<PAGE>
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- --------------------------------------------------------------------------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
/ / Filed by the Registrant
/ / Filed by a Party other than the Registrant
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
------------------------
METROMEDIA INTERNATIONAL GROUP, INC.
(Name of Registrant as Specified in its Charter)
------------------------
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
April 10, 1997
Dear Stockholder:
On behalf of the Board of Directors, I wish to extend to you a cordial
invitation to attend the Annual Meeting of Stockholders of Metromedia
International Group, Inc. ("MMG"), which will be held in the Concourse Level at
1285 Avenue of the Americas, New York, New York 10019 at 9:30 a.m., New York
time, on May 14, 1997. I look forward to greeting as many stockholders as
possible at the Annual Meeting.
At the Annual Meeting, you will be asked to vote on proposals:
1. to elect two Class II Directors for a three year term ending in the year
2000;
2. to ratify the selection of KPMG Peat Marwick LLP as MMG's independent
accountants for the year ending December 31, 1997;
3. to consider and vote upon a proposal submitted by a Stockholder of the
Company, which is more fully described in the attached Proxy Statement
and any other matters that may properly come before the Meeting.
It is important that your shares be represented at the Annual Meeting,
whether or not you are able to attend. Accordingly, you are urged to sign, date
and mail the enclosed proxy promptly. If you later decide to attend the Annual
Meeting, you may revoke your proxy and vote in person. Thank you.
Sincerely,
Stuart Subotnick
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
------------------------
ONE MEADOWLANDS PLAZA
EAST RUTHERFORD, NEW JERSEY 07073
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 1997
------------------------
TO THE STOCKHOLDERS OF
METROMEDIA INTERNATIONAL GROUP, INC.:
NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders (the
"Meeting") of Metromedia International Group, Inc., a Delaware corporation
("MMG"), will be held on May 14, 1997, at 9:30 a.m., local time, in the
Concourse Level, 1285 Avenue of the Americas, New York, New York 10019 for the
purpose of considering and acting upon the following:
1. The election of two members to MMG's Board of Directors to serve a
three-year term as Class II Directors;
2. Ratification of the selection of KPMG Peat Marwick LLP as MMG's
independent accountants for the year ending December 31, 1997;
3. To consider and vote upon a proposal submitted by a Stockholder of the
Company, which is more fully described in the attached Proxy Statement;
4. The transaction of such other business as may properly come before the
Meeting or any adjournment thereof. The Board of Directors is not aware
of any other business that will be presented for consideration at the
Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" PROPOSALS NO. 1 AND NO. 2 AND "AGAINST" PROPOSAL NO. 3 TO BE PRESENTED TO
MMG STOCKHOLDERS AT THE MMG ANNUAL MEETING.
Only stockholders of record at the close of business on April 1, 1997 will
be entitled to notice of and to vote at the Meeting or any adjournment thereof.
The Meeting may be adjourned from time to time without notice other than by
announcement at the Meeting. A list of stockholders entitled to vote at the
Meeting will be available for inspection by any stockholder, for any reason
germane to the Meeting, during ordinary business hours during the ten days prior
to the Meeting at One Meadowlands Plaza, East Rutherford, New Jersey 07073.
By Order of the Board of Directors.
Arnold L. Wadler
Secretary
East Rutherford, New Jersey
April 10, 1997
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING REGARDLESS OF
THE NUMBER OF SHARES YOU HOLD IN ORDER THAT A QUORUM MAY BE ASSURED, WHETHER OR
NOT YOU PLAN TO BE PRESENT AT THE MEETING IN PERSON. PLEASE COMPLETE, SIGN, DATE
AND MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING RETURN ENVELOPE (TO WHICH NO
POSTAGE NEED BE AFFIXED BY THE SENDER IF MAILED WITHIN THE UNITED STATES). IF
YOU RECEIVE MORE THAN ONE PROXY BECAUSE YOUR SHARES ARE REGISTERED IN DIFFERENT
NAMES OR ADDRESSES, EACH SUCH PROXY SHOULD BE SIGNED AND RETURNED TO ASSURE THAT
ALL OF YOUR SHARES WILL BE VOTED. THE PROXY SHOULD BE SIGNED BY ALL REGISTERED
HOLDERS EXACTLY AS THE STOCK IS REGISTERED.
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
------------------------
PROXY STATEMENT
FOR AN ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 1997
------------------------
METROMEDIA INTERNATIONAL GROUP, INC.
This Proxy Statement is being furnished to the holders of shares of common
stock, par value $1.00 per share (the "Common Stock"), of Metromedia
International Group, Inc., a Delaware corporation ("MMG" or the "Company") in
connection with the solicitation of proxies by the Board of Directors of MMG for
use at the Annual Meeting of the Stockholders of MMG to be held at 9:30 a.m. on
May 14, 1997 in the Concourse Level, 1285 Avenue of the Americas, New York, New
York 10019 (the "Annual Meeting"), and any adjournments of the Meeting. This
Proxy Statement and the accompanying proxy card, along with the Company's annual
report on Form 10-K for the year ended December 31, 1996 are being mailed to the
stockholders of the Company on or about April 14, 1997.
At the Annual Meeting, Stockholders of MMG ("MMG Stockholders") will be
asked to vote upon (i) the election of two members to MMG's Board of Directors
to serve a three-year term as Class II Directors, (ii) the ratification of the
selection of KPMG Peat Marwick LLP as MMG's independent accountants for the year
ending December 31, 1997, (iii) to consider and vote upon a proposal submitted
by a stockholder of the Company, as more fully described herein, and (iv) such
other matters as may properly come before the Meeting..
INFORMATION REGARDING THE ANNUAL MEETING
GENERAL
This Proxy Statement is being furnished to holders of Common Stock in
connection with the solicitation of proxies by the Board of Directors of MMG for
use at the Annual Meeting, and any adjournments thereof. Each copy of this Proxy
Statement being mailed or delivered to MMG Stockholders is accompanied by a MMG
proxy card and the Notice of Annual Meeting of Stockholders of MMG. MMG's Annual
Report to Stockholders and its Annual Report on Form 10-K, including financial
statements for the year ended December 31, 1997, accompanies but does not
constitute part of this Proxy Statement.
All properly executed proxy cards delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting in accordance with the
directions given. In voting by proxy with regard to the election of directors,
MMG Stockholders may vote in favor of all nominees, withhold their votes as to
all nominees or withhold their votes as to specific nominees. With regard to
other proposals, MMG Stockholders may vote in favor of each proposal or against
each proposal, or in favor of some proposals and against others, or may abstain
from voting on any or all proposals. Stockholders should specify their
respective choices on the accompanying proxy card. If no specific instructions
are given with regard to the matters to be voted upon, the shares of Common
Stock represented by a signed proxy card will be voted "FOR" Proposals 1 and 2
and "AGAINST" Proposal 3 listed on the proxy card. If any other matters properly
come before the Annual Meeting, the persons named as proxies will vote upon such
matters according to their judgment.
All proxy cards delivered pursuant to this solicitation are revocable at any
time prior to the Annual Meeting at the option of the persons executing them by
giving written notice to the Secretary of MMG, by delivering a later dated proxy
card or by voting in person at the Annual Meeting. All written notices of
revocation and other communications with respect to revocations of proxies
should be addressed to:
<PAGE>
Metromedia International Group, Inc., One Meadowlands Plaza, East Rutherford, NJ
07073, Attention: Arnold L. Wadler, Secretary.
Proxies will initially be solicited by MMG by mail, but directors, officers
and selected employees may solicit proxies from stockholders personally or by
telephone, facsimile or other forms of communication. Such directors, officers
and employees will not receive any additional compensation for such
solicitation. MMG also will request brokerage houses, nominees, fiduciaries and
other custodians to forward soliciting materials to beneficial owners, and MMG
will reimburse such persons for their reasonable expenses incurred in doing so.
All expenses incurred in connection with the solicitation of proxies will be
borne by MMG.
THE ANNUAL MEETING
The Annual Meeting is scheduled to be held in the Concourse Level at 1285
Avenue of the Americas, New York, New York 10019, on May 14, 1997, beginning at
9:30 a.m., local time. MMG Stockholders will be asked to vote upon (i) the
election of two persons to serve a three-year term as Class II Directors of
MMG's Board of Directors (Proposal No. 1), (ii) a proposal to ratify the
selection of KPMG Peat Marwick LLP as MMG's independent accountants for the year
ending December 31, 1997 (Proposal No. 2), and (iii) a proposal submitted by a
Stockholder of the Company which requests that the Board of Directors take
action to amend the Company's Certificate of Incorporation to provide that
stockholders may call special meetings and take action by written consent
(Proposal No. 3).
