<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 18, 1994
REGISTRATION NO. 33-51693
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMC ENTERTAINMENT INC.
(Exact Name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7832 43-1304369
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
106 WEST 14TH STREET
KANSAS CITY, MISSOURI 64105
(816) 221-4000
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
PETER C. BROWN
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
AMC ENTERTAINMENT INC.
106 WEST 14TH STREET, SUITE 1700
KANSAS CITY, MISSOURI 64105
(816) 221-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
Raymond F. Beagle, Jr. William R. Kunkel
Gage & Tucker Skadden, Arps, Slate, Meagher & Flom
2345 Grand Avenue, Suite 2800 333 West Wacker Drive
Kansas City, Missouri 64108 Chicago, Illinois 60606
(816) 292-2000 (312) 407-0700
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. / /
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AMC ENTERTAINMENT INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF
REGULATION S-K SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM S-2
<TABLE>
<CAPTION>
FORM S-2 REGISTRATION STATEMENT ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Forepart of the Registration Statement and Outside Front
Cover Page of Prospectus............................... Front Cover Page of Registration Statement; Outside
Front Cover Page of Prospectus
Inside Front and Outside Back Cover Pages of
Prospectus............................................. Inside Front and Outside Back Cover Pages of Prospectus;
Available Information
Summary Information, Risk Factors and Ratio of Earnings
to Fixed Charges....................................... Prospectus Summary; Risk Factors; Selected Financial
Data; Shares Eligible for Future Sale
Use of Proceeds......................................... Use of Proceeds
Determination of Offering Price......................... Underwriting
Dilution................................................ *
Selling Security Holders................................ *
Plan of Distribution.................................... Outside Front Cover Page of Prospectus; Underwriting
Description of Securities to be Registered.............. Prospectus Summary; Capitalization; Description of
Capital Stock
Interests of Named Experts and Counsel.................. Legal Matters
Information with Respect to the Registrant.............. Outside Front Cover Page of Prospectus; Prospectus
Summary; The Company; Capitalization; Selected
Financial Data; Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Business; Management; Security Ownership of Certain
Beneficial Owners and Management; Description of
Capital Stock; Consolidated Financial Statements
Incorporation of Certain Information by Reference....... Incorporation by Reference
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities............................. *
<FN>
- ------------------------
*Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE SECURITIES IN
ANY STATE
IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 18, 1994
4,000,000 SHARES
PROSPECTUS
, 1994
[LOGO]
AMC ENTERTAINMENT INC.
$ CUMULATIVE CONVERTIBLE PREFERRED STOCK
The shares of $ Cumulative Convertible Preferred Stock, par value
66 2/3 CENTS per share (the "Convertible Preferred"), of AMC Entertainment Inc.
(the "Company") offered hereby (the "Offering") are convertible at the option of
the holder at any time, unless previously redeemed, into shares of the Company's
Common Stock, par value 66 2/3 CENTS per share (the "Common Stock"), at a
conversion price equal to $ per share of Common Stock (equivalent to a
conversion rate of shares of Common Stock for each share of Convertible
Preferred), subject to adjustment under certain conditions. Upon surrender of
any shares of Convertible Preferred for conversion, the Company may, at its
option, pay to the holder of such shares an amount of cash per share of
Convertible Preferred equal to the then Market Value (as defined herein) of the
number of shares of Common Stock into which such shares of Convertible Preferred
are then convertible. On February 17, 1994, the last reported sale price of the
Common Stock on the American Stock Exchange was $12 1/4 per share. Dividends on
the Convertible Preferred will be cumulative and payable quarterly, commencing
June 15, 1994. The liquidation preference of the Convertible Preferred is $25.00
per share, plus accrued and unpaid dividends. The Convertible Preferred will be
redeemable at the option of the Company, in whole or in part, from time to time
on and after 1997, at the redemption prices set forth herein, plus
accrued and unpaid dividends.
The Convertible Preferred has been approved for listing on the American
Stock Exchange, subject to official notice of issuance.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE CONVERTIBLE PREFERRED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC (1) COMMISSIONS (2) COMPANY (3)
<S> <C> <C> <C>
Per Share................................. $25.00 $ $
Total (4)................................. $100,000,000 $ $
<FN>
(1) PLUS ACCRUED DIVIDENDS, IF ANY, FROM THE DATE OF ISSUANCE.
(2) SEE "UNDERWRITING" FOR INDEMNIFICATION ARRANGEMENTS WITH THE UNDERWRITERS.
(3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY, ESTIMATED AT $900,000.
(4) THE COMPANY HAS GRANTED TO THE UNDERWRITERS AN OPTION, EXERCISABLE AT ANY
TIME WITHIN 30 DAYS OF THE DATE HEREOF, TO PURCHASE UP TO 600,000 ADDITIONAL
SHARES SOLELY TO COVER OVER-ALLOTMENTS, IF ANY. IF THE OPTION IS EXERCISED
IN FULL, THE TOTAL PRICE TO THE PUBLIC, UNDERWRITING DISCOUNTS AND
COMMISSIONS AND PROCEEDS TO THE COMPANY WILL BE $115,000,000, $ AND
$ , RESPECTIVELY. SEE "UNDERWRITING."
</TABLE>
The Convertible Preferred is offered by the several Underwriters, subject to
prior sale, when, as and if issued to and accepted by them, and subject to
certain other conditions, including the right to reject orders in whole or in
part. It is expected that delivery of the Convertible Preferred will be made
against payment therefor in New York, New York on or about March , 1994.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
SMITH BARNEY SHEARSON INC.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CONVERTIBLE
PREFERRED AND THE OUTSTANDING COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
AMERICAN STOCK EXCHANGE, THE PACIFIC STOCK EXCHANGE, THE OVER-THE-COUNTER MARKET
OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS. AS USED HEREIN, THE TERM "COMPANY" MEANS
AMC ENTERTAINMENT INC. ("AMCE") AND, UNLESS THE CONTEXT OTHERWISE REQUIRES, ITS
WHOLLY-OWNED SUBSIDIARY, AMERICAN MULTI-CINEMA, INC. ("AMC"), AND ITS
SUBSIDIARIES. REFERENCES HEREIN TO THEATRES OPERATED BY THE COMPANY PRIOR TO MAY
28, 1993 INCLUDE THOSE OWNED BY EXHIBITION ENTERPRISES PARTNERSHIP ("EEP") BUT
MANAGED BY THE COMPANY PRIOR TO SUCH DATE WHEN THE COMPANY ACQUIRED 100%
OWNERSHIP OF EEP.
THE COMPANY
The Company is the third largest motion picture exhibitor in the United
States based on the number of theatre screens operated. Since 1968, when the
Company operated 12 theatres with 22 screens, the Company has expanded its
operations to include 239 theatres with 1,614 screens located in 22 states and
the District of Columbia. Nearly one-half of the screens operated by the Company
are located in Florida, California, Pennsylvania and Texas and approximately 70%
of the Company's screens are located in areas among the 20 largest Areas of
Dominant Influence (television market areas as defined by Arbitron Company).
The Company's revenues are generated primarily from box office admissions
and theatre concession sales, which accounted for 66% and 28%, respectively, of
fiscal 1993 revenues. The balance of the Company's revenues are generated
primarily by on-screen advertising programs and video games located in theatre
lobbies. The Company believes that attendance, revenue and cash flow per screen
at its theatres are among the highest in the industry due to its attractive,
strategically located multi-screen theatres and innovative marketing programs.
The Company is an industry leader in the development and operation of
multi-screen theatres, primarily in large metropolitan markets. This strategy of
establishing multi-screen theatre complexes enhances attendance and concession
sales by enabling the Company to exhibit concurrently a variety of motion
pictures attractive to different segments of the movie-going public. It also
allows the Company to match a particular motion picture's attendance patterns to
the appropriate auditorium size, thereby extending the run of a motion picture
and maximizing profit. In addition, multi-screen theatre complexes realize
economies of scale by serving more patrons from common support facilities,
thereby enabling the Company to spread costs over a higher revenue base. During
the fiscal year ended April 1, 1993, theatres with ten or more screens had per
patron theatre operating income (theatre revenues less cost of operations and
cash payments under theatre leases) of $1.18 compared to $1.02 at theatres with
less than ten screens (excluding "dollar houses"). As of December 30, 1993,
approximately 28% of the Company's screens were in theatre complexes with ten or
more screens and approximately 87% were located in theatre complexes with six or
more screens. The average number of screens per theatre operated by the Company
is 6.8, which is the highest of the five largest theatre chains in North America
and higher than the industry average of 4.5.
Substantially all of the Company's theatres are leased. The Company
continually upgrades its theatre circuit by opening new theatres, refurbishing
and adding new screens to existing theatres and selectively closing unprofitable
theatres. Since March 1988, approximately 38 of the Company's theatres with 325
screens, representing 20% of its screens, have been opened and approximately $43
million has been spent to modernize and remodel its theatres. The Company
believes that this strategy of maintaining modern multi-screen theatre complexes
enhances its ability to license commercially popular motion pictures.
The Company continually introduces new programs and amenities at its
theatres. The following are examples of developments that are being implemented
in the Company's theatre circuit. MovieWatcher-R- is a frequent moviegoer
program that rewards loyal customers for patronizing AMC theatres nationwide.
Teleticketing allows customers to order tickets in advance by telephone and
purchase them with credit cards. AMC's proprietary High Impact Theatre System
provides clear picture and dynamic sound throughout the auditorium. Computerized
box offices maintain attendance records by title and show time, allowing the
Company to make informed staffing, marketing and motion picture exhibition
decisions.
3
<PAGE>
Motion picture theatres are the primary initial distribution channel for new
motion picture releases and the Company believes that the theatrical success of
a motion picture is the critical factor in establishing the value of the motion
picture in cable television, videocassette or other ancillary markets. The total
dollars spent on all types of motion picture entertainment in the United States,
including box office admissions, increased from $17.5 billion in 1987 to $26.0
billion in 1992. From 1980 to 1992, domestic box office admissions have
increased from $2.7 billion to $4.9 billion, primarily due to an increase in
average ticket prices throughout this period.
Prior to May 28, 1993, 60 of the Company's theatres containing 452 screens
were managed by the Company but owned by EEP, a general partnership in which the
Company had a 50% partnership interest. On May 28, 1993, the Company acquired
the remaining partnership interest in EEP for a purchase price aggregating $17.5
million and the payment of $37 million of EEP bank indebtedness. As a result of
the acquisition and the consolidation of EEP, reported revenues and EBITDA for
the thirty-nine week period ended December 30, 1993 were $122.0 million and
$18.7 million higher, respectively, than they would have been had the Company
retained only a 50% interest in EEP. See Notes 4 and 14 of the Company's "Notes
to Consolidated Financial Statements for the fiscal year ended April 1, 1993"
and Note 2 of the Company's "Notes to Consolidated Financial Statements for the
thirty-nine weeks ended December 30, 1993."
The Company intends to use the proceeds of the Offering: (i) to continue to
expand and improve its domestic theatre circuit, (ii) to finance the
construction or acquisition of theatres in foreign markets, (iii) to repurchase
and retire a portion of the Company's outstanding 11 7/8% Senior Notes Due 2000
and 12 5/8% Senior Subordinated Notes Due 2002 (collectively, the "Notes")
pursuant to open market or privately negotiated purchases or otherwise and (iv)
for general corporate purposes.
The Company's predecessor was founded in Kansas City, Missouri in 1920 by
the father of Mr. Stanley H. Durwood, the current Chairman of the Board and
Chief Executive Officer of AMCE. Durwood, Inc. ("DI"), all of whose stock is
beneficially owned by Mr. Stanley H. Durwood and his children, owns 100% of the
Company's Class B Stock and 50.2% of its Common Stock, representing
approximately 98% of the voting power of outstanding securities in matters other
than the election of directors. The Class B Stock is entitled to elect 75% of
AMCE's Board of Directors. See "Security Ownership of Certain Beneficial Owners
and Management."
AMCE is a Delaware corporation with its principal executive offices located
at 106 West 14th Street, Kansas City, Missouri 64105. Its telephone number at
such address is (816) 221-4000.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered...................... 4,000,000 shares of $ Cumulative Convertible Preferred Stock (the
"Convertible Preferred") (4,600,000 shares if the Underwriters' over-allotment
option is exercised in full).
Dividends............................... Cumulative from the date of issuance at the annual rate of $ per share,
payable quarterly on March 15, June 15, September 15 and December 15 of each
year, commencing June 15, 1994, out of funds legally available therefor, when,
as and if declared by the Board of Directors of the Company.
Conversion Rights....................... The Convertible Preferred will be convertible at the option of the holder at any
time, unless previously redeemed, into shares of Common Stock at a conversion
price of $ per share of Common Stock (equivalent to a conversion rate of
shares of Common Stock per share of Convertible Preferred), subject to
adjustment in certain events including a Change of Control or Fundamental Change
(each as defined herein). Upon the surrender of any shares of Convertible
Preferred for conversion, the Company may, at its option, pay to the holder of
such shares an amount in cash equal to the then Market Value (as defined here-
in) of the number of shares of Common Stock into which such shares of
Convertible Preferred are then convertible.
Special Conversion Rights............... The conversion price of the Convertible Preferred will be reduced for a limited
period in certain circumstances. In general, the reduction will occur if a
Fundamental Change or Change of Control occurs (at a per share value) below the
then prevailing conversion price. The minimum conversion price will be 80% of
the last reported sale price of the Common Stock as set forth on the cover page
of this Prospectus (subject to certain adjustments). No adjustment will occur if
a majority of the consideration received by the holders of the Common Stock in
any transaction consists of Marketable Stock (as defined herein) of a successor
corporation or if the holders of Voting Stock (as defined herein) of the Com-
pany hold a majority of the Voting Stock of such successor corporation. See
"Description of Capital Stock -- Convertible Preferred -- Special Conversion
Rights."
Optional Redemption..................... The Convertible Preferred is redeemable for cash at any time after 1997
at the option of the Company, in whole or in part, at a redemption price
initially of $ per share, declining ratably immediately after of
each year thereafter to a redemption price of $25.00 per share after
2001, plus, in each case, any accrued and unpaid dividends.
Ranking................................. The Convertible Preferred will rank, with respect to dividend rights and rights
upon liquidation, winding up or dissolution, senior to all classes of the
Company's common stock (including, without limitation, the Common Stock and
Class B Stock) and junior to any other series of preferred stock that may
hereafter be created that ranks senior to the Convertible Preferred.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Voting Rights........................... Except as required by law or with respect to an amendment of the Certificate of
Incorporation of the Company adversely affecting the rights of the Convertible
Preferred, the holders of the Convertible Preferred will not be entitled to any
voting rights (i) unless the equivalent of six quarterly dividends payable on
the Convertible Preferred are in arrears, in which case the number of directors
of the Company will be increased by two and the holders of the Convertible
Preferred, voting separately as a class with the holders of shares of any other
series of parity preferred stock upon which like voting rights have been
conferred and are exercisable, will be entitled to elect two directors, who
shall serve until all dividends in arrears have been paid or declared and set
apart for payment, and (ii) except with respect to the creation, authorization
or issuance of capital stock ranking senior to or on parity with (in certain
respects) the Convertible Preferred.
Federal Income Tax Consequences......... There are certain federal income tax consequences associated with purchasing,
holding and disposing of the Convertible Preferred, including the fact that a
redemption of shares of Convertible Preferred for cash will be a taxable
transaction. See "Certain Federal Income Tax Consequences."
Use of Proceeds......................... The Company intends to use the net proceeds of the Offering: (i) to improve its
domestic theatre circuit through the construction of new theatres, the addition
of screens at, or remodeling of, existing theatres and the acquisition of
existing theatres from other circuits, (ii) to finance the construction or
acquisition of theatres in foreign markets, (iii) to repurchase and retire a
portion of the Notes pursuant to open market or privately negotiated purchases
or otherwise and (iv) for general corporate purposes.
AMEX Symbol for Common Stock............ AEN
AMEX Symbol for Convertible
Preferred.............................. AEN.Pr
</TABLE>
6
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
ACTUAL (1)
----------------------------------------------------------------
THIRTY-NINE WEEKS ENDED FISCAL YEAR ENDED
------------------------------- ------------------------------
DECEMBER 30, DECEMBER 31, APRIL 1, APRIL 2, MARCH 28,
1993 1992 1993 1992 1991
-------------- -------------- -------- --------- ---------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total revenues (2).............................. $ 447,958 $ 306,130 $404,465 $ 406,964 $ 446,351
Depreciation and amortization................... 29,151 21,086 28,175 31,385 32,572
Operating income................................ 45,462 21,106 26,670 8,793 18,377
Gain (loss) on disposition of assets (3) (79) 9,640 9,638 8,721 6,649
Earnings (loss) before extraordinary items
(4)............................................ 12,519 9,070 7,746 (5,519) 567
Net earnings (loss)............................. 12,519 2,587 1,263 (5,519) 1,067
Earnings (loss) per share....................... 0.76 0.14 0.06 (0.39) 0.02
Ratio of earnings to fixed charges and preferred
stock dividends (5)............................ 1.50 1.36 1.25 -- 1.01
BALANCE SHEET DATA
Cash, cash equivalents and investments.......... $ 58,518 $ 50,373 $ 50,106 $ 36,823 $ 46,554
Total debt (including capitalized lease
obligations)................................... 268,810 253,888 255,302 240,231 263,160
Stockholders' equity............................ 31,966 19,495 18,171 39,869 46,088
Total assets.................................... 407,611 379,112 374,102 377,699 439,488
OTHER DATA
EBITDA (6)...................................... $ 74,613 $ 44,692 $ 57,345 $ 43,178 $ 53,049
Property acquisitions (excluding capitalized
lease obligations)............................. 6,707 7,200 8,821 21,520 20,227
<CAPTION>
PRO FORMA (7)
------------------------------------------
FISCAL
YEAR
THIRTY-NINE WEEKS ENDED ENDED
------------------------------- --------
DECEMBER 30, DECEMBER 31, APRIL 1,
1993 1992 1993
-------------- -------------- --------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE
DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total revenues.................................. $ 447,958 $ 412,177 $543,340
Depreciation and amortization................... 28,825 29,203 38,597
Operating income................................ 45,834 31,112 39,316
Gain (loss) on disposition of assets (3) (79) 9,590 9,590
Earnings before extraordinary items............. 11,602 9,211 7,862
Net earnings.................................... 11,602 2,728 1,379
Earnings per share.............................. 0.71 0.15 0.07
Ratio of earnings to fixed charges and preferred
stock dividends (5)............................ 1.47 1.35 1.24
OTHER DATA
EBITDA (6)...................................... $ 74,659 $ 62,815 $ 80,413
Property acquisitions (excluding capitalized
lease obligations)............................. 8,757 10,910 13,249
</TABLE>
FOOTNOTES ON NEXT PAGE
7
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
<FN>
(1) Effective at the beginning of fiscal 1990 (i.e., the fiscal year ended March
29, 1990), the Company adopted a 52/53 week year. The fiscal year ended
April 2, 1992 consisted of 53 weeks, while the fiscal years ended April 1,
1993 and March 28, 1991 consisted of 52 weeks.
(2) During fiscal 1989, the Company sold 55 theatres with 375 screens to TPI
Entertainment, Inc. ("TPIE"). During fiscal 1992, the Company acquired a 50%
general partnership interest in the screens previously sold to TPIE. During
fiscal 1994, the Company acquired the remaining 50% interest in the
partnership.
(3) Includes the following gains upon the disposition of assets: (i) $8,200,000
in fiscal 1992 from the sale of eight theatres to Carmike Cinemas, Inc., and
(ii) $9,900,000 in fiscal 1993 from the sale of five theatres to Carmike
Cinemas, Inc. In addition, the Company sold a total of 56 theatres in fiscal
1989 and fiscal 1991 to TPIE and, because of the Company's relationship with
TPIE and other factors, the net gain of approximately $70,000,000 was
deferred. Prior to the acquisition of a 50% partnership interest in the
theatres sold to TPIE, the deferred gain was being amortized on the
straight-line method over an average life of approximately 11 years.
Following the Company's acquisition of a 50% partnership interest in EEP,
one-half of the then unamortized deferred gain was applied as a reduction in
the Company's investment in the partnership. After the Company acquired the
remaining partnership interest in EEP, the then unamortized deferred gain
was applied as a reduction to the property and intangible assets acquired.
(4) During fiscal 1993, the Company incurred extraordinary charges, due to a
debt restructuring, in the amount of $10,283,000 before an associated income
tax benefit of $3,800,000. For fiscal 1991, the Company recognized an income
tax benefit of $500,000 upon the utilization of a net operating loss
carryforward.
(5) The Company had a deficiency of earnings to fixed charges and preferred
stock dividends for fiscal 1992 of $3,632,000. For purposes of computing
this ratio, earnings consist of income (loss) before taxes, plus fixed
charges (excluding capitalized interest). Fixed charges consist of interest
expense, amortization of debt issuance costs, and one-third of fixed minimum
rental expense on operating leases treated as representative of the interest
factor attributable to rental expense. For fiscal 1992 and 1993, fixed
charges include $7,439,000 and $7,731,000, respectively, for the Company's
share (50%) of the fixed charges of EEP.
(6) Represents operating income plus depreciation and amortization plus
estimated loss on future disposition of assets. EBITDA is a financial
measure commonly used in the Company's industry and should not be construed
as an alternative to operating income (as determined in accordance with
generally accepted accounting principles ("GAAP"), an indicator of operating
performance, an alternative to cash flows from operating activities (as
determined in accordance with GAAP) or a measure of liquidity.
(7) The pro forma Statement of Operations Data for the fiscal year ended April
1, 1993 and the thirty-nine week periods ended December 30, 1993 and
December 31, 1992 give effect to the acquisition of EEP as if the
acquisition had occurred at the beginning of the period. The pro forma
adjustments are based upon available information and certain assumptions
that management of the Company believes are reasonable. See Note 1 to
"Selected Financial Data" for a discussion of the pro forma adjustments to
the historical data.
</TABLE>
8
<PAGE>
RISK FACTORS
In considering whether to purchase the Convertible Preferred offered hereby,
prospective investors should consider the following:
AVAILABILITY OF MOTION PICTURES
The ability of the Company to operate successfully depends upon a number of
factors, the most important of which is the availability of marketable motion
pictures and the performance of such motion pictures in the Company's markets.
Poor performance of, or disruption in the production of or access to, motion
pictures by the major studios and/or independent producers can adversely affect
the Company's business, and the Company has no control over the operations of
such suppliers. In addition, were the Company to experience poor relationships
with one or more distributors, its business could be adversely affected.
THEATRE DEVELOPMENT
The Company's growth strategy involves the development of new theatres and
may involve acquisitions of existing theatres and theatre circuits. There is
significant competition in the United States for site locations from both
theatre companies and other real estate uses and significant competition among
theatre companies for theatre acquisition opportunities. Further, the Company's
expansion programs may require financing in addition to the net proceeds from
the Offering and internally generated funds. In addition, the development of new
theatre locations involves significant risks and investments of time and is also
likely to have an initial negative impact on earnings. For example, it typically
takes the Company 18 to 24 months from the time a site is identified until a
theatre is opened on the site. Moreover, the availability of attractive site
locations can be affected by changes in the national, regional and local
economic climate, local conditions such as scarcity of space or an increase in
demand for real estate in the area, demographic changes, competition from other
available space and changes in real estate, zoning and tax laws. As a result of
the foregoing, there can be no assurance that the Company will be able to
acquire attractive site locations or existing theatres or theatre circuits on
terms it considers acceptable, that the Company will be able to acquire
financing for such theatres on acceptable terms or that the Company's strategy
will result in improvements to the business, financial condition or
profitability of the Company. See "Business -- Growth Strategy."
FOREIGN OPERATIONS
The Company is investigating opportunities for operating multi-screen
theatre complexes in Europe, Canada, Mexico and Asia but currently does not own,
lease or operate any theatres outside of the United States. There are
significant differences between the exhibition industry in the United States and
in foreign markets. Regulatory barriers affecting such matters as the size of
theatre complexes, the issuance of licenses and the ownership of land may
restrict market entry. Vertical integration of production and exhibition
companies in foreign markets may also have an adverse effect on the Company's
ability to license motion pictures for international exhibition. Quota systems
used by some countries to protect their domestic film industry may adversely
affect revenues from theatres that the Company might develop in such markets.
Such differences in industry structure and regulatory and trade practices may
adversely affect the Company's ability to expand internationally or to operate
at a profit following such expansion.
SIGNIFICANT OUTSTANDING INDEBTEDNESS
The Company had significant amounts of outstanding indebtedness as of
December 30, 1993, including $100 million principal amount of 11 7/8% Senior
Notes due 2000, $100 million principal amount of 12 5/8% Senior Subordinated
Notes due 2002 (collectively, the "Notes") and $68.4 million in capital lease
obligations. In addition, the Company has a $40 million credit facility (the
"Credit Facility"), under which there were no borrowings at December 30, 1993.
Indebtedness of the Company could have important consequences to holders of the
Convertible Preferred, including the following: (i) the Company's ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions, general corporate
9
<PAGE>
purposes or other purposes may be impaired and (ii) a substantial portion of the
Company's cash flow from operations will be dedicated to the payment of interest
on its indebtedness, thereby reducing the funds available to the Company for its
operations, payment of dividends and any future business opportunities.
The Company will require substantial cash flow to make scheduled payments on
existing indebtedness and dividend payments on the Convertible Preferred. The
ability of the Company to make dividend payments on the Convertible Preferred
will be dependent on its future performance and liquidity, which in turn are
subject to financial, economic and other factors affecting the Company, many of
which are beyond its control.
DIVIDEND POLICY; DEPENDENCE ON SUBSIDIARIES; RESTRICTIONS ON DIVIDENDS
Holders of Convertible Preferred will be entitled to receive cumulative cash
dividends in the amounts specified on the cover page of this Prospectus when, as
and if declared by the Board of Directors of AMCE out of funds at the time
legally available therefor. Payment of dividends is subject to declaration by
the Board of Directors and, if not declared, dividends will accumulate from
quarter to quarter without interest until declared and paid. AMCE currently does
not pay regular cash dividends on its Common Stock (into which the Convertible
Preferred is convertible) and does not anticipate paying such dividends in the
foreseeable future.
All of the Company's interest in its theatres is owned by AMC or its
subsidiaries. Therefore, the Company's ability to service its debt and pay
dividends is dependent upon the earnings of its subsidiaries and distribution of
those earnings to the Company or upon other payments of funds by the
subsidiaries to the Company.
The Company's ability to pay dividends on the Convertible Preferred (as well
as the Common Stock) and to make other "restricted payments" is limited under
the Indentures governing the Notes (the "Indentures") to the sum of (i) 25% of
the Company's consolidated cash flow, as defined in the Indentures, from the
date of issuance of the Notes, (ii) net proceeds from the sale of capital stock
since the issuance of the Notes (including this Offering) and (iii) returns on
certain investments. Such amount available under the Indentures aggregated
approximately $9.8 million as of December 30, 1993 and will increase by
approximately $96 million as a result of this Offering.
FINANCIAL LOSSES
The Company has reported losses in each of fiscal years 1989, 1990 and 1992.
Cumulative losses of the Company for the period commencing with the beginning of
fiscal 1989 through the end of fiscal 1993 were approximately $27 million.
However, during this five-year period the Company's cumulative cash flow from
operations was approximately $88 million. The Company believes that statutory
surplus and net profits and cash available to it from future operations will be
sufficient to enable it to meet dividend and debt service requirements of the
Convertible Preferred and existing indebtedness. However, if the Company again
experiences such losses, it may be unable to meet such obligations while
attempting to withstand competitive pressures or adverse economic conditions. In
such circumstances, the value of the Convertible Preferred could be adversely
affected.
CREDIT FACILITY
The Credit Facility contains significant financial and other restrictive
covenants which limit the Company's operating flexibility. Under the Credit
Facility, which expires by its terms in August 1995, the Company and its
subsidiaries generally may not, among other matters, pay cash dividends during
its term in excess of the lesser of (i) $10 million or (ii) $5 million plus 25%
of cash flow, as defined in the Credit Facility, over the term of the Credit
Facility, in each case less capital expenditures outside of the United States.
The Company has made only one borrowing under the Credit Facility, which was in
connection with the acquisition of EEP, and the amount borrowed has been repaid.
The Company does not anticipate any need for borrowing under the Credit
Facility, and if the Company is unable to negotiate satisfactory amendments to
the Credit Facility to permit payment of dividends on the Convertible Preferred,
the Company intends to terminate the Credit Facility. The Company may attempt to
negotiate a new credit facility, but there can be no assurance that it will be
successful in doing so.
10
<PAGE>
CONTROLLING STOCKHOLDER
Voting control of AMCE is vested in the holders of Class B Stock, subject to
the right of holders of the Common Stock to elect one-fourth of the members of
the Board of Directors and the rights of the holders of preferred stock to elect
directors in certain circumstances. Mr. Stanley H. Durwood, primarily through
DI, beneficially owns all of the Class B Stock and 2,642,101 shares of the
Common Stock (approximately 50.2% of the issued and outstanding shares of Common
Stock), which in the aggregate represent approximately 98% of the combined
voting power of the Company's outstanding voting securities on all matters other
than the election of directors. As long as DI holds a majority of the Common
Stock, it will be able to elect or remove all of the Company's Board of
Directors.
ANTI-TAKEOVER MATTERS
Certain provisions of the Credit Facility and the Indentures may have the
effect of delaying or preventing transactions involving a "change of control" of
the Company, including transactions in which stockholders might otherwise
receive a possible substantial premium for their shares over then current market
prices, and may limit the ability of stockholders to approve transactions that
they may deem to be in their best interest.
A "change of control" would require the Company to refinance substantial
amounts of its indebtedness and would impose other significant obligations on
the Company. Generally, the acquisition by any person or persons other than Mr.
Stanley H. Durwood, his spouse, lineal descendants and their spouses (the
"Durwood Family"), any affiliate controlled by the Durwood Family or any trust
solely for the benefit of one or more members of the Durwood Family of
beneficial ownership of capital stock of the Company representing a majority of
the voting power of the Company's capital stock ordinarily having the right to
vote in the election of directors would constitute a "change of control" under
the Credit Facility and under the Indentures. A "change of control" will be an
event of default under the Credit Facility. In addition, upon the occurrence of
a "change of control," the Company would be required to make an offer to
purchase all the Notes; however, the Credit Facility prohibits the purchase of
the Notes by the Company in the event of a "change of control." The inability to
repay indebtedness under the Credit Facility, if accelerated, or to purchase all
of the tendered Notes, would also constitute an event of default under the
Indentures, which would have certain adverse consequences to the Company and
holders of the Convertible Preferred.
A Change of Control of, or a Fundamental Change (each as defined herein) to,
the Company would also give holders of the Convertible Preferred a right to
convert their shares into a greater number of shares of Common Stock. See
"Description of Capital Stock -- Convertible Preferred -- Special Conversion
Rights."
Under AMCE's Certificate of Incorporation, holders of Class B Stock and
Common Stock generally vote as a class, with each share of Common Stock being
entitled to one vote per share and each share of Class B Stock being entitled to
ten votes per share. As a result of the provisions of the Certificate of
Incorporation and the ownership of the Company, no change of control requiring
stockholder approval is possible without the consent of DI, which owns all the
Class B Stock, and Mr. Stanley H. Durwood, who controls DI.
MARKET FOR CONVERTIBLE PREFERRED STOCK
There has been no public market for the Convertible Preferred prior to this
Offering. Due to the absence of any prior public market for the Convertible
Preferred, there can be no assurance that the initial public offering price will
correspond to the price at which the Convertible Preferred will trade in the
public market subsequent to this Offering. Application has been made to list the
Convertible Preferred on AMEX. Prices for the Convertible Preferred will be
determined in the marketplace and may be influenced by many factors, including
the liquidity of the market for the Convertible Preferred, investor perceptions
of the Company, the market price of the Common Stock and general industry and
economic conditions. The Common Stock into which the Convertible Preferred is
convertible is listed and traded on AMEX and the Pacific Stock Exchange.
11
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of this Offering, AMCE will have approximately 5,262,830
shares of Common Stock outstanding and 11,157,000 shares of Class B Stock
outstanding, which are convertible into a like number of shares of Common Stock.
Of the shares of Common Stock outstanding or issuable upon conversion of the
Class B Stock, approximately 2,573,151 are freely tradeable without restriction
or registration under the Securities Act. All of the remaining shares of Common
Stock are either held by affiliates or are "restricted securities," as that term
is defined in Rule 144 promulgated under the Securities Act, all of which are
presently eligible for sale (subject to any applicable volume restrictions of
Rule 144). Additional shares of Common Stock, including shares issuable upon
exercise of options and warrants, will also become eligible for sale in the
public market from time to time. However, holders of substantially all of the
restricted shares have agreed not to sell any of their shares of Common Stock
for a period of 90 days from the date of this Prospectus without the prior
written consent of the Underwriters. Following this Offering, sales of
substantial amounts of AMCE's Common Stock in the public market pursuant to Rule
144 or otherwise, or even the potential of such sales, could adversely affect
the prevailing market price of the Common Stock and impair AMCE's ability to
raise additional capital through the sale of equity securities.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Convertible Preferred
are estimated to be approximately $96 million (assuming the Underwriters'
over-allotment option is not exercised). The Company intends to use such
proceeds (i) to improve its domestic theatre circuit through the construction of
new theatres, the addition of screens at, or remodeling of, existing theatres
and the acquisition of existing theatres from other circuits, (ii) to finance
the construction or acquisition of theatres in foreign markets, (iii) to
repurchase and retire a portion of the Notes pursuant to open market or
privately negotiated purchases or otherwise and (iv) for general corporate
purposes. Such new theatres and screens may be acquired pursuant to lease
agreements or through acquisition of fee ownership and may be constructed by the
Company on a stand-alone basis or through partnerships or other arrangements
with third parties. The Company's determination to acquire Notes will depend on
many factors, including factors beyond its control such as prevailing market
prices for the Notes, and may be subject to limitations in the Indentures and
other debt instruments to which it is a party. The Company has made no
determination as to the amount of proceeds that will be allocated to any of the
foregoing purposes. However, the Company expects that no more than a nominal
amount, if any, of the proceeds would be used for general corporate purposes and
that substantially all of the proceeds will be used for the other purposes
identified above.
The actual number of screens the Company may build or acquire with proceeds
of the Offering or otherwise will depend on a number of factors, including
geographic location, whether the Company acquires fee, as opposed to leasehold,
interests in the theatres and theatre sites and the availability of development
partners or other outside financing sources. Presently the Company is not
engaged in discussions with any person respecting the possible acquisition of
existing theatres or theatre circuits, and there can be no assurances that any
acquisition will occur. Pending their use for the purposes set forth above, the
Company will invest the net proceeds of the Offering in interest-bearing
instruments or other securities.
12
<PAGE>
DIVIDENDS AND PRICE RANGE OF COMMON STOCK
AMCE's Common Stock is listed on the American and Pacific Stock Exchanges
under the symbol AEN. The Convertible Preferred has been approved for listing on
the AMEX, subject to official notice of issuance, under the symbol AEN.Pr. The
table below sets forth, for the periods indicated, the high and low closing
prices of the Common Stock as reported on the AMEX composite tape.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
--------------------
HIGH LOW
--------- ---------
<S> <C> <C>
Year Ended April 2, 1992:
1st Quarter............................................................................ $ 6 3/4 $ 5 1/4
2nd Quarter............................................................................ 6 5
3rd Quarter............................................................................ 5 1/8 4
4th Quarter............................................................................ 5 4 1/8
Year Ended April 1, 1993:
1st Quarter............................................................................ $ 7 1/4 $ 4 3/8
2nd Quarter............................................................................ 7 1/8 4 5/8
3rd Quarter............................................................................ 6 1/2 4 1/8
4th Quarter............................................................................ 8 3/4 5 7/8
Year Ending March 31, 1994:
1st Quarter............................................................................ $ 9 3/4 $ 7 3/8
2nd Quarter............................................................................ 13 9 1/4
3rd Quarter............................................................................ 14 7/8 12 3/8
4th Quarter through February 17, 1994.................................................. 13 1/2 12 1/4
</TABLE>
On February 17, 1994, the reported last sale price of the Common Stock on
AMEX was $12 1/4. As of February 1, 1994, there were 484 holders of record of
Common Stock.
AMCE's Certificate of Incorporation provides that holders of Common Stock
and Class B Stock shall receive, pro rata per share, such cash dividends as may
be declared from time to time by the Board of Directors. Except for a $1.14 per
share dividend declared in connection with a recapitalization that occurred in
August 1992, AMCE has not declared a dividend on shares of Common Stock since
fiscal 1989. Any payment of cash dividends on the Common Stock in the future
will be at the discretion of the Board of Directors and will depend upon such
factors as earnings levels, capital requirements, the Company's financial
condition and other factors deemed relevant by its Board of Directors.
Currently, AMCE does not contemplate declaring or paying any dividends on the
Common Stock.
AMCE's ability to pay cash dividends on the Common Stock, Class B Stock and
Convertible Preferred is restricted under both the terms of the Credit Facility
and the Indentures. The Credit Facility limits the amount of cash dividends
which AMCE may pay during its term to the lesser of (i) $10 million or (ii) $5
million plus 25% of cash flow, as defined in the Credit Facility, over the term
of the Credit Facility, in each case less capital expenditures outside of the
United States. If AMCE is unable to amend its Credit Facility to permit the
payment of dividends on the Convertible Preferred, it will terminate the Credit
Facility. The terms of the Indentures restrict AMCE's ability to pay cash
dividends by requiring that such dividends and other "restricted payments"
(which term includes, as long as the Company's Senior Notes due 2000 are
outstanding, any repurchase prior to maturity of the Company's Senior
Subordinated Notes due 2002) generally not exceed the sum of 25% of cash flow
plus net proceeds of certain capital contributions and sales of capital stock
received, after August 12, 1992. The amount available under the restriction on
payments of cash dividends under the Indentures was approximately $9.8 million
as of December 30, 1993. After giving effect to the Offering, such amount would
be increased by approximately $96 million.
13
<PAGE>
CAPITALIZATION
The following table sets forth the total capitalization of the Company
(including short-term debt) as of December 30, 1993 and as adjusted to reflect
the Offering (assuming no exercise of the Underwriters' over-allotment option
and assuming none of the proceeds are used to purchase Notes). This table should
be read in conjunction with the Company's Consolidated Financial Statements
included elsewhere in the Prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 30, 1993(1)
--------------------------
AS
ACTUAL ADJUSTED
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt (including current portion of
long-term debt).................................. $ 2,519 $ 2,519
Long-term debt.................................... 266,291 266,291
Stockholders' equity
Convertible Preferred Stock, par value
66 2/3 CENTS per share, 10,000,000 shares
authorized at December 30, 1993; 0 shares
issued at December 30, 1993; 4,000,000 shares
issued as adjusted (aggregate liquidation value
of $100,000,000)............................... -- 2,667
Common Stock, par value 66 2/3 CENTS per share,
45,000,000 shares authorized at December 30,
1993; 4,684,130 shares issued and outstanding
(2)(3)......................................... 3,123 3,123
Class B Stock, par value 66 2/3 CENTS per share,
30,000,000 shares authorized at December 30,
1993; 11,730,000 shares issued and outstanding
(3)............................................ 7,820 7,820
Additional paid-in capital...................... 13,979 107,312
Retained earnings............................... 7,044 7,044
---------- ----------
Total stockholders' equity.................... 31,966 127,966
---------- ----------
Total capitalization.......................... $ 300,776 $ 396,776
---------- ----------
---------- ----------
<FN>
- ------------------------
(1) For information concerning the Company's commitments and contingencies, see
"Business -- Legal Proceedings" and Note 11 of the Company's "Notes to
Consolidated Financial Statements for the Fiscal Year ended April 1, 1993"
and Note 5 of the Company's "Notes to Consolidated Financial Statements for
the thirty-nine weeks ended December 30, 1993" included elsewhere in this
Prospectus.
(2) Does not include shares of Common Stock issuable upon the conversion of
Convertible Preferred or 11,730,000 shares reserved for issuance upon
conversion of the Class B Stock or 823,000 shares reserved for issuance upon
the exercise of outstanding employee stock options.
(3) On January 24, 1994, DI converted 573,000 shares of Class B Stock for a like
number of shares of Common Stock.
</TABLE>
14
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected data regarding the Company's five
most recent fiscal years and the interim periods ended December 30, 1993 and
December 31, 1992. The historical financial information for each of the fiscal
years specified below has been derived from the Company's consolidated financial
statements for such periods. The consolidated financial statements for the
fiscal year ended April 1, 1993 have been audited by Coopers & Lybrand, and
those for fiscal years ended April 2, 1992 and March 28, 1991 have been audited
by Deloitte & Touche, each independent certified public accountants, as
indicated in their respective reports thereon which appear elsewhere herein. The
unaudited pro forma financial information of the Company as of and for the
fiscal year ended April 1, 1993 and for the interim periods ended December 30,
1993 and December 31, 1992 has been adjusted to give effect to the acquisition
of EEP as set forth below in footnote 1. Such pro forma information does not
purport to represent what the Company's results of operations would have been
had the acquisition of EEP occurred on the dates presented or to project the
Company's financial position or results of operations for any future period. The
historical financial data set forth below is qualified in its entirety by
reference to the Company's Consolidated Financial Statements and the Notes
thereto included elsewhere in this Prospectus. The historical and pro forma
financial data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Consolidated Financial Statements and the Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED(2)
----------------------------------------------------------------
PRO FORMA(1) ACTUAL
------------------------------ ------------------------------
DECEMBER 30, DECEMBER 31, DECEMBER 30, DECEMBER 31,
1993 1992 1993 1992
------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total revenues (3)........................................ $ 447,958 $ 412,177 $ 447,958 $ 306,130
Total cost of operations.................................. 345,342 323,082 345,388 235,350
Depreciation and amortization............................. 28,825 29,203 29,151 21,086
General and administrative expenses....................... 27,957 26,280 27,957 26,088
Estimated loss on future dispositions..................... -- 2,500 -- 2,500
------------- ------------- ------------- -------------
Operating income.......................................... 45,834 31,112 45,462 21,106
Interest expense (4)...................................... 27,546 26,579 27,616 23,161
Investment income (5)..................................... 1,493 88 3,252 6,485
Gain (loss) on disposition of assets (6).................. (79) 9,590 (79) 9,640
Income tax provision (7).................................. 8,100 5,000 8,500 5,000
------------- ------------- ------------- -------------
Earnings before extraordinary items....................... 11,602 9,211 12,519 9,070
Extraordinary items (8)................................... -- (6,483) -- (6,483)
------------- ------------- ------------- -------------
Net earnings.............................................. $ 11,602 $ 2,728 $ 12,519 $ 2,587
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Earnings per share........................................ $ 0.71 $ 0.15 $ 0.76 $ 0.14
Common dividends per share (9)............................ -- 1.14 -- 1.14
Weighted average number of shares outstanding............. 16,452 16,195 16,452 16,195
Ratio of earnings to fixed charges and preferred stock 1.47 1.35 1.50 1.36
dividends (10)...........................................
BALANCE SHEET DATA
Cash, cash equivalents and investments.................... N/A N/A $ 58,518 $ 50,373
Total debt (including capitalized lease obligations)...... N/A N/A 268,810 253,888
Stockholders' equity...................................... N/A N/A 31,966 19,495
Total assets.............................................. N/A N/A 407,611 379,112
OTHER DATA
EBITDA (11)............................................... $ 74,659 $ 62,815 $ 74,613 $ 44,692
Property acquisitions (excluding property under 8,757 10,910 6,707 7,200
capitalized lease obligations)...........................
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED (2)
--------------------------------------------------------------------------
PRO FORMA
APRIL 1, APRIL 1, APRIL 2, MARCH 28, MARCH 29, MARCH 31,
1993(1) 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total revenues (3).............................. $543,340 $ 404,465 $ 406,964 $ 446,351 $ 416,994 $ 457,508
Total cost of operations........................ 426,012 310,835 325,901 358,770 335,829 382,074
Depreciation and amortization................... 38,597 28,175 31,385 32,572 31,532 38,360
General and administrative expenses............. 36,915 36,285 37,885 34,532 30,406 29,001
Estimated loss on future dispositions of 2,500 2,500 3,000 2,100 1,600 1,100
assets.........................................
--------- --------- --------- --------- --------- ---------
Operating income................................ 39,316 26,670 8,793 18,377 17,627 7,964
Interest expense (4)............................ 35,969 31,401 30,035 35,940 48,502 45,769
Investment income (5)........................... 325 8,239 8,502 13,441 8,159 3,087
Gain (loss) on disposition of assets (6)........ 9,590 9,638 8,721 6,649 14,628 24,670
Income tax provision (7)........................ 5,400 5,400 1,500 1,960 9,050 (3,709)
--------- --------- --------- --------- --------- ---------
Earnings (loss) before extraordinary items...... 7,862 7,746 (5,519) 567 (17,138) (6,339)
Extraordinary items (8)......................... (6,483) (6,483) -- 500 -- --
--------- --------- --------- --------- --------- ---------
Net earnings (loss)............................. $ 1,379 $ 1,263 $ (5,519) $ 1,067 $ (17,138) $ (6,339)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Earnings (loss) per share....................... $ 0.07 $ 0.06 $ (0.39) $ 0.02 $ (1.11) $ (0.55)
Common dividends per share (9).................. 1.14 1.14 -- -- -- 0.03
Weighted average number of shares outstanding... 16,217 16,217 16,088 16,129 16,001 15,896
Ratio of earnings to fixed charges and preferred 1.24 1.25 -- 1.01 -- --
stock dividends (10)...........................
BALANCE SHEET DATA
Cash, cash equivalents and investments.......... N/A $ 50,106 $ 36,823 $ 46,554 $ 41,911 $ 31,937
Total debt (including capitalized lease N/A 255,302 240,231 263,160 258,373 258,535
obligations)...................................
Stockholders' equity............................ N/A 18,171 39,869 46,088 45,581 62,782
Total assets.................................... N/A 374,102 377,699 439,488 457,736 466,154
OTHER DATA
EBITDA (11)..................................... $ 80,413 $ 57,345 $ 43,178 $ 53,049 $ 50,759 $ 46,433
Property acquisitions (excluding property under 13,249 8,821 21,520 20,227 18,075 78,832
capitalized lease obligations).................
<FN>
- ------------------------
(1) The pro forma Statement of Operations Data for the fiscal year ended April
1, 1993, and the thirty-nine week periods ended December 30, 1993 and
December 31, 1992 give effect to the acquisition of EEP as if the
acquisition had occurred at the beginning of the period. The pro forma
adjustments are based upon available information and certain assumptions
that management believes are reasonable. The adjustments to the historical
data are as follows:
(a) Property and intangible assets of EEP were reduced for pro forma
purposes to reflect the push down of the carrying value of EEP with
depreciation and amortization expense similarly reduced.
(b) Financing costs of the $30,000,000 borrowed for the EEP acquisition was
assumed for pro forma purposes at an annual interest rate of 7.25%.
(c) Interest income was reduced upon the use of $24,500,000 in cash at an
assumed annual rate of 4.42%.
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
(2) Effective at the beginning of fiscal 1990 (i.e., the fiscal year ended
March 29, 1990), the Company adopted a 52/53 week year. The fiscal year
ended April 2, 1992 consisted of 53 weeks, while the fiscal years ended
April 1, 1993, March 28, 1991 and March 29, 1990 consisted of 52 weeks.
(3) During fiscal 1989, the Company sold 55 theatres with 375 screens to TPIE
and sold its theatres in the United Kingdom. These operations contributed
approximately $105,000,000 to total revenues in fiscal 1989. During fiscal
1992, the Company acquired a 50% general partnership interest in the screens
previously sold to TPIE. During fiscal 1994, the Company acquired the
remaining 50% interest in the partnership.
(4) Interest expense for fiscal 1990 includes $14,331,000 of interest with
respect to an IRS settlement.
(5) Includes interest income consisting of interest (plus accretion of original
issue discount) on the subordinated notes of a partnership in which the
Company had a 50% interest from April 19, 1991 until May 28, 1993 and
interest on cash deposits and cash equivalents. Investment income also
includes, for various periods, dividend income, equity in earnings of
partnerships and income (loss) from sale of securities.
(6) Includes the following gains upon the disposition of assets: (i)
approximately $25,000,000 in fiscal 1989 from the sale of the Company's
United Kingdom operations; (ii) $7,300,000 in fiscal 1990 from the sale of
five theatres to Act III Inner Loop Theatres, Inc.; (iii) $8,200,000 in
fiscal 1992 from the sale of eight theatres to Carmike Cinemas, Inc. and
(iv) $9,900,000 in fiscal 1993 from the sale of five theatres to Carmike
Cinemas, Inc. In addition, the Company sold a total of 56 theatres in fiscal
1989 and fiscal 1991 to TPIE and, because of the Company's relationship with
TPIE and other factors, the net gain of approximately $70,000,000 was
deferred. Prior to the Company's acquisition of a partnership interest in
the theatres sold to TPIE, the deferred gain was being amortized on the
straight-line method over an average life of approximately 11 years.
Following the Company's acquisition of a 50% partnership interest in EEP,
one-half of the then unamortized deferred gain was applied as a reduction in
the Company's investment in the partnership. After the Company acquired the
remaining partnership interest in EEP, the then unamortized deferred gain
was applied as a reduction to the property and intangible assets acquired.
(7) As of April 1, 1993, the Company had an investment tax credit carryforward
of $2,038,000 available, which expires in 2003. See Note 7 of the Company's
"Notes to Consolidated Financial Statements for the Fiscal Year ended April
1, 1993."
(8) During fiscal 1993, the Company incurred extraordinary charges, due to a
debt restructuring, in the amount of $10,283,000 before an associated income
tax benefit of $3,800,000. From fiscal 1991, the Company recognized an
income tax benefit of $500,000 upon the utilization of a net operating loss
carryforward.
(9) The dividend of $1.14 per share was a special dividend paid in connection
with a recapitalization of the Company which occurred in August 1992. See
Note 6 of the Company's "Notes to Consolidated Financial Statements for the
Fiscal Year ended April 1, 1993."
(10) The Company had a deficiency of earnings to fixed charges and preferred
stock dividends for each of fiscal years 1989, 1990 and 1992 of $13,492,000,
$8,078,000 and $3,632,000, respectively. For purposes of computing this
ratio, earnings consist of income (loss) before taxes, plus fixed charges
(excluding capitalized interest). Fixed charges consist of interest expense,
amortization of debt issuance costs, and one-third of fixed minimum rental
expense on operating leases, estimated by the Company to be representative
of the interest factor attributable to rental expense. For the fiscal years
ended April 2, 1992 and April 1, 1993, fixed charges include $7,439,000 and
$7,731,000, respectively, for the Company's share (50%) of the fixed charges
of EEP.
(11) Represents operating income plus depreciation and amortization plus
estimated loss on future disposition of assets. EBITDA is a financial
measure commonly used in the Company's industry and should not be construed
as an alternative to operating income (as determined in accordance with
GAAP), an indicator of operating performance, an alternative to cash flows
from operating activities (as determined in accordance with GAAP) or a
measure of liquidity. EBITDA for fiscal 1989 includes the results from the
Company's theatre circuit in the United Kingdom which was sold in fiscal
1989. Excluding such theatres from the calculation of EBITDA in fiscal 1989
results in an EBITDA of $53,489,000 for that year.
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's revenues are derived principally from box office admissions
and theatre concession sales. Additional revenues are derived from other sources
such as on-screen advertising and license fees from electronic video games in
theatre lobbies. The Company's principal costs of operations are film rentals
and advertising costs, payroll, costs of concessions, occupancy costs, such as
theatre rentals and utilities, and other expenses such as insurance.
Set forth below is a summary of operating revenues and expenses for the
thirty-nine week periods ended December 30, 1993 and December 31, 1992. In
addition, revenues and expenses are presented on a pro forma basis as if EEP
were consolidated for the thirty-nine week periods ended December 30, 1993 and
December 31, 1992.
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED THIRTY-NINE WEEKS ENDED
DECEMBER 30, 1993 DECEMBER 31, 1992
--------------------------------------------- ---------------------------------------------
PRO % OF TOTAL % OF TOTAL PRO % OF TOTAL % OF TOTAL
FORMA REVENUES ACTUAL REVENUES FORMA REVENUES ACTUAL REVENUES
-------- ---------- -------- ---------- -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Admissions....................... $297,647 67% $297,647 67% $277,865 68% $201,652 66%
Concessions...................... 134,773 30 134,773 30 121,006 29 87,117 29
Management fee income............ 210 -- 210 -- 193 -- 7,183 2
Other............................ 15,328 3 15,328 3 13,113 3 10,178 3
-------- --- -------- --- -------- --- -------- ---
TOTAL.......................... $447,958 100% $447,958 100% $412,177 100% $306,130 100%
-------- --- -------- --- -------- --- -------- ---
-------- --- -------- --- -------- --- -------- ---
COST OF OPERATIONS
Film rentals..................... $154,910 35% $154,910 35% $146,578 35% $105,793 35%
Advertising...................... 13,912 3 13,912 3 13,486 3 9,705 3
Payroll & related expenses....... 61,247 14 61,247 14 58,184 14 43,703 14
Occupancy costs.................. 66,226 15 66,226 15 61,860 15 44,120 14
Concession merchandise........... 20,004 4 20,004 4 18,945 5 13,813 5
Other............................ 29,043 6 29,089 6 24,029 6 18,216 6
-------- --- -------- --- -------- --- -------- ---
TOTAL.......................... $345,342 77% $345,388 77% $323,082 78% $235,350 77%
-------- --- -------- --- -------- --- -------- ---
-------- --- -------- --- -------- --- -------- ---
</TABLE>
18
<PAGE>
Set forth below is a summary of operating revenues and expenses for the last
three fiscal years. In addition, revenues and expenses are presented on a pro
forma basis as if EEP were consolidated for fiscal 1993.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED
FISCAL YEAR ENDED APRIL 1, 1993 APRIL 2, 1992 MARCH 28, 1991
--------------------------------------------- --------------------- ---------------------
PRO % OF TOTAL % OF TOTAL % OF TOTAL % OF TOTAL
FORMA REVENUES ACTUAL REVENUES ACTUAL REVENUES ACTUAL REVENUES
-------- ---------- -------- ---------- -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Admissions............... $365,906 69% $265,766 66% $272,960 67% $303,324 68%
Concessions.............. 159,089 29 114,809 28 114,207 28 121,495 27
Management fee income.... 478 -- 9,342 2 6,502 2 7,633 2
Other.................... 17,867 3 14,548 4 13,295 3 13,899 3
-------- --- -------- --- -------- --- -------- ---
TOTAL.................. $543,340 100% $404,465 100% $406,964 100% $446,351 100%
-------- --- -------- --- -------- --- -------- ---
-------- --- -------- --- -------- --- -------- ---
COST OF OPERATIONS
Film rentals............. $190,136 35% $137,613 34% $138,511 34% $163,311 37%
Advertising.............. 17,860 3 12,786 3 17,123 4 18,065 4
Payroll & related
expenses................ 76,447 14 57,497 14 62,532 15 65,116 14
Occupancy costs.......... 83,028 15 58,878 15 59,438 15 59,253 13
Concession merchandise... 24,046 5 17,522 4 18,288 5 20,368 5
Other.................... 34,495 6 26,539 7 30,009 7 32,657 7
-------- --- -------- --- -------- --- -------- ---
TOTAL.................. $426,012 78% $310,835 77% $325,901 80% $358,770 80%
-------- --- -------- --- -------- --- -------- ---
-------- --- -------- --- -------- --- -------- ---
</TABLE>
OPERATING RESULTS
THIRTY-NINE WEEKS ENDED DECEMBER 30, 1993 COMPARED TO THIRTY-NINE WEEKS
ENDED DECEMBER 31, 1992.
Total revenues for the thirty-nine weeks ended December 30, 1993 increased
$141,828,000, or 46.3%, from $306,130,000 for the prior period ended December
31, 1992 to $447,958,000 in the current period. After giving pro forma effect to
the consolidation of EEP for the prior period, total revenues increased by
$35,781,000, or 8.9%, from $412,177,000. Revenue increases after the pro forma
effect of EEP for the first three quarters of fiscal 1993 included increases in
admissions of $19,782,000, concessions of $13,767,000, and management fees and
other of $2,232,000. Compared to the prior period including EEP theatre
operations, attendance increased approximately 8.5%, the average ticket price
decreased 1.3%, or $.05, and concession revenues per patron increased 2.5%, or
$.04.
Cost of operations increased by $110,038,000, or 46.8%, in the thirty-nine
weeks ended December 30, 1993 from $235,350,000 in the comparable period of the
prior fiscal year to $345,388,000 in the current period. After giving pro forma
effect to the consolidation of EEP for the prior period, total cost of
operations increased by $22,023,000, or 6.8%, from $323,365,000. Including EEP
theatres for the prior period, film rental expense increased $8,332,000 in the
current period, $10,436,000 due to higher volumes offset by a decrease in
expense of $2,104,000 due to a decrease in the percentage of admissions paid to
distributors. Concession costs increased $1,059,000, or 5.6%, in the current
period after including EEP operations for the prior year. Payroll and related
costs increased 5.3%, or $3,063,000 for the thirty-nine weeks ended December 30,
1993 compared to the prior period (including EEP operations).
The Company's operating income for the first three quarters of fiscal 1994
increased $24,356,000 to $45,462,000 from $21,106,000 for the comparable period
in the prior year. After giving pro forma effect to the consolidation of EEP for
the prior period, operating income increased by approximately $15,814,000 from
$29,648,000. The increase in operating income is due primarily to increased
attendance and to a decrease in "direct operating expenses" (cost of operations
excluding film rentals, theatre rentals and taxes, license fees and insurance)
per patron. On a per patron basis, direct operating expenses decreased 2.5% from
$1.58 in the prior year to $1.54 at December 30, 1993.
19
<PAGE>
Substantially all of the management fee income earned in fiscal 1993 was
from the Company's management agreement with EEP. For fiscal 1994, the Company
does not report management fees from EEP theatres in its Consolidated Financial
Statements.
General and administrative expenses increased $1,869,000 in the thirty-nine
weeks ended December 30, 1993 to $27,957,000 from $26,088,000. This increase was
primarily the result of the provision for bonuses to corporate, division and
film office associates under a management incentive program, together with an
increase of $1,686,000 in connection with the Company's exploration of
international opportunities which began in September 1992. Increases in general
and administrative expenses would have been higher but for a charge recorded in
the first quarter of the prior fiscal year of $750,000 in connection with the
consolidation of two operating divisions and savings realized in fiscal 1994
from the division consolidation, in addition to other corporate office expense
reductions, primarily legal and professional expenses.
Interest expense was $27,616,000 in the first three quarters of fiscal 1994,
an increase of $4,455,000, or 19.2%, from the comparable period of fiscal 1993.
The increase consisted of a $2,601,000 increase in interest expense associated
with corporate borrowings and a $1,854,000 increase in capitalized lease
interest. Excluding the effect of the EEP acquisition in fiscal 1994, interest
expense increased by $2,000,000, primarily as the result of the debt
restructuring in the second quarter of fiscal 1993.
Investment income decreased $4,832,000 to 1,653,000 in the first three
quarters of fiscal 1994 from $6,485,000 in the previous fiscal year. Fiscal 1993
included equity in earnings of EEP of $1,676,000. For fiscal 1994, EEP revenues
and expenses are consolidated as of the beginning of the fiscal year. Interest
income decreased $3,747,000 to $1,388,000 in the first two quarters of fiscal
1994 from the comparable period of fiscal 1993, primarily due to the elimination
of interest income from EEP.
Minority interest reported in the first three quarters of fiscal 1994 in the
amount of $1,599,000 represents TPIE's share of the EEP operating loss from
April 2, 1993 to May 27, 1993, prior to the Company's acquisition of TPIE's
partnership interest. Included in the results for fiscal 1993 is a net gain on
the disposition of assets of $9,640,000, primarily from the sale of five
theatres with 32 screens to Carmike Cinemas, Inc.
Due to the debt restructuring in the second quarter of fiscal 1993, the
Company incurred extraordinary charges in the amount of $10,283,000, before tax.
These charges included redemption premiums on then outstanding debentures and
the write-off of deferred charges relating to such debentures and a prior credit
facility. The income tax benefit derived from this charge was $3,800,000,
resulting in a net extraordinary item charge of $6,483,000, or $.40 per share.
For the thirty-nine weeks ended December 30, 1993, the Company recorded
earnings before income taxes and extraordinary item of $21,019,000, in
comparison to earnings of $14,070,000 in the comparable period of the prior
year. After income taxes and extraordinary items, the Company recorded earnings
of $12,519,000, or $.76 per share, compared to earnings of $2,587,000, or $.14
per share, for the thirty-nine weeks ended December 31, 1992. Excluding gains
and losses on disposition of assets, the Company recorded earnings prior to
income taxes and extraordinary item of $21,098,000 for the thirty-nine weeks
ended December 30, 1993, compared to earnings in the previous year of
$4,430,000. The improved earnings of the Company are primarily due to increased
attendance and the acquisition of the remaining one-half share of EEP on May 28,
1993.
Total revenues for the thirteen weeks ended December 30, 1993 increased
25.7% to $132,589,000, compared to $105,492,000 in the prior year. Earnings for
the thirteen weeks decreased 74.7% to $772,000 from $3,054,000 for the prior
year. After giving pro forma effect to the consolidation of EEP for the thirteen
weeks ended December 31, 1992, admissions decreased $8,517,000, or 8.9%, while
concessions decreased $1,985,000, or 4.87%. The decrease in the third quarter is
largely due to decreased attendance and a decrease in the average ticket price
resulting in a decline in admissions of $6,078,000 and $2,439,000, respectively.
