EXHIBIT 10.4
MODIFICATION AND CANCELLATION AGREEMENT
This Modification and Cancellation Agreement (this "Agreement") is entered
into as of November 5, 1997 by Metro-Xxxxxxx-Xxxxx Inc., a Delaware corporation
formerly known as P&F Acquisition Corp. ("MGM"), Metro-Xxxxxxx-Xxxxx Studios
Inc., a Delaware corporation formerly known as Metro-Xxxxxxx-Xxxxx Inc.
("Studios" and, collectively with MGM, the Company), and the person whose name
appears on the signature page of this Agreement ("Participant").
SECTION 1. ORIGINAL PLAN
The Company has a 1996 Management Stock Option and Bonus Plan (the
"Original Plan"), with which Participant is familiar.
SECTION 2. CONTEMPLATED INITIAL PUBLIC OFFERING; OTHER CONDITIONS
(a) MGM is contemplating an initial public offering (the "IPO"). In
connection with the IPO, MGM believes it is advisable to (i) amend and restate
the Original Plan (the "Amendment and Restatement") so that it reads as set
forth in Attachment II to this Agreement (as so amended and restated, the
"Amended and Restated Plan") and (ii) effect the cancellations of Series A
Options, Series B Options and bonus interests issued to Participant under the
Original Plan pursuant to a Non-Qualified Stock Option and Bonus Agreement (the
"Non-Qualified Stock Option and Bonus Agreement") that are contemplated by this
Agreement and similar Modification and Cancellation Agreements.
(b) The Amendment and Restatement and the cancellation of Series A
Options, Series B Options and bonus interests provided for in this Agreement
will not become effective unless the following conditions (the "Conditions") are
satisfied on or before March 31, 1998:
(i) The holders of at least a majority in interest of the Series A
Options, Series B Options and bonus interests issued under the
Original Plan, MGM and Studios have entered into Modification
and Cancellation Agreements similar to this Agreement;
(ii) The Amendment and Restatement has been approved by the holders
of 75% of the outstanding shares of Common Stock (the "Common
Shares") of MGM;
(iii) Tracinda, Seven and MGM have entered into an Inducement
Agreement, in the form of Attachment I to this Agreement (the
"Inducement Agreement"), with Participant and the other holders
of Series A Options, Series B Options and bonus interests under
the Original Plan who have entered into Modification and
Cancellation Agreements similar to this Agreement; and
(iv) It is contemplated that an Underwriting Agreement (the
"Underwriting Agreement") for the IPO will be signed within one
day, such contemplation to be evidenced by a certificate signed
by Xxxxx X. Xxxxxxx or A. Xxxxxx Xxxxxx and
delivered to MGM, which certificate, when signed and delivered,
will conclusively evidence such approval and contemplation.
SECTION 3. PARTICIPANT'S SERIES A OPTIONS, SERIES B OPTIONS
AND BONUS INTERESTS UNDER THE ORIGINAL PLAN
(a) Participant represents and warrants to the Company that Participant
has not sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise
transferred in any manner any of the Series A Options, Series B Options or bonus
interests granted or issued to Participant under the Original Plan or any
interest therein. Participant agrees that the Company is relying on this
representation in entering into and effecting the agreements it is making in
this Agreement and in connection with the IPO.
(b) The Company represents and warrants to Participant that, subject to
the satisfaction of the Conditions and to the approval by the shareholders of
MGM of the Senior Management Bonus Plan, it has adopted a Senior Management
Bonus Plan, a copy of which is Attachment III to this Agreement (the "Bonus
Plan").
SECTION 4. CERTAIN AGREEMENTS
Subject to and effective upon fulfillment of the Conditions and prior to
the execution and delivery of the Underwriting Agreement:
(i) Participant and the Company agree to the Amendment and
Restatement and the Amended and Restated Plan will become
effective;
(ii) The Bonus Plan will become effective, subject to the approval of
the Bonus Plan by the shareholders of the MGM;
(iii) The Non-Qualified Stock Option and Bonus Agreement under the
Original Plan, entered into between the Company and Participant,
will terminate;
(iv) The Stock Option Agreement pursuant to the Amended and Restated
Plan, in the form of Attachment IV to this Agreement (the "Stock
Option Agreement"), will (x) be executed and delivered by
Participant and MGM and (y) provide for Participant to have,
under the Amended and Restated Plan and the Stock Option
Agreement, the Series A Option and Series B Option set forth in
Section 11 hereof; and
(v) The Bonus Interest Agreement, in the form of Attachment V to
this Agreement (the "Bonus Interest Agreement"), will (x) be
executed and delivered by Participant, MGM and Studios and (y)
subject to the approval of the Bonus Plan by the shareholders of
MGM, provide to Participant, under the Bonus Plan and the Bonus
Interest Agreement, the Bonus Interests set forth in Section 11
hereof.
