EXHIBIT 10.1 AGREEMENT AND PLAN OF MERGER

EXHIBIT 10.1

 

 

EXECUTION COPY

 

AGREEMENT AND PLAN OF MERGER

 

by and between

 

LOC ACQUISITION COMPANY

 

and

 

METRO-GOLDWYN-MAYER INC.

 

Dated as of September 23, 2004

 

Table of Contents

 

 

i

 

ii

 

EXHIBIT A—Form of Voting and Support Agreement

EXHIBIT B—Form of Solvency Opinion

 

iii

AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of September 23, 2004, by and between LOC Acquisition Company, a Delaware corporation (“ Newco ”), and Metro-Goldwyn-Mayer Inc., a Delaware corporation (the “ Company ”).

 

WHEREAS, the Boards of Directors of Newco and the Company each have determined that the Merger (as defined in Section 2.1) is in the best interests of their respective companies and their respective stockholders and, accordingly, have each agreed to effect the Merger provided for herein upon the terms and subject to the conditions set forth herein;

 

WHEREAS, Tracinda Corporation (“ Tracinda ”) and 250 Rodeo, Inc. (“ Rodeo ” and, together with Tracinda, the “ Principal Stockholders ”) have entered into a voting and support agreement in the form of Exhibit A to this Agreement, dated as of the date hereof, among the Principal Stockholders and Newco, pursuant to which each of the Principal Stockholders has agreed to vote, or cause to be voted, all of the Company Shares (as defined in Article I hereof) owned by such Principal Stockholder in favor of the transactions contemplated by this Agreement (the “ Voting and Support Agreement ”);

 

WHEREAS, as a condition to the willingness of the Company to enter into this Agreement, Sony Corporation of America (“ SCA ”) has delivered to the Company a signed commitment letter (the “ SCA Equity Commitment Letter ”) pursuant to which SCA has agreed, subject to the terms and conditions set forth therein, to make or cause to be made an equity investment in Newco of an amount of $300,000,000;

 

WHEREAS, as a condition to the willingness of the Company to enter into this Agreement, Comcast Studio Investments, Inc. (“ Comcast ”) has delivered to the Company a signed commitment letter (the “ Comcast Equity Commitment Letter ”) pursuant to which Comcast has agreed, subject to the terms and conditions set forth therein, to make or cause to be made an equity investment in Newco of an amount of $300,000,000 and Comcast Corporation has agreed to cause a bank or similar financial institution to provide a letter of credit for $23,080,000 million in favor of the Company (the “ Comcast Letter of Credit ”);

 

WHEREAS, as a condition to the willingness of the Company to enter into this Agreement, TPG Partners IV, L.P. (“ TPG ”) has delivered to the Company a signed commitment letter (the “ TPG Equity Commitment Letter ”) pursuant to which TPG has agreed, subject to the terms and conditions set forth therein, to make or cause to be made an equity investment in Newco of an amount of $350,000,000 and to cause a bank or similar financial institution to provide a letter of credit for $26,920,000 million in favor of the Company (the “ TPG Letter of Credit ”);

 

WHEREAS, as a condition to the willingness of the Company to enter into this Agreement, DLJ Merchant Banking III, Inc. (“ DLJ ”) has delivered to the Company a signed commitment letter (the “ DLJ Equity Commitment Letter ”) pursuant to which DLJ has agreed, subject to the terms and conditions set forth therein, to make or cause to be made an equity investment in Newco of an amount of $125,000,000 and to cause a bank

 

1

or similar financial institution to provide a letter of credit for $9,620,000 million in favor of the Company (the “ DLJ Letter of Credit ”);

 

WHEREAS, as a condition to the willingness of the Company to enter into this Agreement, Providence Equity Partners IV, L.P. (“ Providence ” and, together with SCA, Comcast, TPG and DLJ, the “ Equity Investors ”) has delivered to the Company a signed commitment letter (the “ Providence Equity Commitment Letter ” and, together with the SCA Equity Commitment Letter, the Comcast Equity Commitment Letter, the TPG Equity Commitment Letter and the DLJ Equity Commitment Letter, the “ Equity Commitment Letters ”) pursuant to which Providence has agreed, subject to the terms and conditions set forth therein, to make or cause to be made an equity investment in Newco of an amount of $525,000,000 and to cause a bank or similar financial institution to provide a letter of credit for $40,380,000 million in favor of the Company (the “ Providence Letter of Credit ” and, together with the Comcast Letter of Credit, the TPG Letter of Credit and the DLJ Letter of Credit, the “ Letters of Credit ”); and

 

WHEREAS, as a condition to the willingness of the Company to enter into this Agreement, the Equity Investors have delivered to the Company the Letters of Credit.

 

NOW, THEREFORE, in consideration of the representations, warranties and covenants set forth in this Agreement and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and subject to the conditions set forth herein, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

Capitalized and certain other terms used in this Agreement have the meanings set forth below. Unless the context otherwise requires, such terms shall include the singular and plural and the conjunctive and disjunctive forms of the terms defined.

 

“ Abend Binders ” shall mean those sixty-three binders that were prepared for pictures in the Company’s library as of 1995 which binders have been made available to Newco prior to the date hereof.

 

“ Abend Laws ” shall have meaning set forth in Section 4.19(d).

 

“ Abend Schedule ” shall have the meaning set forth in Section 4.19(d).

 

“ Acquisition Agreement ” shall have the meaning set forth in Section 6.2(b).

 

“ Acquisition Financing ” shall mean the financing referred to in the Commitments.

 

2

“ Additional Confidentiality Agreement ” shall have the meaning set forth in Section 6.4.

 

“ Affiliate ” shall have the meaning set forth in Rule 12b-2 promulgated under the Exchange Act.

 

“ Agreement ” shall have the meaning set forth in the Preamble hereto.

 

“ Antitrust Division ” shall have the meaning set forth in Section 6.6(b).

 

“ Bankruptcy and Equity Exception ” shall have the meaning set forth in Section 4.4.

 

“ Benefit Plan ” shall mean each Pension Plan, Welfare Plan and any other plan, fund, program, arrangement or agreement (including any employment or consulting agreement) to provide employees, directors, independent contractors, consultants, officers or agents with medical, health, disability, life, bonus, incentive, stock or stock-based right (option, ownership or purchase), retirement, deferred compensation, severance, change in control, salary continuation, vacation, sick leave, fringe, incentive insurance or other benefits) maintained, or contributed to, or required to be contributed to, by the Company or any of its Subsidiaries for the benefit of any current or former independent contractors, consultants, agents, employees, officers or directors of the Company or any of its Subsidiaries.

 

“ Business Day ” shall mean any day, other than a Saturday, Sunday and any day which is a legal holiday under the Laws of the State of New York or the State of California, or is a day on which banking institutions located in either such State are authorized or required by Law or other governmental action to close.

 

“ Certificate of Merger ” shall have the meaning set forth in Section 2.3.

 

“ Closing ” shall have the meaning set forth in Section 2.2.

 

“ Closing Date ” shall have the meaning set forth in Section 2.2.

 

“ Code ” shall mean the Internal Revenue Code of 1986, as amended. All citations to provisions of the Code, or to the Treasury Regulations promulgated thereunder, shall include any amendments thereto and any substitute or successor provisions thereto.

 

“ Comcast ” shall have the meaning set forth in the Recitals hereto.

 

“ Comcast Equity Commitment Letter ” shall have the meaning set forth in the Recitals hereto.

 

“ Comcast Letter of Credit ” shall have the meaning set forth in the Recitals hereto.

 

3

“ Commitment Letters ” shall have the meaning set forth in Section 5.6.

 

“ Commitments ” shall have the meaning set forth in Section 5.6.

 

“ Company ” shall have the meaning set forth in the Preamble hereto.

 

“ Company Adverse Recommendation Change ” shall have the meaning set forth in Section 6.2(b).

 

“ Company Certificate ” shall have the meaning set forth in Section 3.1(c).

 

“ Company Contracts ” shall have the meaning set forth in Section 4.11(a).

 

“ Company Credit Agreement ” shall mean that certain Restatement IV of Credit Agreement, dated as of April 26, 2004, among Metro-Goldwyn-Mayer Studios Inc., the lenders and issuers party thereto and Bank of America, N.A., as agent.

 

“ Company Disclosure Schedule ” shall have the meaning set forth in Article IV.

 

“ Company Employees ” shall have the meaning set forth in Section 6.13(a).

 

“ Company Filed SEC Documents ” shall have the meaning set forth in Section 4.7.

 

“ Company Intellectual Property ” shall have the meaning set forth in Section 4.18(a).

 

“ Company Joint Venture ” shall have the meaning set forth in Section 4.3(d).

 

“ Company Material Adverse Effect ” shall mean a material adverse effect on (i) the business, properties, assets, results of operations or financial condition of the Company and its Subsidiaries taken as a whole or (ii) the ability of the Company and its Subsidiaries to perform the obligations of the Company pursuant to this Agreement; provided , however , that no fact, event or circumstance described in the following clauses (a) through (f), or any effect resulting from or arising out of any such fact, event or circumstance, shall constitute, or shall be considered in determining the existence or occurrence of, a Company Material Adverse Effect: (a) any change in Law or GAAP (or any interpretation thereof by a Governmental Entity or quasi-Governmental Entity, including the Financial Accounting Standards Board or a similar organization), (b) economic or financial market conditions affecting the U.S. economy, any non-U.S. economy or the global economy generally, (c) (A) the impact of piracy on the business of the Company and its Subsidiaries or (B) other changes generally affecting the industries in which the Company and its Subsidiaries operate; provided that, in the case of this clause (c)(B), such changes do not disproportionately affect in a material manner the relevant segment or segments of the Company, its Subsidiaries and their respective

 

4

businesses when compared with the effect of such changes on comparable businesses of other entertainment companies (including the home video/DVD and television distribution and sale businesses), (d) a reduction or slowdown in the development, production or acquisition of Films by or on behalf of the Company or any of its Subsidiaries, (e) the box office performance of any Theatrical Motion Picture produced or distributed by or on behalf of the Company or any of its Subsidiaries and (f) the negotiation (including activities related to due diligence), execution, delivery or public announcement or the pendency of this Agreement and the Voting and Support Agreement or the transactions provided for herein or any actions required hereby (or the failure to take any action prohibited hereby, if consent for such action was requested and denied by Newco) including the impact thereof on the relationships of the Company or any of its Subsidiaries with customers, suppliers, distributors, consultants, independent contractors, talent or employees.

