<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
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
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)
----------------
WITH A COPY TO:
RAYMOND F. BEAGLE, JR.
LATHROP & GAGE L.C.
2345 GRAND AVENUE, SUITE 2800
KANSAS CITY, MISSOURI 64108-2684
(816) 292-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the merger of Durwood, Inc. with the Registrant pursuant to an
Agreement and Plan of Merger and Reorganization dated as of March 31, 1997
described in the enclosed Proxy-- Information Statement/Prospectus have been
satisfied or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
general instruction G, check the following box. / /
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO OFFERING PRICE AGGREGATE
OF SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE OFFERING PRICE
<S> <C> <C> <C>
Common Stock, par value 66 2/3 CENTS per share.... 8,783,294(1) $4.47(2) $39,229,905(2)
Class B Stock, par value 66 2/3 CENTS per share... 5,015,657(1) $4.47(2) $22,435,274(2)
Common Stock, par value 66 2/3 CENTS per share.... 5,015,657(3) -- --
<CAPTION>
TITLE OF EACH CLASS AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Stock, par value 66 2/3 CENTS per share....
Class B Stock, par value 66 2/3 CENTS per share... $18,704
Common Stock, par value 66 2/3 CENTS per share.... --
</TABLE>
(1) The maximum number of shares of Common Stock to be issued in the merger is
8,783,294 and the maximum number of shares of Class B Stock to be issued in
the merger is 5,015,657.
(2) Estimated pursuant to Rule 457(f)(2) of the Securities Act of 1933, as
amended, based upon the book value of $383.89 per share of shares of
Durwood, Inc. to be acquired in the merger.
(3) Consists of shares which may be issuable upon conversion of the Class B
Stock.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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-4
<TABLE>
<CAPTION>
FORM S-4 REGISTRATION
STATEMENT ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
- ------------------------------------------------------------------------ --------------------------------------------------
<C> <C> <S> <C>
A. Information about the Transaction
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus................... Front of Registration Statement; Outside Front
Cover of Proxy Information Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Available Information; Table of Contents;
Incorporation by Reference
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information............................ Summary; Selected Financial Data: Risk Factors
4. Terms of the Transaction.......................... The Merger; Information about the
Company--Description of AMCE Capital Stock;
Comparison of Rights of Holders of AMCE Stock and
DI Stock
5. Pro Forma Financial Information................... Index to Financial Statements
6. Material Contacts with the Company Being
Acquired......................................... The Merger--Background of the Merger
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters.... Not Applicable
8. Interests of the Named Experts and Counsel........ Experts; Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Comparison of Rights of Holders of AMCE Stock and
DI Stock--The Board of Directors
B. Information about the Registrant
10. Information with Respect to
S-3 Registrants.................................. Not Applicable
11. Incorporation of Certain Information by
Reference........................................ Not Applicable
</TABLE>
i
<PAGE>
AMC ENTERTAINMENT INC.
CROSS-REFERENCE SHEET (CONTINUED)
PURSUANT TO ITEM 501(B) OF
REGULATION S-K SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM S-4
<TABLE>
<CAPTION>
FORM S-4 REGISTRATION
STATEMENT ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
- ------------------------------------------------------------------------ --------------------------------------------------
<C> <C> <S> <C>
12. Information with Respect to S-2 or S-3
Registrants...................................... Summary; Information about the Company--Business
of the Company-- Dividends and Price Range of
Common Stock--Selected Financial Data--
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Index to
Financial Statements
13. Incorporation of Certain Information by
Reference........................................ Incorporation by Reference
14. Information with Respect to Registrants Other Than
S-2 or S-3 Registrants........................... Not Applicable
C. Information about the Company Being Acquired
15. Information with Respect to
S-3 Companies.................................... Not Applicable
16. Information with Respect to S-2 and S-3
Companies........................................ Not Applicable
17. Information with Respect to Companies Other Than
S-2 or S-3 Companies............................. Information about DI--Business--Selected Financial
Data--Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Index to Financial Statements
D. Voting and Management Information
18. Information if Proxies, Consents or Authorizations
are to be Solicited.............................. The AMCE Special Meeting; The Merger-- Dissenters'
Rights--Interests of Certain Persons in the
Merger; Information about the Company--Management
of the Company--Certain Transactions; Information
about DI--Security Ownership; DI Special Meeting
19. Information if Proxies, Consents or Authorizations
are not to be Solicited, or in an Exchange
Offer............................................ Not Applicable
</TABLE>
ii
<PAGE>
AMC ENTERTAINMENT INC.
106 WEST 14TH STREET
KANSAS CITY, MISSOURI 64105
May , 1997
To Our Stockholders:
On behalf of the Board of Directors, I cordially invite you to attend a
special meeting of the stockholders (the "AMCE Special Meeting") of AMC
Entertainment Inc. ("AMCE" or the "Company") to be held at , local time on
, 1997, at .
At the AMCE Special Meeting, you will be asked to approve and adopt an
Agreement and Plan of Merger and Reorganization dated as of March 31, 1997 (the
"Merger Agreement") by and between AMCE and Durwood, Inc. ("DI"), pursuant to
which DI will be merged into AMCE, with AMCE remaining as the surviving
corporation (the "Merger").
The Merger was proposed to AMCE by the Durwood family in connection with our
efforts to dissolve DI and a family partnership, American Associated Enterprises
("AAE"), that owns shares of DI Class B Stock, so that we may hold our interests
in AMCE directly in the form of a marketable security instead of indirectly
through DI and AAE. The accompanying notice and Proxy Statement describe the
effect that the Merger would have on my family's interest in AMCE.
SHARES OF AMCE STOCK HELD BY STOCKHOLDERS OTHER THAN DI WILL REMAIN ISSUED
AND OUTSTANDING AND WILL NOT BE EXCHANGED IN THE MERGER. HOLDERS OF AMCE STOCK
SHOULD NOT SURRENDER THEIR SHARES IN CONNECTION WITH THE MERGER.
The AMCE Board of Directors believes that the Merger, which would have no
tax effect on AMCE or its public stockholders, would be beneficial to AMCE and
its stockholders because, among other reasons, it would increase the voting
interest of the stockholders who are not members of my family and simplify the
corporate structure of AMCE. In addition, the sale by members of my family of
AMCE shares in a public secondary offering contemplated to occur following the
Merger will increase the public "float" and liquidity of the AMCE Common Stock
and, as a result, may reduce the volatility of daily stock price changes, narrow
the bid/asked spread and increase the interest of institutional investors in the
AMCE Common Stock. These effects, over time, may enhance shareholder value.
Pursuant to the Merger Agreement and a settlement of a stockholders'
derivative suit in which my son, Mr. Edward D. Durwood, and I are defendants
and/or agreements with AMCE, I and members of my family have agreed to seek the
Merger and to sell at least 3,000,000 shares of AMCE Common Stock within one
year after the closing of the Merger in a public secondary offering (which will
be made only by means of a prospectus).
If the Merger, the secondary offering and related transactions are
consummated, based on shares outstanding on April 3, 1997, (i) unaffiliated
stockholders will own approximately 6,900,000, or 53%, of AMCE's outstanding
shares of Common Stock, and their voting interest in AMCE will have increased
from approximately 3.3% to 11.9%, (ii) I (through trusts which I have
established) will own approximately 4.5 million shares, or 100%, of the
outstanding shares of AMCE Class B Stock and (iii) each of my six children will
own approximately 1 million shares (aggregating approximately 47%) of the
outstanding shares of AMCE Common Stock. Based on voting shares outstanding as
of April 3, 1997, the shares of AMCE Class B stock which I will own will
represent approximately 77% of the combined voting power of AMCE's outstanding
voting stock. However, provisions of an agreement with my children could result
in adjustments pursuant to which I would deliver additional shares to them.
1
<PAGE>
Upon the recommendation of a special committee of the Board of Directors
consisting of Messrs. Charles J. Egan, Jr. and Paul E. Vardeman (the "Special
Committee"), our new outside directors, Messrs. William T. Grant, II and John P.
Mascotte, and the full AMCE Board of Directors have unanimously approved the
Agreement and Plan of Merger and Reorganization and is requesting your approval.
The Board of Directors and the Special Committee believe that the Merger is
in the best interest of AMCE and its stockholders and recommend that you vote
FOR the proposal to approve the Merger Agreement.
Furman Selz LLC, the Special Committee's financial advisor, has rendered an
opinion to the Special Committee to the effect that, as of the date of its
opinion, the consideration to be paid by AMCE is fair, from a financial point of
view, to AMCE.
Details of the Merger and other important information concerning AMCE in the
Merger and DI appear in the accompanying Notice and Proxy Statement. Please give
this material your careful attention.
A CONDITION TO THE MERGER IS THAT THE MERGER AGREEMENT BE APPROVED BY THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF SHARES OF AMCE COMMON STOCK
PRESENT OR REPRESENTED BY PROXY AND VOTING AT THE SPECIAL MEETING, OTHER THAN
DI, MEMBERS OF MY FAMILY AND DIRECTORS AND OFFICERS OF AMCE. THEREFORE, YOUR
VOTE IS IMPORTANT. Whether or not you plan to attend the AMCE Special Meeting,
please complete, sign and date the accompanying proxy card and return it in the
enclosed postage prepaid envelope. If you attend the AMCE Special Meeting, you
may vote in person even if you have previously returned your proxy card. Your
prompt cooperation will be greatly appreciated.
I am gratified by your continued support of the Company.
Sincerely,
Stanley H. Durwood
Chairman and Chief Executive Officer
Enclosures
- --------------------------------------------------------------------------------
NO MATTER HOW MANY OR FEW SHARES YOU OWN, YOUR VOTE IS IMPORTANT. PLEASE SIGN,
DATE AND MAIL THE ENCLOSED PROXY CARD TODAY!
2
<PAGE>
AMC ENTERTAINMENT INC.
106 WEST 14TH STREET
KANSAS CITY, MISSOURI 64105
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD June , 1997
To the Stockholders of AMC ENTERTAINMENT INC.
Notice is hereby given that a special meeting of stockholders of AMC
Entertainment Inc., a Delaware corporation ("AMCE" or the "Company"), will be
held at , , on , 1997, at , local time for the
following purposes:
1. To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger and Reorganization dated March 31, 1997 by and between AMCE
and Durwood, Inc. ("DI"), pursuant to which DI will be merged into AMCE, with
AMCE remaining as the surviving corporation (the "Merger"). In the Merger, (i)
shares of AMCE Common Stock and AMCE $1.75 Cumulative Convertible Preferred
Stock held by AMCE stockholders other than DI will remain issued and outstanding
and will not be exchanged, (ii) each share of AMCE Common Stock and AMCE Class B
Stock held by DI will be canceled, (iii) each share of DI Class A Stock
presently held by Mr. Stanley H. Durwood, the trust created pursuant to the
Revocable Trust Agreement of Mr. Stanley H. Durwood dated August 14, 1989, as
amended (the "1989 Trust"), or the 1992 Durwood, Inc. Voting Trust dated
December 12, 1992 (the "1992 Trust") will be converted into and exchanged for
32.142857 shares of AMCE Class B Stock, so that the 119,500 shares of DI Class A
Stock presently held by Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust
will be convertible into and exchangeable for an aggregate of 3,841,071 shares
of AMCE Class B Stock, (iv) each share of DI Class A Stock presently held by or
for the benefit of persons other than Mr. Stanley H. Durwood, the 1989 Trust or
the 1992 Trust will be converted into and exchanged for 32.142857 shares of AMCE
Common Stock, so that the 500 shares of DI Class A Stock presently held by
persons other than Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust will
be convertible into and exchangeable for an aggregate of 16,071 shares of AMCE
Common Stock, (v) each share of DI Class B Stock to be held by Mr. Stanley H.
Durwood, the 1989 Trust or the 1992 Trust will be converted into and exchanged
for 243.767528 shares of AMCE Class B Stock, so that the 4,818.4664 shares of DI
Class B Stock to be held by Mr. Stanley H. Durwood, the 1989 Trust or the 1992
Trust will be convertible into and exchangeable for an aggregate of 1,174,586
shares of AMCE Class B Stock, and (vi) each share of DI Class B Stock to be held
by the children of Mr. Stanley H. Durwood will be converted into and exchanged
for 243.767341 shares of AMCE Common Stock, so that the 35,965.5336 shares of DI
Class B Stock to be held by the children of Mr. Stanley H. Durwood will be
convertible into and exchangeable for an aggregate of 8,767,223 shares of AMCE
Common Stock, all as more fully described in the accompanying Proxy Statement;
and
2. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Holders of AMCE Common Stock and Class B Stock at the close of business on
, 1997, are entitled to notice of and to vote at the special meeting,
or any adjournment or adjournments thereof. A complete list of such stockholders
will be open to the examination of any stockholder at AMCE's principal executive
offices at 106 West 14th Street, Kansas City, Missouri 64105, for a period of
ten (10) days prior to the meeting. The meeting may be adjourned from time to
time without notice other than by announcement at the meeting.
A CONDITION TO THE MERGER IS THAT THE MERGER AGREEMENT BE APPROVED BY THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF SHARES OF AMCE COMMON STOCK
PRESENT OR REPRESENTED BY PROXY AND VOTING AT THE SPECIAL MEETING, OTHER THAN
3
<PAGE>
DI, MEMBERS OF THE DURWOOD FAMILY AND DIRECTORS AND OFFICERS OF AMCE. THEREFORE,
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF
SHARES YOU HOLD. WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE MEETING IN PERSON,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN
THE ENCLOSED RETURN ENVELOPE. EACH PROXY GRANTED MAY BE REVOKED BY THE
STOCKHOLDER APPOINTING SUCH PROXY AT ANY TIME BEFORE IT IS VOTED. IF YOU RECEIVE
MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE REGISTERED IN DIFFERENT NAMES
OR ADDRESSES, EACH SUCH PROXY CARD SHOULD BE SIGNED AND RETURNED TO ASSURE THAT
ALL YOUR SHARES WILL BE VOTED.
The Notice, the accompanying Proxy Statement and the Proxy enclosed herewith
were sent to you by order of the Board of Directors of AMCE.
Nancy L. Gallagher
Vice President and Secretary
Kansas City, Missouri
, 1997
4
<PAGE>
DURWOOD, INC.
106 WEST 14TH STREET
KANSAS CITY, MISSOURI 64105
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD , 1997
To the Shareholders of Durwood, Inc.:
A special meeting of the shareholders of Durwood, Inc. ("DI") will be held
at the corporate headquarters of DI, 106 West 14th Street, Kansas City, Missouri
on , 1997, at local time to consider and vote upon a proposal to
approve and adopt an Agreement and Plan of Merger and Reorganization dated March
31, 1997 by and between AMC Entertainment Inc. ("AMCE" or the "Company") and DI,
pursuant to which DI will be merged into AMCE, with AMCE remaining as the
surviving corporation (the "Merger").
In the Merger, (i) shares of AMCE Common Stock and AMCE $1.75 Cumulative
Convertible Preferred Stock held by AMCE stockholders other than DI will remain
issued and outstanding and will not be exchanged, (ii) each share of AMCE Common
Stock and AMCE Class B Stock held by DI will be canceled, (iii) each share of DI
Class A Stock presently held by Mr. Stanley H. Durwood, the trust created
pursuant to the Revocable Trust Agreement of Mr. Stanley H. Durwood dated August
14, 1989, as amended (the "1989 Trust"), or the 1992 Durwood, Inc. Voting Trust
dated December 12, 1992 (the "1992 Trust") will be converted into and exchanged
for 32.142857 shares of AMCE Class B Stock, so that the 119,500 shares of DI
Class A Stock presently held by Mr. Stanley H. Durwood, the 1989 Trust or the
1992 Trust will be convertible into and exchangeable for an aggregate of
3,841,071 shares of AMCE Class B Stock, (iv) each share of DI Class A Stock
presently held by or for the benefit of persons other than Mr. Stanley H.
Durwood, the 1989 Trust or the 1992 Trust will be converted into and exchanged
for 32.142857 shares of AMCE Common Stock, so that the 500 shares of DI Class A
Stock presently held by persons other than Mr. Stanley H. Durwood, the 1989
Trust and the 1992 Trust will be convertible into and exchangeable for an
aggregate of 16,071 shares of AMCE Common Stock, (v) each share of DI Class B
Stock to be held by Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust
will be converted into and exchanged for 243.767528 shares of AMCE Class B
Stock, so that the 4,818.4664 shares of DI Class B Stock to be held by Mr.
Stanley H. Durwood, the 1989 Trust or the 1992 Trust will be convertible into
and exchangeable for an aggregate of 1,174,586 shares of AMCE Class B Stock, and
(vi) each share of DI Class B Stock to be held by the children of Mr. Stanley H.
Durwood will be converted into and exchanged for 243.767341 shares of AMCE
Common Stock, so that the 35,965.5336 shares of DI Class B Stock to be held by
the children of Mr. Stanley H. Durwood will be convertible into and exchangeable
for an aggregate of 8,767,223 shares of AMCE Common Stock, all as more fully
described in the accompanying Information Statement/Prospectus.
The close of business on , 1997, has been designated as the record
date for the determination of shareholders entitled to notice of and to vote at
the special meeting or any adjournment thereof.
By Order of the Board of Directors
Kansas City, Missouri
, 1997
5
<PAGE>
SUBJECT TO COMPLETION
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 THESE 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>
PRELIMINARY PROXY--INFORMATION STATEMENT/PROSPECTUS
DATED APRIL 24, 1997
AMC ENTERTAINMENT INC.
---------
PROXY STATEMENT
For Special Meeting of Stockholders of AMC Entertainment Inc.
to be Held on June , 1997,
and
INFORMATION STATEMENT
For Special Meeting of Shareholders of Durwood, Inc.
to be Held on June , 1997
and
PROSPECTUS FOR 8,783,294 SHARES OF AMC ENTERTAINMENT INC.
COMMON STOCK, PAR VALUE 66 2/3 CENTS PER SHARE, AND 5,015,657 SHARES OF AMC
ENTERTAINMENT INC. CLASS B STOCK, PAR VALUE 66 2/3 CENTS PER SHARE
-------------
This Proxy--Information Statement/Prospectus is being furnished as a proxy
statement to holders of Common Stock, par value 66 2/3 CENTS per share ("AMCE
Common Stock" or "Common Stock"), of AMC Entertainment Inc., a Delaware
corporation ("AMCE" or the "Company"), in connection with the solicitation of
proxies by the AMCE Board of Directors (the "AMCE Board") for use at a special
meeting of AMCE stockholders (the "AMCE Special Meeting") to be held on
, 1997, at , commencing at , local time, and at any
adjournments, postponements or continuations thereof.
This Proxy--Information Statement/Prospectus is also being furnished as an
information statement and prospectus to holders of Class A Common Stock, par
value $100 per share ("DI Class A Stock"), and Class B Common Stock, par value
$100 per share ("DI Class B Stock"), of Durwood, Inc., a Missouri corporation
("DI"), in connection with a special meeting of DI shareholders (the "DI Special
Meeting"), to be held on , 1997, at , commencing at ,
local time, and at any adjournments, postponements or continuations thereof.
This Proxy--Information Statement/Prospectus relates to the proposed merger
of DI into AMCE (the "Merger"). The Merger will be effected pursuant to the
terms of an Agreement and Plan of Merger and Reorganization dated as of March
31, 1997, between AMCE and DI (the "Merger Agreement"), pursuant to which DI
will be merged into AMCE, with AMCE remaining as the surviving corporation.
SHARES OF AMCE STOCK HELD BY STOCKHOLDERS OTHER THAN DI WILL REMAIN ISSUED AND
OUTSTANDING AND WILL NOT BE EXCHANGED IN THE MERGER. HOLDERS OF AMCE STOCK
SHOULD NOT SURRENDER THEIR SHARES IN CONNECTION WITH THE MERGER.
In the Merger, (i) each share of AMCE Common Stock and AMCE Class B Stock
held by DI will be canceled, (ii) each share of DI Class A Stock presently held
by Mr. Stanley H. Durwood, the trust created pursuant to the Revocable Trust
Agreement of Mr. Stanley H. Durwood dated August 14, 1989, as amended (the "1989
Trust"), or the 1992 Durwood, Inc. Voting Trust dated December 12, 1992 (the
"1992 Trust") will be converted into and exchanged for 32.142857 shares of
AMCE's Class B Stock, par value 66 2/3 CENTS per share ("AMCE Class B Stock" or
"Class B Stock"), so that the 119,500 shares of DI Class A Stock presently held
by Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust will be convertible
into and exchangeable for an aggregate of 3,841,071 shares of AMCE Class B
Stock, (iii) each share of DI Class A Stock presently held by or for the benefit
of persons other than Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust
will be converted into and exchanged for 32.142857 shares of AMCE Common Stock,
so that the 500 shares of DI Class A Stock presently held by persons other than
Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust will be convertible
into and exchangeable for an aggregate of 16,071 shares of AMCE Common Stock,
(iv) each share of DI Class B Stock to be held by Mr. Stanley H. Durwood, the
1989 Trust or the 1992 Trust will be converted into and exchanged for 243.767528
shares of AMCE Class B Stock, so that the 4,818.4664 shares of DI Class B Stock
to be held by Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust will be
convertible into and exchangeable for an aggregate of 1,174,586 shares of AMCE
Class B Stock, and (v) each share of DI Class B Stock to be held by the children
of Mr. Stanley H. Durwood will be converted into and exchanged for 243.767341
shares of AMCE Common Stock, so that the 35,965.5336 shares of DI Class B Stock
to be held by the children of Mr. Stanley H. Durwood will be convertible into
and exchangeable for an aggregate of 8,767,223 shares of AMCE Common Stock.
(CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" AT PAGE 20 FOR A DISCUSSION OF CERTAIN MATTERS.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy--Information Statement/Prospectus is , 1997.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
In connection with the Merger, AMCE has filed a Registration Statement on
Form S-4 (the "Registration Statement"), of which this Proxy--Information
Statement/Prospectus is a part, with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), covering the AMCE Common Stock and AMCE Class B Stock
issuable in the Merger to holders of shares of DI Class A Stock and DI Class B
Stock.
Holders of AMCE Common Stock and AMCE Class B Stock generally vote as a
class on all matters other than the election of directors, with each share of
AMCE Common Stock having one vote per share and each share of AMCE Class B Stock
having ten votes per share. Subject to provisions of AMCE's Amended and Restated
Certificate of Incorporation ("Certificate of Incorporation") which apply if
outstanding shares of AMCE Class B Stock cease to represent in excess of 12 1/2%
of the combined number of outstanding shares of AMCE Common Stock and AMCE Class
B Stock, holders of AMCE Class B Stock are entitled to elect, voting as a class,
75% of the AMCE Board of Directors, and holders of AMCE Common Stock are
entitled to elect, voting as a class, 25% of the AMCE Board of Directors. Each
share of AMCE Class B Stock is convertible into one share of AMCE Common Stock.
Subject to the prior rights of holders of shares of AMCE $1.75 Cumulative
Convertible Preferred Stock ("Convertible Preferred Stock"), holders of AMCE
Common Stock and AMCE Class B Stock are entitled to receive, pro rata per share,
such dividends as may be declared by the AMCE Board. Holders of AMCE Common
Stock and AMCE Class B Stock are entitled to receive, pro rata per share,
consideration of equal value in any merger or consolidation. See "Information
about the Company--Description of AMCE Capital Stock."
This Proxy--Information Statement/Prospectus is first being mailed on or
about to all stockholders of AMCE of record on , 1997
(the "AMCE Record Date"), whether or not such stockholders are entitled to vote
at the AMCE Special Meeting.
This Proxy--Information Statement/Prospectus and accompanying form of proxy
are first being mailed on or about to all shareholders of DI of record on
, 1997 (the "DI Record Date").
--------------
THIS PROXY--INFORMATION STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION IN SUCH JURISDICTION. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROXY-- INFORMATION STATEMENT/PROSPECTUS IN CONNECTION WITH THE OFFERING MADE
HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY AMCE, DI OR ANY OTHER PERSON. NEITHER
THE DELIVERY OF THIS PROXY--INFORMATION STATEMENT/PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF AMCE OR DI SINCE SUCH DATE. ALL INFORMATION
REGARDING AMCE IN THIS PROXY-- INFORMATION STATEMENT/PROSPECTUS HAS BEEN
SUPPLIED BY AMCE, AND ALL INFORMATION REGARDING DI HAS BEEN SUPPLIED BY DI.
--------------
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
MS. NANCY L. GALLAGHER, VICE PRESIDENT AND SECRETARY OF AMCE, 106 WEST 14TH
STREET, KANSAS CITY, MISSOURI 64105 (TELEPHONE: (816) 221-4000). IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY [DATE
FIVE BUSINESS DAYS PRIOR TO THE DATE OF AMCE SPECIAL MEETING.
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TABLE OF CONTENTS
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SUMMARY............................................................................. 1
Synopsis...................................................................... 1
The Merger.................................................................... 4
The Company................................................................... 11
Recent Note Offering and Amendment to Credit Facility......................... 13
Durwood, Inc.................................................................. 14
Market Value and Dividends.................................................... 15
Summary Financial Data........................................................ 15
Pro Forma Per Share Data...................................................... 19
RISK FACTORS........................................................................ 20
THE AMCE SPECIAL MEETING............................................................ 22
THE MERGER.......................................................................... 25
Background of the Merger...................................................... 25
Reports of Advisors........................................................... 31
Reasons for Recommendation.................................................... 32
Material Terms of the Merger.................................................. 36
The Merger Agreement........................................................ 36
The Stock Agreement......................................................... 39
The Registration Agreement.................................................. 41
The Indemnity Agreement..................................................... 42
General Effects of the Merger................................................. 44
Management and Operations of AMCE After the Merger............................ 46
Certain Federal Income Tax Consequences....................................... 46
Interests of Certain Persons in the Merger.................................... 47
Dissenters' Rights............................................................ 48
Accounting Treatment.......................................................... 49
CAPITALIZATION OF THE COMPANY....................................................... 50
INFORMATION ABOUT THE COMPANY....................................................... 51
Dividends and Price Range of AMCE Common Stock................................ 51
Selected Financial Data....................................................... 52
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................... 56
Business of the Company....................................................... 65
Management of the Company..................................................... 76
Certain Transactions.......................................................... 87
Description of AMCE Capital Stock............................................. 89
INFORMATION ABOUT DI................................................................ 93
Selected Financial Data....................................................... 93
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................... 97
Business of DI................................................................ 106
Security Ownership of DI...................................................... 107
Market for and Dividends on DI Stock.......................................... 107
COMPARISON OF AND RIGHTS OF HOLDERS OF AMCE COMMON AND CLASS B STOCK AND DI STOCK... 107
DI SPECIAL MEETING.................................................................. 113
STOCKHOLDER PROPOSALS............................................................... 114
LEGAL MATTERS....................................................................... 114
EXPERTS............................................................................. 114
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INCORPORATION BY REFERENCE.......................................................... 114
AVAILABLE INFORMATION............................................................... 115
INDEX TO FINANCIAL STATEMENTS....................................................... F-1
Annex 1 - Agreement and Plan of Merger and Reorganization (the "Merger Agreement") A1-1
Exhibit A to Merger Agreement - DI Pre-Merger Action Plan A1-20
Exhibit B to Merger Agreement - Stock Agreement A1-21
Exhibit C to Merger Agreement - Registration Agreement A1-31
Exhibit D to Merger Agreement - Indemnification Agreement A1-46
Exhibit B to Indemnification Agreement - Escrow Agreement A1-55
Annex 2 - Opinion of Furman Selz LLC A2-1
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SUMMARY
THE FOLLOWING IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION AND CONSOLIDATED
FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, CONTAINED ELSEWHERE IN THIS
PROXY-- INFORMATION STATEMENT/PROSPECTUS AND THE EXHIBITS HERETO. STOCKHOLDERS
ARE URGED TO READ THIS PROXY--INFORMATION STATEMENT/PROSPECTUS, INCLUDING
EXHIBITS, IN ITS ENTIRETY. COPIES OF THE MERGER AGREEMENT, THE REGISTRATION
AGREEMENT, THE STOCK AGREEMENT AND THE INDEMNIFICATION AGREEMENT REFERRED TO
HEREIN ARE SET FORTH IN ANNEX 1 HERETO, AND THE SUMMARIES OF SUCH DOCUMENTS
CONTAINED HEREIN ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE FULL TEXTS
OF SUCH AGREEMENTS.
AS USED HEREIN, THE TERM "COMPANY" MEANS AMC ENTERTAINMENT INC. ("AMCE")
AND, UNLESS THE CONTEXT OTHERWISE REQUIRES, ITS SUBSIDIARIES, INCLUDING AMERICAN
MULTI-CINEMA, INC. ("AMC") AND ITS SUBSIDIARIES. REFERENCES TO (I) "MR. STANLEY
H. DURWOOD" INCLUDE, IF THE CONTEXT REQUIRES, MR. STANLEY H. DURWOOD
INDIVIDUALLY AND AS TRUSTEE OF THE 1992 DURWOOD, INC. VOTING TRUST DATED
DECEMBER 12, 1992 (THE "1992 TRUST") AND AS TRUSTEE OF THE TRUST CREATED
PURSUANT TO THE REVOCABLE TRUST AGREEMENT OF MR. STANLEY H. DURWOOD DATED AUGUST
14, 1989, AS AMENDED (THE "1989 TRUST"), (II) "DURWOOD FAMILY STOCKHOLDERS"
MEANS MR. STANLEY H. DURWOOD AND HIS CHILDREN, MRS. CAROL D. JOURNAGAN, MR.
EDWARD D. DURWOOD, MR. THOMAS A. DURWOOD, MRS. ELISSA D. GRODIN, MR. BRIAN H.
DURWOOD AND MR. PETER J. DURWOOD (COLLECTIVELY, THE "DURWOOD CHILDREN"), (III)
"UNAFFILIATED STOCKHOLDERS" MEANS STOCKHOLDERS OF AMCE OTHER THAN THE DURWOOD
FAMILY STOCKHOLDERS, (IV) "DI" MEANS DURWOOD, INC., A MISSOURI CORPORATION, (V)
"DELTA" MEANS DELTA PROPERTIES, INC., A MISSOURI CORPORATION AND A SUBSIDIARY OF
DI, AND (VI) "AAE" MEANS AMERICAN ASSOCIATED ENTERPRISES, A MISSOURI LIMITED
PARTNERSHIP.
SYNOPSIS
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THE COMPANY..................... The Company is primarily engaged in the theatrical
exhibition business. As of April 3, 1997, it operated 228
theatres with an aggregate of 1,957 screens located in 23
states, the District of Columbia, Portugal and Japan.
DURWOOD, INC.................... DI is a holding company whose principal shareholders are
Mr. Stanley H. Durwood and AAE. Mr. Stanley H. Durwood
owns 119,500, or 99%, of the 120,000 outstanding shares of
DI Class A Stock, representing approximately 75% of the
voting power of DI, and AAE owns 40,784, or 100%, of the
outstanding shares of DI Class B Stock, representing
approximately 25% of the voting power of DI. AAE's
partners are Mr. Stanley H. Durwood and the Durwood
Children. Mr. Stanley H. Durwood is the sole director of
DI and his son, Mr. Edward D. Durwood, is the managing
general partner of AAE. DI's principal asset consists of
AMCE stock and at present it has no significant business
activity other than the ownership of such AMCE stock.
DATE, TIME AND PLACE OF AMCE The AMCE Special Meeting will be held on, 1997
SPECIAL MEETING............... at , local time, at , Kansas
City, Missouri.
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ACME RECORD DATE;
STOCKHOLDERS
ENTITLED TO VOTE.............. The AMC Board has set , 1997 as the record
date for the AMCE Special Meeting (the "AMCE Record
Date"). Holders of AMCE Common Stock and AMCE Class B
Stock on the AMCE Record Date will be entitled to vote at
the AMCE Special Meeting. On the AMCE Record Date, there
were shares of AMCE Common Stock outstanding, each of
which will be entitled to one vote on each matter properly
submitted to stockholders at the AMCE Special Meeting, and
11,157,000 shares of AMCE Class B Stock outstanding, each
of which will be entitled to ten votes on each matter
properly submitted to stockholders at the AMCE Special
Meeting.
DATE, TIME AND PLACE OF
DI SPECIAL MEETING............ The DI Special Meeting will be held on , 1997
at , local time, at , Kansas
City Missouri.
DI RECORD DATE; SHAREHOLDERS
ENTITLED TO VOTE.............. The record date for the DI Special Meeting is
, 1997 (the "DI Record Date"). Holders of DI
Class A stock and DI Class B Stock on the DI Record Date
will be entitled to vote at the DI Special Meeting. Each
share of DI Class A Stock and DI Class B Stock will be
entitled to one vote on each matter properly submitted for
vote to DI shareholders at the DI Special Meeting.
PURPOSE OF SPECIAL MEETINGS..... At the Special Meetings, stockholders of AMCE and DI will
be asked to approve the Merger Agreement between AMCE and
its controlling stockholder, DI.