20
<PAGE>
FISCAL YEAR ENDED APRIL 1, 1993 (FISCAL 1993) COMPARED TO FISCAL YEAR ENDED
APRIL 2, 1992 (FISCAL 1992).
Total revenues of the Company for fiscal 1993 were approximately
$404,465,000, representing a decline from fiscal 1992 of $2,499,000, or 0.6%.
Fiscal 1992 included 53 weeks versus 52 weeks in fiscal 1993. Excluding revenues
produced in the fifty-third week of fiscal 1992, total revenues increased in the
1993 fiscal year $5,386,000, or 1.3%. Theatre revenues per screen from owned
theatres increased 2.2%, or $7,399, in fiscal 1993 in spite of a decrease in the
average ticket price of $.03. Concession revenue increased in fiscal 1993 $.03
per patron to $1.59 versus $1.56 in the prior period.
Substantially all of the management fees earned in fiscal 1993 were from the
Company's management agreement with EEP. Management fee income increased 43.7%
in fiscal 1993, or $2,840,000, to $9,342,000 from $6,502,000. The incentive
management fee (see Note 4 of the Company's "Notes to Consolidated Financial
Statements for the Fiscal Year ended April 1, 1993") was earned in fiscal 1993,
producing $1,830,000 in additional revenues. In the prior fiscal year, the
required level of earnings was not met to earn the incentive fee. The remainder
of the increase in management fee income was the result of improved revenues at
EEP theatre locations.
Cost of operations decreased $15,066,000, or 4.6%, in fiscal 1993 to
$310,835,000 from $325,901,000 in the prior period. The major areas of
improvement were in advertising expense and payroll related expenses. The
decline in expense is primarily due to a cost cutting effort implemented in the
third quarter of fiscal 1992. Direct operating expense decreased 9.0%, from
$1.99 to $1.81 per patron in fiscal 1993.
General and administrative expenses decreased $1,600,000, or 4.2%, from
$37,885,000 in fiscal 1992 to $36,285,000 in fiscal 1993. This decrease occurred
notwithstanding the fact that the Company assumed the responsibilities of AMC
Entertainment International, Inc., effective September 4, 1992, which resulted
in expenses of approximately $1,582,000 in fiscal 1993. In addition, during
fiscal year 1992, the Company incurred a one-time charge in the amount of
$750,000 relating to the consolidation of two divisions. Excluding the expenses
referred to above, general and administrative expense decreased $3,932,000, or
10.4%. This improvement is the result of a cost reduction program which resulted
in decreased legal and professional fees of approximately $1,200,000, decreased
research and development costs of $650,000 and miscellaneous other reductions.
Interest expense increased $1,366,000, or 4.5%, in fiscal 1993 from
$30,035,000 in fiscal 1992 to $31,401,000. Interest relating to corporate
borrowings increased $1,795,000, which was offset by a decrease in capital lease
interest of $429,000. The increase in interest expense associated with corporate
borrowings is the result of a recapitalization that was completed in the second
quarter of fiscal 1993 which raised outstanding debt by approximately
$40,000,000. The recapitalization was completed to improve the Company's future
liquidity by increasing the average maturity of its funded debt from 5.1 years
to 9.0 years (as of April 2, 1992).
Investment income decreased $263,000 from $8,502,000 in fiscal 1992 to
$8,239,000 in fiscal 1993. Included in investment income is the Company's equity
in net income of EEP. In fiscal 1993, this amount increased by $1,339,000 to
$1,743,000. Included in fiscal 1992 was a gain of $1,234,000 relating to the
sale of stock held for investment.
Included in the results for fiscal 1993 and fiscal 1992 are gains on
disposition of assets in the amount of $9,638,000 and $8,721,000, respectively.
These gains are primarily the result of theatre sales to Carmike Cinemas, Inc.
In fiscal 1993 and fiscal 1992, the Company recorded $2,500,000 and $3,000,000,
respectively, for estimated losses on future disposition of assets.
Earnings before taxes and extraordinary items were $13,146,000 in fiscal
1993 compared to a loss in fiscal 1992 of $4,019,000. After income taxes and
extraordinary items, net earnings were $1,263,000, or $.06 per share, versus a
loss in the previous year of $5,519,000, or $.39 per share. The improvement in
earnings in fiscal 1993 occurred notwithstanding an extraordinary charge
recorded in the second quarter ended October 1, 1992. The extraordinary charge
in the amount of $10,283,000, before tax, was the result of debt restructuring.
The charge consisted of redemption premiums on the then outstanding debentures
and the
21
<PAGE>
write-off of deferred charges relating to such debentures and a prior credit
facility. The income tax benefit derived from this charge was $3,800,000,
resulting in a net extraordinary item of $6,483,000, or $.40 per share.
FISCAL YEAR ENDED APRIL 2, 1992 (FISCAL 1992) COMPARED TO FISCAL YEAR ENDED
MARCH 28, 1991 (FISCAL 1991).
Total revenues of the Company for fiscal 1992 were approximately
$406,964,000, representing a decline from fiscal 1991 of $39,387,000 or 8.8%.
Fiscal 1992 included 53 weeks versus 52 weeks in fiscal 1991. On a comparable 52
week basis, total revenues decreased by $47,415,000, or 10.6%, from fiscal 1992
to fiscal 1991. This reduction was due primarily to the industry-wide lack of
commercially successful motion pictures. Revenues per screen from owned theatres
in fiscal 1992 were $341,400, compared with $360,491 in fiscal 1991, primarily
because attendance per screen was 5.0% less (or a decrease of 3,258 patrons per
screen) than the comparable period in fiscal 1991. In addition, average ticket
prices fell $.11, or 2.9%, although concession expenditures per patron rose
$.02, or 1.4%, in fiscal 1992 compared to fiscal 1991. The decline in average
ticket prices was due in part to higher percentage attendance at "dollar houses"
and also due to an effort initiated in the fall of 1991 to stimulate attendance
through the selective reduction of ticket prices during non-peak periods (i.e.,
afternoon matinees and "twilite" hours) and revised starting times of movies.
Substantially all of the management fees earned in fiscal 1992 were from the
Company's management agreement with EEP. The Company earned management fees of
$6,502,000 for fiscal 1992, down 14.8% from $7,633,000 in fiscal 1991. The
decrease in management fees is due to lower revenues generated by the managed
theatres.
Cost of operations declined by $32,869,000, or 9.2%, in fiscal 1992 from
$358,770,000 in fiscal 1991. Cost of operations remained fairly constant at
approximately 80% of total revenues during fiscal 1992 and fiscal 1991, despite
decreases in film rent as a percentage of admissions revenue and concession
expense as a percentage of concession revenue in fiscal 1992. These decreases
were offset by increases in occupancy costs, payroll and advertising expenses as
a percentage of total revenues in fiscal 1992.
General and administrative expenses increased by $3,353,000 in fiscal 1992
to $37,885,000, or 9.3% of fiscal 1992 total revenues, from $34,532,000, or 7.7%
of total revenues, in fiscal 1991. The increase can be attributed to legal fees
associated with ongoing legal matters, settlement of a lawsuit and a charge of
approximately $872,000 relating to severance pay upon the resignation of an
executive officer of the Company. General and administrative expenses for the 14
weeks ended April 2, 1992 were $9,463,000 compared to $9,985,000 for the 13 week
period a year earlier, due to the implementation of expense controls during the
third quarter of fiscal 1992. This decrease of $522,000, or 5.2%, occurred
notwithstanding that the fourth quarter of fiscal 1992 exceeded that of fiscal
1991 by one week.
Interest expense was $30,035,000 in fiscal 1992, down by $5,905,000, or
16.4%, from fiscal 1991. The decrease was due primarily to lower rates of
interest on a revolving credit agreement and a reduction in the average
outstanding balance thereunder from $71,000,000 in fiscal 1991 to $53,000,000 in
fiscal 1992. In addition, fiscal 1991 interest expense included a charge of
$1,801,000 of estimated interest relating to an IRS settlement.
Investment income fell by $4,939,000, or 36.7%, to $8,502,000 in fiscal 1992
from $13,441,000 in fiscal 1991 due to lower rates of interest and a reduced
amount of invested funds. Included in both fiscal years was interest income of
approximately $5,000,000 from the EEP subordinated notes. Fiscal 1991 investment
income included approximately $2,400,000 in interest income arising out of the
settlement of litigation concerning the sale of the Company's United Kingdom
assets in fiscal 1989.
Included in results for fiscal 1992 are net gains on disposition of assets
of $8,721,000, primarily from the sale of theatres to Carmike Cinemas, Inc. In
addition, the Company recorded $3,000,000 of estimated losses on future
disposition of assets in fiscal 1992, primarily relating to future lease
obligations, net of subleases, at discontinued fast food locations and closed
theatres, estimated losses on anticipated theatre closings and computer
equipment sold.
22
<PAGE>
For fiscal 1992, the Company recorded a loss before income taxes of
$4,019,000 in comparison to earnings before income taxes of $2,527,000 in fiscal
1991. After income taxes, the Company recorded a net loss of $5,519,000 for
fiscal 1992, compared with net earnings after income taxes and extraordinary
item of $1,067,000 for fiscal 1991. Excluding gains and losses from disposition
of assets, the Company's pre-tax loss from operations was $9,740,000 in fiscal
1992, compared with a loss in fiscal 1991 of $2,022,000.
The accounting treatment accorded the 1989 sale of theatres to TPIE provided
for gain recognition over approximately 11 years. Because of the acquisition in
April 1991 of these same theatres by EEP, in which the Company held a 50%
interest, approximately one-half of the unamortized deferred gain arising from
the 1989 transaction was applied as a reduction in the Company's investment in
EEP, and further periodic recognition of the remaining gain was suspended. For
fiscal 1992, the amount of recognized gain from the 1989 sale was $1,407,000,
compared to recognized gain of $6,585,000 in fiscal 1991. (See Notes 4 and 14 of
the Company's "Notes to Consolidated Financial Statements for the Fiscal Year
ended April 1, 1993".)
In March 1992, AMC entered into a ten-year agreement with Digital Equipment
Corporation ("Digital"), whereby Digital will provide data processing services
for AMC. The cost of Digital's services is $1,200,000 a year, increased by five
percent of the then current annual cost for each year after the first year. As
part of the agreement, Digital purchased all of AMC's existing computer
equipment (except its personal computers) for $600,000. The net book value of
such equipment was approximately $1,100,000; AMC therefore had a charge against
earnings in fiscal 1992 of approximately $500,000 as a result of the sale.
LIQUIDITY, CAPITAL STRUCTURE AND RESOURCES
The Company's revenues are collected in cash, principally through box office
admissions and theatre concession sales. Cash flow from operating activities, as
reflected in the Consolidated Statement of Cash Flows, was $29,062,000,
$18,441,000, and $18,743,000 in fiscal years 1993, 1992 and 1991, respectively,
and $62,125,000 in the first thirty-nine weeks of fiscal 1994, compared with
$26,795,000 in the comparable period of fiscal 1993. The Company has an
operating "float" which partially finances its operations and which permits the
Company to maintain a small amount of working capital capacity. This "float"
exists because admissions revenues are received in cash, while exhibition costs
(primarily film rentals) are ordinarily paid to distributors from 30 to 45 days
following receipt of box office admission revenues and the Company is only
occasionally required to make advance payments or non-refundable guarantees of
film rentals.
In addition to cash and cash equivalents of $58,518,000 at December 30,
1993, the Company had available to it at such date the total commitment amount
under its $40,000,000 Credit Facility. In connection with the acquisition of EEP
on May 28, 1993, the Company borrowed $30,000,000 under the Credit Facility,
which amount was repaid from cash flow from operations by July 28, 1993. Except
for this borrowing, the Company has not utilized the Credit Facility and does
not anticipate that it will need to do so. The Company is required to reduce any
amount outstanding under the Credit Facility to zero for a 60-day consecutive
period each year. The Company has satisfied this requirement for the second
anniversary of the Credit Facility by having no borrowings thereunder during 60
consecutive days following August 10, 1993. As a result, subject to other loan
covenants, any borrowings before August 10, 1994 would not be required to be
paid until June 10, 1995. Under the Credit Facility, the Company and its
subsidiaries generally may not, among other matters, pay cash dividends during
its term in excess of the lesser of (i) $10,000,000 and (ii) $5,000,000 plus 25%
of cash flow, as defined in the Credit Facility, over the term of the Credit
Facility, in each case less capital expenditures outside of the United States.
If the Company is unable to negotiate satisfactory amendments to the Credit
Facility which will permit payment of dividends on the Convertible Preferred, it
intends to terminate the Credit Facility and seek new credit arrangements. The
Credit Facility expires by its terms on August 10, 1995.
The Company estimates that total capital expenditures will be approximately
$15,000,000 in fiscal 1994 (excluding property under capital lease obligations).
Such expenditures include normal maintenance capital expenditures of
approximately 1.5% of revenues and capital expenditures for expansion of the
theatre circuit. Total property acquisitions, including those for refurbishment
of existing theatres and property under capital lease obligations, were
$9,985,000 for the thirty-nine weeks ended December 30, 1993.
23
<PAGE>
The Company believes that opportunities for new theatre openings exist
throughout the United States in areas that are, in the Company's judgment,
inadequately screened. The Company's practice has been to construct new theatres
and screens pursuant to lease agreements. In an effort to reduce costs
associated with leased property, management is exploring the feasibility of
owning versus leasing new theatres. Certain theatres operating under lease
agreements may be purchased if favorable terms can be reached.
An expansion of eight screens at an existing location was completed during
the first thirty-nine weeks of fiscal 1994. Four theatres with twelve screens
were closed in the first thirty-nine weeks of fiscal 1994. The Company has
signed lease agreements for five new theatres with 78 screens and the expansion
of 17 screens at three existing locations scheduled to open at various dates
through the third quarter of fiscal 1997. The estimated minimum rental payments
that may be required over the life of the leases (averaging 20 years) for the
theatres under construction total approximately $94,000,000.
The Company continually monitors the performance of its portfolio of
theatres to determine the best strategy given local and industry-wide
conditions. If an individual theatre's operating margins are unsatisfactory,
management may decide, among other options, to convert the theatre to a "dollar
house," to sell the property (or the lease rights thereto) or to close the
theatre. The closure of a theatre may be coordinated with the opening of a new,
modern AMC theatre complex where the operating margins are expected to be
superior to those of the replaced theatre. The decision to sell or close a
theatre may result in a loss when the carrying value of the property exceeds the
sales price or when a theatre is closed with a remaining lease commitment.
The Indentures contain numerous restrictive covenants that, among other
things, restrict the type and amount of debt that the Company may incur and
impose limitations on the creation of liens, a change of control, transactions
with affiliates, mergers and investments. The Company does not anticipate that
these covenants will materially impede the operation of the Company.
IMPACT OF INFLATION
Historically, the principal impact of inflation and changing prices upon the
Company has been with respect to the construction of new theatres, the purchase
of theatre equipment and the utility and labor costs incurred in connection with
continuing theatre operations. Film rental fees, which are the largest operating
expense incurred by the Company, are customarily paid as a percentage of box
office admission revenues and hence, while the film rental fees may increase on
an absolute basis, the percentages are not directly affected by inflation.
Except as set forth above, for the three years ended April 1, 1993 inflation and
changing prices have not had a significant impact on the Company's total
revenues and results of operations.
24
<PAGE>
BUSINESS
GENERAL
The Company is the third largest motion picture exhibitor in the United
States based on the number of theatre screens operated. Since 1968, when the
Company operated 12 theatres with 22 screens, the Company has expanded its
operations to include 239 theatres with 1,614 screens located in 22 states and
the District of Columbia. Nearly one-half of the screens operated by the Company
are located in Florida, California, Pennsylvania and Texas and approximately 70%
of the Company's screens are located in areas among the 20 largest Areas of
Dominant Influence (television market areas as defined by Arbitron Company).
The Company's revenues are generated primarily from box office admissions
and theatre concession sales, which accounted for 66% and 28%, respectively, of
fiscal 1993 revenues. The balance of the Company's revenues are generated
primarily by on-screen advertising programs and video games located in theatre
lobbies. The Company believes that attendance, revenue and cash flow per screen
at its theatres are among the highest in the industry due to its attractive,
strategically located, multi-screen theatres and innovative marketing programs.
The Company is an industry leader in the development and operation of
multi-screen theatres, primarily in large metropolitan markets. This strategy of
establishing multi-screen theatre complexes enhances attendance and concession
sales by enabling the Company to exhibit concurrently a variety of motion
pictures attractive to different segments of the movie-going public. It also
allows the Company to match a particular motion picture's attendance patterns to
the appropriate auditorium size, thereby extending the run of a motion picture
and maximizing profit. In addition, multi-screen theatre complexes realize
economies of scale by serving more patrons from common support facilities,
thereby enabling the Company to spread costs over a higher revenue base. During
the fiscal year ended April 1, 1993, theatres with ten or more screens had per
patron theatre operating income of $1.18 compared to $1.02 at theatres with less
than ten screens (excluding "dollar houses"). At December 30, 1993,
approximately 28% of the Company's screens were in theatre complexes with ten or
more screens and approximately 87% were located in theatre complexes with six or
more screens. The average number of screens per theatre operated by the Company
is 6.8, which is the highest of the five largest theatre chains in North America
and higher than the industry average of 4.5 based on the most recent data
reported in the National Association of Theatre Owners 1993-1994 Encyclopedia of
Exhibition.
Substantially all of the Company's theatres are leased. The Company
continually upgrades its theatre circuit by opening new theatres, refurbishing
and adding new screens to existing theatres and selectively closing unprofitable
theatres. Since March 1988, approximately 38 of the Company's theatres with 325
screens, representing 20% of its screens, have been opened and approximately $43
million has been spent to modernize and remodel its theatres. The Company
believes that this strategy of maintaining modern multi-screen theatre complexes
enhances its ability to license commercially popular motion pictures.
The Company continually introduces new programs and amenities at its
theatres. The following are examples of developments that are being implemented
in the Company's theatre circuit. MovieWatcher-R- is a frequent moviegoer
program that rewards loyal customers for patronizing AMC theatres nationwide.
Teleticketing allows customers to order tickets in advance by telephone and
purchase them with credit cards. AMC's proprietary High Impact Theatre System
provides a clearer picture and more dynamic sound throughout the auditorium.
Computerized box offices maintain attendance records by title and show time,
allowing the Company to make informed staffing, marketing and motion picture
exhibition decisions.
Motion picture theatres are the primary initial distribution channel for new
motion picture releases and the Company believes that the theatrical success of
a motion picture is the critical factor in establishing the value of the motion
picture in the cable television, videocassette or other ancillary markets.
According to Motion Picture Associates of America, Inc. ("MPAA"), the total
dollars spent on all types of motion picture entertainment in the United States,
including box office admissions, increased from $17.5 billion in 1987 to $26.0
billion in 1992. From 1980 to 1992, domestic box office admissions have
increased from $2.7 billion to $4.9 billion, primarily due to an increase in
average ticket prices throughout this period.
25
<PAGE>
Annual domestic theatre attendance has averaged approximately one billion
persons since the early 1960's. In 1992, annual domestic attendance was 964
million. This stability in attendance has occurred despite substantial growth in
the cable television and videocassette sales and rental businesses. The Company
believes that motion picture theatre attendance has remained stable because
alternative motion picture delivery systems do not provide an experience
comparable to attending a movie in a theatre and variances in year-to-year
attendance are primarily related to the overall popularity and supply of motion
pictures.
Prior to May 28, 1993, 60 of the Company's theatres containing 452 screens
were managed by the Company but owned by EEP, a general partnership in which the
Company had a 50% partnership interest. On May 28, 1993, the Company acquired
the remaining partnership interest in EEP for a purchase price aggregating $17.5
million in cash and the payment of $37 million of bank indebtedness. As a result
of the acquisition and the consolidation of EEP, revenues and EBITDA for the
thirty-nine week period ended December 30, 1993, were $122.0 million and $18.7
million higher, respectively, than they would have been had the Company retained
only a 50% interest in EEP. See Notes 4 and 14 of the Company's "Notes to
Consolidated Financial Statements for the Fiscal Year ended April 1, 1993" and
Note 2 of the Company's "Notes to Consolidated Financial Statements for the
thirty-nine weeks ended December 30, 1993."
GROWTH STRATEGY
The Company intends to expand its domestic theatre circuit by developing new
theatres, increasing the number of screens at existing theatres and possibly by
acquiring existing theatres or circuits from competitors. In addition, the
Company will continue to explore international theatre development in specific
markets.
The Company believes that numerous opportunities for new theatre openings
exist throughout the United States, both in areas of population growth and in
areas of stable population which, in the Company's judgment, are inadequately
served. These markets are attractive either due to a lack of screens relative to
their population or because the existing theatres are not representative of
today's standard multiplex facility design. The Company believes that the best
operating economies are achieved, and the optimal experience for the movie-going
patron is provided, by large theatre facilities of typically 50,000 to 100,000
square feet containing at least 12 screens. A theatre facility of this size
attracts patrons from a larger geographic area and competes effectively against
smaller, less efficient movie theatre complexes that may already exist in a
given market. Although a market may have a sufficient absolute number of screens
based on current population, their scattered configuration and out-dated design
may result in the market being, in the Company's judgment, inadequately served.
Another advantage of the large multiplex facility is that it provides the
Company additional opportunities for prime locations because it can replace a
department store as anchor tenant in a substantial shopping center development.
The Company intends to develop these state-of-the-art theatres at locations
based on retail concentration, access to surface transportation and specific
demographic statistics and trends.
Traditionally, the Company has leased its theatres from real estate
developers. The Company assists the developer in facility design and provides
the developer with a long-term lease to facilitate financing of the project. In
recent years, real estate developers have limited new property development,
primarily due to their financial condition and the availability of financing.
Although the Company believes that most of its new domestic theatres will be
developed through lease arrangements, it will consider developing and owning a
theatre location if it is unable to identify a developer for a specific new
project. In addition to facilitating the development of attractive theatres,
ownership of theatres will allow the Company to obtain the specific sites it
desires and maintain greater control over the development of the projects.
The Company is currently reviewing over 70 potential domestic theatre
locations, and has begun negotiations on 30 sites representing approximately 400
screens. Presently, the Company anticipates that approximately 300 new screens
will be opened or under construction by the end of fiscal 1995, including
approximately 70 screens at 12 existing theatres. However, there can be no
assurance that the Company will finalize negotiations on any of these sites. If
a theatre is operated under a conventional lease arrangement, the Company
typically owns the furniture, fixtures and equipment. The cost per screen to the
Company of a
26
<PAGE>
leased theatre is approximately $150,000, or $3,600,000 for a 24-screen modern
multiplex theatre. If the Company decides to own a theatre in fee, the estimated
cost for a 24-screen modern multiplex theatre will be between $12,000,000 and
$15,000,000, plus the cost of land.
In connection with the development of new theatres and screens, the Company
may participate in the development of "entertainment centers," which would be
destination entertainment complexes anchored by a large multiplex theatre and
containing related leisure time facilities such as casual dining facilities,
sports bars, game rooms, food courts, virtual reality centers, traditional
retail and other similar facilities. The Company anticipates that ultimately it
would retain a minority interest in any such center and would participate in the
initial development and ownership of the center primarily to obtain favorable
theatre lease or acquisition terms.
The United States motion picture exhibition industry is currently
consolidating, with the top ten exhibitors now accounting for approximately 50%
of total screens. However, there remain over 350 participants in the industry
and the Company believes that the trend towards consolidation will afford the
Company the opportunity to acquire both specific theatres or entire circuits.
The Company will consider such acquisitions in order to complement an existing
presence within a market or to enter a new market.
The Company also believes that a significant growth opportunity exists for
the development of multiplex theatres in foreign markets. Many urban areas in
Canada, Mexico, Europe and Asia are substantially under-screened, both in terms
of the absolute number of screens and in the adoption of the multiple screen
theatre format. In addition, the production and distribution of feature films
and the demand for American motion pictures is increasing in many foreign
countries. The Company intends to utilize its experience in the development of
multiplex theatres, as well as its existing relationships with the domestic
motion picture production industry, to enter selected foreign markets. The
Company has opened offices in Toronto, Paris, Mexico City and Hong Kong and is
actively seeking local real estate partners or developers to participate in the
development of these international markets, either through traditional lease
structures, outright fee ownership or the development of entertainment centers.
THEATRE DEVELOPMENT
The following table sets forth information concerning additions and
dispositions of domestic theatres and screens during, and the number of domestic
theatres operated by the Company at the end of, the last five fiscal years and
the thirty-nine weeks ended December 30, 1993.
<TABLE>
<CAPTION>
CHANGES IN THEATRES OPERATED
DURING PERIOD (1)
-----------------------------------------------
TOTAL
ADDITIONS DISPOSITIONS THEATRES OPERATED
---------------------- ---------------------- -----------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF NUMBER OF NUMBER OF
PERIOD ENDED THEATRES SCREENS THEATRES SCREENS THEATRES SCREENS
- ------------------------------------------------------- --------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1989....................................... 32 218 6 25 289 1,690
March 29, 1990....................................... 4 36 17 81 276 1,645
March 28, 1991....................................... 4 47 19 70 261 1,622
April 2, 1992........................................ 7 73 15 78 253 1,617
April 1, 1993........................................ 6 72 16 72 243 1,617
December 30, 1993.................................... 2 15 6 18 239 1,614
-- --
--- ---
Total.............................................. 55 461 79 344
-- --
-- --
--- ---
--- ---
<FN>
- ------------------------
(1) Excludes theatres sold to TPIE in fiscal years 1989 and 1991 referred to
below, all of which the Company continued to manage.
</TABLE>
27
<PAGE>
The Company adds and disposes of theatres based on industry conditions and
its business strategy. Since the beginning of fiscal 1989, the Company has
constructed 38 new theatres having 325 screens, added 54 screens to existing
theatres, closed 54 theatres with 189 screens and sold 24 theatres with 153
screens. An additional 56 theatres with 383 screens were sold to TPIE in fiscal
1989 and fiscal 1991. These sales enabled the Company to strengthen its
financial condition. The theatres sold to TPIE were subsequently acquired by
EEP, which was acquired by the Company in May 1993.
The following table provides greater detail with respect to the Company's
theatre circuit as of December 30, 1993.
<TABLE>
<CAPTION>
SCREENS PER
THEATRE
TOTAL TOTAL ----------------
STATE SCREENS THEATRES 1-5 6-9 10 +
- --------------------------------------- ------- -------- --- --- ----
<S> <C> <C> <C> <C> <C>
Florida................................ 298 40 6 26 8
California............................. 251 35 6 20 9
Texas.................................. 169 23 5 14 4
Pennsylvania........................... 128 25 15 9 1
Michigan............................... 117 20 10 6 4
Missouri............................... 87 12 1 8 3
Arizona................................ 80 12 3 6 3
Colorado............................... 69 10 2 6 2
Virginia............................... 63 9 3 4 2
Ohio................................... 56 8 2 5 1
New Jersey............................. 52 9 4 4 1
Maryland............................... 48 6 0 4 2
Georgia................................ 42 5 0 4 1
Oklahoma............................... 22 3 0 3 0
New York............................... 22 3 0 3 0
Illinois............................... 20 3 0 3 0
Louisiana.............................. 20 3 0 3 0
Washington............................. 20 3 0 3 0
Kansas................................. 18 3 0 3 0
Massachusetts.......................... 10 2 1 1 0
District of Columbia................... 9 1 0 1 0
Nebraska............................... 8 2 1 1 0
Delaware............................... 5 2 2 0 0
------- --- --- --- ----
Total................................ 1,614 239 61 137 41
------- --- --- --- ----
------- --- --- --- ----
</TABLE>
THEATRE OPERATIONS
The Company uses a decentralized structure to operate its business on a
day-to-day basis. Each location is viewed as a discrete profit center and a
portion of theatre level management's compensation is linked to the operating
results of each unit. All theatre level personnel complete formal training
programs to maximize both customer service and the efficiency of the Company's
operations. Theatre management additionally attends a four to six-week training
academy focusing on operations management, administration, marketing and
supervisory management during their first 12 to 24 months with the Company.
Four division offices, each headed by a Vice President, supervise theatre
operations and personnel within their respective regions. The regional Vice
Presidents are also responsible within their markets for real estate activity,
marketing, facilities (design and maintenance) and profit center auditing. The
division offices are located in Los Angeles, California; Kansas City, Missouri;
Clearwater, Florida; and Voorhees, New Jersey.
Policy development, strategic planning, finance and accounting are
centralized at the corporate office. Additionally, the corporate office acts as
a service bureau to both the division offices and theatres regarding
28
<PAGE>
management information systems, benefits, administration and operations
services. Film licensing activity primarily occurs in Los Angeles utilizing a
structure that facilitates interaction between theatre managers, division
managers and motion picture buyers.
The Company has improved the profitability of certain of its older theatres
by converting them to "dollar houses," which display second-run movies and
charge lower admission prices (ranging from $1.00 to $2.00). The Company
operated 28 such theatres with 147 screens at December 30, 1993 (9.1% of the
Company's total screens).
The Company primarily relies upon advertisements and movie schedules
published in newspapers to inform its patrons of motion picture titles and show
times. Radio, television and full page newspaper advertisements are used on a
regular basis to promote new releases and special events. These expenses
generally are paid for by the distributors; however, the Company occasionally
shares the expense of such advertisements. The Company pays for "stack"
advertisements which display information on motion pictures at the Company's
theatres within a geographic area. The Company also exhibits "Now Playing" and
"Coming Soon" spots to promote motion pictures currently playing on the
Company's screens or motion pictures not yet released.
FILM LICENSING
The Company licenses motion pictures from distributors on a film-by-film and
theatre-by-theatre basis. The Company obtains these licenses either by
negotiating directly with, or by submitting bids to, distributors. Negotiations
with distributors are based on several factors, including theatre location,
competition, season and motion picture content. Rental fees paid by the Company
under a negotiated license generally are adjusted subsequent to the exhibition
of a motion picture in a process known as "settlement." Factors taken into
account in the settlement process include the commercial success of a motion
picture relative to original expectations and an exhibitor's commitment to the
motion picture. When motion pictures are licensed through a bidding process, the
bids for new releases are made, at the discretion of the distributor, subject to
the requirements of state law, either on a previewed basis or a non-previewed
("blind-bid") basis. In most cases, the Company licenses its motion pictures on
a previewed basis.
Licenses entered into in either a negotiated or bidding process typically
specify rental fees based on the higher of a gross receipts formula or a theatre
admissions revenue sharing formula. Under a gross receipts formula, the
distributor receives a specified percentage of box office receipts, with the
percentages declining over the term of the run. First-run motion picture rental
usually begins at 70% of box office admissions and gradually declines to as low
as 30% over a period of four to seven weeks. Second-run motion picture rental
typically begins at 35% of box office admissions and often declines to 30% after
the first week. Under a theatre admissions revenue sharing formula (commonly
known as a "90/10" clause), the distributor receives a specified percentage
(i.e., 90%) of the excess of box office receipts over a negotiated allowance for
theatre expenses.
The Company may pay non-refundable guarantees of film rentals or make
advance payments of film rentals, or both, in order to obtain a license in a
negotiated or bid process, subject, in some cases, to a per capita minimum
license fee. Because of the settlement process, negotiated licenses typically
are more favorable to theatre operators with respect to the percentage of
revenue paid to license a motion picture. In the past two years, bidding has
been used less frequently than previously.
The Company's film buyers evaluate the prospects for upcoming motion
pictures prior to the time that distributors solicit bids. Criteria considered
for each motion picture include cast, director, plot, performance of similar
motion pictures, estimated motion picture rental costs and expected MPAA rating.
Successful licensing depends greatly upon knowledge of the tastes of the
residents in markets served by each theatre and insight into the trends in those
tastes, as well as the availability of commercially popular motion pictures.
The Company licenses film through division level film buyers located in Los
Angeles, California and Voorhees, New Jersey. Division level licensing enables
the Company to capitalize on local trends and to take
29
<PAGE>
into account actions of local competitors in its bidding and licensing
strategies. The Company at no time licenses any one motion picture for all its
theatre complexes, which minimizes its risk with respect to any single motion
picture.
A decentralized film licensing strategy is an important ingredient in the
Company's formula for penetration of local markets. In essence, the Company's
business is dependent upon the availability of marketable motion pictures. There
are seven distributors which provide a substantial portion of quality first-run
motion pictures to the exhibition industry. They consist of Buena Vista Pictures
(Disney), Warner Bros. Distribution, Columbia Pictures, Tri-Star Pictures,
Twentieth Century Fox, Universal Film Exchanges, Inc. and Paramount Pictures.
There are numerous smaller distributors and no single distributor dominates the
market. Poor relationships with distributors, poor performance of motion
pictures or disruption in the production of motion pictures by the major studios
and/or independent producers may have an adverse effect upon the business of the
Company. In fiscal 1993, no single distributor accounted for more than 15% of
the motion pictures licensed by the Company or more than 21% of the Company's
box office admissions. From fiscal year to fiscal year the Company's revenues
attributable to individual distributors may vary significantly depending upon
the commercial success of such distributor's motion pictures in any given year.
The Company predominantly licenses "first-run" motion pictures. During the
period January 1, 1982 to December 31, 1992, the number of new first-run motion
pictures released each year by distributors in the United States has ranged from
a low of 361 to a high of 487. In 1992, domestic distributors released 431 new
first-run motion pictures. If a motion picture has substantial potential
following its first run, the Company may license it for a "sub-run." Although
average daily sub-run attendance is often less than average daily first-run
attendance, sub-run film rentals are also generally less than first-run film
rentals. Sub-runs enable the Company to exhibit a variety of motion pictures
during periods in which there are few new film releases.
CONCESSIONS
Concession sales are the second largest source of revenue for the Company
after box office admissions. Concession items include popcorn, soft drinks,
candy and other items. The Company's strategy emphasizes prominent and appealing
concession counters designed for rapid service and efficiency. The Company is
continuing its efforts to increase concession sales through optimizing product
mix, introducing new products and intensive staff training.
COMPETITION
The Company's theatres are subject to varying degrees of competition in the
geographic areas in which they operate. Competition is often intense with
respect to licensing motion pictures, attracting patrons and finding new theatre
sites. Theatres operated by national and regional circuits and by smaller
independent exhibitors compete aggressively with the Company's theatres. The
Company believes that the principal competitive factors with respect to film
licensing include licensing terms (including guarantees), seating capacity and
location of an exhibitor's theatres, the quality of projection and sound
equipment at the theatres, and the exhibitor's ability and willingness to
promote the motion pictures. The competition for patrons is dependent upon
factors such as the availability of popular motion pictures, the location of
theatres, the comfort and quality of theatres and ticket prices.
There are over 350 participants in the domestic motion picture exhibition
industry. Industry participants vary substantially in size, from small
independent operators of a single theatre with a single screen to large national
chains of multi-screen theatres affiliated with entertainment conglomerates. At
the end of 1992, the ten largest motion picture exhibition companies operated
approximately one-half of the total number of screens.
Certain of the Company's competitors are seeking to expand their theatres
and screens in operation. Such expansion has caused certain local marketing
areas or portions thereof to become overscreened.
The Company's theatres face competition from a number of motion picture
exhibition delivery systems, such as pay television, pay per view and home video
systems. While the future impact of such delivery systems on the motion picture
exhibition industry is difficult to determine precisely, there can be no
30
<PAGE>
assurance that such delivery systems will not have an adverse impact on
attendance at the Company's theatres. The Company's theatres also face
competition from other forms of entertainment competing for the public's leisure
time and disposable income.
REGULATORY ENVIRONMENT
The distribution of motion pictures is in large part regulated by federal
and state antitrust laws and has been the subject of numerous antitrust cases.
The consent decrees resulting from one of those cases, to which the Company was
not a party, have a material impact on the Company. Those consent decrees bind
certain major motion picture distributors and require the motion pictures of
such distributors to be offered and licensed to exhibitors, including the
Company, on a theatre-by-theatre basis. Consequently, the Company cannot assure
itself of a supply of motion pictures by entering into long-term arrangements
with major distributors, but must compete for its licenses on a film-by-film and
theatre-by-theatre basis.
Bids for new motion picture releases are made, at the discretion of the
distributor, subject to state law requirements, either on a previewed basis or
blind-bid basis. Certain states have enacted laws regulating the practice of
blind-bidding. Management believes that it may be able to make better business
decisions with respect to film licensing if it is able to preview motion
pictures prior to bidding for them, and accordingly believes that it may be less
able to capitalize on its expertise in those states which do not regulate blind-
bidding.
Under the Americans with Disabilities Act of 1990 (the "ADA"), all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. The Company is implementing modifications to
its theatre design which will satisfy the ADA's requirements. The Company
presently estimates that the cost of such compliance for the current fiscal year
will be approximately $1.3 million, all of which is included in the Company's
$15 million budget for capital expenditures for fiscal 1994.
There are significant differences between the regulatory environment in the
United States and foreign markets. These include certain regulatory barriers and
quota systems as well as unregulated vertical integration of production and
exhibition companies. See "Risk Factors -- Foreign Operations."
EMPLOYEES
As of December 30, 1993, the Company had approximately 1,500 full-time and
6,900 part-time employees. Approximately 11% of the part-time employees were
minors whose wages do not exceed minimum wage.
Fewer than one percent of the Company's employees, consisting primarily of
motion picture projectionists, are represented by the International Alliance of
Theatrical Stagehand Employees and Motion Picture Machine Operators. The
Company's expansion into new markets may increase the number of employees
represented by this union. The Company believes that its relationship with this
union is satisfactory.
As an employer covered by the ADA, the Company must make reasonable
accommodations to the limitations of employees and qualified applicants with
disabilities, provided that such reasonable accommodations do not pose an undue
hardship on the operation of the Company's business. In addition, many of the
Company's employees are covered by various government employment regulations,
including minimum wage, overtime and working condition regulations.
PROPERTIES
Substantially all of the Company's real properties, including its central
offices, are leased. The majority of the Company's theatres are subject to lease
agreements with original terms generally ranging from 15 to 25 years and, in
most cases, renewal options for up to an additional 20 years. The renewal
options generally provide for increased rent. Property leases provide for
minimum annual rentals and may, under certain conditions, require additional
rental payments based on a percentage of revenues. The majority of the
concession, projection, seating and other equipment required for each of the
Company's theatres is owned.
In some cases, the Company's rights as tenant are subject and subordinate to
the mortgage loans of lenders to its lessors so that if a mortgage were to be
foreclosed, the Company could lose its lease. Historically, this has never
occurred.
31
<PAGE>
LEGAL PROCEEDINGS
The following paragraphs summarize significant litigation and proceedings to
which the Company is a party.
INCOME TAX LITIGATION. The Company has been in litigation with the Internal
Revenue Service ("IRS") primarily concerning the Company's method, for the years
1975 and 1978 to 1987, inclusive, of reporting, for income tax purposes, film
rental deductions in the year paid (cash method) rather than in the year the
related film was exhibited (accrual method). These and other issues, including
the determination of various credit and loss carrybacks, and issues related to
certain capital gains, the dividends received deduction, and the understatement
penalty, were the subject of two United States Tax Court cases (DURWOOD, INC. V.
COMMISSIONER OF INTERNAL REVENUE, Docket No. 3706-88 filed February 23, 1988 and
DURWOOD, INC. V. COMMISSIONER OF INTERNAL REVENUE, Docket No. 3322-91 filed
February 22, 1991).
Settlements have been reached with respect to all issues in each of the tax
court cases. Through September 30, 1993, the Company has recorded provisions
totaling approximately $23 million, representing the estimated federal and state
income taxes and interest resulting from the IRS litigation. Through September
30, 1993, the Company has made payments totaling approximately $20 million to
federal and state tax authorities associated with the tax court settlements.
Management believes that adequate amounts have been reserved with respect to
these income tax matters.
SALES TAX LITIGATION. On August 13, 1991, the Florida Department of Revenue
assessed the Company $1,670,000 in taxes, penalties and interest for popcorn
sales in theatres that occurred during the period commencing January 1, 1986 and
ending December 31, 1988. Because the regulation relied on by the Department did
not become effective until December 1987, the Department issued a revised
assessment to the Company in the amount of $388,000, which is based on the
Company's 1988 popcorn sales in Florida. Because the Company's Florida legal
counsel failed to file a petition to contest the assessment within the required
time, the Department has taken the position that the Company owes $388,000 in
taxes plus penalties and interest.
The Company and the Department have agreed to be bound by the final judicial
resolution of another Florida sales tax case currently pending in the Florida
First District Court of Appeals, which presents substantially the same issues.
If the taxpayer prevails in this case, the Company will pay nothing to the
Department. If the Department prevails in this case, the Company will pay the
$388,000 in assessed taxes plus interest, but no penalties. In any event, the
Company will also pursue all available remedies against its former legal
counsel.
SCOTT C. WALLACE, DERIVATIVELY ON BEHALF OF NOMINAL DEFENDANT AMC
ENTERTAINMENT INC. V. STANLEY H. DURWOOD, ET AL., Chancery Court for New Castle
County, Delaware (Civil Action No. 12855). On January 27, 1993, plaintiff filed
a derivative action on behalf of AMCE against four of its directors, Messrs.
Stanley H. Durwood, Edward D. Durwood, Paul E. Vardeman and Charles J. Egan, Jr.
(the "Wallace litigation"). AMCE was named as a nominal defendant. The lawsuit
alleges breach of fiduciary duties of care, loyalty and candor, mismanagement
and waste of assets in connection with the provision of film licensing,
accounting and financial services by American Associated Enterprises, a
partnership beneficially owned by Mr. Stanley H. Durwood and members of his
family, to the Company, certain other transactions with affiliates of the
Company, termination payments to a former officer of the Company and other
transactions. The lawsuit seeks unspecified money damages and equitable relief
and costs, including reasonable attorneys' fees.
JAMES M. BIRD, DERIVATIVELY ON BEHALF OF NOMINAL DEFENDANT AMC ENTERTAINMENT
INC. V. STANLEY H. DURWOOD, ET AL., Chancery Court for New Castle County,
Delaware (Civil Action No. 12939). On April 16, 1993, plaintiff filed a
derivative action on behalf of AMCE against four of its directors, Messrs.
Stanley H. Durwood, Edward D. Durwood, Paul E. Vardeman and Charles J. Egan,
Jr., and one of its former directors, Philip E. Cohen (the "Bird litigation").
AMCE was named as a nominal defendant. The lawsuit alleges many of the same
claims that are alleged in the Wallace litigation, as well as claims involving
certain transactions
32
<PAGE>
with National Cinema Supply Corporation and a fee paid by a subsidiary of the
Company to Mr. Cohen in connection with a transaction between the Company and
TPI Entertainment, Inc. The lawsuit seeks unspecified money damages and
equitable relief and costs, including reasonable attorneys' fees.
On August 20, 1993, the defendants filed motions to dismiss both the Wallace
litigation and the Bird litigation. On September 10, 1993, such defendants filed
motions to stay discovery pending the court's resolution of defendants' motions
to dismiss. On November 1, 1993, the court ordered that discovery be stayed in
the Wallace litigation and the Bird litigation pending resolution of the motions
to dismiss, except for discovery concerning the fitness of Mr. Wallace to serve
as a derivative plaintiff.
The Company is named as a defendant in a number of other lawsuits arising in
the normal course of its business. Management does not expect that any actions
to which the Company is a party will result in a material loss to the Company.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Directors and Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
YEARS ASSOCIATED
NAME AGE(1) POSITION WITH COMPANY
- ---------------------------------------- ----------- -------------------------------------- ------------------
<S> <C> <C> <C>
Stanley H. Durwood 73 Chairman of the Board, Chief Executive 48(2)
Officer and Director (AMCE and AMC)
Charles J. Egan, Jr. 61 Director (AMCE and AMC) 7
Paul E. Vardeman 63 Director (AMCE and AMC) 11
Edward D. Durwood 44 President, Vice Chairman of the Board 18
and Director (AMCE and AMC)
Peter C. Brown 35 Senior Vice President, Chief Financial 2
Officer, Treasurer and Director (AMCE
and AMC)
Philip M. Singleton 47 Senior Vice President, Chief Operating 19
Officer and Director (AMCE and AMC)
Donald P. Harris 43 President -- AMC Film Marketing, Inc. 16
Earl C. Voelker, Jr. 48 Senior Vice President (AMC) 21
Richard J. King 44 Vice President (AMC) 21
Gregory S. Rutkowski 45 Vice President (AMC) 18
Frank T. Stryjewski 37 Vice President (AMC) 15
Richard T. Walsh 40 Vice President (AMC) 18
Richard L. Obert 54 Vice President and Chief Accounting 4
Officer (AMCE and AMC)
<FN>
- ------------------------
(1) As of December 30, 1993.
(2) Includes years with the predecessor of the Company.
</TABLE>
33
<PAGE>
With the exception of Mr. Egan, who became a director on October 30, 1986,
and Messrs. Brown and Singleton, who each became a director on November 12,
1992, all other directors have served as such since AMCE's formation in 1983.
All directors are elected annually, and each holds office until his
successor has been duly elected and qualified or his earlier resignation or
removal. There are no family relationships between any Director and any
Executive Officer of the Company, except that Mr. Edward D. Durwood is the son
of Mr. Stanley H. Durwood. All directors of AMCE also serve as directors of AMC.
All current Executive Officers of the Company hold such offices at the
pleasure of the Board of Directors, subject, in the case of Mr. Peter C. Brown,
Senior Vice President, Chief Financial Officer, Treasurer and a Director of AMCE
and AMC, and Mr. Donald P. Harris, President of AMC Film Marketing, Inc., a
wholly owned subsidiary of AMC, to rights under their respective employment
agreements.
Mr. Stanley H. Durwood has served as a Director of AMCE from its
organization on June 14, 1983 and of AMC since August 2, 1968. In February 1986,
he became Chairman of the Board of AMCE and AMC. Mr. Durwood served as President
of AMCE from June 1983 through February 20, 1986 and from May 1988 through June
1989. Mr. Durwood has served as Chief Executive Officer of AMCE since June 1983
and of AMC since February 20, 1986. He also served as President of AMC from
August 2, 1968 through February 20, 1986 and from May 13, 1988 through November
8, 1990. Mr. Durwood is a graduate of Harvard University.
Mr. Edward D. Durwood became President and Vice Chairman of the Board of
AMCE on June 29, 1989 and of AMC on November 8, 1990. Mr. Durwood has served as
a Director of AMCE since June 14, 1983 and of AMC since November 26, 1980. Mr.
Durwood served as Vice President of AMCE from June 14, 1983 through February 6,
1989, and of AMC from May 5, 1981 through February 6, 1989, at which time Mr.
Durwood became Executive Vice President of both companies. Mr. Durwood holds
undergraduate and M.B.A. degrees from the University of Kansas.
Mr. Peter C. Brown has served as Senior Vice President and Chief Financial
Officer of AMCE and AMC since November 14, 1991 and was elected a Director of
AMCE and AMC on November 12, 1992. Mr. Brown has served as Treasurer of AMCE and
AMC since September 28, 1992. Prior to November 14, 1991, he served as a
consultant to AMCE from October 1990 to October 1991, and as Vice President of
DJS Inverness & Co., an investment banking firm located in New York City, from
November 1987 to October 1990. Mr. Brown is a graduate of the University of
Kansas.
Mr. Philip M. Singleton has served as Senior Vice President and Chief
Operating Officer of AMCE and AMC since November 14, 1991 and was elected a
Director of AMCE and AMC on November 12, 1992. Prior to November 14, 1991, Mr.
Singleton served as Vice President in charge of operations for the Southeast
Division of AMC since May 10, 1982. Mr. Singleton holds an undergraduate degree
from California State University, Sacramento and an M.B.A. degree from the
University of South Florida.
Mr. Charles J. Egan, Jr. has served as a Director of AMCE and AMC since
October 30, 1986. Mr. Egan is Vice President and General Counsel of Hallmark
Cards, Incorporated, which is primarily engaged in the business of social
expressions and related products (including greeting cards, gifts, party goods,
crayons, etc.) and cable television. Mr. Egan holds an A.B. degree from Harvard
University and an LL.B. degree from Columbia University.
Mr. Paul E. Vardeman has served as a Director of AMCE since June 14, 1983
and of AMC since September 28, 1982. Mr. Vardeman has been a member of the law
firm of Polsinelli, White, Vardeman & Shalton, Kansas City, Missouri, since
1982. Prior thereto, Mr. Vardeman served as a Judge of the Circuit Court of
Jackson County, Missouri. Mr. Vardeman holds undergraduate and J.D. degrees from
the University of Missouri, Kansas City.
Mr. Donald P. Harris has served as President of AMC Film Marketing, Inc., a
wholly owned subsidiary of AMC, since April 18, 1989, and prior thereto served
as Vice President of AMC Film Marketing, Inc. from November 26, 1980.
34
<PAGE>
Mr. Earl C. Voelker, Jr. was appointed Senior Vice President in charge of
operations for the Northeast Division of AMC on June 10, 1992. Previously, Mr.
Voelker had been Vice President in charge of operations for the Northeast
Division of AMC since April 30, 1979.
Mr. Richard J. King was appointed Vice President in charge of operations for
the Northeast Division of AMC on June 10, 1992. Previously, Mr. King served as
Vice President in charge of operations for the Southwest Division of AMC since
October 30, 1986, and as Division Operations Manager of AMC since May 7, 1986.
Mr. Gregory S. Rutkowski has served as Vice President in charge of
operations for the West Division of AMC since May 5, 1981.
Mr. Frank T. Stryjewski has served as Vice President in charge of operations
for the Southeast Division of AMC since December 9, 1991. Mr. Stryjewski served
as Vice President -- Operations Resources of AMC from December 1990 to December
1991, and as Vice President -- Human Resources of AMC from December 1988 to
December 1990. Prior to December 1988, Mr. Stryjewski served as National
Training Director of AMC.
Mr. Richard T. Walsh was appointed Vice President in charge of operations
for the Central Division of AMC on June 10, 1992. Previously Mr. Walsh had been
Vice President in charge of operations for the Midwest Division of AMC since
December 1, 1988 and prior thereto served as Division Operations Manager of AMC
from November 23, 1987 through December 1, 1988, and Assistant Division
Operations Manager of AMC since 1984.
Mr. Richard L. Obert has served as Vice President and Chief Accounting
Officer of AMCE and AMC since January 9, 1989. Mr. Obert served as President and
a Director of Franklin Financial Concepts, Inc. from November 1986 through
December 1988.
COMPENSATION OF DIRECTORS
For fiscal 1993, Messrs. Charles J. Egan, Jr. and Paul E. Vardeman were each
paid annual compensation of $2,500 and fees of $2,700 and $2,100, respectively,
for attendance at Board of Directors meetings. Messrs. Egan and Vardeman were
each paid $2,000 per month as compensation for their services as members of the
Audit Committee.
Beginning in fiscal 1994, the Executive Committee of the Board of Directors
of AMCE approved revised compensation arrangements for Messrs. Egan and
Vardeman. The annual cash compensation to be paid to Messrs. Egan and Vardeman
will be $20,000 each for their services as members of the Boards of Directors of
AMCE and AMC and $24,000 each for their services as members of the Audit
Committees of the Company and AMC. Messrs. Egan and Vardeman will each be paid
$900 per hour for attending meetings of (i) any board of directors of AMCE or
its subsidiaries on which he serves, (ii) the Audit Committee after the twelfth
meeting during the fiscal year and (iii) any other committee of the Board of
Directors of AMCE or its subsidiaries on which he serves.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and each of the four other most highly compensated
Executive Officers of the Company (determined as of the end of the last fiscal
year and hereafter referred to as the "named Executive Officers") for the last
three fiscal years ended April 1, 1993, April 2, 1992 and March 28, 1991.
35
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------------
FISCAL OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) COMPENSATION(1)(2)
- ---------------------------------------------- --------- ---------- ---------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
Stanley H. Durwood 1993 $ 420,004 $ 141,800 N/A $ 0
Chief Executive Officer 1992 420,004 -- N/A N/A
1991 420,004 -- N/A N/A
Edward D. Durwood 1993 269,742 122,900 N/A 6,626
President 1992 266,357 -- N/A N/A
1991 250,016 37,500 N/A N/A
Donald P. Harris 1993 272,931 66,000 N/A 5,661
President -- AMC Film Marketing, Inc. 1992 245,550 20,000 N/A N/A
1991 229,996 60,000 N/A N/A
Philip M. Singleton 1993 244,466 100,000 N/A 45,249
Chief Operating Officer 1992 202,433 -- N/A N/A
1991 169,988 42,500 N/A N/A
Peter C. Brown 1993 199,331 107,200 N/A 13,579
Chief Financial Officer 1992 128,471 -- N/A N/A
1991 -- -- N/A N/A
<FN>
- ------------------------
(1) N/A denotes not applicable. For fiscal 1993, perquisites and other
personal benefits did not exceed the lesser of $50,000 or 10% of total
annual salary and bonus. In accordance with the transitional provisions of
the revised rules for executive compensation adopted by the Commission,
amounts of Other Annual Compensation and All Other Compensation are
excluded for fiscal 1992 and 1991.
(2) Includes the Company's contributions to a 401(k) defined contribution
savings plan in the amount of $6,626 for Mr. Edward D. Durwood, $5,661 for
Mr. Donald P. Harris, $6,414 for Mr. Philip M. Singleton and $5,129 for
Mr. Peter C. Brown. In addition, moving expense is included in the amount
of $38,835 for Mr. Singleton and $6,320 for Mr. Brown and medical
continuation coverage payments to a previous employer for Mr. Brown in the
amount of $2,130.
</TABLE>
OPTION EXERCISES AND HOLDINGS. The following table provides information,
with respect to the named Executive Officers, concerning the exercise of options
during the last fiscal year and unexercised options held as of the fiscal year
ended April 1, 1993:
OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR END VALUES
<TABLE>
<CAPTION>
UNEXERCISED OPTIONS VALUE OF
AT FISCAL YEAR UNEXERCISED
END(1) IN-THE-MONEY
SHARES ACQUIRED ON -------------------- OPTIONS AT
NAME EXERCISE VALUE REALIZED SHARES PRICE FISCAL YEAR END
- -------------------------------------- ------------------- ---------------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C>
Stanley H. Durwood.................... -- -- -- -- --
Edward D. Durwood..................... -- -- -- -- --
Donald P. Harris...................... -- -- 15,000 $ 4.67 $ 49,950
-- -- 7,500 9.00 --
Philip M. Singleton................... 15,000 $ 16,200 7,500 9.00 --
Peter C. Brown........................ -- -- -- -- --
<FN>
- ------------------------
(1) All stock options granted are exercisable.
</TABLE>
36
<PAGE>
401(K) PLAN. AMC sponsors a defined contribution savings plan (the "401(k)
Plan") whereby employees of AMC or its subsidiaries may (under current
administrative rules) elect to contribute, in whole percentages from 1% to 16%
of compensation, provided no employee's elective contributions shall exceed the
amount permitted under Section 402(g) of the Internal Revenue Code ($8,994 in
1993). A matching contribution is made by AMC at 50% of an employee's elective
contribution of up to 6% of the employee's compensation. AMC may increase the
50% matching contribution to 100%. Employees have full and immediate vesting
rights to their elective contributions and AMC's matching contributions and
related earnings. AMC's contributions to the accounts of the named Executive
Officers are included in the Summary Compensation Table.
DEFINED BENEFIT RETIREMENT PLAN. AMC sponsors a defined benefit retirement
plan (the "Retirement Plan") which provides benefits to certain employees of AMC
and its subsidiaries based upon years of credited service and the highest
consecutive five-year average annual remuneration. For purposes of calculating
benefits, average annual compensation is limited by Section 401(a)(17) of the
Internal Revenue Code, and is based upon wages, salaries and other amounts paid
to the employee for personal services, excluding certain special compensation. A
participant earns a vested right to an accrued benefit upon completion of five
years of vesting service.
The following table shows the total estimated annual pension benefits
(without regard to minimum benefits) payable to a covered participant under
AMC's Retirement Plan, assuming retirement in calendar 1993 at age 65, payable
in the form of a single life annuity. The benefits are not subject to any
deduction for Social Security or other offset amounts.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
HIGHEST CONSECUTIVE FIVE-YEAR -----------------------------------------------------
AVERAGE ANNUAL COMPENSATION 15 20 25 30 35
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$125,000................................................... $ 17,895 $ 23,860 $ 29,825 $ 35,790 $ 41,755
150,000................................................... 21,645 28,860 36,075 43,290 50,505
175,000................................................... 25,395 33,860 42,325 50,790 59,255
200,000................................................... 29,145 38,860 48,575 58,290 68,005
225,000................................................... 32,895 43,860 54,825 65,790 76,755
235,000................................................... 34,395 45,860 57,325 68,790 80,255
</TABLE>
At April 1, 1993, the years of credited service under the Retirement Plan
for each of the named Executive Officers were: Mr. Edward D. Durwood, 17 years;
Mr. Donald P. Harris, 15 years; Mr. Philip M. Singleton, 18 years; and Mr. Peter
C. Brown, 1 year. Because Mr. Stanley H. Durwood is age 73, he is receiving
minimum required distributions under this Plan pursuant to I.R.C. 401(a)(9),
even though he is an active employee. The amount distributed in fiscal 1993 was
$33,990 and is not included in the Summary Compensation Table.
EXECUTIVE INCENTIVE PROGRAM. On November 15, 1993, the Compensation
Committee of the Company's Board of Directors approved the Executive Incentive
Program (the "EIP") for corporate and field executive and senior management,
including executive officers. The EIP will be in effect for the current fiscal
year. Participants must be employed at year-end to be eligible for an award.
Awards are pro-rated per complete quarter of employment.
Maximum awards under the EIP range from 50% of salary for executive
corporate management participants to 30% of salary for senior field management
participants. Awards are based on up to three performance components: division,
company and personal. The division component, which applies to division and film
office participants, is based on each division's performance relative to a
division operating income quota. For purposes of determining this component,
"division operating income" is defined as operating income less general and
administrative expenses and extraordinary expenses ("DOI"). The company
component, which applies to all eligible participants, is based on the Company's
performance relative to an EBITDA (earnings before interest, taxes, depreciation
and amortization) quota. For division level participants, "EBITDA" is defined as
DOI less national film, home office and international general and administrative
expenses plus capitalized lease adjustments. The personal component of an award
is based upon predetermined individual goals and a supervisor's year-end
performance appraisal, and payment is
37
<PAGE>
subject to the recommendation of the supervisor and approval of the Executive
Committee. The Compensation Committee of the Board of Directors approves the
annual DOI and EBITDA quotas and approves the personal component of awards for
participants who are members of the Executive Committee.
The division and company components are scaled, based on the Company's
performance, as follows: if 80% or less of a DOI or EBITDA quota, respectively,
is met, no amount is awarded with respect to a component based on that quota; if
more than 80% (up to 100%) of a quota is met, each 1% increase (above 80%) in
the percentage of the quota that is met will result in a 5% increase in award
for the respective component; and if 100% to 110% of a quota is met, each 1%
increase in quota (above 100%) will result in a 10% increase in award for the
respective component. For example, if 100% of a quota is met, 100% of the
related award may be paid, whereas if 110% of a quota is met, 200% of the
related award may be paid. The personal component of an award, which is
contingent on the Company achieving a minimum 80% of the EBITDA quota, can be up
to 15% of an individual's salary (but the aggregate amount of all such awards
may not exceed 10% of the salaries of all participants). The Company's Executive
Committee has discretion to defer payment for up to one year of some or all of
the division and company awards.
OTHER EXECUTIVE BENEFIT PLANS. The Executive Medical Reimbursement Plan
covers active employees who are officers of the Company and provides up to
$2,500 a month for the following medical expenses: (i) routine physicals, (ii)
vision care, (iii) well baby care, (iv) hospital room and board charges in
excess of the semi-private room and board rate, (v) expenses in excess of usual
and customary charges, subject to 80% co-insurance, (vi) 50% of mental and
nervous benefits in excess of the basic medical plan's $1,500 calendar year
maximum, to a lifetime maximum of $50,000, (vii) dental reimbursement, subject
to 80% co-insurance and a $3,000 calendar year maximum and (viii) an additional
$2,000 orthodontia lifetime maximum. Supplemental Accidental Death and
Dismemberment coverage in the amount of $250,000 is also provided to active
officers of the Company.
The Executive Savings Plan (the "Savings Plan") covers certain highly
compensated employees (as defined in Section 414(q) of the Internal Revenue
Code) whose elective contributions under the 401(k) Plan have been limited in
order for the 401(k) Plan to satisfy the average deferral percentage
nondiscrimination tests in Section 401(k) of the Internal Revenue Code and/or
whose coverage under the group term life insurance provided by AMC is at the
maximum amount. The Savings Plan provides a three percent increase in pay to all
eligible employees who agree to make a four percent of pay contribution on a
monthly basis to an AMC-approved individual universal life insurance policy
which is owned by the employee. The eligible employees can select, within
certain parameters, the portion of their after-tax premiums that is allocated to
life insurance protection versus the investment element of the universal life
insurance policy. Such benefit amounts for the named Executive Officers are
included in the Summary Compensation Table.
Effective January 1, 1994, the Company adopted the "AMC Nonqualified
Deferred Compensation Plan" (the "Deferred Compensation Plan"), an unfunded
deferred compensation arrangement designed to permit eligible employees of the
Company and certain affiliates to offset the adverse impact of a change in the
tax law made by the Omnibus Budget Reconciliation Act of 1993 (the "Act"), which
reduced the amount of compensation which can be taken into account in a
qualified retirement plan from $235,840 (in 1993) to $150,000 (in 1994).