 

“ Company Options ” shall have the meaning set forth in Section 3.4.

 

“ Company Permits ” shall have the meaning set forth in Section 4.14(a).

 

“ Company Preferred Shares ” shall have the meaning set forth in Section 4.2(a).

 

“ Company Recommendation ” shall have the meaning set forth in Section 6.2(b).

 

“ Company SEC Documents ” shall have the meaning set forth in Section 4.6(a).

 

“ Company Share ” shall mean one share of common stock of the Company, $0.01 par value per share.

 

“ Company Stock Incentive Plan ” shall mean the Company’s Amended and Restated 1996 Stock Incentive Plan, as amended.

 

“ Company Stockholder Approval ” shall have the meaning set forth in Section 4.4.

 

“ Company Stockholder Meeting ” shall have the meaning set forth in Section 4.22.

 

“ Confidentiality Agreements ” shall mean the (i) Confidentiality Agreement, dated as of April 6, 2004, and any extension or modification thereto, between Sony Corporation of America, Providence Equity Partners Inc. and TPG Partners IV, L.P. and the Company, (ii) letter agreement, dated as of April 19, 2004, and any extension or modification thereto, between DLJ Merchant Banking III, Inc., Houlihan Lokey Howard & Zukin Financial Advisors, Inc. and the Company, (iii) the letter agreements, and any extension or modification thereto, among the Company and one or more of the Equity Investors and their respective Representatives and (iv) Confidentiality Agreement, dated

 

5

as of October 28, 2003, as amended on May 10, 2004, between Comcast Corporation and the Company.

 

“ Contract ” shall mean any note, bond, mortgage, indenture, lease, license, permit, concession, franchise, contract, agreement or other instrument or obligation.

 

“ Contributing Investor ” shall have the meaning set forth in Section 6.16(b).

 

“ Contribution Amount ” shall mean the amount delivered to the Company by the issuer of the applicable Letter of Credit upon delivery by the Company of a draw certificate to such issuer, pursuant to the terms of any of the Equity Commitment Letters (other than the SCA Equity Commitment Letter), to the effect that (a) the applicable Equity Investor (other than SCA) is required to maintain its respective Letter of Credit in favor of the Company, (b) the Scheduled Termination Date (as such term is defined in the applicable Letter of Credit), as such date shall have been extended from time to time, will occur within thirty (30) calendar days of the date of such draw certificate and (c) the applicable Equity Investor’s Letter of Credit has not been renewed or extended by the issuer thereof or replaced with a substantially identical letter of credit with a lender that is reasonably acceptable to the Company. For the avoidance of doubt, any amount delivered to the Company by the issuer of a Letter of Credit upon delivery by the Company of a draw certificate of a type other than as described in clauses (a), (b) and (c) of the preceding sentence shall not constitute a Contribution Amount.

 

“ D&O Insurance ” shall have the meaning set forth in Section 6.8(b).

 

“ Debt Securities ” shall mean registered or unregistered bonds, notes, debentures or similar instruments issued to evidence indebtedness for borrowed money.

 

“ Deposit Agreement ” shall mean that certain agreement between SCA and the Company, dated September 12, 2004, as amended as of the date hereof, providing for a payment by SCA of $150 million to an account specified by the Company on the terms and conditions set forth therein.

 

“ Development Projects ” shall mean any and all Films that have been proposed to be developed, produced or acquired by or on behalf of the Company or any of its Subsidiaries, with respect to which pre-production has not commenced, regardless of the stage of development of such project.

 

“ DGCL ” shall mean the Delaware General Corporation Law.

 

“ Dissenting Shares ” shall have the meaning set forth in Section 3.1(e).

 

“ DLJ ” shall have the meaning set forth in the Recitals hereto.

 

“ DLJ Equity Commitment Letter ” shall have the meaning set forth in the Recitals hereto.

 

6

“ DLJ Letter of Credit ” shall have the meaning set forth in the Recitals hereto.

 

“ EC ” shall have the meaning set forth in Section 6.6(b).

 

“ ECMR ” means Council Regulation (EC) No. 139/2004, as amended.

 

“ Effective Time ” shall have the meaning set forth in Section 2.3.

 

“ Elements ” shall mean all physical embodiments of any Film or its elements, or any marketing, advertising or promotional materials, behind-the-scenes footage, featurettes, “bonus” or “added value” materials or other ancillary or subsidiary materials of every kind and nature relating to a Film or its elements in whatever state of completion, wherever located (including in any film laboratory or storage facility owned or controlled by the Company, any of its Subsidiaries or any other Person), in any video, audio or other format (including PAL, NTSC and high definition), including: (i) all positive, negative, fine grain and answer prints; (ii) all exposed or developed film, pre-print materials (including positives, interpositives, negatives, internegatives, color reversals, intermediates, lavenders, fine grain master prints and matrices and all other forms of pre-print elements which may be necessary or useful to produce prints or other copies or additional pre-print elements, whether now known or hereafter devised), subtitles, special effects, cutouts, stock footage, outtakes, tabs and trims; (iii) tapes, discs, hard drives, computer memory, or other electronic media of any nature; (iv) all sound and music tracks, audio and video recordings of all types and gauges (whether analog, digital or otherwise) in all languages and (v) all cells, drawings, storyboards, models, sculptures, puppets, bibles, outlines, scripts, screenplays and other physical properties.

 

“ Employee Security Plans ” shall mean the Metro-Goldwyn-Mayer Inc. Employee Security Plan, the Metro-Goldwyn-Mayer Inc. Employee Security Plan for Named Executive Officers and the Metro-Goldwyn-Mayer Pictures Inc. Employee Security Plan for Named Individuals set forth on Section 1.1(a) to the Company Disclosure Schedule.

 

“ Environmental Claim ” shall mean any claim, action, cause of action, investigation or notice (written or, to the Company’s Knowledge, oral) by any person or entity alleging potential liability (including potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (i) the presence, or release into the environment, of any Materials of Environmental Concern at any location, whether or not owned or operated by the Company or any of its Subsidiaries or (ii) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law.

 

“ Environmental Laws ” shall mean all federal, state, local and foreign Laws and regulations and common laws relating to pollution or protection of human health or the environment (including ambient air, surface water, ground water, land surface or subsurface strata, and natural resources), including Laws relating to emissions,

 

7

discharges, Releases or threatened Releases of Materials of Environmental Concern, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern.

 

“ Equity Commitment Letters ” shall have the meaning set forth in the Recitals hereto.

 

“ Equity Investors ” shall have the meaning set forth in the Recitals hereto.

 

“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended.

 

“ ERISA Affiliate ” means, with respect to any entity, trade or business, any other entity, trade or business that is, or was at the relevant time, a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes or included the first entity, trade or business or that is, or was at the relevant time, a member of the same “controlled group” as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.

 

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“ Exploit ” shall mean, with respect to the Films, to release, distribute, perform, display, exhibit, broadcast or telecast, license, sell, reproduce or create derivative works from, market, create merchandising or otherwise commercially or non-commercially exploit by any and all known or hereafter developed (i) technology, (ii) uses, (iii) media, (iv) formats, (v) modes of transmission and (vi) methods of distribution, dissemination or performance. The meaning of the term “ Exploitation ” shall be correlative to the foregoing.

 

“ Films ” shall mean all motion pictures (including features, shorts and trailers), television, cable or satellite programming (including on-demand and pay-per-view programming), Internet programming, direct-to-video/DVD programming or other live action, animated, filmed, taped or recorded entertainment of any kind or nature, and all components thereof, including titles, themes, content, dialogue, characters, plots, concepts, scenarios, characterizations, elements and music (whether or not now known or recognized) as to which the Company or any of its Subsidiaries owns or controls any right, title or interest, including in any of the following: (i) completed and released works or projects; (ii) works or projects in any stage of progress, including works or projects in development and/or pre-production, in principal photography and/or post-production, and completed but not released as of the Closing Date; (iii) abandoned or “turnaround” works or projects; (iv) to the extent related to the works or projects referred to in the foregoing clauses (i) through (iii), any sequel, prequel and/or remake rights and/or other derivative production rights, including any novelization, merchandising, character, serialization, game and/or interactive rights; (v) any other allied, ancillary, subsidiary and derivative rights (including theme park rights) throughout the universe related to the works and projects referenced in the foregoing clauses (i) through (iv); and (vi) any contractual and

 

8

other rights associated with or related to such works, projects or rights referenced in the foregoing clauses (i) through (v), whether in any media now known or hereafter developed. For the avoidance of doubt, the term “Films” shall include all Library Films, Films in Progress, Development Projects and Significant Unproduced Properties.

 

“ Films In Progress ” shall have the meaning set forth in Section 4.19(f).