The Board of Directors of MMG knows of no business that will be presented
for consideration at the Annual Meeting other than the matters described in this
Proxy Statement.
RECORD DATE; QUORUM. Only holders of record of Common Stock as of the close
of business on April 1, 1997 (the "Record Date") will be entitled to notice of
and to vote at the Annual Meeting. As of the Record Date, there were 66,158,525
shares of Common Stock outstanding and entitled to vote at the Annual Meeting,
held by approximately 7,788 stockholders of record, with each share entitled to
one vote. The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock is necessary to constitute a quorum at the Annual
Meeting. Except with respect to broker non-votes, the consequences of which are
described below, shares of Common Stock represented by proxies marked "ABSTAIN"
for any proposal presented at the Annual Meeting and shares of Common Stock held
by persons in attendance at the Annual Meeting who abstain from voting on any
such proposal will be counted for purposes of determining the presence of a
quorum but shall not be voted for or against such proposal. Because of the vote
required (see below) to approve the proposals presented at the Annual Meeting,
abstentions will have the effect of a vote against such proposal (other than
Proposal 1). Shares as to which a broker indicates it has no discretion to vote
and which are not voted will be considered not present at such meeting for
purposes presented at the Annual Meeting. Because of the vote required to
approve Proposal 3, broker non-votes with respect to such proposals will have
the effect of a vote against Proposal 3 and because of the vote required to
approve the other proposals at the Annual Meeting, broker non-votes will have no
effect on the outcome and the vote on any of such other proposals. With respect
to the election of directors, abstentions and broker non-votes will be
disregarded and will have no effect on the vote.
VOTE REQUIRED. The affirmative vote of the holders of a majority of shares
of Common Stock present in person or represented by proxy at the Annual Meeting
will be required to approve and adopt each of the matters identified in this
Proxy Statement as being presented to holders of shares of Common Stock at the
Annual Meeting (other than Proposal 1 and Proposal 3), each of which will be
voted upon separately at the Annual Meeting. The affirmative vote of the holders
of a majority of all of the issued and outstanding shares of Common Stock
(whether or not represented in person or by proxy at the Annual Meeting) is
required to approve Proposal 3. The affirmative vote of the holders of a
plurality of shares of Common Stock present in person or represented by proxy at
the Annual Meeting will be required to elect each of the Class II Directors to
MMG's Board of Directors.
2
<PAGE>
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of the Record Date, certain information
regarding each person (including any "group" as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) known (based solely upon filings with the Securities and Exchange
Commission (the "Commission") prior to such date pursuant to Sections 13(d) or
13(g) of the Exchange Act) to own beneficially (as such term is defined in Rule
13d-3 under the Exchange Act) more than 5% of the outstanding Common Stock. In
accordance with the rules promulgated by the Commission, such ownership includes
shares currently owned as well as shares which the named person has the right to
acquire beneficial ownership of within 60 days, including, but not limited to,
shares which the named person has the right to acquire through the exercise of
any option, warrant or right, or through the conversion of a security.
Accordingly, more than one person may be deemed to be a beneficial owner of the
same securities.
<TABLE>
<CAPTION>
NUMBER OF SHARE OF
COMMON STOCK PERCENTAGE OF
BENEFICIALLY OWNED OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER (1) COMMON STOCK
- ------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
John W. Kluge, Stuart Subotnick and Metromedia
Company.............................................. 15,292,128(2) 23.1%
One Meadowlands Plaza
East Rutherford, NJ 07073
Dietche & Field Advisers, Inc.......................... 3,160,000 5.02%
437 Madison Avenue
New York, N.Y. 10022
</TABLE>
- ------------------------
(1) Unless otherwise indicated by footnote, the named persons have sole voting
and investment power with respect to the share of Common Stock beneficially
owned.
(2) Metromedia Company is a Delaware general partnership owned and controlled by
John W. Kluge and Stuart Subotnick, each of whom is a director of MMG. The
amount set forth in the table above includes 12,415,455 shares owned by Mr.
Kluge and Mr. Subotnick beneficially through Metromedia Company and Met
Telcell, Inc. ("Met Telcell"), a corporation owned and controlled by Messrs.
Kluge and Subotnick, and 2,605,448 and 231,225 shares of Common Stock,
respectively, owned directly by a trust affiliated with Mr. Kluge and by Mr.
Subotnick, respectively. The amount also includes options issued under the
Metromedia International Group, Inc. 1996 Incentive Stock Plan (the "1996
Stock Plan") exercisable within 60 days of the date hereof.
The foregoing information is based on a review, as of the Record Date, by
MMG of statements filed with the Commission under Sections 13(d) and 13(g) of
the Exchange Act. To the best knowledge of MMG, except as set forth above, no
person owns beneficially more than 5% of the outstanding Common Stock.
SECURITIES BENEFICIALLY OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of Common Stock as
of the Record Date with respect to (i) each director and director nominee of
MMG, (ii) each executive officer named in the
3
<PAGE>
Summary Compensation Table under "Executive Compensation" and (iii) all
directors and executive officers of MMG as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
BENEFICIALLY OWNED PERCENTAGE OF
NAME OF BENEFICIAL OWNER (1) COMMON STOCK
- ----------------------------------------------- -------------------- ---------------
<S> <C> <C>
John P. Imlay, Jr.............................. 20,000(6) *
Clark A. Johnson............................... 38,000(2)(6) *
John W. Kluge.................................. 15,040,903(3)(6) 22.7%
Silvia Kessel.................................. 103,085(7) *
Robert A. Maresca.............................. 30,000(8) *
Carl E. Sanders................................ 62,097(2)( (6) *
Richard J. Sherwin............................. 912,605(9) 1.4%
Stuart Subotnick............................... 12,666,680(4)(6) 19.2%
Arnold L. Wadler............................... 115,415(7) *
Leonard White.................................. 100,000(7) *
All Directors and Officers as a group (10
persons)..................................... 16,422,105 24.4%
</TABLE>
- ------------------------
* Holdings do not exceed one percent of the total outstanding shares of Common
Stock.
(1) Unless otherwise indicated by footnote, the named individuals have sole
voting and investment power with respect to the shares of Common Stock
beneficially owned.
(2) Includes 10,000 shares subject to purchase within 60 days of the date hereof
under the Company's 1991 Non-Employee Director Stock Option Plan.
(3) Represents 12,415,455 shares beneficially owned through Metromedia Company
and Met Telcell, and 2,605,448 shares of Common Stock owned directly by a
trust affiliated with Mr. Kluge.
(4) Represents 12,415,455 shares beneficially owned through Metromedia Company
and Met Telcell and 231,225 shares owned directly by Mr. Subotnick.
(5) Includes 600 shares subject to purchase by Mr. Sanders within 60 days of the
date hereof pursuant to the conversion of the $25,000 face amount (less than
1%) of the Company's 6 % Convertible Subordinated Debentures due 2002
beneficially owned by Mr. Sanders, which are convertible into Common Stock
at a conversion price of $41 5/8 per share.
(6) Includes 20,000 options issued under the 1996 Incentive Stock Plan. The 1996
Stock Plan was approved by the Company's stockholders at the 1996 Annual
Meeting of Stockholders of the Company.
(7) Includes 100,000 options issued under the 1996 Stock Plan, exercisable
within 60 days of the date hereof.
(8) Includes 30,000 options issued under the 1996 Stock Plan, exercisable within
60 days of the date hereof.
(9) Includes options to purchase 657,917 shares of Common Stock, exercisable
within 60 days of the date hereof at an exercise price equal to $1.08.
4
<PAGE>
DIRECTORS AND OFFICERS
DIRECTORS OF MMG
The Board of Directors of MMG, which presently consists of nine members, is
divided into three classes. The Class I Directors were elected for a term
expiring at the Annual Meeting of stockholders to be held in 1999, the Class II
Directors were elected for a term expiring at the Annual Meeting, and the Class
III Directors were elected for a term expiring at the annual meeting of
stockholders to be held in 1998. Members of each class will hold office until
their successors are elected and qualified. At each succeeding annual meeting of
the stockholders of MMG, the successors of the class of directors whose term
expires at that meeting shall be elected by a plurality vote of all votes cast
at such meeting and will hold office for a three-year term. The Class I
Directors, whose term expires at the Annual Meeting of Stockholders to be held
in 1999, are John W. Kluge, Stuart Subotnick and John P. Imlay, Jr. The Class II
Directors, whose term expires at the Annual Meeting are Richard J. Sherwin and
Leonard White. The Class III Directors, whose term expires at the Annual Meeting
of Stockholders to be held in 2000, are Silvia Kessel, Carl E. Sanders, Arnold
L. Wadler and Clark A. Johnson.
For more information regarding each of MMG's directors, including
biographical information, see "PROPOSAL NO. 1--ELECTION OF DIRECTORS."
