Form Of Executive Option Exchange Agreement

EX 10.8
METRO-GOLDWYN-MAYER INC.
EXECUTIVE OPTION EXCHANGE AGREEMENT
PURSUANT TO THE
AMENDED AND RESTATED 1996 STOCK INCENTIVE PLAN


This Executive Option Exchange Agreement (this "Agreement") is entered into as of November 30, 1998 by Metro-Goldwyn-Mayer Inc., a Delaware corporation ("MGM"), Metro-Goldwyn-Mayer Studios Inc., a Delaware corporation ("Studios" and, collectively with MGM, the "Company"), and the person whose name appears on the signature page of this Agreement ("Participant").


A. Under the Company's Amended and Restated 1996 Stock Incentive Plan (the "Plan") and pursuant to that certain Stock Option Agreement Pursuant to the Amended and Restated 1996 Stock Incentive Plan (the "Stock Option Agreement") dated as of November 6, 1997 between the Company and Participant, the Company granted to Participant Series A Options and Series B Options (each as defined in the Stock Option Agreement and set forth on the signature page to this Agreement, and collectively referred to herein as the "Old Options") to purchase shares of the common stock, $0.01 par value per share ("Common Stock"), of the Company.


B. In connection with the Company's initial public offering in November 1997, the Company effected a 41.667 to 1 stock split of the Common Stock (the "Stock Split") and, pursuant to Section 7 of the Plan and Section 8 of the Stock Option Agreement, the aggregate number of options subject to the Plan (including, but not limited to, as set forth in Section 4 of the Plan), the number of Old Options granted to Participant under the Stock Option Agreement and the Exercise Price (as defined in Section 6(a) of the Stock Option Agreement) of the Old Options were appropriately and proportionately adjusted to take into account the effect of the subdivision of the shares of the Common Stock in connection with the Stock Split.


C. Due to the recent decline in the market price of the Common Stock, the Company believes that the purpose of the Plan is being frustrated and that it is in the best interests of the Company to effectively adjust the Exercise Price of the Old Options in order to more closely realign the value of the options with the market price of the Common Stock and thereby, better enable the Company to attract, retain and motivate its employees.


D. In order to effect such adjustment, the Company and Participant now desire to cancel Participant's Old Options in exchange for the Company granting Participant the same number of new options (as set forth on the signature page to this Agreement, the "New Options") under the Plan and on the terms and conditions specified herein and (except as described in Section 2 hereof) set forth in the Stock Option Agreement, with the result that following the cancellation of the Old Options pursuant to this Agreement, Participant will own the New Options, which New Options shall have the Exercise Price set forth on the signature page to this Agreement.


NOW, THEREFORE, in consideration of the covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:


1. Cancellation and Grant of Options.
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(a) Subject to the fulfillment of the Condition (as defined below), (i) Participant does hereby agree to the cancellation of the Old Options and such Old Options shall be deemed to be of no further force or effect, without the requirement of any further action by the Company or Participant and (ii) in consideration of the cancellation of the Old Options, the Company does hereby grant to Participant the


New Options, subject to the terms and conditions specified herein and (except as described in Section 2 hereof) set forth in the Stock Option Agreement.


(b) Participant hereby agrees and acknowledges that the Amended and Restated Shareholders Agreement dated as of August 4, 1997, as amended August 8, 1998 and September 1, 1998 (as amended, the "Shareholders Agreement"), by and among the Company, Tracinda Corporation, Participant and the other parties thereto, shall remain in full force and effect and shall not be modified in any respect by this Agreement.


(c) Participant acknowledges that, by reason of the foregoing cancellation of the Old Options, Participant releases all rights a ...