantially the same form with substantially the same terms and
conditions as contained in Goldwyn's current policies of directors' and
officers' liability insurance with respect to claims arising from facts or
events which occurred before the Goldwyn Effective Time and (ii) from and after
the Goldwyn Effective Time, the Goldwyn Surviving Corporation will indemnify and
hold harmless each present and former director and officer of Goldwyn and its
subsidiaries, determined as of the Goldwyn Effective Time (the "Goldwyn
Indemnified Parties"), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding, or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior the Goldwyn
Effective Time, whether asserted or claimed prior to, at or after the Goldwyn
Effective Time, to the fullest extent that Goldwyn or such subsidiary would have
been permitted under applicable law and its certificate of incorporation or
by-laws as in effect on the date of the Goldwyn Merger Agreement, to indemnify
such person (and the Goldwyn Surviving Corporation shall advance expenses as
incurred to the fullest extent permitted under applicable law provided the
person to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such person is not entitled to
indemnification). Any Goldwyn Indemnified Party wishing to claim indemnification
upon learning of any such claim, action, suit, proceeding or investigation must
promptly notify the Goldwyn Surviving Corporation thereof, though the failure to
so notify shall not relieve the Goldwyn Surviving Corporation of any liability
it may have to such Goldwyn
66
<PAGE>
Indemnified Party except to the extent such failure materially prejudices the
Goldwyn Surviving Corporation. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Goldwyn
Effective Time), a Goldwyn Indemnified Party may retain counsel satisfactory to
him or her and the Goldwyn Surviving Corporation shall pay all reasonable fees
and expenses of such counsel for the Goldwyn Indemnified Party promptly as
statements therefor are received. The Goldwyn Surviving Corporation shall use
its best efforts to assist in the defense of any such matter. If indemnification
is not available with respect to any Goldwyn Indemnified Party, the Goldwyn
Surviving Corporation and the Goldwyn Indemnified Party shall contribute to the
amount payable in such proportion as is appropriate to reflect relative faults
and benefits.
Other Agreements
Voting Agreement
Pursuant to the Voting Agreement, the Goldwyn Family Trust has agreed to
vote the shares of Goldwyn Common Stock held by it (a) in favor of the Goldwyn
Merger, the Goldwyn Merger Agreement and the transactions contemplated by the
Goldwyn Merger Agreement and (b) against any proposal for any recapitalization,
merger, sale of assets or other business combination involving Goldwyn (other
than the Goldwyn Merger) or any other action or agreement that would result in a
breach of any covenant, representation or warranty or any other obligation or
agreement of Goldwyn under the Goldwyn Merger Agreement or which could result in
any of the conditions to Goldwyn's obligations under the Goldwyn Merger
Agreement not being fulfilled.
As of the Goldwyn Record Date, the Goldwyn Family Trust beneficially owns
5,111,261 shares of Goldwyn Common Stock, representing approximately 60.2% of
the outstanding shares of Goldwyn Common Stock (without giving effect to the
exercise of the Goldwyn Put, which exercise is expected to occur after the
Goldwyn Record Date). The vote of the Goldwyn Family Trust in accordance with
the Voting Agreement will be sufficient to approve the Goldwyn Merger Agreement
without any action on the part of any other stockholders of Goldwyn.
Employment Agreements
It is a condition to the consummation of the Goldwyn Merger that Samuel
Goldwyn, Jr. shall have entered into an employment agreement with the Goldwyn
Surviving Corporation. MIG and Mr. Goldwyn have agreed that Mr. Goldwyn will be
employed as Chairman of the Goldwyn Surviving Corporation, reporting directly to
the Chairman and Vice Chairman of MIG. Mr. Goldwyn will have the obligation to
first offer to MIG all of Mr. Goldwyn's film development projects. If MIG
refuses and a third party develops, produces and/or finances the film, all
producer fees payable to Mr. Goldwyn in connection therewith, if any, will be
split evenly between Mr. Goldwyn and MIG. The Goldwyn Employment Agreement is
for a term of seven years, with Mr. Goldwyn receiving an annual base salary of
$625,000 (his current annual salary is $300,000) and a bonus, which bonus,
subject to certain limitations, will be determined based upon the performance of
films produced or acquired by Mr. Goldwyn for MIG. His maximum annual salary and
bonus may not exceed $1.5 million.
In addition, in connection with Mr. Goldwyn's employment arrangement, MIG
has agreed to provide the Goldwyn Surviving Corporation with a revolving credit
facility of $20 million solely for the production and acquisition of qualifying
full-length feature films. To qualify, the Goldwyn Surviving Corporation's
portion of the production costs for such films must be less than or equal to $5
million (except that with respect to one film per year, the Goldwyn Surviving
Corporation's portion of the production costs for such films may not exceed $7
million) and (i) with respect to films produced by the Goldwyn Surviving
Corporation, be approved in advance by MIG's Office of the Chairman and (ii)
with respect to films acquired by the Goldwyn Surviving Corporation, be approved
in advance as part of a business plan or be pre-approved by MIG's Office of the
Chairman. Mr. Goldwyn will control the international and domestic marketing and
exhibition program of films produced or acquired by the Goldwyn Surviving
Corporation. In addition to the foregoing, MIG has agreed to provide the Goldwyn
67
<PAGE>
Surviving Corporation with a revolving development fund for the development of
films, not to exceed $1 million for the first year after the Goldwyn Effective
Time, increasing $250,000 per year up to a maximum of $2 million.
In addition, it is a condition to MIG's obligation to consummate the Goldwyn
Merger that the Goldwyn Surviving Corporation shall have entered into an
employment agreement with Meyer Gottlieb satisfactory to the parties thereto.
Distribution Agreement
It is a condition to the consummation of the Goldwyn Merger that the Goldwyn
Family Trust and the Goldwyn Surviving Corporation enter into the Distribution
Agreement for the worldwide distribution in all media of the Pictures for a term
ending on December 31, 2020. Under the Distribution Agreement, the Goldwyn
Surviving Corporation has the sole and exclusive right and license for the
distribution, licensing and other exploitation of 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 the Goldwyn Surviving Corporation, the
Goldwyn Surviving Corporation shall have the exclusive right of first refusal to
produce any remakes or sequels of any of the Pictures and the right to act as
the Goldwyn Family Trust's sole and exclusive agent and representative for the
distribution, licensing and other exploitation of any such remake or sequel
rights which the Goldwyn Family 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 the Goldwyn
Surviving Corporation 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, the
Goldwyn Surviving Corporation 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.
Goldwyn is obligated to make participation payments to the Goldwyn Family
Trust out of the proceeds from exploiting the Pictures, which participation
payments are payable out of the proceeds from the distribution of the Pictures,
after payment of the distribution fee and reimbursement of expenses described in
the immediately preceding paragraph. A portion of such film participations owed
by Goldwyn to the Goldwyn Family Trust have accrued under the existing agreement
between Goldwyn and the Goldwyn Family Trust relating to the Pictures (the
"Accrued Participations") and have not been paid as a result of limitations set
forth in Goldwyn's credit facility with the Goldwyn Bank Group. Pursuant to the
Distribution Agreement, the Goldwyn Family 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
Family Trust can receive in respect of Accrued Participations and future
participations owed to the Goldwyn Family Trust to a maximum amount per year
escalating from $1.25 million to $1.5 million over a four-year period. The total
amount of Accrued Participations payable as of the Goldwyn Effective Time is
anticipated to be approximately $4.5 million (assuming the exercise of the
Goldwyn Put as described below). If the Goldwyn Put, as described below, is not
exercised as of the Goldwyn Effective Time, the total amount of Accrued
Participations payable as of the Goldwyn Effective Time is anticipated to be
approximately $10.5 million.
Option Agreement
On April 13, 1993, Goldwyn, Mr. Goldwyn and the Goldwyn Family Trust entered
into an option agreement (the "Goldwyn Option Agreement"), which among other
things, provides for the Goldwyn Put, i.e., the issuance, at Goldwyn's option,
of up to 875,000 shares of Goldwyn Common Stock to the Goldwyn Family Trust at a
minimum price of $6.50 per share in exchange for a dollar-for-dollar
68
<PAGE>
reduction of the Accrued Participations payable to the Goldwyn Family Trust.
Goldwyn intends to exercise the Goldwyn Put prior to the Goldwyn Effective Time,
which will result in the issuance to the Goldwyn Family Trust of 875,000 shares
of Goldwyn Common Stock and the reduction of $5,687,500 in Accrued
Participations. The Goldwyn Family Trust has advised Goldwyn that it intends to
sell such shares, after the conversion thereof into shares of Common Stock
pursuant to the Goldwyn Merger, primarily to satisfy certain tax liabilities
incurred in connection with the exercise of the Goldwyn Put. If the Goldwyn Put
remains unexercised, the Goldwyn Option Agreement will be amended and restated,
and the Amended and Restated Option Agreement will be executed, to clarify that
the options granted under the Goldwyn Option Agreement may be exercised
utilizing the Common Stock (the "Option Shares") instead of Goldwyn Common
Stock, with an appropriate adjustment to reflect conversion of Goldwyn Common
Stock to Common Stock based upon the Goldwyn Exchange Ratio. The Amended and
Restated Option Agreement would contain terms substantially similar to the
Goldwyn Option Agreement. Under the Amended and Restated Option Agreement, MIG
and Mr. Goldwyn each would have reciprocal options, expiring April 11, 1999,
entitling (i) Mr. Goldwyn to acquire the Option Shares at a cash exercise price
equal to the quotient of $8.00 divided by the Goldwyn Exchange Ratio, and (ii)
MIG to issue the Option Shares to the Goldwyn Family Trust in exchange for a
dollar-for-dollar reduction of the Accrued Participations payable to the Goldwyn
Family Trust at an exchange price equal to the then market price of the Common
Stock, if such market price is not greater than the quotient of $9.00 divided by
the Goldwyn Exchange Ratio or less than the quotient of $6.50 divided by the
Goldwyn Exchange Ratio, or if greater or lesser than such amounts, at $9.00
divided by the Goldwyn Exchange Ratio or $6.50 divided by the Goldwyn Exchange
Ratio, respectively. Under the Amended and Restated Option Agreement, Mr.
Goldwyn would retain certain "piggyback" and demand registration rights under
the Securities Act with respect to the shares of Common Stock that may be issued
under the Amended and Restated Option Agreement.
Trademark License Agreement
Pursuant to the Trademark License Agreement, Samuel Goldwyn, Jr. has agreed
to license the trademark "Samuel Goldwyn" to the Goldwyn Surviving Corporation
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 the Goldwyn Surviving Corporation that is consistent with the high
quality standards established by Mr. Goldwyn.
Interim Funding
In connection with the Goldwyn Merger, Orion has entered into a six picture
distribution agreement with Goldwyn (the "Financing and Distribution Agreement")
pursuant to which Orion has provided Goldwyn with an advance of up to $5.5
million for the acquisition of Goldwyn's distribution rights in six feature
films.
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. Productions currently owns only de minimis assets. It is a condition
to the consummation of the Goldwyn Merger that the assets, if any, of
Productions that have been financed by Goldwyn or that otherwise relate to the
operations of Goldwyn be transferred to the Goldwyn Surviving Corporation.
Neither MIG, the Goldwyn Surviving Corporation, nor Goldwyn will pay any
consideration for the transfer of these assets.
Nightlife, Inc. ("Nightlife") is a California corporation wholly owned by
Meyer Gottlieb which has been involved in the production of motion pictures and
television programs. Nightlife currently owns only de minimis assets. It is a
condition to the consummation of the Goldwyn Merger that the assets, if any, of
Nightlife that have been financed by Goldwyn or that otherwise relate to the
operations of Goldwyn be transferred to the Goldwyn Surviving Corporation.
Neither MIG, the Goldwyn Surviving Corporation, nor Goldwyn will pay any
consideration for the transfer of these assets.
69
<PAGE>
Registration Rights Agreement
MIG has agreed to use its best efforts to prepare and file with the
Commission, as promptly as practicable, the MIG-Goldwyn Shelf Registration
Statement, which will register for resale all of the shares of Common Stock to
be received by Mr. Goldwyn or the Goldwyn Family Trust pursuant to the Goldwyn
Merger, and 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 Goldwyn Effective Time.
REGULATORY FILINGS AND APPROVALS
The parties have filed the requisite applications under the Hart Scott Act
and the waiting period expired.
CHANGE IN CONTROL
The consummation of the Goldwyn Merger will result in a "change of control"
of Goldwyn (within the meaning of Item 403(c) of the Commission's Regulation
S-K). Upon consummation of the Goldwyn Merger (assuming (i) a Goldwyn
Determination Date of May 28, 1996 and a MIG-Goldwyn Average Closing Price of
$13.12, (ii) the consummation of the Refinancing, (iii) the exercise of the
Goldwyn Put and (iv) without giving effect to the exercise or conversion of any
options, warrants or convertible securities exercisable for or convertible into
Common Stock), existing MIG Stockholders will collectively own approximately
70.7% of the outstanding shares of Common Stock and Goldwyn Stockholders will
collectively own approximately 5.6% of the outstanding shares of Common Stock.
Stockholders purchasing shares of Common Stock in the Equity Offering will own
the remaining 23.7% of the outstanding shares of Common Stock.).
ACCOUNTING TREATMENT
The Goldwyn Merger will be accounted for as a purchase transaction. For
accounting purposes, MIG will be deemed the surviving corporation of the Goldwyn
Merger.
PUBLIC TRADING MARKET
It is a condition to the consummation of the Goldwyn Merger that the shares
of Common Stock to be issued in connection with the Goldwyn Merger be authorized
for listing on the AMEX or any other national securities exchange or automated
quotation system approved by MIG and Goldwyn, in each case, subject to official
notice of issuance. An application to list the shares of Common Stock to be
issued in the Goldwyn Merger on the AMEX will be filed shortly.
DISSENTERS' RIGHTS
Neither MIG Stockholders nor Goldwyn Stockholders are entitled to
dissenters' rights of appraisal or other dissenters' rights under Delaware law
with respect to the Goldwyn Merger or any transactions contemplated by the
Goldwyn Merger Agreement.
CONVERSION OF SHARES, PROCEDURES FOR EXCHANGE OF CERTIFICATES
MIG has appointed Chemical Mellon Shareholder Services to act as Exchange
Agent for the Goldwyn Merger. As soon as practicable after the Goldwyn Effective
Time, MIG shall cause the Exchange Agent to mail appropriate and customary
transmittal materials (which shall specify that
70
<PAGE>
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of Goldwyn Common Stock shall pass, only upon
proper delivery of such certificates to the Exchange Agent) to each Goldwyn
Stockholder of record as of the Goldwyn Effective Time advising such holder of
the effectiveness of the Goldwyn Merger and the procedure for surrendering to
the Exchange Agent outstanding certificates formerly evidencing Goldwyn Common
Stock in exchange for new certificates evidencing Common Stock and cash in lieu
of fractional shares. Upon surrender to the Exchange Agent of a certificate or
certificates formerly representing shares of Goldwyn Common Stock, together with
duly executed transmittal materials, MIG shall promptly (i) issue or cause to be
issued to the persons entitled thereto a certificate representing the number of
whole shares of Common Stock that such persons are entitled to receive in the
Goldwyn Merger and (ii) distribute or cause to be distributed to the persons
entitled thereto cash in lieu of fractional shares. Upon surrender, each
certificate theretofore evidencing Goldwyn Common Stock shall be canceled.
At or promptly after the Goldwyn Effective Time, MIG shall deposit the
Goldwyn Merger Consideration with the Exchange Agent to set up the Goldwyn
Exchange Fund. After the Goldwyn Effective Time, MIG shall, on each payment or
distribution date, tender to the Exchange Agent as an addition to the Goldwyn
Exchange Fund all dividends and other distributions, if any, applicable to
certificates held in the Goldwyn Exchange Fund.
If any issuance of shares of Common Stock in exchange for shares of Goldwyn
Common Stock is to be made to a person other than the Goldwyn Stockholder in
whose name the certificate is registered at the Goldwyn Effective Time, it will
be a condition of such exchange that the certificate so surrendered be properly
endorsed or otherwise in proper form for transfer and that the Goldwyn
Stockholder requesting such issuance either pay any transfer or other tax
required or establish to the satisfaction of MIG that such tax has been paid or
is not payable.
After the Goldwyn Effective Time, there will be no further transfers of
Goldwyn Common Stock on the stock transfer books of Goldwyn. If a certificate
representing Goldwyn Common Stock is presented for transfer, it will be canceled
and a certificate representing the appropriate number of full shares of Common
Stock and cash in lieu of fractional shares and any dividends and distributions
will be issued in exchange therefor.
At and after the Goldwyn Effective Time and until surrendered, shares of
Goldwyn Common Stock will be deemed for all corporate purposes, other than the
payment of dividends and distributions and voting, to evidence ownership of the
number of full shares of Common Stock into which such shares of Goldwyn Common
Stock were converted at the Goldwyn Effective Time. No dividends or other
distributions, if any, payable to holders of Common Stock will be paid to the
holders of any certificates for shares of Goldwyn Common Stock until such
certificates are surrendered. Upon surrender of such certificates, all such
declared dividends and distributions which shall have become payable with
respect to such whole shares of Common Stock in respect of a record date after
the Goldwyn Effective Time will be paid to the holder of record of the whole
shares of Common Stock represented by the certificates issued in exchange
therefor, without interest.
GOLDWYN STOCKHOLDERS SHOULD NOT FORWARD STOCK CERTIFICATES TO THE EXCHANGE
AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS. GOLDWYN STOCKHOLDERS SHOULD
NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
FRACTIONAL SHARES
No fractional shares of Common Stock will be issued to Goldwyn Stockholders
in connection with the Goldwyn Merger. In lieu of the issuance of any fractional
shares, cash equal to such fractional interest multiplied by the market value of
a full share of Common Stock will be paid to the holder of such interest. For
this purpose, the market value of a share of Common Stock will be equal to the
sale
71
<PAGE>
price obtained by the Exchange Agent on the AMEX promptly after the Goldwyn
Effective Time of such share of Common Stock.
INTERESTS OF CERTAIN PERSONS IN THE GOLDWYN MERGER
In considering the recommendation of the Goldwyn Board of Directors with
respect to the Goldwyn Merger Agreement and the transactions contemplated
thereby, Goldwyn Stockholders should be aware that certain members of Goldwyn's
management and the Goldwyn Board of Directors have certain interests in the
Goldwyn Merger not shared by other Goldwyn Stockholders generally. Each of the
members of Goldwyn's Board of Directors was aware of these interests and
considered them, among other matters, in approving the Goldwyn Merger Agreement
and the transactions contemplated thereby.
In connection with the Goldwyn Merger, the Goldwyn Family Trust, of which
Samuel Goldwyn, Jr., the Chairman and Chief Executive Officer of Goldwyn, is
trustee, has agreed to enter into the Distribution Agreement at the Goldwyn
Effective Time, relating to the distribution by the Goldwyn Surviving
Corporation of the Pictures. Among other things, the terms of the Distribution
Agreement differ from those contained in the existing distribution agreement
between the Goldwyn Family Trust and Goldwyn relating to the Pictures by (i)
extending the term to December 31, 2020 (the current agreement terminates on
December 31, 2003, subject to renewal under certain circumstances) and (ii)
providing for certain minimum and maximum payments to the Goldwyn Family Trust
in respect of the Accrued Participations owed to the Goldwyn Family Trust under
the current agreement (the current agreement contains no limitations with
respect to such payments). In addition, the Goldwyn Family Trust will continue
to receive 65% of the net proceeds derived from the distribution of the Pictures
through December 31, 1996, after which time and through the remainder of the
term of the Distribution Agreement, the Goldwyn Family Trust will receive 70% of
such net proceeds. See "PROPOSAL NO. 1--THE GOLDWYN MERGER--Terms and Conditions
of the Goldwyn Merger Agreement-- Other Agreements--Distribution Agreement." In
addition, it is a condition to the consummation of the Goldwyn Merger that Mr.
Goldwyn be employed as Chairman of the Goldwyn Surviving Corporation and that
such corporation have certain amounts made available to it for the development
and production of motion picture product. Furthermore, it is a condition to
MIG's obligation to consummate the Goldwyn Merger that the Goldwyn Surviving
Corporation shall have entered into an employment agreement with Meyer Gottlieb,
President and a director of Goldwyn, satisfactory to the parties thereto. See
"PROPOSAL NO. 1--THE GOLDWYN MERGER--Terms and Conditions of the Goldwyn Merger
Agreement--Other Agreements--Employment Agreements."
On April 13, 1993, Goldwyn, Samuel Goldwyn, Jr. and the Goldwyn Family Trust
entered into the Goldwyn Option Agreement, which among other things, provides
for the Goldwyn Put, i.e., the issuance, at Goldwyn's option, of up to 875,000
shares of Goldwyn Common Stock to the Goldwyn Family Trust at a minimum price at
$6.50 per share in exchange for a dollar-for-dollar reduction of the Accrued
Participations, payable to the Goldwyn Family Trust. Goldwyn intends to exercise
the Goldwyn Put prior to the Goldwyn Effective Time (but subsequent to the
Goldwyn Record Date), which will result in the issuance to the Goldwyn Family
Trust of 875,000 shares of Goldwyn Common Stock and the reduction of $5,687,500
in Accrued Participations. The Goldwyn Family Trust has advised Goldwyn that it
intends to sell such shares, after the conversion thereof into shares of Common
Stock pursuant to the Goldwyn Merger, primarily to satisfy certain tax
liabilities incurred in connection with the exercise of the Goldwyn Put. If the
Goldwyn Put remains unexercised, the Goldwyn Option Agreement will be amended
and restated to clarify that the options granted under the Goldwyn Option
Agreement may be exercised utilizing the Common Stock instead of Goldwyn Common
Stock. Under the Amended and Restated Option Agreement, Mr. Goldwyn would retain
certain "piggyback" and demand registration rights under the Securities Act with
respect to the shares of Common Stock that may be issued under the Amended and
Restated Option Agreement.
72
<PAGE>
MIG has agreed to register for resale under the Securities Act the shares of
Common Stock to be received in the Goldwyn Merger by Mr. Goldwyn or the Goldwyn
Familty Trust on the MIG-Goldwyn Shelf Registration Statement. It is a condition
to the consummation of the Goldwyn Merger that the MIG-Goldwyn Shelf
Registration Statement be declared effective on or prior to the Goldwyn
Effective Time. MIG has further agreed to keep the MIG-Goldwyn Shelf
Registration Statement continuously effective until the earlier of the sale of
all such covered securities, the date all shares not yet sold pursuant to such
registration statement may be sold by Mr. Goldwyn or the Goldwyn Family Trust in
a single transaction using Rule 144 promulgated under the Securities Act and
three years from the Goldwyn Effective Time. See "PROPOSAL NO. 1--THE GOLDWYN
MERGER--Terms and Conditions of the Goldwyn Merger Agreement."
In addition, MIG and 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. See "PROPOSAL NO.
1--THE GOLDWYN MERGER--Terms and Conditions of the Goldwyn Merger
Agreement--Directors' and Officers' Indemnification and Insurance" and "--Other
Agreements."
73
<PAGE>
OPERATIONS AFTER THE GOLDWYN MERGER
Unless otherwise indicated, all references in the following discussion to
MIG or the Company as well as to MIG's Entertainment Group and Communications
Group assume the simultaneous consummation of the Goldwyn Merger and the
Refinancing. In addition, although not subject to a vote of MIG's stockholders,
MIG has signed a definitive agreement to acquire MPCA, which acquisition is
expected to close prior to the consummation of the Goldwyn Merger. Special Note:
Certain statements set forth below under this caption constitute
"forward-looking statements" within the meaning of the Reform Act. See "Special
Note Regarding Forward-Looking Statements" on page 5 for additional factors
relating to such statements.
ENTERTAINMENT GROUP
Through the Entertainment Group, MIG is engaged primarily in the
development, production, acquisition, exploitation and worldwide distribution in
all media of motion pictures, television programming and other filmed
entertainment product. MIG also holds a valuable library of over 2,000 film and
television titles, including Academy Award winning films such as Dances with
Wolves and Silence of the Lambs, action films such as the three-film RoboCop
series and classic motion pictures such as Wuthering Heights, The Pride of the
Yankees, Guys and Dolls and The Best Years of Our Lives. This library provides
MIG with a stable stream of cash flow to support its various production
operations. MIG has adopted a conservative theatrical production, acquisition
and distribution strategy consisting primarily of commercial and specialized
films, with well-defined target audiences in which MIG's portion of the
production costs is generally limited to between $5 million and $10 million per
picture. The Entertainment Group's management has significant experience in the
production of motion picture and television entertainment and was responsible
for producing the recent box-office success Dumb and Dumber and the Academy
Award winning The Madness of King George. MIG also owns what management believes
is the leading specialty theatre circuit with 52 motion picture theatres with a
total of 140 screens located in the United States.
Strategies
MIG intends to further enhance the value of the Entertainment Group's assets
by (i) exploiting its valuable film and television library, (ii) expanding its
production of feature films and (iii) enhancing the value of its theatre
circuit.
Exploiting the Existing Library
MIG expects its film and television library to generate significant cash
flow from its existing, long-term distribution contracts and further
exploitation of its library in traditional domestic and international media,
such as free and pay television and home video. In addition, MIG will also
benefit from several factors which are expected to contribute to an increase in
the demand for MIG's programming. These factors include: (i) the emergence of
technological advances; (ii) the marketing of MIG's titles in new geographic
markets; and (iii) the impact of MIG's expanded feature film production.
MIG has historically been successful in selling its library titles to the
free and pay television and home video markets. These markets are expected to
continue to experience significant growth, primarily as a result of
technological advances and the expansion of the multi-channel television
industry worldwide. The emergence of digital compression, video-on-demand,
direct-to-home-broadcasting, DVD and other new technologies is expected to
increase the worldwide demand for entertainment programming largely by
increasing existing transmission capabilities and by increasing the percentage
of the population which can access multi-channel television systems. With an
extensive library which contains a variety of film and television titles, MIG
believes it is well-positioned to benefit from this anticipated increase in
demand for programming.
74
<PAGE>
In addition to continuing to market its library in countries with
established multi-channel television industries such as the United Kingdom and
France, MIG intends to aggressively market its library in new international
markets in which the multi-channel television industry has recently emerged or
is in the early stages of development.
MIG also expects that the marketability and value of its existing library
will increase as MIG expands its new feature film production operations, which
will enable MIG to market these films together with titles already in its
library.
Expanding Motion Picture Production
MIG has adopted a conservative theatrical production, acquisition and
distribution strategy which it believes will generate more stable cash flows
than the approach of the major motion picture studios. MIG intends to produce or
acquire and release 10 to 14 theatrical features per year, consisting primarily
of commercial and specialized films with a well-defined target audience and
marketing campaign and generally with MIG's portion of the production cost
generally ranging from $5.0 million to $10.0 million each. MIG also expects to
spend between $4.0 million and $8.0 million in domestic print and advertising
costs for each film it produces or acquires. This production strategy has been
followed by MPCA prior to its acquisition by MIG and is based on MPCA's prior
success, including the performance of its commercially successful films such as
Dumb and Dumber and Threesome. MIG also plans to continue to be a leader in the
production, acquisition and distribution of specialized motion pictures and art
films, including those films management believes may have crossover commercial
potential. This strategy has been followed by Goldwyn prior to its acquisition
by the Company and is based on its success with such films as Much Ado About
Nothing, The Madness of King George, Eat Drink Man Woman and Angels and Insects.
In addition, the Entertainment Group intends to continue to co-produce (with
limited financial exposure to the Entertainment Group) larger budget movies with
major studios. For example, Goldwyn is currently producing, in conjunction with
Walt Disney Pictures, The Preacher's Wife, starring Denzel Washington and
Whitney Houston and directed by Penny Marshall. Goldwyn has a gross profit
participation in this film. In order to expand its production capabilities and
minimize its exposure to the performance of any particular film, MIG intends to
finance a significant portion of each film's budget by pre-licensing foreign
distribution rights. Furthermore, certain MIG executives will, on behalf of MIG,
enter into "producer-for-hire" agreements with other studios for which MIG and
such executives will receive a fee.
As of April 30, 1996, MIG has scheduled for domestic theatrical release the
following motion pictures during the year ending December 31, 1996.
<TABLE>
<CAPTION>
TITLE DIRECTOR CAST DESCRIPTION
- ------------------- ------------------ ------------------ -------------------------------
<S> <C> <C> <C>
American Buffalo Michael Corrente Dustin Hoffman Based on the popular and
Dennis Franz influential David Mamet play, a
Sean Nelson powerfully emotional and funny
story of a planned and botched
coin theft.
August Anthony Hopkins Anthony Hopkins Oscar-winning actor Anthony
Kate Burton Hopkins makes his directorial
Hugh Lloyd debut with this film which
Rhoda Lewis transposes Anton Chekov's stage
Leslie Phillips classic Uncle Vanya, to a
northern Welsh village.
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
TITLE DIRECTOR CAST DESCRIPTION
- ------------------- ------------------ ------------------ -------------------------------
<S> <C> <C> <C>
I Shot Andy Warhol Mary Harron Stephen Dorff A riveting portrait of the
Martha Plimpton lesbian revolutionary who
Jared Harris almost
Lili Taylor killed Andy Warhol, and a
Lothaire Bluteau tribute to the true King of Pop
Anna Thompson and the world surrounding him.
Lucky Break Ben Lewis Gia Cerides A sophisticated and bawdy tale
Anthony LaPaglia of a passionate affair with
Rebecca Gibney physical mishaps, set in a
world where everybody is
slightly impaired and with an
unforgettable photo finish.
Maybe . . . Maybe Sonke Wortmann Til Schweiger A hilarious look at infidelity
Not Katja Reimann and mistaken sexual identity as
Joachim Krol an achingly handsome but skirt
Rufus Beck chasing boyfriend gets
entangled in a web of
miscommunications and
misinterpreted situations.
Napoleon Mario Andrecchio In this live action adventure,
an adorable puppy gets lost in
the wild Australian outback.
Befriended by exotic animals,
Napoleon overcomes his fears
and discovers the magic of
nature.
Oh Mary This London Suri Krishnamurna Jason Barry A poignant and dramatic tale
Uba Seagrave from the author of My Left
Foot. Based on actual
incidents, this sometimes
comical, sometimes tragic film
has a powerful emotional
charge.
Original Gangstas Larry Cohen Jim Brown A contemporary action- adventure
Fred Williamson set in Gary, Indiana with a
Pam Grier soundtrack to include music
Richard Roundtree from a number of popular rap
Ron O'Neal groups.
Paul Winfield
Isabelle Sanford
Palookaville Alan Taylor William Forsythe Three young men embrace crime
Adam Trese as a temporary change of
Vincent Gallo lifestyle and the solution to
unemployment.
Phat Beach Doug Ellin Jermaine Hopkins The unprecedented hip hop beach
Brian Hooks comedy involving the comedic
Claudia Kalcem misadventures of two friends
during their summer break.
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
TITLE DIRECTOR CAST DESCRIPTION
- ------------------- ------------------ ------------------ -------------------------------
<S> <C> <C> <C>
The Substitute Robert Mandel Tom Berenger A mercenary goes undercover as
Ernie Hudson a substitute teacher after his
Diane Venora girlfriend is brutally attacked
Glenn Plummer by a gang of students. In an
Marc Anthony effort to uncover her
attackers, he soon discovers a
city wide drug ring that has
infiltrated the school and put
the entire student body in
jeopardy and in a war with the
criminals.
The Arrival David Twohy Charlie Sheen A sci-fi thriller that revolves
Ron Silver around an unassuming scientist
Lindsay Crouse who becomes the only thing that
Teri Polo stands between our civilization
and certain destruction when he
investigates an unusual
shockwave from outer space and
discovers a team of
extraterrestrials poised to
take over the world.
Trees Lounge Steve Buscemi Anthony LaPaglia Revolves around Tommy Basilio,
Chloe Sevigny who loses his job and his
Mimi Rogers girlfriend to his best friend.
Daniel Baldwin But he manages to stumble
Carol Kane across friendship, inspiration,
and a strange kind of truth in
the last place he expected, the
local bar.
</TABLE>
- ------------
Enhance the Value of its Theatrical Exhibition Assets
MIG believes it is the largest exhibitor of specialized motion pictures and
art films in the United States. The Entertainment Group's theatre circuit
currently consists of 52 theatres with a total of 140 screens. MIG's strategy is
to: (i) expand in existing and new major markets through internal growth and
acquisitions, (ii) upgrade and multiplex existing locations where there is
demand for additional screens and (iii) continue to reduce operating and
overhead costs as a percentage of revenue.
Entertainment Group Overview
The Entertainment Group derives its revenue from the distribution of its
product theatrically and in ancillary markets such as home video, pay and free
television throughout the world and from the exhibition of feature films in
MIG's theatres.
Production, Acquisition and Distribution
Theatrical Production, Acquisition and Distribution. MIG intends to
emphasize the production and acquisition of commercial films at significantly
lower than average industry costs. MIG believes that it can successfully control
costs and increase returns by carefully selecting projects that: (i) are based
on exploitable concepts, such as action-adventure and specialized motion
pictures; (ii) are aimed at and cost-effectively marketed to specific niche
audiences; (iii) employ affordable, well-recognized or emerging talent; and (iv)
fit within pre-established cost/performance criteria. MIG also currently plans
to avoid peak seasonal release periods such as early summer, Christmas and other
holidays, when competition for screens is most intense and marketing costs are
highest. MIG plans to continue acquiring product from independent producers for
distribution on a fee basis with no investment other
77
<PAGE>
than recoupable distribution costs. MIG's acquisition program contemplates
output arrangements with producers and the acquisition of existing catalogs, as
well as film-by-film acquisitions.
Home Video Distribution. In addition to releasing its new product, MIG will
continue to exploit titles from its existing library, including previously
released rental titles, re-issued titles and initially released titles, in the
expanding sell-through and premium market sectors and through arrangements with
mail-order and other selected licensees. In addition to distribution in the
traditional videocassette sector, MIG also intends to pursue opportunities to
distribute its library in video discs (see "--The United States Motion Picture
Industry Overview--Emerging Technologies" below) and other emerging multimedia
formats. MIG will continue to act as exclusive U.S. distributor for Streamline
Pictures, a leading supplier of the increasingly popular Japanese anime genre,
and to provide exclusive distribution services for Major League Baseball home
video product and the Fox-Lorber catalog of foreign language and specialty
films.
Television Production and Distribution. MIG's television distribution
involves licensing its film and television library to both pay television
services as well as the free television market. MIG is currently negotiating
services and is in the process of nationwide sales of various syndication
packages to independent television stations and the non-traditional networks.
Such syndication packages will be offered with unpackaged library titles, on a
market-by-market basis. MIG also plans to expand its exploration of
opportunities to produce original programming, including talk and game shows,
for pay television, basic cable, first-run syndication and the non-traditional
networks. MIG has historically engaged in the production and licensing of
television series for first run syndication. MIG has produced and syndicated
seven seasons of the athletic competition series American Gladiators and has
produced and syndicated one season of the series The New Adventures of Flipper,
a remake of its classic series Flipper. MIG intends to continue to produce
television product for the first run syndication market, for cable networks and
for foreign broadcasts. MIG does not intend to produce deficit-financed
television programming for the domestic networks.
Distribution in Foreign Markets. MIG distributes its existing library in
traditional media and established markets outside of the United States and
Canada, while actively pursuing new areas of exploitation. MIG intends to
aggressively market its library in (i) new international markets in which the
multi-channel television industry has recently emerged or is in the early stages
of development, and (ii) territories which have not been reached by privatized
free television, cable television, home video and other traditional media, but
where the industry is expected to develop in the future. MIG will also explore
opportunities to acquire and distribute new product in overseas markets, adding
freshness and value to the library. Other strategies include the acquisition of
foreign language programming for foreign distribution in combination with the
English language library product.
Exhibition
MIG believes that its theatre circuit, with 140 screens in 52 theatres, is
the largest exhibitor of specialized motion pictures and art films in the United
States. The operation of these theatres provides MIG with relatively stable cash
flows and allows MIG to participate in revenues from the exhibition of its films
as well as films produced and distributed by others. MIG intends, on an
opportunistic basis, to acquire additional screens in its existing markets and
to expand into new markets that the Company considers to be among the primary
markets for the exhibition of specialized and art films.
MIG currently operates theatres in 19 cities in California, Colorado,
Louisiana, Massachusetts, Minnesota, Ohio, Texas, Washington and Wisconsin. MIG
emphasizes the exhibition of specialized motion pictures and art films and
commercial films with literary and artistic components which appeal to the
specialized film audience. The seating capacity for all theaters operated by MIG
is approximately
78
<PAGE>
40,000, of which 52% is in theatres located in California. The following table
summarizes the location and number of theatres and screens operated by MIG:
LOCATION THEATERS SCREENS
- -------------------------------------------------------- -------- -------
Belmont, California..................................... 1 3
Berkeley, California.................................... 5 16
Los Angeles, California................................. 3 7
Newport Beach, California............................... 1 1
Oakland, California..................................... 1 3
Palo Alto, California................................... 4 6
Pasadena, California.................................... 1 1
Sacramento, California.................................. 2 6
San Diego, California................................... 5 9
San Francisco, California............................... 6 15
Denver, Colorado........................................ 3 8
New Orleans, Louisiana.................................. 2 5
Cambridge, Massachusetts................................ 1 9
Minneapolis, Minnesota.................................. 2 6
Cleveland, Ohio......................................... 1 3
Dallas, Texas........................................... 1 3
Houston, Texas.......................................... 2 6
Seattle, Washington..................................... 9 28
Milwaukee, Wisconsin.................................... 2 5
-- -------
52 140
-- -------
-- -------
The exhibition of first-run specialized motion pictures and art films is a
niche in the film exhibition business that is distinct from the exhibition of
higher budget, wide-release films. For the most part, specialized motion
pictures and art films are marketed by different distributors and exhibited in
different theaters than commercial films produced by the major studios.
Exhibitors of wide-release films typically must commit a substantial percentage
of their screens to a small number of films. In contrast, exhibitors such as MIG
typically show approximately 30 to 40 different films on their screens at any
given time.
In the normal course of its business, MIG opens new theatres in promising
locations and closes theatres that are not performing well or for which it may
not be feasible to renew the lease. During the twelve months ended March 31,
1996, MIG added 3 theatres with a total of 17 screens and closed one theatre
with a total of two screens.
Competition and Seasonality
All aspects of the Entertainment Group's operations are conducted in a
highly competitive environment. To the extent that MIG seeks to distribute the
films contained in its library or acquire or produce product, MIG will need to
compete with many other motion picture distributors, including the "majors,"
most of which are larger and have substantially greater resources, film
libraries and histories of obtaining film properties, as well as production
capabilities and significantly broader access to distribution and exhibition
opportunities. Many of MIG's competitors have substantially greater assets and
resources. By reason of their resources, these competitors may have access to
programming that would not generally be available to MIG and may also have the
ability to market programming more extensively than MIG.
79
<PAGE>
Distributors of theatrical motion pictures compete with one another for
access to desirable motion picture screens, especially during the summer,
holiday and other peak movie-going seasons, and several of MIG's competitors in
the theatrical motion picture distribution business have become affiliated with
owners of chains of motion picture theaters. In addition, program suppliers of
home video product compete for the open to buy dollars of video specialty stores
and mass merchant retailers. A larger portion of these dollars are designated
for megahit theatrically based sell-thru titles, video games and other
entertainment media. The success of all the Entertainment Group's product is
heavily dependent upon public taste, which is both unpredictable and susceptible
to change.
Although there are no other nationwide exhibitors of specialty motion
pictures, MIG faces direct competition in each market from local or regional
exhibitors of specialized motion pictures and art films. To a lesser degree, MIG
also competes with other types of motion picture exhibitors. Other
organizations, including the national and regional circuits, major studios,
production companies, television networks and cable companies are or may become
involved in the exhibition of films comparable to the type of films exhibited by
MIG. Many of these companies have greater financial and other resources than
MIG. As a result of new theater development and conversion of single-screen
theatres to multiplexes, there is an increasing number of motion picture screens
in the geographic areas in which MIG operates. At the same time, many motion
picture exhibitors have been merging or consolidating their operations,
resulting in fewer competitors with an increased number of motion picture
screens competing for the available pictures. This combination of factors may
tend to increase competition for films that are popular with the general public.
