<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) May 6, 1996
AMC ENTERTAINMENT INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 01-12429 43-1304369
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
106 W. 14TH STREET, KANSAS CITY, MO 64105-1977
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (816) 221-4000
<PAGE>
Item 5. Other Events.
Background. Durwood, Inc. ("DI") is a holding company which owns 11,157,000
shares, or 100%, of the Registrant's Class B Stock, par value 66 2/3 cents per
share (the "Class B Stock") and 2,641,951 shares, or approximately 48%, of the
Registrant's Common Stock, par value 66 2/3 cents per share (the "Common
Stock"). Shares of DI having approximately 75% of the voting power of DI's
outstanding stock are held in revocable voting and inter-vivos trusts for the
benefit of Stanley H. Durwood, who has the sole power to vote such shares.
Substantially all of the remaining shares of DI capital stock are held by
American Associated Enterprises, a Missouri limited partnership ("AAE"). Stanley
H. Durwood is a limited partner of AAE, and his six children, Edward D. Durwood,
Carol D. Journagan, Thomas A. Durwood, Elissa D. Grodin, Brian H. Durwood and
Peter J. Durwood (collectively, the "Durwood Children", and together with
Stanley H. Durwood, the "Durwood Family Members") are the general partners of
AAE. Edward D. Durwood is the managing general partner of AAE and has authority
to vote the shares of DI held by AAE, representing approximately 25% of the
voting power of DI's outstanding stock.
Family Agreement. DI and Stanley H. Durwood have filed a Schedule 13-D
Report (the "Report") with the Securities and Exchange Commission describing a
Durwood Family Settlement Agreement ( the "Family Agreement") between Mr.
Durwood and the Durwood Children. The Family Agreement sets forth the Durwood
Family Members' intention to pursue certain transactions to dissolve AAE and to
cause the shares of the Registrant held by DI to be distributed to Durwood
Family Members through a merger of DI into the Registrant.
In connection with the foregoing, Stanley H. Durwood and the Durwood
Children have agreed to (i) seek the merger of DI into the Registrant, with the
Registrant remaining as the surviving company, pursuant to which shares of DI
stock will be exchanged for shares of the Registrant's stock, and (ii) if all
conditions to such merger are satisfied, dissolve AAE. Shares of the
Registrant's capital stock held by stockholders other than DI would be
unaffected by the proposed merger.
In the Family Agreement, the Durwood Family Members have agreed that
Stanley H. Durwood will receive approximately 5,015,657 shares of the
Registrant's Class B Stock in the merger and that the Durwood Children will
receive approximately 8,767,223 shares of the Registrant's Common Stock in the
merger. To facilitate this agreement, prior to the merger 6,141,343 shares of
Class B Stock held of record by DI will be converted into shares of Common
Stock. The Durwood Family Members also have agreed that within twelve months
after the merger they or their charitable donees will sell a minimum of
3,000,000 shares of Common Stock (of which 500,000 shares will be sold by
Stanley H. Durwood or by his charitable donees and the balance will be sold by
the Durwood Children or their charitable donees) in an underwritten offering,
which will only be made by means of a prospectus. The Report states that prior
to and for purposes of such offering, Stanley H. Durwood intends to convert
500,000 additional shares of Class B stock to be
-2-
<PAGE>
acquired by him in the merger into shares of Common Stock, and that each of the
Durwood Children will sell approximately 416,667 shares of Common Stock in the
secondary offering, unless they agree to a different allocation of the 2,500,000
shares to be sold by them.
The Family Agreement provides that the Registrant (which is not a party to
the Family Agreement) and the Durwood Family Members are to participate equally
in determining all material terms of the offering. Matters to be determined by
Durwood Family Members are to be determined by majority vote, with each family
member having one vote. The date of the offering is to be no sooner than six
months nor later than one year after the merger and is to be determined by the
Registrant and the Durwood Family Members.
The Family Agreement also generally provides that if the price per share to
the public of the 2.5 million shares of the Registrant's Common Stock proposed
to be sold by the Durwood Children in the offering is less than $18, Stanley H.
Durwood will pay the Durwood Children the difference between such sale price and
$18 (net of applicable underwriting commissions), up to $20 million in aggregate
amount, in shares of the Registrant's Common Stock, as an adjustment to the
original allocation of shares to be received by the Durwood Children in the
proposed merger (the " Share Adjustment").
The Family Agreement also provides that for a period of three years, the
Durwood Children will vote their shares of the Registrant's Common Stock for
each candidate for the Registrant's Board of Directors in the same proportionate
manner as the aggregate votes cast in such elections by all other holders of the
Registrant's Common Stock.
Under the Registrant's charter, holders of the Registrant's Class B stock
generally are entitled to elect as a class 75% of the board of directors and to
vote as a class with holders of the Common Stock on other matters, with each
share of Class B Stock being entitled to ten (10) votes per share and each share
of Common Stock being entitled to one (1) vote per share. Holders of the
Registrant's Common Stock generally are entitled to elect 25% of the
Registrant's board of directors. Should the outstanding shares of Class B Stock
be less than 12 1/2% of the total number of outstanding shares of Class B and
Common Stock, the holders of Common Stock would be entitled to vote with the
holders of Class B Stock in the election of the remaining 75% of the Board; for
these purposes, the Class B Stock would have ten votes per share and the Common
Stock would have one vote per share. Each share of the Registrant's Class B
Stock is convertible into one share of the Registrant's Common Stock.