 

“ Foreign Plan ” shall mean each Benefit Plan that is subject to the Laws or applicable customs or rules of relevant jurisdictions other than the United States.

 

“ Franchise Picture ” shall have the meaning set forth in Section 6.1(f).

 

“ FTC ” shall have the meaning set forth in Section 6.6(b).

 

“ GAAP ” shall mean United States generally accepted accounting principles.

 

“ Governmental Entity ” shall mean any governmental body, court, agency, official or regulatory or other authority, whether federal, state, local or foreign.

 

“ HSR Act ” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

“ Indemnified Parties ” shall have the meaning set forth in Section 6.8(a).

 

“ Infringe ” means, with respect to any Intellectual Property, to infringe or misappropriate such Intellectual Property in a manner that violates applicable Law or the legal rights of the owner thereof, or to dilute (as defined under applicable Law) the legal rights of the owner thereof in violation of applicable Law. The terms “ Infringes ” and “ Infringing ” shall have correlative meanings.

 

“ Intellectual Property ” means all intellectual property rights of any nature under the laws of the United States or any other jurisdiction, including, without limitation: (i) patents; (ii) trade secrets, inventions, discoveries, improvements, databases, technology and technical data, whether or not patentable or copyrightable; (iii) trademarks, service marks, trade dress, trade names and Internet domain names; (iv) copyrights and works of authorship and (v) rights of privacy and publicity and rights arising under defamation laws, and, with respect to all of the foregoing, any and all registrations, certificates, issuances, recordings, applications, divisionals, continuations, continuations-in-part, reissues, renewals, extensions and/or re-examinations related thereto.

 

“ IRS ” shall mean the Internal Revenue Service.

 

“ Knowledge ,” or any similar formulation of knowledge, shall mean (i) in the case of the Company, the knowledge of the persons listed on Section 1.1(b) to the Company Disclosure Schedule, and (ii) in the case of Newco, the knowledge of the persons listed on Section 1.1(b) to the Newco Disclosure Schedule.

 

9

“ Law ” shall mean any statute, law, ordinance, rule, regulation or other requirement of any Governmental Entity.

 

“ Leased Premises ” shall have the meaning set forth in Section 4.25(a).

 

“ Letter of Transmittal ” shall have the meaning set forth in Section 3.2(b).

 

“ Letters of Credit ” shall have the meaning set forth in the Recitals hereto.

 

“ Library Films ” shall mean any and all Films that have been completed and/or acquired and delivered, and for which Exploitation has commenced on or prior to the date of this Agreement, and any and all additional Films that have been completed and/or acquired and delivered, and for which Exploitation has commenced after the date of this Agreement, but on or prior to the Closing Date. For the avoidance of doubt, the term “Library Films” shall include all Films other than Films In Progress, Development Projects and Significant Undeveloped Properties.

 

“ Liens ” shall mean, with respect to any asset, pledges, mortgages, title defects or objections, claims, liens, charges, covenants, restrictions, encumbrances and security interests of any kind or nature.

 

“ Material Event ” means a material adverse effect on (i) the business, properties, assets, financial condition or results of operations of a Person and its Subsidiaries, taken as a whole or (ii) the ability of such Person and its Subsidiaries to perform the obligations of such Person pursuant to this Agreement or to consummate the Transactions to be performed or consummated by such Person.

 

“ Materials of Environmental Concern ” shall mean chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum and petroleum products, asbestos or asbestos-containing materials or products, polychlorinated biphenyls, lead or lead-based paints or materials, radon, fungus or mold.

 

“ Merger ” shall have the meaning set forth in Section 2.1.

 

“ Merger Consideration ” shall have the meaning set forth in Section 3.1(c).

 

“ Multiemployer Plan ” shall mean any “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA.

 

“ New Production Commitment ” shall have the meaning set forth in Section 6.1(f).

 

“ Newco ” shall have the meaning set forth in the Preamble hereto.

 

“ Newco Disclosure Schedule ” shall have the meaning set forth in Article V.

 

10

“ Newco Material Adverse Effect ” shall mean a fact, event or circumstance which has had, or is reasonably likely to have, together with all similar or related facts, events and circumstances, a material adverse effect on the ability of Newco to perform its obligations hereunder or which would prevent or materially impede, interfere with, hinder or delay the consummation of the Merger and the Transactions.

 

“ Non-Competition Agreement ” shall mean a Contract that prohibits or materially restricts the ability of the Company or any of its Subsidiaries to operate in any geographical area or compete or operate in any line of business in which the Company or such Subsidiary, as applicable, presently is engaged, other than (a) provisions relating to geographic exclusivity and/or exclusivity by medium or manner of Exploitation contained in agreements for the Exploitation of Films or Intellectual Property licenses or (b) channel distribution restrictions.

 

“ Notice of Adverse Recommendation ” shall have the meaning set forth in Section 6.2(b).

 

“ NYSE ” shall mean the New York Stock Exchange, Inc.

 

“ Option Consideration ” shall have the meaning set forth in Section 3.4.

 

“ Order ” shall mean any judgment, order, writ, preliminary or permanent injunction or decree of any Governmental Entity.

 

“ Owned Real Estate ” shall have the meaning set forth in Section 4.25(a).

 

“ Paying Agent ” shall have the meaning set forth in Section 3.2(a).

 

“ PBGC ” shall mean the Pension Benefit Guarantee Corporation.

 

“ Pension Plan ” shall mean “employee pension benefit plan” (as defined in Section 3(2) of ERISA) maintained, or contributed to, or required to be contributed to, by the Company or any of its Subsidiaries for the benefit of any current or former independent contractors, consultants, agents, employees, officers or directors of the Company or any of its Subsidiaries.

 

“ Permitted Liens ” shall mean (i) statutory Liens for Taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith in appropriate proceedings, (ii) inchoate mechanics’, materialmen’s, carriers’, workmen’s, warehousemen’s, repairmen’s, landlords’ and similar Liens (including all statutory Liens and all privileges or equivalent rights recognized by applicable Law) granted in the ordinary course of business, (iii) customary Liens granted in the ordinary course of business to any guild or other Person in connection with the production of Films, (iv) Liens securing debt reflected as secured debt on the financial statements included or incorporated by reference in the Company Filed SEC Documents so secured as of December 31, 2003, (v) title of the lessor under any capital lease, (vi) such other imperfections in title, rights of usufruct or use or other restrictions and encumbrances that do not materially detract from the value of or

 

11

materially interfere with the use or Exploitation of the Films or Elements (as currently Exploited by the Company and its Subsidiaries), the Owned Real Estate or the Leased Premises, as the case may be, (vii) Contracts entered into in the ordinary course of business pursuant to which any Person has acquired, established, developed or granted any rights to Exploit any Film, (viii) Liens that constitute the rights of any lessee or licensee under any lease or license with respect to any Film or Elements, (ix) Liens securing indebtedness incurred in the ordinary course of business attributable to “negative pick-ups” (as such term is commonly understood in the U.S. entertainment industry) or sale and leaseback transactions (x) Liens created under or in connection with, or otherwise permitted under, the Company Credit Agreement and (xi) any right in, or right to receive, money or other consideration in respect of, or relating in any way to any Film or Elements which consideration is based on the Exploitation of any such asset, however measured and which was granted in return for talent or other personal services rendered or third party rights utilized in connection with such Film or Elements or the development, financing or production thereof.

 

“ Person ” shall mean an individual, corporation, limited liability company, partnership, association, trust or any other entity or organization, including any Governmental Entities.

 

“ Principal Stockholders ” shall have the meaning set forth in the Recitals hereto.

 

“ Proposed Settlement ” shall have the meaning set forth in Section 6.9.

 

“ Providence ” shall have the meaning set forth in the Recitals hereto.

 

“ Providence Equity Commitment Letter ” shall have the meaning set forth in the Recitals hereto.

 

“ Providence Letter of Credit ” shall have the meaning set forth in the Recitals hereto.

 

“ Proxy Statement ” shall have the meaning set forth in Section 6.3(b).

 

“ Release ” shall mean any release, pumping, pouring, emptying, injecting, escaping, leaching, migrating, dumping, seepage, spill, leak, flow, discharge, disposal or emission.

 

“ Representatives ” shall have the meaning set forth in Section 6.2(a).

 

“ Retention Bonus Plan ” shall have the meaning set forth in Section 6.13(e).

 

“ Rodeo ” shall have the meaning set forth in the Recitals hereto.

 

“ Sarbanes-Oxley Act ” shall have the meaning set forth in Section 4.14(c).

 

12

“ SEC ” shall mean the United States Securities and Exchange Commission.

 

“ SCA ” shall have the meaning set forth in the Recitals hereto.

 

“ SCA Equity Commitment Letter ” shall have the meaning set forth in the Recitals hereto.

 

“ Scheduled Plans ” shall have the meaning set forth in Section 4.9(a).

 

“ Securities Act ” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“ Separate Account ” shall have the meaning set forth in Section 6.16(a)

 

“ Side Agreement ” shall mean the agreement, dated as of the date hereof, by and among Newco, Providence Equity Partners Inc., Texas Pacific Group, DLJ Merchant Banking Partners, Sony Pictures Entertainment Inc., Comcast Studio Investments, Inc. and the Company.

