Metro-Goldwyn-Mayer Studios Inc. and certain of its affiliates (collectively, the "Debtors") are sending you this disclosure statement (the "Disclosure Statement") because you may be a creditor entitled to vote on the Joint Prepackaged Plan of Reorganization of Metro-Goldwyn-Mayer Studios Inc. and certain of its Affiliates (the "Plan"). This solicitation (the "Solicitation") of votes is being conducted to obtain sufficient acceptances of the Plan prior to the filing of voluntary cases under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"). If sufficient votes to obtain confirmation of the Plan are received and certain other conditions are met, the Debtors intend to file voluntary cases under chapter 11 of the Bankruptcy Code to implement the Plan. Because no chapter 11 cases have yet been commenced, this Disclosure Statement has not been approved by any Bankruptcy Court as containing "adequate information" within the meaning of section 1125(a) of the Bankruptcy Code. Following the commencement of their chapter 11 cases, the Debtors expect to seek promptly an order of the Bankruptcy Court (1) approving (a) this Disclosure Statement as having contained "adequate information" and (b) the Solicitation as having been in compliance with Section 1125(b) of the Bankruptcy Code, and (2) confirming the Plan described herein. DISCLOSURE STATEMENT DATED OCTOBER 7, 2010 PREPETITION SOLICITATION OF VOTES WITH RESPECT TO JOINT PREPACKAGED PLAN OF REORGANIZATION OF METRO-GOLDWYN-MAYER STUDIOS INC. AND CERTAIN OF ITS AFFILIATES SPECIAL NOTICE REGARDING FEDERAL AND STATE SECURITIES LAWS Neither this Disclosure Statement nor the Plan has been filed with or reviewed by the Bankruptcy Court, and the securities to be issued on or after the Effective Date (as defined below) are not the subject of a registration statement filed with the United States Securities and Exchange Commission (the "SEC") under the United States Securities Act of 1933, as amended (the "Securities Act"), or any securities regulatory authority of any state under any state securities law ("Blue Sky Law"). The Debtors are relying on section 4(2) of the Securities Act and similar provisions of state securities law, as well as, to the extent applicable, the exemption from the Securities Act and equivalent state law registration requirements provided by section 1145(a)(1) of the Bankruptcy Code, to exempt from registration under the Securities Act and Blue Sky Law the offer and sale of new securities in connection with the Solicitation and the Plan. Each holder of a Credit Agreement Claim (as defined in the Plan) or authorized signatory for the beneficial owner of a Credit Agreement Claim will be required to certify on its Ballot whether such holder or beneficial owner is an Accredited Investor, as that term is defined by Rule 501 of Regulation D of the Securities Act. The Plan has not been approved or disapproved by the SEC or any state securities commission and neither the SEC nor any state securities commission has passed upon the accuracy or adequacy of the information contained herein. Any representation to the contrary is a criminal offense. Neither the Solicitation nor this Disclosure Statement constitutes an offer to sell, or the solicitation of an offer to buy securities in any state or jurisdiction in which such offer or solicitation is not authorized. This Disclosure Statement and the information set forth herein are confidential. This Disclosure Statement contains material non-public information concerning the Debtors, their subsidiaries, and their respective securities. Each recipient hereby acknowledges that it (a) is aware that the federal securities laws of the United States prohibit any person who has material non-public information about a company, which is obtained from the company or its representatives, from purchasing or selling securities of such company or from communicating the information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities and (b) is familiar with the United States Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"), and the rules and regulations promulgated thereunder, and agrees that it will not use or communicate to any person, under circumstances where it is reasonably likely that such person is likely to use or cause any person to use, any confidential information in contravention of the Securities Exchange Act or any of its rules and regulations, including Rule 10b-5. THE VOTING DEADLINE TO ACCEPT OR REJECT THE JOINT PREPACKAGED PLAN OF REORGANIZATION OF METRO-GOLDWYN-MAYER STUDIOS INC. AND CERTAIN OF ITS AFFILIATES IS 5:00 P.M. PREVAILING EASTERN TIME ON OCTOBER 22, 2010, UNLESS EXTENDED BY THE DEBTORS (THE "VOTING DEADLINE"). THE RECORD DATE FOR DETERMINING WHETHER A HOLDER OF AN IMPAIRED CLAIM IS ENTITLED TO VOTE ON THE PLAN IS OCTOBER 4, 2010 (THE "VOTING RECORD DATE"). THE DEBTORS ARE FURNISHING THIS DISCLOSURE STATEMENT TO EACH