DI currently owns 2,641,951 shares of the Registrant's Common Stock, which
constitute approximately 48% of the outstanding shares of such class, and
11,157,000 shares of Class B Stock, which constitute 100% of the outstanding
shares of that class. The shares of Class B and Common Stock presently owned of
record by DI represent approximately 98% of the voting power of the Registrant's
outstanding voting stock, other than in the election of directors.
-3-
<PAGE>
The Report states that after giving effect to the proposed merger and
secondary offering (and disregarding shares which may be acquired by Stanley H.
Durwood upon the exercise of employee stock options, shares which the Durwood
Children might acquire under the Share Adjustment referred to in Items 4 and 6
herein and shares of Common Stock which might be issued upon conversion of
outstanding shares of the Registrant's $1.75 Cumulative Convertible Preferred
Stock) (i) Stanley H. Durwood will own approximately 4.5 million shares of Class
B Stock, and each of the Durwood Children will own a maximum of approximately
1.0 million shares of the Registrant's Common Stock, (ii) such shares of Class B
Stock to be owned by Stanley H. Durwood will entitle him to elect a majority of
the Board of Directors and will have approximately 79% of the voting power of
all outstanding shares of the Registrant's capital stock to be then outstanding
generally having the right to vote on matters submitted to stockholders, other
than the election of directors, and (iii) the shares of Common Stock to be owned
by the Durwood Children will represent approximately 52% of the shares of Common
Stock expected to be then outstanding.
The Report also states that Stanley H. Durwood's holdings will diminish and
the Durwood Children's holdings will increase if the Durwood Children acquire
additional shares under the Share Adjustment. However, based on the number of
shares of Common Stock and Class B Stock presently outstanding, the Share
Adjustment should not result in Stanley H. Durwood owning shares with less than
50% of the combined voting power of the outstanding shares of Common and Class B
Stock unless the Registrant and the Durwood Family Members determine to proceed
with a secondary offering of the family's shares at a time during which the
market value of the Registrant's stock is less than approximately $6.70 per
share.
The Family Agreement is conditioned upon negotiation and execution of a
merger agreement with the Registrant. The Registrant has appointed a special
committee of non-management directors to consider and negotiate the proposed
merger. The special committee has advised the Durwood Family Members that a
condition to such transaction will be that it is approved by the holders of a
majority of the shares of Common Stock voting thereon, other than the Durwood
Family Members.
Other Matters. The Report also states that the parties and their counsel in
certain shareholder derivative litigation, IN RE AMC SHAREHOLDER DERIVATIVE
LITIGATION, filed against Stanley H. Durwood and other directors of the
Registrant, are discussing a possible settlement, a portion of which would
require the appointment of two additional outside directors who would be
empowered to approve transactions between the Registrant and Durwood Family
Members.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
(c) Exhibits
EX-99.1 Durwood Family Agreement
-4-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMC Entertainment Inc.
Date May 6, 1966 By /s/Peter C. Brown
Peter C. Brown
Executive Vice-President and
Chief Financial Officer
-5-
EXHIBIT 99.1
DURWOOD FAMILY SETTLEMENT AGREEMENT
This Durwood Family Settlement Agreement (the "Agreement") is entered into
as of January 22, 1996 by and among STANLEY H. DURWOOD, individually, as Trustee
of the 1992 Durwood, Inc. Voting Trust dated December 12, 1992, as amended, and
as Trustee of the Stanley H. Durwood Trust Agreement dated August 14, 1989, as
amended (referred to in this Agreement, regardless of capacity, as "SHD"); and
CAROL D. JOURNAGAN, EDWARD D. DURWOOD, THOMAS A. DURWOOD, ELISSA D. GRODIN,
BRIAN H. DURWOOD, and PETER J. DURWOOD (collectively, the "Durwood Children").
SHD and the Durwood Children are referred to in this Agreement collectively as
the "Partners" and individually as a "Partner."