 

“ Significant Unproduced Properties ” means those Development Projects with respect to which, as of the date of this Agreement (or, with respect to the Closing, the Closing Date): (i) are in active development (or, if not in active development, development has commenced within two (2) years prior to the date of this Agreement) and have not been abandoned as of the date of this Agreement; (ii) the Company and/or its Subsidiaries owns or controls rights in such materials and is developing them for possible production as a Theatrical Motion Picture or as direct-to-video/DVD or made-for-television programming, or such materials are being developed by a Third Party for possible production as a Theatrical Motion Picture or as direct-to-video/DVD or made-for-television programming and the Company or one or more of its Subsidiaries has the right or obligation to finance (in whole or in part) and/or acquire any Exploitation rights in such Development Projects, Theatrical Motion Picture, direct-to-video/DVD or made-for-television programming; (iii) pre-production has not been commenced; and (iv) an amount in excess of $1 million has been expended and/or committed by the Company and/or its Subsidiaries in respect of development and/or production costs.

 

“ Specified Actions ” shall have the meaning set forth in Section 6.6(b).

 

“ Subsidiary ” of any Person means (i) a corporation more than 50% of the combined voting power of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one of more other Subsidiaries of such Person or by such Person and one or more other Subsidiaries thereof, (ii) a partnership of which such Person, or one or more other Subsidiaries of such Person or such Person and one or more other Subsidiaries thereof, directly or indirectly, is the general partner and has the power to direct the policies, management and affairs of such partnership, (iii) a limited liability company of which such Person or one or more other Subsidiaries of such Person or such Person and one or more other Subsidiaries thereof, directly or indirectly, is the managing member and has the power to direct the policies, management and affairs of such company or (iv) any other Person (other than a corporation, partnership or limited

 

13

liability company) in which such Person, or one or more other Subsidiaries of such Person or such Person and one or more other Subsidiaries thereof, directly or indirectly, has at least a majority ownership and has the power to direct the policies management and affairs thereof.

 

“ Substitute Financing ” shall have the meaning set forth in Section 6.6(f).

 

“ Superior Proposal ” shall mean a bona fide written Takeover Proposal (with all of the provisions in the definition of Takeover Proposal adjusted to increase the percentage of outstanding shares of capital stock, other securities, assets, properties and other rights to be acquired or disposed of to one hundred percent (100%)) that was not solicited by, or the result of any solicitation by the Company or any of its Subsidiaries or by any of their respective officers, directors, Affiliates, investment banks, accountants, financial advisors or other representatives or agents, in violation of Section 6.2, which the Company’s Board of Directors determines in good faith (after consultation with its financial advisors) to be (i) reasonably likely to be consummated and (ii) superior to the stockholders of the Company as compared to the transactions provided for herein and any alternative proposed in writing by Newco in accordance with Section 6.2 hereof, taking into account, among other things, the Person making such Takeover Proposal and all legal, financial, regulatory, fiduciary and other aspects of this Agreement and such Takeover Proposal, including any conditions relating to financing, regulatory approvals or other events or circumstances beyond the control of the party invoking the condition and any revisions made or proposed in writing by Newco prior to the time of determination.

 

“ Surviving Corporation ” shall have the meaning set forth in Section 2.1.

 

“ Takeover Proposal ” shall mean any inquiry, proposal or offer relating to (i) the acquisition after the date hereof of twenty percent (20%) or more of the outstanding shares of capital stock or twenty percent (20%) or more of the aggregate outstanding Voting Securities of the Company by any Third Party, (ii) a merger, consolidation, business combination, reorganization, share exchange, sale of substantially all assets, recapitalization, liquidation, dissolution or similar transaction which would result in any Third Party acquiring twenty percent (20%) or more of the fair market value of the assets (including capital stock of the Company’s Subsidiaries) of the Company and its Subsidiaries, taken as a whole, (iii) any other transaction which would, directly or indirectly, result in a Third Party acquiring twenty percent (20%) or more of the fair market value of the assets (including rights and capital stock of the Company’s Subsidiaries) of the Company and its Subsidiaries, taken as a whole, immediately prior to such transaction (whether by purchase of assets, acquisition of stock of a Subsidiary or otherwise), (iv) a merger, consolidation, business combination, reorganization, share exchange, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its Subsidiaries which would result in any Third Party (other than the Principal Stockholders) or the shareholders of such Third Party (other than the Principal Stockholders) owning twenty percent (20%) or more of the outstanding shares of capital stock or twenty percent (20%) or more of any other voting securities of the Company or any resulting parent entity; provided, that in the case of a transaction involving solely the

 

14

Subsidiaries of the Company, such Subsidiaries constitute twenty percent (20%) or more of the fair market value of the assets of the Company and its Subsidiaries, taken as a whole or (v) any combination of the foregoing

 

“ Tax Return ” shall mean any report, return, election, notice, declaration, information statement or other form or document (including all schedules, exhibits and other attachments thereto) relating to and filed or required to be filed with a Taxing authority in connection with any Tax (including estimated Taxes), and shall include any amendment to any of the foregoing.

 

“ Taxable Period ” shall mean any taxable year or any other period that is treated as a taxable year (or other period, in the case of a Tax imposed with respect to such other period; for example, a quarter) with respect to which any Tax may be imposed under any applicable Law.

 

“ Taxes ” shall mean any and all federal, state, local and foreign taxes, assessments, duties, impositions and levies including taxes that are based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, alternative or add-on minimum, severance, capital stock, premium, registration, transfer, gains, franchise, withholding, payroll, recapture, employment, excise, estimated, unemployment, insurance, social security, business license, occupation, business organization, stamp, environmental and property taxes, together with all interest, penalties and additions imposed with respect to such amounts. For purposes of this Agreement, “Taxes” also includes any obligations under any agreements or arrangements with any Person with respect to the liability for, or sharing of, Taxes (including pursuant to Treasury Regulations Section 1.1502-6 or comparable provisions of state, local or foreign tax Law) and including any liability for Taxes as a transferee or successor, by Contract or otherwise.

 

“ Termination Date ” shall have the meaning set forth in Section 8.1(b)(ii).

 

“ Termination Fee ” shall have the meaning set forth in Section 8.4(a).

 

“ Theatrical Motion Picture ” shall mean any feature length motion picture intended for initial exhibition in motion picture theatres.

 

“ Third Party ” shall mean any Person or group other than Newco and the Equity Investors.

 

“ TPG ” shall have the meaning set forth in the Recitals hereto.

 

“ TPG Equity Commitment Letter ” shall have the meaning set forth in the Recitals hereto.

 

“ TPG Letter of Credit ” shall have the meaning set forth in the Recitals hereto.

 

“ Tracinda ” shall have the meaning set forth in the Recitals hereto.

 

15

“ Transactions ” shall mean the Acquisition Financing and other agreements and arrangements between and among the Equity Investors and Newco in effect on the date hereof or entered into after the date hereof in compliance with the last sentence of Section 6.6(b) of this Agreement and to be in effect upon the consummation of the Merger.

 

“ Voting and Support Agreement ” shall have the meaning set forth in the Recitals hereto.

 

“ Voting Securities ” means capital stock of the Company having the power to vote, or act by written consent, with respect to matters on which the stockholders are entitled to vote.

 

“ WARN Act ” shall mean the Worker Adjustment and Retraining Notification Act of 1988, as amended.

 

“ Welfare Plan ” shall mean “employee welfare benefit plan” (as defined in Section 3(1) of ERISA) maintained, or contributed to, or required to be contributed to, by the Company or any of its Subsidiaries for the benefit of any current or former independent contractors, consultants, agents, employees, officers or directors of the Company or any of its Subsidiaries.

 

ARTICLE II

THE MERGER

 

Section 2.1 The Merger . Upon the terms and subject to the conditions of this Agreement, at the Effective Time, Newco shall be merged with and into the Company in accordance with the DGCL and the terms of this Agreement (the “ Merger ”), whereupon the separate corporate existence of Newco shall cease, and the Company shall be the surviving corporation of the Merger (the Company, as the surviving corporation after the Merger is sometimes referred to herein as the “ Surviving Corporation ”).

 

Section 2.2 Closing . Subject to the terms and conditions of this Agreement, the closing of the Merger (the “ Closing ”) shall take place on a day that is a full trading day on the NYSE (a) at the offices of Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, New York 10019 at 10:00 a.m., New York City time, no later than the second Business Day following the satisfaction of the conditions set forth in Article VII of this Agreement (other than (i) those conditions that are waived in accordance with the terms of this Agreement by the party or parties for whose benefit such conditions exist and (ii) any such conditions which, by their terms, are not capable of being satisfied until the Closing Date, but subject to the satisfaction of such conditions as of the Closing) or (b) at such other place, time and/or date as the parties hereto may otherwise agree. The date upon which the Closing shall occur is referred to herein as the “ Closing Date .”

 

Section 2.3 Effective Time . If all of the conditions to the Merger set forth in Article VII of this Agreement have been fulfilled or waived and this Agreement

 

16

shall not have been terminated as provided in Article VIII of this Agreement, the parties hereto shall cause a certificate of merger (the “ Certificate of Merger ”) to be properly executed and filed in accordance with the DGCL and the terms of this Agreement on the Closing Date. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of Delaware or at such other time as is specified by the parties hereto as the effective time in the Certificate of Merger (the “ Effective Time ”). The Merger shall have the effects set forth in the applicable provisions of the DGCL.

 

Section 2.4 Certificate of Incorporation and By-Laws .

 

(a) The Certificate of Merger shall provide that, at the Effective Time, the certificate of incorporation of the Surviving Corporation as in effect immediately prior to the Effective Time shall, subject to the second sentence of this Section 2.4(a), be amended as of the Effective Time so as to contain the provisions, and only the provisions, contained immediately prior to the Effective Time in the certificate of incorporation of Newco, except for Article I thereof, which shall read “The name of the corporation is Metro-Goldwyn-Mayer Inc.” Prior to the Closing Date, Newco shall amend its certificate of incorporation to include the provisions required by Section 6.8(a), and the certificate of incorporation of the Surviving Corporation shall include the provisions required by Section 6.8(a).

