A delivery man brings a package into Michael's office - then pulls out a gun. He shoots Michael but Michael manages to dodge each bullet. Michael then pulls out his own guns and sprays the delivery man's body. He falls down dead. Movie titles play - it's "Threat Level Midnight." The real Michael talks to camera about how his film - 11 years in production - is now finished.
Everyone attends a screening of the film in the conference room. The film, narrated by Stanley, tells the story of Michael Scarn, a secret agent (played by Michael). Scarn is pulled out of retirement by the President (Darryl) who wants him to stop Goldenface (Jim) from blowing up an all-star hockey game.
The film is very confusing, shot poorly, and unintentionally hysterical, but Pam urges the office audience to treat it with love and they applaud all the way through. In interview, Jim explains to the camera that he only took the role to impress Pam.
Familiar faces pop up throughout the film, including Jan, Todd Packer, and Karen. "Threat Level Midnight" suddenly becomes a musical, with Scarn performing an epic song and dance entitled "The Scarn."
Michael asks Holly what she thinks. But she hesitates to answer and Michael stops the film and walks out. In her office, he explains he's very upset with her for not recognizing how important the film is to him. He storms out and re-starts the movie for the rest of the office.
The film continues, but Michael's starting to realize how bad it is. He leaves the conference room to discover that Holly's been watching it from outside. She apologizes but Michael tells her not to, adding that she's right. They go back into the conference room, where he starts laughing loudly at how silly it is.
The film ends with Scarn saving the hockey game and destroying Goldenface. When a confusing plot point arises in the epilogue concerning the President, Dwight tries to defend the apparent error, but Michael just laughs it off. The audience loves his masterpiece.