METRO-GOLDWYN-MAYER INC, DEF 14A, 1999-03-30

METRO-GOLDWYN-MAYER INC
DEF 14A, 1999-03-30
MOTION PICTURE & VIDEO TAPE PRODUCTION

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Confidential, for Use of the
[_] Preliminary Proxy Statement Commission Only (as Permitted by
Rule 14a-6(e)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12

METRO-GOLDWYN-MAYER INC.
(Name of Registrant as Specified In Its Charter)

N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

Notes:
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[LOGO OF METRO-GOLDWYN-MAYER INC.]

METRO-GOLDWYN-MAYER INC.

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 11, 1999

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To Our Stockholders:

The Annual Meeting of Stockholders of Metro-Goldwyn-Mayer Inc., a Delaware
corporation (the "Company"), will be held in the Main Theatre at the Company's
executive offices located at 2450 Broadway Street, Santa Monica, CA 90404-
3061, on May 11, 1999, at 10:00 a.m., local time (the "Annual Meeting"), for
the following purposes:

1. To elect a Board of Directors;

2. To consider and act upon the approval and ratification of the
repricing of stock options granted pursuant to the Amended and
Restated 1996 Stock Incentive Plan;

3. To consider and act upon the approval and ratification of a proposal
to amend the Amended and Restated 1996 Stock Incentive Plan to
increase the aggregate number of shares of the common stock,
$.01 par value per share, of the Company issuable thereunder from
8,125,065 to 15,000,000;

4. To consider and act upon the approval and ratification of the
amendment of the Bonus Interest Agreements entered into pursuant to
the Senior Management Bonus Plan;

5. To consider and act upon the ratification of the selection of Arthur
Andersen LLP as independent auditors of the Company for the fiscal
year ending December 31, 1999; and

6. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.

Stockholders of record at the close of business on March 19, 1999 are
entitled to notice of and to vote at the Annual Meeting. A list of such
stockholders will be available for examination by any stockholder, during
ordinary business hours, at the Company's executive offices for a period of 10
days prior to the meeting date.

Please date, sign and return the enclosed proxy whether or not you plan to
attend the Annual Meeting. If you plan to attend the Annual Meeting, please
also check the appropriate box on the enclosed proxy and detach the admission
ticket to present at the meeting.

PLEASE DATE, SIGN AND MAIL THE ENCLOSED PROXY.
Use the enclosed envelope which requires no postage for mailing in the United
States.

By Order of the Board of Directors

/s/ William Allen Jones

William Allen Jones
Senior Executive Vice President
and Secretary
Santa Monica, California
March 31, 1999
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METRO-GOLDWYN-MAYER INC.
2500 Broadway Street
Santa Monica, California 90404
(310) 449-3000

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PROXY STATEMENT
March 31, 1999

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General

The accompanying form of proxy and the persons named therein as proxies have
been approved by, and this solicitation is made on behalf of, the Board of
Directors of Metro-Goldwyn-Mayer Inc. in connection with the Annual Meeting of
Stockholders of Metro-Goldwyn-Mayer Inc. (the "Annual Meeting") to be held at
10:00 a.m., local time, on May 11, 1999 in the Main Theatre at the Company's
executive offices located at 2450 Broadway Street, Santa Monica, CA 90404-
3061, and at any and all postponements and adjournments thereof. Metro-
Goldwyn-Mayer Inc., together with its direct and indirect subsidiaries, is
hereinafter referred to as the "Company," unless the context indicates
otherwise.

This Proxy Statement and accompanying proxy were first mailed to
stockholders on or about March 31, 1999. The costs of solicitation of proxies
will be paid by the Company. In addition to soliciting proxies by mail, the
Company's officers, directors and other regular employees, without additional
compensation, may solicit proxies personally or by other appropriate means.
The Company will reimburse brokers, banks, fiduciaries and other custodians
and nominees holding the common stock, $.01 par value per share, of the
Company (the "Common Stock") in their names or in the names of their nominees
for their reasonable out-of-pocket charges and expenses in forwarding proxies
and proxy materials to the beneficial owners of the Common Stock.

Voting Rights and Outstanding Shares

Only stockholders of record of the Common Stock as of March 19, 1999 will be
entitled to vote at the Annual Meeting. The authorized capital stock of the
Company presently consists of 250,000,000 shares of the Common Stock and
25,000,000 shares of preferred stock, $.01 par value per share. On March 19,
1999, there were outstanding 150,873,728 shares of the Common Stock, which
constitutes all of the outstanding voting securities of the Company entitled
to vote at the Annual Meeting. Each share of the Common Stock is entitled to
one vote on all matters to come before the Annual Meeting. No shares of the
Company's preferred stock are issued and outstanding.

The presence, in person or by proxy, of the holders of at least a majority
of the total number of outstanding shares of the Common Stock entitled to vote
is necessary to constitute a quorum at the Annual Meeting. Abstentions and
broker non-votes (i.e. shares held by brokers or nominees as to which
instructions have not been received from beneficial owners or persons entitled
to vote that the broker or nominee does not have discretionary power to vote
on a particular matter) are counted for the purpose of determining the
presence or absence of a quorum for the transaction of business. In the event
that there are not sufficient votes for a quorum at the time of the Annual
Meeting, the Annual Meeting may be adjourned in order to permit the further
solicitation of proxies.

Directors will be elected by a plurality of the votes of the shares of the
Common Stock present in person or represented by proxy. For Proposals 3 and 5
the affirmative vote of the holders of a majority of the outstanding shares of
the Common Stock represented in person or by proxy and entitled to vote on
each such proposal for approval. For Proposals 2 and 4 the affirmative vote of
the holders of at least 75 percent of the outstanding shares of the Common
Stock represented in person or by proxy and entitled to vote on each such
proposal will be required for approval. Tracinda (as defined below), which
owned approximately 79.5 percent of the outstanding shares of the Common Stock
as of March 19, 1999, has agreed to vote its shares in favor of the approval
of Proposals 2 and 4. See "Proposal 2--Options Repricing," "Proposal 3--
Amendment to the 1996 Stock Incentive Plan," "Proposal 4--Bonus Interest
Amendment" and "Proposal 5--Ratification of the Selection of Independent
Auditors."

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With regard to the election of directors, votes may be cast in favor of or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on proposals other than the
election of directors and will be counted as present for purposes of the
proposal on which the abstention is voted. Therefore, such abstentions will
have the effect of a negative vote. Broker non-votes are not counted for
purposes of determining whether a proposal has been approved and, therefore,
have the effect of reducing the number of affirmative votes required to
achieve a majority of the votes cast for such proposal.

Proxies must be written, signed by the stockholder and returned to the
Secretary of the Company. Any stockholder who signs and returns a proxy may
revoke it at any time before it is voted by filing with the Secretary of the
Company a written revocation or a duly executed proxy bearing a date later
than the date of the proxy being revoked. Any stockholder attending the Annual
Meeting in person may withdraw such stockholder's proxy and vote such
stockholder's shares.

The Common Stock does not have cumulative voting rights. The Company, Metro-
Goldwyn-Mayer Studios Inc. ("MGM Studios"), Tracinda Corporation ("Tracinda"
and, collectively with a Delaware corporation that is principally owned by
Tracinda, the "Tracinda Group") and Frank G. Mancuso, Chairman of the Board
and Chief Executive Officer of the Company, are parties to an Amended and
Restated Investors Shareholder Agreement dated as of August 4, 1997, as
amended September 1, 1998 (the "Investors Shareholder Agreement") pursuant to
which they have agreed to vote their respective shares of the Common Stock as
a group with respect to certain matters, including, but not limited to,
certain corporate governance matters and the election of the Board of
Directors of the Company. See "Security Ownership of Certain Beneficial Owners
and Management--Investors Shareholder Agreement."

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The table below sets forth the beneficial ownership of the Common Stock as
of March 19, 1999 of (i) each director of the Company, (ii) the Chief
Executive Officer and the other four most highly compensated executive
officers of the Company who were serving as executive officers on December 31,
1998 (the "Named Executive Officers"), (iii) the directors and Named Executive
Officers of the Company as a group and (iv) each person who at such time, to
the Company's knowledge, beneficially owned more than five percent of the
outstanding shares of the Common Stock of the Company.

<TABLE>
<CAPTION>
Number of Percentage
Name and Address of Beneficial Owner Shares(1) of Class
------------------------------------ ----------- ----------
<S> <C> <C>
The Tracinda Group(2)................................ 134,997,723 89.4%
150 S. Rodeo Drive
Beverly Hills, CA 90212
Frank G. Mancuso(3).................................. 1,558,338 1.0
A. Robert Pisano(4).................................. 312,127 *
James D. Aljian(5)................................... 13,866 *
Francis Ford Coppola................................. -- --
Willie D. Davis(5)................................... 670 *
Alexander M. Haig, Jr.(5)............................ -- --
Kirk Kerkorian(5)(6)................................. 134,997,723 89.4
Alex Yemenidjian(5).................................. 5,000 *
Jerome B. York(5).................................... 13,061 *
William A. Jones(7).................................. 121,951 *
Daniel J. Taylor(8).................................. 42,351 *
Robert Brada(9)...................................... 5,358 *
All Directors and Named Executive Officers as a group
(12 persons)........................................ 137,070,445 90.0
</TABLE>
- --------
* Less than 1 percent.

(1) The number of shares shown includes shares over which the person named has
either sole or shared voting or investment power and shares as to which
certain directors and executive officers disclaim beneficial ownership.
The shares of the Common Stock which a person has the right to acquire
within 60 days of March 19, 1999 and the shares of Common Stock underlying
options that are vested as of March 19, 1999 or that will become vested
within 60 days are deemed to be outstanding for the purpose of calculating
the beneficial ownership of the holder of such options or other rights,
but are not deemed to be outstanding for the purpose of computing the
beneficial ownership of any other person. As a result, the aggregate
percentage ownership of the Common Stock may exceed 100 percent.

(2) Includes: 156,251 shares of the Common Stock issuable at a price of $6.41
per share pursuant to a presently exercisable stock option which expires
on October 10, 2002 and 16,208,463 shares of the Common Stock acquired
from Seven Network Limited ("Seven") on September 1, 1998 for aggregate
consideration of $389 million. All of the shares of the Common Stock held
by the Tracinda Group are pledged to a group of banks to secure a
syndicated credit facility to the Tracinda Group. For a description of
certain voting agreements applicable to such shares, see "--Investors
Shareholder Agreement."

(3) Includes: 901,935 shares of the Common Stock underlying options vested as
of March 19, 1999 or that will become vested within 60 days of such date.
Also includes 7,578 shares of the Common Stock which are owned by Mr.
Mancuso's children and grandchildren and as to which Mr. Mancuso
disclaims beneficial

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ownership. For a description of certain voting agreements applicable to the
shares of the Common Stock held by Mr. Mancuso, see "--Investors
Shareholder Agreement."

(4) Includes: 270,606 shares of the Common Stock underlying options vested as
of March 19, 1999 or that will become vested within 60 days of such date
and 593 shares of the Common Stock allocated to Mr. Pisano's account in
the Savings Plan (as defined in "Benefit Plans--MGM Savings Plan") as of
March 19, 1999. Also includes 7,052 shares of the Common Stock which are
held by the Pisano's Children's Trust and as to which Mr. Pisano
disclaims beneficial ownership.

(5) Each of Messrs. Aljian, Kerkorian, Yemenidjian and York is an employee
of, and was nominated to the Board of Directors of the Company by,
Tracinda. Each of Messrs. Aljian, Davis, Haig, Kerkorian, York and
Yemenidjian is a director of, and Mr. Yemenidjian is also an executive
officer of, MGM Grand, Inc., an affiliate of Tracinda. Includes: (i) with
respect to Mr. Aljian, 530 shares of the Common Stock, (ii) with respect
to Mr. Davis, 365 shares of the Common Stock and (iii) with respect to
Mr. York, 442 shares of the Common Stock, representing in each case the
estimated number of shares of the Common Stock (based on a per share
price of $11.31 as of March 19, 1999) to be issued under the Director
Plan (as defined in "--Director Compensation") within 60 days of March
19, 1999. See "--Director Compensation."

(6) Mr. Kerkorian is the President, Chief Executive Officer and sole
shareholder and director of, and was nominated to the Board of Directors
of the Company by, Tracinda. Represents 134,997,723 shares of the Common
Stock beneficially owned by the Tracinda Group. For a description of
certain voting agreements applicable to the shares of the Common Stock
beneficially owned by Mr. Kerkorian, see "--Investors Shareholder
Agreement."

(7) Includes: 82,452 shares of the Common Stock underlying options vested as
of March 19, 1999 or that will become vested within 60 days of such date,
and 499 shares of the Common Stock allocated to Mr. Jones' account in the
Savings Plan as of March 19, 1999.

(8) Includes: 40,688 shares of the Common Stock underlying options vested as
of March 19, 1999 or that will become vested within 60 days of such date
and 511 shares of the Common Stock allocated to Mr. Taylor's account in
the Savings Plan as of March 19, 1999.

(9) Includes: 4,680 shares of the Common Stock underlying options vested as
of March 19, 1999 or that will become vested within 60 days of such date
and 447 shares of the Common Stock allocated to Mr. Brada's account in
the Savings Plan as of March 19, 1999.

Investors Shareholder Agreement

The following is a summary description of the material terms of the
Investors Shareholder Agreement. This summary description does not purport to
be complete and is subject to and qualified in its entirety by reference to
the definitive Investors Shareholder Agreement, a copy of which is filed as an
exhibit to the Company's Annual Report on Form 10-K filed with the Securities
Exchange Commission (the "Commission") on March 30, 1999 (the "Annual
Report").

Voting of Shares. Until November 2012 the Tracinda Group, the Company and
Mr. Mancuso have agreed to vote all their respective shares of capital stock
of the Company and to take all necessary or desirable action, in each case so
that:

(i) the Board of Directors of the Company consists of nine members
(subject to the provisions described below), up to four of whom are
nominated by Tracinda (subject to reduction if the Tracinda Group does not
maintain a certain level of ownership of the Common Stock), two of whom are
nominated by the Chairman and Chief Executive Officer of the Company (one
of whom shall be Mr. Mancuso as long as he serves as the Chief Executive
Officer of the Company), and three independent directors who are nominated
by the majority of the Board of Directors of the Company (which majority,
so long as the Tracinda Group beneficially owns at least 16,666,800 shares
of the Common Stock, must include Tracinda's nominees on the Board of
Directors of the Company) and who are not affiliated or associated with
Tracinda and otherwise meet the requirements of the New York Stock Exchange
(the "NYSE") for serving as independent

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directors; provided, however, that the Tracinda Group is only obligated to
vote for nominees selected by the Board of Directors of the Company which
are acceptable to Tracinda. The Board of Directors may determine to reduce
the size of the Board of Directors to eight persons, in which case the
number of independent directors will be reduced to two. Furthermore,
Tracinda has the exclusive right (which, to the extent the same may be
required by law, may be exercised indirectly) (A) to remove, with or
without cause, any director designated by it in accordance with the
foregoing and (B) to designate and elect any replacement for a director
designated by it in accordance with the foregoing upon the death,
resignation, retirement, disqualification or removal from office of such
director;

(ii) the Compensation Committee (as defined below) consists of one member
of the Board of Directors of the Company nominated by Tracinda (so long as
the Tracinda Group maintains a certain level of ownership of the Common
Stock), one member of the Board of Directors of the Company nominated by
the remaining members of the Board of Directors of the Company and one
independent director nominated by the majority of the Board of Directors of
the Company (which majority, so long as the Tracinda Group beneficially
owns at least 16,666,800 shares of the Common Stock, must include
Tracinda's nominees on the Board of Directors of the Company) and who is
not affiliated or associated with Tracinda and otherwise meets the
requirements of the NYSE for serving as an independent director; and

(iii) the Executive Committee (as defined below) consists of three
members of the Board of Directors of the Company nominated by Tracinda (so
long as the Tracinda Group maintains a certain level of ownership of the
Common Stock), one member of the Board of Directors of the Company
nominated by the remaining members of the Board of Directors of the
Company, and two members of the Board of Directors of the Company nominated
by the Chairman and Chief Executive Officer of the Company (one of whom
shall be Mr. Mancuso as long as he serves as the Chief Executive Officer of
the Company).