WITNESSETH:
WHEREAS, the Partners include all of the partners of American Associated
Enterprises, a Missouri limited partnership ("AAE"); and
WHEREAS, Durwood, Inc., a Missouri corporation ("DI"), has issued and
outstanding 120,000 shares of Class A Common Stock, $1.00 par value ("DI Class
A"), and 40,784 shares of Class B Common Stock, $1.00 par value ("DI Class B");
and
WHEREAS, the Partners, through AAE and otherwise, beneficially own 119,500
DI Class A shares and 40,784 DI Class B shares; and
WHEREAS, DI is the majority stockholder of AMC Entertainment Inc., a
Delaware corporation ("AMCE"), as DI owns 2,641,951 shares, or 49%, of the
outstanding Common Stock, par value 66 2/3 cents per share, of AMCE ("AMCE
Common Stock") and 11,157,000 shares, or 100%, of the outstanding Class B Stock,
par value 66 2/3 cents per share, of AMCE ("AMCE Class B Stock"); and
WHEREAS, the Durwood Children have expressed a strong interest in
converting the assets of AAE (consisting principally of DI Class B shares) into
more liquid assets and terminating the partnership relationship; and
WHEREAS, a dispute has arisen among the Partners as to the allocation of
appreciation in the shares of DI Class B stock; and
WHEREAS, the Durwood Children have proposed that the existence of DI be
terminated in order to resolve the dispute respecting AAE, and accordingly,
subject to the approval of the AMCE stockholders and certain other conditions,
AMCE and DI are contemplating a tax-free reorganization pursuant to Section
368(a)(1)(A) of the Internal Revenue Code, whereby DI would merge into and with
AMCE (the "Merger"); and
-1-
<PAGE>
WHEREAS, the Partners desire to have the Merger consummated and, prior to
the consummation of the Merger, the Partners must take certain actions relating
to AAE and its assets and to DI and its assets; and
WHEREAS, following the Merger, the Partners intend to participate in a
registered offering to sell to the public at least 3,000,000 shares of AMCE
Common Stock (the "Secondary Offering"); and
WHEREAS, after extended negotiations and in order to avoid threatened
litigation, the Partners have reached an agreement respecting the number of DI
Class B shares to be distributed to the Partners in connection with the
termination and liquidation of AAE and the other matters set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. TERMINATION OF AAE. Immediately following the satisfaction or waiver of
all conditions of each of DI and AMCE to consummate the Merger set forth in the
Merger Agreement (as defined below), the Partners shall take all actions
necessary and appropriate to terminate and liquidate AAE. Such actions shall be
effective immediately prior to the Effective Time (as defined below) and shall
include but not be limited to (a) Stanley H. Durwood shall execute and deliver
to the Managing Partner of AAE a notice terminating AAE, a copy of which is
attached hereto as EXHIBIT A, and (b) the Managing Partner of AAE shall then
distribute the assets of AAE to the Partners as follows:
Number of DI
Partner Class B Shares
------- --------------
Stanley H. Durwood 4,818.4664
Carol D. Journagan 5,994.2556
Edward D. Durwood 5,994.2556
Thomas A. Durwood 5,994.2556
Elissa D. Grodin 5,994.2556
Brian H. Durwood 5,994.2556
Peter J. Durwood 5,994.2556
Any cash remaining in AAE shall be distributed equally among the Durwood
Children.
2. APPROVAL OF MERGER. The Partners shall participate equally in the
negotiations of the terms and provisions of the Merger, which will be set forth
in a definitive Agreement and Plan of Merger between AMCE and DI (the "Merger
Agreement"). Each Partner agrees to approve the Merger Agreement, provided that
such Merger Agreement as approved by the Board of Directors of AMCE does not
materially conflict with this Agreement. SHD shall use his best efforts to
obtain the consent of Harvard College with respect to the approval of the Merger
and the Merger
-2-
<PAGE>
Agreement. Contemporaneously with the distribution of DI Class B shares to the
Partners as a result of the liquidation of AAE, each Partner, as a shareholder
of DI, shall execute and deliver to the Secretary of DI a counterpart of a
statement of unanimous consent to action taken by the shareholders of DI, a copy
of which is attached hereto as Exhibit B. The parties anticipate that the Merger
shall become effective immediately upon the latest to occur of the filing of the
Merger Agreement, or a certificate or articles of merger in lieu thereof, with
the Secretaries of State of each of Delaware and Missouri in accordance with
applicable law. The time of such effectiveness is referred to in this Agreement
as the "Effective Time." Notwithstanding the foregoing, without the approval of
each Partner, DI shall not take, or omit to take, any action which shall
constitute a waiver of any condition of the Merger Agreement or a failure to
enforce the terms of the Merger Agreement or to perform the obligations of DI
under the Merger Agreement.
3. DISPOSITION OF DI ASSETS. The parties shall cause DI to accomplish
the following actions, and DI shall take no other actions except those in the
ordinary course of business, prior to the Effective Time:
(a) All of the actions set forth in the "DI Pre-Merger Action Plan,"
as attached to correspondence dated September 22, 1995 to the attorneys
representing certain members of the Durwood family, or such variation of such
actions as shall be agreed upon in writing by the Partners, shall be effected.
The Partners agree that all life insurance policies on the life of SHD, the
Executive Hills note and the Greg Rutkowski note held by DI will be transferred
to AMCE in the Merger. In addition, DI shall also retain an amount of cash
necessary to pay its own costs and expenses and all costs and expenses allocated
to DI with respect to the transactions contemplated in this Agreement. In the
event of any inconsistency between this Agreement (or any subsequent written
agreement among the Partners as described in this Paragraph 3) and the DI
Pre-Merger Action Plan, the terms and provisions of this Agreement (or such
subsequent written agreement) shall supersede those in the DI Pre-Merger Action
Plan.
(b) After the liquidation of AAE but prior to the Effective Time, all
of the issued and outstanding capital stock of Delta Properties, Inc., a
subsidiary of DI ("Delta"), shall be distributed to the shareholders of DI in
the ratio that the number of shares of AMCE stock to be received in the Merger
by such DI shareholder bears to the aggregate number of shares of AMCE stock to
be received in the Merger by all DI shareholders.