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SECTION 5. ANTIDILUTION ADJUSTMENT
Prior to or concurrent with the consummation of the IPO, MGM will effect,
in one or more transactions, a net stock split of the Common Shares whereby each
Common Share will be divided into 41.667 Common Shares (the "Stock Split"). As
a result of the Stock Split, the following changes (the "Antidilution
Adjustment") will be made pursuant to the antidilution provisions of (x) the
Amended and Restated Plan and the Bonus Plan and (y) the Stock Option Agreement
and the Bonus Plan Agreement:
(i) Under the Amended and Restated Plan, the number of Common Shares
in Section 4 thereof, as in effect prior to the Antidilution
Adjustment, will be multiplied by the Stock Split, and by virtue
of the Antidilution Adjustment, the 195,000 number in Section 4
of the Amended and Restated Plan will become 8,125,065.
(ii) Under the Stock Option Agreement, the price at which Series A
Options and Series B Options thereunder (together, the
"Options") may be exercised will be divided by the Stock Split
and the number of Common Shares which may be purchased pursuant
to Options will be multiplied by the Stock Split. By way of
illustration, if, prior to the Antidilution Adjustment, a person
would have held Options to purchase 2,000 Common Shares for an
Option exercise price of $1,000 per share under the Stock Option
Agreement by virtue of the Antidilution Adjustment, those
Options will become Options under the Stock Option Agreement to
purchase 83,334 post-Stock Split Common Shares for an Option
exercise price of $24 per share;
(iii) Under the Bonus Plan, the $1,000 amount in Section 4 thereof, as
in effect prior to the Antidilution Adjustment, will be divided
by the Stock Split, and by virtue of the Antidilution
Adjustment, that $1,000 amount will become $24;
(iv) Under the Bonus Plan, the 58,095 Bonus Interests and 20,000
Bonus Interests referred to in Section 5 of the Bonus Plan will
be adjusted to 2,420,686 Bonus Interests and 833,340 Bonus
Interests, respectively; and
(v) Under the Bonus Interest Agreement, the $1,000 and $2,000
amounts in Section 5 thereof, the $1,000 amount in Section 7
thereof and each of the dollar amounts in Section 8 thereof, in
each case as in effect prior to the Antidilution Adjustment,
will be divided by the Stock Split, and by virtue of the
Antidilution Adjustment, the $1,000 and $2,000 amounts will
become $24 and $48, respectively, and the other dollar amounts
in Section 8 of the Bonus Plan Agreement will be divided by
41.667.
All dollar amounts changed as a result of the Antidilution Adjustment will be
rounded to the nearest xxxxx. After the Antidilution Adjustment, all further
antidilution adjustments, if any, will be made in accordance with the terms of
the Amended and Restated Plan, Stock Option Agreement, Bonus Plan and Bonus
Interest Agreement, as applicable.
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SECTION 6. LIMITED POWER OF ATTORNEY
(a) Participant, MGM and Studios recognize the potential difficulties of
having the Stock Option Agreement and Bonus Interest Agreement signed by
Participant and similar agreements being signed by other persons in a relatively
short period of time. Accordingly, the limited power of attorney provided for
below is granted by Participant.
(b) Participant hereby appoints Xxxxx X. Xxxxxxx and A. Xxxxxx Xxxxxx, or
either of them, with full power of substitution, as Participant's true and
lawful Attorney, for participant and in Participant's place and stead, to
execute and deliver, for Participant and in Participant's name -- but in each
case subject to the satisfaction of the Conditions and after the Antidilution
Adjustment and completion of the information specified in, and in accordance
with, the footnotes thereto -- the Inducement Agreement, Stock Option Agreement
and Bonus Interest Agreement.
(c) This limited power of attorney is coupled with an interest, is
irrevocable and will survive the death, incapacity or termination of employment
of Participant, provided that this limited power of attorney will terminate on
the earlier to occur of (x) the execution and delivery by Participant, including
pursuant to this limited power of attorney, of both the Stock Option Agreement
and Bonus Interest Agreement or (y) March 31, 1998.
SECTION 7. AGREEMENT NOT REVOCABLE; SUCCESSORS, SPECIFIC PERFORMANCE AND OTHER
EQUITABLE REMEDIES; NO OBLIGATION TO COMPLETE IPO
(a) None of MGM, Studios or Participant may revoke or rescind this
Agreement, which shall survive the death, incapacity or termination of
employment of Participant. This Agreement will be binding on MGM, Studios,
Participant and their respective successors and assigns, however such succession
or assignment is effected (including, without limitation, by the laws of
descent, distribution and conservatorship, sale, assignment, conveyance, gift,
pledge, hypothecation or otherwise).