MEETINGS AND CERTAIN COMMITTEES OF THE BOARD
The Board of Directors held one regular meeting and three special meetings
during 1996. In addition, the Board of Directors took action by unanimous
written consent one time in 1996. On December 4, 1996, John D. Phillips resigned
as President and Chief Executive Officer and as a Director of the Company. All
directors attended at least 75% of the aggregate total number of meetings of the
Board of Directors and all committees of the Board of Directors on which they
served.
The Board of Directors has delegated certain functions to the following
standing committees:
THE EXECUTIVE COMMITTEE. The Executive Committee is authorized to exercise,
to the extent permitted by law, all of the powers of the Board of Directors in
the management and affairs of the Company. The Executive Committee held thirteen
meetings in 1996. The members of the Executive Committee are Messrs. Kluge and
Subotnick.
THE AUDIT COMMITTEE. The Audit Committee is responsible for (a) reviewing
the professional services and independence of MMG's independent auditors and the
scope of the annual external audit recommended by the independent auditors, (b)
ensuring that the scope of the annual external audit is sufficiently
comprehensive, (c) reviewing, in consultation with MMG's independent auditors
and MMG's internal auditors, the plan and results of the annual external audit,
the adequacy of MMG's internal control systems and the results of MMG's internal
audit and (d) reviewing with management and MMG's independent auditors MMG's
annual financial statements, financial reporting practices and the results of
such external audit. The Audit Committee met once during 1996. The current
members of the Audit Committee are Messrs. Subotnick, Imlay and Johnson.
THE COMPENSATION COMMITTEE. The Compensation Committee's functions are to
review, approve, recommend and report to the Board of Directors on matters
specifically relating to the compensation of MMG's executive officers and other
key executives and to administer MMG's stock option plans. The Compensation
Committee held one meeting during 1996. The current members of the Compensation
Committee are Messrs. Sanders, Imlay and Johnson.
THE NOMINATING COMMITTEE. The Nominating Committee's principal function is
to identify candidates and recommend to the Board of Directors nominees for
membership on the Board of Directors. The Nominating Committee expects normally
to be able to identify from its own resources the names of qualified nominees,
but it will accept from stockholders recommendations of individuals to be
considered as nominees, provided MMG Stockholders follow procedures specified in
MMG's By-laws. These procedures provide that, in order to nominate an individual
to the Board of Directors, a MMG Stockholder must provide timely notice of such
nomination in writing to the Secretary of MMG and a written statement
5
<PAGE>
by the candidate of his or her willingness to serve. Such notice must include
the information required to be disclosed in solicitations for proxies for
election of directors pursuant to Regulation 14A under the Exchange Act, along
with the name, record address, class and number of shares of common stock
beneficially owned by the stockholder giving such notice. To be timely, notice
must be received by MMG not less than 60 days nor more than 90 days prior to the
first anniversary of the date of MMG's annual meeting for the preceding year;
provided, however, that in the event the date of such annual meeting of
stockholders is advanced by more than 30 days or delayed by more than 60 days
from such anniversary date, such notice must be received within 10 days
following public disclosure by MMG of the date of the annual or special meeting
at which directors are to be elected. For purposes of this notice requirement,
disclosure shall be deemed to be first made when disclosure of such date of the
annual or special meeting of stockholders is first made in a press release
reported by the Dow Jones News Service, Associated Press or other comparable
national news services, or in a document which has been publicly filed by MMG
with the Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.
Any such nominations should be submitted in writing to MMG, One Meadowlands
Plaza, East Rutherford, New Jersey 07073, Attention: Secretary. The Nominating
Committee did not hold any formal meetings in 1996. The current members of the
Nominating Committee are Messrs. Subotnick and Wadler and Ms. Kessel.
COMPENSATION OF DIRECTORS
During 1996, each director of the Company who was not employed by the
Company or affiliated with Metromedia Company (the "Non-Employee Directors")
received a $2,000 monthly retainer plus a separate attendance fee for each
meeting of the Board of Directors or committee of the Board of Directors in
which such director participated. During 1996, the attendance fees were $1,200
for each meeting of the Board of Directors attended by a Non-Employee Director
in person and $500 for each meeting of the Board of Directors in which a
Non-Employee Director participated by conference telephone call. Members of
committees of the Board of Directors are paid $500 for each meeting attended.
Prior to December 13, 1995, Non-Employee Directors were entitled to receive
options to purchase shares of the Company's Common Stock under the Company's
1991 Non-Employee Director Stock Option Plan (as amended, the "Director Plan").
Under the Director Plan, each Non-Employee Director who was a director of the
Company on August 3, 1992 was granted an option to purchase 10,000 shares of the
Company's Common Stock at an exercise price of $11.875, the closing price of the
Common Stock on the trading day immediately preceding the date of grant. Options
granted to these Non-Employee Directors became fully vested as to all 10,000
shares upon approval of certain amendments to the Director Plan at the Company's
1993 Annual Meeting of Stockholders.
The Director Plan further provided that each person who became a
Non-Employee Director of the Company after August 3, 1992 would receive an
option to purchase 10,000 shares of the Company's Common Stock on the day such
director is elected as a director, at an exercise price equal to the closing
price of the Common Stock on the trading day preceding such director's election.
Options granted to these Non-Employee Directors became fully vested and
exercisable as to all 10,000 shares on March 31 in the year after the date the
Non-Employee Director was elected, provided the Company had net income for the
year in which the Non-Employee Director was elected or earnings equal to or
better than budgeted results for such year.
All options granted under the Director Plan had a term of ten years. The
Director Plan had originally been scheduled to terminate on June 27, 2001.
However, at a meeting of the Board of Directors held on December 13, 1995, the
Board of Directors terminated the Director Plan. Options outstanding as of
December 13, 1995 are unaffected by the termination of the Director Plan.
On August 29, 1996, the stockholders of the Company adopted the 1996 Stock
Plan. Pursuant to the 1996 Stock Plan, at a Compensation Committee meeting held
on January 31, 1996, each director was granted options to purchase 50,000 shares
of the Company's Common Stock at an exercise price of $12.75, the Closing Price
of the Common Stock on the trading day immediately preceding the date of grant.
10,000
6
<PAGE>
shares vested on January 31, 1996 and the remainder of the options vest ratably
over a four year period beginning January 31, 1996.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information on
compensation awarded to, earned by or paid to the Chief Executive Officer and
MMG's other most highly compensated executive officers during the fiscal years
ended December 31, 1996, December 31, 1995 and December 31, 1994 for services
rendered in all capacities to MMG and its subsidiaries. In addition, the Summary
Compensation Table sets forth similar information for such periods with respect
to John D. Phillips, who would have been among MMG's four most highly
compensated executive officers during 1996 but for the fact that he was not
serving as an executive officer of MMG at the end of 1996. The persons listed in
the table below are referred to as the "Named Executive Officers."
SUMMARY COMPENSATION
The following table sets forth compensation awarded to, earned by or paid to
the named executive officers for services rendered to MMG and its subsidiaries
during the fiscal year ended December 31, 1996. During 1996, Messrs. Subotnick,
Wadler, Maresca and Ms. Kessel, each of whom serves as an executive officer of
the Company, were employed and paid by Metromedia Company. The amounts shown
below as salary with respect to each of such executive officers reflect the
portion of their compensation paid by MMG to Metromedia Company in respect of
such executive's services to MMG and its subsidiaries, pursuant to the
Management Agreement (as described below). The compensation expensed by the
Company and paid to Metromedia Company pursuant to the Management Agreement
includes payment for salary only and does not include any payment relating to
bonus or other compensation. No other amounts were paid by MMG to such named
executive officers during 1996. During 1996, Mr. Phillips was paid directly by
MMG.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AWARDS
OTHER NUMBER OF
NAME AND ANNUAL SECURITIES ALL OTHER
PRINCIPAL COMPENSATION UNDERLYING COMPENS.