MEMBER OF AN IMPAIRED CLASS UNDER THE JOINT PREPACKAGED PLAN OF REORGANIZATION OF METRO- GOLDWYN-MAYER STUDIOS INC. AND CERTAIN OF ITS AFFILIATES. THIS DISCLOSURE STATEMENT IS TO BE USED BY EACH RECIPIENT SOLELY IN CONNECTION WITH HIS, HER, OR ITS EVALUATION OF THE PLAN, AND USE OF THIS DISCLOSURE STATEMENT FOR ANY OTHER PURPOSE IS NOT AUTHORIZED. WITHOUT THE PRIOR WRITTEN CONSENT OF THE DEBTORS, THIS DISCLOSURE STATEMENT MAY NOT BE REPRODUCED OR PROVIDED TO OTHERS (OTHER THAN THOSE ADVISORS OF ANY RECIPIENT OF THIS DISCLOSURE STATEMENT WHO MAY REVIEW THE INFORMATION CONTAINED HEREIN TO ASSIST SUCH RECIPIENT IN HIS, HER, OR ITS EVALUATION OF THE PLAN). Prepared by: Klee, Tuchin, Bognanoff & Stern LLP Skadden, Arps, Slate, Meagher & Flom LLP 1999 Avenue of the Stars Four Times Square Thirty-Ninth Floor New York, New York 10036 Los Angeles, California 90067 (212) 735-3000 (310) 407-4000 Jay M. Goffman Kenneth N. Klee Michael L. Tuchin 300 South Grand Avenue Suite 3400 Proposed Counsel for Debtors and Los Angeles, California 90071 Debtors in Possession (213) 687-5000 Nick P. Saggese Rick C. Madden Glenn S. Walter INTRODUCTION AND DISCLAIMER Metro-Goldwyn-Mayer Studios Inc. ("MGM Studios") and its affiliated Debtors1 (collectively, together with their non-Debtor affiliates the "Company" or "MGM") submit this Disclosure Statement to certain holders of claims against the Debtors in connection with the Solicitation of acceptances of the proposed Joint Prepackaged Plan of Reorganization of Metro-Goldwyn-Mayer Studios Inc. and Certain of Its Affiliates, dated as of October 7, 2010 (a copy of which is annexed hereto as Appendix A). The Debtors are soliciting such acceptances from holders of secured obligations under the Credit Agreement.2 Under the Plan, the Debtors propose to restructure their financial affairs, including the obligations owed under the Credit Agreement. To effectuate the restructuring of such obligations, assuming the requisite votes are obtained on the Plan, the Debtors will file for bankruptcy relief (and will concurrently or shortly thereafter file the Plan) and will seek the necessary relief from the Bankruptcy Court to continue, in the ordinary course of business, to pay their employees, trade vendors, and certain other creditors in full and on time. In furtherance of their restructuring, the Debtors have entered into (or will be entering into) the Transaction Documents, which include the Investment Agreement, the Stockholders Agreement, and the Registration Rights Agreement. Together, the Plan and the Transactions Documents provide, inter alia, for (i) existing equity in Reorganized Holdings to be cancelled, (ii) claims under the Credit Agreement to be converted into approximately 95.3% of the equity in Reorganized Holdings, (iii) the contribution by Spyglass Entertainment Holdings, LLC ("Spyglass") of certain assets to the Reorganized Company in exchange for 0.52% of the equity in Reorganized Holdings, and (iv) the merger of Cypress Entertainment Group, Inc. ("Cypress") and Garoge, Inc. ("Garoge") with and into a special purpose direct limited liability company subsidiary of Reorganized Holdings, with the Debtor affiliate as the surviving entity and the C/G Stockholders receiving approximately 4.17% of the equity in Reorganized Holdings. The Debtors are furnishing this Disclosure Statement to all holders of Credit Agreement Claims to enable such claimholders to vote to accept or reject the Plan. The Disclosure Statement is to be used by holders of Credit Agreement Claims solely in connection with their evaluation of the Plan. Use of this Disclosure Statement for any other purpose is not authorized. This Disclosure Statement may not be reproduced or provided to anyone other than advisors to the recipient without the prior written consent of the Debtors. The Debtors intend to use any and all Ballots (as defined herein) accepting the Plan that were received pursuant to the Solicitation and not subsequently withdrawn prior to the Voting Deadline (as defined herein) to seek confirmation of the Plan. Votes in favor of the Plan may also be used by the Debtors as acceptances to any modifications to the Plan provided such modifications do not materially and adversely affect the treatment of Credit Agreement Claims. See Section IX.D — "Feasibility of the Plan and Best Interests of Creditors – Confirmation Without Acceptance of All Impaired Classes: The 'Cramdown' Alternative." This Disclosure Statement describes certain aspects of the Plan, the Company's operations, the restructuring of the Company's financial affairs, the disposition of the Company's obligations with respect to the Credit Agreement, the Company's post-restructuring management and other related matters. FOR A COMPLETE UNDERSTANDING OF THE PLAN, YOU SHOULD READ THIS DISCLOSURE STATEMENT, THE PLAN, AND THE APPENDICES AND EXHIBITS THERETO IN THEIR ENTIRETY. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE PLAN AND THIS DISCLOSURE STATEMENT, THE TERMS OF THE PLAN ARE CONTROLLING. THE DEBTORS HAVE NOT COMMENCED CASES UNDER CHAPTER 11 OF THE BANKRUPTCY CODE AT THIS TIME. BECAUSE NO BANKRUPTCY CASES HAVE BEEN COMMENCED, THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT HAS NOT BEEN 1 A list of the Debtors is attached to the Plan as Exhibit B. 2 All capitalized terms not otherwise defined in this Disclosure Statement have the meanings ascribed to such terms in the Plan, a copy of which is attached hereto as Appendix A. i APPROVED BY ANY BANKRUPTCY COURT AS CONTAINING "ADEQUATE INFORMATION" WITHIN THE MEANING OF SECTION 1125(a) OF THE BANKRUPTCY CODE. NONETHELESS, IF CHAPTER 11 CASES ARE SUBSEQUENTLY COMMENCED, THE DEBTORS INTEND TO SEEK PROMPTLY AN ORDER OF THE BANKRUPTCY COURT APPROVING THIS DISCLOSURE STATEMENT PURSUANT TO SECTION 1125 OF THE BANKRUPTCY CODE AND DETERMINING THAT THE SOLICITATION OF VOTES ON THE PLAN BY MEANS OF THIS DISCLOSURE STATEMENT COMPLIED WITH SECTION 1126(b) OF THE BANKRUPTCY CODE. THE DEBTORS INTEND TO CONTINUE OPERATING THEIR BUSINESSES IN CHAPTER 11 IN THE ORDINARY COURSE AND TO SEEK THE NECESSARY RELIEF FROM THE BANKRUPTCY COURT TO PAY THEIR EMPLOYEES, TRADE VENDORS, AND CERTAIN OTHER CREDITORS IN FULL AND ON TIME. THE CLAIMS OF THE DEBTORS' EMPLOYEES, GENERAL UNSECURED CREDITORS (INCLUDING TRADE CREDITORS, LICENSORS, AND LESSORS), AND OTHER SECURED CREDITORS OTHER THAN THOSE HOLDING CREDIT AGREEMENT CLAIMS ARE NOT IMPAIRED UNDER THE PLAN. THE CONFIRMATION AND EFFECTIVENESS OF THE PLAN ARE SUBJECT TO THE SATISFACTION OR WAIVER OF MATERIAL CONDITIONS PRECEDENT, INCLUDING ALL CONDITIONS PRECEDENT TO ENTERING INTO THE INVESTMENT AGREEMENT AND NEW CREDIT FACILITY. THERE CAN BE NO ASSURANCE THAT THOSE CONDITIONS PRECEDENT WILL BE SATISFIED. THE DEBTORS CURRENTLY INTEND TO SEEK TO EFFECTUATE THE PLAN PROMPTLY AFTER CONFIRMATION OF THE PLAN. THERE CAN BE NO ASSURANCE, HOWEVER, AS TO WHEN AND WHETHER CONFIRMATION OF THE PLAN AND THE EFFECTIVE DATE ACTUALLY WILL OCCUR. PROCEDURES FOR DISTRIBUTIONS UNDER THE PLAN, INCLUDING MATTERS THAT ARE EXPECTED TO AFFECT (A) THE TIMING OF THE RECEIPT OF DISTRIBUTIONS BY HOLDERS OF CLAIMS IN CERTAIN CLASSES AND (B) THE AMOUNT OF DISTRIBUTIONS ULTIMATELY RECEIVED BY SUCH HOLDERS ARE DESCRIBED IN SECTION V — "SUMMARY OF THE PLAN OF REORGANIZATION." IF THE PLAN IS NOT CONFIRMED AND/OR EFFECTUATED, THEN THE DEBTORS WILL HAVE TO CONSIDER ALL OF THEIR OPTIONS AS DEBTORS IN BANKRUPTCY. SEE SECTION X — "ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN." NO PERSON IS AUTHORIZED BY THE DEBTORS IN CONNECTION WITH THE PLAN OR THE SOLICITATION TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION REGARDING THIS DISCLOSURE STATEMENT OR THE PLAN OTHER THAN AS CONTAINED IN THIS DISCLOSURE STATEMENT AND THE APPENDICES ATTACHED HERETO OR INCORPORATED HEREIN BY REFERENCE OR REFERRED TO HEREIN. IF SUCH INFORMATION OR REPRESENTATION IS GIVEN OR MADE, IT MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE DEBTORS. THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE LEGAL, BUSINESS, FINANCIAL, OR TAX ADVICE. ANY CREDITOR OR INTEREST HOLDER DESIRING ANY SUCH ADVICE OR ANY OTHER ADVICE SHOULD CONSULT WITH ITS OWN ADVISORS. THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT, INCLUDING THE INFORMATION REGARDING THE COMPANY'S HISTORY, BUSINESS, AND OPERATIONS, IS INCLUDED FOR PURPOSES OF SOLICITING ACCEPTANCES OF THE PLAN BUT, AS TO CONTESTED MATTERS AND ADVERSARY PROCEEDINGS THAT MAY BE PENDING AS OF THE FILING OF THE DEBTORS' CHAPTER 11 CASES OR COMMENCED AFTER THE FILING OF THE DEBTORS' CHAPTER 11 CASES, IS NOT TO BE CONSTRUED AS AN ADMISSION OR A STIPULATION BUT RATHER AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS. THIS DISCLOSURE STATEMENT MAY NOT BE RELIED ON FOR ANY PURPOSE OTHER THAN TO DETERMINE WHETHER TO VOTE TO ACCEPT OR TO REJECT THE PLAN, AND NOTHING ii STATED HEREIN CONSTITUTES AN ADMISSION OF ANY FACT OR LIABILITY BY ANY PARTY, OR BE ADMISSIBLE IN ANY PROCEEDING INVOLVING THE COMPANY OR ANY OTHER PARTY, OR BE DEEMED A REPRESENTATION OF THE TAX OR OTHER LEGAL EFFECTS OF THE PLAN ON THE COMPANY OR HOLDERS OF CLAIMS OR INTERESTS. CERTAIN OF THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT, BY THEIR NATURE, ARE FORWARD-LOOKING AND CONTAIN ESTIMATES AND ASSUMPTIONS. THERE CAN BE NO ASSURANCE THAT SUCH STATEMENTS WILL BE REFLECTIVE OF ACTUAL OUTCOMES. ALL HOLDERS OF CREDIT AGREEMENT CLAIMS SHOULD CAREFULLY READ AND CONSIDER THIS DISCLOSURE STATEMENT AND THE PLAN IN THEIR ENTIRETY, INCLUDING SECTION VI — "RISK FACTORS TO BE CONSIDERED," BEFORE VOTING TO ACCEPT OR REJECT THE PLAN. Except with respect to the "Financial Projections" attached hereto as Appendix C and except as otherwise specifically and expressly stated herein (including with respect to the pleadings the Debtors expect to file in the Chapter 11 Cases), this Disclosure Statement does not reflect any events that may occur subsequent to the date hereof and that may have a material impact on the information contained in this Disclosure Statement. Accordingly, the delivery of this Disclosure Statement will not, under any circumstance imply that the information herein is correct or complete as of any time subsequent to the date hereof. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, ALL INFORMATION CONTAINED HEREIN HAS BEEN PROVIDED BY THE DEBTORS. UNLESS SPECIFICALLY NOTED, THE FINANCIAL INFORMATION CONTAINED HEREIN HAS NOT BEEN AUDITED BY A CERTIFIED PUBLIC ACCOUNTING FIRM. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS: This Disclosure Statement contains certain forward-looking statements, all of which are based on various estimates and assumptions. Such forward-looking statements are subject to inherent uncertainties and to a wide variety of significant business, economic, and competitive risks, including, among others, those summarized herein. See Section VI — "Risk Factors To Be Considered." When used in this Disclosure Statement, the words "anticipate," "believe," "estimate," "will," may," "intend," and "expect" and similar expressions generally identify forward-looking statements. Although the Debtors believe that their plans, intentions, and expectations reflected in the forward- looking statements are reasonable, they cannot be sure that they will be achieved. These statements are only predictions and are not guarantees of future performance or results. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by a forward-looking statement. All forward-looking statements attributable to the Debtors or persons acting on their behalf are expressly qualified in their entirety by the cautionary statements set forth in this Disclosure Statement. Forward-looking statements speak only as of the date on which they are made. Except as required by law, the Debtors expressly disclaim any obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise. iii TABLE OF CONTENTS INTRODUCTION AND DISCLAIMER.......................................................................................................................i I. OVERVIEW OF THE COMPANY................................................................................................................1 A. Corporate Structure of the Company................................................................................................1 B. Overview Of Business Operations....................................................................................................1 1. New Film and Television Production:................................................................................1 2. Theatrical Distribution:.......................................................................................................2 3. Physical Home Entertainment Distribution:.......................................................................3 4. Digital Home Entertainment Distribution:..........................................................................3 5. Worldwide Television Distribution:...................................................................................3 6. MGM Channels / Networks:...............................................................................................3 7. Consumer Products and Licensing:....................................................................................4 C. Corporate History..............................................................................................................................4 D. Capital Structure...............................................................................................................................5 1. MGM Credit Facility..........................................................................................................5 2. Print and Advertising Facility.............................................................................................6 3. United Artists Entertainment Credit Facility......................................................................6 E. Events Leading to Chapter 11 Cases.................................................................................................7 1. Industry Wide Factors.........................................................................................................7 2. Lack of New Production.....................................................................................................7 3. Evaluation of Restructuring Alternatives............................................................................8 F. The Proposed Plan............................................................................................................................9 G. Spyglass, Cypress and Garoge..........................................................................................................9 