Except to the extent consistent with the Investors Shareholder Agreement,
the Board of Directors of the Company shall not be authorized to fill a
vacancy on the Board of Directors of the Company caused by the death,
resignation, retirement, disqualification or removal of a director.

For as long as Mr. Mancuso serves as a member of the Board of Directors of
the Company, Mr. Mancuso shall act as the Chairman of the Board of Directors
of the Company. The Board of Directors of the Company shall have the right to
remove Mr. Mancuso as a director of the Company, with or without cause, only
upon the termination of his employment as Chief Executive Officer, subject to
the terms of Mr. Mancuso's employment agreement. See "Executive Compensation--
Employment Agreements--Frank G. Mancuso." If Mr. Mancuso ceases to act as
Chief Executive Officer of the Company, Mr. Mancuso has agreed to resign as a
director of the Company and all other positions held by Mr. Mancuso at the
Company. Any person selected by Mr. Mancuso as the second management director
must agree to resign as a director of the Company and a member of any
committee of the Board of Directors of the Company at such time as Mr. Mancuso
ceases to serve as the Chief Executive Officer of the Company, unless such
other person is acceptable to the new Chief Executive Officer of the Company.

Until October 10, 2001 the obligations described above in the paragraph
heading "--Voting of Shares" will be binding upon any transferee of any member
of the Tracinda Group except for any person (other than an affiliate of
Tracinda) who acquires (i) shares of the Common Stock from a member of the
Tracinda Group pursuant to a public offering registered under the Securities
Act of 1933, as amended (the "Securities Act") or pursuant to Rule 144 or
Regulation S promulgated thereunder or (ii) not more than 4,166,700 shares of
the Common Stock from the Tracinda Group in one transaction or a series of
related transactions.

Business Operations. Each of the Company, MGM Studios, the Tracinda Group
and Mr. Mancuso has agreed to use their best efforts (until November 2012) to
ensure that the Company does not engage in any business activity except the
entertainment business unless (i) all directors of the Board of Directors
shall have approved such engagement in other business activities or (ii) a
majority of the Board of Directors shall have approved such engagement in
other business activities and such engagement in other business activities
shall

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have been approved by the stockholders of the Company in accordance with the
applicable provisions of the Delaware General Corporation Law (the "DGCL").
For purposes of the Investors Shareholder Agreement, the entertainment
business shall include the acquisition, development, production, marketing,
distribution, exhibition, publication or use of intellectual property for
purposes of providing entertainment, education or information and all services
and activities reasonably related thereto, including the services and
activities currently provided or conducted by the Company and its
subsidiaries.

Pre-emptive Rights. The Company has granted to each of the Tracinda Group
and Mr. Mancuso certain pre-emptive rights with respect to the Common Stock.
Subject to certain exceptions, if at any time prior to November 2012, the
Company proposes to issue to any person any shares of the Common Stock or any
securities exercisable for the purchase of or convertible into the Common
Stock, each of the Tracinda Group and Mr. Mancuso may subscribe for and
purchase for cash a number of shares of the Common Stock or securities
exercisable for the purchase of or convertible into the Common Stock,
respectively, such that, after giving effect to such issuance to such other
persons and such purchase by either the Tracinda Group or Mr. Mancuso, as the
case may be, such purchaser will continue to beneficially own the same
percentage of the outstanding Common Stock (including securities exercisable
for the purchase of or convertible into the Common Stock) that such purchaser
beneficially owned prior thereto.

The price to be paid in any such purchase by the Tracinda Group or Mr.
Mancuso and the other terms of purchase shall be the same as applicable to the
purchase of the Common Stock or such other securities by such other person,
except that in all cases the price to be paid by the Tracinda Group and Mr.
Mancuso shall be paid in cash. If such shares of the Common Stock or such
other securities are to be issued to such other person for property or
services, the price per share or other security to be paid by the Tracinda
Group and Mr. Mancuso shall be equal to the fair market value per share or
other security of the property or services to be received by the Company from
such other person, as such fair market value is determined by the independent
directors of the Company elected to the Board of Directors of the Company.

Such pre-emptive rights will terminate, with respect to the Tracinda Group,
at such time as the Tracinda Group beneficially owns less than 10,416,750
shares of the Common Stock (as presently constituted) and, with respect to Mr.
Mancuso, at such time as Mr. Mancuso is no longer the Chief Executive Officer
of the Company.

Shareholders Agreement

The following is a summary description of the material terms of the Amended
and Restated Shareholders Agreement (the "Shareholders Agreement") dated as of
August 4, 1997, as amended August 8, 1998, September 1, 1998 and March 19,
1999, by and among the Company, MGM Studios, the Tracinda Group, Mr. Mancuso
and the other persons specified on the signature pages thereto (Mr. Mancuso
and such specified persons, collectively, "Executives"). This summary
description does not purport to be complete and is subject to and qualified in
its entirety by reference to the definitive Shareholders Agreement, a copy of
which is filed as an exhibit to the Annual Report. For purposes of the
Shareholders Agreement, any shares of the Common Stock beneficially owned,
directly or indirectly, by any member of the Tracinda Group will be deemed to
be owned by Tracinda.

Tag-Along Rights. The Tracinda Group has agreed to be bound by certain "tag-
along" restrictions with respect to certain transfers of its shares of the
Common Stock. Subject to certain exceptions, if any member of the Tracinda
Group desires to transfer shares of the Common Stock beneficially owned by it,
directly or indirectly, in whole or in part (a "Tag-Along Sale"), then each
Executive shall have the right but not the obligation, (i) to exercise in the
manner provided in the Shareholders Agreement or in the respective Executive's
stock option agreement certain options held by such Executives pursuant to the
1996 Incentive Plan to the extent required to realize the "tag-along" rights
of such Executives and (ii) to elect that such member of the Tracinda Group be
obligated to require, as a condition to such Tag-Along Sale, that the proposed
purchaser purchase from each such electing Executive a proportional number of
shares (excluding shares of the Common Stock acquired pursuant to open market
purchases). Any such sales by any Executive shall be on the same terms and
conditions

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as the proposed Tag-Along Sale by such member of the Trancinda Group, and on
the same date as the closing of the proposed Tag-Along Sale.

Demand Registration Rights. Subject to certain exceptions and conditions,
the Tracinda Group and the Executives have the right to make up to three
requests, in the case of the Tracinda Group, and up to two requests with
respect to all of the Executives, for registration ("Demand Registration")
under the Securities Act of all or part of the Common Stock or securities
issued as a dividend on or distribution with respect to or in exchange,
replacement or in subdivision of, any such Common Stock, which have not been
sold pursuant to an effective registration statement under the Securities Act
or pursuant to Rule 144 under the Securities Act (the "Registrable
Securities") held by them; provided that any request for a Demand Registration
shall not be otherwise deemed to be effective unless such request includes
Registrable Securities with an estimated value of no less than $50 million.
Demand Registration requests may be for shelf registrations (covering sales on
a delayed or contingent basis) if the Company is then eligible to effect shelf
registrations. The Company will pay all of the expenses of any such Demand
Registration, including the fees and expenses of a single counsel retained by
the selling stockholders; however, each selling stockholder will be
responsible for the underwriting discounts and commissions and transfer taxes
in connection with shares sold by such stockholder and any party requesting
long-form registration when short-form registration is available will bear the
incremental cost thereof. Each selling stockholder and the underwriters
through whom shares are sold on behalf of a selling stockholder will be
entitled to customary indemnification from the Company and MGM Studios, in the
case of the selling stockholders, and the Company, in the case of the
underwriters, against certain liabilities, including liabilities under the
Securities Act.

"Piggyback" Registration Rights. If the Company proposes to register any of
its equity securities under the Securities Act (other than (i) a registration
on Form S-4 or Form S-8 or any successor or similar forms or (ii) a
registration in connection with a pro rata distribution of rights to subscribe
for shares of the Common Stock to all holders of the Common Stock) and the
registration form to be used may be used for the registration of the
Registrable Securities, whether or not for sale for its own account, then,
subject to certain exceptions and conditions, each member of the Tracinda
Group and each of the Executives shall be entitled to request that the
Registrable Securities of the same class beneficially owned by such party be
included in such registration (a "Piggyback Registration"). The Company will
pay all of the expenses of any such Piggyback Registration, including the fees
and expenses of a single counsel retained by the selling stockholders;
however, each selling stockholder will be responsible for the underwriting
discounts and commissions and transfer taxes in connection with shares sold by
such stockholder. Each selling stockholder and the underwriters through whom
shares are sold on behalf of a selling stockholder will be entitled to
customary indemnification from the Company and MGM Studios, in the case of the
selling stockholders, and the Company, in the case of the underwriters against
certain liabilities, including liabilities under the Securities Act.

Certain Holdback Agreements. The Tracinda Group and each of the Executives
has agreed, if requested by the Company or any managing underwriters of a
registration of securities of the Company, not to effect any public sale or
distribution (including sales pursuant to Rule 144) of shares of equity
securities of the Company, or any securities convertible into or exchangeable
or exercisable for equity securities, for a period not to exceed the period
commencing with the date seven days prior to and ending with the date 180 days
after the effective date of any underwritten registration by the Company of
its securities (except as part of such underwritten registration). The Company
has agreed to a similar restriction (except as part of such underwritten
registration or pursuant to registrations on Form S-4 or Form S-8 or any
successor forms) and to use its best efforts to cause certain holders of its
capital stock (other than in a registered public offering) to so agree.

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PROPOSAL 1

ELECTION OF DIRECTORS

The following table sets forth the names of each nominee (the "Nominees")
for election as a director of the Company and provides information concerning
such Nominee's principal occupation for at least the past five years, age as
of March 19, 1999 and certain other matters. Directors of the Company hold
office until the next annual meeting of stockholders, until their respective
successors are duly qualified or until their earlier resignation or removal.

The Nominees are all current members of the Board of Directors. All proxies
received by the Board of Directors will be voted for such Nominees, unless
directions to the contrary are given. In the event that any Nominee is unable
to or declines to serve, an event that is not anticipated, the proxies will be
voted for the election of another nominee designated by the Board of Directors
or, if none is so designated, will be voted according to the judgment of the
person or persons voting the proxy.

The Board of Directors recommends that stockholders vote "FOR" the Nominees.

<TABLE>
<CAPTION>
Name Age Principal Occupation and Other Directorships
---- --- --------------------------------------------
<C> <C> <S>
Frank G. Mancuso........ 65 Mr. Mancuso has been the Chairman of the Board
and Chief Executive Officer of the Company since
October 1996 and has been the Chairman of the
Board and Chief Executive Officer of MGM Studios
since July 1993. Prior to joining MGM Studios,
Mr. Mancuso was the Chairman and Chief Executive
Officer of Paramount Pictures Corporation from
September 1984 to March 1991, having served
Paramount in numerous other capacities beginning
in 1963.

A. Robert Pisano........ 56 Mr. Pisano was appointed as a director and Vice
Chairman of the Board of Directors of the Company
in December 1997. Mr. Pisano has served as Vice
Chairman of the Company and MGM Studios since
March 1997 and, prior thereto, served as
Executive Vice President of MGM Studios from
August 1993 to March 1997. Prior to joining MGM
Studios, Mr. Pisano was Executive Vice President
of Paramount Pictures Corporation from June 1985
to May 1991, where he served as General Counsel
and a member of the Office of the Chairman. Prior
to 1985 and from February 1992 to August 1993,
Mr. Pisano was a partner with the law firm of
O'Melveny & Myers LLP.

James D. Aljian......... 66 Mr. Aljian has been a director of the Company
since October 1996. Mr. Aljian has served as an
executive of Tracinda since October 1987. In
addition, Mr. Aljian serves on the board of
directors of MGM Grand, Inc. and on the
shareholders' committee of DaimlerChrysler AG.

Francis Ford Coppola.... 59 Mr. Coppola has been a director of the Company
since January 1998. Since 1993 Mr. Coppola has
been the owner, Chairman and President of
American Zoetrope, a film company based in San
Francisco. Mr. Coppola is also a five-time Oscar-
winning director, writer and producer.
Mr. Coppola previously served on the board of
directors of MGM Studios from December 1993 to
October 1996.

Willie D. Davis ........ 64 Mr. Davis has been a director of the Company
since November 1998. Mr. Davis is President and
Director of All-Pro Broadcasting, Inc., an AM and
FM radio broadcasting company. Mr. Davis has
served on the board of directors of MGM Grand,
Inc. since 1989 and is director of Sara Lee
Corporation, K-Mart Corporation, Johnson
Controls, Inc., Alliance Bank, WICOR, Dow
Chemical Company, Rally's Hamburgers, Inc. and
LA Gear, Inc.
</TABLE>

8
<PAGE>

<TABLE>
<CAPTION>
Name Age Principal Occupation and Other Directorships
---- --- --------------------------------------------
<C> <C> <S>
Alexander M. Haig, Jr. . 74 Mr. Haig has been a director of the Company since
November 1998. Mr. Haig is Chairman of Worldwide
Associates Inc., an international business
advisory firm. In addition, Mr. Haig has served
on the board of directors and as a consultant to
MGM Grand, Inc. since 1990 and serves on the
boards of directors of America Online, Inc.,
Interneuron Pharmaceuticals, Inc. and Preferred
Employers Holdings, Inc.

Kirk Kerkorian.......... 81 Mr. Kerkorian has been a director of the Company
since October 1996 and has had a professional
relationship with MGM Studios and its
predecessors for over 25 years. Mr. Kerkorian has
served as Chief Executive Officer, President and
sole director and shareholder of Tracinda for
more than the past five years. In addition, Mr.
Kerkorian serves on the board of directors of MGM
Grand, Inc.

Alex Yemenidjian........ 43 Mr. Yemenidjian has been a director of the
Company since November 1997. Mr. Yemenidjian has
served as the President of MGM Grand, Inc. since
July 1995, as Chief Operating Officer of MGM
Grand, Inc. since June 1995, as Chief Financial
Officer from May 1994 to February 1998 and was an
Executive Vice President of MGM Grand, Inc. from
June 1992 to July 1995. Prior thereto, Mr.
Yemenidjian served as the Chairman of the
Executive Committee of MGM Grand, Inc. from
January 1991 to June 1992, and as the President
and Chief Operating Officer of MGM Grand, Inc.
from March 1990 to January 1991. Mr. Yemenidjian
has been a director of MGM Grand, Inc. since
1989. In addition, Mr. Yemenidjian served as an
executive of Tracinda from January 1990 to
January 1997 and has served as an executive of
Tracinda since February 1999.

Jerome B. York.......... 60 Mr. York has been a director of the Company since
October 1996. Mr. York has served as the Vice
Chairman of Tracinda since September 1995. Prior
to joining Tracinda, Mr. York served as Senior
Vice President and Chief Financial Officer of IBM
Corporation from May 1993 to September 1995 and
as a director of IBM Corporation from January
1995 to September 1995. Prior thereto, Mr. York
served as Executive Vice President-Finance and
Chief Financial Officer of Chrysler Corporation
from May 1990 to May 1993 and as a director of
Chrysler Corporation from April 1992 to May 1993.
In addition, Mr. York serves on the boards of
directors of MGM Grand, Inc., Apple Computer,
Inc. and Waste Management, Inc.
</TABLE>

Section 16(a) Beneficial Ownership Reporting Compliance

To the Company's knowledge (based solely upon a review of the copies of
Section 16(a) reports furnished to the Company and representations that no
other reports were required), during the year ended December 31, 1998, the
Company's officers, directors and 10 percent beneficial owners have complied
with all applicable Section 16(a) filing requirements, except that Mr. A.
Robert Pisano, in filing one of his monthly reports on Form 4, inadvertently
omitted to include a purchase of 2,000 shares by an Individual Retirement
Account of which he is the beneficiary. Upon learning of the omission, Mr.
Pisano promptly filed an amended Form 4.