POSITION YEAR SALARY($) BONUS($) ($)(1) STOCK OPTIONS ($)(2)
- ------------------------------------------------ --------- ----------- ---------- ----------------- ------------- -----------
John D. Phillips................................ 1996 $ 604,454 -- -- -0- --
Former President and Chief Executive 1995 $ 624,984 $ 700,000 -- -0- $ 15,096
Officer(1)(3) 1994 $ 438,289 $ 438,289 -- -0- $ 13,336
Stuart Subotnick................................ 1996 $ 55,328 -- -- 50,000 --
President and Chief 1995 -- -- -- -- --
Executive Officer (4) 1994 -- -- -- -- --
Silvia Kessel................................... 1996 $ 350,000 -- -- 250,000 --
Executive Vice President and Chief Financial 1995 -- -- -- -- --
President 1994 -- -- -- -- --
Arnold L. Wadler................................ 1996 $ 350,000 -- -- 250,000 --
Executive Vice President, General Counsel and 1995 -- -- -- -- --
Secretary 1994 -- -- -- -- --
Robert A. Maresca............................... 1996 $ 200,000 -- -- 75,000 --
Senior Vice President and Chief Accounting 1995 -- -- -- -- --
Officer 1994 -- -- -- -- --
</TABLE>
- ------------------------
(1) John D. Phillips served as President and Chief Executive Officer of MMG from
January 1, 1996 through December 4, 1996, and during such period the Company
provided perquisites and other personal benefits to Mr. Phillips. The value
of the perquisites and benefits provided Mr. Phillips during 1994, 1995,
1996 did not exceed the lesser of $50,000 or 10% of such officer's salary
plus annual bonus.
(FOOTNOTES CONTINUED ON NEXT PAGE)
7
<PAGE>
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
- ------------------------------
(2) The amounts in this column include (i) premiums paid by the Company on
behalf of Mr. Phillips under life insurance policies providing death
benefits to the designated beneficiaries of the executive officers,
including premium payments of (A) $13,336 made by the Company to Mr.
Phillips in 1994 and $15,096 made by the Company to Mr. Phillips in 1995 in
lieu of his participation in the life insurance programs maintained by the
Company for its executive officers; and $15,721 made by the Company to Mr.
Phillips in 1996.
(3) The amounts shown for 1994 and 1996 reflect less than a full year of
compensation for Mr. Phillips who was employed by the Company from April 19,
1994 through December 4, 1996.
(4) Mr. Subotnick was appointed President and Chief Executive Officer on
December 4, 1996. The amounts shown for Mr. Subotnick reflect the portion of
the payment made by MMG to Metromedia Company for this period.
PENSION PLANS
The Company maintains a qualified defined benefit pension plan and a
nonqualified supplemental pension plan for the benefit of eligible participants,
including certain of the Company's former executive officers. The Company's
nonqualified supplemental pension plan provides benefits that would otherwise be
denied participants by reason of certain limitations under the Internal Revenue
Code on qualified plan benefits and provides certain other supplemental pension
benefits to certain of the Company's executive officers and highly compensated
employees. On December 13, 1995, the Board of Directors of the Company amended
the pension plan and the supplemental pension plan to cease benefit accruals
after December 31, 1995. Accordingly, the only benefits that will be payable
under these plans are those benefits that had accrued as of December 31, 1995.
A participant's compensation covered by the Company's pension plan and
supplemental pension plan is his or her average annual compensation for the five
consecutive calendar plan years during the last ten years of the participant's
career for which such average is the highest or, in the case of a participant
who has been employed for less than five full calendar years, the period of his
or her employment with the Company and its subsidiaries ("covered
compensation"). A participant's covered compensation generally means the total
taxable compensation required to be reported on the participant's Form W-2 for
income tax purposes, except that this amount (excluding bonuses) is annualized
for periods covering less than a full calendar year. Generally, a participant
earns retirement benefits at the rate of 2% of his covered compensation for the
first 20 years of service and 1% for each additional 20 years of service.
Participants become vested in their retirement benefits after completing at
least five years of servicing or attaining age 50 or upon retirement after age
62 with at least one year of service. The estimated years of service for each
Named Executive Officer as of December 31, 1996 was as follows: Mr. Phillips:
2 2/3 years. Based on these provisions and the number of years of service
completed, the annual vested retirement benefits as of December 31, 1996 were
$45,015 for Mr. Phillips. Mr. Phillip's covered compensation for purposes of the
pension plan differs from compensation reported in the Summary Compensation
Table (the "Table") in that (i) covered compensation includes certain taxable
employee benefits not required to be reported in the Table and (ii) covered
compensation includes all compensation received by the executive during the year
(regardless of when it was earned), whereas the Table includes only compensation
earned during the year.
8
<PAGE>
OPTION/SAR GRANTS
DURING THE YEAR ENDED DECEMBER 31, 1996
The following table sets forth individual grants of stock options or limited
stock appreciation rights ("SARs") by MMG pursuant to the Metromedia
International Group, Inc. 1996 Incentive Stock Plan to the Named Executive
Officers during the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
SECURITIES
OPTIONS/ SARS % OF TOTAL
UNDER GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE EXPIRATION GRANT-DATE
NAME GRANTED (#)(1) FISCAL YEAR PRICE(2) DATE(3) VALUATION(4)
- ------------------------------------------ ----------------- ----------------- ----------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Stuart Subotnick.......................... * * * * *
Silvia Kessel............................. 250,000 9.6% $ 12.75 January 31, 2006 $ 1,240,250
Arnold L. Wadler.......................... 250,000 9.6% $ 12.75 January 31, 2006 $ 1,240,250
Robert A. Maresca......................... 75,000 2.9% $ 12.75 January 31, 2006 $ 368,250
</TABLE>
- ------------------------
(1) The date of grant for these options was January 31, 1996.
(2) The exercise price of the options granted during 1996 is equal to the fair
market value of shares of Common Stock of MMG on the date of grant of the
options. The exercise price may be paid in cash, or at the discretion of the
Compensation Committee, by tendering already owned shares of Common Stock of
MMG, or a combination thereof. On March 26, 1997, the Board of Directors
approved a cancellation and reissuance of the existing options at a price of
$9.3129, the fair market value of the MMG stock on such date.
(3) Options expire ten years from date of grant or, in case of retirement or
termination of employment, the date three months from such date of cessation
of employment. Options became one fifth exercisable on the date of grant and
vest ratably over a four year period. To the extent not already exercisable,
the options become fully exercisable in the event of a "change of control",
as defined in the Metromedia International Group, Inc. 1996 Incentive Stock
Plan.
(4) As permitted by the Commission, the Black-Scholes method of option valuation
has been used to determine grant date present value. The assumptions used in
the Black-Scholes option valuation calculation are: estimated future annual
stock price volatility of 38.951%; a United States risk-free rate of return
of 5.228%; and no future dividend yield. MMG does not advocate or
necessarily agree that the Black-Scholes method or any other method
permitted by the Commission can properly determine the value of an option.
However, no gain to the optionees is possible without an increase in the
stock price. Thus a zero increase or decrease in stock price, compared to
the exercise price, will not produce any gain for the optionee.
* Mr. Subotnick was granted 50,000 options in his capacity as a Director of
the Company. He did not receive any stock option grants in his capacity as
Chief Executive Officer.
AGGREGATED OPTION AND SAR EXERCISES IN 1996
AND FISCAL YEAR-END OPTION AND SAR VALUES
The following table sets forth information concerning the exercise of
options or SARs by the Named Executive Officers during the 1996 fiscal year and
the number of unexercised options and SARs held by such officers as of the end
of the 1996 fiscal year.
<TABLE>
<CAPTION>
FISCAL
YEAR END
VALUE
$9.8750
----------
<S> <C> <C> <C> <C> <C>
VALUE OF
UNEXERCISED
IN THE
MONEY
OPTIONS/
NUMBER OF SECURITIES SARS
VALUE REALIZED UNDERLYING UNEXERCISED AT FISCAL
(MARKET OPTIONS/SAR'S YEAR END
SHARES PRICE AT AT FISCAL YEAR END(#) ($)
ACQUIRED EXERCISE LESS -------------------------- ----------
NAME ON EXERCISE EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE
- -------------------------------------- --------------- ------------------- ----------- ------------- ----------
John D. Phillips...................... -0- -0- 300,000 -0- 1,050,000
Stuart Subotnick...................... -0- -0- 10,000 40,000 -0-
Arnold L. Wadler...................... -0- -0- 50,000 200,000 -0-
Silvia Kessel......................... -0- -0- 50,000 200,000 -0-
Robert A. Maresca..................... -0- -0- 15,000 75,000 -0-
<CAPTION>
<S> <C>
NAME UNEXERCISABLE
- -------------------------------------- -----------------
John D. Phillips...................... -0-
Stuart Subotnick...................... -0-
Arnold L. Wadler...................... -0-
Silvia Kessel......................... -0-
Robert A. Maresca..................... -0-
</TABLE>
9
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MMG'S RELATIONSHIP WITH METROMEDIA COMPANY
MMG is a party to a number of agreements and arrangements with Metromedia
Company ("Metromedia") and its affiliates, the material terms of which are
summarized below.