MIG also competes with national and regional circuits and independent exhibitors
with respect to attracting patrons and acquiring new theatres.
The United States Motion Picture Industry Overview
The United States motion picture industry encompasses the production and
theatrical exhibition of feature-length motion pictures and the subsequent
distribution of such pictures in home video, television and other ancillary
markets. The industry is dominated by the major studios, including Universal
Pictures, Warner Bros., Twentieth Century Fox, Sony Pictures Entertainment
(including Columbia Pictures, Tri-Star Pictures and Sony Classics), Paramount
Pictures and The Walt Disney Company (including Buena Vista, Touchstone
Pictures, Hollywood Pictures and Miramax), which historically have produced and
distributed the majority of theatrical motion pictures released annually in the
United States. The major studios generally own their production studios and have
national or worldwide distribution organizations. Major studios typically
release films with production costs ranging from $20,000,000 to $50,000,000 or
more and provide a continual source of motion pictures to the nation's theatre
exhibitors.
In recent years, "independent" motion picture production companies played an
important role in the production of motion pictures for the worldwide feature
film market. The independents do not own production studios and have more
limited distribution capabilities than the major studios, often distributing
their product through "majors." Independents typically produce fewer motion
pictures at substantially lower average production costs than major studios.
Several of the more prominent independents, including Miramax and New Line, were
acquired by large entertainment companies, giving them access to greater
financial resources.
Motion Picture Production and Financing
The production of a motion picture begins with the screenplay adaptation of
a popular novel or other literary work acquired by the producer or the
development of an original screenplay having its genesis in a story line or
scenario conceived of or acquired by the producer. In the development phase, the
producer typically seeks production financing and tentative commitments from a
director, the
80
<PAGE>
principal cast members and other creative personnel. A proposed production
schedule and budget also are prepared during this phase.
Upon completing the screenplay and arranging financial commitments,
pre-production of the motion picture begins. In this phase, the producer (i)
engages creative personnel to the extent not previously committed; (ii)
finalizes the filming schedule and production budget; (iii) obtains insurance
and secures completion guarantees; (iv) if necessary, establishes filming
locations and secures any necessary studio facilities and stages; and (v)
prepares for the start of actual filming. Principal photography, the actual
filming of the screenplay, may extend from six to twelve weeks or more,
depending upon such factors as budget, location, weather and complications
inherent in the screenplay.
Following completion of principal photography, the motion picture is edited,
optical, dialogue, music and any special effects are added, and voice, effects
and music sound tracks and picture are synchronized during post-production. This
results in the production of the negative from which the release prints of the
motion picture are made.
The cost of a theatrical motion picture produced by an independent
production company for limited distribution ranges from approximately $4,000,000
to $10,000,000 as compared with an average of approximately $30,000,000 for
commercial films produced by major studios for wide release. Production costs
consist of acquiring or developing the screenplay, film studio rental,
cinematography, post-production costs and the compensation of creative and other
production personnel. Distribution expenses, which consist primarily of the
costs of advertising and release prints, are not included in direct production
costs and vary widely depending on the extent of the release and nature of the
promotional activities.
Independent and smaller production companies generally avoid incurring
substantial overhead costs by hiring creative and other production personnel and
retaining the other elements required for pre-production, principal photography
and post-production activities on a project-by-project basis. Unlike the major
studios, the independents and smaller production companies also typically
finance their production activities from discrete sources. Such sources include
bank loans, pre-sales, co-productions, equity offerings and joint ventures.
Independents generally attempt to complete their financing of a motion picture
production prior to commencement of principal photography, at which point
substantial production costs begin to be incurred and must be paid.
Pre-sales are used by independent film companies and smaller production
companies to finance all or a portion of the direct production costs of a motion
picture. Pre-sales consist of fees paid to the producer by third parties in
return for the right to exhibit the motion picture when completed in theaters or
to distribute it in home video, television, foreign or other ancillary markets.
Producers with distribution capabilities may retain the right to distribute the
completed motion picture either domestically or in one or more foreign markets.
Other producers may separately license theatrical, home video, television,
foreign and all other distribution rights among several licensees.
Both major studios and independent film companies often acquire motion
pictures for distribution through a customary industry arrangement known as a
negative pickup, under which the studio or independent film company agrees to
acquire from an independent production company all rights to a film upon
completion of production. The independent production company normally finances
production of the motion picture pursuant to financing arrangements with banks
or other lenders in which the lender is granted a security interest in the film
and the independent production company's rights under its arrangement with the
studio or independent. When the studio or independent picks up the completed
motion picture, it assumes the production financing indebtedness incurred by the
production company in connection with the film. In addition, the independent
production company is paid a production fee and generally is granted a
participation in the net profits from distribution of the motion pictures.
81
<PAGE>
Motion Picture Distribution
Motion picture distribution encompasses the distribution of motion pictures
in theaters and in ancillary markets such as home video, pay-per-view, pay
television, broadcast television, foreign and other markets. The distributor
typically acquires rights from the producer to distribute a motion picture in
one or more markets. For its distribution rights, the distributor typically
agrees to advance the producer a certain minimum royalty or guarantee, which is
to be recouped by the distributor out of revenues generated from the
distribution of the motion picture and is generally nonrefundable. The producer
also is entitled to receive a royalty equal to an agreed-upon percentage of all
revenues received from distribution of the motion picture in excess of revenues
covered by the royalty advance.
Theatrical Distribution
The theatrical distribution of a motion picture involves the manufacture of
release prints, the promotion of the picture through advertising and publicity
campaigns and the licensing of the motion picture to theatrical exhibitors. The
size and success of the promotional advertising campaign can materially affect
the revenues realized from the theatrical release of a motion picture. The costs
incurred in connection with the distribution of a motion picture can vary
significantly, depending on the number of screens on which the motion picture is
to be exhibited and the ability to exhibit motion pictures during peak
exhibition seasons. Competition among distributors for theaters during such peak
seasons is great. Similarly, the ability to exhibit motion pictures in the most
popular theaters in each area can affect theatrical revenues.
The distributor and theatrical exhibitor generally enter into a license
agreement providing for the exhibitor's payment to the distributor of a
percentage of the box office receipts for the exhibition period, in some cases
after deduction of the theater's overhead, or a flat negotiated weekly amount.
The distributor's percentage of box office receipts generally ranges from an
effective rate of 35% to over 50%, depending upon the success of the motion
picture at the box office and other factors. Distributors carefully monitor the
theaters which have licensed the picture to ensure that the exhibitor promptly
pays all amounts due the distributor. Substantial delays in collections are not
unusual.
Motion pictures may continue to play in theaters for up to six months
following their initial release. Concurrently with their release in the United
States, motion pictures generally are released in Canada and may also be
released in one or more other foreign markets. Typically, the motion picture
then becomes available for distribution in other markets as follows:
MONTHS AFTER APPROXIMATE
INITIAL RELEASE RELEASE PERIOD
--------------- --------------
Domestic home video......................... 4-6 months --
Domestic pay-per-view....................... 6-9 months 3 months
Domestic pay television..................... 10-18 months 12-21 months
Domestic network or basic cable............. 30-36 months 18-36 months
Domestic syndication........................ 30-36 months 3-15 years
Foreign home video.......................... 6-12 months --
Foreign television.......................... 18-24 months 3-12 years
Home Video
Home video distribution consists of the promotion and sale of videocassettes
and videodiscs to local, regional and national video retailers which rent or
sell such products to consumers primarily for home viewing.
82
<PAGE>
Pay-Per-View
Pay-per-view television allows cable television subscribers to purchase
individual programs, including recently released motion pictures and live
sporting, music or other events, on a "per use" basis. The subscriber fees are
typically divided among the program distributor, the pay-per-view operator and
the cable system operator.
Pay Television
Pay television allows cable television subscribers to view HBO, Cinemax,
Showtime, The Movie Channel, Encore and other pay television network programming
offered by cable system operators for a monthly subscription fee. The pay
television networks acquire a substantial portion of their programming from
motion picture distributors.
Broadcast and Basic Cable Television
Broadcast television allows viewers to receive, without charge, programming
broadcast over the air by affiliates of the major networks (ABC, CBS, NBC and
Fox), independent television stations and cable and satellite networks and
stations. In certain areas, viewers may receive the same programming via cable
transmission for which subscribers pay a basic cable television fee.
Broadcasters or cable systems operators pay fees to distributors for the right
to air programming a specified number of times.
Foreign Markets
In addition to their domestic distribution activities, some motion picture
distributors generate revenues from distribution of motion pictures in foreign
theaters, home video, television and other foreign markets. There has been a
dramatic increase in recent years in the worldwide demand for filmed
entertainment. This growth is largely due to the privatization of television
stations, introduction of direct broadcast satellite services, growth of home
video and increased cable penetration.
Other Markets
Revenues also may be derived from the distribution of motion pictures to
airlines, schools, libraries, hospitals and the military, licensing of rights to
perform musical works and sound recordings embodied in a motion picture, and
rights to manufacture and distribute games, dolls, clothing and similar
commercial articles derived from characters or other elements of a motion
picture.
Emerging Technologies
Video-On-Demand. Perhaps the most important advance in the last five years
has been the development of the video-on-demand technology through the creation
of digital video compression. Digital compression involves the conversion of the
analog television signal into digital form and the compression of more than one
video signal into one standard channel for delivery to customers. Compression
technology will be applied not only to cable but to satellite and over-the-air
broadcast transmission systems. This offers the opportunity to dramatically
expand the capacity of current transmission systems. Several telecommunications
companies are currently testing trial video-on-demand systems. These include
Bell Atlantic, Time Warner, Telecommunications, Inc. and Pacific Telesis.
DVD. Another new technology that has emerged is the video CD or "digital
variable disc." Just as compact discs have become the dominant medium for
prerecorded music, DVD is expected to become a widely-accepted format for home
video programming.
DBS. Direct Broadcast Satellite (DBS) technology also offers a new
transmission technology. As the major delivery system for premium television
services in Europe, particularly in the U.K., DBS is expected to expand the pay
television market in the United States.
83
<PAGE>
COMMUNICATIONS GROUP
Through the Communications Group, MIG intends to capitalize on the demand,
which developed in the late 1980s and early 1990s, for modern communications
systems in Eastern Europe and other emerging markets. MIG owns interests in and
participates along with local business and governmental partners in the
management of joint ventures which operate a variety of communications services
in certain countries in Eastern Europe and certain of the former Soviet
Republics. MIG's joint ventures typically cover markets which have large
populations and strong economic potential, but lack reliable and efficient
communications services. MIG also targets markets where systems can be
constructed with relatively low capital investments and where multiple
communications services can be offered to the population.
MIG owns interests in and participates along with local entities in the
management of joint ventures which operate and/or are constructing: (i) 10
wireless cable television systems with combined households of approximately 9.0
million; (ii) 8 paging systems with combined target populations of approximately
79.5 million; (iii) an international toll calling service in the Republic of
Georgia covering a population of approximately 5.5 million; (iv) 4 trunked
mobile radio systems with an aggregate target population of approximately 88.0
million; and (v) 5 radio stations in 7 cities reaching combined target
households of approximately 8.6 million in Hungary, Russia and Latvia. The
Communications Group recently purchased for $2.6 million (plus rights to acquire
up to a maximum of $500,000 worth of Common Stock) 56% of a U.K. company that
has ownership interests in 9 companies providing trunked mobile radio services
in certain cities in Portugal, Spain, Belgium and Germany. The Company is also
pursuing licenses for similar services in other emerging markets, where the
economies are expanding, including the Pacific Rim. In addition, the
Communications Group has entered into a definitive agreement to acquire 80% of a
company operating a radio station in Prague, Czech Republic.
MIG believes that the performance of its existing joint ventures has
demonstrated that there is significant demand for these services in its license
areas. Many of the joint ventures are in the early stages of constructing and/or
marketing their services, and MIG expects to significantly increase its
subscriber and customer bases as these businesses mature. In addition, as one of
the first entrants into these markets, MIG believes that it has developed a
reputation for providing quality service and has formed important relationships
with local entities. As a result, MIG believes it is well positioned to
capitalize on opportunities to provide additional communications services in its
markets as licenses are awarded.
For a summary of the joint ventures' markets and existing projects, their
status, MIG's direct or indirect ownership interest, the year such projects
became operational, the population or number of households in the ventures'
market and the amount of capital loaned to such venture by MIG and contributed
to such projects by MIG, see "--Communications Group Overview--Markets" below.
Strategies
MIG's strategy is to grow its subscriber and customer bases, as well as its
revenues and cash flows by (i) completing the build out of existing license
areas; (ii) pursuing additional licenses in existing markets and (iii) obtaining
new licenses in attractive markets;
Completing Build Out of Existing License Areas
The Communications Group was formed to capitalize on the demand for modern
communications systems in Eastern Europe which developed in the late 1980s and
early 1990s. Since its formation in 1990, the Communications Group has been
aggressively investing in joint ventures to obtain communications licenses in
underserved markets. Many of the Communications Group's operating companies are
currently in various stages of constructing their systems. MIG intends to
accelerate the build out of those areas requiring additional construction and
believes that, as a result of the Company's use of
84
<PAGE>
wireless technology, a significant portion of this build out can be completed at
a significantly lower cost than wired technology.
Pursuing Additional Licenses in Existing Markets
MIG is pursuing opportunities to provide additional communications services
in regions in which it currently operates. This strategy will enable MIG to more
efficiently utilize its existing infrastructure and to capitalize on marketing
opportunities by bundling its services. MIG expects to benefit from its
knowledge of and experience with local governments, laws and customs in pursuing
such opportunities. MIG believes that in the markets in which it currently
provides certain of its services, the Company typically has several significant
competitive advantages that will enable it to obtain licenses for and
successfully operate additional services in these markets. These competitive
advantages include (i) established relationships with local joint venture
partners; (ii) established relationships with consumers; and (iii) a fundamental
understanding of the region's political, economic and cultural issues.
Obtaining New Licenses in Attractive Markets
MIG is actively pursuing investments in joint ventures to obtain new
licenses for wireless cable television, paging, wireless telephony and radio
broadcast projects in markets in which it presently does not have any licenses.
MIG intends to target emerging markets with strong economic potential which lack
adequate communications services. MIG has identified several attractive
opportunities in Eastern Europe and the Pacific Rim, and recently began to
provide cable services in Bucharest, Romania and paging services in St.
Petersburg, Russia. In evaluating whether to enter a new market, MIG assesses,
among other factors, the (i) potential demand for MIG's services and the
availability of competitive services; (ii) strength of local partners; and (iii)
political, social and economic environment.
Communications Group Overview
Markets
A summary, as of May 1, 1996, of the Communications Group's markets and
existing projects, their status, MIG's direct or indirect ownership interest in
each such project, the year such projects became operational, the population or
number of households in the project's market, the amount of capital loaned to
such projects by MIG and contributed to such projects by MIG is detailed in the
chart below:
85
<PAGE>
<TABLE>
<CAPTION>
DIRECT
OR INDIRECT HOUSEHOLD/ AMOUNT LOANED
OWNERSHIP YEAR POPULATION(1) TO PROJECT
MARKET AND PROJECTS(15) STATUS INTEREST OPERATIONAL (IN MILLIONS) (IN THOUSANDS)(2)
-------------------------------------------- ---------------- ----------- ----------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
. MOSCOW, RUSSIA
Wireless Cable Television................... Operational 50.0% 1992 3.5 $ 8,881
FM Radio (2 Frequencies).................... Operational 51.0 1994(3) 3.5 1,838
. TBILISI, GEORGIA
Wireless Cable Television................... Operational 49.0 1993 0.5 3,520
International Toll Calling Operational 30.0 1994 5.5 --
(Nationwide)(4).............................
Paging...................................... Operational 45.0 1994 5.0(5) 475
. RIGA, LATVIA
Wireless Cable Television................... Operational 50.0 1992 0.4 8,184
Paging (Nationwide)......................... Operational 50.0 1995(6) 2.8 1,268
FM Radio.................................... Operational 55.0 1995(7) 0.4 35
Cellular Telephony (Nationwide)............. Licensed 24.5 -- 2.8 --
. TASHKENT, UZBEKISTAN
Wireless Cable Television................... Operational 50.0 1993 1.2 3,360(12)
Paging...................................... Operational 50.0 1994 23.1(5) --
Wireless Local Loop Telephony............... License pending 50.0 -- 2.1 --
. ESTONIA
Paging...................................... Operational 39.1 1993 1.5 2,535
. BUCHAREST, ROMANIA
Wireless Cable Television................... Operational 99.0 1996 0.9 786
Paging...................................... Operational 54.1 1993 23.0(5) 2,324
Trunked Mobile Radio........................ Operational 54.1 1995 2.1 448
. KISHINEV, MOLDOVA
Wireless Cable Television................... Operational 50.0 1994 0.3 1,346
. ALMATY, KAZAKHSTAN
Wireless Cable Television................... Operational 50.0 1995 0.8 1,016
Paging...................................... Operational 50.0 1995 17.4(5) 245
. ST. PETERSBURG, RUSSIA
Wireless Cable Television................... Under contract 45.0 -- 0.9 --
AM Radio.................................... Operational 50.0 1995(8) 0.9 --
FM Radio.................................... Operational 50.0 1995(8) 0.9 429
Paging...................................... Operational 40.0 1995(9) 5.5 --
. NIZHNY NOVGOROD, RUSSIA
Paging...................................... Operational 45.0 1994 2.8 52
. MINSK, REPUBLIC OF BELARUS
Wireless Cable Television................... Under 50.0 -- 0.3 518
construction
. BUDAPEST, SIOFOK, AND KHEBEGY,
HUNGARY
AM Radio.................................... Operational 100.0 1994(10) 3.5(11) 948(13)
FM Radio (2 Frequencies).................... Operational 100.0 1994(10)
. SOCHI, RUSSIA
FM Radio.................................... Operational 51.0 1995 0.3 85
. VILNIUS, LITHUANIA
Wireless Cable Television................... Under 55.0 -- 0.2 --
construction
. BATUMI, GEORGIA
Paging...................................... Licensed, under 35.0 -- 0.5 --
construction
<CAPTION>
AMOUNT
CONTRIBUTED
TO PROJECT
(IN THOUSANDS)(2)
-----------------
<S> <C> <C>
MARKET AND PROJECTS(15)
--------------------------------------------
. MOSCOW, RUSSIA
Wireless Cable Television................... $ 1,093
FM Radio (2 Frequencies).................... 823
. TBILISI, GEORGIA
Wireless Cable Television................... 779
International Toll Calling 2,556
(Nationwide)(4)............................. 250
Paging......................................
. RIGA, LATVIA
Wireless Cable Television................... 819
Paging (Nationwide)......................... 250
FM Radio.................................... 140
Cellular Telephony (Nationwide)............. --
. TASHKENT, UZBEKISTAN
Wireless Cable Television................... 580(12)
Paging...................................... --
Wireless Local Loop Telephony............... --
. ESTONIA
Paging...................................... 396
. BUCHAREST, ROMANIA
Wireless Cable Television................... 682
Paging...................................... 490
Trunked Mobile Radio........................ --
. KISHINEV, MOLDOVA
Wireless Cable Television................... 400
. ALMATY, KAZAKHSTAN
Wireless Cable Television................... 222
Paging...................................... 2
. ST. PETERSBURG, RUSSIA
Wireless Cable Television................... --
AM Radio.................................... --
FM Radio.................................... 133
Paging...................................... 527
. NIZHNY NOVGOROD, RUSSIA
Paging...................................... 330
. MINSK, REPUBLIC OF BELARUS
Wireless Cable Television................... 400
. BUDAPEST, SIOFOK, AND KHEBEGY,
HUNGARY
AM Radio.................................... 8,107(13)
FM Radio (2 Frequencies)....................
. SOCHI, RUSSIA
FM Radio.................................... 185
. VILNIUS, LITHUANIA
Wireless Cable Television................... 81
. BATUMI, GEORGIA
Paging...................................... -- (14)
</TABLE>
- ------------
(1) Covered population is provided for paging, telephony and trunk mobile radio
systems and covered households for wireless cable television and radio
systems.
(2) Represents amounts loaned and contributed as of December 31, 1995.
(3) Purchased equity of existing operational company in 1994; the company was
formed in 1991.
(4) Provides international toll calling services between the entire Republic of
Georgia and the rest of the world and is the only Intelsat designated
representative in Georgia to provide such services.
(5) Indicates population the Communications Group intends to cover in the
foreseeable future. In each of the foregoing markets, the Communications
Group covers the capital city and is currently expanding the services of
such operations to cover additional cities.
(6) Purchased equity of existing company in 1995; the company was formed in
1994.
(7) Purchased equity of existing operational company in 1995; the company was
formed in 1993.
(8) Purchased equity of existing operational company in 1995; the company was
formed in 1993.
(9) Purchased equity of existing company in 1995; the company was formed in
1994.
(10) Purchased equity of existing operational company in 1994; the company was
formed in 1989.
(11) Total household coverage of AM and FM radio.
(12) Reflects amounts loaned and contributed to all projects in Tashkent,
Uzbekistan.
(13) Reflects amounts loaned and contributed to all projects in Hungary.
(14) The Communications Group contributed $63,450 to the equity of this project
after December 31, 1995.
(15) Does not give effect to the consummation on May 17, 1996 of an acquisition
of 56% of a United Kingdom company holding interests in 9 companies
providing trunked mobile radio services in certain cities in Portugal,
Spain, Belgium and Germany or the purchase of 80% of a company operating a
radio station in Prague, Czech Republic in which the Communications Group
has not yet competed the acquisition of its ownership interest.
86
<PAGE>
The markets which MIG targets for its services typically (i) have large
populations; (ii) have strong economic potential; (iii) are usually the capital
city of a country, republic or province; and (iv) are easily accessible to the
Communications Group's central offices. MIG believes that most of its markets
have a concentration of educated people who desire quality entertainment, sports
and news as well as reliable and efficient communications services. As principal
cities of their respective countries, republics or provinces, these markets are
in many cases home to a significant number of foreign diplomats, businessmen and
advisors who MIG anticipates will often become premium service customers.
MIG believes that the vast majority of the political, social and economic
leaders of these markets recognize the importance of communications as a means
to modernizing their societies. In the Communications Group's markets, the
breadth of television programming is somewhat limited and there exists a demand
for quality entertainment and news programming. Additionally, the antiquated
telephone systems in many of these markets do not have the capacity to
adequately serve residents. MIG believes that its systems can provide a solution
to these problems because: (i) MIG's wireless cable television and AM and FM
broadcast services will provide a wide selection of quality entertainment,
sports broadcasting, educational programming, and international news at an
affordable rate to both local and foreign residents; (ii) MIG's wireless
telephony services will be a comparatively low-cost means of quickly providing
intra-country communications as well as telephone access to the rest of the
world using international satellite links; and (iii) MIG's alphanumeric and
digital display paging services will be a dependable and efficient means to
communicate one-way without the need for a recipient to access a telephone
network, which is often overloaded or unavailable. MIG is not aware of any
significant governmental restrictions with respect to broadcasting time or
program content in its existing cable television and radio broadcasting markets
which may have a material adverse effect on MIG and its operations in these
markets.
In most cities where MIG provides or expects to provide service, a
substantial percentage of the population (approximately 90% in Moscow) lives in
large apartment buildings. This characteristic lowers the cost of installation
and eases penetration of wireless cable television and wireless telephony
services into a city, because a single microwave receiving location can bring
service to a large number of people. MIG currently is licensed to provide
wireless cable television to markets which have in the aggregate approximately
9.0 million households, and paging services in markets with a population
totaling approximately 79.5 million. MIG believes that the cost of constructing
a coaxial cable television system covering the same number of households as are
covered by each of MIG's systems would be significantly more expensive than the
costs incurred by MIG in constructing a wireless system.
MIG has obtained political risk insurance from OPIC for its operating cable
television systems in Moscow, Riga, Tbilisi and Tashkent and for its
international toll calling joint venture which operates in the Republic of
Georgia, and may endeavor to obtain OPIC insurance for additional systems which
are eligible for such insurance. OPIC is a United States governmental agency
which provides United States investors with insurance against expropriation,
political violence and loss of business income in more than 130 developing
nations. Subject to the exclusions provided for in the contract of insurance,
OPIC insurance provides coverage up to certain policy limits for loss of
investment in a joint venture due to expropriation by foreign governments or
political violence. In some ventures, the policy also covers loss of business
income resulting from political violence. Risks not related to expropriation or
political violence are not covered by OPIC insurance. OPIC insurance does not
cover loss of investment related to non-payment of principal and/or interest on
any loan extended to any joint venture and/or joint venture project unless such
non-payment was caused by an expropriation by a foreign government or political
violence. The Communications Group currently has outstanding a significant
amount of loans of its joint ventures. MIG currently has expropriation and
political violence insurance coverage with OPIC in the amount of (i) $2,800,000
with respect to its Moscow cable television system; (ii) $2,200,000 with respect
to its Riga cable television system; (iii) $3,000,000 with respect to its
Tbilisi cable television system; (iv) $2,000,000 with respect to its Tashkent
cable television system and (v) $2,858,000 with respect to its international
toll calling joint venture in the Republic of Georgia.
87
<PAGE>
MIG currently has loss of business income insurance with OPIC in the amount of
(i) $1,500,000 with respect to its Moscow cable television system; (ii)
$1,000,000 with respect to its Riga cable television system; and (iii) $550,000
with respect to its Tbilisi cable television system. MIG is also currently
eligible to purchase additional expropriation and political violence insurance
and loss of business income insurance from OPIC with respect to these systems.
There can be no assurance that any insurance obtained by MIG from OPIC will
adequately compensate MIG for any losses it may incur or that MIG will elect to
obtain or be able to obtain OPIC insurance for any of its additional systems or
renew existing policies. See "RISK FACTORS - Risk to MITI Inherent in Foreign
Investment."
Joint Ventures
After deciding to obtain an interest in a particular communication business,
MIG generally enters into discussions with the appropriate Ministry of
Communications or local parties which have interests in communications
properties in a particular market. If the negotiations are successful, a joint
venture agreement is entered into and is registered, and the right to use
frequency licenses is contributed to the joint venture by MIG's local partner or
is allocated by the appropriate governmental authority to the joint venture. In
the case of MIG's radio station operations, MIG has, in many cases, directly
purchased companies with an operating radio station or an ownership interest in
a joint venture which operates a radio station.
Generally, MIG owns approximately 50% of the equity in a joint venture with
the balance of such equity being owned by a local entity, often a
government-owned enterprise. In 1995, the Russian Federation Legislature
proposed, but did not enact legislation, which would limit the interest which a
foreign person is permitted to own in entities holding broadcasting licenses. If
legislation is enacted in Russia or any of MIG's other markets limiting foreign
ownership of broadcasting licenses and MIG is required to reduce its interests
in any of the ventures in which it owns an interest, it is unclear how such
reduction would be effected. See "RISK FACTORS--Risks to MITI Inherent in
Foreign Investment."
Each joint venture's day-to-day activities are managed by a local management
team selected by its board of directors or its shareholders. The operating
objectives, business plans, and capital expenditures of a joint venture are
approved by the joint venture's board of directors, or in certain cases, by its
shareholders. In most cases, an equal number of directors or managers of the
joint venture are selected by MIG and its local partner. In other cases, a
differing number of directors or managers of the joint venture may be selected
by MIG on the basis of the percentage ownership interest of MIG in the joint
venture.
In many cases, the credit agreement pursuant to which MIG loans funds to a
joint venture provides MIG with the right to appoint the general manager of the
joint venture and to approve unilaterally the annual business plan of the
venture. These rights continue so long as amounts are outstanding under the
credit agreement. In other cases, such rights may also exist by reason of MIG's
percentage ownership interest in the joint venture or under the terms of the
joint venture's governing instruments.
MIG's joint ventures are limited liability entities which are permitted to
enter into contracts, acquire property and assume and undertake obligations in
their own names. Because the joint ventures are limited liability companies, the
joint venture equity holders have limited liability to the extent of their
investment. Under the joint venture agreements, each of MIG and the local joint
venture partner is obligated to make initial capital contributions to the joint
venture. In general, a local joint venture partner does not have the resources
to make cash contributions to the joint venture. In such cases, MIG has
established or plans to establish an agreement with the joint venture whereby,
in addition to cash contributions by MIG, each of MIG and the local partner
makes in-kind contributions (usually communications equipment in the case of MIG
and frequencies, space on transmitting towers and office space in the case of
the local partner), and the joint venture signs a credit agreement with MIG
pursuant to which MIG loans the venture certain funds. Typically, such credit
agreements provide for interest payments to MIG at MIG's current cost of
borrowing in the United States and for payment of
88
<PAGE>
principal and interest from 90% of the joint venture's available cash flow prior
to any pro rata distributions to MIG and the local partner. As of March 31,
1996, MIG had obligations to fund (i) an additional $0.3 million to the equity
of its joint ventures (or to complete the payment of shares purchased by MIG)
and (ii) up to an additional $12.3 million to fund the various credit lines MIG
has extended to its joint ventures. MIG's funding commitments under such credit
lines are contingent upon its approval of the joint ventures' business plans. To
the extent that MIG does not approve a joint venture's business plan, MIG is not
required to provide funds to such joint venture under the credit line. After the
full repayment of the loan owed by the joint venture to MIG, the distributions
(including profits) from the joint venture to MIG and the local partner are made
on a pro rata basis in accordance with their respective ownership interests.
Services to and Payments from Joint Ventures
In addition to loaning funds to the joint ventures, MIG often provides
certain services to many of the joint ventures. MIG currently charges certain
ventures for services provided by it. MIG often does not require start-up joint
ventures to reimburse it for certain services that MIG provides such as
engineering advice, assistance in locating programming, and assistance in
ordering equipment. As each joint venture grows, MIG institutes various payment
mechanisms to have the joint venture reimburse it for such services where they
are provided. The failure of MIG to obtain reimbursement of such services will
not have a material impact on MIG.
Under existing legislation in certain of MIG's markets, distributions from a
joint venture to its partners will be subject to taxation. The laws in MIG's
markets vary markedly with respect to the tax treatment of distributions to
joint venture partners and such laws have also recently been revised
significantly in many of MIG's markets. There can be no assurance that such laws
will not continue to undergo major changes in the future which could have a
significant negative impact on MIG and its operations.
Marketing
MIG targets its wireless cable television service toward foreign national
households, embassies, foreign commercial establishments, international and
local hotels, local households and local commercial establishments. Paging
services are targeted toward people who spend a significant amount of time
outside of offices, have a need for mobility, or are business people without
ready access to telephones. Paging market segments include the local police, the
military, foreign and local business people and embassy personnel.
Radio station programming is targeted toward 25 to 55 year old consumers,
who are believed by management of MIG to be the most affluent in the emerging
societies of Eastern Europe and the former Soviet Republics. Each station's
format is intended to appeal to the particular listening interests of this
consumer group in its market. This is intended to enable the commercial sales
departments of each joint venture to present to advertisers the most desirable
market for their products and services, thereby heightening the value of the
station's commercial advertising time. Advertising on these stations is sold to
local and international advertisers.
Development of Communications Systems
Wireless Cable Television. Wireless cable television is a technology
experiencing rapid growth worldwide. In the United States, wireless cable
television, also referred to as MMDS (multichannel, multi-point distribution
service), is gaining acceptance as a competitor to coaxial cable service. In
addition, the service has low installation and maintenance costs relative to
coaxial cable services.
Each of MIG's wireless cable television systems is expected to operate in a
similar manner. Various programs, transmitted to satellite transponders, will be
received by the joint venture's satellite dishes
89
<PAGE>
located in a central facility. The signal will then be transmitted to a video
switching system located in the joint venture's facilities, generally near the
city's main transmission tower. Other programs, such as movies, will be combined
into a predetermined set of channels and fed to solid state, self-diagnostic
transmitters and antennae located on the transmission tower. Encrypted
multichannel signals will then be broadcast as far as 50 kilometers in all
directions.
The specialized compact receiving antenna systems, installed on building
rooftops as part of the system, will receive the multiple channel signals
transmitted by the transmission tower antennae and convert and route the signals
to a set-top converter and a television receiver via a coaxial cabling system
within the building. The set-top converter descrambles the signal and is also
used as a channel selector to augment televisions having a limited number of
channel.
Wireless Cable Television Programming. MIG currently offers English, French,
German and Russian language programming, with plans to expand into other
languages as demand increases. Some of MIG's channels are dubbed and others are
subtitled into the local language. Generally, MIG's "basic" service provides
programming of local off-air channels and an additional five to six channels
with a varied mixture of distant off-air channels, European or American sports,
music, international news or general entertainment. MIG's "premium" service
generally includes the channels which make up its basic service as well as an
additional number of satellite channels and a movie channel that offers recent
and classic movies, which feature such actors as Robert De Niro, Candice Bergen,
Charles Bronson and Sean Connery.
MIG's programming options currently include news channels such as BBC World,
CNN International, Sky News and Euronews, music, sports and entertainment
channels such as BBC Prime, MTV Europe, Eurosport, TNT/Cartoon Network, NBC
Super Channel and Discovery Channel Europe and a movie channel.
MIG currently offers "Pay Per View" movies on its Baltcom cable television
system which operates in Riga, Latvia and is planning in the future to add such
service to its program lineups in certain of its markets. The subscriber pays
for "Pay Per View" services in advance, and the intelligent decoders that MIG
uses automatically deduct the purchase of a particular service from the amount
paid in advance.
Paging. MIG's paging systems represent a moderately priced service which is
complementary to telephony. Alphanumeric and digital display paging systems are
useful in Eastern European countries, the former Soviet Republics and other
emerging markets for sending information one-way without the need for a
recipient to access a telephone network, which in many of these markets are
often overloaded or unavailable.
MIG offers service with three types of pagers: (i) tone only, which upon
encoded signaling produces several different tones depending on the code
transmitted; (ii) digital display, which emits a variety of tones and permits
the display of up to 16 digits; and (iii) alphanumeric, which emits a variety of
tones and displays as many as 63 characters. Subscribers may also purchase
additional services, such as paging priority, group calls and other options.
As an adjunct to paging services, the joint ventures operate 24-hour service
bureaus to receive calls and record and transmit messages. In addition,
automatic paging messages are accepted from personal computers, telex machines
and cellular telephones.
AM and FM Radio. Programming in each of MIG's AM and FM markets is designed
to appeal to the particular interests of a specific demographic group in such
markets. Although MIG's radio programming formats are constantly changing,
programming generally consists of popular music from the United States, Western
Europe, and the local area. News is delivered by local announcers in the
language appropriate to the region, and announcements and commercials are
locally produced. By developing a strong listenership base comprised of a
specific demographic group in each of its markets,
90
<PAGE>
MIG believes it will be able to attract advertisers seeking to reach these
listeners. MIG believes that the technical programming and marketing expertise
that it provides to its joint ventures enhances the performance of the joint
ventures' radio stations.
International Toll Calling. MIG owns approximately 30% of Telecom Georgia.
Telecom Georgia handles all international calls inbound to and outbound from the
Republic of Georgia to the rest of the world. Telecom Georgia is currently
making interconnect arrangements with several international long distance
carriers such as Sprint and Telespazio of Italy. For every international call
made to the Republic of Georgia, a payment will be due to Telecom Georgia by the
interconnect carrier and for every call made from the Republic of Georgia to
another country, Telecom Georgia will bill its subscribers and pay a destination
fee to the interconnect carrier.
Trunked Mobile Radio. MIG's Romanian joint venture provides trunked mobile
radio services in certain areas in Romania. MIG also recently signed a letter of
intent to purchase a 51% interest in Protocall Ventures, Ltd., a U.K. company
with ownership interests in 9 trunk mobile systems operating in Portugal, Spain,
Belgium and Germany. Trunked mobile radio systems are primarily designed to
provide mobile voice communications among members of user groups and
interconnection to the public switched telephone network. Trunked mobile radio
systems are commonly used by taxi companies, construction teams, security
services and other groups with need for significant internal communications.
Wireless Telephony. MIG is currently exploring a number of investment
opportunities in wireless telephony systems in a number of countries in Eastern
Europe, the former Soviet Republics, including Uzbekistan and Georgia, and the
emerging markets in the Pacific Rim and has installed test systems in certain of
these markets. MIG believes that its proposed wireless telephony systems are a
time and cost effective means of improving the communications infrastructure in
Eastern Europe, the former Soviet Republics and emerging markets in the Pacific
Rim. The current telephone systems in these markets are antiquated and
overloaded, and consumers in these markets typically must wait several years to
obtain telephone service.
MIG's proposed fixed wireless local loop telephony offers the current
telephone service provider a rapid and cost effective method to expand their
service base. The system eliminates the need to build additional fixed wire line
infrastructure by utilizing a microwave connection directly to the subscriber.
Competition
Wireless Cable
Most of MIG's current cable television competitors in its markets are
undercapitalized, small, local companies that are providing limited programming
to their subscribers. MIG does not, however, have or expect to have exclusive
franchises with respect to its cable television operations and may therefore
face more significant competition in the future from highly capitalized entities
seeking to provide services similar to MIG's in its markets. MIG also encounters
competition in some markets from unlicensed competitors which may have lower
operating expenses and may be able to provide cable television service at lower
prices than MIG. MIG currently competes in all of its markets with over-the-air
broadcast television stations. MIG is also aware that equipment is being
manufactured for the purpose of unlawfully receiving and decoding encrypted
signals transmitted by wireless cable television ventures. MIG believes that it
has thus far only experienced unlawful receipt of its signal on a limited basis
with respect to certain of its wireless cable television services. In addition,
another possible source of competition for MIG are videotape cassettes. MIG's
wireless cable also competes with individual satellite dishes.
91
<PAGE>
Paging
In some of MIG's paging markets, MIG has experienced and can expect to
continue to experience competition from existing small, local, paging operators
who have limited areas of coverage and from, in some cases, paging operators
established by Western European and United States investors with substantial
experience in paging. MIG also faces competition from a segment of radio paging
operations utilizing FM Subcarrier Frequency transmissions. The local phone
systems are also considered to be a significant competitor to MIG's paging
operations. MIG does not have or expect to have exclusive franchises with
respect to its paging operations and may therefore face more significant
competition in the future from highly capitalized entities seeking to provide
services similar to MIG's in its markets.
Wireless Telephony
While the existing wireline telephone systems in Eastern Europe and the
former Soviet Republics are often antiquated, the fact that these systems are
already well-established and operated by governmental authorities means that
they are a source of competition for MIG's proposed wireless telephony
operations. In addition, one-way paging service may be a competitive alternative
which is adequate for those who do not need a two-way service, or it may be a
service that reduces wireless telephony usage among wireless telephony
subscribers. MIG does not have or expect to have exclusive franchises with
respect to its wireless telephony operations and may therefore face more
significant competition in the future from highly capitalized entities seeking
to provide services similar to or competitive with MIG's in its markets. In
certain markets, cellular telephone operators exist and represent a competitive
alternative to MIG's proposed wireless telephony and cellular systems. A
cellular telephone can be operated in the same manner as a wireless loop
telephone in that either type of service can simulate the conventional telephone
service by providing local and international calling from a fixed position in
its service area. Both services are connected directly to a telephony switch
operated by the local telephone company and therefore can initiate calls to or
receive calls from anywhere in the world currently served by the international
telephone network. Cellular telephony and wireless loop telephony eliminate the
need for trenching and laying of wires for telephone services and thus deploy
telephone service quickly and cost effectively. Wireless loop technology
utilizes radio frequencies, instead of copper or fiber optic cable, to transmit
between a central telephone switch and a subscriber's building. Cellular
telephony enables a subscriber to move from one place in a city to another while
using the service while wireless loop telephony is intended to provide fixed
telephone services which can be deployed as rapidly as cellular telephony and at
a lower cost.
FM and AM Radio
In each of MIG's existing markets, there are either a number of stations in
operation already or plans for competitive stations to be in service shortly. As
additional stations are constructed and commence operations, MIG expects to face
significantly increased competition for listeners and advertising revenues from
parties with programming, engineering and marketing expertise comparable to
MIG's. Other media businesses, including broadcast television, cable television,
newspapers, magazines and billboard advertising also compete with MIG's radio
stations for advertising revenues.