9
<PAGE>

Information Regarding the Board of Directors and Committees

Board Meetings. The Board of Directors held six meetings and acted once by
written consent during 1998. During 1998 all directors attended at least 75
percent of the meetings of the Board of Directors and committees on which they
served (held during the period for which they served). The Board of Directors
does not have a standing nominating committee. The candidates for election at
this Annual Meeting were nominated by the Board of Directors.

Executive Committee. The Executive Committee of the Board of Directors of
the Company (the "Executive Committee") was established on December 16, 1997
and currently consists of Messrs. Aljian, Kerkorian, Mancuso, Pisano,
Yemenidjian (Chairman) and York. The Executive Committee exercises all the
powers and authority of the Board of Directors during intervals between
meetings of the Board of Directors, except as limited by the DGCL. The
Executive Committee held seven meetings and acted twice by written consent
during 1998.

Audit Committee. The Audit Committee of the Board of Directors of the
Company (the "Audit Committee") was established on October 10, 1996 and
currently consists of Mr. Davis and Mr. Yemenidjian (Chairman). The function
of the Audit Committee is to: (i) review and approve the selection of, and all
services performed by, the Company's independent auditors; (ii) meet and
consult with, and receive reports from, the Company's independent auditors,
its financial and accounting staff and its internal audit department regarding
internal controls; and (iii) review and act with respect to the scope of audit
procedures, accounting practices and internal accounting and financial
controls of the Company. The Audit Committee is comprised exclusively of
directors who are not salaried employees of the Company and who are, in the
opinion of the Board of Directors, free from any relationship which would
interfere with the exercise of independent judgment as a committee member. The
Audit Committee met once during 1998.

Finance Committee. The Finance Committee of the Board of Directors of the
Company (the "Finance Committee") was established on November 12, 1998 and
currently consists of Messrs. Aljian, Mancuso, Pisano, Yemenidjian and York
(Chairman). The Finance Committee exercises all the powers and authority of
the Board of Directors with respect to the financial affairs of the Company
during intervals between meetings of the Board of Directors or the Executive
Committee, except as limited by the DGCL. The Finance Committee met once
during 1998.

Compensation Committee; Compensation Committee Interlocks and Insider
Participation. The Compensation Committee of the Board of Directors of the
Company (the "Compensation Committee") was established on November 7, 1997 and
currently consists of Messrs. Coppola, Yemenidjian and York (Chairman). The
Compensation Committee is responsible for administering the Company's stock
incentive plans and monitoring, reviewing and making recommendations to the
Board of Directors with respect to the Company's compensation policies,
including the granting of awards under the incentive plans. See "Compensation
Committee Report on Executive Compensation." The Compensation Committee held
one meeting and acted by written consent six times during 1998.

Messrs. Yemenidjian and York are employees of Tracinda and directors of MGM
Grand Inc., an affiliate of Tracinda, Mr. Yemenidjian is an executive officer
of MGM Grand, Inc., an affiliate of Tracinda, and Mr. Coppola is the brother
of the sole shareholder of Taliafilm, Inc., with which the Company has entered
into an agreement. See "Certain Relationships and Related Transactions." In
addition, Mr. Pisano is a director and serves on the compensation committee of
Mr. Coppola's family trust.

Bonus Plan Committee. The Bonus Plan Committee of the Board of Directors of
the Company (the "Bonus Plan Committee") was established on November 7, 1997
and is comprised of the same members of, and holds its meetings at the same
time as, the Compensation Committee. The Bonus Plan Committee is responsible
for administering the Senior Management Bonus Plan (as defined below). See
"Proposal 4--Bonus Interest Amendment."

10
<PAGE>

Non-Employee Director Plan Committee. The Non-Employee Director Plan
Committee of the Board of Directors of the Company (the "Director Plan
Committee") is comprised of the Messrs. Mancuso and Pisano. The Director Plan
Committee is responsible for administering the 1998 Non-Employee Director
Stock Plan (the "Director Plan"). No meetings of the committee were held
during 1998. See "--Director Compensation."

Director Compensation

Each director of the Company who is not a full-time employee of the Company
or its subsidiaries (a "Non-Employee Director"), currently seven persons, will
be paid (i) $25,000 per annum for serving as a director of the Company, (ii)
$15,000 per annum additional if such Non-Employee Director is a member of the
Executive Committee, (iii) $2,000 per meeting (up to a maximum of $8,000 per
annum) for attendance at Audit Committee meetings if such Non-Employee
Director is a member of the Audit Committee, and (iv) $1,000 per meeting (up
to a maximum of $4,000 per annum) for attendance at Compensation Committee
meetings if such Non-Employee Director is a member of the Compensation
Committee. No compensation is paid for attendance at Finance Committee
meetings.

Mr. Haig, a member of the Board of Directors of the Company, renders
consulting services to the Company for which he receives fees at the rate of
$50,000 per annum.

Pursuant to the Director Plan, each Non-Employee Director is entitled to
elect to receive all or a portion of the compensation received as a director
("Election Amount") in the form of shares of the Common Stock. Shares are
issued under the Director Plan in equal quarterly installments (based on the
Election Amount) and the actual number of shares of the Common Stock to be
received by a Non-Employee Director will be determined based on the fair
market value of the Common Stock on the date of issuance. Up to 100,000 shares
of the Common Stock, subject to certain adjustments, have been reserved for
issuance under the Director Plan. The Director Plan is administered by the
Director Plan Committee, which has the power to amend the Plan, subject to
certain limitations. For the 1998 plan year, commencing the day immediately
following the 1998 annual meeting and ending on the date of the Annual
Meeting, three Non-Employee Directors elected to participate in the Director
Plan: Mr. Aljian elected to receive 60 percent of his annual compensation as a
director in shares of the Common Stock, Mr. Davis elected to receive 50
percent of his annual compensation as a director in shares of the Common Stock
and Mr. York elected to receive 50 percent of his annual compensation as a
director in shares of the Common Stock. As of March 19, l999, the Company had
issued an aggregate of 2,843 shares of the Common Stock under the Director
Plan as follows: 1,364 shares were issued to Mr. Aljian, 1,174 shares were
issued to Mr. York and 305 shares were issued to Mr. Davis.

On May 18, 1998 the Company filed a registration statement on Form S-8 with
the Commission (which registration statement became effective upon filing)
with respect to the shares of the Common Stock authorized to be issued
pursuant to the Director Plan.

In addition, Non-Employee Directors receive reimbursement for out-of-pocket
expenses in attending meetings of the Board of Directors and any committees
thereof on which they serve. See "Certain Relationships and Related
Transactions" for a description of certain transactions involving directors or
their affiliates and the Company.

11
<PAGE>

EXECUTIVE COMPENSATION

Executive Compensation Summary

Compensation Summary. The following table sets forth the cash compensation
(including cash bonuses) paid or awarded by the Company for the fiscal years
ended December 31, 1998, 1997 and 1996 to the Named Executive Officers and
Messrs. Corrigan and Johnson (the "Former Officers").

Summary Compensation Table

<TABLE>
<CAPTION>
Long-Term Compensation
------------------------
Annual Compensation Awards
----------------------------------- ------------------------
Bonus
Interests Securities
and Underlying
Name and Other Annual Equivalents Options All Other
Principal Position Year Salary($) Bonus($) Compensation($) (#)(1) (#)(2) Compensation($)
------------------ ---- --------- -------- --------------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Frank G. Mancuso........ 1998 $2,020,400 $ -- $3,000,000(3) -- -- $ 122,185(6)
Chairman of the Board 1997 2,020,400 -- 5,780,769(4) 811,756 1,745,680 168,228
and Chief Executive 1996 2,691,408 750,000 576,923(5) -- -- 17,228,129
Officer

A. Robert Pisano........ 1998 965,600 750,000 -- -- 523,754 17,085(7)
Vice Chairman of the 1997 965,600 750,000 -- 243,544 523,754 17,085
Board of Directors 1996 816,984 -- -- -- -- 1,800,706

William A. Jones........ 1998 598,325 -- -- -- 159,584 27,595(8)
Senior Executive Vice 1997 546,626 -- -- 74,209 159,584 34,309
President and Secretary 1996 467,238 -- -- -- -- 1,051,476

Daniel J. Taylor(9)..... 1998 573,161 45,333 -- 29,292(10) 179,168 35,533(11)
Senior Executive Vice 1997 153,192 41,667 -- 54,042 116,250 67,539
President and Chief
Financial Officer

Robert Brada(12)........ 1998 327,301 50,000 -- 40,584(13) 87,292(14) 6,400(15)
Executive Vice
President
and General Counsel

Michael G. Corrigan(16). 1998 362,762 -- -- -- -- 2,616,968(17)
Senior Executive Vice 1997 328,185 -- -- 83,334 179,168 104,845
President and Chief
Financial Officer

David G. Johnson(18).... 1998 426,592 -- -- -- -- 2,468,579(19)
Senior Executive Vice 1997 573,483 100,000 -- 83,334 179,168 5,946
President and General 1996 482,893 122,692 -- -- -- 538,858
Counsel
</TABLE>
- --------
(1) Except as otherwise footnoted: (i) with respect to 1996, the bonuses
granted under the predecessor plan to the Senior Management Bonus Plan
were canceled in connection with the adoption of the Senior Management
Bonus Plan in November 1997 and (ii) with respect to 1997, such number
represents the number of Bonus Interests (as such term is defined below)
granted pursuant to the Senior Management Bonus Plan after giving effect
to (A) the cancellation in November 1997 of the bonuses which had been
granted under the predecessor plan and (B) the Bonus Interest Amendment
(as such term is defined below). Each Bonus Interest entitles the
participant to receive up to $24.00 under certain circumstances. In
connection with the Bonus Interest Amendment, the trigger and ceiling
prices (as such terms are defined below) of 243,544, 74,209 and 54,042
Bonus Interests granted to Messrs. Pisano, Jones and Taylor,
respectively, were reduced. See "--Incentive and Bonus Plans--Senior
Management Bonus Plan."

12
<PAGE>

(2) Except as otherwise footnoted: (i) with respect to 1996, options granted
under the predecessor plan to the 1996 Incentive Plan (as defined below)
were canceled in connection with the amendment and restatement of the
1996 Incentive Plan in November 1997 as follows: 872,840, 261,877,
79,792, 58,125 and 89,584 Series A Options and 958,549, 287,502, 87,876,
63,959 and 98,334 Series B Options granted to Messrs. Mancuso, Pisano,
Jones, Taylor and Johnson, respectively; (ii) with respect to 1997,
certain options granted under the 1996 Incentive Plan were canceled and
regranted in connection with the Options Repricing (as such term is
defined below) and (iii) with respect to 1998, such number includes the
number of options re-granted pursuant to the 1996 Incentive Plan in
connection with the Options Repricing as follows: 261,877, 79,792,
121,043 and 26,000 Series A Options and 261,877, 79,792, 58,125 and 0
Series B Options granted to Messrs. Pisano, Jones, Taylor and Brada,
respectively, but does not double count options which were granted in
1998 prior to the Options Repricing and were canceled and regranted in
connection with the Options Repricing. See "--Incentive and Bonus Plans--
1996 Incentive Plan."

(3) Represents the annual stock purchase payment paid in advance in 1998 for
the period of November 18, 1998 to November 17, 1999 to Mr. Mancuso
pursuant to his employment agreement, out of the after-tax proceeds of
which he was required to purchase shares of the Common Stock at a
purchase price equal to the fair market value of such shares. See "--
Employment Agreements--Frank G. Mancuso."

(4) Represents (i) the portion of the annual stock purchase payment for the
period of January 1, 1997 to November 17, 1997 and (ii) the annual stock
purchase payment paid in advance in 1997 for the period of November 18,
1997 to November 17, 1998 to Mr. Mancuso pursuant to his employment
agreement, out of the after-tax proceeds of which he was required to
purchase shares of the Common Stock at a purchase price of $24.00 per
share. See "--Employment Agreements--Frank G. Mancuso."

(5) Represents the portion of the annual stock purchase payment paid to Mr.
Mancuso for the period of October 10, 1996 to December 31, 1996 pursuant
to his employment agreement, out of the after-tax proceeds of which he
was required to purchase shares of the Common Stock at a purchase price
of $24.00 per share. See "--Employment Agreements--Frank G. Mancuso."

(6) Represents life insurance premiums paid by the Company for the benefit of
Mr. Mancuso. See "--Employment Agreements--Frank G. Mancuso."

(7) Includes: a matching contribution of $6,400 paid by the Company for the
benefit of Mr. Pisano under the Savings Plan and $10,685 in life
insurance premiums paid by the Company for the benefit of Mr. Pisano. See
"--Employment Agreements--A. Robert Pisano."

(8) Includes: a matching contribution of $6,400 paid by the Company for the
benefit of Mr. Jones under the Savings Plan and $21,195 in life insurance
premiums paid by the Company for the benefit of Mr. Jones. See "--
Employment Agreements-- William A. Jones."

(9) Mr. Taylor was hired by the Company as Executive Vice President-Corporate
Finance in August 1997 and was appointed as Senior Executive Vice
President and Chief Financial Officer on June 15, 1998. Accordingly, the
amounts shown in the table above with respect to "Annual Compensation"
for 1997 are for a period of less than a full year.

(10) In connection with his appointment as Senior Executive Vice President and
Chief Financial Officer on June 15, 1998, Mr. Taylor was granted the
Taylor Cash Bonus (as defined below), which is equivalent to 29,292 Bonus
Interests, after giving effect to the Bonus Interests Repricing, and is
only payable in certain circumstances. See "--Employment Agreements--
Daniel J. Taylor."

(11) Includes: $29,133 in moving allowance and reimbursement of moving
expenses incurred by Mr. Taylor in connection with his relocation to Los
Angeles and a matching contribution of $6,400 paid by the Company for the
benefit of Mr. Taylor under the Savings Plan. See "--Employment
Agreements--Daniel J. Taylor."

(12) Mr. Brada was hired by the Company in June 1995. On January 8, 1999, Mr.
Brada was determined by the Board of Directors to be an "officer" of the
Company, as such term is defined in the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). Accordingly, information is only
provided in the table above with respect to 1998.

13
<PAGE>

(13) In connection with his appointment as Executive Vice President on June 1,
1998 and as Executive Vice President and General Counsel on August 21,
1998, Mr. Brada was granted the Brada Cash Bonus (as defined below),
which is equivalent to 40,584 Bonus Interests, after giving effect to the
Bonus Interests Repricing, and is only payable in certain circumstances.
See "--Employment Agreements--Robert Brada."

(14) Includes: 30,646 Series A and 30,646 Series B Options granted to Mr.
Brada on October 26, 1998. See "--Employment Agreements--Robert Brada."

(15) Represents a matching contribution of $6,400 paid by the Company for the
benefit of Mr. Brada under the Savings Plan. See "--Employment
Agreements--Robert Brada."

(16) Mr. Corrigan was appointed Senior Executive Vice President and Chief
Financial Officer of the Company in July 1997 and ceased to be employed
by the Company on June 15, 1998. Accordingly, the amounts shown in the
table above with respect to "Annual Compensation" are for periods of less
than one year. All of Mr. Corrigan's options and Bonus Interests became
vested and exercisable upon the cessation of his employment with the
Company and are not subject to the Options Repricing or the Bonus
Interest Amendment.

(17) Represents the amount paid to Mr. Corrigan in connection with the
termination of his employment agreement in July 1998.

(18) Mr. Johnson resigned from the Company effective August 20, 1998.
Accordingly, the amounts shown in the table above with respect to "Annual
Compensation" for 1998 are for a period of less than one year. All of Mr.
Johnson's options and Bonus Interests became vested and exercisable upon
his resignation from the Company and are not subject to the Options
Repricing or the Bonus Interest Amendment.

(19) Represents a matching contribution of $6,400 paid by the Company for the
benefit of Mr. Johnson under the Savings Plan and $2,462,179 paid to Mr.
Johnson in connection with the termination of his employment agreement in
August 1998.

14
<PAGE>

Option Grants and Long Term Incentive Awards. The following table sets forth
information with respect to grants of employee stock options issued by the
Company to the Named Executive Officers and the Former Officers for the fiscal
year ended December 31, 1998. See "--Incentive and Bonus Plans--1996 Incentive
Plan."