 

(b) The by-laws of Newco, as in effect immediately prior to the Effective Time, shall, subject to the second sentence of this Section 2.4(b), be the initial by-laws of the Surviving Corporation. Prior to the Closing Date, Newco shall amend its by-laws to include the provisions required by Section 6.8(a), and the by-laws of the Surviving Corporation shall include the provisions required by Section 6.8(a).

 

Section 2.5 Directors and Officers .

 

(a) The directors of Newco immediately prior to the Effective Time shall be the directors of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.

 

(b) The officers of Newco immediately prior to the Effective Time shall be the officers of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.

 

ARTICLE III

MERGER CONSIDERATION; CONVERSION OR

CANCELLATION OF SHARES IN THE MERGER

 

Section 3.1 Effect on Capital Stock . As of the Effective Time, by virtue of the Merger and without any action on the part of Newco, or the Company or their respective stockholders:

 

17

(a) Capital Stock of Newco . Each issued and outstanding share of (i) Class A common stock of Newco shall be converted into and become one fully paid and nonassessable share of Class A common stock, par value $0.01 per share, of the Surviving Corporation, (ii) Class B common stock of Newco shall be converted into and become one fully paid and nonassessable share of Class B common stock, par value $0.01 per share, of the Surviving Corporation, (iii) 10% Junior Preferred Stock, par value $1,000 per share, of Newco shall be converted into and become one fully paid and nonassessable share of 10% Junior Preferred Stock, par value $1,000 per share, of the Surviving Corporation and (iv) 14% Senior Preferred Stock, par value $1,000 per share, of Newco shall be converted into and become one fully paid and nonassessable share of 14% Senior Preferred Stock, par value $1,000 per share, of the Surviving Corporation.

 

(b) Treasury Stock and Newco Owned Stock . Each Company Share owned by Newco or held in the treasury of the Company immediately prior to the Effective Time shall be automatically cancelled and retired and shall cease to exist, and no payment shall be made with respect thereto. For the avoidance of doubt, any Company Shares held in the Metro-Goldwyn-Mayer Inc. Deferred Compensation Plan or that otherwise relate to or are issuable under any employee benefit plan, program or arrangement for the benefit of current or former employees, officers, directors or consultants of the Company or any of its Subsidiaries shall not be cancelled pursuant to this Section 3.1(b) and shall be converted into the right to receive Merger Consideration pursuant to Section 3.1(c).

 

(c) Conversion of Company Shares . Each issued and outstanding Company Share (other than any Company Share to be cancelled in accordance with Section 3.1(b) of this Agreement and any Dissenting Shares) shall automatically be converted into the right to receive an amount in cash equal to $12.00, without interest (the “ Merger Consideration ”). All Company Shares converted into the right to receive the Merger Consideration pursuant to this Section 3.1(c) shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate which immediately prior to the Effective Time represented Company Shares (a “ Company Certificate ”) shall thereafter cease to have any rights with respect to such Company Shares, except the right to receive the Merger Consideration to be issued in consideration therefor upon the surrender of such Company Certificate.

 

(d) Adjustments . If, between the date of this Agreement and the Effective Time, there is a reclassification, recapitalization, stock split, stock dividend, subdivision, combination or exchange of shares with respect to, or rights issued in respect of, Company Shares, the Merger Consideration shall be adjusted accordingly, without duplication, to provide to the holders of Company Shares the same economic effect as contemplated by this Agreement prior to such event.

 

(e) Dissenting Company Shares . Company Shares that have not been voted for adoption of this Agreement and with respect to which appraisal shall have been properly demanded in accordance with Section 262 of the DGCL (“ Dissenting Shares ”) shall not be converted into the right to receive the Merger Consideration at or after the Effective Time unless and until the holder of such shares withdraws such holder’s

 

18

demand for appraisal (in accordance with Section 262(k) of the DGCL) or becomes ineligible for such appraisal, but rather, the holder of the Dissenting Shares shall be entitled only to payment of the fair value of such Dissenting Shares in accordance with Section 262 of the DGCL. If a holder of Dissenting Shares shall withdraw (in accordance with Section 262(k) of the DGCL) the demand for such appraisal or shall become ineligible for such appraisal, then, as of the Effective Time or the occurrence of such event, whichever last occurs, each of such holder’s Dissenting Shares shall cease to be a Dissenting Share and shall be converted into and represent the right to receive the Merger Consideration. The Company shall give Newco prompt written notice of any written demands received by the Company for appraisal of Company Shares and Newco shall have the right to participate at its own expense in all negotiations and proceedings with respect to such demands. The Company shall not make any payments with respect to, or compromise or settle any demand for, appraisal without the prior written consent of Newco.

 

Section 3.2 Exchange of Company Certificates .

 

(a) As soon as reasonably practicable, but no later than the Effective Time, Newco shall deposit or cause to be deposited, with a bank or trust company selected by Newco and reasonably acceptable to the Company (the “ Paying Agent ”) for exchange and payment in accordance with this Article III, an amount in cash sufficient to deliver the aggregate Merger Consideration in exchange for the Company Certificates.

 

(b) As of or promptly following the Effective Time, the Surviving Corporation shall cause the Paying Agent to mail to each holder of record of Company Certificates (other than Company Certificates representing Dissenting Shares) that has not previously surrendered his, her or its Company Certificates, (i) a letter of transmittal in customary form with such other customary provisions as Newco may reasonably specify (the “ Letter of Transmittal ”), that shall specify that delivery shall be effected, and risk of loss and title to Company Certificates shall pass, only upon proper delivery of Company Certificates to the Paying Agent and (ii) instructions for use in effecting the surrender of Company Certificates in exchange for the Merger Consideration (which instructions shall provide that at the election of the surrendering holder, Company Certificates may be surrendered, and the Merger Consideration in exchange therefor collected, by hand delivery). Upon surrender of a Company Certificate for cancellation to the Paying Agent, together with a Letter of Transmittal properly completed and validly executed in accordance with the instructions thereto, and such other documents as may be reasonably required by the Paying Agent, the holder of such Company Certificate shall be entitled to receive in exchange therefor the Merger Consideration into which the Company Shares previously represented by such Company Certificate shall have been converted pursuant to Section 3.1 and any Company Certificate so surrendered shall be forthwith cancelled. The Paying Agent shall promptly accept such Company Certificate upon compliance with such reasonable terms and conditions as the Paying Agent may impose to effect an orderly exchange thereof in accordance with customary exchange practices. No interest shall accrue on the Merger Consideration payable upon the surrender of any Company Certificate for the benefit of, or be paid to, the holders of Company Certificates.

 

19

(c) All Merger Consideration delivered upon the surrender of Company Certificates in accordance with the terms of this Article III shall be deemed to have been paid in full satisfaction of all rights pertaining to Company Shares theretofore represented by such Company Certificates. Until surrendered as contemplated by this Section 3.2, each Company Certificate shall be deemed at all times after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration into which Company Shares theretofore represented by such Company Certificate shall have been converted pursuant to this Article III. No interest will be paid or will accrue on the cash payable upon the surrender of any Company Certificate.

 

(d) At the Effective Time, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of Company Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Company Certificates are presented to the Surviving Corporation or the Paying Agent for any reason, they shall be cancelled and exchanged as provided in this Article III.

 

(e) If any Company Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Company Certificate to be lost, stolen or destroyed and, if required by the Paying Agent, the posting by such Person of a bond or other surety in such customary amount as the Paying Agent may reasonably direct as indemnity against any claim that may be made with respect to such Company Certificate and subject to such other reasonable and customary conditions as the Paying Agent may impose, the Paying Agent shall deliver in exchange for such Company Certificate the Merger Consideration into which Company Shares theretofore represented by such Company Certificate shall have been converted pursuant to this Article III.

 

(f) If any payment under this Article III is to be made to a Person other than the Person in whose name any Company Certificate surrendered in exchange therefor is registered, it shall be a condition of payment that the Company Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer and that the Person requesting such payment shall pay any transfer or other Taxes required by reason of the payment to a Person other than the registered holder of Company Certificate surrendered or such Person shall establish to the satisfaction of the Surviving Corporation that such Taxes have been paid or are not applicable.

 

(g) The Paying Agent shall invest any funds held by it for purposes of this Section 3.2 as directed by the Surviving Corporation, on a daily basis. Any interest and other income resulting from such investments shall be paid to the Surviving Corporation.

 

(h) Newco, the Company or the Paying Agent, as the case may be, shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to the holders of Company Shares such amounts, if any, as are required to be deducted or withheld under any provision of U.S. federal tax Law, or any provision of state, local or foreign tax Law, with respect to the making of such

 

20

payment. Amounts so withheld shall be treated for all purposes of this Agreement as having been paid to the holders of Company Shares in respect of which such deduction or withholding was made. Nothing contained herein shall require that Newco or any Affiliate thereof make any additional payment to holders of Company Shares as a result of such withholding or deduction.

 

(i) None of Newco, the Company or the Paying Agent shall be liable to any Person in respect of any cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. Any portion of the cash that has been made available to the Paying Agent pursuant to this Section 3.2 that remains unclaimed by the holder of any Company Certificate twelve (12) months after the Effective Time, shall be returned to the Surviving Corporation and any such holder who has not exchanged such holder’s Company Certificate prior to such time shall thereafter look only to the Surviving Corporation for any claim for Merger Consideration hereunder.

 

Section 3.3 Taking of Necessary Action; Further Action . If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, properties, rights, privileges, powers and franchises of the Company and Newco, the officers and directors of the Company and Newco are fully authorized in the name of their respective corporations, or otherwise, to take, and they shall take, all such lawful and necessary action, so long as such action is consistent with this Agreement.