ENVIRONMENTAL MATTERS
Certain of the Company's former operations have used or generated, and
Snapper continues to use or generate, substances or wastes that are regulated or
may be deemed hazardous under applicable Environmental Laws. From time to time,
the Company's operations have resulted or may result in certain noncompliance
with applicable requirements under Environmental Laws. See "Risk Factors--
Environmental Matters". The Company also may incur liability pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended ("CERCLA" or "Superfund"), for contamination at or from sites to
which it may have sent hazardous wastes. Courts
92
<PAGE>
have interpreted CERCLA to impose strict, joint and several liability upon all
persons liable for response costs at a hazardous waste disposal site if the harm
at the site is indivisible. This generally means that each responsible party
could be held liable for the entire costs of the necessary response actions at a
Superfund site. As a practical matter, however, at sites where there are
multiple responsible parties for a cleanup, the costs of cleanup typically are
allocated, according to a volumetric or other standard, among the parties.
CERCLA also provides that responsible parties generally may seek contribution
for the costs of cleaning up a site from other responsible parties. Thus, if one
party is required to clean up an entire site, that party can seek reimbursement
or recovery of such costs from other responsible parties.
In that regard, certain predecessors or former subsidiaries of the Company
have been identified as potentially responsible parties ("PRPs") pursuant to
CERCLA at seven sites to which such entities, among others, sent hazardous
wastes. In divesting one such subsidiary, the Company provided indemnification
to the purchaser pursuant to which the Company has undertaken the defense or
payment of cleanup costs, as appropriate, for five such Superfund matters. The
Company believes that its obligations with respect to three of the seven sites
have been completed. Furthermore, the costs incurred by the Company with respect
to all such matters have not been significant, and the Company has established
reserves (which are currently at $1.3 million), that, together with certain
anticipated offsets from the purchaser for other matters relating to the
purchase, it believes will be sufficient to cover the remaining, as well as any
future, such environmental obligations. As a result, the Company does not
believe that such matters will have a material adverse effect upon the Company's
results of operations or financial condition. However, because neither the final
total cleanup costs at the four remaining Superfund sites have been ascertained
nor the former subsidiary's final proportionate share determined, there can be
no assurance that such matters, or any similar liabilities that arise in the
future, will not ultimately have such an effect.
In addition, a wholly-owned subsidiary of the Company is undertaking a
cleanup as a contaminated site which was formerly used for the storage of
manufacturing wastes. In anticipation of site cleanup, the Company established
reserves of $1.8 million for the cleanup of this site. In early 1996, the site
was targeted by the State of Alabama Department of Environmental Management
("ADEM") for cleanup. Since that time, the Company has undertaken site
investigations, submitted a remediation plan to ADEM, and has engaged in ongoing
discussions with ADEM for the cleanup and closure of the site. The Company
subsequently met with ADEM and believes that it has reached agreement with ADEM
regarding remediation at the site. Based on cost estimates for the anticipated
remediation, the Company believes that the previously-established reserves for
this site will be adequate to cover the costs of remediating the property.
However, because the agreement between the Company and ADEM and the remediation
plan for the site are not yet final, and because it is possible that the
remediation costs could be higher than estimated, there can be no assurance that
the reserves in fact will be adequate to cover the remediation at the site.
Nonetheless, the Company does not believe that the final cleanup costs for the
site will have a material adverse effect upon the Company's results of
operations or financial condition.
93
<PAGE>
THE REFINANCING
Special Note: Certain statements set forth below under this caption
constitute "forward-looking statements" within the meaning of the Reform Act.
See "Special Note Regarding Forward-Looking Statements" on page 5 for additional
factors relating to such statements.
GENERAL
Concurrently with the consummation of the Goldwyn Merger, MIG intends to
consummate the Equity Offering of approximately 15,000,000 shares of its Common
Stock and (i) cause the Entertainment Group to enter into the Entertainment
Group Credit Facility, an approximately $300.0 million secured credit facility.
Equity Offering
MIG expects to raise approximately $193.0 million through a public offering
of Common Stock (assuming no exercise of the underwriters' overallotment
option). Assuming an offering price of $12.875 per share, approximately
15,000,000 shares of Common Stock would be issued in the Equity Offering. The
following chart summarizes the ownership of the Common Stock following the
Equity Offering (assuming (i) a Goldwyn Determination Date of May 28, 1996 and a
MIG-Goldwyn Average Closing Price of $13.12, (ii) the consummation of the
Goldwyn Merger, (iii) the exercise of the Goldwyn Put and (iv) without giving
effect to the exercise or conversion of any options, warrants or convertible
securities exercisable for or convertible into Common Stock) and the MPCA
Acquisition:
PERCENTAGE OF OUTSTANDING
STOCKHOLDER SHARES OF COMMON STOCK
- ----------------------------------------------------- -------------------------
Metromedia Company and its Affiliates................ 24.1%
Existing MIG Stockholders (other than Metromedia
Company and its Affiliates)......................... 46.6
Goldwyn Stockholders................................. 5.6
New MIG Stockholders (who purchase shares of Common
Stock in the Equity Offering)....................... 23.7
-----
100.0%
-----
-----
On May 8, 1996, MIG filed a Registration Statement on Form S-3, as amended,
to register the shares of Common Stock to be offered in the Equity Offering.
Entertainment Group Credit Facility
The Entertainment Group has entered into a commitment letter with Chemical
Bank ("Chemical") which provides that Chemical is committed, subject to the
satisfaction of certain conditions, to provide the $300 million of financing to
the Entertainment Group described below. Chemical has committed to fund the
entire amount of the facility, but a portion of the commitment may be syndicated
to other financial institutions either before or after the Goldwyn Effective
Time. Pursuant to the commitment letter with Chemical, at the Goldwyn Effective
Time, the Entertainment Group, Chemical and the other bank parties thereto will
enter into the Entertainment Group Credit Facility which will provide for an
aggregate of $300 million of financing consisting of a secured term loan of $200
million (the "Term Loan") and a revolving credit facility of $100 million,
including a $10 million letter of credit subfacility (the "Revolving Credit
Facility"). At the Goldwyn Effective Time, approximately $85.0 million will be
available under the Revolving Credit Facility. The Term Loan will be used solely
to refinance up to $200.0 million of Orion's, Goldwyn's and MPCA's existing
indebtedness and the Revolving Credit Facility will be used to finance the
Entertainment Group's production, acquisition and
94
<PAGE>
distribution of motion pictures, for its domestic theatrical exhibition business
and for general working capital purposes.
The Term Loan will bear interest at the Entertainment Group's option at a
rate of LIBOR plus 2 1/2% or Chemical's alternative base rate plus 1 1/2%. The
Revolving Credit Facility will bear interest at the Entertainment Group's option
at a rate of LIBOR plus 1% or Chemical's alternative base rate. The Term Loan
will have a final maturity date of June 30, 2001 and will amortize in 20 equal
quarterly installments of $7.5 million commencing on September 30, 1996, with
the remaining principal amount due at the final maturity date. The amount of the
Term Loan at the Goldwyn Effective Time will be the amount, up to a maximum of
$200 million, based upon a "borrowing base" for the Entertainment Group
calculated using a percentage of its eligible outstanding accounts receivable
(including cash flow from the Entertainment Group's domestic theatrical
exhibition business) and a credit for the Entertainment Group's film and
television library. Such borrowing base would currently provide for $200 million
of availability under the Term Loan. In addition to the amortization schedule
described above, the Entertainment Group Credit Facility will provide that in
the event that the amount outstanding under the Term Loan exceeds the borrowing
base, the Entertainment Group must pay down the excess outstandings. The Term
Loan and the Revolving Credit Facility will be secured by a first priority lien
on all of the stock of Orion and its subsidiaries and on substantially all of
the Entertainment Group's assets, including its accounts receivable and film and
television library. Amounts outstanding under the Revolving Credit Facility will
also be guaranteed jointly and severally by Metromedia Company and by its
partners, John W. Kluge and Stuart Subotnick. To the extent the borrowing base
exceeds the amount outstanding under the Term Loan, such excess will be used to
support the Revolving Credit Facility so as to reduce the exposure of the
guarantors under such facility.
The Entertainment Group Credit Facility will contain customary covenants
including maintenance of corporate existence, compliance with ERISA, maintenance
of properties, delivery of certain monthly, quarterly and annual financial
information, delivery of budgets and other information regarding new motion
picture productions, limitations on the issuance of additional indebtedness and
guarantees, limitations of the creation of new liens, limitations on the number
of films the Entertainment Group may produce simultaneously and the development
costs and budgets for such films, limitations on the aggregate amount of
unrecouped print and advertising costs the Entertainment Group may incur,
limitations on the amount of the Entertainment Group's leases, capital and
overhead expenses, prohibitions on the declaration of dividends or distributions
by the Entertainment Group (other than up to $15 million, to the extent
contributed by the Company to the Entertainment Group), limitations on the
merger or consolidation of the Entertainment Group or the sale by the
Entertainment Group of any substantial portion of its assets or stock and
restrictions on the Entertainment Group's line of business, other than
activities relating to the production, distribution and exhibition of
entertainment product. The Entertainment Group Credit Facility will also contain
financial covenants, including requiring maintenance by the Entertainment Group
of the ratio of the Entertainment Group's Free Cash Flow (as defined in the
Entertainment Group Credit Facility) to the Entertainment Group's cumulative
investment in film product above certain specified levels at the end of each
fiscal quarter, and requiring that the Entertainment Group's cumulative
investment in film product not exceed Free Cash Flow by more than certain
specified levels. In addition, the Entertainment Group Credit Facility will
contain a minimum ratio of (a)(i) Theater Group EBITDA (as defined in the
Entertainment Group Credit Facility) plus (ii) Theater Group Occupancy Charges
(as defined in the Entertainment Group Credit Facility) to (b) Theater Group
Occupancy Charges for each rolling four quarter period.
The Revolving Credit Facility will contain the following events of default:
nonpayment of principal or interest on the facility, the occurrence of a "change
of control" (as defined below) and an assertion by the guarantors of such
facility that the guarantee of such facility is unenforceable. A "change of
control" is defined to mean (i) a change in ownership of Orion which results in
it not being wholly owned by MIG or (ii)(a) if Metromedia Company and its
affiliates do not control at least 20% of the outstanding Common Stock or (b) if
a third party controls more Common Stock than Metromedia
95
<PAGE>
Company and its affiliates or is entitled to designate a majority of the members
of MIG's Board of Directors. The Term Loan portion of the Entertainment Group
Credit Facility will also contain a number of customary events of default
including non-payment of principal and interest and the occurrence of a "change
of management" (as defined below), violation of covenants, falsity of
representations and warranties in any material respect, certain cross-default
and cross-acceleration provisions, and bankruptcy or insolvency of Orion or its
material subsidiaries. A "change of management" is defined to mean a termination
of employment of Existing Management (as defined in the Entertainment Group
Credit facility) and the objection to such person's replacement by the required
lenders within a designated period.
The commitment letter with Chemical for the Entertainment Group Credit
Facility provides for a number of customary conditions precedent to the making
of loans to the Entertainment Group, including the receipt of certain legal
opinions and certificates, absence of any material adverse change in the
Entertainment Group's business and satisfaction by Chemical of the results of
its investigation of the Entertainment Group to confirm certain assumptions.
Sources and Uses of Funds
The following summarizes the anticipated sources and uses of funds from the
Refinancing (assuming the consummation of the Refinancing and the Goldwyn Merger
occurred on March 31, 1996):
(IN MILLIONS)
<TABLE>
<CAPTION>
SOURCES OF FUNDS USES OF FUNDS
- ----------------------------------- --------------------------------------------
<S> <C> <C> <C>
Equity Offering(1)................. $193.0 Refinance Existing MIG Credit
Facility.......................... $ 29.0
Entertainment Group Credit Refinance Orion Bank Debt..........
Facility.......................... 215.0 126.0
Refinance Existing Goldwyn Debt.... 73.0
Working Capital.................... 148.0(2)
Refinance Existing MPCA Debt and
other Miscellaneous Expenses...... 15.0(3)
Transaction Expenses............... 17.0(4)
Total Sources.................. $408.0 Total Uses......................... $408.0
------ ------
------ ------
</TABLE>
- ------------
(1) Based on a closing price of $12.875 on the AMEX on May 28, 1996. Assumes no
exercise of the underwriters' overallotment option.
(2) This amount includes approximately $6.2 million outstanding as of May 28,
1996 under a bridge loan agreement between the Communications Group and
Metromedia Company, which will be repaid with proceeds of the Offering and
reduce working capital by $6.2 million. In addition, the Entertainment Group
would have $85.0 million available under the Entertainment Group Credit
Facility.
(3) Includes approximately $10.0 million of MPCA indebtedness at March 31, 1996.
(4) Represents estimated aggregate expenses incurred in connection with the
Goldwyn Merger and the Refinancing, including underwriting fees and
expenses.
96
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
PRO FORMA COMBINING FINANCIAL STATEMENT
The following unaudited Pro Forma Combining Balance Sheet of Metromedia
International Group, Inc. (MIG) as of March 31, 1996 and unaudited Pro Forma
Combining Statements of Operations for three months ended March 31, 1996 and the
year ended December 31, 1995 illustrates the effect of the Goldwyn Merger and
the Refinancing. The unaudited Pro Forma Combining Balance Sheet assumes that
the Goldwyn Merger and Refinancing occurred on March 31, 1996 and the Unaudited
Pro Forma Combining Statements of Operations assumes that the Goldwyn Merger and
Refinancing occurred at the beginning of the period presented. The following
information does not give effect to the consummation of the MPCA Acquisition.
In addition, separate pro formas have been presented to illustrate the
effect of prior acquisitions and refinancings of MIG, as discussed in the
respective footnotes to the pro formas.
Pursuant to the terms of the Goldwyn Merger Agreement, each share of Goldwyn
Common Stock will be converted into and exchangeable for, a number of shares of
Common Stock, the Goldwyn Exchange Ratio determined by dividing $5.00 by the
MIG-Goldwyn Average Closing Price on the Goldwyn Determination Date; provided,
that, if the MIG-Goldwyn Average Closing Price is below $12.50, the MIG-Goldwyn
Average Closing Price shall be deemed to be $12.50 and if the MIG-Goldwyn
Average Closing Price is greater than $16.50, the MIG-Goldwyn Average Closing
Price shall be deemed to be $16.50.
These unaudited Pro Forma Combining Financial Statements have been prepared
assuming a Goldwyn Exchange Ratio of .3811 (which assumes a MIG-Goldwyn Average
Closing Price of $13.12 and the exercise of the Goldwyn Put. The actual Goldwyn
Exchange Ratio will be determined on the Goldwyn Determination Date in
accordance with the formulas set forth in the Goldwyn Merger Agreement. See
"PROPOSAL NO. 1--THE GOLDWYN MERGER."
ACCOUNTING TREATMENT
The Goldwyn Merger will be accounted for as a purchase transaction. For
accounting purposes, MIG will be deemed to be the surviving coporation in the
Goldwyn Merger.
The pro forma adjustments are based upon currently available information and
upon certain assumptions that management of each of MIG and Goldwyn
(collectively "Management") believes are reasonable. The Goldwyn Merger will be
recorded based upon the estimated fair market value of the net tangible and
intangible assets acquired at the date of acquisition. The adjustments included
in the unaudited Pro Forma Combining Financial Statements represent Management's
preliminary determination of these adjustments based upon available information.
There can be no assurance that the actual adjustments will not differ
significantly from the pro forma adjustments reflected in the pro forma
financial information.
The unaudited Pro Forma Combining Financial Statements are not necessarily
indicative of either future results of operations or results that might have
been achieved if the foregoing transactions had been consummated as of the
indicated dates. The unaudited Pro Forma Combining Financial Statements should
be read in conjunction with the historical financial statements of MIG
(incorporated by reference) and Goldwyn (included in Goldwyn's Annual Report on
Form 10-K accompanying this Proxy Statement/Prospectus), together with the
related notes thereto.
97
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
UNAUDITED PRO FORMA COMBINING BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PRO FORMA MIG PRO FORMA
MERGER AND PRO FORMA WITH EQUITY MIG
MIG GOLDWYN DEBT REFINANCING DEBT REFINANCING REFINANCING PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED ADJUSTMENTS COMBINED
---------- ---------- ---------------- ---------------- ----------- ---------
Cash and marketable
securities.............. $ 17,180 $ 1,849 $ (6,100)(1) $ 12,929 $ 157,577(7) $ 170,506
Accounts receivable...... 26,991 8,266 -- 35,257 -- 35,257
Notes receivable......... -- -- -- -- -- --
Inventories.............. -- -- -- -- -- --
Film inventories......... 56,892 8,905 -- 65,797 -- 65,797
Other current assets..... 4,975 426 -- 5,401 -- 5,401
---------- ---------- ---------------- ---------------- ----------- ---------
Current assets........... 106,038 19,446 (6,100) 119,384 157,577 276,961
Film inventories......... 126,396 54,994 -- 181,390 -- 181,390
Property and equipment,
net..................... 9,181 32,206 -- 41,387 -- 41,387
Intangibles.............. 118,818 3,619 68,722(2) 187,540 -- 187,540
(3,619)(3)
Other assets............ 206,700 1,585 (830)(4) 206,571 -- 206,571
(3,403)(5)
(4,981)(1)
7,500(1)
---------- ---------- ---------------- ---------------- ----------- ---------
Total assets.......... $ 567,133 $ 111,850 $ 57,289 $ 736,272 $ 157,577 $ 893,849
---------- ---------- ---------------- ---------------- ----------- ---------
---------- ---------- ---------------- ---------------- ----------- ---------
Accounts payable and
accrued expenses........ $ 97,301 $ 9,138 $ 2,700(2) $ 109,139 $ -- $ 109,139
Short-term debt.......... 55,327 73,633 (78,450)(1) 90,510 (28,754)(7) 61,756
40,000(1)
Other current
liabilities............. 31,431 12,236 (800)(6) 39,464 -- 39,464
(3,403)(5)
---------- ---------- ---------------- ---------------- ----------- ---------
Current liabilities...... 184,059 95,007 (39,953) 239,113 (28,754) 210,359
Deferred revenues....... 40,839 18,583 -- 59,422 -- 59,422
Long-term debt.......... 249,605 2,685 160,000(1) 292,140 -- 292,140
(120,150)(1)
Other liabilities....... 28,278 15,884 (4,888)(6) 39,275 -- 39,275
Stockholders' equity:
Common stock............ 42,635 1,706 175(6) 46,204 15,000(7) 61,204
3,569(2)
(1,881)(2)
Additional paid-in
capital................ 728,964 24,654 5,513(6) 772,347 178,125(7) 943,678
42,381(2) (6,794)(7)
1,002(2)
(30,167)(2)
Retained earnings
(accumulated deficit).... (707,247) (46,137) 50,586(2) (712,228) -- (712,228)
(3,619)(3)
(830)(4)
(4,981)(1)
Treasury stock.......... -- (532) 532(2) -- -- --
---------- ---------- ---------------- ---------------- ----------- ---------
Total
stockholders'equity
(deficiency)....... 64,352 (20,309) 62,280 106,323 186,331 292,654
---------- ---------- ---------------- ---------------- ----------- ---------
Total liabilities and
stockholders' equity
(deficiency)....... $ 567,133 $ 111,850 $ 57,289 $ 736,272 $ 157,577 $ 893,849
---------- ---------- ---------------- ---------------- ----------- ---------
---------- ---------- ---------------- ---------------- ----------- ---------
</TABLE>
98
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
UNAUDITED PRO FORMA COMBINING STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996
------------------------------------------------------------------------------------------
PRO FORMA MIG PRO FORMA
MERGER AND PRO FORMA WITH EQUITY MIG
MIG GOLDWYN DEBT REFINANCING DEBT REFINANCING REFINANCING PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED ADJUSTMENTS COMBINED
---------- ---------- ---------------- ---------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues........................ $ 30,808 $ 35,493 -$- $ 66,301 $-- $ 66,301
Cost of revenues................ 25,089 34,526 -- 59,615 -- 59,615
Operating expenses.............. 14,066 6,788 -- 20,854 -- 20,854
Depreciation and amortization... 1,723 1,028 (57)(8) 3,381 -- 3,381
687(9) --
---------- ---------- ------ ------- ----- ---------
Operating income (loss)......... (10,070) (6,849) (630) (17,549) -- (17,549 )
Other income (expense):
Interest expense............... (7,034) (3,143) 3,143(10) (7,489) -- (7,489 )
(3,750)(11)
(675)(12)
3,970(15)
Other.......................... (54) -- -- (54) -- (54 )
---------- ---------- ------ ------- ----- ---------
Income (loss) before tax........ (17,158) (9,992) 2,058 (25,092) -- (25,092 )
Provision for income taxes...... 200 779 (779)(14) 200 -- 200
Equity in losses of
subsidiaries................... 1,783 -- -- 1,783 -- 1,783
---------- ---------- ------ ------- ----- ---------
Net income (loss) from
continuing operations.......... $ (19,141) $ (10,771) $2,837 $(27,075) $-- $(27,075 )
---------- ---------- ------ ------- ----- ---------
---------- ---------- ------ ------- ----- ---------
Number of shares issued and
outstanding.................... 42,635 8,489 46,204 15,000 61,204
---------- ---------- ------- ----- ---------
---------- ---------- ------- ----- ---------
Loss per share.................. $ (0.45) $ (1.27) $ (0.59) $ (0.44 )
---------- ---------- ------- ---------
---------- ---------- ------- ---------
</TABLE>
99
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
UNAUDITED PRO FORMA COMBINING STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED,
-----------------------------------------------------------------------------------------------------
PRO FORMA MIG PRO FORMA
DECEMBER 31, 1995 MARCH 31, 1996 MERGER AND PRO FORMA WITH EQUITY MIG
MIG GOLDWYN DEBT REFINANCING DEBT REFINANCING REFINANCING PRO FORMA
PRO FORMA HISTORICAL ADJUSTMENTS COMBINED ADJUSTMENTS COMBINED
----------------- -------------- ---------------- ---------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues............ $ 145,150 $107,784 $-- $ 252,934 $-- $ 252,934
Cost of revenues.... 132,762 108,301 -- 241,063 -- 241,063
Operating
expenses........... 67,972 19,891 -- 87,863 -- 87,863
Depreciation and
amortization....... 6,442 3,770 (229)(8) 12,732 -- 12,732
2,749(9) --
-------- -------------- ------ -------- ----------- ---------
Operating income
(loss)............. (62,026) (24,178) (2,520) (88,724) -- (88,724)
Other income
(expense):
Interest expense... (25,489) (8,490) 8,490(10) (29,453) -- (29,453)
(15,000)(11)
(2,700)(12)
13,736(13)
Other.............. 10,360 -- -- 10,360 -- 10,360
-------- -------------- ------ -------- ----------- ---------
Income (loss) before
tax................ (77,155) (32,668) 2,006 (107,817) -- (107,817)
Provision for income
taxes.............. 973 (541) 541(14) 973 -- 973
Equity in losses of
subsidiaries....... 11,818 -- -- 11,818 -- 11,818
-------- -------------- ------ -------- ----------- ---------
Net income (loss)
from continuing
operations......... $ (89,946) $(32,127) $ 1,465 $ (120,608) $-- $(120,608)
-------- -------------- ------ -------- ----------- ---------
-------- -------------- ------ -------- ----------- ---------
Number of shares
issued and
outstanding........ 42,635 8,489 46,204 15,000 61,204
-------- -------------- -------- ----------- ---------
Loss per share...... $ (2.11) $ (3.78) $ (2.61) $ (1.97)
-------- -------------- -------- ---------
-------- -------------- -------- ---------
</TABLE>
100
<PAGE>
(1) Reflects refinancing of the Goldwyn Bank Debt and Orion's bank debt and
payment of refinancing fees with (a) $200 million from the Entertainment
Group Credit Facility and (b) cash on hand. Deferred financing fees
associated with Orion's bank debt in the amount of $5.0 million have been
written off and are accounted for as an extraordinary loss in the pro forma
combining balance sheet as a charge to retained earnings (accumulated
deficit).
(2) Reflects the excess of cost over the estimated fair value of net
liabilities assumed in the Goldwyn Merger, the elimination of Goldwyn's
historical common stock and historical additional paid-in capital, adjusted
for the shares issued pursuant to the shareholder participation rights,
retained earnings (accumulated deficit), retirement of Goldwyn's treasury
stock, and the value of the Common Stock and options issued to the Goldwyn
Stockholders in the Goldwyn Merger.
Shares to be issued in exchange for accrued stockholder
participation rights........................................... 875
Goldwyn shares outstanding at March 31, 1996..................... 8,489
--------
Goldwyn shares outstanding at March 31, 1996 adjusted............ 9,364
Number of shares issued to acquire Goldwyn....................... 3,569
Per share price at closing (assumed for illustrative purposes)... $ 12.875
--------
Value of shares issued........................................... $ 45,950
Value of Goldwyn options (using Black-Scholes method)............ 1,002
Transaction costs................................................ 2,700
--------
Purchase price................................................... 49,652
Less--Estimated fair value of net liabilities assumed.......... (19,070)
--------
Excess of cost over fair value of the net liabilities assumed.... $ 68,722
--------
--------
These adjustments reflect an assumed closing price for the Common Stock of
$12.875. As a result, each share of Goldwyn Common Stock would be converted into
0.3811 shares of Common Stock based on the assumed MIG-Goldwyn Average
Closing Price of $13.12.
The Company has made a preliminary allocation of excess cost over estimated fair
value of net liabilities assumed to goodwill as Goldwyn's assets and liabilities
are estimated to approximate fair value. However there can be no assurance
that the actual adjustment will not differ significantly from the pro forma
adjustment.
(3) Reflects write-off of Goldwyn's historical goodwill.
(4) Reflects write-off of Goldwyn deferred financing fees.
(5) Reflects elimination of interim financing between Orion and Goldwyn.
(6) Reflects a reduction of $5,700 of an historical accrued participation right
of a Goldwyn Stockholder in exchange for the issuance of 875,000 Goldwyn
shares.
(7) Reflects the issuance of 15.0 million shares of Common Stock at an assumed
price of $12.875 per share, net of estimated Common Stock issuance costs of
$6,794, and the refinancing of MIG's credit facility.
(8) Reflects elimination of historical Goldwyn goodwill amortization.
(9) Reflects amortization expense of the excess of cost over the fair value of
net tangible assets acquired in the Goldwyn Acquisition by use of the
straight-line method over 25 years.
(10) Reflects elimination of interest expense attributable to the Goldwyn Bank
Debt as a result of the Entertainment Group Credit Facility.
101
<PAGE>
(11) Reflects additional interest expense on the Entertainment Group Credit
Facility (assumed rate 7.50%). A 1/8% change in the assumed rate would
result in a change of $250 in annual interest expense.
(12) Reflects amortization of deferred financing fees arising from the
Entertainment Group Credit Facility. This amount is being amortized using
the effective interest method over a period of five years.
(13) Reflects elimination of interest expense attributable to MIG's credit
facility and Orion's bank debt amounting to $2,325 and $11,031,
respectively, as well as elimination of amortization on Orion's deferred
financing fees of $380 as a result of the Entertainment Group Credit
Facility.
(14) Reflects elimination of Goldwyn provision for taxes.
(15) Reflects elimination of interest expense attributable to MIG's credit
facility and Orion's bank debt amounting to $805 and $2,683, respectively,
as well as elimination of amortization on Orion's deferred financing fees
of $482 as a result of the Entertainment Group Credit Facility.
102
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31, 1995
--------------------------------------------------------------------------------------------
MIG
MIG ACTAVA STERLING REFINANCING PRO FORMA MIG
HISTORICAL(A) ADJUSTMENTS(B) ADJUSTMENTS(B) ADJUSTMENTS(C) ADJUSTMENTS PRO FORMA
------------- -------------- -------------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues.................... $ 138,871 $ -- $ 6,279 $ -- $ -- $145,150
Cost of revenues............ 132,762 -- 4,336 -- -- 137,098
Operating expenses.......... 50,771 8,126 3,489 -- 1,250(d) 63,636
Depreciation and
amortization............... 2,795 -- -- -- 3,647(e) 6,442
------------- ------- ------ ------- ----------- ---------
Operating income (loss)..... (47,457) (8,126) (1,546) -- (4,897) (62,026 )
Other income (expense)
Interest expense........... (29,539) (11,717) -- 15,767 -- (25,489 )
Other...................... (1,280) 11,640 -- -- -- 10,360
------------- ------- ------ ------- ----------- ---------
Income (loss) before tax.... (78,276) (8,203) (1,546) 15,767 (4,897) (77,155 )
Provision for income tax.... 767 -- 206 -- -- 973
Equity in losses of
subsidiaries............... 7,936 3,882 -- -- -- 11,818
------------- ------- ------ ------- ----------- ---------
Income (loss) from cont.
operations................. $ (86,979) $(12,085) $ (1,752) $ 15,767 $(4,897) $(89,946 )
------------- ------- ------ ------- ----------- ---------
------------- ------- ------ ------- ----------- ---------
</TABLE>
- ------------
<TABLE>
<C> <S>
(a) Reflects 12 months of operations of Orion and MITI, 2 months of operations of Actava and
Sterling, and 2 months of MITI minority interest step-up.
(b) Reflects additional 10 months of activity for Actava and Sterling prior to the November
1 Mergers.
(c) Reflects interest expense on the term loan portion of the Orion's bank debt (assumed
interest rate of 9.1%), the revolving credit portion of the Orion's bank debt (assumed
interest rate of 7.6%), MIG's credit facility (assumed interest rate of 8.1%),
commitment fee of 1% on unused portion of the revolving credit portion of Orion's bank
debt, net of $27.1 million reduction in interest expense related to refinanced Orion
debt and $2.4 million reduction in interest expense related to refinanced MITI debt.
(d) Reflects additional 10 month Metromedia Company management fee.
(e) Reflects additional 10 months of goodwill amortization for MITI, additional 10 months of
goodwill amortization for Sterling, and removal of 10 months of pre-merger goodwill
amortization for MITI. All goodwill is assumed to be amortized over a 25-year period.
</TABLE>
103
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE GOLDWYN MERGER
Consummation of the Goldwyn Merger is conditioned upon receipt by Goldwyn of
the opinion of Rosenfeld, Meyer & Susman, LLP, counsel to Goldwyn, outlined
below. Such opinion will be issued with the understanding that the relevant
facts are as described in the Proxy Statement/Prospectus and exhibits and
appendices hereto, and in rendering its opinion such counsel will rely on the
accuracy of the factual statements and representations in the foregoing document
and upon certain representations made in writing to such counsel. An opinion of
counsel, however, is not binding on the Internal Revenue Service or the courts.
Goldwyn has not requested nor will it request an advance ruling from the
Internal Revenue Service.
As of the date of this Proxy Statement/Prospectus, Rosenfeld, Meyer &
Susman, LLP has advised Goldwyn that the material Federal income tax
consequences of the Goldwyn Merger will be as follows:
(i) The Goldwyn Merger will qualify as a tax-free reorganization within
the meaning of Section 368(a) of the Code.
(ii) No gain or loss will be recognized by a stockholder of Goldwyn upon
receipt of shares of Common Stock in exchange for shares of Goldwyn Common
Stock, except as described in (ii) below.
(iii) Each stockholder of Goldwyn who receives cash proceeds from the
sale of fractional interests in shares of Common Stock will recognize gain
or loss equal to the difference between such proceeds and the tax basis
allocated to such stockholder's fractional share interests. Any such gain or
loss recognized as described in this paragraph will constitute capital gain
or loss if the stockholder's shares of Goldwyn Common Stock were held as a
capital asset at the Goldwyn Effective Time.
(iv) The tax basis of the shares of Common Stock (including fractional
share interests for which cash is ultimately received) received by a
stockholder of Goldwyn will be the same as the tax basis of the shares of
Goldwyn Common Stock exchanged therefor.
(v) The holding period of Common Stock in the hands of a stockholder of
Goldwyn will include the holding period of the shares of Goldwyn Common
Stock exchanged therefor, provided that such shares were held as a capital
asset at the Goldwyn Effective Time.
(vi) No gain or loss will be recognized by Goldwyn as a result of the
Goldwyn Merger.
LIMITATIONS ON NET OPERATING LOSS CARRY-FORWARDS
The following discussion describes certain limitations on the utilization of
net operating loss carry-forwards by MIG and its subsidiaries and Goldwyn and
its subsidiaries. These issues have not been opined on by counsel, and neither
MIG nor Goldwyn has requested or will request an advance ruling from the
Internal Revenue Service with respect thereto.
In the event that the application of limitations described below on the
utilization of net operating loss carry-forwards results in MIG and its
subsidiaries (including Goldwyn after the Goldwyn Merger) recognizing taxable
income in excess of utilizable net operating losses, the companies would
generally be subject to Federal income tax on such excess taxable income.
104
<PAGE>
The November 1 Mergers
On November 1, 1995, Orion and MITI merged with and into wholly-owned
subsidiaries of MIG (formerly known as The Actava Group Inc. ("Actava")), and
MCEG Sterling Incorporated ("Sterling") merged with and into MIG. For their
taxable years ending on or before November 1, 1995, Orion, Actava, MITI and
Sterling and the subsidiaries included in their respective affiliated groups of
corporations which filed consolidated Federal income tax returns with Orion,
Actava, MITI and Sterling as the parent corporation (such Orion, Actava, MITI
and Sterling affiliated groups hereinafter being referred to as the "Orion
Group", the "Actava Group", the "MITI Group" and the "Sterling Group",
respectively, and individually as a "Former Group" and collectively as the
"Former Groups") reported or will report net operating loss carryforwards (such
pre-November 1, 1995 net operating loss carryforwards hereinafter referred to
collectively as the "Pre-November 1 Losses"). As a result of the November 1
Mergers, certain limitations applied to the use of the Pre-November 1 Losses of
the Former Groups by MIG and its subsidiaries included in the affiliated group
of corporations which will file a consolidated Federal income tax return with
MIG as the parent corporation (the "MIG Group").
Under Section 382 of the Code, annual limitations will generally apply to
the use of the Pre-November 1 Losses of the Former Groups by the MIG Group. The
amount of the annual limitation with respect to a Former Group depends upon the
application of certain principles contained in Section 382 of the Code relating
to the valuation of such Former Group immediately prior to the November 1
Mergers and an interest factor published by the Internal Revenue Service on a
monthly basis. Based on the market price of the Common Stock at the effective
time of the November 1 Mergers, the exchange ratios with respect to the shares
of Orion, MITI and Sterling and the published interest factor of 5.75 percent
(applicable to transactions that occurred in November 1995), the annual
limitations on the use of the Pre-November 1 Losses of the Orion Group, Actava
Group, the MITI Group and the Sterling Group, respectively, by the MIG Group
would currently be approximately $11.9 million, $18.3 million, $10.0 million and
$.51 million per year, respectively. The amount of any such limitation with
respect to a Former Group would generally be increased by the amount of any
recognized "built-in" gains of former members of such Former Group. In addition,
to the extent Pre-November 1 Losses equal to the annual limitation with respect
to any of the Former Groups are not used in any year, the unused amount would
generally be available to be carried forward and used to increase the limitation
with respect to such Former Group in the succeeding year.
The use of Pre-November 1 Losses of the Orion Group, the MITI Group and the
Sterling Group will also be separately limited by the income and gains
recognized by the corporations that were members of each of the Orion Group, the
MITI Group and the Sterling Group, respectively, including corporations such as
MIG (in the case of Sterling) that are successors by merger to any of such
members. Under proposed Treasury regulations, such Pre-November 1 Losses of any
such former members of any such Former Group, or successors thereof, would be
usable on an aggregate basis to the extent of the income and gains of such
former members of such Former Group, or successors thereof on an aggregate
basis.
The Goldwyn Merger
As of the end of its most recent taxable year, Goldwyn and the subsidiaries
included in the affiliated group of corporations which file consolidated Federal
income tax returns with Goldwyn as the parent corporation (the "Goldwyn Group")
reported or will report net operating loss carryforwards. As a result of the
Goldwyn Merger, the limitations discussed above will apply to the use of such
net operating losses and any net operating losses which the Goldwyn Group will
report for the taxable year ending on the Goldwyn Effective Time (such net
operating losses hereinafter referred to as the "Goldwyn Pre-Merger Losses") by
the MIG Group. See "Limitations on Net Operating Loss Carry-Forwards--The
November 1 Mergers."
105
<PAGE>
Under Section 382 of the Code, the annual limitations with respect to the
use of the Goldwyn Pre-Merger Losses by the MIG Group will generally apply.
Based the market price of the Common Stock, the Goldwyn Exchange Ratio and the
most recently published interest factor of 5.68 percent (applicable for
transactions occurring during May 1996), the annual limitation on the use of the
Goldwyn Pre-Merger Losses would be approximately $2.3 million per year.
The use of the Goldwyn Pre-Merger Losses will also be separately limited by
the income and gains recognized by the corporations that were members of the
Goldwyn Group. Under proposed Treasury regulations, the Goldwyn Pre-Merger
Losses would be usable on an aggregate basis to the extent of the income and
gains of such former members of the Goldwyn Group on an aggregate basis.
THE DISCUSSION SET FORTH ABOVE IS A GENERAL DISCUSSION OF THE MATERIAL
FEDERAL INCOME TAX CONSEQUENCES. IT DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN
TAX CONSEQUENCES OF THE GOLDWYN MERGER. IN ADDITION, THE DISCUSSION DOES NOT
ADDRESS THE TAX CONSEQUENCES THAT MAY BE RELEVANT TO PARTICULAR CATEGORIES OF
STOCKHOLDERS SUBJECT TO SPECIAL TREATMENT UNDER CERTAIN FEDERAL INCOME TAX LAWS,
SUCH AS DEALERS IN SECURITIES, BANKS, INSURANCE COMPANIES, FOREIGN INDIVIDUALS
AND ENTITIES AND REGULATED INVESTMENT COMPANIES OR TO EMPLOYEES HOLDING GOLDWYN
OPTIONS. THE DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE,
EXISTING AND PROPOSED TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE
RULINGS AND COURT DECISIONS. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE,
POSSIBLY WITH RETROACTIVE EFFECT, AND ANY SUCH CHANGE COULD AFFECT THE
CONTINUING VALIDITY OF THIS DISCUSSION. EACH GOLDWYN STOCKHOLDER SHOULD CONSULT
HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE GOLDWYN
MERGER TO HIM OR HER IN PARTICULAR, INCLUDING THE APPLICATION AND EFFECT OF
FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
106
<PAGE>
INFORMATION REGARDING MIG
BUSINESS OF MIG
MIG is a global entertainment, media and communications company with
continuing operations currently in two business groups. Through its
Entertainment Group, MIG is engaged primarily in the development, production,
acquisition, exploitation and worldwide distribution in all media of motion
pictures, television programming and other filmed entertainment product. It has
an extensive film library of over 1,200 titles, including Dances with Wolves,
Silence of the Lambs and Platoon. Operating through its Communications Group,
MIG owns interests in and participates along with local partners in the
management of joint ventures which operate wireless cable television systems,
paging systems, an international toll call service, a trunk mobile radio service
and radio stations in certain countries in Eastern Europe and certain of the
former Soviet Republics. In addition, on May 17, 1996, MIG entered into the MPCA
Acquisition Agreement to acquire MPCA, which focuses on producing and acquiring
commercially marketable films featuring popular actors at substantially less
than average industry cost. A recent success produced by MPCA was the film Dumb
and Dumber, starring Jim Carrey. Additionally, MPCA is a supplier of low cost
production to major entertainment companies including Tri-Star Pictures, Turner,
MGM/UA, Showtime Networks and HBO. Bradley Krevoy and Steven Stabler, the
principals of MPCA, will be employed by MIG's Entertainment Group following the
MPCA Acquisition. The shares of Common Stock issued to the stockholders of MPCA
pursuant to the MPCA Acquisition Agreement have not been registered for resale
under the Securities Act. It is anticipated, however, that MIG and MPCA will
enter into a registration rights agreement pursuant to which MIG will grant to
the stockholders of MPCA two demand registration rights and unlimited
"piggyback" registration rights (subject to customary cutbacks). Pursuant to
such registration rights agreement, MIG and the stockholders of MPCA have agreed
to indemnify each other against certain liabilities, including liabilities under
the Securities Act. Consummation of the MPCA Acquisition Agreement is subject to
certain conditions precedent including expiration or early termination of the
waiting period under the Hart Scott Act, the execution of certain ancillary
agreements, the satisfaction by MIG of its due diligence review of MPCA and
other customary closing conditions. MIG also owns two non-strategic assets:
Snapper, which manufactures and sells lawn and garden equipment and MIG's
investment in Roadmaster, a leading sporting goods manufacture. For accounting
purposes, Snapper and MIG's investment in Roadmaster have been classified as
assets held for disposition. MIG is actively exploring a sale of Snapper.