Under the Deferred Compensation Plan, participants in the Company's 401(k)
Plan who are making the maximum deferral thereunder and whose estimated annual
compensation will exceed $100,000 in 1994 may elect, in advance and irrevocably
for each year, to reduce their compensation and to defer under the Deferred
Compensation Plan such additional portion of their W-2 compensation as they may
determine. Such participants whose annual compensation in 1994 exceeds $150,000
will have elective Deferred Compensation Plan deferrals of up to 4% of their
compensation matched by the Company at the rate of 50%, but only to the extent
affected by the change in the law. For example, an employee who will earn
$180,000 in 1994 and who elects to defer 4% of his compensation would have a
match equal to the lesser of (a) 2% of the difference between the limit set
forth in Section 401(a)(17) of the Internal Revenue Code of 1986 (the "Code")
and $180,000 and (b) 50% of the difference between the maximum permissive
elective deferral under Section 402(g) of the Code ($9,240 in 1994) and the
amount of his elective deferral under the 401(k) Plan for the year. The old
limit, the new limit and the Deferred Compensation Plan's minimum eligibility
38
<PAGE>
criteria (compensation over $100,000 to make deferrals and over $150,000 to be
credited with a match) are subject to periodic cost-of-living adjustments. The
Company's maximum obligation under the Deferred Compensation Plan for any one
participant for 1994 is $1,620.
Elective deferrals and matching credits, if any, will be credited to a
deferral account maintained by or at the direction of the Company and remain
subject to the claims of the Company's creditors. Upon the earlier of a
participant's normal retirement age (65) or other termination of employment, the
participant will receive the amounts credited to his deferral account, adjusted
for earnings and losses, in a lump sum or in installments over ten years, as
elected by the participant prior to making the deferrals. Both the participant's
deferrals and the match, if applicable, are fully vested at all times.
OTHER COMPENSATION PLANS. On February 2, 1977, the Board of Directors of
AMC authorized the continued payment to Mr. Stanley H. Durwood, in the event of
his disability, of 80% of his then current salary and bonuses for a period of up
to two years, such salary payment to be reduced, if necessary, so that such
payments, together with disability compensation under AMC's group insurance
policy, do not exceed 100% of his then current salary and bonus.
Messrs. Peter C. Brown and Donald P. Harris each have employment agreements
with the Company providing for base annual salaries of no less than $180,000 and
$220,000, respectively, an automobile, and bonuses at the sole discretion of the
Chief Executive Officer of the Company. Messrs. Brown and Harris have current
base salaries of $220,000 and $263,900, respectively. The Company may terminate
Mr. Brown's employment agreement at any time upon at least 270 days prior
notice. Mr. Harris' employment agreement terminates on July 31, 1994, upon his
death, upon his disability as defined in his employment agreement, or upon the
Company's good faith determination that cause for termination as described in
his employment agreement exists. In the event Mr. Stanley H. Durwood ceases to
control the management of the Company for any reason, then the Company and each
of the foregoing named employees has the option to terminate his employment
agreement. In such event, the Company shall pay $135,000 in cash to Mr. Brown,
and an amount in cash to Mr. Harris equal to the aggregate cash compensation,
exclusive of bonus, to the end of the term of his employment under his
employment agreement, after discounting such amount to its then present value
using a discount rate equal to the lesser of one-half of the then announced
prime rate of interest or 10% per annum. The aggregate amount payable under
these agreements, assuming termination by reason of a change in control at
December 30, 1993, was $287,000.
On December 30, 1986, the Company, through its majority owned subsidiary,
AMC Philadelphia, Inc. ("AMCP"), acquired all the outstanding capital stock of
Budco Theatres, Inc. ("Budco"), which operated a chain of 35 theatres with 104
screens in the Philadelphia area. AMCP was formed prior to the Budco acquisition
by AMC and Mr. H. Donald Busch, who was then a stockholder and President of
Budco. AMC owns 80% of the capital stock of AMCP and Mr. Busch owns the
remaining 20%. As of December 30, 1993, AMCP and its subsidiaries operated 33
theatres with 163 screens.
Pursuant to the Stockholders' Agreement entered into between AMCP, AMC and
Mr. Busch in connection with the formation of AMCP, Mr. Busch has the right to
require AMCP to purchase all of his shares of AMCP stock upon his death, after
the expiration of a ten-year period (ending December 30, 1996), if AMC dismisses
Mr. Busch other than for cause, if AMC sells a majority of its shares of AMCP
stock or upon the occurrence of certain other events. Upon Mr. Busch's death,
his attempt to transfer his shares of AMCP stock, his resignation as an officer
and employee of AMCP, his termination as an employee for cause or certain other
events, AMC has an option to purchase all of Mr. Busch's shares of AMCP stock.
In the case of Mr. Busch's exercise of his put option or AMC's exercise of its
purchase option as described above, the purchase price for Mr. Busch's shares of
AMCP stock shall be their book value (or a higher value under certain
circumstances) but in no event shall Mr. Busch receive less than $5 million for
his 20% stock interest in AMCP. At the time of the acquisition of Budco, Mr.
Busch also entered into a ten-year employment agreement with AMCP as its
President and Chief Executive Officer at an annual salary of $250,000. AMC has
guaranteed the monetary obligations of AMCP to Mr. Busch under both the
Stockholders' Agreement and the employment agreement.
CERTAIN TRANSACTIONS
Since its formation, the Company has been a member of an affiliated group of
companies (the "DI affiliated group") beneficially owned by Mr. Stanley H.
Durwood and members of his family. Mr. Stanley H. Durwood is President,
Treasurer and a Director of DI and Chairman of the Board, Chief Executive
Officer
39
<PAGE>
and a Director of AMCE and AMC. There have been a number of transactions
involving AMCE or AMC with the DI affiliated group in prior years. The Company
intends to ensure that all transactions with DI or other related parties are
fair, reasonable and in the best interest of the Company. In that regard, the
Audit Committees of the Boards of Directors of AMCE and AMC review all material
proposed transactions between AMCE and DI or other related parties to determine
that, in their best business judgment, such transactions meet that standard. The
Audit Committees consist of Messrs. Vardeman and Egan, neither of whom are
officers or employees of the Company nor stockholders, directors, officers or
employees of DI. Set forth below is a description of significant transactions
which have occurred since April 3, 1992, or involve receivables that remain
outstanding at December 30, 1993. There may in the future be other transactions
between AMCE or AMC and such DI affiliated group members and individuals.
Certain corporate departments of AMC perform general and administrative
services for DI and its subsidiaries. AMC charged DI and its subsidiaries
$225,000 for such services for fiscal 1993.
Periodically, AMC and DI reconcile any accounts owed by one company to the
other, which are kept on a non-interest bearing basis. Charges to the
intercompany account have included the allocation of AMC's general and
administrative expenses and payments made by AMC on behalf of DI. In fiscal
1993, the largest balance owed by DI and its subsidiaries to the Company was
$1.8 million. Of this amount, $843,000 consisted of AMC payments to DI under the
federal income tax sharing agreement which DI does not have to repay until the
consolidated group is able to realize the Company's tax benefit in the future or
until such amount is used to offset future tax sharing liabilities of the
Company. As of December 30, 1993, DI and its subsidiaries owed the Company $1.3
million. See "Tax Sharing Agreement."
In July 1992, Mr. Jeffery W. Journagan, a son-in-law of Mr. Stanley H.
Durwood, was employed by a subsidiary of the Company. Mr. Journagan's current
salary is $68,640.
AMC loaned $200,000 to Mr. Donald P. Harris, President -- AMC Film
Marketing, Inc., in January 1987. This loan was evidenced by a promissory note
bearing interest at the rate of 6% per annum, provided for the payment of all
principal at maturity and was secured by a Second Deed of Trust on Mr. Harris'
residence in Los Angeles County, California. The loan was made to Mr. Harris in
connection with the purchase of his principal residence. Principal on the note
was due on January 1, 1992, but the note has been extended to January 16, 1997.
In connection with the extension, the interest rate on the note was increased to
7.5%. The largest aggregate amount outstanding on the note for fiscal 1993 was
$200,000. Interest is payable on the note annually and the principal amount
outstanding on the note as of December 30, 1993 was $200,000.
For a description of certain employment agreements between the Company and
Messrs. Peter C. Brown and Donald P. Harris, see "Other Compensation Plans."
TAX SHARING AGREEMENT
DI and the Company are permitted to file consolidated federal income tax
returns because DI owns Company stock that possesses at least 80% of the total
voting power of all Company stock and that has a value equal to at least 80% of
the total value of all Company stock. DI and the Company currently file
consolidated federal income tax returns and DI has informed the Company that it
will continue to file consolidated federal income tax returns with the Company
as long as it owns the requisite amount of Company stock.
DI and the Company entered into an agreement dated July 1, 1983 pursuant to
which, so long as DI and the Company file a consolidated federal income tax
return, the Company will pay to DI the amount of tax that would be payable
calculated as if the Company filed a separate consolidated federal income tax
return for such period and all prior taxable periods; provided, however, that if
such return would have reflected a refund due to the Company, DI will pay the
Company an amount equal to such refund when and if the consolidated group is
able to realize the Company's tax benefit in the future.
It is anticipated that the issuance of the Convertible Preferred will cause
DI and the Company to cease to be eligible to file consolidated federal income
tax returns on the date on which the Convertible Preferred is issued. This event
will accelerate the payment of approximately $5 million of federal income tax on
intercompany gains which have been deferred for income tax purposes.
40
<PAGE>
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of February 1, 1994,
with respect to beneficial owners of five percent or more of any class of the
Company's capital stock:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES
TITLE OF CLASS BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
- ---------------------------------------- ----------------------------------------------- ------------------ -----------------
<S> <C> <C> <C>
Common Stock............................ Durwood, Inc. (1) 2,641,951(2) 50.2%(2)
106 West 14th Street
Kansas City, MO 64105
Wells Fargo Institutional 268,947(3) 5.1(4)
Trust Company, N.A. (3)
45 Fremont Street
17th Floor
San Francisco, CA 94105
David L. Babson & Company, Inc. (5) 417,500(5) 7.9(6)
One Memorial Drive
Cambridge, MA 02142
Class B Stock (7)....................... Durwood, Inc. (1) 11,157,000(2) 100.0(2)
106 West 14th Street
Kansas City, MO 64105
<FN>
- ------------------------
(1) A revocable inter-vivos trust established by Mr. Stanley H. Durwood for
the benefit of Mr. Stanley H. Durwood holds approximately 75% of the
voting power of the outstanding capital stock of DI. American Associated
Enterprises, a Missouri limited partnership of which Mr. Stanley H.
Durwood is the limited partner and his children are the general partners
(on whose behalf Mr. Edward D. Durwood has voting authority), holds
approximately 25% of the voting power of DI's outstanding capital stock.
Mr. Stanley H. Durwood is Chairman of the Board, Chief Executive Officer
and a Director of AMCE and AMC, and Mr. Edward D. Durwood is President,
Vice Chairman of the Board and a Director of AMCE and AMC.
(2) Class B Stock is convertible into Common Stock on a share-for-share basis.
The stated percentage has been computed without giving effect to the
conversion option. Were all shares of Class B Stock converted there would
be 16,419,830 shares of Common Stock outstanding, of which DI would hold
13,798,951 shares, or 84% of the outstanding Common Stock.
(3) As reported by Wells Fargo Institutional Trust Company, N.A. on Schedule
13G dated February 11, 1993.
(4) Because the number of outstanding shares of Common Stock has increased
since February 11, 1993, the number of shares of Common Stock disclosed in
such Schedule 13G constitutes 5.1% of the outstanding shares of Common
Stock as of February 1, 1994.
(5) As reported by David L. Babson & Company, Inc. on Schedule 13G dated
January 25, 1994.
(6) Because the number of outstanding shares of Common Stock has increased
since the date of the information in such Schedule 13G, the number of
shares of Common Stock disclosed therein constitutes 7.9% of the
outstanding shares of Common Stock as of February 1, 1994.
(7) In the election of Directors, holders of Class B Stock are entitled to
elect four of the Company's six Directors. On other matters, holders of
Class B Stock vote as a class with holders of Common Stock, with each
share of Class B Stock being entitled to ten votes per share.
</TABLE>
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<PAGE>
BENEFICIAL OWNERSHIP BY DIRECTORS AND OFFICERS
The following table sets forth certain information as of February 1, 1993
with respect to beneficial ownership by Directors and Executive Officers of the
Company's Common Stock and Class B Common Stock. The amounts set forth below
include 695,000 shares of Common Stock subject to options under the Company's
1984 Stock Option Plan held by executive officers which are not exercisable
until June 1994.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ---------------------------------------- -------------------------------------------- --------------------- ----------------
<S> <C> <C> <C>
Common Stock............................ Stanley H. Durwood 2,642,101(1) 50.2%
Edward D. Durwood 200,000(2) 3.6
Paul E. Vardeman 300 *
Philip M. Singleton 170,000(2) 3.1
Peter C. Brown 150,000(2) 2.8
Donald P. Harris 59,808(2) 1.1
All Directors and Executive Officers as a
group (13 persons, including the individuals
named above) 3,396,689(2) 56.9
Class B Stock........................... Stanley H. Durwood 11,157,000(1) 100.0
<FN>
- ------------------------
*Less than one percent.
(1) See Notes 1 and 2 under "-- Principal Stockholders." Mr. Stanley H. Durwood
also directly owns 150 shares of AMCE's Common Stock.
(2) Includes shares subject to options to purchase Common Stock under the
Company's 1984 Stock Option Plan, as follows: Edward D. Durwood -- 200,000
shares; Philip M. Singleton -- 150,000 shares; Peter C. Brown -- 150,000
shares; Donald P. Harris -- 57,000 shares; and all executive officers as a
group -- 707,000 shares.
</TABLE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 45,000,000 shares of
Common Stock, par value 66 2/3 CENTS per share, of which 4,684,130 shares were
outstanding as of December 30, 1993 (5,262,830 at February 1, 1994), 30,000,000
shares of Class B Stock, par value 66 2/3 CENTS per share, of which 11,730,000
shares were outstanding as of December 30, 1993 (11,157,000 at February 1,
1994), and 10,000,000 shares of Preferred Stock, par value 66 2/3 CENTS per
share, of which 4,000,000 shares of Convertible Preferred will be outstanding
following completion of this Offering (4,600,000 shares if the Underwriters'
over-allotment option is exercised in full). As used under this caption, the
term "Company" refers only to AMCE and not to its subsidiaries.
CONVERTIBLE PREFERRED
GENERAL. When issued, the Convertible Preferred will be fully paid and
nonassessable. The holders of the Convertible Preferred will have no preemptive
rights with respect to any shares of capital stock of the Company or any other
securities of the Company convertible into, or carrying rights or options to
purchase, any such shares. The Convertible Preferred will not be subject to any
sinking fund or other obligation of the Company to redeem or retire the
Convertible Preferred. Unless redeemed by the Company or converted, the
Convertible Preferred will be perpetual. United Missouri Bank, N.A., is the
registrar, transfer agent, conversion agent and dividend disbursing agent for
the Convertible Preferred. The following summary description of the terms of the
Convertible Preferred does not purport to be complete and is qualified in its
entirety by reference to the Certificate of Designations for the Convertible
Preferred, a copy of which is filed
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<PAGE>
as an exhibit to the Registration Statement of which this Prospectus forms a
part. Upon request, the Transfer Agent for the Convertible Preferred will
furnish holders a copy of the Certificate of Designations. The Convertible
Preferred has been approved for listing on the AMEX, subject to official notice
of issuance.
RANKING. The Convertible Preferred will rank, with respect to dividend
rights and rights on liquidation, winding-up and dissolution, (i) senior to all
classes of common stock of the Company (including, without limitation, the
Common Stock and Class B Stock) and each other class of capital stock or series
of preferred stock established after the Offering by the Board of Directors of
the Company which does not expressly provide that it ranks senior to or on a
parity with the Convertible Preferred as to dividend rights and rights on
liquidation, winding-up and dissolution (collectively referred to with the
common stock of the Company as "Junior Securities"), (ii) on a parity with each
other class of capital stock or series of preferred stock established after the
Offering by the Board of Directors of the Company which expressly provides that
such series will rank on a parity with the Convertible Preferred as to dividend
rights and rights on liquidation, winding-up and dissolution (collectively
referred to as "Parity Securities") and (iii) junior to each other class of
capital stock or series of preferred stock established after the Offering by the
Board of Directors of the Company which expressly provides that such series will
rank senior to the Convertible Preferred as to dividend rights and rights on
liquidation, winding-up and dissolution (collectively referred to as "Senior
Securities"). While any shares of Convertible Preferred are outstanding, the
Company may not issue, authorize or increase the authorized amount of, or issue
or authorize or increase any obligation or security convertible into or
evidencing a right to purchase any additional class or series of (x) Senior
Securities, without the vote or consent of the holders of two-thirds of the
outstanding shares of Convertible Preferred and any Parity Securities, voting as
a single class without regard to series, or (y) Parity Securities, without the
vote or consent of the holders of a majority of the outstanding shares of
Convertible Preferred and any Parity Securities, voting as a single class
without regard to series. However, the Company may create additional classes of
Junior Securities, increase the authorized number of shares of any Junior
Security or issue any Junior Securities without the consent of any holder of the
Convertible Preferred. See "-- Voting Rights."
DIVIDENDS. Holders of shares of the Convertible Preferred will be entitled
to receive, when, as and if declared by the Board of Directors of the Company
out of funds of the Company legally available for payment, cash dividends at an
annual rate of $ per share of Convertible Preferred, payable in arrears on
March 15, June 15, September 15 and December 15 of each year, commencing June
15, 1994 (and, in the case of any accrued but unpaid dividends, at such
additional times and for such interim periods, if any, as determined by the
Board of Directors), except that if any such date is a Saturday, Sunday or legal
holiday, then such dividend shall be payable on the next day that is not a
Saturday, Sunday or legal holiday. Each dividend will be payable to holders of
record as they appear in the stock register of the Company on a record date
fixed by the Board of Directors which shall be not more than 60 nor less than
ten days before the payment date. Dividends will be cumulative from the date of
original issuance of the Convertible Preferred. Dividends payable on the
Convertible Preferred for each full dividend period will be computed by
annualizing the dividend rate and dividing by four. Dividends payable for any
period less than a full dividend period or for that portion of any period
greater than a full dividend period will be computed on the basis of a 360-day
year consisting of twelve 30-day months. The Convertible Preferred will not be
entitled to any dividend, whether payable in cash, property or stock, in excess
of full cumulative dividends. No interest, or sum of money in lieu of interest,
will be payable in respect of any accrued and unpaid dividends.
No full dividends may be declared or paid or funds set apart for the payment
of dividends on any Parity Securities for any period unless full cumulative
dividends shall have been paid or set apart for such payment on the Convertible
Preferred. If full cumulative dividends are not paid in full, or declared in
full and sums set apart for the payment thereof, upon the Convertible Preferred
and upon any other Parity Securities, all dividends declared upon shares of
Convertible Preferred and any such Parity Securities will be declared and paid
pro rata so that in all cases the amount of dividends declared per share on the
Convertible Preferred and on such other Parity Securities will bear to each
other the same ratio that accrued and unpaid dividends per share on the shares
of Convertible Preferred and such other Parity Securities bear to each other. No
dividends may be paid or set apart for such payment on Junior Securities (except
dividends on Junior Securities payable in additional shares of Junior Securities
or rights to acquire Junior Securities) and no
43
<PAGE>
Junior Securities may be repurchased, redeemed or otherwise retired, nor may
funds be set apart for payment with respect thereto, if full dividends for all
prior periods have not been paid on the Convertible Preferred. Accumulated
unpaid dividends will not bear interest.
Under Delaware law, the Company may declare and pay dividends on its capital
stock only out of surplus, as defined in the Delaware General Corporation Law
(the "DGCL") or, if there is no such surplus, out of its net profits for the
fiscal year in which the dividend is declared and/or the preceding fiscal year.
Surplus under the DGCL is generally defined to mean the excess, at any given
time, of the net assets of a corporation over the amount of the corporation's
capital. No dividends or distributions may be declared, paid or made if the
Company is or would be rendered insolvent by virtue of such dividend or
distribution, or if such declaration, payment or distribution would contravene
the Certificate of Incorporation.
LIQUIDATION RIGHTS. In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, before any payment or
distribution of assets is made on any Junior Securities, including, without
limitation, the Common Stock and Class B Stock of the Company, but after payment
or provision for payment of the Company's debts and other liabilities, the
holders of the Convertible Preferred shall receive a liquidation preference of
$25.00 per share and shall be entitled to receive all accrued and unpaid
dividends through the date of distribution, and the holders of any Parity
Securities shall be entitled to receive the full respective liquidation
preferences (including any premium) to which they are entitled and shall receive
all accrued and unpaid dividends with respect to their respective shares through
and including the date of distribution. If, upon such a voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the assets of the Company
are insufficient to pay in full the amounts described above as payable with
respect to the Convertible Preferred and any Parity Securities, the holders of
the Convertible Preferred and such Parity Securities will share ratably in any
such distribution of assets of the Company, first in proportion to their
respective liquidation preferences, until such preferences are paid in full, and
then in proportion to their respective amounts of accrued but unpaid dividends.
After payment of any such liquidating preference and accrued dividends, the
shares of Convertible Preferred will not be entitled to any further
participation in any distribution of assets by the Company. Neither the sale or
transfer of all or substantially all the assets of the Company, nor the merger
or consolidation of the Company into or with any other corporation or a merger
of any other corporation with or into the Company, nor any dissolution,
liquidation, winding up, or reorganization of the Company immediately followed
by reincorporation of another corporation, will be deemed to be a liquidation,
dissolution or winding-up of the Company.
OPTIONAL REDEMPTION. Shares of the Convertible Preferred are not subject to
any mandatory redemption, sinking fund or other similar provision and may not be
redeemed at the option of the Company on or prior to 1997. After
1997, the Convertible Preferred will be redeemable at the option of the
Company upon notice at any time, in whole or in part, at the following
redemption prices per share (expressed as a percentage of the $25.00 liquidation
preference thereof), plus accrued and unpaid dividends, if any, up to but
excluding the date fixed for redemption, if redeemed during the twelve-month
period commencing immediately after of the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ----------------------------------------------------------- ----------------
<S> <C>
1997....................................................... %
1998.......................................................
1999.......................................................
2000.......................................................
2001 and thereafter........................................ 100%
</TABLE>
If fewer than all of the outstanding shares of the Convertible Preferred are
to be redeemed, the shares to be redeemed will be determined pro rata or by lot.
In the event that any quarterly dividends payable on the Convertible Preferred
are in arrears, the Convertible Preferred may not be redeemed unless all
outstanding shares of Convertible Preferred are simultaneously redeemed or the
outstanding shares of the Convertible Preferred are redeemed on a pro rata
basis.
Notice of redemption will be given by first class mail, not less than 30
days nor more than 60 days prior to the date fixed for redemption thereof, to
each record holder of the shares of Convertible Preferred to be
44
<PAGE>
redeemed at the address of such holder in the stock register of the Company. If
a notice of redemption has been given, from and after the specified redemption
date (unless the Company defaults in making payment of the redemption price),
dividends on the Convertible Preferred so called for redemption will cease to
accrue, such shares will no longer be deemed to be outstanding, and all rights
of the holders thereof as stockholders of the Company (except the right to
receive the redemption price) will cease.
The ability of the Company to redeem shares of Convertible Preferred is
restricted under the terms of the Credit Facility and the Notes.
VOTING RIGHTS. Except as indicated below or as expressly required by
applicable law, the holders of the Convertible Preferred will have no voting
rights. If the equivalent of six full quarterly dividends payable on the
Convertible Preferred are in arrears, the authorized number of directors of the
Company will be increased by two and the holders of the Convertible Preferred,
voting separately as a class with the holders of shares of any Parity Securities
upon which like voting rights have been conferred and are exercisable, will be
entitled to elect two directors, either by written consent or at any meeting at
which directors are to be elected, until all dividends in arrears on the
Convertible Preferred have been paid or declared and set apart for payment. Upon
payment or declaration and setting apart of funds for payment of all such
dividends in arrears, the term of office of each director elected will
immediately terminate and the number of directors constituting the entire Board
of Directors will be reduced by the number of directors elected by the holders
of the Convertible Preferred and any Parity Securities.
The vote or consent of the holders of two-thirds of the outstanding shares
of Convertible Preferred and any Parity Securities, voting together as a single
class without regard to series, will be required to issue, authorize or increase
the authorized amount of, or issue or authorize or increase any obligation or
security convertible into or evidencing a right to purchase, any additional
class or series of Senior Securities. Furthermore, the vote or consent of the
holders of a majority of the outstanding shares of Convertible Preferred and any
Parity Securities, voting together as a single class without regard to series,
will be required to issue, authorize or increase the authorized amount of, or
issue or authorize or increase any obligation or security convertible into or
evidencing a right to purchase, any additional class or series of Parity
Securities. However, the Company may create additional classes of Junior
Securities, increase the authorized number of shares of any Junior Security or
issue any Junior Securities without the consent of any holder of the Convertible
Preferred. No such vote or consent of the holders of the Convertible Preferred
is required if, at or prior to the time when the issuance of any such Senior or
Parity Securities is to be made or any such change is to take effect, as the
case may be, provision is made for the redemption of all of the Convertible
Preferred at the time outstanding pursuant to the terms of the Convertible
Preferred.
The vote or consent of the holders of two-thirds of the outstanding shares
of Convertible Preferred, voting as a class, will be required to authorize an
amendment to the Certificate of Incorporation, whether or not such holders are
entitled to vote thereon by the Certificate of Incorporation, if the amendment
would increase or decrease the aggregate number of authorized shares of such
class, increase the par value of the shares of such class, or alter or change
the powers, preferences or special rights of the shares of such class so as to
affect them adversely.
CONVERSION. Shares of the Convertible Preferred will be convertible at any
time at the option of the holder thereof into such number of whole shares of
Common Stock as is equal to the aggregate liquidation preference of the shares
of Convertible Preferred surrendered for conversion divided by the initial
conversion price as set forth on the cover page of this Prospectus, subject to
adjustment as described below. Upon the surrender of any shares of Convertible
Preferred for conversion, in lieu of issuing the Common Stock issuable upon
conversion of the Convertible Preferred, the Company may, at its option, pay to
the holder of such shares of Convertible Preferred an amount in cash equal to
the then Market Value (as defined below) of the number of shares of Common Stock
into which such shares of Convertible Preferred are then convertible.
Notwithstanding the foregoing, the Company's ability to redeem for cash the
Convertible Preferred surrendered for conversion is restricted under the terms
of the Company's Credit Facility and Notes. Holders of the Convertible Preferred
will not be entitled to any payment or adjustment on account of
45
<PAGE>
accrued and unpaid dividends upon conversion of the Convertible Preferred.
Shares of Convertible Preferred surrendered for conversion during the period
after any dividend payment record date and prior to the corresponding dividend
payment date must be accompanied by payment of an amount equal to the dividend
payable on such shares on such dividend payment date. Dividends with respect to
shares of Convertible Preferred that are called for redemption on a redemption
date during the period after any dividend payment record date and prior to the
corresponding dividend payment date shall be payable notwithstanding conversion
of such shares after such record date and prior to such dividend payment date,
and the holder converting such shares need not include payment of such dividend
amount upon surrender of such shares for conversion. Shares of Convertible
Preferred called for redemption will not be convertible after the close of
business on the business day preceding the date fixed for redemption unless the
Company defaults in payment of the redemption price. No fractional shares of
Common Stock will be issued as a result of conversion, but, in lieu thereof, an
amount equal to Market Value of such fractional interest will be paid in cash by
the Company.
The initial conversion price per share of Common Stock is subject to
adjustment (under formulae set forth in the Certificate of Designations for the
Convertible Preferred) in certain events, including: (i) the issuance of Common
Stock as a dividend or distribution on the Common Stock of the Company, (ii)
certain subdivisions and combinations of the Common Stock, (iii) the issuance to
all holders of Common Stock of certain rights or warrants to purchase Common
Stock at a price per share less than the then current market price per share and
(iv) the distribution to all holders of Common Stock of evidences of
indebtedness of the Company, shares of capital stock of the Company (other than
Common Stock), cash or other assets (excluding those rights, warrants, dividends
and distributions referred to above and dividends and distributions in
connection with the liquidation, dissolution or winding-up of the Company or
paid in cash out of the current or retained earnings of the Company). No
adjustment of the conversion price will be made until cumulative adjustments
amount to one percent or more of the conversion price as last adjusted, but any
such adjustment that would otherwise be required to be made shall be carried
forward and taken into account in any subsequent adjustment.
The Company from time to time may decrease the conversion price by any
amount for any period of at least 20 days, in which case the Company shall give
at least 15 days' notice of such decrease. At its option, the Company also may
make such other reduction in the conversion price as the Board of Directors
deems advisable to avoid or diminish any income tax to holders of Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes. See "Certain
Federal Income Tax Consequences."
In the event of (i) any recapitalization or reclassification of shares of
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, as a result of a subdivision or
combination of the Common Stock), (ii) any consolidation or merger of the
Company with or into another person or any merger of another person into the
Company (other than a merger that does not result in a reclassification,
conversion, exchange or cancellation of Common Stock), (iii) any sale or
transfer of all or substantially all of the assets of the Company or (iv) any
compulsory share exchange, pursuant to which any holders of Common Stock shall
be entitled to receive other securities, cash or other property, the holder of
each share of Convertible Preferred then outstanding shall have the right
thereafter to convert such share only into the kind and amount of the
securities, cash or other property that would have been receivable upon such
recapitalization, reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Common Stock issuable upon
conversion of such share of Convertible Preferred immediately prior to such
recapitalization, reclassification, consolidation, merger, sale, transfer or
share exchange. The company formed by such consolidation or resulting from such
merger or that acquires such assets or that acquires the Company's shares, as
the case may be, shall make provisions in its certificate or articles of
incorporation or other constituent document to establish such right. Such
certificate or articles of incorporation or other constituent document shall
provide for adjustments that, for events subsequent to the effective date of
such certificate or articles of incorporation or other constituent documents,
shall be as nearly equivalent as may be practicable to the relevant adjustments
provided for in the preceding two paragraphs and in this paragraph.
46
<PAGE>
Holders of shares of Convertible Preferred desiring to convert the same into
Common Stock must surrender the shares being converted free of any adverse
interest, accompanied by a written notice of conversion specifying the number
(in whole shares) of shares of Convertible Preferred to be converted and the
name or names in which such holder wishes the certficate or certificates for
Common Stock to be issued. Each conversion will be deemed to have been effected
immediately prior to the close of business on the date on which the Company
receives such shares of Convertible Preferred and notice. Such conversion shall
be at the conversion price in effect on such conversion date. Each holder of
Common Stock issuable upon the conversion of the Convertible Preferred will be
deemed a holder of record of Common Stock at the close of business on such date
of conversion unless (x) the stock transfer books of the Company shall be closed
on that date, in which event at the close of business on the next succeeding day
on which such stock transfer books are open or (y) within ten days of receipt of
such conversion notice or as promptly after such receipt as practicable the
Company delivers to the holder written notice of the Company's election to pay
cash in lieu of delivering Common Stock and a check in payment for such shares
of Common Stock in an amount equal to their Market Value (as defined below).
SPECIAL CONVERSION RIGHTS. The Convertible Preferred has a special
conversion right that becomes effective upon the occurrence of certain types of
significant transactions affecting ownership or control of the Company or the
market for the Common Stock. The purpose of the special conversion right is to
provide (subject to certain exceptions) partial loss protection upon the
occurrence of a Change of Control or a Fundamental Change (each as defined
below) at a time when the Market Value of the Common Stock issuable upon
conversion by a holder is less than the then prevailing conversion price. In
such situations, the special conversion right would, for a limited period,
reduce the then prevailing conversion price to the higher of the Market Value of
the Common Stock or a minimum conversion price equal to 80% of the last reported
sale price of the Common Stock as reflected on the cover page of this
Prospectus, subject to certain adjustments (and increase the equivalent
conversion ratio accordingly). Consequently, to the extent that the Market Value
of the Common Stock is less than the minimum conversion price, a holder will
have a lesser degree of protection from loss upon exercise of a special
conversion right.
The special conversion right is intended to provide limited loss protection
to investors in certain circumstances, while not giving holders a veto power
over significant transactions affecting ownership or control of the Company.
Although the special conversion right may render more costly or otherwise
inhibit certain proposed transactions, its purpose is not to inhibit or
discourage takeovers or other business combinations.
Each holder of the Convertible Preferred will be entitled to a special
conversion right if a Change of Control or Fundamental Change occurs. However,
if the majority of the value of the consideration received in a transaction by
holders of Common Stock is Marketable Stock (as defined below) or if the holders
of Voting Stock (as defined below) of the Company hold a majority of the Voting
Stock of the Company's successor, the transaction will not be a Fundamental
Change, and holders of the Convertible Preferred will not have special
conversion rights as the result of that transaction.
A special conversion right will permit a holder of the Convertible
Preferred, at the holder's option during the 30-day period described in the
following paragraph, to convert all, but not less than all, the holder's
Convertible Preferred at a conversion price equal to the Special Conversion
Price (as defined below). A holder exercising a special conversion right will
receive Common Stock if a Change of Control occurs and, if a Fundamental Change
occurs, will receive the same consideration received for the number of shares of
Common Stock into which the holder's Convertible Preferred would have been
convertible at the Special Conversion Price. In either case, however, the
Company or its successor may, at its option, elect to pay the holder cash equal
to the Market Value of the number of shares of Common Stock into which the
holder's Convertible Preferred is convertible at the Special Conversion Price.
The Company will mail to each registered holder of the Convertible Preferred
a notice setting forth details of any special conversion right occasioned by a
Change of Control or Fundamental Change within 30 days after the event occurs. A
special conversion right may be exercised only within the 30-day period after
the notice is mailed and will expire at the end of that period. Exercise of a
special conversion right, to the
47
<PAGE>
extent permitted by law, is irrevocable, and all the Convertible Preferred
surrendered for conversion will beconverted at the end of the 30-day period
mentioned in the preceding sentence. The Company, in taking any action in
connection with any Change of Control, Fundamental Change or related special
conversion right, will undertake to comply with all applicable federal
securities regulations including, to the extent applicable, Rules 13e-4 and
14e-1 under the Exchange Act.
The shares of Convertible Preferred that are not converted pursuant to a
special conversion right will continue to be convertible pursuant to the general
conversion rights described under the caption "-- Conversion" above.
The special conversion right is not intended to, and does not, protect
holders of the Convertible Preferred in all circumstances that might affect
ownership or control of the Company or the market for the Common Stock or that
might otherwise adversely affect the value of an investment in the Convertible
Preferred. The ability to control the Company may be obtained by a person even
if that person does not, as is required to constitute a Change of Control,
acquire more than 50% of the Company's voting power. The Company and the market
for the Common Stock may be affected by various transactions that do not
constitute a Fundamental Change. In particular, transactions involving the
transfer of substantially less than all of the Company's assets or the transfer
or conversion of less than 50% of the voting power may have a significant effect
on the Company and the market for the Common Stock, as could transactions in
which holders of Common Stock receive primarily Marketable Stock or in which
holders of Voting Stock (presently the Class B Stock) of the Company continue to
own a majority of the Voting Stock of the successor to the Company. In addition,
if the special conversion right does arise as the result of a Fundamental
Change, the special conversion right will allow a holder exercising a special
conversion right to receive the same type of consideration received by the
holders of Common Stock and, thus, the degree of protection afforded by the
special conversion right may be affected by the type of consideration received.
As used herein, a "Change of Control" with respect to the Company shall be
deemed to have occurred at the first time after the issuance of the Convertible
Preferred that (i) a majority of the Board of Directors of the Company, over a
two-year period, is replaced from the directors who constituted the Board of
Directors of the Company at the beginning of such period, which replacement
shall not have been approved by the Board of Directors of the Company (or
replacement directors approved by the Board of Directors of the Company), as
constituted at the beginning of such period, or (ii) a person or entity or group
of persons or entities acting in concert as a partnership or other group (other
than the DI affiliates (as defined below), any subsidiary of the Company, any
employee stock purchase plan, stock option plan or other stock incentive plan or
program, retirement plan or automatic reinvestment plan or any substantially
similar plan of the Company or any subsidiary of the Company or any person
holding securities of the Company for or pursuant to the terms of any such
employee benefit plan) shall, as a result of a tender or exchange offer, open
market purchases, privately negotiated purchases or otherwise, have become the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company representing 50% or more of the combined voting power
of the then outstanding securities of the Company ordinarily (and apart from
rights accruing under special circumstances) having the right to vote in the
election of directors.
As used herein, the term "DI affiliates" means (i) Mr. Stanley H. Durwood,
his spouse and any of his lineal descendants and their respective spouses
(collectively the "Durwood Family"), (ii) any controlled affiliate of any member
of the Durwood Family and (iii) any trust for the benefit of one or more members
of the Durwood Family (whether or not any member of the Durwood Family is a
trustee of such trust) and no other person other than one or more charitable
organizations.
As used herein, a "Fundamental Change" with respect to the Company means (i)
the occurrence of any transaction or event in connection with which (a) 66 2/3%
or more of the outstanding Common Stock or (b) securities of the Company
representing 50% or more of the combined voting power of the then outstanding
securities of the Company ordinarily (and apart from rights accruing under
special circumstances) having the right to vote in the election of directors is
exchanged for, converted into, acquired for or constitutes solely the right to
receive cash, securities, property or other assets (whether by means of an
48
<PAGE>
exchange offer, liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise) or (ii) the conveyance, sale,
lease, assignment, transfer or other disposal of all or substantially all of the
Company's property, business or assets; provided, however, that a Fundamental
Change will not be deemed to have occurred with respect to either of the
following transactions or events: (a) any transaction or event in which more
than 50% (by value as determined in good faith by the Board of Directors) of the
consideration received by holders of Common Stock consists of Marketable Stock
or (b) any consolidation or merger of the Company in which the holders of Voting
Stock of the Company immediately prior to such transaction own, directly or
indirectly, 50% or more of the Voting Stock of the sole surviving corporation
(or of the ultimate parent of such sole surviving corporation) outstanding at
the time immediately after such consolidation or merger. There is no established
meaning of what constitutes a sale of "all or substantially all" of a company's
property, business or assets. This uncertainty may make it difficult for a
holder to determine whether or not a Fundamental Change has occurred, and thus,
whether he is entitled to a special conversion right respecting the shares of
Convertible Preferred held by him.
As used herein, "Voting Stock" means, with respect to any person, capital
stock of such person, having general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
such person (irrespective of whether or not at the time capital stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency). Because holders of Class B Stock presently are
entitled to elect more than 50% of the Company's Board of Directors, the Class B
Stock is presently the only Voting Stock of the Company for purposes of this
definition.
As used herein, "Special Conversion Price" means the higher of (i) the
Market Value of the Common Stock or (ii) $ per share (which amount will,
each time the conversion price is adjusted, be adjusted so that the ratio of
such amount to the conversion price, after giving effect to any such adjustment,
shall always be the same as the ratio of $ to the initial conversion
price, without giving effect to any such adjustment). As used herein, "Market
Value" of the Common Stock or any other Marketable Stock is the average of the
last reported sales prices of the Common Stock or such other Marketable Stock,
as the case may be, for the five trading days ending on the last trading day
preceding the date of the Fundamental Change, Change of Control or conversion,
as applicable.
As used herein, the term "Marketable Stock" means the Common Stock or common
stock of any corporation that is the successor to all or substantially all of
the business or assets of the Company as a result of a Fundamental Change or of
the ultimate parent of such successor, which is (or will, upon distribution
thereof, be) listed or quoted on the New York Stock Exchange, the American Stock
Exchange, the Nasdaq National Market or any similar system of automated
dissemination of quotations of securities prices in the United States.
COMMON STOCK AND CLASS B STOCK
VOTING RIGHTS. The holders of Common Stock are entitled to one vote per
share and, except for the election of directors, vote together as a single class
with the Class B Stock, subject to the right to vote as a separate class on
certain charter amendments affecting the Common Stock and as required by law.
The holders of Class B Stock are entitled to ten votes per share and, except
for the election of directors, vote together with the Common Stock as a single
class, subject to the right to vote as a separate class on certain charter
amendments affecting the Class B Stock and as required by law.
Holders of Common Stock, voting separately as a class, with each share
having one vote for such purpose, generally have the right to elect 25% of the
Board of Directors. So long as any shares of Class B Stock remain outstanding,
holders of Class B Stock, voting separately as a single class, with each share
of Class B Stock having one vote for such purpose, generally have the right to
elect 75% of the Board of Directors. If the total number of shares of Class B
Stock outstanding becomes less than 12 1/2% of the aggregate number of shares of
Common Stock and Class B Stock outstanding, then so long as shares of Common
Stock are listed on the AMEX, the 75% of the Board of Directors otherwise
elected by holders of Class B Stock will be elected by holders of Common Stock
and Class B Stock voting together as a single class,
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with each share of Common Stock having one vote per share and each share of
Class B Stock having ten votes per share. In the event that no shares of Class B
Stock remain outstanding, the holders of Common Stock may elect all of the Board
of Directors, with each share having one vote for such purpose. Holders of
Common Stock and Class B Stock do not have cumulative voting rights in elections
of directors.
CONVERSION RIGHTS. Each holder of Class B Stock is entitled to convert all
or any portion of such holder's shares of Class B Stock into the same number of
shares of Common Stock. Upon approval of the holders of a majority of the
outstanding shares of Class B Stock, a pro rata percentage of shares of Class B
Stock of each holder of record will be automatically converted into the same
number of shares of Common Stock. The Company's Certificate of Incorporation
requires the Company to reserve and keep available a sufficient number of
authorized but unissued shares of Common Stock to permit conversion of all
outstanding shares of Class B Stock.
PREEMPTIVE RIGHTS. Holders of Common Stock and Class B Stock have no
preemptive rights.
DIVIDEND AND LIQUIDATION RIGHTS. Holders of Common Stock and Class B Stock
are entitled to receive, pro rata per share, such dividends as the Board of
Directors may from time to time declare out of funds of the Company legally
available for the payment of dividends, subject to the prior rights of holders
of any then outstanding Preferred Stock. Upon any liquidation, dissolution or
winding-up of the Company, holders of Common Stock and Class B Stock are
entitled to receive, pro rata per share, any remaining assets of the Company
available for distribution to stockholders, subject to the prior rights of
holders of any then outstanding Preferred Stock.
CERTAIN STOCK TRANSACTIONS. No stock dividend, stock split, subscription
right, combination, subdivision or exchange may be paid or issued by the Company
to holders of Common Stock or Class B Stock except in shares of (or a right to
subscribe to shares of) the same class and only if such action is taken at the
same time with respect to the other class so that the number of shares of each
class outstanding (or subject to a subscription right) is increased or decreased
in like proportion. The Company may not merge or consolidate unless the terms
and conditions of the merger or consolidation provide that holders of Common
Stock and Class B Stock then outstanding receive, pro rata per share,
consideration of equal value.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW
DIRECTOR LIABILITY. The DGCL permits a corporation to include in its
certificate of incorporation provisions eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for such director's breach of fiduciary duty, provided that such
provisions may not eliminate or limit a director's liability (i) for a breach of
his or her duty of loyalty to the corporation or its stockholders; (ii) for acts
or omissions not in good faith or involving intentional misconduct or a knowing
violation of law; (iii) for unlawful payments of dividends, certain stock
repurchases or redemptions; or (iv) for any transaction from which the director
derived an improper personal benefit. These provisions generally protect a
corporation's directors from personal liability for breaches of their duty of
care, including liability for grossly negligent business decisions. The
Company's Certificate of Incorporation includes provisions which eliminate the
personal liability of directors for breach of fiduciary duty to the full extent
permitted by the DGCL.
REQUISITE VOTING PERCENTAGE. The DGCL generally provides that the
affirmative vote of a majority of the shares represented and entitled to vote at
a stockholders' meeting at which a quorum is present (either in person or by
proxy) is required for routine stockholder action other than the election of
directors. For mergers, consolidations and transactions involving the
disposition of substantially all of a corporation's assets, the affirmative vote
of a majority of outstanding shares is required by the DGCL. The DGCL permits a
corporation to require a greater vote in its certificate of incorporation or its
by-laws. The Company's Certificate of Incorporation and By-Laws do not provide
for any greater voting requirement. However, the Certificate of Designations
respecting the Convertible Preferred requires the approval of the holders of
two-thirds of the outstanding shares of Convertible Preferred and any Parity
Securities, voting as a class, for the issuance, authorization or increase of
any class of Senior Securities. See "-- Convertible Preferred -- Voting Rights".
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TRANSACTIONS WITH INTERESTED STOCKHOLDERS. Under the DGCL, a corporation
may not engage in any business combination (hereinafter defined) with an
Interested Stockholder (hereinafter defined) for a period of three years
following the date that such stockholder became an Interested Stockholder (the
"Interested Stockholder Date") unless: (i) prior to the Interested Stockholder
Date, the board of directors of the corporation approves the business
combination; (ii) upon consummation of the business combination the Interested
Stockholder owns at least 85% of the voting stock of the corporation outstanding
at the time the transaction commenced; or (iii) on or subsequent to the
Interested Stockholder Date, the business combination is approved by the board
of directors and is authorized at a meeting of stockholders by the affirmative
vote, and not by written consent, of at least two-thirds of the outstanding
voting stock which is not owned by the Interested Stockholder.
As used in the preceding paragraph, (i) an "Interested Stockholder" is any
person (other than the corporation or its subsidiaries) that, with certain
exceptions, (A) is the owner of 15% or more of the outstanding voting stock of
the corporation, or (B) is an affiliate or associate of the corporation and was
the owner of 15% or more of the outstanding voting stock of the corporation at
any time within the three year period immediately prior to the Interested
Stockholder Date; and (ii) a "business combination" is (A) a merger or
consolidation; (B) a sale, lease, exchange, mortgage, pledge, transfer or other
disposition of a corporation's assets having an aggregate market value equal to
ten percent or more of the aggregate market value of all of the corporation's
assets, determined on a consolidated basis, or having an aggregate market value
equal to ten percent or more of the aggregate market value of all of the
corporation's outstanding stock; (C) the issuance or transfer of any stock to an
Interested Stockholder, other than issuances pursuant to the exercise of certain
convertible securities outstanding prior to the Interested Stockholder Date,
certain issuances or transfers made on the same terms to all stockholders, or
issuances or transfers which do not increase the proportionate interest of an
Interested Stockholder, (D) a transaction which increases an Interested
Stockholder's proportionate share of the stock of any class or series; and (E)
any receipt by an Interested Stockholder of loans, advances, guarantees, pledges
or other financial benefits from the corporation.
INDEMNIFICATION. The DGCL provides that indemnification of a person who was
or is a party, or is threatened to be made a party, to a legal proceeding by
reason of the fact that such person was or is a director, officer or agent of a
corporation, or is or was serving as a director, officer, employee or agent of
another corporation or other firm at the request of a corporation, against
expenses, judgments, fines and amounts paid in settlement, is mandatory under
certain circumstances (generally respecting expenses, including attorneys' fees,
incurred by an indemnified party who is successful on the merits of the
proceedings giving rise to the claim for indemnification) and permissive in
others. Under the DGCL, permissive indemnification is subject to authorization
(i) by a majority vote of a quorum consisting of directors who were not parties
to such legal proceeding, or (ii) if such quorum is not obtainable, or even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the corporation's stockholders. The
standard of conduct required by the DGCL requires that a person seeking
indemnification shall have acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to criminal proceedings, had no reason to believe his or her
conduct was unlawful. For actions or suits brought by or in the name of the
corporation, the DGCL provides that a director, employee, officer or agent of a
corporation may be indemnified against expenses by such person in connection
with such proceeding, except if such person is adjudged to be liable to the
corporation, in which case such person can be indemnified if and only to the
extent that a court shall determine that, despite the adjudication of liability,
in view of all of the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses as the court shall deem
proper.
The Company's Certificate of Incorporation contains provisions requiring
indemnification to the full extent permitted by the DGCL. In certain
circumstances, the Company's Certificate of Incorporation also provides for
mandatory advance payment of indemnifiable expenses by the Company.
TRANSFER AGENT. United Missouri Bank, N.A., Kansas City, Missouri, is the
transfer agent and registrar for the Common Stock and will be the transfer agent
for the Convertible Preferred.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
INTRODUCTION
The discussion set forth below is a summary of the material tax
considerations relevant to original investors with respect to the purchase,
ownership, and disposition of Convertible Preferred, but does not purport to be
a complete analysis of all of the potential tax effects of such purchase,
ownership, and disposition. The discussion is limited to United States federal
income tax matters. The discussion is based upon the Code, Treasury regulations,
Internal Revenue Service ("IRS") rulings, and judicial decisions now in effect,
all of which are subject to change at any time, possibly with retroactive
effect, by legislative, judicial, or administrative action. Except as otherwise
indicated, references in this section to Common Stock are to the Common Stock
issuable upon conversion of the Convertible Preferred.
The discussion is applicable only to investors who will hold the Convertible
Preferred and the Common Stock as "capital assets" (generally, property held for
investment) within the meaning of Section 1221 of the Code. In addition, the
discussion does not address the tax consequences of purchasing, owning, or
disposing of Convertible Preferred to taxpayers which are subject to special
rules that do not apply to taxpayers generally, such as life insurance
companies, tax-exempt organizations, regulated investment companies, S
corporations, financial institutions, broker-dealers, foreign entities, and
nonresident alien individuals.
Gage & Tucker, counsel to the Company, has given an opinion that the
discussion, insofar as it expresses conclusions of law, is accurate in all
material respects. The Company has not sought, nor does it intend to seek, a
ruling from the IRS as to any of the matters covered by the discussion. There
can be no assurance that the IRS will not challenge, perhaps successfully,
certain of the conclusions reached in the discussion.
THE TAX CONSEQUENCES OF PURCHASING, OWNING, AND DISPOSING OF CONVERTIBLE
PREFERRED MAY VARY DEPENDING ON A HOLDER'S PARTICULAR SITUATION. PROSPECTIVE
INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE TAX
CONSEQUENCES TO THEM OF AN INVESTMENT IN THE CONVERTIBLE PREFERRED, INCLUDING
BUT NOT LIMITED TO THE APPLICATION TO THEM OF FEDERAL ESTATE AND GIFT, STATE,
LOCAL, FOREIGN, AND OTHER TAX LAWS.
DIVIDENDS ON CONVERTIBLE PREFERRED
Distributions made by the Company with respect to the Convertible Preferred
will be characterized as dividends taxable as ordinary income to the extent that
the Company has current or accumulated earnings and profits as computed for
federal income tax purposes. A distribution made to a holder of Convertible
Preferred with respect to such stock that exceeds the holder's allocable share
of the Company's current or accumulated earnings and profits as computed for
federal income tax purposes will be treated as follows. First, the distribution
will be applied against and reduce the holder's adjusted basis in the holder's
Convertible Preferred. Then, to the extent that the distribution exceeds the
holder's adjusted basis in the Convertible Preferred, the distribution will be
taxed as a capital gain. The capital gain will be long-term capital gain if the
holder's holding period for the Convertible Preferred is more than one year.
The Company believes that it has accumulated earnings and profits as
computed for federal income tax purposes, but no definitive earnings and profits
studies have been conducted and the amount of such earnings and profits, if any,
is unknown. While no assurance can be given, the Company believes that it will
have current earnings and profits as computed for federal income tax purposes
for 1994. It is not possible to predict whether the Company will have current or
accumulated earnings and profits in subsequent years. Thus, there can be no
assurance that all or any portion of any distribution made with respect to the
Convertible Preferred will be characterized as a dividend for federal income tax
purposes.
CORPORATE HOLDERS -- DEDUCTION FOR DIVIDENDS RECEIVED
A corporate holder of Convertible Preferred will generally be entitled, in
computing its taxable income, to a deduction in an amount equal to 70 percent of
any distributions received by it with respect to such stock that are treated as
dividends. This deduction is subject to several limitations, as described in the
following paragraphs.
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The dividends received deduction will be available only for dividends
received on shares of Convertible Preferred that the corporate holder has held
for at least 46 days, or at least 91 days in the case of dividends attributable
to a period or periods aggregating more than 366 days. A holder's holding period
for these purposes generally will be reduced by periods during which: (i) the
holder has an option to sell, is under a contractual obligation to sell, or has
made (but not closed) a short sale of substantially identical stock or
securities; (ii) the holder is the grantor of an option to purchase
substantially identical stock or securities; or (iii) the holder's risk of loss
with respect to the shares is considered diminished by reason of the holding of
one or more positions in substantially similar or related property.
In addition to the foregoing, no dividends received deduction will be
allowed to a corporate holder of the Convertible Preferred for dividends
received by such holder with respect to such stock to the extent that the holder
is obligated (whether pursuant to a short sale or otherwise) to make related
payments with respect to positions in substantially similar or related property.
The dividends received deduction allowed to a corporate holder of Convertible
Preferred with respect to all dividends received by such holder, and not simply
those paid with respect to the Convertible Preferred, will be limited to a
specified proportion of the holder's adjusted taxable income. Also, the
dividends received deduction allowed to a corporate holder may be reduced or
eliminated in accordance with the rules set forth in Section 246A of the Code,
if the holder has indebtedness that is directly attributable to its investment
in portfolio stock, such as the Convertible Preferred.
Special rules may apply to a corporate holder of the Convertible Preferred
who receives a dividend with respect to such stock that is considered to be an
"extraordinary dividend" within the meaning of Section 1059 of the Code. If a
corporate holder receives such an extraordinary dividend with respect to
Convertible Preferred, and if the holder has not held such stock for more than
two years before the Company declares, announces, or agrees to the amount or
payment of such dividend, whichever is earliest, then the holder's basis in the
stock will be reduced (but not below zero) by any nontaxed portion of the
dividend, which generally is the amount of the dividends received deduction. For
purposes of determining if Convertible Preferred has been held for more than two
years, rules similar to those that are applicable to determining how long such
stock has been held for purposes of the dividends received deduction will apply.
Upon the sale or disposition of Convertible Preferred, any part of the nontaxed
portion of an extraordinary dividend that has not been applied to reduce basis
because of the limitation on reducing basis below zero will be treated as gain
from the sale or exchange of such stock.
An "extraordinary dividend" on the Convertible Preferred generally will
include a dividend received by a holder that: (i) equals or exceeds five percent
of the holder's adjusted basis in the stock, treating all dividends having
ex-dividend dates within an 85-day period as one dividend; or (ii) exceeds 20
percent of the holder's adjusted basis in the stock (determined without regard
to any reduction for the nontaxed portion of other extraordinary dividends),
treating all dividends having ex-dividend dates within a 365-day period as one
dividend. A holder may elect to use the fair market value of the stock, rather
than its adjusted basis, for purposes of applying the five percent and 20
percent limitations, if the holder is able to establish such fair market value
to the satisfaction of the IRS. An "extraordinary dividend" will also include
any amount treated as a dividend upon a redemption of Convertible Preferred that
is either part of a partial liquidation of the Company under Section 302(e) of
the Code or not pro rata as to all shareholders, and the basis reduction and
gain recognition rules described in the preceding paragraph will apply to such
an extraordinary dividend without regard to the period the holder held the
stock.
A dividend on the Convertible Preferred received by a holder generally will
be a "qualified preferred dividend" if: (i) the stock was not in arrears as to
dividends when acquired by the holder; and (ii) the holder's actual rate of
return on such stock, as determined under Section 1059(e)(3) of the Code, does
not exceed 15 percent. Where a qualified preferred dividend received with
respect to the Convertible Preferred would otherwise be treated as an
extraordinary dividend: (i) the basis reduction rules generally applicable to
extraordinary dividends will not apply if the holder holds the stock for more
than five years; and (ii) if the holder disposes of the stock before it has been
held for more than five years, the aggregate reduction in basis under such basis
reduction rules will not exceed the excess of the qualified preferred dividends
paid on such stock during the period held by the taxpayer over the qualified
preferred dividends which would have been
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paid during such period on the basis of the stated rate of return on such stock
as determined under Section 1059(e)(3) of the Code. For purposes of determining
if Convertible Preferred has been held for more than five years, rules similar
to those that are applicable to determining how long such stock has been held
for purposes of the dividends received deduction will apply.
In addition to the foregoing rules which limit the dividends received
deduction, a corporate holder of Convertible Preferred in general may, for
purposes of computing its alternative minimum tax liability, be required to
include in its alternative minimum taxable income the amount of any dividends
received deduction allowed in computing regular taxable income.
ADJUSTMENT OF CONVERSION PRICE
Holders of Convertible Preferred may be deemed to have received a
constructive distribution of stock that is taxable as a dividend if, among other
things, the conversion price of the Convertible Preferred is adjusted to reflect
a cash or property distribution with respect to the Common Stock. However, an
adjustment to the conversion price made pursuant to a bona fide reasonable
adjustment formula which has the effect of preventing the dilution of the
interests of the holders generally will not be considered to result in a
constructive stock dividend. Certain of the possible adjustments in the
conversion price that might occur as a result of the provisions in the
Certificate of Designations respecting the Convertible Preferred (including,
without limitation, the provisions respecting adjustments that might occur in
the event of a Change of Control or a Fundamental Change and the provisions that
relate to action taken by the Board of Directors to reduce the conversion price
to avoid or diminish income tax to the holders of Common Stock or for any other
purpose) may not qualify as being pursuant to a bona fide reasonable adjustment
formula. If a nonqualifying adjustment were made, the holders of Convertible
Preferred, as indicated above, might be deemed to have received a taxable stock
dividend.
Any such constructive dividends may constitute (and cause other dividends to
constitute) "extraordinary dividends" to corporate holders. Any such
extraordinary dividends would be subject to the rules relating to such dividends
described above.
REDEMPTION PREMIUM
With respect to preferred stock, such as the Convertible Preferred, that is
callable but is neither puttable by holders nor subject to a mandatory
redemption by the issuer (whether expressly or by other arrangements), if the
redemption price of such preferred stock exceeds its issue price, and if such
excess is not considered to be a reasonable redemption premium, the entire
amount of the redemption premium will be treated as being distributed to the
holder of such stock, on an economic accrual basis, over the period of time
beginning with the issuance of such stock and ending when the stock is first
redeemable. In this respect, the income tax regulations provide that a
redemption premium not in excess of 10 percent of the issue price on stock which
is not redeemable for five years from the date of issue will be considered to be
reasonable. Even if this test is not satisfied, however, a redemption premium
will be considered to be reasonable if it is in the nature of a penalty for a
premature redemption of the preferred stock and it does not exceed the amount
the issuer would be required to pay for the right to make such premature
redemption under the market conditions existing at the time of issuance.
The Company believes that the premium which it would be required to pay in
order to call the Convertible Preferred is equivalent to premium rates presently
payable on newly-issued comparable stock paying comparable dividends. However,
there can be no assurance that redemption premiums will not be treated as
constructive dividends in accordance with the general rules stated above.
CONVERSION OF CONVERTIBLE PREFERRED INTO COMMON STOCK
A holder of Convertible Preferred may elect to convert such stock at any
time, and the Company will then determine whether the conversion will be made
into shares of Common Stock or into cash, all as described under "Description of
Capital Stock -- Convertible Preferred." The consequences of a conversion of
Convertible Preferred into Common Stock are discussed in the following
paragraph. The consequences of a conversion of Convertible Preferred into cash
are discussed below in this section under "Redemption of Convertible Preferred
for Cash."
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No gain or loss will be recognized upon the conversion of Convertible
Preferred solely into shares of Common Stock. However, gain realized upon the
receipt of cash paid in lieu of fractional shares of Common Stock will be taxed
immediately. Except to the extent that basis is utilized when cash is paid in
lieu of fractional shares of Common Stock, the adjusted basis for the shares of
Common Stock received upon the conversion will be equal to the adjusted basis of
the Convertible Preferred converted, and the holding period of the shares of
Common Stock will include the holding period of the Convertible Preferred
converted.
REDEMPTION OF CONVERTIBLE PREFERRED FOR CASH
A redemption of the Convertible Preferred for cash will be treated as a sale
or exchange of such stock by the holder thereof (except to the extent of any
declared but unpaid dividends) if the redemption either: (i) is a complete
redemption of all stock of the Company owned by the holder under Section
302(b)(3) of the Code; (ii) is "substantially disproportionate" with respect to
the holder under Section 302(b)(2) of the Code; or (iii) is "not essentially
equivalent to a dividend" under Section 302(b)(1) of the Code. In determining
whether any of the Section 302(b) tests are met, Common Stock and any other
stock of the Company will be taken into account, along with Convertible
Preferred. Also in making such determination, stock that is constructively owned
under Section 318 of the Code, as well as stock that is actually owned, will be
taken into account.
Generally, a redemption by a holder is substantially disproportionate if the
holder's percentage ownership of both all voting stock and all common stock,
including the Class B Stock, considered separately, immediately after the
redemption is less than 80 percent of such percentage ownership immediately
before the redemption. Whether a redemption by a holder is not essentially
equivalent to a dividend depends on the holder's facts and circumstances, but
generally requires a meaningful reduction in the holder's proportionate interest
in the Company.
If any of the Section 302(b) tests described above is satisfied, so that a
redemption of Convertible Preferred IS treated as a sale or exchange of such
stock, then the redemption will result in taxable gain or loss equal to the
difference between the amount of cash received and the holder's adjusted basis
in the redeemed shares. Any such gain or loss will be capital gain or loss and
will be long-term capital gain or loss if the holder's holding period exceeds
one year.
