Exhibit 10.2
METROMEDIA INTERNATIONAL GROUP, INC.
INCENTIVE BONUS AGREEMENT
-------------------------
THIS
AGREEMENT is entered into as of the 1st day of October, 2006
(the
"Effective Date") by and between Metromedia International Group,
Inc., a
Delaware corporation (the "Company"), and Mark Stephen Hauf
("Executive").
WHEREAS, the Company has entered into a letter of intent pursuant
to which
it anticipates selling all or substantially all of its assets (the
"LOI Sale
Transaction"); and
WHEREAS, Executive is currently employed by the Company as its
Chief
Executive Officer, and the Board of Directors of the Company (the
"Board") has
determined that it is in the best interests of the Company and its
stockholders
to compensate Executive for creating the value in the Company's
securities that
the Company expects to realize in connection with the LOI Sale
Transaction or
any other "Sale Transaction" (defined below) and to provide an
incentive for
Executive to perform his duties to the Company in furtherance of
the Company's
efforts to consummate such transaction; and
WHEREAS, to such end, the Company desires to provide Executive with
certain
payments and benefits pursuant to the terms of this Agreement;
and
WHEREAS, the Board of Directors has authorized the Company to enter
into
this Agreement.
NOW,
THEREFORE, for and in consideration of the premises and the
mutual
covenants and agreements contained herein and other good and
valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the
Company and Executive hereby agree as follows:
I.
Incentive Bonus.
The Company agrees that, if a definitive agreement to
consummate the LOI Sale Transaction or any other sale of the
Company or
transaction pursuant to which the Company sells all or
substantially all of its
assets (collectively with the LOI Transaction, a "Sale
Transaction") is entered
into by January 31, 2007, the Sale Transaction is subsequently
consummated and
the holders of shares of preferred stock, par value $1.00 per
share, of the
Company ("Preferred Stock") have received an amount equal to $68.00
per share of
Preferred Stock, Executive shall be entitled to receive a bonus
equal to 3.2% of
the gross proceeds received by the Company or its shareholders in
the Sale
Transaction (the "Incentive Bonus"), which shall be payable in a
single lump sum
cash payment as soon as reasonably practicable following the date
of the last
payment to the holders of Preferred Stock that results in such
holders receiving
at least $68.00 per share (the "Payment Date"), subject to
Executive's continued
<PAGE>
employment on such date. Notwithstanding the foregoing, if
Executive's
employment is terminated by the Company without "Cause" or by
Executive for
"Good Reason" (as such terms are defined in the employment
agreement, entered
into on October 6, 2003 and effective as of October 1, 2003, by and
between
Executive and the Company, as amended from time to time (the
"Employment
Agreement")) at any time before the Payment Date, Executive shall
be entitled to
receive the Incentive Bonus on the Payment Date, if it occurs.
Executive hereby
acknowledges that the Company's filing of any chapter 11 case in
any United
States Bankruptcy Court shall not constitute Good Reason within the
meaning of
his Employment Agreement.
II.
Certain Additional
Payments by the Company
A. If it is determined (as hereafter
provided) that any payment or
distribution by the Company to or for the benefit of Executive,
whether paid or
payable or distributed or distributable pursuant to the terms of
this Agreement
or otherwise pursuant to or by reason of any other agreement,
policy, plan,
program or arrangement (a "Payment"), would be subject to the
excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code")
(or any successor provision thereto) or to any similar tax imposed
by state or
local law, or any interest or penalties with respect to such excise
tax (such
tax or taxes, together with any such interest and penalties, are
hereafter
collectively referred to as the "Excise Tax"), then Executive will
be entitled
to receive an additional payment or payments (a "Gross-Up Payment")
in an amount
such that, after payment by Executive of all taxes (including any
interest or
penalties imposed with respect to such taxes), including any Excise
Tax, imposed
upon the Gross-Up Payment, Executive retains an amount of the
Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
B. Subject to
Section II.F of this Agreement, all determinations
required to be made under this Section II, including whether an
Excise Tax is
payable by Executive and the amount of such Excise Tax and whether
a Gross-Up
Payment is required and the amount of such Gross-Up Payment, will
be made by a
nationally recognized firm of certified public accountants (the
"Accounting
Firm") selected by the Company, which may be the Company's regular
outside
auditors. The Company will direct the Accounting Firm to submit
its
determination and detailed supporting calculations to both the
Company and
Executive within 30 calendar days after the date of consummation of
the Sale
Transaction and any other such time or times as may be requested by
the Company
or Executive. If the Accounting Firm determines that any Excise Tax
is payable
by Executive, the Company will pay the required Gross-Up Payment to
Executive no
later than five calendar days prior to the due date for the
Executive's income
tax return on which the Excise Tax is included. If the Accounting
Firm
determines that no Excise Tax is payable by Executive, it will, at
the same time
as it makes such determination, furnish Executive with an opinion
that he has
substantial authority not to report any Excise Tax on his federal,
state, local
income or other tax return. Any determination by the Accounting
Firm as to the
amount of the Gross-Up Payment will be binding upon the Company and
Executive.
As a result of the uncertainty in the application of Section 4999
of the Code
(or any successor provision thereto) and the possibility of similar
uncertainty
regarding applicable state or local tax law at the time of any
determination by
<PAGE>
the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will
not have been made by the Company should have been made (an
"Underpayment"),
consistent with the calculations required to be made hereunder. If
the Company
exhausts or fails to pursue its remedies pursuant to Section II.F
hereof, and
Executive thereafter is required to make a payment of any Excise
Tax, Executive
shall so notify the Company, which will direct the Accounting Firm
to determine
the amount of the Underpayment that has occurred and to submit its
determination
and detailed supporting calculations to both the Company and
Executive as
promptly as possible. Any such Underpayment will be promptly paid
by the Company
to, or for the benefit of, Executive within five business days
after receipt of
such determination and calculations.
C. The Company
and Executive will each provide the Accounting Firm
access to and copies of any books, records and documents in the
possession of
the Company or Executive, as the case may be, reasonably requested
by the
Accounting Firm, and otherwise cooperate with the Accounting Firm
in connection
with the preparation and issuance of the determination contemplated
by Section
II.B hereof.
D. The federal,
state and local income or other tax returns filed by
Executive will be prepared and filed on a consistent basis with
the
determination of the Accounting Firm with respect to the Excise Tax
payable by
Executive. Executive will make proper payment of the amount of any
Excise Tax,
and at the request of the Company, provide to the Company true and
correct
copies (with any amendments) of his federal income tax return as
filed with the
Internal Revenue Service and corresponding state and local tax
returns, if
relevant, as filed with the applicable taxing authority, and such
other
documents reasonably requested by the Company, evidencing such
payment. If prior
to the filing of Executive's federal income tax return, or
corresponding state
or local tax return, if relevant, the Accounting Firm determines
that the amount
of the Gross-Up Payment should be reduced, Executive will within
five business
days pay to the Company the amount of such reduction.
E. The fees and
expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by
Section II.B
and Section II.D he