Roadmaster is a leading sporting goods manufacturer of which MIG owns 38% of the
outstanding shares. As MIG has disclosed in Amendment No. 1 to its Schedule 13D
relating to Roadmaster filed with the Commission on March 1, 1996, MIG intends
to dispose of its investment in Roadmaster during 1996. MIG intends to pursue a
strategy of making selective acquisitions of attractive entertainment, media and
communications assets that complement its existing business groups. In
particular, the Company is interested in expanding its library of proprietary
motion picture rights and in expanding the network through which it distributes
various entertainment, media and communications products and services.
MIG had also entered into the Alliance Merger Agreement on December 20, 1995
to acquire Alliance. As disclosed in MIG's Current Report on Form 8-K dated
April 29, 1996, the Boards of Directors of MIG and Alliance mutually agreed that
due to changing conditions, the proposed acquisition of Alliance by MIG would
not be in the best interest of their respective stockholders and accordingly,
MIG and Alliance terminated the Alliance Merger Agreement on April 29, 1996.
MIG's principal executive offices are located 945 East Paces Ferry Road,
Suite 2210, Atlanta, Georgia 30326, telephone: (404) 261-6190.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data presented below as of and
for the year ended December 31, 1995 and as of and for each of the years in the
four-year period ended February 28, 1995
107
<PAGE>
have been derived from financial statements audited by KPMG Peat Marwick LLP,
independent certified public accountants. The consolidated financial statements
as of December 31, 1995 and February 28, 1995, and for the year ended December
31, 1995 and each of the years for the two year period ended February 28, 1995
together with the report of KPMG Peat Marwick LLP, are contained in MIG's Annual
Report on Form 10-K for the year ended December 31, 1995. The selected unaudited
data presented below for the three month periods ended March 31, 1996 and 1995
and as of March 31, 1996, are derived from the unaudited consolidated financial
statements of MIG contained in MIG's Form 10Q which are incorporated herein by
reference. In the opinion of management of the Company, the unaudited financial
data reflect all adjustments, consisting of normal recurring adjustments,
necessary to present fairly the financial data for such periods and as of such
date. The results for the three month periods ended March 31, 1996 and 1995 are
not necessarily indicative of results to be expected for the full year.
SELECTED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31, YEARS ENDED FEBRUARY 28/29,
--------------------- ------------ ---------------------------------------------
1996 1995 1995* 1995 1994 1993 1992
--------- --------- ------------ -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
UNAUDITED
---------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Revenues................ $ 30,808 $ 37,678 $ 138,871 $194,789 $ 175,713 $ 222,318 $ 491,117
Equity in losses of
Joint Ventures........ 1,783 588 (7,981) (2,257) (777) -- --
Loss from continuing
operations before
extraordinary item.... (19,141) (20,366) (87,024) (69,411) (132,530) (72,973) (280,832)
Loss from continuing
operations before
extraordinary item per
common share.......... (0.45) (0.97) (3.54) (3.43) (7.71) (19.75) (3,052.52)
Common and common
equivalent shares
entering into
computation of per
share amounts......... 42,615 20,935 24,541 20,246 17,188 3,694 92
BALANCE SHEET DATA
Total Assets............ 567,133 ** 599,638 391,870 520,651 704,356 856,950
Notes and subordinated
debt................... 304,932 ** 304,643 237,027 274,500 325,158 521,968
</TABLE>
- ------------
* The consolidated financial statements for the twelve months ended December
31, 1995 include two months for Orion (January and February 1995) that were
included in the February 28, 1995 consolidated financial statements. The
revenues and net loss for the two month duplicate period are $22.5 and $11.4
million, respectively.
** The accounting survivor of the November 1 Mergers (as defined herein) was
Orion, whose fiscal year prior to the consummation of the November 1 Mergers
ended on February 28. As a result, these numbers for March 31, 1995 are not
available.
DESCRIPTION OF MIG CAPITAL STOCK
The following summary description of the capital stock of MIG does not
purport to be complete and is qualified in its entirety by reference to MIG's
Restated Certificate of Incorporation, a copy of which is filed as an exhibit to
the Registration Statement of which this Joint Proxy Statement/Prospectus is a
part, and to the description of MIG's capital stock contained in its
Registration
108
<PAGE>
Statement on Form 8-A, filed with the Commission pursuant to the Exchange Act on
November 1, 1995, which is incorporated herein by reference.
General
As of the date hereof, the total number of shares of authorized stock is
180,000,000 shares, consisting of 70,000,000 shares of preferred stock, par
value $1.00 per share (the "Preferred Stock"), and 110,000,000 shares of Common
Stock, par value $1.00 per share. As of March 31, 1996, there were no shares of
Preferred Stock issued and outstanding and 42,635,488 shares of Common Stock
issued and outstanding.
Common Stock
MIG has not paid a dividend to its stockholders since the dividend declared
in the fourth quarter of 1993, and has no plans to pay cash dividends in the
foreseeable future. Any future dividends will depend upon MIG's earnings,
capital requirements, financial condition and other relevant factors including
the existence or absence of any contractual limitations on the payment of
dividends. MIG is currently a party to a credit agreement with Chemical Bank
which restricts the payment of dividends.
The holders of shares of Common Stock will be entitled to receive such
dividends, if any, that may be declared from time to time by MIG's Board of
Directors in its discretion from funds legally available therefor, subject to
the dividend priority of the holders of Preferred Stock, if any. The holders of
shares of Common Stock also will be entitled to share in any distribution to
stockholders upon liquidation, dissolution or winding up of MIG, subject to the
prior liquidation rights of the holders of Preferred Stock, if any.
Each holder of Common Stock is entitled to one vote for each share held of
record for all matters to be voted upon by the stockholders. Directors of MIG
are elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors.
The Board of Directors of MIG is divided into three classes. One class of
directors was initially elected for a term expiring at the MIG Annual Meeting
(the "Class I Directors"), a second class was initially elected for a term
expiring at the annual meeting of stockholders of MIG to be held in 1997 (the
"Class II Directors"), and a third class was initially elected for a term
expiring at the annual meeting of stockholders to be held in 1998 (the "Class
III Directors"). 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 are John W.
Kluge, Stuart Subotnick, and John P. Imlay, Jr. The Class II Directors are John
D. Phillips, Richard J. Sherwin, and Leonard White. The Class III Directors are
Clark A. Johnson, Silvia Kessel, Carl E. Sanders and Arnold L. Wadler.
All outstanding shares of Common Stock are fully paid and nonassessable.
When issued, all of the shares of Common Stock to be issued in connection with
the Goldwyn Merger will be fully paid and nonassessable. The holders of Common
Stock do not have preemptive rights.
Preferred Stock
MIG Preferred Stock may be issued from time to time in one or more series of
any number of shares, with such voting powers, preferences and rights and
qualifications, limitations or restrictions, and such distinctive serial
designations as may be stated in the resolution or resolutions adopted by the
MIG Board of Directors providing for the issuance of such series and as
permitted by the DGCL. Currently, no shares of Preferred Stock are issued and
outstanding.
109
<PAGE>
TRANSFER AGENT AND REGISTRAR
Chemical Mellon Shareholder Services will be the transfer agent and
registrar for the Common Stock.
RESTRICTIONS ON RESALE OF COMMON STOCK BY AFFILIATES
Under Rule 145 of the Securities Act, certain persons who receive Common
Stock pursuant to the Goldwyn Merger and who are deemed to be "affiliates" of
Goldwyn will be limited in their right to resell such securities. With respect
to Goldwyn, the term "affiliate" is defined to include any person who, directly
or indirectly, controls, is controlled by or is under common control with
Goldwyn at the time the Goldwyn Merger is submitted to a vote of the Goldwyn
Stockholders. Each affiliate of Goldwyn (e.g. generally any director or
executive officer of Goldwyn or any stockholder of Goldwyn who beneficially owns
a substantial percentage of outstanding shares of Goldwyn Common Stock), who
desires to resell Common Stock received in the Goldwyn Merger must sell such
securities either pursuant to an effective registration statement or in
accordance with the applicable provisions of Rule 145(d) under the Securities
Act.
Rule 145(d) requires that persons deemed to be affiliates of Goldwyn resell
their stock pursuant to those requirements of Rule 144 under the Securities Act
which relate to the availability of current public information concerning the
issuer, the volume of securities permitted to be sold and the manner in which
securities may be sold, if such stock is sold within the first two years after
the receipt thereof. After two years, if such person is not an affiliate of MIG
and if either MIG is current in the filing of its periodic securities law
reports under the Exchange Act or there otherwise exists certain public
information concerning MIG, a former affiliate of Goldwyn may freely resell the
securities received in the Goldwyn Merger without limitation. After three years
from the date of issuance of such securities, if such person is not an affiliate
of MIG at the time of sale and for a period of at least three months prior to
such sale, such person may freely resell such securities, without limitation,
regardless of the status of MIG's periodic securities law reports under the
Exchange Act. Certificates representing shares of Common Stock to be received by
affiliates of Goldwyn in the Goldwyn Merger will be legended as to the
restrictions imposed upon resale of such stock.
It is a condition to the consummation of the Goldwyn Merger that the
MIG-Goldwyn Shelf Registration Statement to register for resale shares of Common
Stock to be received by Mr. Goldwyn and the Goldwyn Family Trust in connection
with the Goldwyn Merger be declared effective by the Commission prior to the
Goldwyn Effective Time. Upon the effectiveness of such registration statement,
Mr. Goldwyn and the Goldwyn Family Trust will hold shares of Common Stock which
may be resold without complying with Rule 145 under the Securities Act.
COMPARISON OF THE RIGHTS OF STOCKHOLDERS OF MIG AND GOLDWYN
General
As a result of the Goldwyn Merger, Goldwyn Stockholders, whose rights are
currently governed by Delaware law and the Goldwyn Certificate of Incorporation
(the "Goldwyn Certificate") and By-laws will become stockholders of MIG. As
stockholders of MIG, their rights will be governed by Delaware law and by MIG's
Restated Certificate of Incorporation (the "MIG Certificate") and By-laws. The
following discussion is intended only to highlight certain of the rights of
stockholders under Delaware law generally and, specifically, certain differences
between the rights of stockholders of MIG and Goldwyn. The discussion does not,
purport to constitute a detailed comparison of the provisions of Delaware law,
or any of the parties Certificates of Incorporation or By-laws. Stockholders are
referred to such law and the appropriate Certificates of Incorporation and
By-laws for a definitive treatment of the subject matter.
110
<PAGE>
Classification of the Board of Directors
Delaware law permits (but does not require) classification of a
corporation's board of directors into one, two or three classes. The Goldwyn
Certificate divides its Board of Directors into three classes, with the
directors of each class being elected to staggered three year terms. The MIG
Certificate also provides for a Board of Directors divided into three classes.
One class of MIG directors was elected for a term expiring at the annual meeting
of MIG Stockholders to be held in 1996, a second class was elected for a term
expiring at the annual meeting of MIG Stockholders to be held in 1997, and the
third class was elected for a term expiring at the annual meeting of MIG
Stockholders to be held in 1998. Members of each class hold their respective
offices until their successors are elected and qualified. At each succeeding
annual meeting of MIG Stockholders, the successors of the class of directors
whose term expires at that meeting are elected by a plurality vote of all votes
cast at such meeting and will hold office for a three year term.
Amendments to By-Laws
Under Delaware law, the power to adopt, amend or repeal By-laws rests with
the stockholders entitled to vote. A Delaware corporation may, however, in its
certificate of incorporation, confer the power to adopt, amend or repeal By-laws
upon its directors. The Goldwyn Certificate and By-laws authorize the Goldwyn
Board of Directors to adopt, amend or repeal the Goldwyn By-laws; provided, that
Goldwyn's By-laws may be amended or repealed by the holders of at least 75% of
the voting power of the then outstanding voting stock of Goldwyn.
The MIG Certificate and By-laws provide that the MIG By-laws may be amended
by the affirmative vote of either a majority of the MIG Board of Directors then
in office or by the holders of a majority of the outstanding capital stock of
MIG entitled to vote thereon.
Removal of Directors
Under Delaware law, although stockholders may generally remove directors
with or without cause by a majority vote, stockholders may remove members of
classified boards only for cause unless the certificate of incorporation
provides otherwise. The Goldwyn Certificate (which provides for a classified
board) provides that any director may be removed from office at any time, with
or without cause, by the affirmative vote of the holders of at least 75% of the
then outstanding shares of voting stock, voting together as a single class.
The MIG Certificate (which provides for a classified board) provides that
MIG Stockholders may only remove members of its Board of Directors for cause.
Power to Call Special Meetings of Stockholders
Under Delaware law, special meetings of a corporation's stockholders may be
called by the corporation's Board of Directors or by such person or persons as
may be authorized by its certificate of incorporation or By-laws. The Goldwyn
By-laws provide that special meetings of the stockholders may be called only by
the Chairman of the Goldwyn Board or by a majority of the entire Goldwyn Board
of Directors.
The MIG Certificate provides that special meetings of stockholders may only
be called by the Chairman or Vice Chairman of MIG's Board of Directors.
Action by Written Consent
Delaware law provides that, unless otherwise provided in the certificate of
incorporation, stockholders may act by written consent in lieu of a meeting if
consents are signed representing not less than the minimum number of votes that
would be necessary to take such action at a meeting where all shares entitled to
vote were present and voted. The Goldwyn Certificate does not provide otherwise.
The MIG Certificate prohibits stockholder action by written consent.
Accordingly, all action by MIG Stockholders must be taken at a duly called
annual or special meeting.
111
<PAGE>
Stockholder Nominations and Proposals
MIG's By-laws establish procedures that must be followed for stockholders to
nominate individuals to the Board of Directors of MIG or to propose business at
MIG's annual meeting of stockholders. 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.
In order properly to propose that certain business come before the annual
meeting of stockholders, a MIG Stockholder must provide timely notice in writing
to the Secretary of MIG, which notice must include a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting. In addition, the notice must
contain the name, record address, class and number of shares of MIG's capital
stock beneficially owned by the stockholder giving such notice, any material
interest of the stockholder in such business and all other information that
would be required to be filed with the Commission if such person were a
participant in a solicitation subject to Section 14 of the Exchange Act.
To be timely, notice must be received by MIG not less than 60 days nor more
than 90 days prior to the first 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 ten days
following public disclosure by MIG of the date of the annual or special meeting
at which directors are to be elected or the proposed business is to be
conducted. 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.
The Goldwyn By-laws also establish procedures similar to those contained in
MIG's By-laws that Goldwyn Stockholders must follow in order to nominate an
individual to the Goldwyn Board of Directors or to propose business at its
annual meeting of stockholders.
Stockholder Rights Plan
The Board of Directors of MIG has previously disclosed its intention to
adopt a stockholder rights plan. In connection with the Goldwyn Merger, the
Board of Directors of MIG postponed its plan to adopt such rights plan. The MIG
Board intends to adopt such a plan in 1996. Although the exact terms of the
rights plan are not known, it is anticipated that such rights plan will cause
substantial dilution to a person or group that attempts to acquire MIG on terms
not approved by MIG's Board. Such rights plan may have an anti-takeover effect.
The Board of Directors of Goldwyn has not adopted a stockholder rights plan.
Issuance of Rights
The Goldwyn Certificate authorizes the Goldwyn Board of Directors to create
and issue rights entitling the holders thereof to purchase shares of stock of
Goldwyn or any other corporation. The Goldwyn Board of Directors has been
authorized to determine (i) the initial purchase price per share to be purchased
upon exercise of such rights; (ii) provisions relating to the times at which and
the circumstances under which such rights may be exercised or sold; (iii)
provisions which adjust the number or exercise price of such rights upon
exercise of such rights in certain circumstances; (iv) provisions which deny the
holder of a specified percentage of the outstanding stock the right to exercise
such rights and/or cause the rights held by such holder to become void; (v)
provisions which permit Goldwyn to redeem such rights; and (vi) the appointment
of a rights agent with respect to such rights. The MIG Certificate does not
contain similar provisions with respect to the creation and issuance of rights.
112
<PAGE>
INFORMATION REGARDING GOLDWYN
BUSINESS OF GOLDWYN
Goldwyn is a diversified independent entertainment company engaged in the
production and worldwide distribution of motion pictures and television
programming and in theatrical exhibition.
Goldwyn's Film Division is a producer and leading distributor of specialized
motion pictures and art films, which are substantially less expensive to produce
and distribute than films produced by major studios for wide release.
Specialized films also are characterized by underlying literary and artistic
elements intended to appeal primarily to sophisticated audiences. Certain
specialized motion pictures have "crossover" commercial potential as well, that
is, artistic and creative elements, such as an exceptional cast, critically
acclaimed performances or a timely or compelling storyline, which appeal to a
broader audience. Specialized films released by Goldwyn in recent years include
the Academy Award-winning The Madness of King George, the crossover commercial
success Much Ado About Nothing, and Academy Award-nominated films Eat, Drink,
Man, Woman, The Wedding Banquet, Longtime Companion and Henry V.
Goldwyn's Television Division (the "Television Division") produces original
programming for the first-run syndication market and distributes feature films
and other television programming worldwide. The Television Division produces and
syndicates the athletic competition series American Gladiators, which is
currently in its seventh season. American Gladiators is syndicated in over 90%
of the United States television markets and is licensed in a number of foreign
countries. The Television Division has also produced and syndicated the series
The New Adventures of Flipper, a remake of its classic television series
Flipper, for broadcast in the 1995/1996 season. The New Adventures of Flipper is
syndicated in over 85% of the United States television markets and is licensed
in a number of foreign countries. In addition, the Television Division
syndicates movie packages from Goldwyn's library of over 850 feature films.
Goldwyn believes that its Samuel Goldwyn Theatre Group (the "Theatre
Group"), with 140 screens in 52 theatres, is the largest exhibitor of
specialized motion pictures and art films in the United States. The operation of
the Theatre Group allows Goldwyn to participate in revenues from the exhibition
of films distributed by Goldwyn as well as films produced and distributed by
others. The Theatre Group fulfills a key element of Goldwyn's strategy by
broadening Goldwyn's presence in the market for specialized motion pictures and
art films and providing a source of relatively stable revenues and cash flow to
Goldwyn. The Theatre Group intends, on an opportunistic basis, to acquire
additional screens in its existing markets and to expand into new markets that
the Theatre Group considers to be the primary markets for the exhibition of
specialized motion pictures and art films.
Goldwyn was founded as a California corporation in 1979 and reincorporated
as a Delaware corporation in 1991. Unless the context requires otherwise, all
references to Goldwyn mean Goldwyn and its subsidiaries.
The principal executive offices of Goldwyn are located at 10203 Santa Monica
Boulevard, Los Angeles, California 90067, and its telephone number is (310)
552-2255.
113
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered by this Proxy
Statement/Prospectus will be passed upon for MIG by Paul, Weiss, Rifkind,
Wharton & Garrison.
EXPERTS
The consolidated financial statements and schedules of Metromedia
International Group, Inc. as of December 31, 1995 and February 28, 1995 and for
the year ended December 31, 1995, and for each of the years in the two year
period ended February 28, 1995 have been incorporated by reference herein and in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements and related schedules of The Actava
Group Inc. appearing in The Actava Group Inc. Annual Report on Form 10-K for the
year ended December 31, 1994 as amended, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements and
related schedules are incorporated by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements and related schedules of The Samuel
Goldwyn Company as of March 31, 1996 and 1995 and for the three years ended
March 31, 1996, appearing in The Samuel Goldwyn Company Annual Report on Form
10-K for the year ended March 31, 1996 have been incorporated in the Proxy
Statement/Prospectus in reliance upon the report of Price Waterhouse LLP,
independent public accountants, included therein and upon the authority of such
firm as experts in accounting and auditing.
The report of Price Waterhouse LLP on the consolidated financial statements
of The Samuel Goldwyn Company as at March 31, 1996 and 1995 and for the three
years ended March 31, 1996 contains an explanatory paragraph stating that the
possibility that The Samuel Goldwyn Company's credit facility and loan terms may
not be extended beyond the June 28, 1996 maturity date raises substantial doubt
about its ability to continue as a going concern.
114
<PAGE>
APPENDIX A
EXECUTION COPY
AMENDMENT NO. 1 TO THE GOLDWYN MERGER AGREEMENT
AMENDMENT NO. 1 TO THE GOLDWYN MERGER AGREEMENT ("Amendment No. 1") dated
as of May 29, 1996 by and among Metromedia International Group, Inc., a Delaware
corporation ("Metromedia"), SGC Merger Corp., a Delaware corporation and a
wholly-owned subsidiary of Metromedia ("SGC Mergerco") and The Samuel Goldwyn
Company, a Delaware corporation (the "Company").
WHEREAS, Metromedia, SGC Mergerco and Goldwyn are parties to a Merger
Agreement dated as of January 31, 1996 (the "Goldwyn Merger Agreement"),
pursuant to which SGC Mergerco will merge with and into the Company (the
"Merger"), with the Company as the surviving corporation of the Merger; and
WHEREAS, Metromedia, SGC Mergerco and the Company desire to amend certain
provisions of the Goldwyn Merger Agreement as set forth herein.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Section 2.1(a) of the Goldwyn Merger Agreement is amended by replacing
the following phrase beginning on the 24th line thereof and ending on the 27th
line thereof:
"which is five business days prior to the Metromedia Stockholders'
Meeting (as defined in Section 4.3(c) hereof) including both the day
of the Metromedia Stockholders' Meeting."
with the following phrase:
"which is five business days prior to the Company Stockholders'
Meeting (as defined in Section 4.2(c) hereof) including both the day
of the Company Stockholders' Meeting."
2. Section 4.1(c) of the Goldwyn Merger Agreement is amended by deleting in
its entirety the phrase beginning on the 6th line thereof and ending on the 9th
line thereof: "it being understood that the Proxy Statement and the Prospectus
will also serve as a proxy statement and prospectus for Metromedia's
transactions with Alliance Entertainment Corp."
3. Section 4.3 of the Goldwyn Merger Agreement is amended by (i) deleting
in its entirety paragraph (c) thereof and (ii) relettering paragraphs (d)
through (h) thereof as paragraphs (c) through (g) thereof.
4. The introductory paragraph to Section 6.1 of the Goldwyn Merger
Agreement is amended by replacing the phrase "whether before or after approval
by the stockholders of Metromedia or the Company" with "whether before or after
approval by the stockholders of the Company."
5. Section 6.1 of the Goldwyn Merger Agreement is amended by
<PAGE>
2
(i) deleting in its entirety paragraph (f) thereof and (ii) relettering
paragraph (g) thereof as paragraph (f) thereof.
6. In accordance with Section 5.1(a), Metromedia hereby unilaterally waives
the condition regarding approval by its stockholders of the Merger and the
transactions contemplated by the Goldwyn Merger Agreement.
7. This Amendment No. 1 shall be governed by the laws of the State of
Delaware, applicable to agreements made and to be performed entirely within such
State.
8. This Amendment No. 1 may be executed in one or more counterparts, each
of which shall be deemed an original, with all of which together shall
constitute one in the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 on the
date first written above.
METROMEDIA INTERNATIONAL GROUP, INC.
By: /s/ SILVIA KESSEL
----------------------------
Name: Silvia Kessel
Title: Senior Vice President
SGC MERGER CORP.
By: /s/ SILVIA KESSEL
----------------------------
Name: Silvia Kessel
Title: Senior Vice President
THE SAMUEL GOLDWYN COMPANY
By: /s/ MEYER E. GOTTLIEB
----------------------------
Name: Meyer E. Gottlieb
Title: President
<PAGE>
================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
METROMEDIA INTERNATIONAL GROUP, INC.,
SGC MERGER CORP.,
and
THE SAMUEL GOLDWYN COMPANY
Dated as of January 31, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
THE MERGER.............................................................1
Section 1.1 The Merger................................................1
Section 1.2 Closing...................................................1
Section 1.3 Effective Time............................................1
Section 1.4 Certificate of Incorporation and By-laws..................2
Section 1.5 Officers and Directors....................................2
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK
AND OPTIONS; EXCHANGE OF CERTIFICATE...................................2
Section 2.1 Effect on Capital Stock of the Company and Options........2
(a) Conversion of Shares of Company Common Stock..........2
(b) Effect on Company Options.............................3
(c) Treasury Shares.......................................3
(d) Mergerco Common Stock.................................3
Section 2.2 Exchange of Certificates..................................3
(a) Exchange Agent........................................3
(b) Exchange Procedures...................................4
(c) Distributions with Respect to Unexchanged Shares......5
(d) Further Ownership Rights..............................5
(e) No Fractional Shares..................................5
(f) Termination of Exchange Fund..........................6
(g) Withholding Rights....................................6
(h) No Liability..........................................6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................6
Section 3.1 Representations and Warranties of the Company.............6
(a) Organization, Standing and Corporate Power;
Subsidiaries .......................................7
(b) Certificate of Incorporation and By-laws..............7
(c) Capitalization........................................7
(d) SEC Documents; Financial Statements...................8
(e) Authority.............................................9
(f) Compliance with Applicable Laws.......................9
(g) Government Approvals; Required Consents...............9
(h) Non-Contravention....................................10
(i) Litigation...........................................10
(j) Taxes and Related Tax Matters........................10
(k) Certain Agreements...................................11
(l) Employee Benefits....................................12
(m) Contracts............................................13
i
<PAGE>
Page
----
(n) Environmental Matters................................13
(o) Absence of Certain Changes or Events.................14
(p) Information Supplied.................................14
(q) Real Estate..........................................14
(r) Intellectual Property................................16
(s) Investment Company Act...............................16
(t) Brokers or Finders...................................16
(u) Vote Required........................................16
Section 3.2 Representations and Warranties of Metromedia.............17
(a) Organization, Standing and Corporate Power;
Subsidiaries ......................................17
(b) Certificate of Incorporation and By-laws.............17
(c) Capitalization.......................................17
(d) SEC Documents; Financial Statements..................18
(e) Authority............................................19
(f) Compliance with Applicable Laws......................19
(g) Government Approvals; Required Consents..............19
(h) Non-Contravention....................................20
(i) Litigation...........................................20
(j) Taxes and Related Tax Matters........................20
(k) Certain Agreements...................................21
(l) Employee Benefits....................................22
(m) Contracts............................................23
(n) Environmental Matters................................23
(o) Absence of Certain Changes or Events.................23
(p) Information Supplied.................................24
(q) Real Estate..........................................24
(r) Intellectual Property................................25
(s) Investment Company Act...............................25
(t) Brokers or Finders...................................25
ARTICLE 4
COVENANTS.............................................................25
Section 4.1 Mutual Covenants of Metromedia and the Company...........25
(a) Confidentiality......................................26
(b) Publicity............................................26
(c) Preparation of the Proxy Statement and the
Registration Statement ............................26
(d) Satisfaction of Conditions...........................27
(e) Other Actions........................................27
(f) Advice of Changes; SEC Documents.....................27
(g) Compliance with Laws.................................27
Section 4.2 Covenants of the Company.................................28
(a) Access to Information................................28
(b) Ordinary Course......................................28
(c) Meetings; Fiduciary Duties...........................29
(d) No Solicitation......................................30
(e) Affiliates...........................................31
(f) Tax Returns..........................................31
ii
<PAGE>
Page
----
Section 4.3 Covenants of Metromedia..................................31
(a) Access to Information................................31
(b) Listing..............................................31
(c) Meeting..............................................31
(d) S-3; S-8.............................................31
(e) Directors' & Officers' Indemnification and Insurance.32
(f) Tax Returns..........................................32
(g) Interim Financing....................................33
(h) Production and Development...........................33
ARTICLE 5
CONDITIONS PRECEDENT..................................................33
Section 5.1 Conditions to the Obligations of Metromedia and
the Company to Effect the Merger....................................33
(a) Stockholder Approval.................................33
(b) Registration Statement...............................34
(c) Blue Sky Laws........................................34
(d) Listing..............................................34
(e) No Injunctions or Restraints.........................34
(f) HSR Act..............................................34
(g) Governmental and Regulatory Consents.................34
(h) The Company Required Consents........................34
(i) Metromedia Required Consents.........................34
(j) Employment Agreement.................................34
(k) Credit Agreement.....................................35
(l) Interim Financing....................................35
Section 5.2 Conditions to the Obligations of Metromedia..............35
(a) Accuracy of Representations and Warranties...........35
(b) Performance of Agreements............................35
(c) No Material Adverse Change...........................35
(d) Opinions of Counsel..................................35
(e) Fairness Opinions....................................35
(f) Affiliate Letters....................................35
(g) Distribution Agreement...............................35
(h) Trademark License....................................36
(i) Option Agreement.....................................36
(j) Certain Agreement....................................36
(k) Certain Assets.......................................36
Section 5.3 Conditions to the Obligations of the Company.............36
(a) Accuracy of Representations and Warranties...........36
(b) Performance of Agreements............................36
(c) Fairness Opinion.....................................36
(d) No Material Adverse Change...........................37
(e) Legal Opinions.......................................37
(f) Forms S-3 and S-8....................................37
ARTICLE 6
TERMINATION AND AMENDMENT.............................................37
iii
<PAGE>
Page
----
Section 6.1 Termination..............................................37
Section 6.2 Effect of Termination....................................38
ARTICLE 7
GENERAL PROVISIONS....................................................38
Section 7.1 Certain Definitions......................................38
Section 7.2 Notices..................................................39
Section 7.3 Interpretation...........................................40
Section 7.4 Waivers and Amendments...................................40
Section 7.5 Expenses and Other Payments..............................41
Section 7.6 Assignment...............................................41
Section 7.7 Entire Agreement; No Third Party Beneficiaries...........42
Section 7.8 Representations and Warranties...........................42
Section 7.9 Governing Law............................................42
Section 7.10 Counterparts............................................42
EXHIBITS
Exhibit A -- Voting Agreement
Exhibit B -- [Intentionally Omitted]
Exhibit C -- [Intentionally Omitted]
Exhibit D -- Form of Opinion of Rosenfeld, Meyer & Susman, L.L.P.
Exhibit E -- Distribution Agreement
Exhibit F -- Trademark License Agreement
Exhibit G -- Option Agreement
Exhibit H -- Form of Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 31, 1996, between
METROMEDIA INTERNATIONAL GROUP, INC., a Delaware corporation ("Metromedia"), SGC
MERGER CORP., a Delaware corporation and a wholly-owned subsidiary of Metromedia
("SGC Mergerco"), and THE SAMUEL GOLDWYN COMPANY, a Delaware corporation (the
"Company").
WHEREAS, upon the terms and subject to the conditions of this Agreement,
the Company has agreed that at the Effective Time (as hereinafter defined) SGC
Mergerco will merge with and into the Company (the "Merger") and the
stockholders of the Company will receive shares of Metromedia in the manner
provided in Section 2; and
WHEREAS, Metromedia and the Company wish to make certain representations,
warranties and agreements in connection with the Merger and also prescribe
various conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL"), SGC Mergerco shall be merged with and into the Company at the
Effective Time. Upon and after the Effective Time, the separate corporate
existence of SGC Mergerco shall cease and the Company shall be the surviving
corporation in the Merger (the "Surviving Corporation"). In accordance with the
DGCL, all of the rights, privileges, powers, immunities, purposes and franchises
of SGC Mergerco and the Company shall vest in the Surviving Corporation and all
of the debts, liabilities, obligations and duties of SGC Mergerco and the
Company shall become the debts, liabilities, obligations and duties of the
Surviving Corporation.
Section 1.2 Closing. The closing of the Merger (the "Closing") will take
place at the offices of Paul, Weiss, Rifkind, Wharton & Garrison at 10:00 a.m.
on a Business Day (as hereinafter defined) mutually agreed to by Metromedia and
the Company prior to the Termination Date (as hereinafter defined) following the
satisfaction or waiver by the party entitled to the benefit of such condition of
each of the conditions set forth in Article 5 or at such other place, time and
date as Metromedia and the Company may agree. The time and date upon which the
Closing occurs is referred to herein as the "Closing Date."
Section 1.3 Effective Time. On the Closing Date (or on such other date as
Metromedia and the Company may agree), SGC Mergerco and the Company shall cause
a
<PAGE>
2
Certificate of Merger (the "Certificate of Merger") to be executed and filed
with the Secretary of State of the State of Delaware in accordance with the
relevant provisions of the DGCL and shall make all other filings or recordings
required under the DGCL. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Secretary of State of the State of
Delaware, or at such later time as is specified in the Certificate of Merger
(the "Effective Time").
Section 1.4 Certificate of Incorporation and By-laws. The Certificate of
Incorporation of SGC Mergerco shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law except that Section 1 of the Certificate of Incorporation of
SGC Mergerco shall be amended and restated in its entirety as follows: "1. The
name of the Corporation is "GOLDWYN ENTERTAINMENT COMPANY (the "Corporation")"
or such section shall be amended to reflect the change to such other name as the
parties may agree. The By-laws of SGC Mergerco shall be the By-laws of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law.
Section 1.5 Officers and Directors.
(a) The directors of SGC Mergerco at the Effective Time shall be the
directors of the Surviving Corporation and shall hold office until their
respective successors are duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation.
(b) The officers of the Surviving Corporation at the Effective Time
shall consist of the individuals designated at the Effective Time by Metromedia
and the Company and they shall hold office until their respective successors are
duly elected or appointed and qualified or until the their earlier death,
resignation or removal in accordance with the Certificate of Incorporation and
By-laws of the Surviving Corporation.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK
AND OPTIONS; EXCHANGE OF CERTIFICATE
Section 2.1 Effect on Capital Stock of the Company and Options. At the
Effective Time, by virtue of the Merger and without any action on the part of
the holder thereof:
(a) Conversion of Shares of Company Common Stock. Each issued and
outstanding share of Common Stock, par value $.20 per share, of the Company (the
"Company Common Stock") shall be converted into the right to receive the Merger
Consideration (as defined herein). At the Effective Time, all such shares of
Company Common Stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration to be issued in consideration therefor upon surrender of such
certificate in accordance with Section 2.2, without interest. The term "Merger
Consideration" shall mean, for each share of Company
<PAGE>
3
Common Stock, a number of fully paid and nonassessable shares of Common Stock,
par value $1.00 per share, of Metromedia (the "Metromedia Common Stock") equal
to a fraction (rounded to the fourth decimal point) (the "Exchange Ratio"), the
numerator of which is 5 and the denominator of which is the average of the last
sale prices for the Metromedia Common Stock as reported on the American Stock
Exchange ("AMEX") for the last 20 consecutive trading days ending on the date
(the "Determination Date") which is five business days prior to the Metromedia
Stockholders' Meeting (as defined in Section 4.3(c) hereof) including both the
day of the Metromedia Stockholders' Meeting and the day of the Determination
Date in such determination (the "Average Closing Price"); provided, that, if the
Average Closing Price is below $12.50 it shall be deemed to be $12.50 and if the
Average Closing Price is greater than $16.50, it shall be deemed to be $16.50.
Notwithstanding the foregoing, if between the date of this Agreement and the
Effective Time the outstanding shares of Metromedia Common Stock or Company
Common Stock shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the Exchange Ratio
shall be correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
(b) Effect on Company Options. At the Effective Time, each holder of
an issued and outstanding option exercisable for shares of Company Common Stock
("Company Options") will receive, by virtue of the Merger and without any action
on the part of the holder thereof, options exercisable for shares of Metromedia
Common Stock with the same terms and conditions as Company Options immediately
prior to the Effective Time except that (i) the exercise price and the number of
shares issuable upon exercise shall be divided and multiplied, respectively, by
the Exchange Ratio and (ii) all Company Options will become immediately
exercisable in accordance with their terms.
(c) Treasury Shares. Each share of Company Common Stock held in
treasury by the Company immediately prior to the Effective Time shall, by virtue
of the Merger, be canceled and retired and cease to exist, without any
conversion thereof.
(d) Mergerco Common Stock. Each then issued outstanding share of
Common Stock, par value $.01 per share ("Mergerco Common Stock"), of SGC
Mergerco shall be converted into one fully paid and non-assessable share of
Common Stock, par value $.20 per share of the Surviving Corporation.
Section 2.2 Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Metromedia shall
appoint Chemical/Mellon Shareholder Services to act as exchange agent in the
Merger (the "Exchange Agent") for purposes of effecting the exchange for the
Merger Consideration. At the Effective Time, Metromedia shall deposit with the
Exchange Agent, for the benefit of the holders of shares of Company Common
Stock, for exchange in accordance with this Article 2, through the Exchange
Agent, certificates representing a number of shares of Metromedia Common Stock
equal to the product (rounded down to the nearest whole number) of the Exchange
Ratio multiplied by the number of shares of Company Common Stock outstanding
immediately prior to the Effective Time. For purposes of this Agreement, shares
of Metromedia Common Stock, together with any dividends or distributions with
respect thereto, are hereinafter referred to as the
<PAGE>
4
"Exchange Fund" and such shares of Metromedia Common Stock, are hereinafter
collectively referred to as the "Merger Securities." The Exchange Agent shall
deliver the Merger Securities out of the Exchange Fund as directed by
Metromedia.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Metromedia shall instruct the Exchange Agent to mail to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time represented outstand ing shares of the Company Common Stock
(collectively, the "Certificates") whose shares were converted into the right to
receive the Merger Consideration pursuant to Section 2.1(a), (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Metromedia may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for certificates
representing the Merger Securities comprising the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed, and such other documents as
reasonably may be required by the Exchange Agent, and acceptance thereof by the
Exchange Agent, each holder of a Certificate shall be entitled to receive in
exchange therefor certificates representing the Merger Securities comprising the
Merger Consideration that such holder has the right to receive pursuant to the
provisions of this Article 2, and the Certificate so surrendered shall forthwith
be canceled. The Exchange Agent shall accept such Certificates upon compliance
with such reasonable terms and conditions as the Exchange Agent may impose to
effect an orderly exchange thereof in accordance with normal exchange practices.
After the Effective Time, there shall be no further transfer on the books and
records of the Company or its transfer agent of Certificates and if such
Certificates are presented to the Company for transfer, they shall be canceled
against delivery of certificates representing the Merger Securities comprising
the Merger Consideration as herein provided. If any certificates for Merger
Securities are to be issued in a name other than that in which the Certificate
surrendered for exchange is registered, it shall be a condition of such exchange
that the Certificate so surrendered shall be properly endorsed, with the
signature guaranteed, or otherwise in proper form for transfer and that the
Person requesting such exchange shall pay to the Company or its transfer agent
any transfer or other taxes required by reason of the issuance of certificates
representing such Merger Securities in the name other than that of the
registered holder of the Certificate surrendered, or establish to the
satisfaction of the Company or its transfer agent that such tax has been paid or
is not applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender certificates representing the
Merger Securities to which such holder is entitled and cash and other dividends,
distributions or payments as contemplated by this Section 2.2. Subject to
applicable law, following surrender of any such Certificate, there shall be paid
to the record holder thereof, the certificates representing the shares of
Metromedia Common Stock issued in exchange therefor, as well as, (x) at the time
of such surrender (or as soon thereafter as the cash from the sale of Company
Excess Shares (as hereinafter defined) is obtained by the Exchange Agent), the
amount of any cash payable in lieu of a fractional share of Metromedia Common
Stock to which such holder is entitled pursuant to Section 2.2(e), (y) at the
time of such surrender, the amount of dividends or other distributions or
payments with a record date after the Effective Time theretofore paid with
respect to such shares of Metromedia Common Stock, and (z) at the appropriate
payment date, the amount of dividends or other distributions or payments with a
record date after the Effective Time but prior to surrender and a payment date
subsequent
<PAGE>
5
to surrender payable with respect to such whole shares of Metromedia Common
Stock. In no event shall Persons entitled to receive such dividends,
distributions or payments be entitled to receive any interest thereon.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions or payments declared or made after the Effective Time with
respect to Metromedia Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate, with respect to
the shares of Metromedia Common Stock represented thereby and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to Section
2.2(e) until the holder of record of such Certificate shall surrender such
Certificate.