(c) Each Partner recognizes that the assets of DI and Delta are
subject to the provisions of paragraph 9 of this Agreement.
4. CONVERSION OF AMCE CLASS B STOCK. Each Partner agrees to approve the
conversion of 6,141,343 shares of AMCE Class B Stock owned by DI into shares of
AMCE Common Stock. Such conversion shall occur immediately following the
distribution of DI Class B shares to the Partners as a result of the termination
and liquidation of AAE. The approval of such conversion by the DI shareholders
shall be included in the statement of unanimous consent described in paragraph 2
above. As a result of such conversion, DI's ownership of AMCE stock will be as
set forth below:
-3-
<PAGE>
Class of AMCE Stock Number of Shares Owned by DI
----------------------------------------
Before Conversion After Conversion
----------------- ----------------
Common Stock 2,641,951 8,783,294
Class B Stock 11,157,000 5,015,657
5. VOTING AGREEMENT. For a period of 36 months following the Effective
Time, each of the Durwood Children shall vote his or her respective shares of
AMCE Common Stock for each candidate for the Board of Directors of AMCE in the
same proportionate manner as the aggregate votes cast in such elections by all
other holders of AMCE Common Stock. Nothing in this paragraph 5 shall prohibit
any of the Durwood Children from transferring any shares of AMCE Common Stock
(although the Durwood Children acknowledge that certain reasonable restrictions
on transfer may be imposed in one or more subsequent agreements which may be
entered into in connection with the transactions contemplated in this
Agreement), and the provisions of this paragraph 5 shall not be binding upon any
transferee of such shares of AMCE Common Stock other than a Family Member of a
party or a Controlled Entity of a party (as defined in this paragraph below).
For the purposes of this Agreement, a "Family Member" of a party includes such
party's spouse, siblings, children or other descendants, or any spouses of any
of them, or a trust for the benefit of any of them or for the benefit of such
party, or a trust created by any of them for the benefit of a charitable
organization, or a partnership created by or among any of the foregoing, and a
"Controlled Entity" of a party is an entity controlled by such party or a Family
Member of such party.
6. SHARE ALLOCATION. In connection with the Merger, the Partners agree
that the shareholders of DI shall receive the number of shares of AMCE stock
set opposite each person's name below:
Carol D. Journagan 1,461,203.83 shares of AMCE Common Stock
Edward D. Durwood 1,461,203.83 shares of AMCE Common Stock
Thomas A. Durwood 1,461,203.83 shares of AMCE Common Stock
Elissa D. Grodin 1,461,203.83 shares of AMCE Common Stock
Brian H. Durwood 1,461,203.83 shares of AMCE Common Stock
Peter J. Durwood 1,461,203.83 shares of AMCE Common Stock
Harvard College 16,071 shares of AMCE Common Stock
SHD 5,015,657 shares of AMCE Class B Stock
-4-
<PAGE>
7. SECONDARY OFFERING. (a) The Partners will offer a minimum of three
million shares of AMCE Common Stock to be distributed in the Secondary Offering.
The Durwood Children agree that of the 8,767,223 shares they will receive in the
aggregate in the Merger, at least 2.5 million shares will be offered in the
Secondary Offering. SHD agrees that of the 5,015,657 shares he will receive in
the Merger, 500,000 shares of AMCE Common Stock will be offered in the Secondary
Offering. SHD further agrees that no shares in excess of such 500,000 shares
will be offered in the Secondary Offering. Subject to paragraphs 7(b) and 7(c)
below, all of the shares to be offered in the Secondary Offering shall be
deposited in escrow with an independent third party as escrow agent immediately
following the Merger. The underwriter's commission will be borne by each of the
Partners in the ratio that the number of shares sold in the Secondary Offering
by such Partner bears to the total number of shares sold in the Secondary
Offering. The Durwood Children may agree among themselves as to the number of
shares that each will contribute in the Secondary Offering, provided, that if
the Durwood Children are unable to reach such an agreement, each of them will
contribute 416,666.67 shares in the Secondary Offering.
(b) Notwithstanding any provision of paragraph 7(a) to the contrary,
(i) SHD shall have the right to make gifts of shares of AMCE Common Stock to one
or more charitable entities (including charitable remainder trusts) prior to the
Secondary Offering; (ii) such charitable entities shall have the right, but not
the obligation, to participate in the Secondary Offering with respect to all or
a part of any such shares received from SHD, up to 500,000 shares in the
aggregate; (iii) such charitable entities shall deposit such shares to be so
offered in the Secondary Offering in escrow as described in Paragraph 7(a) and
such shares shall be subtracted from the 500,000 shares that SHD must offer in
the Secondary Offering; (iv) if the number of shares such charitable entities
offer in the Secondary Offering is less than 500,000 shares in the aggregate,
SHD shall offer in the Secondary Offering that number of shares equal to the
difference between 500,000 and the number of shares in the aggregate to be
offered in the Secondary Offering by such charitable entities; and (v) any
shares so deposited in escrow by SHD that are not sold in the Secondary Offering
shall be returned to SHD.