Option Grants in Fiscal Year Ended December 31, 1998
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------- Potential Realizable
Percent of Value at Assumed
Shares Total Options Annual Rates of Stock
Underlying Granted to Price Appreciation For
Options Employees in Exercise or Option Term ($)(2)
Granted Fiscal Year Base Price Expiration ----------------------
Name (#) (%)(1) ($/sh) Date 0% 5% 10%
- ---- ---------- ------------- ----------- ---------- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Frank G. Mancuso........ -- --% $ -- -- $ -- $ -- $ --
A. Robert Pisano........ 523,754(3) 8.9 14.90 10/9/2006 -- -- 2,150,920
William A. Jones........ 159,584(3) 2.7 14.90 10/9/2006 -- -- 655,370
Daniel J. Taylor........ 116,250(3) 2.0 14.90 7/31/2007 -- -- 654,238
62,918(4) 1.1 14.90 8/2/2008 -- -- 484,289
Robert Brada............ 15,600(3) 0.3 14.90 11/11/2007 -- -- 96,520
10,400(4) 0.2 14.90 7/12/2008 -- -- 78,766
61,292 1.0 14.90 10/25/2008 -- -- 502,472
Michael G. Corrigan..... -- -- -- -- -- -- --
David G. Johnson........ -- -- -- -- -- -- --
</TABLE>
- --------
(1) Based on a total of 5,900,396 stock options granted pursuant to the 1996
Incentive Plan during the fiscal year ended December 31, 1998, including
the 5,352,504 options that were canceled and regranted in connection with
the Options Repricing, but without double counting options which were
granted in 1998 prior to the Options Repricing and were canceled and
regranted in connection with the Options Repricing.

(2) As of December 31, 1998. The closing sale price per share of the Common
Stock on the NYSE , as reported by the Dow Jones News Retrieval, on
October 26, 1998, the date of the Options Repricing, was $9.06. Potential
gains, if any, are net of exercise price, but before taxes associated with
exercise. The 0 percent, 5 percent and 10 percent assumed compounded
annual rates of stock price appreciation are mandated by rules of the
Commission. There can be no assurance provided to any Named Executive
Officer or any other holder of the Company's securities that the actual
stock price appreciation over the remaining option term will be at the
assumed 0 percent, 5 percent and 10 percent levels or at any other defined
level. Unless the market price of the Common Stock appreciates over the
remaining option term, no value will be realized from the option grants
made to persons named in this table.

(3) These options were initially granted prior to 1998 and were canceled and
regranted in connection with the Options Repricing in October 1998. See
"--Incentive and Bonus Plans--1996 Incentive Plan."

(4) These options were granted in 1998 prior to the Options Repricing and were
canceled and regranted in connection with the Options Repricing. See "--
Incentive and Bonus Plans--1996 Incentive Plan."

15
<PAGE>

The following table sets forth information with respect to the ownership and
value of options as of December 31, 1998 held by the Named Executive Officers
and the Former Officers. No Named Executive Officer or Former Officer
exercised any options in the fiscal year ended December 31, 1998.

Aggregated Option Exercises in Fiscal Year Ended December 31, 1998
and Option Values as of December 31, 1998

<TABLE>
<CAPTION>
Securities Underlying Unexercised Value of Unexercised In-The-Money
Options at December 31, 1998(1) Options at December 31, 1998(2)
--------------------------------- ---------------------------------
Name Exercisable (#) Unexercisable (#) Exercisable ($) Unexercisable ($)
---- --------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
Frank G. Mancuso........ 378,231 1,367,449 $-- $--
A. Robert Pisano........ -- 523,754 -- --
William A. Jones........ -- 159,584 -- --
Daniel J. Taylor........ -- 179,168 -- --
Robert Brada............ -- 87,292 -- --
Michael G. Corrigan..... 179,168 -- -- --
David G. Johnson........ 179,168 -- -- --
</TABLE>
- --------
(1) Represents the total number of options outstanding to the Named Executive
Officers and Former Officers under to the 1996 Incentive Plan after giving
effect to the Options Repricing. With respect to Messrs. Pisano, Jones,
Taylor and Brada, each option listed above is exercisable at $14.90 per
share of the Common Stock, after giving effect to the Options Repricing,
and, with respect to Mr. Mancuso and the Former Officers, each option
listed above is exercisable at $24.00 per share of the Common Stock. Such
options generally vest over a period of five years. See "--Incentive and
Bonus Plans--1996 Incentive Plan."

(2) The closing sale price of the Common Stock on the NYSE, as reported by the
Dow Jones News Retrieval, on December 31, 1998 was $13.19 per share, which
was less than the exercise prices of all of the options currently
outstanding to the Named Executive Officers and the Former Officers under
the 1996 Incentive Plan after giving effect to the Options Repricing.
Pursuant to the Options Repricing, the exercise price of certain options
was reduced from $24.00, $21.50 or $20.00 to $14.90. See "--Incentive and
Bonus Plans--1996 Incentive Plan."

On October 26, 1998 the Compensation Committee approved, and in December
1998 the entire Board of Directors affirmed and ratified, the Options
Repricing. The Options Repricing is subject to approval of the stockholders of
the Company. Tracinda, which owns approximately 79.5 percent of the
outstanding shares of the Common Stock as of March 19, 1999, has agreed to
vote in favor of the approval of the Options Repricing. The following table
sets forth information with respect to the participation of the Named
Executive Officers and the Former Officers in the Options Repricing. See "--
Incentive and Bonus Plans--1996 Incentive Plan."

Option Repricing on October 26, 1998

<TABLE>
<CAPTION>
Length of
Option
Closing Market Term
Shares Price of Common Old New Remaining
Underlying Stock on Date Exercise Exercise on Date of
Options of Repricing Price Price Repricing
Name Repriced (#) ($) ($) ($)(1) (2)
---- ------------ --------------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Frank G. Mancuso........ -- $ -- $ -- $ -- --
A. Robert Pisano........ 523,754 9.06 24.00 14.90 96 Months
William A. Jones........ 159,584 9.06 24.00 14.90 96 Months
Daniel J. Taylor........ 116,250 9.06 24.00 14.90 106 Months
62,918 9.06 24.00 14.90 118 Months
Robert Brada............ 15,600 9.06 20.00 14.90 109 Months
10,400 9.06 21.50 14.90 117 Months
Michael G. Corrigan..... -- -- -- -- --
David G. Johnson........ -- -- -- -- --
</TABLE>

16
<PAGE>

- --------
(1) The exercise price of the options granted in connection with the Options
Repricing was determined by the Compensation Committee of the Board of
Directors of the Company.

(2) As of October 26, 1998.

The following table sets forth information with respect to grants of Bonus
Interests under the Senior Management Bonus Plan and other long term incentive
compensation for the fiscal year ended December 31, 1998 to the Named
Executive Officers and the Former Officers. See "--Incentive and Bonus Plans--
Senior Management Bonus Plan."

Long-Term Incentive Plans--Awards in Fiscal Year Ended December 31, 1998

<TABLE>
<CAPTION>
Number of Shares, Performance or
Units or Other Other Period Until
Name Rights (#)(1) Maturation or Payout(2)
---- ----------------- -----------------------
<S> <C> <C>
Frank G. Mancuso................. -- --
A. Robert Pisano................. -- --
William A. Jones................. -- --
Daniel J. Taylor................. 29,292(3) 44 months
Robert Brada..................... 40,584(4) 34 months
Michael G. Corrigan.............. -- --
David G. Johnson................. -- --
</TABLE>
- --------
(1) Does not include the number of Bonus Interests subject to the Bonus
Interest Amendment in October 1998 as follows: 0, 243,544, 74,209, 54,042,
and 0 Bonus Interests to Messrs. Mancuso, Pisano, Jones, Taylor and Brada,
respectively.

(2) As of December 31, 1998. Bonus Interests and the Taylor Cash Bonus and
Brada Cash Bonus generally vest over a period of five years and are only
payable in certain circumstances. See "--Incentive and Bonus Plans--Senior
Management Bonus Plan."

(3) Represents the Taylor Cash Bonus, which is equivalent to 29,292 Bonus
Interests, after giving effect to the Bonus Interests Repricing, and is
only payable in certain circumstances. See "--Employment Agreements--
Daniel J. Taylor."

(4) Represents the Brada Cash Bonus, which is equivalent to 40,584 Bonus
Interests, after giving effect to the Bonus Interests Repricing, and is
only payable in certain circumstances. See "--Employment Agreements--
Robert Brada."

Pension Plans. The Company maintains a retirement plan (the "MGM Retirement
Plan"), which covers substantially all of the employees of the Company. See
"Benefit Plans--MGM Retirement Plan." The Company also has entered into the
MGM Supplemental Executive Retirement Agreement dated April 22, 1996, as
amended and restated as of July 18, 1997 (the "Supplemental Executive
Retirement Agreement"), with Mr. Pisano. See "--Employee Benefit Plans--
Supplemental Executive Retirement Agreement." The following table sets forth
estimated annual benefits payable upon retirement with regard to the MGM
Retirement Plan.

17
<PAGE>

Pension Plan Table

<TABLE>
<CAPTION>
Years of Service(1)
-----------------------------------------
Remuneration(2) 15 20 25 30 35
--------------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 50,000........................ $11,625 $15,500 $19,375 $ 23,250 $ 27,125
100,000........................ 24,909 33,212 41,515 49,818 58,121
150,000........................ 39,159 52,212 65,265 78,318 91,371
160,000........................ 42,009 56,012 70,015 84,018 98,021
200,000........................ 53,409 71,212 89,015 106,818 124,621
</TABLE>
- --------
(1) As of December 31, 1998, Messrs. Mancuso, Pisano, Jones, Taylor and Brada
were credited with 5, 5, 15, 6, and 3 years of service, respectively.

(2) The compensation covered by the MGM Retirement Plan includes base salary
only, and not bonus or other amounts. The amount of the benefit to which a
participant is entitled is an annual amount equal to 1.55 percent of
annual base salary up to the Social Security wage base ($68,400 for 1998)
plus 1.9 percent of annual base salary above that amount up to the maximum
allowable under the MGM Retirement Plan (currently $160,000 per year) for
each year of credited service up to a maximum of 35 years, at which time
the applicable percentage is 1.55 percent of the annual base salary for
each year of service in excess of 35. Benefits become vested upon
completion of five years of service. For each of the Named Executive
Officers, the current compensation covered by the MGM Retirement Plan is
the maximum allowable under the MGM Retirement Plan, which is
substantially less than the annual compensation for each such Named
Executive Officer listed in the "Salary" column of the Summary
Compensation Table.

Incentive and Bonus Plans

1996 Incentive Plan. The Company has an Amended and Restated 1996 Stock
Incentive Plan (the "1996 Incentive Plan"). Awards under the 1996 Incentive
Plan are generally not restricted to any specific form or structure and may
include, without limitation, qualified or non-qualified stock options,
incentive stock options, restricted stock awards and stock appreciation rights
(collectively, "Awards"). Awards may be conditioned on continued employment,
have various vesting schedules and accelerated vesting and exercisability
provisions in the event of, among other things, a change in control of the
Company. The 1996 Incentive Plan is administered by the Compensation
Committee, which has broad authority to amend the plan and grant Awards
thereunder.

As of March 19, 1999, 8,125,065 shares of the Common Stock were reserved for
award under the 1996 Incentive Plan, of which options to purchase 7,692,176
shares of the Common Stock were outstanding. Of the outstanding options,
5,395,912 are held by the Named Executive Officers and certain other current
or former senior employees (the "Executive Options") and 2,296,264 are held by
approximately 375 other employees of the Company (the "Employee Options"). All
of the outstanding options generally vest over a period of five years and are
not exercisable unless vested; provided that, notwithstanding anything to the
contrary contained in the 1996 Incentive Plan or the agreements pursuant
thereto, the options which were regranted pursuant to the Options Repricing
are not exercisable until stockholder approval of the Options Repricing is
obtained. In addition, 2,474,329 of the Executive Options cannot be exercised
until December 31, 2001 (subject in each case to early vesting and, depending
on the circumstances, early exercisability in certain events, including the
death or permanent disability of the optionee, termination of the optionee's
employment under certain circumstances or a "Designated Change in Control" of
the Company (as defined in the 1996 Incentive Plan), which includes (i) the
Tracinda Group ceasing to beneficially own in the aggregate 50.1 percent or
more of the voting securities of the Company and any other person, other than
an entity controlled by the Company, beneficially owning 30 percent or more of
the voting securities of the Company or (ii) the sale of substantially all of
the assets of the Company). Of the Executive Options, 3,291,896 are
exercisable at $14.90, after giving effect to the Options Repricing, and
2,104,016 are exercisable at $24.00. Of the Employee Options, 2,013,864 are
exercisable at $14.90, after giving effect to the Options Repricing, and
282,400 are exercisable at $11.38. As of March 19, 1999, 2,781,240 Executive
Options were vested (or would vest within 60 days), of which 1,572,128
Executive Options were

18
<PAGE>

exercisable (or would become exercisable within 60 days), and 394,224 Employee
Options were vested and exercisable (or would vest and become exercisable
within 60 days).

In May 1998 the Company filed a registration statement on Form S-8 with the
Commission (which registration statement became effective upon filing) with
respect to the shares of the Common Stock underlying the options granted or
authorized to be granted under the 1996 Incentive Plan.

Due to the decline in the market price of the Common Stock, the Compensation
Committee and the Board of Directors determined that the purpose of the 1996
Incentive Plan was not being achieved. Therefore, in order more closely to
realign the exercise price of the options with the market price of the Common
Stock and thereby better enable the Company to attract, retain and motivate
its employees, effective on October 26, 1998 (subject to certain conditions)
the Company canceled and regranted at a reduced exercise price certain of the
options theretofore granted under the 1996 Incentive Plan (collectively, the
"Options Repricing"). The effect of the Options Repricing was to:

(i) adjust the exercise price of the options granted to Messrs. Pisano,
Jones, Taylor and Brada (with respect to the Named Executive Officers) and
certain other senior employees of the Company (collectively, "Executive
Repricing Participants") as of October 26, 1998 from $24.00 to $14.90
(3,164,604 options) with respect to the Executive Repricing Participants
other than Mr. Brada, and from $20.00 (15,600 options) and $21.50 (10,400
options) to $14.90 with respect to Mr. Brada (see "Executive Compensation
Summary--Option Grants and Long Term Incentive Awards--Options Repricing on
October 26, 1998"); and

(ii) adjust the exercise price of the Employee Options outstanding as of
October 26, 1998 to $14.90 from $20.00, with respect to 2,027,900 options,
from $22.00, with respect to 10,400 options, from $21.50, with respect to
103,800 options, and from $19.63, with respect to 19,800 options.

No changes were made to the vesting schedule or expiration date of such
options; provided that, notwithstanding anything to the contrary contained in
the 1996 Incentive Plan or the agreements pursuant thereto, the options which
were subject to the Options Repricing are not exercisable until the later of
(i) the date stockholder approval of the Options Repricing is obtained and
(ii) the applicable date of exercise set forth in the respective option
agreement. The Options Repricing is subject to approval by the stockholders of
the Company. If the Options Repricing is not approved by the holders of at
least 75 percent of the outstanding shares of the Common Stock, the Options
Repricing will be null and void and the options outstanding as of October 26,
1998, except to the extent otherwise terminated or modified, will be
reinstated. Tracinda, which owned approximately 79.5 percent of the
outstanding shares of the Common Stock as of March 19, 1999, has agreed to
vote its shares in favor of the approval of the Options Repricing.

The Board of Directors has approved, subject to stockholder approval and
ratification, an increase in the aggregate number of shares of the Common
Stock issuable under the 1996 Incentive Plan from 8,125,065 shares of the
Common Stock to 15,000,000 shares of the Common Stock.

The foregoing description of the 1996 Incentive Plan and the Options
Repricing is qualified in all respects by the actual provisions of the 1996
Incentive Plan and the form of Executive Options Exchange Agreement which are
filed as exhibits to the Annual Report.