THE MERGER...................... If the Merger Agreement is approved, DI will be merged
into AMCE, and AMCE will be the surviving corporation in
the Merger. In the Merger, shares of DI stock will be
exchanged for shares of AMCE stock. There will be no
increase in the aggregate number of outstanding shares of
AMCE as a result of the Merger, although the number of
outstanding shares of AMCE Common Stock will increase and
the number of outstanding shares of AMCE Class B Stock
will decrease. SHARES OF AMCE STOCK HELD BY STOCKHOLDERS
OTHER THAN DI WILL REMAIN ISSUED AND OUTSTANDING AND WILL
NOT BE EXCHANGED IN THE MERGER. See "--The Merger--
General."
The Merger has been approved by a Special Committee of the
AMCE Board consisting of Messrs. Charles J. Egan, Jr. and
Paul E. Vardeman (the "Special Committee"), by the New
Independent Directors of AMCE (as defined herein under
"--The Derivative Action Settlement Agreement") and by the
full AMCE Board. The Merger has also been approved by Mr.
Stanley H. Durwood, as sole director of DI.
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AMCE REASONS
FOR THE MERGER................ The Special Committee of the AMCE Board has concluded that
the Merger is fair to, and in the best interests of, AMCE
and its unaffiliated stockholders because (i) it will
increase the voting interest of AMCE or unaffiliated
stockholders, (ii) it will simplify the corporate
structure of AMCE, (iii) it will be accounted for as a
corporate reorganization, will not affect AMCE's total
capitalization and will have no tax effect on unaffiliated
stockholders, and (iv) the Durwood Family Stockholders
have agreed to sell a portion of the shares they receive
in the Merger in a registered secondary offering, which
will increase the public "float" and liquidity of AMCE
Common Stock, as a result of which the volatility of daily
stock price changes may be reduced, the bid/ asked spread
for AMCE Common Stock may narrow and the interest of
institutional investors in the AMCE Common Stock may
increase. These effects, over time, may enhance
shareholder value. Because AMCE will be reimbursed by Mr.
Stanley H. Durwood and certain related trusts and entities
for 50% and, in certain instances, 100% of its expenses in
connection with the Merger and subsequent secondary
offering by the Durwood Family Stockholders, the Special
Committee concluded that all of these benefits are
possible without substantial cost to AMCE or its
unaffiliated stockholders. The AMCE Board has adopted the
reasons of the Special Committee for approving the Merger.
See "--AMCE Reasons for the Merger" and "The
Merger--Certain Federal Income Tax Consequences."
DI REASONS FOR THE MERGER....... The Merger will permit the Durwood Family Stockholders to
hold their interests in AMCE directly instead of
indirectly through DI and AAE, thereby enhancing their
liquidity through ownership of a marketable security.
VOTE REQUIRED................... Under the Delaware General Corporation Law (the "DGCL")
and AMCE's Certificate of Incorporation, the Merger
Agreement requires the approval of the holders of a
majority of the votes of shares of AMCE Common Stock and
AMCE Class B Stock outstanding on the AMCE Record Date,
with such shares voting together as a single class and
with each share of AMCE Common Stock being entitled to one
vote and each share of AMCE Class B Stock being entitled
to ten votes. As of the AMCE Record Date, DI owned all
outstanding shares of AMCE Class B Stock and 2,641,951, or
approximately 40%, of the outstanding shares of AMCE
Common Stock. As of the AMCE Record Date, other directors
and executive officers of AMCE were entitled to vote
[19,418] shares of AMCE Common Stock. DI has indicated its
intention to vote the shares of AMCE Stock which it owns
in favor of the Merger Agreement.
The Merger Agreement also requires the approval of the
holders of two-thirds of the outstanding shares of DI
Class A Stock and DI Class B Stock, voting together as a
single class, and of the
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holders of a majority of the shares of DI Class A Stock
and DI Class B Stock, respectively, each voting as a
separate class. Mr. Stanley H. Durwood and the Durwood
children (provided the Merger occurs before September 30,
1997) have indicated their intention to cause the shares
of DI Stock which they beneficially own to be voted in
favor of the Merger Agreement.
Upon the recommendation of the Special Committee, a
condition to the Merger is that the Merger Agreement also
receive approval of the holders of a majority of shares of
AMCE Common Stock present or represented by proxy and
voting at the AMCE Special Meeting, other than those
shares held by DI, the Durwood Family Stockholders, their
spouses, their children living in the same household and
directors and officers of AMCE.
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THE MERGER
GENERAL
The Merger has been sought by the Durwood Family Stockholders so that they
may hold their interests in AMCE directly instead of indirectly through DI and
AAE. AMCE was asked to consider engaging in the Merger and related transactions,
and the Special Committee was appointed to consider and review the Merger. If
the Special Committee considered the Merger to be in the best interests of AMCE
and its unaffiliated stockholders, it was to negotiate the terms of the Merger
and related transactions and make recommendations to the full AMCE Board in this
connection. The Special Committee was given the full power and authority of the
AMCE Board to reject the Merger. After its investigation and analysis and
negotiations, the Special Committee has recommended the approval of the Merger
Agreement and related transactions. Each of the New Independent Directors and
the full AMCE Board have also voted to approve the Merger Agreement and related
transactions. See "The Merger--Background of the Merger." Consummation of the
Merger also has been made a condition of settlement of the Derivative Action (as
defined herein) to which the Company and certain of its current and former
directors are parties. See "--The Derivative Action" and "Information About the
Company--Business of the Company--Legal Proceedings."
Pursuant to the terms and subject to the conditions of the Merger Agreement,
upon consummation of the Merger (i) each share of AMCE Common Stock and AMCE
Class B Stock held by DI will be canceled, (ii) each share of DI Class A Stock
presently held by Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust will
be converted into and exchanged for 32.142857 shares of AMCE Class B Stock, so
that the 119,500 shares of DI Class A Stock presently held by Mr. Stanley H.
Durwood, the 1989 Trust or the 1992 Trust will be convertible into and
exchangeable for an aggregate of 3,841,071 shares of AMCE Class B Stock, (iii)
each share of DI Class A Stock presently held by persons other than Mr. Stanley
H. Durwood, the 1989 Trust or the 1992 Trust will be converted into and
exchanged for 32.142857 shares of AMCE Common Stock, so that the 500 shares of
DI Class A Stock presently held by persons other than Mr. Stanley H. Durwood,
the 1989 Trust or the 1992 Trust will be convertible into and exchangeable for
an aggregate of 16,071 shares of AMCE Common Stock, (iv) each share of DI Class
B Stock to be held by Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust
will be converted into and exchanged for 243.767528 shares of AMCE Class B
Stock, so that the 4,818.4664 shares of DI Class B Stock to be held by Mr.
Stanley H. Durwood, the 1989 Trust or the 1992 Trust will be convertible into
and exchangeable for an aggregate of 1,174,586 shares of AMCE Class B Stock, and
(v) each share of DI Class B Stock to be held by the Durwood Children will be
converted into and exchanged for 243.767341 shares of AMCE Common Stock, so that
the 35,965.5336 shares of DI Class B Stock to be held by the Durwood Children
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will be convertible into and exchangeable for an aggregate of 8,767,223 shares
of AMCE Common Stock.
SHARES OF AMCE STOCK HELD BY STOCKHOLDERS OTHER THAN DI WILL REMAIN ISSUED
AND OUTSTANDING AND WILL NOT BE EXCHANGED IN THE MERGER. HOLDERS OF AMCE STOCK
OTHER THAN DI SHOULD NOT SURRENDER THEIR SHARES IN CONNECTION WITH THE MERGER.
Prior to consummation of the Merger, DI will convert 6,141,343 shares of
AMCE Class B stock into an equivalent number of shares of AMCE Common Stock.
Concurrent with the consummation of the Merger (and as a condition thereto), AAE
will be liquidated. After giving effect to the Merger and liquidation of AAE,
there will be issued and outstanding up to an aggregate of 5,015,657 shares of
AMCE Class B Stock, all of which will be beneficially owned by Mr. Stanley H.
Durwood, and (based on the number of such shares outstanding as of April 3,
1997) 12,725,312 shares of AMCE Common Stock, of which 8,767,223, or
approximately 69% of the outstanding shares of AMCE Common Stock, will be
beneficially owned by the Durwood Children.
Prior to the Effective Time of the Merger (as defined herein under "The
Merger--Material Terms of the Merger--The Merger Agreement"), all of DI's assets
(other than its equity interest in AMCE) will be contributed to Delta. In
addition, DI's other subsidiaries, other than AMCE and its subsidiaries, have
been merged into Delta and Delta has agreed to assume certain DI liabilities.
Delta shares will be distributed to DI's shareholders so that at the Effective
Time DI's sole assets will consist of stock of AMCE and its beneficial interest
in certain tax credits and operating loss carryforwards.
If the Merger occurs, Mr. Stanley H. Durwood will indemnify AMCE for all
losses resulting from any breach by DI of the Merger Agreement or resulting from
any liability of DI and for all taxes attributable to DI prior to the Effective
Time and all losses in connection therewith. If the Merger does not occur,
subject to certain limitations, Mr. Stanley H. Durwood and Delta will indemnify
AMCE against losses resulting from any breach by DI of the Merger Agreement. See
"--The Indemnification Agreement" and "The Merger--Material Terms of the
Merger--The Merger Agreement--Expenses."
Under the Merger Agreement, AMCE will be responsible for paying 50% of its
costs in connection with the Merger, which are estimated to be approximately $2
million in the aggregate. If the Merger occurs, Mr. Stanley H. Durwood and Delta
have agreed, subject to certain limitations, to indemnify AMCE for all of DI's
Merger expenses which are not paid prior to the Effective Time and for 50% of
AMCE's expenses in connection with the Merger. This obligation of Mr. Stanley H.
Durwood may be offset by certain Credit Amounts (as defined below under
"--Indemnification Agreement") resulting from the realization by AMCE of tax
benefits from the utilization of certain tax credits and operating loss
carryforwards of DI. See "--The Indemnification Agreement." If the Merger is not
consummated for any reason (other than as a result of certain terminations by
the AMCE Board), DI will be responsible for all of its expenses and AMCE's
expenses in the Merger. If the Merger is not consummated as a result of certain
terminations by the AMCE Board, DI will be responsible for all of its expenses
and 50% of AMCE's expenses in the Merger. Mr. Stanley H. Durwood and Delta have
agreed to indemnify AMCE for any breach by DI of such obligation described in
the preceding two sentences.
As promptly as practicable after March 31, 2000, AMCE will pay Mr. Stanley
H. Durwood an amount equal to any Credit Amounts which have not been used to
offset various of his obligations to AMCE under the Stock Agreement, the
Indemnification Agreement and the Registration Agreement. If such benefits are
realized after such date, the related Credit Amounts will be paid to Mr. Stanley
H. Durwood when they are realized. See "--The Indemnification Agreement; --The
Stock Agreement; --The Registration Agreement."
For a period of three years after the Merger, the Durwood Children have
agreed to give an irrevocable proxy to the Secretary and each Assistant
Secretary of AMCE to vote their shares of AMCE Common Stock in the election of
directors for each candidate in the same proportionate manner as the aggregate
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votes cast in such elections by other holders of AMCE Common Stock not
affiliated with AMCE, its directors and officers. See "--The Stock Agreement."
If the Merger Agreement is not approved by the requisite vote of AMCE's
stockholders, the Merger Agreement will be terminated and the Merger abandoned.
THE REGISTRATION AGREEMENT; SECONDARY OFFERING
As a condition to the Merger, AMCE and the Durwood Family Stockholders will
enter into a registration agreement (the "Registration Agreement") pursuant to
which the Durwood Family Stockholders will agree to sell at least 3,000,000
shares of AMCE Common Stock in a registered secondary offering (the "Secondary
Offering") and AMCE will agree to file a registration statement with respect to
such shares so that the registration statement becomes effective not more than
twelve months and not less than six months after the Merger. Consummation of the
Secondary Offering is subject to certain conditions and other rights of the
parties. Subject to certain conditions, the expenses of the Secondary Offering
will be borne by Mr. Stanley H. Durwood and Delta. See "The Merger--Material
Terms of the Merger--The Registration Agreement." This obligation may be offset
by certain Credit Amounts resulting from the realization by AMCE of tax benefits
from the utilization of certain tax credits and operating loss carryforwards of
DI. See "--Indemnification Agreement."
Of the 3,000,000 shares to be sold in the Secondary Offering, 500,000 will
be sold by Mr. Stanley H. Durwood or his charitable donees who may agree to
participate in the Secondary Offering. After giving effect to the Merger and
Secondary Offering (and disregarding shares which may be acquired by Mr. Stanley
H. Durwood upon the exercise of employee stock options, shares which he may
transfer to the Durwood Children under the Share Adjustment (as defined herein
under "The Merger--Background of the Merger--Subsequent Meetings of the Special
Committee" ) and shares of AMCE Common Stock which might be issued upon
conversion of shares of AMCE's outstanding Convertible Preferred Stock), (i)
unaffiliated stockholders will own approximately 6.9 million, or 53%, of the
outstanding shares of AMCE Common Stock, and their voting interest in AMCE will
have increased from approximately 3.3% to 11.9%, (ii) Mr. Stanley H. Durwood
will own approximately 4.5 million, or 100% of the outstanding, shares of AMCE
Class B Stock, which will represent approximately 77% of the combined voting
power of the AMCE Class B Stock and AMCE Common Stock, based on the number of
shares outstanding as of April 3, 1997, and will be entitled to elect 75% of the
AMCE Board, and (iii) the Durwood Children will own in the aggregate
approximately 6.3 million shares of AMCE Common Stock, which will represent
approximately 47% of the number of outstanding shares of that class, based on
the number of shares outstanding as of April 3, 1997. Holders of AMCE Common
Stock are entitled to elect 25% of the AMCE Board.
The number of shares owned by Mr. Stanley H. Durwood could be further
reduced and the shares owned by the Durwood Children increased as a result of
other agreements among the Durwood Family Stockholders. See "Risk Factors--
Controlling Stockholders" and "The Merger--Background of the Merger--Subsequent
Meetings of the Special Committee."
THE INDEMNIFICATION AGREEMENT
In connection with the Merger, Mr. Stanley H. Durwood, Delta and the Durwood
Children have entered into an agreement (the "Indemnification Agreement")
agreeing to indemnify AMCE from certain losses and expenses. If the Merger
occurs, (i) Mr. Stanley H. Durwood will indemnify AMCE from losses resulting
from any breach by DI of its representations, warranties and covenants in the
Merger Agreement or based upon any liability of DI and for any taxes (or losses
incurred by AMCE in connection therewith) attributable to DI or its subsidiaries
for taxable periods prior to the Effective Time, (ii) each of the Durwood Family
Stockholders will (severally and not jointly) indemnify AMCE for any losses
which it might incur as a result of the breach by such party of certain tax
related representations, warranties and
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covenants made by such party in the Stock Agreement and (iii) subject to certain
conditions, Mr. Stanley H. Durwood and Delta will indemnify AMCE from and
against all of DI's Merger expenses that have not been paid prior to the
Effective Time and 50% of AMCE's Merger expenses. If the Merger does not occur,
subject to certain conditions, Mr. Stanley H. Durwood and Delta will indemnify
AMCE from losses resulting from any breach by DI of its representations,
warranties and covenants in the Merger Agreement. If the Merger is not
consummated for any reason (other than as a result of certain terminations by
the AMCE Board), DI will be responsible for all of its expenses and AMCE's
expenses in the Merger. If the Merger is not consummated as a result of certain
terminations by the AMCE Board, DI will be responsible for all of its expenses
and 50% of AMCE's expenses in the Merger. Mr. Stanley H. Durwood and Delta have
agreed to indemnify AMCE for any breach by DI of such obligation described in
the preceding two sentences.
Mr. Stanley H. Durwood's obligations to pay DI's unpaid expenses and 50% of
AMCE's Merger expenses if the Merger occurs, as required by the Indemnification
Agreement, to pay AMCE's expenses in the Secondary Offering, as required by the
Registration Agreement, and to pay a $2 million penalty and 100% of AMCE's
Merger expenses if the Secondary Offering does not occur, as required by the
Stock Agreement, may be offset by certain credit amounts resulting from net tax
benefits realized by AMCE from the utilization by AMCE of DI's alternative
minimum tax credit carryforwards and Missouri operating loss carryforwards
("Credit Amounts"). Any Credit Amount not so applied will be paid to Mr. Stanley
H. Durwood promptly after March 31, 2000. Any Credit Amount that arises after
March 31, 2000 also will be paid promptly to Mr. Stanley H. Durwood. The maximum
amount of Credit Amounts that Mr. Durwood could be paid or used to offset his
responsibilities to AMCE is approximately $1,100,000, reduced by any amounts
utilized on separate DI income tax returns for 1996 and the portion of 1997
prior to the Effective Time.
In connection with the Merger, AMCE has agreed to indemnify the Durwood
Children from losses resulting from any breach by AMCE of any representation,
warranty, covenant or agreement made by it in the Merger Agreement.
The foregoing indemnification obligations generally will lapse on March 31,
2000.
See "The Merger--Material Terms of the Merger--The Indemnification
Agreement."
THE STOCK AGREEMENT
As a condition precedent to the Merger, the Durwood Family Stockholders will
enter into an agreement (the "Stock Agreement") which, for three years, limits
the ability of the Durwood Children to deposit shares in a voting trust, solicit
proxies, participate in election contests or make a proposal concerning an
extraordinary transaction involving AMCE. Under the Stock Agreement, the Durwood
Children will also agree, among other matters, for a period of three years, (i)
to grant an irrevocable proxy to the Secretary and each Assistant Secretary of
AMCE to vote their shares of AMCE Common Stock for each candidate to the AMCE
Board in the same proportion as the aggregate votes cast by all other
stockholders not affiliated with AMCE, its directors or officers and (ii) that
AMCE will have a right of first refusal with respect to any such shares the
Durwood Children wish to sell in a transaction exempt from registration, except
for such shares sold in brokers' transactions. See "The Merger--Material Terms
of the Merger--The Stock Agreement." The Stock Agreement obligates Mr. Stanley
H. Durwood and Delta, whose shares will be distributed by DI to the Durwood
Family Stockholders before the Merger, to pay AMCE $2 million and to reimburse
AMCE for all of its Merger expenses if the Secondary Offering is not consummated
within 12 months after the Merger. This obligation may be offset by certain
Credit Amounts resulting from the realization by AMCE of tax benefits from the
utilization of certain tax credits and operating loss carryforwards of DI. See
"--Indemnification Agreement."
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Company has been advised by special tax counsel that the Merger will
qualify for federal income tax purposes as a reorganization under the Internal
Revenue Code of 1986, as amended (the "Code"). Accordingly, no taxable income,
gain or loss will be recognized by AMCE, DI, the AMCE stockholders or the DI
shareholders as a result of the Merger (other than incident to the receipt by DI
shareholders of cash for fractional shares or by Mr. Stanley H. Durwood of
Credit Amounts). See "--The Indemnification Agreement." Because the tax
consequences of the Merger to DI shareholders under federal, state, local and
foreign tax laws may vary depending upon a taxpayer's particular situation, it
is recommended that each DI shareholder consult with his or her own tax advisor
regarding the specific tax consequences of the Merger to that particular person.
For a more complete description of the federal income tax consequences of the
Merger, see "The Merger--Certain Federal Income Tax Consequences."
ACCOUNTING TREATMENT
Management expects that the Merger will be accounted for as a corporate
reorganization and that, accordingly, the recorded balances for consolidated
assets, liabilities, total stockholders' equity and results of operations of the
Company will not be affected.
AMCE REASONS FOR THE MERGER
The Special Committee and the full AMCE Board concluded that the Merger is
fair to, and in the best interests of, AMCE and its unaffiliated stockholders
for the reasons set forth below.
- The Merger will increase the voting interest of the unaffiliated
stockholders from 3.3% to 11.9% (assuming no conversions of AMCE's
outstanding Convertible Preferred Stock) and from 7.8% to 14.1% (assuming
the conversion of AMCE's Convertible Preferred Stock). This increase will
be a result of the conversion by DI of shares of AMCE Class B Stock (which
have ten votes per share) into shares of AMCE Common Stock (which have one
vote per share) in connection with the Merger.
- The Merger will simplify the corporate structure of AMCE and related
companies.
- The Merger will be accounted for as a corporate reorganization, will not
affect AMCE's total capitalization and will have no tax effect on AMCE or
its unaffiliated stockholders.
- As a result of the Merger, shares of AMCE stock will be distributed to the
Durwood Family Stockholders who have agreed, subject to certain
conditions, to sell a portion of those shares in the Secondary Offering.
This Secondary Offering will benefit AMCE and its unaffiliated
stockholders because:
- The Secondary Offering will increase the public "float" of the AMCE
Common Stock by approximately 75% if the minimum of 3,000,000 shares is
sold. The voting interest of the unaffiliated stockholders will
increase from 14.1% to 19.7% (assuming the Convertible Preferred Stock
is converted and the shares sold in the Secondary Offering are
purchased by unaffiliated stockholders).
- By increasing the public float and liquidity, the Secondary Offering
may make it easier for stockholders to sell or buy shares and may
reduce the volatility of daily stock price changes, narrow the
bid/asked spread and increase the interest of institutional investors
in AMCE Common Stock. These effects, over time, may enhance shareholder
value.
Because AMCE will be reimbursed by Mr. Stanley H. Durwood and certain
related trusts and entities for 50% and, in certain instances, 100% of its
expenses in connection with the Merger and the Secondary
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Offering, all of these benefits are possible without substantial cost to AMCE or
its stockholders. See "The Merger--Background of the Merger--Reasons for
Recommendations."
OPINION OF FINANCIAL ADVISOR
Furman Selz LLC ("Furman Selz") has delivered to the Special Committee and
the AMCE Board its opinion to the effect that the consideration to be paid by
AMCE in the Merger is fair, from a financial point of view, to AMCE. See "The
Merger--Background of Merger--Reports of Advisors." The full text of the written
opinion, which sets forth the assumptions made, procedures followed and the
matters considered in and scope of the review by Furman Selz in rendering its
opinion, is attached as Annex 2 and should be read in its entirety. See "The
Merger--Background of the Merger--Reasons for Recommendation--Report of Furman
Selz" for information regarding, among other things, the selection of Furman
Selz and its compensation in connection with the Merger.
RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE AMCE BOARD
Upon the recommendation of the Special Committee, the AMCE Board (including
the New Independent Directors) has unanimously approved the Merger pursuant to
the terms of the Merger Agreement, believes that the Merger is in the best
interests of AMCE and its stockholders and recommends that the stockholders vote
FOR the proposal to approve the Merger Agreement. See "The Merger--Background of
the Merger--Reasons for Recommendations."
DI REASONS FOR THE MERGER
The Merger is being sought by the Durwood Family Stockholders pursuant to
their efforts to dissolve AAE, a family partnership, and their desire to own
AMCE shares directly instead of indirectly through DI, thereby enhancing the
liquidity of their investment in AMCE through ownership of a marketable security
instead of one that is not publicly traded.
RECOMMENDATION OF THE DI BOARD
Mr. Stanley H. Durwood, DI's sole board member, has approved the Merger
pursuant to the terms of the Merger Agreement, believes that the Merger is in
the best interests of DI and its shareholders and recommends that the DI
shareholders vote FOR the proposal to approve the Merger Agreement.
DISSENTERS' RIGHTS
Holders of AMCE Common Stock do not have appraisal rights under the DGCL in
connection with the Merger. Holders of AMCE Class B Stock have appraisal rights
under the DGCL in connection with the Merger; however, DI is the sole
stockholder of AMCE Class B Stock and is a party to the Merger Agreement.
Shareholders of DI are entitled to dissenters' appraisal rights under The
General and Business Corporation Law of Missouri (the "GBCLM"), but a condition
to the Merger is that no DI shareholder shall have exercised his or her
dissenters' rights under the GBCLM. See "The Merger-- Dissenters' Rights."
REGULATORY MATTERS
The Merger is not subject to any federal or state regulatory requirements or
approvals.
THE DERIVATIVE ACTION SETTLEMENT AGREEMENT
The dissolution of AAE, the Merger and the sale of at least 3,000,000 shares
of AMCE Common Stock by the Durwood Family Stockholders are provided for in the
settlement of a derivative action (the "Derivative Action") that was filed by
certain stockholders in 1993 against Messrs. Stanley H. Durwood,
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<PAGE>
Edward D. Durwood, Charles J. Egan, Jr., Paul E. Vardeman and a former AMCE
director. In the Derivative Action, plaintiffs allege breach of fiduciary duties
of care, loyalty and candor, mismanagement, constructive fraud and waste of
assets in connection with, among other allegations, the provision of film
licensing, accounting and financial services to the Company by AAE, certain
other transactions with affiliates of the Company, termination payments to a
former officer, certain transactions between the Company and National Cinema
Supply Corporation, and a fee paid by a subsidiary to a former director in
connection with a transaction between the Company and TPI Entertainment, Inc.
Plaintiffs in the Derivative Action seek unspecified money damages and
equitable relief and costs, including reasonable attorneys' fees. See
"Information about the Company--Business of the Company--Legal Proceedings."
On October 10, 1996, counsel for the parties in the Derivative Action
entered into a Stipulation and Agreement of Compromise and Settlement (the
"Derivative Action Settlement Agreement") providing for the discharge and
release of all claims against the defendants, the Durwood Family Stockholders
and the Company relating to such transactions, the proposed settlement, the
Merger, the Secondary Offering and indemnification of defendants for their
expenses, except claims for fraud, misrepresentation or omissions in connection
with the Secondary Offering and claims relating to the implementation of the
settlement. The Derivative Action Settlement Agreement provides, among other
matters, (i) for the dissolution of AAE, the merger of DI into AMCE and the
sale, within 12 months thereafter, of 3,000,000 shares of AMCE Common Stock by
the Durwood Family Stockholders in a public underwritten secondary offering
(which will only be made by means of a prospectus), (ii) for the payment by
defendants of an aggregate of approximately $1.3 million to persons who were
holders of AMCE Common Stock on January 2, 1996 (other than the defendants, DI
or the Durwood Family Stockholders), (iii) the nomination, for three annual
meetings, of two additional outside directors (initially, Messrs. William T.
Grant, II and John P. Mascotte (collectively, with their replacements, if any,
the "New Independent Directors")) to serve on the AMCE Board whose biographical
information has been furnished to plaintiffs' counsel and which persons, to be
nominated, must be serving on the board of another public company or be a member
of senior management of a publicly held company or a privately held company with
$50 million in annual revenues, (iv) that Messrs. Stanley H. Durwood and Edward
D. Durwood will cause the other Durwood Family Stockholders to vote their shares
with respect to the election and reelection of the New Independent Directors in
the same proportion as votes cast by all stockholders not affiliated with AMCE,
its directors and officers, (v) that the New Independent Directors are to have
the ability to approve or disapprove (a) any proposed transaction between AMCE
and any of the Durwood Family Stockholders, except with respect to compensation
issues relating to Mr. Stanley H. Durwood or any other Durwood Family
Stockholder who is an officer of AMCE, which are to be governed by existing AMCE
Board procedures, and (b) the hiring and compensation of any person related to
Mr. Stanley H. Durwood who is not an officer of AMCE, and (vi) that the New
Independent Directors, together with either Messrs. Charles J. Egan, Jr. or Paul
E. Vardeman, are to have the ability to approve or disapprove all other
related-party transactions with all officers, directors and ten percent
stockholders of AMCE.
The Derivative Action Settlement Agreement provides that AMCE will pay the
cost of providing notice of the settlement to its stockholders and for the fees
of the settlement administrator who will be responsible for distributing the
settlement amount to eligible stockholders.
The Derivative Action Settlement Agreement requires court approval and is
conditioned upon, among other things, the consummation of the Merger.
Consistent with the Derivative Action Settlement Agreement, at AMCE's Annual
Meeting of Stockholders held on November 14, 1996, two additional outside
directors, Messrs. John P. Mascotte and William T. Grant, II, were nominated by
the company and elected to the AMCE Board by the holders of AMCE Common Stock.
10
<PAGE>
The members of the Special Committee are parties to the Derivative Action.
Although they will not make any monetary payment out of personal funds as a
result of, or be subject to any sanctions under, the Derivative Action
Settlement Agreement, because they have an interest in such agreement, they may
also be deemed to have an interest in the outcome of the vote on the proposed
Merger Agreement. As described above, the Merger has also been approved by the
New Independent Directors of AMCE and by the full AMCE Board. Upon the
recommendation of the Special Committee, a condition to the Merger is that the
Merger Agreement also receive approval by the holders of a majority of the
outstanding shares of AMCE Common Stock (other than DI, the Durwood Family
Stockholders, their spouses, children sharing the same household and directors
and officers of AMCE) present and voting at the AMCE Special Meeting.
THE COMPANY
The Company is one of the leading theatrical exhibition companies in North
America. In the fiscal year ended March 28, 1996, the Company's revenues were
$657,872,000. As of April 3, 1997, the Company operated 228 theatres with an
aggregate of 1,957 screens located in 23 states, the District of Columbia,
Portugal and Japan. Approximately 61% of the screens operated by the Company are
located in Florida, California, Texas, Missouri and Michigan and approximately
73% of the Company's domestic screens are located in areas among the 20 largest
"Areas of Dominant Influence" (television market areas as defined by Arbitron
Company).
The Company is an industry leader in the development and operation of
"megaplex" and multiplex theatres, primarily in large metropolitan markets.
Megaplex theatres are theatres having at least 14 screens with predominantly
stadium-style seating (seating with an elevation between rows to provide
unobstructed viewing). Multiplex theatres are theatres having two or more
screens, generally without stadium-style seating. The Company believes that its
strategy of developing megaplex theatres has prompted the current theatrical
exhibition industry trend in the United States and Canada toward the development
of larger theatre complexes. This trend has accelerated the obsolescence of many
existing movie theatres by setting new standards for moviegoers, who have
demonstrated their preference for the more attractive surroundings, wider
variety of films, better customer services and more comfortable seating typical
of megaplexes.
In addition to providing a superior entertainment experience, megaplex
theatres realize economies of scale by serving more patrons from common support
facilities, thereby spreading costs over a higher revenue base. The Company's
megaplex theatres have consistently ranked among its top grossing facilities on
a per screen basis. During the thirty-nine weeks ended December 26, 1996,
attendance per screen at the Company's megaplex theatres was 86,200 on an
annualized basis compared to 61,600 for the Company's multiplex theatres.
(During 1995, the last period for which data is available, the theatrical
exhibition industry in the United States averaged approximately 47,000 patrons
per screen.) In addition, during the thirty-nine weeks ended December 26, 1996,
average revenue per patron at the Company's megaplex theatres was $6.62 compared
to $6.04 for its multiplex theatres, and operating cash flow before rent of the
Company's megaplex theatres was 36% of the total revenues of such theatres,
whereas operating cash flow before rent of the Company's multiplex theatres was
32% of total revenues of such theatres. As of April 3, 1997, 591 screens, or
30.2% of the Company's screens, were in megaplex and multiplex theatres with 14
or more screens and of these, 352 screens, or 18.0% of the Company's screens,
were in megaplex theatres. The average number of screens per theatre operated by
the Company is 8.6, compared to an average of 5.9 for the ten largest North
American theatrical exhibition companies (based on number of screens) and 5.2
for all North American theatrical exhibition companies.
The Company continually upgrades its theatre circuit by opening new theatres
(primarily megaplex theatres), adding new screens to existing theatres and
selectively closing unprofitable theatres. Since April 1995, the Company has
opened 24 new theatres with 422 screens, representing 21.6% of its
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current number of screens, and has added 42 screens to existing theatres. Of
these 422 screens, 352 screens were in 17 megaplex locations. Among these new
theatres are the Company's first theatre in Japan, the Canal City 13, in
Fukuoka, and its first theatre in Portugal, the Arrabida 20, in Porto. As of
April 3, 1997, the Company had 21 new theatres under construction having an
aggregate of 514 screens and was adding 44 screens to existing theatres; all of
these theatres and screens will be located in the United States.
Revenues for the Company are generated primarily from box office admissions
and theatre concessions sales, which accounted for 65% and 30%, respectively, of
fiscal 1997 revenues through December 26, 1996. The balance of the Company's
revenues are generated primarily by the Company's on-screen advertising
business, video games located in theatre lobbies and the rental of theatre
auditoriums.
AMCE has three direct wholly-owned subsidiaries, AMC, AMC Entertainment
International, Inc. and National Cinema Network, Inc. All of the Company's
domestic theatrical exhibition business is conducted through AMC and its
subsidiaries. The Company is developing theatres in international markets
through AMC Entertainment International, Inc. and its subsidiaries. The Company
engages in the on-screen advertising business through National Cinema Network,
Inc.
AMCE is a Delaware corporation with its principal executive offices located
at 106 West 14th Street, Kansas City, Missouri 64105-1977. Its telephone number
at such address is (816) 221-4000.
BUSINESS STRATEGY
The Company intends to expand its theatre circuit primarily by developing
new theatres in major markets in the United States and select international
markets. New theatres will primarily be megaplex theatres which will also be
equipped with SONY Dynamic Digital Sound-TM- (SDDS-TM-) and AMC LoveSeat-TM-
style seating (plush, high-backed seats with retractable armrests). Other
amenities may include auditoriums with TORUS-TM- Compound Curved Screens and
High Impact Theatre Systems-TM- (HITS-TM-), which enhance picture and sound
quality, respectively.