(d) Further Ownership Rights. The Merger Securities comprising the
Merger Consideration issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article 2, together with any dividends,
distributions or payments contemplated by Section 2.2(b) and any cash in lieu of
fractional shares as contemplated by Section 2.2(e), shall be deemed to have
been issued (and paid) in full satisfaction of all rights pertaining to the
shares of Company Common Stock theretofore represented by such Certificates. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation or the Exchange Agent for any reason, they shall be canceled and
exchanged as provided in this Article 2.
(e) No Fractional Shares.
(i) No certificates or scrip evidencing fractional shares of
Metromedia Common Stock shall be issued upon the surrender for exchange of the
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of the Surviving Corporation.
(ii) As promptly as practicable following the Effective Time, the
Exchange Agent shall determine the excess of (x) the number of full shares of
Metromedia Common Stock in the Exchange Fund over (y) the aggregate number of
full shares of Metromedia Common Stock to be distributed to holders of the
Company Common Stock pursuant to Sec tion 2.2(a)(such excess being herein called
the "Company Excess Securities"). As soon after the Effective Time as
practicable, the Exchange Agent, as agent for the holders of Metromedia Common
Stock, shall sell the Company Excess Shares at then prevailing prices in the
manner pro vided in paragraph (iii) of this Section.
(iii) The sale of the Company Excess Securities by the Exchange
Agent shall be executed on the principal national securities exchange on which
the shares of Metromedia Common Stock are listed or, if such securities are not
listed, on the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") and shall be executed in round lots to the extent
practicable. Until the net proceeds of such sale or sales have been distributed
to the former stockholders of the Company, the Exchange Agent will hold such
proceeds in trust for the former stockholders of the Company (the "Company
Securities Trust"). Metromedia shall pay all commissions, transfer taxes and
other out-of-pocket transaction costs, including the expenses and compensation,
of the Exchange Agent incurred in connection
<PAGE>
6
with such sale of Company Excess Securities out of the Company Securities Trust.
The Exchange Agent shall determine the portion of the Company Securities Trust
to which each former stockholder of the Company shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising the Company
Securities Trust by a fraction, the numerator of which is the amount of the
fractional share interest to which such former stockholder of the Company is
entitled and the denominator of which is the aggregate amount of fractional
share interests to which all are entitled.
(iv) As soon as practicable after the determination of the amount
of cash, if any, to be paid to former stockholders of the Company in lieu of any
fractional interests, the Exchange Agent shall make available such amounts to
such former stockholders of the Company.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund and
the Company Securities Trust, which remains undistributed to the former
stockholders of the Company for six months after the Effective Time shall be
delivered to Metromedia, upon demand, and any former stockholders of the Company
who have not theretofore complied with this Article 2 shall thereafter look only
to Metromedia for payment of their claim for any Merger Consideration and any
dividends or distributions or other payments with respect to Company Common
Stock.
(g) Withholding Rights. Metromedia or the Exchange Agent shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agree ment to any holder of shares of Company Common Stock such
amounts as Metromedia or the Exchange Agent is required to deduct and withhold
with respect to the making of such payment under the Internal Revenue Code of
1986, as amended (the "Code"), or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by Metromedia or the Exchange
Agent, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the shares of Company Common Stock in
respect of which such deduction and withholding was made by the Surviving
Corporation or the Exchange Agent.
(h) No Liability. None of Metromedia, the Company, SGC Mergerco or the
Exchange Agent shall be liable to any Person in respect of any Merger Securities
comprising the Merger Consideration delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Representations and Warranties of the Company. The Company
represents and warrants to Metromedia as follows:
(a) Organization, Standing and Corporate Power; Subsidiaries. Each of
the Company and its Subsidiaries (as hereinafter defined) is a corporation or
partnership duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation
<PAGE>
7
or organization, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification necessary, other than in such jurisdictions where the failure so
to qualify would not have a Material Adverse Effect (as hereinafter defined)
with respect to the Company. Except as set forth in Section 3.1(a) of the
disclosure schedule delivered to Metromedia by the Company on or prior to the
date hereof (the "Company Disclosure Schedule"), the Company SEC Documents (as
hereinafter defined) set forth a true and complete list of all of Company's
Significant Subsidiaries (as hereinafter defined), including (x) the
jurisdiction of incorporation or organization of each such Subsidiary and (y)
the percentage of each such Subsidiary's outstanding capital stock or other
ownership interest owned by the Company and/or another Subsidiary of the
Company, as the case may be, if less than 100%. All of the outstanding shares of
capital stock or other ownership interests in each of the Significant
Subsidiaries of the Company are duly authorized, validly issued, fully paid and
nonassessable and, except as set forth in Section 3.1(a) of the Company
Disclosure Schedule, are owned (of record and beneficially) by the Company
and/or by another Subsidiary of the Company, as the case may be, free and clear
of all pledges, claims, options, rights of first refusal, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"), and not subject to preemptive rights created by
statute, such Subsidiary's respective Certificate of Incorporation or By-laws or
equivalent organizational documents or any agreement to which such Subsidiary is
a party or by which such Subsidiary is bound. Other than as set forth in Section
3.1(a) of the Company Disclosure Schedule, the Company does not directly or
indirectly own any material equity interest in any Person.
(b) Certificate of Incorporation and By-laws. Complete and correct
copies of the Certificate of Incorporation and By-laws or equivalent
organizational documents, each as amended to date, of the Company and each of
its Significant Subsidiaries shall have been delivered to Metromedia on or prior
to the date hereof. The Certificates of Incorporation, By-laws and equivalent
organizational documents of the Company and each of its Significant Subsidiaries
are in full force and effect. Neither the Company nor any of its Significant
Subsidiaries is in violation of any material provision of its Certificate of
Incorporation, By-laws or equivalent organizational documents.
(c) Capitalization. As of January 15, 1996, the authorized capital
stock of the Company consists of: (i) 15,000,000 shares of Company Common Stock
of which, (A) 8,489,226 shares are issued and outstanding, all of which are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights, (B) 43,448 shares are held in the treasury of the Company,
(C) 1,590,667 shares are reserved for future issuance for the exercise of stock
options with a term, exercise price, vesting schedule and other material terms
set forth separately for each of the Company's stock option plans in Section
3.1(c) of the Company Disclosure Schedule and (ii) 3,000,000 shares of Preferred
Stock, par value $.20 per share (the "Company Preferred Stock"), none of which
are issued and outstanding. Except as described in this Section 3.1(c) or in
Section 3.1(c) of the Company Disclosure Schedule, no shares of the capital
stock or other equity securities of the Company are authorized, issued or
outstanding, or reserved for any other purpose, and there are no options,
warrants or other rights (including registration rights), agreements,
arrangements or commitments of any character (including, without limitation,
obligations to issue shares as the deferred purchase price for acquisitions of
<PAGE>
8
stock or assets of third parties) to which the Company or any of its
Subsidiaries is a party relating to the issued or unissued capital stock or
other equity securities or ownership interests of the Company or any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to grant,
issue or sell any shares of capital stock or other equity securities or
ownership interests of the Company or any of its Subsidiaries, by sale, lease,
license or otherwise. The Company has no outstanding bonds, debentures, notes or
other obligations the holders of which have the right to vote or which are
convertible into or exercisable for securities having the right to vote with the
stockholders of the Company on any matter. Other than as contemplated by this
Agreement or as set forth in Section 3.1(c) of the Company Disclosure Schedule,
there are no outstanding contractual obligations, commitments, understandings or
arrangements of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire or make any payment in respect of any shares of capital stock
or other equity securities or ownership interests of the Company or any of its
Subsidiaries. Since January 15, 1996, the Company has not (i) issued any shares
of its capital stock (except pursuant to the exercise of then outstanding
options in accordance with their terms) or options, warrants or other securities
convertible into shares of its capital stock, or (ii) repurchased any shares of
its capital stock.
(d) SEC Documents; Financial Statements. The Company has made
available to Metromedia a true and complete copy of each form, report, schedule,
registration statement and definitive proxy statement filed by the Company with
the SEC since September 30, 1993 (as such documents have since the time of their
filing been amended or supplemented, the "Company SEC Documents"), which are all
the documents (other than preliminary material) that the Company was required to
file with the SEC since such date. As of their respective dates, the Company SEC
Documents (other than preliminary material) complied in all material respects
with the requirements of the Securities Act of 1933, as amended (the "Securities
Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as applicable, and the rules and regulations of the SEC thereunder applicable to
such Company SEC Documents, and none of the Company SEC Documents, as such
documents have been amended to date (including all financial statements included
therein and exhibits and schedules thereto and documents incorporated by
reference therein), contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the Company
SEC Documents (as such documents may have been amended to date) comply as to
form in all material respects with applicable accounting require ments and with
the rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited financial statements, as
permitted by Exchange Act Form 10-Q) and fairly present (subject, in the case of
the unaudited financial statements, to normal, recurring audit adjustments that,
individually and in the aggregate, were not material) the consolidated financial
position of the Company and its consolidated Subsidiaries as at the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended. Section 3.1(d) of the Company Disclosure Schedule contains a
description (specifying obligation, obligee and amount) of all Debt (as defined
in Section 7.1) of the Company and its Subsidiaries as of the date hereof.
(e) Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and to perform its obligations hereunder
and to consummate
<PAGE>
9
the transactions contemplated hereby, subject, in the case of the Merger, to the
approval of this Agreement by the stockholders of the Company. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby, subject, in the case of the Merger, to the
approval of this Agreement by the stockholders of the Company. This Agreement
has been duly and validly executed and delivered by the Company and constitutes
a valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, subject, in the case of the Merger, to the approval
of this Agreement by the stockholders of the Company.
(f) Compliance with Applicable Laws. The Company and its Subsidiaries
hold all permits, licenses, variances, exemptions, orders and approvals of all
Govern mental Entities (as hereinafter defined) that are necessary to the
operation of the businesses of the Company and its Subsidiaries taken as a whole
(the "Company Permits") except as would not have a Material Adverse Effect with
respect to the Company. The Company and its Subsidiaries are in compliance with
the terms of the Company Permits, except where any such failure so to comply
would not have a Material Adverse Effect with respect to the Company. Except as
would not have a Material Adverse Effect with respect to the Company, the
businesses of the Company and its Subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any Governmental Entity. No
investigation or review by any Governmental Entity with respect to the Company
or any of its Subsidiaries is pending or, to the knowledge of the Company,
threatened, nor, to the knowledge of the Company, has any Governmental Entity
indicated an intention to conduct the same that would, in any such case, have a
Material Adverse Effect with respect to the Company.
(g) Government Approvals; Required Consents.
(i) No consent, approval or authorization of, or declaration or
filing with, or notice to, any Governmental Entity on the part of the Company is
required in connection with the execution or delivery by the Company of this
Agreement, the consummation by the Company of the transactions contemplated
hereby or compliance by the Company with the provisions hereof, other than (A)
the filing of the Certificate of Merger with the Secretary of State of the State
of Delaware in accordance with the DGCL, (B) filings with the SEC and any
applicable national securities exchange, (C) filings under state securities or
"Blue Sky" laws, (D) filings under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder
(the "HSR Act") and (E) as otherwise set forth in Section 3.1(g)(i) of the
Company Disclosure Schedule or as would not cause a Material Adverse Effect with
respect to the Company (any such consents, approvals, authorizations,
declarations, filings or notices specified in clauses (A) through (E) being
referred to as "Company Governmental Approvals").
(ii) No consent, approval or action of, or filing with, or notice
to, any Person (other than a Governmental Entity) shall be required in
connection with the execution or delivery by the Company of this Agreement,
consummation by the Company of the transactions contemplated hereby or
compliance by the Company with the provisions hereof, other than as set forth in
Section 3.1(g)(ii) of the Company Disclosure Schedule (the "Company
<PAGE>
10
Required Consents") and other than consents, approvals, actions, filings or
notices which would not have a Material Adverse Effect with respect to the
Company.
(h) Non-Contravention. The execution and delivery of this Agreement by
the Company do not, and the consummation of the transactions contemplated hereby
and compliance by the Company with the provisions hereof will not, (i) conflict
with or result in any violation of any provision of the Certificate of
Incorporation or By-laws or equivalent organizational documents, in each case as
amended and/or restated, of the Company or any of its Subsidiaries; (ii) except
as set forth in Section 3.1(h)(ii) of the Company Disclosure Schedule, if the
Company Required Consents are obtained, result in any violation or breach of, or
result in a modification of the effect of, or constitute (with or without notice
or lapse of time or both) a default under or give rise to any right of
termination, cancellation or acceleration under, any con tract, agreement,
indenture, note, bond, loan, mortgage, lease, instrument, license, permit,
concession, franchise, commitment or other binding arrangement (collectively,
"Contracts") to which the Company or any of its Subsidiaries is a party or by or
to which any of them or any of their properties may be bound or subject, or
result in the creation of any Lien upon the properties of the Company or any of
its Subsidiaries in each case pursuant to the terms of any such Contract; (iii)
if the Company Governmental Approvals are obtained, result in any violation of
any law, statute, regulation, order, writ, judgment or decree of any
Governmental Entity applicable to the Company; or (iv) if the Company
Governmental Approvals and the Company Required Consents are obtained, result in
the violation, revocation or suspension of any Company Permit, other than with
respect to clauses (ii) through (iv) above, any such violations, breaches,
modifications, defaults, terminations, cancellations, accelerations, Liens,
revocations or suspensions that, individually and in the aggregate, would not
have a Material Adverse Effect with respect to the Company.
(i) Litigation. As of the date of this Agreement and as of the
Closing Date, except as disclosed in the Company SEC Documents or in Section
3.1(i) of the Company Disclosure Schedule, there is no suit, action or
proceeding pending, or, to the knowledge of the Company, threatened against the
Company or any Subsidiary of the Company that, individually or in the aggregate
with any other such suits, actions or proceedings, would have a Material Adverse
Effect with respect to the Company, nor is there any judgment, decree, injunc
tion, rule or order of any Governmental Entity or arbitrator outstanding against
the Company or any Subsidiary of the Company that, individually or in the
aggregate, would have a Material Adverse Effect with respect to the Company.
(j) Taxes and Related Tax Matters.
(i) Other than Taxes and Tax Sharing Agreement Amounts (as each
term is hereinafter defined) that individually and in the aggregate are not
material all federal, state, county, local, foreign and other taxes (including,
without limitation, income, profits, premium, estimated, excise, sales, use,
occupancy, gross receipts, franchise, ad valorem, severance, capital levy,
production, transfer, withholding, employment, unemployment compensa tion,
payroll related and property taxes, import duties and other governmental charges
and assessments), whether or not measured in whole or in part by net income, and
including deficiencies, interest, additions to tax or interest, and penalties
with respect thereto, (hereinafter "Taxes" or, individually, a "Tax") required
to be paid on or before the date hereof by or with
<PAGE>
11
respect to the Company and its Subsidiaries (or any of them), including amounts,
other than amounts being contested in good faith, required to be paid on or
before the date hereof with respect to Taxes as a result of any tax sharing
agreement or similar arrangement ("Tax Sharing Agreement Amounts") of the
Company and its Subsidiaries (or any of them), have been timely paid, except
with respect to Taxes and Tax Sharing Agreement Amounts for which the failure to
pay would not have a Material Adverse Effect with respect to the Company.
(ii) All material returns and reports required to be filed by or
with respect to the Company and its Subsidiaries (or any of them) with respect
to Taxes (herein after "Tax Returns" or, individually, a "Tax Return") on or
before the date hereof have been timely filed. No penalties or other charges in
a material amount are or will become due with respect to the late filing of any
Tax Return of the Company or any of its Subsidiaries or payment of any Tax of
the Company or any of its Subsidiaries, required to be filed or paid on or
before the date hereof.
(iii) With respect to all Tax Returns filed by or with respect to
the Company and any of its Subsidiaries, (A) Section 3.1(j) of the Company
Disclosure Schedule sets forth the periods for which the statute of limitations
for the assessment of federal Taxes have expired; (B) except as set forth in
Section 3.1(j) of the Company Disclosure Schedule, no audit is in progress and
no extension of time has been executed with respect to any date on which any Tax
Return was or is to be filed and no waiver or agreement has been executed for
the extension of time for the assessment or payment of any Tax; and (C) except
as set forth in Sec tion 3.1(j) of the Company Disclosure Schedule, there is no
material unassessed deficiency proposed or threatened against the Company or any
of its Subsidiaries.
(iv) Except as set forth in Section 3.1(j) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has been or
is a party to any tax sharing agreement or similar arrangement.
(v) Section 3.1(j) of the Company Disclosure Schedule identifies
(i) the common parent of each group of affiliated corporations that filed a
consolidated federal income tax return, and the period to which such returns
related, that included the Company or any of its Significant Subsidiaries since
1992, and (ii) all material Tax liabilities, of which the Company has knowledge,
that have been asserted by the Internal Revenue Service (the "IRS") with respect
to any such return and all claims with respect to Taxes in a material amount
that have been asserted against the Company under any tax sharing agreement to
which it is a party.
(k) Certain Agreements. Except as set forth in Section 3.1(k) and/or
Section 3.1(l) of the Company Disclosure Schedule, and except for this
Agreement, as of the date of this Agreement, neither the Company nor any of its
Subsidiaries is a party to any oral or written (i) agreement with any executive
officer or other key employee of the Company or any Subsidiary of the Company
the benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company of the
nature contemplated by this Agreement, or agreement with respect to any
executive officer of the Company providing any term of employment or
compensation guarantee extending for a period longer than three years after the
Closing Date and for the payment of in excess of $200,000 per annum or (ii)
plan, including any stock option plan, stock appreciation right plan, restricted
stock plan or stock
<PAGE>
12
purchase plan, any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement. Section 3.1(k) of the Company Disclosure Schedule sets forth
a schedule of assets (other than immaterial assets with a value less than
$25,000) of Samuel Goldwyn Productions, Inc. ("SG Productions") and Nightlife
Productions, Inc.
("Nightlife").
(l) Employee Benefits.
(i) Except as set forth in Section 3.1(l) of the Company
Disclosure Schedule, there are no United States or foreign employee benefit
plans or arrangements (collectively, the "Company Benefit Plans") of any type
(including, without limitation, plans described in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), under which the
Company or any corporation, person or trade or business which is a member of a
group which is under common control with the Company within the meaning of
Sections 414(b)-(o) of the Code and, if applicable, Sections 4001(a)(14) and (b)
of ERISA (an "ERISA Affiliate") has incurred any unsatisfied material liability
or could reasonably be expected in the future to incur any direct or indirect,
actual or contingent material liability (including, without limitation, any
liability that might arise indirectly under Section 414 of the Code or Section
4069 of ERISA).
(ii) With respect to each Company Benefit Plan, the Company will
deliver or make available on or prior to the date hereof to Metromedia complete
and accurate copies (where applicable) of: (A) all plan texts and agreements;
(B) all material employee communications regarding an the Company Benefit Plan
not embodied in plan texts and agreements that could materially affect the
liabilities of the Company or its Subsidiaries with respect to such plan; (C)
the most recent annual report; (D) the most recent annual and periodic
accounting of plan assets; (E) the most recent determination letter received
from the IRS; and (F) the most recent actuarial valuation.
(iii) No event has occurred or might reasonably be expected to
occur as a result of which any Company Benefit Plan or the Company or any of its
ERISA Affiliates could, directly or indirectly (whether through a commonly
controlled entity under Code Section 414 or otherwise), incur material liability
for failure to comply with the applicable requirements of Title IV of ERISA,
section 302 of ERISA, sections 412, 420, 4971 or 4975 of the Code, the
continuation coverage requirements of section 601 et seq. of ERISA and section
4980B of the Code, and corresponding or similar provisions of foreign laws or
regulations, other than routine claims for benefits in accordance with the terms
of such plan except as would not have a Material Adverse Effect with respect to
the Company.
(iv) Each Company Benefit Plan has been operated in all respects
in accordance with its terms and with the requirements of applicable law and
regulations except to the extent any such operation would not have a Material
Adverse Effect with respect to the Company.
<PAGE>
13
(v) With respect to each Company Benefit Plan that is a defined
benefit pension plan, since the most recent financial statements of the Company
there has been no material increase in such plan's liabilities other than the
accrual of benefits in the ordinary course and in accordance with the terms of
such plan.
(vi) Except as set forth in Sec-tion 3.1(l) of the Company
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement will not, with respect to employees or former employees of the Company
or any of its ERISA Affiliates: (A) entitle any individual to severance pay; (B)
accelerate the time of payment or vesting of, increase the amount of, or satisfy
a condition to the compensation due to any individual; and (C) result in the
payment of an amount that would, individually or in combination with any other
such payment, constitute an "excess parachute payment" under Code section
280G(b)(1).
(m) Contracts. There is (i) no contract, agreement or understanding
required to be described in or filed as an exhibit to any Company SEC Document
that is not described in or filed as required by the Securities Act or the
Exchange Act, as the case may be and (ii) except as described in Section 3.1(m)
of the Company Disclosure Schedule, no output agreement, material license
agreement or contract providing for the payment by the Company of more than
$100,000 per annum or $500,000 in the aggregate. All such contracts, agreements
and understanding are valid and binding and are in full force and effect and
enforceable in accordance with their respective terms other than contracts,
agreements or understandings which are by their terms no longer in force or
effect. Except for the Company Required Consents and except to the extent any of
the following would not have a Material Adverse Effect with respect to the
Company, (i) no approval or consent of, or notice to, any Person is needed in
order that such contract, agreement or understanding shall continue in full
force and effect in accordance with its terms without penalty, acceleration or
rights of early termination following the consummation of the transactions
contemplated by this Agreement, and (ii) the Company is not in violation of
breach of or default under any such contract, agreement or understanding nor to
the Company's knowledge is any other party to any such contract, agreement or
understanding.
(n) Environmental Matters. Except as set forth in Section 3.1(n) of
the Company Disclosure Schedule, (i) the Company and each of its Subsidiaries
has obtained and is in material compliance with the terms and conditions of all
permits, licenses and other authorizations required under applicable federal,
state, local and foreign laws, regulations and codes as currently in effect
relating to pollution and protection of the environment ("Environmental Laws");
(ii) no asbestos in a friable condition or equipment containing polychlorinated
biphenyls or leaking under ground or above-ground storage tanks is contained in
or located at any facility owned, leased or controlled by the Company or any of
its Subsidiaries; (iii) the Company and each of its Subsidi aries is in material
compliance with all applicable Environmental Laws, and has fully disclosed all
known material past and present non-compliance with Environmental Laws, and all
known past discharges, emissions, leaking or releases known to the Company of
any substance or waste regulated under or defined by Environmental Laws that
could reasonably be expected to form the basis of any claim, action, suit,
proceeding, hearing or investigation under any applicable Environmental Laws;
and (iv) neither the Company nor any of its Subsidiaries has received notice of
any past or present events, conditions, circumstances, activities, practices,
incidents, actions or plans that have resulted in or threaten to result in any
common law or legal liability, or otherwise
<PAGE>
14
form the basis of any claim, action, suit, proceeding, hearing or investigation
under any applicable Environmental Laws; provided, however, that clauses (i)
through (iv) address only those matters that would have a Material Adverse
Effect with respect to the Company.
(o) Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Documents, or except as contemplated by this Agreement, since
December 31, 1995, the Company and its Subsidiaries have conducted their
respective businesses only in the ordinary and usual course, and, as of the date
of this Agreement, there has not been (i) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of the Company's capital stock; (ii) any return of
any capital or other distribution of assets to stockholders of the Company;
(iii) any material investment by the Company or any of its Subsidiaries either
by the purchase of any property or assets or by any acquisition (by merger,
consolidation or acquisition of stock or assets) of any corporation, partnership
or other business organization or division thereof; (iv) any sale, disposition,
license or other transfer of assets or properties of the Company or its
Subsidiaries (other than the license of product in the ordinary course of
business); (v) any incurrence or guarantee of any Debt other than in the
ordinary course of business consistent with past practices; or (vi) any change,
occurrence or circumstance of any character (whether or not in the ordinary
course of business) that, individually or in the aggregate, has had or would
have a Material Adverse Effect with respect to the Company.
(p) Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in (i) the
registration state ment on Form S-4 to be filed with the SEC by Metromedia in
connection with the issuance of the Merger Securities (collectively, the
"Registration Statement") and (ii) the joint proxy statement (the "Proxy
Statement") to be filed with the SEC by Metromedia and the Company in connection
with the Metromedia Stockholders' Meeting and the Company Stockholders' Meeting
(as hereinafter defined) will, at the time the Registration Statement is filed
with the SEC, at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act or at the time the Proxy Statement is
mailed to the Company's stockholders, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(q) Real Estate.
(i) Ownership of Premises. The Company or one of its Subsidiaries
is the owner of good and insurable fee title to the land described on Section
3.1(q)(i) of the Company Disclosure Schedule and to all of the buildings,
structures and other improve ments located thereon (collectively, the "Company
Owned Real Property") free and clear of all Title Defects (as hereinafter
defined) except as would not have a Material Adverse Effect with respect to the
Company. The Company Owned Real Property constitutes all of the real property
owned by the Company and its Subsidiaries on the date hereof. As used in this
Agreement, "Title Defects" shall mean and include any mortgage, deed of trust,
lien, pledge, security interest, claim, lease, charge, option, right of first
refusal, easement, restrictive covenant, encroachment or other survey defect,
encumbrance or other restriction or limitation whatsoever.
<PAGE>
15
(ii) Leased Properties. Section 3.1(q)(ii) of the Company
Disclosure Schedule sets forth a true, correct and complete schedule of all
leases, subleases, licenses and other agreements (collectively, the "Company
Real Property Leases") under which the Company or any Subsidiary uses or
occupies or has the right to use or occupy, now or in the future, any real
property (the land, buildings and other improvements covered by the Company Real
Property Leases being herein called the "Company Leased Real Property"), which
Section 3.1(q)(ii) of the Company Disclosure Schedule sets forth the date of and
parties to each Company Real Property Lease, the date of and parties to each
amendment, modification and supplement thereto, the term and renewal terms
(whether or not exercised) thereof and a brief description of the Company Leased
Real Property covered thereby. The Company has heretofore delivered to or made
available true, correct and complete copies of all Company Real Property Leases
(including all modifications, amendments and supplements). Each Company Real
Property Lease is valid, binding and in full force and effect, all rent and
other sums and charges payable by the Company or a Subsidiary as tenant
thereunder are current, no notice of default or termination under any Company
Real Property Lease is outstanding, no termination event or condition or uncured
default on the part of the Company or the applicable Subsidiary or, to the
Company's or the applicable Subsidiary's knowledge, the landlord, exists under
any Company Real Property Lease, and no event has occurred and no condition
exists which, with the giving of notice or the lapse of time or both, would
constitute such a default or termination event or condition, which, when
considered individually or in the aggregate with all such other Company Real
Property Leases under which there is such an event or condition has or will have
a Material Adverse Effect with respect to the Company. Except as set forth on
Section 3.1(q)(ii) of the Company Disclosure Schedule, to the Company's or the
applicable Subsidiaries' knowledge, no landlord under any Company Real Property
Lease has notified the Company or the applicable Subsidiary that it does not
intend to renew any such lease following the expiration of its term. Except as
does not have a Material Adverse Effect with respect to the Company, the Company
or a Subsidiary, whichever is applicable, holds the leasehold estate under and
interest in each Company Real Property Lease free and clear of all Title
Defects. The Company and its Subsidiaries have no ownership, financial or other
interest in the landlord under any Company Real Property Lease.
(iii) Entire Premises; Condition. All of the land, buildings,
structures and other improvements used by the Company and its Subsidiaries in
the conduct of their business are included in the Company Owned Real Property
and the Company Leased Real Property. The facilities, machinery, equipment,
furniture, leasehold improvements, fixtures, vehicles, structures, any related
capitalized items and other tangible property material to the business of the
Company located on the Company Owned Real Property and the Company Leased Real
Property including, without limitation, the improvements on such property and
the utility systems serving such properties (collectively, the "Tangible
Property") are in good operating condition and repair, subject to ordinary wear
and tear, and are suitable for their intended use. During the past three years
there has not been any significant interruption of the operations of the Company
due to inadequate maintenance of the Tangible Property or otherwise.
(r) Intellectual Property.
Section 3.1(r) of the Company Disclosure Schedule sets forth a list of all
of the Company's and its Subsidiaries' registered trademarks and registered
copyrights, all applications for any of the foregoing and all permits, grants
and licenses or other rights running to the
<PAGE>
16
Company and any of its Subsidiaries relating to any of the foregoing that are
material to the business of the Company and its Subsidiaries taken as a whole.
Except as set forth on Section 3.1(r) of the Company Disclosure Schedule, (i)
the Company or one of its Subsidiaries own, or are licensed to, or otherwise
have, the right to use all registered trademarks and copyrights set forth on
Section 3.1(r) of the Company Disclosure Schedule, and (ii) the Company's rights
in the property set forth on such list are free and clear of any liens or other
encumbrances and the Company and its Subsidiaries have not received written
notice of any adversely-held copyright or trademark of any other person, or
notice of any charge or claim of any person relating to such intellectual
property or any process or confidential information of the Company and its
Subsidiaries and to the Company's knowledge there is no basis for any such
charge or claim, and (iii) the Company, its Subsidiaries and their respective
predecessors, if any, have not conducted business at any time during the period
beginning five years prior to the date hereof under any corporate or
partnership, trade or fictitious names other than their current corporate or
partnership names, except in the case of clauses (i), (ii) and (iii) above, any
of the foregoing which do not and will not have an Material Adverse Effect with
respect to the Company.
(s) Investment Company Act. The Company and each of its Subsidiaries
either (i) is not an "investment company," or to the Company's knowledge a
company "controlled" by, or to the Company's knowledge an "affiliated company"
with respect to, an "investment company," required to register under the
Investment Company Act of 1940, as amended (the "Investment Company Act") or
(ii) satisfies all conditions for an exemption from the Investment Company Act,
and, accordingly, neither the Company nor any of its Subsidiaries is required to
be registered under the Investment Company Act.
(t) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other Person retained by or on behalf of the Company is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement except
Furman Selz L.L.C., whose fees and expenses will be paid by the Company in
accordance with the Company's agreement with such firm.
(u) Vote Required. The Board of Directors of the Company has approved
this Agreement, the Merger and the other transactions contemplated hereby and
has recommended that its stockholders vote in favor of the adoption and approval
of this Agreement (the "Recommendation"). The affirmative vote of a majority of
the votes that the holders of the outstanding shares of Company Common Stock are
entitled to cast with respect to the adoption and approval of this Agreement is
the only vote of the holders of any class or series of the capital stock of the
Company necessary to approve the Merger and the other transactions contemplated
hereby. Attached as Exhibit A hereto is a true and correct copy of the executed
Voting Agreement by and among Metromedia and the Samuel Goldwyn, Jr. Family
Trust (the "Trust") pursuant to which the Trust has agreed to vote its shares of
Company Common Stock in favor of the Merger and the transactions contemplated by
this Agreement. As of the date hereof and as of the Closing Date, the letter and
Deal Memo dated December 15, 1995 ("Deal Memo") between the Company and Polygram
Filmed Entertainment Distribution Inc. ("Polygram") has been terminated and is
of no further force and effect except to the extent that the payment of a
breakup fee of $2,000,000 payable to Polygram and the reimbursement of
Polygram's fees and expenses pursuant to Section 8 of the Deal Memo may be
applicable.
<PAGE>
17
Section 3.2 Representations and Warranties of Metromedia. Metromedia
represents and warrants to the Company as follows:
(a) Organization, Standing and Corporate Power; Subsidiaries. Each of
Metromedia and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification necessary, other than in such jurisdictions where the failure so
to qualify would not have a Material Adverse Effect with respect to Metromedia.
Except as set forth in Section 3.2(a) of the disclosure schedule delivered to
the Company by Metromedia on or prior to the date hereof (the "Metromedia
Disclosure Schedule"), the Metromedia SEC Documents (as hereinafter defined) set
forth a true and complete list of the Significant Subsidiaries of Metromedia,
including (x) the jurisdiction of incorporation or organization of each such
Subsidiary and (y) the percentage of each such Subsidiary's outstanding capital
stock or other ownership interest owned by Metromedia, or a Subsidiary of
Metromedia, as the case may be, if less than 100%. All of the outstanding shares
of capital stock or other ownership interests of each of the Significant
Subsidiaries of Metromedia are duly authorized, validly issued, fully paid and
nonassessable and, except as set forth in Section 3.2(a) of the Metromedia
Disclosure Schedule, are owned (of record and beneficially) by Metromedia,
and/or by a Subsidiary of Metromedia, free and clear of all Liens and not
subject to preemptive rights created by statute, such Subsidiary's respective
Certificate of Incorporation or By-laws or equivalent organizational documents
or any agreement to which such Subsidiary is a party or by which such Subsidiary
is bound. Other than as set forth in Section 3.2(a) of the Metromedia Disclosure
Schedule, Metromedia does not directly or indirectly own any material equity
interest in any Person (other than a Subsidiary) in which Metromedia has
invested more than $5,000,000.
(b) Certificate of Incorporation and By-laws. Complete and correct
copies of the Certificate of Incorporation and By-laws or equivalent
organizational documents, each as amended to date, of Metromedia and each
Significant Subsidiary of Metromedia shall have been delivered to the Company no
later than the date hereof. The Certificates of Incorporation, By-laws and
equivalent organizational documents of Metromedia and each Significant
Subsidiary of Metromedia are in full force and effect. Neither Metromedia nor
any Significant Subsidiary of Metromedia is in violation of any provision of its
Certificate of Incorporation, By-laws or equivalent organizational documents.
(c) Capitalization. As of January 15, 1996, (i) the authorized capital
stock of Metromedia consists of (A) 100,000,000 shares of Metromedia Common
Stock, 42,549,886 of which shares are issued and outstanding, and are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights, 1,914,187 shares of Metromedia Common Stock are reserved for
exercise of stock options with a term, exercise price, vesting schedule and
other material terms set forth for each of Metromedia's stock option plans in
Section 3.2(c) of the Metromedia Disclosure Schedule and 1,801,802 shares are
reserved for issuance upon the conversion of convertible debt and (B) 70,000,000
shares of Metromedia Preferred Stock, none of which are issued and outstanding
and (ii) the authorized capital stock of SGC Mergerco consists of 1,000 shares
of Mergerco Common Stock, 1,000 shares of which are issued and outstanding and
are duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights.
<PAGE>
18
Except as described in this Section 3.2(c) or in Section 3.2(c) of the
Metromedia Disclosure Schedule, no shares of the capital stock or other equity
securities of Metromedia are authorized, issued or outstanding, or reserved for
any other purpose, and there are no options, warrants or other rights (including
registration rights), agreements, arrangements or commitments of any character
to which Metromedia or any of its respective Subsidiaries is a party relating to
the issued or unissued capital stock or other equity securities or ownership
interests of Metromedia or any of its Subsidiaries or obligating Metromedia or
any of its Subsidiaries to grant, issue or sell any shares of capital stock or
other equity securities or ownership interests of Metromedia or any of its
Subsidiaries, by sale, lease, license or otherwise. Except as described in
Section 3.2(c) of the Metromedia Disclosure Schedule, neither Metromedia nor any
of its Subsidiaries has any outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote or which are convertible
into or exercisable for securities having the right to vote with the
stockholders of any such Person on any matter. Other than as contemplated by
this Agreement or as set forth in Section 3.2(c) of the Metromedia Disclosure
Schedule, there are no outstanding contractual obligations, commitments,
understandings or arrangements of Metromedia or any of its Subsidiaries to
repurchase, redeem or otherwise acquire or make any payment in respect of any
shares of capital stock of Metromedia or any of its Subsidiaries. Except as set
forth in Section 3.2(c) of the Metromedia Disclosure Schedule, since January 15,
1996 Metromedia has not (i) issued any shares of its capital stock (except
pursuant to the exercise of then outstanding options or warrants in accordance
with their terms) or options, warrants or other securities convertible into
shares of its capital stock, or (ii) repurchased any shares of its capital
stock.
(d) SEC Documents; Financial Statements. Metromedia has made available
to the Company a true and complete copy of each form, report, schedule and
registration statement filed with the SEC by Metromedia since September 30, 1993
and by Orion Pictures Corporation since September 30, 1993 (as such documents
have since the time of their filing been amended or supplemented, the
"Metromedia SEC Documents"), which are all the documents (other than preliminary
material) that Metromedia or its respective Subsidiaries was required to file
with the SEC since such date. As of their respective dates, the Metromedia SEC
Documents (other than preliminary material) complied in all material respects
with the requirements of the Securities Act or the Exchange Act as applicable,
and the rules and regulations of SEC thereunder applicable to such Metromedia
SEC Documents, and none of the Metromedia SEC Documents, as such documents have
been amended to date (including all financial statements included therein and
exhibits and schedules thereto and documents incorporated by reference therein),
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
financial statements of Metromedia and each Subsidiary of Metromedia included in
the Metromedia SEC Documents (as such documents may have been amended to date)
comply as to form in all material respects with applicable accounting require
ments and with the rules and regulations of the SEC with respect thereto, have
been prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited financial statements, as permitted by Exchange Act Form
10-Q) and fairly present (subject, in the case of the unaudited financial
statements, to normal, recurring audit adjustments that, individually and in the
aggregate, were not material) the consolidated financial position of Metromedia
and/or the applicable Subsidiaries of Metromedia and its consolidated
Subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended.
(e) Authority. Metromedia and SGC Mergerco have all requisite
corporate power and authority to enter into this Agreement and to perform their
obligations hereunder and to consummate the transactions contemplated hereby,
subject, in the case of the
<PAGE>
19
Merger, to the approval of this Agreement by the stockholders of Metromedia and
the receipt by the Board of Directors of Metromedia of the opinion of Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") referred to in Section 5.2(e)
hereof (the "Fairness Opinion"). The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of Metromedia
and SGC Mergerco and no other corporate proceedings on the part of Metromedia
and SGC Mergerco are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby, subject, in the case of the Merger, to the
approval of this Agreement by the stockholders of Metromedia and the receipt by
the Board of Directors of Metromedia of the Fairness Opinion. This Agreement has
been duly and validly executed and delivered by Metromedia and SGC Mergerco and
constitutes a valid and binding obligation of Metromedia and SGC Mergerco
enforceable against Metromedia and SGC Mergerco in accordance with its terms,
subject, in the case of the Merger, to the approval of this Agreement by the
stockholders of Metromedia and the receipt by the Board of Directors of
Metromedia of the Fairness Opinion.
(f) Compliance with Applicable Laws. Metromedia and its Subsidiaries
hold all permits, licenses, variances, exemptions, orders and approvals of all
Govern mental Entities that are necessary to the operation of the businesses of
Metromedia and its Subsidiaries taken as a whole (the "Metromedia Permits"),
except as would not have a Material Adverse Effect with respect to Metromedia.
Metromedia and its Subsidiaries are in compliance with the terms of the
Metromedia Permits applicable to it, except where any such failure so to comply
would not have a Material Adverse Effect with respect to Metromedia. Except as
would not have a Material Adverse Effect with respect to Metromedia, the
business of Metromedia and its Subsidiaries is not being conducted in violation
of any law, ordinance or regulation of any Governmental Entity. No investigation
or review by any Governmental Entity with respect to Metromedia or any of its
subsidiaries is pending or, to the knowledge of Metromedia, threatened, nor, to
the knowledge of Metromedia, has any Governmental Entity indicated an intention
to conduct the same that would, in any such case, have a Material Adverse Effect
with respect to Metromedia.