If none of the Section 302(b) tests described above is satisfied, so that a
redemption of Convertible Preferred is NOT treated as a sale or exchange of such
stock, then the redemption will be treated as a distribution taxable as a
dividend to the extent of the Company's current and accumulated earnings and
profits. The holder's basis in the redeemed Convertible Preferred would, in such
case, generally be transferred to the holder's remaining shares of Company
stock, if any. As described above, the amount of cash received that is treated
as a dividend will constitute an "extraordinary dividend," and the basis
reduction and gain recognition rules applicable to such a dividend will apply
irrespective of the period of time that the holder has held the Convertible
Preferred, if such redemption is not pro rata as to all shareholders.
OTHER DISPOSITION OF CONVERTIBLE PREFERRED
Upon the sale or exchange of shares of Convertible Preferred, or of shares
of Common Stock, to or with a person other than the Company, a holder will
recognize capital gain or loss equal to the difference between the amount
realized on such sale or exchange and the holder's adjusted basis in such stock.
Any capital gain or loss recognized will generally be treated as long-term
capital gain or loss if the holder held such stock for more than one year. For
this purpose, the period for which the Convertible Preferred was held would be
included in the holding period of the Common Stock received upon conversion.
BACKUP WITHHOLDING
Under Section 3406 of the Code and applicable regulations thereunder, a
holder of Convertible Preferred or Common Stock may be subject to backup
withholding at the rate of 31 percent with respect to dividends paid on, or the
proceeds of a sale, exchange, or redemption of, the Convertible Preferred or
Common Stock. If: (i) the holder ("payee") fails to furnish or certify a
taxpayer identification number to the payor; (ii) the IRS notifies the payor
that the taxpayer identification number furnished by the payee is incorrect;
(iii) there has been a "notified payee underreporting" described in Section
3406(c) of the Code; or
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(iv) there has been a "payee certification failure" described in Section 3406(d)
of the Code, then the Company generally will be required to withhold an amount
equal to 31 percent of any dividend or redemption payment made with respect to
the Convertible Preferred or Common Stock. Any amounts withheld under the backup
withholding rules from a payment to a holder will be allowed as a credit against
the holder's federal income tax liability or as a refund.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of this Offering, the Company will have approximately
5,262,830 shares of Common Stock outstanding and 11,157,000 shares of Class B
Stock outstanding, which are convertible into a like number of shares of Common
Stock. Of the shares of Common Stock outstanding or issuable upon conversion of
the Class B Stock, approximately 2,573,151 are freely tradeable without
restriction or registration under the Securities Act of 1933, as amended (the
"Securities Act"). All of the remaining shares of Common Stock are either held
by affiliates or are "restricted securities" as that term is defined in Rule 144
promulgated under the Securities Act, all of which are presently eligible for
sale (subject to any applicable volume restrictions of Rule 144). Additional
shares of Common Stock, including shares issuable upon exercise of options, will
also become eligible for sale in the public market from time to time. However,
holders of substantially all of the restricted shares have agreed not to sell
any of their shares of Common Stock for a period of 90 days from the date of
this Prospectus without the prior written consent of the Underwriters. Following
this offering, sales of substantial amounts of the Company's Common Stock in the
public market pursuant to Rule 144 or otherwise, even the potential of such
sales, could adversely affect the prevailing market price for the Common Stock
and impair the Company's ability to raise additional capital through the sale of
equity securities.
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement (the
"Underwriting Agreement"), the Underwriters named below, for whom Donaldson,
Lufkin & Jenrette Securities Corporation, Bear, Stearns & Co. Inc. and Smith
Barney Shearson Inc. are acting as representatives (the "Representatives"), have
severally agreed to purchase from the Company, and the Company has agreed to
sell to the several Underwriters, the number of shares of Convertible Preferred
set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ---------------------------------------------------------------------------------- -----------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation...............................
Bear, Stearns & Co. Inc...........................................................
Smith Barney Shearson Inc.........................................................
-----------
Total.........................................................................
-----------
-----------
</TABLE>
The Underwriting Agreement provides that the Underwriters' obligations are
subject to certain conditions and that the Underwriters must purchase all of the
shares of Convertible Preferred if any are purchased.
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Convertible Preferred to the public initially at the
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per share
of Convertible Preferred. The Underwriters may allow and such dealers may
reallow further concessions, not in excess of $ per share, to certain other
dealers. After the shares of Convertible Preferred are released for sale to the
public, the public offering price, concessions and discounts to dealers may be
changed by the Representatives.
The Company has granted to the Underwriters an option, exercisable at any
time within 30 days after the date of this Prospectus, to purchase from the
Company up to 600,000 additional shares of Convertible
56
<PAGE>
Preferred at the public offering price less the underwriting discount set forth
on the cover page of this Prospectus. The Underwriters may exercise the option
solely for the purpose of covering over-allotments made in connection with the
sale of the 4,000,000 shares of Convertible Preferred offered hereby.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act and to contribute to
payments the Underwriters may be required to make in respect of those
liabilities where indemnification is unavailable.
The Company and its directors, certain executive officers, principal
shareholders and other affiliates have agreed that for a period of 90 days from
the date of this Prospectus, they will not offer, sell, contract to sell, grant
any option to purchase or otherwise transfer or dispose of shares of Common
Stock or any other equity security of the Company or securities convertible into
or evidencing the right to acquire such Common Stock or other equity security,
without the prior written consent of the Underwriters, except for the issuance
of shares upon the exercise of outstanding stock options and the grant of
employee stock options under existing stock option plans.
LEGAL MATTERS
The validity of the issuance of the Convertible Preferred offered hereby and
the descriptions given under "Certain Federal Income Tax Consequences" have been
passed upon for the Company by Gage & Tucker, Kansas City, Missouri. Certain
legal matters related to this Offering will be passed upon for the Underwriters
by Skadden, Arps, Slate, Meagher & Flom, Chicago, Illinois. Raymond F. Beagle,
Jr., a partner in Gage & Tucker, is general counsel of the Company.
EXPERTS
The consolidated financial statements and schedules of the Company as of and
for the year ended April 1, 1993, appearing in this Prospectus and Registration
Statement have been audited by Coopers & Lybrand, independent auditors, to the
extent and for the periods indicated in their reports also appearing herein and
in the Registration Statement. These financial statements have been included in
reliance upon such reports given upon the authority of such firm as experts in
auditing and accounting.
The consolidated financial statements and the related financial statement
schedules of the Company as of April 2, 1992 and for each year in the two-year
period ended April 2, 1992 included and incorporated by reference in this
prospectus have been audited by Deloitte & Touche, independent auditors, as
stated in their reports, which are included and incorporated by reference
herein, and have been so included and incorporated in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.
The financial statements of EEP included in this Prospectus have been
audited by Deloitte & Touche, independent auditors, as stated in their report
appearing in the Registration Statement and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
57
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-2 (the "Registration
Statement," which term shall encompass all amendments, exhibits, annexes and
schedules thereto), pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder,
covering the shares being offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission, and
to which reference is hereby made. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved.
The Company files periodic reports, proxy statements and other information
with the Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Registration Statement, as well as such reports, proxy
statements and other information filed by the Company with the Commission, may
be inspected at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should also be available for inspection and copying at the regional offices of
the Commission located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates.
The Company's Common Stock is listed on the American Stock Exchange, Inc.
("AMEX") and the Pacific Stock Exchange. The Company's periodic reports and
proxy statements filed under the Exchange Act as well as other information
concerning the Company can be requested at the AMEX, 86 Trinity Place, New York,
New York 10086 and at the Pacific Stock Exchange, 301 Pine Street, Suite 1104,
San Francisco, California 94104.
------------------------
INCORPORATION BY REFERENCE
The following documents filed by the Company with the Commission (File no.
01-12429) are incorporated in this Prospectus by reference and hereby made a
part hereof:
1. The Company's Annual Report on Form 10-K for the fiscal year ended April 1,
1993;
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended July 1,
1993, September 30, 1993 and December 30, 1993; and
3. The Company's Current Report on Form 8-K dated June 10, 1993, as amended
August 2, 1993.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference, other
than exhibits to such documents. Requests should be directed to AMC
Entertainment Inc., Attention: Nancy L. Gallagher, Corporate Secretary, 106 West
14th Street, Kansas City, Missouri 64105 (telephone: (816) 221-4000).
58
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
AMC ENTERTAINMENT INC.
UNAUDITED FINANCIAL STATEMENTS:
Unaudited Consolidated Statement of Operations for the Thirty-nine week periods ended December 30, 1993
and December 31, 1992 and pro forma Consolidated Statement of Operations for the Thirty-nine week
periods ended December 30, 1993 and December 31, 1992................................................. F-2
Unaudited Consolidated Balance Sheets at December 30, 1993 and December 31, 1992....................... F-3
Unaudited Consolidated Statements of Cash Flows for the Thirty-nine week periods ended December 30,
1993 and December 31, 1992............................................................................ F-4
Unaudited Consolidated Statements of Stockholders' Equity for the Thirty-nine weeks ended December 30,
1993 and December 31, 1992............................................................................ F-6
Notes to Unaudited Consolidated Financial Statements................................................... F-7
INDEPENDENT AUDITORS' REPORTS............................................................................ F-11
AUDITED FINANCIAL STATEMENTS:
Consolidated Statements of Operations for the Fifty-two weeks ended April 1, 1993, the Fifty-three
weeks ended April 2, 1992 and the Fifty-two weeks ended March 28, 1991, and pro forma Consolidated
Statement of Operations for the Fifty-two weeks ended April 1, 1993................................... F-13
Consolidated Balance Sheets at April 1, 1993 and April 2, 1992......................................... F-14
Consolidated Statements of Cash Flows for the Fifty-two weeks ended April 1, 1993, the Fifty-three
weeks ended April 2, 1992 and the Fifty-two weeks ended March 28, 1991................................ F-15
Consolidated Statements of Stockholders' Equity for the Fifty-two weeks ended April 1, 1993, the
Fifty-three weeks ended April 2, 1992 and the Fifty-two weeks ended March 28, 1991.................... F-17
Notes to Consolidated Financial Statements............................................................. F-18
EXHIBITION ENTERPRISES PARTNERSHIP
INDEPENDENT AUDITORS' REPORT............................................................................. F-41
FINANCIAL STATEMENTS:
Statement of Operations for the Fifty-three week period ended December 31, 1992........................ F-42
Balance Sheet at December 31, 1992..................................................................... F-43
Statement of Cash Flows for the Fifty-three week period ended December 31, 1992........................ F-44
Statement of Changes in Partners' Capital.............................................................. F-46
Notes to Financial Statements.......................................................................... F-47
</TABLE>
F-1
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(UNAUDITED)
THIRTY-NINE WEEKS ENDED
----------------------------------------------
PRO FORMA ACTUAL
---------------------- ----------------------
12/30/93 12/31/92 12/30/93 12/31/92
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues
Admissions..................................................... $ 297,647 $ 277,865 $ 297,647 $ 201,652
Concessions.................................................... 134,773 121,006 134,773 87,117
Management fee income.......................................... 210 193 210 7,183
Other.......................................................... 15,328 13,113 15,328 10,178
---------- ---------- ---------- ----------
Total revenues............................................... 447,958 412,177 447,958 306,130
Expenses
Film rentals................................................... 154,910 146,578 154,910 105,793
Advertising.................................................... 13,912 13,486 13,912 9,705
Payroll & related expenses..................................... 61,247 58,184 61,247 43,703
Occupancy costs................................................ 66,226 61,860 66,226 44,120
Concession merchandise......................................... 20,004 18,945 20,004 13,813
Other.......................................................... 29,043 24,029 29,089 18,216
---------- ---------- ---------- ----------
Total cost of operations..................................... 345,342 323,082 345,388 235,350
Depreciation and amortization.................................. 28,825 29,203 29,151 21,086
General & administrative expenses.............................. 27,957 26,280 27,957 26,088
Estimated loss on future disposition of assets................. -- 2,500 -- 2,500
---------- ---------- ---------- ----------
Total expenses............................................... 402,124 381,065 402,496 285,024
---------- ---------- ---------- ----------
Operating income............................................. 45,834 31,112 45,462 21,106
Other expense (income)
Interest expense
Corporate borrowings......................................... 19,115 18,132 19,185 16,584
Capitalized leases........................................... 8,431 8,447 8,431 6,577
Investment income.............................................. (1,493) (88) (1,653) (6,485)
Minority interest.............................................. -- -- (1,599) --
Loss (gain) on disposition of assets........................... 79 (9,590) 79 (9,640)
---------- ---------- ---------- ----------
Earnings before income taxes and extraordinary item.............. 19,702 14,211 21,019 14,070
Income tax provision............................................. 8,100 5,000 8,500 5,000
---------- ---------- ---------- ----------
Net earnings before extraordinary item........................... 11,602 9,211 12,519 9,070
Extraordinary item-loss on extinguishment of debt (net of income
tax benefit of $3,800).......................................... -- (6,483) -- (6,483)
---------- ---------- ---------- ----------
Net earnings..................................................... $ 11,602 $ 2,728 $ 12,519 $ 2,587
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per share before extraordinary item..................... $ .71 $ .55 $ .76 $ .54
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per share............................................... $ .71 $ .15 $ .76 $ .14
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of shares outstanding.................... 16,452 16,195 16,452 16,195
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
F-2
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
(UNAUDITED)
12/30/93 12/31/92
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents.................................................................... $ 58,518 $ 24,538
Investments............................................................................. -- 25,835
Receivables, net of allowance for doubtful accounts of $596 at December 30, 1993 and
$663 at December 31, 1992.............................................................. 8,349 10,035
Prepaid film rentals.................................................................... 290 300
Other current assets.................................................................... 8,515 7,476
---------- ----------
Total current assets.................................................................. 75,672 68,184
Investment in TPI Enterprises, Inc........................................................ 8,682 8,682
Investment in and advances to partnership................................................. -- 40,052
Property, net............................................................................. 263,562 226,353
Other long-term assets.................................................................... 59,695 35,841
---------- ----------
Total assets.......................................................................... $ 407,611 $ 379,112
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Film rentals payable.................................................................... $ 27,509 $ 17,297
Accrued expenses and other liabilities.................................................. 49,036 37,639
Estimated IRS settlement................................................................ 3,146 4,796
Other accounts payable, including related parties of $178 at December 31, 1992.......... 7,907 3,384
Current maturities of borrowings and capital lease obligations.......................... 2,519 2,464
---------- ----------
Total current liabilities............................................................. 90,117 65,580
Corporate borrowings...................................................................... 200,126 200,914
Capital lease obligations................................................................. 66,165 50,510
Other long-term liabilities............................................................... 19,237 15,621
---------- ----------
Total liabilities..................................................................... 375,645 332,625
---------- ----------
Deferred gain on sale of assets........................................................... -- 26,992
Commitments and contingencies.............................................................
Stockholders' equity
Common stock; 4,684,130 shares issued and outstanding at December 30, 1993 and 4,539,380
shares at December 31, 1992.............................................................. 3,123 3,026
Class B stock; 11,730,000 shares issued and outstanding................................... 7,820 7,820
Additional paid-in capital................................................................ 13,979 12,800
Retained earnings (accumulated deficit)................................................... 7,044 (4,151)
---------- ----------
Total stockholders' equity............................................................ 31,966 19,495
---------- ----------
Total liabilities and stockholders' equity............................................ $ 407,611 $ 379,112
---------- ----------
---------- ----------
</TABLE>
F-3
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
THIRTY-NINE
WEEKS ENDED
----------------------
12/30/93 12/31/92
---------- ----------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings............................................................................ $ 12,519 $ 2,587
---------- ----------
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization -- property............................................. 22,157 18,024
other long-term assets.................................. 5,081 3,062
Loss (gain) on sale of long-term assets................................................. 79 (9,640)
Change in certain assets and liabilities, net of effects from acquisitions and
investments:
Receivables........................................................................... (1,995) (2,228)
Other current assets.................................................................. 1,135 592
Film rentals, net..................................................................... 8,940 3,252
Accrued expenses, other liabilities and other accounts payable........................ 13,650 8,005
Estimated IRS settlement.............................................................. (1,650) --
Other, net............................................................................ 2,209 3,141
---------- ----------
Total adjustments................................................................... 49,606 24,208
---------- ----------
Net cash provided by operating activities............................................... 62,125 26,795
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property acquisitions................................................................... (6,707) (7,200)
Sales (investments) in money market instruments, short-term commercial paper and
corporate bonds, net................................................................... 26,109 (375)
Purchase of partnership interest, net of cash acquired.................................. (8,486) --
Proceeds from disposition of property................................................... 511 14,768
Other, net.............................................................................. (143) (290)
---------- ----------
Net cash provided by investing activities............................................... 11,284 6,903
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit agreements.............................................. 30,000 3,000
Repayments under line of credit agreements.............................................. (30,000) (57,000)
Principal payments under capital leases................................................. (1,314) (672)
Proceeds from issuance of debt securities............................................... -- 198,654
Repurchase of debentures................................................................ -- (125,000)
Repayment of acquired subsidiary indebtedness........................................... (37,000) --
Other repayments........................................................................ (1,400) (6,124)
Proceeds from issuance of common stock.................................................. 1,276 845
Redemption of preferred stock........................................................... -- (5,000)
Dividends paid on preferred stock....................................................... -- (2,531)
Dividends paid on common stock.......................................................... -- (18,550)
Deferred financing costs................................................................ (450) (8,145)
---------- ----------
Net cash used in financing activities................................................... (38,888) (20,523)
---------- ----------
NET INCREASE IN CASH AND EQUIVALENTS...................................................... 34,521 13,175
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD............................................... 23,997 11,363
---------- ----------
CASH AND EQUIVALENTS AT END OF PERIOD..................................................... $ 58,518 $ 24,538
---------- ----------
---------- ----------
</TABLE>
F-4
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT NARRATIVES)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
<TABLE>
<CAPTION>
(UNAUDITED)
THIRTY-NINE
WEEKS ENDED
------------------------
12/30/93 12/31/92
----------- -----------
<S> <C> <C>
Capital lease obligations incurred in connection with property acquired............. $ 3,278 $ 811
</TABLE>
On May 28, 1993, Cinema Enterprises II, Inc. ("CENI II"), a wholly-owned
subsidiary of American Multi-Cinema, Inc. ("AMC"), acquired a 50% partnership
interest in Exhibition Enterprises Partnership ("EEP") from TPI Entertainment,
Inc. Together with the 50% partnership interest already owned by Cinema
Enterprises, Inc. ("CENI"), EEP became wholly-owned by subsidiaries of AMC. Cash
and equivalents held by EEP at May 28, 1993 totaled $9,014,000. Liabilities
assumed from the May 28, 1993 transaction are as follows:
<TABLE>
<S> <C> <C>
Fair value of assets acquired (including cash and equivalents)............... $ 70,170
Cash paid.................................................................... (17,500)
---------
Liabilities assumed.......................................................... $ 52,670
---------
---------
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
(UNAUDITED)
THIRTY-NINE WEEKS
ENDED
--------------------
12/30/93 12/31/92
--------- ---------
<S> <C> <C>
Cash paid during the period for:
Interest (net of amounts capitalized)........................................... $ 20,123 $ 18,947
Income taxes.................................................................... 5,425 887
Income taxes resulting from IRS settlement...................................... 1,650 --
Cash received during the period for:
Interest and dividend income.................................................... 1,342 5,290
Income tax refunds.............................................................. 106 82
</TABLE>
F-5
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
(UNAUDITED)
PREFERRED STOCK COMMON STOCK CLASS B STOCK ADDITIONAL RETAINED TOTAL
--------------- ------------------ -------------------- PAID-IN EARNINGS STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
------ ------ --------- ------ ----------- ------ ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, April 2, 1992........ 5 $ 1 4,358,380 $2,906 11,730,000 $7,820 $ 26,599 $ 2,543 $ 39,869
Net earnings for the
thirty-nine weeks ended
December 31, 1992............ -- -- -- -- -- -- -- 2,587 2,587
Net proceeds from sale of
Common Stock................. -- -- 181,000 120 -- -- 725 -- 845
Redemption of Preferred
Stock........................ (5) (1) -- -- -- -- (4,999 ) -- (5,000 )
Dividends declared:
14% Preferred Stock......... -- -- -- -- -- -- -- (256 ) (256 )
Common and Class B.......... -- -- -- -- -- -- (9,525 ) (9,025 ) (18,550 )
------ ------ --------- ------ ----------- ------ ---------- -------- ------------
Balance, December 31, 1992.... -- -- 4,539,380 3,026 11,730,000 7,820 12,800 (4,151 ) 19,495
Net loss for the thirteen
weeks ended April 1, 1993.... -- -- -- -- -- -- -- (1,324 ) (1,324 )
------ ------ --------- ------ ----------- ------ ---------- -------- ------------
Balance, April 1, 1993........ -- -- 4,539,380 3,026 11,730,000 7,820 12,800 (5,475 ) 18,171
Net earnings for the
thirty-nine weeks ended
December 30, 1993............ -- -- -- -- -- -- -- 12,519 12,519
Net proceeds from sale of
Common Stock................. -- -- 144,750 97 -- -- 1,179 -- 1,276
------ ------ --------- ------ ----------- ------ ---------- -------- ------------
Balance, December 30, 1993.... -- $-- 4,684,130 $3,123 11,730,000 $7,820 $ 13,979 $ 7,044 $ 31,966
------ ------ --------- ------ ----------- ------ ---------- -------- ------------
------ ------ --------- ------ ----------- ------ ---------- -------- ------------
</TABLE>
F-6
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1993
(UNAUDITED)
NOTE 1 -- THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
AMC Entertainment Inc. ("AMCE"), through American Multi-Cinema, Inc. ("AMC")
and its Subsidiaries (collectively with AMCE, unless the context otherwise
requires, the Company), is principally involved in the operation and management
of multi-screen motion picture theatres.
In the opinion of management, the accompanying consolidated financial data
contains all adjustments (which comprise only normal recurring accruals)
necessary to present fairly its financial position as of December 30, 1993 and
December 31, 1992 and the results of operations and cash flows.
The interim consolidated financial data should be read in conjunction with
AMCE's notes to the consolidated financial statements for the fiscal year ended
April 1, 1993 appearing elsewhere herein.
Due to the seasonal nature of the Company's business, results for the
thirty-nine weeks ended December 30, 1993 are not necessarily indicative of the
results to be expected for the entire year.
FISCAL YEAR
The Company has a 52/53 week fiscal year ending on the Thursday closest to
the last day of March (March 31, 1994 for the current year, which includes
fifty-two weeks and April 1, 1993 for the prior year, which included fifty-two
weeks).
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is computed based upon net earnings (loss) for the
period less preferred stock dividends divided by the weighted average number of
common shares outstanding and outstanding stock options when their effect is
dilutive.
PRESENTATION
Certain amounts have been reclassified from prior period consolidated
financial statements to conform with the current year presentation. Such amounts
were not material.
PRO FORMA INFORMATION
On May 28, 1993, the Company acquired the other 50% interest in Exhibition
Enterprises Partnership ("EEP" or the "Partnership") (See Note 2). The unaudited
pro forma information combines the operating results of EEP for the twenty-six
weeks ended September 30, 1993 and October 1, 1992 with that of the Company for
the same periods. Certain intercompany balances and transactions were
eliminated. The unaudited pro forma Statement of Operations gives effect to the
EEP acquisition as though it had occurred at the beginning of these periods. For
pro forma purposes, the financing costs of the $30,000,000 borrowed for the
acquisition were estimated at an annual interest rate of 7.25% and interest
income was reduced due to the use of $24,500,000 in cash at an annual interest
rate of 4.42%. Recorded property and intangible assets of EEP were reduced by
$27,730,000 for pro forma purposes to reflect the excess of the net assets of
EEP over the Company's basis in these net assets, with depreciation and
amortization similarly reduced.
NOTE 2 -- TRANSACTIONS WITH TPI ENTERPRISES, INC.
INVESTMENT IN TPI ENTERPRISES, INC.
The Company owns 1,475,144 shares of Common Stock of TPI Enterprises, Inc.
("TPI"), representing approximately seven percent of TPI's outstanding stock. On
April 19, 1991, AMC granted a ten year purchase option for the shares that
includes an irrevocable proxy to vote the option shares. The purchase price
under the option is $6.00 per share for a period of three years following April
19, 1991 and thereafter the purchase price will increase by $.50 per share for
each successive year under the option agreement. The Company accounts for this
investment on the cost method.
F-7
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1993
(UNAUDITED)
NOTE 2 -- TRANSACTIONS WITH TPI ENTERPRISES, INC. (CONTINUED)
INVESTMENT IN AND ADVANCES TO PARTNERSHIP
Prior to May 28, 1993, EEP was 50% owned by Cinema Enterprises, Inc.
("CENI"), a wholly-owned subsidiary of AMC, and 50% owned by TPI Entertainment,
Inc. ("TPIE"), a wholly-owned subsidiary of TPI. On April 19, 1991, the
Partnership acquired the ownership interest in 57 movie theatres (56 theatres
previously purchased by TPIE from AMC and 1 theatre constructed by TPIE),
subject to obligations under notes, loans and capital leases. From inception
through April 1, 1993, the Company accounted for its investment in EEP on the
equity method.
At December 31, 1992, investment in and advances to partnership included a
12% Subordinated Promissory Note due from EEP of $42,364,000 principal amount,
discounted for an effective yield of 14%, plus a note receivable in the amount
of $710,000 from the April 25, 1991 sale of a theatre.
On May 28, 1993, the Company completed the acquisition of TPIE's partnership
interest in EEP for $17,500,000 in cash. The acquisition also required the
repayment of $37,000,000 in EEP bank indebtedness which was funded by borrowings
under a revolving line of credit of $30,000,000 together with cash on hand. The
acquisition was accounted for under the purchase method of accounting and EEP
was consolidated, for financial reporting purposes, as a wholly-owned
subsidiary. The unamortized deferred gain arising from the 1989 and 1990 sales
of theatres to TPIE ($26,992,000) was applied as a reduction to the carrying
value of the EEP assets. On a pro forma basis, the effect of the acquisition on
the Company's fiscal 1993 results would have been an increase in earnings of
approximately $116,000.
For fiscal 1994, the Company is accounting for its investment in EEP on a
consolidated basis by including EEP's assets and liabilities, as adjusted for
the purchase, in the Consolidated Balance Sheet, and by including EEP's revenues
and expenses in the Consolidated Statement of Operations beginning April 2,
1993. One-half of the Partnership's net loss for the period April 2, 1993
through May 27, 1993 attributable to TPIE ($1,599,000) has been recorded as
minority interest.
NOTE 3 -- BORROWINGS
LOAN AGREEMENT
Effective August 10, 1992, AMC entered into a loan agreement with two banks
to provide a revolving line of credit of up to $40,000,000 for working capital
and other general corporate purposes (the "Credit Facility"). The Credit
Facility terminates on the third anniversary of the agreement date. The Company
has the option to borrow at rates based on either the bank's base rate, CD rates
or LIBOR and is required to pay an annual commitment fee of 3/8 of 1% on the
unused amount of the commitment. At December 30, 1993, AMC had no borrowings on
the Credit Facility.
The Credit Facility includes several financial covenants. The Company is
required to maintain a maximum net debt to consolidated EBITDA ratio and a
minimum fixed charge coverage ratio. The required net debt to consolidated
EBITDA ratio is 4.00 to 1 for fiscal 1994 and 3.50 to 1 thereafter. The required
fixed charge coverage ratio is 1.35 to 1 for fiscal 1994 and 1.50 to 1
thereafter. In addition, the covenants contained in the Credit Facility limit
the Company's capital expenditures to $25,000,000 per year, of which the Company
may allocate to capital expenditures outside of the United States the lesser of
$10,000,000 or $5,000,000 plus 25% of cash flow (minus 100% of cash flow, if
negative), in each case less the amount of permitted dividends paid or declared
by the Company. As of December 30, 1993, the Company has satisfied all financial
covenants relating to the Credit Facility.
F-8
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1993
(UNAUDITED)
NOTE 3 -- BORROWINGS (CONTINUED)
The Credit Facility stipulates that there shall be a period of at least 60
consecutive days during each twelve month period following the agreement date
when there are no loans outstanding under the Credit Facility. The Company has
satisfied this stipulation for the second anniversary of the loan agreement by
not borrowing funds for 60 consecutive days following August 10, 1993.
NOTE 4 -- PROPERTY
A summary of property follows (in thousands):
<TABLE>
<CAPTION>
(UNAUDITED)
----------------------
12/30/93 12/31/92
---------- ----------
<S> <C> <C>
Property owned:
Land.................................................................................... $ 20,239 $ 20,239
Buildings and improvements.............................................................. 86,283 82,991
Furniture, fixtures and equipment....................................................... 164,099 128,921
Leasehold improvements.................................................................. 119,124 91,821
---------- ----------
389,745 323,972
Less -- accumulated depreciation and amortization....................................... 170,231 132,557
---------- ----------
219,514 191,415
---------- ----------
Property leased under capitalized leases:
Buildings............................................................................... 68,313 54,668
Less -- accumulated amortization........................................................ 24,265 19,730
---------- ----------
44,048 34,938
---------- ----------
Net property.............................................................................. $ 263,562 $ 226,353
---------- ----------
---------- ----------
</TABLE>
NOTE 5 -- CONTINGENCIES
The Company, in the normal course of business, is party to various legal
actions. Management believes that the potential exposure, if any, from such
matters would not have a material adverse effect on the Company. The following
paragraphs summarize significant litigation and proceedings to which the Company
is a party.
EL CAJON CINEMAS, INC. V. AMERICAN MULTI-CINEMA, INC., UNITED STATES
DISTRICT COURT, SOUTHERN DISTRICT OF CALIFORNIA (CASE NO. 90 0710B (IEG)). On
May 30, 1990, El Cajon Cinemas, Inc. (El Cajon) instituted this suit against AMC
(the San Diego litigation). On August 31, 1990, El Cajon filed its first amended
complaint against AMC alleging violations of Section 1 of the Sherman Act,
applicable California statutes prohibiting state antitrust violations and unfair
competition and tortious interference. The amended complaint sought unspecified
damages and attorneys' fees. On November 21, 1990, AMC answered the amended
complaint and filed a counterclaim against El Cajon and George E. Krikorian (El
Cajon's sole stockholder and President), seeking relief for violations of
Section 1 of the Sherman Act, for violations of applicable California statutes
prohibiting state antitrust violations and unfair competition, and for tortious
interference with contractual relations/prospective advantage. AMC's
counterclaim sought unspecified damages and attorneys' fees.
In December 1993, the parties agreed to a full settlement of the San Diego
litigation. AMC paid El Cajon $75,000 and the court dismissed El Cajon's
complaint and AMC's counterclaim with prejudice.
INCOME TAX LITIGATION. The Company has been in litigation with the Internal
Revenue Service (IRS) primarily concerning the Company's method, for the years
1975 and 1978 to 1987, inclusive, of reporting, for income tax purposes, film
rentals and deductions in the year paid (cash method) rather than in the year
the
F-9
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1993
(UNAUDITED)
NOTE 5 -- CONTINGENCIES (CONTINUED)
related film was exhibited (accrual method). These and other issues, including
issues relating to certain capital gains, the dividends received deduction and
the understatement penalty, were the subject of two United States Tax Court
cases (Durwood, Inc. v. Commissioner of Internal Revenue, Docket No. 3706-88
filed February 23, 1988 and Durwood, Inc. v. Commissioner of Internal Revenue,
Docket No. 3322-91 filed February 22, 1991).
Settlements have been reached with respect to all issues in each of the tax
court cases. Through September 30, 1993, the Company has recorded provisions
totaling $22,951,000 representing the estimated additional federal and state
income taxes and interest resulting from the IRS litigation. Through December
30, 1993, the Company has made payments totaling $19,805,000 to federal and
state tax authorities associated with the tax court settlements. Management
believes that adequate amounts have been reserved with respect to these income
tax matters.
SALES TAX LITIGATION. On August 13, 1991, the Florida Department of Revenue
assessed the Company $1,670,000 in taxes, penalties and interest for popcorn
sales in theatres that occurred during the period commencing January 1, 1986,
and ending December 31, 1988. Because the regulation relied on by the Department
did not become effective until December 1987, the Department issued a revised
assessment to the Company in the amount of $388,000, which is based on the
Company's 1988 popcorn sales in Florida. Because the Company's Florida legal
counsel failed to file a petition to contest the assessment, within the required
time, the Department has taken the position that the Company owes $388,000 in
taxes plus penalties and interest.
The Company and the Department have agreed to be bound by the final judicial
resolution of another Florida sales tax case currently pending in the Florida
First District Court of Appeals, which presents substantially the same issues.
If the taxpayer prevails in this case, the Company will pay nothing to the
Department. If the Department prevails, the Company will pay the $388,000 in
assessed taxes plus interest, but no penalties. In any event the Company will
also pursue all available remedies against its former legal counsel.
NOTE 6 -- INCOME TAXES
The Company records deferred income taxes using enacted tax laws and rates
for the years in which the taxes are expected to be paid. Effective in fiscal
1993, the Company adopted Statement of Financial Accounting Standards No. 109
(SFAS 109), "Accounting for Income Taxes." The effect of adopting SFAS 109 was
not material.
Upon the adoption of SFAS 109 on April 3, 1992, the Company recorded a
valuation allowance of $16,562,000 against deferred tax assets based on the lack
of sufficient evidence required under SFAS 109 to support the realizability of
the deferred tax assets. At December 30, 1993, the valuation allowance amounted
to approximately $13,000,000. Based on increasing positive evidence supporting
the potential realizability of the deferred tax assets, it is possible that this
valuation allowance may be decreased in future periods. A reduction in the
valuation allowance will increase net income in the period of adjustment.
NOTE 7 -- COMMITMENTS
The Company has entered into agreements to lease space for the operation of
theatres not yet fully constructed. Of the total number of anticipated openings,
leases for five new theatres with 78 screens and leases for the expansion of 17
screens at three existing locations have been finalized. The scheduled
completion of construction and theatre openings are at various dates through the
third quarter of fiscal 1997. The estimated minimum rental payments that may be
required under the terms of the leases total approximately $94,000,000.
F-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of AMC Entertainment Inc.
Kansas City, Missouri
We have audited the consolidated balance sheet of AMC Entertainment Inc. and
subsidiaries as of April 1, 1993, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year (Fifty-two weeks)
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. We did not audit the financial statements of
Exhibition Enterprises Partnership, a joint venture partnership, which is
recorded using the equity method of accounting (see Note 4). The investment in
and advances to this partnership represent 11 percent of consolidated assets as
of April 1, 1993 and the equity in its earnings represents 23 percent of
consolidated earnings before extraordinary items for the year (Fifty-two weeks)
ended April 1, 1993. Those statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for Exhibition Enterprises Partnership, is based solely on the
report of the other auditors. The financial statements of AMC Entertainment Inc.
and subsidiaries as of April 2, 1992 and for the year (Fifty-three weeks) ended
April 2, 1992 and the year (Fifty-two weeks) ended March 28, 1991 were audited
by other auditors whose report, dated May 21, 1992, except as to the information
presented in Note 2, for which the date is June 21, 1993, expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit and the report of the other auditors provides a
reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of AMC Entertainment Inc. and
subsidiaries as of April 1, 1993, and the results of their operations and their
cash flows for the year (Fifty-two weeks) then ended, in conformity with
generally accepted accounting principles.
As discussed in Note 7 to the financial statements, the Company changed its
method of accounting for income taxes to conform with Statement of Financial
Accounting Standards No. 109.
/s/ Coopers & Lybrand
Kansas City, Missouri
June 21, 1993
F-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of AMC Entertainment Inc.
Kansas City, Missouri
We have audited the accompanying consolidated balance sheet of AMC
Entertainment Inc. and subsidiaries as of April 2, 1992 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year (Fifty-three weeks) ended April 2, 1992 and the year (Fifty-two weeks)
ended March 28, 1991. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of AMC Entertainment Inc. and
subsidiaries as of April 2, 1992, and the results of their operations and their
cash flows for the year (Fifty-three weeks) ended April 2, 1992 and the year
(Fifty-two weeks) ended March 28, 1991 in conformity with generally accepted
accounting principles.
As discussed in Note 2, the 1992 and 1991 financial statements have been
restated.
/s/ Deloitte & Touche
Kansas City, Missouri
May 21, 1992
(June 21, 1993 as to Note 2)
F-12
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNAUDITED FIFTY-TWO FIFTY-THREE FIFTY-TWO
PRO FORMA WEEKS ENDED WEEKS ENDED WEEKS ENDED
4/1/93 4/1/93 4/2/92 3/28/91
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues
Admissions.............................................. $ 365,906 $ 265,766 $ 272,960 $ 303,324
Concessions............................................. 159,089 114,809 114,207 121,495
Management fee income (Note 4).......................... 478 9,342 6,502 7,633
Other................................................... 17,867 14,548 13,295 13,899
----------- ------------ ------------ ------------
Total revenues...................................... 543,340 404,465 406,964 446,351
Expenses
Film rentals............................................ 190,136 137,613 138,511 163,311
Advertising............................................. 17,860 12,786 17,123 18,065
Payroll & related expenses.............................. 76,447 57,497 62,532 65,116
Occupancy costs......................................... 83,028 58,878 59,438 59,253
Concession merchandise.................................. 24,046 17,522 18,288 20,368
Other................................................... 34,495 26,539 30,009 32,657
----------- ------------ ------------ ------------
Total cost of operations............................ 426,012 310,835 325,901 358,770
Depreciation and amortization........................... 38,597 28,175 31,385 32,572
General & administrative expenses....................... 36,915 36,285 37,885 34,532
Estimated loss on future disposition of assets (Note
13).................................................... 2,500 2,500 3,000 2,100
----------- ------------ ------------ ------------
Total expenses...................................... 504,024 377,795 398,171 427,974
----------- ------------ ------------ ------------
Operating income.................................... 39,316 26,670 8,793 18,377
Other expense (income)
Interest expense
Corporate borrowings.................................. 24,924 22,828 21,033 26,149
Capitalized leases.................................... 11,045 8,573 9,002 9,791
Investment income (Note 4).............................. (325) (8,239) (8,502) (13,441)
Gain on disposition of assets (Note 14)................. (9,590) (9,638) (8,721) (6,649)
----------- ------------ ------------ ------------
Earnings (loss) before income taxes and extraordinary
items.................................................... 13,262 13,146 (4,019) 2,527
Income tax provision (Note 7)............................. 5,400 5,400 1,500 1,960
----------- ------------ ------------ ------------
Earnings (loss) before extraordinary items................ 7,862 7,746 (5,519) 567
Extraordinary items
Loss on extinguishment of debt (net of income tax
benefit of $3,800) (Note 6)............................ (6,483) (6,483) -- --
Utilization of net operating loss carryforward.......... -- -- -- 500
----------- ------------ ------------ ------------
Net earnings (loss) (Note 2).............................. $ 1,379 $ 1,263 $ (5,519 ) $ 1,067
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Earnings (loss) per share before extraordinary item....... $ .47 $ .46 $ (.39 ) $ (.01 )
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Earnings (loss) per share................................. $ .07 $ .06 $ (.39 ) $ .02
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Weighted average number of shares outstanding............. 16,217 16,217 16,088 16,129
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
</TABLE>
F-13
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT NARRATIVE)
<TABLE>
<CAPTION>
4/1/93 4/2/92
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents.................................................................... $ 23,997 $ 11,363
Investments............................................................................. 26,109 25,460
Receivables, net of allowance for doubtful accounts of $611,000 at April 1, 1993 and
$900,000 at April 2, 1992.............................................................. 8,704 7,807
Prepaid film rentals.................................................................... 188 843
Other current assets (Note 9)........................................................... 7,374 8,068
---------- ----------
Total current assets.................................................................. 66,372 53,541
Investment in TPI Enterprises, Inc. (Note 4).............................................. 8,682 8,682
Investment in and advances to partnership (Note 4)........................................ 40,187 38,185
Property, net (Notes 6, 8 and 14)......................................................... 223,981 244,473
Other long-term assets (Notes 6 and 9).................................................... 34,880 32,818
---------- ----------
Total assets.......................................................................... $ 374,102 $ 377,699
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Film rentals payable.................................................................... $ 12,090 $ 14,588
Accrued expenses and other liabilities (Notes 9, 11 and 13)............................. 35,871 31,220
Estimated IRS settlement (Notes 2 and 7)................................................ 4,796 4,796
Other accounts payable, including related parties of $126,000 at April 1, 1993, and
$730,000 at April 2, 1992.............................................................. 3,976 4,700
Current maturities of borrowings and capital lease obligations (Note 6)................. 2,618 7,406
---------- ----------
Total current liabilities............................................................. 59,351 62,710
Corporate borrowings (Note 6)............................................................. 200,633 182,164
Capital lease obligations (Note 6)........................................................ 52,051 50,661
Other long-term liabilities (Note 10)..................................................... 16,904 15,303
---------- ----------
Total liabilities..................................................................... 328,939 310,838
---------- ----------
Deferred gain on sale of assets (Note 14)................................................. 26,992 26,992
Commitments and contingencies (Notes 6, 10 and 12)
Stockholders' equity (Notes 2, 3 and 6)
Preferred stock; 5 shares issued and outstanding at April 2, 1992....................... -- 1
Common stock; 4,539,380 and 4,358,380 shares issued and outstanding at April 1, 1993 and
April 2, 1992, respectively............................................................ 3,026 2,906
Class B stock; 11,730,000 shares issued and outstanding................................. 7,820 7,820
Additional paid-in capital.............................................................. 12,800 26,599
Retained earnings (accumulated deficit)................................................. (5,475) 2,543
---------- ----------
Total stockholders' equity............................................................ 18,171 39,869
---------- ----------
Total liabilities and stockholders' equity............................................ $ 374,102 $ 377,699
---------- ----------
---------- ----------
</TABLE>
F-14
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FIFTY-TWO FIFTY-THREE FIFTY-TWO
WEEKS ENDED WEEKS ENDED WEEKS ENDED
4/1/93 4/2/92 3/28/91
------------ ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss).................................................. $ 1,263 $ (5,519) $ 1,067
------------ ------------ ------------
Adjustments to reconcile net earnings (loss) to net cash provided by
operating activities:
Depreciation and amortization -- property.......................... 23,869 25,829 26,341
-- other long-term assets................ 4,306 5,556 6,231
-- deferred gain......................... -- (1,407) (6,585)
Gain on sale of other long-term assets............................. (9,638) (7,314) --
Change in assets and liabilities:
Receivables...................................................... (897) 4,065 770
Other current assets............................................. 694 (1,969) (526)
Film rentals, net................................................ (1,843) (6,555) 3,386
Accrued expenses, other liabilities and other
accounts payable................................................ 8,131 3,996 4,407
Estimated IRS settlement......................................... -- -- (16,698)
Other, net....................................................... 3,177 1,759 350
------------ ------------ ------------
Total adjustments.............................................. 27,799 23,960 17,676
------------ ------------ ------------
Net cash provided by operating activities............................ 29,062 18,441 18,743
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property acquisitions................................................ (8,786) (21,045) (20,227)
Investments in money market instruments, short-term commercial paper
and corporate bonds, net............................................ (649) (2,085) (1,941)
Investment in Exhibition Enterprises Partnership..................... -- (2,423) --
Proceeds from sale of TPI Enterprises, Inc. common stock............. -- 5,385 --
Proceeds from disposition of property................................ 14,768 11,623 1,797
Other, net........................................................... (739) (622) (666)
------------ ------------ ------------
Net cash provided by (used in) investing activities.................. 4,594 (9,167) (21,037)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit agreements........................... 3,000 25,000 88,000
Repayments under line of credit agreements........................... (57,000) (41,000) (29,000)
Principal payments under capital leases.............................. (885) (1,653) (1,186)
Proceeds from issuance of debt securities............................ 198,654 -- --
Repurchase of debentures............................................. (125,000) -- --
Other repayments..................................................... (6,400) (2,574) (52,146)
Proceeds from issuance of common stock............................... 845 -- --
Redemption of preferred stock........................................ (5,000) -- --
Dividends paid on preferred stock.................................... (2,531) -- --
Dividends paid on common stock....................................... (18,550) -- --
Deferred financing costs............................................. (8,155) (493) (672)
------------ ------------ ------------
Net cash provided by (used in) financing activities.................. (21,022) (20,720) 4,996
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS........................ 12,634 (11,446) 2,702
CASH AND EQUIVALENTS AT BEGINNING OF YEAR.............................. 11,363 22,809 20,107
------------ ------------ ------------
CASH AND EQUIVALENTS AT END OF YEAR.................................... $ 23,997 $ 11,363 $ 22,809
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-15
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT NARRATIVE)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
<TABLE>
<CAPTION>
FIFTY-TWO FIFTY-THREE FIFTY-TWO
WEEKS ENDED WEEKS ENDED WEEKS ENDED
4/1/93 4/2/92 3/28/91
------------ ------------ ------------
<S> <C> <C> <C>
Capital lease obligations incurred in connection with
property acquired........................................... $3,931 -- $1,781
Borrowings incurred in connection with property acquired..... 35 $ 475 --
</TABLE>
In connection with the April 19, 1991 capital contribution to Exhibition
Enterprises Partnership ("EEP"), the Company exchanged 3.8 million common shares
of TPI Enterprises, Inc. ("TPI") for a 50% ownership interest in the
partnership. The TPI shares had a book carrying value of $22,364,000 and a fair
market value of $24,225,000.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
FIFTY-TWO FIFTY-THREE FIFTY-TWO
WEEKS ENDED WEEKS ENDED WEEKS ENDED
4/1/93 4/2/92 3/28/91
------------ ------------ ------------
<S> <C> <C> <C>
Cash paid during the period for:
Interest (net of amounts capitalized)...................... $ 32,697 $ 29,752 $ 34,937
Income taxes............................................... 1,343 635 2,273
Interest on proposed IRS settlement........................ -- -- 9,896
Income taxes on proposed IRS settlement.................... -- -- 8,259
Cash received during the period for:
Interest and dividend income............................... 7,182 9,078 12,021
Income tax refunds......................................... 133 493 455
</TABLE>
F-16
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK CLASS B STOCK ADDITIONAL RETAINED TOTAL
--------------- ------------------ ------------------- PAID-IN EARNINGS STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
------ ------ --------- ------ ---------- ------ ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March 29, 1990, as
previously reported......... 5 $ 1 4,328,380 $2,886 11,730,000 $7,820 $ 26,479 $11,385 $ 48,571
Effect of restatement (Note
2).......................... -- -- -- -- -- -- -- (2,990 ) (2,990 )
------ ------ --------- ------ ---------- ------ ---------- -------- ------------
Balance, March 29, 1990,
as restated................. 5 1 4,328,380 2,886 11,730,000 7,820 26,479 8,395 45,581
Net earnings............... -- -- -- -- -- -- -- 1,067 1,067
Net proceeds from sale of
Common Stock.............. -- -- 30,000 20 -- -- 120 -- 140
Dividends declared:
14% Preferred stock...... -- -- -- -- -- -- -- (700 ) (700 )
------ ------ --------- ------ ---------- ------ ---------- -------- ------------
Balance, March 28, 1991,
as restated................. 5 1 4,358,380 2,906 11,730,000 7,820 26,599 8,762 46,088
Net loss................... -- -- -- -- -- -- -- (5,519 ) (5,519 )
Dividends declared:
14% Preferred stock...... -- -- -- -- -- -- -- (700 ) (700 )
------ ------ --------- ------ ---------- ------ ---------- -------- ------------
Balance, April 2, 1992, as
restated.................... 5 1 4,358,380 2,906 11,730,000 7,820 26,599 2,543 39,869
Net earnings............... -- -- -- -- -- -- -- 1,263 1,263
Net proceeds from sale of
Common Stock.............. -- -- 181,000 120 -- -- 725 -- 845
Redemption of Preferred
Stock..................... (5 ) (1 ) -- -- -- -- (4,999 ) -- (5,000 )
Dividends declared:
14% Preferred Stock...... -- -- -- -- -- -- -- (256 ) (256 )
Common and Class B....... -- -- -- -- -- -- (9,525 ) (9,025 ) (18,550 )
------ ------ --------- ------ ---------- ------ ---------- -------- ------------
Balance, April 1, 1993....... -- -- 4,539,380 $3,026 11,730,000 $7,820 $ 12,800 $(5,475 ) $ 18,171
------ ------ --------- ------ ---------- ------ ---------- -------- ------------
------ ------ --------- ------ ---------- ------ ---------- -------- ------------
</TABLE>
F-17
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991
NOTE 1 -- THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
AMC Entertainment Inc. ("AMCE"), through American Multi-Cinema, Inc. ("AMC")
and its subsidiaries (collectively with AMCE, unless the context otherwise
requires, the "Company") is principally involved in the operation and management
of multi-screen motion picture theatres.
AMCE is 84.8% owned by Durwood, Inc. ("DI"). See Note 5 for further
description of AMCE's related party transactions.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of AMCE and its
subsidiaries, all of which are wholly owned, except AMC Philadelphia, Inc.
("AMCP"), which is 80% owned. At April 1, 1993 and April 2, 1992, the minority
interest in AMCP amounted to $1,771,000 and $1,085,000, respectively, and is
included in other long-term liabilities. All significant intercompany balances
and transactions have been eliminated.
FISCAL YEAR
The Company has a 52/53 week fiscal year ending on the Thursday closest to
the last day of March. The current year ended April 1, 1993, included fifty-two
weeks. The year ended April 2, 1992, included fifty-three weeks and the year
ended March 28, 1991, included fifty-two weeks.
CASH AND EQUIVALENTS
This balance is comprised of cash on hand and temporary cash investments
with original maturities of less than thirty days.
INVESTMENTS
Investments are comprised principally of money market instruments,
short-term commercial paper and corporate bonds at April 1, 1993 and are carried
at cost which approximates market.
CONCENTRATION OF CREDIT RISK
The Company invests excess cash in deposits with major banks and in high
quality short-term liquid money instruments. Such investments are made only in
instruments issued or enhanced by high quality financial institutions
(investment grade or better). Amounts invested in a single institution are
limited to minimize risk.
PREPAID FILM RENTALS
The Company is occasionally required to advance or guarantee film rentals to
secure the right to exhibit certain films. Such advances and guarantees are
charged to expense as the films are exhibited, based on the distributor's
proportionate share of admissions revenue.
REFUNDABLE CONSTRUCTION ADVANCES
Included in receivables at April 1, 1993 is $320,000 ($1,920,000 at April 2,
1992) advanced to developers to fund a portion of the construction costs of new
theatres that are to be operated by AMC pursuant to lease agreements. These
advances are refunded by the developers either during or shortly after
completion of construction.
F-18
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 1 -- THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY
Property is recorded at cost. The Company uses the straight-line method in
computing depreciation and amortization for financial reporting purposes and
accelerated methods, with respect to certain assets, for income tax purposes.
The estimated useful lives are generally as follows:
<TABLE>
<S> <C>
Buildings and improvements 20 to 40 years
Leasehold improvements 5 to 25 years
Furniture, fixtures and equipment 3 to 10 years
</TABLE>
Expenditures for additions (including interest during construction), major
renewals and betterments are capitalized, and expenditures for maintenance and
repairs are charged to expense as incurred. The cost of assets retired or
otherwise disposed of and the related accumulated depreciation are eliminated
from the accounts in the year of disposal. Gains or losses resulting from
property disposals are credited or charged to operations currently.
Interest capitalized aggregated $90,000 for the year ended April 1, 1993
($141,000 and $174,000 for the years ended April 2, 1992 and March 28, 1991,
respectively).
OTHER LONG-TERM ASSETS
Other long-term assets are comprised principally of:
- amounts assigned to theatre leases assumed under favorable terms
which are being amortized on a straight-line basis over the
remaining terms of the leases including all renewal options;
- costs incurred in connection with the issuance of debt
securities which are being amortized over the respective life of
the issue on the effective interest method;
- investments in partnerships and corporate joint ventures
accounted for under the cost or equity methods; and
- deferred preopening, and design costs relating to new theatres
which are being amortized over two years.
INCOME TAXES
The Company, pursuant to a tax sharing agreement, joins with DI in filing a
consolidated federal income tax return. The Company's provision for income tax
expense is computed as if it filed a separate consolidated return. Included in
other current assets at April 1, 1993 and April 2, 1992 was $563,000 and
$1,931,000, respectively, of prepaid or recoverable federal and state income
taxes. Investment tax credits are accounted for under the flow-through method.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is computed based upon net earnings (loss) for the
period less preferred stock dividends divided by the weighted average number of
common shares outstanding and outstanding stock options when their effect is
dilutive.
ACCOUNTING CHANGE
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109 (SFAS 109) - "Accounting for Income
Taxes." This new standard changes the accounting
F-19
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 1 -- THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
for deferred income taxes. The Company has adopted SFAS 109 for fiscal 1993. The
effect of adopting SFAS 109 was not material. Prior to 1993, the Company
accounted for income taxes in accordance with the Accounting Principles Board
Opinion No. 11 (APB 11) -- "Accounting for Income Taxes."
Effective during fiscal year 1992, the Company adopted the provisions of
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 106, -- "Employers' Accounting for Postretirement Benefits Other Than
Pensions". This statement provides that the obligation to provide benefits
arises as employees render the services necessary to earn the benefits such that
the cost of providing the benefits should be recognized over those employee
service periods. The impact of this change on the fiscal 1992 operations was not
material.
PRESENTATION
Certain amounts have been reclassified from prior period consolidated
financial statements to conform with the current year presentation. Such amounts
were not material.
PRO FORMA INFORMATION
On May 28, 1993 the Company acquired the other 50% interest in Exhibition
Enterprises Partnership ("EEP" or the "Partnership") (See Note 4). The unaudited
pro forma information combines the operating results of EEP for the fifty-three
weeks ended April 1, 1993 with that of the Company for the fifty-two weeks ended
April 1, 1993. Certain intercompany balances and transactions were eliminated.
The unaudited pro forma Statement of Operations gives effect to the EEP
acquisition as though it had occurred at the beginning of the year. For pro
forma purposes, the financing costs of the $30,000,000 borrowed for the
acquisition were estimated at an annual interest rate of 7.25% and interest
income was reduced due to the use of $24,500,000 in cash at an annual interest
rate of 4.42%. Recorded property and intangible assets of EEP were reduced by
$27,730,000 for pro forma purposes to reflect the excess of the net assets of
EEP over the Company's basis in these net assets, with depreciation and
amortization similarly reduced.
NOTE 2 -- ACCOUNTING CHANGE AND RESTATEMENT OF RESULTS
FASB Technical Bulletin No. 85-3, "Accounting for Operating Leases with
Scheduled Rent Increases" was issued November 14, 1985. It requires scheduled
rent increases, which are included in minimum lease payments, to be recognized
on a straight-line basis over the lease term. The Company did not implement this
accounting standard when it was issued. The accompanying financial statements
have been restated to implement this standard and account for operating leases
with scheduled rent increases on a straight-line basis.
In fiscal 1991, based upon computations in support of the prepayment to the
Internal Revenue Service ("IRS") relating to a settlement of tax accounting
issues, the Company concluded that adequate amounts had been reserved to settle
state and federal liabilities associated with fiscal years 1978 through 1987. In
fiscal 1993, an error was discovered in the computations supporting the adequacy
of the estimated IRS settlement. The accompanying financial statements have been
restated to report the corrected liability in fiscal 1991 and in subsequent
periods.
F-20
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 2 -- ACCOUNTING CHANGE AND RESTATEMENT OF RESULTS (CONTINUED)
The effect of the restatement on previously reported net earnings (loss)
follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1992 1991
--------- ---------
<S> <C> <C>
Net earnings (loss), as previously reported........................................ $ (3,959) $ 4,334
Effect of restatement.............................................................. (1,560) (3,267)
--------- ---------
Net earnings (loss), as restated................................................... $ (5,519) $ 1,067
--------- ---------
--------- ---------
Earnings (loss) per share before extraordinary item, as restated................... $ (.39) $ (.01)
--------- ---------
--------- ---------
Earnings (loss) per share, as restated............................................. $ (.39) $ .02
--------- ---------
--------- ---------
</TABLE>
The effect of the restatement on the current and prior years quarterly
financial results follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------
07/02/92 10/01/92 12/31/92
----------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Net earnings (loss), as previously reported.............................. $ 9,359 $ (9,719) $ 3,246
Effect of restatement.................................................... 85 (192) (192)
----------- --------- -----------
Net earnings (loss), as restated......................................... $ 9,444 $ (9,911) $ 3,054
----------- --------- -----------
----------- --------- -----------
Earnings (loss) per share before extraordinary item, as restated......... $ .57 $ (.22) $ .19
----------- --------- -----------
----------- --------- -----------
Earnings (loss) per share, as restated................................... $ .57 $ (.62) $ .19
----------- --------- -----------
----------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED (UNAUDITED)
---------------------------------------------- FISCAL
06/27/91 09/26/91 12/26/91 04/02/92 1992
----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net earnings (loss), as previously reported........ $ 537 $ (1,411) $ (3,079) $ (6) $ (3,959)
Effect of restatement.............................. (390) (390) (390) (390) (1,560)
----------- --------- --------- ----- ---------
Net earnings (loss), as restated................... $ 147 $ (1,801) $ (3,469) $ (396) $ (5,519)
----------- --------- --------- ----- ---------
----------- --------- --------- ----- ---------
Earnings (loss) per share, as restated............. -- $ (.12) $ (.23) $ (.04 ) $ (.39)
----------- --------- --------- ----- ---------
----------- --------- --------- ----- ---------
</TABLE>
NOTE 3 -- STOCKHOLDERS' EQUITY
CAPITAL STOCK
Holders of the Company's stock have no pre-emptive or subscription rights
and there are no restrictions with respect to transferability. Holders of the
Common Stock have no conversion rights, but holders of Class B Stock may elect
to convert at any time on a share-for-share basis into Common Stock.
The authorized common stock of AMCE consists of two classes of stock. Each
holder of Common Stock (66 2/3 CENTS par value; 45,000,000 shares authorized) is
entitled to one vote per share, and each holder of Class B Stock (66 2/3 CENTS
par value; 30,000,000 shares authorized) is entitled to 10 votes per share.
Presently holders of Common Stock, voting as a class, are entitled to elect 33%
of AMCE's Board of Directors with Class B stockholders electing the remainder.
CUMULATIVE PREFERRED STOCK
The Company has authorized 10,000,000 shares of Preferred Stock, without par
value.
F-21
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 3 -- STOCKHOLDERS' EQUITY (CONTINUED)
On June 23, 1988, DI purchased twenty-five shares of Preferred Stock with an
assigned value of 66 2/3 CENTS per share. The purchase price was $1,000,000 per
share and the series of Preferred Stock, which was unregistered, was designated
as the "Cumulative Preferred Stock 14% Series of 1988". The Cumulative Preferred
Stock had preference in liquidation in the amount of $1,000,000 per share plus
accrued and unpaid dividends.
On February 24, 1989, the Company redeemed twenty shares of the Cumulative
Preferred Stock owned by DI in the amount of $20,000,000. On August 12, 1992,
the Company redeemed the remaining five shares of Cumulative Preferred Stock
owned by DI in the amount of $7,531,000, including accrued and unpaid dividends.
STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS
1983 PLAN In June 1983, AMCE adopted a stock option plan ("1983 Plan") for
selected employees. This plan provides for the grant of rights to purchase
shares of Common Stock under both incentive and non-incentive stock option
agreements. The number of shares which may be sold under the plan may not exceed
750,000 shares. The 1983 Plan provides that the exercise price may not be less
than the fair market value of the stock at the date of grant and unexercised
options expire no later than ten years after date of grant.
1984 PLAN In September 1984, AMCE adopted a non-qualified stock option plan
("1984 Plan"). This plan provides for the grant of rights to purchase shares of
Common Stock under non-qualified stock option agreements. The number of shares
which may be sold under the plan may not exceed 750,000 shares. The 1984 Plan
provides that the exercise price will be determined by the Company's Stock
Option Committee and that the options expire no later than ten years after date
of grant.
Pertinent information covering the two plans follows:
<TABLE>
<CAPTION>
1993 1992
--------------------------- ---------------------------
NUMBER OF OPTION PRICE NUMBER OF OPTION PRICE
SHARES PER SHARE SHARES PER SHARE
---------- --------------- ----------- --------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year............... 453,750 $4.67-$11.13 453,750 $4.67-$11.13
Cancelled...................................... (30,000) $9.00 --
Exercised...................................... (181,000) $4.67 --
---------- -----------
Outstanding at end of year..................... 242,750 $4.67-$11.13 453,750 $4.67-$11.13
---------- -----------
---------- -----------
Exercisable at end of year..................... 242,750 $4.67-$11.13 453,750 $4.67-$11.13
---------- -----------
---------- -----------
Available for grant at end of year............. 977,529 947,529
---------- -----------
---------- -----------
</TABLE>
Expiration dates for outstanding stock options at April 1, 1993 are as
follows:
<TABLE>
<CAPTION>
OPTION PRICE
FISCAL YEAR NUMBER OF SHARES PER SHARE
- ---------------------------- ----------------- -------------
<S> <C> <C>
1994 138,750 $ 9.00
1995 44,000 4.67
1996 60,000 11.13
-------
Total options outstanding 242,750
-------
-------
</TABLE>
F-22
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 4 -- TRANSACTIONS WITH TPI ENTERPRISES, INC.