H. Transaction Documents...................................................................................................................10 II. SUMMARY OF TREATMENT OF CLAIMS AND INTERESTS UNDER THE PLAN...........................21 III. PLAN VOTING INSTRUCTIONS AND PROCEDURES..........................................................................26 A. Notice To Holders Of Claims.........................................................................................................26 B. Solicitation Package........................................................................................................................26 C. Voting Procedures And Ballots And Voting Deadline....................................................................27 D. Confirmation Hearing And Deadline For Objections To Confirmation..........................................28 IV. THE ANTICIPATED CHAPTER 11 CASES..............................................................................................28 A. Motions To Be Filed On The Petition Date....................................................................................28 1. Motion To Approve Combined Disclosure Statement And Confirmation Hearing..........28 2. Motion To Use Cash Collateral And Obtain DIP Financing............................................28 3. Motion To Continue Using Existing Cash Management Systems....................................29 4. Motion For Authority To Pay Prepetition Employee Compensation And Associated Benefits..........................................................................................................29 5. Motion To Pay Prepetition Unsecured Claims.................................................................29 6. Motion To Pay Taxes........................................................................................................29 7. Adequate Assurance Of Utilities......................................................................................29 8. Motion To Pay Shippers And Storage Labs......................................................................30 9. Retention Of Noticing Agent............................................................................................30 10. Motion To Pay Prepetition Participations And Residuals.................................................30 11. Motion For Authorization To Honor Obligations Due To United Artists Production Finance LLC In The Ordinary Course of Business........................................30 12. Motion to Approve Break-Up Fee and Expense Reimbursement.....................................30 13. Other "First Day" Motions................................................................................................31 B. Anticipated Timetable For The Chapter 11 Cases..........................................................................31 V. SUMMARY OF THE PLAN OF REORGANIZATION..............................................................................31 A. Overview Of Chapter 11.................................................................................................................32 B. Overall Structure Of The Plan.........................................................................................................32 C. Classification And Treatment Of Claims And Interests..................................................................32 1. Treatment Of Unclassified Claims....................................................................................32 2. Classification And Treatment Of Claims And Interests...................................................33 3. Acceptance Or Rejection Of The Plan..............................................................................37 iv 4. Means For Implementation Of The Plan..........................................................................37 D. Provisions Governing Distributions................................................................................................40 1. Allowed Claims................................................................................................................40 2. Distributions For Claims Allowed As Of The Effective Date..........................................40 3. Fractional Shares..............................................................................................................40 4. Interest And Penalties On Claims.....................................................................................40 5. Means Of Cash Payment...................................................................................................40 6. Withholding And Reporting Requirements......................................................................40 7. Setoffs...............................................................................................................................41 E. Treatment Of Executory Contracts And Unexpired