Metromedia and its affiliates are collectively the largest single
stockholder of the Company, owning, as of the Record Date, approximately 23% of
the issued and outstanding shares of Common Stock. Prior to the November 1, 1995
mergers of Orion Pictures Corporation ("Orion") and Metromedia
Telecommunications, Inc. ("MITI") with and into subsidiaries of MMG and the
merger of MCEG Sterling Incorporated ("Sterling") with and into MMG
(collectively, the November 1 Mergers"), Metromedia and its affiliates were the
principal stockholders of Orion and MITI.
Prior to the November 1 Mergers, Orion, MITI and Sterling were party to a
number of material contracts and other arrangements with Metromedia and certain
affiliates of Metromedia pursuant to which Metromedia and certain of its
affiliates made loans or provided financing to, or paid obligations on behalf
of, each of Orion, MITI and Sterling (collectively, the "Metromedia
Obligations"). In connection with the consummation of the November 1 Mergers,
the Metromedia Obligations were refinanced, repaid or converted into equity of
the Company.
ORION CREDIT FACILITY. On June 27, 1996, MMG's Entertainment Group, through
Orion and Chase Manhattan Bank entered into a $300 million facility, consisting
of a $200 million term loan and a $100 million revolving credit facility (the
"Credit Facility"). Orion's obligations under the Credit Facility are guaranteed
on a joint and several basis by all of Orion's active subsidiaries. In addition,
in order further to induce Chase and the other Lenders to provide the revolving
portion of the Amended Credit Facility, John W. Kluge and Metromedia Company
each guaranteed the due and punctual payment of all funds due under the
revolving credit loan portion of such credit facility, including all related
costs and attorneys' fees, up to a maximum amount of the lesser of (i) $100
million and (ii) the amount, if any, by which Orion's outstanding obligations
under the revolver exceed the amount by which the borrowing base under the
Credit Facility exceeds the term loan portion of such credit facility. As of
March 31, 1997, Orion owed approximately $86 million under the revolving portion
of the Credit Facility, none of which was reserved for outstanding letters of
credit. Neither Mr. Kluge nor Metromedia received any consideration for
guaranteeing Orion's obligations under the Amended Credit Facility. Their
guarantees were, however, a condition to Chase's agreeing to provide the
revolving portion of such Facility. In addition, Metromedia had guaranteed the
payment by Orion to Chase of certain fees payable in connection with the
execution of the commitment letter with Chemical for the Old Credit Facility.
All such fees were paid by Orion on January 5, 1996. Furthermore, Metromedia
guaranteed the payment of certain third party accounts receivable owed to Orion
so that the entire face amount of such accounts could be included in the
borrowing base for the Credit Facility. Neither Mr. Kluge nor Metromedia
received any consideration for providing such guarantees.
SNAPPER CREDIT FACILITY. On November 26, 1996, Snapper entered into a
credit agreement (the "Snapper Credit Agreement") with AmSouth Bank of Alabama
("AmSouth"), pursuant to which AmSouth has agreed to make available to Snapper a
revolving line of credit up to $55 million, upon the terms and subject to
conditions contained in the Snapper Credit Agreement (the "Snapper Revolver")
for a period ending on January 1, 1999 (the "Snapper Revolver Termination
Date"). The Snapper Revolver is guaranteed by the Company. At March 31, 1997,
$51,703,572.93 million was outstanding under the Snapper Revolver.
Interest under the Snapper Revolver is payable at Snapper's option at a rate
equal to either (i) prime plus .5% (from November 26, 1996 through May 25, 1997)
or prime plus 1.5% (from May 26, 1997 to the Snapper Revolver Termination Date)
or (ii) LIBOR (as defined in the Snapper Credit Agreement) plus 2.5% (from
November 26, 1996 through May 25, 1997) or LIBOR plus 3.5% (from May 26, 1997 to
the
10
<PAGE>
Snapper Revolver Termination Date). The Snapper Credit Agreement is secured by a
first priority security interest in all of Snapper's assets and properties and
is also entitled to the benefit of a replenishable $1,000,000 cash collateral
account, which was initially funded by Snapper. Under the Snapper Credit
Agreement, AmSouth may draw upon amounts in this cash collateral account to
satisfy any payment defaults by Snapper and Messrs. Kluge and Subotnick are
obligated to replenish such account any time amounts are so withdrawn, up to the
entire amount of the Snapper Revolver.
At December 31, 1996, Snapper was not in compliance with certain financial
covenants under the Snapper Revolver. Subsequent to December 31, 1996, Snapper
and AmSouth amended the Snapper Credit Agreement. As part of the amendment to
the Snapper Credit Agreement, AmSouth waived the covenant defaults as of
December 31, 1996. The amendment replaces certain existing financial covenants
with covenants regarding minimum quarterly cash flow and equity requirements, as
defined. In addition, Snapper and AmSouth have agreed to the principal terms and
conditions of a $10.0 million working credit facility. As additional
consideration for AmSouth making this new facility available, Snapper will
provide AmSouth with either (i) the joint and several guarantees of Messrs.
Kluge and Subotnick on the new facility only; or (ii) an additional $10 million
interest-bearing deposit made by the Company at AmSouth. This deposit will not
be specifically pledged to secure the Snapper Revolver or to secure Snapper's
obligations thereunder, but AmSouth shall have the right to offset against such
deposit as granted by law and set forth in the Snapper Revolver. The closing of
the credit facility remains subject to the execution of definitive loan
documentation.
MANAGEMENT AGREEMENT. The Company is a party to a management agreement with
Metromedia dated November 1, 1995, as amended on January 1, 1997 (the
"Management Agreement"), pursuant to which Metromedia provides the Company with
management services, including legal, insurance, payroll and financial
accounting systems and cash management, tax and benefit plans. The Management
Agreement terminates on October 31, 1997, and is automatically renewed for
successive one year terms unless either party terminates upon 60 days prior
written notice. The management fee under the Management Agreement was $1,500,000
until December 31, 1996. Pursuant to an amendment dated January 1, 1997, the
management fee under the Management Agreement was increased to $3,250,000
million per year, payable monthly at a rate of $270,833.33 per month. The
increase is a function, in part, of a detailed analysis conducted by Metromedia
Company concerning the market value of the services provided by Metromedia
Company to the Company, including the compensation of the Company's executive
officers. The Company is also obligated to reimburse Metromedia all its
out-of-pocket costs and expenses incurred and advances paid by Metromedia in
connection with the Management Agreement. Pursuant to the Management Agreement,
the Company has agreed to indemnify and hold Metromedia harmless from and
against any and all damages, liabilities, losses, claims, actions, suits,
proceedings, fees, costs or expenses (including reasonable attorneys' fees and
other costs and expenses incident to any suit, proceeding or investigation of
any kind) imposed on, incurred by or asserted against Metromedia in connection
with the Management Agreement. In fiscal 1996, Metromedia received no money for
its out-of-pocket costs and expenses or for interest on advances extended by it
to the Company pursuant to the Management Agreement.
TRADEMARK LICENSE AGREEMENT. The Company is a party to a license agreement
with Metromedia (the "Metromedia License Agreement"), dated November 1, 1995 as
amended on June 13, 1996, pursuant to which Metromedia has granted the Company a
non-exclusive, non-transferable, non-assignable right and license, without the
right to grant sublicenses, to use the trade name, trademark and corporate name
"Metromedia" in the United States and, with respect to MITI, worldwide,
royalty-free for a term of 10 years. The Metromedia License Agreement can be
terminated by Metromedia upon one month's prior written notice in the event (i)
the expiration or termination of the Management Agreement; (ii) of a Change in
Control of the Company (as defined below); or (iii) any of the stock or all or
substantially all of the assets of any of the subsidiaries of the Company are
sold or transferred, in which case, the Metromedia License Agreement shall
terminate with respect to such subsidiary. A Change in Control of the Company is
defined as (a) a transaction in which a person or "group" (within the meaning of
Section 13(d)(3) of the
11
<PAGE>
Exchange Act) not in existence at the time of the execution of the Metromedia
License Agreement becomes the beneficial owner of stock entitling such person or
group to exercise 50% or more of the combined voting power of all classes of
stock of the Company; (b) a change in the composition of the Company's Board of
Directors whereby a majority of the members thereof are not directors serving on
the board at the time of the Metromedia License Agreement or any person
succeeding such director who was recommended or elected by such directors; (c) a
reorganization, merger or consolidation whereby, following the consummation
thereof, Metromedia would hold less than 10% of the combined voting power of all
classes of the Company's stock; (d) a sale or other disposition of all or
substantially all of the assets of the Company; or (e) any transaction the
result of which would be that the Common Stock would not be required to be
registered under the Exchange Act and the holders of Common Stock would not
receive common stock of the survivor of the transaction which is required to be
registered under the Exchange Act.