(c) Notwithstanding any provision of paragraph 7(a) to the contrary,
(i) the Durwood Children shall have the right to make gifts of shares of AMCE
Common Stock to one or more charitable entities (including charitable remainder
trusts) prior to the Secondary Offering; (ii) such charitable entities shall
have the right, but not the obligation, to participate in the Secondary Offering
with respect to all or a part of any such shares received from the Durwood
Children, up to 2.5 million shares in the aggregate; (iii) such charitable
entities shall deposit such shares to be so offered in the Secondary Offering in
escrow as described in Paragraph 7(a) and such shares shall be subtracted from
the 2.5 million shares that the Durwood Children must offer in the Secondary
Offering; (iv) if the number of shares such charitable entities offer in the
Secondary Offering is less than 2.5 million in the aggregate, the Durwood
Children shall agree among themselves how to satisfy their obligation to offer
at least 2.5 million shares in the aggregate; provided, that if the Durwood
Children are unable to reach such an agreement, each one of the Durwood Children
shall offer in the Secondary Offering that number of shares equal to the
difference between (A) 416,666 and (B) that number of shares in the aggregate to
be offered in the Secondary Offering by all the charitable entities to which
such child has made gifts; and (v) any shares so deposited in escrow by
-5-
<PAGE>
the Durwood Children that are not sold in the Secondary Offering shall be
returned to the Durwood Children.
8. SECONDARY OFFERING PROCEDURAL ISSUES. AMCE and the Partners shall
participate equally in selecting an underwriter for the Secondary Offering and
in determining all material terms of the Secondary Offering. If the price per
share to the public in the Secondary Offering (the "Secondary Offering Price")
is less than $18.00, SHD will pay the Durwood Children in the aggregate an
amount equal to (i) the difference between $18.00 and the Secondary Offering
Price, (ii) multiplied by the number of shares sold by the Durwood Children in
the Secondary Offering but not to exceed 2.5 million shares, and (iii) minus an
amount equal to the underwriter's commission that otherwise would have been paid
on the product of (i) and (ii) above as if such amount were part of the sale
proceeds in the Secondary Offering, based on the applicable underwriter's
commission rate in the Secondary Offering. Notwithstanding any provision
contained in this Paragraph 8 to the contrary, the aggregate amount which SHD
may be required to pay to the Durwood Children pursuant to this paragraph 8
shall not exceed $20 million. SHD will pay such amount to the Durwood Children
in shares of AMCE Common Stock valued at the Secondary Offering Price. Such
payment, if any, shall be deemed to be an adjustment to the original allocation
of shares of AMCE Common Stock that each Partner received in the Merger. The
Secondary Offering will occur on a date no sooner than six months and no later
than 12 months following the Merger, such date to be determined by AMCE and the
Partners. On all matters to be determined by the Partners concerning the
Secondary Offering, each Partner shall have one vote and the affirmative vote of
a majority of the Partners shall control.
9. TRANSACTION COSTS. The Partners acknowledge that certain of AMCE's
expenses in the Merger and the Secondary Offering and certain fees may be
allocated to DI or to them in the Merger Agreement and related documents. Such
expenses and fees, together with the expenses of liquidating AAE, DI's Merger
expenses and any penalty imposed on the Partners in such agreements in the event
that the Secondary Offering does not occur as contemplated in paragraph 7 of
this Agreement, but not including the underwriter's commission in the Secondary
Offering (collectively, the "DI Transaction Costs"), will be paid by SHD to the
extent that (i) excess cash held by DI on the Effective Time, plus (ii) all
assets of Delta on the Effective Time, are insufficient to pay or provide for
the DI Transaction Costs. The Partners agree to cause Delta to apply all of its
assets or their proceeds, as necessary, to pay the DI Transaction Costs. For the
purposes of this Paragraph 9, the amount of cash held by DI on the Effective
Time will be deemed excess to the extent such amount is unnecessary in order for
AMCE's net worth not to decrease as a result of the Merger. All fees and
expenses of the transactions contemplated in this Agreement, including but not
limited to the liquidation of AAE, the Merger and the Secondary Offering, shall
be borne by AMCE or DI. SHD will pay those expenses of DI to the extent that (i)
excess cash held by DI on the Effective Time, plus (ii) all assets of Delta on
the Effective Time, are insufficient to pay or provide for such expenses. With
respect to the fees and expenses of the transactions contemplated in this
Agreement, the Durwood Children shall bear only their pro rata share of the
underwriter's commission in the Secondary Offering and their own attorneys'
fees.
-6-
<PAGE>
10. SHD INDEMNITY.
(a) SHD shall indemnify and hold the Durwood Children harmless from
any claims, losses, damages, costs or expenses (including reasonable attorneys'
fees) which they might incur with respect to the DI Transaction Costs or which
result from breaches by DI of its representations, warranties and covenants in
the Merger Agreement. SHD shall also indemnify and hold the Durwood Children
harmless from any liability which they may incur under Section 16(b) of the
Securities Exchange Act of 1934, solely by reason of their sale of shares of
AMCE Common Stock in the Secondary Offering and their receipt of any additional
shares of AMCE Common Stock from SHD pursuant to Paragraph 8 of this Agreement.