 

Section 3.4 Company Stock Options . Prior to the Effective Time, the Board of Directors of the Company (or, if appropriate, any committee thereof) shall adopt appropriate resolutions and take all other actions necessary and appropriate to provide that, at the Effective Time, each unexpired and unexercised option or similar right to purchase Company Shares (the “ Company Options ”) under the Company Stock Incentive Plan, whether or not then exercisable or vested, shall, at the discretion of the Board of Directors of the Company (or, if appropriate, any committee thereof) either (i) become fully exercisable and vested immediately prior to the Effective Time and shall be cancelled and, in exchange therefor, each former holder of any such cancelled Company Option shall be entitled to receive, in consideration of such cancellation, a payment by the Surviving Corporation in cash (subject to any applicable withholding or other taxes required by applicable Law to be withheld) in an amount (such amounts payable hereunder being referred to as the “ Option Consideration ”) equal to the product of (A) the total number of Company Shares subject to such Company Option immediately prior to its cancellation and (B) the excess, if any, of the Merger Consideration plus eight dollars ($8.00) over the exercise price per share of such Company Option; provided , that in calculating the Option Consideration, there shall be no addition of eight dollars ($8.00) in the preceding clause (B) with respect to any Company Option (x) with a strike price that was adjusted as a result of the declaration or payment by the Company of the eight dollar ($8.00) per share cash dividend that became payable on May 17, 2004 or (y) that was granted after May 17, 2004 or (ii) solely with respect to options granted to (x) the persons listed on Section 3.4 of the Company Disclosure Schedule and (y) persons whose options are subject to Laws outside

 

21

the United States become fully exercisable and vested at the Effective Time and be adjusted to entitle the holder upon exercise to receive the Option Consideration, subject to any applicable withholding or other taxes required by applicable Law to be withheld, without paying the exercise price of the Company Option. With respect to any Company Option treated in accordance with clause (ii) of the preceding sentence, the Company shall use commercially reasonable efforts to obtain the consent of the holder of such Company Option to the payment of the Option Consideration as soon as practicable following the Effective Time, provided that the Company may not provide any holder with any consideration to obtain such consent other than as provided in this Section 3.4. As soon as practicable following the Effective Time, the Surviving Corporation shall provide each holder of Company Options which are cancelled pursuant to this Section 3.4 with cash payments equal to the Option Consideration in accordance with the action taken by the Board of Directors of the Company (or, if appropriate, any committee thereof) and any such cancelled Company Options shall no longer be exercisable by the former holder thereof, but shall only entitle such holder to the payment of the Option Consideration. At the Effective Time, the Company Stock Incentive Plan shall be terminated, except to the extent that it shall continue to apply to Company Options granted prior to the Effective Time and described in clause (ii) of the first sentence of this Section 3.4 (to the extent such Company Options remain outstanding and unexercised following the Effective Time) and no further Company Options shall be granted thereunder.

 

Section 3.5 Equity Plans . The Company shall take all actions necessary to provide that any right to payment or issuance of Company Shares after the Effective Date under any plan, program or arrangement of the Company shall be converted into the right to receive, as applicable, Merger Consideration or the Option Consideration. Prior to the Closing, the Company shall amend the Metro-Goldwyn-Mayer Inc. Deferred Compensation Plan to provide that participants in such plan shall not have the right to receive any distributions from such plan after the Closing in a form other than cash.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth (i) in the disclosure schedule delivered by the Company to Newco prior to or concurrently with the execution of this Agreement (the “ Company Disclosure Schedule ”), which Company Disclosure Schedule identifies the Section (or, if applicable, subsection) to which such exception relates ( provided that any disclosure in the Company Disclosure Schedule relating to one section or subsection shall also apply to other sections and subsections to the extent that it is reasonably apparent that such disclosure would also apply to or qualify such other sections and subsections), or (ii) in the Company SEC Documents filed prior to the date hereof, the Company represents and warrants to Newco as follows:

 

Section 4.1 Organization . The Company (i) is a corporation duly incorporated and validly existing and in good standing under the Laws of the State of

 

22

Delaware, (ii) has all corporate power and authority to own, lease and operate its properties and assets and to carry on its business as currently conducted and (iii) is duly qualified and licensed to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned, leased or operated by it or the nature of its activities makes such qualification or license necessary, except where the failure to be so qualified or licensed has not had, and would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company has made available to Newco complete and correct copies of its certificate of incorporation and by-laws and all the amendments thereto, as currently in effect.

 

Section 4.2 Capitalization .

 

(a) The authorized capital stock of the Company consists of 500,000,000 Company Shares and 25,000,000 shares of preferred stock, $0.01 par value per share, of the Company (“ Company Preferred Shares ”). As of September 17, 2004, (i) 238,193,195 Company Shares (excluding treasury shares) were issued and outstanding, (ii) 13,767,310 Company Shares were held by the Company in its treasury, (iii) no Company Preferred Shares were issued and outstanding, (iv) 100,000 Company Shares were reserved for issuance under the Company’s 1998 Non-Employee Director Stock Plan, (v) 2,000,000 Company Shares were reserved for issuance under the Company’s Savings Plan, (vi) 1,000,000 Company Shares were reserved for issuance under the Company’s 2000 Employee Incentive Plan and (vii) 36,000,000 Company Shares were reserved for issuance under the Company’s Stock Incentive Plan and Company Options to acquire 27,779,630 Company Shares were outstanding. No shares of capital stock of the Company are owned by any Subsidiary of the Company. None of the Company Shares held by the Company in its treasury were acquired from any current or former Subsidiary of the Company. All of the outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable and free of preemptive and similar rights. Except as set forth above, there are no outstanding (i) shares of capital stock, Debt Securities or other voting securities of or ownership interests in the Company, (ii) securities of the Company or any of its Subsidiaries convertible into or exchangeable for shares of capital stock, Debt Securities or voting securities of, or ownership interests in, the Company, (iii) subscriptions, calls, Contracts, commitments, understandings, restrictions, arrangements, rights, warrants, options or other rights to acquire from the Company or any Subsidiary of the Company, or obligations of the Company or any Subsidiary of the Company to issue any capital stock, Debt Securities, voting securities or other ownership interests in, or any securities convertible into or exchangeable or exercisable for any capital stock, Debt Securities, voting securities, or ownership interests in, the Company, or obligations of the Company or any Subsidiary of the Company to grant, extend or enter into any such agreement or commitment or (iv) obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any outstanding securities of the Company, or to vote or to dispose of any shares of capital stock of the Company. All of the outstanding equity securities of the Company have been offered and issued in compliance with all applicable securities laws, including the Securities Act and “blue sky” laws, except where the failure to be in compliance would not be reasonably expected to cause a Company Material Adverse Effect.

 

23

(b) Section 4.2(b) of the Company Disclosure Schedule lists each Company Option outstanding on September 17, 2004, the number of Company Shares issuable thereunder, the vesting schedule, the expiration date and the exercise price thereof. Other than the Company Options, there are no outstanding options issued by the Company or any of its Subsidiaries with respect to any Company Shares. Except as set forth on Section 4.2(b) of the Company Disclosure Schedule, there are no outstanding rights under the Company’s Senior Management Bonus Plan or Company Deferred Compensation Plan that would entitle any person to payment of Company Shares on or prior to Closing. There are no outstanding rights under the Company’s Senior Management Bonus Plan or Company Deferred Compensation Plan that would entitle any person to payment in the form of Company Shares following the Closing.

 

(c) Except for the Voting and Support Agreement, there are no voting trusts or other agreements or understandings to which the Company or any of its Subsidiaries is a party with respect to the voting of the shares of any capital stock of the Company or any of its Subsidiaries. No Contract to which the Company or any of its Subsidiaries is a party grants or imposes on any shares of the capital stock of the Company any right, preference, privilege or transfer restrictions with respect to the transactions contemplated by this Agreement (including any rights of first refusal).

 

Section 4.3 Subsidiaries .

 

(a) Each Subsidiary of the Company is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the requisite power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted and each Subsidiary of the Company is qualified and licensed to transact business as a foreign corporation, and is in good standing, in each jurisdiction in which the properties owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so qualified or licensed would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company has made available to Newco complete and correct copies of the certificate of incorporation and by-laws (or similar organizational documents) of each Subsidiary, and all the amendments thereto, as currently in effect.

 

(b) All of the outstanding shares of capital stock or other ownership interests of each Subsidiary of the Company are validly issued, fully paid, nonassessable and free of preemptive or similar rights. All of the outstanding shares of capital stock or other ownership interests of the Company’s Subsidiaries are held, directly or indirectly by the Company, free and clear of all claims, liens, and encumbrances. There are no outstanding (i) shares of capital stock, Debt Securities or voting securities or other ownership interests of any Subsidiary of the Company other than those owned, directly or indirectly, by the Company, (ii) subscriptions, options, warrants, rights, calls, contracts or other commitments, understandings, restrictions or arrangements relating to the issuance or sale with respect to any shares of capital stock or other ownership interests of any Subsidiary of the Company, including any right of conversion or exchange under any outstanding security, instrument or agreement or (iii) obligations of the Company or any

 

24

of its Subsidiaries to repurchase, redeem or otherwise acquire any outstanding securities or other ownership interests of any Subsidiary of the Company, or to vote or to dispose of any shares of the capital stock or other ownership interests of any Subsidiary of the Company.

 

(c) Section 4.3(c) of the Company Disclosure Schedule lists (i) each “Subsidiary” of the Company and (ii) its jurisdiction of incorporation or organization.