In addition, Metromedia has reserved the right to terminate the Metromedia
License Agreement in its entirety immediately upon written notice to the
Company, if, in Metromedia's sole judgment, the Company's continued use of
"Metromedia" as a trade name would jeopardize or be detrimental to the goodwill
and reputation of Metromedia.
Pursuant to the Metromedia License Agreement, the Company has agreed to
indemnify and hold harmless Metromedia against any and all losses, claims,
suits, actions, proceedings, investigations, judgments, deficiencies, damages,
settlements, liabilities and reasonable legal (and other expenses related
thereto) arising in connection with the Metromedia License Agreement.
IMAGE OUTPUT AGREEMENT. Mr. Kluge beneficially owns more than 10% of the
common stock of Image Investors Co., a Delaware corporation. Image Investors
owns approximately 40% of the common stock of Image Entertainment, Inc.
("Image"). OHEC was a party to an output license agreement with Image which
terminated on December 31, 1995 pursuant to which OHEC granted to Image the
rights to manufacture, market and sell on laserdiscs for private in-home use
certain feature length programs released by Orion on videocassette for a period
of three years from the date of first release by Image on laserdisc in
consideration of a royalty payment payable with respect to each program. Orion,
OHEC and Image are currently negotiating the terms of a new output agreement.
Since December 31, 1996, the parties have been operating as if the old output
agreement is still in effect. For the year ended December 31, 1996, Image paid
to Orion approximately $565,404 under the agreement.
The Company believes that the terms of each of the transactions described
above were no less favorable to the Company then could have been obtained from
non-affiliated parties.
CERTAIN AGREEMENTS REGARDING EMPLOYMENT
PHILLIPS EMPLOYMENT AGREEMENT. Phillips Employment Agreement Mr. Phillips
and the Company were parties to an employment agreement dated as of April 19,
1994, as amended on November 1, 1995 (the "Phillips Employment Agreement"),
under which the Company employed Mr. Phillips as its President and Chief
Executive Officer. On December 4, 1996, Mr. Phillip's resigned from the Company
and the Phillip's Employment Agreement terminated. Pursuant to the Phillips
Employment Agreement, Mr. Phillips is entitled to receive payment in the amount
of his base salary (at an annual rate of $625,000 per year) for one year
following the termination. He will also continue to receive certain benefits,
including health, medical and life insurance and an office and secretary
designated by the Company clerical assistance during such one year period.
In connection with his employment, Mr. Phillips also received from the
Company an option (the "Phillips Option") to purchase 300,000 shares of Common
Stock at a price of $6.375 per share. The Phillips Option may be exercised at
any time through April 18, 2001. Mr. Phillips has the right to transfer the
Phillips Option in whole or in part at any time. The Company has also agreed to
register with the Commission any shares purchased upon the exercise of the
Phillips Option.
12
<PAGE>
POST-EMPLOYMENT CONSULTING AGREEMENT--TOD CHMAR. On December 5, 1996, Mr.
Chmar resigned from the Company and executed a Release of Claims and a
Post-Employment Consulting Agreement. Pursuant to the Consulting Agreement, Mr.
Chmar will receive consulting fees of $235,000 during the one year consulting
term ending December 5, 1997.
MISCELLANEOUS. Mr. Phillips is the sole stockholder of JDP Aircraft II,
Inc., a Georgia corporation ("JDP Aircraft"). On October 21, 1994, the Company
and JDP Aircraft entered into a lease agreement under which JDP Aircraft
provides the Company with the use of a Citation Jet owned by JDP Aircraft. The
lease agreement terminated on December 4, 1996. The Company paid $248,400 to JDP
Aircraft under the lease agreement for services provided during 1996.
On April 19, 1994, Mr. Phillips was elected President and Chief Executive
Officer of the Company. He was elected to the Board of Directors of the Company
on the same date. At this time, Renaissance Partners in which Mr. Phillips
serves as a general partner, purchased 700,000 shares of Common Stock from the
Company for $4,462,500, representing a price of $6.375 per share. This price
represents the last sale price of the Common Stock on the New York Stock
Exchange (on which the Common Stock was traded prior to the November 1 Mergers)
on April 11, 1994, the date before the Company announced that it had received an
investment proposal from Mr. Phillips. The Company also entered into a
Registration Rights Agreement with Renaissance Partners pursuant to which the
Company agreed to register with the Commission the 700,000 shares of Common
Stock purchased by Renaissance Partners. Such shares were registered with the
Commission in November 1995.
Mr. Sanders is Chairman of Troutman Sanders, a law firm which provided legal
services to the Company.
INDEMNIFICATION AGREEMENTS
MMG has entered into indemnification agreements (the "Indemnification
Agreements") with certain officers and directors of MMG. The Indemnification
Agreements provide for indemnification of such directors and officers to the
fullest extent authorized or permitted by law. The Indemnification Agreements
also provide for (i) advancement by MMG of expenses incurred by the director or
officer in defending certain litigation, (ii) the appointment in certain
circumstances of an independent legal counsel to determine whether the director
or officer is entitled to indemnification and (iii) the continued maintenance by
MMG of directors' and officers' liability insurance (which currently consists of
$15 million of primary coverage). These Indemnification Agreements were approved
by the stockholders of MMG at its 1993 Annual Meeting of Stockholders.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires MMG's directors and executive
officers, and persons who beneficially own more than 10% of the outstanding
Common Stock, to file with the Commission and the AMEX initial reports of
ownership and reports of changes in ownership of the Common Stock. Such
officers, directors and greater than 10% stockholders are required by the
regulations of the Commission to furnish MMG with copies of all reports that
they file under Section 16(a). To MMG's knowledge, based solely on a review of
the copies of such reports furnished to MMG and written representations that no
other reports were required, all Section 16(a) filing requirements applicable to
MMG's officers, directors and greater than 10% beneficial owners were complied
with by such persons during fiscal year ended December 31, 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Sanders, Imlay and Johnson.
13
<PAGE>
COMPENSATION COMMITTEE REPORT ON COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is comprised entirely of independent directors and is responsible
for developing and making recommendations to the Board with respect to MMG's
executive compensation policies.
The following report of the Compensation Committee discusses MMG's executive
compensation policies generally and, specifically, the relationship of MMG's
performance in 1996 to the compensation of MMG of its executive officers:
With the exception of Mr. Phillips, the Company's executive officers are
employed and paid by Metromedia Company, and a portion of such compensation is
expensed by the Company and paid by the Company to Metromedia Company pursuant
to the Management Agreement. The amounts paid by the Company to Metromedia for
the compensation of the Company's executive officers consist of compensation
only and not any bonus or other compensation payments. No additional amounts are
paid by the Company to any of the executive officers employed by Metromeida.
In general, the Compensation Committee seeks to link the compensation
attributable to each executive officer to the performance of MMG and that of the
compensation attributable to each such executive officer. Within these
parameters, the executive compensation program attempts to provide an overall
level of executive compensation that is competitive with companies of comparable
size and with similar market and operating characteristics.
During 1996, the Compensation Committee reviewed total officer compensation
against a market comparison group of approximately 12 companies in the
communications industry (the "Comparison Group") to assess the current
competitiveness of the compensation of MMG's executive officers. The
Compensation Committee considered MMG's executive compensation in view of the
Company's size, the number of operating units, and the role and responsibilities
of MMG's executive officers. In comparing the compensation of its executives
with that of executives of companies in the Comparison Group, the Compensation
Committee considered the competitiveness of the aggregate amount paid to Mr.
Phillips and the amount expensed by MMG and paid to Metromedia pursuant to the
Management Agreement.
The companies included in the NASDAQ Telecommunications Index for purposes
of analyzing the performance of MMG's Common Stock during 1996 (see "Performance
Graph" below) are not identical to the 12 companies in the Comparison Group
whose compensation policies were reviewed by the Compensation Committee in 1996
in assessing the competitiveness of the base salaries of MMG's executive
officers. Nevertheless, MMG believes that the cross-section of companies
included in the NASDAQ Telecommunications Index and the Comparison Group are
sufficiently similar and provide a reasonable basis for the Compensation
Committee to develop justified compensation policies and for an investor to
evaluate the performance of MMG's Common Stock.