SHD shall also indemnify and hold the Durwood Children harmless from any
liability for federal or state gift tax, penalty and interest, including any
estate tax, penalty and interest generated by prior gifts (such gift or estate
tax liability, together with penalty and interest, being referred to in this
paragraph 10(a) collectively as "Taxes"), as a result of the Durwood Children
having entered into the transactions contemplated in this Agreement, provided,
that such indemnification by SHD shall be limited to (i) any such claim for
Taxes made by (A) the Internal Revenue Service during the period of assessment
under Section 6501(a) of the Internal Revenue Code or (B) any state taxing
authority during the period of assessment under applicable, analogous state law,
for the gift tax returns filed by each of the Durwood Children, respectively,
for the 1996 tax year (and, if applicable, the year in which the Merger occurs)
as contemplated in paragraph 10(b) of this Agreement, and (ii) any obligation
for Taxes owed to any taxing authority as a result of any law or regulation
requiring a report to it of an obligation for Taxes to a different taxing
authority with respect to a claim described in clause (i). Notwithstanding the
immediately preceding sentence, if SHD's death occurs before the amount in
respect of any liability for indemnification pursuant to this paragraph 10(a)
has been finally determined, the maximum amount which SHD's estate shall be
required to pay in respect of such liability for indemnification pursuant to
this Paragraph 10(a) shall be limited to the greater of (x) the value of SHD's
gross estate, as finally determined for federal estate tax purposes, less the
amount allowed as an estate tax charitable deduction under Section 2055(a) of
the Internal Revenue Code, and less the amount of estate taxes as finally
determined, and (y) $20,000,000. During his life, SHD represents and warrants
that he shall maintain a net worth of not less than $40,000,000 in order to
satisfy his obligations under this Agreement. Notwithstanding any provision
contained in this Paragraph 10 to the contrary, SHD shall have no
indemnification obligation with respect to attorneys' fees incurred by any of
the Durwood Children in connection with the negotiation and review of this
Agreement or any of the other transactions contemplated in this Agreement.
(b) Each Partner agrees that such Partner has no intention whatsoever
of making a gift to any other Partner in connection with the transactions
described in this Agreement. Each Partner also agrees to file a gift tax return
for the 1996 tax year on or before April 15, 1997 with the Internal Revenue
Service and applicable state taxing authorities, which returns shall disclose
the transactions contemplated in this Agreement and shall report such
transactions as nontaxable. In the event that the Merger occurs after 1996, each
Partner also agrees to file a gift tax return for the tax year in which the
Merger occurs with the Internal Revenue Service and applicable state taxing
authorities on or before April 15 in the year immediately following the Merger,
which returns shall disclose the transactions contemplated in this Agreement and
shall report such transactions as non-taxable. Such Partner or such Partner's
estate must obtain the prior written approval of the other
-7-
<PAGE>
Partners of the description of the transactions contemplated in this Agreement
contained in any such return or any other federal or state gift or estate tax
return filed by a Partner or with respect to a Partner's estate.
(c) Each of the Durwood Children shall promptly notify SHD (which
reference to SHD for the purposes of this paragraph 10(c) shall also include
SHD's representatives) of the existence of any claim, demand or other matter
(for purposes of this paragraph 10(c), a "Claim"), to which the indemnification
obligations of SHD under this Agreement would apply. SHD shall have the sole
right to defend such Claim at his own expense and with counsel of his own
selection. If such Claim relates to federal or state gift or estate taxes, SHD
shall have the sole right at his expense to control all audits and proceedings
respecting such Claim. None of the Durwood Children shall admit any liability
with respect to such Claim or settle, compromise, pay or discharge such Claim
without the prior written consent of SHD, which consent shall not be
unreasonably withheld. SHD shall not settle, compromise, pay or discharge such
Claim without the prior written consent of each of the Durwood Children who is
seeking indemnification under this Agreement for such Claim, which consent shall
not be unreasonably withheld; provided, that each of the Durwood Children shall
accept any settlement of such Claim as long as the amount of such settlement is
paid by SHD. Each of the Durwood Children shall cooperate with SHD in the
defense of such Claim. If such Claim is one that cannot by its nature be
defended solely by SHD (including, without limitation, any federal or state tax
proceeding), then each of the Durwood Children shall make available all
information and assistance that SHD may reasonably request. If such Claim
relates to federal or state gift or estate taxes, then each of the Durwood
Children shall also (i) execute and deliver such powers of attorney and other
documents requested by SHD in order to carry out the intent of this paragraph
10(c), (ii) retain such records, documents, accounting data and other
information concerning the preparation or filing of returns and reports with
respect to such Claim, (iii) refrain from any oral or written communication with
any third party, including but not limited to the Internal Revenue Service or
any state taxing authority, concerning such Claim, and (iv) give SHD reasonable
access to such records, documents, accounting data and other information in
connection with the preparation or audit of any returns or reports with respect
to such Claim.
11. FURTHER ASSURANCES. Each of the parties to this Agreement, at any time
prior to or after the Merger, shall execute, acknowledge and deliver any further
assignments, conveyances, releases, indemnifications, consent minutes and other
assurances, documents and instruments, and shall take any other action
consistent with the terms of this Agreement, that may reasonably be requested by
any other party hereto for the purpose of terminating and liquidating AAE and
distributing its assets, approving and effecting the conversion of AMCE Class B
Stock owned by DI, or, after the negotiation and execution of the Merger
Agreement, approving and consummating the Merger.