Leases............................................................41 1. Assumption/Rejection of Executory Contracts and Unexpired Leases.............................41 2. Compensation And Benefit Programs..............................................................................42 3. Century City Leases..........................................................................................................42 4. Employment Contracts.....................................................................................................42 F. Confirmation And Consummation Of The Plan..............................................................................42 1. Condition To Entry Of The Confirmation Order..............................................................42 2. Conditions To Effective Date...........................................................................................43 3. Waiver Of Conditions.......................................................................................................43 G. Effect Of Plan Confirmation...........................................................................................................44 1. Binding Effect...................................................................................................................44 2. Revesting Of Assets..........................................................................................................44 3. Releases And Related Matters..........................................................................................44 4. Discharge Of The Debtors..............................................................................................45 5. Injunction........................................................................................................................45 6. Exculpation And Limitation Of Liability.....................................................................46 7. Term Of Bankruptcy Injunction Or Stays.........................................................................46 8. Post-Effective Date Retention Of Professionals...............................................................47 H. Retention Of Jurisdiction................................................................................................................47 I. Failure of Bankruptcy Court to Exercise Jurisdiction.....................................................................48 J. Miscellaneous Provisions................................................................................................................48 1. Effectuating Documents And Further Transactions..........................................................48 2. Corporate Action..............................................................................................................48 3. Indemnification Of Directors And Officers......................................................................48 4. Payment Of Statutory Fees...............................................................................................49 5. Amendment Or Modification Of The Plan.......................................................................49 6. Additional Debtors............................................................................................................50 7. Severability Of Plan Provisions........................................................................................50 8. Successors And Assigns...................................................................................................50 9. Revocation, Withdrawal, Or Non-Consummation............................................................50 10. Governing Law.................................................................................................................50 VI. RISK FACTORS TO BE CONSIDERED....................................................................................................50 A. Failure to Confirm the Plan.............................................................................................................51 B. Potential Adverse Effects of Chapter 11.........................................................................................51 C. Dependence on Key Personnel........................................................................................................51 D. Business Risks................................................................................................................................51 1. No Assurance Of Ultimate Recoveries.............................................................................51 2. Inherent Uncertainty Of Debtors' Financial Projections...................................................51 3. Lack of Audited and Recent Financial Reports................................................................52 4. Turmoil In Financial Markets...........................................................................................52 