Senior Management Bonus Plan. The Company has a Senior Management Bonus Plan
(the "Senior Management Bonus Plan") under which 2,420,685 bonus interests
("Bonus Interests") have been granted to an aggregate of 18 present or former
executives and senior employees of the Company. The Senior Management Bonus
Plan is administered and may be amended by the Bonus Plan Committee of the
Board of Directors; provided, however, that the Senior Management Bonus Plan
may only be amended with the consent of: (i) the Board of Directors; (ii) the
Board of Directors of Metro-Goldwyn-Mayer Studios Inc.; and (iii) persons then
holding a majority in interest of the outstanding Bonus Interests.

19
<PAGE>

Subject to certain vesting and other requirements, including approval of the
Bonus Interest Amendment described below by the stockholders of the Company,
each Bonus Interest, held by an Executive Repricing Participant entitles the
holder to receive a cash payment if (i) the sum of the average closing price
of the Common Stock during the 20 trading days plus, in certain circumstances,
per share distributions on the Common Stock (together, the "Price") preceding
a Determination Date (defined below) is greater than (ii) $14.90 (i.e., the
"trigger price") and less than $29.80 (i.e., the "ceiling price") (adjusted
for stock splits, reverse stock splits and similar events). With respect to
Bonus Interests held by all others, each Bonus Interest entitles the bolder to
receive a cash payment if the Price preceding a Determination Date is greater
than $24.00 and less than $48.00 (adjusted for stock splits, reverse stock
splits and similar events). The cash payment will be equal to (A) the vested
portion of the Bonus Interests on the Determination Date multiplied by (B) the
amount by which the Price on the Determination Date is less than $29.80, with
respect to Executive Repricing Participants, or $48.00, with respect to all
others, multiplied by (C) 1.61, with respect to the Executive Repricing
Participants only. In each case, a maximum of $24.00 per Bonus Interest may be
received by the holder thereof. Once a payment is made in respect of the
vested portion of a Bonus Interest, no further payment is due in respect of
that portion. If at any Determination Date the Price equals or exceeds $29.80,
with respect to Executive Repricing Participants, or $48.00, with respect to
all others, no payment will thereafter be due in respect of any then-vested
portion of a Bonus Interest.

"Determination Dates" occur on June 30 and December 31 of each year,
commencing December 31, 2001 and ending December 31, 2006 and will also occur
upon a "Designated Change in Control" (as defined in the Senior Management
Bonus Plan) or the taking of any action for the dissolution or liquidation of
the Company (each a "Special Circumstance"). In addition, with respect to the
applicable officer only, a Determination Date shall occur in the event of a
termination of such officer's employment due to death or "Permanent
Disability" (as defined in the Senior Management Bonus Plan"), if such death
or Permanent Disability shall have occurred prior to December 31, 2001, by the
Company for "Cause" or by such officer without "Good Reason" (each, as defined
in the Senior Management Bonus Plan).

Bonus Interests generally vest 20 percent on the first anniversary of the
date of their grant and approximately 1.67 percent each month thereafter. The
Senior Management Bonus Plan provides for accelerated vesting and payment in
the event of a Special Circumstance (with payment at discounted present value
in the event payment is made in connection with a Designated Change in Control
which occurs prior to December 31, 2001), accelerated vesting in the event of
termination of employment in certain circumstances and payment at discounted
present value, for the officer involved, in the event of death or Permanent
Disability.

Due to the decline in the market price of the Common Stock, the Bonus Plan
Committee and the Board of Directors determined that the purpose of the Senior
Management Bonus Plan was not being achieved. Therefore, in order more closely
to realign the value of the Bonus Interests with the market price of the
Common Stock and thereby better enable the Company to provide an incentive to
its senior management, effective on October 26, 1998 (subject to certain
conditions) the Company amended the terms of the Bonus Interests (or certain
bonus arrangements based on the value of the Bonus Interests) of the Executive
Repricing Participants to reduce the trigger and ceiling prices of the Bonus
Interests granted to such Executive Repricing Participants (or on which their
bonuses were based) (the "Bonus Interest Amendment"). Specifically, the
trigger price was adjusted from $24.00 per Bonus Interest to $14.90, the
ceiling price was adjusted from $48.00 per Bonus Interest to $29.80 and a
multiplier of 1.61 per Bonus Interest was included in order for the maximum
amount receivable with respect to each Bonus Interest to remain at $24.00. No
changes were made to the vesting schedule or expiration date or any other
provision of the Bonus Interests. The Bonus Interest Amendment is subject to
approval by the stockholders of the Company. If the Bonus Interest Amendment
is not approved by the holders of at least 75 percent of the outstanding
shares of the Common Stock, the Bonus Interest Amendment will be null and void
and the terms of the Bonus Interest Agreements which existed as of October 26,
1998, except to the extent otherwise terminated or modified, will be
reinstated. Tracinda, which owned approximately 79.5 percent of the
outstanding shares of the Common Stock as of March 19, 1999, has agreed to
vote its shares in favor of the approval of the Bonus Interest Amendment.

20
<PAGE>

The foregoing description of the Senior Management Bonus Plan and the Bonus
Interest Amendment is qualified in all respects by the actual provisions of
the Senior Management Bonus Plan and the form of Bonus Interest Amendment
which are filed as exhibits to the Annual Report.

Employment Agreements

Frank G. Mancuso. The Company has entered into an employment agreement with
Frank G. Mancuso effective as of October 10, 1996, as amended as of August 4,
1997, which provides that he will serve as Chairman and Chief Executive
Officer of the Company for an initial term which ends on October 9, 2001.
Mr. Mancuso is entitled to an annual base salary of $2 million, subject to
increase at the discretion of the Board of Directors of the Company and an
annual stock purchase payment of $3 million (payable annually in advance), out
of the after tax proceeds of which he is required to purchase shares of the
Common Stock. Such purchases were at a price of $24.00 per share until
November 17, 1998. Thereafter, such purchases are at the fair market value of
such shares. In addition, Mr. Mancuso is entitled to receive certain other
benefits, including a car allowance, medical insurance, participation in the
Company's 1996 Incentive Plan, Senior Management Bonus Plan, Savings Plan, MGM
Retirement Plan and any other similar plan or program which the Company
provides for its senior officers generally, and other benefits customarily
afforded to executives of similar stature in the motion picture industry. The
Company is also obligated to maintain a five year, reducing-term life
insurance policy in the initial face amount of $25 million on Mr. Mancuso's
life for his benefit. Pursuant to his employment agreement, Mr. Mancuso holds
stock options to purchase shares of the Common Stock and Bonus Interests. See
"--Executive Compensation" and "--Incentive and Bonus Plan." In connection
with the MGM Acquisition, in consideration of the waiver by Mr. Mancuso of
certain rights relating to the change of control under his previous employment
agreement with the Company and to induce him to enter into the existing
employment agreement, in October 1996 Mr. Mancuso received 63,751 shares of
the Common Stock and $1,020,000 in cash. If Mr. Mancuso's employment is
terminated without cause by the Company or if Mr. Mancuso terminates the
agreement for "good reason," which includes a "Designated Change in Control"
of the Company (as defined in the 1996 Incentive Plan), his account in the
1996 Incentive Plan and Senior Management Bonus Plan will vest immediately and
he will be entitled to receive as severance an amount equivalent to the
present value of the sum of the base salary and the stock purchase payment for
the entire remaining term of the employment agreement. As of December 31,
1998, the amount payable to Mr. Mancuso in the event of such circumstances
would be approximately $10.7 million. Mr. Mancuso is entitled to resign at any
time on not less than 30 days' prior notice.

A. Robert Pisano. The Company has entered into an employment agreement with
Mr. Pisano effective as of October 10, 1996, which provides that he will serve
as Vice Chairman of the Company for an initial term which ends on October 9,
2001. Pursuant to the agreement, Mr. Pisano is entitled to an annual salary of
$950,000, an annual guaranteed bonus of $750,000 and an annual discretionary
bonus. In addition, Mr. Pisano is entitled to receive certain other benefits,
including a car allowance, medical insurance, participation in the Company's
1996 Incentive Plan, Senior Management Bonus Plan, Savings Plan, MGM
Retirement Plan and any other similar plan or program which the Company
provides for its senior officers generally. The Company is also obligated to
maintain a term life insurance policy in the face amount of $5 million on Mr.
Pisano's life for his benefit. Furthermore, Mr. Pisano is entitled to receive
certain additional retirement benefits under his Supplemental Executive
Retirement Agreement. See "--Employee Benefit Plans--Supplemental Executive
Retirement Agreement." Under the 1996 Incentive Plan and the Senior Management
Bonus Plan, Mr. Pisano holds stock options to purchase shares of the Common
Stock and Bonus Interests, respectively. See "--Executive Compensation" and
"--Incentive and Bonus Plan." In connection with the MGM Acquisition, in
consideration of the waiver by Mr. Pisano of certain rights relating to the
change of control under his previous employment agreement with the Company and
to induce him to enter into his existing employment agreement, Mr. Pisano
received 15,000 shares of the Common Stock and $235,343 in cash. If Mr.
Pisano's employment is terminated without cause by the Company or if he
terminates the agreement for "good reason," which includes a "Designated
Change in Control" of the Company (as defined in the 1996 Incentive Plan), his
account in the 1996 Incentive Plan and Senior Management Bonus Plan will vest
immediately and he will be entitled to receive the net present value of the
difference between (i) $8.5 million and (ii) the sum of the annual salary and
the

21
<PAGE>

guaranteed bonuses paid to him to the date of the termination and, in
addition, all insurance benefits for the remainder of the term of the
employment agreement. As of December 31, 1998, the amount payable to
Mr. Pisano in the event of such circumstances would be approximately $4.6
million.

William A. Jones. The Company has entered into an employment agreement with
Mr. Jones effective as of October 10, 1996, which provides that he will serve
as Senior Executive Vice President of the Company for an initial term which
ends on October 9, 2001. Pursuant to the agreement, Mr. Jones is entitled to a
current annual salary of 625,000, subject to adjustment as determined by the
Company, and an annual discretionary bonus. In addition, Mr. Jones is entitled
to receive certain other benefits, including a car allowance, medical
insurance, participation in the Company's 1996 Incentive Plan, Senior
Management Bonus Plan, Savings Plan, MGM Retirement Plan and any other similar
plan or program which the Company provides for its senior officers generally.
The Company is also obligated to maintain a term life insurance policy in the
face amount of $2 million on Mr. Jones' life for his benefit. Under the 1996
Incentive Plan and Senior Management Bonus Plan, Mr. Jones holds stock options
to purchase shares of Common Stock and Bonus Interests, respectively. See "--
Executive Compensation" and "--Incentive and Bonus Plans." In connection with
the MGM Acquisition, in consideration of the waiver by Mr. Jones of certain
rights relating to the change in control under his previous employment
agreement with the Company and to induce him to enter into his existing
employment agreement, Mr. Jones received 26,042 shares of the Common Stock and
$416,178 in cash. If Mr. Jones' employment is terminated without cause by the
Company or if he terminates the agreement for "good reason," his account in
the 1996 Incentive Plan and Senior Management Bonus Plan will vest immediately
and he will be entitled to receive the net present value of the sum of the
annual salary through the entire remaining term of the employment agreement
and all insurance benefits for the remainder of the term of the employment
agreement. As of December 31, 1998, the amount payable to Mr. Jones in the
event of such circumstances would be approximately $1.6 million.

Daniel J. Taylor. The Company has entered into an employment agreement with
Mr. Taylor effective as of August 1, 1997, as amended as of June 15, 1998,
which provides that he will serve as Senior Executive Vice President and Chief
Financial Officer of the Company for an initial term which ends on June 14,
2003. Pursuant to the agreement, as amended, Mr. Taylor is entitled to a
current annual salary of $750,000, which will increase by $50,000 in October
each year for four years, and an annual discretionary bonus. Under his
employment agreement prior to its amendment, Mr. Taylor was entitled to an
annual guaranteed bonus of $100,000 prorated for any periods less than 12
months. In addition, Mr. Taylor may receive an additional bonus, payable only
in the event of a Designated Change in Control of the Company (as defined in
the 1996 Incentive Plan) (the "Taylor Cash Bonus"). The amount of the Taylor
Cash Bonus shall be determined as of the day before, and shall be payable
within five business day from and after, the Designated Change in Control and
shall otherwise be equivalent to the amount which would have been received
with respect to 29,292 Bonus Interests on such date, after giving effect to
the Bonus Interests Repricing had such Bonus Interests been granted to Mr.
Taylor in August 1997. See "--Incentive and Bonus Plans--Senior Management
Bonus Plan." Mr. Taylor is entitled to receive certain other benefits,
including a car allowance, medical insurance, participation in the Company's
1996 Incentive Plan, Senior Management Bonus Plan, Savings Plan, MGM
Retirement Plan and any other similar plan or program which the Company
provides for its senior officers generally. Under the 1996 Incentive Plan and
Senior Management Bonus Plan, Mr. Taylor holds stock options to purchase
shares of the Common Stock and Bonus Interests, respectively. See "--Executive
Compensation" and "--Incentive and Bonus Plans." If Mr. Taylor's employment is
terminated without cause by the Company or if he terminates the agreement for
"good reason," his account in the 1996 Incentive Plan and Senior Management
Bonus Plan will vest immediately and he will be entitled to receive the net
present value of the sum of the annual salary through the entire remaining
term of the employment agreement and all insurance benefits for the remainder
of the term of the employment agreement. As of December 31, 1998, the amount
payable to Mr. Taylor in the event of such circumstances would be
approximately $3.4 million.

Robert Brada. The Company has entered into an employment agreement with Mr.
Brada effective as of June 1, 1995, as amended as of June 1, 1998 and as of
August 21, 1998, which provides that he will serve as

22
<PAGE>

Executive Vice President and General Counsel of the Company for an initial
term which ends on May 31, 2001. Pursuant to the agreement, as amended, Mr.
Brada is entitled to a current annual salary of $425,000, subject to increase
as determined by the Company on August 21 of each year and an annual
discretionary bonus. In addition, Mr. Brada will receive a bonus, payable only
in the event of a Designated Change in Control of the Company (as defined in
the 1996 Incentive Plan) or certain other major corporate events (the "Brada
Cash Bonus"). The amount of the Brada Cash Bonus shall be determined as of the
day before, and shall be payable within five business days from and after, the
Designated Change in Control or other major corporate event and shall
otherwise be equivalent to the amount which would have been received with
respect to 40,584 Bonus Interests on such date, after giving effect to the
Bonus Interest Repricing had such Bonus Interests been granted to Mr. Brada in
October 1996. See "--Incentive and Bonus Plans--Senior Management Bonus Plan."
Mr. Brada is entitled to receive certain other benefits, including a car
allowance, medical insurance, participation in the Company's 1996 Incentive
Plan, Savings Plan, MGM Retirement Plan and any other similar plan or program
which the Company provides for its employees generally. Under the 1996
Incentive Plan, Mr. Brada holds options to purchase 87,292 shares of the
Common Stock (15,600 of which were granted on November 12, 1997, 10,400 of
which were granted on July 13, 1998 and 61,292 of which were granted on
October 26, 1998), each at an exercise price of $14.90 per share, after giving
effect to the Options Repricing. See "--Executive Compensation" and "--
Incentive and Bonus Plans." If Mr. Brada's employment is terminated without
cause by the Company or if he terminates the agreement for "good reason," his
account in the 1996 Incentive Plan and, under certain circumstances, the Brada
Cash Bonus, will vest immediately and he will be entitled to continue to
receive the salary through the entire remaining term of the employment
agreement. As of December 31, 1998, the amount payable to Mr. Brada in the
event of such circumstances would be approximately $968,000.

The employment agreement of each of Messrs. Pisano, Jones and Taylor also
contains: (i) a nondisclosure provision which is effective for the term of
such individual's employment with the Company and for an indefinite period
thereafter; (ii) noninterference and non-competition provisions, each of which
is effective for the term of such individual's employment with the Company and
one year thereafter; and (iii) and, together with Mr. Brada's employment
agreement, a provision prohibiting the solicitation for employment and
employment of certain Company employees, or making public statements
concerning the Company, for a period of one year following termination of
employment.