CHIEF EXECUTIVE OFFICER COMPENSATION. Amounts earned during 1996 by MMG's
former President and Chief Executive Officer, John D. Phillips, and MMG's
President and Chief Executive Officer, Stuart Subotnick are shown in the Summary
Compensation Table. Mr. Phillips' base salary was established in April 1994, at
the time he became the CEO, at the same amount earned by his predecessor. This
amount remained unchanged from February 1991 through December 4, 1996. Mr.
Phillips compensation for 1996 consisted of a base salary and the right to
participate in certain benefit plans generally available to MMG employees,
including MMG's health, disability and life insurance programs. In addition, Mr.
Phillips participated in the Company's lifetime defined benefit pension plan and
its nonqualified supplemental pension. Benefit accruals under these plans ceased
at December 31, 1995. See "EXECUTIVE COMPENSATION--Pension Plans."
Mr. Subotnick's base salary was established in December 1996 upon the
resignation of Mr. Phillips. The Company expenses the amount of Mr. Subotnick's
base salary only and such amounts are included in the payments made by the
Company to Metromedia Company under the Management Agreement.
14
<PAGE>
Mr. Subotnick's base salary was determined by analyzing the compensation of
chief executive officers in the Comparison Group, along with the amounts
previously paid to Mr. Phillips. The Company believes such analysis is
reasonable.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). One of the factors
the Compensation Committee considers in connection with compensation matters is
the anticipated tax treatment to the Company and to the executives of the
compensation arrangements. The deductibility of certain types of compensation
depends upon the timing of an executive's vesting in, or exercise of, previously
granted rights. Moreover, interpretation of, and changes in, the tax laws and
other factors Beyond the Compensation Committee's control also affect the
deductibility of compensation. Accordingly, the Compensation Committee will not
necessarily limit executive compensation to that deductible under Section 162(m)
of the Code. The Compensation Committee will consider various alternatives to
preserving the deductibility of compensation payments and benefits to the extent
consistent with its other compensation objectives.
The foregoing report of the Compensation Committee shall not be deemed to be
incorporated by reference into any filing of MMG under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, except to
the extent that the Company specifically incorporates such information by
reference, and shall not otherwise be deemed filed under such Acts.
Submitted by the Compensation
Committee of MMG's Board of
Directors as of March 26, 1996
John P. Imlay, Jr.
Clark A. Johnson
Carl Sanders
15
<PAGE>
PERFORMANCE GRAPH
The following graph sets forth MMG's total stockholder return as compared to
the Standard & Poor's 500 Index, the Standard & Poor's Consumer Goods Index (the
"Consumer Goods Index") and the NASDAQ Telecommunications Stock Index for the
five year period from January 1, 1991 through December 31, 1996 (with the
exception of the Consumer Goods Index for 1996 as that index was not published
for such period). The total stockholder return assumes $100 invested at the
beginning of the period in MMG's Common Stock, the Standard & Poor's 500 Index,
the Consumer Goods Index, and the NASDAQ Telecommunications Index.
In 1995, the Company used the Consumer Goods Index for purposes of analyzing
the performance of MMG's Common Stock. As a result of the Company's decision to
change its business focus to communications, media and entertainment, the
Compensation Committee has decided to analyze MMG's Common Stock relative to the
NASDAQ Telecommunications Stock Index. The Committee believes that the Consumer
Goods Index is no longer an appropriate gauge to measure performance.
Nonetheless, in accordance with the rules and regulations of the Commission, the
Company is required to include the Consumer Goods Index in its comparison for
1996. Since such index is no longer published it is not included in this Proxy
Statement.
METROMEDIA INTERNATIONAL GROUP CUMULATIVE TOTAL SHAREHOLDER RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Metromedia International Group Inc. $100 $92 $58 $70 $107 $76
S&P 500 $100 $108 $118 $120 $165 $203
NASDAQ Telecommunications Stock Index $100 $123 $189 $158 $207 $212
S&P Consumer Goods Index $100 $107 $106 $106 $141 N/A
</TABLE>
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<PAGE>
PROPOSAL NO. 1--ELECTION OF DIRECTORS
The following table sets forth certain information with respect to the
members of MMG's Board of Directors, including the two incumbent Class II
Directors (Messrs. Sherwin and White) who have been nominated by the Board of
Directors for re-election as Class II Directors at the Annual Meeting.
The Board of Directors knows of no reason why any of its nominees will be
unable or will refuse to accept election. If any nominee becomes unable or
refuses to accept election, the Board of Directors will either reduce the number
of directors to be elected or select a substitute nominee. If a substitute
nominee is selected, proxies will be voted in favor of such nominee.
The affirmative vote of the holders of a plurality of shares of Common Stock
present in person or represented by proxy at the Annual Meeting will be required
to elect each of the three Class I Directors to MMG's Board.
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION FOR PAST CLASS OF DIRECTOR
FIVE YEARS AND CERTAIN DIRECTORSHIPS AGE DIRECTORS SINCE
- -------------------------------------------------------------------------------------- --- ---------- -----------
<S> <C> <C> <C>
John P. Imlay, Jr..................................................................... 60 Class I 1993
Served since 1990 as Chairman of Dun & Bradstreet Software Services, Inc., an
application software company located in Atlanta, Georgia. Mr. Imlay is the former
Chairman of Management Science America, a mainframe applications software company.
Management Science America was acquired by Dun & Bradstreet Software Services, Inc.
in 1990. Mr. Imlay is also a director of the Atlanta Falcons, a National Football
League team, and The Gartner Group. Mr. Imlay is a member of the Audit Committee and
the Compensation Committee.
John W. Kluge......................................................................... 82 Class I 1995
Chairman of the Board of Directors of the Company since November 1, 1995. Chairman
of the Board and a director of Orion Pictures Corporation since 1992. Chairman and
President of Metromedia Company and its predecessor-in-interest, Metromedia, Inc.
for over five years. Mr. Kluge is also a Director of The Bear Stearns Companies,
Inc., Conair Corporation and Occidental Petroleum Corporation. Mr. Kluge is Chairman
of the Executive Committee.
Stuart Subotnick...................................................................... 55 Class I 1995
President and Chief Executive Officer since December 4, 1996 and Vice Chairman of
the Board of Directors of the Company since November 1, 1995. Vice Chairman of the
Board and a director of Orion Pictures Corporation since 1992. Executive Vice
President of Metromedia and its predecessor-in-interest, Metromedia Company, Inc.
for over five years. Mr. Subotnick is also a Director of Carnival Cruise Lines,
Inc., a cruise ship company and RDM Sports Group, Inc., a diversified sporting goods
company. Mr. Subotnick is Chairman of the Audit Committee and a member of the
Executive and Nominating Committees.
Richard J. Sherwin.................................................................... 53 Class II 1995
President of MITI. Mr. Sherwin has served as Co-President and director of MITI and
its predecessor companies since October 1990. Prior to that, Mr. Sherwin served as
the Chief Operating Officer of Graphic Scanning Corp., a paging and wireless
telecommunications company.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION FOR PAST CLASS OF DIRECTOR
FIVE YEARS AND CERTAIN DIRECTORSHIPS AGE DIRECTORS SINCE
- -------------------------------------------------------------------------------------- --- ---------- -----------
<S> <C> <C> <C>
Leonard White......................................................................... 55 Class II 1995
President and Chief Executive Officer of Orion. Mr. White has served in this
capacity from March 1992 through November 1, 1995. Interim President and Chief
Executive Officer of Orion from March 1992 until November 1992. Chairman of the
Board and Chief Executive Officer of Orion Home Entertainment Corporation, a
subsidiary of Orion ("OHEC"), from March 1991 until March 1992. President and Chief
Operating Officer of Orion Home Video division of OHEC from March 1987 until March
1991.
Clark A. Johnson...................................................................... 65 Class III 1995
Director of the Company since April 27, 1990. He has served as chairman and Chief
Executive Officer of Pier One Imports, Inc., a specialty retailer of decorative home
furnishings, since August 1988. Mr. Johnson is a director of Albertson's, Inc.,
Anacomp, Inc., Heritage Media Corporation, InterTAN, Inc. and Pier One Imports, Inc.
Mr. Johnson is a member of the Compensation and Audit Committees.
Silvia Kessel......................................................................... 46 Class III 1995
Executive Vice President since August 29, 1996 and Senior Vice President, Chief
Financial Officer and Treasurer of the Company since the November 1, 1995. Executive
Vice President and a director of Orion Pictures Corporation since January 1993.