ACQUISITION AND DISPOSITION OF STOCK
In August 1987, the Company purchased 6,275,144 shares of Common Stock of
TPI Enterprises, Inc. ("TPI"), at a cost of $37,651,000 or $6.00 per share.
Prior to April 19, 1991, this investment was accounted for by the equity method
on a one calendar quarter lag basis.
On April 19, 1991, Cinema Enterprises, Inc. ("CENI"), a wholly-owned
subsidiary of AMC, contributed 3.8 million shares of TPI Common Stock for an
interest in a partnership. Subsequently, these shares were distributed to TPI.
See the following discussion titled "Partnership Transaction and Related
Agreements."
Also on April 19, 1991, the Company sold one million shares of TPI Common
Stock for $5,500,000 and granted a purchase option on an additional 1,475,144
shares to a limited partnership of which Stephen R. Cohen, the Chairman of the
Board and Chief Executive Officer of TPI, is the general partner. The purchase
price under the option is $6.00 per share for a period of three years following
April 19, 1991, and thereafter the purchase price will increase by $.50 per
share for each successive year throughout the balance of the ten-year term of
the Option Agreement. In the Option Agreement, AMC granted an irrevocable proxy
to the limited partnership to vote the option shares during the term of the
option.
The Company recognized a net gain of approximately $854,000 resulting from
the TPI Common Stock transactions which was included in investment income in
fiscal 1992. After April 19, 1991, the Company's ownership percentage in TPI
fell to approximately eight percent. Consequently, the Company began accounting
for this investment on the cost method.
DISPOSITION OF THEATRES
On February 24, 1989, the Company sold 55 theatres with 375 screens and on
May 17, 1990, the Company sold one theatre with eight screens to TPI
Entertainment, Inc. ("TPIE"), a wholly-owned subsidiary of TPI, under the terms
of the Asset Purchase Agreement dated August 24, 1988, as amended.
Due to (1) substantial continuing involvement with the properties and risk
related thereto, (2) the Company's approximate 27% ownership (at the date of
original sale) of TPI and (3) the TPIE purchase money notes that were received
as part of the proceeds in this transaction, the estimated gain (aggregating
approximately $70,352,000) was deferred for financial reporting purposes to be
recognized in future periods. Prior to the Company's acquisition of a
partnership interest in the theatres sold to TPIE, the deferred gain was being
amortized on the straight-line method over an average life of approximately 11
years.
PARTNERSHIP TRANSACTION AND RELATED AGREEMENTS
On March 4, 1991, CENI entered into a general partnership agreement (the
"Partnership Agreement") with TPIE, forming EEP.
On April 19, 1991, pursuant to the Partnership Agreement, TPIE contributed
to EEP its interest in the assets (subject to certain exclusions) relating to
the 57 movie theatres (56 theatres purchased from AMC and one theatre
constructed by TPIE) owned and operated by TPIE and other leasehold interests,
subject to obligations under notes, loans and capital leases. Also, CENI
contributed to EEP 3.8 million Common Shares (the "Shares") of TPI. Following
the capital contributions, EEP distributed the Shares to TPIE. In addition, EEP
was obligated to pay to TPIE an amount of cash, determined in accordance with
the Partnership Agreement, which was the sum of $800,000 plus additions to gross
theatre property and principal payments on the Merchants Bank loan held by TPIE
from September 27, 1990 to April 19, 1991. Such obligations aggregating
$4,724,000, including interest, were paid in August, 1991.
F-23
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 4 -- TRANSACTIONS WITH TPI ENTERPRISES, INC. (CONTINUED)
Prior to May 28, 1993, CENI and TPIE each had a 50% interest in EEP. Under
the Partnership Agreement, net income and net losses generally were allocable to
the partners in accordance with their partnership interests; however, during the
first and second fiscal years of the Partnership, 70% and 60%, respectively, of
the depreciation expense was allocated to TPIE. Thereafter, the depreciation
expense was allocated in accordance with each partner's respective partnership
interest. The Company's aggregate cost (fair market value of the stock
contributed plus transaction fees) of the EEP investment was $26,141,000 and the
Company's opening partnership capital was $9,872,000. In accounting for the
investment in EEP, approximately $28,755,000 of unamortized deferred gain
arising from the 1989 sale of theatres to TPIE was applied as a reduction to the
Company's investment in the Partnership. The excess of the Company's opening
partnership capital over the Company's net investment in EEP was amortized to
investment income on the straight-line method over 18 years, which approximated
the remaining lives of the leases.
The Partnership was managed by a Board of Managers consisting of two
representatives of CENI and two representatives of TPIE. The theatres are
managed by AMC under the provisions of a management agreement. The Partnership
pays AMC a management fee equal to 5% of theatre revenues. An additional
management fee of up to 1% of theatre revenues may be earned by AMC if theatre
level cash flow exceeds a specified amount in a fiscal year.
AMC had pledged the capital stock of CENI to secure third party indebtedness
of EEP, which aggregated $37 million as of April 1, 1993.
Included in receivables at April 1, 1993 and April 2, 1992 are amounts due
from EEP for approximately $1,168,000 and $582,000, respectively. These
receivables consist primarily of management fees and other operating expenses
incurred by AMC on behalf of EEP.
Investment in and advances to partnership as of April 1, 1993 includes a 12%
Subordinated Promissory Note due from EEP of $42,364,000 principal amount,
discounted by $2,485,000 (for an effective yield of 14%) plus a note receivable
in the amount of $710,000 from the April 25, 1991 sale of a theatre. At April 2,
1992, the carrying value of the notes receivable balance was $40,331,000.
The investment in EEP was accounted for by the equity method as the Company
did not have a controlling ownership interest or a majority representation on
the Partnership's Board of Managers. The Company's equity in earnings of EEP
(included in investment income) totaled $1,743,000 and $404,000 in fiscal years
ended April 1, 1993 and April 2, 1992, respectively.
F-24
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 4 -- TRANSACTIONS WITH TPI ENTERPRISES, INC. (CONTINUED)
The following is a summary of financial information of EEP at December 31,
1992 and December 26, 1991 and for the periods then ended (in thousands):
<TABLE>
<CAPTION>
12/31/92 12/26/91
------------ ------------
<S> <C> <C>
Current assets:
Cash and equivalents..................................................... $ 8,707 $ 4,126
Receivables.............................................................. 1,997 802
Other current assets..................................................... 2,256 936
------------ ------------
Total current assets................................................. 12,960 5,864
Property, net............................................................ 61,123 64,835
Intangible assets, net................................................... 48,252 52,628
Other long-term assets................................................... 1,368 372
------------ ------------
Total assets......................................................... $ 123,703 $ 123,699
------------ ------------
------------ ------------
Current liabilities:
Film rentals, net........................................................ $ 5,906 $ 7,201
Accrued expenses and other liabilities................................... 6,012 5,019
Other accounts payable................................................... 901 1,418
Current maturities of borrowings and capital lease obligations........... 4,481 4,401
------------ ------------
Total current liabilities............................................ 17,300 18,039
Borrowings............................................................... 78,074 77,074
Capital lease obligations................................................ 12,771 13,252
------------ ------------
Total liabilities.................................................... 108,145 108,365
Partners' capital........................................................ 15,558 15,334
------------ ------------
Total liabilities and partners' capital.............................. $ 123,703 $ 123,699
------------ ------------
------------ ------------
<CAPTION>
53 WEEKS 36 WEEKS
ENDED ENDED
12/31/92 12/26/91
------------ ------------
<S> <C> <C>
Total theatre revenues..................................................... $ 148,397 $ 88,975
Cost of operations......................................................... 116,104 72,848
Management fee expense..................................................... 9,246 4,700
General and administrative................................................. 235 107
Interest expense........................................................... 10,185 7,734
Other income............................................................... (95) (282)
------------ ------------
Earnings before depreciation............................................... 12,722 3,868
Depreciation............................................................... 12,498 8,278
------------ ------------
Net earnings (loss)........................................................ $ 224 $ (4,410)
------------ ------------
------------ ------------
</TABLE>
On May 28, 1993, the Company completed the acquisition of TPIE's partnership
interest of EEP with the payment of $17,500,000. The acquisition required the
repayment of $37,000,000 in EEP bank indebtedness which was funded by borrowings
of $30,000,000 from the New Credit Facility together with cash on hand. On a pro
forma basis, the effect of the acquisition on the Company's fiscal 1993 results
would have
F-25
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 4 -- TRANSACTIONS WITH TPI ENTERPRISES, INC. (CONTINUED)
been an increase in earnings of approximately $116,000. For pro forma purposes,
the unamortized deferred gain arising from 1989 and 1990 sales of theatres to
TPIE ($26,992,000 at April 1, 1993) was applied as a reduction to the carrying
value of the EEP assets.
NOTE 5 -- TRANSACTIONS WITH RELATED PARTIES
American Associated Enterprises ("Enterprises") is a Missouri limited
partnership formed by Mr. Stanley H. Durwood, Chairman of the Board, Chief
Executive Officer and a Director of the Company, and his children, one of whom
is Mr. Edward D. Durwood, President, Vice Chairman of the Board and a Director
of the Company. Enterprises and the Chief Executive Officer of the Company own
DI. Prior to December 26, 1991, when the agreement was terminated, the Company
engaged Enterprises for the purpose of executing film license contracts and
providing related accounting and financial management services. The Company paid
Enterprises for rentals associated with films exhibited in the Company's
theatres and Enterprises in turn disbursed such funds to film distributors for
such rentals. Enterprises billed the Company approximately $1,000,000 for
services provided in the fiscal years ended April 2, 1992 and March 28, 1991.
The Company and DI maintain inter-company accounts which are kept on a
non-interest bearing basis. Charges to the inter-company accounts include the
allocation of AMC general and administrative expense and payments made by AMC on
behalf of DI. At April 1, 1993, DI and non-AMCE subsidiaries owed the Company
approximately $717,000 ($1,410,000 at April 2, 1992), including prepaid federal
income taxes of $843,000 ($1,920,000 at April 2, 1992) which are due from DI
upon the receipt of refunds from tax authorities or which may be used to offset
future taxes payable to DI under a tax sharing agreement.
Phillip E. Cohen, a former director of the Company and the former Chairman
of the Finance Committee of its Board of Directors, is also the sole beneficial
owner of Morgan Schiff & Co., Inc., an investment banking firm. In connection
with the sale of TPI Enterprises, Inc. common stock to C&C Investment Holdings,
L.P., the Company paid a fee of approximately $297,000 to Morgan Schiff & Co.,
Inc. as a commission on this transaction. (See Note 4.)
NOTE 6 -- BORROWINGS AND CAPITAL LEASE OBLIGATIONS
RECAPITALIZATION
As part of a recapitalization plan, on August 12, 1992, AMCE issued $200
million of Debt Securities consisting of $100 million of 11 7/8% Senior Notes,
due August 1, 2000, priced at 99.36 to yield 12%, and $100 million of 12 5/8%
Senior Subordinated Notes, due August 1, 2002, priced at 99.294 to yield
12 3/4%. The net proceeds from the offering of the Debt Securities, together
with cash on hand, were used as follows: (i) to redeem all of the AMCE 13.6%
Debentures at an aggregate price of $52,720,000 (representing 105.44% of the
principal amount thereof), plus accrued and unpaid interest thereon; (ii) to
redeem all of the AMCE 11 7/8% Debentures at an aggregate price of $78,563,000
(representing 104.75% of the principal amount thereof), plus accrued and unpaid
interest thereon; (iii) to repay all of AMC's outstanding indebtedness under a
credit facility ($36,000,000 in aggregate principal amount outstanding on August
12, 1992); (iv) to redeem all of AMCE's outstanding shares of Cumulative
Preferred Stock 14% Series of 1988 at an aggregate price of approximately
$7,531,000 (representing the liquidation preference value thereof, plus accrued
and unpaid dividends thereon); and (v) to pay a special cash dividend of
approximately $18,550,000 in the aggregate ($1.14 per share) in respect of the
Common Stock and the Class B Stock on a pro rata basis.
The terms of the Indentures respecting the Senior Notes and the Senior
Subordinated Notes issued in the recapitalization restrict the Company's ability
to pay cash dividends by requiring that such dividends and other "restricted
payments" generally not exceed the sum of 25% of cash flow plus net proceeds of
certain
F-26
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 6 -- BORROWINGS AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
capital contributions and sales of capital stock received after August 12, 1992.
The Debt Securities are unsecured and unconditionally guaranteed by AMC and
significant subsidiaries. The Indentures provide conditions and limitations upon
the sale of assets, change in control, permitted investments, additional
indebtedness, and other limitations. After August 1, 1997, the Company may
redeem the Debt Securities at various call premiums as specified in the
Indentures.
The discounts on the Debt Securities are being amortized to interest expense
following the interest method of amortization. Costs related to the issuance of
the Debt Securities were capitalized and are charged to amortization expense,
following the interest method, over the life of the respective securities.
Unamortized issuance costs of $7,245,000 at April 1, 1993 are included in other
long-term assets.
Premiums paid to redeem the Debentures together with the write-off of
unamortized debt issue costs and other costs directly related to the debt
redemptions resulted in an extraordinary loss of $6,483,000 ($.40 per share),
net of income tax benefit of $3,800,000.
LOAN AGREEMENT
In connection with the recapitalization, effective August 10, 1992, AMC
entered into a three year loan agreement with two banks to provide a revolving
line of credit of up to $40,000,000 for working capital and other general
corporate purposes (the "New Credit Facility"). The Company has the option to
borrow at rates based on either the bank's base rate, CD rates or LIBOR and is
required to pay an annual commitment fee of 3/8 of 1% on the unused amount of
the commitment. At April 1, 1993, AMC had no borrowings on the New Credit
Facility but could borrow up to $40,000,000 as provided in the loan agreement.
The New Credit Facility includes several financial covenants. The Company is
required to maintain a maximum net debt to consolidated EBITDA ratio and a
minimum fixed charge coverage ratio. The required net debt to consolidated
EBITDA ratio is 4.00 to 1 for fiscal 1994 and 3.50 to 1 thereafter. The required
fixed charge coverage ratio is 1.35 to 1 for fiscal 1994 and 1.50 to 1
thereafter. In addition, the covenants contained in the New Credit Facility
limit the Company's capital expenditures to $25,000,000 per year, of which the
Company may allocate to capital expenditures outside of the United States the
lesser of $10,000,000 or $5,000,000 plus 25% of cash flow (minus 100% of cash
flow, if negative), in each case less the amount of permitted dividends paid or
declared by the Company, as described below. These and other provisions of the
New Credit Facility may have the effect of limiting the amount of assets held by
the Company.
The New Credit Facility limits the amount of dividends that the Company and
its subsidiary, American Multi-Cinema, Inc., may pay during its term to the
lesser of $10,000,000 or $5,000,000 plus 25% of cash flow (minus 100% of cash
flow if negative) over the term of the New Credit Facility, in each case less
capital expenditures outside the United States. In addition, AMC will be
permitted to pay, in any six-month period, dividends in an amount equal to the
aggregate scheduled payments of interest on the Senior Subordinated Notes for
such period, unless payments on such securities would not then be permitted by
the subordination provisions of such securities. The New Credit Facility
stipulates that there shall be a period of at least 60 consecutive days during
each twelve month period following the agreement date when there are no loans
outstanding under the New Credit Facility. The Company has satisfied this
stipulation for the first twelve month period by not borrowing funds during the
first 60 days of the loan agreement.
COLLATERALIZED DEBT
Certain notes payable which total $1,556,000 at April 1, 1993 have been
collateralized by a pledge of property with a net book value of $2,341,000 at
April 1, 1993.
F-27
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 6 -- BORROWINGS AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
DIVIDEND RESTRICTIONS
As discussed above, the amount of cash dividends payable by the Company is
limited by covenants to the Indentures governing the Senior Notes, Senior
Subordinated Notes and covenants to the New Credit Facility. As of April 1,
1993, according to the most restrictive terms of the covenants, the Company
could pay a cash dividend of approximately $1,800,000.
SUMMARY OF BORROWINGS
The Company is obligated under bonds, notes and other indebtedness as
follows (in thousands):
<TABLE>
<CAPTION>
TOTALS
--------------------
RATES OF APRIL 1, APRIL 2,
INTEREST MATURITY DATES DUE IN 1994 1993 1992
------------- -------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
SENIOR DEBT
- -----------------------------------------------------
Senior notes......................................... 11.875% August, 2000 -- $ 99,394 --
Revolving credit agreement........................... Various April, 1993 -- -- $ 54,000
Serially to
Equipment installment notes.......................... 8% to 12.58% 2009 $ 1,115 2,478 8,405
Industrial revenue bonds............................. 12% August, 1992 -- -- 310
Serially to
Capital lease obligations............................ 7.25% to 20% 2025 1,292 53,343 51,597
Other indebtedness................................... Various Various 211 768 919
----------- --------- ---------
Total senior debt.................................. 2,618 155,983 115,231
----------- --------- ---------
SUBORDINATED DEBT
- -----------------------------------------------------
Senior subordinated notes............................ 12.625% August, 2002 -- 99,319 --
Senior subordinated debentures....................... 13.60% December, 2000 -- -- 50,000
11.875% July, 2001 -- -- 75,000
----------- --------- ---------
Total subordinated debt............................ -- 99,319 125,000
----------- --------- ---------
Total borrowings................................... $ 2,618 $ 255,302 $ 240,231
----------- --------- ---------
----------- --------- ---------
</TABLE>
Minimum annual payments required under existing capital lease obligations,
present value thereof and maturities of total indebtedness at April 1, 1993 are
as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL LEASE OBLIGATIONS
--------------------------------
MINIMUM NET
LEASE LESS PRESENT
PAYMENTS INTEREST VALUE OTHER DEBT TOTAL
---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1994......................................... $ 10,133 $ 8,841 $ 1,292 $ 1,326 $ 2,618
1995......................................... 10,322 8,588 1,734 170 1,904
1996......................................... 10,310 8,280 2,030 78 2,108
1997......................................... 10,369 7,906 2,463 76 2,539
1998......................................... 10,460 7,440 3,020 85 3,105
Thereafter................................... 91,345 48,541 42,804 200,224 243,028
---------- --------- --------- ---------- ----------
Total...................................... $ 142,939 $ 89,596 $ 53,343 $ 201,959 $ 255,302
---------- --------- --------- ---------- ----------
---------- --------- --------- ---------- ----------
</TABLE>
NOTE 7 -- INCOME TAXES
The Company records deferred income taxes using enacted tax laws and rates
for the years in which the taxes are expected to be paid. Effective in the
fourth quarter of fiscal year 1993, the Company adopted
F-28
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 7 -- INCOME TAXES (CONTINUED)
Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for
Income Taxes," retroactive to April 3, 1992. Previously issued 1993 unaudited
interim financial statements were restated for the effects of SFAS 109. Prior to
1993, the Company accounted for income taxes under Accounting Principles Board
Opinion No. 11 (APB 11), "Accounting for Income Taxes." The effect of adopting
SFAS 109 was not material.
Income taxes reflected in the consolidated statements of operations for the
three years ended April 1, 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
1993
------------------
(LIABILITY METHOD)
1992 1991
------ ------
(DEFERRED METHOD)
<S> <C> <C> <C>
Current:
Federal............................... $ 2,077 $ 900 $ 797
State................................. 600 600 663
------- ------ ------
Total current....................... 2,677 1,500 1,460
------- ------ ------
Deferred:
Federal............................... (3,145) -- --
State................................. (785) -- --
Net operating loss carryforwards...... 3,670 -- --
Change in valuation allowance......... (817) -- --
------- ------ ------
Total deferred...................... (1,077) -- --
------- ------ ------
Total provision......................... 1,600 1,500 1,460
Tax benefit of extinguishment of debt... 3,800 -- --
Tax effect of loss carryforwards........ -- -- 500
------- ------ ------
Total provision before extraordinary
items.................................. $ 5,400 $1,500 $1,960
------- ------ ------
------- ------ ------
</TABLE>
The effective tax rate on income before extraordinary items was 41% in 1993,
(37%) in 1992 and 78% in 1991. The difference between the effective rate and the
U.S. federal income tax statutory rate of 34% in 1993, 1992 and 1991 are
accounted for as follows (in thousands):
<TABLE>
<CAPTION>
1993(1) 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Tax on earnings (loss) before provision for income tax and extraordinary
items at statutory rates................................................. $ 4,470 $ (1,366) $ 859
Add (subtract) tax effect of:
Federal benefit not available(2)........................................ N/A 1,366 --
Installment sale........................................................ 463 637 637
State income tax, net of federal benefit................................ 600 600 663
Change in valuation allowance(3)........................................ (817) N/A N/A
Other, net.............................................................. 684 263 (199)
--------- --------- ---------
Income tax expense before extraordinary items............................. $ 5,400 $ 1,500 $ 1,960
--------- --------- ---------
--------- --------- ---------
<FN>
- ------------------------
(1) As calculated under SFAS 109.
(2) The N/A denotes items which do not apply to SFAS 109.
(3) The N/A denotes items which do not apply to APB11.
</TABLE>
F-29
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 7 -- INCOME TAXES (CONTINUED)
Deferred income taxes for 1993 reflect the impact of "temporary differences"
between the amount of assets and liabilities for financial reporting purposes
and such amounts as measured by tax laws and regulations. These "temporary
differences" are determined in accordance with SFAS 109 and are more inclusive
in nature than "timing differences" as determined under APB 11. Deferred income
taxes for 1992 and 1991 have not been restated. The significant components of
deferred income tax assets and liabilities at April 1, 1993 are as follows (in
thousands):
<TABLE>
<CAPTION>
DEFERRED INCOME TAX
----------------------
ASSETS LIABILITIES
--------- -----------
<S> <C> <C>
Accrued reserves and liabilities.................................................. $ 2,798 $ 141
Investments in partnerships....................................................... 10,723 --
Capital lease obligations......................................................... 6,711 --
Deferred gains on installment sales............................................... 10,797 7,649
Depreciation...................................................................... -- 12,075
Deferred rents.................................................................... 2,953 --
Investment tax credit carryforward................................................ 2,038 --
Other............................................................................. 1,145 478
--------- -----------
Total............................................................................. 37,165 20,343
Less: Valuation allowance....................................................... 15,745 --
--------- -----------
Net............................................................................. 21,420 20,343
Less: Current deferred income taxes............................................. 1,077 --
--------- -----------
Total noncurrent deferred income taxes............................................ $ 20,343 $ 20,343
--------- -----------
--------- -----------
Net noncurrent deferred income taxes.............................................. $ 0
---------
---------
</TABLE>
SFAS 109 requires a valuation allowance against deferred tax assets if,
based on the weight of available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized. The Company believes
that uncertainty exists with respect to the future realization of investment tax
credit carryforwards and certain future income tax deductions. Therefore, the
Company established a valuation allowance relating to such items of $15,745,000
and $16,562,000 as of April 1, 1993 and April 2, 1992, respectively.
As of April 1, 1993, the Company has investment tax credit carryforwards of
$2,038,000, which expire in 2003.
The Company settled litigation with the Internal Revenue Service ("IRS")
primarily concerning the Company's method, for the years 1978 through 1987, of
reporting for income tax purposes, film rentals and deductions in the year paid
(cash method) rather than in the year the related film was exhibited (accrual
method). In July 1990, the Company made a prepayment to the IRS in the amount of
$18,155,000. Included in the Consolidated Balance Sheet at April 1, 1993 is
$4,796,000 in estimated state and federal taxes and interest payable related to
the above settlement. (See Note 12.)
F-30
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 8 -- PROPERTY
A summary of property follows (in thousands):
<TABLE>
<CAPTION>
APRIL 1, APRIL 2,
1993 1992
---------- ----------
<S> <C> <C>
Property owned:
Land.......................................................................... $ 20,239 $ 23,180
Buildings and improvements.................................................... 83,028 77,547
Furniture, fixtures and equipment............................................. 129,297 134,329
Leasehold improvements........................................................ 92,118 97,636
---------- ----------
324,682 332,692
Less -- accumulated depreciation and amortization............................. 137,266 124,521
---------- ----------
187,416 208,171
---------- ----------
Property leased under capitalized leases:
Buildings..................................................................... 56,569 54,669
Less -- accumulated amortization.............................................. 20,004 18,367
---------- ----------
36,565 36,302
---------- ----------
Net property.................................................................... $ 223,981 $ 244,473
---------- ----------
---------- ----------
</TABLE>
NOTE 9 -- OTHER ASSETS AND LIABILITIES
Other assets and liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
APRIL 1, APRIL 2,
1993 1992
--------- ---------
<S> <C> <C>
Other current assets:
Prepaid rent.................................................................... $ 4,089 $ 4,406
Prepaid income taxes............................................................ 563 1,931
Deferred income taxes........................................................... 1,077 --
Other........................................................................... 1,645 1,731
--------- ---------
$ 7,374 $ 8,068
--------- ---------
--------- ---------
Other long-term assets:
Investments, at cost............................................................ $ 5,738 $ 4,033
Investments in partnerships and corporate joint ventures........................ 1,676 2,685
Lease rights and location premiums, net......................................... 17,577 20,004
Deferred charges, net........................................................... 8,228 4,715
Other........................................................................... 1,661 1,381
--------- ---------
$ 34,880 $ 32,818
--------- ---------
--------- ---------
</TABLE>
F-31
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 9 -- OTHER ASSETS AND LIABILITIES (CONTINUED)
<TABLE>
<CAPTION>
APRIL 1, APRIL 2,
1993 1992
--------- ---------
<S> <C> <C>
Accrued expenses and other liabilities:
Taxes other than income......................................................... $ 3,832 $ 3,293
Interest........................................................................ 4,756 6,052
Payroll and vacation............................................................ 6,445 4,389
Casualty claims and premiums.................................................... 2,408 2,615
Reserve for future disposition.................................................. 3,653 3,013
Deferred income................................................................. 8,413 4,340
Other........................................................................... 6,364 7,518
--------- ---------
$ 35,871 $ 31,220
--------- ---------
--------- ---------
</TABLE>
NOTE 10 -- LEASES
DESCRIPTION OF LEASING AGREEMENTS
The majority of the Company's operations are conducted in premises occupied
under lease agreements with base terms ranging generally from 15 to 25 years,
with certain leases containing options to extend the leases for up to an
additional 20 years. The leases provide for fixed rentals and/or rentals based
on revenues with a guaranteed minimum. The Company also leases certain equipment
under leases expiring at various dates. The majority of the leases provide that
the Company will pay all, or substantially all, the taxes, maintenance,
insurance and certain other operating expenses. Assets held under capital leases
are included in property. Performance under some leases has been guaranteed by
DI.
OPERATING LEASES
The Company has entered into agreements to lease space for the operation of
theatres not yet fully constructed. Of the total number of anticipated openings,
leases for two new theatres with 22 screens and four screens at an existing
location have been finalized. Construction is scheduled for completion, and
theatres for opening, at various dates through the fourth quarter of fiscal
1994. The estimated minimum rental payments that may be required under the terms
of these operating leases total approximately $45 million.
Following is a schedule, by year, of future minimum rental payments required
under these leases and existing operating leases that have initial or remaining
non-cancellable terms in excess of one year at April 1, 1993 (in thousands):
<TABLE>
<S> <C>
Fiscal year ended:
1994.................................................... $ 32,347
1995.................................................... 33,667
1996.................................................... 32,893
1997.................................................... 31,736
1998.................................................... 30,247
Thereafter.............................................. 290,983
---------
Total minimum payments required........................... $ 451,873
---------
---------
</TABLE>
The Company records rent expense on a straight-line basis over the term of
the lease. Included in long-term liabilities at April 1, 1993 and April 2, 1992
is $7,382,000 and $6,854,000, respectively, of deferred rent representing pro
rata future minimum rental payments for leases with scheduled rent increases.
F-32
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 10 -- LEASES (CONTINUED)
Rent expense is summarized as follows for the years ended (in thousands):
<TABLE>
<CAPTION>
APRIL 1, APRIL 2, MARCH 28,
1993 1992 1991
--------- --------- -----------
<S> <C> <C> <C>
Theatre premises:
Minimum rentals:
Paid to related parties (1)....................................... -- -- $ 112
Paid to others.................................................... $ 37,466 $ 36,749 35,535
Percentage rentals based on revenues................................ 1,722 1,518 3,501
Equipment rentals................................................... 778 927 474
--------- --------- -----------
$ 39,966 $ 39,194 $ 39,622
--------- --------- -----------
--------- --------- -----------
<FN>
- ------------------------
(1) Related party interest to theatre property was sold to an unrelated party
in June 1990.
</TABLE>
On May 28, 1993 the Company completed the acquisition of TPIE's partnership
interest of EEP. The minimum rental payments required under the leases,
associated with the EEP theatres, that have initial or remaining noncancelable
terms in excess of one year at December 31, 1992, are reflected in the table
below (in thousands):
<TABLE>
<S> <C>
Fiscal year ended:
1993.................................................... $ 14,038
1994.................................................... 15,177
1995.................................................... 15,322
1996.................................................... 15,134
1997.................................................... 14,944
Thereafter.............................................. 163,470
---------
Total minimum payments required........................... $ 238,085
---------
---------
</TABLE>
NOTE 11 -- EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT PLAN
Effective during fiscal year 1991, the Company adopted the provisions of
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 87 (SFAS 87) -- "Employers' Accounting for Pensions". The adoption of SFAS
87 was not material to the consolidated financial statements for fiscal 1991,
the year of adoption, or in previous periods for which the Statement was
applicable.
The Company sponsors a non-contributory defined benefit pension plan
covering, after a minimum of one year of employment, all employees age 21 or
older, who have completed 1,000 hours of service in their first twelve months of
employment or in a calendar year and who are not covered by a collective
bargaining agreement.
The plan calls for benefits to be paid to eligible employees at retirement
based primarily upon years of credited service with the Company (not exceeding
thirty-five) and the employee's highest five year average compensation.
Contributions to the plan reflect benefits attributed to employees' services to
date, as well as services expected to be earned in the future. Plan assets are
invested in a group annuity contract with an insurance company pursuant to which
the plan's benefits are paid to retired and terminated employees and the
beneficiaries of deceased employees.
F-33
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 11 -- EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the plan's funded status as of December 31,
1992 and 1991 (Plan valuation dates) and the amounts included in the
consolidated balance sheets as of April 1, 1993 and April 2, 1992 (in
thousands):
<TABLE>
<CAPTION>
APRIL 1, APRIL 2,
1993 1992
--------- ---------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation, including vested
benefits of $7,191 and $5,440.................................................... $ 7,631 $ 5,912
--------- ---------
--------- ---------
Projected benefit obligation for service rendered to date......................... $ 13,173 $ 10,260
Less: Plan assets at fair value................................................. 6,388 5,312
--------- ---------
Projected benefit obligation in excess of plan assets............................. 6,785 4,948
Less: Unrecognized net loss from past experience different from that assumed and
effects of changes in assumptions........................................... 2,662 915
Less: Unrecognized net obligation upon adoption being recognized over 15 years,
net of amortization......................................................... 2,709 2,934
Less: Plan contributions from measurement date to end of fiscal year............ 201 110
--------- ---------
Pension liability included in consolidated balance sheet.......................... $ 1,213 $ 989
--------- ---------
--------- ---------
</TABLE>
Net pension expense includes the following components for the years ended
(in thousands):
<TABLE>
<CAPTION>
APRIL 1, APRIL 2, MARCH 28,
1993 1992 1991
--------- --------- -----------
<S> <C> <C> <C>
Service cost benefits earned during the period........................... $ 936 $ 761 $ 715
Interest cost on the projected benefit obligation........................ 714 586 504
Actual return on plan assets............................................. (471) (942) (35)
Net amortization and deferral............................................ 203 810 (62)
--------- --------- -----------
Net pension expense...................................................... $ 1,382 $ 1,215 $ 1,122
--------- --------- -----------
--------- --------- -----------
</TABLE>
The weighted average discount rates used to measure the projected benefit
obligation were 6.5%, 7.0% and 7.25% for the years ended December 31, 1992, 1991
and 1990, respectively. The rate of increase in future compensation levels was
6.50% for the three years and the expected long-term rate of return on assets
was 8.0% for December 31, 1992 and 8.5% for December 31, 1991 and December 31,
1990. The Company uses the straight-line method of amortization for prior
service cost and unrecognized gains and losses over the average remaining
service period of 15 years.
A limited number of employees are covered by collective bargaining
agreements under which payments are made to a union-administered fund.
401(K) PLAN
The Company sponsors a voluntary thrift savings plan ("401(k) Plan")
covering the same employees eligible for the pension plan. Since inception of
the savings plan, the Company has matched 50% of each eligible employee's
elective contributions, limited to 3% of the employee's salary.
The Company's share of expense under the thrift savings plan was $777,000
for the year ended April 1, 1993 ($868,000 and $844,000 for the fiscal years
ended April 2, 1992 and March 28, 1991, respectively).
F-34
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 11 -- EMPLOYEE BENEFIT PLANS (CONTINUED)
OTHER RETIREMENT BENEFITS
Effective during fiscal year 1992, the Company adopted the provisions of
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 106 (SFAS 106) -- "Employers' Accounting for Postretirement Benefits Other
Than Pensions." SFAS 106 requires employers to accrue the cost of postretirement
benefits other than pensions over the term of employment. Prior to adoption of
SFAS 106, the Company accounted for postretirement benefits other than pensions
as an expense when the benefits were paid. The adoption of SFAS 106 was not
material to the consolidated financial statements for the year (53 weeks) ended
April 2, 1992.
The Company currently offers eligible retirees the opportunity to
participate in a health plan (medical and dental) and a life insurance plan.
Substantially all employees may become eligible for these benefits provided that
the employee must be at least 55 years of age and have 15 years of credited
service at retirement. The health plan is contributory, with retiree
contributions adjusted annually; the life insurance plan is noncontributory. The
accounting for the health plan anticipates future modifications to the cost-
sharing provisions to provide for retiree premium contributions of approximately
20% of total premiums, increases in deductibles and co-insurance at the medical
inflation rate and coordination with Medicare.
Retiree health and life insurance plans are not funded. The Company is
amortizing the transition obligation on the straight-line method over a period
of 20 years.
The following table sets forth the plans' accumulated postretirement benefit
obligation reconciled with the amount included in the consolidated balance
sheets as of April 1, 1993 and April 2, 1992 (in thousands):
<TABLE>
<CAPTION>
APRIL 1, APRIL 2,
1993 1992
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................................. $ 297 $ 367
Fully eligible active plan participants.................................. 183 117
Other active plan participants........................................... 810 688
--------- ---------
Accumulated postretirement benefit obligation.............................. 1,290 1,172
Unrecognized transition obligation......................................... (897) (947)
Unrecognized gains......................................................... 3 --
--------- ---------
Accrued postretirement benefit cost in the balance sheet................... $ 396 $ 225
--------- ---------
--------- ---------
</TABLE>
Postretirement expense includes the following components for the years ended
(in thousands):
<TABLE>
<CAPTION>
APRIL 1, APRIL 2,
1993 1992
----------- -----------
<S> <C> <C>
Service cost............................................................... $ 138 $ 128
Interest cost on accumulated postretirement benefit obligation............. 91 85
Amortization of transition obligation over 20 years........................ 49 50
----- -----
Postretirement expense..................................................... $ 278 $ 263
----- -----
----- -----
</TABLE>
For measurement purposes, the annual rate of increase in the per capita cost
of covered health care benefits assumed for fiscal 1993 was 14% for pre-65
medical, 12% for post-65 medical and 8% for dental. The rates were assumed to
decrease gradually to 6% for medical and 4% for dental at 2020 and remain at
that level thereafter. The health care cost trend rate assumption has a
significant effect on the amounts
F-35
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 11 -- EMPLOYEE BENEFIT PLANS (CONTINUED)
reported. Increasing the assumed health care cost trend rates by one percentage
point in each year would increase the accumulated postretirement benefit
obligation as of April 1, 1993 by $208,000 and the aggregate of the service and
interest cost components of postretirement expense for the year (52 weeks) then
ended by $48,000. The weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 8.5%.
NOTE 12 -- CONTINGENCIES
The Company, in the normal course of business, is party to various legal
actions. Management believes that the potential exposure, if any, from such
matters would not have a material adverse effect on the Company. The following
paragraphs summarize significant litigation and proceedings to which the Company
is a party.
EL CAJON CINEMAS, INC. V. AMERICAN MULTI-CINEMA, INC., United States
District Court, Southern District of California (Case No. 90 0710B (IEG)). On
May 30, 1990, El Cajon Cinemas, Inc. ("El Cajon") instituted this suit against
AMC (the "San Diego litigation"). On August 31, 1990, El Cajon filed its first
amended complaint against AMC alleging violations of Section 1 of the Sherman
Act, applicable California statutes prohibiting state antitrust violations and
unfair competition and tortious interference. The amended complaint sought
unspecified damages and attorneys' fees. On November 21, 1990, AMC answered the
amended complaint, and filed a counterclaim against El Cajon and George E.
Krikorian (El Cajon's sole stockholder and President), seeking relief for
violations of Section 1 of the Sherman Act, for applicable California statutes
prohibiting state antitrust violations and unfair competition, and tortious
interference with contractual relations/prospective advantage. AMC's
counterclaim seeks unspecified damages and attorneys' fees. On July 20, 1992, El
Cajon filed a motion for partial summary judgment on its complaint against AMC
and an application for a preliminary injunction, which alleged that the San
Diego litigation involves $6 million in treble damages. On October 23, 1992, the
court denied El Cajon's motion for summary judgment and its application for a
preliminary injunction. The court also granted in part AMC's motions for partial
summary judgment and dismissed El Cajon's claims under California statutes
prohibiting unfair competition and portions of El Cajon's claims under Section 1
of the Sherman Act. AMC voluntarily dismissed its claim against El Cajon for
violating the California unfair competition and antitrust statutes. El Cajon
voluntarily dismissed its claims for violation of the California antitrust
statutes. On November 30, 1992, the court denied AMC's motion for partial
summary judgment on the remaining antitrust claims.
On January 11, 1993, El Cajon filed a supplemental/second amended complaint
against AMC, which alleges violations of Section 1 of the Sherman Act. The only
claims remaining for trial are for violations of Section 1 of the Sherman Act.
On April 23, 1993, El Cajon filed (1) a motion for partial summary judgment on
AMC's Section 1 claims against El Cajon and (2) a motion for reconsideration of
the court's granting portions of AMC's motion for partial summary judgment on El
Cajon's Section 1 claims. Trial of the San Diego litigation has been set for
September 7, 1993.
INCOME TAX LITIGATION. The Company has been in litigation with the Internal
Revenue Service ("IRS") primarily concerning the Company's method, for the years
1975 and 1978 to 1987, inclusive, of reporting, for income tax purposes, film
rentals and deductions in the year paid (cash method) rather than in the year
the related film was exhibited (accrual method). These and other issues were the
subject of two United States Tax Court cases (DURWOOD, INC. V. COMMISSIONER OF
INTERNAL REVENUE, Docket No. 3706-88 filed February 23, 1988 and DURWOOD, INC.
V. COMMISSIONER OF INTERNAL REVENUE, Docket No. 3322-91 filed February 22,
1991).
F-36
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 12 -- CONTINGENCIES (CONTINUED)
Through April 1, 1993, the Company has recorded provisions totaling $22,951,000
representing the estimated additional federal and state income taxes and
interest resulting from the IRS litigation. In July 1990, the Company made a
prepayment to the IRS of $18,155,000.
Settlements have been reached with respect to all issues in each of the Tax
Court cases. On or about November 5, 1991, the Company and the Commissioner of
Internal Revenue entered into a closing agreement of final determination
providing for the resolution of film rent and interest income issues with
respect to the taxable years December 31, 1980 through March 31, 1988. The
agreement resulted in a liability which approximates the amount previously
accrued by the Company and affects the net operating loss carryforwards into
future years.
On September 2, 1992, the Company and the Commissioner of Internal Revenue
filed with the United States Tax Court a Second Supplemental Stipulation of
Partial Settlement in DURWOOD, INC. V. COMMISSIONER OF INTERNAL REVENUE, Docket
No. 3322-91, which Stipulation resolved all remaining issues, including issues
relating to certain capital gains, the dividends received deduction, and the
understatement penalty. Management believes that adequate amounts have been
reserved with respect to these income tax matters.
SALES TAX LITIGATION. On August 13, 1991, the Florida Department of Revenue
assessed the Company $1,670,000 in taxes, penalties and interest for popcorn
sales in theatres that occurred during the period commencing January 1, 1986,
and ending December 31, 1988. The Company protested the assessment relying in
part on a regulation which exempted certain popcorn sales from sales tax and
which remained in effect until January 2, 1989. Because the conflicting
regulation relied on by the Department when it assessed the Company did not
become effective until December 1987, the Department issued a revised assessment
to the Company in the amount of $388,000, which is based on the Company's 1988
popcorn sales in Florida. The Company intended to contest this assessment and
instructed its Florida legal counsel to file a petition seeking an
administrative hearing with the Department. However, the Company's Florida legal
counsel failed to file the petition and the time period to file the petition has
expired. Accordingly, the Department has taken the position the Company owes
$388,000 in taxes plus penalties and interest.
The Company has discharged its Florida legal counsel and has demanded that
its former counsel pay all amounts due the Department, which demand has been
refused. The Company intends to seek relief from the Department. If rejected,
the Company is prepared to pay the $388,000 in assessed taxes and simultaneously
apply for a refund of that amount based on the negligence of its former legal
counsel. If the Department would deny the claim for a refund, the Company will
pursue all available remedies against its former legal counsel.
NOTE 13 -- FUTURE DISPOSITION OF ASSETS
The Company has provided reserves for expected losses arising from the
discontinuation of the operation of fast food restaurants, for theatres which
have been or are anticipated to be closed and for other future dispositions of
assets.
In conjunction with the opening of certain new theatres in fiscal 1986
through 1988, the Company expanded its food services by leasing additional space
adjacent to those theatres and used such space to operate specialty fast food
restaurants. The Company discontinued operating the restaurants due to
unprofitability. The Company continues to sub-lease or to convert to other uses
the space leased for these restaurants. The Company is obligated under long-term
lease commitments with remaining terms of up to eighteen years. At April 1, 1993
the base rent aggregates approximately $1,206,000 annually, and $16,302,000
F-37
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 13 -- FUTURE DISPOSITION OF ASSETS (CONTINUED)
over the remaining term of the leases. As of April 1, 1993, the Company has
subleased approximately 82% of the space with remaining terms ranging from 2
months to 213 months. Non-cancellable subleases currently aggregate
approximately $1,060,000 annually, and $6,742,000 over the remaining term of the
subleases.
As of April 1, 1993, the Company remains obligated under lease commitments
for four closed theatres and for office space at two locations with remaining
terms of up to six years. The current leasing costs of these closed locations
approximates $382,000 annually, and $1,247,000 over the remaining term of the
leases. Non-cancellable subleases currently aggregate approximately $58,000
annually, and $257,000 over the remaining term of the subleases. The Company has
been in negotiation with certain landlords and believes the ultimate cost of
settling the leases will be less than the full amount of the lease obligations.
The following represents the activity in the estimated reserve for the
disposition of assets which is included in accrued expenses and other
liabilities in the consolidated balance sheets (in thousands):
<TABLE>
<S> <C>
Balance, March 29, 1990.................................... $ 763
Provision for loss on asset disposition.................... 2,100
Charge offs................................................ (1,268)
---------
Balance, March 28, 1991.................................... 1,595
Provision for loss on asset disposition.................... 3,000
Charge offs................................................ (1,582)
---------
Balance, April 2, 1992..................................... 3,013
Provision for division restructuring....................... 750
Provision for loss on asset disposition.................... 2,500
Charge offs................................................ (2,610)
---------
Balance, April 1, 1993..................................... $ 3,653
---------
---------
</TABLE>
NOTE 14 -- DISPOSITION OF ASSETS
Gain on disposition of assets for the years ended April 1, 1993, April 2,
1992 and March 28, 1991 are as follows (in thousands):
<TABLE>
<CAPTION>
APRIL 1, APRIL 2, MARCH 28,
1993 1992 1991
--------- --------- -----------
<S> <C> <C> <C>
Sale of theatres to Carmike Cinemas, Inc................................. $ 9,903 $ 8,169 --
Amortization of deferred gain............................................ -- 1,407 $ 6,585
Other, net............................................................... (265) (855) 64
--------- --------- -----------
$ 9,638 $ 8,721 $ 6,649
--------- --------- -----------
--------- --------- -----------
</TABLE>
DISPOSITION OF THEATRES
On February 24, 1989, the Company sold 55 theatres with 375 screens and on
May 17, 1990, the Company sold one theatre with 8 screens to TPIE. The gain,
aggregating approximately $70,352,000, was deferred from income, due to
continuing involvement with the properties, substantial ownership of TPI (at the
date of original sale) and the TPIE purchase money notes that were received as
part of the proceeds in this transaction. Prior to the Company's acquisition of
a partnership interest in the theatres sold to TPIE, the deferred gain was being
amortized on the straight-line method over an average life of approximately 11
F-38
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED APRIL 1, 1993
(53 WEEKS) ENDED APRIL 2, 1992
AND (52 WEEKS) ENDED MARCH 28, 1991 (CONTINUED)
NOTE 14 -- DISPOSITION OF ASSETS (CONTINUED)
years. Approximately one half of the deferred gain from the 1989 sale of
theatres to TPIE has been applied as a reduction to the Company's investment in
EEP. Further income recognition of the remaining deferred gain balance has been
suspended. (See Note 4.)
On May 16, 1991, the Company sold eight theatres with 45 screens to Carmike
Cinemas, Inc. for $9,416,000 with a recognized gain of $8,169,000.
On May 21, 1992, the Company sold five theatres with 32 screens to Carmike
Cinemas, Inc. for $12,132,000 with a recognized gain of $9,903,000.
NOTE 15 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
The carrying value of cash and equivalents approximates fair value because
of the short maturity of those instruments. Investments in corporate bonds were
valued based on quoted market prices. The fair value of the investment in TPI
Enterprises, Inc. is based on the lower of the quoted market price of this
common stock investment or the exercise price specified in a purchase option
agreement. The fair value of the subordinated promissory note receivable from
EEP was determined by reference to the estimated premium paid for the AMCE
Senior Subordinated Notes over U.S. treasury notes with similar average
maturities. For other notes receivable, the fair value was based upon a premium
over bank prime lending rates. The fair value of stock investments and publicly
held corporate borrowings was based upon quoted market prices. For other
corporate borrowings, the fair value was based upon rates available to the
Company from bank loan agreements or rates based upon the estimated premium over
U.S. treasury notes with similar average maturities.
The estimated fair values of the Company's financial instruments at April 1,
1993 follows (in thousands):
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
---------- ----------
<S> <C> <C>
Financial assets:
Cash and equivalents...................................... $ 23,997 $ 23,997
Investments............................................... 26,109 26,225
Investment in TPI Enterprises, Inc........................ 8,682 8,851
Subordinated note receivable.............................. 39,879 42,837
Other notes receivable.................................... 726 746
Stock investments......................................... 1,600 3,701
Financial liabilities:
Corporate borrowings...................................... 201,959 218,391
</TABLE>
F-39
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS BY QUARTER
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FISCAL YEAR
------------------
07/02/92 06/27/91 10/01/92 09/26/91 12/31/92 12/26/91 04/01/93 04/02/92 1993 1992
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues................. $99,888 $90,582 $100,750 $112,469 $105,492 $87,828 $98,335 $116,085 $404,465 $406,964
Total cost of operations....... 77,980 76,435 78,701 88,918 78,669 69,955 75,485 90,593 310,835 325,901
Depreciation and amortization.. 7,191 8,071 6,981 7,688 6,914 7,781 7,089 7,845 28,175 31,385
General & administrative
expenses...................... 8,717 9,490 9,393 10,281 7,978 8,651 10,197 9,463 36,285 37,885
Estimated loss on future
disposition of assets......... -- -- -- 600 2,500 -- -- 2,400 2,500 3,000
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Operating income (loss)........ 6,000 (3,414 ) 5,675 4,982 9,431 1,441 5,564 5,784 26,670 8,793
Interest expense............... 6,871 7,947 7,668 7,097 8,622 7,356 8,240 7,635 31,401 30,035
Investment income.............. 1,814 3,206 1,956 1,819 2,715 1,829 1,754 1,648 8,239 8,502
Gain (loss) on disposition of
assets........................ 9,851 8,677 (141 ) (1,130 ) (70 ) 992 (2 ) 182 9,638 8,721
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Earnings (loss) before income
taxes & extraordinary item.... 10,794 522 (178 ) (1,426 ) 3,454 (3,094 ) (924 ) (21 ) 13,146 (4,019)
Income tax provision........... 1,350 375 3,250 375 400 375 400 375 5,400 1,500
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Earnings (loss) before
extraordinary item............ 9,444 147 (3,428 ) (1,801 ) 3,054 (3,469 ) (1,324 ) (396 ) 7,746 (5,519)
Extraordinary item............. -- -- (6,483 ) -- -- -- -- -- (6,483) --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net earnings (loss)............ $ 9,444 $ 147 $(9,911 ) $(1,801 ) $ 3,054 $(3,469 ) $(1,324 ) $ (396 ) $ 1,263 $ (5,519)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Earnings (loss) per share
before extraordinary item..... $ 0.57 $ -- $ (0.22 ) $ (0.12 ) $ 0.19 $ (0.23 ) $ (0.08 ) $ (0.04 ) $ 0.46 $ (0.39)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Earnings (loss) per share...... $ 0.57 $ -- $ (0.62 ) $ (0.12 ) $ 0.19 $ (0.23 ) $ (0.08 ) $ (0.04 ) $ 0.06 $ (0.39)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
Quarterly results of operations for fiscal 1993 and 1992 have been restated
to reflect a change in accounting for operating leases. See Note 2 to the
Consolidated Financial Statements.
F-40
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Managers of
Exhibition Enterprises Partnership
Kansas City, Missouri
We have audited the accompanying balance sheets of Exhibition Enterprises
Partnership, (a partnership operated by Cinema Enterprises, Inc. and TPI
Entertainment, Inc.) as of December 31, 1992, and the related statements of
operations, partners' capital and cash flows for the year (53 weeks) then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Partnership as of December 31, 1992, and
the results of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche
Kansas City, Missouri
February 5, 1993
F-41
<PAGE>
EXHIBITION ENTERPRISES PARTNERSHIP
STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FIFTY-THREE
WEEKS ENDED
DECEMBER 31, 1992
-----------------
<S> <C>
Revenues.......................................................................................
Admissions................................................................................... $ 101,038
Concessions.................................................................................. 44,117
Other (Note 9)............................................................................... 3,242
--------
Total revenues............................................................................... 148,397
Expenses
Cost of operations........................................................................... 116,104
Depreciation and amortization................................................................ 12,626
--------
Total cost of operations..................................................................... 128,730
General & administrative expenses (Note 3)................................................... 9,481
--------
Total operating expenses................................................................... 138,211
--------
Operating income........................................................................... 10,186
--------
Other expense (income)
Interest expense
Borrowings................................................................................. 7,705
Capitalized leases......................................................................... 2,480
Investment and other income, net............................................................. (223)
--------
Net earnings................................................................................... $ 224
--------
--------
</TABLE>
See Notes to Financial Statements
F-42
<PAGE>
EXHIBITION ENTERPRISES PARTNERSHIP
BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1992
-----------------
<S> <C>
ASSETS
Current assets:
Cash and equivalents......................................................................... $ 8,707
Receivables (Note 9)......................................................................... 1,997
Other current assets......................................................................... 2,256
--------
Total current assets....................................................................... 12,960
Property, net (Notes 4 and 5).................................................................. 61,123
Intangible assets, net (Note 6)................................................................ 48,252
Other long-term assets......................................................................... 1,368
--------
$ 123,703
--------
--------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Film rentals payable......................................................................... $ 5,906
Accrued expenses and other liabilities (Note 3).............................................. 6,012
Other accounts payable....................................................................... 901
Current maturities of borrowings and capital lease obligations (Note 4)...................... 4,481
--------
Total current liabilities................................................................ 17,300
Borrowings (Note 4)............................................................................ 78,074
Capital lease obligations (Note 4)............................................................. 12,771
--------
Total liabilities........................................................................ 108,145
--------
Commitments and contingencies (Notes 7 and 8)..................................................
Partners' capital.............................................................................. 15,558
--------
$ 123,703
--------
--------
</TABLE>
See Notes to Financial Statements
F-43
<PAGE>
EXHIBITION ENTERPRISES PARTNERSHIP
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FIFTY-THREE
WEEKS ENDED
DECEMBER 31, 1992
-----------------
<S> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 224
-------
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization -- property................................................ 8,379
-- intangible assets........................................... 4,247
Loss on sale of assets................................................................... 13
Change in assets and liabilities:
Receivables............................................................................ (477)
Other current assets................................................................... (1,320)
Film rentals, net...................................................................... (1,295)
Accrued expenses, other liabilities and other accounts payable......................... 476
Other, net............................................................................... 350
-------
Total adjustments...................................................................... 10,373
-------
Net cash provided by operating activities.................................................... 10,597
-------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property acquisitions........................................................................ (5,408)
Proceeds from disposition of assets.......................................................... 147
Other long-term assets....................................................................... (1,354)
-------
Net cash used in investing activities........................................................ (6,615)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit agreement.................................................... 8,400
Repayments under line of credit agreement.................................................... (3,400)
Repayment on term loan....................................................................... (4,000)
Principal payments under capital leases...................................................... (401)
-------
Net cash provided by financing activities.................................................... 599
-------
NET INCREASE IN CASH AND EQUIVALENTS........................................................... 4,581
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD.................................................... 4,126
-------
CASH AND EQUIVALENTS AT END OF PERIOD.......................................................... $ 8,707
-------
-------
</TABLE>
See Notes to Financial Statements
F-44
<PAGE>
EXHIBITION ENTERPRISES PARTNERSHIP
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In connection with the April 19, 1991 partners' capital contributions,
liabilities were assumed as follows:
<TABLE>
<S> <C>
Book value of assets provided by partners............................... $ 122,096
Liabilities assumed..................................................... 102,352
---------
Opening partners' capital............................................... $ 19,744
---------
---------
</TABLE>
In connection with the April 25, 1991 acquisition of the Tri-City Theatre,
the Partnership issued a subordinated promissory note payable to AMC in the
amount of $710,000.
SUPPLEMENTAL CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
FIFTY-THREE
WEEKS ENDED
DECEMBER 31, 1992
-----------------
<S> <C>
Interest paid (net of amounts capitalized)..................................................... $ 11,531
</TABLE>
See Notes to Financial Statements
F-45
<PAGE>
EXHIBITION ENTERPRISES PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(IN THOUSANDS)
<TABLE>
<S> <C>
Partners' capital at December 26, 1991............................................. $ 15,334
Net earnings....................................................................... 224
---------
Partners' capital at December 31, 1992............................................. $ 15,558
---------
---------
</TABLE>
See Notes to Financial Statements
F-46
<PAGE>
EXHIBITION ENTERPRISES PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
YEAR (53 WEEKS) ENDED DECEMBER 31, 1992
NOTE 1 -- THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
Exhibition Enterprises Partnership ("EEP" or "the Partnership") is owned by
two general partners, Cinema Enterprises, Inc. ("CENI"), a wholly owned
subsidiary of American Multi-Cinema, Inc. ("AMC"), and TPI Entertainment, Inc.
("TPIE"), a wholly owned subsidiary of TPI Enterprises, Inc. ("TPI"), each with
a fifty percent ownership interest. The Partnership is engaged in the operation
of multi-screen motion picture theatres which generate revenues from box office
admissions and theatre concession sales. At December 31, 1992, the Partnership
operated 444 screens in 60 theatres. The Partnership's theatres are managed by
AMC and use the AMC name and logo in the operation of the theatres.
FISCAL YEAR
The Partnership commenced operations on April 19, 1991 with its first fiscal
period (36 weeks) ending on December 26, 1991. The Partnership is on a 52/53
week accounting period with its fiscal year ending on the last Thursday in
December.
CASH AND EQUIVALENTS
This balance is comprised of cash on hand, deposits in banks and temporary
cash investments with original maturities of less than thirty days.
PROPERTY
Property is recorded at cost. The Partnership uses the straight-line method
in computing depreciation and amortization for financial reporting purposes. The
estimated useful lives are generally as follows:
<TABLE>
<S> <C>
Furniture and fixtures 3 to 10 years
Leasehold improvements 5 to 25 years
Buildings and improvements 10 to 40 years
</TABLE>
Leasehold improvements are amortized over the shorter of the lives of the
applicable leases or the estimated useful lives of the assets.
Buildings under capital leases are amortized over the term of the applicable
lease, excluding renewal options.
Expenditures for additions (including interest during construction), major
renewals and betterments are capitalized and expenditures for maintenance and
repairs are charged to expense as incurred. The cost of assets retired or
otherwise disposed of and the related accumulated depreciation are eliminated
from the accounts in the year of disposal. Gains or losses resulting from
property disposals are credited or charged to operations currently.
Interest capitalized aggregated $42,000 for the fifty-three weeks ended
December 31, 1992.
INTANGIBLE ASSETS
Intangible assets are comprised principally of:
- goodwill which is being amortized on a straight-line basis over
twenty-four years.
- amounts assigned to theatre leases assumed under favorable terms
which are being amortized on a straight-line basis over the
remaining terms of the leases excluding renewal options.
- amounts assigned to location premium which are being amortized
on a straight-line basis over the remaining terms of the leases
including all renewal options.
- costs incurred in obtaining financing which are being amortized
on a straight-line basis over the term of the loan.
F-47
<PAGE>
EXHIBITION ENTERPRISES PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
YEAR (53 WEEKS) ENDED DECEMBER 31, 1992
NOTE 1 -- THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER ASSETS
Other current assets include amounts for prepaid expenses and merchandise
inventory. Other long-term assets include amounts for deposits, and deferred
preopening, start-up and design costs relating to new theatres which are being
amortized over two years.
COST OF OPERATIONS
Cost of operations is summarized as follows (in thousands):
<TABLE>
<CAPTION>
FIFTY-THREE
WEEKS ENDED
DECEMBER 31, 1992
-----------------
<S> <C>
Film rentals............................................... $ 53,802
Advertising................................................ 5,093
Wages and payroll taxes.................................... 18,960
Occupancy costs............................................ 23,749
Concession merchandise..................................... 6,618
Other...................................................... 7,882
--------
$ 116,104
--------
--------
</TABLE>
INCOME TAXES
The Partnership is not liable for income taxes. Each partner must report on
their corporate income tax returns their respective share of partnership income
or loss as determined by the partnership for income tax purposes.
RECLASSIFICATION
Certain amounts have been reclassified from prior period financial
statements to conform with the current year presentation.
NOTE 2 -- PARTNERSHIP FORMATION
On February 24, 1989, AMC sold 55 theatres with 375 screens to TPIE. AMC
also entered into a management agreement with TPIE to manage the theatres for a
fee based upon a specified percentage of revenues of the managed theatres. At
the time of the sale, AMC held 6,275,144 shares of Common stock of TPI.
On May 17, 1990, an additional eight-screen theatre owned by AMC was sold to
TPIE. Since that date and prior to the formation of the Partnership, TPIE
completed the construction of one theatre with eight screens.
The Partnership was formed on March 4, 1991 when TPIE entered into a general
partnership agreement with CENI.
On April 19, 1991, pursuant to the Partnership Agreement, TPIE contributed
to EEP its interest in the assets (subject to certain exclusions) relating to
the 57 movie theatres owned and operated by TPIE and other leasehold interests,
subject to obligations under notes, loans and capital leases, and CENI
contributed to EEP 3.8 million Common Shares of TPI (the "Shares")
(collectively, the "Initial Capital Contributions"). Following the Initial
Capital Contributions, EEP distributed the Shares to TPIE. In addition, EEP was
obligated to pay to TPIE an amount of cash, determined in accordance with the
Partnership Agreement,
F-48
<PAGE>
EXHIBITION ENTERPRISES PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
YEAR (53 WEEKS) ENDED DECEMBER 31, 1992
NOTE 2 -- PARTNERSHIP FORMATION (CONTINUED)
which was the sum of $800,000 plus additions to gross theatre property and
principal payments on the Merchants Bank loan held by TPIE from September 27,
1990 to April 19, 1991. Such obligations aggregating $4,724,000, including
interest, were paid in August, 1991.
CENI and TPIE each have a 50% interest in EEP. The Partnership will have a
term of ten years (unless earlier terminated or extended in accordance with the
Partnership Agreement). During the first and second fiscal years of the
Partnership, 70% and 60%, respectively, of the depreciation expense was
allocated to TPIE. Thereafter, the depreciation expense will be allocated in
accordance with each partner's respective partnership interest. Depreciation
subject to the special allocation includes all depreciation and amortization of
property and intangible assets, excluding the amortization of deferred finance
charges. The Partnership is managed by a Board of Managers consisting of two
representatives of CENI and two representatives of TPIE. The theatres continue
to be managed by AMC under the Amended and Restated Management Agreement dated
March 4, 1991. AMC has the authority to manage the day-to-day affairs of the
Partnership's business. In addition, CENI has the exclusive right to represent
the Partnership with respect to the sale or purchase of Partnership assets and
certain other types of transactions.
In the event that CENI causes EEP to enter into one of the transactions
referred to above over the objection of TPIE, TPIE will have the option to
require CENI to purchase TPIE's entire partnership interest at a price based
upon a formula contained in the Partnership Agreement. The Partnership Agreement
provides that with respect to the sale of assets (and certain other transactions
specified in the Partnership Agreement) such purchase price is payable with the
New Purchase Money Notes, issued by the partnership to replace the Purchase
Money Notes delivered to AMC in connection with the purchase of the theatres
from AMC by TPIE. The purchase price will otherwise be payable in cash.