(g) Government Approvals; Required Consents.
(i) No consent, approval or authorization of, or declaration or
filing with, or notice to, any Governmental Entity on the part of Metromedia and
its Subsidiaries is required in connection with the execution or delivery by
Metromedia of this Agreement, and the consummation by Metromedia and its
Subsidiaries of the transactions contemplated hereby or compliance by Metromedia
and its Subsidiaries with the provisions hereof, other than (A) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
in accordance with the DGCL, (B) filings with the SEC and any applicable
National Security exchange, (C) filings under State securities or "Blue Sky"
laws, (D) filings under the HSR Act and (E) as otherwise set forth in Section
3.2(g)(i) of the Metromedia Disclosure Schedule or as would not cause a Material
Adverse Effect (any such consents, approvals, authorizations, declarations,
filings or notices specified in clauses (A) through (E) being referred to as
"Metromedia Governmental Approvals").
(ii) No consent, approval or action of, or filing with, or notice
to, any Person (other than a Governmental Entity) shall be required in
connection with the execution or delivery by Metromedia of this Agreement, the
consummation by Metromedia and its Subsidiaries of the transactions contemplated
hereby or compliance by Metromedia and its Subsidiaries with the provisions
hereof, other than as set forth in Section 3.2(g)(ii) of the Metromedia
Disclosure Schedule ("Metromedia Required Consents") and other than the
consents,
<PAGE>
20
approvals, actions, filings or notices which would not have a Material Adverse
Effect with respect to Metromedia.
(h) Non-Contravention. The execution and delivery of this Agreement by
Metromedia and SGC Mergerco does not, and the consummation of the transactions
contemplated hereby and compliance by Metromedia and SGC Mergerco with the
provisions hereof will not, (i) conflict with or result in any violation of any
provision of the Certificate of Incorporation or By-laws or equivalent
organizational documents, in each case as amended and/or restated, of Metromedia
and its Subsidiaries (ii) except as set forth in Section 3.2(h)(ii) of the
Metromedia Disclosure Schedule, if the Metromedia Required Consents are
obtained, result in any violation or breach of, or result in a modification of
the effect of, or constitute (with or without notice or lapse of time or both) a
default under or give rise to any right of termination, cancellation or
acceleration under, any contracts to which Metromedia and its Subsidiaries are a
party or by or to which any of them or any of their properties may be bound or
subject, or result in the creation of any Lien upon the properties of Metromedia
and its Subsidiaries in each case pursuant to the terms of any such Contract;
(iii) if the Metromedia Governmental Approvals are obtained, result in any
violation of any law, statute, regulation, order, writ, judgment or decree of
any Governmental Entity applicable to Metromedia and its Subsidiaries or (iv) if
the Metromedia Governmental Approvals and the Metromedia Required Consents are
obtained, result in the violation, revocation or suspension of any Metromedia
Permit, other than with respect to clauses (ii) through (iv) above, any such
violations, breaches, modifications, defaults, termina tions, cancellations,
accelerations, Liens, revocations or suspensions that, individually and in the
aggregate, would not have a Material Adverse Effect with respect to Metromedia.
(i) Litigation. As of the date of this Agreement and as of the Closing
Date, except as disclosed in the Metromedia SEC Documents, there is no suit,
action or proceeding pending, or, to the knowledge of Metromedia, threatened
against Metromedia and its Subsidiaries that, individually or in the aggregate
with any other such suits, actions or proceedings, would have a Material Adverse
Effect with respect to Metromedia, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Metromedia and its Subsidiaries, that, individually or in the aggregate,
would have a Material Adverse Effect with respect to Metromedia.
(j) Taxes and Related Tax Matters.
(i) Other than Taxes and Tax Sharing Agreement Amounts that
individually and in the aggregate are not material all Taxes required to be paid
on or before the date hereof by or with respect to Metromedia and its
Subsidiaries (or any of them), including amounts, other than amounts being
contested in good faith, required to be paid on or before the date hereof with
respect to Taxes as a result of any Tax Sharing Agreement of Metromedia and its
Subsidiaries (or any of them), have been timely paid, except with respect to
Taxes and Tax Sharing Agreement Amounts for which the failure to pay would not
have a Material Adverse Effect with respect to Metromedia.
(ii) All material Tax Returns required to be filed by or with
respect to Metromedia and its Subsidiaries (or any of them) with respect to
Taxes on or before the date hereof have been timely filed. No penalties or other
charges in a material amount are or will become due with respect to the late
filing of any Tax Return of Metromedia or any of its Subsid iaries or payment of
any Tax of Metromedia or any of its Subsidiaries, required to be filed or paid
on or before the date hereof.
<PAGE>
21
(iii) With respect to all Tax Returns filed by or with respect to
Metromedia and any of its Subsidiaries, (A) Section 3.2(j) of the Metromedia
Disclosure Schedule sets forth the periods for which the statute of limitations
for the assessment of federal Taxes have expired; (B) except as set forth in
Section 3.2(j) of the Metromedia Disclosure Schedule, no audit is in progress
and no extension of time has been executed with respect to any date on which any
Tax Return was or is to be filed and no waiver or agreement has been executed
for the extension of time for the assessment or payment of any Tax; and (C)
except as set forth in Section 3.2(j) of the Metromedia Disclosure Schedule,
there is no material unassessed deficiency proposed or threatened against
Metromedia or any of its Subsidiaries.
(iv) Except as set forth in Section 3.2(j) of the Metromedia
Disclosure Schedule, neither Metromedia nor any of its Subsidiaries has been or
is a party to any tax sharing agreement or similar arrangement.
(v) Section 3.2(j) of the Metromedia Disclosure Schedule
identifies (i) the common parent of each group of affiliated corporations that
filed a consolidated federal income tax return, and the period to which such
returns related, that included Metromedia or any of its Significant Subsidiaries
since 1989, (ii) all material Tax liabilities, of which Metromedia has
knowledge, that have been asserted by the IRS with respect to any such return
and all claims with respect to Taxes in a material amount that have been
asserted against Metromedia under any tax sharing agreement to which it is a
party.
(k) Certain Agreements. Except as set forth in Section 3.2(k) and/or
Section 3.2(l) of the Metromedia Disclosure Schedule, and except for this
Agreement, as of the date of this Agreement, neither Metromedia nor any of its
Subsidiaries is a party to any oral or written (i) agreement with any executive
officer or other key employee of Metromedia or any of its Subsidiaries the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving Metromedia, of the nature
contemplated by this Agreement, or agreement with respect to any executive
officer of Metromedia providing any term of employment or compensation guarantee
extending for a period longer than three years after the Closing Date and for
the payment of in excess of $200,000 per annum or (ii) plan, including any stock
option plan, stock appreciation right plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
(l) Employee Benefits.
(i) Except as set forth in Section 3.2(l) of the Metromedia
Disclosure Schedule, there are no United States or foreign employee benefit
plans or arrangements (collectively, the "Metromedia Benefit Plans") of any type
(including, without limitation, plans described in Section 3(3) of ERISA), under
which Metromedia or any of its ERISA Affiliates has incurred any unsatisfied
material liability or could reasonably be expected in the future to incur any
direct or indirect, actual or contingent material liability (including, without
limitation, any liability that might arise indirectly under Section 414 of the
Code or Section 4069 of ERISA).
(ii) With respect to each Metromedia Benefit Plan, Metromedia
will deliver or make available on or prior to the date hereof to the Company
complete and accurate copies (where applicable) of: (A) all plan texts and
agreements; (B) all material employee communications regarding a Metromedia
Benefit Plan not embodied in plan texts and
<PAGE>
22
agreements that could materially affect the liabilities of the Metromedia
Benefit Plan or the liabilities of Metromedia or its ERISA Affiliates with
respect to such plan; (C) the most recent annual report; (D) the most recent
annual and periodic accounting of plan assets; (E) the most recent determination
letter received from the IRS; and (F) the most recent actuarial valuation.
(iii) No event has occurred or might reasonably be expected to
occur as a result of which any Metromedia Benefit Plan or Metromedia or any of
its ERISA Affiliates could, directly or indirectly (whether through a commonly
controlled entity under Code Section 414 or otherwise), incur liability for
failure to comply with the applicable requirements of Title IV of ERISA, section
302 of ERISA, sections 412, 420, 4971 or 4975 of the Code, the continuation
coverage requirements of section 601 et seq. of ERISA and section 4980B of the
Code, and corresponding or similar provisions of foreign laws or regulations,
other than routine claims for benefits in accordance with the terms of such
plan, except as would not have a Material Adverse Effect with respect to
Metromedia.
(iv) Each Metromedia Benefit Plan has been operated in all
respects in accordance with its terms and with the requirements of applicable
laws and regulations except to the extent any such operation would not have a
Material Adverse Effect with respect to Metromedia.
(v) With respect to each Metromedia Benefit Plan that is a
defined benefit pension plan, since the most recent financial statements of
Metromedia there has been no material increase in such plan's liabilities other
than the accrual of such benefits in the ordinary course and in accordance with
the terms of such plan.
(vi) Except as set forth in Section 3.2(l) of the Metromedia
Disclosure Schedule or the Metromedia SEC Documents, the consummation of the
transactions contemplated by this Agreement will not without additional
discretionary action by Metromedia, the Company or any of their respective ERISA
Affiliates, with respect to employees or former employees of Metromedia or any
of their ERISA Affiliates: (A) entitle any individual to severance pay; (B)
accelerate the time of payment or vesting of, increase the amount of, or satisfy
a condition to the compensation due to any individual; and (C) result in the
payment of an amount that would, individually or in combination with any other
such payment, constitute an "excess parachute payment" under Code Section
280G(b)(1).
(m) Contracts. There is no contract, agreement or understanding
required to be described in or filed as an exhibit to any Metromedia SEC
Document that is not described in or filed as required by the Securities Act or
the Exchange Act, as the case may be. All such contracts, agreements and
understanding are valid and binding and are in full force and effect and
enforceable in accordance with their respective terms other than contracts,
agreements or understandings which are by their terms no longer in force or
effect. Except for the Metromedia Required Consents and except to the extent any
of the following would not have a Material Adverse Effect with respect to
Metromedia, (i) no approval or consent of, or notice to, any Person is needed in
order that such contract, agreement or understanding shall continue in full
force and effect in accordance with its terms without penalty, acceleration or
rights of early termination following the consummation of the transactions
contemplated by this Agreement, and (ii) Metromedia is not in violation of
breach of or default under any such contract, agreement or understanding nor to
Metromedia's knowledge is any other party to any such contract, agreement or
understanding.
<PAGE>
23
(n) Environmental Matters. Except as set forth in Section 3.2(n) of
the Metromedia Disclosure Schedule, (i) Metromedia and each of its Subsidiaries
has obtained and is in material compliance with the terms and conditions of all
permits, licenses and other authorizations required under applicable
Environmental Laws; (ii) no asbestos in a friable condition or equipment
containing polychlorinated biphenyls or leaking underground or above-ground
storage tanks is contained in or located at any facility owned, leased or
controlled by Metromedia or any of its Subsidiaries; (iii) Metromedia and each
of its Subsidiaries is in material compliance with all applicable Environmental
Laws, and has fully disclosed all known material past and present non-compliance
with Environmental Laws, and all known past discharges, emissions, leaking or
releases known to Metromedia or each of its Subsidiaries of any substance or
waste regulated under or defined by Environmental Laws that could reasonably be
expected to form the basis of any claim, action, suit, proceeding, hearing or
investigation under any applicable Environmental Laws; and (iv) neither
Metromedia nor any of its Subsidiaries has received notice of any past or
present events, conditions, circumstances, activities, practices, incidents,
actions or plans that have resulted in or threaten to result in any common law
or legal liability, or otherwise form the basis of any claim, action, suit,
proceeding, hearing or investigation under any applicable Environmental Laws;
provided, however, that clauses (i) through (iv) address only those matters that
would have a Material Adverse Effect with respect to Metromedia.
(o) Absence of Certain Changes or Events. Except as set forth in
Section 3.2(o) of the Metromedia Disclosure Schedule or as disclosed in the
Metromedia SEC Documents, or as contemplated by this Agreement, since December
31, 1995, Metromedia and its Subsidiaries have conducted their respective
businesses only in the ordinary and usual course, and, as of the date of this
Agreement, there has not been (i) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to any of Metromedia's capital stock; (ii) any return of any capital or
other distribution of assets to stockholders of Metromedia; (iii) any material
investment by Metromedia or any of its Subsidiaries either by the purchase of
any property or assets or by any acquisition (by merger, consolidation or
acquisition of stock or assets) of any corporation, partnership or other
business organization or division thereof other than the ownership of an equity
interest in any person in an amount less than $5,000,000; (iv) any sale,
disposition or other transfer of assets or properties of Metromedia or its
Subsidiaries (other than the sale of inventory in the ordinary course of
business) in excess of $500,000 individually or $2,000,000 in the aggregate; (v)
any incurrence or guarantee of any Debt other than in the ordinary course of
business consistent with past practices or any Debt in excess of $10,000,000 in
the aggregate; or (vi) any change, occurrence or circumstance of any character
(whether or not in the ordinary course of business) that, individually or in the
aggregate, has had or would have, a Material Adverse Effect with respect to
Metromedia.
(p) Information Supplied. Neither the Registration Statement nor the
Proxy Statement will, at the time the Registration Statement is filed with the
SEC, at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act or at the time the Proxy Statement is mailed
to the Company's and Metromedia's stockholders, as the case may be, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
provided, however, that this representation and warranty shall not apply to
statements or omissions made in reliance upon and in conformity with information
furnished in writing by the Company to Metromedia expressly for use in or for
incorporation by reference into the Registration Statement or the Proxy
Statement or any amendments or supplements thereto.
<PAGE>
24
(q) Real Estate.
(i) Ownership of Premises. Metromedia or one of its Subsidiaries
is the owner of good and insurable fee title to the land in the United States
described on Section 3.2(q)(i) of the Metromedia Disclosure Schedule and to all
of the buildings, structures and other improvements located thereon
(collectively, the "Metromedia Owned Real Property") free and clear of all Title
Defects (as hereinafter defined) except as would not have a Material Adverse
Effect with respect to Metromedia. The Metromedia Owned Real Property
constitutes all of the real property owned by Metromedia and its Subsidiaries on
the date hereof.
(ii) Leased Properties. Section 3.2(q)(ii) of the Metromedia
Disclosure Schedule sets forth a true, correct and complete schedule of all
leases, subleases, licenses and other agreements (collectively, the "Metromedia
Real Property Leases") under which Metromedia or any Subsidiary uses or occupies
or has the right to use or occupy, now or in the future, any real property in
the United States (the land, buildings and other improvements covered by the
Metromedia Real Property Leases being herein called the "Metromedia Leased Real
Property"), which Section 3.2(q)(ii) of the Metromedia Disclosure Schedule sets
forth the date of and parties to each Metromedia Real Property Lease, the date
of and parties to each amendment, modification and supplement thereto, the term
and renewal terms (whether or not exercised) thereof and a brief description of
the Metromedia Leased Real Property covered thereby. Metromedia has heretofore
delivered to or made available true, correct and complete copies of all
Metromedia Real Property Leases (including all modifications, amendments and
supplements). Each Metromedia Real Property Lease is valid, binding and in full
force and effect, all rent and other sums and charges payable by Metromedia or a
Subsidiary as tenant thereunder are current, no notice of default or termination
under any Metromedia Real Property Lease is outstanding, no termination event or
condition or uncured default on the part of Metromedia or the applicable
Subsidiary or, to Metromedia's or the applicable Subsidiary's knowledge, the
landlord, exists under any Metromedia Real Property Lease, and no event has
occurred and no condition exists which, with the giving of notice or the lapse
of time or both, would constitute such a default or termination event or
condition, which, when considered individually or in the aggregate with all such
other Metromedia Real Property Leases under which there is such an event or
condition has or will have a Material Adverse Effect with respect to Metromedia.
Except as does not have a Material Adverse Effect with respect to Metromedia,
Metromedia or a Subsidiary, whichever is applicable, holds the leasehold estate
under and interest in each Metromedia Real Property Lease free and clear of all
Title Defects. Metromedia and its Subsidiaries have no ownership, financial or
other interest in the landlord under any Metromedia Real Property Lease.
(iii) Entire Premises. All of the land, buildings, structures and
other improvements in the United States used by Metromedia and its Subsidiaries
in the conduct of their business are included in Metromedia Owned Real Property
and Metromedia Leased Real Property.
(r) Intellectual Property.
Section 3.2(r) of the Metromedia Disclosure Schedule sets forth a list of
all of Metromedia's and its Subsidiaries' registered trademarks and registered
copyrights, all applications for any of the foregoing and all permits, grants
and licenses or other rights running to Metromedia and any of its Subsidiaries
relating to any of the foregoing that are material to the business of Metromedia
and its Subsidiaries taken as a whole. Except as set forth on Section 3.2(r) of
the Metromedia Disclosure Schedule, (i) Metromedia or one of its Subsidiaries
own, or are licensed to, or otherwise have, the right to use all registered
trademarks and registered
<PAGE>
25
copyrights set forth on Section 3.2(r) of the Metromedia Disclosure Schedule,
and (ii) Metromedia's rights in the property set forth on such list are free and
clear of any liens or other encumbrances and Metromedia and its Subsidiaries
have not received written notice of any adversely-held copyright or trademark of
any other person, or notice of any charge or claim of any person relating to
such intellectual property or any process or confidential information of
Metromedia and its Subsidiaries and to Metromedia's knowledge there is no basis
for any such charge or claim, and (iii) Metromedia, its Subsidiaries and their
respective predecessors, if any, have not conducted business at any time during
the period beginning five years prior to the date hereof under any corporate or
partnership, trade or fictitious names other than their current corporate or
partnership names, except in the case of clauses (i), (ii) and (iii) above, any
of the foregoing which do not and will not have an Material Adverse Effect with
respect to Metromedia.
(s) Investment Company Act. Metromedia and each of its Subsidiaries
either (i) is not an "investment company," or to Metromedia's knowledge a
company "controlled" by, or to Metromedia's knowledge an "affiliated company"
with respect to, an "investment company," required to register under the
Investment Company Act of 1940, as amended (the "Investment Company Act") or
(ii) satisfies all conditions for an exemption from the Investment Company Act,
and, accordingly, neither Metromedia nor any of its Subsidiaries is required to
be registered under the Investment Company Act.
(t) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other Person retained by or on behalf of Metromedia is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement,
except DLJ, whose fees and expenses will be paid by Metromedia in accordance
with Metromedia's agreement with such firm.
ARTICLE 4
COVENANTS
Section 4.1 Mutual Covenants of Metromedia and the Company. Each of
Metromedia and the Company agrees that, except as expressly contemplated or
permitted by this Agreement, it shall (and shall cause each of its Subsidiaries
to) comply with the following covenants:
(a) Confidentiality. From and after the date hereof, each party shall,
and shall use its best efforts to cause its Affiliates and its and their
respective Agents (as hereinafter defined) to keep secret and hold in strictest
confidence any and all documents and information relating to the other party and
its respective Affiliates furnished to such first party (whether before or after
the date hereof) in connection with the transactions contemplated hereunder,
other than the following: (i) information that has become generally available to
the public other than as a result of a disclosure by such party, its Affiliates
or its Agents; (ii) information that becomes available to such party or an Agent
of such party on a nonconfidential basis from a third party having no obligation
of confidentiality to a party to this Agreement and which has not itself
received such information directly or indirectly in breach of any such obliga
tion of confidentiality; (iii) information that is required to be disclosed by
applicable law, judicial order or pursuant to any listing agreement with, or the
rules or regulations of, any securities exchange on which securities of such
party or any such Affiliate are listed or traded; provided that the party making
such disclosure or whose Affiliates or Agents are making such disclosure shall
notify the other party as promptly as practicable (and, if possible, prior to
making such disclosure)
<PAGE>
26
and shall use its reasonable best efforts to limit the scope of such disclosure
and seek confidential treatment of the information to be disclosed; and (iv)
disclosures made by any party as shall be reasonably necessary in connection
with obtaining the Metromedia Required Consents and/or the Company Required
Consents.
(b) Publicity. Except as otherwise required by applicable law or the
rules or regulations of any securities exchange on which the securities of such
party or any Affil iate of such party are listed or traded, until the earlier of
(i) the date on which this Agreement ceases to be in effect and (ii) the Closing
Date, no party shall issue or cause the publication of any press release or
other public announcement with respect to the transactions contemplated by this
Agreement without the consent of the other party and in any event each party
agrees that it will give the other party reasonable opportunity to review and
comment upon any such release or announcement prior to publication of the same.
(c) Preparation of the Proxy Statement and the Registration Statement.
Metromedia shall, with all reasonably necessary assistance from the Company,
prepare and cause to be filed with the SEC the Registration Statement, in which
the Proxy Statement will be included as a Prospectus, it being understood that
the Proxy Statement and the Prospectus will also serve as a proxy statement and
prospectus for Metromedia's transactions with Alliance Entertainment Corp. Each
party shall provide the other party and its Agents with reasonable opportunity
to review and comment upon the Registration Statement, including all amendments
thereto and all supplements to the Proxy Statement contained therein, prior to
the filing thereof with the SEC and/or the distribution thereof to the
stockholders of Metromedia and the Company, and shall make all reasonable
changes thereto requested by such other party or its Agents. Each party hereto
shall use its reasonable best efforts to have the Registration Statement
declared effective by the SEC as promptly as practicable. Each party shall
provide and shall be deemed to have provided the other party with the
information concerning it required to be included in the Registration Statement.
Metromedia shall take any action required to be taken under any applicable state
securities laws in connection with the issuance of the Merger Securities in the
Merger pursuant to this Agreement.
(d) Satisfaction of Conditions. Subject to the terms and conditions of
this Agreement, each party hereto agrees to use its reasonable best efforts,
subject to their respective fiduciary duties, to cause the conditions set forth
in Article 5 of this Agreement to be satisfied, and to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement (including the transactions contemplated by Section 4.1(h)), including
cooperating fully with the other party, including by provision of information
and making of all necessary filings in connection with, among other things, the
HSR Act. In case at any time after the Closing Date any further action is
necessary or desirable to carry out the purposes of this Agreement, each party
shall take all such necessary action.
(e) Other Actions. From the date hereof through the Closing Date, each
of Metromedia and the Company shall not, and shall cause its Subsidiaries not
to, take any action that would or is reasonably likely to result in any of the
representations and warranties of Metromedia or the Company, as the case may be,
set forth in this Agreement being untrue in any material respect as of the date
made, or in any of the conditions to the Closing set forth in Article 5 of this
Agreement not being satisfied.
<PAGE>
27
(f) Advice of Changes; SEC Documents. Each party shall confer on a
regular and frequent basis with the other, report on operational matters and
promptly advise the other orally and in writing of (i) any material notice or
other communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated by
this Agreement; (ii) any material notice or other communication from any
regulatory authority or national securities exchange in connection with the
transactions contemplated by this Agreement; (iii) any claims, actions,
proceedings or investigations commenced or, to the best of such party's
knowledge, threatened, involving or affecting such party or any of its
Subsidiaries, or any of its property or assets, or, to the best of such party's
knowledge, any employee, consultant, director or officer, in his or her capacity
as such, of such party or any of its Subsidiaries, which, if pending on the date
hereof, would have been required to have been disclosed in the Metromedia
Disclosure Schedule or the Company Disclosure Schedule, as the case may be, or
which relates to the consummation of the Merger or the other transactions
contemplated by this Agreement; and (iv) any change or event that would have a
Material Adverse Effect with respect to such party. Each party shall promptly
provide the other (or its counsel) copies of all filings made by such party with
any Governmental Entity in connection with this Agreement and the transactions
contemplated hereby.
(g) Compliance with Laws. The parties agree to conduct their
businesses and cause the businesses of their Subsidiaries to be conducted in
compliance with all applicable laws and regulations except with respect to the
Company, where failure to comply would not have a Material Adverse Effect with
respect to the Company and, with respect to Metromedia where failure to comply
would not have a Material Adverse Effect with respect to Metromedia.
(h) Refinancing. Each of Metromedia and the Company agrees to use
reasonable commercial efforts to take all necessary steps and actions to
facilitate any refinancing of indebtedness of Metromedia and/or the Company and
their respective Subsidiaries and any other financing arrangements in connection
with the consummation of the transactions contemplated hereby including, without
limitation, all amounts owed by the Company pursuant to the Second Amended and
Restated Credit Agreement dated as of April 28, 1995 (the "Credit Agreement")
among the Company and Bank of America National Trust and Savings Association, as
Agent, Collateral Agent and the Letter of Credit Issuing Bank and the Other
Financial Institutions Party thereto, as amended (collectively, the
"Financings"), it being the intention of Metromedia and the Company to refinance
(or extend the maturity date of) all amounts outstanding pursuant to the Credit
Agreement on or prior to the maturity date set forth in the Credit Agreement and
to consummate the Merger by May 15, 1996.
Section 4.2 Covenants of the Company. During the period from the date of
this Agreement and continuing until the Closing Date, the Company agrees that
except as expressly contemplated or permitted by this Agreement, or to the
extent that Metromedia shall otherwise consent in writing (which consent may be
withheld in its sole discretion):
(a) Access to Information. Upon reasonable notice, the Company shall,
and shall cause its Subsidiaries to, afford to Metromedia and its Agents,
access, during normal business hours during the period prior to the Closing
Date, to all its properties, books, Contracts, commitments and records and,
during such period, the Company shall, and shall cause its Subsidiaries to,
promptly furnish or otherwise make available to Metromedia (i) a copy of each
report, schedule, registration statement and other document filed or received by
any of them during such period pursuant to the requirements of Federal
securities laws and (ii) all other
<PAGE>
28
information concerning its business, properties and personnel as Metromedia may
reasonably request.
(b) Ordinary Course. The Company shall, and shall cause its
Subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and use
its best efforts to preserve intact their current business organizations, keep
available the services of their current officers and employees and preserve
their relationships with customers, suppliers, contractors, distributors,
licensors, licensees and others having business dealings with them to the end
that their goodwill and ongoing businesses shall not be impaired in any material
respect at the Closing Date. Without limiting the generality of the foregoing,
and except as otherwise required by law, neither the Company nor any of its
Subsidiaries shall:
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock (except dividends
and distributions by a direct or indirect wholly-owned Subsidiary of the Company
to its parent), (y) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock or (z) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its
Subsidiaries or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities;
(ii) except for the exercise by the Company of the Goldwyn Option
pursuant to the Option Agreement dated as of April 13, 1993 by and among the
Company, Samuel Goldwyn, Jr. and The Samuel Goldwyn Jr. Trust (the "Option
Exercise"), authorize for issuance, issue, deliver, sell or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise), pledge
or otherwise encumber any shares of its capital stock or the capital stock of
any of its Subsidiaries, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities or any other securities or
equity equivalents (including without limitation stock appreciation rights)
other than issuances upon exercise of employee and director stock options issued
pursuant to employee and non-employee director stock option plans outstanding on
the date hereof and listed in Section 3.1(c) of the Company Disclosure Schedule;
(iii) except with respect to annual bonuses made in the ordinary
course of business consistent with past practice and except as contemplated by
this Agreement, adopt or amend in any material respect any bonus, profit
sharing, compensation, severance, termination, stock option, stock appreciation
right, pension, retirement, employment or other employee benefit agreement,
trust, plan or other arrangement for the benefit or welfare of any director,
officer or employee of the Company or any of its Subsidiaries or increase in any
manner the compensation or fringe benefits of any director, officer or employee
of the Company or any of its Subsidiaries or pay any benefit not required by any
existing agreement or place any assets in any trust for the benefit of any
director, officer or employee of the Company or any of its Subsidiaries (in each
case, except with respect to employees in the ordinary course of business
consistent with past practice);
(iv) amend its certificate of incorporation, by-laws or
equivalent organizational documents or alter through merger, liquidation,
reorganization, restruc turing or in any other fashion the corporate structure
or ownership of any Subsidiary of the Company;
<PAGE>
29
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its material properties or
assets;
(vi) acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the stock or assets of, or by
any other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or (y) any assets
that are material, individually or in the aggregate, to the Company and its
Subsidiaries taken as a whole;
(vii) except for borrowings permitted under credit facilities
filed as exhibits to the Company SEC Documents, incur any Debt, issue or sell
any debt securities or warrants or other rights to acquire any debt securities
of the Company or any of its Subsidiaries, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to maintain any
financial condition of another Person or enter into any arrangement having the
economic effect of any of the foregoing, or make any loans, advances or capital
contributions to, or investments in, any other Person, other than to the Company
or any direct or indirect wholly-owned Subsidiary of the Company;
(viii) change any accounting principle used by it, unless
required by the SEC or the Financial Accounting Standards Board; and
(ix) except for the Option Exercise, enter into any transaction
or series of transactions with any Affiliate of the Company (other than a
wholly-owned Subsidiary of the Company) or otherwise that would be required to
be disclosed pursuant to Item 404 of Regulation S-K other than on terms and
conditions substantially as favorable to the Company or such Subsidiary as would
be obtainable by the Company or such Subsidiary at the time of such transaction
with a Person that is not an Affiliate of the Company.
(c) Meetings; Fiduciary Duties. The Company shall, promptly after the
date hereof, take all action necessary in accordance with the DGCL and its
Certificate of Incorporation and By-laws to convene a meeting of the Company's
stockholders at a time mutually agreed to by the Company and Metromedia to,
among other things, consider and vote upon this Agreement (the "Company
Stockholders' Meeting"), and the Company shall consult with Metromedia in
connection therewith. The Board of Directors of the Company shall not withdraw
or modify or propose to withdraw or modify in a manner adverse to Metromedia,
the Recommendation, unless the Board of Directors of the Company concludes in
good faith following receipt of a written opinion addressed to the Company from
outside counsel to the Company that such action is reasonably necessary for the
Board of Directors of the Company to comply with its fiduciary obligations to
stockholders under applicable law. The Company shall use its best efforts to
solicit from stockholders of the Company proxies in favor of the approval and
adoption of this Agreement and to secure the vote or the consent of the
stockholders required by the DGCL to approve and adopt this Agreement.
(d) No Solicitation. Neither the Company nor any of its Subsidiaries
shall, nor shall it or any of its Subsidiaries authorize or permit any of their
respective Agents to, (i) solicit, initiate, encourage (including by way of
furnishing information) or take any other action to facilitate, any inquiry or
the making of any proposal which constitutes, or may reasonably be expected to
lead to, any acquisition or purchase of a substantial amount of assets of, or
any equity interest in, the Company or any of its Subsidiaries or any tender
offer (including a self tender offer) or exchange offer, merger, consolidation,
business combination, sale of substantially all
<PAGE>
30
assets, sale of securities, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of its Subsidiaries (other than
the transactions contemplated by this Agreement) or any other material corporate
transaction (other than transactions permitted pursuant to Section 4.2(b) of
this Agreement) the consummation of which would or could reasonably be expected
to impede, interfere with, prevent or materially delay the Merger (collectively,
"Transaction Proposals") or agree to or endorse any Transaction Proposal or (ii)
propose, enter into or participate in any discussions or negotiations regarding
any of the foregoing, or furnish to any other Person any information with
respect to its business, properties or assets or any of the foregoing, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other Person to do or seek any of the
foregoing; provided, however, that the foregoing clauses (i) and (ii) shall not
prohibit the Company from (A) furnishing information pursuant to an appropriate
confidentiality letter concerning the Company and its businesses, properties or
assets to a third party who the Board of Directors of the Company has a
reasonable basis for determining is likely to make a Qualified Transaction
Proposal (as defined below), (B) engaging in discussions or negotiations with
such a third party who has made a Qualified Transaction Proposal or (C)
following receipt of a Qualified Transaction Proposal, taking and disclosing to
its stockholders a position contemplated by Rule 14e-2(a) under the Exchange Act
or changing the Recommendation, but in each case referred to in the foregoing
clauses (A) through (C) only after the Board of Directors of the Company
concludes in good faith following receipt of a written opinion addressed to the
Company from outside counsel to the Company that such action is reasonably
necessary for the Board of Directors of the Company to comply with its fiduciary
obligations to stockholders under applicable law. If the Board of Directors of
the Company receives a Transaction Proposal, then the Company shall immediately
inform Metromedia of the terms and conditions of such proposal and the identity
of the Person making it and shall keep Metromedia fully informed of the status
and details of any such Transaction Proposal and of all steps it is taking in
response to such Transaction Proposal. For purposes of this Agreement, the term
"Qualified Transaction Proposal" shall mean a Transaction Proposal that the
Board of Directors of the Company determines in good faith, after consultation
with its outside financial advisor, is reasonably capable of being consummated
and is not subject to any material contingencies relating to financing.
(e) Affiliates. Prior to the Closing Date, the Company shall endeavor
to deliver to Metromedia (i) a letter identifying all Persons who, to the
knowledge of the Company, may be deemed to be "affiliates" of the Company under
Rule 145 under the Securities Act, including, without limitation, all directors
and executive officers of the Company (collectively, the "Company Affiliates"),
and (ii) copies of letter agreements, each in the form prepared by Metromedia
and reasonably acceptable to the Company, executed by each Company Affiliate
(the letters described in clauses (i) and (ii) being collectively referred to as
"Affiliate Letters"). The parties agree that the Affiliate Letter to be signed
by Samuel Goldwyn, Jr. will contain a lockup provision with Metromedia's lead
underwriter for the Financings providing that Mr. Goldwyn agree not to sell his
shares of Metromedia Common Stock received in the Merger (other than the shares
issued in exchange for the Company Common Stock received by Mr. Goldwyn pursuant
to the Option Exercise) for a period of 180 days from the Closing Date.
Metromedia shall not be required to maintain the effectiveness of the
Registration Statement for the purposes of resale of the Merger Securities by
such affiliates and the certificates representing the Merger Securities received
by such affiliates in the Merger shall bear a customary legend regarding
applicable Securities Act restrictions and the provisions of this Section
4.2(e).
(f) Tax Returns. All Tax Returns required to be filed by or with
respect to the Company and its Subsidiaries (or any of them) after the date
hereof and on or before the Effective Time shall be prepared and timely filed,
in a manner consistent with prior years and
<PAGE>
31
applicable laws and regulations other than such Tax Returns for which the
failure to file would not have a Material Adverse Effect with respect to the
Company.
Section 4.3 Covenants of Metromedia. During the period from the date of
this Agreement and continuing until the Closing Date, Metromedia agrees that,
except as expressly contemplated or permitted by this Agreement, or to the
extent that the Company shall otherwise consent in writing (which consent may be
withheld in its sole discretion):
(a) Access to Information. Upon reasonable notice, Metromedia shall
afford to the Company and its Agents access, during normal business hours during
the period prior to the Closing Date, to all its properties, books, Contracts,
commitments and records and, during such period, Metromedia shall promptly
furnish or otherwise make available to the Company (i) a copy of each report,
schedule, registration statement and other document filed or received by any of
them during such period pursuant to the requirements of Federal securities laws
and (ii) all other information concerning the businesses, properties and
personnel of Metromedia and its Subsidiaries as the Company may reasonably
request.
(b) Listing. Metromedia shall use its best efforts to cause the shares
of Metromedia Common Stock comprising the Merger Consideration to be approved
for listing on the AMEX, subject to official notice of issuance.
(c) Meeting. Metromedia shall, promptly after the date hereof, take
all action necessary in accordance with the DGCL and its Restated Certificate of
Incorporation and By-laws to convene a meeting of Metromedia's stockholders at a
time mutually agreed to by the Company and Metromedia to, among other things,
consider and vote upon this Agreement (the "Metromedia Stockholders' Meeting"),
and Metromedia shall consult with the Company in connection therewith.
(d) S-3; S-8. Metromedia shall enter into a registration rights
agreement with Samuel Goldwyn, Jr. and, as contemplated thereby, agrees to file
and use its best efforts to have declared effective by the SEC a Registration
Statement on Form S-3 (the "Form S-3") covering the shares of Metromedia Common
Stock to be received by Samuel Goldwyn, Jr. in the Merger. In addition,
Metromedia agrees to file a Form S-8 to cover the shares of Metromedia Common
Stock to be issued upon exercise of the Company Options (the "Form S-8").
(e) Directors' & Officers' Indemnification and Insurance.
(i) For a period of four years after the Effective Time,
Metromedia shall maintain in effect policies of directors' and officers'
liability insurance for the Surviving Corporation in substantially the same form
with substantially the same terms and conditions as contained in the Company's
current policies of directors' and officers' liability insurance with respect to
claims arising from facts or events which occurred before the Effective Time.
(ii) From and after the Effective Time, the Surviving Corporation
will indemnify and hold harmless each present and former director and officer of
the Company and its Subsidiaries, determined as of the Effective Time (the
"Indemnified Parties'), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining
<PAGE>
32
to matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent that the Company or such Subsidiary would have been permitted under
applicable law and its certificate of incorporation or by-laws as in effect on
the date hereof, to indemnify such person (and the Surviving Corporation shall
advance expenses as incurred to the fullest extent permitted under applicable
law provided the person to whom expenses are advanced provides an undertaking to
repay such advances if it is ultimately determined that such person is not
entitled to indemnification).
(iii) Any Indemnified Party wishing to claim indemnification
under Section 4.3(e), upon learning of any such claim, action, suit, proceeding
or investigation, shall promptly notify the Surviving Corporation thereof, but
the failure to so notify shall not relieve the Surviving Corporation of any
liability it may have to such Indemnified Party except to the extent such
failure materially prejudices the Surviving Corporation. In the event of any
such claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), an Indemnified Party may retain counsel satisfactory
to him or her, the Surviving Corporation shall pay all reasonable fees and
expenses of such counsel for the Indemnified Party promptly as statements
therefor are received. The Surviving Corporation shall use its respective best
efforts to assist in the defense of any such matter. If such indemnity is not
available with respect to any Indemnified Party, then the Surviving Corporation
and the Indemnified Party shall contribute to the amount payable in such
proportion as is appropriate to reflect relative faults and benefits.
(iv) The provisions of this Section 4.3(e) are intended for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
(f) Tax Returns. All Tax Returns required to be filed by or with
respect to Metromedia and its Subsidiaries (or any of them) after the date
hereof and on or before the Effective Time shall be prepared and timely filed,
in a manner consistent with prior years and applicable laws and regulations
other than such Tax Returns for which the failure to file would not have a
Material Adverse Effect with respect to Metromedia.
(g) Interim Financing. Promptly following the execution of this
Agreement, Metromedia shall use its best efforts to cause Orion Pictures
Corporation or an Affiliate of Orion Pictures Corporation to provide the Company
up to $5.5 million of financing in accordance with the terms of that certain
letter from Orion Pictures Corporation to the Company dated the date hereof (the
"Interim Financing").
(h) Production and Development. From and after the Closing Date,
Metromedia will provide the Surviving Corporation with a revolving credit
facility in the aggregate principal amount of $20,000,000 to be utilized by the
Surviving Corporation solely for the production and acquisition (including by
way of a negative pick-up) of Motion Picture Product (as hereinafter defined).
Motion Picture Product shall mean full-length feature films with budgeted
negative costs (including all costs customarily included in connection with the
preparation, production and completion, both above-the-line and below-the-line,
of such product) not in excess of $5,000,000 (provided that one film per fiscal
year may have a budgeted negative cost not in excess of $7,000,000) which is,
(i) with respect to Motion Picture Product produced by the Surviving
Corporation, approved in advance by the Office of the Chairman of Metromedia and
(ii) with respect to Motion Picture Product acquired by the Surviving
Corporation, is either approved in advance or is a feature film included in an
acquisition plan or acquisition strategy for a film festival or similar event
the acquisition costs of which were pre-approved by the Office of
<PAGE>
33
the Chairman of Metromedia. In addition, Metromedia will provide the Surviving
Corporation with a revolving development fund for the development of Motion
Picture Product which will not exceed at any time $1,000,000 for the one year
period from the Effective Time to the first anniversary of the Effective Time,
increasing by $250,000 per year thereafter to a maximum of $2,000,000. As
projects are "greenlighted" by Metromedia, the amount of development costs for
such Motion Picture Product shall be included in the budgeted negative cost for
such project and the amount of the Surviving Corporation's development fund
shall be increased (up to the applicable maximum amount) by the amount of such
development costs that become included in the budgeted negative costs for
projects. In addition, the Surviving Corporation may expend amounts for the
development of television product (other than deficit-financed television
product) as such amounts are approved by the Office of the Chairman of
Metromedia.