The Company's strategy of establishing megaplex theatres enhances attendance
and concessions sales by enabling it to exhibit concurrently a variety of motion
pictures attractive to different segments of the movie-going public. Megaplexes
also allow the Company to match a particular motion picture's attendance
patterns to the appropriate auditorium size (ranging from approximately 90 to
450 seats), thereby extending the run of a motion picture and providing superior
theatre economics. The Company believes that megaplex theatres enhance its
ability to license commercially popular motion pictures and to access
economically prime real estate sites due to its desirability as an anchor
tenant.
The Company believes that the megaplex format will create a new replacement
cycle for the industry. The new format raises moviegoers' expectations by
providing superior viewing lines, comfort, picture and sound quality as well as
increased choices of films and start times. The Company believes that consumers
will increasingly choose theatres based on the quality of the movie-going
experience rather than the location of the theatre. As a result, the Company
believes that older, smaller theatres will become obsolete as the megaplex
concept matures.
The Company believes that significant market opportunities exist for
development of modern megaplex and multiplex theatres in select international
markets. The theatrical exhibition business has become increasingly global and
box office receipts from international markets approximate those of the U.S.
market and are rising at a faster rate. In addition, the production and
distribution of feature films and demand for American motion pictures are
increasing in many countries. The Company believes that its experience in
developing and operating megaplex and multiplex theatres provides it with a
significant advantage in developing megaplex and multiplex facilities in
international markets and the Company intends to utilize this experience, as
well as its existing relationships with domestic motion picture
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studios, to enter certain international markets. The Company's strategy in these
markets is to operate leased theatres and consider partnerships or joint
ventures, where appropriate, to share risk and leverage resources. Presently the
Company's activities in international markets are directed toward Japan,
Portugal, Spain, Hong Kong and Canada, which markets the Company believes are
under screened.
THEATRICAL EXHIBITION INDUSTRY OVERVIEW
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 often the most important factor in establishing its value in
the cable television, videocassette and other ancillary markets. The Company
further believes that the emergence of new motion picture distribution channels
has not adversely affected attendance at theatres and that these distribution
channels do not provide an experience comparable to that of viewing a movie in a
theatre. The Company believes that the public will continue to recognize the
advantages of viewing a movie on a large screen with superior audio and visual
quality, while enjoying a variety of concessions and sharing the experience with
a larger audience.
Annual domestic theatre attendance has averaged approximately one billion
persons since the early 1960s. In 1996, estimated domestic attendance was 1.35
billion. Fluctuations and variances in year-to-year attendance are primarily
related to the overall popularity and supply of motion pictures.
The theatrical exhibition industry in North America is comprised of over 400
exhibitors, approximately 250 of which operate four or more screens. Based on
the listing of exhibitors in the National Association of Theatre Owners (NATO)
1996-97 Encyclopedia of Exhibitions, as of May 1, 1996, the ten largest
exhibitors (in terms of number of screens) operated approximately 56% of the
total screens, with no one exhibitor operating more than ten percent of the
total screens.
RECENT NOTE OFFERING AND AMENDMENT TO CREDIT FACILITY
NOTE OFFERING. On March 19, 1997, AMCE sold $200 million aggregate
principal amount of 9 1/2% Senior Subordinated Notes due 2009 (the "Notes") in a
private transaction conforming with Rule 144A and Regulation S (the "Note
Offering"). The Notes were issued under an Indenture dated March 19, 1997 (the
"Note Indenture") between AMCE and The Bank of New York, as Trustee. Net
proceeds from the issuance of the Notes (approximately $193.8 million) were used
to reduce borrowings under AMCE's $425 million credit facility (the "Credit
Facility"). Amounts repaid under the Credit Facility will again be available for
borrowing thereunder, and AMCE intends to utilize this increased availability to
continue with its current expansion program.
Interest on the Notes is payable on March 15 and September 15 of each year,
commencing September 15, 1997. The Notes are redeemable at the option of AMCE,
in whole or in part, at any time on or after March 15, 2002 at 104.75% of the
principal amount thereof, declining ratably to 100% of the principal amount
thereof on or after March 15, 2006, plus in each case interest accrued to the
redemption date. Upon a change of control (as defined in the Note Indenture),
each holder of the Notes will have the right to require AMCE to repurchase such
holder's Notes at a price equal to 101% of the principal amount thereof plus
accrued and unpaid interest to the date of repurchase. The Notes are
subordinated to all existing and future senior indebtedness (as defined in the
Note Indenture) of AMCE.
AMCE has agreed to use its best efforts to (i) file and cause to become
effective by August 16, 1997, a registration statement relating to a registered
offer to exchange the Notes (the "Exchange Offer") for notes of AMCE with terms
identical in all material respects to the Notes and (ii) cause the Exchange
Offer to be consummated by September 15, 1997. If the Exchange Offer
registration statement is not declared effective by August 16, 1997, AMCE has
agreed that in lieu thereof it will use its best efforts to cause to become
effective by September 15, 1997 a shelf registration statement with respect to
the Notes. In the event that either (a) the Exchange Offer registration
statement is not filed on or prior to June 17, 1997,
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<PAGE>
(b) the Exchange Offer registration statement is not declared effective on or
prior to August 16, 1997 or (c) the Exchange Offer is not consummated or a shelf
registration statement, with respect to the Notes, is not declared effective on
or prior to September 15, 1997, the interest rate borne by the Notes will
increase by 0.50% per annum following June 17, 1997 in the case of clause (a)
above, following August 16, 1997 in the case of clause (b) above and following
September 15, 1997 in the case of clause (c) above. The aggregate amount of such
increase will in no event exceed 1.00% per annum. Upon (x) the filing of the
Exchange Offer registration statement after June 17, 1997, (y) the effectiveness
of the Exchange Offer registration statement after August 16, 1997 or (z) the
consummation of the Exchange Offer or the effectiveness of a shelf registration
statement, as the case may be, after September 15, 1997, the interest rate borne
by the Notes from the date of filing, effectiveness or consummation, as the case
may be, will be reduced to 9 1/2%.
The Note Indenture contains certain covenants that, among other things,
restrict the ability of AMCE and its subsidiaries to: incur additional
indebtedness; pay dividends or make distributions in respect of their capital
stock; purchase or redeem capital stock; enter into transactions with
stockholders or certain affiliates; or consolidate, merge or sell all or
substantially all of AMCE's assets, other than in certain transactions between
AMCE and one or more of its wholly-owned subsidiaries and other than the Merger.
All of these limitations are subject to a number of important qualifications.
The Note Indenture does not impose any limitation on the incurrence by AMCE and
its subsidiaries of liabilities that are not considered "Indebtedness" under the
Note Indenture, such as those that would be incurred under certain
sale/leaseback transactions; nor does the Note Indenture impose any limitation
on the amount of liabilities incurred by subsidiaries, if any, that might be
designated as Unrestricted Subsidiaries (as defined therein). Furthermore, there
are no restrictions on the ability of AMCE and its subsidiaries to make advances
to, or invest in, other entities (including unaffiliated entities) and no
restrictions on the ability of AMCE's subsidiaries to enter into agreements
restricting their ability to pay dividends or otherwise transfer funds to AMCE.
If the Notes attain "investment grade status" ( as defined in the Note
Indenture), the covenants in the Note Indenture limiting AMCE's ability to incur
indebtedness, pay dividends, acquire stock or engage in transactions with
affiliates will cease to apply.
The Notes have not been registered under the Securities Act and may not be
offered or sold in the United States or to or for the benefit of United States
persons absent registration or an applicable exemption from the registration
requirements of the Securities Act.
AMENDMENT TO CREDIT FACILITY. On April 10, 1997, the Company and its
lenders entered into an amendment and restatement of the Credit Facility, which
among other matters, extended the termination date of the Credit Facility to
2004, eliminated a covenant which had restricted the amount of capital
expenditures that the Company could incur during any fiscal year and modified
and added certain other financial covenants. See "Information About the
Company--Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."
DURWOOD, INC.
DI is a holding company whose principal shareholders are Mr. Stanley H.
Durwood and AAE. Mr. Stanley H. Durwood owns 119,500, or 99%, of the 120,000
outstanding shares of DI Class A Stock, representing approximately 75% of the
voting power of DI, and AAE owns 40,784, or 100%, of the DI Class B Stock,
representing approximately 25% of the voting power of DI. AAE's partners are Mr.
Stanley H. Durwood and the Durwood Children. Mr. Stanley H. Durwood is the sole
director of DI and his son, Mr. Edward D. Durwood, is the managing general
partner of AAE. DI's principal asset consists of stock of AMCE and at present it
has no significant business activity other than the ownership of such stock of
AMCE. DI's principal executive offices are located at 106 West 14th Street,
Kansas City, Missouri 64105. Its telephone number at such address is (816)
221-4000.
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MARKET VALUES AND DIVIDENDS
AMCE Common Stock is publicly traded and listed on the American Stock
Exchange ("AMEX") and the Pacific Stock Exchange.
None of the AMCE Class B Stock nor DI Class A Stock or DI Class B Stock has
an established public trading market. On May 3, 1996, the last trading date
preceding public announcement of the Durwood Family Settlement Agreement, the
reported last sales price of AMCE Common Stock on the AMEX was $25.75. On April
16, 1997, the day preceding announcement that the Merger Agreement had been
entered into, the reported last sale price of the AMCE Common Stock on the AMEX
was $20.00. On , the date preceding the date of this Proxy-- Information
Statement/Prospectus, the reported last sales price of AMCE Common Stock on the
AMEX was $ per share.
Except for a $1.14 per share special dividend paid in August 1992, AMCE has
not declared a dividend on its stock since fiscal 1990. DI has not declared a
dividend on its stock since fiscal 1989.
SUMMARY FINANCIAL DATA
The following tables set forth certain historical and pro forma financial
data for the Company and DI. The summary financial data with respect to the
Company for the five fiscal years ended March 28, 1996 has been derived from the
Company's consolidated financial statements for such periods. Operating results
for the interim period ended December 26, 1996 are not necessarily indicative of
the results that may be expected for the entire fiscal year ending April 3,
1997.
The summary financial data with respect to DI for the five fiscal years
ended March 28, 1996 has been derived from the audited financial statements of
DI. Operating results for the interim period ended December 26, 1996 are not
necessarily indicative of the results that may be expected for the entire fiscal
year ending April 3, 1997.
The unaudited pro forma financial information of the Company as of and for
the fiscal year ended March 28, 1996 and for the interim period ended December
26, 1996 has been adjusted to give effect to the Merger as set forth in the
Notes to the Company's Condensed Pro Forma Financial Statements included
elsewhere herein. The table also gives effect to the Note Offering and the
application of the net proceeds thereof to the reduction of outstanding
indebtedness under the Credit Facility as described under "--Recent Note
Offering and Amendment to Credit Facility--Note Offering." Such pro forma
information does not purport to represent what the Company's results of
operations would have been had the Merger and Note Offering occurred on the
dates presented or to project the Company's financial position or results of
operations for any future period.
The summary financial data presented herein should be read in conjunction
with the audited financial statements and other historical and pro forma
financial information of each of the Company and DI included elsewhere in this
Proxy--Information Statement/Prospectus and Management's Discussion and Analysis
of Financial Condition and Results of Operations for each of the Company and DI
included elsewhere herein.
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AMC ENTERTAINMENT INC.
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED YEAR ENDED
------------------------------ ---------------------------------------------------------------------
DECEMBER 26, DECEMBER 28, MARCH 28, MARCH 30, MARCH 31, APRIL 1, APRIL 2,
1996(1)(2) 1995(1)(2) 1996(1)(2) 1995(1)(2) 1994(1)(2) 1993(2) 1992(2)
-------------- -------------- -------------- ----------- ----------- -------------- -----------
(IN THOUSANDS, EXCEPT STATISTICAL DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA
Total revenues.......... $ 527,555 $ 492,861 $ 657,872 $ 564,664 $ 587,453 $ 404,465 $ 406,964
Depreciation and
amortization.......... 37,543 30,842 43,886 37,913 38,048 28,175 31,385
Operating income........ 32,552 52,513 68,669 51,029 60,736 26,670 8,793
Gain (loss) on
disposition of
assets................ (84) 21 (222) (156) 296 9,638 8,721
Earnings (loss) before
extraordinary item.... 10,811 20,348 27,371 33,978 15,312 7,746 (5,519)
Net earnings (loss)..... 10,811 998(4) 8,021(4) 33,978 15,312 1,263(3) (5,519)
Preferred dividends..... 4,454 5,250 7,000 7,000 538 256 700
BALANCE SHEET DATA
Cash, equivalents and
investments........... $ 18,436 $ 22,687 $ 10,795 $ 140,377 $ 151,469 $ 50,106 $ 36,823
Total assets............ 639,740 464,207 483,458 522,154 501,276 374,102 377,699
Total debt (including
capitalized lease
obligations).......... 330,701 198,786 188,172 267,504 268,188 255,302 240,231
Stockholders' equity.... 164,712 153,645 158,918 157,388 130,404 18,171 39,869
OTHER FINANCIAL DATA
EBITDA(5)............... $ 70,095 $ 83,355 $ 112,555 $ 88,942 $ 98,784 $ 57,345 $ 43,178
Capital expenditures.... 163,645 72,496 120,796 56,403 10,651 8,786 21,045
STATISTICAL DATA (AT
PERIOD END)
Number of theatres
operated.............. 233 232 226 232 236 243 253
Number of screens
operated.............. 1,936 1,726 1,719 1,630 1,603 1,617 1,617
Screens per theatre..... 8.3 7.4 7.6 7.0 6.8 6.7 6.4
</TABLE>
16
<PAGE>
DURWOOD, INC.*
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED YEAR ENDED
------------------------------ ---------------------------------------------------------------
DECEMBER 26, DECEMBER 28, MARCH 28, MARCH 30, MARCH 31, APRIL 1, APRIL 2,
1996(1)(2) 1995(1)(2) 1996(1)(2) 1995(1)(2) 1994(1)(2) 1993(2) 1992(2)
-------------- -------------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total revenues............. $ 527,555 $ 492,861 $ 657,872 $ 564,667 $ 587,458 $ 404,475 $ 406,495
Depreciation and
amortization............. 37,276 30,581 43,537 37,569 37,701 27,834 31,041
Operating income........... 32,760 52,266 68,494 51,313 60,256 25,244 5,902
Gain (loss) on disposition
of assets................ (84) 23 (220) (142) 296 9,627 8,735
Earnings (loss) before
extraordinary item and
minority interest.......... 11,269 20,399 26,541 35,355 20,847 7,723 (9,253)
Net earnings (loss)........ 5,124 (3,499) 23 23,796 20,074 (526) (8,532)
BALANCE SHEET DATA
Cash, equivalents and
investments.............. $ 19,866 $ 24,673 $ 12,888 $ 142,754 $ 152,979 $ 50,596 $ 36,865
Total assets............... 638,544 465,334 481,827 521,735 500,060 370,229 375,190
Total debt (including
capitalized lease
obligations)............... 330,701 198,830 188,172 267,548 268,233 255,346 263,668
Stockholders' equity....... 61,723 44,363 47,476 46,891 23,095 6,719 16,202
OTHER FINANCIAL DATA
EBITDA (5)................. $ 70,036 $ 82,847 $ 112,031 $ 88,882 $ 97,957 $ 55,578 $ 39,943
Capital expenditures....... 163,645 72,496 120,796 56,701 10,672 8,773 21,048
</TABLE>
- --------------
* Because AMCE is a majority owned subsidiary of DI, the information shown
reflects data respecting AMCE.
17
<PAGE>
<TABLE>
<CAPTION>
AMCE
PRO FORMA(6)
THIRTY-NINE WEEKS YEAR ENDED
ENDED DECEMBER 26, 1996 MARCH 28, 1996
------------------------------ ------------------------------
MERGER & NOTE MERGER & NOTE
OFFERING COMBINED MERGER OFFERING COMBINED MERGER
------------------- --------- ------------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total revenues................... $ 527,555 $ 527,555 $ 657,872 $ 657,872
Depreciation and amortization.... 37,543 37,543 43,886 43,886
Operating income................. 32,552 32,552 68,669 68,669
Gain (loss) on disposition of
assets......................... (84) (84) (222) (222)
Earnings before extraordinary
item........................... 5,982 10,811 15,787 27,371
Preferred dividends.............. 4,454 4,454 7,000 7,000
BALANCE SHEET DATA
Cash, equivalents and
investments.................... $ 18,436 $ 18,436 -- --
Total assets..................... 644,890 639,740 -- --
Total debt (including capitalized
lease obligations)............. 335,851 330,701 --
Stockholders' equity............. 163,712 163,712 -- --
OTHER FINANCIAL DATA
EBITDA(5)........................ $ 70,095 $ 70,095 $ 112,555 $ 112,555
Capital expenditures............. 163,645 163,645 120,796 120,796
</TABLE>
- --------------
(1) Fiscal 1997, 1996, 1995 and 1994 include the effects from the acquisition of
Exhibition Enterprises Partnership ("EEP") on May 28, 1993.
(2) Fiscal 1997 and 1992 include 53 weeks. All other years have 52 weeks.
(3) Fiscal 1993 includes a $6,483,000 extraordinary loss equal to $.40 per
common share.
(4) Fiscal 1996 includes a $19,350,000 extraordinary loss equal to $1.15 per
common share.
(5) 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.
(6) The pro forma Statement of Operations Data for the thirty-nine weeks ended
December 26, 1996 and for the fiscal year ended March 28, 1996 give effect
to the Merger and Note Offering described elsewhere herein, as though such
transactions had occurred at the beginning of the period. The pro forma
Balance Sheet Data gives effect to such transactions as though they had
occurred on December 26, 1996. See the Company's Condensed Pro Forma
Financial Statements and the Notes thereto included elsewhere in this
Proxy--Information Statement/Prospectus.
18
<PAGE>
PRO FORMA PER SHARE DATA
The following table sets forth the income from continuing operations and
book value per common share of AMCE and DI for the periods indicated. This
comparison should be read in conjunction with the pro forma selected financial
statements and the historical financial statements and the notes thereto
included elsewhere herein. Neither AMCE nor DI paid any cash dividends on their
common shares during the periods indicated. AMCE pays quarterly dividends of
$.4375 per share on its Convertible Preferred Stock.
<TABLE>
<CAPTION>
THIRTY-NINE
WEEKS ENDED YEAR ENDED
------------------- ----------------
DECEMBER 26, 1996 MARCH 28, 1996
------------------- ----------------
<S> <C> <C>
INCOME PER SHARE FROM CONTINUING OPERATIONS
AMCE Historical:
Primary............................................. $ .36 $ 1.21
Fully diluted....................................... .36 1.20
Pro Forma AMCE for Merger:
Primary............................................. $ .36 $ 1.21
Fully diluted....................................... .36 1.20
Pro Forma AMCE for Merger & Note Offering:
Primary............................................. $ .09 $ .53
Fully diluted....................................... .09 .53
DI Historical:
Primary............................................. $ 31.41 $ 98.74
Fully diluted....................................... 31.09 97.34
Equivalent Pro Forma DI (excluding Note Offering):
Primary............................................. $ .33(1) $ 1.21(1)
Fully diluted....................................... .33(1) 1.19(1)
BOOK VALUE PER COMMON SHARE
AMCE Historical....................................... $ 4.61 $ 3.57
Pro Forma AMCE for Merger............................. 4.61 --
Pro Forma AMCE for Merger & Note Offering............. 4.55 --
DI Historical......................................... $ 383.89 $ 295.28
Equivalent Pro Forma DI (excluding Note Offering)..... 4.61 --
</TABLE>
- --------------
(1) Reflects the effect to DI of the pre-Merger activities provided for in the
Pre-Merger Action Plan (Exhibit A to the Merger Agreement). Does not
consider the Note Offering and its effect on DI.
19
<PAGE>
RISK FACTORS
In connection with the transactions contemplated by this Proxy--Information
Statement/Prospectus, the following should be considered.
CONTROLLING STOCKHOLDERS
Voting control of AMCE is vested in the holders of AMCE Class B Stock,
subject to the right of holders of AMCE Common Stock to elect 25% of the members
of the AMCE Board. Currently, Mr. Stanley H. Durwood and the Durwood Children,
through DI, beneficially own all of the shares of outstanding AMCE Class B Stock
and 2,641,951 shares of outstanding AMCE Common Stock (approximately 40% of the
issued and outstanding shares of AMCE Common Stock as of April 3, 1997), which
in the aggregate represent approximately 97% of the voting power of AMCE's
voting securities as of April 3, 1997. Therefore, Mr. Stanley H. Durwood has the
ability to elect or remove a majority of the AMCE Board. See "Information about
the Company--Management of the Company" and "The Merger--General Effects of the
Merger." Mr. Stanley H. Durwood has recently undergone surgery for esophageal
cancer.
The 1989 Trust and the 1992 Trust hold approximately 75% of the voting power
of the outstanding capital stock of DI. The 1992 Trust is the record owner of
such DI shares, and has issued voting trust certificates to the 1989 Trust. Mr.
Stanley H. Durwood is the sole acting trustee of these trusts; the named
successor trustees under Mr. Stanley H. Durwood's trusts are Messrs. Charles J.
Egan, Jr., a director of AMCE, and Raymond F. Beagle, Jr., general counsel to
the Company. Under the terms of the 1992 Trust, Mr. Durwood has all voting
powers with respect to shares held therein during his lifetime. Thereafter, all
voting rights with respect to such shares vest in his successor trustees and any
additional trustees whom they might appoint, who shall exercise such rights by
majority vote. Unless revoked by Mr. Stanley H. Durwood or otherwise terminated
or extended in accordance with its terms, the 1992 Trust will terminate in the
year 2030.
After giving effect to the Merger and Secondary Offering (and disregarding
shares which may be acquired by Mr. Stanley H. Durwood upon the exercise of
employee stock options, shares which the Durwood Children might acquire under
the Share Adjustment and shares of AMCE Common Stock which might be issued upon
conversion of shares of Convertible Preferred Stock), (i) Mr. Stanley H. Durwood
will own approximately 4.5 million shares of AMCE Class B Stock, and each of the
Durwood Children will own a maximum of approximately 1.0 million shares of AMCE
Common Stock, and (ii) based on the number of shares outstanding as of April 3,
1997 (a) such shares of AMCE Class B Stock to be owned by Mr. Stanley H. Durwood
will entitle him to elect a majority of the AMCE Board and will have
approximately 77% of the voting power of all shares of AMCE's capital stock
expected to be then outstanding generally having the right to vote on matters
submitted to stockholders, other than the election of directors, and (b) the
AMCE Common Stock to be owned by the Durwood Children will represent
approximately 47% of the shares of AMCE Common Stock expected to be then
outstanding.
As a result of their ownership of shares of AMCE Common Stock after the
Merger and because attendance at stockholders meetings generally is less than
100%, any corporate action requiring the approval of the holders of AMCE Common
Stock voting as a class may as a practical matter require the approval of the
Durwood Children instead of Mr. Stanley H. Durwood, as is presently the case.
Matters requiring approval of holders of the AMCE Common Stock voting as a class
include any proposed amendment to AMCE's Certificate of Incorporation changing
the authorized number or par value of shares of AMCE Common Stock or altering
the powers, preferences or special rights of the shares of such class so as to
affect them adversely. See "Comparison of Rights of Holders of AMCE Stock and DI
Stock--Voting Rights--Requisite Voting Percentage in General and in Certain
Extraordinary Matters."
Holders of AMCE Common Stock are entitled to elect 25% of the AMCE Board. As
stated above, the Durwood children will hold approximately 47% of the shares of
AMCE Common Stock after the Merger and Secondary Offering. For a period of three
years after the Effective Time of the Merger, the Durwood
20
<PAGE>
Children will grant an irrevocable proxy to vote their shares of AMCE Common
Stock for each candidate to the AMCE Board in the same proportion as the
aggregate votes cast by all other stockholders not affiliated with AMCE, its
directors and officers. Also, the Durwood Children will agree during such period
not to become a member of any group (other than a group of Durwood Family
Stockholders), solicit proxies or enter into any arrangement or agreement with
respect to voting shares. See "The Merger-- Material Terms of the Merger--The
Stock Agreement."
RESTRICTIONS ON TRANSFER
Under the Stock Agreement, whose execution by the Durwood Family
Stockholders is a condition to the Merger, AMCE will have a right of first
refusal for a period of three years with respect to any shares of AMCE Common
Stock that the Durwood Children wish to sell in a transaction exempt from
registration under the Securities Act, except for such shares sold in a broker's
transactions. During such period, the Durwood Family Stockholders may not
transfer stock by gift to any person or entity unless such person or entity
agrees to be bound by the Stock Agreement, provided that each Durwood Family
Stockholder may transfer up to 5% of the shares of AMCE stock he or she receives
in the Merger to certain charitable assignees (as defined in the Stock
Agreement). Under the Stock Agreement, each Durwood Family Stockholder generally
must agree that he or she will not sell more than 50% of his or her AMCE stock
(or, in the case of Mr. Stanley H. Durwood, an additional amount) for two years.
See "The Merger--Material Terms of the Merger--The Stock Agreement." Pursuant to
the Indemnification Agreement, a portion of the shares received by each Durwood
Family Stockholder must be deposited in escrow under an Escrow Agreement. See
"The Merger Agreement--Material Terms of the Merger--The Indemnification
Agreement--Other Agreements."
The Durwood Family Stockholders may be considered "affiliates" of DI and
AMCE as such term is defined under the Securities Act. Shares of AMCE received
in the Merger by those who are affiliates will be subject to applicable
restrictions under Rule 145 and Rule 144 promulgated under the Securities Act,
which are summarized below.
Prior to the expiration of one year after the Merger, Durwood Family
Stockholders who were affiliates of DI (whether or not they are also affiliates
of AMCE) may publicly sell securities of AMCE acquired in the Merger only in a
registered offering or in compliance with Rule 144. Generally, a sale will
comply with Rule 144 only if (i) AMCE has filed all reports required of it under
Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") for a period of twelve months preceding the date of any such sale, (ii)
the number of securities sold by a person does not exceed the volume limitations
imposed by Rule 144 (generally, the greater of the average weekly reported
trading volume in AMCE Common Stock during the four calendar weeks preceding the
filing of the notice discussed below or 1% of the outstanding shares of AMCE
Common Stock may be sold during any three month period by a person or those with
whom he or she may be acting in concert), (iii) the sale is made in a "broker's
transaction", as defined in Rule 144, or in a transaction directly with a
"market maker", as permitted by such Rule, and (iv) notice of the sale is filed
with the Commission and the AMEX concurrently with the placement of any order
with a broker or the execution of a transaction with a market maker.
Commencing one year after the date of the Merger, Durwood Family
Stockholders who were affiliates of DI but who are not then affiliates of AMCE
may publicly sell securities acquired in the Merger without restriction under
Rule 145 or Rule 144 provided that AMCE has filed all reports required of it
under Section 13 of the Exchange Act for a period of twelve months preceding the
date of any such sale.
Commencing two years after the date of the Merger, Durwood Family
Stockholders who were affiliates of DI but who are not then affiliates of AMCE
may publicly sell securities acquired in the Merger without restriction under
Rule 145 or Rule 144.
21
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Based on the number of shares outstanding on April 3, 1997, upon
consummation of the Merger (and disregarding any fractional shares which are
paid for in cash in the Merger), there will be 12,725,312 shares of AMCE Common
Stock outstanding, 5,015,657 shares of AMCE Class B Stock outstanding, which are
convertible into a like number of shares of AMCE Common Stock, and 3,303,600
shares of Convertible Preferred Stock outstanding, which are presently
convertible into 5,695,406 shares of AMCE Common Stock. Of the shares of AMCE
Common Stock outstanding or issuable upon conversion of the Convertible
Preferred Stock, approximately 9,637,000 will be freely tradeable without
restriction or registration under the Securities Act. Additional shares of AMCE
Common Stock, including shares issuable upon exercise of options, will also
become eligible for sale in the public market from time to time. See
"Restrictions on Resale." Although the Special Committee and the AMCE Board
believe that the Merger and Secondary Offering will increase the public float
and liquidity, which may reduce the volatility of daily stock price changes,
narrow the bid/asked spread and increase institutional investor interest in AMCE
Common Stock (see "The Merger--Report of Advisors--Reasons for
Recommendations"), sales of substantial amounts of AMCE 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 AMCE Common Stock
and impair AMCE's ability to raise additional capital through the sale of equity
securities.
THE AMCE SPECIAL MEETING
DATE, TIME AND PLACE OF MEETING; RECORD DATE; VOTING RIGHTS
This Proxy--Information Statement/Prospectus is furnished in connection with
the solicitation of the enclosed proxy by the AMCE Board for use at the AMCE
Special Meeting to be held at a.m. local time on 1997, at
, Kansas City, Missouri. This Proxy--Information Statement/Prospectus
and the accompanying proxy are being mailed to all stockholders of AMCE
(including holders of Convertible Preferred Stock) on or about , 1997.
The AMCE Board has established , 1997, as the AMCE Record Date for
the AMCE Special Meeting. Only stockholders of record at the close of business
on the AMCE Record Date are entitled to notice of the AMCE Special Meeting, and
only holders of AMCE Common Stock and AMCE Class B Stock on the AMCE Record Date
are entitled to vote at the AMCE Special Meeting and any adjournments thereof.
At the close of business on the AMCE Record Date, there were outstanding
shares of AMCE Common Stock and 11,157,000 shares of AMCE Class B Stock.
At the AMCE Special Meeting, the shares of AMCE Common Stock and AMCE Class B
Stock shall vote together as a single class, with each outstanding share of AMCE
Common Stock having one vote per share and each outstanding share of AMCE Class
B Stock having ten votes per share.
PURPOSE OF THE AMCE SPECIAL MEETING
At the AMCE Special Meeting, AMCE stockholders eligible to vote thereat will
be asked to consider and vote upon a proposal to approve and adopt the Merger
Agreement. A copy of the Merger Agreement is attached as Annex 1 to this Proxy--
Information Statement/Prospectus. If the Merger Agreement receives the requisite
approval of stockholders of AMCE and DI, (i) shares of AMCE Common Stock and
Convertible Preferred Stock held by AMCE stockholders other than DI will remain
issued and outstanding and will not be exchanged, (ii) each share of AMCE Common
Stock and AMCE Class B Stock held by DI will be canceled, (iii) each share of DI
Class A Stock presently held by Mr. Stanley H. Durwood, the 1989 Trust or the
1992 Trust will be converted into and exchanged for 32.142857 shares of AMCE
Class B Stock, so that the 119,500 shares of DI Class A Stock presently held by
Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust will be convertible
into and exchangeable for an aggregate of 3,841,071 shares of AMCE Class B
Stock, (iv) each share of DI Class A Stock presently held by persons other than
22
<PAGE>
Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust will be converted into
and exchanged for 32.142857 shares of AMCE Common Stock, so that the 500 shares
of DI Class A Stock presently held by persons other than Mr. Stanley H. Durwood,
the 1989 Trust or the 1992 Trust will be convertible into and exchangeable for
an aggregate of 16,071 shares of AMCE Common Stock, (v) each share of DI Class B
Stock to be held by Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust
will be converted into and exchanged for 243.767528 shares of AMCE Class B
Stock, so that the 4,818.4664 shares of DI Class B Stock to be held by Mr.
Stanley H. Durwood, the 1989 Trust or the 1992 Trust will be convertible into
and exchangeable for an aggregate of 1,174,586 shares of AMCE Class B Stock, and
(vi) each share of DI Class B Stock to be held by the Durwood Children will be
converted into and exchanged for 243.767341 shares of AMCE Common Stock, so that
the 35,965.5336 shares of DI Class B Stock to be held by the Durwood Children
will be convertible into and exchangeable for an aggregate of 8,767,223 shares
of AMCE Common Stock.
VOTE REQUIRED FOR THE MERGER
Under AMCE's Certificate of Incorporation and the DGCL, the approval of the
holders of a majority of the votes of outstanding shares of AMCE Common Stock
and AMCE Class B Stock entitled to notice of and to vote at the AMCE Special
Meeting, voting as a single class, is required to approve the Merger Agreement,
with each share of AMCE Common Stock being entitled to one vote and each share
of AMCE Class B Stock being entitled to ten votes. In addition, upon the
recommendation of the Special Committee, a condition to the Merger is that the
Merger Agreement also be approved by the holders of a majority of the shares of
AMCE Common Stock present or represented by proxy and voting at the AMCE Special
Meeting, other than those held by DI, the Durwood Family Stockholders, their
spouses, their children sharing the same house and directors and officers of
AMCE. If the Merger is not approved by the requisite vote of AMCE's
stockholders, the Merger Agreement will be terminated and the proposed Merger
abandoned.
THE SPECIAL COMMITTEE AND THE AMCE BOARD RECOMMEND THAT THE STOCKHOLDERS OF
AMCE VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT.