TPIE has the option to require CENI to purchase TPIE's partnership interest
at a price based upon a formula contained in the Partnership Agreement (payable
in part with the New Purchase Money Notes) in 1995 and 1999. At the end of the
term of the Partnership, CENI will have the right to buy, and TPIE will have the
right to require CENI to buy, TPIE's partnership interest at fair market value
(payable in cash). In the event of a change in control of CENI, as defined in
the Partnership Agreement, TPIE will have the option to require CENI to buy
TPIE's partnership interest at fair market value. In the event that either
partner wishes to transfer a partnership interest to an unaffiliated third
party, each partner's interest is subject to a right of first refusal in favor
of the other partner, with the consideration payable in the same form as offered
by the third party.
CENI and TPIE may be required to make additional cash contributions to the
extent that Available Funds, as defined in the Partnership Agreement, are
insufficient to fully fund certain expenses. Failure of a partner to make a
capital contribution could result in liability of that partner to EEP or the
dilution of such partner's partnership interest. Should a partner's interest
fall below 20%, such partner will only have one representative on the Board of
Managers.
NOTE 3 -- TRANSACTIONS WITH RELATED PARTIES
The Partnership pays a management fee to AMC (as operator) equal to 5% of
theatre revenues, as defined in the Amended and Restated Management Agreement.
In addition, the operator may be entitled to an additional management fee if
theatre level cash flow in a fiscal year exceeds a specified amount. The
additional fee is equal to the lesser of one percent of theatre revenues for the
fiscal year or theatre level cash flow in excess of a base amount. For 1992, AMC
earned the full 1% additional management fee.
The Partnership pays an administrative fee to TPIE on a quarterly basis
equal to 1/4 of 1% of theatre revenues.
F-49
<PAGE>
EXHIBITION ENTERPRISES PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
YEAR (53 WEEKS) ENDED DECEMBER 31, 1992
NOTE 3 -- TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
Included in accrued expenses and other liabilities are the following amounts
payable to related parties (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1992
-----------------
<S> <C>
Accrued management fee payable to AMC.............................................. $ 2,311
Accrued administrative fee payable to TPIE......................................... 97
</TABLE>
Expenses with related parties were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1992
-----------------
<S> <C>
Management fee to AMC.............................................................. $ 8,876
Administrative fee to TPIE......................................................... 370
Interest expense on AMC subordinated notes......................................... 5,084
</TABLE>
NOTE 4 -- BORROWINGS AND CAPITAL LEASE OBLIGATIONS
The Partnership is obligated under notes and other indebtedness as follows
(in thousands):
<TABLE>
<CAPTION>
BALANCE
RATES OF MATURITY DUE IN DECEMBER 31,
INTEREST DATES 1993 1992
---------------------- ----------------- --------- ------------
<S> <C> <C> <C> <C>
Merchants Bank term loan..................... 1% above base rate February, 1994 $ 4,000 $ 34,000
Merchants Bank revolving credit loan......... 1% above base rate February, 1994 -- 5,000
Subordinated note............................ 12% August, 2000 -- 42,364
Tri-City note................................ See below See below -- 710
--------- ------------
Total borrowings........................... 4,000 82,074
Capital lease obligations.................... Various Serially to 2011 481 13,252
--------- ------------
Total borrowings and capital lease
obligations............................... $ 4,481 $ 95,326
--------- ------------
--------- ------------
</TABLE>
Minimum annual payments required under existing capital lease obligations,
the present value thereof and maturities of total indebtedness at December 31,
1992 are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL LEASE OBLIGATIONS
---------------------------------
MINIMUM NET
LEASE LESS PRESENT OTHER
PAYMENTS INTEREST VALUE DEBT TOTAL
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1993.................................. $ 2,892 $ 2,411 $ 481 $ 4,000 $ 4,481
1994.................................. 2,892 2,315 577 35,000 35,577
1995.................................. 2,896 2,198 698 -- 698
1996.................................. 2,874 2,057 817 -- 817
1997.................................. 2,861 1,897 964 10,591 11,555
Thereafter............................ 17,272 7,557 9,715 32,483 42,198
----------- --------- --------- --------- ---------
Total............................. $ 31,687 $ 18,435 $ 13,252 $ 82,074 $ 95,326
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
</TABLE>
In connection with the 1989 purchase of theatres from AMC, TPIE entered into
a term loan with The Merchants Bank, ("the Bank") and executed 12% subordinated
promissory notes to AMC. The Partnership
F-50
<PAGE>
EXHIBITION ENTERPRISES PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
YEAR (53 WEEKS) ENDED DECEMBER 31, 1992
NOTE 4 -- BORROWINGS AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
assumed the debt of the term loan, with the consent of the Bank. The Partnership
issued a 12% Subordinated Promissory Note to AMC in exchange for the notes
executed by TPIE, under substantially the same terms as the replaced notes.
The term loan is payable in $1,000,000 quarterly principal installments with
interest payable monthly. Certain covenants restrict the Partnership's ability
to make additional acquisitions, incur additional indebtedness, encumber any of
its assets, make payments to its affiliates, dispose of a substantial portion of
its assets, make investments, or enter into certain other transactions without
the prior approval of the Bank. The Partnership had borrowings under this
agreement in the amount of $34,000,000 at December 31, 1992. The Bank has also
made available a revolving credit line in the maximum principal amount of
$5,000,000. As of December 31, 1992, the Partnership had $5,000,000 of
borrowings under this line of credit. The term loan and revolving credit line
agreement is renewable, at the option of the Partnership, for an additional
three years to an extended maturity date of February 24, 1997. The renewal is
conditioned upon the timely payments of principal and interest and that no event
of default is continuing. The term loan has a debt coverage requirement based
upon the Net Cash Flow (as defined in the loan agreement). The Partnership has
exceeded the debt coverage requirement for each quarterly period from inception
to December 31, 1992.
The 12% Subordinated Promissory Note due to AMC is payable in three
installments of $10,591,000 on August 31, 1997, 1998 and 1999, and a fourth
installment in the amount of the remaining principal balance on August 31, 2000.
Interest on the 12% Subordinated Promissory Note is payable quarterly.
On April 25, 1991, the Partnership purchased the Tri-City theatre from AMC
in exchange for a subordinated promissory note in the amount of $710,000. The
note bears interest (determined annually) equal to the lesser of 50% of theatre
level cash flow or the prime rate plus one percent. Anytime the theatre level
cash flow for a fiscal year is negative, AMC is required to pay the Partnership
the amount of the deficiency. For fiscal 1992, the cash flow deficiency of the
Tri-City theatre was $3,000. The Partnership has the right to require AMC to
repurchase the theatre (upon 30 days notice) in consideration for the
cancellation of the note.
NOTE 5 -- PROPERTY
A summary of property follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1992
------------
<S> <C>
Property owned:
Buildings and improvements........................................................................ $ 3,155
Furniture, fixtures and equipment............................................................... 38,725
Leasehold improvements.......................................................................... 23,094
------------
64,974
Less -- Accumulated depreciation and amortization............................................... 12,221
------------
52,753
------------
Property leased under capitalized leases:
Buildings....................................................................................... 9,682
Less -- Accumulated amortization................................................................ 1,312
------------
8,370
------------
Net property........................................................................................ $ 61,123
------------
------------
</TABLE>
F-51
<PAGE>
EXHIBITION ENTERPRISES PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
YEAR (53 WEEKS) ENDED DECEMBER 31, 1992
NOTE 6 -- INTANGIBLE ASSETS
A summary of intangible assets follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1992
------------
<S> <C>
Goodwill............................................................................................ $ 11,897
Lease rights........................................................................................ 13,741
Location premium.................................................................................... 29,621
Deferred finance charges............................................................................ 365
------------
55,624
Less -- Accumulated amortization.................................................................... 7,372
------------
Net intangible assets............................................................................... $ 48,252
------------
------------
</TABLE>
NOTE 7 -- LEASES
DESCRIPTION OF LEASING AGREEMENTS
The majority of the Partnership's operations are conducted in premises
occupied under lease agreements with original terms generally ranging from 15 to
25 years and, in most cases, renewal options for up to an additional 25 years.
The renewal options generally provide for increased rent. The property leases
provide for minimum annual rentals and under certain conditions may require
additional rental payments based on a percentage of revenues. The majority of
the leases provide that the Partnership will pay all, or substantially all, the
taxes, maintenance, insurance and certain other operating expenses. Assets held
under capital leases are included in property.
OPERATING LEASES
The Partnership has entered into agreements to lease space for the operation
of theatres not yet fully constructed. Of the total number of anticipated
openings, leases for one new theatre with 14 screens and 16 screens at two
existing locations have been finalized. Construction is scheduled for
completion, and theatres for opening, at various dates through the second
quarter of 1994. The estimated minimum rental payments that may be required
under the terms of these operating leases total approximately $28 million.
Following is a schedule of future minimum rental payments required under
these leases and existing operating leases that have initial or remaining
non-cancellable terms in excess of one year at December 31, 1992 (in thousands):
<TABLE>
<S> <C>
Year ended:
1993........................................................... $ 14,038
1994........................................................... 15,177
1995........................................................... 15,322
1996........................................................... 15,134
1997........................................................... 14,944
Thereafter..................................................... 163,470
---------
Total minimum payments required................................ $ 238,085
---------
---------
</TABLE>
F-52
<PAGE>
EXHIBITION ENTERPRISES PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
YEAR (53 WEEKS) ENDED DECEMBER 31, 1992
NOTE 7 -- LEASES (CONTINUED)
Rent expense is summarized as follows (in thousands):
<TABLE>
<CAPTION>
FIFTY-THREE
WEEKS ENDED
DECEMBER 31, 1992
-----------------
<S> <C>
Minimum rentals........................................................ $ 15,382
Percentage rentals based on revenues................................... 550
-------
$ 15,932
-------
-------
</TABLE>
NOTE 8 -- CONTINGENCIES
The Partnership, in the normal course of business, is party to various legal
actions. Management believes that potential exposure, if any, of these actions
would not have a material adverse effect on the Partnership.
NOTE 9 -- CASUALTY INSURANCE CLAIMS
On August 23, 1992, the Miami, Florida area was struck by hurricane Andrew.
The hurricane destroyed one theatre with eight screens and temporarily suspended
the operation of eleven theatres.
The theatres are fully insured for both property damages and business
interruption. The insurance recovery for the destroyed theatre is expected to
sufficiently cover the book value of the property and the obligations under an
operating lease.
Included in other revenues for the year (53 weeks) ended December 31, 1992,
is $1,316,000 of recoveries from insurance carriers for business interruption.
Recoveries for repairs and other expenses were applied against the related
expense account. Included in accounts receivable at December 31, 1992, is
$1,184,000 in claims for repairs, business interruption and reconstruction costs
to be collected from insurance carriers. Such amount has subsequently been
received.
NOTE 10 -- SUBSEQUENT EVENT (UNAUDITED)
On May 28, 1993, Cinema Enterprises II, Inc. ("CENI II"), a wholly owned
subsidiary of American Multi-Cinema, Inc. ("AMC"), acquired a 50% partnership
interest in Exhibition Enterprises Partnership ("EEP") from TPI Entertainment,
Inc. Together with the 50% partnership interest already owned by Cinema
Enterprises, Inc. ("CENI"), EEP became wholly owned by subsidiaries of AMC. The
acquisition required the repayment of $37,000,000 in EEP bank indebtedness which
was funded by a capital contribution of $27,000,000 by CENI II together with
cash on hand. CENI II's capital investment in EEP will result in an adjustment
in the carrying value of certain EEP assets and liabilities.
F-53
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THESE SECURITIES IN
ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT
IMPLY THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PROSPECTUS SUMMARY...................................................... 3
RISK FACTORS............................................................ 9
USE OF PROCEEDS......................................................... 12
DIVIDENDS AND PRICE RANGE OF COMMON STOCK............................... 13
CAPITALIZATION.......................................................... 14
SELECTED FINANCIAL DATA................................................. 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.......................................................... 18
BUSINESS................................................................ 25
MANAGEMENT.............................................................. 33
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......... 41
DESCRIPTION OF CAPITAL STOCK............................................ 42
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................. 52
SHARES ELIGIBLE FOR FUTURE SALE......................................... 56
UNDERWRITING............................................................ 56
LEGAL MATTERS........................................................... 57
EXPERTS................................................................. 57
AVAILABLE INFORMATION................................................... 58
INCORPORATION BY REFERENCE.............................................. 58
INDEX TO FINANCIAL STATEMENTS........................................... F-1
</TABLE>
4,000,000 SHARES
[LOGO]
AMC ENTERTAINMENT INC.
$ CUMULATIVE CONVERTIBLE
PREFERRED STOCK
-----------------
P R O S P E C T U S
-----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
SMITH BARNEY SHEARSON INC.
, 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
APPENDIX A TO PROSPECTUS
DESCRIPTION OF OMITTED GRAPHIC MATERIAL
1. The inside front cover of this Prospectus contains 11 photographs of the
interiors and exteriors of certain of the Company's theatres.
2. The inside back cover of this Prospectus contains a map of the United
States identifying the location and number of screens of those theatres
of the Company which are located in its major markets as set forth below.
Number of
Major Market Screens
FLORIDA
Gainesville.................................. 10
Jacksonville................................. 22
Miami........................................ 86
Orlando...................................... 56
Tampa........................................ 94
W. Palm Beach................................ 16
CALIFORNIA
Bakersfield.................................. 6
Los Angeles.................................. 159
San Diego.................................... 20
San Francisco................................ 32
San Jose..................................... 23
TEXAS
Dallas....................................... 76
Houston...................................... 85
San Antonio.................................. 9
PENNSYLVANIA
Harrisburg................................... 32
Philadelphia................................. 140
MICHIGAN
Detroit...................................... 95
Lansing...................................... 22
MISSOURI & KANSAS
Kansas City.................................. 62
St. Louis.................................... 47
ARIZONA
Phoenix...................................... 66
Tucson....................................... 14
COLORADO
Colorado Springs............................. 6
Denver....................................... 63
VIRGINIA
Norfolk...................................... 33
OHIO
Columbus..................................... 34
Toledo....................................... 22
GEORGIA
Atlanta...................................... 42
OKLAHOMA
Oklahoma City................................ 22
NEW YORK
Buffalo...................................... 22
New York..................................... 22
ILLINOIS
Carbondale................................... 8
Chicago...................................... 12
LOUISIANA
New Orleans.................................. 8
Shreveport................................... 12
WASHINGTON
Seattle-Tacoma............................... 20
MASSACHUSETTS
Springfield.................................. 10
DISTRICT OF COLUMBIA........................... 87
NEBRASKA
Omaha........................................ 8
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
DESCRIPTION
- -----------------------------------------------------------------------------
<S> <C>
SEC Registration Fee......................................................... $ 39,655
AMEX Listing Fee............................................................. 37,500
Printing and Engraving Expenses.............................................. 250,000
Legal Fees and Expenses...................................................... 275,000
Accounting Fees and Expenses................................................. 170,000
Rating Agency Fees........................................................... 60,000
Blue Sky Fees and Expenses................................................... 20,000
Miscellaneous................................................................ 47,845
----------
Total.................................................................... $ 900,000
----------
----------
</TABLE>
Except for the SEC Registration Fee and the AMEX Listing Fee, all fees and
expenses are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
AMC Entertainment Inc. is incorporated in Delaware. Under Section 145 of the
General Corporation Law of the State of Delaware, a corporation has the power,
under specified circumstances, to indemnify its directors, officers, employees
and agents in connection with actions, suits or proceedings brought against them
by a third party or in the right of the corporation, by reason of the fact that
they were or are such directors, officers, employees or agents, against expenses
incurred in any such action, suit, or proceeding. AMCE's certificate of
incorporation requires indemnification of directors and officers to the full
extent permitted by the Delaware General Corporation Law and provides that, in
any action by a claimant, AMCE shall bear the burden of proof that the claimant
is not entitled to indemnification.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
provided that such provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (relating to liability for unauthorized acquisitions or redemptions
of, dividends on, capital stock) of the Delaware General Corporation Law, or
(iv) for any transaction from which the director derived an improper personal
benefit. The Certificate of Incorporation of AMCE contains the provisions
permitted by Section 102(b)(7) of the Delaware General Corporation Law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons and the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
successful defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person thereof in the successful defense of any action,
suit or proceeding in connection with the securities being registered pursuant
to this Registration Statement, the Company will, unless in the opinion of
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-1
<PAGE>
ITEM 16. EXHIBITS
(A) EXHIBITS
<TABLE>
<C> <S>
*1.1. Form of Underwriting Agreement
*3.1. Restated and Amended Certificate of Incorporation of AMC
Entertainment Inc.
*3.2. Form of Certificate of Designations Relating to Convertible
Preferred Stock.
*3.3. Bylaws of AMC Entertainment Inc.
*5.1. Opinion of Gage & Tucker as to the validity of Convertible
Preferred Stock.
*7.1. Opinion of Richards, Layton & Finger concerning liquidation
preference.
8.1. Opinion of Gage & Tucker concerning certain tax matters. (12)
10.1. AMC Entertainment Inc. 1983 Stock Option Plan. (2)
10.2. Federal Income Tax Allocation Agreement dated as of July 1, 1983,
between Durwood, Inc. and AMC Entertainment Inc. (2)
10.3. AMC Entertainment Inc. 1984 Employee Stock Purchase Plan. (3)
10.4. AMC Entertainment Inc. 1984 Employee Stock Option Plan. (4)
10.5. American Multi-Cinema, Inc. Savings Plan, a defined contribution
401(k) plan, restated January 1, 1989, as amended. (1)
10.6. Defined Benefit Retirement Income Plan for Certain Employees of
American Multi-Cinema, Inc. dated January 1, 1989, as amended.
(1)
10.7. Employment Agreement dated August 1, 1989, between AMC
Entertainment Inc. and Donald P. Harris. (1)
10.8. Letter Agreement dated November 13, 1991, among AMC Entertainment
Inc., American Multi-Cinema, Inc. and Peter C. Brown. (1)
10.9. Disability Compensation Provisions respecting Stanley H. Durwood.
(1)
10.10. Executive Medical Expense Reimbursement and Supplemental
Accidental Death or Dismemberment Insurance Plan, as restated
effective as of February 1, 1991. (1)
10.11. Film Marketing Incentive Plan applicable to Donald P. Harris. (1)
10.12. Division Operations Incentive Program. (1)
10.13. Management Agreement dated December 30, 1986, between AMC
Philadelphia, Inc. and H. Donald Busch ("Busch"). (5)
10.14. Stockholders' Agreement dated December 30, 1986, between AMC
Philadelphia, Inc. and Busch. (5)
10.15. Letter of Agreement dated November 25, 1986, between American
Multi-Cinema, Inc. and Busch. (5)
10.16. Letter of Agreement dated December 30, 1986, between American
Multi-Cinema, Inc. and Busch. (5)
10.17. (a) General Partnership Agreement of Exhibition Enterprises
Partnership dated as of March 4, 1991, by and between Cinema
Enterprises, Inc. and TPI Entertainment, Inc. (the "General
Partnership Agreement"). (6)
10.17. (b) Letter Agreement dated April 25, 1991, respecting General
Partnership Agreement (1).
10.17. (c) First Amendment to Partnership Agreement dated May 28, 1993 (7)
10.18. (a) Amended and Restated Management Agreement dated March 4, 1991, by
and between Exhibition Enterprises Partnership and American
Multi-Cinema, Inc. (the "Management Agreement"). (6)
10.18. (b) Letter Agreement dated March 4, 1991, respecting Management
Agreement. (1)
10.18. (c) Letter Agreement dated April 25, 1991, respecting Management
Agreement. (1)
10.19. Release and Consent Agreement dated March 4, 1991, by and between
American Multi-Cinema, Inc. and TPI Entertainment, Inc. (6)
10.20. Tri-City Purchase Agreement dated March 4, 1991, between
Exhibition Enterprises Partnership and American Multi-Cinema,
Inc. (6)
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.21. Standstill Agreement entered into as of March 4, 1991, by and
among TPI Enterprises, Inc., AMC Entertainment Inc., American
Multi-Cinema, Inc., Durwood, Inc., Stanley H. Durwood and Edward
D. Durwood. (8)
10.22. Stock Sale Agreement dated March 4, 1991, by and between American
Multi-Cinema, Inc. and C&C Investment Holdings, L.P. (6)
10.23. (a) Option Agreement dated March 4, 1991, by and between American
Multi-Cinema, Inc. and C&C Investment Holdings, L.P. (the "Option
Agreement") (6)
10.23. (b) Amendment dated April 25, 1991, to Option Agreement. (1)
10.24. Settlement Agreement dated November 5, 1991, among American
Multi-Cinema, Inc., AMC Philadelphia, Inc., Exhibition
Enterprises Partnership and General Amusement Corporation. (1)
10.25. Real Estate Contract dated March 30, 1992, among Philip M.
Singleton, C. Suzanne Singleton and American Multi-Cinema, Inc.
(7)
10.26. Promissory Note Secured by Deed of Trust dated January 16, 1992,
made by Donald P. Harris and Susan H. Harris payable to American
Multi-Cinema, Inc. (1)
10.27. Draft Second Mortgage dated January 16, 1992, among Donald P.
Harris, Susan H. Harris and American Multi-Cinema, Inc. (9)
10.28. AMC Entertainment Inc. 1985 Employee Stock Purchase Plan. (8)
10.29. Partnership Interest Purchase Agreement dated May 28, 1993 among
Exhibition Enterprises Partnership, Cinema Enterprises, Inc.,
Cinema Enterprises II, Inc., American Multi-Cinema, Inc., TPI
Entertainment, Inc. and TPI Enterprises, Inc. (7)
10.30. Mutual Release and Indemnification Agreement dated May 28, 1993
among Exhibition Enterprises Partnership, Cinema Enterprises,
Inc., American Multi-Cinema, Inc., TPI Entertainment, Inc. and
TPI Enterprises, Inc. (7)
10.31. Assignment and Assumption Agreement between Cinema Enterprises
II, Inc., and TPI Entertainment, Inc. (7)
10.32. Confidentiality Agreement dated May 28, 1993 among TPI
Entertainment, Inc., TPI Enterprises, Inc., Exhibition
Enterprises Partnership, Cinema Enterprises, Inc., Cinema
Enterprises II, Inc. and American Multi-Cinema, Inc. (7)
10.33. Termination Agreement dated May 28, 1993 among TPI Entertainment,
Inc., TPI Enterprises, Inc., Exhibition Enterprises Partnership,
American Multi-Cinema, Inc., Cinema Enterprises, Inc., AMC
Entertainment Inc., Durwood, Inc., Stanley H. Durwood and Edward
D. Durwood. (7)
10.34. Promissory Note dated June 16, 1993, made by Thomas L. Velde and
Katherine G. Terwilliger, husband and wife, payable to American
Multi-Cinema, Inc. (7)
10.35. Second Mortgage dated June 16, 1993, among Thomas L. Velde,
Katherine G. Terwilliger and American Multi-Cinema, Inc.
10.36. Summary of American Multi-Cinema, Inc. Executive Incentive
Program. (11)
*10.37. AMC Non-Qualified Deferred Compensation Plan.
11.1. Computation of Per Share Earnings. (12)
12.1. Computation of Ratio of Earnings to Fixed Charges and Preferred
Stock Dividends. (12)
16.1. Letter regarding change in certifying accountant (9).
21.1. Subsidiaries of Registrant (11)
*23.1. Consent of Coopers & Lybrand.
*23.2. Consent of Deloitte & Touche.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
*23.3. Consent of Gage & Tucker to the use of their opinions filed as
Exhibits 5.1 and 8.1 (incorporated in Exhibits 5.1 and 8.1).
*23.4. Consent of Richards, Layton & Finger to the use of their opinion
filed as Exhibit 7.1 (incorporated in Exhibit 7.1).
24.1. Power of Attorney (included elsewhere in the Registration
Statement).
<FN>
- ------------------------
(1) Incorporated by reference from AMCE's Form S-1 (File No. 33-48586) filed
June 12, 1992, as amended.
(2) Incorporated by reference from AMCE's Form S-1 (File No. 2-84675) filed
June 22, 1983.
(3) Incorporated by reference from AMCE's Form S-8 (File No. 2-97523) filed
July 3, 1984.
(4) Incorporated by reference from AMCE's S-8 and S-3 (File No. 2-97522) filed
July 3, 1984.
(5) Incorporated by reference from AMCE's Form 8-K dated December 30, 1986.
(6) Incorporated by reference from AMCE's Form 8-K (File No. 0-12429) dated
March 4, 1991.
(7) Incorporated by reference from AMCE's Form 10-K (File No. 1-12429) for the
fiscal year ended April 1, 1993.
(8) Incorporated by reference from AMCE's Form S-8 (File No. 2-92048) filed
July 3, 1985.
(9) Incorporated by reference from AMCE's Form 10-Q (File No. 1-12429) for the
13 weeks ended July 2, 1992.
(10) Incorporated by reference from AMCE's Form 8-K (File No. 0-12429) dated
August 17, 1988.
(11) Filed on December 23, 1993 as an Exhibit to this Registration Statement.
(12) Filed on February 4, 1994 as an Exhibit to Amendment No. 1 to this
Registration Statement.
* Filed herewith
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, AMC
Entertainment Inc. certifies that it has reasonable grounds to believe that it
meets all the requirements for filing a Form S-2 and has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Kansas City and the State
of Missouri, on the 18th day of February, 1994.
AMC ENTERTAINMENT INC.
By: ________/s/_PETER C. BROWN________
Peter C. Brown,
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
TITLE DATE
--------------------------------- ----------------------
<C> <S> <C>
*/s/STANLEY H. DURWOOD Chairman of the Board, Chief
Stanley H. Durwood Executive Officer and Director February 18, 1994
*/s/ED DURWOOD President, Vice Chairman of the
Edward D. Durwood Board and Director February 18, 1994
*/s/PAUL E. VARDEMAN
Paul E. Vardeman Director February 18, 1994
*/s/CHARLES J. EGAN, JR.
Charles J. Egan, Jr. Director February 18, 1994
Senior Vice President and Chief
/s/PETER C. BROWN Financial Officer, Treasurer and February 18, 1994
Peter C. Brown Director
*/s/PHILIP M. SINGLETON Senior Vice President and Chief
Philip M. Singleton Operating Officer and Director February 18, 1994
*/s/RICHARD L. OBERT Vice President and Chief
Richard L. Obert Accounting Officer February 18, 1994
*By: /s/PETER C. BROWN
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DOCUMENT DESCRIPTION NO.
- ---------- ----------------------------------------------------------------- ---------------
<C> <S> <C>
*1.1. Form of Underwriting Agreement.
*3.1. Restated and Amended Certificate of Incorporation of AMC
Entertainment Inc.
*3.2. Form of Certificate of Designations Relating to Convertible
Preferred Stock.
*3.3. Bylaws of AMC Entertainment Inc.
*5.1. Opinion of Gage & Tucker as to the validity of the Convertible
Preferred Stock.
*7.1. Opinion of Richards, Layton & Finger concerning liquidation
preference.
*10.37. AMC Non-Qualified Deferred Compensation Plan.
*23.1. Consent of Coopers & Lybrand.
*23.2. Consent of Deloitte & Touche.
*23.3. Consent of Gage & Tucker to the use of their opinion filed as
Exhibit 5.1 (incorporated in Exhibit 5.1).
*23.4. Consent of Richards, Layton & Finger to the use of their opinion
filed as Exhibit 7.1 (incorporated in Exhibit 7.1).
<FN>
- ------------------------
* Filed herewith
</TABLE>
<PAGE>
EXHIBIT 1.1
4,000,000 Shares
AMC ENTERTAINMENT INC.
$___ Cumulative Convertible Preferred Stock
(66 2/3 CENTS par value)
UNDERWRITING AGREEMENT
February ___, 1994
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
SMITH BARNEY SHEARSON INC.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
140 Broadway
New York, New York 10005
Ladies and Gentlemen:
AMC Entertainment Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the several underwriters listed on Schedule A
hereto (the "Underwriters"), for whom Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), Bear Stearns & Co. Inc. and Smith Barney Shearson Inc.
(collectively, the "Representatives") have been duly authorized to act as
representatives, an aggregate of 4,000,000 shares (the "Firm Shares") of $____
Cumulative Convertible Preferred Stock, 66 2/3 CENTS par value per share, of
the Company (the "Preferred Stock"). The Company also proposes to sell to the
several Underwriters an aggregate of not more than 600,000 shares of Preferred
Stock (the "Additional Shares"), as provided in Section 4 hereof, if requested
by the Underwriters. The Firm Shares and Additional Shares are herein
collectively referred to as the "Shares."
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with
<PAGE>
the provisions of the Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder (collectively, the "Act"), a
registration statement on Form S-2 (No. 33-51693), including a preliminary
prospectus, subject to completion, relating to the Shares. The registration
statement, as amended at the time it becomes effective or, if a post-effective
amendment is filed with respect thereto, as amended by such post-effective
amendment at the time of its effectiveness, including in each case financial
statements and exhibits, and the information (if any) contained in a
prospectus subsequently filed with the Commission pursuant to Rule 424(b)
under the Act and deemed to be a part of the registration statement at the
time of its effectiveness pursuant to Rule 430A under the Act, is hereinafter
referred to as the "Registration Statement"; and the prospectus in the form
used to confirm sales of the Shares, whether or not filed with the Commission
pursuant to Rule 424(b) under the Act, and including all documents
incorporated or deemed to be incorporated by reference therein, is hereinafter
referred to as the "Prospectus." Any reference in this Agreement to the
registration statement, the Registration Statement, any preliminary prospectus
or the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-2 under the
Act, as of the date of the registration statement, the Registration Statement,
any preliminary prospectus or the Prospectus, as the case may be, and any
reference to any amendment or supplement to the registration statement, the
Registration Statement, any preliminary prospectus or the Prospectus shall be
deemed to refer to and include any documents incorporated by reference therein
as of the date of the amendment or supplement to the registration statement,
the Registration Statement, any preliminary prospectus or the Prospectus. As
used herein, the term "Incorporated Documents" means the documents that at the
time are incorporated by reference in the registration statement, the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto pursuant to Item 12 of Form S-2 under the Act.
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations and warranties contained in this Agreement, and subject to its
terms and conditions, the Company agrees to issue and sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to
purchase from the Company, the aggregate number of Firm
2
<PAGE>
Shares set forth opposite their names on Schedule A hereto at the purchase
price equal to $_____ per share (the "Purchase Price").
On the basis of the representations and warranties contained in
this Agreement, and subject to its terms and conditions, the Company agrees to
sell to the Underwriters up to 600,000 Additional Shares, and the Underwriters
shall have a right to purchase, severally and not jointly, from time to time,
up to an aggregate of 600,000 Additional Shares from the Company at the
Purchase Price. Additional Shares may be purchased as provided in Section 4
hereof solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. If any Additional Shares are to be
purchased, each Underwriter, severally and not jointly, agrees to purchase the
number of Additional Shares (subject to such adjustments to eliminate
fractional shares as the Representatives may determine) which bears the same
proportion to the total number of Additional Shares to be purchased as the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule A hereto bears to the total number of Firm Shares.
The Company shall, concurrently with the execution of this
Agreement, deliver an agreement executed by (i) each of the directors and
executive officers of the Company and (ii) Durwood, Inc., pursuant to which
each such person will agree, not to, directly or indirectly, offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of,
without the prior written consent of DLJ, any shares of Common Stock or any
other equity security of the Company, or any securities convertible into or
exercisable or exchangeable for, or warrants, options or rights to purchase or
acquire, Common Stock or any other equity security of the Company or enter
into any agreement to do any of the foregoing, for a period of 90 days after
the date of the Prospectus, except pursuant to this Agreement.
Notwithstanding the foregoing, during such period the Company may issue shares
of Common Stock upon the exercise of outstanding employee stock options and
may grant employee stock options pursuant to the Company's existing stock
option plans. The Company agrees not to file a registration statement (other
than on Form S-8 relating solely to employee stock option plans described in
the Prospectus) or prospectus relating to its Common Stock or other equity
securities (or any securities convertible into or
3
<PAGE>
exercisable or exchangeable for or warrants, options or rights to purchase or
acquire, Common Stock or other equity securities of the Company) for a period
of 180 days after the date of the Prospectus without the prior written consent
of the Representatives.
3. TERMS OF THE PUBLIC OFFERING. The Company is advised by you
that the Underwriters propose (i) to make a public offering of their
respective portions of the Shares as soon after the effective date of the
Registration Statement as in your judgment is advisable and (ii) initially to
offer the Shares upon the terms set forth in the Prospectus.
4. DELIVERY AND PAYMENT. Delivery to you of and payment for
the Firm Shares shall be made at 10:00 A.M., Chicago time, on the fifth
business day (such time and date being referred to as the "Closing Date")
following the date of the initial public offering of the Shares as advised by
you to the Company, at such place as you shall reasonably designate. The
Closing Date and the location of delivery of the Firm Shares may be varied by
agreement among you and the Company.
Delivery to the Underwriters of and payment for any Additional
Shares to be purchased by the Underwriters shall be made at such place as the
Representatives shall designate, at 10:00 A.M., Chicago time, on such date
(the "Option Closing Date"), which may be the same as the Closing Date but
shall in no event be earlier than the Closing Date, as shall be specified in a
written notice from the Representatives to the Company to purchase a number,
specified in said notice, of Additional Shares. Such notice may be given at
any time within 30 days after the date of this Agreement, provided that the
Option Closing Date shall not be earlier than two business days nor later than
ten business days after such notice. The Option Closing Date and the location
of delivery of and payment for the Additional Shares may be varied by
agreement among the Underwriters and the Company.
Certificates representing the Shares shall be registered in such
names and issued in such denominations as you shall request in writing not
later than two full business days prior to the Closing Date, or the Option
Closing Date, as the case may be, and shall be made available to you at the
offices of DLJ (or at such other place as shall be acceptable to you) for
inspection not later than 10:00 A.M., Chicago time, on the business day
4
<PAGE>
next preceding the Closing Date, or the Option Closing Date, as the case may
be. Certificates in definitive form representing the Shares shall be
delivered to you on the Closing Date, or the Option Closing Date, as the case
may be, with any transfer taxes payable upon initial issuance thereof duly
paid by the Company, for your respective accounts against payment of the
Purchase Price by certified or official bank check or checks payable in New
York Clearing House or similar next-day funds to the order of the Company.
5. AGREEMENTS OF THE COMPANY. The Company agrees with each of
you that:
(a) It will, if necessary, file an amendment to the Registration
Statement including, if necessary pursuant to Rule 430A under the Act, a
post-effective amendment to the Registration Statement, in each case as
soon as practicable after the execution and delivery of this Agreement,
and will use its best efforts to cause the Registration Statement or
such post-effective amendment to become effective at the earliest
possible time. The Company will comply fully and in a timely manner
with the applicable provisions of Rule 424 and Rule 430A under the Act.
(b) It will advise you promptly and, if requested by any of you,
confirm such advice in writing, (i) when the Registration Statement has
become effective, if and when the Prospectus is sent for filing pursuant
to Rule 424 under the Act and when any post-effective amendment to the
Registration Statement becomes effective, (ii) of the receipt of any
comments from the Commission or any state securities commission or
regulatory authority that relate to the Registration Statement or
requests by the Commission or any state securities commission or
regulatory authority for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement, or of the
suspension of qualification of the Shares for offering or sale in any
jurisdiction, or the initiation of any proceeding for such pur-
5
<PAGE>
pose by the Commission or any state securities commission or other
regulatory authority, and (iv) of the happening of any event, during such
period as in your reasonable judgment you are required to deliver a
Prospectus in connection with sales of the Shares by you, which makes any
statement of a material fact made in the Registration Statement untrue or
which requires the making of any additions to or changes in the
Registration Statement (as amended or supplemented from time to time) in
order to make the statements therein not misleading or that makes any
statement of a material fact made in the Prospectus (as amended or
supplemented from time to time) untrue or which requires the making of any
additions to or changes in the Prospectus (as amended or supplemented from
time to time) in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company
shall use its best efforts to prevent the issuance of any stop order or
order suspending the qualification or exemption of the Shares under any
state securities or Blue Sky laws, and, if at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption of the Shares under any state securities or Blue Sky laws, the
Company shall use every reasonable effort to obtain the withdrawal or
lifting of such order at the earliest possible time.
(c) It will furnish to you without charge three signed copies
(plus one (1) additional signed copy to your legal counsel) of the
Registration Statement as first filed with the Commission and of each
amendment to it, including all exhibits filed therewith, and will
furnish to you such number of conformed copies of the Registration
Statement as so filed and of each amendment to it, without exhibits, as
you may reasonably request.
(d) It will not file any amendment or supplement to the
Registration Statement, whether before or after the time when it be-
6
<PAGE>
comes effective, or make any amendment or supplement to the Prospectus, of
which you shall not previously have been advised and provided a copy
within two business days prior to the filing thereof (or such reasonable
amount of time as is necessitated by the exigency of such amendment or
supplement) or to which you shall reasonably object; and it will prepare
and file with the Commission, promptly upon your reasonable request, any
amendment to the Registration Statement or supplement to the Prospectus
which may be necessary or advisable in connection with the distribution of
the Shares by you, and will use its best efforts to cause the same to
become effective as promptly as possible.
(e) Promptly after the Registration Statement becomes effective,
and from time to time thereafter for such period in your reasonable
judgment as a prospectus is required to be delivered in connection with
sales of the Shares by you, it will furnish to each Underwriter and
dealer without charge (for a period of one year after the Registration
Statement becomes effective upon reimbursement of the reasonable cost of
providing such copies thereafter) as many copies of the Prospectus (and
of any amendment or supplement to the Prospectus) as such Underwriters
and dealers may reasonably request.
(f) If during such period as in your reasonable judgment you are
required to deliver a Prospectus in connection with sales of the Shares
by you any event shall occur as a result of which it becomes necessary
to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances existing as of the date the
Prospectus is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement the Prospectus to comply with any law,
it will promptly prepare and file with the Commission an appropriate
amendment or supplement to the Prospectus so that the statements in the
Prospectus, as so amended or supplemented, will not, in the light of the
circumstances existing as of the date the Prospectus is so delivered, be
misleading, and will comply with applicable
7
<PAGE>
law, and will furnish to each Underwriter and dealer without charge such
number of copies thereof as such Underwriters and dealers may reasonably
request.
(g) Prior to any public offering of the Shares, it will cooperate
with you and your counsel in connection with the registration or
qualification of the Shares for offer and sale by you under the state
securities or Blue Sky laws of such jurisdictions as you may request
(provided, that the Company shall not be obligated to qualify as a
foreign corporation in any jurisdiction in which it is not so qualified
or to take any action that would subject it to general consent to
service of process in any jurisdiction in which it is not now so
subject). The Company will continue such qualification in effect so
long as required by law for distribution of the Shares.
(h) It will make generally available to its security holders as
soon as reasonably practicable a consolidated earnings statement
covering a period of at least twelve months beginning after the
"effective date" (as defined in Rule 158 under the Act) of the
Registration Statement (but in no event commencing later than 90 days
after such effective date) which shall satisfy the provisions of Section
11(a) of the Act and Rule 158 thereunder, and to advise you in writing
when such statement has been so made available.
(i) It will timely complete all required filings and otherwise
fully comply in a timely manner with all provisions of the Securities
Exchange Act of 1934, as amended, including the rules and regulations
thereunder (collectively, the "Exchange Act"), in connection with the
registration, if any, of the Shares thereunder.
(j) For a period of five years after the date hereof and for such
longer period as any of the Shares are outstanding, it will mail to each
of you without charge a copy of each report or other publicly available
information required to be furnished to holders of the Shares by law and
a copy of such other publicly
8
<PAGE>
available information regarding the Company as you may reasonably
request at the same time as such reports or other information are
required to be furnished to such holders.
(k) Whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, it will pay and be
responsible for all costs, expenses, fees and taxes in connection with
or incident to (i) the printing, processing, filing, distribution and
delivery under the Act of the Registration Statement, each preliminary
prospectus, the Prospectus and all amendments or supplements thereto,
(ii) the printing, processing, execution, distribution and delivery of
this Agreement, any memoranda describing state securities or Blue Sky
Laws and all other agreements, memoranda, correspondence and other
documents printed, distributed and delivered in connection with the
offering of the Shares, (iii) the registration with the Commission and
the issuance and delivery of the Shares, (iv) the registration or
qualification of the Shares for offer and sale under the securities or
Blue Sky laws of the jurisdictions referred to in paragraph (g) above
(including, in each case, the reasonable fees and disbursements of
counsel relating to such registration or qualification and memoranda
relating thereto and any filing fees in connection therewith), (v)
furnishing such copies of the Registration Statement, Prospectus and
preliminary prospectus, and all amendments and supplements to any of
them, as may be reasonably requested by you, (vi) filing, registration
and clearance with the National Association of Securities Dealers, Inc.
(the "NASD") in connection with the offering of the Shares (including
any filing fees in connection therewith and the reasonable fees and
disbursements of counsel relating thereto), (vii) the listing of the
Shares, if any, on a stock exchange or automated quotation system,
(viii) the rating of the Shares by investment rating agencies and (ix)
the performance by the Company of its other obligations under this
Agreement, including (without limitation) the cost of its personnel and
other internal costs, the cost of printing and engraving the
certifi-
9
<PAGE>
cates representing the Shares, and all expenses and taxes incident to the
sale and delivery of the Shares to you.
(l) It will use the proceeds from the sale of the Shares in the
manner described in the Prospectus under the caption "Use of Proceeds."
(m) It will cause the Shares to be listed on the American Stock
Exchange and will use its best efforts to maintain such listing while
any of the Shares are outstanding.
(n) It will use its best efforts to do and perform all things
required to be done and performed under this Agreement by it prior to or
after the Closing Date, or the Option Closing Date, as the case may be,
and to satisfy all conditions precedent on its part to the delivery of
the Shares.
6. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to each of you that:
(a) The Company and the transactions contemplated by this
Agreement meet the requirements for using Form S-2 under the Act. When
the Registration Statement becomes effective, including at the date of
any post-effective amendment, at the date of the Prospectus (if
different) and at the Closing Date and the Option Closing Date, if any,
the Registration Statement will comply in all material respects with the
provisions of the Act, and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; the
Prospectus and any supplements or amendments thereto will not at the
date of the Prospectus, at the date of any such supplements or
amendments and at the Closing Date, and the Option Closing Date, if any,
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
except that the representations and warranties
10
<PAGE>
contained in this paragraph (a) shall not apply to statements in or
omissions from the Registration Statement or the Prospectus (or any
supplement or amendment to them) made in reliance upon and in conformity
with information relating to you furnished to the Company in writing by
you expressly for use therein. The Company acknowledges for all
purposes under this Agreement that the statements set forth in the first
sentence of the last paragraph on the cover page and in the third
paragraph under the caption "Underwriting" in the Prospectus (or any
amendment or supplement) constitute the only written information
furnished to the Company by any Underwriter expressly for use in the
Registration Statement or the Prospectus (or any amendment or supplement
to them) and that the Underwriters shall not be deemed to have provided
any information (and therefore are not responsible for any statement or
omission) pertaining to any arrangement or agreement with respect to any
party other than the Underwriters. No contract or document of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement is
not described and filed as required.
(b) The Incorporated Documents heretofore filed, when they were
filed (or, if any amendment with respect to any such document was filed,
when such amendment was filed), conformed in all material respects with
the requirements of the Exchange Act and rules and regulations
thereunder; no such document when it was filed (or, if an amendment with
respect to any such document was filed, when such amendment was filed)
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to
make the statements therein not misleading.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 424 under the Act, complied when so filed in all
material respects with the Act.
11
<PAGE>
(d) The Company and each of its Subsidiaries (as defined in
Section 12 hereof) has been duly organized, is validly existing as a
corporation or partnership, as the case may be, in good standing under
the laws of its jurisdiction of organization and has the requisite
corporate or partnership (as the case may be) power and authority to
carry on its business as it is currently being conducted, to own, lease
and operate its properties and, as applicable, to authorize the offering
of the Shares, to execute, deliver and perform this Agreement and to
issue, sell and deliver the Shares, and each is duly qualified and is in
good standing as a foreign corporation or partnership (as the case may be)
authorized to do business in each jurisdiction where the operation,
ownership or leasing of property or the conduct of its business requires
such qualification, except where the failure to be so qualified would not,
singly or in the aggregate, have a material adverse effect on the
properties, business, results of operations, condition (financial or
otherwise), affairs or prospects of the Company and the Subsidiaries taken
as a whole (a "Material Adverse
Effect").
(e) All of the issued and outstanding shares of capital stock of,
or other ownership interests in, each Subsidiary have been duly and
validly authorized and issued, and all of the shares of capital stock
of, or other ownership interests in, each Subsidiary are owned, directly
or through Subsidiaries, by the Company, except for (i) AMC
Philadelphia, Inc. and its subsidiaries, which are 80% owned by the
Company, and (ii) AMC Europe, which is 99% owned by the Company.
All such shares of capital stock are fully paid and nonassessable, and
are owned free and clear of any security interest, mortgage, pledge,
claim, lien or encumbrance (each, a "Lien"). There are no outstanding
subscriptions, rights, warrants, options, calls, convertible securities,
commitments of sale or Liens related to or
12
<PAGE>
entitling any person to purchase or otherwise to acquire any shares of
the capital stock of, or other ownership interest in, any Subsidiary.
(f) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under "Capitalization"; all
the shares of issued and outstanding capital stock have been duly
authorized and validly issued and are fully paid, nonassessable and not
subject to any preemptive or similar rights; the Shares that are being
sold by the Company hereunder have been duly authorized for issuance and
sale to the Underwriters pursuant to this Agreement and, when issued and
delivered by the Company pursuant to this Agreement against payment of
the consideration set forth herein, will be validly issued and fully
paid and nonassessable; the capital stock of the Company, including the
Shares, conforms in all material respects to all statements relating
thereto in the Prospectus and the Registration Statement; and the
issuance of the Shares by the Company will not be subject to preemptive
or other similar rights.
(g) All the shares of Common Stock of the Company to be issued
upon conversion of the Shares have been duly authorized and reserved for
issuance and, when issued upon such conversion, will be validly issued,
fully paid and non-assessable and the issuance of such Common Stock will
not be subject to any preemptive or similar rights.
(h) Neither the Company nor any of the Subsidiaries is (i) in
violation of its respective charter, bylaws or other similar governance
documents or (ii) in default in the performance of any bond, debenture,
note or any other evidence of indebtedness or any indenture, mortgage,
deed of trust or other contract, lease or other instrument to which the
Company or any of the Subsidiaries is a party or by which any of them is
bound, or to which any of the property or assets of the Company or any
of the Subsidiaries is subject except for any such defaults which would
not, singly or in the aggregate, have a Material Adverse Effect.
13
<PAGE>
(i) This Agreement has been duly authorized and validly executed
and delivered by the Company and constitutes a valid and legally binding
agreement of the Company, enforceable against the Company in accordance
with its terms (assuming the due execution and delivery hereof by you).
(j) The execution and delivery of this Agreement by the Company,
the issuance and sale of the Shares, the conversion of the Shares into
Common Stock in accordance with their terms, the performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not conflict with or result in a breach or violation of
any of the respective charters or bylaws of the Company or any of the
Subsidiaries or any of the terms or provisions of, or constitute a
default or cause an acceleration of any obligation under or result in
the imposition or creation of (or the obligation to create or impose) a
Lien with respect to, any bond, note, debenture or other evidence of
indebtedness or any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any of the Subsidiaries
is a party or by which it or any of them is bound, or to which any
properties of the Company or any of the Subsidiaries is or may be
subject, or contravene any order of any court or governmental agency or
body having jurisdiction over the Company or any of the Subsidiaries or
any of their properties, or violate or conflict with any statute, rule
or regulation or administrative or court decree applicable to the
Company or any of the Subsidiaries, or any of their respective
properties.
(k) There is no action, suit or proceeding before or by any court
or governmental agency or body, domestic or foreign, pending against or
affecting the Company or any of the Subsidiaries, or any of their
respective properties, which is required to be disclosed in the
Registration Statement or the Prospectus and which is not so described,
or which might result, singly or in the aggregate, in a Material Adverse
Effect or which might materially
14
<PAGE>
and adversely affect the consummation of this Agreement or the
transactions contemplated hereby, and to the best of the Company's
knowledge, no such proceedings are contemplated or threatened. No
contract or document of a character required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit to
the Registration Statement is not so described or filed.
(l) No action has been taken and no statute, rule or regulation
or order has been enacted, adopted or issued by any governmental agency
or body which prevents the issuance or conversion of the Shares,
suspends the effectiveness of the Registration Statement, prevents or
suspends the use of any preliminary prospectus or suspends the sale of
the Shares in any jurisdiction referred to in Section 5(g) hereof; no
injunction, restraining order or order of any nature by a Federal or
state court of competent jurisdiction has been issued with respect to
the Company or any of the Subsidiaries which would prevent or suspend
the issuance, sale or conversion of the Shares, the effectiveness of the
Registration Statement, or the use of any preliminary prospectus in any
jurisdiction referred to in Section 5(g) hereof; no action, suit or
proceeding is pending against or, to the best of the Company's
knowledge, threatened against or affecting the Company or any of the
Subsidiaries before any court or arbitrator or any governmental body,
agency or official, domestic or foreign, which, if adversely determined,
would materially interfere with or adversely affect the issuance or
conversion of the Shares or in any manner draw into question the
validity of this Agreement or the Shares; and every request of the
Commission or any securities authority or agency of any jurisdiction for
additional information (to be included in the Registration Statement or
the Prospectus or otherwise) has been complied with in all material
respects.
(m) To the best knowledge of the Company, there are no costs or
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of
15
<PAGE>
properties or compliance with Environmental Laws or any permit, license
or approval, any related constraints on operating activities and any
potential liabilities to third parties) relating to Environmental Laws
(as defined below) which are likely to, singly or in the aggregate,
result in a Material Adverse Effect on the Company and its Subsidiaries,
taken as a whole. Neither the Company nor any of the Subsidiaries has
violated any environmental, safety or similar law or regulation
applicable to its business relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), lacks any permits,
licenses or other approvals required of them under applicable
Environmental Laws or is violating any terms and conditions of any such
permit, license or approval, nor has the Company or any of the
Subsidiaries violated any Federal, state or local law relating to
discrimination in the hiring, promotion or pay of employees nor any
applicable wage or hour laws, nor any provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA") or the rules and
regulations promulgated thereunder, nor has the Company or any of the
Subsidiaries engaged in any unfair labor practice, which in each case
might result, singly or in the aggregate, in a Material Adverse Effect.
There is (i) no significant unfair labor practice complaint pending
against the Company or any of the Subsidiaries or, to the best knowledge
of the Company, threatened against any of them, before the National
Labor Relations Board or any state or local labor relations board, and
no significant grievance or significant arbitration proceeding arising
out of or under any collective bargaining agreement is so pending
against the Company or any of the Subsidiaries or, to the best knowledge
of the Company, threatened against any of them, (ii) no significant
strike, labor dispute, slowdown or stoppage pending against the Company
or any of its Subsidiaries or, to the best knowledge of the Company,
threatened against the Company or any of the Subsidiaries and (iii) to
the best knowledge of the Company, no union representation question
existing with
16
<PAGE>
respect to the employees of the Company or any of the Subsidiaries and,
to the best knowledge of the Company, no union organizing activities are
taking place, except (with respect to any matter specified in clause
(i), (ii) or (iii) above, singly or in the aggregate) such as could not
have a Material Adverse Effect.
(n) Except as would not result, singly or in the aggregate, in a
Material Adverse Effect, the Company and each of the Subsidiaries has
good and marketable title, free and clear of all Liens (except Liens for
taxes not yet due and payable), to all property and assets reflected in
the Company's audited consolidated financial statements for the fiscal
year ended April 1, 1993.
(o) The firm of accountants that has certified or shall certify
the applicable consolidated financial statements and supporting
schedules of the Company filed or to be filed with the Commission as
part of the Registration Statement and the Prospectus are independent
public accountants with respect to the Company and the Subsidiaries, as
required by the Act. The consolidated historical and PRO FORMA
financial statements, together with related schedules and notes, set
forth in the Prospectus and the Registration Statement comply as to form
in all material respects with the requirements of the Act. Such
historical financial statements fairly present the consolidated
financial position of the Company and the Subsidiaries at the respective
dates indicated and the results of their operations and their cash flows
for the respective periods indicated, in accordance with generally
accepted accounting principles ("GAAP") consistently applied throughout
such periods. Such PRO FORMA financial statements have been
prepared on a basis consistent with such historical statements, except
for the PRO FORMA adjustments specified therein, and give effect to
assumptions made on a reasonable basis and present fairly the historical
transactions reflected therein. The other financial and statistical
information and data included in the Prospectus and in the
17
<PAGE>
Registration Statement, historical and PRO FORMA, are, in all
material respects, accurately presented and prepared on a basis
consistent with such financial statements and the books and records of
the Company.
(p) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and up to the
Closing Date, or Option Closing Date, as the case may be, except as set
forth in the Prospectus, neither the Company nor any of the Subsidiaries
has incurred any liabilities or obligations, direct or contingent, which
are material to the Company and the Subsidiaries taken as a whole, nor
entered into any transaction not in the ordinary course of business and
there has not been, singly or in the aggregate, any material adverse
change, or any development which may reasonably be expected to involve a
material adverse change, in the properties, business, results of
operations, condition (financial or otherwise), affairs or prospects of
the Company and the Subsidiaries taken as a whole (a "Material Adverse
Change").
(q) All tax returns required to be filed by the Company or any of
the Subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other
charges due or claimed to be due from such entities have been paid,
other than those being contested in good faith and for which adequate
reserves have been provided or those currently payable without penalty
or interest.
(r) No authorization, approval or consent or order of, or filing
with, any court or governmental body or agency is necessary in
connection with the transactions contemplated by this Agreement, except
such as may be required by the NASD or have been obtained and made under
the Act or state securities or Blue Sky laws or regulations. Neither
the Company nor any of its affiliates is presently doing busi-
18
<PAGE>
ness with the government of Cuba or with any person or affiliate located
in Cuba.
(s) (i) Each of the Company and the Subsidiaries has all
certificates, consents, exemptions, orders, permits, licenses,
authorizations, or other approvals (each, an "Authorization") of and
from, and has made all declarations and filings with, all Federal,
state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, necessary or required
to own, lease, license and use its properties and assets and to conduct
its business in the manner described in the Prospectus, except to the
extent that the failure to obtain or file would not, singly or in the
aggregate, have a Material Adverse Effect, (ii) all such Authorizations
are valid and in full force and effect and (iii) the Company and the
Subsidiaries are in compliance in all material respects with the terms
and conditions of all such Authorizations and with the rules and
regulations of the regulatory authorities and governing bodies having
jurisdiction with respect thereto.
(t) Neither the Company nor any of the Subsidiaries is (a) an
"investment company" or a company "controlled" by an investment company
within the meaning of the Investment Company Act of 1940, as amended, or
(b) a "holding company" or a "subsidiary company" of a holding company,
or an "affiliate" thereof within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(u) No holder of any security of the Company has or will have any
right to require the registration of such security by virtue of any
transaction contemplated by this Agreement.
(v) The Shares have been approved for listing on the American
Stock Exchange subject to official notice of issuance.
(w) The Company and the Subsidiaries possess the patents, patent
rights, licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or un-
19
<PAGE>
patentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names (collectively,
"Intellectual Property") presently employed by them in connection with the
businesses now operated by them, and neither the Company nor any of the
Subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to the foregoing which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Change. The use of such
Intellectual Property in connection with the business and operations of
the Company and the Subsidiaries does not, to the Company's knowledge,
infringe on the rights of any person.
(x) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to each
Underwriter as to the matters covered thereby.
(y) The Company and each of the Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (1) transactions are executed in accordance with management's
general or specific authorizations; (2) transactions are recorded as
necessary to permit preparation of financial statements in conformity
with GAAP and to maintain asset accountability; and (3) access to assets
is permitted only in accordance with management's general or specific
authorization;
(z) Each of the amendments to the Company's certificate of
incorporation and bylaws, each of the agreements with its stockholders
and other parties, and each of the actions of the Company's board of
directors and stockholders which are in each case necessary to effect
any of the transactions and events
20
<PAGE>
described in the Prospectus, are in full force and effect.
(aa) The Company has not (i) taken, directly or indirectly, any
action designed to cause or to result in, or that has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Shares or (ii) since the initial filing of the
Registration Statement (A) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of the Shares or (B) paid or
agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.
(bb) The Company and each Subsidiary maintains insurance covering
their properties, operations, personnel and businesses. Such insurance
insures against such losses and risks as are adequate in accordance with
customary industry practice to protect the Company and its Subsidiaries
and their businesses. Neither the Company nor any Subsidiary has
received notice from any insurer or agent of such insurer that
substantial capital improvements or other expenditures will have to be
made in order to continue such insurance. All such insurance is
outstanding and duly in force on the date hereof and will be outstanding
and duly in force on the Closing Date and any Option Closing Date.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless (i) each of
the Underwriters and (ii) each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) any
of the Underwriters (any of the persons referred to in this clause (ii)
being hereinafter referred to as a "controlling person"), and (iii) the
respective officers, directors, partners and employees of any of the
Underwriters or any controlling person (any person referred to in clause
(i), (ii) or (iii) may hereinafter be referred to as
21
<PAGE>
an "Indemnified Person") to the fullest extent lawful, from and against
any and all losses, claims, damages, liabilities, judgments, actions and
expenses (including without limitation and as incurred, reimbursement of
all reasonable costs of investigating, preparing, pursuing or defending
any claim or action, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, including the
reasonable fees and expenses of counsel to any Indemnified Person)
directly or indirectly caused by, related to, based upon, arising out of
or in connection with any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement (or any
amendment thereto), including the information deemed to be a part of the
Registration Statement pursuant to Rule 430A(b) promulgated under the
Act, if applicable, or the Prospectus (including any amendment or
supplement thereto) or any preliminary prospectus, or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made)
not misleading, except insofar as such losses, claims, damages,
liabilities or expenses are caused by an untrue statement or omission or
alleged untrue statement or omission that is made in reliance upon and
in conformity with information relating to any of the Underwriters
furnished in writing to the Company by any of the Underwriters expressly
for use in the Registration Statement (or any amendment thereto) or the
Prospectus (or any amendment or supplement thereto) or any preliminary
prospectus, and PROVIDED FURTHER, that the Company will not be
liable to any Underwriter or any person controlling any Underwriter with
respect to any such untrue statement or omission made in any preliminary
prospectus that is corrected in the Prospectus (or any amendment or
supplement thereto) if the person asserting any such loss, claim, damage
or liability purchased Shares from such Underwriter but was not sent or
given a copy of the Prospectus (as amended or supplemented), at or prior
to the written confirmation of the sale of such Shares to such
22
<PAGE>
person in any case where such delivery of the Prospectus (as amended or
supplemented) is required by the Act and the untrue statement or alleged
untrue statement of a material fact, or the omission or alleged omission
to state a material fact, that is found to be or is alleged to be the
basis of liability in such preliminary prospectus was corrected in the
Prospectus as amended or supplemented and if such Underwriter would not
have been liable had a copy of such Prospectus been so sent or given
unless such failure to deliver the Prospectus (as amended or
supplemented) was a result of noncompliance by the Company with Section
5(e) of this Agreement. The Company shall notify you promptly of the
institution, threat or assertion of any claim, proceeding (including any
governmental investigation) or litigation in connection with the matters
addressed by this Agreement which involves the Company or an Indemnified
Person.
(b) In case any action or proceeding (including any governmental
investigation) shall be brought or asserted against any of the
Indemnified Persons with respect to which indemnity may be sought
against the Company, such Underwriter (or the Underwriter controlled by
such controlling person) shall promptly notify the Company in writing
(provided, that the failure to give such notice shall not relieve the
Company of its obligations pursuant to this Agreement). Such
Indemnified Person shall have the right to employ its own counsel in any
such action and the fees and expenses of such counsel shall be paid, as
incurred, by the Company (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to Indemnification
hereunder). The Company shall not, in connection with any one such
action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for such Indemnified Persons, which firm
shall be designated by the Underwriters. The Company
23
<PAGE>
shall be liable for any settlement of any such action or proceeding
effected with the Company's prior written consent, which consent will
not be unreasonably withheld, and the Company agrees to indemnify and
hold harmless any Indemnified Person from and against any loss, claim,
damage, liability or expense by reason of any settlement of any action
effected with the written consent of the Company. Notwithstanding the
foregoing sentence, if at any time an Indemnified Person shall have
requested the Company to reimburse the Indemnified Person for fees and
expenses of counsel as contemplated by the second sentence of this
paragraph, the Company agrees that it shall be liable for any settlement
of any proceeding effected without its written consent if (i) such
settlement is entered into more than 45 days after receipt by the
Company of the aforesaid request and (ii) the Company shall not have
reimbursed the Indemnified Person in accordance with such request prior
to the date of such settlement. The Company shall not, without the
prior written consent of each Indemnified Person, settle or compromise
or consent to the entry of judgment in or otherwise seek to terminate
any pending or threatened action, claim, litigation or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not any Indemnified Person is a party thereto), unless such
settlement, compromise, consent or termination includes an unconditional
release of each Indemnified Person from all liability arising out of
such action, claim, litigation or proceeding.