Senior Vice President of Orion from June 1991 to November 1992. Senior Vice
President of Metromedia since January 1994. President of Kluge & Company from
January 1992. Managing Director of Kluge & Company (and its predecessor) from April
1990 to January 1994. Ms. Kessel is also a Director of RDM Sports Group, Inc. Ms.
Kessel is a member of the Nominating Committee.
Carl E. Sanders....................................................................... 71 Class III 1995
Engaged in the private practice of law as Chairman of Troutman Sanders, a law firm
located in Atlanta, Georgia. Director of the Company since 1967, except for a
one-year period from April 1970 to April 1971. Former Governor of the State of
Georgia and a director of Carmike Cinemas, Inc., Norrell Corporation, Healthdyne,
Inc., and RDM Sports Group, Inc. Mr. Sanders is Chairman of the Compensation
Committee.
Arnold L. Wadler...................................................................... 53 Class III 1995
Executive Vice President since August 29, 1996 and Senior Vice President, General
Counsel and Secretary of the Company since November 1, 1995. Senior Vice President,
Secretary and General Counsel of Metromedia Company and its predecessor-in-interest,
Metromedia, Inc., for over five years. Director of Orion Pictures Corporation since
1992. Mr. Wadler is Chairman of the Nominating Committee.
</TABLE>
On December 11 and 12, 1991 (the "Filing Date"), Orion and certain of its
subsidiaries filed voluntary bankruptcy petitions under Chapter 11 of the United
State Bankruptcy Code. The United States Bankruptcy Court for the Southern
District of New York confirmed Orion's Modified Third Amended Joint Consolidated
Plan of Reorganization (the "Plan") on October 10, 1992 and the Plan was
consummated on November 5, 1992. Silvia Kessel and Leonard White, current
directors of the Company, each served as executive officers of Orion on the
Filing Date.
18
<PAGE>
PROPOSAL NO. 2--RATIFICATION OF
THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of MMG has appointed the firm of KPMG Peat Marwick
LLP, independent auditors, to audit the consolidated financial statements of MMG
and its subsidiaries for the fiscal year ending December 31, 1997, subject to
ratification by the MMG Stockholders.
A partner of KPMG Peat Marwick LLP is expected to be present at the Annual
Meeting and to be provided with an opportunity to make a statement if such
partner desires to do so and to be available to respond to appropriate questions
from stockholders.
If the stockholders do not ratify the appointment KPMG Peat Marwick LLP as
MMG's independent auditors for the forthcoming fiscal year, such appointment
will be reconsidered by the Audit Committee and the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT AUDITORS OF MMG'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
PROPOSAL NO. 3--STOCKHOLDER PROPOSAL
Alan G. Hevesi, investment adviser and a trustee of the New York City
Teachers' Retirement System ("NYCTRS"), c/o The City of New York, Office of the
Comptroller, 1 Centre Street, New York, New York 10007-2341, owner of 15,900
shares of Common Stock, has submitted the following proposal on behalf of
NYCTRS:
"BE IT RESOLVED, that the shareholders of Metromedia International Group
request that the Board of Directors amend the certificate of incorporation
to reinstate the rights of the shareholders to take action by written
consent and to call special meetings".
STATEMENT IN SUPPORT: "The rights of the shareholders to take action by
written consent and to call special meetings should not be abridged.
The Company's elimination of these rights, in our opinion, effectively
removes important processes by which shareholders can act expeditiously to
protect their investment interests.
For example, the right of shareholders to act to remove incumbent directors
for egregious conduct should not be limited to the annual meeting. Also,
shareholders should not be prevented from giving timely consideration to a
bidder's proposal to acquire control of the Company, or a dissident
shareholder's slate of nominees for election to the Board of Directors,
because such proposals are required to be presented only at the annual
meeting."
STATEMENT OF THE BOARD OF DIRECTORS: Presently, the Restated Certificate of
Incorporation and By-laws of the Company (collectively, the "Corporate
Documents") (i) require, among other things, that special meetings of
stockholders for any purpose be called by either the Chairman or Vice Chairman
of the Board of Directors and (ii) do not provide for stockholder action by
written consent. If the Company amended the Corporate Documents as proposed, it
would be allowing its stockholders to call special meetings and act without a
meeting whenever, however frequently and for whatever reason such stockholders
may desire. For the reasons stated below, the Board of Directors believes that
the requested amendments to the Corporate Documents are not in the best
interests of the Company and its stockholders.
Applicable Delaware law does not grant stockholders of a corporation the
absolute right to call a special meeting or act by written consent, and instead
permits each individual corporation to determine in its Corporate Documents
whether stockholders will have such rights. The Board of Directors believes that
the
19
<PAGE>
Delaware legislature adopted this approach due to the significant financial and
administrative burdens that a special meeting or stockholder action by consent
can impose on a public corporation.
Approximately 7,788 persons and entities are the record and beneficial owners of
the Company's common stock, each of whom, if Proposal 3 is approved, would be
entitled under the proposal to demand a special meeting or institute action by
written consent. Each such stockholder would also be entitled to notice of, and
to receive proxy materials relating to, any special meeting, thereby
necessitating actual expenditures (legal, printing and postage) in addition to
those associated with the Company's annual meeting. In addition, the calling of
a special meeting would necessitate the diversion of corporate officers and
employees from their other duties in order to prepare for such a meeting. The
Board of Directors believes that the interest of the Company's stockholders
would be better served utilizing these resources to improve its businesses.
Similarly, the Board of Directors believes that permitting action to be taken by
written consent would create confusion as multiple stockholders would be able to
solicit written consents on various matters and would divert valuable corporate
resources to this process.
In light of the foregoing, the Board of Directors believes that the adoption of
Proposal 3 could leave the Company exposed to numerous calls for special
meetings and stockholder action by consent that may be of little or no benefit
to stockholders and which are a significant burden to the Company. Stockholders,
such as the proponent of Proposal 3, remain free to make proposals at the
Company's annual meeting. The Board of Directors believe that the Chairman and
Vice Chairman of the Board of Directors are in the best position to determine if
a special meeting is warranted.
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS BELIEVES THAT PROPOSAL
3 IS NOT IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS.
ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
AGAINST PROPOSAL 3.
Approval by the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock is required for approval of Proposal 3.
20
<PAGE>
ANNUAL REPORT; INCORPORATION BY REFERENCE
THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
(WHICH CONTAINS THE COMPANY'S AUDITED CONSOLIDATED FINANCIAL STATEMENTS) IS
BEING MAILED TO STOCKHOLDERS TOGETHER WITH THIS PROXY STATEMENT. TO THE EXTENT
THIS PROXY STATEMENT HAS BEEN OR WILL BE SPECIFICALLY INCORPORATED BY REFERENCE
INTO ANY FILING BY THE COMPANY UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THE SECTIONS OF THE PROXY
STATEMENT ENTITLED "BOARD OF DIRECTORS REPORT ON COMPENSATION" AND "PERFORMANCE
GRAPH" SHALL NOT BE DEEMED TO BE SO INCORPORATED UNLESS SPECIFICALLY OTHERWISE
PROVIDED IN ANY SUCH FILING.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any stockholder of MMG who wishes to present a proposal at the 1998 Annual
Meeting of Stockholders of MMG, and who wishes to have such proposal included in
MMG's proxy statement for that meeting, must deliver a copy of such proposal to
MMG at One Meadowlands Plaza, East Rutherford, New Jersey 07073, Attention:
Corporate Secretary, no later than December 10, 1997; provided, however, that if
the 1998 Annual Meeting of Stockholders is held on a date more than 30 days
before or after the corresponding date of the 1997 Annual Meeting of
Stockholders, any stockholder who wishes to have a proposal included in MMG's
proxy statement for that meeting must deliver a copy of the proposal to MMG a
reasonable time before the proxy solicitation is made. MMG reserves the right to
decline to include in MMG's proxy statement any stockholder's proposal which
does not comply with the rules of the Commission for inclusion therein.
OTHER BUSINESS
The Board of Directors does not intend to bring any other business before
the meeting and it is not aware that anyone else intends to do so. If any other
business comes before the meeting, it is the intention of the persons named in
the enclosed form of proxy to vote as proxies in accordance with their best
judgment.
PLEASE EXERCISE YOUR RIGHT TO VOTE BY PROMPTLY COMPLETING, SIGNING AND
RETURNING THE ENCLOSED PROXY FORM. YOU MAY LATER REVOKE THE PROXY AND, IF YOU
ARE ABLE TO ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors,
Arnold L. Wadler
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
April 10, 1997
21