ARTICLE 5
CONDITIONS PRECEDENT
Section 5.1 Conditions to the Obligations of Metromedia and the Company to
Effect the Merger. The respective obligations of each party to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the affirmative vote of a majority of the votes that the holders of
each of the out standing shares of Metromedia Common Stock and the Company
Common Stock, respectively, are entitled to cast; provided, that, to the extent
Metromedia determines in good faith upon the advice of counsel to Metromedia
that the approval by Metromedia's stockholders of the Merger and the
transactions contemplated by this Agreement is not required under applicable law
or the rules and regulations of the AMEX, Metromedia may unilaterally waive the
condition regarding approval by Metromedia's stockholders of the Merger and the
transactions contemplated by this Agreement.
(b) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings seeking a stop order.
(c) Blue Sky Laws. Metromedia shall have received all state securities
or "Blue Sky" permits and other authorizations necessary to issue the shares of
Metromedia Common Stock.
(d) Listing. The Metromedia Common Stock to be issued in the Merger
pursuant to this Agreement shall have been authorized for listing on the AMEX or
any other national securities exchange or automated quotation system approved by
Metromedia and the Company, in each case, subject to official notice of
issuance.
(e) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "Injunction")
restraining or preventing the consummation of the Merger or subjecting any party
or any of its Affiliates to substantial damages as a result of the consummation
of the Merger shall be in effect; provided, however, that the party invoking
this condition shall have used reasonable best efforts to have vacated such
Injunction.
<PAGE>
34
(f) HSR Act. All HSR Act waiting periods shall have expired or been
terminated.
(g) Governmental and Regulatory Consents. All filings required to be
made prior to the Effective Time with, and all consents, approvals, permits and
authorizations required to be obtained prior to the Effective Time from,
Governmental Entities, including, without limitation, those set forth in the
Metromedia Disclosure Schedule and/or the Company Disclosure Schedule, in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Metromedia and the
Company will have been made or obtained (as the case may be).
(h) The Company Required Consents. The Company Required Con sents
shall have been obtained and be in full force and effect, except for those the
failure to obtain which would not have a Material Adverse Effect with respect to
the Company and its Subsidiaries (and Metromedia shall have received evidence
thereof reasonably satisfactory to it).
(i) Metromedia Required Consents. The Metromedia Required Consents
shall have been obtained and be in full force and effect, except for those the
failure to obtain which would not have a Material Adverse Effect with respect to
Metromedia and its Subsidiaries (and the Company shall have received evidence
thereof reasonably satisfactory to it).
(j) Employment Agreement. The Surviving Corporation shall have entered
into an employment agreement with Samuel Goldwyn, Jr. having the principal terms
set forth in that certain letter dated as of the date hereof from Metromedia to
Mr. Goldwyn.
(k) Credit Agreement. All amounts outstanding under the Credit
Agreement (or any refinancing, renewal or extension thereof) shall have been
repaid or refinanced in full.
(l) Interim Financing. The Interim Financing shall have been provided
in the manner specified in the Financing and Distribution Agreement.
Section 5.2 Conditions to the Obligations of Metromedia. The obligations of
Metromedia under this Agreement to consummate the transactions contemplated
hereby are subject to the satisfaction of the following conditions, the
imposition of which is solely for the benefit of Metromedia and any one of more
of which may be expressly waived by Metromedia, in its sole discretion, except
as otherwise required by law:
(a) Accuracy of Representations and Warranties. The representations
and warranties of the Company contained herein shall have been true and correct
in all material respects when made, and shall be true and correct in all
material respects at and as of the Closing Date as though made on and as of the
Closing Date (except to the extent that any such representation and warranty had
by its terms been made as of a specific date in which case such representation
and warranty shall have been true and correct as of such specific date).
Metromedia shall have received a certificate dated the Closing Date signed by an
executive officer of the Company certifying to the fulfillment of this
condition.
(b) Performance of Agreements. The Company shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement or
otherwise contemplated hereby to be performed and complied with by it at or
prior to the Closing Date. Metromedia shall
<PAGE>
35
have received a certificate dated the Closing Date signed by an executive
officer of the Company certifying to the fulfillment of this condition.
(c) No Material Adverse Change. Since December 31, 1995, no change or
event shall have occurred which has had or could reasonably be expected to have
a Material Adverse Effect with respect to the Company.
(d) Opinions of Counsel. Metromedia shall have received the opinion of
Rosenfeld, Meyer & Susman, L.L.P. dated the Effective Time substantially in the
form of Exhibit D hereto.
(e) Fairness Opinions. Metromedia shall have received the opinion of
DLJ, as of the date determined by the Board of Directors of Metromedia in
connection with the approval of this Agreement and as of the date the Proxy
Statement is mailed to Metromedia stockholders, to the effect that the Merger is
fair to the Metromedia stockholders from a financial point of view, which
opinion shall not have been amended, modified or withdrawn.
(f) Affiliate Letters. Metromedia shall have received the Affiliate
Letters executed by each Company Affiliate.
(g) Distribution Agreement. The agreement between the Company and the
Trust relating to the distribution of the Samuel Goldwyn Classics Library shall
have been amended and restated in a manner satisfactory to Metromedia containing
the principal terms set forth on Exhibit E hereto.
(h) Trademark License. The license agreement between the Company and
Samuel Goldwyn, Jr. relating to the use of certain trademarks shall have been
amended and restated in a manner satisfactory to Metromedia containing the
principal terms set forth on Exhibit F hereto.
(i) Option Agreement. The Option Agreement dated as of April 13, 1993
shall have been amended in a manner satisfactory to Metromedia with the
principal terms set forth on Exhibit G hereto.
(j) Certain Agreement. Metromedia shall be satisfied as to the matters
referred to in that certain side letter dated the date hereof between the
Company and Metromedia.
(k) Certain Assets. The assets of Productions and Nightlife financed
by the Company or otherwise relating to the Company's operations shall have been
transferred to the Surviving Corporation or another entity in a manner
satisfactory to Metromedia.
(l) Employment Agreement. The Surviving Corporation shall have entered
into an employment agreement with Meyer Gottlieb in form and substance
satisfactory to the parties thereto.
(m) Other Indebtedness. The maturity date for all amounts outstanding
under the Loan and Security Agreement dated as of April 2, 1994 by and between
Perez Productions Limited and Banque Paribas Los Angeles Agency, as amended,
shall have been extended beyond the Effective Time.
<PAGE>
36
Section 5.3 Conditions to the Obligations of the Company. The obligations
of the Company to consummate the transactions contemplated hereby are subject to
the satisfaction of the following conditions, the imposition of which is solely
for the benefit of the Company and any one or more of which may be expressly
waived by the Company, in its sole discretion, except as otherwise required by
law:
(a) Accuracy of Representations and Warranties. The representations
and warranties of Metromedia contained herein shall have been true and correct
in all material respects when made, and shall be true and correct in all
material respects at and as of the Closing Date as though made on and as of the
Closing Date (except to the extent that any such representation and warranty had
by its terms been made as of a specific date, in which case such representation
and warranty shall have been true and correct in all material respects as of
such specific date). The Company shall have received a certificate dated the
Closing Date signed by an executive officer of Metromedia certifying to the
fulfillment of this condition.
(b) Performance of Agreements. Metromedia shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement to be
performed and complied with by it at or prior to the Closing Date. The Company
shall have received a certificate dated the Closing Date signed by an executive
officer of Metromedia certifying to the fulfillment of this condition.
(c) Fairness Opinion. The Company shall have received the opinion of
Furman, Selz, L.L.C., as of the date the Board of Directors of the Company
approves this Agreement and as of the date the Proxy Statement is mailed to the
Company's stockholders, to the effect that the Merger Consideration is fair to
the Company's stockholders from a financial point of view, which opinion shall
not have been amended, modified or withdrawn.
(d) No Material Adverse Change. Since December 31, 1995, no change or
event shall have occurred which has had or could reasonably be expected to have
Material Adverse Effect with respect to Metromedia.
(e) Legal Opinions. The Company shall have received (i) the opinion of
Paul, Weiss, Rifkind, Wharton & Garrison dated the Effective Time substantially
in the form of Exhibit H hereto and (ii) the opinion of Rosenfeld, Meyer &
Susman, LLP to the effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code.
(f) Forms S-3 and S-8. The Form S-3 and Form S-8 shall have been
declared effective by the SEC.
ARTICLE 6
TERMINATION AND AMENDMENT
Section 6.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time
whether before or after approval by the stockholders of Metromedia or the
Company:
(a) by mutual written consent of Metromedia and the Company;
<PAGE>
37
(b) by either Metromedia or the Company if there has been a material
breach of any representation, warranty, covenant or agreement on the part of the
Company, on the one hand, or Metromedia, on the other hand, as the case may be,
set forth in this Agreement which breach, if not a wilful breach, has not been
cured within ten (10) Business Days following receipt by the breaching party of
notice of such breach;
(c) by either Metromedia or the Company if the Merger shall not have
been consummated before the Termination Date (or such later date as may be
agreed to by Metromedia and the Company); provided, however, that neither party
may terminate this Agreement under this Section 6.1(c) if the failure has been
caused by such party's material breach of this Agreement;
(d) by either Metromedia or the Company, if this Agreement shall fail
to receive the requisite vote for approval and adoption by the stockholders of
the Company at the Company Stockholders' Meeting;
(e) by either Metromedia or the Company, if (i) the Board of Directors
of the Company shall, modify or change the Recommendation in a manner adverse to
Metromedia or shall have resolved to do any of the foregoing; (ii) the Board of
Directors of the Company shall have recommended to the stockholders of the
Company a Transaction Proposal; (iii) a tender offer (including a self-tender
offer) or exchange offer for shares of capital stock of the Company, which would
result in the beneficial ownership by any Person or any "group" (as defined in
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder) of more than 50% of the outstanding shares of any class of capital
stock of the Company, is commenced, and the Board of Directors of the Company
recommends that the stockholders of the Company tender their shares in such
tender or exchange offer; or (iv) any Person shall have acquired beneficial
ownership or the right to acquire beneficial ownership of, or any "group" shall
have been formed which beneficially owns, or has the right to acquire
"beneficial ownership" of, more than 50% of the then outstanding shares of any
class of capital stock of the Company;
(f) by either Metromedia or the Company if this Agreement shall fail
to receive the requisite vote for approval and adoption by the stockholders of
Metromedia at the Metromedia Stockholders' Meeting; or
(g) by Metromedia or the Company if a court of competent jurisdiction
or other Governmental Entity shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
consummation of the Merger and such order, decree, ruling or other action shall
have become final and nonappealable.
Section 6.2 Effect of Termination. In the event this Agreement is
terminated and the Merger abandoned pursuant to Section 6.1, all further
obligations of the parties hereunder shall terminate except that the obligations
set forth in Sections 4.1(a) and 4.1(b), this Section 6.2 and Section 7.5 shall
survive; provided that, if this Agreement is so terminated by a party because
one or more of the conditions to such party's obligations hereunder is not
satisfied as a result of the other party's willful or knowing failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies for breach of contract or otherwise, including,
without limitation, damages relating thereto, shall also survive such
termination unimpaired.
<PAGE>
38
ARTICLE 7
GENERAL PROVISIONS
Section 7.1 Certain Definitions. As used in this Agreement, the following
terms shall have the meanings set forth in this Section:
(a) "Affiliate" means, with respect to any Person, any other Person
that, directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person.
(b) "Agent" means, with respect to any Person, such Person's officers,
directors, employees, attorneys, accountants, investment bankers, financial
advisors or other representatives or agents.
(c) "Business Day" means any day other than a day on which (i) banks
in the State of New York are authorized or obligated to be closed or (ii) the
AMEX is closed.
(d) "Debt" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money (whether on-balance sheet or
off-balance sheet); (ii) all obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments; (iii) all obligations of such
Person as lessees under leases that have been or should be, in accordance with
GAAP, recorded as capital leases; (iv) all obligations, contingent or otherwise,
of such Person under banker's acceptance, letter of credit or similar
facilities; (v) all Debt of others referred to in clauses (i) through (iv) above
guaranteed directly or indirectly in any manner by such Person; and (vi) all
Debt of others referred to in clauses (i) through (v) above secured by (or for
which the holder of such Debt has an existing right, contingent or otherwise, to
be secured by) any Lien on property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Debt.
(e) "Governmental Entity" means any foreign, federal, state, municipal
or other governmental or regulatory department, commission, board, bureau,
agency or instrumentality.
(f) "Material Adverse Effect" means, with respect to any Person, any
change or effect that is or is reasonably likely to be materially adverse to the
business, assets, properties, operations or condition (financial or otherwise)
of such Person and its Subsidiaries taken as a whole or adversely affects the
ability of such Person to consummate the transactions contemplated by this
Agreement in any material respect.
(g) "Person" means any individual, corporation, partnership, firm,
group (as such term is used in Section 13(d)(3) of the Exchange Act), joint
venture, association, trust, limited liability company, unincorporated
organization, estate, trust or other entity.
(h) "SEC" means the Securities and Exchange Commission.
(i) "Significant Subsidiary" shall have the meaning ascribed to
such term in Section 1-02(v) of Regulation S-X under the Securities Act and,
shall include, with respect to Metromedia, SGC Mergerco.
<PAGE>
39
(j) "Subsidiary" of any Person means any corporation, partnership,
joint venture or other legal entity of which such Person (either directly or
through or together with any other Subsidiary of such Person), owns, directly or
indirectly, 50% or more of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or similar governing body of such corporation, partnership, joint venture or
other legal entity.
(k) "Termination Date" shall mean September 30, 1996.
Section 7.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given when delivered personally, upon a
receipt of a transmittal confirmation if sent by facsimile or like transmission,
and on the next Business Day when sent by Federal Express, Express Mail or
similar overnight courier service to the parties at the following addresses or
facsimile numbers (or at such other address or facsimile number for a party as
shall be specified by like notice):
(a) If to the Company, to:
The Samuel Goldwyn Company
10203 Santa Monica Boulevard
Los Angeles, California 90067
Attention: Meyer Gottlieb
Facsimile: (310) 284-8493
with a copy to:
Rosenfeld, Meyer & Susman, LLP
9601 Wilshire Boulevard
Beverly Hills, California 90210
Attention: Mel Ziontz, Esq.
Facsimile: (310) 271-6430
(b) If to Metromedia or SGC Mergerco,
to:
Metromedia International Group, Inc.
c/o Metromedia Company
One Meadowlands Plaza
East Rutherford, New Jersey 07073
Attention: Arnold L. Wadler, Esq.
Facsimile: (201) 531-2803
<PAGE>
40
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: James M. Dubin, Esq.
Facsimile: (212) 757-3990
Section 7.3 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. Dollar
amounts referred to in this Agreement shall not be deemed to establish any
standard of materiality.
Section 7.4 Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by written instruments signed by the parties to this Agreement, or in the
case of a waiver, by the party waiving compliance. Except where a specific
period for action or inaction is provided herein, no delay on the part of a
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof. Neither any waiver on the part of a party of any such right,
power or privilege, nor any single or partial exercise of any such right, power
or privilege, shall preclude any further exercise thereof or the exercise of any
other such right, power or privilege.
Section 7.5 Expenses and Other Payments.
(a) The parties to this Agreement shall, except as otherwise
specifically provided herein, bear their respective expenses incurred in
connection with the preparation, execution and performance of this Agreement and
the transactions contemplated hereby, including, without limitation, all fees
and expenses of their respective Agents.
(b) The Company agrees that if this Agreement shall be terminated
pursuant to:
(i) Section 6.1(e); or
(ii) (A) Section 6.1(b) and such termination is the result of a
material breach by the Company of any covenant, representation or warranty
contained herein which is not cured and (B) within six months after the date of
termination of this Agreement, a Business Combination (as hereinafter defined)
shall have occurred or the Company shall have entered into a definitive
agreement providing for a Business Combination;
then the Company shall pay to Metromedia an amount equal to $3
million plus the reimbursement of all of Metromedia's fees and expenses,
including all of its reasonable legal, accounting and investment banking fees
and expenses.
In addition, (i) if this Agreement is terminated by Metromedia pursuant to
Section 6.1(b), the Company shall reimburse all of Metromedia's fees and
expenses, including all of its
<PAGE>
41
reasonable legal, accounting and investment banking fees and expenses relating
to the Merger or (ii) if this Agreement is terminated by the Company pursuant to
Section 6.1(b), Metromedia shall reimburse all of the Company's fees and
expenses, including all of its reasonable legal, accounting and investment
banking fees and expenses relating to the Merger.
(c) Any payment required to be made pursuant to Section 7.5(b) shall
be made as promptly as practicable but not later than two Business Days after
termination of this Agreement and shall be made by wire transfer of immediately
available funds to an account designated by Metromedia, except that any payment
to be made as the result of an event described in Section 7.5(b)(ii) shall be
made as promptly as practicable but not later than two Business Days after the
earlier to occur of the Business Combination or the execution of the definitive
agreement providing for a Business Combination.
(d) For purposes of this Section 7.5, the term "Business Combination"
shall mean (i) a merger, consolidation, share exchange, business combination or
similar transaction involving the Company; (ii) a sale, lease, exchange,
transfer or other disposition of 50% or more of the assets of the Company and
its Subsidiaries taken as a whole, in a single transaction or series of
transactions; or (iii) the acquisition by any Person or "group" (as defined in
Section 13(d) of the Exchange Act and the rules and regulations thereunder) of
"beneficial ownership" of 50% or more of Company Common Stock whether by tender
offer or exchange offer or otherwise.
Section 7.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
Section 7.7 Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein) (a) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof and (b) other than Section 7.6 is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
Section 7.8 Representations and Warranties. None of the representations and
warranties of the parties made in this Agreement or in any instrument delivered
hereunder shall survive the Closing.
Section 7.9 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware applicable to agreements
made and to be performed entirely within such state.
Section 7.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one and the same instrument.
<PAGE>
42
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first above written.
METROMEDIA INTERNATIONAL
GROUP, INC.
By: /s/ JOHN D. PHILLIPS
----------------------------
Name: John D. Phillips
Title: President
SGC MERGER CORP.
By: /s/ JOHN D. PHILLIPS
----------------------------
Name: John D. Phillips
Title: President
THE SAMUEL GOLDWYN COMPANY
By: /s/ MEYER GOTTLIEB
----------------------------
Name: Meyer Gottlieb
Title: President
<PAGE>
APPENDIX B
[LETTERHEAD OF DONALDSON, LUFKIN & JENRETTE]
June 3, 1996
Board of Directors
Metromedia International Group, Inc.
945 East Paces Ferry Road
Suite 2210
Atlanta, GA 30326
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to Metromedia International Group, Inc. (the "Company") of the
consideration to be paid by the Company per share of Goldwyn common stock
pursuant to the terms of the Agreement and Plan of Merger dated as of January
31, 1996, between the Company and The Samuel Goldwyn Company ("Goldwyn"), as
amended by Amendment No. 1 thereto, dated as of the date hereof (the
"Agreement").
Pursuant to the Agreement, each issued and outstanding share of Goldwyn
common stock, par value $0.20 per share, shall be converted into the right to
receive one share of common stock of the Company, $1.00 par value per share,
multiplied by an Exchange Ratio. If the Goldwyn Average Closing Price is between
$12.50 and $16.50, the Exchange Ratio will be equal to a fraction, the numerator
of which is five (5) and the denominator of which is the Goldwyn Average Closing
Price; provided, that if the Goldwyn Average Closing Price is less than $12.50,
the Goldwyn Average Closing Price shall be deemed to be $12.50 and if the
Goldwyn Average Closing Price is greater than $16.50, the Goldwyn Average
Closing Price shall be deemed to be $16.50. The Goldwyn Average Closing Price
shall be the average closing price of Goldwyn's common stock over the 20
consecutive trading day period ending five business days prior to Goldwyn's
stockholder meeting.
In arriving at our opinion, we have reviewed the Agreement and the
Preliminary Proxy Statement as filed with the Securities and Exchange Commission
on May 8, 1996. We also have reviewed certain financial and other information
that was publicly available or furnished to us by the Company and Goldwyn
including information provided during discussions with their respective
managements. Included in the information provided during discussions with the
respective managements were estimated financial statements for the year ended
December 31, 1995, certain financial projections of Goldwyn for the period
beginning January 1996 and ending December 2000 prepared by the management of
Goldwyn and certain financial projections of the Company for the period
beginning January 1996 and ending December 2000 prepared by the management of
the Company. In addition, we have compared certain financial and securities data
of the Company and Goldwyn with various other companies whose securities are
traded in public markets, reviewed the historical stock prices and trading
volumes of the common stock of Goldwyn and the Company, reviewed prices and
premiums paid in certain other business combinations and conducted such other
financial studies, analyses and investigations as we deemed appropriate for
purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to us from public sources, that was provided to us by the Company,
Goldwyn or their respective representatives, or that was otherwise reviewed by
us. With respect to the financial projections supplied to us, we have assumed
that they have been reasonably prepared on the basis reflecting the best
currently available estimates and judgments of the management of the Company and
Goldwyn as to the future operating and financial
<PAGE>
Board Of Directors
Metromedia International Group, Inc.
Page 2 June 3, 1996
performance of the Company and Goldwyn. We have not assumed any responsibility
for making any independent evaluation of Goldwyn's or the Company's assets or
liabilities or for making any independent verification of any of the information
reviewed by us. We have relied as to all legal matters on advice of counsel to
the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
prices at which the Company's common stock will trade at any time. Our opinion
does not constitute a recommendation to any stockholder as to how such
stockholder should vote on the proposed transaction. In addition, our opinion
does not address the underlying business decision of the Company to consummate
the transaction contemplated by the Agreement.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. Since January 1, 1991, DLJ
has provided various investment banking services, which include financial
advisory services in connection with a number of mergers and acquisition
transactions and restructurings, acting as placement agent in connection with
the private placement of securities, and acting as an underwriter for the
Company and affiliates of the Company and its largest stockholder, Metromedia
Company. DLJ has received usual and customary compensation for the
above-mentioned services. In addition, DLJ and certain of its affiliates
currently own an aggregate of 593,898 shares of common stock of the Company,
constituting 1.4% of the outstanding shares.
Please note that DLJ is a full service firm engaged in securities trading
and brokerage activities, as well as providing investment banking and financial
advisory services. In the ordinary course of our trading and brokerage
activities, DLJ or its affiliates may at any time hold long or short positions,
and may trade or otherwise effect transactions, for our own account or the
accounts of customers, in debt or equity securities of the Company or Goldwyn.
We recognize our responsibility for compliance with federal laws in connection
with any such activities.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the consideration to be paid by the Company per share of
Goldwyn common stock pursuant to the Agreement is fair to the Company from a
financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:/s/ David F. Posnick
----------------------------
David F. Posnick
Vice President
<PAGE>
APPENDIX C
[LETTERHEAD OF FURMAN SELZ LLC]
June 3, 1996
Board of Directors
The Samuel Goldwyn Company
10203 Santa Monica Boulevard
Los Angeles, California 90067
Madam and Gentlemen:
We understand that Metromedia International Group, Inc. (together with its
subsidiaries and affiliates, the "Acquiror"), SGC Merger Corp., a wholly owned
subsidiary of the Acquiror ("Merger Sub"), and the Samuel Goldwyn Company (the
"Company") have entered into an Agreement and Plan of Merger, dated as of
January 31, 1996 (the "Merger Agreement"), pursuant to which, among other
things, Merger Sub will be merged with and into the Company in a transaction
(the "Merger") in which each share of the Company's common stock, par value $.20
per share (the "Shares"), will be converted into the right to receive a number
of shares (the "Merger Consideration") of the common stock, par value $1.00 per
share, of the Acquiror (the "Acquiror Shares") equal to a fraction, the
numerator of which is five and the denominator of which is the average of the
last sale prices for the Acquiror Shares for the last 20 consecutive trading
days ending on the date which is five business days prior to the date of the
special meeting of the Acquiror's stockholders to consider and vote upon the
Merger ("the "Average Closing Price"); provided that if the Average Closing
Price is below $12.50, the Average Closing Price shall be deemed to be $12.50,
and if the Average Closing Price is greater than $16.50, the Average Closing
Price shall be deemed to be $16.50. Also in connection with the Merger, the
Acquiror and the Samuel Goldwyn, Jr. Family Trust (the "Trust") have entered
into an agreement, dated as of January 31, 1996 (the "Voting Agreement"),
pursuant to which the Trust has agreed to certain matters, including to vote its
Shares in favor of the Merger. The terms and conditions of the Merger are more
fully set forth in the Merger Agreement.
You have requested our opinion, as investment bankers, as to the fairness
to the Company's stockholders, from a financial point of view, of the Merger
Consideration. For purposes of the opinion set forth below, we have among other
things:
(1) Reviewed the Company's Annual Reports, Form 10-Ks and related
financial information for the period from its initial public offering
until the fiscal year ended March 31, 1996, and certain other filings
with the Securities and Exchange Commission made by the Company,
including
<PAGE>
FURMAN SELZ LLC
The Samuel Goldwyn Company
June 3, 1996
Page Two
proxy statements, Form 8-Ks and registration statements, since its
initial public offering;
(2) Reviewed the Acquiror's significant predecessor companies' Annual
Reports, Form 10-K's and related financial information for the three
fiscal years ended December 31, 1994 and February 28, 1995, the
Acquiror's significant predecessor companies' Form 10-Qs and the
related unaudited financial information for the quarterly periods
ended March 31, 1995, June 30, 1995 and September 30, 1995, and May
31, 1995 and August 31, 1995, and certain other filings with the
Securities and Exchange Commission made by the Acquiror and the
Acquiror's significant predecessor companies, including proxy
statements, Form 8-Ks and registration statements, since January 1,
1994.
(3) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Company and the Acquiror, furnished to us by the Company and the
Acquiror;
(4) Conducted discussions with certain members of senior management of the
Company and the Acquiror concerning their respective business and
operations, assets, present condition and future prospects;
(5) Reviewed the historical market prices and trading activity for the
Shares and the Acquiror Shares and compared them with that of certain
publicly traded companies which we deemed to be reasonably similar to
the Company and the Acquiror, respectively;
(6) Compared the results of operations of the Company and the Acquiror
with those of certain companies which we deemed to be reasonably
similar to the Company and the Acquiror, respectively;
(7) Compared the proposed financial terms of the transaction contemplated
by the Merger Agreement with the financial terms of certain other
mergers and acquisitions which we deemed to be relevant;
<PAGE>
FURMAN SELZ LLC
The Samuel Goldwyn Company
June 3, 1996
Page Three
(8) Participated in discussions and negotiations among representatives of
the Company and the Acquiror and their financial and legal advisors
and reviewed the Merger Agreement and the Voting Agreement; and
(9) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market
and monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness
of all information supplied or otherwise made available to us by the Company and
the Acquiror, and we have not undertaken any responsibility or obligation to
verify such information or conducted a physical inspection of the assets,
properties or facilities of the Company, or undertaken any independent
evaluation or appraisal of the assets or liabilities of the Company or the
Acquiror nor have we been furnished with any such evaluations or appraisals.
With respect to the financial forecasts furnished by the Company and the
Acquiror, we have assumed that they have been reasonably prepared and reflect
the best currently available estimates and judgment of the management of the
Company or the Acquiror as to the expected future financial performance of the
Company or the Acquiror, as the case may be. We assume no responsibility for and
express no view as to such forecasts or estimates or the assumptions on which
they are based. We have also assumed that the Merger will qualify as a tax-free
transaction for the stockholders of the Company.
In preparing our opinion, we were not provided with historical or projected
pro forma financial statements reflecting the operations of the Acquiror
assuming the consummation of (i) the proposed merger (the "Alliance Merger")
between the Acquiror and Alliance Entertainment Corp. ("Alliance"), (ii) the
proposed merger (the "MPC Merger") between the Acquiror and Motion Picture Corp.
of America ("MPC"), or (iii) the Merger. In preparing our opinion, we did not
conduct any discussions with the senior management of Alliance or MPC. In
preparing our opinion, we considered the financial condition of the Company,
including the Company's near-term liquidity and capital requirements, and the
corresponding effect on the Company's projected financial results. Our opinion
necessarily is based upon conditions as they exist and can be evaluated on the
date hereof, and does not represent an opinion as to what the trading value of
the Acquiror Shares will be when the Merger is consummated.
<PAGE>
FURMAN SELZ LLC
The Samuel Goldwyn Company
June 3, 1996
Page Four
We have, in the past, provided financial advisory and investment banking
services to the Company and have received fees for the rendering of such
services. Furman Selz may, in the future provide financial advisory and
investment banking services to the Acquiror and receive customary fees for the
rendering of such services. In the ordinary course of business, we may
actively trade the securities of both the Company and the Acquiror for our
own account and the account of our customers and, accordingly, may at any
time hold a long or short position in securities of the Company and the
Acquiror.
Our opinion is directed to the Board of Directors of the Company and does
not constitute a recommendation to any stockholder as to how such stockholder
should vote at the stockholders' meeting held in connection with the Merger, nor
do we express any opinion as to any terms or elements of the Merger or the
Merger Agreement other than as specifically set forth herein or as to any
agreements or arrangements which might be concluded between the Acquiror and the
Company after the date hereof. Our opinion does not address the relative merits
of the Merger and any other transaction or business strategies that might have
been pursued as alternatives to the Merger or the underlying business decision
of the Board of Directors of the Company to proceed with or effect the Merger.
Based upon and subject to the foregoing, it is our opinion on the date
hereof, as investment bankers, that the Merger Consideration is fair to the
Company's stockholders from a financial point of view.
Very truly yours,
FURMAN SELZ LLC
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceedings, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer, director,
employee or agent of such corporation, or is or was serving at the request of
such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include judgments, fines, amounts
paid in settlement and expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided that such officer or director acted in good faith and in a
manner he reasonably believed to be in or not opposed to the corporation's best
interests, and, with respect to criminal proceedings, had no reasonable cause to
believe his conduct was illegal. A Delaware corporation may indemnify its
officers and directors against expenses actually and reasonably incurred by them
in connection with an action by or in the right of the corporation under the
same conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation
in the performance of his duty. Where an officer or director is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred in connection therewith.
Section 102(b)(7) of the Delaware Law further provides that a corporation in
its certificate of incorporation may eliminate or limit the personal liability
of its directors to the corporation or its stockholders for breach of their
fiduciary duties in certain circumstances.
In accordance with Section 145 of the Delaware Law, the Company's Restated
Certificate of Incorporation provides that the Company shall indemnify its
officers and directors against, among other things, any and all judgments,
fines, penalties, amounts paid in settlements and expenses paid or incurred by
virtue of the fact that such officer or director was acting in such capacity to
the extent not prohibited by law.
In addition, as permitted by Section 102(b)(7) of the Delaware Law, the
Company's Restated Certificate of Incorporation contains a provision limiting
the personal liability of the Company's directors for violations of their
fiduciary duties to the fullest extent permitted by the Delaware Law. This
provision eliminates each director's liability to the Company or its
stockholders for monetary damages except (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware Law, or (iv) for any transaction
from which a director derived an improper personal benefit. The general effect
of this provision is to eliminate a director's personal liability for monetary
damages for actions involving a breach of his or her fiduciary duty of care,
including any such actions involving gross negligence.
Also, in accordance with the Delaware Law and pursuant to the Company's
Restated Certificate of Incorporation, the Company is authorized to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the Company would
have the power to indemnify such person against liability under the Delaware
Law.
II-1
<PAGE>
The Company has entered into agreements (the "Indemnification Agreements")
with certain directors and officers of the Company (the "Indemnified Parties")
which require the Company to indemnify each Indemnified Party against, and to
advance expenses incurred by each Indemnified Party in the defense of, any claim
arising out of his or her employment to the fullest extent permitted under law.
The Indemnification Agreements also provide, among other things, for (i)
advancement by the Company of expenses incurred by the director or officer in
defending certain litigation, (ii) the appointment of an independent legal
counsel to determine whether the director or officer is entitled to indemnity
and (iii) the continued maintenance by the Company of directors' and officers'
liability insurance providing each director or officer who is a party to any
such agreement with $5 million of primary coverage and an excess policy
providing $5 million of additional coverage. These Indemnification Agreements
were approved by the stockholders at the Company's 1993 Annual Meeting of
Stockholders.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A. EXHIBITS
The exhibits listed below are filed as part of or incorporated by reference
in this Registration Statement. Where such filing is made by incorporation by
reference to a previously filed report, such report is identified in
parentheses. See the Index of Exhibits included with the exhibits filed as part
of this Registration Statement.
<TABLE><CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------------------------
<C> <S>
2.1 Amended and Restated Agreement and Plan of Merger dated as of January 31, 1996 by
and among the Registrant, Alliance Merger Corp. and Alliance Entertainment
Corp., without disclosure schedules (Exhibit 99.1 to Current Report on Form 8-K
dated December 20, 1995). The Registrant agrees to furnish a copy of any omitted
schedule supplementally to the Commission upon request.
2.2 Agreement and Plan of Merger dated as of January 31, 1996 by and among the
Registrant, The Samuel Goldwyn Company and SGC Merger Corp., without disclosure
schedules (Exhibit 99.1 to Current Report or Form 8-K dated January 31, 1996).
The Registrant agrees to furnish a copy of any omitted schedule supplementally
to the Commission upon request.
2.3 Amended and Restated Agreement and Plan of Merger dated as of September 27, 1995
by and among the Registrant, Orion Pictures Corporation, MCEG Sterling
Incorporated, Metromedia International Telecommunications, Inc., OPC Merger
Corp. and MITI Merger Corp. and exhibits thereto (Exhibit 99(a) to the Current
Report on Form 8-K dated September 27, 1995). The Registrant agrees to furnish a
copy of any omitted schedule supplementally to the Commission upon request.
2.4 Termination and Release Agreement dated April 29, 1996 by and among the
Registrant, Alliance Merger Corp. and Alliance Entertainment Corp. (Exhibit 99.2
to the Current Report on Form 8-K dated April 29, 1996).
2.5* Amendment No. 1 to the Goldwyn Merger Agreement dated as of May 29, 1996 among the
Registrant, SGC Merger Corp. and The Samuel Goldwyn Company.
3.1 Restated Certificate of Incorporation of the Registrant (Exhibit 3(a) to
Registration Statement on Form S-3 (Registration No. 33-63853)).
3.2 Restated By-Laws of the Registrant (Exhibit 3(b) to Registration Statement on Form
S-3 (Registration No. 33-63853)).
4.1 Reference is made to Exhibit 3.1.
</TABLE>
II-2
<PAGE>
<TABLE><CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------------------------
<C> <S>
4.2 Indenture dated as of August 1, 1973 with respect to 9 1/2% Subordinated
Debentures due August 1, 1998, between the Registrant and Chemical Bank, as
Trustee (Exhibit T3C to Application on Form T-3 for Qualification of Indenture
under the Trust Indenture Act of 1939 (File No. 22-7615)).
4.3 Agreement among the Registrant, Chemical Bank and Manufacturers Hanover Trust
Company, dated as of September 26, 1980, with respect to successor trusteeship
of the 9 1/2% Subordinated Debentures due August 1, 1998 (Exhibit 4(d)(ii) to
Registration Statement on Form S-14 (Registration No. 2-81094)).
4.4 Instrument of registration, appointment and acceptance dated as of June 9, 1986
among the Registrant, Manufacturers Hanover Trust Company and Irving Trust
Company, with respect to successor trusteeship of the 9 1/2% Subordinated
Debentures due August 1, 1998 (Exhibit 4(d)(iii) to Annual Report on Form 10-K
for the year ended December 31, 1986).
4.5 Indenture dated as of March 15, 1977, with respect to 9 7/8% Senior Subordinated
Debentures due March 15, 1997, between the Registrant and The Chase Manhattan
Bank, N.A., as Trustee (Exhibit 2(d) to Registration Statement on Form S-7
(Registration No. 2-58317)).
4.6 Agreement among the Registrant, The Chase Manhattan Bank, N.A. and United States
Trust Company of New York, dated as of June 14, 1982, with respect to successor
trusteeship of the 9 7/8% Senior Subordinated Debentures due March 15, 1997
(Exhibit 4(e)(ii) to Registration Statement on Form S-14 (Registration No. 2-
281094)).
4.7 Indenture between National Industries, Inc. and First National City Bank, dated
October 1, 1974, with respect to the 10% Subordinated Debentures, due October 1,
1999 (Exhibit T3C to Post-Effective Amendment No. 1 to Application on Form T-3
for Qualification of Indenture under the Trust Indenture Act of 1939 (File No.
22-8076)).
4.8 Agreement among National Industries, Inc., the Registrant, Citibank, N.A., and
Marine Midland Bank, dated as of December 20, 1977, with respect to successor
trusteeship of the 10% Subordinated Debentures due October 1, 1999 (Exhibit
4(f)(ii) to Registration Statement on Form S-14 (Registration No. 2-81094)).
4.9 First Supplemental Indenture among the Registrant, National Industries, Inc. and
Marine Midland Bank, dated January 3, 1978, supplemental to the Indenture dated
October 1, 1974 between National and First National City Bank for the 10%
Subordinated Debentures due October 1, 1999 (Exhibit 2(q) to Registration
Statement on Form S-7 (Registration No. 2-60566)).
4.10 Indenture dated as of August 1, 1987 with respect to 6 1/2% Convertible
Subordinated Debentures due August 4, 2002, between the Registrant and Chemical
Bank, as Trustee (Exhibit 4(i) to Annual Report on Form 10-K for the year ended
December 31, 1987).
5* Opinion of Paul, Weiss, Rifkind, Wharton & Garrison regarding the legality of the
Securities being registered.
8.1* Opinion of Rosenfeld, Meyer & Susman, LLP regarding the tax consequences of the
Goldwyn Merger.
10.1 1982 Stock Option Plan of the Registrant (Exhibit A to Proxy Statement, dated
March 31, 1982).
10.2 1989 Stock Option Plan of the Registrant (Exhibit A to Proxy Statement, dated
March 31, 1982).
10.3 1969 Restricted Stock Plan of the Registrant (Exhibit 10(a)(iii) to Annual Report
on Form 10-K for the year ended December 31, 1990).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------------------------
<C> <S>
10.4 1991 Non-Employee Director Stock Option Plan (Exhibit 10(a)(iv) to Annual Report
on Form 10-K for the year ended December 31, 1991).
10.5 Amendment to 1991 Non-Employee Director Stock Option Plan (Exhibit 10(a)(v) to
Annual Report on Form 10-K for the year ended December 31, 1992).
10.6 Snapper Power Equipment Profit Sharing Plan (Exhibit 10(c) to Annual Report on
Form 10-K for the year ended December 31, 1987).
10.7 Retirement Plan executed November 1, 1990, as amended effective January 1, 1989
(Exhibit 10(h)(i) to Annual Report on Form 10-K for the year ended December 31,
1990).
10.8 Supplemental Retirement Plan of the Registrant (Exhibit 10(j) to Annual Report on
Form 10-K for the year ended December 31, 1983).
10.9 Supplemental Executive Medical Reimbursement Plan (Exhibit 10(h)(iii) to Annual
Report on Form 10-K for the year ended December 31, 1990).
10.10 Amendment to Supplemental Retirement Plan of the Registrant, effective April 1,
1992 (Exhibit 10(h)(iv) to Annual Report on Form 10-K for the year ended
December 31, 1991).
10.11 1992 Officer and Director Stock Purchase Plan (Exhibit 10(l) to Annual Report on
Form 10-K for the year ended December 31, 1991).
10.12 Metromedia International Group, Inc. 1996 Incentive Stock Plan (Exhibit 10.38 to
Annual Report on Form 10-K for the year ended December 31, 1995).
10.13 Form of Restricted Purchase Agreement between certain officers of the Registrant
and the Registrant (Exhibit 10(u) to Annual Report on Form 10-K for the year
ended December 31, 1991).