Limitation of Liability and Indemnification Matters

As permitted by applicable provisions of the DGCL, the Company's Amended and
Restated Certificate of Incorporation, as amended to date, contains a
provision whereunder the Company will indemnify each of the officers and
directors of the Company (or their estates, if applicable), and may indemnify
any employee or agent of the Company (or their estates, if applicable), to the
fullest extent permitted by the DGCL as it exists or may in the future be
amended.

In addition, the Company has entered into indemnification agreements with
its directors, its executive officers and certain other officers providing for
indemnification by the Company, including under circumstances in which
indemnification is otherwise discretionary under Delaware law. These
agreements constitute binding agreements between the Company and each of the
other parties thereto, thus preventing the Company from modifying its
indemnification policy in a way that is adverse to any person who is a party
to such an agreement.

The Company currently maintains insurance on behalf of its officers and
directors against certain liabilities that may be asserted against any such
officer or director in his or her capacity as such, subject to certain
customary exclusions. The amount of such insurance is deemed by the Board of
Directors to be adequate to cover such liabilities.

23
<PAGE>

COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION

The following report of the Compensation Committee and the performance graph
that appears immediately after such report shall not be deemed to be
soliciting material or to be filed with the Commission under the Securities
Act or the Exchange Act or incorporated by reference in any document so filed.

Compensation

The Compensation Committee of the Board of Directors was established in
November 1997 and is responsible for administering the Company's incentive
plans and monitoring, reviewing, approving and/or making recommendations to
the Board of Directors with respect to the Company's compensation policies.
The Compensation Committee believes that the most effective executive
compensation program is one that provides incentives to achieve both current
and long-term strategic management goals of the Company, with the ultimate
objective of enhancing stockholder value. In this regard, the Compensation
Committee believes executive compensation should: (i) be effective in
attracting, motivating and retaining key executives; (ii) correlate with the
performance of the Company as a whole and the executive's individual
performance; and (iii) provide the executives with a financial interest in the
Company similar to the interests of the Company's stockholders.

The Company's executives are compensated through a combination of salary,
bonuses and long-term incentive arrangements (where appropriate), including
grants of stock options and other stock-based awards under the 1996 Incentive
Plan and Bonus Interests under the Senior Management Bonus Plan. Annual
salaries of the Named Executive Officers are set forth in such executive's
employment agreements. The Compensation Committee believes the salaries of the
Company's executives to be competitive with the salaries paid by companies
with which the Company competes.

Discretionary bonuses, where appropriate, are generally determined by the
Chief Executive Officer of the Company with the concurrence of the
Compensation Committee after the end of the Company's fiscal year and are
based on an assessment of the Company's results and the level of a particular
individual's performance for that year. In its review of bonuses for the
Company's senior executives, the Compensation Committee will consider the
following: improvement in the financial performance of the Company (including
improvements in cash flow, operating income and return on equity); the
executives' levels of responsibility and performance (based upon evaluations
and the recommendation of Mr. Mancuso as to proposed bonuses for executives
other than himself); and the other components of their compensation. Mr. Brada
received a discretionary bonus in February 1998 in the amount of $50,000 for
the 1997 fiscal year. No discretionary bonuses were awarded to the Named
Executive Officers for 1998.

The Compensation Committee believes that a significant component of the
compensation paid to the Company's executives over the long-term should be
derived from stock options and other stock-based awards. The Compensation
Committee strongly believes that stock ownership in the Company is a valuable
incentive to executives and that the grant to them of stock options and other
stock-based awards serves to align their interests with the interests of the
stockholders as a whole and encourages them to manage the Company in a way
that endeavors to maximize its long-term profitability. Long-term incentive
arrangements are considered on a case-by-case basis, and may be determined as
part of an overall compensation package in conjunction with demonstrable
enhancements to stockholder values. The Compensation Committee determines
whether to grant stock options and other stock-based awards, as well as the
amount of the grants, by taking into account the proposed recipient's past and
prospective value to the Company; the performance of the proposed recipient
(based upon evaluations and the recommendation of Mr. Mancuso as to proposed
grants for executives other than himself); and the amount of stock options or
other stock-based awards previously granted.

In connection with his appointment as Senior Executive Vice President and
Chief Financial Officer on June 15, 1998, Mr. Taylor was granted 62,918
options. Mr. Brada was granted 10,400 options in July 1998 in connection with
his promotion to Executive Vice President and 61,292 options in October 1998
in connection

24
<PAGE>

with his appointment as Executive Vice President and General Counsel. See
"Executive Compensation--Executive Compensation Summary" and "Executive
Compensation--Incentive and Bonus Plans." The Compensation Committee may grant
additional options or other stock-based awards to the Named Executive Officers
in the future.

In addition, in connection with his appointment as Senior Executive Vice
President and Chief Financial Officer on June 15, 1998, Mr. Taylor was granted
the Taylor Cash Bonus, which is equivalent to 29,292 Bonus Interests. Mr.
Brada was granted the Brada Cash Bonus, which is equivalent to 40,584 Bonus
Interests in August 1998 in connection with his promotion to Executive Vice
President and General Counsel. Each of the Taylor Cash Bonus and the Brada
Cash Bonus is payable only in certain circumstances. See "Executive
Compensation--Employment Agreements--Daniel J. Taylor" and "--Robert Brada,"
"Executive Compensation--Executive Compensation Summary," "Executive
Compensation--Incentive and Bonus Plans" and "Proposal 4--Bonus Interest
Amendment."

The Compensation Committee intends to review the compensation arrangements
of the Company's senior executives from time to time and to make
recommendations where appropriate.

Repricing of Stock Options and Bonus Interests

In connection with the October 1998 Rights Offering (the "Rights Offering"),
the Compensation Committee approved, and the Board of Directors subsequently
affirmed and ratified, the Options Repricing and the Bonus Interest Amendments
which included (i) the cancellation of stock options previously granted to
Messrs. Pisano, Jones, Taylor and Brada at exercise prices between $20.00 and
$24.00 per share and the grant of new stock options at an exercise price of
$14.90 per share and (ii) the amendment of the Taylor Cash Bonus, the Brada
Cash Bonus and the Bonus Interest Agreements of Messrs. Pisano, Jones and
Taylor to lower the trigger and ceiling payment thresholds from $24.00 and
$48.00 per share, respectively, to $14.90 and $29.80 per share, while
maintaining the maximum value of each Bonus Interest (or bonus equivalent) at
$24.00. The closing price of the Common Stock on the NYSE, as reported by the
Dow Jones News Retrieval, on the date of the Compensation Committee action was
$9.06 per share. Both the Options Repricing and the Bonus Interest Amendment--
collectively, the "Repricings") are subject to stockholder approval. See
"Proposal 2--Repricing of Options" and "Proposal 4--Bonus Interest Amendment."

The Compensation Committee determined that due to the decline in the market
price of the Common Stock, the purposes of the 1996 Incentive Plan and the
Senior Management Bonus Plan were not being achieved. In particular, the
market value of the Common Stock had fallen significantly below the exercise
price of the stock options and the trigger payment threshold of the Bonus
Interests, thereby greatly reducing their value and frustrating the purposes
for which the 1996 Incentive Plan and Senior Management Bonus Plan were
adopted-- namely, to attract, retain and motivate executives and employees by
(i) providing for or increasing their proprietary interest in the Company (in
the case of the stock options) and (ii) providing performance incentives
through the opportunity to receive cash bonuses (in the case of the Bonus
Interests). By more closely realigning the value of the stock options and
Bonus Interests with the market price of the Common Stock, the Compensation
Committee believes that the Company will be better able to motivate its senior
management to achieve the long-term strategic business objectives of the
Company with the ultimate objective of enhancing stockholder value.

Moreover, the completion of the Rights Offering has had the effect of
lowering the average cost of the shares of Common Stock held by many of the
stockholders who participated therein, including the Company's principal
stockholder. The Compensation Committee believes that the motivational value
of the stock options and Bonus Interests will be greatly enhanced if the
exercise price of the stock options and the base payment threshold of the
Bonus Interests are more closely aligned with the average price of the shares
held by the Company's principal stockholder and other stockholders who
participated in the Rights Offering.

In light of the foregoing, the Compensation Committee does not expect the
Repricings to have any material impact on future compensation policy with
respect to the Named Executives Officers. See "Executive Compensation
Summary--Option Grants and Long Term Incentive Awards--Option Repricing on
October 26, 1998."

25
<PAGE>

Compensation Awarded to the Chief Executive Officer

Mr. Mancuso became Chairman of the Board and Chief Executive Officer of the
Company in October 1996 and has been Chairman of the Board and Chief Executive
Officer of MGM Studios since July 1993. Mr. Mancuso is eligible to participate
in the same executive compensation plans and to receive the same benefits
generally available to the Company's other senior executives except that Mr.
Mancuso did not participate in the Repricings. Pursuant to the terms of his
employment agreement, which was entered into in 1996, Mr. Mancuso's annual
base salary is $2 million, plus an annual stock purchase payment of $3
million, and the Company maintains a five-year reducing term life insurance
policy in the initial face amount of $25 million for Mr. Mancuso's benefit.
Mr. Mancuso was not granted any additional options or Bonus Interests in 1998.
Mr. Mancuso did not receive a discretionary bonus with respect to 1998. See
"Executive Compensation--Executive Compensation Summary," "Executive
Compensation--Incentive and Bonus Plans," and "Executive Compensation--
Employment Agreements--Frank G. Mancuso."

Tax Considerations

The Compensation Committee's current policy is to structure the performance-
based portion of the compensation of its Named Executive Officers in a manner
that complies with Section 162(m) of the Internal Revenue Code whenever, in
the judgment of the Compensation Committee, doing so would be consistent with
the objectives of the compensation plan under which the compensation would be
payable. However, the Compensation Committee has the authority to award non-
deductible compensation as it deems appropriate and in the best interests of
the Company. See "Certain Federal Income Tax Consequences."

Compensation Committee:

/s/ Jerome B. York
-------------------------------------
Jerome B. York
(Chairman)

/s/ Alex Yemenidjian
-------------------------------------
Alex Yemenidjian

/s/ Francis Ford Coppola
-------------------------------------
Francis Ford Coppola

26
<PAGE>

Company Stock Price Performance Graph

The following graph compares the Company's cumulative total stockholder
return with those of Standard & Poor's 500 Composite Stock Price Index and the
Standard & Poor's Entertainment Group Index for the period commencing November
13, 1997 (the first day of trading of the Common Stock on the NYSE) and ending
December 31, 1998, including the reinvestment of any dividends. No dividends
were paid in respect of the Company's securities during the period.

COMPARISON OF CUMULATIVE TOTAL RETURNS

[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
S&P
Entertainment S&P
Measurement Date Company Group Index 500 Index
---------------- ------- ------------- ---------
<S> <C> <C> <C>
November 13, 1997.......................... $100.00 $100.00 $100.00
December 31, 1997.......................... $ 95.24 $118.11 $106.43
December 31, 1998.......................... $ 62.80 $160.02 $136.84
</TABLE>

27
<PAGE>

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

Certain federal income tax consequences relating to options granted under
the 1996 Incentive Plan and Bonus Interests granted under the Senior
Management Bonus Plan and the Repricings are described below.

Options

Under the 1996 Incentive Plan, the Company may grant options that qualify
under Section 422 of the Internal Revenue Code ("Incentive Options") as well
as options that do not so qualify ("Non-Qualified Options").

There are generally no federal income tax consequences to the optionee upon
exercise of an Incentive Option, except that the amount by which the fair
market value of the shares of the Common Stock at the time of exercise exceeds
the option exercise price is a tax preference item possibly giving rise to
alternative minimum tax. If the shares of the Common Stock acquired on the
exercise of an Incentive Option are not disposed of within two years from the
date the Incentive Option was granted and within one year after the shares are
transferred to the optionee, any gain or loss realized upon the subsequent
disposition of the shares will be characterized as long-term capital gain or
loss. If the optionee disposes of such shares before the two holding periods
described above are satisfied, the optionee will generally recognize ordinary
income equal to the lesser of (i) the fair market value of the shares on the
date of exercise minus the optionee exercise price or (ii) the amount realized
on disposition minus the option exercise price (except for certain "wash"
sales, gifts or sales to related persons), and the Company will be entitled to
a corresponding deduction. Any gain in excess of this amount will be
characterized as long-term capital gain if the optionee held the shares of the
Common Stock for more than one year.

Upon the exercise of a Non-Qualified Option, the optionee will recognize
ordinary income in the amount by which the then fair market value of the
shares of the Common Stock acquired exceeds the option exercise price, and the
Company will be entitled to a deduction in an equal amount. Provided the
shares of the Common Stock are held as a capital asset, upon the subsequent
disposition of the shares of the Common Stock the optionee will recognize
capital gain or loss in an amount equal to the difference between the proceeds
received upon disposition and his or her basis for the shares. The basis will
be equal to the sum of the price paid for the shares and the amount of income
realized upon exercise of the option. Any capital gain or loss to the optionee
will be characterized as long-term or short-term, depending upon whether his
or her holding period for tax purposes exceeds one year.

The taxable income recognized upon the exercise of a Non-Qualified Option is
subject to the applicable employment taxes and withholding for federal income
tax purposes.

The Options Repricing, involving the cancellation and regranting at a
reduced exercise price of certain options granted under the 1996 Incentive
Plan, will not be a taxable event to the optionees or the Company.

Bonus Interests

Payments made pursuant to the Bonus Interests will be taxable to holders
thereof as ordinary income and deductible by the Company. Such payments will
be subject to the applicable employment taxes and withholding for federal
income tax purposes.

The Bonus Interests Amendment will not be a taxable event to the optionees
or the Company.

Deductibility of Compensation

Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to a publicly-held corporation for compensation in excess of $1
million paid in any fiscal year to certain executive officers. Section 162(m)
further provides, however, that compensation will not be subject to the
deduction limit if certain conditions are met and the compensation qualifies
as "performance-based compensation." In addition, in the

28
<PAGE>

case of a privately held corporation that undergoes an initial public
offering, the Treasury Regulations under Section 162(m) provide that the
deduction limit does not apply to any compensation paid, during a specified
"reliance period," pursuant to a plan or agreement that existed while the
corporation was privately held, if the corporation complied with certain
disclosure requirements. The reliance period terminates on the earliest to
occur of (i) the expiration of the plan or agreement, (ii) the material
modification of the plan or agreement, (iii) the issuance of all stock and
other compensation allocated under the plan and (iv) the first meeting of the
stockholders at which directors are to be elected that occurs after the close
of the third calendar year following the calendar year in which the initial
public offering occurs. In the case of stock options, the reliance period
applies to the date of grant and not exercise.

The Company believes that any compensation paid or options granted pursuant
to the Company's incentive plans or agreements during the reliance period will
not be subject to the deduction limit of Section 162(m). However, compensation
paid and options granted after the reliance period to a Named Executive
Officer or an employee who may be one of the most highly compensated officers
of the Company at the time such compensation is paid will be subject to the
limitations of Section 162(m) unless such compensation or option grants
qualify as performance-based compensation. In particular, the proposed
amendment to the 1996 Incentive Plan, whereby the aggregate number of shares
of the Common Stock issuable under the Plan will be increased from 8,125,065
to 15,000,000 shares of the Common Stock, may constitute a "material
modification" of the 1996 Incentive Plan, resulting in the termination of the
reliance period with respect to the 1996 Incentive Plan. In such case, any
compensation paid or options granted pursuant to the 1996 Incentive Plan
subsequent to this reliance period may be subject to the limitations of
Section 162(m) unless they qualify as performance-based compensation.

In general, any salary paid after the termination of a reliance period,
including salary paid pursuant to the employment agreements, will not qualify
as performance-based compensation and will be subject to Section 162(m). The
Company believes that options and Bonus Interests previously granted, other
than the Taylor Cash Bonus and Brada Cash Bonus, were structured to qualify as
performance-based compensation. However, because of ambiguities and
uncertainties as to the application and interpretation of Section 162(m) and
the Treasury Regulations issued thereunder, no assurance can be given that
compensation intended by the Company to satisfy the requirements for
deductibility under Section 162(m) will so qualify.