PROXIES
Properly executed and dated proxies which are received by AMCE prior to the
AMCE Special Meeting will be voted in accordance with the instructions thereon.
If a proxy is received with no instructions given with respect to the matters to
be acted upon, the shares represented by the proxy will be voted for the
proposal to approve and adopt the Merger Agreement. A proxy may be revoked at
any time before being voted by written notice to such effect received by the
Secretary of AMCE before the proxy is voted at the Special Meeting, by delivery
to AMCE of a subsequently dated proxy or by a vote cast in person at the AMCE
Special Meeting by written ballot. Abstentions and broker non-votes will be
counted in determining whether there is a quorum at the AMCE Special Meeting,
and in determining whether the Merger has received the requisite vote under the
DGCL, will be counted in the tabulation of votes cast on the proposal to approve
the Merger Agreement and will have the effect of a negative vote. However, for
the purpose of determining whether the Merger Agreement has received the
approval of those present and voting at the AMCE Special Meeting other than the
Durwood Family Stockholders, their spouses, children and directors and officers
of AMCE, abstentions and broker non-votes will not be counted.
A proxy confers discretionary authority with respect to the voting of the
shares represented thereby on any other business that may properly come before
the meeting and any adjournments thereof. The AMCE Board is not aware that any
such other business is to be presented for action at the meeting and does not
itself intend to present any such other business. However, if any such other
business does come before the meeting, shares represented by proxies given
pursuant to this solicitation will be voted by the persons named in the proxy in
accordance with their best judgment. A proxy also confers
23
<PAGE>
discretionary authority on the persons named therein to vote on matters incident
to the conduct of the meeting.
COSTS OF SOLICITATION
AMCE and DI will share all of the expenses in connection with printing this
Proxy--Information Statement/Prospectus. The costs of solicitation of proxies
also will be shared by AMCE and DI. Mr. Stanley H. Durwood and Delta have agreed
to indemnify AMCE against all of DI's expenses and for 50% of AMCE's expenses in
connection with the Merger (subject to offset for certain Credit Amounts). See
"The Merger--Material Terms of the Merger--Indemnification Agreement--Other
Indemnification" and "--Other Agreements." If the Merger is not consummated for
any reason other than as a result of a termination by the AMCE Board for a
Specified Reason or Without Cause (as such terms are defined in the Merger
Agreement), DI will be responsible for all of its expenses and all of AMCE's
expenses; if the Merger is terminated for a Specified Reason or Without Cause,
DI shall be responsible for all of its expenses and 50% of AMCE's expenses. See
"The Merger--Material Terms of the Merger--The Merger Agreement--Merger
Expenses." AMCE will reimburse brokers, fiduciaries, custodians and other
nominees for reasonable out-of-pocket expenses incurred in sending this
Proxy--Information Statement/ Prospectus and other proxy materials to, and
obtaining instructions relating to such materials from, beneficial owners of
AMCE Common Stock. AMCE stockholder proxies may be solicited by directors,
executive officers or regular employees of AMCE in person, by letter or by
telephone or telegram. No additional compensation will be paid to those persons
for such service.
24
<PAGE>
THE MERGER
BACKGROUND OF THE MERGER
APPOINTMENT OF SPECIAL COMMITTEE. On October 5, 1994, the AMCE Board formed
the Special Committee, consisting of Messrs. Charles J. Egan, Jr. and Paul E.
Vardeman, the only two members of the AMCE Board at the time who were not
Durwood Family Stockholders or employees of AMCE, to review and consider the
possible merger of DI into AMCE and certain related transactions, which included
the Secondary Offering of shares of AMCE Common Stock to be received in the
Merger by the Durwood Family Stockholders. If the Special Committee considered
the Merger to be in the best interests of AMCE and its unaffiliated
stockholders, it was to negotiate the terms of the Merger and related
transactions and to make recommendations to the full AMCE Board in this
connection. The Special Committee was given the full power and authority of the
AMCE Board to reject the Merger.
As more fully described below, the Special Committee recommended that the
New Independent Directors approve and that the full AMCE Board approve and adopt
the Merger Agreement relating to the Merger and recommend that AMCE stockholders
approve and adopt the Merger Agreement. The Special Committee also recommended
that the New Independent Directors and the full AMCE Board approve certain
related agreements and take the necessary steps to register the sale in the
Secondary Offering of certain of the shares of AMCE Common Stock to be received
in the Merger by the Durwood Family Stockholders.
ORGANIZATION AND OWNERSHIP OF AMCE AND DI. AMCE was formed in 1983 as the
result of a reorganization involving DI and AMC. Prior to the reorganization, DI
owned approximately 99% of American Multi-Cinema, Inc.'s capital stock.
Following the reorganization and related transactions, including the offering to
the public of shares of AMCE Common Stock, DI owned 100% of AMCE's Class B Stock
and approximately 43% of AMCE's Common Stock. As of April 3, 1997, DI owned
approximately 40% of the outstanding AMCE Common Stock and 100% of the
outstanding AMCE Class B Stock.
DI was formed in 1947. In 1982, Mr. Stanley H. Durwood was DI's sole
shareholder. In that year, Mr. Stanley H. Durwood recapitalized DI and exchanged
all of his DI stock for 120,000 shares of DI Class A Stock and 40,784 shares of
DI Class B Stock. The shares of DI Class A Stock are entitled to preferences on
liquidation aggregating $450 per share, for a total of $54 million.
Following DI's recapitalization, Mr. Stanley H. Durwood gave 25% of his DI
Class B shares to the Durwood Children in equal amounts. Mr. Stanley H. Durwood
and each of his children then contributed all of their DI Class B shares to AAE.
In exchange for the contribution of their DI Class B shares to AAE, the Durwood
Children received equal 1/6 interests in AAE as general partners. In exchange
for his contribution, Mr. Stanley H. Durwood received a preferred limited
partnership interest in AAE having a fixed value on liquidation, plus a right to
an annual cumulative distribution equal to 14% of this value. Upon liquidation
of AAE, Mr. Stanley H. Durwood is entitled to receive partnership assets worth
the current value of his preferred limited partnership share.
Prior to December 26, 1991, the Company engaged AAE for the purposes of
executing film license contracts and providing related accounting and financial
management services. Effective December 26, 1991, the Company began to execute
film rental agreements directly with distributors and stopped using AAE for such
services. In 1992, AAE ceased all business activity and since then has been
unable to meet its annual distribution obligation to Mr. Stanley H. Durwood,
which continues to accumulate.
25
<PAGE>
Chart I below illustrates how Mr. Stanley H. Durwood and his children hold
their interests in AMCE indirectly through two entities. The Durwood Family
Stockholders own interests in AAE which, together with Harvard College and the
1989 Trust and 1992 Trust, owns DI, which in turn owns approximately 40% of the
outstanding AMCE Common Stock and 100% of the outstanding AMCE Class B Stock as
of April 3, 1997.
[GRAPH]
As can be seen in Chart I, the Durwood Family Stockholders do not hold AMCE
stock directly. Each holds an interest in AAE and (except for Mr. Stanley H.
Durwood, who has a direct interest through the 1989 Trust and the 1992 Trusts)
an indirect interest in DI, which holds AMCE Common Stock and AMCE Class B
Stock. There is no public market for interests in AAE or DI and these holdings
are essentially illiquid. In addition, an individual member of the Durwood
family has no real ability by his or her decision alone to sell the shares of
AMCE Common Stock or AMCE Class B Stock that he or she indirectly owns.
GENESIS OF PROPOSAL FOR THE MERGER AND SECONDARY OFFERING. In the spring of
1994, the Durwood Children began suggesting to Mr. Stanley H. Durwood that AAE
should be liquidated and the AMCE stock held by DI distributed in accordance
with the economic interests of DI's shareholders as then reflected in the value
of the AMCE shares which DI held. The reasons the Durwood Children sought these
steps were to terminate AAE's escalating obligations to Mr. Stanley H. Durwood,
which diminished the value of their interests in AMCE, and to eliminate AAE and
DI as separate legal entities, thereby enabling the Durwood Family Stockholders
to hold their interests in AMCE directly (in the form of a
26
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marketable security) rather than indirectly through ownership of stock of DI or
partnership interests in AAE. After lengthy and difficult negotiations between
Mr. Stanley H. Durwood and the Durwood Children involving resolution of
valuation issues and other matters involving the relationships among the
Company, Mr. Stanley H. Durwood and the Durwood Children, a proposal was
developed whereby AAE was to be liquidated (see Chart II below) and DI was to be
merged into AMCE (see Chart III below). The result of these transactions would
be that the Durwood Family Stockholders would hold their interests in AMCE stock
directly and would then be able to make a public sale of all or part of these
interests. AMCE was asked to consider engaging in the Merger and related
transactions.
Chart II shows the structure following the liquidation of AAE but prior to
the Merger. Besides the elimination of AAE, Chart II also reflects the
conversion of 6,141,343 shares of AMCE Class B Stock into AMCE Common Stock
pursuant to the terms of the AMCE Class B Stock.
[GRAPH]
Chart III shows the ownership structure after the Merger. By acquiring DI in
the Merger, AMCE will receive the same number of shares of AMCE Common Stock and
AMCE Class B Stock as AMCE will issue in the Merger to stockholders of DI
(except for fractional shares). Accordingly, the aggregate number of outstanding
shares of AMCE will not change as a result of the Merger, although the number of
shares of AMCE Common Stock will increase and the number of shares of AMCE Class
B Stock will decrease.
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[GRAPH]
Because Mr. Stanley H. Durwood, Chairman of the Board of AMCE and its
principal stockholder, Mr. Edward D. Durwood and other Durwood Family
Stockholders are partners in AAE and indirectly owners of DI and would also be
sellers in the Secondary Offering, the AMCE Board, by unanimous written consent
on October 5, 1994, established the Special Committee composed of the only two
members of the AMCE Board at that time who were not Durwood Family Stockholders
or employees of AMCE.
Preliminary drafts of a merger agreement and related documents were prepared
by counsel for the Company in consultation with management and provided to the
Special Committee and representatives of the Durwood Children. Generally, these
documents provided for (i) the termination of AAE, (ii) the merger of DI into
AMCE, (iii) a registration rights agreement providing for one demand
registration of shares received by the Durwood Family Stockholders in the
Merger, and (iv) a stock agreement imposing certain obligations and limitations
on the Durwood Children with respect to such matters as the solicitation of
proxies and the voting and sale of shares received by them in the Merger. This
proposal contemplated that AMCE would pay its expenses incurred in connection
with the Merger and its internal expenses incurred in connection with a
Secondary Offering by the Durwood Family Stockholders.
INITIAL ACTIONS BY THE SPECIAL COMMITTEE. The Special Committee held its
initial meeting on October 11, 1994. The Special Committee retained Hughes
Hubbard & Reed LLP as Special Counsel. It also retained Furman Selz as financial
advisor initially to assist in the valuation of DI and to advise the Special
Committee concerning the AMCE/DI exchange ratio in the Merger and the benefits
to AMCE and its unaffiliated stockholders of the Merger. Subsequently, Furman
Selz also advised the Special Committee on the terms of the Secondary Offering.
The Special Committee chose Furman Selz because the firm is regularly engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of securities
and valuations for other corporate purposes and has considerable expertise in
the entertainment industry.
KPMG Peat Marwick LLP ("KPMG") was also retained to assist in connection
with the Special Committee's review of DI and its subsidiaries and certain
accounting aspects of the Merger.
In this initial consideration, the Special Committee saw important benefits
to AMCE and its unaffiliated stockholders from the simplification of the
ownership structure of the Company through the Merger. The Special Committee was
also of the view that by increasing the float and liquidity of the AMCE Common
Stock, the Secondary Offering might make it easier for stockholders to sell
their shares or buy additional ones (because there would be more potential
buyers and sellers and more shares available to buy and sell), might make the
market price of the stock less volatile and might narrow the bid/asked spread.
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On this preliminary basis, the Special Committee believed it advisable to
proceed with its investigation of DI and begin the negotiation of the terms of
the Merger and the Secondary Offering.
SUBSEQUENT MEETINGS OF THE SPECIAL COMMITTEE. On November 10, 1994, the
Special Committee received a preliminary report from KPMG on the results to date
of their limited procedures performed with respect to DI and its subsidiaries,
excluding the Company. The procedures dealt principally with assets and
liabilities that it was later agreed were to be removed from DI and not be
acquired or assumed by AMCE in the Merger.
Negotiations concerning the Merger were then suspended while Mr. Stanley H.
Durwood and the Durwood Children conducted further lengthy discussions
concerning the value of their interests in DI and AAE and negotiated the number
of shares that should be allocated to the Durwood Children and Mr. Stanley H.
Durwood in a merger between DI and AMCE.
On July 18, 1995, following resumption of negotiations concerning the
Merger, the Special Committee met and identified several aspects of the Merger
and the Secondary Offering that would be of major importance to it and that it
would seek in the negotiations:
- At the time of the Merger, DI should have as few assets (apart from AMCE
capital stock) as possible. This would make valuation of DI easier.
- AMCE should be indemnified by Mr. Stanley H. Durwood and/or members of his
family for any liability resulting from a detailed set of representations,
including representations concerning DI and actions taken prior to the
Merger by DI and AAE in their restructuring.
- AMCE should not indemnify Mr. Stanley H. Durwood for any breaches of
AMCE's representations.
- Parameters for the Secondary Offering acceptable to the Special Committee
should be finalized prior to signing the Merger Agreement.
- Mr. Stanley H. Durwood and/or the Durwood Children should bear part of
AMCE's expenses relating to the Merger and the Secondary Offering.
- Because of the importance of the Secondary Offering to AMCE and its
unaffiliated stockholders, Mr. Stanley H. Durwood and/or the Durwood
Children should make a cash payment to AMCE and bear all of AMCE's
expenses if the Merger was consummated but the Secondary Offering was not
for certain reasons.
- The Merger should be subject to approval by the holders of a majority of
the AMCE Common Stock held by persons not affiliated with the management
of AMCE or the Durwood Family Stockholders voting on the Merger.
At meetings on August 10, 16 and 21, 1995, the Special Committee met to
discuss the major tasks involved in the Merger and Secondary Offering and to
review the Merger Agreement and Indemnification Agreement. See "Material Terms
of the Merger" for a summary of the terms of these agreements.
On August 22, 1995, the Special Committee received comments from certain of
the other parties to the transaction on the draft agreements. In addition, the
Special Committee was briefed on the status of preliminary settlement
negotiations relating to the Derivative Action. The Committee was told that
among the possible settlement provisions being discussed was a requirement that
DI merge into AMCE and that the Durwood Family Stockholders sell shares of AMCE
Common Stock to the public.
On August 24, 1995, the Special Committee met to discuss the nature of the
reimbursement of Company expenses and other payments it would seek from the
Durwood Family Stockholders if the Merger occurred but the Secondary Offering
did not occur. The Special Committee was also advised that the Durwood Family
Stockholders needed to discuss further certain issues associated with the
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Secondary Offering and the restructuring of DI and the allocation of the costs
of the transactions among the Durwood Family Stockholders.
On January 22, 1996, Mr. Stanley H. Durwood tentatively agreed with the
Durwood Children, in the context of a comprehensive settlement of disputed
issues between them respecting the Merger, that he would pay any of AMCE's
expenses of the proposed merger and secondary offering that were allocated to DI
or, in certain instances, the Durwood Family Stockholders, in the Merger
Agreement to the extent that such expenses exceeded certain assets of Delta at
the Effective Time of the Merger.
Between January 22 and May 3, 1996, the Durwood Family Stockholders
circulated written drafts of an agreement (the "Durwood Family Settlement
Agreement"), which was executed on May 3, 1996 by the last of the parties to
sign. The Durwood Family Settlement Agreement provides, among other matters,
that, subject to satisfaction or waiver of all conditions precedent to the
Merger, (i) Mr. Stanley H. Durwood will receive 5,015,657 shares of AMCE Class B
Stock for his interests in DI and AAE and the Durwood Children will receive an
aggregate of 8,767,223 shares of AMCE Common Stock for their interests, (ii)
within 12 months after the proposed Merger of DI and AMCE, the Durwood Family
Stockholders will offer an aggregate minimum of 3,000,000 shares of AMCE Common
Stock in a secondary offering, of which 500,000 shares (after conversion of an
equal number of shares of AMCE Class B Stock into AMCE Common Stock) will be
sold by Mr. Stanley H. Durwood or any of his charitable donees who independently
agrees to participate in the Secondary Offering and the balance by the Durwood
Children or any of their charitable donees who independently agrees to
participate in the Secondary Offering, (iii) Mr. Stanley H. Durwood will pay the
Durwood Children up to $20 million in shares of AMCE Common Stock if and to the
extent the price received by them in the sale of 2,500,000 shares of AMCE Common
Stock in the Secondary Offering is less than $18 per share (net of applicable
underwriting commissions) (the "Share Adjustment") and (iv) for three years
after the Merger, the Durwood Children will give a proxy to the Secretary and
each Assistant Secretary of AMCE to vote their shares of AMCE Common Stock for
each candidate for the AMCE Board in the same proportionate manner as the
aggregate votes cast in such elections by all other holders of AMCE Common Stock
not affiliated with AMCE, its directors and officers. The Durwood Family
Settlement Agreement also contains other provisions relating to such matters as
the termination of AAE, the conversion of shares of AMCE Class B Stock prior to
the proposed Merger and indemnification from any unexpected gift tax and other
matters.
The Special Committee met again on May 21, 1996 following advice that
agreement had been reached on these issues described above among the Durwood
Family Stockholders and following the distribution of revised drafts of the
Merger Agreement and the related agreements. The Special Committee reviewed the
representations to be given by DI, the reimbursement of AMCE's expenses, the
terms of the proposed Secondary Offering and the restrictions on transfer of
AMCE stock by Durwood Family Stockholders contained in the Stock Agreement.
On July 24, September 25 and November 5, 1996, the Special Committee met to
discuss issues raised in the negotiations, including the indemnification
provisions, the parameters of the Secondary Offering and the form of tax opinion
regarding the Merger. At the last of these meetings, the Special Committee was
advised that lawyers for the parties in the Derivative Action had executed the
Derivative Action Settlement Agreement providing for the settlement of that
litigation. The Special Committee discussed the inclusion of a provision
requiring the Merger as part of the settlement.
On November 25, 1996, January 20, 1997 and February 6, 1997, the Special
Committee met to receive status reports on the negotiations and consider issues
relating to the accounting treatment of the Merger and the allocation of
indemnification obligations for the benefit of AMCE among the Durwood Family
Stockholders.
On March 13, 1997, the AMCE Board and the Special Committee met to consider
the Merger and the Secondary Offering. The Special Committee convened first and
heard the reports of Furman Selz
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and KPMG, financial advisors to the Special Committee. Furman Selz discussed its
analysis of the Merger, presented the Special Committee with its fairness
opinion and discussed the benefits to AMCE and its unaffiliated stockholders of
the Merger and the Secondary Offering. See "--Reports of Advisors."
KPMG reported to the Special Committee on the results of its limited
procedures performed with respect to DI. See "--Reports of Advisors." Coopers &
Lybrand L.L.P. ("Coopers & Lybrand"), auditors for the Company, then discussed
the accounting treatment of the Merger.
A joint meeting of the full AMCE Board and the Special Committee then
convened. Counsel to the Special Committee summarized the history of discussions
concerning the Merger and related transactions and of deliberations of the
Special Committee. Counsel to the Special Committee then summarized the
provisions of the Merger Agreement, Indemnification Agreement, Stock Agreement
and Registration Agreement. Furman Selz and KPMG then presented their reports to
the Special Committee, followed by a discussion by Coopers & Lybrand of the
accounting treatment of the Merger. Following these presentations, the meeting
of the full AMCE Board was recessed and the meeting of the Special Committee was
reconvened. The Special Committee reviewed its conclusions concerning the Merger
and related transactions and voted unanimously to recommend approval of the
Merger and related transactions to the New Independent Directors and the full
AMCE Board. The meeting of the Special Committee was adjourned, and the meeting
of the full AMCE Board was reconvened. The Special Committee then presented its
reasons for recommending approval of the Merger and related transactions and
gave its recommendation to the full AMCE Board and the New Independent
Directors. After discussions and questions by the AMCE Board, each of the New
Independent Directors and each other member of the full AMCE Board voted to
approve the Merger and related transactions, subject to agreement by the Durwood
Children to amend their right to terminate the Durwood Family Settlement
Agreement if the Merger had not occurred by a certain date. By March 25, 1997,
the Durwood Children had agreed to extend this date to September 30, 1997. On
March 31, 1997, AMCE executed the Merger Agreement.
SUMMARY OF TERMS OF AGREEMENTS. The Merger Agreement, a Stock Agreement, a
Registration Agreement and an Indemnification Agreement were negotiated by the
Special Committee. See "The Merger--Material Terms of the Merger" for a summary
of the terms of these Agreements.
REPORTS OF ADVISORS
FAIRNESS OPINION OF FURMAN SELZ. Furman Selz advised the Special Committee
on March 13, 1997 that it was its opinion as investment bankers that the
consideration to be paid by AMCE in the Merger is fair, from a financial point
of view, to AMCE. Furman Selz expressed its view that because DI would at the
time of the Merger have no assets (other than shares of AMCE Common Stock and
AMCE Class B Stock) and AMCE would be indemnified against certain liabilities of
DI, the value of the shares of AMCE Common Stock and AMCE Class B Stock to be
issued in the Merger should be viewed as the total consideration to be paid by
AMCE in the Merger. Because this consideration will equal the aggregate amount
of shares of AMCE stock held by DI at the time of the Merger (subject to the
payment of fractional shares in cash), which shares will be acquired by AMCE by
virtue of the Merger, the Merger can be viewed as an exchange of like assets.
ADDITIONAL PRESENTATION OF FURMAN SELZ. In connection with a discussion of
the Merger, Furman Selz also noted the following:
Furman Selz noted that the Merger would increase the voting interest of
AMCE's unaffiliated stockholders. Assuming conversion of the Convertible
Preferred Stock and without giving effect to the Secondary Offering, the
public's voting interest would increase from 7.8% to 14.1%. After consummation
of the Secondary Offering, such interest would increase to 19.7%. Furman Selz
discussed the possibility that such increase in the voting interest of public
stockholders would enhance the attractiveness of
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AMCE's stock, in particular to institutional holders. Furman Selz noted that
institutional ownership of AMCE Common Stock is low relative to other companies
in the theatrical exhibition industry.
Furman Selz expressed the view that the Merger would create an ownership
structure for AMCE that would be easier to understand. See "--Organization and
Ownership of AMCE and DI", Chart I.
Furman Selz further stated that by increasing the public float and
liquidity, the Secondary Offering may narrow the bid/asked spread of AMCE Common
Stock, perhaps reduce the volatility of daily stock price changes and may
increase the interest of institutional investors in AMCE Common Stock. Furman
Selz expressed the view that these effects, over time, may enhance shareholder
value.
Furman Selz stated its conclusion that these potential benefits to AMCE and
its stockholders were significant in comparison to the transaction costs to be
borne by AMCE in the Merger.
REPORT OF KPMG. At the direction of the Special Committee, KPMG performed
certain limited procedures relating primarily to the assets and liabilities of
DI and subsidiaries, other than the Company, and various tax issues.
REASONS FOR RECOMMENDATIONS
Based on its investigations and analysis and the reports of its advisors,
the Special Committee concluded that the Merger is fair to, and in the best
interests of, AMCE and its unaffiliated stockholders for the following reasons:
(1) The Merger will increase the voting interest of the unaffiliated
stockholders from 7.8% to 14.1% (assuming the conversion of the Convertible
Preferred Stock and before the Secondary Offering). This increase will be a
result of the conversion by DI of shares of AMCE Class B Stock (which have
ten votes per share) into shares of AMCE Common Stock (which have one vote
per share) in connection with the Merger.
(2) The Merger will simplify the corporate structure of AMCE and related
companies by removing the two levels of holding companies (AAE and DI).
(3) The Merger will be accounted for as a corporate reorganization and
will not affect AMCE's total capitalization because AMCE will issue shares
of AMCE stock in the exact number (except for the payment of fractional
shares in cash) of the shares of AMCE stock held by DI that AMCE will
acquire in the Merger. Also, because DI will have no other assets or
liabilities, except for certain contingent assets and liabilities against
which AMCE will be indemnified, the Merger may be viewed as an exchange of
like assets in which shares of AMCE stock will be exchanged in consideration
for a like amount of shares. The Special Committee received and relied upon
an opinion of Furman Selz as to the fairness from a financial point of view
to AMCE of the consideration to be paid by AMCE in the Merger. It also
relied upon the results of the limited procedures performed by KPMG and
discussions with Coopers & Lybrand and the advice of the Commission staff
concerning the Merger's treatment as a corporate reorganization.
(4) The Merger will have no tax effect on unaffiliated stockholders
because it will be a tax-free reorganization in the opinion of special tax
counsel. See "--Certain Federal Income Tax Consequences."
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(5) Finally, as a result of the Merger, shares of AMCE stock will be
distributed to stockholders of DI who have agreed to sell a portion of those
shares in the Secondary Offering. As noted below in greater detail, the
Secondary Offering will benefit AMCE and its unaffiliated stockholders.
In its consideration of the Merger, the Special Committee also reviewed the
Secondary Offering and concluded it was in the best interests of AMCE and its
stockholders for the following reasons:
(1) The Secondary Offering will increase the float and liquidity of the
AMCE Common Stock, making it easier for stockholders to sell their shares or
buy additional ones. Approximately 3.9 million shares of AMCE Common Stock
(not including shares issuable upon conversion of the AMCE Convertible
Preferred Stock) are owned by persons who are not Durwood Family
Stockholders. If the minimum of 3,000,000 shares of AMCE Common Stock is
sold in the Secondary Offering, the public float will increase by over 75%.
In addition, the shares currently held by the Durwood Family Stockholders
through AAE and DI will, as a result of the Merger, be held directly by
those persons and may be sold at their individual discretion (absent the
Merger, action of AAE and/or DI would be needed), subject to transfer
restrictions in the Stock Agreement and elsewhere. Future sales by these
persons will further increase the public float. As a result of the Secondary
Offering, the voting interest of persons who are not Durwood Family
Stockholders will increase from 6.2% to approximately 11.9% (assuming the
Convertible Preferred Stock is not converted) or 14.1% to 19.7% on a fully
diluted basis.
(2) By increasing the public float and liquidity, the Secondary Offering
may reduce the volatility of daily stock price changes, narrow the bid/asked
spread and increase the interest of institutional investors in AMCE Common
Stock. These effects, over time, may enhance shareholder value.
The Special Committee noted that all of these benefits are possible without
substantial cost to AMCE or its stockholders. AMCE has incurred expenses in
negotiating the Merger Agreement and related agreements and will incur
additional expenses in carrying out the terms of these agreements, including
seeking the approval of its stockholders (total costs are estimated at $2
million). However, DI (if the merger is not consummated) and Mr. Stanley H.
Durwood, the 1989 Trust, the 1992 Trust and Delta (if the merger is consummated)
will pay 50% of AMCE's expenses (subject to offset for Credit Amounts), and, in
certain circumstances, 100% of AMCE's expenses. In addition, Mr. Stanley H.
Durwood, the 1989 Trust and the 1992 Trust will reimburse AMCE for its expenses
in connection with the Secondary Offering (subject to offset for Credit Amounts)
and, with certain exceptions, if the Secondary Offering is not consummated, will
pay AMCE $2 million (subject to offset for Credit Amounts) for diversion of its
employees in connection with the Secondary Offering.
The Special Committee also based its recommendations on the fact that the
terms of the Merger Agreement and the related agreements (including the
Secondary Offering) were determined through arms' length negotiations between
representatives of the Durwood Family Stockholders and DI, on the one hand, and
the Special Committee, on the other hand.
In view of the wide variety of factors considered in connection with its
evaluation of the Merger, the Special Committee did not find it practicable to
assign relative weights to the factors considered in reaching its decision, and,
therefore, the Special Committee did not qualify or otherwise attach relative
weights to the specific factors it considered.
The Special Committee considered as an important element of its assessment,
among the other factors described above, the analyses of its financial advisor
as to the fairness of the Merger. The Special Committee relied upon the fairness
opinion of Furman Selz for its analysis and the Special Committee expressly
adopted the conclusions and analysis of Furman Selz as its own.
The Special Committee also considered as another important element of its
assessment of the Merger the results of the limited procedures performed with
respect to DI and its subsidiaries, other than the Company, conducted by KPMG.
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The Special Committee (whose members are parties to the Derivative Action)
also took note of the following. As discussed above, a proposal relating to the
Merger and Secondary Offering became part of preliminary settlement discussions
in the Derivative Action. These settlement negotiations were not finalized until
October 10, 1996, by which time the Special Committee had substantially
concluded its analysis of the benefits of the Merger and the Secondary Offering.
On that date, the Derivative Action Settlement Agreement was signed and provided
for the Merger and Secondary Offering as part of the settlement. In this
connection, Mr. Stanley H. Durwood and Mr. Edward D. Durwood had entered into
the Durwood Family Settlement Agreement in which all parties agreed to work to
effect the Merger. The provisions relating to the Merger and the Secondary
Offering are only a part of the Derivative Action Settlement Agreement and the
undertakings of the parties.
The Special Committee noted that in addition to approval of the Merger
Agreement by the Special Committee, the Merger Agreement is subject to approval
by the holders of a majority of the shares of AMCE Common Stock (other than
those owned by DI, the Durwood Family Stockholders, their spouses, their
children sharing the same household and directors and officers of AMCE) voting
on the Merger.
Based on the preceding, the Special Committee recommended that the New
Independent Directors approve and that the full AMCE Board approve and adopt the
Merger Agreement and the related agreements (including the Secondary Offering)
described above and recommend that AMCE stockholders approve and adopt the
Merger Agreement. In accordance with the Derivative Action Settlement Agreement,
two New Independent Directors have been elected to the AMCE Board. The
Derivative Action Settlement Agreement requires that the New Independent
Directors shall have the ability to approve or disapprove any proposed
transaction between AMCE and members of the Durwood Family. Accordingly, the New
Independent Directors voted separately and as part of the full AMCE Board on the
Merger and the Secondary Offering.
The full AMCE Board and the two New Independent Directors voted unanimously
to approve and adopt the Merger Agreement and the related agreements (including
the Secondary Offering) and to recommend that AMCE stockholders approve and
adopt the Merger Agreement.
FAIRNESS OPINION OF FURMAN SELZ. Furman Selz has delivered its written
opinion to the Special Committee that, as of March 13, 1997, the consideration
to be paid by AMCE in the Merger is fair, from a financial point of view, to
AMCE. In rendering the opinion, Furman Selz assumed that at the time of the
Merger, DI will have no liabilities except for a contingent liability which,
they were informed, is remote. They also took note of the fact that certain
shareholders of DI will indemnify AMCE against the existence of such liabilities
for a period of two years after the March 31 occurring immediately after the
Effective Date. They have also relied upon the accuracy and completeness of the
financial and other information supplied to or otherwise used by them in
arriving at their opinion and have not attempted independently to verify such
information. They have further relied upon the assurances of the management of
DI and AMCE that they were not aware of any facts that would make such
information inaccurate or misleading. In view of the opinion that Chadbourne &
Parke LLP, special tax counsel, will render, Furman Selz assumed that the Merger
will qualify as a reorganization in which no taxable income, gain or loss will
be recognized by AMCE or DI. They also assumed that the Merger would be
accounted for as a pooling of interests. The opinion is based on economic,
market and financial conditions existing as of its date. No limitations were
imposed by the AMCE Board or the Special Committee upon Furman Selz with regard
to the investigations made or procedures followed by Furman Selz in rendering
its opinion.
The full text of Furman Selz's opinion, which sets forth assumptions made,
matters considered and limits of the review undertaken in arriving at the
opinions set forth therein, is attached as Annex 2 and is incorporated herein by
reference in its entirety. AMCE's stockholders are urged to read this opinion in
its entirety for assumptions made, matters considered and limits of the review
by Furman Selz. The summary of the opinion set forth herein is qualified in its
entirety by reference to the full text of the opinion. Furman Selz's opinion is
directed only to the fairness, from a financial point of view, of the
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consideration to be paid by AMCE in the Merger and does not constitute a
recommendation to any stockholder of AMCE to vote to approve the Merger. In
rendering its opinion, Furman Selz, among other things, reviewed the forms of
Merger Agreement, Indemnification Agreement, Stock Agreement and Registration
Agreement, together with certain historical financial information of DI and
AMCE. Furman Selz also met with members of management of DI and AMCE,
respectively, and considered the trading history of AMCE Common Stock from
January 2, 1992 through March 7, 1997 and a comparison of that trading history
with those of other companies in the theatrical exhibition industry. It compared
historical and projected financial results and financial condition of AMCE with
those of other companies engaged in the theatrical exhibition industry. Furman
Selz also undertook such other studies, analysis and investigations as it deemed
appropriate. Furman Selz is a nationally recognized investment banking firm
regularly engaged in the evaluation of businesses and their securities in
connection with mergers and acquisitions. Furman Selz was selected by the
Special Committee because of, among other reasons, the Special Committee's
assessment of Furman Selz's expertise in financial matters and business
combination transactions in the entertainment industry.