12. MUTUAL RELEASES.
(a) Effective as of the Effective Time, each Partner releases, acquits
and forever discharges the other Partners and their respective personal
representatives, heirs, trustees, assigns, attorneys and agents, from any and
all claims, demands, liabilities, obligations, losses, actions and
-8-
<PAGE>
causes of action of any kind or nature, at law or in equity, past or existing,
known or unknown, including but not limited to those arising out of, related to
or connected with AAE or DI.
(b) Notwithstanding any provisions of this Agreement to the contrary,
the mutual releases provided herein shall not apply to any breach of or default
under this Agreement or any other document executed and delivered in connection
with the transactions contemplated hereby, or any claim, demand or cause of
action arising out of any transaction or otherwise among any or all of the
Partners that occurs in whole or in part after the Effective Time.
13. SHD REPRESENTATIONS. SHD represents and warrants to the Durwood
Children that SHD is the beneficial owner of, and has good and valid title to,
119,500 DI Class A shares, free and clear of all liens, encumbrances, claims,
charges, assessments and limitations of every kind.
14. REPRESENTATIONS. Each Partner represents and warrants to the other
Partners as follows:
(a) Such Partner is the beneficial owner of, and has good and valid
title to, such Partner's partnership interest in AAE, free and clear of all
liens, encumbrances, claims, charges, assessments and limitations of every kind.
(b) At the time of such Partner's execution of the statement of
unanimous consent described in paragraph 2 of this Agreement and on the
Effective Time, such Partner shall be the beneficial owner of and shall have
good and valid title to, the number of DI B shares set opposite such Partner's
name in paragraph 1 of this Agreement, free and clear of all liens,
encumbrances, claims, charges, assessments and limitations of every kind.
(c) Such Partner has the legal authority and capacity to execute this
Agreement and to perform such Partner's obligations under this Agreement. This
Agreement constitutes a valid and legally binding obligation of such Partner
enforceable in accordance with its terms.
(d) The execution and delivery of this Agreement by such Partner and
the consummation of the transactions contemplated by this Agreement will not
result in the breach of any term, condition or other provision of, or constitute
a default under, any agreement or instrument to which such Partner is a party or
by which such Partner is bound, or violate or result in a breach of or
constitute a default under any judgement, order, decree or other restriction of
any court or governmental agency to which such Partner is subject.
-9-
<PAGE>
15. COVENANTS. Each Partner agrees that such Partner will not sell, assign,
transfer, pledge, grant an option with respect to or otherwise dispose of any
interest in, or enter into any agreement, arrangement or understanding with
respect to the foregoing, all or any part of such Partner's partnership interest
in AAE or, after the liquidation of AAE, such Partner's DI Class B Shares.
Notwithstanding the immediately preceding sentence, each Partner may transfer
all or any part of such partnership interest or such shares to a Family Member
or a Controlled Entity of such Partner, provided, that such transferee
contemporaneously and in writing must expressly assume and undertake all of the
obligations of such party under this Agreement.
16. AMENDMENT TO PARTNERSHIP AGREEMENT. To the extent that the Limited
Partnership Agreement respecting AAE (the "AAE Partnership Agreement") is in any
way inconsistent with the transactions contemplated by this Agreement, this
Agreement shall be deemed to be an amendment to the AAE Partnership Agreement
and this Agreement shall control with respect to any inconsistencies with the
AAE Partnership Agreement.
17. CONDITIONS. With the exception of paragraph 18, this Agreement is
conditioned upon the negotiation and execution of the Merger Agreement. After
the Merger Agreement has been entered into by DI and AMCE, paragraphs 1, 3(b),
4, 5, 6, 7, 8, 9, 10, 12 and 16 of this Agreement are conditioned upon the
satisfaction or waiver of all conditions of each of AMCE and DI to consummate
the Merger set forth in the Merger Agreement. In addition, if for any reason the
Merger Agreement shall not have been executed on or before May 15, 1996, or the
Merger shall not have been consummated on or before October 31, 1996, the
Durwood Children shall have the right to terminate this Agreement. Such decision
shall be made by the affirmative vote of a majority of the Durwood Children,
with each of the Durwood Children having one vote.
18. PUBLICITY. No Partner shall issue any public announcement concerning
the transactions contemplated by this Agreement or the existence or terms of
this Agreement without the approval of the other Partners, unless otherwise
required by law or regulation; provided, however, that any Partner may disclose
the contents of this Agreement to banks and other financial institutions in
connection with the filing of financial statements.
19. SURVIVAL. All representations, warranties, covenants and agreements
made herein shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement.
20. ATTORNEYS' FEES. If any legal action or other proceeding is brought for
the enforcement of this Agreement, or because of an alleged breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which such party or parties may
be entitled.