29
<PAGE>

BENEFIT PLANS

MGM Retirement Plan

The MGM Retirement Plan was adopted in March 1986 to provide retirement
income to certain employees who have completed at least one year of service.
The MGM Retirement Plan is a defined benefit plan under which all
contributions are made by MGM Studios. The compensation covered by the MGM
Retirement Plan includes base salary only, and not bonus or other amounts.
Subject to certain limits, the amount of the pension to which a participant is
entitled is an annual amount equal to 1.55 percent of annual base salary up to
the Social Security wage base ($65,400 for 1997) plus 1.9 percent of annual
base salary above that amount up to the maximum amount allowable under the MGM
Retirement Plan (currently $160,000 per year) for each year of credited
service up to 35 years, at which time the applicable percentage is 1.55
percent of the annual base salary for each year of service in excess of 35.
Participants become vested upon completion of five years of service.
Participants, or their beneficiaries, are entitled to receive benefits which
have vested under the MGM Retirement Plan upon their normal, early or deferred
retirement or upon the total and permanent disability, death or other
termination of such participant's employment and after attaining normal or
early retirement age. Benefits are normally payable on a monthly basis either
(i) in a "life only" form to a unmarried participant during his or her life or
(ii) in a qualified "joint and survivor" form to married participants, which
shall be the actuarial equivalent of the life only form and which shall
provide equal monthly payments to the participant during his or her lifetime
with an amount equal to 50 percent (or 75 percent or 100 percent at the
election of the participant) of such payments continued after his or her death
payable to his or her spouse for the remainder of such spouse's life.
Alternatively, participants may, under certain circumstances, elect that a
single lump-sum death benefit be payable or that a "ten-year certain and life"
form, providing for equal monthly payments be made to the participant during
his or her lifetime with the provision that in the event the participant dies
prior to the expiration of ten years, such payments would continue to his or
her beneficiary for the remainder of the ten-year period.

It is the intention of the Company to continue the MGM Retirement Plan;
however, the Company has the right to amend or terminate the MGM Retirement
Plan at any time. If the plan is terminated, the available assets held in
trust will be used to pay benefits to retired employees (including
beneficiaries), terminated vested employees entitled to benefits and active
employees. If termination occurs when the MGM Retirement Plan assets are not
sufficient to pay all benefits accrued to the date of the termination, the
assets held in trust under the plan will be allocated among employees and
beneficiaries in accordance with the provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). The Company is not liable
for the payment of MGM Retirement Plan benefits from its own assets. Upon full
satisfaction of the MGM Retirement Plan's liability to employees and their
beneficiaries, any amount remaining in the plan will be returned to the
Company.

The Internal Revenue Code requires certain provisions for benefit accruals
if a defined benefit plan becomes "top heavy," that is, if the value of
accrued benefits for "key employees" is more than 60 percent of the total
value of all accrued benefits. While the Company believes that it is unlikely
that the MGM Retirement Plan will ever become top heavy, in such an event, it
may become necessary to amend the MGM Retirement Plan to conform it to the
applicable Internal Revenue Code requirements.

Supplemental Executive Retirement Agreement

Pursuant to Mr. Pisano's previous employment agreement and in place of
certain benefits under a pension plan maintained for Mr. Pisano's benefit by a
prior employer (the "Prior Plan") which Mr. Pisano forfeited when he joined
the Company in 1993, the Company entered into the Supplemental Executive
Retirement Agreement with Mr. Pisano. The Supplemental Executive Retirement
Agreement provides Mr. Pisano with an annual benefit equal to $150,000 (the
"Benefit Amount"), less an amount equal to the benefit Mr. Pisano is entitled
to receive under the Prior Plan and subject to certain adjustments, payable in
the form of a single life annuity commencing on the later of the date Mr.
Pisano attains age 60 and the date Mr. Pisano's employment with the Company is
terminated, including due to Mr. Pisano's death. The minimum aggregate amount
payable to Mr. Pisano or his beneficiaries will be $900,000, less all benefits
to which Mr. Pisano is entitled under the Prior Plan. All benefits

30
<PAGE>

under the Supplemental Executive Retirement Agreement are fully vested. If Mr.
Pisano continues in the employment of the Company after attaining age 60, the
Benefit Amount shall be increased by 5/12ths of one percent for each month Mr.
Pisano continues to be employed by the Company after such date. In addition,
after payments have commenced under the Supplemental Executive Retirement
Plan, the Benefit Amount shall be increased effective each January 1 by the
adjustment factor applied to retiree payments for the calendar year under the
Prior Plan. If Mr. Pisano is unmarried on the date benefits commence, the
benefit shall be payable monthly for Mr. Pisano's life ("life only" basis).
If, however, Mr. Pisano is married on the date benefits commence, he may elect
to have the benefits to which he is entitled payable on the life only basis or
have the actuarial equivalent of the life only form payable in equal monthly
payments to him during his lifetime with an amount equal to 50 percent or 100
percent of such payments to continue after his death to his spouse for the
remainder of his spouse's life. In the event of a Designated Change of Control
of the Company (as defined in the 1996 Incentive Plan and the Supplemental
Executive Retirement Agreement) or the termination of Mr. Pisano's employment
agreement by the Company without cause or by Mr. Pisano for good reason, the
Company will deposit into escrow an amount sufficient to provide on an
actuarial basis the level of payments required under the Supplemental
Executive Retirement Agreement.

MGM Savings Plan

Employees, including officers, who have completed one year of service have
the opportunity to participate in the MGM Savings Plan (the "Savings Plan")
which is managed by CIGNA Retirement and Investment Services. Participants in
the Savings Plan may contribute a portion of their pre-tax compensation (up to
a maximum of $10,000) and after-tax compensation (subject to certain
limitations) into the Savings Plan and direct the investment of such
contributions. MGM Studios matches 100 percent of such employee contributions
up to four percent of such employee's eligible compensation. Effective January
1, 1998, the Savings Plan was amended to allow the matching contributions to
be made in cash or in shares of the Common Stock. The employee contributions
to the Savings Plan and the earnings thereon are always 100 percent vested.
The matching contributions and the earnings thereon vest 20 percent for each
full year of service and employees become 100 percent vested (i) after five
years of service, (ii) upon their total and permanent disability or (iii) upon
their death. Employees receive a lump sum payment of the vested portion of
their respective Savings Plan account when their employment is terminated. In
addition, an employee may, under certain conditions, withdraw or borrow from
the vested portion of his or her respective Savings Plan account.

On August 7, 1998 the Company filed a registration statement on Form S-8
with the Commission (which registration statement became effective upon
filing) with respect to up to one million shares of the Common Stock
authorized to be issued pursuant to the Savings Plan.

As of December 31, 1998, the Company had contributed an aggregate of 81,515
shares of the Common Stock to the Savings Plan.

31
<PAGE>

PROPOSAL 2

OPTIONS REPRICING

Under the Company's 1996 Incentive Plan 7,692,176 options have been granted
to executives and other employees of the Company as of March 19, 1999. The
1996 Incentive Plan is administered by the Compensation Committee, which has
broad authority to amend the plan and grant Awards thereunder.

Due to the decline in the market price of the Common Stock, the Compensation
Committee and the Board of Directors determined that the purpose of the 1996
Incentive Plan was not being achieved. Therefore, in order more closely to
realign the exercise price of the options with the market price of the Common
Stock and thereby better enable the Company to attract, retain and motivate
its employees, effective on October 26, 1998 (subject to certain conditions),
the Compensation Committee and the Board of Directors approved the Options
Repricing whereby the Company, pursuant to Option Exchange Agreements,
canceled and regranted at a reduced exercise price certain of the options
theretofore granted under the 1996 Incentive Plan.

The terms of the 1996 Incentive Plan and the options currently granted
thereunder and the Options Repricing are described in more detail under the
headings "Executive Compensation--Incentive and Bonus Plans--1996 Incentive
Plan" and "Certain Federal Income Tax Consequences."

The following table sets forth information with respect to the number of
options subject to the Options Repricing, if any, that have been granted to:
(i) the Named Executive Officers and Former Officers, individually and as a
group; (ii) the directors of the Company, as a group, who are not Named
Executive Officers; and (iii) employees of the Company, as a group, other than
the Named Executive Officers, in connection with the Options Repricing.

1996 Stock Incentive Plan

<TABLE>
<CAPTION>
Number of
Dollar Options
Name Value($)(1) Repriced(#)(2)
---- ----------- --------------
<S> <C> <C>
Frank G. Mancuso............................... -- --
A. Robert Pisano............................... -- 523,754
William A. Jones............................... -- 159,584
Daniel J. Taylor............................... -- 179,168
Robert Brada................................... -- 26,000
Michael G. Corrigan............................ -- --
David G. Johnson............................... -- --
Named Executive Officers and Former Officers as
a Group....................................... -- 888,506
Non-Executive Director Group................... -- --
Non-Executive Officer Employee Group........... -- 4,463,998
</TABLE>
- --------
(1) The closing sale price of the Common Stock on the NYSE, as reported by the
Dow Jones News Retrieval, on October 26, 1998, the date of the Option
Repricing, was less than the exercise price of the options granted to the
Named Executive Officers and Former Officers under the 1996 Incentive Plan
in connection with the Options Repricing. See "--Incentive and Bonus
Plans--1996 Incentive Plan."

(2) Represents the number of options that were canceled and regranted in
connection with the Options Repricing.

Copies of the 1996 Incentive Plan and the form of Executive Option Exchange
Agreement are filed as exhibits to the Annual Report.

32
<PAGE>

The Options Repricing is subject to approval of the Company's stockholders.
If the Options Repricing is not approved by the holders of at least 75 percent
of the outstanding shares of the Common Stock, the Options Repricing will be
null and void and the options outstanding as of October 26, 1998, except to
the extent otherwise terminated or modified, will be reinstated. Tracinda,
which owned approximately 79.5 percent of the outstanding shares of the Common
Stock as of March 19, 1999, has agreed to vote its shares in favor of the
approval of the Options Repricing.

The Board of Directors recommends that stockholders vote "FOR" Proposal 2.

33
<PAGE>

PROPOSAL 3

AMENDMENT TO 1996 STOCK INCENTIVE PLAN

The Board of Directors and the Compensation Committee have proposed, subject
to stockholder approval, an increase in the aggregate number of shares of
Common Stock issuable under the 1996 Incentive Plan from 8,125,065 shares of
the Common Stock to 15,000,000 shares of the Common Stock.

The purpose of the amendment is to provide additional shares of the Common
Stock for Awards under the 1996 Incentive Plan in order to provide incentive
for employees of the Company and increase their personal interest in the
continued success and progress of the Company. The Board of Directors and the
Compensation Committee believe that long-term growth is dependent upon
obtaining qualified personnel and that the granting of Awards under the 1996
Incentive Plan is and has been an important aid in attracting and retaining
individuals of exceptional ability and in providing additional incentive for
them in performing services to the Company. All employees of the Company are
eligible to receive a grant of an Award under the 1996 Incentive Plan. For a
description of the Awards heretofore granted under the 1996 Incentive Plan,
see "Executive Compensation--Incentive and Bonus Plans--1996 Incentive Plan"
and "Certain Federal Income Tax Consequences."

To effect the increase in the number of shares issuable under the 1996
Incentive Plan, the Board of Directors proposes to amend and restate Sections
4(a) and 4(b) of the 1996 Incentive Plan. Sections 4(a) and 4(b) of the 1996
Incentive Plan are proposed to be amended and restated as follows:

"(a) The aggregate number of Common Shares that may be issued pursuant to
all Incentive Stock Options granted under this Plan may not exceed 15
million, and the aggregate number of Common Shares that may be issued
pursuant to all Incentive Stock Options granted to any one Participant
under this Plan may not exceed 8,125,065, subject in each case to
adjustment as provided in Section 7 of this Plan.

(b) The aggregate number of Common Shares and Derivative Securities
issued and issuable pursuant to all Awards (including all Incentive Stock
Options) granted under this Plan may not at any time exceed 15 million, and
the aggregate number of Common Shares and Derivative Securities issued and
issuable pursuant to all Awards (including Incentive Stock Options) granted
to any one Participant under this Plan may not at any time exceed
8,125,065, subject to in each case adjustment as provided in Section 7 of
this Plan."

The benefits or amount of additional Awards, if any, that will be received
by or allocated to: (i) the Named Executive Officers and Former Officers,
individually and as a group; (ii) the directors of the Company, as a group,
who are not Named Executive Officers; and (iii) employees of the Company, as a
group, other than the Named Executive Officers, as a result of the amendment
to the 1996 Stock Incentive Plan is not determinable and would not have been
determinable if the 1996 Incentive Plan, as amended, had been in effect during
the fiscal year ended December 31, 1998.

A copy of the 1996 Incentive Plan is filed as an exhibit to the Annual
Report.

The affirmative vote of the holders of at least a majority of the shares of
the Common Stock is required to approve the amendment to the 1996 Incentive
Plan.

The Board of Directors recommends that stockholders vote "FOR" Proposal 3.

34
<PAGE>

PROPOSAL 4

BONUS INTEREST AMENDMENT

Under the Company's Senior Management Bonus Plan 2,420,685 Bonus Interests
have been granted to an aggregate of 18 current or former senior employees of
the Company. No additional Bonus Interests will be granted under the Senior
Management Bonus Plan. However, the Company has granted Mr. Taylor and
Mr. Brada the Taylor Cash Bonus and Brada Cash Bonus, respectively, which are
based on the value of the Bonus Interests and are only payable in certain
circumstances. See "Employment Agreements--Daniel J. Taylor" and "--Robert
Brada."

The terms of the Bonus Interests, the Senior Management Bonus Plan and the
Bonus Interest Amendment are described in more detail under the headings
"Executive Compensation--Incentive and Bonus Plans--Senior Management Bonus
Plan" and "Certain Federal Income Tax Consequences."

The following table sets forth information with respect to the number of
Bonus Interests under the Senior Management Bonus Plan and the Taylor Cash
Bonus and Brada Cash Bonus subject to the Bonus Interest Amendment and granted
to: (i) the Named Executive Officers and Former Officers, individually and as
a group; (ii) the directors of the Company, as a group, who are not Named
Executive Officers; and (iii) employees of the Company, as a group, other than
the Named Executive Officers.

<TABLE>
<CAPTION>
Dollar Number of
Name Value($)(1) Units(#)
---- ----------- ---------
<S> <C> <C>
Frank G. Mancuso................................... -- --
A. Robert Pisano................................... -- 243,544(2)
William A. Jones................................... -- 74,209(2)
Daniel J. Taylor................................... -- 83,334(3)
Robert Brada....................................... -- 40,584(4)
Michael G. Corrigan................................ -- --
David G. Johnson................................... -- --
Named Executive Officers and Former Officers as a
Group............................................. -- 441,671(5)
Non-Executive Director Group....................... -- --
Non-Executive Officer Employee Group............... -- 1,237,134(2)
</TABLE>
- --------
(1) As of October 26, 1998, the effective date of the Bonus Interest Amendment
and December 31, 1998, the Price (as defined above) was lower than the
minimum level necessary to entitle a participant in the Senior Management
Bonus Plan to any payment with respect to the Bonus Interests. As
described under "--Incentive and Bonus Plans--Senior Management Bonus
Plan," the maximum amount payable is $24.00 per Bonus Interest in the
event the Price equaled $14.90 per share, with respect to Executive
Repricing Participants, or $24.00, with respect to all others, on a
Determination Date. The amount receivable for each Bonus Interest would
decline to zero as the Price increased up to $29.80 per share, with
respect to Executive Repricing Participants, or $48.00 per share, with
respect to all others.

(2) Represents the number of Bonus Interests granted pursuant to the Senior
Management Bonus Plan which are subject to the Bonus Interest Amendment.

35
<PAGE>

(3) Includes 54,042 Bonus Interests granted pursuant to the Senior Management
Bonus Plan and the Taylor Cash Bonus, which is equivalent to 29,292 Bonus
Interests.