5. Unpredictability Of Entertainment Industry.....................................................................52 6. Rapid Technological Changes And Alternative Forms Of Delivery Or Storage Of Filmed Entertainment..................................................................................................53 7. Piracy Of Motion Pictures, Including Digital And Internet Piracy, May Reduce The Gross Receipts From The Exploitation Of Our Films...............................................53 8. Collective Bargaining Agreements...................................................................................53 9. Competition......................................................................................................................53 v 10. World Events....................................................................................................................53 11. Litigation..........................................................................................................................54 12. Brand Concentration.........................................................................................................54 13. UAPF Credit Facility........................................................................................................54 14. Sale Of Equity In Cypress and Garoge.............................................................................54 E. Methods of Solicitation...................................................................................................................54 F. Classification And Treatment Of Claims And Equity Interests......................................................55 VII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS.....................................................56 A. Plan Securities.................................................................................................................................56 B. Issuance and Resale of Plan Securities Under the Plan...................................................................56 1. Exemption From Registration...........................................................................................56 2. Resales Of Plan Securities; Definition Of Underwriter....................................................56 C. Listing of New Common Stock.......................................................................................................57 D. Issuance of New Common Stock to Spyglass and the C/G Stockholders.......................................57 VIII. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN......................................58 A. Certain U.S. Federal Income Tax Consequences to the Debtors.....................................................59 1. Cancellation Of Indebtedness Income..............................................................................59 2. Net Operating Losses – Section 382.................................................................................59 B. Certain Income Tax Consequences to U.S. Holders.......................................................................60 1. U.S. Holders Of Class 3 Credit Agreement Claims..........................................................60 2. U.S. Holders Of Interests In Holdings..............................................................................62 3. Backup Withholding And Information Reporting............................................................62 C. Certain Income Tax Consequences to Non-U.S. Holders...............................................................63 1. Non-U.S. Holders Of Class 3 Credit Agreement Claims..................................................63 2. Backup Withholding And Information Reporting............................................................63 3. Additional Withholding Requirements.............................................................................64 D. Importance of Obtaining Professional Tax Assistance...................................................................64 IX. FEASIBILITY OF THE PLAN AND BEST INTERESTS OF CREDITORS.............................................64 A. Feasibility of the Plan.....................................................................................................................64 B. Acceptance Of The Plan.................................................................................................................65 C. Best Interests Test...........................................................................................................................65 D. Confirmation Without Acceptance Of All Impaired Classes: The 'Cramdown' Alternative...........66 X. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN..............................67 XI. THE SOLICITATION..................................................................................................................................67 A. Parties In Interest Entitled To Vote.................................................................................................67 B. Classes Impaired Under The Plan...................................................................................................68 C. Revocation; Waivers Of Defects; Irregularities..............................................................................68 D. Further Information; Additional Copies..........................................................................................68 XII. CONCLUSION AND RECOMMENDATION............................................................................................69 vi APPENDICES APPENDIX A Joint Prepackaged Plan of Reorganization of Metro-Goldwyn-Mayer Studios Inc. and Certain of Its Affiliates APPENDIX B Liquidation Analysis APPENDIX C Financial Projections APPENDIX D Audited Financial Statement (March, 2009) APPENDIX E Unaudited Financial Statement (March, 2010) vii I. OVERVIEW OF THE COMPANY This Disclosure Statement contains, among other things, descriptions and summaries of provisions of the Plan. Unless otherwise defined herein, all capitalized terms contained herein have the meanings ascribed to them in the Plan. A. Corporate Structure of the Company MGM Holdings Inc. ("Holdings") is the ultimate parent of the MGM family of companies. Holdings owns MGM Holdings II Inc. which, in turn, owns Metro-Goldwyn-Mayer Inc. Metro-Goldwyn-Mayer Inc. owns, directly or indirectly, a number of subsidiaries, including various non-Debtor entities. Metro-Goldwyn-Mayer Inc.'s principal direct and indirect subsidiaries are MGM Studios, United Artists Corporation, United Artists Films Inc. and Orion Pictures Corporation. A list of the Debtors is attached as Exhibit B to the Plan. Generally, the Debtors include all the wholly owned domestic subsidiaries of Holdings other than certain special purpose subsidiaries whose organizational documents contain bankruptcy remote provisions. The Company's executive offices are located at 10250 Constellation Boulevard, Los Angeles, California 90067-6241. The Company's telephone number is (310) 449-3000. The Company's internet address is www.mgm.com. Attached hereto as Appendices D and E, respectively, is the Company's audited financial statement for the fiscal year ending March, 2009, and unaudited financial statement for the fiscal year ending March, 2010 (collectively, the "Financial Statements"). B. Overview Of Business Operations MGM is a film entertainment company, with one of the world's largest film and television libraries and a group of important content franchises. The Company is engaged primarily in the development, production and worldwide distribution of feature films, television programming, interactive media, music, and licensed merchandise. The Company's film and television library (the "MGM Library") contains approximately 4,100 theatrically released feature film titles and approximately 10,800 television episodes, and is one of the largest collections of post-1948 feature films in the world. Films in the MGM Library have won over 200 Academy Awards, including fifteen Best Picture Awards. The MGM Library also contains rights to many iconic film and television franchises. More specifically, assets comprising the MGM Library include: (i) MGM (post-1985) / United Artists film library which consists of more than 2,100 MGM, United Artists and Cannon Group titles, including the James Bond, Pink Panther, and Rocky franchises as well as Legally Blonde, Hannibal, Rain Man, and A Fish Called Wanda; (ii) the Orion Pictures film library which consists of more than 1,300 titles, including Silence of the Lambs and Dances With Wolves; (iii) the Polygram film library which consists of more than 700 titles, including When Harry Met Sally and Four Weddings and a Funeral; and (iv) the television programs library which includes approximately 10,800 episodes of programming, including Stargate SG-1, the longest running science fiction series in U.S. television history. The Company also co-owns the rights to produce two films based on The Hobbit, a book which has sold more than 100 million copies worldwide. The Company's operations are carried out through seven key business segments: 1. New Film and Television Production: The Company is involved in the development and production of films, television series, and other programs. In recent history, the Company has been involved in production in one of three ways: (i) under the New United Artists (as defined below) banner with certain non-Debtor affiliates, (ii) as part of joint ventures with strategic partners, or (iii) under the MGM banner. First, MGM Studios own a 62.5% stake in United Artists Entertainment, LLC ("United Artists Entertainment," and, together with its subsidiaries, "New United Artists"), which is not a debtor herein. United