21. SPECIFIC PERFORMANCE. Each party acknowledges that the other parties
would be irreparably damaged and would not have an adequate remedy at law for
money damages in the event that any of the covenants or agreements of the
acknowledging party set forth in this Agreement were not performed in accordance
with its terms or otherwise breached or threatened to be breached. Each
-10-
<PAGE>
party therefore agrees that any or all other parties shall be entitled to the
specific enforcement of such covenants and agreements and to injunctive or other
equitable relief in addition to any remedy to which any such party may be
entitled, at law or in equity. If the party bringing the action substantially
prevails in any legal action brought to enforce such party's rights under this
paragraph, such party shall be entitled to receive from the breaching party all
reasonable fees and expenses incurred by such party in enforcing such party's
rights hereunder.
22. NOTICE. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed or
telexed or sent by facsimile transmission, Federal Express, Express Mail,
overseas courier or certified mail, postage prepaid. Any such notice shall be
deemed to be given when so delivered personally, telegraphed, telexed or sent by
facsimile transmission, or if mailed by Federal Express or Express Mail, one
business day after the date of mailing, or if mailed by certified mail, three
business days after the date of mailing, or if mailed by overseas courier, four
business days after the date of mailing. Such notice or other communication
shall be sent to the parties as follows:
To: Stanley H. Durwood Suite 1700 Power & Light Bldg.
106 West 14th Street
Post Office Box 419615
Kansas City, MO 64141-6615
with a copy to: Raymond F. Beagle, Jr., Esq.
Lathrop & Gage L.C.
2345 Grand Boulevard
Kansas City, MO 64108-2684
Carol D. Journagan 1323 Granite Creek Drive
Blue Springs, MO 64015
with a copy to: Glenn Kurlander, Esq.
John C. Novogrod, Esq.
Schiff Hardin & Waite
150 East 52nd St. Suite 2900
New York, NY 10022
Edward D. Durwood 3001 West 68th St.
Shawnee Mission, KS 66208
with a copy to: Glenn Kurlander, Esq.
John C. Novogrod, Esq.
Schiff Hardin & Waite
150 East 52nd St., Suite 2900
New York, NY 10022
-11-
<PAGE>
Thomas A. Durwood P.O. Box 7208
Rancho Santa Fe, CA 92067
with a copy to: Glenn Kurlander, Esq.
John C. Novogrod, Esq.
Schiff Hardin & Waite
150 East 52nd St., Suite 2900
New York, NY 10022
Elissa D. Grodin 187 Chestnut Hill Rd.
Wilton, CT 06897
with a copy to: Robert C. Kopple, Esq.
Kopple & Klinger
2029 Century Park East, Suite 1040
Los Angeles, CA 90067
Brian H. Durwood 655 N.W. Altishim Pl
Beaverton, OR 97006
with a copy to: Robert C. Kopple, Esq.
Kopple & Klinger
2029 Century Park East, Suite 1040
Los Angeles, CA 90067
Peter J. Durwood 666 West End Avenue, #22F
New York, NY 10025
with a copy to: Robert C. Kopple, Esq.
Kopple & Klinger
2029 Century Park East, Suite 1040
Los Angeles, CA 90067
Any party may, by notice to the other parties given in accordance with this
paragraph, designate another address or person for receipt of notices hereunder.
23. BINDING EFFECT. The rights and obligations under this Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective personal representatives, heirs and assigns.
24. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto pertaining to the subject matter hereof and supersedes
all prior or contemporaneous, written or verbal agreements, understandings and
negotiations in connection herewith.
-12-
<PAGE>
25. AMENDMENTS. This Agreement cannot be modified, amended or terminated,
except by an instrument in writing signed by all the Partners; provided,
however, that any provision of this Agreement may be waived only in writing by
the party to be charged with the waiver.
26. ASSIGNMENT. This Agreement shall not be assigned by any party without
the prior written consent of the other parties.
27. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by any court of final jurisdiction, it is the intent of
the parties that all other provisions of this Agreement be construed to remain
fully valid, enforceable and binding on the parties.
28. GOVERNING LAW. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of Missouri as applied to contracts that
are executed and performed entirely in such State.
29. CAPTIONS. The captions in this Agreement are for convenience only and
in no way define, limit or describe the scope or intent of this Agreement or any
party hereto, nor in any other way affect this Agreement or any part hereof.
30. EXHIBITS. All exhibits attached to this Agreement are incorporated
herein by this reference.
31. MISCELLANEOUS. Whenever the context of this Agreement shall require,
the use of any gender shall include all genders, and the use of any singular
shall include the plural, and vice versa.
32. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and
the same agreement.
33. TAX CODE. All references to sections of the Internal Revenue Code are
to such sections in the Internal Revenue Code of 1986 or such similar provisions
in a subsequent tax code.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Durwood Family
Agreement to be duly executed as of the day and year first above written.
/s/Stanley H. Durwood
Stanley H. Durwood, individually, as Trustee
of the 1992 Durwood, Inc. Voting Trust dated
December 12, 1992, as amended, and as Trustee
of the Stanley H. Durwood Trust Agreement
dated August 14, 1989, as amended
/s/Carol D. Journagan
Carol D. Journagan
/s/Edward D. Durwood
Edward D. Durwood
/s/Thomas A. Durwood
Thomas A. Durwood
/s/Elisssa D. Grodin
Elissa D. Grodin
/s/Brian H. Durwood
Brian H. Durwood
/s/Peter J. Durwood
Peter J. Durwood
-14-