(b) The parties to this Agreement will, in addition to damages or other
remedies at law for breach, default or misrepresentation, as appropriate, be
entitled to equitable remedies, including specific performance, for breach of
prospective breach of this Agreement.
(c) Notwithstanding anything to the contrary in this Agreement, MGM has no
obligation to effect or endeavor to effect the IPO.
SECTION 8. NO EMPLOYMENT RIGHTS
Subject to the provisions of any written employment agreement between
Participant and MGM, Studios or a subsidiary of either, no provision of this
Agreement or the Attachments to this Agreement (i) confers upon Participant any
right to continue in the employ of the Company or any of its subsidiaries, (ii)
affects the right of the Company and each of its subsidiaries to terminate the
employment of Participant, with or without "Cause" (as defined in the Stock
Option Agreement and the Bonus Interest Agreement) and for any reason or without
reason, or (iii) confers on Participant any right to participate in any employee
welfare or benefit plan or
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other program of the Company or any of its subsidiaries other than as explicitly
provided in this Agreement and the Attachments to this Agreement. Participant
acknowledges and agrees that, subject to any written employment agreement
between Participant and any of MGM, Studios or a subsidiary of MGM or Studios,
the Company and each of its subsidiaries may terminate the employment of
Participant at any time (x) with or without Cause and (y) for any reason or for
no reason.
SECTION 9. GOVERNING LAW
Except with respect to Section 6 hereof, which is governed by and is to be
construed and enforced in accordance with the internal laws, and not the laws
pertaining to choice of conflict of laws, of the State of California and to the
extent provided in Section 10(c) hereof, this Agreement is governed by and is to
be construed and enforced in accordance with the internal laws, and not the laws
pertaining to choice or conflict of laws, of the State of Delaware.
SECTION 10. ARBITRATION OF DISPUTES
(a) Except as provided in Section 7(b) hereof, all disputes between
Participant and the Company, however significant, arising out of, relating in
any way to, or in connection with, this Agreement (including the validity, scope
and enforceability of this Section 10) will be settled only by an arbitration
(x) conducted in accordance with the then rules of the American Arbitration
Association or any similar successor body and (y) held in Los Angeles,
California.
(b) The arbitration will be held before a single arbitrator mutually
agreed to by the parties to the arbitration, except that, if the parties fail to
agree to an arbitrator within 20 days from the date on which the claimant's
request for arbitration is delivered to the other party(ies) to the arbitration,
the arbitration shall be held before an arbitrator appointed by the American
Arbitration Association.
(c) Discovery will be available in the arbitration proceedings pursuant to
the provisions of California Code of Civil Procedure Section 1283.05, which are
incorporated herein by this reference and made applicable to any arbitration
held pursuant to this Section 10.
(d) The award of the arbitrator will be made within 90 days from the date
on which the arbitrator is selected. The award of the arbitrator will be final
and, to the greatest extent allowed by law, the parties waive their right to any
form of appeal. The arbitrator must award costs and fees, including the fees of
the arbitrator, to the prevailing party. Judgment on any award of the
arbitrator may be entered in any court having jurisdiction or application may be
made to such court for the judicial acceptance of the award and for one or more
orders of enforcement.
SECTION 11. PARTICIPANT'S SERIES A OPTIONS,
SERIES B OPTIONS AND BONUS INTERESTS
The following sets forth, as provided this Agreement and the Attachments
hereto, upon satisfaction of the Conditions, but subject to the Antidilution
Adjustment, the Series A Options, Series B Options and Bonus Interests that
Participant will have under the Amended and Restated Plan, Stock Option
Agreement, Bonus Plan and Bonus Interest Agreement:
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Series A Options Series B Options Bonus Interests
------------------------- -------------------------- --------------------------
Number Number Maximum
of Common of Common Amount
Shares Shares Receivable
subject to Exercise Subject to Exercise per Bonus
Options Price Options Price Number Interest
---------- -------- ---------- -------- ------ ----------
Amended and
Restated Stock ______ $1,000 ______ $1,000 N/A N/A
Option Plan and
Stock Option
Agreement
thereunder
Bonus Plan and
Bonus Interest N/A N/A N/A N/A _____ $1,000
Agreement
thereunder
PARTICIPANT
---------------------------------------
[Name of Participant]
METRO-XXXXXXX-XXXXX INC.
By:
------------------------------------
Name:
-----------------------------------
Title:
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METRO-XXXXXXX-XXXXX STUDIOS INC.
By:
------------------------------------
Name:
-----------------------------------
Title:
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ATTACHMENTS
-----------
Description Number
Inducement Agreement I
Amended and Restated Plan II
Senior Management Bonus Plan III
Stock Option Agreement IV
Bonus Interest Agreement V
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