 

(d) Section 4.3(d)(i) of the Company Disclosure Schedule sets forth the name and jurisdiction of each Person that is not a Subsidiary of the Company but in which the Company, directly or indirectly, holds an equity interest (each, a “ Company Joint Venture ” and collectively, the “ Company Joint Ventures ”). All of the Company’s interests in the Company Joint Ventures are owned, directly or indirectly, by the Company or by one or more of its Subsidiaries, in each case free and clear of all claims, liens, and encumbrances. Except as set forth in Section 4.3(d)(ii) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has a contractual obligation, contingent or otherwise, to fund or participate in the debts of any Company Joint Venture, which as of the date of this Agreement, has not been funded, other than any individual obligation to fund or participate in debts in an amount less than $20 million; provided that such obligations do not exceed $50 million in the aggregate.

 

(e) Except for the capital stock of its Subsidiaries, and the ownership interests in the Company Joint Ventures, the Company does not own, directly or indirectly, any capital stock or other ownership interest in any entity.

 

Section 4.4 Authority . The Company has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the Merger and the other transactions contemplated by this Agreement. The execution, delivery and performance of this Agreement and the consummation by the Company of the Merger and the other transactions contemplated by this Agreement have been duly 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 such transactions, other than, with respect to the Merger, the adoption of this Agreement by the holders of a majority of the outstanding Company Shares (the “ Company Stockholder Approval ”). This Agreement has been duly executed and delivered by the Company and, assuming the due execution and delivery hereof by Newco, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar Laws of general applicability relating to or affecting creditors’ rights and to general equity principles (the “ Bankruptcy and Equity Exception ”).

 

Section 4.5 Consents and Approvals; No Violations .

 

(a) The execution, delivery and performance by the Company of this Agreement do not, and the consummation by the Company of the Merger and the other transactions contemplated by this Agreement will not, require any filing or registration

 

25

with, notification to, or authorization, permit, consent or approval of, or other action by or in respect of, any Governmental Entities other than (i) the filing of the Certificate of Merger as contemplated by Article II hereof, (ii) the filings required under the HSR Act and filings required by any other Governmental Entity relating to antitrust, competition, trade or other regulatory matters, (iii) as required to comply with any applicable requirements of the Securities Act, the Exchange Act, the NYSE and state securities and “blue sky” Laws and (iv) such other filings, registrations, notifications, authorizations, permits, consents, approvals or actions, the failure of which to take or obtain would not have or be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

(b) Subject to the adoption of this Agreement by the holders of a majority of the outstanding Company Shares, the execution, delivery and performance by the Company of this Agreement do not, and the consummation by the Company of the Merger and the other transactions contemplated by this Agreement will not, (i) conflict with, or result in any breach of, any provision of the certificate of incorporation or by-laws of the Company or any similar organizational documents of any of its Subsidiaries, (ii) violate, conflict with, require consent pursuant to, result in a breach of, constitute a default (with or without due notice or lapse of time or both) under, or give rise to a right (by any party other than the Company or any Subsidiary of the Company) of, or result in, the termination, cancellation, modification, acceleration or the loss of a benefit under, or result in the creation of any Lien upon any of the properties or assets of the Company or any of its Subsidiaries under, any of the terms, conditions or provisions of any Contract to which the Company or any of its Subsidiaries is a party or by which any of its properties or assets may be bound or (iii) violate any Order or Law applicable to the Company, any of its Subsidiaries or any of their properties or assets, except, in the case of clauses (ii) and (iii) above, for any violation, conflict, consent, breach, default, termination, cancellation, modification, acceleration, loss or creation that would not be reasonably expected to have, either individually or in the aggregate, a Company Material Adverse Effect.

 

(c) The execution and delivery of the Voting and Support Agreement by the Principal Stockholders, the consummation by the Principal Stockholders of the transactions contemplated thereby and the performance by the Principal Stockholders of their obligations thereunder shall not (with or without due notice or lapse of time or both) result in any violation or the breach of, or constitute a default under, or give rise to any right of termination, cancellation or acceleration or any payments under, or result in a loss of a benefit or in the creation or imposition of a lien under, any of the terms, conditions or provisions of any note, lease, mortgage, indenture, license, agreement or other instrument or obligation to which the Company or any of its assets, may be bound.

 

Section 4.6 SEC Reports and Financial Statements.

 

(a) The Company has filed with the SEC all forms, reports, schedules, statements and other documents required to be filed by it since January 1, 2001 (together with all exhibits and schedules thereto and all information incorporated therein by reference, the “ Company SEC Documents ”). The Company SEC Documents, as of their

 

26

respective dates or, if amended, as of the date of the last such amendment, (i) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (ii) complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder. No Subsidiary of the Company is required to make any filings with the SEC.

 

(b) The consolidated financial statements of the Company included or incorporated by reference in the Company SEC Documents, as of the date filed with the SEC, complied in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with GAAP applied on a consistent basis during the periods indicated (except as may be indicated in the notes thereto) and fairly presented, in all material respects (subject, in the case of the unaudited statements, to normal, recurring audit adjustments not material in amount), 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 each of the periods then ended. Since January 1, 2001, there has been no material change in the Company’s accounting methods or principles that would be required to be disclosed in the Company’s financial statements in accordance with GAAP, except as described in the notes to such Company financial statements.

 

(c) The Company has made available to Newco a complete and correct copy of any amendments or modifications, which, as of the date of this Agreement, are required to be filed with the SEC, but have not yet been filed with the SEC, to (i) agreements, documents or other instruments which previously have been filed by the Company with the SEC since January 1, 2001 pursuant to the Exchange Act and (ii) the Company Filed SEC Documents themselves and, reasonably promptly following the execution of any such amendments or modifications, will make available to Newco any such amendments or modifications entered into after the date hereof and so required to be filed. The Company has timely responded to all comment letters of the staff of the SEC relating to the Company Filed SEC Documents (and will timely respond to any comment letters to the staff of the SEC relating to any Company SEC Documents filed after the date hereof, subject to Section 6.3 hereof), and the SEC has not advised the Company that any final responses are inadequate, insufficient or otherwise non-responsive. The Company has made available to Newco true, correct and complete copies of all correspondence with the SEC occurring since January 1, 2001 and prior to the date hereof and will, reasonably promptly following the receipt thereof, make available to Newco any such correspondence sent or received after the date hereof. To the Knowledge of the Company, none of the Company Filed SEC Documents is the subject of ongoing SEC review.

 

Section 4.7 Absence of Certain Changes or Events . Except for the negotiation (including activities related to due diligence), execution and delivery of this Agreement, or as disclosed in the Company SEC Documents publicly available prior to the date of this Agreement (the “ Company Filed SEC Documents ”), (a) since December

 

27

31, 2003, the Company and its Subsidiaries have conducted their respective businesses only in the ordinary course, (b) since December 31, 2003, there has not been any event or events that has had or would be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect and (c) since June 30, 2004, neither the Company nor any Subsidiary has taken any action that, if taken after the date hereof would be prohibited by Section 6.1(a), (d), (e), (f), (g), (h), (i), (p) and (u) hereof.

 

Section 4.8 No Undisclosed Liabilities . Except as and to the extent disclosed in the Company Filed SEC Documents, neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature, whether or not accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due and whether or not required to be disclosed, reserved against or otherwise provided for (including any liability for breach of Contract, breach of warranty, torts, infringements, claims or lawsuits) other than (i) liabilities or obligations in the amounts reflected on or reserved against in the Company’s consolidated balance sheet as of June 30, 2004 included in the Company’s financial statements, (ii) liabilities or obligations that would not have, individually or in the aggregate, a Company Material Adverse Effect and (iii) fees and expenses actually incurred by the Company in connection with the transactions contemplated by this Agreement.

 

Section 4.9 Benefit Plans; Employees and Employment Practices .

 

(a) Section 4.9 of the Company Disclosure Schedule contains a list of all Benefit Plans (excluding any employment or consulting agreements) (other than (i) any such plan that is maintained for the purpose of complying with any non-U.S. Law or (ii) any immaterial plan that is not subject to ERISA) (the “ Scheduled Plans ”). With respect to the Scheduled Plans (other than Multiemployer Plans), the Company has delivered or made available to Newco true, complete and correct copies of (i) each such Scheduled Plan (or, in the case of any unwritten Benefit Plans, descriptions thereof), (ii) the three (3) most recent annual reports on Form 5500 filed with the IRS with respect to each such Scheduled Plan (if any such report was required), (iii) the most recent summary plan description and all subsequent summaries of material modifications for each such Scheduled Plan for which such summary plan description is required, (iv) each trust agreement and group annuity contract relating to any Scheduled Plan; (v) the most recent determination letter from the IRS, if any and (vi) the most recent actuarial valuation, if any. Each Benefit Plan (other than a Multiemployer Plan) has, in all material respects, been established, funded, maintained and administered in compliance with its terms and with the applicable provisions of ERISA, the Code and all other applicable Laws. There are no material amendments to any Benefit Plan or the establishment of any new Benefit Plan (in both cases, other than a Multiemployer Plan) that have been adopted or approved by the Company or any of its Subsidiaries (and that are not reflected in the documents made available by the Company to Newco prior to the date hereof with respect to such Benefit Plan), and neither the Company nor any of its Subsidiaries has undertaken or committed to make any such amendments or to adopt or approve any new plans.

 

28

(b) All Pension Plans (other than Multiemployer Plans) have been the subject of favorable and up-to-date (through any applicable remedial amendment period) determination letters from the IRS, or a timely application therefor has been filed, to the effect that such Pension Plans are qualified and exempt from federal income taxes under Section 401(a) and 501(a), respectively, of the Code, and, to the Knowledge of the Company, no circumstances exist and, to the to the Knowledge of the Company, no events have occurred that could adversely affect the qualification of any Pension Plan or the related trust.