Pursuant to a letter agreement dated May 22, 1995 between Furman Selz and
AMCE (the "Engagement Letter"), Furman Selz was engaged to provide financial
advisory and investment banking services to the Special Committee in connection
with its consideration of the Merger, including the rendering of a written
opinion relating to the fairness to AMCE, from a financial point of view, of the
Merger consideration. The Special Committee on behalf of AMCE has agreed to pay
Furman Selz an aggregate fee pursuant to the Engagement Letter of $350,000. Of
this fee, $175,000 has been paid and the remaining $175,000 will be payable upon
the consummation of the Merger. AMCE has also agreed to reimburse Furman Selz
for its reasonable out-of-pocket expenses, and to hold harmless Furman Selz from
and against certain losses, claims, damages, liabilities and expenses related to
or arising out of Furman Selz's engagement under or its role in connection with
the Engagement Letter. Furman Selz may in the future, from time to time, perform
certain other financial advisory and securities underwriting services for AMCE
for which it may receive a fee. In the ordinary course of its business, Furman
Selz may trade in the equity securities of AMCE for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or short
position in such securities.
During the course of its engagement, Furman Selz provided the Special
Committee with presentations and other information and assisted in negotiations
and met on numerous occasions in person and by telephone with the Special
Committee. On March 13, 1997, Furman Selz delivered to the Special Committee its
written opinion that, as of such date, the consideration to be paid by AMCE in
the Merger was fair, from a financial point of view, to AMCE.
In its presentation to the Special Committee on March 13, 1997, Furman Selz
expressed its view that because DI would at the time of the Merger have no
assets (other than shares of AMCE Common Stock and AMCE Class B Stock) and AMCE
would be indemnified against certain liabilities of DI, the value of the shares
of AMCE Common Stock and AMCE Class B Stock to be issued in the Merger should be
viewed as the total consideration to be paid by AMCE in the Merger. Because this
consideration will equal the aggregate amount of shares of AMCE stock held by DI
at the time of the Merger (subject to the payment of fractional shares in cash),
which shares will be acquired by AMCE by virtue of the Merger, the Merger can be
viewed as an exchange of like assets.
Furman Selz believes that its analysis must be considered as a whole and
that selecting portions of its analysis and the factors considered by Furman
Selz, without considering all the factors and analysis, could create an
incomplete view of the processes underlying Furman Selz's opinion and its
presentation to the Special Committee. The preparation of a fairness opinion is
a complex process not susceptible to partial analysis or summary description. In
rendering its opinion, Furman Selz made numerous assumptions, many of which are
beyond the control of AMCE or DI.
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MATERIAL TERMS OF THE MERGER
The following is a summary of certain provisions of the Merger Agreement and
the Stock Agreement, Registration Agreement and Indemnity Agreement referred to
therein. Copies of such agreements are exhibits to the Merger Agreement and
included in Annex 1 to this Proxy--Information Statement/ Prospectus, and such
summary is qualified in its entirety by reference to the full texts of such
agreements.
THE MERGER AGREEMENT
EFFECTIVE TIME. The closing date of the Merger shall occur as promptly as
practicable after satisfaction or waiver of all the conditions in the Merger
Agreement. The Merger shall be effective (the "Effective Time") immediately upon
the filing of the Merger Agreement or a Certificate of Merger with the Secretary
of State of Delaware in accordance with applicable law.
MERGER CONSIDERATION. In the Merger, shares of DI stock will be converted
as follows (subject to the payment of fractional shares in cash):
Each share of DI Class A Stock which immediately prior to the Effective Time
is owned of record by persons other than Mr. Stanley H. Durwood, the 1989 Trust
and the 1992 Trust shall be converted into 32.142857 shares of AMCE Common
Stock.
Each share of DI Class A Stock issued and outstanding immediately prior to
the Effective Time owned by Mr. Stanley H. Durwood, the 1989 Trust or the 1992
Trust shall be converted into 32.142857 shares of AMCE Class B Stock.
Each share of DI Class B Stock which immediately prior to the Effective Time
is owned of record by Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust
will be converted into 243.767528 shares of AMCE Class B Stock.
Each share of DI Class B Stock which immediately prior to the Effective Time
is owned of record by any person other than Mr. Stanley H. Durwood, the 1989
Trust or the 1992 Trust will be converted into 243.767341 shares of AMCE Common
Stock.
SHARES OF AMCE COMMON STOCK HELD BY PERSONS OTHER THAN DI AND SHARES OF
CONVERTIBLE PREFERRED STOCK WILL NOT BE EXCHANGED IN THE MERGER. Each share of
AMCE Common Stock and Class B Stock held by DI at the Effective Time will be
canceled.
CONVERSION AND EXCHANGE OF SHARES. After the Effective Time of the Merger,
each holder of an outstanding certificate or certificates formerly representing
shares of DI Class A Stock or DI Class B Stock will be entitled to receive, upon
surrender of his or her DI stock certificates, a certificate or certificates
representing the number of full shares of AMCE Common Stock or AMCE Class B
Stock into which such shares of DI stock shall have been converted pursuant to
the Merger, together with cash in lieu of any fractional shares. Promptly after
the Effective Time of the Merger, AMCE or its representative will mail or
otherwise deliver to each holder of certificates formerly representing DI Class
A Stock or DI Class B Stock instructions for surrendering his or her DI stock
certificates for certificates representing shares of AMCE Common Stock or AMCE
Class B Stock, as the case may be, and cash in lieu of any fractional shares.
From and after the Effective Time of the Merger, certificates formerly
representing shares of DI Class A Stock or DI Class B Stock will be deemed for
all corporate purposes to evidence ownership of the number of full shares of
AMCE Common Stock or AMCE Class B Stock into which such shares were converted
pursuant to the Merger, provided, that until such DI stock certificates have
been so surrendered, no dividends payable to the holders of record of DI stock
as of any date subsequent to the Merger shall be paid to the holders of such
outstanding DI stock certificates. Any dividends payable on AMCE Common Stock or
AMCE Class B Stock to holders of record as of any date after the Effective Time
of the
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<PAGE>
Merger and prior to the exchange of certificates by any DI shareholder will be
paid to such shareholder, without interest, at the time such shareholder
surrenders his or her DI stock certificates for exchange.
SHARES OF AMCE STOCK HELD BY PERSONS AND ENTITIES OTHER THAN DI WILL NOT BE
EXCHANGED IN THE MERGER. HOLDERS OF AMCE STOCK SHOULD NOT SURRENDER THEIR SHARES
IN CONNECTION WITH THE MERGER.
DI PRE-MERGER ACTION PLAN. Pursuant to the DI Pre-Merger Action Plan set
forth as Exhibit A to the Merger Agreement (the "DI Pre-Merger Action Plan"),
prior to the Effective Time, all of DI's assets (other than its equity interest
in AMCE) will be transferred to Delta and Delta will agree to assume certain of
DI's liabilities, and DI's other subsidiaries, other than AMCE and its
subsidiaries, have been merged into Delta. Delta shares will be distributed to
DI's shareholders so that, at the Effective Time, DI's sole assets will consist
of stock of AMCE and its beneficial interest in certain tax credits and
operating loss carryforwards. In addition, AAE will be liquidated.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties relating to, among other things: (i)
each of AMCE's and DI's organization and similar corporate matters, (ii) each of
AMCE's and DI's capital structure, (iii) authorization, execution, delivery and
enforceability of the Merger Agreement and related matters, (iv) the
subsidiaries of DI (other than AMCE) and investments by DI in other persons and
entities, (v) the financial statements of DI as of and for the fiscal year ended
March 26, 1996 and as of and for the thirty-nine week period ended December 26,
1996, (vi) absence of material changes with respect to DI since December 26,
1996, except as contemplated by the DI Pre-Merger Action Plan (vii) absence of
material liabilities of DI as of the Effective Time, (viii) the filing by DI of
its tax returns and payment of its taxes, (ix) the absence of ownership by DI
and its subsidiaries (other than AMCE) of real property or tangible assets, and
the absence of ownership of any assets of DI other than AMCE Common Stock and
AMCE Class B Stock at the Effective Time, (x) leases of DI, (xi) the accuracy of
the books and records of DI, (xii) the ownership by DI of certain life insurance
policies, (xiii) compliance by DI with applicable law, (xiv) the absence of
litigation and other proceedings involving DI or any of its subsidiaries (other
than AMCE), (xv) the absence of misstatements by DI in written materials
furnished in connection with the transaction, (xvi) the lack of liabilities of
DI and its subsidiaries (other than AMCE) for a brokerage or similar fee in
connection with the transaction, (xvii) DI's employees and benefit plans,
(xviii) contracts of DI and the absence of such contracts binding upon DI at the
Effective Time, (xix) the adequacy of reserves on DI's December 26, 1996 balance
sheet and (xx) that any contract of DI benefiting any insider or affiliate of DI
is set forth on a schedule to the Merger Agreement.
CERTAIN COVENANTS. DI has agreed that until the Effective Time, except as
otherwise contemplated in the Pre-Merger Action Plan, it will conduct its
business only in the ordinary course as previously conducted, will not amend its
certificate of incorporation, declare or pay any dividend or other distribution
in respect of its capital stock, incur any indebtedness, enter into any material
agreement or take other actions prohibited by the Merger Agreement. DI has also
agreed to afford representatives of AMCE access to its books and records in
connection with the transactions contemplated by the Merger Agreement.
AMCE has agreed to prepare and file the Registration Statement with respect
to the issuance of shares of AMCE in the Merger. AMCE has also agreed to use its
reasonable efforts to have listed for trading on the AMEX and, if AMCE Common
Stock is still listed on the Pacific Stock Exchange, on the Pacific Stock
Exchange, the AMCE Common Stock to be issued pursuant to the Merger.
DI has agreed that at the time the Registration Statement or any
post-effective amendment thereto becomes effective, and at all times subsequent
to any such effectiveness up to and including the Effective Time, any
information regarding DI or any insider or affiliate of DI set forth in the
Registration Statement, any amendments or supplements thereto, the proxy
statement and in any other proxy soliciting material to be used by AMCE and DI
in connection with the transactions contemplated by the
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<PAGE>
Merger Agreement, will comply as to form in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission thereunder, and will not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made therein not misleading. DI further agrees to cause
all actions contemplated by the Pre-Merger Action Plan to occur at the times
contemplated by the Pre-Merger Action Plan.
CONDITIONS TO CLOSING. The respective obligations of AMCE and DI to effect
the Merger are subject to the following conditions, among others: (i) the Merger
Agreement shall have been approved by the requisite votes of the holders of AMCE
Common Stock, AMCE Class B Stock, DI Class A Stock and DI Class B Stock, and, in
addition, shall have been approved by the holders of a majority of the
outstanding shares of AMCE Common Stock (excluding the Durwood Family
Stockholders, their spouses, children living in the same household and officers
and directors of AMCE) present and voting at the meeting of stockholders called
to consider the Merger, (ii) all required approvals of state securities
administrators shall have been obtained and at the Effective Time no stop order
or similar restraining order shall have been threatened or entered by the
Commission or any state securities administrators, (iii) the shares of AMCE
Common Stock to be issued pursuant to the Merger shall have been approved for
listing by the AMEX and, if AMCE Common Stock is still listed on the Pacific
Stock Exchange, on such exchange, (iv) all relevant governmental filings shall
have been made or obtained, (v) all requisite consents, approvals and agreements
of third parties in connection with the Merger and the actions contemplated by
the Pre-Merger Action Plan shall have been received and (vi) Harvard College
shall have given its written consent to the Merger.
The obligations of AMCE to effect the Merger are subject to the following
conditions, among others: (i) DI shall have taken all requisite corporate action
in connection with the Merger and Pre-Merger Action Plan, (ii) there shall be no
litigation, proceedings or actions concerning the Merger that in the judgment of
the AMCE Board renders consummation of the Merger inadvisable, (iii) no
dissenters' rights shall have been exercised by the holders of any shares of DI
Stock, (iv) the Indemnification Agreement, Stock Agreement and Registration
Agreement shall have been executed by the other parties thereto and remain in
full force and effect, (v) AMCE shall have received a satisfactory fairness
opinion from Furman Selz, (vi) AMCE shall have received from Coopers & Lybrand
satisfactory "comfort letters", (vii) the representations and warranties of DI
in the Merger Agreement shall continue to be true and correct in all material
respects, (viii) DI shall have performed in all material respects its
obligations in the Merger Agreement to be performed prior to the Effective Time,
(ix) AMCE shall have received an opinion of Chadbourne & Parke, LLP to the
effect that the Merger will constitute a reorganization within the meaning of
Section368(a)(1)(A) of the Code and no income, gain or loss will be recognized
by AMCE or DI as a result of the Merger, (x) AMCE shall have received a
satisfactory opinion from special counsel to DI and (xi) DI shall have converted
6,141,343 shares of AMCE Class B Stock into a like number of shares of AMCE
Common Stock.
The obligations of DI to effect the Merger are subject to the following
conditions, among others: (i) AMCE shall have taken all requisite corporate
action in connection with the transactions contemplated by the Merger Agreement,
(ii) the Indemnification Agreement, Stock Agreement and Registration Agreement
shall have been executed by AMCE and remain in full force and effect, (iii)
there shall be no litigation, proceedings or actions concerning the Merger that
in the judgment of the Board of Directors of DI renders consummation of the
Merger inadvisable, (iv) the representations and warranties of AMCE in the
Merger Agreement shall continue to be true and correct in all material respects,
(v) AMCE shall have performed in all material respects its obligations under the
Merger Agreement to be performed prior to the Effective Time and (vi) DI and its
shareholders shall have received the opinion of Chadbourne & Parke, LLP to the
effect that the Merger will constitute a reorganization within the meaning of
Section368(a)(1)(A) of the Code and except for cash received in lieu of
fractional shares or in payment of Credit Amounts (see--"Indemnification
Agreement--Other Agreements" ), no income, gain or loss will be recognized by DI
or its shareholders as a result of the Merger.
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<PAGE>
EXPENSES. If the Merger is not consummated for any reason (other than as a
result of the Board of Directors of AMCE terminating the Merger Agreement for a
Specified Reason (as defined below) or Without Cause (as defined below)), DI
shall be responsible for all of the expenses of DI and AMCE in connection with
the Merger. If the Merger Agreement is terminated by the AMCE Board for a
Specified Reason or Without Cause, DI shall be responsible for 50% of AMCE's
expenses (but shall continue to be responsible for 100% of DI's expenses).
A "Specified Reason" shall mean any of the following bases for a
determination by the AMCE Board to terminate the Merger Agreement: (i) that it
is in the best interest of AMCE to pursue an unrelated transaction and the
transactions contemplated by the Merger Agreement would adversely impact such
unrelated transaction, (ii) that certain conditions in the Merger Agreement have
failed due to circumstances beyond the control of the parties or the Durwood
Family Stockholders or (iii) AMCE's condition relating to litigation is not
satisfied (unless DI or any Durwood Family Stockholder is involved in a role
adverse to AMCE). "Without Cause" shall mean a determination by the AMCE Board
to terminate the Merger Agreement without having a reasonable basis for such
action.
AMENDMENT AND TERMINATION. DI and AMCE, by mutual consent of the Board of
Directors of DI and the AMCE Board acting with the recommendation of the Special
Committee, may amend the Merger Agreement at any time, provided that no such
amendment shall (i) if agreed to after approval by the stockholders of AMCE,
change the amount or nature of the consideration received by shareholders of DI
or, in the judgment of the AMCE Board acting with the recommendation of the
Special Committee, otherwise have a material adverse effect on the rights of
AMCE stockholders, or (ii) be effective unless approved by a majority of the
Durwood Family Stockholders.
The Merger may be deferred or abandoned at any time prior to the Effective
Time by the Board of Directors of DI or the AMCE Board acting with the
recommendation of the Special Committee.
THE STOCK AGREEMENT
One of the conditions to the Merger is that the Durwood Family Stockholders
enter into the Stock Agreement with AMCE.
RESTRICTIONS ON CERTAIN ACTIONS. Pursuant to the Stock Agreement, each of
the Durwood Children agrees that for a period of three years commencing on the
date of the Merger (the "Restricted Period"), he or she will not become a member
of a group (other than a group composed solely of Durwood Family Stockholders)
or make any public or private proposal with respect to an extraordinary
transaction involving AMCE or any of its subsidiaries, participate in any proxy
or election contest, or subject shares of AMCE Common Stock owned by him or her
to a voting agreement or other arrangement with respect to the voting of such
shares.
Each of the Durwood Children also grants a proxy to the Secretary and each
Assistant Secretary of AMCE to vote shares of AMCE Common Stock owned by him or
her for each candidate for the AMCE Board in the same proportion as the
aggregate votes cast in such elections by all other holders of AMCE Common Stock
not affiliated with AMCE, its directors and officers. This proxy will remain in
effect during the Restricted Period.
Each Durwood Family Stockholder agrees not to transfer any of its AMCE
stock, except in compliance with the Securities Act. Each Durwood Family
Stockholder also agrees that during the Restricted Period he or she will not
transfer AMCE stock by gift to any person or entity unless such person or entity
agrees to be bound by the Stock Agreement, provided that each Durwood Family
Stockholder may transfer up to 5% of the shares of AMCE stock he or she receives
in the Merger to certain charitable assignees (as defined in the Stock
Agreement) free of the provisions of the Stock Agreement.
Each of the Durwood Children also agrees that in the event any of them
desires during the Restricted Period to sell any of his or her shares of AMCE
stock in a transaction exempt from the
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<PAGE>
Securities Act (other than in a brokers' transaction), he or she shall first
afford AMCE the opportunity to purchase such shares on the same terms and
conditions as the proposed sale.
SECONDARY OFFERING. Each Durwood Family Stockholder agrees to use his or
her best efforts to cause the Secondary Offering to be consummated during the
period beginning on the date that is six months and one day from the Effective
Date and ending on the date that is six months from such beginning date,
provided that such six-month period may be extended under certain circumstances.
In the event that the Merger is consummated but the Secondary Offering is
not consummated, other than as a result of the breach by AMCE of the
Registration Agreement, Mr. Stanley H. Durwood, the 1992 Trust, the 1989 Trust
and Delta agree jointly and severally to pay AMCE a fee of $2 million (subject
to offset for Credit Amounts ( See "--The Indemnification Agreement -- Other
Agreements")) and to reimburse AMCE for all of its expenses in connection with
the Merger not theretofore reimbursed.
TAX MATTERS. Except as provided below, each Durwood Family Stockholder
represents that it has no intention of disposing of a number of shares of AMCE
stock received in the Merger in excess of 50% of the number of such shares
received by such Durwood Family Stockholder in the Merger. In addition, to
enable Harvard College to sell all of the shares of AMCE Common Stock it
receives in the Merger if it so elects, and to take account of the payment of
Credit Amounts, if any, Mr. Stanley H. Durwood, the 1989 Trust and the 1992
Trust, collectively, represent that they have no intention of disposing of an
additional number of shares of AMCE Class B Stock equal to 65% of the number of
shares of AMCE Common Stock received by Harvard College in the Merger, plus a
number of shares of AMCE Class B Stock equal to the Specified Percentage (as
defined below) of the number of shares of AMCE Class B Stock and AMCE Common
Stock issued in the Merger. "Specified Percentage" means a percentage equal to
the product of (A) a fraction having a numerator of $1,125,000 and a denominator
equal to the sum of the value of all shares of AMCE Common Stock and AMCE Class
B Stock issued in the Merger, plus $1,125,000, multiplied by (B) 1.25.
Each Durwood Family Stockholder also covenants not to dispose of a like
number of shares of AMCE stock received in the Merger by such Durwood Family
Stockholder during the two-year period commencing with the Effective Time of the
Merger.
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THE REGISTRATION AGREEMENT
A condition to the Merger Agreement is that the Durwood Family Stockholders
enter into the Registration Agreement.
REGISTRATION. In the Registration Agreement, the Durwood Family
Stockholders agree to sell at least 3,000,000 shares of AMCE Common Stock in a
registered underwritten Secondary Offering during a six-month period beginning
the day that is six months and one day from the date of the Merger (provided
that such period can be extended under certain circumstances). They also agree
that the underwriters for such registration will use their reasonable efforts in
light of market conditions to sell at least 70% of such shares to institutional
(as opposed to retail) investors. The Durwood Family Stockholders have the right
to increase the number of shares included in the Secondary Offering to up to
5,000,000 shares.
The managing underwriters for the Secondary Offering shall be selected
jointly by AMCE and the Durwood Family Stockholders.
AMCE shall be entitled to postpone the filing of the registration statement
for the Secondary Offering for up to 180 days if, as a result of the
registration, AMCE would be required to prepare any financial statements other
than those it customarily prepares or AMCE determines in its reasonable business
judgment that such registration would interfere with any material financing,
acquisition, corporate reorganization or other material corporate transaction or
development.
REGISTRATION PROCEDURES. AMCE agrees to prepare and file a registration
statement covering the Secondary Offering, and use its reasonable efforts to
cause such registration statement to become effective. In connection with the
Secondary Offering, AMCE agrees to enter into one or more underwriting or
similar agreements, as appropriate, with customary provisions.
AMCE agrees to supplement or amend the prospectus included in the
registration statement as may be necessary to effect and maintain the
effectiveness of the registration statement for the period of the Secondary
Offering.
REGISTRATION EXPENSES. Mr. Stanley H. Durwood, the 1989 Trust, the 1992
Trust and Delta shall pay all expenses in connection with the Secondary Offering
(subject to offset for Credit Amounts (see "--The Indemnification
Agreement--Other Agreements")), except that each seller of securities in the
Secondary Offering shall pay its pro rata portion of all underwriting discounts
and commissions and the fees and expenses of its own counsel, and AMCE shall pay
all of its internal expenses.
INDEMNIFICATION. AMCE agrees to indemnify each seller of securities in the
Secondary Offering (other than Mr. Stanley H. Durwood, the 1992 Trust and the
1989 Trust) from all damages that may arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in the
registration statement, or any preliminary, final or summary prospectus
contained therein or furnished by AMCE to any such seller, or any amendment or
supplement thereto, or that may arise out of or are based upon any omission or
alleged omission to state therein a material fact necessary to make the
statements therein not misleading, provided that AMCE shall not be obligated to
indemnify any such person (i) to the extent the damages are caused by an untrue
statement or alleged untrue statement or omission or alleged omission based upon
written information furnished to AMCE by any seller of securities, (ii) with
respect to any preliminary prospectus to the extent the damage results from the
fact that such person sold securities to a person to whom a prospectus was not
given at or prior to the confirmation of such sale if AMCE has previously
furnished copies of the prospectus to such seller or underwriter and the damage
results from an untrue statement or omission contained in the preliminary
prospectus which was corrected in the prospectus and (iii) with respect to sales
occurring after AMCE has given notice to the seller that the prospectus needs to
be amended or supplemented and prior to the delivery by AMCE of an amended or
supplemented prospectus.
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Each Durwood Family Stockholder agrees to indemnify AMCE and all other
sellers of securities against damages to the same extent as the indemnity by
AMCE, but only with reference to information relating to such Durwood Family
Stockholder furnished to AMCE by such Durwood Family Stockholder for use in the
registration statement, or any preliminary, final or summary prospectus.
Each party agrees that in the event the indemnities described above are
unavailable or insufficient it will contribute to the amount paid or payable to
the indemnified party in an equitable manner.
The indemnification and contribution obligations described above will
terminate (except as to claims already made) on the March 31 that is two years
after the March 31 occurring immediately after the date on which the Effective
Time occurs.
THE INDEMNIFICATION AGREEMENT
A condition to the Merger Agreement is that the Durwood Family Stockholders
enter into the Indemnification Agreement.
INDEMNITIES REGARDING REGISTRATION STATEMENT AND PROXY STATEMENT. Each of
the Durwood Family Stockholders has agreed to indemnify AMCE and its affiliates,
officers, directors, employees, agents, successors and assigns for damages
incurred as a result of any untrue statement or alleged untrue statement of a
material fact contained in the Proxy--Information Statement/Prospectus and
related Registration Statement, 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 light of the circumstances under which they were made,
not misleading, if the statement or omission was made in reliance upon and in
conformity with the information supplied by such Durwood Family Stockholders.
Such indemnification obligations are several, except that the obligations of Mr.
Stanley H. Durwood, the 1992 Trust and the 1989 Trust are joint and several.
Mr. Stanley H. Durwood, the 1992 Trust and the 1989 Trust (the "SHD
Indemnitors") have agreed to indemnify AMCE and its affiliates, officers,
directors, employees, agents, successors and assigns for damages incurred as a
result of any untrue statement or alleged untrue statement of a material fact
contained in the Proxy--Information Statement/Prospectus and related
Registration Statement, 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 light of the circumstances under which they were made, not
misleading, if the statement or omission was made in reliance upon and in
conformity with information provided by the SHD Indemnitors regarding DI,
subsidiaries of DI (other than AMCE) and AAE.
AMCE has agreed to indemnify each Durwood Family Stockholder, other than the
SHD Indemnitors, for any damages incurred by them as a result of any untrue
statement or alleged untrue statement of a material fact contained in the
Proxy--Information Statement/Prospectus and related Registration Statement, 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 light of the
circumstances under which they were made, not misleading, in each case except to
the extent that the statement or omission was made in reliance upon and in
conformity with information supplied by the Durwood Family Stockholders.
OTHER INDEMNIFICATION. If the Effective Time occurs, AMCE shall indemnify
the Durwood Family Stockholders (other than Mr. Stanley H. Durwood, the 1989
Trust and the 1992 Trust), and certain of their assigns, against damages
resulting from a breach of any representation, warranty, covenant or agreement
of AMCE contained in the Merger Agreement.
If the Effective Time occurs, the SHD Indemnitors shall indemnify AMCE for
any damages resulting from a breach of any representation, warranty, covenant or
agreement of DI contained in the Merger Agreement or resulting from any
liability or obligation of DI or its subsidiaries (other than AMCE).
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If the Effective Time occurs, the SHD Indemnitors and Delta shall indemnify
AMCE for all of DI's expenses in connection with the Merger which have not been
paid prior to the Effective Time and for 50% of AMCE's expenses in connection
with the Merger (subject to offset for Credit Amounts (see "--The
Indemnification Agreement--Other Agreements")).
If the Effective Time occurs, the SHD Indemnitors shall indemnify AMCE for
all taxes attributable to DI or any of its subsidiaries (other than AMCE) for
periods ending on or prior to the Effective Time.
If the Effective Time does not occur, the SHD Indemnitors and Delta shall
indemnify AMCE for all damages resulting from the breach by DI of any
representation, warranty, covenant or agreement in the Merger Agreement.
If the Effective Time occurs, each Durwood Family Stockholder shall
indemnify AMCE for all damages resulting from a breach by such Durwood Family
Stockholder of any provision of Article VI of the Stock Agreement, which Article
provides in general that the Durwood Family Stockholders may not dispose of more
than 50% of the shares of AMCE stock received in the Merger during the two-year
period following the date on which the Effective Time occurs. See "--The Stock
Agreement--Tax Matters."
The indemnification obligations of the parties will terminate (except as to
claims already made) on the March 31 that is two years after the March 31
occurring immediately after the date on which the Effective Time occurs.
OTHER AGREEMENTS. The Durwood Family Stockholders have agreed that the
Durwood Family Settlement Agreement will not be amended without the prior
consent of AMCE, such consent not to be unreasonably withheld.
Each Durwood Family Stockholder has agreed to deposit certain of the shares
of AMCE stock received by him or her in the Merger in escrow for a period of two
years following the date of the Merger.
AMCE has agreed that to the extent it realizes net tax benefits from the
utilization of DI's alternative minimum tax credits and Missouri net operating
loss carryforwards, it will credit such amounts against certain obligations of
the SHD Indemnitors to pay AMCE's merger expenses if the Merger occurs, as
required by the Indemnification Agreement, to pay AMCE's expenses in the
Secondary Offering, as required by the Registration Agreement, and to pay a $2
million penalty amount and 100% of AMCE's Merger Expenses if the Secondary
Offering does not occur, as required by the Stock Agreement, and after March 31,
2000 will pay the SHD Indemnitors other Credit Amounts so realized but not so
credited. Any Credit Amount that arises after March 31, 2000 also will be paid
to Mr. Stanley H. Durwood. DI's alternate minimum tax credits were approximately
$559,000 and its Missouri operating loss carryforwards were approximately
$13,761,000 as of March 28, 1996. Such tax benefits, if fully utilized, would
create Credit Amounts aggregating approximately $1,100,000, which would be
reduced by any subsequent utilization of such benefits on separate tax returns
of DI for 1996 and the portion of 1997 prior to the Effective Time.
The SHD Indemnitors agree that they will not transfer shares of AMCE Stock
(other than in the Secondary Offering, to a charitable assignee (as defined in
the Indemnification Agreement) or otherwise in an arms'-length sale for fair
consideration) unless the transferee agrees to be bound by the provisions of the
Indemnification Agreement as an SHD Indemnitor and to guarantee the performance
by the SHD Indemnitors of their obligations under the Indemnification Agreement
and certain of their obligations under the Registration Agreement and Stock
Agreement, provided that an SHD Indemnitor may not transfer more than 5% of the
shares of AMCE stock received by it in the Merger to a charitable assignee
unless such charitable assignee receiving shares in excess of such threshold
agrees to be so bound.
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GENERAL EFFECTS OF THE MERGER
Pursuant to the Merger Agreement, DI will be merged into AMCE, with AMCE
remaining as the surviving corporation. Prior to the Merger, AAE will be
liquidated. SHARES OF AMCE COMMON STOCK HELD BY STOCKHOLDERS OTHER THAN DI AND
CONVERTIBLE PREFERRED STOCK WILL NOT BE EXCHANGED IN THE MERGER AND WILL REMAIN
OUTSTANDING. After consummation of the Merger, the separate existence of DI will
cease, the Certificate of Incorporation and Bylaws of AMCE will remain unchanged
and the directors and officers of AMCE will continue to serve as such until
their successors are duly elected or appointed or until their earlier
resignation or removal.
The table and notes set forth below illustrates, based on stockholdings as
of April 3, 1997, the beneficial ownership (before and after giving effect to
the Merger) of the Durwood Family Stockholders and other persons known to AMCE
to own beneficially in excess of 5% of its Common Stock, directors and Named
Executive Officers (as defined below in "Management of the Company--Compensation
of Management") and all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
POST-MERGER(4)
---------------------------
PRE-MERGER
-----------------------------------------------------------------
AMCE COMMON STOCK
AMCE COMMON AMCE CLASS B STOCK
NAMES OF BENEFICIAL STOCK ------------------------------- ---------------------------
OWNERS AND ADDRESSES OF -------------------------------- % OF % OF
CERTAIN 5% OWNERS NUMBER NUMBER CLASS NUMBER CLASS
------------------- ------------------ ----------- -------------- -----------
% OF
CLASS
-----------
<S> <C> <C> <C> <C> <C> <C>
Durwood, Inc. 2,641,951(1)(2)(4) 40.1 11,157,000(1)(4) 100 -- --
Stanley H. Durwood 2,685,851(1)(2)(3)(4) 40.5 11,157,000(1)(2)(4) 100 43,900(3)(4) *
Carol D. Journagan 2,641,951(2) 40.1 11,157,000(2)(4) 100 1,461,203(5) 11.5
Edward D. Durwood 2,641,951(2) 40.1 11,157,000(2)(4) 100 1,461,203(5) 11.5
Thomas A. Durwood 2,641,951(2) 40.1 11,157,000(2)(4) 100 1,461,203(5) 11.5
Elissa D. Grodin 2,641,951(2) 40.1 11,157,000(2)(4) 100 1,461,203(5) 11.5
Brian H. Durwood 2,641,951(2) 40.1 11,157,000(2)(4) 100 1,461,203(5) 11.5
Peter J. Durwood 2,641,951(2) 40.1 11,157,000(2)(4) 100 1,461,203(5) 11.5
Vanguard Explorer Fund,
Inc. c/o The Vanguard
Group of Investment
Companies P.O. Box 2600
Valley Forge, PA 19482 482,720(6) 6.8 482,720(6) 3.8
Wellington Management
Company, LLP 75 State
Street Boston, MA 02109 658,260(7) 9.1 0 658,260(7) 5.2
Philip M. Singleton 133,000(8) 2.0 0 133,000(8) 1.0
Peter C. Brown 117,000(8) 1.7 0 117,000(8) *
Richard T. Walsh 23,675(8) * 0 23,675(8) *
John P. Mascotte 1,000 * 1,000 *
Paul E. Vardeman 300 * 300 *
All directors and
executive officers as a
group 2,999,119 43.3 11,157,000 100 357,168 2.7
<CAPTION>
AMCE CLASS B STOCK
NAMES OF BENEFICIAL ---------------------------
OWNERS AND ADDRESSES OF % OF
CERTAIN 5% OWNERS NUMBER CLASS
-------------- -----------
<S> <C> <C>
Durwood, Inc. -- --
Stanley H. Durwood 5,015,657(4)(5) 100
Carol D. Journagan 0 --
Edward D. Durwood 0 --
Thomas A. Durwood 0 --
Elissa D. Grodin 0 --
Brian H. Durwood 0 --
Peter J. Durwood 0 --
Vanguard Explorer Fund,
Inc. c/o The Vanguard
Group of Investment
Companies P.O. Box 2600
Valley Forge, PA 19482 0 --
Wellington Management
Company, LLP 75 State
Street Boston, MA 02109 0 --
Philip M. Singleton 0 --
Peter C. Brown 0 --
Richard T. Walsh 0 --
John P. Mascotte 0 --
Paul E. Vardeman 0 --
All directors and
executive officers as a
group 5,015,657 100
</TABLE>
- --------------
* less than 1%
(1) The 1989 Trust and the 1992 Trust hold approximately 75% of the voting
power of the outstanding capital stock of DI. Record ownership of the DI shares
is in the name of the 1992 Trust, which has issued
44
<PAGE>
its voting trust certificates to the 1989 Trust. AAE holds approximately 25% of
the voting power of DI. Mr. Stanley H. Durwood is the sole director of DI and is
Chairman of the Board, Chief Executive Officer and a Director of AMCE and AMC.