10.14 Agreement between the Registrant and J.B. Fuqua regarding sale by the Registrant
of rights in the name (Exhibit 10(q) to Annual Report on Form 10-K for the year
ended December 31, 1992).
10.15 Form of Indemnification Agreement between the Registrant and certain of its
directors and executive officers (Exhibit 10(u) to Annual Report on Form 10-K
for the year ended December 31, 1993).
10.16 Employment Agreement between the Registrant and John D. Phillips dated April 19,
1994 (Exhibit 99(a) to Current Report on Form 8-K dated April 19, 1994).
10.17 First Amendment to Employment Agreement dated November 1, 1995 between the
Registrant and John D. Phillips (Exhibit 10.16 to Annual Report on Form 10-K for
the year ended December 31, 1995).
10.18 Option Agreement between the Registrant and John D. Phillips dated April 19, 1994
(Exhibit 99(b) to Current Report on Form 8-K dated April 19, 1994).
10.19 Registration Rights Agreement among the Registrant, Renaissance Partners and John
D. Phillips dated April 19, 1994 (Exhibit 99(c) to Current Report on Form 8-K
dated April 19, 1994).
10.20 Shareholders Agreement dated as of December 6, 1994 among the Registrant,
Roadmaster, Henry Fong and Edward Shake (Exhibit 10(r)(i) to Annual Report on
Form 10-K for the year ended December 31, 1994).
10.21 Registration Rights Agreement dated as of December 6, 1994 between the Registrant
and Roadmaster (Exhibit 10(r)(ii) to Annual Report on Form 10-K for the year
ended December 31, 1994).
10.22 Environmental Indemnity Agreement dated as of December 6, 1994 between the
Registrant and Roadmaster (Exhibit 10(r)(iii) to Annual Report on Form 10-K for
the year ended December 31, 1994).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------------------------
<C> <S>
10.23 Lease Agreement dated October 21, 1994 between JDP Aircraft II, Inc. and the
Registrant (Exhibit 10(s) to Annual Report on Form 10-K for the year ended
December 31, 1994).
10.24 Lease Agreement dated as of October 4, 1995 between JDP Aircraft II, Inc. and the
Registrant (Exhibit 10 to Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995).
10.25 Finance and Security Agreement dated as of October 30, 1992 with respect to a
revolving credit facility of up to $100 million, between the Registrant and ITT
Commercial Finance Corp. (Exhibit 4(g)(i) to Annual Report on Form 10-K for the
year ended December 31, 1994).
10.26 Amendment dated as of September 27, 1993 to Finance and Security Agreement, dated
as of October 30, 1992, with respect to a revolving credit facility of up to
$100 million, between the Registrant and ITT Commercial Corp. (Exhibit 4(g)(ii)
to Annual Report on Form 10-K for the year ended December 31, 1994).
10.27 Amendment dated as of March 29, 1994 to Finance and Security Agreement, dated as
of October 30, 1992, with respect to a revolving credit facility of up to $100
million, between the Registrant and ITT Commercial Finance Corp. (Exhibit
4(g)(iii) to Annual Report on Form 10-K for the year ended December 31, 1994).
10.28 Amendment dated as of April 15, 1994 to Finance and Security Agreement, dated as
of October 30, 1992, with respect to a revolving credit facility of up to $100
million, between the Registrant and ITT Commercial Finance Corp. (Exhibit
4(g)(iv) to Annual Report on Form 10-K for the year ended December 31, 1994).
10.29 Amendment dated as of September 23, 1994 to Finance and Security Agreement, dated
as of October 30, 1992, with respect to a revolving credit facility of up to
$100 million, between the Registrant and ITT Commercial Finance Corp. (Exhibit
4(g)(v) to Annual Report on Form 10-K for the year ended December 31, 1994).
10.30 Amendment dated as of March 3, 1995 to Finance and Security Agreement, dated as of
October 23, 1992, as amended, with respect to a revolving credit facility of up
to $100 million, between the Registrant and ITT Commercial Finance Corp.
(Exhibit 4 to Quarterly Report on Form 10-Q for the quarter ended June 30,
1995).
10.31 Amendment dated as of November 1, 1995, to Finance and Security Agreement dated as
of October 23, 1992, as amended, with respect to a revolving credit facility of
up to $45 million, between Snapper, Inc. and Deutsche Financial Services
Corporation (formerly ITT Commercial Finance Corp.) (Exhibit 10(a)(vii) to
Registration Statement on Form S-3 (Registration No. 33-63853)).
10.32 Letter Agreement dated October 12, 1995 between Triton Group Ltd. and the
Registrant (Exhibit 4(d)(i) to the Registration Statement on Form S-3
(Registration No. 33-63401)).
10.33 Registration Rights Agreement dated as of September 27, 1995, among the Registrant
and the Metromedia Holders named therein (Exhibit 99(b) to Current Report on
Form 8-K dated September 27, 1995).
10.34 Contribution Agreement dated as of November 1, 1995 among Met International, Inc.,
Met Productions, Inc. and the Registrant (Exhibit 10(f) to Registration
Statement on Form S-3 (Registration No. 33-63853)).
10.35 Credit, Security and Guaranty Agreement dated as of November 1, 1995 among Orion
Pictures Corporation, the Corporate Guarantors referred to therein, the Lenders
referred to therein and Chemical Bank (Exhibit 10(g) to Registration Statement
on Form S-3 (Registration No. 33-63853)).
10.36 Credit Agreement dated as of November 1, 1995 between Metromedia Company and the
Registrant (Exhibit 10(h) to Registration Statement on Form S-3 (Registration
No. 33-63853)).
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------------------------
<C> <S>
10.37 Management Agreement dated November 1, 1995 between Metromedia Company and
Metromedia International Group, Inc. (Exhibit 10.37 to Annual Report on Form
10-K for the year ended December 31, 1995).
10.38 License Agreement dated November 1, 1995 between Metromedia Company and Metromedia
International Group, Inc. (Exhibit 10.39 to Annual Report on Form 10-K for the
year ended December 31, 1995).
10.39 MITI Bridge Loan Agreement, dated February 29, 1996, among Metromedia Company and
Metromedia International Telecommunications, Inc. relating to a $15 million
bridge loan from Metromedia Company to Metromedia International
Telecommunications Inc. (Exhibit 10.40 to Annual Report on Form 10-K for the
year ended December 31, 1995).
11 Statement of computation of earnings per share (Exhibit 11 to Annual Report on
Form 10-K for the year ended December 31, 1995).
16 Letter from Ernst & Young to the Securities and Exchange Commission (Exhibit 99.1
to Current Report on Form 8-K dated November 1, 1995).
21 Subsidiaries of the Registrant (Exhibit 21 to Annual Report on Form 10-K for the
year ended December 31, 1995).
23.1* Consent of KPMG Peat Marwick LLP regarding the Registrant.
23.2* Consent of Ernst & Young LLP regarding the Registrant.
23.3* Consent of Price Waterhouse LLP regarding Goldwyn.
23.4* Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in the opinion filed
as Exhibit 5 hereto).
23.5* Consent of Rosenfeld, Meyer & Susman, LLP (included in the opinion filed as
Exhibit 8.1 hereto).
23.6* Consent of Donaldson, Lufkin & Jenrette Securities Corporation.
23.7* Consent of Furman Selz LLC.
24 Power of Attorney (included on page II-9 of this Registration Statement).
99.1* Fairness Opinion of Donaldson, Lufkin & Jenrette Securities Corporation (included
as Appendix B to the Proxy Statement/Prospectus forming a part of this
Registration Statement).
99.2* Fairness Opinion of Furman Selz LLC (included as Appendix C to the Proxy
Statement/Prospectus forming a part of this Registration Statement).
99.3* Proxy Card to Goldwyn Stockholders.
</TABLE>
- ------------
* Filed herewith.
B. FINANCIAL STATEMENT SCHEDULES
Financial Statement Schedules have been omitted because they are not
applicable or not required or because the information has been incorporated by
reference.
C. FAIRNESS OPINIONS
The fairness opinion of Donaldson, Lufkin & Jenrette Securities Corporation
and the fairness opinion of Furman Selz LLC are set forth as Appendices B and C,
respectively, to the Proxy Statement/Prospectus forming a part of this
Registration Statement.
II-6
<PAGE>
ITEM 22. UNDERTAKINGS
1. Rule 415 Offering. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the registration statement is on Form S-3, Form S-8, or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant
to section 13 or section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
2. Subsequent Documents Incorporated by Reference. The undersigned
Registrant hereby undertakes that, for purposes of determining any liability
under the Securities Act of 1933, each filing of the Registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. Registration on Form S-4. (a) The undersigned Registrant hereby
undertakes as follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
II-7
<PAGE>
(b) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (a) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
4. Acceleration of Effectiveness. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
5. Response to Requests for Information. The undersigned Registrant hereby
undertakes to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
6. Post-effective Amendment. The undersigned Registrant hereby undertakes to
supply by means of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein, that was not the
subject of and included in the registration statement when it became effective.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of
Georgia:
METROMEDIA INTERNATIONAL GROUP, INC.
By: /s/ JOHN D. PHILLIPS
..................................
John D. Phillips
President and Chief Executive Officer
Date: June 3, 1996
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature to this
Registration Statement appears below hereby constitutes and appoints Silvia
Kessel, Arnold L. Wadler and Robert A. Maresca, such person's true and lawful
attorney-in-fact and agent with full power of substitution for such person and
in such person's name, place and stead, in any and all capacities, to sign and
to file with the Securities and Exchange Commission any and all amendments and
post-effective amendments to this Registration Statement, with exhibits thereto
and other documents in connection therewith, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or any
substitute therefor, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Registrant and in the capacities indicated on the 3rd day of June, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- ------------------------------------------------
<C> <S>
/s/ JOHN W. KLUGE Chairman of the Board
........................................
John W. Kluge
/s/ STUART SUBOTNICK Vice Chairman of the Board
........................................
Stuart Subotnick
/s/ JOHN D. PHILLIPS President and Chief Executive Officer and
........................................ Director (Principal Executive Officer)
John D. Phillips
/s/ SILVIA KESSEL Senior Vice President, Chief Financial Officer
........................................ and Director (Principal Financial Officer)
Silvia Kessel
/s/ ARNOLD L. WADLER Senior Vice President, General Counsel and
........................................ Director
Arnold L. Wadler
/s/ ROBERT A. MARESCA Senior Vice President (Principal Accounting
........................................ Officer)
Robert A. Maresca
</TABLE>
II-9
<PAGE>
SIGNATURE TITLE
--------- -----
/s/ JOHN P. IMLAY, JR. Director
........................................
John P. Imlay, Jr.
/s/ CLARK A. JOHNSON Director
........................................
Clark A. Johnson
/s/ RICHARD J. SHERWIN Director
........................................
Richard J. Sherwin
/s/ LEONARD WHITE Director
........................................
Leonard White
/s/ CARL E. SANDERS Director
........................................
Carl E. Sanders
II-10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------------- --------
<C> <S> <C>
2.1 Amended and Restated Agreement and Plan of Merger dated as of January 31,
1996 by and among the Registrant, Alliance Merger Corp. and Alliance
Entertainment Corp., without disclosure schedules (Exhibit 99.1 to
Current Report on Form 8-K dated December 20, 1995). The Registrant
agrees to furnish a copy of any omitted schedule supplementally to the
Commission upon request................................................
2.2 Agreement and Plan of Merger dated as of January 31, 1996 by and among
the Registrant, The Samuel Goldwyn Company and SGC Merger Corp.,
without disclosure schedules (Exhibit 99.1 to Current Report or Form
8-K dated January 31, 1996). The Registrant agrees to furnish a copy of
any omitted schedule supplementally to the Commission upon request.....
2.3 Amended and Restated Agreement and Plan of Merger dated as of September
27, 1995 by and among the Registrant, Orion Pictures Corporation, MCEG
Sterling Incorporated, Metromedia International Telecommunications,
Inc., OPC Merger Corp. and MITI Merger Corp. and exhibits thereto
(Exhibit 99(a) to the Current Report on Form 8-K dated September 27,
1995). The Registrant agrees to furnish a copy of any omitted schedule
supplementally to the Commission upon request..........................
2.4 Termination and Release Agreement dated April 29, 1996 by and among the
Registrant, Alliance Merger Corp. and Alliance Entertainment Corp.
(Exhibit 99.2 to the Current Report on Form 8-K dated April 29, 1996)....
2.5* Amendment No. 1 to the Goldwyn Merger Agreement dated as of May 29, 1996
among the Registrant, SGC Merger Corp. and The Samuel Goldwyn
Company..................................................................
3.1 Restated Certificate of Incorporation of the Registrant (Exhibit 3(a) to
Registration Statement on Form S-3 (Registration No. 33-63853))..........
3.2 Restated By-Laws of the Registrant (Exhibit 3(b) to Registration
Statement on Form S-3 (Registration No. 33-63853)).....................
4.1 Reference is made to Exhibit 3.1.........................................
4.2 Indenture dated as of August 1, 1973 with respect to 9 1/2% Subordinated
Debentures due August 1, 1998, between the Registrant and Chemical
Bank, as Trustee (Exhibit T3C to Application on Form T-3 for
Qualification of Indenture under the Trust Indenture Act of 1939 (File
No. 22-7615))..........................................................
4.3 Agreement among the Registrant, Chemical Bank and Manufacturers Hanover
Trust Company, dated as of September 26, 1980, with respect to
successor trusteeship of the 9 1/2% Subordinated Debentures due August
1, 1998 (Exhibit 4(d)(ii) to Registration Statement on Form S-14
(Registration No. 2-81094))............................................
4.4 Instrument of registration, appointment and acceptance dated as of June
9, 1986 among the Registrant, Manufacturers Hanover Trust Company and
Irving Trust Company, with respect to successor trusteeship of the 9
1/2% Subordinated Debentures due August 1, 1998 (Exhibit 4(d)(iii) to
Annual Report on Form 10-K for the year ended December 31, 1986).......
4.5 Indenture dated as of March 15, 1977, with respect to 9 7/8% Senior
Subordinated Debentures due March 15, 1997, between the Registrant and
The Chase Manhattan Bank, N.A., as Trustee (Exhibit 2(d) to
Registration Statement on Form S-7 (Registration No. 2-58317)).........
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------------- --------
<C> <S> <C>
4.6 Agreement among the Registrant, The Chase Manhattan Bank, N.A. and United
States Trust Company of New York, dated as of June 14, 1982, with
respect to successor trusteeship of the 9 7/8% Senior Subordinated
Debentures due March 15, 1997 (Exhibit 4(e)(ii) to Registration
Statement on Form S-14 (Registration No. 2-281094))....................
4.7 Indenture between National Industries, Inc. and First National City Bank,
dated October 1, 1974, with respect to the 10% Subordinated Debentures,
due October 1, 1999 (Exhibit T3C to Post-Effective Amendment No. 1 to
Application on Form T-3 for Qualification of Indenture under the Trust
Indenture Act of 1939 (File No. 22-8076))..............................
4.8 Agreement among National Industries, Inc., the Registrant, Citibank,
N.A., and Marine Midland Bank, dated as of December 20, 1977, with
respect to successor trusteeship of the 10% Subordinated Debentures due
October 1, 1999 (Exhibit 4(f)(ii) to Registration Statement on Form
S-14 (Registration No. 2-81094)).......................................
4.9 First Supplemental Indenture among the Registrant, National Industries,
Inc. and Marine Midland Bank, dated January 3, 1978, supplemental to
the Indenture dated October 1, 1974 between National and First National
City Bank for the 10% Subordinated Debentures due October 1, 1999
(Exhibit 2(q) to Registration Statement on Form S-7 (Registration No.
2-60566))..............................................................
4.10 Indenture dated as of August 1, 1987 with respect to 6 1/2% Convertible
Subordinated Debentures due August 4, 2002, between the Registrant and
Chemical Bank, as Trustee (Exhibit 4(i) to Annual Report on Form 10-K
for the year ended December 31, 1987)..................................
5* Opinion of Paul, Weiss, Rifkind, Wharton & Garrison regarding the
legality of the Securities being registered............................
8.1* Opinion of Rosenfeld, Meyer & Susman, LLP regarding the tax consequences
of the Goldwyn Merger..................................................
10.1 1982 Stock Option Plan of the Registrant (Exhibit A to Proxy Statement,
dated March 31, 1982)..................................................
10.2 1989 Stock Option Plan of the Registrant (Exhibit A to Proxy Statement,
dated March 31, 1982)..................................................
10.3 1969 Restricted Stock Plan of the Registrant (Exhibit 10(a)(iii) to
Annual Report on Form 10-K for the year ended December 31, 1990).......
10.4 1991 Non-Employee Director Stock Option Plan (Exhibit 10(a)(iv) to Annual
Report on Form 10-K for the year ended December 31, 1991)..............
10.5 Amendment to 1991 Non-Employee Director Stock Option Plan (Exhibit
10(a)(v) to Annual Report on Form 10-K for the year ended December 31,
1992)..................................................................
10.6 Snapper Power Equipment Profit Sharing Plan (Exhibit 10(c) to Annual
Report on Form 10-K for the year ended December 31, 1987)..............
10.7 Retirement Plan executed November 1, 1990, as amended effective January
1, 1989 (Exhibit 10(h)(i) to Annual Report on Form 10-K for the year
ended December 31, 1990)...............................................
10.8 Supplemental Retirement Plan of the Registrant (Exhibit 10(j) to Annual
Report on Form 10-K for the year ended December 31, 1983)..............
10.9 Supplemental Executive Medical Reimbursement Plan (Exhibit 10(h)(iii) to
Annual Report on Form 10-K for the year ended December 31, 1990).......
10.10 Amendment to Supplemental Retirement Plan of the Registrant, effective
April 1, 1992 (Exhibit 10(h)(iv) to Annual Report on Form 10-K for the
year ended December 31, 1991)..........................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------------- --------
<C> <S> <C>
10.11 1992 Officer and Director Stock Purchase Plan (Exhibit 10(l) to Annual
Report on Form 10-K for the year ended December 31, 1991)..............
10.12 Metromedia International Group, Inc. 1996 Incentive Stock Plan (Exhibit
10.38 to Annual Report on Form 10-K for the year ended December 31,
1995)..................................................................
10.13 Form of Restricted Purchase Agreement between certain officers of the
Registrant and the Registrant (Exhibit 10(u) to Annual Report on Form
10-K for the year ended December 31, 1991).............................
10.14 Agreement between the Registrant and J.B. Fuqua regarding sale by the
Registrant of rights in the name (Exhibit 10(q) to Annual Report on
Form 10-K for the year ended December 31, 1992)........................
10.15 Form of Indemnification Agreement between the Registrant and certain of
its directors and executive officers (Exhibit 10(u) to Annual Report on
Form 10-K for the year ended December 31, 1993)........................
10.16 Employment Agreement between the Registrant and John D. Phillips dated
April 19, 1994 (Exhibit 99(a) to Current Report on Form 8-K dated April
19, 1994)..............................................................
10.17 First Amendment to Employment Agreement dated November 1, 1995 between
the Registrant and John D. Phillips (Exhibit 10.16 to Annual Report on
Form 10-K for the year ended December 31, 1995)........................
10.18 Option Agreement between the Registrant and John D. Phillips dated April
19, 1994 (Exhibit 99(b) to Current Report on Form 8-K dated April 19,
1994)..................................................................
10.19 Registration Rights Agreement among the Registrant, Renaissance Partners
and John D. Phillips dated April 19, 1994 (Exhibit 99(c) to Current
Report on Form 8-K dated April 19, 1994)...............................
10.20 Shareholders Agreement dated as of December 6, 1994 among the Registrant,
Roadmaster, Henry Fong and Edward Shake (Exhibit 10(r)(i) to Annual
Report on Form 10-K for the year ended December 31, 1994)..............
10.21 Registration Rights Agreement dated as of December 6, 1994 between the
Registrant and Roadmaster (Exhibit 10(r)(ii) to Annual Report on Form
10-K for the year ended December 31, 1994).............................
10.22 Environmental Indemnity Agreement dated as of December 6, 1994 between
the Registrant and Roadmaster (Exhibit 10(r)(iii) to Annual Report on
Form 10-K for the year ended December 31, 1994)........................
10.23 Lease Agreement dated October 21, 1994 between JDP Aircraft II, Inc. and
the Registrant (Exhibit 10(s) to Annual Report on Form 10-K for the
year ended December 31, 1994)..........................................
10.24 Lease Agreement dated as of October 4, 1995 between JDP Aircraft II, Inc.
and the Registrant (Exhibit 10 to Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995)......................................
10.25 Finance and Security Agreement dated as of October 30, 1992 with respect
to a revolving credit facility of up to $100 million, between the
Registrant and ITT Commercial Finance Corp. (Exhibit 4(g)(i) to Annual
Report on Form 10-K for the year ended December 31, 1994)..............
10.26 Amendment dated as of September 27, 1993 to Finance and Security
Agreement, dated as of October 30, 1992, with respect to a revolving
credit facility of up to $100 million, between the Registrant and ITT
Commercial Corp. (Exhibit 4(g)(ii) to Annual Report on Form 10-K for
the year ended December 31, 1994)......................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------------- --------
<C> <S> <C>
10.27 Amendment dated as of March 29, 1994 to Finance and Security Agreement,
dated as of October 30, 1992, with respect to a revolving credit
facility of up to $100 million, between the Registrant and ITT
Commercial Finance Corp. (Exhibit 4(g)(iii) to Annual Report on Form
10-K for the year ended December 31, 1994).............................
10.28 Amendment dated as of April 15, 1994 to Finance and Security Agreement,
dated as of October 30, 1992, with respect to a revolving credit
facility of up to $100 million, between the Registrant and ITT
Commercial Finance Corp. (Exhibit 4(g)(iv) to Annual Report on Form
10-K for the year ended December 31, 1994).............................
10.29 Amendment dated as of September 23, 1994 to Finance and Security
Agreement, dated as of October 30, 1992, with respect to a revolving
credit facility of up to $100 million, between the Registrant and ITT
Commercial Finance Corp. (Exhibit 4(g)(v) to Annual Report on Form 10-K
for the year ended December 31, 1994)..................................
10.30 Amendment dated as of March 3, 1995 to Finance and Security Agreement,
dated as of October 23, 1992, as amended, with respect to a revolving
credit facility of up to $100 million, between the Registrant and ITT
Commercial Finance Corp. (Exhibit 4 to Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995)...................................
10.31 Amendment dated as of November 1, 1995, to Finance and Security Agreement
dated as of October 23, 1992, as amended, with respect to a revolving
credit facility of up to $45 million, between Snapper, Inc. and
Deutsche Financial Services Corporation (formerly ITT Commercial
Finance Corp.) (Exhibit 10(a)(vii) to Registration Statement on Form
S-3 (Registration No. 33-63853)).......................................
10.32 Letter Agreement dated October 12, 1995 between Triton Group Ltd. and the
Registrant (Exhibit 4(d)(i) to the Registration Statement on Form S-3
(Registration No. 33-63401))...........................................
10.33 Registration Rights Agreement dated as of September 27, 1995, among the
Registrant and the Metromedia Holders named therein (Exhibit 99(b) to
Current Report on Form 8-K dated September 27, 1995)...................
10.34 Contribution Agreement dated as of November 1, 1995 among Met
International, Inc., Met Productions, Inc. and the Registrant (Exhibit
10(f) to Registration Statement on Form S-3 (Registration No.
33-63853)).............................................................
10.35 Credit, Security and Guaranty Agreement dated as of November 1, 1995
among Orion Pictures Corporation, the Corporate Guarantors referred to
therein, the Lenders referred to therein and Chemical Bank (Exhibit
10(g) to Registration Statement on Form S-3 (Registration No.
33-63853)).............................................................
10.36 Credit Agreement dated as of November 1, 1995 between Metromedia Company
and the Registrant (Exhibit 10(h) to Registration Statement on Form S-3
(Registration No. 33-63853))...........................................
10.37 Management Agreement dated November 1, 1995 between Metromedia Company
and Metromedia International Group, Inc. (Exhibit 10.37 to Annual
Report on Form 10-K for the year ended December 31, 1995)..............
10.38 License Agreement dated November 1, 1995 between Metromedia Company and
Metromedia International Group, Inc. (Exhibit 10.39 to Annual Report on
Form 10-K for the year ended December 31, 1995)........................
10.39 MITI Bridge Loan Agreement, dated February 29, 1996, among Metromedia
Company and Metromedia International Telecommunications, Inc. relating
to a $15 million bridge loan from Metromedia Company to Metromedia
International Telecommunications Inc. (Exhibit 10.40 to Annual Report
on Form 10-K for the year ended December 31, 1995).....................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------------- --------
<C> <S> <C>
11 Statement of computation of earnings per share (Exhibit 11 to Annual
Report on Form 10-K for the year ended December 31, 1995)..............
16 Letter from Ernst & Young to the Securities and Exchange Commission
(Exhibit 99.1 to Current Report on Form 8-K dated November 1, 1995)....
21 Subsidiaries of the Registrant (Exhibit 21 to Annual Report on Form 10-K
for the year ended December 31, 1995)..................................
23.1* Consent of KPMG Peat Marwick LLP regarding the Registrant................
23.2* Consent of Ernst & Young LLP regarding the Registrant....................
23.3* Consent of Price Waterhouse LLP regarding Goldwyn........................
23.4* Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in the
opinion filed as Exhibit 5 hereto).....................................
23.5* Consent of Rosenfeld, Meyer & Susman, LLP (included in the opinion filed
as Exhibit 8.1 hereto).................................................
23.6* Consent of Donaldson, Lufkin & Jenrette Securities Corporation...........
23.7* Consent of Furman Selz LLC...............................................
24 Power of Attorney (included on page II-9 of this Registration
Statement).............................................................
99.1* Fairness Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
(included as Appendix B to the Proxy Statement/Prospectus forming a
part of this Registration Statement)...................................
99.2* Fairness Opinion of Furman Selz LLC (included as Appendix C to the Proxy
Statement/Prospectus forming a part of this Registration Statement)....
99.3* Proxy Card to Goldwyn Stockholders.......................................
</TABLE>
- ------------
* Filed herewith.
Exhibit 2.5
EXECUTION COPY
AMENDMENT NO. 1 TO THE GOLDWYN MERGER AGREEMENT
AMENDMENT NO. 1 TO THE GOLDWYN MERGER AGREEMENT ("Amendment No. 1") dated
as of May 29, 1996 by and among Metromedia International Group, Inc., a Delaware
corporation ("Metromedia"), SGC Merger Corp., a Delaware corporation and a
wholly-owned subsidiary of Metromedia ("SGC Mergerco") and The Samuel Goldwyn
Company, a Delaware corporation (the "Company").
WHEREAS, Metromedia, SGC Mergerco and Goldwyn are parties to a Merger
Agreement dated as of January 31, 1996 (the "Goldwyn Merger Agreement"),
pursuant to which SGC Mergerco will merge with and into the Company (the
"Merger"), with the Company as the surviving corporation of the Merger; and
WHEREAS, Metromedia, SGC Mergerco and the Company desire to amend certain
provisions of the Goldwyn Merger Agreement as set forth herein.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Section 2.1(a) of the Goldwyn Merger Agreement is amended by replacing
the following phrase beginning on the 24th line thereof and ending on the 27th
line thereof:
"which is five business days prior to the Metromedia Stockholders'
Meeting (as defined in Section 4.3(c) hereof) including both the day
of the Metromedia Stockholders' Meeting."
with the following phrase:
"which is five business days prior to the Company Stockholders'
Meeting (as defined in Section 4.2(c) hereof) including both the day
of the Company Stockholders' Meeting."
2. Section 4.1(c) of the Goldwyn Merger Agreement is amended by deleting in
its entirety the phrase beginning on the 6th line thereof and ending on the 9th
line thereof: "it being understood that the Proxy Statement and the Prospectus
will also serve as a proxy statement and prospectus for Metromedia's
transactions with Alliance Entertainment Corp."
3. Section 4.3 of the Goldwyn Merger Agreement is amended by (i) deleting
in its entirety paragraph (c) thereof and (ii) relettering paragraphs (d)
through (h) thereof as paragraphs (c) through (g) thereof.
4. The introductory paragraph to Section 6.1 of the Goldwyn Merger
Agreement is amended by replacing the phrase "whether before or after approval
by the stockholders of Metromedia or the Company" with "whether before or after
approval by the stockholders of the Company."
5. Section 6.1 of the Goldwyn Merger Agreement is amended by
<PAGE>
2
(i) deleting in its entirety paragraph (f) thereof and (ii) relettering
paragraph (g) thereof as paragraph (f) thereof.
6. In accordance with Section 5.1(a), Metromedia hereby unilaterally waives
the condition regarding approval by its stockholders of the Merger and the
transactions contemplated by the Goldwyn Merger Agreement.
7. This Amendment No. 1 shall be governed by the laws of the State of
Delaware, applicable to agreements made and to be performed entirely within such
State.
8. This Amendment No. 1 may be executed in one or more counterparts, each
of which shall be deemed an original, with all of which together shall
constitute one in the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 on the
date first written above.
METROMEDIA INTERNATIONAL GROUP, INC.
By: /s/ SILVIA KESSEL
----------------------------
Name: Silvia Kessel
Title: Senior Vice President
SGC MERGER CORP.
By: /s/ SILVIA KESSEL
----------------------------
Name: Silvia Kessel
Title: Senior Vice President
THE SAMUEL GOLDWYN COMPANY
By: /s/ MEYER E. GOTTLIEB
----------------------------
Name: Meyer E. Gottlieb
Title: President
Exhibit 5
[PAUL, WEISS, RIFKIND, WHARTON & GARRISON]
June 3, 1996
Metromedia International Group, Inc.
945 East Paces Ferry Road
Suite 2210
Atlanta, Georgia 30326
Re: Metromedia International Group, Inc.
Registration Statement on form S-4
File No. 333-____
Dear Ladies and Gentlemen:
In connection with the above-captioned Registration Statement (the
"Registration Statement"), filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "Act"), and the Rules
and Regulations promulgated thereunder (the "Rules"), we have been requested by
Metromedia International Group, Inc., a Delaware corporation (the "Company"), to
furnish our opinion as to the validity of 1,287,344 shares (the "Merger Shares")
of Common Stock, par value $1.00 per share (the "Common Stock"), to be issued by
the Company, pursuant to the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of January 31, 1996, as amended, among the Company, SGC
Merger Corp. and The Samuel Goldwyn Company.
<PAGE>
Metromedia International Group, Inc. 2
In connection with the furnishing of this opinion, we have reviewed the
Registration Statement (including all amendments thereto), originals, or copies
certified or otherwise identified to our satisfaction, of the Company's Restated
Certificate of Incorporation and Restated By-laws, each as in effect on the date
hereof, and records of certain of the Company's corporate proceedings. We have
also examined and relied upon representations as to factual matters contained in
certificates of officers of the Company, and have made such other investigations
of fact and law and have examined and relied upon the originals, or copies
certified or otherwise identified to our satisfaction, of such documents,
records, certificates or other instruments, and upon such factual information
otherwise supplied to us, as in our judgment are necessary or appropriate to
render the opinion expressed below. In addition, we have assumed, without
independent investigation, the genuineness of all signatures, the authenticity
of all documents submitted to us as originals and the conformity of original
documents to all documents submitted to us as certified, photocopied, reproduced
or conformed copies, the authenticity of all such latter documents and the legal
capacity of all individuals who have executed any of the documents.
Based on the foregoing, we are of the opinion that the Merger Shares, when
issued in accordance with the Merger Agreement, will be duly authorized, validly
issued, fully paid and nonassessable.
Our opinion expressed above is limited to the General Corporation Law of
the State of Delaware. Please be advised that no member of this firm is admitted
to practice in the State of Delaware. Our opinion is rendered only with respect
to laws and the rules, regulations and orders thereunder, which are currently in
effect.
This letter is furnished by us solely for your benefit and the benefit of
holders of outstanding shares of the Common Stock and may not be relied on in
any manner or for any purpose by any other purpose by any other person or entity
without our prior written consent.
We hereby consent to the reference of our firm under the heading "Legal
Matters" in the Proxy Statement/Prospectus contained in the Registration
Statement and to the filing of this opinion as Exhibit 5 thereto.
Very truly yours,
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
Exhibit 8.1
[ROSENFELD, MEYER & SUSMAN, LLP]
________, 1996
The Samuel Goldwyn Company
10203 Santa Monica Boulevard
Los Angeles, CA 90067
Ladies and Gentlemen:
You have requested our opinion as to whether the proposed merger of SGC
Merger Corp. ("SGC Mergerco") with and into The Samuel Goldwyn Company
("Goldwyn"), with Goldwyn being the surviving corporation (the "Goldwyn
Merger"), will constitute a reorganization for United States federal income tax
purposes within the meaning of section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code").
In reaching the opinions expressed below, we have reviewed and relied on
(i) the Agreement and Plan of Merger (the "Merger Agreement"), dated as of
January 31, 1996, as amended, by and among Metromedia International Group, Inc.
("MIG"), SGC Mergerco and Goldwyn, (ii) the amended Proxy Statement/Prospectus
(the "Proxy Statement") filed with the Securities and Exchange Commission on May
___, 1996, and as further amended to date, (iii) the representation letters
dated the date hereof addressed to us in connection with the opinion set forth
below from Goldwyn and MIG, and (iv) such other information and materials as we
have deemed appropriate.
We have assumed that the Merger Agreement has been duly executed by the
parties thereto and constitutes the valid and legally binding obligation of such
parties, that the Merger Agreement has not been amended or modified, that the
parties to the Merger Agreement will act in accordance therewith, and that there
are no other agreements or understandings among the parties in connection with
the subject matter thereof. All capitalized terms used herein without definition
have the meanings assigned to them in the Proxy Statement.
Based upon and subject to the foregoing, it is our opinion that:
(i) The Goldwyn Merger will qualify as a reorganization within the meaning
of section 368(a) of the Code.
<PAGE>
2
(ii) No gain loss will be recognized by a stockholder of Goldwyn upon
receipt of shares of Common Stock in exchange for shares of Goldwyn Common
Stock, except as described in (iii) below.
(iii) Each stockholder of Goldwyn who receives cash proceeds from the sale
of fractional interests in shares of Common Stock will recognize gain or loss
equal to the difference between such proceeds and the tax basis allocated to
such stockholder's fractional share interests. Any such gain or loss recognized
as described in this paragraph will constitute capital gain or loss if the
stockholder's shares of Goldwyn Common Stock were held as a capital asset at the
time of the Goldwyn Merger.
(iv) The tax basis of the shares of Common Stock (including fractional
share interests for which cash is ultimately received) received by a stockholder
of Goldwyn will be the same as the tax basis of the shares of Goldwyn Common
Stock exchanged therefor.
(v) The holding period of Common Stock in the hands of a stockholder of
Goldwyn will include the holding period of the shares of Goldwyn Common Stock
exchanged therefor, provided that such shares were held as a capital asset at
the time of the Goldwyn Merger.
(vi) No gain or loss will be recognized by Goldwyn as a result of the
Goldwyn Merger.
We express no opinion concerning any United States, state, local or foreign
tax matter relating to the Goldwyn Merger and the other transactions described
in the Proxy Statement, except as expressly set forth above. In addition, we
express no opinion concerning the tax consequences that may be relevant to
particular categories of stockholders of Goldwyn subject to special treatment
under certain federal income tax laws, such as but not limited to dealers in
securities, banks, insurance companies, foreign individuals and entities and
regulated investment companies or to employees holding Goldwyn options.
The above opinions are based on currently existing provisions of the Code,
existing and proposed treasury regulations thereunder and current administrative
rulings and court decisions. All of the foregoing are subject to change,
possibly with retroactive effect, and any such change could affect the
continuing validity of this opinion.
<PAGE>
3
This letter is furnished by us solely for your benefit and the benefit of
holders of outstanding Goldwyn Common Stock and may not be relied on in any
manner or for any purpose by any other person or entity without our prior
written consent.
We hereby consent to the filing of this opinion as an exhibit to the Proxy
Statement and consent to the reference to our firm in the section of the Proxy
Statement captioned "Certain Federal Income Tax Consequences -- The Goldwyn
Merger."
Very truly yours,
ROSENFELD, MEYER & SUSMAN, LLP
Exhibit 23.1
Independent Auditors' Consent
The Board of Directors
Metromedia International Group, Inc.:
We consent to the use of our report incorporated herein by reference and to the
references to our firm under the headings "Selected Consolidated Financial Data"
and "Experts" in the prospectus.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
-----------------------------
New York, New York
May 31, 1996
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to use
of our reports dated March 10, 1995, with respect to the financial statements
and schedules of The Actava Group Inc. included in the Registration Statement
(Form S-4) and related Prospectus of Metromedia International Group, Inc., dated
May 30, 1996 for the registration of 1,787,344 shares of its common stock.
/s/ Ernst & Young LLP
__________________________________
Ernst & Young LLP
Atlanta, Georgia
May 30, 1996
Exhibit 23.3
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Metromedia
International Group, Inc. of our report dated May 3, 1996 appearing on page F-2
of The Samuel Goldwyn Company's Annual Report on Form 10-K for the year ended
March 31, 1996. We also consent to the incorporation by reference of our report
on the Financial Statement Schedule which appears on page F-21 of The Samuel
Goldwyn Company's Form 10-K. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
Price Waterhouse LLP
May 30, 1996
Exhibit 23.6
CONSENT OF
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
May 31, 1996
Board of Directors
Metromedia International Group, Inc.
Atlanta, Georgia
We hereby consent to the inclusion of our opinion dated May 31, 1996 in the
Proxy Statement/Prospectus which forms a part of the Metromedia International
Group, Inc. registration statement on Form S-4 (File No. 333-_______). In giving
this consent we do not hereby admit that Donaldson, Lufkin & Jenrette Securities
Corporation is within the class of persons whose consent is required by Section
7 of the Securities Act of 1933, as amended, or the rules and regulations
promulgated thereunder.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ David F. Posnick
----------------------------
Name: David F. Posnick
Title: Vice President
Exhibit 23.7
CONSENT OF FURMAN SELZ LLC
We hereby consent to the use of our opinion letter to the Board of
Directors of The Samuel Goldwyn Company ("Goldwyn") included as Appendix C to
the Proxy Statement/Prospectus which forms a part of the Registration Statement
on Form S-4 relating to the proposed merger of SGC Merger Corp., a wholly owned
subsidiary of Metromedia International Group, Inc., with and into Goldwyn, and
to the references to such opinion in such Proxy Statement/Prospectus under the
captions "Summary Information -- Opinions of Financial Advisors -- Goldwyn,"
"Proposal No. 1 -- The Goldwyn Merger -- Board Recommendation; Reasons for the
Goldwyn Merger -- Goldwyn's Reasons for the Goldwyn Merger," and "Proposal No. 1
- -- The Goldwyn Merger -- Opinion of Financial Advisors -- Goldwyn." In giving
such consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or rules and regulations of the Securities and Exchange Commission thereunder.
/s/ FURMAN SELZ LLC
May 30, 1996
Exhibit 99.3
PROXY
THE SAMUEL GOLDWYN COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF STOCKHOLDERS,
JULY 2, 1996
The undersigned hereby appoints Samuel Goldwyn, Jr. and Meyer Gottlieb, 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 special meeting (the
"Special Meeting") of Stockholders of The Samuel Goldwyn Company ("Goldwyn"), to
be held on July 2, 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, $.20 par value, of
Goldwyn 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/Prospectus of Goldwyn
and Metromedia International Group, Inc. ("MIG"), dated June 3, 1996.
1. To approve the Agreement and Plan of Merger, dated as of January 31, 1996,
as amended, by and among MIG, Goldwyn and SGC Merger Corp., a wholly-owned
subsidiary of MIG ("SGC Mergerco") pursuant to which SGC Mergerco will merge
with and into Goldwyn.
FOR / / AGAINST / / ABSTAIN / /
2. To transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
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" PROPOSAL 1 LISTED ABOVE.
<PAGE>
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.
DATED: JUNE 3, 1996
PLEASE MARK, DATE, SIGN,
AND RETURN THIS PROXY CARD
PROMPTLY USING THE
ENCLOSED ENVELOPE.
__________________________
Signature
__________________________
Signature if held jointly