 

(c) With respect to any plan (other than a Multiemployer Plan) subject to Title IV of ERISA (or Section 302 of ERISA or Section 412 or 4971 of the Code) to which the Company, any of its Subsidiaries or any ERISA Affiliate made, or was required to make, contributions during the past six (6) years: (i) there does not exist any accumulated funding deficiency within the meaning of Section 412 of the Code or Section 302 of ERISA, whether or not waived; (ii) the fair market value of the assets of such Pension Plan equals or exceeds the actuarial present value of all accrued benefits under such Pension Plan (whether or not vested, each as determined under the assumptions and valuation method of the latest actuarial valuation of such plan); (iii) no reportable event within the meaning of Section 4043(c) of ERISA for which the 30-day notice requirement has not been waived has occurred, and the consummation of the transactions contemplated by this agreement will not result in the occurrence of any such reportable event; (iv) all premiums to the PBGC have been timely paid in full; (v) no liability or contingent liability (including liability pursuant to Section 4069 of ERISA but excluding premiums to the PBGC) under Title IV of ERISA has been or is reasonably expected to be incurred by the Company or any of its Subsidiaries or ERISA Affiliates; and (vi) the PBGC has not instituted proceedings to terminate any such Pension Plan and, to the Company’s knowledge, no condition exists that presents a risk that such proceedings will be instituted or which would constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any such Pension Plan. With respect to any Multiemployer Plan to which the Company, any of its Subsidiaries or any ERISA Affiliate made, or was required to make, contributions during the past six (6) years: (i) none of the Company, any of its Subsidiaries nor any ERISA Affiliate has made or suffered a “complete withdrawal” or a “partial withdrawal,” as such terms are respectively defined in Sections 4203 and 4205 of ERISA; (ii) no event has occurred that presents a material risk of a complete or partial withdrawal; (iii) none of the Company, any of its Subsidiaries nor any ERISA Affiliate has any contingent liability under Section 4204 or 4212(c) of ERISA and (iv) none of the Company and its Subsidiaries, nor any of their respective ERISA Affiliates has received any notification, nor has any reason to believe, that any such plan is in reorganization, has been terminated, is insolvent, or may be reasonably expected to be in reorganization, to be insolvent or to be terminated.

 

(d) Neither the Company, its Subsidiaries or any ERISA Affiliate has any material liability for life, health, medical or other welfare benefits for former employees or beneficiaries or dependents thereof with coverage or benefits under Benefit Plans other than Pension Plans, other than as required by Section 4980B of the Code or Part 6 of Title I of ERISA or any other applicable Law. All material contributions or

 

29

premiums owed by the Company or any of its Subsidiaries with respect to Benefit Plans under Law, contract or otherwise have been made in full and on a timely basis. To the Knowledge of the Company, no Pension Plan or Welfare Plan or any “fiduciary” or “party-in-interest” (as such terms are respectively defined by Sections 3(21) and 3(14) of ERISA) thereto has engaged in a transaction prohibited by Section 406 of ERISA or 4975 of the Code for which a valid exemption is not available. There are no pending or, to the Knowledge of the Company, threatened, claims, lawsuits, arbitrations or audits asserted or instituted against any Benefit Plan (other than Multiemployer Plans), any fiduciary (as defined by Section 3(21) of ERISA) thereto, the Company, any of its Subsidiaries or any employee or administrator thereof in connection with the existence, operation or administration of a Benefit Plan (other than Multiemployer Plans), other than routine claims for benefits. All liabilities with respect to each Foreign Plan have been funded in accordance with the terms of such Foreign Plan and have been properly reflected in the financial statements of the Company and its Subsidiaries.

 

(e) Neither the execution and delivery of this Agreement nor the consummation of the transactions provided for herein will (either alone or in conjunction with any other event (which event would not alone have an effect described in the following clauses (i) through (iii)) (i) cause or result in the accelerated vesting, funding or delivery of, or increase the amount or value of, any material payment or benefit to any employee, officer or director of the Company or any of its Subsidiaries, (ii) cause or result in the funding of any Benefit Plan or (iii) cause or result in a limitation on the right of the Company or any of its Subsidiaries to amend, merge, terminate or receive a reversion of assets from any Benefit Plan or related trust. Without limiting the generality of the foregoing, no amount paid or payable by the Company or any of its Subsidiaries in connection with the transactions provided for herein (either solely as a result thereof or as a result of such transactions in conjunction with any other event) will be an “excess parachute payment” within the meaning of Section 280G of the Code.

 

Section 4.10 Employment/Labor .

 

(a) Except as set forth in Section 4.10(a)(i) of the Company Disclosure Schedule, as of the date of this Agreement, there is no labor dispute, controversy, arbitration, grievance, strike, slowdown, lockout or work stoppage against the Company or any of its Subsidiaries pending, or to the Knowledge of the Company, threatened which may interfere with the business activities of the Company or any of its Subsidiaries, except where such dispute, controversy, arbitration, grievance, strike, slowdown, lockout or work stoppage would not have, or be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect. Except as set forth in Section 4.10(a)(ii) of the Company Disclosure Schedule and except for any specific labor agreements required by Governmental Entities that are generally applicable to similarly-situated employers, the Company and its Subsidiaries are neither party to, nor bound by, any labor agreement, collective bargaining agreement, work rules or practices (except for those work rules or practices required by Governmental Entities that are generally applicable to similarly-situated employers), or any other labor-related agreements or arrangements with any labor union, labor organization or works council; there are no labor agreements, collective bargaining agreements, work rules or practices

 

30

(other than those work rules or practices required by Governmental Entities that are generally applicable to similarly-situated employers), or any other labor-related agreements or arrangements that pertain to any of the employees of the Company or its Subsidiaries; and no employees of the Company or its Subsidiaries are represented by any labor organization with respect to their employment with the Company or its Subsidiaries. No labor union, labor organization, works council, or group of employees of the Company or its Subsidiaries has made a pending demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or threatened in writing to be brought or filed with the National Labor Relations Board or any other labor relations tribunal or authority. To the Knowledge of the Company, there are no organizational efforts presently being made involving any of the presently unorganized employees of the Company or its Subsidiaries. Neither the Company nor any of its Subsidiaries is a party to, or otherwise bound by, any Order relating to employees or employment practices.

 

(b) The Company and its Subsidiaries are in compliance in all material respects with all Laws and Orders applicable to such entity or the employees or other persons providing services to or on behalf of such entity, as the case may be, relating to the employment of labor, including all such Laws and Orders relating to discrimination, civil rights, immigration, safety and health, workers’ compensation, wages, withholding, hours, employment standards and classification, including the WARN Act, the California WARN Act (California Labor Code Section 1400, et seq.), Title VII of the Civil Rights Act of 1964, Age Discrimination in Employment Act, Americans with Disabilities Act, Equal Pay Act, Health Insurance Portability and Accessibility Act, ERISA and Family and Medical Leave Act.

 

(c) The Company has made a good faith and diligent effort to locate all written personnel manuals, handbooks, policies, rules or procedures applicable to employees of the Company and/or its Subsidiaries, and has listed such located materials in Section 4.10(c) of the Company Disclosure Schedule and provided true and complete copies thereof to Newco.

 

(d) Section 4.10(d) of the Company Disclosure Schedule contains a true and complete list of the names and the sites of employment or facilities of those individuals who suffered an “employment loss” (as defined in the WARN Act) at any site of employment or facility of the Company or any of its Subsidiaries (governed by the WARN Act) during the 90-day period prior to the date of this Agreement. Section 4.10(d) of the Company Disclosure Schedule shall be updated immediately prior to the Closing with respect to the 90-day period prior to the Closing.

 

Section 4.11 Contracts .

 

(a) All Contracts required to be filed as exhibits to the Company Filed SEC Documents (such Contracts, the “ Company Contracts ”) have been so filed. Except as disclosed in the Company Filed SEC Documents, neither the Company nor any of its Subsidiaries, or, to the Knowledge of the Company, any other party, (i) is in violation or breach of or in default under (nor does there exist any condition which together with the

 

31

passage of time or the giving of notice would result in a violation or breach of, or constitute a default under, or give rise to any right of termination, amendment, cancellation, acceleration or loss of benefits, or result in the creation of any Lien upon any of the properties or assets of the Company or any of its Subsidiaries under) any Company Contract, or (ii) has otherwise failed to exercise an option under any Company Contract which may adversely impact the Company’s or any of its Subsidiaries’ rights under a Company Contract, in each case, except as would not be reasonably expected to have, either individually or in the aggregate, a Company Material Adverse Effect. To the Knowledge of the Company, no other party to any such Company Contract has alleged that the Company or any Subsidiary is in violation or breach of or in default under any such Company Contract or has notified the Company or any Subsidiary of an intention to modify any material terms of or not to renew any such Company Contract. Since December 31, 2003, neither the Company nor any of its Subsidiaries has released or waived any material right under any such Company Contract other than in the ordinary course of business.

 

(b) Except as disclosed in Section 4.9 (or any subsection thereof) or Section 4.11(b) of the Company Disclosure Schedule or disclosed in the Company SEC Documents filed prior to the date hereof, neither the Company nor any of its Subsidiaries is a party to, or bound by, any undischarged written or oral (i) Non-Competition Agreement or (ii) agreement not entered into in the ordinary course of business between the Company and any of its Affiliates other than any Subsidiary of the Company.

 

Section