Mr. Stanley H. Durwood is the sole acting trustee of the 1989 Trust and the
1992 Trust and as such has sole voting power over the shares of AMCE stock held
by DI; the named successor trustees under Mr. Stanley H. Durwood's trusts are
Messrs. Charles J. Egan, Jr., a director of AMCE, and Raymond F. Beagle, Jr.,
general counsel to the Company. Under the terms of his revocable voting trust
(the 1992 Trust), Mr. Stanley H. Durwood has all voting powers with respect to
shares held therein during his lifetime. Thereafter, all voting rights with
respect to such shares vest in his successor trustees and any additional
trustees whom they might appoint, who shall exercise such rights by majority
vote. Unless revoked by Mr. Stanley H. Durwood or otherwise terminated or
extended in accordance with its terms, the 1992 Trust will terminate in 2030.
Mr. Stanley H. Durwood may be deemed to share investment power with the
Durwood Children with respect to such shares held of record by DI. As reported
in the Schedule 13Ds filed by Mr. Stanley H. Durwood and DI and by the Durwood
Children and AAE, Mr. Stanley H. Durwood and the Durwood Children have entered
into the Durwood Family Settlement Agreement expressing their intention to
pursue certain transactions to dissolve AAE and to cause shares of AMCE held by
DI to be distributed to members of the Durwood family through the Merger of DI
into AMCE. Thereafter, the Durwood Family Stockholders intend to sell 3,000,000
shares of AMCE Common Stock in the Secondary Offering, which will be made only
by means of a prospectus. If the proposed transactions are consummated, Mr.
Stanley H. Durwood will retain approximately 4.5 million shares (or 100%) of
AMCE Class B Stock and each of the Durwood Children will retain approximately 1
million shares (aggregating approximately 47%) of AMCE Common Stock. Based on
voting shares outstanding as of April 3, 1997, the shares to be retained by Mr.
Stanley H. Durwood will represent approximately 77% of the combined voting power
of AMCE's voting stock. However, provisions of the Durwood Family Settlement
Agreement could result in an adjustment pursuant to which Mr. Stanley H. Durwood
would deliver additional shares of AMCE stock to the Durwood Children. Mr.
Stanley H. Durwood has agreed with the Durwood Children that if the price per
share to the public of the 2.5 million shares of AMCE Common Stock proposed to
be sold by the Durwood Children in the Secondary Offering following the Merger
is less than $18, Mr. 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 AMCE Common
Stock, as an adjustment to the original allocation of shares to be received by
the Durwood Children in the Merger. Mr. Stanley H. Durwood's holdings will
diminish and the Durwood Children's holdings will increase if the Durwood
Children acquire additional shares under such Share Adjustment. However, based
on the number of shares of AMCE Common Stock and AMCE Class B Stock outstanding
at April 3, 1997, the Share Adjustment should not result in Mr. Stanley H.
Durwood owning shares with less than 50% of the combined voting power of the
outstanding AMCE stock unless the Durwood Family Stockholders determine to
proceed with a Secondary Offering of the family's shares at a price to the
public of less than approximately $6.90 per share. Mr. Stanley H. Durwood's
voting control also will be diluted if he is obligated to dispose of shares to
honor tax and other indemnity obligations made to the Durwood Children and AMCE
in connection with the Merger and other related transactions, or if additional
shares of AMCE Common Stock are issued under AMCE's existing employee benefit
plans or upon conversion of Convertible Preferred Stock.
(2) As stated in note (1), as a result of the Durwood Family Settlement
Agreement, the Durwood Children may share investment power with respect to the
shares owned of record by DI and have filed ownership reports with the
Commission to such effect.
(3) Includes 150 shares owned directly by Mr. Stanley H. Durwood and 43,750
shares subject to presently exercisable stock options.
45
<PAGE>
(4) The shares of AMCE Class B Stock are convertible into AMCE Common Stock
on a share-for-share basis. The number and percentage of shares of AMCE Common
Stock shown as beneficially owned do not give effect to the conversion option.
(5) Does not give effect to the proposed sale of shares by certain of the
Durwood Family Stockholders in the Secondary Offering. See "--Material Terms of
the Merger--The Registration Agreement."
(6) This is the number of shares of AMCE Common Stock that would be obtained
upon conversion of Convertible Preferred Stock reported as owned by Vanguard
Explorer Fund, Inc. in its Schedule 13G dated February 10, 1997. Vanguard
Explorer Fund, Inc. reported that it has sole power to vote such shares and
shared power to dispose of them.
(7) This is the number of shares of AMCE Common Stock reported as owned by
Wellington Management Company, LLP in its Schedule 13G dated February 12, 1997,
which number, AMCE has been supplementally advised, represents the number of
shares that would be obtained upon conversion of Convertible Preferred Stock
beneficially owned by Wellington Management Company, LLP. Of these shares
(which, based on the report, are believed to include the shares owned by
Vanguard Explorer Fund, Inc. referred to in note (6)), Wellington Management
Company, LLP reports that it has shared voting power with respect to 37,584
shares and shared dispositive power with respect to 658,260 shares.
(8) Includes shares subject to presently exercisable options to purchase AMCE
Common Stock under AMCE's 1984 and 1994 Stock Option and Incentive Plans, as
follows: Mr. Philip M. Singleton-- 117,000 shares; Mr. Peter C. Brown--117,000
shares; Mr. Richard T. Walsh--23,625 shares; and all officers as a
group--337,500 shares. No adjustments will be made to outstanding options held
by employees as a result of the Merger.
MANAGEMENT AND OPERATIONS OF AMCE AFTER THE MERGER
There will be no changes in the operations of AMCE resulting from the
Merger. However, pursuant to the Derivative Action Settlement Agreement, two New
Independent Directors have been nominated by the Company and elected to serve on
the AMCE Board and will be empowered for three years to approve or disapprove
all transactions between the Company and the Durwood Family Stockholders and all
employment and compensation matters involving the Durwood Family Stockholders,
other than Mr. Stanley H. Durwood and any other Durwood Family Stockholder who
is an officer of AMCE. The current directors and officers of AMCE will continue
to serve as such following the Merger until their successors are duly elected or
appointed or their earlier resignation or removal.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal income tax
consequences of the Merger to AMCE, DI and their shareholders. The summary is
based upon the Code, administrative pronouncements, judicial decisions and
Department of Treasury regulations, subsequent changes to any of which may
affect the tax consequences described herein. The summary does not purport to be
a comprehensive description of all of the tax consequences applicable to a
particular taxpayer. In particular, the summary does not address the tax
treatment to holders subject to special tax rules, such as banks, insurance
companies, dealers in securities or stockholders who acquired their stock
pursuant to the exercise of employee stock options or otherwise as compensation.
In addition, the summary only applies to a holder who is a U.S. citizen or
resident, a U.S. corporation, partnership or other entity created or organized
under the laws of the United States, or an estate or trust the income of which
is subject to U.S. federal income taxation regardless of its source and who
holds shares as capital assets. Shareholders are urged to consult their tax
advisor as to the particular United States federal income tax consequences to
them of the Merger and as to the foreign, state, local and other tax
consequences thereof.
46
<PAGE>
Chadbourne & Parke LLP has provided an opinion to the effect that, under
current law, the Merger will qualify as a tax-free reorganization under Section
368 of the Code, and accordingly, that the Merger will have the tax consequences
set forth below. Such opinion is subject to the conditions, qualifications and
assumptions set forth therein and has been filed as an exhibit to the
Registration Statement of which this Proxy--Information Statement/Prospectus is
a part. As stated above, it is a condition to the consummation of the Merger
that no dissenters' rights shall have been exercised by any of the Durwood
Family Stockholders, and the opinion of Chadbourne & Parke LLP is based upon the
assumption that this condition will be satisfied. Opinions of counsel are not
binding on the Internal Revenue Service ("IRS") or the courts, and the parties
do not intend to request a ruling from the IRS with respect to the Merger.
Accordingly, there can be no assurance that the IRS will not challenge such
conclusion or that a court will not sustain such challenge.
TAX CONSEQUENCES TO AMCE AND DI. The Merger will qualify as a
"reorganization" within the meaning of Section 368(a) of the Code. As a result,
no taxable income, gain or loss will be recognized by either AMCE or DI in the
Merger.
TAX CONSEQUENCES TO AMCE STOCKHOLDERS. The Merger will not be treated as a
sale or exchange by the stockholders of AMCE. As a consequence thereof, such
stockholders will recognize no taxable income, gain or loss as a result of the
Merger.
TAX CONSEQUENCES TO NON-DISSENTING DI SHAREHOLDERS. Subject to the
discussion below concerning fractional shares, no taxable income, gain or loss
will be recognized to the shareholders of DI as a result of the Merger, except
to the extent of any cash received by Mr. Stanley Durwood, the 1989 Trust and/or
the 1992 Trust pursuant to the Indemnification Agreement in respect of the
utilization of certain tax attributes realized by AMCE.
The aggregate tax basis of the shares of AMCE stock received by the DI
shareholders, including the fractional shares deemed to be received, will be the
same as the aggregate tax basis of the shares of DI stock exchanged thereof. The
holding period of the shares of AMCE stock received in the Merger will include
the holding period of the shares of DI stock surrendered therefor.
DI shareholders who receive cash with respect to fractional shares will be
treated as having received such fractional shares pursuant to the Merger and
then as having sold those fractional shares for cash. Such shareholders will
recognize gain or loss with respect to such fractional shares in an amount equal
to the difference between the tax basis allocated to such fractional shares and
the cash received in respect thereof. Any such gain or loss will be a capital
gain or loss and will constitute long-term capital gain or loss if the holding
period of such fractional shares (as determined above) exceeds one year.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The members of the Special Committee are parties to the Derivative Action.
Although they will not make any monetary payment out of personal funds as a
result of, or be subject to sanctions under, the Derivative Action Settlement
Agreement, because they have an interest in such agreement, they may also be
deemed to have an interest in the outcome of the vote on the proposed Merger
Agreement. As described above, the Merger has also been approved by the New
Independent Directors of AMCE and by the full AMCE Board. Upon the
recommendation of the Special Committee, a condition to the Merger is that the
Merger Agreement also receive approval by the holders of a majority of the
outstanding shares of AMCE Common Stock (other than DI, the Durwood Family
Stockholders, their spouses, children sharing the same household and directors
and officers of AMCE) present and voting at the AMCE Special Meeting.
Mr. Stanley H. Durwood also is a party to the Derivative Action. Because he
also has an interest in the Derivative Action Settlement Agreement, he also may
also be deemed to have an interest in the outcome of the vote of the proposed
Merger Agreement.
47
<PAGE>
DISSENTERS' RIGHTS
Under the DGCL, holders of AMCE Common Stock have no dissenters' rights with
respect to the Merger. Holders of AMCE Class B Stock have appraisal rights under
the DGCL in connection with the Merger; however, DI is the sole stockholder of
AMCE Class B Stock and is a party to the Merger Agreement.
Under Section 351.455 of the General and Business Corporation Law of
Missouri (the "GBCLM"), shareholders of DI who do not vote for approval of the
Merger Agreement and who follow certain other procedures summarized below will
have the right to dissent from and obtain payment in cash of the fair value of
their shares in the event of the consummation of the Merger. However, AMCE may
elect to terminate the Merger Agreement if any of the DI shareholders exercises
dissenters' rights. The following is a summary of the procedures which must be
followed by any DI shareholder who wishes to dissent and demand payment for his
or her shares in the event of consummation of the Merger. Holders receiving cash
upon exercise of dissenters' rights will recognize a gain or loss for federal
income tax purposes. See "The Merger--Certain Federal Income Tax Consequences."
A shareholder may assert dissenters' rights only if such shareholder:
(i) Delivers to DI prior to or at the DI Special Meeting a written
objection to the Merger Agreement. Such objection should be delivered or
mailed in time to arrive before the vote at such DI Special Meeting to
Durwood, Inc., 106 West 14th Street, Kansas City, Missouri, 64105, Attn:
Secretary. Such a written objection must be made in addition to, and
separate from, any proxy or other vote against adoption and approval of the
Merger. Neither a vote against, a failure to vote for, nor an abstention
from voting will satisfy the requirement that a written objection be
delivered to DI before the vote is taken. Unless a shareholder files the
written objection as provided above, he or she will not have any rights as a
dissenting shareholder; and
(ii) Does NOT vote for approval of the Merger Agreement. A shareholder
who abstains from voting or who does not vote will not be foreclosed from
exercising dissenters' rights; and
(iii) Delivers to AMCE within twenty days after the Effective Date of
the Merger a written demand for payment of the fair value of his or her
shares of DI stock as of the day prior to the date on which the vote for
approval was taken and which includes a statement of the number and class of
shares owned. Such demand must be mailed or delivered to AMCE at AMC
Entertainment Inc., 106 West 14th Street, Kansas City, Missouri, 64105,
Attn: Secretary. Any shareholder who fails to make a written demand for
payment within the twenty-day period after the Effective Date of the Merger
shall be conclusively presumed to have consented to the Merger Agreement and
shall be bound by the terms thereof. Neither a vote against the Merger nor
the written objection referred to in paragraph (i) satisfies the written
demand requirement referred to in this paragraph (iii).
A beneficial owner of shares who is not the record owner may not assert
dissenters' rights. If the stock is owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, or by a nominee, the written demand
asserting dissenters' rights must be executed by the fiduciary or nominee. If
the stock is owned of record by more than one person, as in a joint tenancy or
tenancy in common, the demand must be executed by all joint owners. An
authorized agent, including an agent for two or more joint owners, may execute
the demand for a shareholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in executing the demand, he
is acting as agent for the record owner.
If within thirty days of the Effective Date the value of a dissenting
shareholder's shares is agreed upon between the shareholder and AMCE, AMCE will
make payment to the shareholder within ninety days of the Effective Date, upon
the shareholder's surrender of his or her share certificates. Upon payment of
the agreed value, the dissenting shareholder will cease to have any interest in
such shares or in AMCE.
48
<PAGE>
If the dissenting shareholder and AMCE do not agree on the fair value of the
shares within thirty days of the Effective Date, the dissenting shareholder may,
within sixty days thereafter, file a petition in any court of competent
jurisdiction within Jackson County, Missouri asking for a finding and a
determination of the fair value of the shares. The dissenting shareholder is
entitled to judgment against AMCE for the amount of such fair value as of the
day prior to the date on which such vote was taken approving the Merger
Agreement, together with interest thereon to the date of judgment. The judgment
is payable only upon and simultaneously with the surrender to AMCE of the
certificates representing said shares. Upon payment of the judgment, the
dissenting shareholder shall cease to have any interest in such shares or in
AMCE. Unless the dissenting shareholder shall file such petition within the time
herein limited, such shareholder and all persons claiming under the shareholder
shall be conclusively presumed to have approved and ratified the Merger
Agreement and shall be bound by the terms thereof.
The right of a dissenting shareholder to be paid the fair value for his or
her shares will cease if the shareholder fails to comply with the procedures of
the GBCLM or if the Merger Agreement is terminated for any reason.
IT IS A CONDITION TO AMCE'S OBLIGATION TO CONSUMMATE THE MERGER THAT NO DI
SHAREHOLDER SHALL HAVE EXERCISED HIS OR HER DISSENTER'S RIGHTS.
ACCOUNTING TREATMENT
Management expects that the Merger will be accounted for as a corporate
reorganization and, accordingly, the recorded balances for consolidated assets,
liabilities, total stockholders' equity and results of operations of the Company
will not be affected.
49
<PAGE>
CAPITALIZATION OF THE COMPANY
The following table sets forth the total capitalization of the Company
(including short-term debt) as of December 26, 1996 and as adjusted to give pro
forma effect to the Merger and the Note Offering and the application of the
$193.8 million in net proceeds thereof to the reduction of outstanding
indebtedness under the Credit Facility as described in "Summary--Recent Note
Offering and Amendment to Credit Facility--Note Offering." This table should be
read in conjunction with the Company's Consolidated Financial Statements and the
Notes thereto included elsewhere herein.*
<TABLE>
<CAPTION>
AS OF DECEMBER 26, 1996
AS ADJUSTED FOR
-----------------------------------------
MERGER & NOTE
OFFERING
COMBINED MERGER ACTUAL
--------------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C>
Short-term debt (including current portion of long-term debt).......... $ 3,417 $ 3,417 $ 3,417
Long-term debt:........................................................
Credit Facility(1)................................................... 71,212 265,000 265,000
9 1/2% Senior Subordinated Notes due 2009.......................... 198,938 -- --
Capital lease obligations and other long-term debt................... 62,284 62,284 62,284
Stockholders' equity
$1.75 Cumulative Convertible Preferred Stock, par value 66 2/3 CENTS
per share, 10,000,000 shares authorized; 3,323,600 shares issued
and outstanding as of December 26, 1996 (aggregate liquidation
value of $83,090).................................................. 2,216 2,216 2,216
Common Stock, par value 66 2/3 CENTS per share, 45,000,000 shares
authorized; 6,569,989 shares issued; 12,711,332 as adjusted for
Merger(2).......................................................... 8,474 8,474 4,380
Class B Stock, par value 66 2/3 CENTS per share, 30,000,000 shares
authorized; 11,157,000 shares issued and outstanding; 5,015,657 as
adjusted for Merger................................................ 3,344 3,344 7,438
Additional paid-in capital........................................... 107,791 107,791 107,791
Foreign currency translation adjustment.............................. (619) (619) (619)
Retained earnings.................................................... 42,875 42,875 43,875
--------------- ----------- -----------
164,081 164,081 165,081
Less Common Stock in treasury, at cost, 20,500 shares................ 369 369 369
--------------- ----------- -----------
Total stockholders' equity......................................... 163,712 163,712 164,712
--------------- ----------- -----------
Total capitalization................................................... $ 499,563 $ 494,413 $ 495,413
--------------- ----------- -----------
--------------- ----------- -----------
</TABLE>
- --------------
(1) As of December 26, 1996, the total availability under the Credit Facility
was $425 million of which the Company had borrowed $265 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations Liquidity and Capital Resources." After giving pro forma effect
to the application of the net proceeds from the Note Offering as described,
the amount available for borrowing under the Credit Facility as of such date
would be $353.8 million.
(2) Does not include 5,729,886 shares of AMCE Common Stock issuable upon the
conversion of Convertible Preferred Stock, 11,157,000 shares reserved for
issuance upon conversion of AMCE Class B Stock or 774,500 shares reserved
for issuance upon the exercise of outstanding employee stock options and
vesting of outstanding performance share awards, at the maximum level of
performance attainment.
* For information concerning the Company's commitments and contingencies, see
Notes 9 and 11 to AMCE's Consolidated Financial Statements included
elsewhere herein.
50
<PAGE>
INFORMATION ABOUT THE COMPANY
DIVIDENDS AND PRICE RANGE OF AMCE COMMON STOCK
AMCE Common Stock is listed on the American and Pacific Stock Exchanges
under the symbol AEN. There is no established trading market for AMCE Class B
stock. The table below sets forth, for the periods indicated, the high and low
closing prices of the AMCE Common Stock as reported on the AMEX composite tape.
<TABLE>
<CAPTION>
PRICE RANGE OF AMCE
COMMON STOCK
HIGH LOW
--------- ---------
<S> <C> <C>
YEAR ENDED MARCH 30, 1995:
1st Quarter................................................................ $ 12.75 $ 9.75
2nd Quarter................................................................ 13.25 11.12
3rd Quarter................................................................ 12.37 10.37
4th Quarter................................................................ 12.62 9.87
YEAR ENDING MARCH 28, 1996:
1st Quarter................................................................ $ 14.50 $ 11.00
2nd Quarter................................................................ 18.12 13.50
3rd Quarter................................................................ 23.50 17.62
4th Quarter................................................................ 24.12 19.25
YEAR ENDING APRIL 3, 1997
1st Quarter................................................................ $ 33.87 $ 23.12
2nd Quarter................................................................ 27.87 15.87
3rd Quarter................................................................ 19.50 13.75
4th Quarter................................................................ 20.25 13.87
</TABLE>
On May 3, 1996, the last trading day preceding the announcement of the
Durwood Family Settlement Agreement, the reported last sale price of AMCE Common
Stock on the AMEX was $25.75. On April 16, 1997, the day preceding announcement
that the Merger Agreement had been entered into, the reported last sale price of
AMCE Common Stock on the AMEX was $20.00. On , the date preceding
the date of the Proxy-Information Statement/Prospectus, the reported last sale
price of AMCE Common Stock on the AMEX was $ . As of , 1997,
there were holders of record of AMCE Common Stock. See "The
Merger--General Effects of the Merger" for the effect of the Merger on the
percentage of present holdings of AMCE Common Stock and AMCE Class B Stock by
directors, officers and persons beneficially owning in excess of 5% of either
class of such stock.
AMCE's Certificate of Incorporation provides that holders of AMCE Common
Stock and AMCE Class B Stock shall receive, pro rata per share, such cash
dividends as may be declared from time to time by the AMCE Board. Certain
provisions of the Note Indenture and the Credit Facility govern the payment of
dividends on and purchase by AMCE of its capital stock. Presently, it is not
anticipated that the most restrictive of these provisions, as set forth in the
Credit Facility, will affect the ability of AMCE to pay dividends in the
foreseeable future. See "--Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources." 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 AMCE
Common Stock or AMCE Class B Stock since fiscal 1990. Any payment of cash
dividends on AMCE Common Stock in the future will be at the discretion of the
AMCE Board and will depend upon such factors as earnings levels, capital
requirements, AMCE's financial condition and other factors deemed relevant by
the AMCE Board. Currently, AMCE does not contemplate declaring or paying any
dividends on its Common Stock or Class B Stock.
51
<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 26, 1996 and
December 28, 1995. Operating results for the interim period ended December 26,
1996 are not necessarily indicative of the results that may be expected for the
entire fiscal year ending April 3, 1997. 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 unaudited pro forma
financial information of the Company as of and for the fiscal year ended March
28, 1996 and for the interim period ended December 26, 1996 has been adjusted to
give effect to the Merger, as set forth in the Notes to the Company's Condensed
Pro Forma Financial Statements included elsewhere herein, and to the Note
Offering and the application of the net proceeds thereof to the reduction of
outstanding indebtedness under the Credit Facility as described under
"Summary--Recent Note Offering and Amendment to Credit Facility--Note Offering."
Such pro forma information does not purport to represent what the Company's
results of operations would have been had the Merger and Note Offering 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
Proxy--Information Statement/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", the Company's
Consolidated Financial Statements and the Notes thereto and Durwood, Inc.'s
Consolidated Financial Statements and the Notes thereto included elsewhere in
this Proxy--Information Statement/Prospectus.
52
<PAGE>
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
-------------------------------------------------------------
DECEMBER 26,
1996 PRO FORMA(1)(2)(6)
-----------------------
MERGER AND
NOTE
OFFERING DECEMBER 26, DECEMBER 28,
COMBINED MERGER 1996 ACTUAL(1)(2) 1995 ACTUAL(1)(2)
------------ --------- ----------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
AND STATISTICAL DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total revenues.......................................... $ 527,555 $ 527,555 $ 527,555 $ 492,861
Total cost of operations................................ 417,527 417,527 417,527 371,420
Depreciation and amortization........................... 37,543 37,543 37,543 30,842
General and administrative expenses..................... 39,933 39,933 39,933 38,086
------------ --------- ----------------- -----------------
Operating income........................................ 32,552 32,552 32,552 52,513
Interest expense........................................ 22,466 15,036 15,036 24,510
Investment income....................................... 664 664 664 6,624
Gain (loss) on disposition of assets.................... (84) (84) (84) 21
------------ --------- ----------------- -----------------
Earnings before income taxes and extraordinary item..... 10,666 18,096 18,096 34,648
Income tax provision.................................... 4,684 7,285 7,285 14,300
------------ --------- ----------------- -----------------
Earnings before extraordinary item...................... 5,982 10,811 10,811 20,348
Extraordinary item...................................... -- -- -- (19,350)
------------ --------- ----------------- -----------------
Net earnings............................................ $ 5,982 $ 10,811 $ 10,811 $ 998
------------ --------- ----------------- -----------------
------------ --------- ----------------- -----------------
Preferred dividends..................................... 4,454 4,454 4,454 5,250
------------ --------- ----------------- -----------------
Net earnings (loss) for common shares................... $ 1,528 $ 6,357 $ 6,357 $ (4,252)
------------ --------- ----------------- -----------------
------------ --------- ----------------- -----------------
Earnings per share before extraordinary item:
Primary................................................. $ .09 $ .36 $ .36 $ .90
Fully diluted........................................... .09 .36 .36 .89
Earnings (loss) per share:
Primary................................................. $ .09 $ .36 $ .36 $ (.25)(4)
Fully diluted........................................... $ .09 $ .36 $ .36 $ (.25)(4)
Common dividends per share.............................. $ -- $ -- $ -- $ --
Weighted average number of shares outstanding:
Primary................................................. 17,659 17,659 17,659 16,795
Fully diluted........................................... 17,861 17,861 17,861 16,922
BALANCE SHEET DATA
Cash, equivalents and investments....................... $ 18,436 $ 18,436 $ 18,436 $ 22,687
Total assets............................................ 644,890 639,740 639,740 464,207
Total debt (including capitalized lease obligations).... 335,851 330,701 330,701 198,786
Stockholders' equity.................................... 163,712 163,712 164,712 153,645
OTHER FINANCIAL DATA
EBITDA(5)............................................... $ 70,095 $ 70,095 $ 70,095 $ 83,355
Capital expenditures.................................... 163,645 163,645 163,645 72,496
STATISTICAL DATA (AT PERIOD END)
Number of theatres operated............................. 233 233 233 232
Number of screens operated.............................. 1,936 1,936 1,936 1,726
Screens per theatre..................................... 8.3 8.3 8.3 7.4
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------------------------------------------------------------------
MARCH 28,
1996
PRO FORMA(1)(2)(6)
-----------------------
MERGER AND
NOTE MARCH 28, MARCH 30, MARCH 31, APRIL 1, APRIL 2,
OFFERING 1996 1995 1994 1993 1992
COMBINED MERGER ACTUAL(1)(2) ACTUAL(1)(2) ACTUAL(1)(2) ACTUAL(2) ACTUAL(1)(2)
------------ --------- ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, RATIOS AND STATISTICAL DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total revenues................. $ 657,872 $ 657,872 $ 657,872 $ 564,664 $ 587,453 $ 404,465 $ 406,964
Total cost of operations....... 496,567 496,567 496,567 435,915 449,177 310,835 325,901
Depreciation and
amortization................. 43,886 43,886 43,886 37,913 38,048 28,175 31,385
General and administrative
expenses..................... 48,750 48,750 48,750 39,807 39,492 36,285 37,885
Estimated loss on future
disposition of assets........ -- -- -- -- -- 2,500 3,000
------------ --------- ------------ ------------ ------------ ------------ ------------
Operating income............... 68,669 68,669 68,669 51,029 60,736 26,670 8,793
Interest expense............... 46,649 28,828 28,828 35,908 36,375 31,401 30,035
Investment income.............. 7,052 7,052 7,052 10,013 1,156 8,239 8,502
Minority interest.............. -- -- -- -- 1,599 -- --
Gain (loss) on disposition of
assets....................... (222) (222) (222) (156) 296 9,638 8,721
------------ --------- ------------ ------------ ------------ ------------ ------------
Earnings (loss) before income
taxes and extraordinary
item......................... 28,850 46,671 46,671 24,978 27,412 13,146 (4,019)
Income tax provision........... 13,063 19,300 19,300 (9,000) 12,100 5,400 1,500
------------ --------- ------------ ------------ ------------ ------------ ------------
Earnings (loss) before
extraordinary item........... $ 15,787 $ 27,371 27,371 33,978 15,312 7,746 (5,519)
------------ ---------
------------ ---------
Extraordinary item............. -- -- (19,350) -- -- (6,483) --
------------ ------------ ------------ ------------ ------------
Net earnings (loss)............ -- -- $ 8,021 $ 33,978 $ 15,312 $ 1,263 $ (5,519)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Preferred dividends............ $ 7,000 $ 7,000 7,000 7,000 538 256 700
------------ --------- ------------ ------------ ------------ ------------ ------------
------------ ---------
Net earnings (loss) for common
shares....................... -- -- $ 1,021 $ 26,978 $ 14,774 $ 1,007 $ (6,219)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Earnings (loss) per share before
extraordinary item:
Primary........................ $ .53 $ 1.21 $ 1.21 $ 1.63 $ .89 $ .46 $ (.39)
Fully diluted.................. .53 1.20 1.20 1.45 .89 .46 (.39)
Earnings (loss) per share:
Primary........................ -- -- $ .06(4) $ 1.63 $ .89 $ .06(3) $ (.39)
Fully diluted.................. -- -- $ .06(4) $ 1.45 $ .89 $ .06(3) $ (.39)
Common dividends per share..... $ -- $ -- $ -- $ -- $ -- $ 1.14 $ --
Weighted average number of shares
outstanding:
Primary........................ 16,513 16,795 16,795 16,593 16,521 16,217 16,088
Fully diluted.................. 16,513 17,031 17,031 23,509 16,550 16,217 16,088
BALANCE SHEET DATA
Cash, equivalents and
investments.................. -- -- $ 10,795 $ 140,377 $ 151,469 $ 50,106 $ 36,823
Total assets................... -- -- 483,458 522,154 501,276 374,102 377,699
Total debt (including
capitalized lease
obligations)................. -- -- 188,172 267,504 268,188 255,302 240,231
Stockholders' equity........... -- -- 158,918 157,388 130,404 18,171 39,869
OTHER FINANCIAL DATA
EBITDA(5)...................... $ 112,555 $ 112,555 $ 112,555 $ 88,942 $ 98,784 $ 57,345 $ 43,178
Capital expenditures........... 120,796 120,796 120,796 56,403 10,651 8,786 21,045
STATISTICAL DATA (AT PERIOD END)
Number of theatres operated.... 226 226 226 232 236 243 253
Number of screens operated..... 1,719 1,719 1,719 1,630 1,603 1,617 1,617
Screens per theatre............ 7.6 7.6 7.6 7.0 6.8 6.7 6.4
</TABLE>
- --------------
(1) Fiscal 1997, 1996, 1995 and 1994 include the effects from the acquisition of
EEP on May 28, 1993.
(2) Fiscal 1997 and 1992 include 53 weeks. All other years have 52 weeks.
54
<PAGE>
(3) Fiscal 1993 includes a $6,483,000 extraordinary loss equal to $.40 per
common share.
(4) Fiscal 1996 includes a $19,350,000 extraordinary loss equal to $1.15 per
common share.
(5) 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.
(6) See the Company's Condensed Pro Forma Financial Statements and the Notes
thereto included elsewhere herein.
55
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OPERATING RESULTS
As a result of the commencement of international operations during fiscal
1997, the Company has decided to begin disaggregating its domestic and
international exhibition operations and the Company's on-screen advertising and
other business in order to provide more information as to the Company's
revenues, cost of operations, depreciation and amortization, and general and
administrative expenses as set forth in the table below for the thirty-nine week
periods ended December 26, 1996 and December 28, 1995.