(4) Represents the Brada Cash Bonus, which is equivalent to 40,584 Bonus
Interests.

(5) Includes 371,795 Bonus Interests granted pursuant to the Senior Management
Bonus Plan, the Taylor Cash Bonus and the Brada Cash Bonus.

Copies of the Senior Management Bonus Plan, the form of Bonus Interest
Amendment, and the employment agreements of Messrs. Taylor and Brada are filed
as exhibits to the Annual Report.

The Bonus Interest Amendment is subject to approval of the Company's
stockholders. If the Bonus Interest Amendment is not approved by the holders
of at least 75 percent of the outstanding shares of the Common Stock, the
Bonus Interest Amendment will be null and void and the terms of the Bonus
Interest Agreements which existed as of October 26, 1998, except to the extent
otherwise terminated or modified, will be reinstated. Tracinda, which owned
approximately 79.5 percent of the outstanding shares of the Common Stock as of
March 19, 1999, has agreed to vote its shares in favor of the approval of the
Bonus Interest Amendment.

The Board of Directors recommends that stockholders vote "FOR" Proposal 4.

36
<PAGE>

PROPOSAL 5

RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS

The Company's Board of Directors, with the concurrence of the Audit
Committee, has selected Arthur Andersen LLP as the Company's independent
auditors for the fiscal year ending December 31, 1999. Although the
appointment of Arthur Andersen LLP is not required to be submitted to a vote
of the stockholders, the Board of Directors believes it appropriate as a
matter of policy to request that the stockholders ratify the appointment for
the current fiscal year. In the event a majority of the votes cast at the
meeting are not voted in favor of the appointment, the Board of Directors and
the Audit Committee will reconsider their selection. Proxies solicited by the
Board will be voted in favor of the appointment unless stockholders specify
otherwise in such proxies.

A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting with the opportunity to make a statement if he or she so
desires and to respond to appropriate questions.

The Board of Directors recommends that stockholders vote "FOR" Proposal 5

37
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Sales of Unregistered Securities to Mr. Mancuso

Pursuant to Mr. Mancuso's employment agreement, Mr. Mancuso receives an
annual stock purchase payment of $3 million (payable annually in advance in
November of each year), out of the after tax proceeds of which he is required
to purchase shares of the Common Stock. For the year ended December 31, 1998,
Mr. Mancuso had purchased 159,082 of the Common Stock for aggregate
consideration of approximately $3.0 million. Mr. Mancuso is next scheduled to
purchase shares of the Common Stock under his employment agreement in November
1999. See footnotes 3, 4 and 5 to "--Executive Compensation--Summary
Compensation Table" and "Management--Employment Agreements--Frank G. Mancuso."
The Company believes that the issuances of such shares to Mr. Mancuso were
exempt from registration under Section 4(2) of the Securities Act.

Investors Shareholder Agreement and Shareholders Agreement

The Tracinda Group, Mr. Mancuso, the Company and MGM Studios are parties to
the Investors Shareholder Agreement and the Shareholders Agreement, each of
which contains certain provisions relating to the corporate governance of the
Company and provide for certain rights relating to the shares of the Common
Stock, including registration rights and transfer restrictions. See "Ownership
of Voting Securities--Investors Shareholder Agreement" and "Ownership of
Voting Securities--Shareholders Agreement."

Other Transactions With Tracinda and its Affiliates

In connection with the Rights Offering in October 1998, the Tracinda Group
entered into a standby agreement with the Company pursuant to which it agreed
to exercise all of the subscription rights (the "Rights") distributed to it in
the Rights Offering and to purchase any shares of the Common Stock which were
not otherwise subscribed for in the Rights Offering. The Tracinda Group
purchased 75,933,009 shares of the Common Stock in the Rights Offering,
representing all of the shares of Common Stock underlying the Rights
distributed to it in the Rights Offering, for an aggregate purchase price of
approximately $626,447,000. Because the Rights Offering was oversubscribed,
the Tracinda Group was not obliged to purchase any additional shares of the
Common Stock.

In February 1980 a predecessor-in-interest to the Company granted to a
predecessor-in-interest to MGM Grand Inc. an exclusive open-ended royalty-free
license, which was amended in 1992 and further amended in 1998. Pursuant to
the license, as amended, MGM Grand, Inc. has the right to use certain
trademarks that include the letters "MGM," as well as logos and names
consisting of or related to stylized depictions of a lion, in its resort hotel
and/or gaming businesses and other businesses that are not related to filmed
entertainment. In 1986 MGM granted MGM Grand Air, Inc. ("Grand Air") an
exclusive open-ended royalty-free license to use one of its logos consisting
of a stylized depiction of a lion in Grand Air's airline business. The Company
did not receive any monetary compensation for these licenses. Tracinda owns a
majority of the outstanding common stock of MGM Grand, Inc., the parent of
both MGM Grand Hotel ("Grand Hotel") and Grand Air. Additionally, the Company
and affiliates of Tracinda occasionally conduct cross-promotional campaigns,
in which the Company's motion pictures and the affiliates' hotels are promoted
together; however, the Company believes that the amounts involved are
immaterial.

The Company and Grand Hotel have an ongoing relationship whereby Grand Hotel
can utilize key art, still photographs of artwork and one minute film clips
from certain of the Company's motion picture releases on an as-needed basis.
The Company did not receive any monetary compensation for these licenses.

The Company sells to Grand Hotel and certain of its affiliates, on a
wholesale basis, videocassettes and other merchandise such as baseball caps,
clothing, keychains and watches bearing the Company's trademarks and logos for
resale to consumers in retail shops located within Grand Hotel's hotels. Grand
Hotel currently is the Company's largest wholesale customer of the Company's
merchandise and, consequently, receives customary

38
<PAGE>

volume discounts from the Company. For the year ended December 31, 1998, the
Company recognized revenues of $24,000 for such videocassettes and
merchandise.

From time to time, the Company uses aircraft owned by Tracinda for use in
the Company's business. The Company believes that the terms of such
arrangements are no less favorable to the Company than those that could be
obtained from unrelated parties. For the year ended December 31, 1998, the
aggregate of the payments made to Tracinda for the use of such aircraft was
approximately $3,000.

Other Transactions

The Company has an exclusive producer overhead arrangement with FGM
Entertainment for the services of Frank Mancuso, Jr., the son of Mr. Mancuso,
which expires on July 31, 2002. FGM Entertainment, a company wholly owned by
Mr. Mancuso, Jr., receives $400,000 each year, subject to five to ten percent
annual increases, for overhead expenses, as well as a development fund and a
production fund to pay for the costs of developing and producing projects. FGM
Entertainment must submit all projects that it wishes to produce or develop to
the Company and receives a producing fee, as well as certain participations
and royalties, for each picture that is produced under the arrangement. For
the year ended December 31, 1998, these fees, participations and royalties
(paid to Mr. Mancuso, Jr. for movies produced by him such as Species, Fled,
Hoodlum and Ronin) totalled approximately $2.4 million. The Company has the
right to acquire the domestic or worldwide rights to each picture produced
under the arrangement and controls all remake, sequel and television rights.

In connection with the commencement of Mr. Taylor's employment with the
Company and to assist Mr. Taylor with his relocation to the Los Angeles area,
the Company entered into an agreement with Mr. Taylor pursuant to which the
Company agreed to purchase, if Mr. Taylor requested, Mr. Taylor's former
residence for the amount of $390,000. The residence was sold to a third party
in November 1998. Pursuant to the Company's relocation policies, until the
sale of the residence closed, the Company reimbursed Mr. Taylor for the
mortgage payments on the residence in the amount of $2,473 per month and was
responsible for the cost of maintaining the residence. For the year ended
December 31, 1998, such payments aggregated $33,760. In addition, the Company
had made an unsecured non-recourse interest-free loan in the principal amount
of $130,000 in order to assist Mr. Taylor in the purchase of a residence in
the Los Angeles area, which amount has been settled in accordance with the
terms of such loan.

In 1998 the Company acquired all of the interest of Taliafilm, Inc.
("Taliafilm"), a company wholly owned by the sister of Mr. Coppola, in the
motion picture Never Say Never Again for $2.5 million and approximately 20
percent of the adjusted gross receipts received by the Company from the
exploitation of the film. In addition, the Company assumed certain obligations
of Taliafilm relating to such film.

In 1995 the Company licensed to a subsidiary of Seven, a former beneficial
owner of more than 5 percent of the Company's Common Stock, the right to
distribute certain motion picture and television product in the Australian
free television market. This agreement was amended on September 9, 1997. The
product licensed includes certain Library pictures and theatrical motion
pictures and television series, miniseries and made-for-television movies
produced or distributed by the Company during the term of the agreement. The
license fees for the Library product are at a rate which the Company believes
is arm's-length. The term of the output portion of the agreement is 15 years.
The license fees for output product television series, television movies and
television mini-series are on a "most favored nations" basis with prices paid
by the Seven subsidiary for comparable programming. For the year ended
December 31, 1998, the Company recognized revenues of $5.6 million under this
agreement.

In 1994, in connection with the formation of MovieVision, a joint venture in
which the Company and a subsidiary of Seven have non-controlling interests,
the Company licensed to the joint venture certain of its current theatrical
and television motion pictures, as well as a number of Library pictures, for
distribution on Australian pay and basic cable television. The agreement
expires on June 30, 2000, with all motion pictures covered by the agreement
reverting to the Company within one year after that date, but both the Company
and

39
<PAGE>

MovieVision have the right to extend the license for a further five years. The
Company receives a license fee for each picture that is based on the number of
MovieVision's subscribers. For the year ended December 31, 1998, the Company
recognized revenues of $3.6 million under this license agreement. The Company
believes that the terms of the agreement are no less favorable to the Company
than those contained in its licenses with unaffiliated licensees.

Seven has agreed to reimburse the Company for losses that the Company may
incur in connection with the distribution of Joey, an Australian film with
respect to which the Company has acquired distribution rights from an
unrelated third party.

40
<PAGE>

STOCKHOLDER PROPOSALS AND NOMINATIONS FOR THE 2000 ANNUAL MEETING

Under Rule 14a-8 of Regulation 14A of the Exchange Act, any stockholder
intending to submit to the Company a proposal that qualifies for inclusion in
the Company's proxy statement and proxy relating to the annual meeting of
stockholders to be held in 2000 must submit such proposal so that it is
received by the Company no later than December 10, 1999 and must satisfy the
other requirements of Rule 14a-8. All such stockholder proposals should be
submitted to the Secretary of the Company.

Separately, under Rule 14a-4 of Regulation 14A, the Company may exercise
discretionary voting authority under proxies it solicits to vote on a proposal
made by a stockholder that the stockholder does not seek to include in the
Company's proxy statement and proxy for such meeting pursuant to Rule 14a-8,
unless the Company is notified about the proposal before February 15, 2000 and
the stockholder satisfies the other requirements of Rule 14a-4(c).

OTHER MATTERS

While the Notice of Annual Meeting of Stockholders calls for the transaction
of such other business as may properly come before the meeting, the Board of
Directors has no knowledge of any matters to be presented for action by the
stockholders other than as set forth above. The enclosed proxy gives
discretionary authority to the proxies, however, to consider and vote upon any
additional matters that may be presented.

ANNUAL REPORT TO STOCKHOLDERS AND ANNUAL REPORT ON FORM 10-K

The Company's Annual Report to Stockholders and Annual Report on Form 10-K
(without exhibits thereto) for the year ended December 31, 1998 accompanies
this Proxy Statement. Exhibits to the Annual Report on Form 10-K may be
obtained from the Company upon request. To obtain any such exhibits contact
the Corporate Secretary, Metro-Goldwyn-Mayer Inc., 2500 Broadway Street, Santa
Monica, California 90404.

Stockholders are urged to immediately mark, date, sign and return the
enclosed proxy in the envelope provided, to which no postage need be affixed
if mailed in the United States.

By order of the Board of Directors,

/s/ William Allen Jones

William Allen Jones
Senior Executive Vice President
and Secretary

Santa Monica, California
March 31, 1999

41
<PAGE>

METRO-GOLDWYN-MAYER INC.

Proxy for Annual Meeting of Stockholders
May 11, 1999
Solicited on Behalf of the Board of Directors

The undersigned hereby appoints WILLIAM A. JONES, DANIEL J. TAYLOR and
ROBERT BRADA, and each of them, Proxies, with full power of substitution, to
represent and vote all shares of the common stock, $.01 par value per share,
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Stockholders of Metro-Goldwyn-Mayer Inc. to be held in the
Main Theatre at the Company's executive offices located at 2450 Broadway
Street, Santa Monica, California on May 11, 1999, at 10:00 a.m., and at any
adjournments thereof, upon any and all matters which may properly be brought
before said meeting or any adjournments thereof. The undersigned hereby
revokes any and all proxies heretofore given with respect to such meeting.

The Board of Directors recommends a vote FOR Items 1, 2, 3, 4 and 5.

(Continued and to be SIGNED on the other side)

- -----------------------------------------------------------------------------
- FOLD AND DETACH HERE -

METRO-GOLDWYN-MAYER INC.

Annual Meeting of Stockholders

Tuesday, May 11, 1999
10:00 a.m.
Main Theatre
MGM Plaza
2450 Broadway Street
Santa Monica, California

ADMISSION TICKET

This ticket must be presented at the door for entrance to the meeting.
<PAGE>

- --------------------------------------------------------------------------------
Please mark [X]
your votes as
indicated in
this example

This Proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. Unless otherwise directed, or if no direction
is given, this Proxy will be voted FOR all of the nominees in Proposal 1, FOR
each of the other Proposals and in accordance with the best judgment of the
proxy holders or any of them on any other matters which may properly come
before the meeting or any adjournment or postponement thereof.

1. Election of Directors
FOR all nominees named
(except as marked Withhold Authority
to the contrary) for all nominees named
[_] [_]

Names of Nominees: James D. Aljian, Francis Ford Coppola, Willie D. Davis,
Alexander M. Haig, Jr., Kirk Kerkorian, Frank G. Mancuso, A. Robert Pisano,
Alex Yemenidjian, Jerome B. York.

2. Approval of options repricing

FOR AGAINST ABSTAIN
[_] [_] [_]

3. Approval of amendment to Amended and Restated 1996 Stock Incentive Plan

FOR AGAINST ABSTAIN
[_] [_] [_]

4. Approval of bonus interest amendment

FOR AGAINST ABSTAIN
[_] [_] [_]

5. Ratification of the selection of independent auditors

FOR AGAINST ABSTAIN
[_] [_] [_]

I plan to attend the meeting [_]

(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the following line.)

________________________________________________________________________________

Dated:__________________________________________________________________ , 1999

_______________________________________________________________________________
Signature

_______________________________________________________________________________
Signature if held jointly

Please sign your name exactly as it appears hereon. In the case of joint
owners, each should sign. If signing as executor, trustee, guardian or in any
other representative capacity or as an officer of a corporation, please
indicate your full title as such.

- -------------------------------------------------------------------------------
<PAGE>

ADMISSION TICKET

Annual Meeting
of
Metro-Goldwyn-Mayer Inc.
Tuesday, May 11, 1999
10:00 a.m.
Main Theatre
MGM Plaza
2450 Broadway Street
Santa Monica, California
================================================================================
Agenda
1. To elect a Board of Directors.
2. To consider and act upon the approval and ratification of the repricing of
stock options granted pursuant to the Amended and Restated 1996 Stock
Incentive Plan.
3. To consider and act upon the approval and ratification of a proposal to
amend the Amended and Restated 1996 Stock Incentive Plan to increase the
aggregate number of shares of the common stock, $.01 par value per share,
of the Company issuable thereunder from 8,125,065 to 15,000,000.
4. To consider and act upon the approval and ratification of the amendment of
the Bonus Interest Agreements entered into pursuant to the Senior
Management Bonus Plan.
5. To consider and act upon the ratification of the selection of Arthur
Andersen LLP as independent auditors of Metro-Goldwyn-Mayer Inc. for the
fiscal year ending December 31, 1999.
6. To transact such other business as may properly come before the meeting or
any adjournments thereof.
================================================================================