(c) Each of the Underwriters agrees, severally and not jointly,
to indemnify and hold harmless the Company, its directors, its officers
who sign the Registration Statement, any person controlling (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the
Company, and the officers, directors, partners and employees of each
such person, to the same extent as the foregoing indemnity from the
Company to each of the Indemnified Persons, but only with respect to
claims and actions based on information relating to such Underwriter
furnished in writing by
24
<PAGE>
such Underwriter expressly for use in the Prospectus.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or expenses referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities and expenses
(i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the
indemnified party on the other hand from the offering of the Securities
or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the
relative fault of the indemnifying parties and the indemnified party, as
well as any other relevant equitable considerations. The relative
benefits received by the Company, on the one hand, and any of the
Underwriters, on the other hand, shall be deemed to be in the same
proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the
Company to the total underwriting discounts and commissions received by
such Underwriter, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault of the Company and the
Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact related to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The indemnity and
contribution obligations of the Company set forth herein shall be in
addition to any liability or obligation the Company may otherwise have
to any Indemnified Person.
25
<PAGE>
The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7(d) were
determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to
in the immediately preceding paragraph. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages,
liabilities or expenses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, none
of the Underwriters (and its related Indemnified Persons) shall be
required to contribute, in the aggregate, any amount in excess of the
amount by which the total underwriting discount applicable to the Shares
purchased by such Underwriter exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 7(d)
are several in proportion to the respective number of Shares purchased
by each of the Underwriters hereunder and not joint.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters to purchase the Firm Shares under this
Agreement are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company
contained in this Agreement shall be true and correct on the Closing
Date with the same force and effect as if made on and as of the Closing
Date (except for those made as of a specified date, which will be true
in all material respects as of such date). The Company shall have
performed or complied with all of its obligations and agreements herein
contained and required to be performed or com-
26
<PAGE>
plied with by it at or prior to the Closing Date.
(b) (i) The Registration Statement shall have become effective
(or, if a post-effective amendment is required to be filed pursuant to
Rule 430A promulgated under the Act, such post-effective amendment shall
have become effective) not later than 10:00 A.M., Chicago time, on the
date of this Agreement or at such later date and time as you may approve
in writing, (ii) at the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
no proceedings for that purpose shall have been commenced or shall be
pending before or contemplated by the Commission and every request for
additional information on the part of the Commission shall have been
complied with in all material respects, and (iii) no stop order
suspending the sale of the Shares in any jurisdiction referred to in
Section 5(g) shall have been issued and no proceeding for that purpose
shall have been commenced or shall be pending or threatened.
(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, prevent the
issuance of the Shares; and no injunction, restraining order or order of
any nature by a Federal or state court of competent jurisdiction shall
have been issued as of the Closing Date which would prevent the issuance
of the Shares.
(d) (i) Since the date hereof or since the dates as of which
information is given in the Registration Statement and the Prospectus,
there shall not have been any Material Adverse Change, (ii) since the
date of the latest balance sheet included in the Registration Statement
and the Prospectus, there shall not have been any material change in the
capital stock or long-term debt, or material increase in short-term
debt, of the Company or any of the Subsidiaries and (iii) the Company
and the Subsidiaries shall have no liability or obliga-
27
<PAGE>
tion, direct or contingent, that is material to the Company and the
Subsidiaries taken as a whole and is required to be disclosed on a balance
sheet in accordance with GAAP and is not disclosed on the latest balance
sheet included in the Registration Statement and the Prospectus.
(e) You shall have received a certificate of the Company, dated
the Closing Date, executed on behalf of the Company, by the President or
any Vice President and a principal financial or accounting officer of
the Company confirming, as of the Closing Date, the matters set forth in
paragraphs (a), (b), (c) and (d) of this Section 8.
(f) On the Closing Date, you shall have received:
(1) an opinion or opinions (satisfactory to you and your
counsel), dated the Closing Date, of Gage & Tucker, counsel for the
Company (or other counsel satisfactory to you), to the effect that:
(i) the Company and each of American
Multi-Cinema, Inc. ("AMC"), AMC Film Marketing, Inc., Conservco,
Inc., AMC Philadelphia, Inc., Budco Theatres, Inc., Concord
Cinema, Inc., AMC Realty Inc., Cinema Enterprises, Inc. and Cinema
Enterprises II, Inc. (the "Significant Subsidiaries") is a duly
organized and validly existing corporation in good standing under
the laws of its jurisdiction of incorporation, has the requisite
corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the
Registration Statement and the Prospectus, and with respect to the
Company, to execute, deliver and perform this Agreement, and
is duly qualified as a foreign corporation and in good standing in
each jurisdiction where the ownership, leasing or operation of
property or the conduct of its business requires such qualification,
except where the failure to be so qualified would not have,
singly or
28
<PAGE>
in the aggregate, a Material Adverse Effect;
(ii) the Company has full corporate power and
authority to authorize, issue and sell the Shares as contemplated
by this Agreement;
(iii) this Agreement has been duly authorized,
executed and delivered by the Company;
(iv) all the outstanding shares of capital
stock of the Company have been duly authorized and validly issued
and are fully paid, non-assessable and not subject to any
preemptive rights;
(v) the Shares have been duly authorized, and
when issued and delivered to the Underwriters against payment
therefor as provided by this Agreement, will have been validly
issued and will be fully paid and non-assessable, and the issuance
of such Shares is not subject to any preemptive or similar rights;
(vi) the shares of Common Stock of the Company
to be issued upon conversion of the Shares have been duly
authorized and reserved for issuance and, when issued and delivered
upon such conversion as provided in the Certificate of Designations
will be validly issued, fully paid and non-assessable and the
issuance of such Common Stock will not be subject to any preemptive
or similar rights;
(vii) the authorized capital stock of the
Company (including the Shares) conforms in all material respects
to the descriptions thereof contained in the Prospectus; insofar
as such statements constitute a summary of legal proceedings or
requirements or legal documents, the statements in the Prospectus
under the captions "Risk Factors--Anti-Takeover Matters,"
"Business--Regulatory Environment," (other than the last paragraph
under such caption), "Business--Legal Proceedings," and "Certain
Federal Income Tax Consequences" provide a fair summary in all
material respects of the matters
29
<PAGE>
addressed therein;
(viii) all of the issued and outstanding shares
of capital stock of, each Significant Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable and,
except in the case of AMC Philadelphia, Inc. and its subsidiaries,
the shares of capital stock of each Significant Subsidiary are
owned, directly or through Subsidiaries, by the Company, free and
clear of any perfected security interests or, to the knowledge of
such counsel, any other security interests, Liens, encumbrances or
claims. The Company indirectly owns 80% of the outstanding capital
stock of AMC Philadelphia, Inc. and its subsidiaries, free and clear
of any perfected security interests, or, to the knowledge of such
counsel, any other security interests, Liens, encumbrances or
claims;
(ix) except with respect to premptive rights
granted in favor of certain stockholders of AMC Philadelphia, Inc.,
there are to such counsel's knowledge no outstanding subscriptions,
rights, warrants, options, calls, convertible securities or
commitments of sale related to or entitling any person to purchase
or otherwise to acquire any shares of the capital stock of, or other
ownership interest in, any Significant Subsidiary;
(x) neither the Company nor any of the
Subsidiaries is (a) an "investment company" or a company
"controlled" by an investment company within the meaning of the
Investment Company Act of 1940, as amended, or (b) a "holding
company" or a "subsidiary company" of a holding company, or an
"affiliate" thereof within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
30
<PAGE>
(xi) the descriptions in the Registration
Statement and the Prospectus of United States Federal, state and
local statutes and of contracts and other documents are accurate
in all material respects and fairly present the information required
to be shown; and such counsel does not know of any legal or
governmental proceedings required to be described in the
Registration Statement or the Prospectus which are not described as
required or of any contracts or documents of a character required to
be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement which are not
described and filed as required; it being understood that such
counsel need express no opinion as to the financial statements,
notes or schedules or other financial and statistical data included
therein;
(xii) the Registration Statement has become
effective under the Act; any required filing of the Prospectus,
and any supplements thereto, pursuant to Rule 424(b) has been made
in the manner and within the time period required by Rule 424(b);
and to the knowledge of such counsel (after due inquiry) no stop
order suspending the effectiveness of the Registration Statement
or any part thereof has been issued and no proceedings therefor
have been instituted or are pending or contemplated under the Act;
(xiii) no authorization, approval, consent or
order of, or filing with, any court or governmental body or agency
is required for the consummation by the Company of the
transactions contemplated by this Agreement, except such as have
been obtained and made under the Act, state securities or Blue Sky
laws or regulations or such as may be required by the NASD; the
execution and delivery of this Agreement, the issuance and sale of
the Shares, the performance of this Agreement and the consummation
of the transactions contemplated by this Agreement will not
31
<PAGE>
result in a breach or violation of any of the respective charters
or bylaws of the Company or any of the Subsidiaries or the terms
or provisions of, or constitute a default under, any statute, rule
or regulation or to the knowledge of such counsel (after due
inquiry) any agreement or instrument to which the Company or any
of the Subsidiaries is a party or by which any of them is bound,
or to which any of the properties of the Company or any of the
Subsidiaries is subject (except that such counsel need not opine
with respect to any agreement or instrument the breach or
violation of which, or default under, could not result in a
material Adverse Effect or adversely affect the ability of the
Company to consummate the transactions contemplated hereby), or to
the knowledge of such counsel (after due inquiry) any order of any
court or governmental agency or body having jurisdiction over the
Company or any of the Subsidiaries or any of their properties;
(xiv) at the time it became effective and on
the Closing Date, the Registration Statement (except for financial
statements, the notes thereto and related schedules and other
financial and statistical data included therein, as to which no
opinion need be expressed) complied as to form in all material
respects with the Act; and
(xv) the amendment and restatement of the
Company's Certificate of Incorporation, as described in the
Information Statement of the Company which was filed with the
Commission on January 21, 1994, has been approved and recommended
by the Board of Directors of the Company, approved by the
requisite vote of the Company's stockholders and filed with the
Secretary of State of the State of Delaware and elsewhere as
required by applicable law and such amendment and restatement is
in full force and effect.
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<PAGE>
(2) Gage & Tucker shall additionally state that such
counsel has participated in conferences with officers and other
representatives of the Company, representatives of the independent
public accountants for the Company, your representatives and your
counsel in connection with the preparation of the Registration Statement
and Prospectus and has considered the matters required to be stated
therein and the statements contained therein, although such counsel has
not independently verified, and need not pass upon or assume any
responsibility for, the accuracy, completeness or fairness of
such statements (except as indicated above); and such counsel advises
you that, on the basis of the foregoing, no facts came to such counsel's
attention that caused such counsel to believe that the Registration
Statement (as amended or supplemented, if applicable), at the time such
Registration Statement or any post-effective amendment became effective,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading (other than information omitted
therefrom in reliance on Rule 430A under the Act), or the Prospectus (as
amended or supplemented), as of its date and the Closing Date, contained
an untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being
understood that such counsel need express no opinion with respect to the
financial statements, notes and schedules and other financial and
statistical information included in the Registration Statement or
Prospectus). In rendering any such opinion or opinions, counsel may
rely, as to matters of fact, to the extent such counsel deems proper, on
certificates of responsible officers of the Company and public officials
and, as to matters involving the application of laws of any jurisdiction
other than the State of Missouri and the United States, to the extent
such counsel deems proper and specifies in such opinion and to the
extent such opinion is satisfactory in form and scope to counsel for the
Underwriters, upon the opinion of other counsel qualified in such
juris-
33
<PAGE>
dictions whom they believe are reliable and who are satisfactory to
counsel for the Underwriters. Copies of such opinion shall be delivered
to the Underwriters and counsel for the Underwriters
(g) You shall have received an opinion, dated the Closing Date,
of Skadden, Arps, Slate, Meagher & Flom ("Skadden Arps"), counsel for
the Underwriters, in form and substance reasonably satisfactory to you.
(h) You shall have received letters on and as of the date hereof
as well as on and as of the Closing Date (in the latter case
constituting an affirmation of the statements set forth in the former),
in form and substance satisfactory to you, from Coopers & Lybrand and
Deloitte & Touche, independent public accountants, with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus.
(i) Skadden Arps shall have been furnished with such documents
and opinions, in addition to those set forth above, as they may
reasonably require for the purpose of enabling them to review or pass
upon the matters referred to in this Section 8 and in order to evidence
the accuracy, completeness or satisfaction in all material respects of
any of the representations, warranties or conditions herein contained.
(j) The opinions of Gage & Tucker described in paragraph (f)
above, shall be rendered to you at the request of the Company and shall
so state therein.
(k) Prior to the Closing Date, the Company shall have furnished
to you such further information, certificates and documents as you may
reasonably request.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to satisfaction on and as of the Option Closing
Date of the conditions set forth in paragraphs (a) through (k) above except
that the opinions called for in paragraphs (f) and
34
<PAGE>
(g) and the letters referred to in (h) shall be revised to reflect the sale of
the Additional Shares.
9. DEFAULTS. If on the Closing Date, or on the Option Closing
Date, as the case may be, any of the Underwriters shall fail or refuse to
purchase the Firm Shares or the Additional Shares, as the case may be, which
they have agreed to purchase hereunder on such date, and the aggregate number
of the Firm Shares or the Additional Shares, as the case may be, that such
defaulting Underwriters agreed but failed or refused to purchase does not
exceed 10% of the total number of Shares that all of the Underwriters are
obligated to purchase on such date, each non-defaulting Underwriter shall be
obligated to purchase, severally, as the proportion which the number of Firm
Shares set forth opposite its name on Schedule A hereto bears to the total
number of Firm Shares which all the non-defaulting Underwriters have agreed to
purchase, or in such other proportion as you may specify, to purchase the Firm
Shares or Additional Shares, as the case may be, that such defaulting
Underwriters agreed but failed or refused to purchase on such date; PROVIDED
that in no event shall the number of Firm Shares or Additional Shares, as the
case may be, that any Underwriter has agreed to purchase pursuant to Section 2
hereof be increased pursuant to this Section 9 by an amount in excess of
one-ninth of such number of Firm Shares or Additional Shares, as the case may
be, without the written consent of such Underwriter. If, on the Closing Date,
or the Option Closing Date, as the case may be, any of the Underwriters shall
fail or refuse to purchase the Firm Shares or Additional Shares, as the case
may be, and the total number of Firm Shares or Additional Shares, as the case
may be, with respect to which such default occurs exceeds 10% of the total
number of Shares to be purchased on such date by all Underwriters, and
arrangements satisfactory to you and the Company for the purchase of such
Shares are not made within 48 hours after such default, this Agreement shall
terminate without liability on the part of the non-defaulting Underwriters or
the Company, except as otherwise provided in Section 10. In any such case
that does not result in termination of this Agreement, the Underwriters or the
Company may postpone the Closing Date, or the Option Closing Date, as the case
may be, for not longer than seven (7) days, in order that the required
changes, if any, in the Registration Statement and the Prospectus or any other
documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve a
35
<PAGE>
defaulting Underwriter from liability in respect of any default by any such
Underwriter under this Agreement.
10. EFFECTIVE DATE OF AGREEMENT AND TERMINATION. This
Agreement shall become effective upon the later of (i) the execution and
delivery of this Agreement by the parties hereto, (ii) the effectiveness of
the Registration Statement and (iii) if a post-effective amendment is required
to be filed pursuant to Rule 430A under the Act, the effectiveness of such
post-effective amendment.
This Agreement may be terminated at any time on or prior to the
Closing Date, or the Option Date, as the case may be, by you by notice to the
Company if any of the following has occurred: (i) subsequent to the date the
Registration Statement is declared effective or the date of this Agreement,
any Material Adverse Change which, in the judgment of any Underwriter,
materially impairs the investment quality of the Shares or makes it
impracticable or inadvisable to market the Shares or to enforce contracts for
the sale of the Shares, (ii) any outbreak or escalation of hostilities or
other national or international calamity or crisis or material adverse change
in the financial markets of the United States or elsewhere, or any other
substantial national or international calamity or emergency if the effect of
such outbreak, escalation, calamity, crisis or emergency would, in the
judgment of any Underwriter, make it impracticable or inadvisable to market
the Shares or to enforce contracts for the sale of the Shares, (iii) any
suspension or limitation of trading generally in securities on the New York
Stock Exchange, the American Stock Exchange or in the over-the-counter markets
or any setting of minimum prices for trading on such exchange or markets, (iv)
any declaration of a general banking moratorium by either Federal or New York
authorities, (v) the taking of any action by any Federal, state or local
government or agency in respect of its monetary or fiscal affairs that in your
judgment has a material adverse effect on the financial markets in the United
States, and would, in your judgment, make it impracticable or inadvisable to
market the Shares or to enforce contracts for the sale of the Shares, (vi) the
enactment, publication, decree, or other promulgation of any Federal or state
statute, regulation, rule or order of any court or other governmental
authority which, in your judgment, materially and adversely affects or will
materially and adversely affect the business or operations of the Company or
any Subsid-
36
<PAGE>
iary, or (vii) any securities of the Company or any of the
Subsidiaries shall have been downgraded or placed on any "watch list" for
possible downgrading by any nationally recognized statistical rating
organization, provided, that in the case of such "watch list" placement,
termination shall be permitted only if such placement would, in the judgment
of any Underwriter, make it impracticable or inadvisable to market the Shares
or to enforce contracts for the sale of the Shares or materially impair the
investment quality of the Shares.
The indemnities and contribution provisions and the other
agreements, representations and warranties of the Company, its officers and
directors and of the Underwriters set forth in or made pursuant to this
Agreement shall remain operative and in full force and effect, and will
survive delivery of and payment for the Shares, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
any of the Underwriters or by or on behalf of the Company, the officers or
directors of the Company or any controlling person of the Company, (ii)
acceptance of the Shares and payment for them hereunder and (iii) termination
of this Agreement.
If this Agreement shall be terminated by the Underwriters pursuant
to clauses (i) or (vii) of the second paragraph of this Section 10 or because
of the failure or refusal on the part of the Company to comply with the terms
or to fulfill any of the conditions of this Agreement, the Company agrees to
reimburse you for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by you. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has
agreed to pay pursuant to Section 5(k) hereof.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the
Underwriters, any Indemnified Person referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement,
and no other person shall acquire or have any right under or by virtue of this
Agreement. The terms "successors and assigns" shall not include a purchaser
of any of the Securities from any of the Underwriters merely because of such
purchase.
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<PAGE>
11. NOTICES. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company, to it at 106
West 14th Street, Suite 1700, Kansas City, Missouri 64105, Attention: Peter
C. Brown and (b) if to any Underwriter, to Donaldson, Lufkin & Jenrette
Securities Corporation, 140 Broadway, New York, New York 10005, Attention:
Syndicate Department, and, in each case, with a copy to Gage & Tucker, 2345
Grand Avenue, 28th Floor, Kansas City, Missouri 64108, Attention: Carl Struby,
Skadden, Arps, Slate, Meagher & Flom at 333 West Wacker Drive, Suite 2100,
Chicago, Illinois 60606, Attention: William R. Kunkel, or in any case to such
other address as the person to be notified may have requested in writing.
12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS
APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW
YORK.
13. SUCCESSORS. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers and directors and other persons referred to in Section 7, and no
other person will have any right or obligation hereunder.
38
<PAGE>
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument. Please confirm that
the foregoing correctly sets forth the agreement among the Company and you.
Very truly yours,
AMC ENTERTAINMENT INC.
By:
------------------------
Name:
Title:
The foregoing Underwriting Agreement
is hereby confirmed and accepted
as of the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
SMITH BARNEY SHEARSON INC.
Acting on behalf of themselves and the
several Underwriters named on Schedule A hereto.
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
-------------------------
Name:
Title:
39
<PAGE>
SCHEDULE A
Number of
Firm Shares
To Be Purchased
---------------
Donaldson, Lufkin & Jenrette
Securities Corporation............................
Bear, Stearns & Co. Inc.............................
Smith Barney Shearson Inc...........................
-------------
Total.......................................
-------------
-------------
40
<PAGE>
EXHIBIT 3.1
RESTATED AND AMENDED CERTIFICATE OF
INCORPORATION OF
AMC ENTERTAINMENT INC.
AMC Entertainment Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "corporation"), does
hereby certify:
I. The corporation has issued and received payment for its stock.
II. The name of the corporation is AMC Entertainment Inc., which is the
name under which the corporation was originally incorporated. The
corporation's original Certificate of Incorporation was filed with the
Delaware Secretary of State on June 13, 1983.
III. This Restated and Amended Certificate of Incorporation was duly
adopted by the corporation's board of directors and stockholders in
accordance with Section242 and Section245 of the Delaware General
Corporation Law. Written consent to the adoption hereof was given in
accordance with Section228 of the Delaware General Corporation Law. Written
notice of the action so taken in accordance with Section228 of the Delaware
General Corporation Law has been provided to all stockholders who did not
consent to the adoption hereof.
IV. The corporation's certificate of incorporation is hereby amended and
restated as follows:
FIRST: The name of the corporation is AMC Entertainment Inc.
SECOND: The registered office of the corporation in the State of Delaware is
located at Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH: (a) The aggregate number of shares of capital stock that the
corporation shall have authority to issue is 85,000,000 shares, consisting of
45,000,000 shares of Common Stock, par value 66 2/3 CENTS per share (the "Common
Stock"), 30,000,000 shares of Class B Stock, par value 66 2/3 CENTS per share
(the "Class B Stock"), and 10,000,000 shares of Preferred Stock, par value
66 2/3 CENTS per share (the "Preferred Stock").
(b) The board of directors is authorized to establish by resolution or
resolutions one or more series of the Preferred Stock, the number of shares of
each series, and the powers, preferences, rights, qualifications, limitations
and restrictions of each series of the Preferred Stock.
(c) The powers, preferences, rights, qualifications, limitations and
restrictions of the Common Stock and the Class B Stock are set forth below:
(i) DIVIDENDS. The holders of Common Stock and the holders of Class B
Stock shall receive, pro rata per share, such cash dividends, out of funds
legally available therefor, as from time to time may be declared thereon by the
board of directors.
(ii) STOCK DIVIDENDS, ETC. No stock dividend, stock split, subscription
right, combination, subdivision or exchange may be paid or issued to holders of
Common Stock or the holders of Class B Stock except in shares of (or a right to
subscribe to shares of) the same class, and only if such action is taken at the
same time with respect to the other class so that the number of shares of Common
Stock and Class B Stock outstanding (or subject to a subscription right) is
increased or decreased in like proportion. The corporation may not merge or
consolidate unless the terms and conditions of the merger or consolidation shall
provide that all holders of Common Stock then outstanding and all holders of
Class B Stock then outstanding receive, pro rata per share, consideration
therein of equal value.
(iii) LIQUIDATION. Subject to such preferences and rights on liquidation
as may be granted by the board of directors in resolutions establishing one or
more series of Preferred Stock, in the event of any liquidation, dissolution, or
winding up of the corporation, whether voluntary or involuntary, the holders of
shares of Common Stock then outstanding and the holders of Class B Stock then
outstanding shall receive, pro rata per share, any remaining assets of the
corporation available for distribution to its stockholders.
<PAGE>
(iv) CONVERSION.
(A) OPTIONAL CONVERSION. Subject to and upon compliance with the terms
and provisions of this paragraph (c)(iv)(A) of Article Fourth, each holder of
Class B Stock shall be entitled at any time and from time to time to convert all
or any portion of such holder's shares of Class B Stock into the same number of
shares of Common Stock. Each conversion of shares of Class B Stock into shares
of Common Stock shall be effected by the surrender of the certificate or
certificates representing the shares to be converted at the principal office of
the Corporation at any time during normal business hours, together with a
written notice by the holder of such shares, stating that such holder desires to
convert such shares, or a stated number of such shares, represented by such
surrendered certificate or certificates into shares of Common Stock, and the
name or names (with addresses) and denominations in which the certificate or
certificates for shares to be issued in such conversion shall be issued together
with instructions for delivery thereof. Promptly after such surrender and the
receipt of such written notice, the corporation will issue and deliver in
accordance with such instructions (1) the certificate or certificates for the
shares of Common Stock issuable upon such conversion, and (2) a certificate
representing the number of shares of Class B Stock which were evidenced by the
certificate or certificates surrendered to the corporation in connection with
such conversion but which were not converted. Any such conversion shall be
deemed to have been effected as of the close of business on the date on which
such certificate or certificates shall have been surrendered and such notice
shall have been received by the corporation, and at such time the rights of such
holder with respect to the converted shares shall cease and the person or
persons in whose name or names the certificate or certificates for shares issued
upon such conversion are to be issued shall be deemed to have become the holder
or holders of the shares represented thereby.
(B) AUTOMATIC CONVERSION. The holders of Class B Stock shall be
entitled to vote at any annual meeting of stockholders or at a special meeting
called for such purpose or to consent thereto in writing with respect to a
resolution providing that a pro rata percentage of shares of Class B Stock of
each holder of record, as shall be specified in such resolution, shall be
automatically converted into and for all purposes shall be deemed to be the same
number of shares of Common Stock. Upon approval of such resolution by a majority
of the outstanding shares of Class B Stock or the receipt by the corporation of
a consent thereto signed by at least such a majority, the rights of each holder
to such percentage of shares of Class B Stock shall cease automatically, and the
holders thereof shall be entitled to all rights attendant to holders of such
shares of Common Stock.
(C) NO CONVERSION CHARGES. Any issuance of certificates for shares of
Common Stock upon conversion (whether optional or automatic) of shares of Class
B Stock shall be made without charge to the holders of such shares for any
issuance tax in respect thereof or other cost incurred by the corporation in
connection with such conversion and the related issuance of shares of Common
Stock.
(D) AVAILABLE COMMON STOCK. The corporation shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of issue upon conversion of outstanding shares of Class B
Stock, such number of shares of Common Stock as shall then be issuable upon a
conversion of all of the outstanding shares of Class B Stock. The shares of
Common Stock so issuable shall, when so issued, be duly and validly issued,
fully paid and non-assessable.
(v) VOTING.
(A) GENERAL. Except as otherwise provided (1) by this section (c)(v)
of Article Fourth, (2) by the board of directors in resolutions establishing one
or more series of Preferred Stock, or (3) by law, the right to vote on all
matters to be voted upon by the stockholders of the corporation is vested in the
holders of the outstanding shares of Common Stock and Class B Stock, voting
together as if a single class, with each outstanding share of Common Stock
having one vote per share for such purposes and each outstanding share of Class
B Stock having ten votes per share for such purposes.
(B) VOTE REGARDING AUTOMATIC CONVERSION. The holders of the Class B
Stock, having one vote per share for such purpose, shall have the exclusive
right to vote with respect to an automatic conversion of Class B Stock pursuant
to paragraph (c)(iv)(B) of Article Fourth hereof.
<PAGE>
(C) ELECTION OF DIRECTORS. The right to vote on the election of
directors of the corporation is subject to the following terms and conditions:
(1) So long as any shares of Class B Stock shall be outstanding (and not
converted into shares of Common Stock pursuant to section (c)(iv) of Article
Fourth hereof), at any time that the holders of any class of securities of the
Corporation generally having the right to vote in the election of directors
shall take any action for the purpose of electing directors, whether at an
annual or special meeting of stockholders or otherwise, the holders of the
shares of Class B Stock then outstanding, voting separately as a single class,
with each outstanding share of Class B Stock having one vote per share for such
purpose, shall have the exclusive right to elect such number of directors as
shall equal 75% of the members of the board of directors to be elected by
holders of shares generally having the right to vote in the election of
directors; PROVIDED, HOWEVER, that if such number of directors is not an
integral multiple of four, the holders of Class B Stock shall have the exclusive
right to elect such number of directors as shall equal 75% of the board of
directors to be elected by holders of shares generally having the right to vote
in the election of directors with any fraction of one-half or more rounded up
and with any fraction of less than one-half eliminated; and, provided further,
however, that so long as shares of Common Stock are listed on the American Stock
Exchange any such fraction shall be eliminated. Notwithstanding anything herein
to the contrary, in the event that the total number of shares of Class B Stock
outstanding is less than 12 1/2% of the total number of shares of Class B Stock
and Common Stock outstanding, then, so long as shares of Common Stock are listed
on the American Stock Exchange, the right to elect the said 75% of the board of
directors to be elected by holders of shares generally having the right to vote
in the election of directors shall be vested in the holders of the outstanding
shares of Common Stock and Class B Stock, voting together as if a single class,
with each outstanding share of Common Stock having one vote per share for such
purpose and each outstanding share of Class B Stock having ten votes per share
for such purpose.
(2) At any time that the holders of any class of securities of the
Corporation generally having the right to vote in the election of directors
shall take any action for the purpose of electing directors, the holders of the
shares of Common Stock then outstanding, voting separately as a single class,
with each outstanding share of Common Stock having one vote per share for such
purpose, shall have the exclusive right to elect such number of directors as
shall equal 25% of the members of the board of directors to be elected by
holders of shares generally having the right to vote in the election of
directors; PROVIDED, HOWEVER, that if such number of directors is not an
integral multiple of four, the holders of Common Stock shall have the exclusive
right to elect such number of directors as shall equal 25% of the board of
directors to be elected by holders of shares generally having the right to vote
in the election of directors with any fraction of more than one-half rounded up
and with any fraction of one-half or less eliminated; and PROVIDED FURTHER,
HOWEVER, that so long as shares of Common Stock are listed on the American Stock
Exchange any such fraction shall be rounded up.
(3) The other provisions of this paragraph (c)(v) of Article Fourth
notwithstanding, the board of directors may provide special voting rights for
holders of Preferred Stock in resolutions establishing one or more series of
Preferred Stock. That number of directors authorized to be elected by holders of
Preferred Stock pursuant to such resolutions shall be in addition to that number
of directors provided for in the bylaws which are to be elected by holders of
stock generally having the right to vote in the election of directors.
(4) Subject to voting rights granted by the board of directors in
resolutions establishing one or more series of Preferred Stock, in the event
that no shares of Class B Stock shall be outstanding (whether due to any
conversion pursuant to section (c)(iv) of Article Fourth or otherwise), the
right to vote on the election of directors of the corporation is vested
exclusively in the holders of the outstanding shares of Common Stock, with each
outstanding share of Common Stock having one vote per share for such purpose.
(D) REMOVAL OF DIRECTORS. Any director elected pursuant to this
section (c)(v) of Article Fourth may be removed either for or without cause at
any time by the affirmative vote of the holders of a majority of all of the
outstanding shares of the class of stock which elected such director, at a
special meeting of stockholders called for such purpose, and any vacancy created
by such removal may be filled, at such special meeting, by the affirmative vote
of the holders of a majority of all of the outstanding shares entitled to vote
on such removal; PROVIDED, HOWEVER, that if such director was elected by the
holders of the outstanding shares of Class B Stock and at or prior to the time
such special meeting is held no shares of Class B Stock shall be
<PAGE>
outstanding (whether due to any conversion pursuant to section (c)(iv) of
Article Fourth or otherwise), the affirmative vote of the holders of a majority
of all of the outstanding shares of Common Stock shall be required for any such
removal and the filling of any vacancy created by such removal.
(E) VACANCIES. If prior to the end of the term of any director elected
by the holders of Common Stock or Class B Stock pursuant to this section (c)(v)
of Article Fourth, such director shall cease to be a director by reason of
death, resignation or disability, the vacancy so created shall be filled by the
appointment of a new director for the unexpired term of such former director by
a majority of the remaining directors elected by the holders of the same class
of stock which elected such former director or, as the case may be, by the sole
remaining director so elected; PROVIDED, HOWEVER, that if such former director
was elected by the holders of the outstanding shares of Class B Stock and at the
time such vacancy is created no shares of Class B Stock shall be outstanding
(whether due to any conversion pursuant to section (c)(iv) of Article Fourth or
otherwise), such vacancy shall be filled by a majority of all the remaining
directors elected by the holders of Common Stock and Class B Stock or, as the
case may be, by the sole remaining director elected by the holders of Common
Stock and Class B Stock. If either the holders of the shares of Common Stock or
the holders of the shares of Class B Stock shall fail to elect such number of
directors as such holders shall have the right to elect pursuant to section
(c)(v)(C) of Article Fourth, the vacancy or vacancies created by such failure to
elect may be filled at any time prior to the end of the terms of the directors
then in office by a majority of the remaining directors elected by the holders
of each such class which so failed to elect, or as the case may be, by the sole
remaining director so elected; PROVIDED, HOWEVER, that if such vacancy or
vacancies were created by failure of the holders of outstanding shares of Class
B Stock so to elect and at the time such vacancy or vacancies are to be filled
no shares of Class B Stock shall be outstanding (whether due to any conversion
pursuant to section (c)(iv) of Article Fourth or otherwise), such vacancy or
vacancies shall be filled by a majority of all of the remaining directors
elected by the holders of Common Stock and Class B Stock or, as the case may be,
by the sole remaining director elected by the holders of Common Stock and Class
B Stock.
(F) CERTAIN AMENDMENTS. The holders of the outstanding shares of
Common Stock or Class B Stock shall be entitled to vote separately as a class
upon any proposed amendment, if such amendment would increase or decrease the
aggregate number of authorized shares of such class, increase or decrease the
par value of the shares of such class, or alter or change the powers,
preferences or special rights of the shares of such class so as to affect them
adversely.
FIFTH: The business and affairs of the corporation shall be managed by or
under the direction of the board of directors, and the directors need not be
elected by ballot unless required by the by-laws of the corporation.
SIXTH: In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the board of directors is expressly authorized to
make, amend and repeal the by-laws of the corporation.
SEVENTH: (a) Each person who was or is a party or is involuntarily made a
party threatened to be made a party to or is involuntarily involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative ("proceeding"), by reason of the fact that he or a person of whom
he is the legal representative is or was a director or officer of the
corporation or is or was serving at the request of the corporation as a director
or officer of another corporation, or as its representative in a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer or representative or in any other
capacity while serving as a director, officer or representative, shall be
indemnified and held harmless by the corporation to the fullest extent permitted
by the Delaware General Corporation law, as the same exists or may hereafter be
amended, against all expenses, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by him in connection therewith.
Such right shall be a contract right and shall include the right to be paid by
the corporation expenses incurred in defending any such proceeding in advance of
its final disposition upon delivery to the corporation of an undertaking, by or
on behalf of such person, to repay all amounts so advanced if it should be
determined ultimately that such person is not entitled to be indemnified under
this Article Seventh or otherwise.
<PAGE>
(b) If a claim under this Article Seventh is not paid in full by the
corporation within ninety days after a written claim has been received by the
corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and if successful, in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking
has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the corporation.
Neither the failure of the corporation (including its board of directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation (including its board of directors, independent
legal counsel, or its stockholders) that the claimant had not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that claimant had not met the applicable standard of conduct.
(c) The rights conferred by this Article Seventh shall not be exclusive of
any other right which such persons may have or hereafter acquire under any
statute, provision, by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
(d) The corporation may maintain insurance, at its expense, to protect
itself and any such director, officer, or representative against any such
expense, liability or loss, whether or not the corporation would have the power
to indemnify him against such expense, liability or loss under the Delaware
General Corporation Law.
EIGHTH: The corporation reserves the right to amend and repeal any provision
contained in this Certificate of Incorporation in the manner from time to time
prescribed by the laws of the State of Delaware. All rights herein conferred are
granted subject to this reservation.
NINTH: A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (a) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the Delaware General Corporation Law,
or (d) for any transaction from which the director derived an improper personal
benefit. If the Delaware General Corporation Law is amended to authorize the
further elimination or limitation of the personal liability of a director, then
the liability of a director of the corporation shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation Law, as
amended. No amendment to or repeal of this Article Ninth shall apply to or have
any effect on the liability or alleged liability of any director of the
corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
IN WITNESS WHEREOF, AMC Entertainment Inc. has caused this Restated and
Amended Certificate of Incorporation to be signed this 17th day of February,
1994.
(Corporation Seal) AMC ENTERTAINMENT INC.
By: /s/S. H. DURWOOD
Stanley H. Durwood
Chairman of the Board and
Chief Executive Officer
ATTEST:
By: /s/NANCY L. GALLAGHER
Nancy L. Gallagher
Secretary
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF DESIGNATIONS
$ _____ CUMULATIVE CONVERTIBLE PREFERRED STOCK
($.66 2/3 Par Value)
of
AMC ENTERTAINMENT INC.
- -------------------------------------------------------------------------------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
- -------------------------------------------------------------------------------
AMC Entertainment Inc., a Delaware corporation (hereinafter called
the "Company"), pursuant to Section 151 of the General Corporation Law of the
State of Delaware (the "GCL") does hereby make this Certificate of Designations
and does hereby state and certify that, pursuant to the authority expressly
vested in the Board of Directors of the Company (the "Board of Directors") by
the Certificate of Incorporation, and pursuant to Section 141(c) of the GCL the
following resolution has been duly adopted:
RESOLVED, that pursuant to Article Fourth of the Restated and
Amended Certificate of Incorporation ("Certificate of Incorporation") (which
authorizes 10,000,000 shares of preferred stock, $.66 2/3 par value), the
designations, powers and preferences, and the relative participating, optional
and other special rights, and the qualifications, limitations and restrictions
thereof, of a series of $___ Cumulative Convertible Preferred Stock are fixed as
stated herein.
RESOLVED, that each share of the $____ Cumulative Convertible
Preferred Stock shall rank equally in all respects and shall be subject to the
following provisions:
Section 1. DESIGNATION; RANK. This series of preferred stock shall
be designated $____ Cumulative Convertible Preferred Stock, par value $.66 2/3
per share (the "Convertible Preferred"). The Convertible Preferred will rank,
with respect to dividend rights and rights on liquidation, winding up and
dissolution, (a) senior to all classes of common stock of the Company
(including, without limitation, the Common Stock and Class B Stock) and each
other class of
<PAGE>
capital stock or series of preferred stock established after the offering of
the Convertible Preferred by the Board of Directors that does not expressly
provide that it ranks senior to or on a parity with the Convertible Preferred
as to dividend rights and rights on liquidation, winding up and dissolution
(collectively referred to with the common stock of the Company as "Junior
Securities"), (b) on a parity with each other class of capital stock or series
of preferred stock issued by the Company established after the offering of the
Convertible Preferred by the Board of Directors that expressly provides that
such series will rank on a parity with the Convertible Preferred as to
dividend rights and rights on liquidation, winding up and dissolution
(collectively referred to as "Parity Securities") and (c) junior to each other
class of capital stock or series of preferred stock established after the
offering of the Convertible Preferred by the Board of Directors that expressly
provides that such series will rank senior to the Convertible Preferred as to
dividend rights and rights on liquidation, winding up and dissolution
(collectively referred to as "Senior Securities"). Pursuant to Section 6(b)
hereof, while any shares of Convertible Preferred are outstanding, the Company
may not issue, authorize or increase the authorized amount of, or issue or
authorize or increase any obligation or security convertible into or
evidencing a right to purchase, any additional class or series of (x) Senior
Securities, without the vote or consent of the holders of two-thirds of the
outstanding shares of Convertible Preferred and any Parity Securities, voting
together as a single class without regard to series, or (y) Parity Securities,
without the vote or consent of the holders of a majority of the outstanding
shares of Convertible Preferred and any Parity Securities, voting together as
a single class without regard to series. However, the Company may create
additional classes of Junior Securities, increase the authorized number of
shares of any Junior Security or issue any Junior Securities without the
consent of any holder of the outstanding shares of Convertible Preferred.
Section 2. AUTHORIZED NUMBER. The number of shares constituting
the Convertible Preferred shall be 4,600,000 shares.
Section 3. DIVIDENDS. Holders of shares of the Convertible
Preferred will be entitled to receive, when, as and if declared by the Board
of Directors out of funds of the Company legally available for payment, cash
dividends at an annual rate of $ ____ per share of Convertible Preferred,
payable in arrears on March 15, June 15, September 15 and December 15 of each
year, commencing June 15, 1994 (and, in the case of any accrued but unpaid
dividends, at such additional times and for such interim periods, if any, as
determined by the Board of Directors), except that if any such date is a
Saturday, Sunday or legal holiday, then such dividend shall be payable on the
next day that
2
<PAGE>
is not a Saturday, Sunday or legal holiday. Each dividend will be payable to
holders of record as they appear in the stock register of the Company on a
record date fixed by the Board of Directors, which shall be not more than 60
days nor less than 10 days before the payment date. Dividends will be
cumulative from the date of original issuance of the Convertible Preferred.
Dividends payable on the Convertible Preferred for each full dividend period
will be computed by annualizing the dividend rate and dividing by four.
Dividends payable for any period less than a full dividend period or for that
portion of any period greater than a full dividend period will be computed on
the basis of a 360-day year consisting of twelve 30-day months. The
Convertible Preferred will not be entitled to any dividend, whether payable in
cash, property or stock, in excess of full cumulative dividends. No interest,
or sum of money in lieu of interest, will be payable in respect of any accrued
and unpaid dividends.
No full dividends may be declared or paid or funds set apart for
the payment of dividends on any Parity Securities for any period unless full
cumulative dividends shall have been paid or set apart for such payment on the
Convertible Preferred. If full cumulative dividends are not paid in full, or
declared in full and sums set apart for the payment thereof, upon the
Convertible Preferred and upon any other Parity Securities, all dividends
declared upon shares of Convertible Preferred and any such Parity Securities
will be declared and paid pro rata so that in all cases the amount of
dividends declared per share on the Convertible Preferred and on such other
Parity Securities will bear to each other the same ratio that accrued and
unpaid dividends per share on the shares of Convertible Preferred and such
other Parity Securities bear to each other. No dividends may be paid or set
apart for such payment on Junior Securities (except dividends on Junior
Securities payable in additional shares of Junior Securities or rights to
acquire Junior Securities) and no Junior Securities may be repurchased,
redeemed or otherwise retired, nor may funds be set apart for payment with
respect thereto, if full dividends have not been paid on the Convertible
Preferred. Accumulated unpaid dividends will not bear interest.
Section 4. LIQUIDATION RIGHTS. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the Company, before
any payment or distribution of assets is made on any Junior Securities,
including, without limitation, the Common Stock and Class B Stock of the
Company, but after payment or provision for payment of the Company's debts and
other liabilities, the holders of the Convertible Preferred shall receive a
liquidation preference of $25.00 per share and shall be entitled to receive
all accrued and unpaid dividends through the date of distribution, and the
holders of any Parity
3
<PAGE>
Securities shall be entitled to receive the full respective liquidation
preferences (including any premium) to which they are entitled and shall
receive all accrued and unpaid dividends with respect to their respective
shares through and including the date of distribution. If, upon such a
voluntary or involuntary liquidation, dissolution or winding up of the
Company, the assets of the Company are insufficient to pay in full the amounts
described above as payable with respect to the Convertible Preferred and any
Parity Securities, the holders of the Convertible Preferred and such Parity
Securities will share ratably in any such distribution of assets of the
Company, first in proportion to their respective liquidation preferences,
until such preferences are paid in full, and then in proportion to their
respective amounts of accrued but unpaid dividends. After payment of any such
liquidation preference and accrued dividends, the shares of Convertible
Preferred will not be entitled to any further participation in any
distribution of assets by the Company. Neither the sale or transfer of all or
substantially all the assets of the Company, nor the merger or consolidation
of the Company into or with any other corporation or a merger of any other
corporation with or into the Company, nor any dissolution, liquidation,
winding up or reorganization of the Company immediately followed by
reincorporation of another corporation, will be deemed to be a liquidation,
dissolution or winding up of the Company.
Section 5. OPTIONAL REDEMPTION.
(a) Shares of the Convertible Preferred may not be redeemed
by the Company on or prior to _________ ___, 1997. After _________ ___, 1997,
the Company, at its option, may redeem the shares of Convertible Preferred, in
whole or in part, out of funds legally available therefor, at any time or from
time to time, subject to the notice provisions and provisions for partial
redemption described below, during the twelve-month periods beginning on
_________ in each of the following years at the following redemption prices
per share (expressed as a percentage of the $25.00 liquidation preference
thereof) plus accrued and unpaid dividends, if any, up to but excluding the
date fixed for redemption (the "Redemption Date"), whether or not declared
(the "Redemption Price"):
<TABLE>
YEAR REDEMPTION PRICE
<S> <C>
1997......................... %
1998.........................
1999.........................
2000.........................
2001 and thereafter.......... 100%
</TABLE>
4
<PAGE>
(b) In the event the Company shall redeem shares of
Convertible Preferred, notice of such redemption shall be given by first class
mail, postage prepaid, not less than 30 days nor more than 60 days prior to
the Redemption Date, to each holder of record of the shares of Convertible
Preferred to be redeemed, at such holder's address as the same appears in the
stock register of the Company. Each such notice shall state (i) the
Redemption Date, (ii) the number of shares of Convertible Preferred to be
redeemed and, if less than all the shares held by such holder is to be
redeemed, the number of such shares to be redeemed from such holder, (iii) the
Redemption Price, (iv) the place or places where certificates for such shares
of Convertible Preferred are to be surrendered for payment of the Redemption
Price, (v) the then current Conversion Price (as defined in Section 7 hereof)
and (vi) that dividends on the shares of Convertible Preferred to be redeemed
shall cease to accrue on such Redemption Date. In order to facilitate the
redemption of the Convertible Preferred, the Board of Directors may fix a
record date for determination of holders of shares of Convertible Preferred to
be redeemed, which shall not be less than 30 days nor more than 60 days prior
to the Redemption Date with respect thereto. If, on the Redemption Date,
funds necessary for the redemption shall be available therefor, and shall have
been irrevocably deposited or set aside, then, notwithstanding that the
certificates evidencing any shares of Convertible Preferred so called for
redemption shall not have been surrendered (unless the Company defaults in
making payment of the Redemption Price), the dividends with respect to the
shares so called for redemption shall cease to accrue after the Redemption
Date, such shares shall no longer be deemed outstanding, all rights of the
holders of such shares as stockholders of the Company shall cease, and all
rights whatsoever with respect to the shares so called for redemption (except
the right of the holders to receive the Redemption Price without interest upon
surrender of their certificates therefor) shall terminate.
Upon surrender in accordance with said notice of the certificates
for any such shares of Convertible Preferred so redeemed (properly endorsed or
assigned for transfer, if the Board of Directors shall so require and the
notice shall so state), such shares shall be redeemed by the Company at the
applicable Redemption Price. If fewer than all of the outstanding shares of
Convertible Preferred are to be redeemed, the shares to be redeemed shall be
selected by the Company from outstanding shares of Convertible Preferred not
previously called for redemption by lot or pro rata. If fewer than all the
shares of Convertible Preferred represented by any certificate are redeemed, a
new certificate shall be issued representing the unredeemed shares without
cost to the holder thereof.
5
<PAGE>
In the event that the Company has failed to pay accrued and unpaid
dividends on the Convertible Preferred, the Convertible Preferred may not be
redeemed unless all outstanding shares of Convertible Preferred are
simultaneously redeemed or the outstanding shares of the Convertible Preferred
are redeemed on a pro rata basis.
Notwithstanding the foregoing, if notice of redemption has been
given pursuant to this subsection (b) and any holder of shares of Convertible
Preferred shall, prior to the close of business on the business day
immediately preceding the Redemption Date, give written notice to the Company
pursuant to Section 7(d) hereof of the conversion of any or all of the shares
to be redeemed held by such holder (accompanied by a certificate or
certificates for such shares, duly endorsed or assigned to the Company), then
(x) the Company shall not have the right to redeem such shares, (y) the
conversion of such shares to be redeemed shall become effective as provided in
Section 7, and (z) any funds that shall have been deposited for the payment of
the Redemption Price for such shares shall be returned to the Company
immediately after such conversion (subject to declared dividends payable to
holders of shares of Convertible Preferred on the dividend payment record date
for such dividends being so payable, to the extent set forth in Section 7
hereof, regardless of whether such shares are converted subsequent to such
dividend payment record date and prior to the related dividend payment date);
provided, however, that shares of Convertible Preferred called for redemption
will not be convertible after the close of business on the business day
immediately preceding the Redemption Date, unless the Company defaults in
payment of the Redemption Price.
Section 6. VOTING RIGHTS.
(a) Except as otherwise provided herein or as may be
required by Delaware law or provided by the resolution creating any other
series of preferred stock, the holders of shares of Convertible Preferred will
have no voting rights.
(b) So long as any shares of Convertible Preferred are
outstanding, the vote or consent of the holders of two-thirds of the
outstanding shares of Convertible Preferred and any Parity Securities, voting
together as a single class without regard to series, shall be necessary to
issue, authorize or increase the authorized amount of, or issue or authorize
or increase any obligation or security convertible into or evidencing a right
to purchase, any additional class or series of Senior Securities.
Furthermore, the vote or consent of the
6
<PAGE>
holders of a majority of the outstanding shares of Convertible Preferred and
any Parity Securities, voting together as a single class without regard to
series, shall be necessary to issue, authorize or increase the authorized
amount of, or issue or authorize or increase any obligation or security
convertible into or evidencing a right to purchase, any additional class or
series of Parity Securities. However, the Company may create additional
classes of Junior Securities, increase the authorized number of shares of any
Junior Security or issue any Junior Securities without the consent of any
holder of the Convertible Preferred. No such vote or consent of the holders
of the Convertible Preferred is required if, at or prior to the time when the
issuance of any such Senior or Parity Securities is to be made or any such
change is to take effect, as the case may be, provision is made for the
redemption of all of the Convertible Preferred at the time outstanding
pursuant to the terms of the Convertible Preferred.
The vote or consent of the holders of two-thirds of the outstanding
shares of Convertible Preferred, voting as a class, will be required to
authorize an amendment to the Certificate of Incorporation, whether or not
such holders are entitled to vote thereon by the Certificate of Incorporation,
if the amendment would increase the aggregate number of authorized shares of
such class, increase or decrease the par value of the shares of such class, or
alter or change the powers, preferences or special rights of the shares of
such class so as to affect them adversely.
(c) (i) In the event that dividends on the Convertible
Preferred, if any are then outstanding, remain unpaid in cash for six
full quarterly periods, the maximum authorized number of directors of
the Company will be increased by two, and holders of the Convertible
Preferred, voting separately as a class with the holders of shares of
any Parity Securities upon which like voting rights have been conferred
and are exercisable, shall be entitled to vote their shares of
Convertible Preferred to elect an additional two directors. So long as
any shares of Convertible Preferred shall be outstanding, the holders of
Convertible Preferred shall retain the right to vote and elect, with the
holders of any such Parity Securities, as a class, such number of
directors until any outstanding dividends on the Convertible Preferred
are paid in full or declared and set aside for payment. Such period is
hereinafter referred to as a "default period."
7
<PAGE>
(ii) So long as any shares of Convertible Preferred
shall be outstanding, during any default period, such voting right of
the holders of Convertible Preferred may be exercised initially at a
special meeting called pursuant to subparagraph (iii) below, at any
annual meeting of the stockholders of the Company or by written consent
of such holders pursuant to the GCL. The absence of a quorum of holders
of common stock of the Company (including, without limitation, the
Common Stock and Class B Stock) or any class thereof shall not affect
the exercise of such voting rights by the holders of Convertible
Preferred and Parity Securities.
(iii) Unless the holders of Convertible Preferred and
Parity Securities, if any are then outstanding, have, during an existing
default period, previously exercised their right to elect directors, the
Board of Directors may order, or any stockholder or stockholders owning
in the aggregate not less than 5% of the outstanding shares of
Convertible Preferred and Parity Securities may request, the calling of
a special meeting of holders of Convertible Preferred and Parity
Securities, which meeting shall thereupon be called by the President, a
Vice President or the Secretary of the Company. Notice of such meeting
and of any annual meeting at which holders of Convertible Preferred and
Parity Securities are entitled to vote pursuant to this paragraph shall
be given to each holder of record of Convertible Preferred by mailing a
copy of such notice to such holder at such holder's last address as the
same appears in the stock register of the Company. Such special meeting
shall be called for a time not later than 45 days after such order or
request, or in default of the calling of such meeting within 45 days
after such order or request, such meeting may be called on similar
notice by any stockholder or stockholders owning in the aggregate not
less than 5% of the outstanding shares of Convertible Preferred and
Parity Securities. Notwithstanding the provisions of this subparagraph,
no such special meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting of
stockholders.
(iv) During any default period, the holders of common
stock of the Company (including, without limitation, the Common Stock
and Class B Stock), and other classes of stock
8
<PAGE>
of the Company, if applicable, shall continue to be entitled to elect
that number of directors that such holders would be entitled to elect
under the Certificate of Incorporation and Bylaws as though no default
period had occurred. After the holders of Convertible Preferred and
Parity Securities, voting together separately as a class, shall have
exercised their right to elect two directors, (x) the directors so
elected by the holders of Convertible Preferred and Parity Securities
shall continue in office until the earlier of (A) such time as their
successors shall have been elected by such holders or (B) the expiration
of the default period, and (y) any vacancy in the Board of Directors
caused by the resignation, death or removal of a director elected by the
holders of the Convertible Preferred and any Parity Securities may be
filled by vote of the remaining director theretofore elected by the
holders of the Convertible Preferred and any Parity Securities.
References in this subparagraph to directors elected by the holders of a
particular class of stock shall include directors elected by such
directors to fill vacancies as provided in clause (y) of the foregoing
sentence.
(v) Immediately upon the expiration of a default
period, (x) the right of the holders of Convertible Preferred to elect
directors shall cease, (y) the term of any directors elected by the
holders of Convertible Preferred and Parity Securities as a class shall
terminate, and (z) the number of directors shall be such number as may
be provided for in the Certificate of Incorporation or Bylaws of the
Company irrespective of any increase made pursuant to the provisions of
subparagraph (i) of this subsection (c) (such number being subject,
however, to change thereafter in any manner provided by law or in the
Certificate of Incorporation or Bylaws of the Company).
Section 7. CONVERSION.
(a) RIGHT TO CONVERT. Each share of Convertible
Preferred will be convertible at any time at the option of the holder thereof
into such number of whole shares of Common Stock (calculated as to each
conversion to the nearest 1/100 of a share) as is equal to the liquidation
preference of such share of Convertible Preferred surrendered for conversion
divided by the initial conversion price of $____ per share of Common Stock,
subject to adjustment as described in Section 7(b) below (the "Conversion
Price"). Upon the surrender of
9
<PAGE>
any shares of Convertible Preferred for conversion, in lieu of issuing the
Common Stock issuable upon conversion of the Convertible Preferred, the
Company may, at its option, pay to the holder of such shares of Convertible
Preferred an amount in cash equal to the then Market Value (as defined in
Section 8(e)(v) below) of the number of shares of Common Stock (including any
fraction thereof) into which such shares of Convertible Preferred are then
convertible. Dividends shall cease to accrue on shares of Convertible
Preferred surrendered for conversion into Common Stock on the date such shares
are surrendered. No fractional shares of Common Stock shall be issued upon
the conversion of Convertible Preferred, but in lieu of any fractional shares
to which the holder of shares of Convertible Preferred would otherwise be
entitled, the Company shall, after aggregation of all fractional share
interests held by each holder into as many whole shares of Common Stock as is
possible and issuing such whole shares to the holder of such Convertible
Preferred surrendered for conversion, pay an amount of cash (computed to the
nearest cent) equal to any remaining fractional share interests multiplied by
the then Market Value of the Common Stock.
In the case of any share of Convertible Preferred that is
converted after any record date with respect to the payment of a dividend on
the Convertible Preferred and on or prior to the dividend payment date with
respect to such dividend, the dividend due on such dividend payment date shall
be payable to the holder of record of such share of Convertible Preferred as
of such record date notwithstanding such conversion on or prior to the
dividend payment date or the default by the Company in the payment of the
dividends due on such dividend payment date. Shares of Convertible Preferred
surrendered for conversion during the period from the close of business on any
record date with respect to the payment of a dividend on the Convertible
Preferred to the opening of business on the dividend payment date with respect
to such dividend shall (except in the case of shares of Convertible Preferred
that have been called for redemption on a Redemption Date within such period)
be accompanied by payment in immediately available funds or other funds
acceptable to the Company of an amount equal to the dividend payable on such
dividend payment date on the shares of Convertible Preferred being surrendered
for conversion. The dividend with respect to a share of Convertible Preferred
called for redemption on a Redemption Date during the period from the close of
business on any record date with respect to the payment of a dividend on the
Convertible Preferred to and including the dividend payment date with respect
to such dividend shall be payable on such dividend payment date to the holder
of record of such share of Convertible Preferred on such dividend record date
notwithstanding the conversion of such share of Convertible Preferred after
such record date and prior to such dividend payment date, and the
10
<PAGE>
holder converting such share of Convertible Preferred need not include a
payment of such dividend amount upon surrender of such share of Convertible
Preferred for conversion. Except as provided in this subsection, holders of
Convertible Preferred will not be entitled to any payment or adjustment on
account of accrued and unpaid dividends on shares of Convertible Preferred
surrendered for conversion or for dividends on the shares of Common Stock
issued upon such conversion.
(b) ANTIDILUTION PROVISIONS. The Conversion Price is
subject to adjustment from time to time as follows:
(i) In case the Company shall pay or make a dividend
or other distribution on any Common Stock of the Company in Common
Stock, the Conversion Price in effect at the opening of business on the
day following the record date for such dividend or other distribution
shall be reduced by multiplying such Conversion Price by a fraction the
numerator of which shall be the number of shares of Common Stock
outstanding at the close of business on the record date fixed for such
determination and the denominator of which shall be the sum of such
number of shares and the total number of shares constituting such
dividend or other distribution, such reduction to become effective
immediately after the opening of business on the day following the date
fixed for such determination. For the purposes of this subparagraph,
the number of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Company. The Company will
not pay any dividend or make any distribution on shares of Common Stock
held in the treasury of the Company.
(ii) In case the Company shall issue rights, warrants
or other securities convertible into Common Stock to all holders of its
Common Stock, entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the current market price per
share (determined as provided in Section 7(b)(v) below) of the Common
Stock on the record date for such rights, warrants or convertible
securities, the Conversion Price in effect at the opening of business on
the day following the record date shall be reduced by multiplying such
Conversion Price by a fraction the numerator of which shall be the
number of shares of Common Stock outstanding at the close of business on
the date
11
<PAGE>
fixed for such determination plus the number of shares of Common Stock
that the aggregate of the offering price of the total number of shares
of Common Stock so offered for subscription or purchase would purchase
at such current market price and the denominator of which shall be the
number of shares of Common Stock outstanding at the close of business on
the record date fixed for such determination plus the number of shares
of Common Stock so offered for subscription or purchase, such reduction
to become effective immediately after the opening of business on the day
following the record date. For the purposes of this subparagraph, the
number of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Company. The Company will
not issue any rights, warrants or convertible securities in respect of
shares of Common Stock held in the treasury of the Company.
(iii) In case the outstanding shares of Common Stock
shall be subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the date upon which such subdivision becomes effective shall
be proportionately reduced, and conversely, in case the outstanding
shares of Common Stock shall each be combined into a smaller number of
shares of Common Stock, the Conversion Price in effect at the opening of
business on the day following the date upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
opening of business on the day following the date upon which such
subdivision or combination becomes effective.
(iv) In case the Company shall, by dividend or
otherwise, distribute to all holders of its Common Stock (x) evidences
of its indebtedness and/or (y) cash, capital stock (other than Common
Stock) or other assets (excluding any dividend or distribution payable
in cash out of the current or retained earnings of the Company or in
connection with the liquidation, dissolution or winding up of the
Company and any dividend or distribution of any rights, warrants or
convertible securities referred to in subparagraphs (i) and (ii) of this
subsection (b)), then in each case the Conversion Price shall be
adjusted so that the Conversion Price shall equal the price determined
by multiplying the Conversion
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Price in effect immediately prior to the close of business on the record
date for the determination of holders of Common Stock entitled to
receive such distribution by a fraction of which the numerator shall be
the current market price per share (determined as provided in Section
7(b)(v) below) of the Common Stock on such record date less the then
fair market value as determined by the Board of Directors (whose
determination shall be conclusive and shall be described in a statement
filed with the transfer agent for the Convertible Preferred (the
"Transfer Agent")) of the portion of the cash, capital stock or other
assets or evidences of indebtedness so distributed (and for which an
adjustment to the Conversion Price has not previously been made pursuant
to the terms of this subsection (b)) applicable to one share of Common
Stock and the denominator shall be such current market price per share
of the Common Stock, such adjustment to become effective immediately
prior to the opening of business on the day following such record date.
(v) For the purpose of any computation under
subparagraphs (ii) and (iv) of this subsection (b), the current market
price per share of Common Stock on any day shall be deemed to be the
average of the last reported sale price (or closing bid price if no sale
occurred) for the 20 consecutive Trading Days (as defined below)
selected by the Board of Directors commencing no more than 30 Trading
Days before and ending no later than the day before the day in question
on the American Stock Exchange, Inc. (the "AMEX"), or, if the Common
Stock is not then traded on the AMEX, such other national securities
exchange on which the Common Stock is listed or admitted to trading or,
if the Common Stock is not then traded on any national securities
exchange, the Nasdaq National Market or any similar system of automated
dissemination of quotations of securities prices. As used herein, the
term "Trading Day" means, (x) if the Common Stock is not so listed or
admitted for trading but is quoted on the Nasdaq National Market or any
similar system of automated dissemination of quotations of securities
prices, days on which trades may be made on such system or, (y) if the
Common Stock is listed or admitted for trading on any national
securities exchange, days on which such national securities exchange is
open for business.