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
----------------------------------------------
DECEMBER 26, DECEMBER 28,
1996 1995 % CHANGE
-------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Domestic
Admissions.................................. $ 337,528 $ 324,737 3.9 %
Concessions................................. 158,322 148,323 6.7
Other....................................... 12,549 10,691 17.4
-------------- -------------- ---
508,399 483,751 5.1
International
Admissions.................................. 7,171 -- --
Concessions................................. 1,033 -- --
Other....................................... 2 -- --
-------------- -------------- ---
8,206 -- --
On-screen advertising and other............... 10,950 9,110 20.2
-------------- -------------- ---
Total revenues............................ $ 527,555 $ 492,861 7.0 %
-------------- -------------- ---
-------------- -------------- ---
COST OF OPERATIONS
Domestic
Film rentals................................ $ 173,009 $ 166,054 4.2 %
Concession merchandise...................... 25,966 22,891 13.4
Rent........................................ 54,288 47,979 13.1
Other....................................... 145,582 128,974 12.9
-------------- -------------- ---
398,845 365,898 9.0
International
Film rentals................................ 4,331 -- --
Concession merchandise...................... 309 -- --
Rent........................................ 3,222 -- --
Other....................................... 3,290 -- --
-------------- -------------- ---
11,152 -- --
On-screen advertising and other............... 7,530 5,522 36.4
-------------- -------------- ---
Total cost of operations.................. $ 417,527 $ 371,420 12.4 %
-------------- -------------- ---
-------------- -------------- ---
DEPRECIATION AND AMORTIZATION
Domestic and corporate........................ $ 35,618 $ 29,940 19.0 %
International................................. 647 -- --
On-screen advertising and other............... 1,278 902 41.7
-------------- -------------- ---
Total depreciation and amortization....... $ 37,543 $ 30,842 21.7 %
-------------- -------------- ---
-------------- -------------- ---
GENERAL AND ADMINISTRATIVE
Domestic and corporate........................ $ 30,452 $ 31,799 (4.2)%
International................................. 4,890 2,756 77.4
On-screen advertising and other............... 4,591 3,531 30.0
-------------- -------------- ---
Total general and administrative
expenses................................ $ 39,933 $ 38,086 4.8 %
-------------- -------------- ---
-------------- -------------- ---
</TABLE>
56
<PAGE>
THIRTY-NINE WEEKS ENDED DECEMBER 26, 1996 AND DECEMBER 28, 1995
REVENUES. Total revenues increased 7.0%, or $34,694,000, during the
thirty-nine weeks ended December 26, 1996 compared to the thirty-nine weeks
ended December 28, 1995.
Total domestic revenues increased 5.1% from the prior year. Admissions
revenues increased 3.9% due to a 3.5% increase in average ticket prices and a
0.4% increase in attendance. Attendance and admissions revenue increased during
the period due to the addition of new theatres, primarily megaplexes. This
increase in attendance from new theatres was partially offset by a decrease in
attendance at same theatres (theatres opened prior to fiscal 1996) which caused
a 9.7% decrease in admissions revenues at same theatres. Additionally,
attendance decreased due to closed theatres. The decline in attendance at same
theatres was due to competitive factors and a lack of popular films from the
Company's key suppliers when compared to the prior year. Concessions revenues at
domestic theatres increased by 6.7% due to a 6.3% increase in average
concessions per patron and the increase in total attendance. The increase in
average concessions per patron is attributable to higher consumption at new
megaplex theatres and new concessions products.
Total international revenues were the result of admissions and concessions
revenues from the Company's first theatre in Japan, the Canal City 13 located in
Fukuoka, Japan, which opened during the first quarter of fiscal 1997. Admissions
and concessions revenues accounted for 87% and 13% of total international
revenues, respectively. The Company's initial attendance was negatively impacted
by film distributors in Japan who restricted the Company's ability to obtain
film product until approximately two weeks after its competitors had received
it. This delay in releasing films to the Company has generally been eliminated.
On-screen advertising and other revenues increased 20.2% due primarily to an
increase in revenues generated by the Company's on-screen advertising business,
which resulted from an increase in the number of screens served.
COST OF OPERATIONS. Total cost of operations increased 12.4%, or
$46,107,000, during the thirty-nine weeks ended December 26, 1996 compared to
the thirty-nine weeks ended December 28, 1995.
Total domestic cost of operations increased 9.0% from the prior year. Film
rentals expense increased 4.2% due to higher admissions revenues. As a
percentage of admissions revenues, film rentals expense increased from 51.1% to
51.3%. The 13.4% increase in concessions merchandise expense is attributable to
the increase in concessions revenues. As a percentage of concessions revenues,
concessions merchandise expense increased from 15.4% to 16.4% due primarily to
increases in raw popcorn costs and lower margins on new concessions products.
Rent expense increased 13.1% due to the higher number of screens in operation.
Other cost of operations increased 12.9% from the same period in the prior year
due to the higher number of screens in operation, $1,921,000 of advertising
expenses associated with the opening of new theatres and higher expenses
associated with the Company's theatre management development program.
Total international cost of operations were the result of expenses
associated with the Company's theatre in Japan. As a percentage of admissions
revenues, film rentals expense was 60.4% because film rentals in Japan are
generally higher than those domestically. Concessions merchandise expense was
30.0% of concessions revenues due to the high procurement costs of concessions
products sourced from the United States. As a percentage of total revenues, rent
expense was 39.3% as a result of low attendance and admissions revenues and the
higher real estate costs in Japan.
On-screen advertising and other cost of operations increased 36.4% as a
result of the higher number of screens served and related start-up expenses.
57
<PAGE>
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
21.7%, or $6,701,000, during the thirty-nine weeks ended December 26, 1996. This
increase was caused by an increase in employed theatre assets resulting from the
Company's expansion program.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 4.8%, or $1,847,000, during the thirty-nine weeks ended December 26,
1996.
Domestic and corporate general and administrative expenses decreased 4.2%
primarily due to a decrease in the current year's bonus expense related to the
decline in the Company's operating performance and severance payments for two
former executive officers during the prior year. These decreases in general and
administrative expenses were partially offset by increased expenses related to
the Company's expansion program.
International general and administrative expenses increased 77.4% due
primarily to payroll, rent and other expenses to support the Company's
international operations and costs associated with the Company's international
expansion program.
General and administrative expenses associated with on-screen advertising
and other increased 30.0% due primarily to an increase in payroll and related
costs.
OPERATING INCOME. Operating income decreased 38.0%, or $19,961,000, during
the thirty-nine weeks ended December 26, 1996. Operating income decreased due to
a reduction of operating income from same theatres, which was partially offset
by an increase in operating income from new theatres, primarily megaplexes,
added to the domestic circuit and a decrease in domestic and corporate general
and administrative expenses. Additionally, operating income was reduced by
operating losses from the Company's theatre in Japan, increases in international
general and administrative expenses and operating losses from the Company's
on-screen advertising business.
INTEREST EXPENSE. Interest expense decreased 38.7%, or $9,474,000, during
the thirty-nine weeks ended December 26, 1996 compared to the corresponding
period for the prior year. The decrease in interest expense resulted from lower
rates under the Company's Credit Facility, which was partially offset by an
increase in average outstanding borrowings related to the Company's expansion
program.
INVESTMENT INCOME. Investment income decreased 90.0%, or $5,960,000, during
the thirty-nine weeks ended December 26, 1996 due to a decrease in outstanding
cash and investments compared to the same period in the prior year. Cash and
investments decreased as a result of the Company's redemption of substantially
all of its 11 7/8% Senior Notes due 2000 ("Senior Notes") and 12 5/8% Senior
Subordinated Notes due 2002 ("12 5/8% Senior Subordinated Notes") on December
28, 1995.
EARNINGS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. Earnings before income
taxes and extraordinary item decreased by 47.7%, or $16,552,000, during the
thirty-nine weeks ended December 26, 1996 due primarily to the $19,961,000
decrease in operating income.
NET EARNINGS. Net earnings before extraordinary item decreased $9,537,000
during the thirty-nine weeks ended December 26, 1996 to $10,811,000 from
$20,348,000 in the same period in the previous year. Net earnings for the period
were $10,811,000 compared to $998,000 in the same period in the previous year,
which included an extraordinary item (a loss of $19,350,000 in connection with
the early extinguishment of debt). Net earnings before extraordinary item per
common share, after deducting preferred dividends, was $.36 compared to earnings
of $.90 for the same period in the previous year. Net
58
<PAGE>
earnings per common share, after deducting preferred dividends, was $.36
compared to a loss of $.25 for the same period in the previous year.
<TABLE>
<CAPTION>
YEARS (52 WEEKS) ENDED
-------------------------------------------------------------------------------------
MARCH 28, % OF TOTAL MARCH 30, % OF TOTAL MARCH 31, % OF TOTAL
1996 REVENUES 1995 REVENUES 1994 REVENUES
----------- -------------- ----------- -------------- ----------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Admissions................. $ 431,361 66% $ 371,145 66% $ 389,454 66%
Concessions................ 196,645 30 169,120 30 176,274 30
Other...................... 29,866 4 24,399 4 21,725 4
----------- --- ----------- --- ----------- ---
Total.................... $ 657,872 100% $ 564,664 100% $ 587,453 100%
----------- --- ----------- --- ----------- ---
----------- --- ----------- --- ----------- ---
COST OF OPERATIONS
Film rentals............... $ 215,099 33% $ 182,669 32% $ 197,461 34%
Concession merchandise..... 32,641 5 26,453 5 26,349 4
Rent....................... 64,813 10 60,076 11 58,443 10
Other...................... 184,014 28 166,717 29 166,924 28
----------- --- ----------- --- ----------- ---
Total.................... $ 496,567 76% $ 435,915 77% $ 449,177 76%
----------- --- ----------- --- ----------- ---
----------- --- ----------- --- ----------- ---
</TABLE>
YEARS (52 WEEKS) ENDED MARCH 28, 1996 AND MARCH 30, 1995
REVENUES. Total revenues for the year (52 weeks) ended March 28, 1996
increased 16.5%, or $93,208,000, to $657,872,000 compared to $564,664,000 for
the year (52 weeks) ended March 30, 1995. Admissions revenues increased 16.2%
due to a 11.1% increase in attendance and a 4.4% increase in average ticket
prices. The increase in attendance resulted from the popularity of films
licensed during fiscal 1996 and the net addition of 89 screens since fiscal 1995
at new and higher performing locations. Attendance during the prior fiscal year
was impacted by a dispute with a major distributor over film licensing terms,
which resulted in the Company's licensing that distributor's films for a smaller
number of its theatres than it otherwise would have. In fiscal 1996, the Company
licensed that distributor's films for what it considers to be a more acceptable
number of the Company's theatres. Concessions revenues and average concessions
revenues per patron increased 16.3% and 4.2%, respectively, in fiscal 1996. The
increase in concessions revenues was primarily attributable to the increase in
attendance.
COST OF OPERATIONS. Total cost of operations increased 13.9%, or
$60,652,000, in fiscal 1996 to $496,567,000 from $435,915,000 in fiscal 1995. As
a percentage of total revenues, cost of operations was 76% and 77% in fiscal
1996 and 1995, respectively. Film rentals expense increased 17.8% in fiscal 1996
due to higher attendance levels and a .7% increase in the percentage of
admissions paid to film distributors. Concessions merchandise, rent and other
costs of operations increased 11.1% from the prior year due to increases in
payroll, concessions merchandise, rent and other theatre operating expenses
associated with the increase in admissions and concessions revenues and from the
higher number of screens in operation.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
15.8%, or $5,973,000, to $43,886,000 in fiscal 1996 from $37,913,000 in fiscal
1995. This increase resulted primarily from the reduction, effective December
30, 1994, in the estimated lives of lease rights and location premiums on
certain smaller theatres to correspond to the base terms of the theatre leases,
an increase in employed theatre assets and the recognition of an impairment loss
of $1,799,000 in connection with the adoption of Statement of Financial
Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. See Note 1 of the Company's "Notes
to Consolidated Financial Statements."
59
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 22.5%, or $8,943,000, to $48,750,000 in fiscal 1996 from $39,807,000
in fiscal 1995. The increase in general and administrative expenses is primarily
attributable to payroll and other costs associated with the Company's
development of theatres in the United States and certain international markets,
additional bonus expenses related to improved profitability of the Company and
severance payments for two former executive officers. As a percentage of total
revenues, general and administrative expenses increased to 7.4% in fiscal 1996
from 7.1% in fiscal 1995.
INTEREST EXPENSE. Interest expense decreased 19.7%, or $7,080,000, to
$28,828,000 in fiscal 1996 from $35,908,000 in fiscal 1995. The decrease in
interest expense resulted from higher amounts of capitalized interest from
increased construction activities and lower interest rates under the Company's
new Credit Facility. See Note 6 of the Company's "Notes to Consolidated
Financial Statements."
INVESTMENT INCOME. Investment income decreased 29.6%, or $2,961,000, to
$7,052,000 in fiscal 1996 from $10,013,000 in fiscal 1995 due primarily to a net
gain of $1,407,000 recorded in fiscal 1995 from the sales of stock of TPI
Enterprises, Inc. and AmeriHealth, Inc. and a decrease of $1,513,000 in interest
income in fiscal 1996.
EARNINGS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. Earnings before income
taxes and extraordinary item increased 86.8%, or $21,693,000, to $46,671,000 in
fiscal 1996 from $24,978,000 in fiscal 1995. The Company recorded a $19,350,000
extraordinary loss, net of income tax benefit of $13,400,000, related to
extinguishment of debt in fiscal 1996. See Note 6 of the Company's "Notes to
Consolidated Financial Statements."
NET EARNINGS. For the year (52 weeks) ended March 28, 1996, the Company
recorded net earnings of $8,021,000, a $25,957,000 decrease from net earnings of
$33,978,000 for the year (52 weeks) ended March 30, 1995. Net earnings per
common share, after deducting $7,000,000 of preferred dividends, was $.06 in
fiscal 1996 compared to $1.63 in fiscal 1995. The decrease in net earnings was
impacted by an extraordinary loss of $19,350,000 incurred as a result of the
Company's repurchase of Senior Notes and 12 5/8% Senior Subordinated Notes in
fiscal 1996. Also, in fiscal 1996 the Company had a tax expense of $19,300,000,
as opposed to a tax benefit of $9,000,000 in fiscal 1995. The fiscal 1995 tax
benefit resulted from a $19,792,000 reduction in the deferred tax valuation
allowance established under Statement of Financial Accounting Standards No. 109,
ACCOUNTING FOR INCOME TAXES. Earnings per share before extraordinary item, after
deduction of preferred dividends, was $1.21 in fiscal 1996 compared to $1.63 in
fiscal 1995.
YEARS (52 WEEKS) ENDED MARCH 30, 1995, AND MARCH 31, 1994
REVENUES. Total revenues for the year (52 weeks) ended March 30, 1995
decreased 3.9%, or $22,789,000, to $564,664,000 compared to $587,453,000 for the
year (52 weeks) ended March 31, 1994. Admissions revenues decreased 4.7% due to
a 4.4% decrease in attendance and a .3% decrease in average ticket prices.
Attendance during fiscal 1995 was impacted by a dispute with a major distributor
over film licensing terms, which resulted in the Company licensing that
distributor's films for a smaller number of its theatres than it would have
otherwise. Concessions revenues decreased by 4.1% in fiscal 1995. The decrease
in concessions revenues was primarily attributable to the decrease in
attendance.
COST OF OPERATIONS. Total cost of operations decreased 3.0%, or
$13,262,000, in fiscal 1995 to $435,915,000 from $449,177,000 in fiscal 1994. As
a percentage of total revenues, cost of operations was 77% and 76% in fiscal
1995 and 1994, respectively. Film rentals expense decreased 7.5% in fiscal 1995
due to lower attendance levels and a 1.5% decrease in the percentage of
admissions paid to film distributors. Concession, rent and other costs of
operations increased .6% from the prior year.
60
<PAGE>
DEPRECIATION AND AMORTIZATION. Depreciation and amortization decreased .4%,
or $135,000, to $37,913,000 in fiscal 1995 from $38,048,000 in fiscal 1994.
Effective December 30, 1994, the Company reduced the estimated lives of lease
rights and location premiums on certain smaller theatres to correspond to the
base terms of the theatre leases. The effect of this change in accounting
estimate was to increase amortization expense in fiscal 1995 by $1,542,000.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased .8%, or $315,000, to $39,807,000 in fiscal 1995 from $39,492,000 in
fiscal 1994. The increase was primarily the result of additional professional
and consulting and travel and entertainment expenses and the costs related to
the restructuring of division offices, offset by decreases in legal fees and
bonuses under incentive programs. As a percentage of total revenues, general and
administrative expenses increased to 7.0% in fiscal 1995 from 6.7% in fiscal
1994.
INTEREST EXPENSE. Interest expense decreased 1.3%, or $467,000, to
$35,908,000 in fiscal 1995 from $36,375,000 in fiscal 1994. The decrease in
interest expense resulted primarily from borrowings on the $40 million Credit
Facility during the first half of fiscal 1994. The Credit Facility was not
utilized in fiscal 1995.
INVESTMENT INCOME. Investment income increased $8,857,000 to $10,013,000 in
fiscal 1995 from $1,156,000 in fiscal 1994. This increase was the result of
additional interest income of $5,835,000 and an increase in other investment
income of $3,022,000 in fiscal 1995. The increase in interest income was due to
additional cash and investments as a result of the March 3, 1994, sale of
preferred stock. The increase in other investment income was primarily due to
the gains on sales of stock of TPI Enterprises, Inc. ("TPIE") and AmeriHealth,
Inc.
INCOME FROM MINORITY INTEREST. Income from minority interest in the amount
of $1,599,000 was recorded in the first quarter of fiscal 1994 relating to
TPIE's share of the Exhibition Enterprises Partnership ("EEP") operating loss
from April 2, 1993, through May 27, 1993, prior to the Company's acquisition of
TPIE's partnership interest in EEP.
EARNINGS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. Earnings before income
taxes and extraordinary item decreased 8.9%, or $2,434,000, to $24,978,000 in
fiscal 1995 from $27,412,000 in fiscal 1994.
INCOME TAX PROVISION. The income tax provision in fiscal 1995 reflects a
benefit of $9,000,000 which is a decrease of $21,100,000 from the tax expense of
$12,100,000 in fiscal 1994. This decrease in income tax provision resulted
primarily from a $19,792,000 reduction in the deferred tax asset valuation
allowance established under Statement of Financial Accounting Standards No. 109,
ACCOUNTING FOR INCOME TAXES. Based on the Company's positive earnings in recent
years and the expectation of continued earnings, management believes that the
uncertainties that led to the establishment of the valuation allowance have been
removed with respect to the realization of deferred tax assets. Accordingly, the
valuation allowance was eliminated.
NET EARNINGS. For the year (52 weeks) ended March 30, 1995, the Company
recorded net earnings of $33,978,000, a $18,666,000 increase from net earnings
of $15,312,000 for the year (52 weeks) ended March 31, 1994. Net earnings for
common shares in fiscal 1995, after deducting $7,000,000 for preferred
dividends, were $26,978,000, or $1.63 per share, compared to net earnings for
common shares of $14,774,000, or $.89 per share, in fiscal 1994, after deducting
$538,000 for preferred dividends.
LIQUIDITY AND CAPITAL RESOURCES
The forward-looking statements included in this section, which reflect
management's best judgment based on factors currently known, involve risks and
uncertainties. Actual results could differ
61
<PAGE>
materially from those anticipated in the forward-looking statements included
herein as a result of a number of factors, including but not limited to the
Company's ability to enter into various financing programs, competition from
other companies, changes in economic climate, increase in demand for real
estate, demographic changes, changes in real estate, zoning and tax laws, the
performance of films licensed by the Company and other risks and uncertainties.
The Company's revenues are collected in cash, principally through box office
admissions and theatre concessions sales. The Company has an operating "float"
which partially finances its operations and which generally permits the Company
to maintain a smaller 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. The Company is only
occasionally required to make advance payments or non-refundable guarantees of
film rentals. Film distributors generally release films which they anticipate
will be the most successful during the summer and holiday seasons. Consequently,
the Company typically generates higher revenues during such periods. Cash flow
from operating activities, as reflected in the Consolidated Statements of Cash
Flows, was $86,453,000, $44,184,000 and $63,680,000 in fiscal years 1996, 1995
and 1994, respectively, and was $56,575,000 and $61,566,000 for the thirty-nine
weeks ended December 26, 1996 and December 28, 1995, respectively.
During the current fiscal year, the Company has continued its expansion
program by opening 14 leased theatres with 244 screens, two owned theatres with
46 screens and one theatre with 24 screens leased pursuant to a ground lease.
Included in these openings is the Company's first theatre in Japan, the Canal
City 13 in Fukuoka, which opened in April 1996, and the Company's first theatre
in Portugal, the Arrabida 20 in Porto, which opened in late December 1996. In
addition, the Company closed 14 leased theatres with 72 screens and one owned
theatre with four screens, resulting in a circuit total of 1,957 screens in 228
theatres as of April 3, 1997. The Company has under construction 15 new leased
theatre locations totaling 362 screens, four new owned theatres with 104
screens, two theatres with 48 screens leased pursuant to a ground lease and
additions to four existing theatres for 44 new screens. All of these theatres
and screens will be located in the United States.
During fiscal 1996 and the thirty-nine weeks ended December 26, 1996, the
Company had capital expenditures of $120,796,000 and $163,645,000, respectively,
primarily for the development of new theatres and the addition of screens at
existing locations. The Company estimates that capital expenditures for the
fourth quarter of fiscal 1997 were approximately $77 million. The Company has
plans to open approximately 700 screens during fiscal 1998. If these planned
screens are opened as scheduled, the Company estimates that total capital
expenditures for fiscal 1998 will aggregate approximately $375 million. Included
in these amounts are assets which the Company anticipates placing into
sale/leaseback or other comparable financing programs which will have the effect
of reducing the Company's net cash outlays (see discussion below).
On December 28, 1995, the Company completed the redemption of substantially
all of its Senior Notes and the 12 5/8% Senior Subordinated Notes and entered
into the Credit Facility. The Company redeemed $99,383,000 of the Senior Notes
at a total price of $1,117.90 per $1,000 principal amount and $95,096,000 of its
12 5/8% Senior Subordinated Notes at a total price of $1,144.95 per $1,000
principal amount. The Company utilized cash and investments along with
borrowings of $130,000,000 under the Credit Facility to redeem the Senior Notes
and the 12 5/8% Senior Subordinated Notes.
As a part of the refinancing plan, the Company entered into the Credit
Facility, which was amended and restated as of April 10, 1997. The Credit
Facility matures in 2004, permits borrowings at interest rates based on either
the bank's base rate or LIBOR and requires an annual commitment fee based on
margin ratios that could result in a rate of .1875% to .375% on the unused
portion of the commitment. As of April 3, 1997, the Company had outstanding
borrowings of $110,000,000 under the Credit Facility at an average interest rate
of 6.4% per annum.
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Prior to its April 10, 1997 amendment and restatement, the Credit Facility
contained a covenant that generally limited the Company's capital expenditures.
This covenant has been eliminated.
Covenants of the Credit Facility impose limitations on the incurrence of
additional indebtedness, creation of liens, change of control, transactions with
affiliates, mergers, investments, guaranties, asset sales, business activities
and pledges. The Company is required to maintain (i) a maximum net indebtedness
to consolidated EBITDA ratio, as defined in the terms of the Credit Facility
(generally, the ratio of the principal amount of outstanding indebtedness (less
cash and equivalents) to earnings before interest, taxes, depreciation,
amortization and other noncash charges) of 5.25 to 1 during the first four years
of the Credit Facility, a ratio of 4.75 to 1 during the fifth year, a ratio of
4.25 to 1 in the sixth year and a ratio of 4.0 to 1 thereafter, and a (ii)
minimum cash flow coverage ratio, as defined in the Credit Facility (generally,
the ratio of consolidated EBITDA for the most recent four quarters to the sum of
(A) consolidated interest expense for such period, (B) amounts paid as
dividends, for the optional repurchase or redemption of subordinated debt or
capital stock, or with respect to the principal amount of capitalized lease
obligations during such period, plus (C) the current portion of debt with an
original maturity exceeding one year), of 1.40 to 1. If the Company prepays,
defeases or repurchases more than $10 million of the Notes or any other
subordinated debt incurred after April 10, 1997, it is required to maintain a
maximum net senior indebtedness to EBITDA ratio, as defined in the Credit
Facility, of 4.5 to 1 during the first four years of the Credit Facility and 4.0
to 1 thereafter.
On March 19, 1997, the Company sold $200 million aggregate principal amount
of its Notes in the Note Offering. Net proceeds from the issuance of the Notes
(approximately $193.8 million) were used to reduce borrowings under the Credit
Facility. Amounts repaid under the Credit Facility will again be available for
borrowing thereunder, and the Company intends to utilize this increased
availability to continue with its current expansion program.
The Notes bear interest at the rate of 9 1/2% per annum, payable in March
and September. The Notes are redeemable at the option of the Company, in whole
or in part, at any time on or after March 15, 2002 at 104.75% of the principal
amount thereof, declining ratably to 100% of the principal amount thereof on or
after March 15, 2006, plus in each case interest accrued to the redemption date.
Upon a change of control (as defined in the Note Indenture), each holder of the
Notes will have the right to require the Company to repurchase such holder's
Notes at a price equal to 101% of the principal amount thereof plus accrued and
unpaid interest to the date of repurchase. The Notes are subordinated to all
existing and future senior indebtedness (as defined in the Note Indenture) of
the Company.
The Company has agreed to use its best efforts to (i) file and cause to
become effective by August 16, 1997 a registration statement relating to a
registered offer to exchange the Notes (the "Exchange Offer") for notes of AMCE
with terms identical in all material respects to the Notes and (ii) cause the
Exchange Offer to be consummated by September 15, 1997. If the Exchange Offer
registration statement is not declared effective by August 16, 1997, the Company
has agreed that in lieu thereof it will use its best efforts to cause to become
effective by September 15, 1997 a shelf registration statement with respect to
the Notes. In the event that either (a) the Exchange Offer registration
statement is not filed on or prior to June 17, 1997, (b) the Exchange Offer
registration statement is not declared effective on or prior to August 16, 1997
or (c) the Exchange Offer is not consummated or a shelf registration statement,
with respect to the Notes, is not declared effective on or prior to September
15, 1997, the interest rate borne by the Notes will increase by 0.50% per annum
following June 17, 1997 in the case of clause (a) above, following August 16,
1997 in the case of clause (b) above and following September 15, 1997 in the
case of clause (c) above. The aggregate amount of such increase will in no event
exceed 1.00% per annum. Upon (x) the filing of the Exchange Offer registration
statement after June 17, 1997, (y) the effectiveness of the Exchange Offer
registration statement after August 16, 1997 or (z) the consummation of the
Exchange Offer or the effectiveness of a shelf registration statement, as the
case may be, after September 15, 1997, the interest rate borne by the Notes from
the date of filing, effectiveness or consummation, as the case may be, will be
reduced to 9 1/2%.
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The Note Indenture contains certain covenants that, among other things,
restrict the ability of the Company and its subsidiaries to: incur additional
indebtedness; pay dividends or make distributions in respect of their capital
stock; purchase or redeem capital stock; enter into transactions with
stockholders or certain affiliates; or consolidate, merge or sell all or
substantially all of the Company's assets, other than in certain transactions
between the Company and one or more of its wholly-owned subsidiaries and other
than the Merger. All of these limitations are subject to a number of important
qualifications. The Note Indenture does not impose any limitation on the
incurrence by the Company and its subsidiaries of liabilities that are not
considered "Indebtedness" under the Note Indenture, such as those that would be
incurred under certain sale/leaseback transactions; nor does the Note Indenture
impose any limitation on the amount of liabilities incurred by subsidiaries, if
any, that might be designated as Unrestricted Subsidiaries (as defined therein).
Furthermore, there are no restrictions on the ability of the Company and its
subsidiaries to make advances to, or invest in, other entities (including
unaffiliated entities) and no restrictions on the ability of the Company's
subsidiaries to enter into agreements restricting their ability to pay dividends
or otherwise transfer funds to the Company. If the Notes attain "investment
grade status" (as defined in the Note Indenture), the covenants in the Note
Indenture limiting the Company's ability to incur indebtedness, pay dividends,
acquire stock or engage in transactions with affiliates will cease to apply.
The Company may pursue other financing programs in connection with its
expansion plan. The Company is currently negotiating a sale/leaseback
transaction (the "Sale/Leaseback Transaction") with respect to certain of its
theatres, including theatres which are scheduled to open in fiscal 1998, the net
proceeds of which, if consummated, are expected to be approximately $170
million. The theatres, if any, sold in the proposed Sale/Leaseback Transaction
would be leased back by the Company pursuant to an operating lease. The
estimated net proceeds of approximately $170 million from the Sale/Leaseback
Transaction, if consummated, would be applied to reduce outstanding indebtedness
under the Credit Facility. To the extent that the net proceeds are so applied,
the amount available for borrowing under the Credit Facility would be increased
and the Company would utilize any such increased availability to continue its
expansion program. If the Sale/Leaseback Transaction occurs, the Company
anticipates that the resulting increase in rent would be partially offset by
decreases in depreciation and amortization and interest expense.
The Company believes that cash generated from operations, existing cash and
equivalents, amounts which the Company received from the Note Offering and that
it anticipates receiving for assets placed in the Sale/Leaseback Transaction and
other offerings and the unused commitment amount under its Credit Facility will
be sufficient to fund operations and planned capital expenditures through the
end of fiscal 1998.
During the thirty-nine weeks ended December 26, 1996, various holders of
Convertible Preferred Stock converted 676,400 shares into 1,166,109 shares of
AMCE Common Stock at a conversion rate of 1.724 shares of AMCE Common Stock for
each share of Convertible Preferred Stock. Convertible Preferred Stock dividend
payments decreased 13.5%, or $711,000, to $4,539,000 for the thirty-nine weeks
ended December 26, 1996 from $5,250,000 for the same period in the previous year
as a result of the conversions. Future conversions will continue to reduce the
amount of dividends paid by the Company and increase the number of shares of
AMCE Common Stock outstanding.
On January 10, 1997, the Company purchased the 20% minority interest in the
common stock of AMC Philadelphia, Inc., an 80% owned subsidiary, for $7,400,000
in cash. The Company utilized borrowings on its Credit Facility to finance the
purchase. Management does not believe that the acquisition will have a
significant effect on the Company's results of operations.
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<PAGE>
OTHER
Congress recently passed legislation to increase the federal minimum hourly
wage paid to hourly wage employees over a two-year period. This recent
legislation will increase the aggregate average hourly wage paid by the Company.
The Company intends to relieve the cost pressure from the minimum wage increase
by pursuing better labor and operating efficiencies as well as some price
adjustments for theatres in certain markets. Such legislation is not expected to
have a material adverse effect on the Company's results of operations, liquidity
or financial position.
IMPACT OF INFLATION
Historically, the principal impact of inflation and changing prices upon the
Company has been to increase the costs of the construction of new theatres, the
purchase of theatre equipment and the utility and labor costs incurred in
connection with continuing theatre operations. Film rentals expense, the largest
cost of operations of the Company, is customarily paid as a percentage of
admissions revenues and hence, while the film rentals expense may increase on an
absolute basis, the percentage of admissions revenues represented by such
expense is not directly affected by inflation. Except as set forth above,
inflation and changing prices have not had a significant impact on the Company's
total revenues and results of operations.
RECENTLY ISSUED FINANCIAL ACCOUNTING PRONOUNCEMENTS
During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION.The Statement allows companies to measure compensation cost in
connection with employee stock compensation plans using a fair value based
method or to continue to use an intrinsic value based method to account for
stock options and awards. The Company currently plans to continue using the
intrinsic value based method.
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), EARNINGS PER SHARE. SFAS
128 eliminated the presentation of primary and fully diluted earnings per share
("EPS") and requires presentation of basic and diluted EPS. The principal
difference between primary and basic EPS is that common stock equivalents are
not included with the weighted average number of shares outstanding used in the
computation. Diluted EPS is computed similarly to fully diluted EPS. SFAS 128 is
effective for periods ending after December 15, 1997, including interim periods,
and requires restatement of all prior-period EPS data. Early adoption is not
permitted. Management has not yet determined the impact that this statement will
have to the Company.
BUSINESS OF THE COMPANY
GENERAL
The Company is one of the leading theatrical exhibition companies in North
America. In the fiscal year ended March 28, 1996, the Company's revenues were
$657,872,000. As of April 3, 1997, the Company operated 228 theatres with an
aggregate of 1,957 screens located in 23 states, the District of Columbia,
Portugal and Japan. Approximately 61% of the screens operated by the Company are
located in Florida, California, Texas, Missouri and Michigan and approximately
73% of the Company's domestic screens are located in areas among the 20 largest
"Areas of Dominant Influence" (television market areas as defined by Arbitron
Company).
The Company is an industry leader in the development and operation of
"megaplex" and "multiplex theatres", primarily in large metropolitan markets.
Megaplex theatres are theatres having at least 14 screens with predominantly
stadium-style seating (seating with an elevation between rows to provide
unobstructed viewing). Multiplex theatres are theatres having two or more
screens, generally without
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stadium-style seating. The Company believes that its strategy of developing
megaplex theatres has prompted the current theatrical exhibition industry trend
in the United States and Canada toward the development of larger theatre
complexes. This trend has accelerated the obsolescence of many existing movie
theatres by setting new standards for moviegoers, who have demonstrated their
preference for the more attractive surroundings, wider variety of films, better
customer services and more comfortable seating typical of megaplexes.
In addition to providing a superior entertainment experience, megaplex
theatres realize economies of scale by serving more patrons from common support
facilities, thereby spreading costs over a higher revenue base. The Company's
megaplex theatres have consistently ranked among its top grossing facilities on
a per screen basis. During the thirty-nine weeks ended December 26, 1996,
attendance per screen at the Company's megaplex theatres was 86,200 on an
annualized basis compared to 61,600 for the Company's multiplex theatres.