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(vi) No adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or decrease of
at least 1% of such price; provided, however, that any adjustments that
by reason of this subparagraph are not required to be made shall be
carried forward and taken into account in any subsequent adjustment and
provided, further, that adjustment shall be required and made in
accordance with the provisions of this subsection (b) (other than this
subparagraph) not later than such time as may be required in order to
preserve the tax-free nature of a distribution to the holders of shares
of Common Stock. Anything in this paragraph to the contrary
notwithstanding, the Company may, from time to time, decrease the
Conversion Price by any amount for any period of at least 20 days, in
which case the Company shall give at least 15 days' notice of such
decrease. At its option, the Company also may make such other reduction
in the Conversion Price as the Board of Directors deems advisable to
avoid or diminish any income tax to holders of Common Stock resulting
from any dividend or distribution of stock (or rights to acquire stock)
or from any event treated as such for income tax purposes. All
calculations shall be made to the nearest cent.
(vii) Whenever the Conversion Price is adjusted as
herein provided, the Company shall promptly mail an officer's
certificate signed by the President or a Vice President and the Chief
Financial Officer of the Company setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts
requiring such adjustment and the manner of computing same, which
certificate shall constitute conclusive evidence, absent manifest error,
of the correctness of such adjustment. If the calculation of the
adjustment requires a determination by the Board of Directors, such
certificate shall include a copy of the resolution of the Board of
Directors relating to such determination. The certificate shall be
mailed to each holder of shares of Convertible Preferred at their last
address as the same appears in the stock register of the Company and to
the Transfer Agent for the Convertible Preferred.
(c) CONSOLIDATION, MERGER OR SALE OF ASSETS. In case of
(i) any recapitalization or reclassification of shares of Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to
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par value, as a result of a subdivision or combination of the Common Stock),
(ii) any consolidation or merger of the Company with or into another person or
any merger of another person into the Company (other than a merger that does
not result in a reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Company), (iii) any sale or transfer
of all or substantially all of the assets of the Company or (iv) any
compulsory share exchange, pursuant to which any holders of Common Stock shall
be entitled to receive other securities, cash or other property, each holder
of a share of Convertible Preferred then outstanding shall have the right
thereafter to convert such share only into the kind and amount of securities,
cash and other property receivable upon such consolidation, merger, sale,
transfer, recapitalization, reclassification or share exchange by a holder of
the number of shares of Common Stock of the Company into which such share of
Convertible Preferred might have been converted immediately prior to such
consolidation, merger, sale, transfer, recapitalization, reclassification or
share exchange. The company formed by such consolidation or resulting from
such merger or that acquires such assets or that acquires the Company's
shares, as the case may be, shall make provisions in its certificate or
articles of incorporation or other constituent document to establish such
right. Such certificate or articles of incorporation or other constituent
document shall provide for adjustments that, for events subsequent to the
effective date of such certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be practicable to
the relevant adjustments provided for in this subsection (c) and subsection
(b) of this Section 7.
In case (x) the Company shall take any action that would result in
an adjustment to the Conversion Price, or (y) of any consolidation, merger or
share exchange to which the Company is a party and for which approval of any
stockholders of the Company is required, or of the sale or transfer of all or
substantially all of the assets of the Company, or (z) of the voluntary or
involuntary dissolution, liquidation or winding up of the Company, then the
Company shall cause to be filed with the Transfer Agent for the Convertible
Preferred and shall cause to be mailed to all holders of shares of Convertible
Preferred at each such holder's last address as the same appears in the stock
register of the Company, at least 10 days prior to the applicable record or
effective date hereinafter specified, a notice stating (A) the date on which a
record is to be taken for the purpose of such actions or, if a record is not
to be taken, the date as of which the holders of Common Stock of record are to
be determined or (B) the date on which such consolidation, merger, share
exchange, sale, transfer, dissolution, liquidation or winding up is expected
to become effective and the date as of
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which it is expected that holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation or winding up. Neither the failure to give
such notice nor any defect therein shall affect the legality or validity of
the proceedings described in subparagraphs (i) through (iv) of this subsection
(c).
(d) MECHANICS OF CONVERSION. Before any holder of
Convertible Preferred shall be entitled to convert the same into shares of
Common Stock and to receive certificates therefor, such holder shall surrender
the certificate or certificates for the Convertible Preferred to be converted,
duly endorsed and accompanied by any transfer instrument sufficient to
transfer the Convertible Preferred being converted to the Company free of any
adverse interest, at the office of the Transfer Agent for the Convertible
Preferred, and shall give written notice of conversion to the Company at such
office specifying the number (in whole shares) of shares of Convertible
Preferred to be converted and the name or names in which such holder wishes
the certificate or certificates of Common Stock to be issued. The Company
shall, within 10 days or as promptly as practicable after such delivery, issue
and deliver at such office to such holder of the Convertible Preferred (or to
any other person specified in the notice delivered by such holder) a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid and a check payable to the holder
for any cash amounts payable as the result of a conversion into fractional
shares of Common Stock or, if the Company so elects, a check payable to the
holder for the cash amount payable in lieu of the delivery of shares of Common
Stock pursuant to Section 7(a) hereof together with written notice of the
Company's election to pay cash in lieu of delivering such shares of Common
Stock. Such conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the Company receives
notice and the shares of Convertible Preferred to be converted, and the person
or persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders
of such shares of Common Stock on such date of conversion, unless either (x)
the stock transfer books of the Company shall be closed on that date, in which
event such conversion shall be deemed to have been effected immediately prior
to the close of business on the next succeeding day on which such stock
transfer books are open, and such person or persons shall be deemed to have
become a holder or holders of record of Common Stock at the close of business
on such later date, but such conversion shall be at the Conversion Price in
effect on the date upon which such shares shall have been surrendered and such
notice received by the
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Company or (y) within 10 days after the Company receives such notice, the
Company delivers to the holder written notice of its election to pay cash in
lieu of delivering shares of Common Stock pursuant to Section 7(a) hereof. In
case any certificate for shares of the Convertible Preferred shall be
surrendered for conversion of only a part of the shares represented thereby,
the Company shall deliver within 10 days or as promptly as practicable
thereafter at such office, or upon the written order of the holder thereof, a
certificate or certificates for the number of shares of Convertible Preferred
represented by such surrendered certificate that are not being converted.
Notwithstanding the foregoing, the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such
conversion unless the certificates evidencing the Convertible Preferred are
either delivered to the Company or the Transfer Agent for the Convertible
Preferred or the Company or the Transfer Agent for the Convertible Preferred
shall have received evidence satisfactory to it evidencing that such
certificates have been lost, stolen or destroyed and the holder of such
Convertible Preferred executes an agreement satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection with such
certificates.
The Company will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares
of Common Stock on conversions of shares of Convertible Preferred pursuant
hereto; provided, however, that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issue or
delivery of shares of Common Stock in a name other than that of the holder of
the shares of Convertible Preferred to be converted, and no such issue or
delivery shall be made unless and until the person requesting such issue or
delivery has paid to the Company the amount of any such tax or has
established, to the satisfaction of the Company, that such tax has been paid.
(e) NO IMPAIRMENT. The Company will not, through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms to be observed or performed
hereunder by the Company but will at all times in good faith assist in the
carrying out of all the provisions of this Section 7 and in the taking of all
such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Convertible Preferred against
impairment.
Section 8. SPECIAL CONVERSION RIGHTS.
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(a) Upon the occurrence of a Change of Control (as defined
in Section 8(e) below) with respect to the Company, each holder of Convertible
Preferred shall have the right, at the holder's option, for a period of 30
days after the mailing of a Special Conversion Notice (as defined in Section
8(c) hereof) to convert all, but not less than all, of such holder's
Convertible Preferred into Common Stock of the Company at an adjusted
conversion price per share equal to the Special Conversion Price (as defined
in Section 8(e) below). The Company may, at its option, in lieu of providing
Common Stock upon any such special conversion, pay to the holder cash equal to
the Market Value (as defined in Section 8(e) below) of the Common Stock
multiplied by the number of shares of Common Stock into which such shares of
Convertible Preferred are convertible at an adjusted conversion price equal to
the Special Conversion Price. If the Company elects to pay the holder cash in
lieu of delivering shares of Common Stock as provided in the immediately
preceding sentence, the Company will deliver, within 10 days after the
conversion date, a check payable to the holder for the cash amount payable in
lieu of the delivery of shares of Common Stock together with written notice of
the Company's election to pay cash in lieu of delivering such shares. Shares
of Convertible Preferred that become convertible pursuant to a special
conversion right shall, unless so converted, remain convertible into the
number of shares of Common Stock that the holders of the Convertible Preferred
would have owned immediately after the Change of Control if the holders had
converted the Convertible Preferred immediately before the effective date of
the Change of Control, subject to adjustment as provided in Section 7 hereof.
(b) Upon the occurrence of a Fundamental Change (as defined
in Section 8(e) below) with respect to the Company, each holder of Convertible
Preferred shall have a special conversion right, at the holder's option, for a
period of 30 days after the mailing of a Special Conversion Notice by the
Company to the holders of the Convertible Preferred, to convert all, but not
less than all, of such holder's Convertible Preferred into the kind and amount
of cash, securities, property or other assets receivable upon such Fundamental
Change by a holder of the number of shares of Common Stock into which such
shares of Convertible Preferred would have been convertible immediately prior
to such Fundamental Change at an adjusted conversion price per share equal to
the Special Conversion Price. The Company or a successor corporation, as the
case may be, may, at its option and in lieu of providing the consideration as
required above upon such conversion, pay to the holder cash equal to the
Market Value of the Common Stock multiplied by the number of shares of Common
Stock into which such shares of Convertible Preferred are convertible at an
adjusted conver-
18
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sion price equal to the Special Conversion Price. If the Company elects to pay
the holder cash in lieu of delivering the consideration required upon such
conversion as provided in the immediately preceding sentence, the Company will
deliver, within 10 days after the conversion date, a check payable to the holder
for the cash amount payable in lieu of the delivery of such consideration
together with written notice of the Company's election to pay cash in lieu of
delivering such consideration. Shares of Convertible Preferred that become
convertible pursuant to a special conversion right shall, unless so converted,
remain convertible into the kind and amount of cash, securities, property or
other assets that the holders of the Convertible Preferred would have owned
immediately after the Fundamental Change if the holders had converted the
Convertible Preferred immediately before the effective date of the Fundamental
Change, subject to adjustment as provided in Section 7 hereof.
(c) Upon the occurrence of a Change of Control or a
Fundamental Change with respect to the Company, within 30 days after such
occurrence, the Company shall mail to each registered holder of Convertible
Preferred a notice of such occurrence (the "Special Conversion Notice")
setting forth the following: (i) the event constituting the Change of Control
or Fundamental Change, (ii) the conversion date with respect to exercise of
the applicable special conversion right, (iii) the Special Conversion Price,
(iv) the conversion rate (and related Conversion Price) then in effect under
Section 7 and the continuing conversion rights, if any, under Section 7, (v)
the name and address of the paying agent, (vi) that holders who want to
convert shares of Convertible Preferred must satisfy the requirements of
Section 7(d) (specifying such requirements) and must exercise such special
conversion right within the 30-day period after the mailing of such notice by
the Company, (vii) that exercise of such special conversion right shall be
irrevocable and no dividends on shares of Convertible Preferred (or portions
thereof) tendered for conversion shall accrue from and after the conversion
date and (viii) that the Company (or a successor corporation, if applicable)
may, at its option, elect to pay cash (specifying the amount thereof per
share) for all shares of Convertible Preferred tendered for conversion.
(d) A holder of Convertible Preferred must exercise the
special conversion right within the 30-day period after the mailing of the
Special Conversion Notice, and such special conversion right shall expire at
the end of such 30-day period. Such right must be exercised in accordance
with Section 7 to the extent the procedures in Section 7 are consistent with
the special provisions of this Section 8. Exercise of such conversion right
shall be irrevocable, to the extent permitted by applicable law, and dividends
on Convertible Preferred
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tendered for conversion shall cease to accrue from and after the conversion
date. The conversion date with respect to the exercise of a special
conversion right arising upon a Change of Control or Fundamental Change shall
be the 30th day after the mailing of the Special Conversion Notice. In taking
any action in connection with any Change of Control or Fundamental Change or
related special conversion right, the Company will comply with all applicable
federal securities laws and regulations including, to the extent applicable,
Rules 13e-4 and 14e-1 under the Securities Exchange Act of 1934, as amended.
(e) The following definitions shall apply to terms used
herein:
(i) The term "DI affiliates" means (x) Mr. Stanley
H. Durwood, his spouse and any of his lineal descendants and their
respective spouses (collectively, the "Durwood Family"), (y) any
controlled affiliate of any member of the Durwood Family and (z) any
trust for the benefit of one or more members of the Durwood Family
(whether or not any member of the Durwood Family is a trustee of such
trust) and no other person other than one or more charitable
organizations.
(ii) A "Change of Control" with respect to the
Company shall be deemed to have occurred at the first time after the
issuance of the Convertible Preferred that (x) a majority of the Board
of Directors of the Company, over a two-year period, is replaced from
the directors who constituted the Board of Directors of the Company at
the beginning of such period, which replacement shall not have been
approved by the Board of Directors of the Company (or replacement
directors approved by the Board of Directors of the Company), as
constituted at the beginning of such period, or (y) a person or entity
or group of persons or entities acting in concert as a partnership or
other group (other than the DI affiliates, any subsidiary of the
Company, any employee stock purchase plan, stock option plan or other
stock incentive plan or program, retirement plan or automatic
reinvestment plan or any substantially similar plan of the Company or
any subsidiary of the Company or any person holding securities of the
Company for or pursuant to the terms of any such employee benefit plan)
shall, as a result of a tender or exchange offer, open-market purchases,
privately negotiated purchases or otherwise, have become the
20
<PAGE>
beneficial owner (within the meaning of Rule 13d-3 under the Exchange
Act) of securities of the Company representing 50% or more of the
combined voting power of the then outstanding securities of the Company
ordinarily (and apart from rights accruing under special circumstances)
having the right to vote in the election of directors.
(iii) A "Fundamental Change" with respect to the
Company shall be deemed to have occurred after (x) the occurrence of any
transaction or event in connection with which (A) 66 2/3% or more of the
outstanding Common Stock or (B) securities of the Company representing
50% or more of the combined voting power of the then outstanding
securities of the Company ordinarily (and apart from rights accruing
under special circumstances) having the right to vote in the election of
directors is exchanged for, converted into, acquired for or constitutes
solely the right to receive cash, securities, property or other assets
(whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization
or otherwise) or (y) the conveyance, sale, lease, assignment, transfer
or other disposal of all or substantially all of the Company's property,
business or assets; provided, however, that a Fundamental Change will
not be deemed to have occurred with respect to either of the following
transactions or events: (1) any transaction or event in which more than
50% (by value as determined in good faith by the Board of Directors) of
the consideration received by holders of Common Stock consists of
Marketable Stock (as defined below) or (2) any consolidation or merger
of the Company in which the holders of Voting Stock (as defined below)
of the Company immediately prior to such transaction own, directly or
indirectly, 50% or more of the Voting Stock of the sole surviving
corporation (or of the ultimate parent of such sole surviving
corporation) outstanding at the time immediately after such
consolidation or merger.
(iv) The term "Voting Stock" means, with respect to
any person, capital stock of such person having general voting power
under ordinary circumstances to elect at least a majority of the board
of directors, managers or trustees of such person (irrespective of
whether or not at the time capital stock of
21
<PAGE>
any other class or classes shall have or might have voting power by
reason of the happening of any contingency).
(v) The term "Special Conversion Price" means the
higher of (x) the Market Value of the Common Stock or (y) $__________
per share (which amount will, each time the Conversion Price is
adjusted, be adjusted so that the ratio of such amount to the Conversion
Price, after giving effect to any such adjustment, shall always be the
same as the ratio of $_________ to the initial Conversion Price, without
giving effect to any such adjustment). As used herein, "Market Value"
of the Common Stock or any other Marketable Stock is the average of the
last reported sales prices of the Common Stock or such other Marketable
Stock, as the case may be, for the five trading days ending on the last
trading day preceding the date of the Fundamental Change, Change of
Control or conversion, as applicable.
(vi) The term "Marketable Stock" means the Common
Stock or common stock of any corporation that is the successor to all or
substantially all of the business or assets of the Company as a result
of a Fundamental Change or of the ultimate parent of such successor,
which is (or will, upon distribution thereof, be) listed or quoted on
the New York Stock Exchange, the AMEX, the Nasdaq National Market or any
similar system of automated dissemination of quotations of securities
prices in the United States.
Section 9. STATUS OF REACQUIRED SHARES. If shares of the
Convertible Preferred are redeemed pursuant to Section 5 hereof or converted
pursuant to Section 7 hereof, the shares so redeemed or converted shall, upon
compliance with any statutory requirements, assume the status of authorized
but unissued shares of preferred stock of the Company.
Section 10. RESERVATION AND ISSUANCE OF SHARES. So long as any
shares of Convertible Preferred remain outstanding, the Company agrees to keep
reserved for issuance in connection with the conversion of the Convertible
Preferred at all times a number of authorized but unissued shares of Common
Stock at least equal to the total number of shares of Common Stock issuable
upon conversion of all of the Convertible Preferred outstanding at such time.
The Company covenants and agrees that all shares of Common Stock which may be
22
<PAGE>
issued upon conversion of shares of Convertible Preferred will upon issue be
duly and validly issued, fully paid and non-assessable, free of all liens and
charges and not subject to any preemptive rights.
Section 11. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or when sent by telex or telecopier (with
receipt confirmed), provided a copy is also sent by express (overnight, if
possible) courier, addressed, (a) in the case of a holder of the Convertible
Preferred, to such holder's address of record and, (b) in the case of the
Company, to the Company's principal executive offices to the attention of the
Company's Secretary.
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IN WITNESS WHEREOF, AMC Entertainment, Inc. has caused this
Certificate of Designations to be duly executed by its duly authorized officer
and attested by its secretary this ____ day of __________, 1994.
AMC ENTERTAINMENT INC.
By:_________________________________
Name:
Title:
ATTEST:
- -----------------------------
Name: Nancy Gallagher
Title: Secretary
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<PAGE>
EXHIBIT 3.3
AMC ENTERTAINMENT INC.
BY-LAWS
ARTICLE I - STOCKHOLDERS
------------------------
SECTION 1. ANNUAL MEETING.
An annual meeting of the stockholders, for the election of directors
to succeed those whose terms expire and for the transaction of such other
business as may properly come before the meeting, shall be held on the second
Thursday in November of each year, if not a legal holiday, and if a legal
holiday, then on the next secular day following, and at such place and at such
time on the designated date as the Board of Directors shall fix each year.
SECTION 2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes
prescribed in the notice of the meeting, may be called by the Board of Directors
or the Chairman of the Board and shall be held at such place, on such date, and
at such time as they or he shall fix.
SECTION 3. NOTICE OF MEETINGS.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten nor more than sixty days before
the date on which the meeting is to be held, to each stockholder entitled to
vote at such meeting, except as otherwise provided herein or required by law
(meaning, here and hereinafter, as required from time to time by the Delaware
General Corporation Law or the Certificate of Incorporation of the corporation).
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<PAGE>
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
days after the date for which the meeting was originally noticed, or if a new
record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity
herewith. At any adjourned meeting, any business may be transacted which might
have been transacted at the original meeting.
SECTION 4. QUORUM.
At any meeting of the stockholders, the holders of a majority of all
of the shares of the stock entitled to vote at the meeting, present in person or
by proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by law.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote who
are present, in person or by proxy, may adjourn the meeting to another place,
date, or time.
If a notice of any adjourned special meeting of stockholders is sent
to all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters
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shall be determined by a majority of the votes cast at such meeting.
SECTION 5. ORGANIZATION.
Such person as the Board of Directors may have designated or, in the
absence of such a person, the Chairman of the Board of the corporation, or, in
his absence, such person as may be chosen by the holders of a majority of the
shares entitled to vote who are present, in person or by proxy, shall call to
order any meeting of the stockholders and act as chairman of the meeting. In
the absence of the Secretary of the corporation, the secretary of the meeting
shall be such person as the chairman appoints.
SECTION 6. CONDUCT OF BUSINESS.
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him in order.
SECTION 7. PROXIES AND VOTING.
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing filed in
accordance with the procedure established for the meeting.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefore by a stockholder entitled to vote or his proxy, a stock vote
shall be taken. Every
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<PAGE>
stock vote shall be taken by ballots, each of which shall state the name of the
stockholder or proxy voting and such other information as may be required under
the procedure established for the meeting. Every vote taken by ballots shall be
counted by an inspector or inspectors appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast,
and except as otherwise required by law, all other matters shall be determined
by a majority of the votes cast.
SECTION 8. STOCK LIST.
A complete list of stockholders to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
name, shall be open to the examination of any such stockholder, for any purpose
germane to the meeting, during ordinary business hours for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting and the number of
shares held by each of them.
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<PAGE>
SECTION 9. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING.
Any action required to be taken at any annual or special meeting of
stockholders of the corporation, or any action which may be taken at any annual
or special meeting of the stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted.
ARTICLE II - BOARD OF DIRECTORS
-------------------------------
SECTION 1. NUMBER AND TERM OF OFFICE.
The number of directors who shall constitute the Board of Directors
shall be six (6), effective as of the date of the Annual Meeting of
Stockholders. Each director shall be elected for a term of one year, and each
holds office until such director's successor is duly elected and qualified or
until such director's earlier resignation or removal, except as otherwise
provided herein or required by law. The other provisions of these by-laws
notwithstanding, upon issuance of shares of the corporation's Convertible
Preferred Stock, par value 66 2/3 cents per share (the "Convertible Preferred
Stock"), and so long as any shares of the Convertible Preferred Stock shall
remain outstanding, during the occurrence of a "default period," as defined in
the Certificate of Designations filed with the Secretary of State of the State
of Delaware with respect to the Convertible Preferred Stock, the maximum
authorized number of directors on the Board of Directors shall be increased by
two, and the two additional directors shall be elected by holders of Convertible
Preferred Stock pursuant to the terms of the Certificate of Designations.
SECTION 2. REGULAR MEETINGS.
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
SECTION 3. SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called by one-third
of the directors then in office (rounded up to the
-5-
<PAGE>
nearest whole number) or by the Chairman of the Board and shall be held at such
place, on such date, and at such time as they or he shall fix. Notice of the
place, date, and time of each such special meeting shall be given each director
by whom it is not waived by mailing written notice not less than three days
before the meeting or by telegraph or by facsimile the same not less than
twenty-four hours before the meeting. Unless otherwise indicated in the notice
thereof, any and all business may be transacted at a special meeting.
SECTION 4. QUORUM.
At any meeting of the Board of Directors, a majority of the total
number of the whole Board shall constitute a quorum for all purposes. If a
quorum shall fail to attend any meeting, a majority of those present may
adjourn the meeting to another place, date, or time, without further notice or
waiver thereof.
SECTION 5. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
SECTION 6. CONDUCT OF BUSINESS.
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the Board may from time
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<PAGE>
to time determine, and all matters shall be determined by the vote of a majority
of the directors present, except as otherwise provided herein or required by
law. Action may be taken by the Board of Directors without a meeting if all
members thereof consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors.
SECTION 7. POWERS.
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as may be exercised or
done by the corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with
law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form
as it may determine, of written obligations of every kind, negotiable
or non-negotiable, secured or unsecured, and to do all things
necessary in connection therewith;
(4) To remove any officer of the corporation with or without
cause, and from time to time to devolve the powers and duties of an
officer upon any other person for the time being;
-7-
<PAGE>
(5) To confer upon any officer of the corporation the power to
appoint, remove and suspend subordinate officers, employees and
agents;
(6) To adopt from time to time such stock, option, stock
purchase, bonus or other compensation plans for directors, officers,
employees and agents of the corporation and its subsidiaries as it may
determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers, employees and agents of
the corporation and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent
with these by-laws, for the management of the corporation's business
and affairs.
SECTION 8. COMPENSATION OF DIRECTORS.
Directors, as such, may receive, pursuant to resolution of the Board
of Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
ARTICLE III - COMMITTEES
SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS.
The Board of Directors, by a vote of a majority of the whole Board,
may from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it
-8-
<PAGE>
thereby confers, to serve at the pleasure of the Board and shall, for those
committees and any others provided for herein, elect a director or directors to
serve as the member or members, designating, if it desires, other directors as
alternate members who may replace any absent or disqualified member at any
meeting of the committee. Any committee so designated may exercise the power
and authority of the Board of Directors to declare a dividend or to authorize
the issuance of stock if the resolution which designates the committee or a
supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his place, the member or members of the committee present at the
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may by unanimous vote appoint another member of the Board of Directors
to act at the meeting in the place of the absent or disqualified member.
SECTION 2. CONDUCT OF BUSINESS.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third of the members shall constitute
a quorum unless the committee shall consist of one or two members, in which
event one member shall constitute a quorum; and all matters shall be determined
by a majority vote of the members present. Action may be taken by any committee
without a meeting if all members
-9-
<PAGE>
thereof consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of such committee.
ARTICLE IV - OFFICERS
---------- --------
SECTION 1. GENERALLY.
The officers of the corporation shall consist of: a Chairman of the
Board, a President, one or more Vice Presidents, any one or more of whom may be
designated as an Executive Vice President or Senior Vice President, a Secretary,
and Treasurer, and such other officers as from time to time may be appointed by
the Board of Directors. Officers shall be elected by the Board of Directors,
which shall consider that subject at its first meeting after every annual
meeting of stockholders. Each officer shall hold office until his successor is
elected and qualified or until his earlier resignation or removal. Any number
of offices may be held by the same person.
SECTION 2. CHAIRMAN OF THE BOARD.
The Chairman of the Board shall be the Chief Executive Officer of the
corporation, shall preside at meetings of the Board of Directors, shall be
responsible for the general supervision and direction of the business of the
corporation, and shall perform such other duties and responsibilities as are
prescribed by the Board of Directors.
SECTION 3. PRESIDENT.
The President shall be responsible for such duties as are delegated to
him by the Board of Directors, including without
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<PAGE>
limitation the monitoring and supervision of the corporation's day to day
operations. The President shall perform the duties of the Chairman of the Board
in the event of the Chairman of the Board's absence or disability.
SECTION 4. VICE PRESIDENT.
Each Vice President shall have such powers and duties as may be
delegated to him by the Board of Directors. One Vice President shall be
designated by the Board to perform the duties and exercise the powers of the
President in the event of the President's absence or disability.
SECTION 5. TREASURER.
The Treasurer shall have the responsibility for maintaining the
financial records of the corporation and shall have custody of all monies and
securities of the corporation. He shall make such disbursements of the funds of
the corporation as are authorized and shall render from time to time an account
of all such transactions and of the financial condition of the corporation. The
Treasurer shall also perform such other duties as the Board of Directors may
from time to time prescribe.
SECTION 6. SECRETARY.
The Secretary shall issue all authorized notices for, and shall keep
minutes of, all meetings of the stockholders and the Board of Directors. He
shall have charge of the corporate books and shall perform such other duties as
the Board of Directors may from time to time prescribe.
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<PAGE>
SECTION 7. DELEGATION OF AUTHORITY.
The Board of Directors may from time to time delegate the powers or
duties of any officer to any other officers or agents, notwithstanding any
provision hereof.
SECTION 8. REMOVAL.
Any officer of the corporation may be removed at any time, with or
without cause, by the Board of Directors.
SECTION 9. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless otherwise directed by the Board of Directors, the Chairman of
the Board shall have power to vote and otherwise act on behalf of the
corporation, in person or by proxy, at any meeting of stockholders of or with
respect to any action of stockholders of any other corporation in which this
corporation may hold securities and otherwise to exercise any and all rights
and powers which this corporation may possess by reason of its ownership of
securities in such other corporation.
ARTICLE V - STOCK
--------- -----
SECTION 1. CERTIFICATES OF STOCK.
Each stockholder shall be entitled to a certificate signed by, or in
the name of the corporation by, the Chairman of the Board or the President, and
by the Secretary or an Assistant Secretary, or by the Treasurer or an Assistant
Treasurer, certifying the number of shares owned by him. Any or all of the
signatures on the certificate may be a facsimile.
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<PAGE>
SECTION 2. TRANSFERS OF STOCK.
Transfers of stock shall be made only upon the transfer books of the
corporation kept at an office of the corporation or by transfer agents
designated to transfer shares of the stock of the corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these by-
laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
SECTION 3. RECORD DATE.
The Board of Directors may fix a record date, which shall not be more
than sixty nor less than ten days before the date of any meeting of
stockholders, nor more than sixty days prior to the time for the other action
hereinafter described, as of which there shall be determined the stockholders
who are entitled: to notice of or to vote at any meeting of stockholders or any
adjournment thereof; to express consent to corporate action in writing without a
meeting; to receive payment of any dividend or other distribution or allotment
of any rights; or to exercise any rights with respect to any change, conversion
or exchange of stock or with respect to any other lawful action.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES.
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish
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<PAGE>
concerning proof of such loss, theft or destruction and concerning the giving of
a satisfactory bond or bonds of indemnity.
SECTION 5. REGULATIONS.
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI - NOTICES
---------- -------
SECTION 1. NOTICES.
Except as otherwise specifically provided herein or required by law,
all notices required to be given to any stockholder, director, officer, employee
or agent shall be in writing and may in every instance be effectively given by
hand delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, or by sending such notice by prepaid telegram or mailgram. Any
such notice shall be addressed to such stockholder, director, officer, employee
or agent at his or her last known address as the same appears on the books of
the corporation. The time when such notice is received, if hand delivered, or
dispatched, if delivered through the mails or by telegram or mailgram, shall be
the time of the giving of the notice.
SECTION 2. WAIVERS.
A written waiver of any notice, signed by a stockholder, director,
officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder,
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<PAGE>
director, officer, employee or agent. Neither the business nor the purpose of
any meeting need be specified in such a waiver.
ARTICLE VII - MISCELLANEOUS
----------- -------------
SECTION 1. FACSIMILE SIGNATURES.
In addition to the provisions for use of facsimile signatures
elsewhere specifically authorized in these by-laws, facsimile signatures of any
officer or officers of the corporation may be used whenever and as authorized by
the Board of Directors or a committee thereof.
SECTION 2. CORPORATE SEAL.
The Board of Directors may provide a suitable seal, containing the
name of the corporation, which seal shall be in the charge of the Secretary. If
and when so directed by the Board of Directors or a committee thereof,
duplicates of the seal may be kept and used by the Treasurer or by an Assistant
Secretary or Assistant Treasurer.
SECTION 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the corporation shall, in the performance of his
duties, be fully protected in relying in good faith upon the books of account or
other records of the corporation, including reports made to the corporation by
any of its officers, by an independent certified public accountant, or by an
appraiser selected with reasonable care.
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<PAGE>
SECTION 4. FISCAL YEAR.
The fiscal year of the corporation shall be as fixed by the Board of
Directors.
SECTION 5. TIME PERIODS.
In applying any provision of these by-laws which require that an act
be done or not done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
ARTICLE VIII - AMENDMENTS
------------ ----------
These by-laws may be amended or repealed by the Board of Directors at
any meeting or by the stockholders at any meeting.
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<PAGE>
EXHIBIT 5.1
Gage & Tucker
2345 Grand Avenue
Kansas City, Missouri 64108
(816) 292-2000
February 18, 1994
AMC Entertainment Inc.
106 West 14th Street
Kansas City, Missouri 64105
Gentlemen:
We have acted as counsel for AMC Entertainment Inc., a Delaware corporation
(the "Company"), in connection with the preparation and filing of a registration
statement (file no. 33-51693) on Form S-2 (the "Registration Statement") for the
registration under the Securities Act of 1933, as amended (the "Securities
Act"), of 4,600,000 shares of Convertible Preferred Stock, 66 2/3 CENTS par
value per share (the "Convertible Preferred Stock"), of the Company, including
600,000 shares subject to an over-allotment option granted to the underwriters.
In connection therewith we have examined:
1. The resolutions of the Board of Directors of the Company, which resolutions
(i) authorize the preparation and filing of the Registration Statement, (ii)
approve the Underwriting Agreement with the underwriters (the "Underwriting
Agreement"), and (iii) authorize certain related transactions;
2. The Registration Statement;
3. The Restated and Amended Certificate of Incorporation of the Company;
4. The proposed form of Certificate of Designations with respect to the
Convertible Preferred Stock (the "Certificate of Designations");
5. The Bylaws of the Company, as amended; and
6. The proposed form of the Underwriting Agreement.
We also have made such other factual and legal investigations as we deemed
necessary or appropriate in order to render the opinion hereafter expressed. In
such examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity of
all photostatic documents and certified copies submitted to us as the original
documents.
Based solely on the foregoing, we are of the opinion that, upon filing of
the Certificate of Designations with the Secretary of State of Delaware, said
shares of the Convertible Preferred Stock will be duly authorized, and, upon
delivery by the Company and receipt by the Company of adequate consideration
therefor, said shares of the Convertible Preferred Stock will be validly issued,
fully paid and nonassessable.
Although none of our partners are members of the Bar of the State of
Delaware, we are generally familiar with the Delaware General Corporation Law,
and we consider ourselves competent to opine on the Delaware General Corporation
Law to the extent the same is applicable to the issuance by the Company of the
Convertible Preferred Stock. We express no opinion as to the laws of any
jurisdiction other than the Delaware General Corporation Law.
The opinion set forth in this letter is effective as of the date hereof. No
expansion of our opinion may be made by implication or otherwise. We express no
opinion other than as herein expressly set forth. We do not
<PAGE>
undertake to advise you with respect to any matter within the scope of this
letter which comes to our attention after the date of this letter and disclaim
any responsibility to advise you of future changes of law or fact which may
affect the above opinion. This letter is solely for your use in connection with
the registration of the Convertible Preferred Stock and is not to be quoted from
in whole or in part without the express written consent of this firm.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to all references made to this firm in such
Registration Statement. In giving such consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act.
Very truly yours,
/s/_Gage & Tucker
<PAGE>
EXHIBIT 7.1
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
(302) 658-6541
February 18, 1994
AMC Entertainment Inc.
106 West 14th Street
Kansas City, Missouri 64105
Ladies and Gentlemen:
We have acted as special Delaware counsel to AMC Entertainment, Inc., a
Delaware corporation (the "Company"), in connection with the registration by the
Company on Form S-2 of 4,600,000 Shares of its Convertible Preferred Stock, par
value $.66 2/3 per share (the "Convertible Preferred Stock"). In this
connection, you have requested our opinion as to whether there will exist any
restriction upon the surplus of the Company available for the payment of
dividends on stock of the Company by reason of the fact that the liquidation
preference of the Convertible Preferred Stock will exceed the par value of such
stock, and whether any remedy would be available to the holders of the
Convertible Preferred Stock before or after payment of any dividend that would
reduce or reduces the surplus of the Company to an amount less than the amount
of such excess.
For the purpose of rendering our opinion as expressed herein, and only for
such purpose, we have examined and have relied upon the following documents:
(i) the Restated and Amended Certificate of Incorporation of the Company
(the "Restated Certificate") to be filed with the Secretary of State of the
State of Delaware (the "Secretary") pursuant to Section 245 of the General
Corporation Law of the State of Delaware (the "General Corporation Law");
(ii) the proposed Certificate of Designations with respect to the
Convertible Preferred Stock (the "Certificate of Designations"); and
(iii) the Registration Statement on Form S-2 with respect to the Convertible
Preferred Stock (the "Registration Statement") as filed with the Securities and
Exchange Commission (the "Commission").
With respect to the foregoing documents, we have assumed: (i) the
authenticity of all documents submitted to us as originals, the conformity with
authentic original documents of all documents submitted to us as copies or
forms, the genuineness of all signatures and the legal capacity of natural
persons, and (ii) that the foregoing documents, in the forms thereof submitted
for our review have not been and will not be altered, amended or repealed in any
respect material to our opinion as stated herein. We have not reviewed any
documents other than the documents listed above for purposes of rendering our
opinion as expressed herein, and we assume that there exists no provision of any
such other document that bears upon or is inconsistent with our opinion as
expressed herein. We have conducted no independent factual investigation of our
own but rather have relied solely upon the foregoing documents, the statements
and information set forth therein and the additional matters recited or assumed
herein, all of which we assume to be true, complete and accurate in all material
respects.
In summary, Section 4 of the Certificate of Designations provides that in
the event of any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, the holders of record of the Convertible Preferred
Stock are entitled to receive out of the assets of the Company available for
distribution to its stockholders, whether from capital, surplus or earnings,
before any distribution or payment will be
<PAGE>
made to the holders of Common Stock or any other class of capital stock of the
Company ranking upon liquidation junior to the Convertible Preferred Stock,
$25.00 per share, plus an amount equal to accrued but unpaid dividends thereon,
if any (the "Liquidation Preference").
Section 170 of the General Corporation Law authorizes a Delaware corporation
to pay dividends out of its surplus. Surplus is defined by Section 154 of the
General Corporation Law as the amount by which the net assets of a corporation
exceed its capital. Both net assets, as defined in Section 154, and capital, as
defined in and determined in accordance with Sections 154 and 244 of the General
Corporation Law, are determined without reference to the amount of any
liquidation preference of any class of the corporation's stock. Accordingly, the
authorization in Section 170 of the General Corporation Law for payment of
dividends out of surplus is not in any way limited or restricted solely by
reason of the fact that a series or class of stock of a corporation, such as the
Convertible Preferred Stock, has a liquidation preference in excess of the par
value of the stock.
We are aware of no controlling decision of any court of the State of
Delaware that addresses the question presented for our consideration, but we
believe that our courts would adopt the reasoning set forth herein should the
question be litigated. We note in addition that our opinion as stated herein is
supported by the discussion of the Court in BAILEY V. TUBIZE RAYON CORPORATION,
56 F. Supp. 418, 423 (D. Del. 1944) (applying Delaware law).
Based upon and subject to the foregoing, and subject to the limitations
stated hereinbelow, it is our opinion that, solely as a matter of law, under the
General Corporation Law as in effect on the date hereof: (1) prior to a
liquidation, dissolution or winding up of the affairs of the Company, there will
be no restriction upon the surplus of the Company available for the payment of
dividends on stock of the Company solely by reason of the fact that the
Liquidation Preference exceeds the par value of the Convertible Preferred Stock;
and (2) no remedy would be available to holders of the Convertible Preferred
Stock either before or after payment of any dividend, prior to a liquidation,
dissolution or winding up of the affairs of the Company, solely by reason of the
fact that payment of such dividend would reduce or reduces the surplus of the
Company to an amount less than the difference between the Liquidation Preference
and the par value of the Convertible Preferred Stock.
The foregoing opinion is limited to the General Corporation Law, and we have
not considered and express no opinion on the effect of any other laws or the
laws of any other state or jurisdiction, including federal laws regulating
securities or other federal laws, or the rules and regulations of stock
exchanges or of any other regulatory body.
We hereby consent to the use and filing of this opinion as an exhibit to the
Registration Statement provided, however, that in giving such consent we do not
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the Rules and Regulations of
the Commission thereunder. Except as provided for hereinabove, without our prior
written consent, this opinion may not be furnished or quoted to, or relied upon
by, any other person or entity for any purpose.
Very truly yours,
/s/ Richards, Layton & Finger
GPW/CSB/mbw
<PAGE>
EXHIBIT 10.37
AMC
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1994
<PAGE>
AMC
NONQUALIFIED DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ---------------------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
INTRODUCTION.................................................................................................... 1
1. DEFINITIONS.......................................................................................... 1
2. PARTICIPANTS......................................................................................... 2
3. DEFERRED COMPENSATION................................................................................ 2
4. DEFERRED ACCOUNTS, MATCHING EMPLOYER CREDITS AND DIRECTED INVESTMENT CREDITS......................... 3
5. DISTRIBUTIONS........................................................................................ 4
6. ELECTION TO DEFER COMPENSATION....................................................................... 4
7. ELECTION OF A FORM OF PAYMENT........................................................................ 5
8. PARTICIPANT'S RIGHTS UNSECURED....................................................................... 5
9. NONALIENATION CLAUSE................................................................................. 5
10. CLAIMS PROCEDURE..................................................................................... 5
11. AMENDMENTS TO THE PLAN............................................................................... 5
12. TERMINATION OF THE PLAN.............................................................................. 5
13. EXPENSES............................................................................................. 6
14. NOTICES.............................................................................................. 6
15. CONSTRUCTION......................................................................................... 6
SIGNATURES...................................................................................................... 6
</TABLE>
i
<PAGE>
AMC
NONQUALIFIED DEFERRED COMPENSATION PLAN
INTRODUCTION
American Multi-Cinema, Inc. (the "Sponsoring Employer") and certain of its
Affiliates have adopted this Plan, effective as of January 1, 1994, to provide a
vehicle through which the highly compensated employees of the Sponsoring
Employer and its Affiliates can be made whole for any reduction in salary
deferrals and matching employer contributions under the American Multi-Cinema,
Inc. I.R.C. Section 401(k) Savings Plan because of the I.R.C. Section 401(a)(17)
limit on Compensation to $150,000 (as indexed), effective for plan years
beginning on or after January 1, 1994. It is intended that participation in this
Plan shall be limited to a select group of management or highly compensated
employees and, as a result, the Plan shall be exempt from parts 2, 3 and 4 of
Title I of the Employee Retirement Income Security Act of 1974.
1. DEFINITIONS
Whenever used in this Plan, the following terms shall have the meanings set
forth below.
(a) "ADMINISTRATOR" means the officer of the Sponsoring Employer who is
designated by the Board of Directors of the Sponsoring Employer to administer
the Plan. Initially the Administrator shall be Jeffrey L. Schnabel, the Vice
President-Administration of the Sponsoring Employer.
(b) "AFFILIATE" means any Employer that is an affiliate or related to the
Sponsoring Employer, including any employer that is a member of a controlled
group of corporations with the Sponsoring Employer or controlled groups of
trades or businesses, as defined in Sections 414(b) and (c) of the Internal
Revenue Code.
(c) "BENEFICIARY" means the person or persons named by a Participant, on a
form supplied by the Administrator, to receive benefits upon the Participant's
death in accordance with the terms of this Plan. If a Participant is married and
is domiciled in a community property state his surviving spouse shall be deemed
to be his Beneficiary unless the surviving spouse consented in writing to the
designation of a nonspouse Beneficiary.
(d) "COMPENSATION" for the purpose of the deferral of Compensation that will
be matched under this Plan by Employer credits to his Deferral Account shall be
equal to the amount determined for each calendar year which is equal to the
difference between (i) minus (ii), where:
i) is the Compensation limit under Section 401(a)(17) of the Internal
Revenue Code for the calendar year assuming this section of the Internal
Revenue Code had not been amended by the Omnibus Reconciliation Act of 1993
(i.e., $235,840 indexed after 1993 under the provisions of I.R.C. Section
401(a)(17) as in effect immediately prior to 1994); and
ii) is the Compensation limit that actually applies under Section
401(a)(17) of the Internal Revenue Code for such calendar year.
"COMPENSATION" for the purpose of the deferral of Compensation that will not
be matched under this Plan by Employer credits to his Deferral Account shall be
equal to the employee's actual Compensation for the calendar year, that,
disregarding for this purpose any deferrals made under this Plan and any
deferrals under the I.R.C. Section 401(k) and I.R.C. Section 125 plans
maintained by the Employers, would be reported as Compensation for such year on
his Treasury Department Form W-2.
(e) "DEFERRAL ACCOUNT" means the deferral account established for a
Participant pursuant to Section 4 hereof.
(f) "ELIGIBLE EMPLOYEE" for the purpose of eligibility to defer Compensation
under this Plan that is matched by Employer credits means an employee of an
Employer whose actual Compensation exceeds the Compensation limit then in effect
under Section 401(a)(17) of the Internal Revenue Code.
1
<PAGE>
"COMPENSATION" for the purpose of determining whether an employee or
employer is an Eligible Employee under this Plan shall be estimated by the
Administrator each year prior to January 1, based on the total cash Compensation
the employee is expected to receive in the next calendar year from his Employer
that would be reported as gross income for such calendar year on his Treasury
Department Form W-2 for such calendar year, but counting for this purpose any
estimated deferrals under this Plan, any estimated deferrals under the I.R.C.
Section 401(k) and I.R.C. Section 125 plans maintained by the Employers. This
estimate of Compensation will be made by the Administrator on the basis of the
information available to him at that time.
"ELIGIBLE EMPLOYEE" for the purpose of eligibility to defer compensation
under this Plan that is not matched by Employer credits means an employee of an
Employer whose Compensation the Administrator estimates prior to each November
1, will exceed one hundred thousand dollars ($100,000) in the next calendar. If
the Compensation limit under Section 401(a)(17) has been increased as a result
of cost of living adjustments, this one hundred thousand dollar ($100,000)
eligibility threshold shall be indexed at the same rate (e.g., when the $150,000
Compensation limit under I.R.C. Section 401(a)(17) is increased to $160,000, the
$100,000 threshold shall be increased to $106,667). An employee shall not be an
Eligible Employee for the purpose of either matched or unmatched deferrals if he
is not a participant in the American Multi-Cinema, Inc. I.R.C. Section 401(k)
Savings Plan or is not making the maximum deferrals which are permitted under
the Plan by the Sponsoring Employer (because of the I.R.C. Section 401(k)
average deferral percentage test).
(g) "EMPLOYER" means the Sponsoring Employer or any of its Affiliates which
is an adopting employer under the American Multi-Cinema, Inc. (I.R.C. Section
401(k)) Savings Plan, and who also adopts this Plan, their successors and
assigns.
(h) "PARTICIPANT" means an Employee who is eligible to participate in this
Plan and has elected to defer Compensation under this Plan.
(i) "PLAN" means the AMC Nonqualified Deferred Compensation Plan as set
forth in this document, as amended from time to time.
(j) "SPONSORING EMPLOYER" means American Multi-Cinema, Inc., its successors
and assigns.
2. PARTICIPANTS
Each Eligible Employee may elect to become a Participant in this Plan by
filing a written notice with the Administrator in the form prescribed by the
Administrator and subject to the timing and other restrictions and provisions of
this Plan.
3. DEFERRED COMPENSATION
Any Participant may elect, in accordance with Section 6 of this Plan, to
defer annually the receipt of a portion of the Compensation otherwise payable to
the Participant by the Employer in any calendar year, which portion shall be
designated by the Participant which may not exceed four percent (4%) of his
Compensation which is eligible for matching Employer credits. With respect to
regular Compensation, the election shall be made for a calendar year in the
percentage of regular Compensation, which is eligible for matching Employer
credits to his Deferral Account amount of pursuant to subsection 1(e) hereof.
"Regular Compensation" for this purpose means Compensation that is not bonus or
incentive compensation. Commissions, for the purpose of this Plan, are treated
as regular Compensation. With respect to the deferral of bonuses or incentive
compensation, the deferral must be made before the beginning of the fiscal year
of the Sponsoring Employer or Employer during which it is earned and shall be
made on (i) a percentage basis which may be all or any portion of a bonus or
incentive compensation (ii) in a dollar amount, or (iii) in a dollar amount in
excess of a minimum amount of cash bonus or incentive pay. Any deferral election
hereunder shall be irrevocable for the calendar or fiscal year to which it
applies after the election is received by the Administrator unless it is revoked
in writing before the beginning of the calendar or fiscal year to which it
applies and such written revocation is received by the Administrator in a timely
manner. Any
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Compensation deferred pursuant to this Section 3 shall be credited by the
Sponsoring Employer or a Participant's Employer to a Deferral Account maintained
in the name of the Participant at the time hereinafter provided in Section 4.
The amount of deferred Compensation from regular Compensation that is to be
matched with Employer credits to the Participant's Deferral Account(s) shall be
deferred and credited each calendar year after the Participant's Compensation
which is included in his gross income for Federal income tax purposes has
exceeded the applicable Compensation limit under Section 401(a)(17) of the
Internal Revenue Code for such calendar year. The amount of regular Compensation
that is not to be matched with Employer credits to the Participant's Deferral
Account shall be deferred and credited proportionately throughout the calendar
year in the percentage amount elected. The amount of any bonus or incentive
Compensation that is deferred under this Plan, regardless of whether it is to be
matched with Employer credits, shall be credited to Deferral Accounts as of the
day on which the bonus or incentive Compensation payments are received by the
trustee of the (so-called rabbi) trust for this Plan.
Each year the Administrator shall furnish each Participant with an annual
statement of his Account. Prior to the beginning of each calendar year, the
Administrator shall furnish each Participant and Eligible Employee with forms
for enrollments or changes.
4. DEFERRED ACCOUNTS, MATCHING EMPLOYER
CREDITS AND DIRECTED INVESTMENT CREDITS
(a) A Deferral Account shall be established for each Participant by the
Sponsoring Employer and each Employer who is a participating Employer to which
deferral amounts, matching Employer credits and deemed investment earnings and
losses shall be credited or debited. If a Participant changes his Employer, a
separate Deferral Account shall be maintained for his deferrals from
Compensation from each Employer.
(b) Amounts deferred by a Participant under this Plan shall be credited to
his Deferral Account as of the day received by the trustee of the (so-called
rabbi) trust for this Plan.
(c) A Participant's deferrals under this Plan which are eligible for
matching Employer credits shall be credited each month in an amount equal to
fifty percent (50%) of the Participant's deferrals which are eligible for
matching Employer credits as set forth in 1(d) hereof. Such amounts shall be
credited as of the day it is received by the trustee of the (so-called rabbi)
trust for this Plan. Notwithstanding any provision in this Plan to the contrary,
in no event shall a Participant's matching Employer credits to his Deferral
Account in any year exceed an amount equal to (i) minus (ii), where:
i) is the maximum limitation on elective deferrals under Section 402(g)
of the Internal Revenue Code for such calendar year (e.g., $8,994 for 1993);
and
ii) is the maximum amount that can be deferred by the Participant under
the American Multi-Cinema, Inc. (I.R.C. Section 401(k)) Savings Plan for
such calendar year.
(d) A Participant may request that the amounts credited to his Deferral
Account(s) be invested with the approval of the Employer and held in an
irrevocable (so-called rabbi) trust established and maintained by the Sponsoring
Employer. As of January 1, 1994, and until this provision of this Plan is
amended, a Participant may only request that his Deferral Account(s) be invested
through the rabbi trust in the Principal Mutual Life Insurance Company Premier
Growth General Investment Account -- Fixed Account or in one or more of the
following SEC registered investment funds, (which are part of the Principal
Mutual Life Insurance Company Separate Account B):
- Principal Capital Accumulation Fund, Inc.
- Principal Government Securities Fund, Inc.
- Principal Money Market Fund, Inc.
Any investment request or investment change under this Plan must be approved
by the Administrator or such other person as may be designated by the Board of
Directors of the Sponsoring Employer.
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Investment requests or changes, if approved by the Administrator or other
authorized person, shall be executed as soon as reasonably practicable after
they are approved.
If the Participant does not request a directed investment, or a directed
investment is not approved by the Administrator or other authorized person, the
Participant's deferrals shall be deemed to be invested in the Principal Money
Market Fund, Inc. or shall be credited with such other interest credits as may
be established by an amendment to this provision of this Plan document.
(e) Investment earnings or losses shall be reflected in a Participant's
Deferral Account, based on the fair market value of the investments elected or
deemed to have been elected by the Participant as of any date.
5. DISTRIBUTIONS
(a) Upon the earlier of a Participant's normal retirement (age 65) or other
termination of employment with the Employer for any reason other than death, the
Participant will be entitled to receive all amounts credited to the
Participant's Deferral Account(s) as of his retirement or other termination of
employment, in a lump sum or in installments over a period of ten (10) years
pursuant to paragraph (d) of this Section.
(b) Upon termination of a Participant's employment with the Employer by
reason of his death, before the distribution of his Deferral Account(s) in a
lump sum or the commencement of installment distributions, the Participant's
designated Beneficiary or Beneficiaries will be entitled to receive all amounts
credited to the Participant's Deferral Account(s) as of the date of his death,
in a lump sum or in installments over a period of ten (10) years pursuant to
Paragraph (d) of this Section.
(c) Upon the death of a Participant who was receiving installment
distributions prior to complete distribution to him of the entire balance of his
Deferral Account(s) (and after the date of the termination of his employment
with his Employer), the Participant's designated Beneficiary or Beneficiaries
will be entitled to receive the balance of his Deferral Account(s) on the date
of his death in the form of the remaining installment payments due pursuant to
paragraph (d) of this Section.
(d) The Administrator shall direct distribution of the amounts credited to a
Participant's Deferral Account(s), including investment earnings or losses
credited thereon pursuant to Section 4, to a Participant or his Beneficiary or
Beneficiaries pursuant to the preceding paragraphs of this Section, in a lump
sum, or in substantially equal installments over a period of ten (10) years in
accordance with the Participant's election pursuant to Section 7. Distributions
shall, at the written election of the Participant, filed and accepted by the
Administrator, provide for the payment in the form elected in accordance with
Section 7, either:
i) as soon as reasonably practicable after the earliest of (i) the date
upon which the Participant attains normal retirement age (65), (ii) dies or
(iii) his termination of employment occurs; or
ii) as of the first business day of the calendar year immediately
following the earliest of (i) the date upon which the Participant attains
his normal retirement age (65), (ii) dies or (iii) his termination of
employment occurs.
In the case of installment payments over a period of ten (10) years,
subsequent installments shall be made on the annual or quarterly anniversary
dates of the date of the first installment as determined by the Participant's
election pursuant to Section 7. Each such installment shall be made from the
balance credited to the Participant's Deferral Account(s) pursuant to Section 4.
In the case of installment payments pursuant to paragraph (c) of this Section,
installment payments after the Participant's death shall continue to be made at
the same frequency as the installment payments were being made to the
Participant prior to his death.
6. ELECTION TO DEFER COMPENSATION
The Notice by which a Participant elects to defer Compensation as provided
in this Plan shall be in writing, signed by the Participant, and delivered to
the Administrator prior to January 1 of the calendar year in which the
Compensation is to be deferred or in which it is otherwise payable to the
Participant, or for calendar year 1994 deferrals from regular Compensation only
(as defined in Section 3) by January 21, 1993.
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A Participant's election when first eligible and any subsequent election shall
be irrevocable (except as provided in Section 3) when it is delivered by the
Participant to the Administrator. A new deferral election will only apply to
regular Compensation earned in calendar years beginning after the election is
received by the Administrator and/or to bonuses or incentive Compensation earned
in an Employer's fiscal years beginning after the election is received by the
Administrator.
7. ELECTION OF A FORM OF PAYMENT
A Participant's election of a form of payment shall be made in writing at
the time he first elects to defer Compensation under this Plan and shall be
filed with the Administrator. A form of payment election by a Participant may be
changed, but only as to Compensation deferred for a calendar year and/or
Employer fiscal year beginning after the new election. Any change of a form of
payment election shall only be effective if made in writing on a form provided
by the Administrator and filed with the Administrator.
8. PARTICIPANT'S RIGHTS UNSECURED
The right of the Participant or his designated Beneficiary to receive a
distribution hereunder shall be an unsecured claim against the general assets of
his Employer, and neither the Participant nor his designated Beneficiary shall
have any rights in or against any amount credited to his Deferral Account(s) or
any other specific assets of his Employer, including any assets of his Employer
which are set aside in an irrevocable (so-called rabbi) trust. In no event,
however, shall any Employer be liable or responsible under this Plan for the
benefit obligations due hereunder to any Participant employed by another
participating Employer in this Plan. If a Participant has been employed for more
than one participating Employer while he deferred Compensation under this Plan,
each Employer shall be liable and responsible for its proportionate share of the
deferrals and the investment credits attributable to such deferrals. All amounts
credited to a Participant's Deferral Account(s) under this Plan shall constitute
general assets of the Employers.
9. NONALIENATION CLAUSE
The right of the Participant or his designated Beneficiary to receive a
distribution hereunder may not be assigned, attached, sold, transferred,
pledged, or otherwise alienated.
10. CLAIMS PROCEDURE
Any Participant who is denied benefits under this Plan may appeal such
decision in writing to the Administrator. If such an appeal is denied, the
Administrator will notify the Employee of his decision in writing within sixty
(60) days of the date the Administrator received the appeal. Such notice shall
set forth the specific reasons for the denial, specific references to pertinent
Plan provisions, and a description of any additional material or information
necessary if the Participant wishes to resubmit the claim.
11. AMENDMENTS TO THE PLAN
The Board of Directors of the Sponsoring Employer may amend the Plan at any
time without the consent of the Participant, or their Beneficiaries, provided,
however, that no amendment shall divest any Participant or Beneficiary of the
credits to his Deferral Account(s), or of any rights to which he would have been
entitled if the Plan had been terminated immediately prior to the effective date
of such amendment.
12. TERMINATION OF THE PLAN
The Board of Directors of the Sponsoring Employer may terminate this Plan at
any time. Upon termination of the Plan, distribution of the credits to a
Participant's Deferral Account(s) shall be made in the manner and at the time
heretofore prescribed; provided that no additional credits shall be made to the
Deferral Account(s) of a Participant following termination of the Plan other
than investment earnings or losses credited or debited pursuant to Section 4.
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13. EXPENSES
Costs of administration of the Plan will be paid by the Employers, except
for any fees and expenses that may be directly charged to investments requested
or deemed to have been requested by a Participant pursuant to Section 4(d)
hereof.
14. NOTICES
Any notice or election required or permitted to be given hereunder shall be
in writing and shall be deemed to be filed:
(a) on the date it is personally delivered to the Administrator; or
(b) three business days after it is sent by registered or certified
mail, addressed to --
American Multi-Cinema, Inc.
Employee Benefits Department
106 West 14th Street, Suite 1700
P.O. Box 419615
Kansas City, Missouri 64141-6615
15. CONSTRUCTION
Any words used herein in the masculine shall be construed in the feminine
where they would so apply. Words in the singular shall be construed in the
plural in all cases where they would so apply. Section headings are inserted for
convenience of reference only and are to be ignored in the construction of any
provision hereof. Nothing in this plan shall be deemed to constitute a guarantee
of employment; nor shall this plan be construed as a contract of employment.
SIGNATURES
IN WITNESS WHEREOF, the Sponsoring Employer and the Employers have executed
this plan document this 21st day of December, 1993, to be effective as of
January 1, 1994.
<TABLE>
<S> <C>
ATTEST (Seal) AMERICAN MULTI-CINEMA, INC.
By: /s/ DIANE M. SCHULTE By: /s/ ED DURWOOD
Assistant Secretary President
ATTEST (Seal) AMC ENTERTAINMENT INTERNATIONAL, INC.
By: /s/ DIANE M. SCHULTE By: /s/ ED DURWOOD
Assistant Secretary Executive Vice President
ATTEST (Seal) AMC FILM MARKETING, INC.
By: /s/ DIANE M. SCHULTE By: /s/ ED DURWOOD
Assistant Secretary Chairman of the Board
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
ATTEST (Seal) AMC PHILADELPHIA, INC.
By: /s/ DIANE M. SCHULTE By: /s/ ED DURWOOD
Assistant Secretary Executive Vice President
ATTEST (Seal) AMC REALTY, INC.
By: /s/ DIANE M. SCHULTE By: /s/ PETER C. BROWN
Assistant Secretary Sr. Vice President and Treasurer
ATTEST (Seal) BUDCO THEATRES, INC.
By: /s/ DIANE M. SCHULTE By: /s/ PETER C. BROWN
Assistant Secretary Sr. Vice President, Chief Financial
Officer and Treasurer
ATTEST (Seal) CONCORD CINEMA, INC.
By: /s/ DIANE M. SCHULTE By: /s/ PETER C. BROWN
Assistant Secretary Sr. Vice President, Chief Financial
Officer and Treasurer
ATTEST (Seal) DURWOOD, INC.
By: /s/ DIANE M. SCHULTE By: /s/ ED DURWOOD
Assistant Secretary Executive Vice President
ATTEST (Seal) ENTERTAINMENT DEVELOPMENT GROUP, INC.
By: /s/ DIANE M. SCHULTE By: /s/ ED DURWOOD
Assistant Secretary Executive Vice President
</TABLE>
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EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Stockholders of
AMC Entertainment Inc.
Kansas City, Missouri
We consent to the inclusion in Amendment No. 2 to the registration statement
of AMC Entertainment Inc. (the Company) on Form S-2 respecting its Cumulative
Convertible Preferred Stock, par value 66 2/3 CENTS per share, of our report
dated June 21, 1993 on our audit of the consolidated financial statements of the
Company for the fiscal year ended April 1, 1993. We also consent to the
references to us under the headings "Selected Financial Data" and "Experts" in
the registration statement.
We also consent to the incorporation by reference of our reports on the
consolidated financial statements and financial statement schedules dated June
21, 1993, which reports are included in the Company's annual report on Form 10-K
for the fiscal year ended April 1, 1993.
/s/ Coopers & Lybrand
Kansas City, Missouri
February 18, 1994
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENTS
To the Board of Directors and Stockholders of
AMC Entertainment, Inc.
Kansas City, Missouri
We consent to the incorporation by reference in this Amendment No. 2 to
Registration Statement No. 33-51693 of AMC Entertainment Inc. on Form S-2 of our
reports dated May 21, 1992 (June 21, 1992 as to Note 2), included in the Annual
Report on Form 10-K of AMC Entertainment Inc. for the year ended April 1, 1993,
and to the use of our reports dated May 21, 1992 (June 21, 1993 as to Note 2)
related to AMC Entertainment Inc. and our report dated February 5, 1993 related
to Exhibition Enterprises Partnership, appearing in the Prospectus, which is
part of such Registration Statement. We also consent to the references to us
under the headings "Selected Financial Data" and "Experts" in such Prospectus.
/s/ Deloitte & Touche
Kansas City, Missouri
February 18, 1994