(During 1995, the last period for which data is available, the theatrical
exhibition industry in the United States averaged approximately 47,000 patrons
per screen.) In addition, during the thirty-nine weeks ended December 26, 1996,
average revenue per patron at the Company's megaplex theatres was $6.62 compared
to $6.04 for its multiplex theatres, and operating cash flow before rent of the
Company's megaplex theatres was 36% of the total revenues of such theatres,
whereas operating cash flow before rent of the Company's multiplex theatres was
32% of total revenues of such theatres. As of April 3, 1997, 591 screens, or
30.2% of the Company's screens, were in megaplex and multiplex theatres with 14
or more screens and of these, 352 screens, or 18.0% of the Company's screens,
were in megaplex theatres. The average number of screens per theatre operated by
the Company is 8.6, compared to an average of 5.9 for the ten largest North
American theatrical exhibition companies (based on number of screens) and 5.2
for all North American theatrical exhibition companies.
The Company continually upgrades its theatre circuit by opening new theatres
(primarily megaplex theatres), adding new screens to existing theatres and
selectively closing unprofitable theatres. Since April 1995, the Company has
opened 24 new theatres with 422 screens, representing 21.6% of its current
number of screens, and has added 42 screens to existing theatres. Of these 422
screens, 352 screens were in 17 megaplex locations. Among these new theatres are
the Company's first theatre in Japan, the Canal City 13, in Fukuoka, and its
first theatre in Portugal, the Arrabida 20, in Porto. As of April 3, 1997, the
Company had 21 new theatres under construction having an aggregate of 514
screens and was adding 44 screens to existing theatres. All of these theatres
and screens will be located in the United States.
Revenues for the Company are generated primarily from box office admissions
and theatre concessions sales, which accounted for 65% and 30%, respectively, of
fiscal 1997 revenues through December 26, 1996. The balance of the Company's
revenues are generated primarily by the Company's on-screen advertising
business, video games located in theatre lobbies and the rental of theatre
auditoriums.
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 the Company. DI, substantially all of whose stock is
beneficially owned by Mr. Stanley H. Durwood and the Durwood Children, owned
100% of the outstanding shares of AMCE Class B Stock and 40% of the outstanding
shares of AMCE Common Stock as of April 3, 1997, representing in the aggregate
approximately 97% of the voting power of outstanding securities in matters other
than the election of directors. Holders of AMCE Class B Stock are entitled to
ten votes per share and as a class are presently entitled to elect 75% of the
AMCE Board. See "--Security Ownership of Beneficial Owners" and "--Management of
the Company."
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<PAGE>
BUSINESS STRATEGY
The Company intends to expand its theatre circuit primarily by developing
new theatres in major markets in the United States and select international
markets. New theatres will primarily be megaplex theatres which will also be
equipped with SONY Dynamic Digital Sound-TM- (SDDS-TM-) and AMC LoveSeat-TM-
style seating (plush, high-backed seats with retractable armrests). Other
amenities may include auditoriums with TORUS-TM- Compound Curved Screens and
High Impact Theatre Systems-TM- (HITS-TM-), which enhance picture and sound
quality, respectively.
The Company's strategy of establishing megaplex theatres enhances attendance
and concessions sales by enabling it to exhibit concurrently a variety of motion
pictures attractive to different segments of the movie-going public. Megaplexes
also allow the Company to match a particular motion picture's attendance
patterns to the appropriate auditorium size (ranging from approximately 90 to
450 seats), thereby extending the run of a motion picture and providing superior
theatre economics. The Company believes that megaplex theatres enhance its
ability to license commercially popular motion pictures and to access
economically prime real estate sites due to its desirability as an anchor
tenant.
The Company believes that the megaplex format will create a new replacement
cycle for the industry. The new format raises moviegoers' expectations by
providing superior viewing lines, comfort, picture and sound quality as well as
increased choices of films and start times. The Company believes that consumers
will increasingly choose theatres based on the quality of the movie-going
experience rather than the location of the theatre. As a result, the Company
believes that older, smaller theatres will become obsolete as the megaplex
concept matures.
The Company believes that significant market opportunities exist for
development of modern megaplex and multiplex theatres in select international
markets. The theatrical exhibition business has become increasingly global and
box office receipts from international markets approximate those of the U.S.
market and are rising at a faster rate. In addition, the production and
distribution of feature films and demand for American motion pictures is
increasing in many countries. The Company believes that its experience in
developing and operating megaplex and multiplex theatres provides it with a
significant advantage in developing megaplex and multiplex facilities in
international markets and the Company intends to utilize this experience, as
well as its existing relationships with domestic motion picture studios, to
enter certain international markets. The Company's strategy in these markets is
to operate leased theatres and consider partnerships or joint ventures, where
appropriate, to share risk and leverage resources. Presently the Company's
activities in international markets are directed toward Japan, Portugal, Spain,
Hong Kong and Canada, which markets the Company believes are under screened.
The Company continually monitors its theatres to determine their performance
and 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 $1.75). It operated 12 such
theatres with 68 screens as of April 3, 1997 (3.5% of the Company's total
screens). Other strategies for under performing theatres include selling them to
discount operators and closing them. Divestiture strategies for theatres with
longer leases include selling them to other exhibitors, closing them or
converting such theatres to other uses and subleasing them.
THEATRE CIRCUIT
The following table sets forth information concerning additions and
dispositions of theatres and screens during, and the number of theatres and
screens operated as of the end of, the last five fiscal years. The Company adds
and disposes of theatres based on industry conditions and its business strategy.
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CHANGES IN THEATRES OPERATED
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF NUMBER OF NUMBER OF NUMBER OF
FISCAL YEAR ENDED THEATRES SCREENS THEATRES SCREENS THEATRES SCREENS
- ------------------------- --------------- --------------- --------------- --------------- --------------- -------------
ADDITIONS DISPOSITIONS TOTAL THEATRES OPERATED
-------------------------------- -------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
April 1, 1993............ 6 72 16 72 243 1,617
March 31, 1994........... 2 15 9 29 236 1,603
March 30, 1995........... 3 53 7 26 232 1,630
March 28, 1996........... 7 150 13 61 226 1,719
April 3, 1997............ 17 314 15 76 228 1,957
-- --
--- ---
Total.................. 35 604 60 264
-- --
-- --
--- ---
--- ---
</TABLE>
The following table provides greater detail with respect to the Company's
theatre circuit as of April 3, 1997.
<TABLE>
<CAPTION>
SCREENS PER
THEATRE
TOTAL TOTAL ------------
DOMESTIC SCREENS THEATRES 1-13 14+
- ---------------------------------------------------------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Florida................................................... 390 43 35 8
California................................................ 333 35 28 7
Texas..................................................... 221 24 21 3
Missouri.................................................. 127 13 10 3
Michigan.................................................. 115 19 19 --
Arizona................................................... 114 13 11 2
Pennsylvania.............................................. 105 15 15 --
Georgia................................................... 86 7 3 4
Colorado.................................................. 65 9 9 --
Ohio...................................................... 62 5 3 2
Virginia.................................................. 62 8 7 1
New Jersey................................................ 50 8 8 --
Maryland.................................................. 48 6 6 --
Oklahoma.................................................. 22 3 3 --
North Carolina............................................ 22 1 -- 1
Louisiana................................................. 20 3 3 --
Washington................................................ 20 3 3 --
New York.................................................. 16 2 2 --
Massachusetts............................................. 10 2 2 --
District of Columbia...................................... 9 1 1 --
Nebraska.................................................. 8 2 2 --
Illinois.................................................. 8 1 1 --
Kansas.................................................... 6 1 1 --
Delaware.................................................. 5 2 2 --
--
----- --- ---
Total Domestic.......................................... 1,924 226 195 31
--
--
----- --- ---
----- --- ---
INTERNATIONAL
- ----------------------------------------------------------
Japan..................................................... 13 1 1 --
Portugal.................................................. 20 1 -- 1
--
----- --- ---
Total International..................................... 33 2 1 1
--
--
----- --- ---
----- --- ---
Total Circuit............................................. 1,957 228 196 32
--
--
----- --- ---
----- --- ---
</TABLE>
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As of April 3, 1997, the Company operated 17 megaplex theatres having an
aggregate of 352 screens, representing 18.0% of its screens.
Of the Company's 228 theatres and 1,957 screens operated as of April 3,
1997, AMC was the owner or lessee of 223 theatres with 1,909 screens, and AMC
Entertainment International, Inc., an AMCE subsidiary, leased one theatre with
13 screens and its subsidiary, Actividades Multi-Cinemas E Espectaculos, LDA,
leased one theatre with 20 screens. AMC also operated three theatres with 15
screens owned by a third party.
Of the 228 theatres operated by the Company as of April 3, 1997, 14 theatres
with 157 screens were owned, 14 theatres with 135 screens were leased pursuant
to ground leases, 197 theatres with 1,650 screens were leased pursuant to
building leases and three theatres with 15 screens were managed. The Company's
leases generally have terms from 15 to 25 years, with options to extend the
lease for up to 20 additional years. The leases typically require escalating
minimum annual rent payments and additional rent payments based on a percentage
of the leased theatre's revenue above a base amount and require the Company to
pay for property taxes, maintenance, insurance and certain other
property-related expenses.
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.
The majority of the concessions, projection, seating and other equipment
required for each of the Company's theatres is owned.
The Company leases its corporate headquarters, located in Kansas City,
Missouri. Regional theatre and film licensing offices are leased in Los Angeles,
California; Clearwater, Florida; and Voorhees, New Jersey.
THEATRE DEVELOPMENT
New theatre sites are typically selected on the basis of retail
concentration, access to surface transportation and demographic trends
identified by reference to census figures and other statistical sources. Each
division of the Company has a real estate function to identify potential sites,
develop the economic profile of the sites and present the concepts to senior
management. The Company obtains some sites through several large real estate
developers of regional and strip malls with which it has developed proven
working relationships.
When approved by senior management, the real estate representatives
negotiate lease or purchase terms and, once finalized, then turn the project
over to the construction department for construction management. The Company
typically targets for development areas such as specialty shopping or
entertainment centers and retail space in or near suburban malls.
FILM LICENSING
The Company predominantly licenses "first-run" motion pictures from
distributors on a film-by-film and theatre-by-theatre basis. The Company obtains
these licenses either by negotiations directly with, or by submitting bids to,
distributors. Negotiations with distributors are based on several factors,
including theatre location, competition, season of the year and motion picture
content. Rental fees are paid by the Company under a negotiated license and are
made on either a "firm terms" basis, where final terms are negotiated at the
time of licensing, or are adjusted subsequent to the exhibition of a motion
picture in a process known as "settlement." When motion pictures are licensed
through a bidding process, the distributor decides whether to accept bids on a
previewed basis or a non-previewed ("blind-bid") basis, subject to certain state
law requirements. In most cases, the Company licenses its motion pictures on a
previewed basis.
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Licenses entered into through both negotiated and bid processes typically
state that rental fees shall be 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
fees are generally the greater of (i) 70% of box office admissions, gradually
declining to as low as 30% over a period of four to seven weeks, and (ii) a
specified percentage (I.E., 90%) of the excess of box office receipts over a
negotiated allowance for theatre expenses (commonly known as a "90/10" clause).
Second-run motion picture rental fees typically begin at 35% of box office
admissions and often decline to 30% after the first week.
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
admissions revenue ultimately paid to license a motion picture. In the past few
years, bidding has been used less frequently by the industry. Presently, the
Company licenses substantially all of its films on a negotiated basis.
The Company licenses films through film buyers who enable the Company to
capitalize on local trends and to take into account actions of local competitors
in the Company's negotiation and bidding strategies. Criteria considered in
licensing each motion picture include cast, director, plot, performance of
similar motion pictures, estimated motion picture rental costs and expected
rating by the Motion Pictures Association of America (the "MPAA"). 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 at
no time licenses any one motion picture for all of its theatres.
The Company's business is dependent upon the availability of marketable
motion pictures. There are several distributors which provide a substantial
portion of quality first-run motion pictures to the exhibition industry. These
include Buena Vista Pictures (Disney), Warner Bros. Distribution, SONY Pictures
Releasing (Columbia Pictures and Tri-Star Pictures), Twentieth Century Fox,
Universal Film Exchanges, Inc. and Paramount Pictures. There are numerous other
distributors and no single distributor dominates the market. From year to year,
the Company's revenues attributable to individual distributors may vary
significantly depending upon the commercial success of each distributor's motion
pictures in any given year. In fiscal 1996, no single distributor accounted for
more than 11% of the motion pictures licensed by the Company or for more than
25% of the Company's box office admissions. 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. Some of the major
distributors have announced their intention to reduce production of films.
During the period from January 1, 1990 to December 31, 1995, the annual
number of first-run motion pictures released by distributors in the United
States ranged from a low of 382 in 1995 to a high of 440 in 1993, according to
the MPAA. If a motion picture still 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 lower 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.
MARKETING
The Company relies primarily 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 are
generally paid for by the distributors; however, the Company occasionally shares
the
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<PAGE>
expense of such advertisements. The Company pays for newspaper "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.
THEATRE MANAGEMENT AND 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 management's compensation at each theatre 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 two-week training academy
focusing on operations administration and marketing during their first 12 to 24
months with the Company.
A typical ten-screen movie theatre has approximately 60 employees and five
managers. A 24-screen megaplex may have as many as 150 employees and 12
managers. The Company is committed to developing the strongest possible
management teams and seeks college graduates for career management positions.
Three division offices, each headed by a Senior Vice President of AMC,
supervise theatre operations and personnel within their respective regions. The
division Senior Vice Presidents are also responsible within their markets for
real estate development, marketing, facilities (design and maintenance) and
profit center auditing. The division offices are located in Los Angeles,
California; Clearwater, Florida; and Voorhees, New Jersey (Philadelphia).
Policy development, strategic planning, finance and accounting for the
Company are managed at the Company's corporate office located in Kansas City,
Missouri. Additionally, the corporate office provides support to both the
division offices and individual theatres regarding management information
systems, administration, employee benefits and operations services. All film
licensing activity occurs in Woodland Hills, California, utilizing a structure
that facilitates interaction between theatre managers, division managers and
film buyers.
CONCESSIONS
Concessions sales are the second largest source of revenue for the Company
after box office admissions. Concessions items include popcorn, soft drinks,
candy and other products. The Company's strategy emphasizes prominent and
appealing concessions counters designed for rapid service and efficiency.
The Company's primary concessions products are various sizes of popcorn,
soft drinks, candy and hot dogs, all of which the Company sells at each of its
theatres. However, different varieties of candy and soft drinks are offered at
theatres based on preferences in that particular geographic region. The Company
has also implemented "combo-meals" for children which offer a pre-selected
assortment of concessions products.
Newer megaplex theatres are designed to have more concessions service
capacity per seat than multiplex theatres and typically have three concessions
stands, with each stand having multiple service stations to make it easier to
serve larger numbers of customers. In addition, the primary concessions stand in
such theatres generally features the "pass-through" concept, which provides a
staging area behind the concessions equipment to prepare concessions products.
This permits the concessionist serving patrons to simply sell concessions items
instead of also preparing them, thus providing more rapid service to customers.
Strategic placement of large concessions stands within theatres heightens their
visibility, aids in reducing the length of concessions lines and improves
traffic flow around the concessions stands.
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<PAGE>
The Company negotiates prices for its concessions supplies directly with
concessions vendors on a national or regional basis to obtain high volume
discounts or bulk rates.
MANAGEMENT INFORMATION SYSTEMS
The Company has a point of sale ("POS") management information system to
further enhance its ability to maximize revenues, control costs and efficiently
manage the Company's theatre circuit. The POS information system provides
corporate management with a detailed daily admissions and concessions revenue
report by the start of business the following morning. This information allows
management to make adjustments to movie schedules, prolong runs or increase the
number of screens on which successful movies are being played and substitute
films when gross receipts cease to meet expected goals. Seating and box office
information is available to box office personnel, making it possible for theatre
management to avoid overselling a particular film and providing faster and more
accurate response to customer inquiries regarding showings and available
seating. The POS information system also tracks concessions sales and provides
weekly in-theatre inventory reports, leading to better inventory management and
control. The POS system also processes the MovieWatcher-Registered Trademark-
program whereby moviegoers earn points for each movie attended and earn discount
concession coupons and passes for movies. This frequent moviegoer program is the
only program of its type in the industry, and the Company believes it enhances
customer loyalty.
THEATRICAL EXHIBITION INDUSTRY OVERVIEW
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 often the most important factor in establishing its value in
the cable television, videocassette and other ancillary markets. The Company
further believes that the emergence of new motion picture distribution channels
has not adversely affected attendance at theatres and that these distribution
channels do not provide an experience comparable to that of viewing a movie in a
theatre. The Company believes that the public will continue to recognize the
advantages of viewing a movie on a large screen with superior audio and visual
quality, while enjoying a variety of concessions and sharing the experience with
a larger audience.
Annual domestic theatre attendance has averaged approximately one billion
persons since the early 1960s. In 1996, estimated domestic attendance was 1.35
billion. Fluctuations and variances in year-to-year attendance are primarily
related to the overall popularity and supply of motion pictures.
The theatrical exhibition industry in North America is comprised of over 400
exhibitors, approximately 250 of which operate four or more screens. Based on
the listing of exhibitors in the NATO 1996-97 Encyclopedia of Exhibitions, as of
May 1, 1996, the ten largest exhibitors (in terms of number of screens) operated
approximately 56% of the total screens, with no one exhibitor operating more
than 10% of the total screens.
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<PAGE>
The following table represents the results of a survey by NATO for 1990
through 1995 and information obtained from THE HOLLYWOOD REPORTER for 1996
outlining the historical trends in U.S. theatre attendance, average ticket
prices and box office sales for the last seven years.
<TABLE>
<CAPTION>
U.S. BOX OFFICE
ATTENDANCE AVERAGE TICKET SALES
YEAR (IN MILLIONS) PRICE (IN MILLIONS)
- -------------------------------------------- --------------- ----------------- -----------------
<S> <C> <C> <C>
1990........................................ 1,189 $ 4.22 $ 5,021
1991........................................ 1,141 $ 4.21 $ 4,803
1992........................................ 1,173 $ 4.15 $ 4,871
1993........................................ 1,244 $ 4.14 $ 5,154
1994........................................ 1,292 $ 4.18 $ 5,396
1995........................................ 1,263 $ 4.35 $ 5,493
1996........................................ 1,350 $ 4.39 $ 5,920
</TABLE>
COMPETITION
The Company competes against both local and national exhibitors, some of
which may have substantially greater financial resources than the Company. There
are over 400 companies competing in the domestic theatrical exhibition industry.
Industry participants vary substantially in size, from small independent
operators to large international chains. As of May 1, 1996, the ten largest
motion picture exhibition companies operated approximately 56% of the total
number of screens, based on the listing of exhibitors in the NATO 1996-1997
Encyclopedia of Exhibitions.
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, seating capacity and location and condition
of an exhibitor's theatres. The competition for patrons is dependent upon
factors such as the availability of popular motion pictures, the location and
number of theatres and screens in a market, the comfort and quality of the
theatres and pricing.
As with other exhibitors, the Company's smaller multiplex theatres are
subject to being rendered obsolete through the introduction of new, competing
megaplex theatres.
The theatrical exhibition industry also faces competition from other
distribution channels for filmed entertainment, such as cable television, pay
per view and home video systems, as well as from all other forms of
entertainment.
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 industry and 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 film-by-film and 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
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<PAGE>
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 has and will continue to
implement modifications to its theatre design to satisfy the ADA's requirements.
As the Company expands internationally, it becomes subject to regulation by
foreign governments. There are significant differences between the theatrical
exhibition industry regulatory environment in the United States and in
international markets. Regulatory barriers affecting such matters as the size of
theatres, the issuance of licenses and the ownership of land may restrict market
entry. Vertical integration of production and exhibition companies in
international markets may also have an adverse effect on the Company's ability
to license motion pictures for international exhibition. The Company's initial
attendance at its theatre in Japan was negatively impacted by film distributors
in Japan who restricted the Company's ability to obtain film product until
approximately two weeks after its competitors had received it. This delay in
releasing films to the Company generally has been eliminated. The Company's
international operations also face the additional risks of fluctuating currency
values. Quota systems used by some countries to protect their domestic film
industry may adversely affect revenues from theatres that the Company develops
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.
SEASONALITY
The theatrical exhibition industry is seasonal in nature, with the highest
attendance and revenues occurring during the summer months and the holiday
seasons. The Company generally reports its highest revenues and earnings during
its second fiscal quarter.
EMPLOYEES
As of April 3, 1997, the Company had approximately 1,800 full-time and 8,500
part-time employees. Approximately 11% of the part-time employees were minors
paid the minimum wage.
Fewer than one percent of the Company's employees, consisting primarily of
motion picture projectionists, are represented by a union, the International
Alliance of Theatrical Stagehand Employees and Motion Picture Machine Operators.
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 conditions regulations.
LEGAL PROCEEDINGS
The following paragraphs summarize significant litigation and proceedings to
which the Company is a party.
IN RE: AMC SHAREHOLDER DERIVATIVE LITIGATION, CHANCERY COURT FOR NEW CASTLE
COUNTY, DELAWARE (CIVIL ACTION NO. 12855). On February 15, 1995, the court
ordered the consolidation of two derivative actions filed against four persons
who were then directors of the Company, Messrs. Stanley H. Durwood, Edward D.
Durwood, Paul E. Vardeman and Charles J. Egan, Jr., and one of its former
directors,
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<PAGE>
Mr. Phillip Ean Cohen. The two cases were originally filed on January 27, 1993,
by Mr. Scott C. Wallace and on April 16, 1993, by Mr. James M. Bird,
respectively. On December 8, 1994, the court, pursuant to a stipulation by the
parties, entered an order approving Mr. Wallace's withdrawal as a derivative
plaintiff, granting the motion for intervention filed by Mr. Philip J. Bogosian,
Auginco, Mr. Norman M. Werther and Ms. Ellen K. Werther, and authorizing the
filing of the intervenors' complaint. The intervenors' complaint includes
substantially the same allegations as the Wallace and Bird complaints. The two
actions, as consolidated, are referred to below as the "Derivative Action."
In the Derivative Action, plaintiffs allege breach of fiduciary duties of
care, loyalty and candor, mismanagement, constructive fraud and waste of assets
in connection with, among other allegations, the provision of film licensing,
accounting and financial services to the Company by AAE, certain other
transactions with affiliates of the Company, termination payments to a former
officer of the Company, certain transactions between the Company and 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 TPIE. The
Derivative Action seeks unspecified money damages and equitable relief and
costs, including reasonable attorneys' fees.
On February 9, 1995, the defendants filed a motion to dismiss the Derivative
Action. Discovery has been stayed pending resolution of the motion to dismiss.
On October 10, 1996, counsel for the parties in the Derivative Action
entered into the Derivative Action Settlement Agreement providing for the
discharge and release of all claims against the defendants, the Durwood Family
Stockholders and the Company relating to such transactions, the proposed
settlement, the Merger, the Secondary Offering and indemnification of defendants
for their expenses, except claims for fraud, misrepresentation or omissions in
connection with the Secondary Offering and claims relating to the implementation
of the settlement. The Derivative Action Settlement Agreement provides, among
other matters, (i) for the dissolution of AAE, the merger of DI into AMCE and
the sale, within 12 months thereafter, of 3,000,000 shares of AMCE Common Stock
by the Durwood Family Stockholders in a public underwritten secondary offering
(which will only be made by means of a prospectus), (ii) for the payment by
certain of the defendants of an aggregate of approximately $1.3 million to
persons who were holders of AMCE Common Stock on January 2, 1996 (other than the
defendants, DI or the Durwood Family Stockholders), (iii) the nomination, for
three annual meetings, of two additional outside directors (initially, Messrs.
William T. Grant, II and John P. Mascotte) to serve on the AMCE Board whose
biographical information has been furnished to plaintiffs counsel and which
persons, to be nominated, must be serving on the board of another public company
or be a member of senior management of a publicly held company or a privately
held company with $50 million in annual revenues, (iv) that Messrs. Stanley H.
Durwood and Edward D. Durwood will cause the other Durwood Family Stockholders
to vote their shares with respect to the election and reelection of the New
Independent Directors in the same proportion as votes cast by all stockholders
not affiliated with AMCE, its directors and officers, (v) that the New
Independent Directors will have the ability to approve or disapprove (a) any
proposed transaction between AMCE and any of the Durwood Family Stockholders,
except with respect to compensation issues relating to Mr. Stanley H. Durwood or
any other Durwood Family Stockholder who is an officer of AMCE, which are to be
governed by existing AMCE Board procedures, and (b) the hiring and compensation
of any person related to Mr. Stanley H. Durwood who is not an officer of AMCE,
and (vi) that the New Independent Directors, together with either Mr. Charles J.
Egan, Jr. or Mr. Paul E. Vardeman, are to have the ability to approve or
disapprove all other related-party transactions with all officers, directors and
ten percent stockholders of AMCE.
The Derivative Action Settlement Agreement provides that AMCE will pay the
cost of providing notice of the settlement to its stockholders and for the fees
of the settlement administrator who will be responsible for distributing the
settlement amount to eligible stockholders.
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<PAGE>
The Derivative Action Settlement Agreement requires court approval and is
conditioned upon, among other things, the consummation of the Merger.
In addition, from time to time the Company is involved in various legal
proceedings arising from the ordinary course of its business operations, such as
personal injury claims, employment matters and contractual disputes. The Company
believes that its potential liability with respect to proceedings currently
pending is not material in the aggregate to the Company's consolidated financial
position or results of operations.
MANAGEMENT OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
The Directors and Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
YEARS
ASSOCIATED
WITH THE
NAME AGE(1) POSITIONS COMPANY(1)
- --------------------------------- ----------- --------------------------------- -----------------
<S> <C> <C> <C>
Stanley H. Durwood............... 76 Chairman of the Board, Chief 51(3)
Executive Officer and Director
(AMCE and AMC)
Peter C. Brown................... 38 President (AMCE)(4); Executive 5
Vice President (AMC); Chief
Financial Officer and Director
(AMCE and AMC)
Philip M. Singleton.............. 50 President (AMC)(4); Executive 22(3)
Vice President (AMCE); Chief
Operating Officer and Director
(AMCE and AMC)
Charles J. Egan, Jr.............. 64 Director (AMCE) 10
William T. Grant, II............. 46 Director (AMCE) --(2)
John P. Mascotte................. 57 Director (AMCE) --(2)
Paul E. Vardeman................. 67 Director (AMCE) 13(3)
Richard T. Walsh................. 43 Senior Vice President (AMC) 21(3)
Richard J. King.................. 48 Senior Vice President (AMC) 25(3)
Rolando B. Rodriguez............. 37 Senior Vice President (AMC) 21(3)
Richard L. Obert................. 57 Senior Vice President-Chief 8
Accounting and Information
Officer (AMCE and AMC)
Charles P. Stilley............... 42 President (AMC Realty, Inc.) 15(3)
Richard M. Fay................... 47 President (AMC Film Marketing) 1
</TABLE>
- --------------
(1) As of April 3, 1997.
(2) First elected to the AMCE Board on November 14, 1996.
(3) Includes years of service with the predecessor of the Company.
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<PAGE>
(4) Prior to January 10, 1997, Messrs. Brown and Singleton were serving as
Executive Vice Presidents of both AMCE and AMC. They were appointed to their
present positions as Presidents of AMCE and AMC, respectively, on January
10, 1997.
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.
All current Executive Officers of the Company hold such offices at the
pleasure of the AMCE Board, subject, in the case of Messrs. Stanley H. Durwood,
Peter C. Brown, Philip M. Singleton and Richard M. Fay, 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. Mr. Durwood has
served as Chairman of the Board of Directors of AMCE and AMC since February
1986, and has served as Chief Executive Officer of AMCE since June 1983, and of
AMC since February 20, 1986. Mr. Durwood served as President of AMCE (i) from
June 1983 through February 20, 1986, (ii) from May 1988 through June 1989, and
(iii) from October 6, 1995 to January 10, 1997. Mr. Durwood served as President
of AMC (i) from August 2, 1968 through February 20, 1986, (ii) from May 13, 1988
through November 8, 1990, and (iii) from October 6, 1995 to January 10, 1997.
Mr. Durwood is a graduate of Harvard University.
Mr. Peter C. Brown has served as a Director of AMCE and AMC since November
12, 1992. Mr. Brown was appointed President of AMCE on January 10, 1997. Mr.
Brown served as Executive Vice President of AMCE from August 3, 1994 to January
10, 1997, as Executive Vice President of AMC since August 3, 1994, and as Chief
Financial Officer of AMCE and AMC since November 14, 1991. Mr. Brown served as
Senior Vice President of AMCE and AMC from November 14, 1991 until his
appointment as Executive Vice President in August 1994. Mr. Brown served as
Treasurer of AMCE and AMC from September 28, 1992 through September 19, 1994.
Prior to November 14, 1991, Mr. Brown served as a consultant to AMCE from
October 1990 to October 1991. Mr. Brown is a graduate of the University of
Kansas.
Mr. Philip M. Singleton has served as a Director of AMCE and AMC since
November 12, 1992. Mr. Singleton was appointed President of AMC on January 10,
1997. Mr. Singleton has served as Executive Vice President of AMCE since August
3, 1994, as Executive Vice President of AMC from August 3, 1994 to January 10,
1997, and as Chief Operating Officer of AMCE and AMC since November 14, 1991.
Mr. Singleton served as Senior Vice President of AMCE and AMC from November 14,
1991 until his appointment as Executive Vice President in August 1994. Prior to
November 14, 1991, Mr. Singleton served as Vice President in charge of
operations for the Southeast Division of AMC from 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 since October 30,
1986. Mr. Egan is Vice President of Hallmark Cards, Incorporated, and was
General Counsel of such company until December 31, 1996. Hallmark Cards,
Incorporated is primarily engaged in the business of greeting cards and related
social expressions products, Crayola crayons and the production of movies for
television. Mr. Egan also serves as a member of the Board of Trustees, Treasurer
and Chairman of the Finance Committee of the Kansas City Art Institute. Mr. Egan
holds an A.B. degree from Harvard University and an LL.B. degree from Columbia
University.
Mr. William T. Grant, II has served as a Director of AMCE since November 14,
1996. Mr. Grant is Chairman of the Board, President, Chief Executive Officer and
a Director of LabONE, Inc. and Chairman of the Board, Chief Executive Officer
and a Director of Seafield Capital Corporation. Mr. Grant served as President of
Seafield Capital Corporation from 1990 to 1993, at which time he became Chairman
of the Board of Seafield Capital Corporation. LabONE, Inc. provides risk
appraisal laboratory testing services to the insurance industries in the United
States and Canada and is a subsidiary of Seafield Capital
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Corporation. Seafield Capital Corporation is a holding company whose
subsidiaries operate primarily in the healthcare and insurance services areas.
Mr. Grant also serves on the board of directors of Commerce Bancshares, Inc.,
Kansas City Power & Light Company, Business Men's Assurance Company of America
and Response Oncology, Inc. Mr. Grant holds a B.A. degree from the University of
Kansas and an M.B.A. degree from the Wharton School of Finance at the University
of Pennsylvania.
Mr. John P. Mascotte has served as a Director of AMCE since November 14,
1996. Mr. Mascotte is Chairman of the Board of Johnson & Higgins of Missouri,
Inc., a privately held insurance broker. Mr. Mascotte is also a consultant to
the First District, African Methodist Episcopal Church and was Chairman of the
Heart of America 1996 United Way General Campaign. Prior thereto, Mr. Mascotte
served as Chairman of the Board and Chief Executive Officer of The Continental
Corporation, a large property-casualty insurer. Mr. Mascotte also serves on the
board of directors of Hallmark Cards, Incorporated, Business Men's Assurance
Company of America and American Home Products Corporation. In addition, from
1983 until 1996, Mr. Mascotte served on the board of directors of Chemical
Banking Corporation. Mr. Mascotte holds B.S. degrees from St. Joseph's College,
Rensselaer, Indiana, and an LL.B. degree from the University of Virginia. Mr.
Mascotte is also a certified public accountant and a chartered life underwriter.
Mr. Paul E. Vardeman has served as a Director of AMCE since June 14, 1983.
Mr. Vardeman is a director, officer and shareholder of the law firm of
Polsinelli, White, Vardeman & Shalton, P.C., Kansas City, Missouri, and has been
associated with such law firm 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. Richard T. Walsh has served as Senior Vice President in charge of
operations for the West Division of AMC since July 1, 1994. Previously, Mr.
Walsh served as Vice President in charge of operations for the Central Division
of AMC from June 10, 1992, and as Vice President in charge of operations for the
Midwest Division of AMC from December 1, 1988.
Mr. Richard J. King has served as Senior Vice President in charge of
operations for the Northeast Division of AMC since January 4, 1995. Previously,
Mr. King served as Vice President in charge of operations for the Northeast
Division of AMC from June 10, 1992, and as Vice President in charge of
operations for the Southwest Division of AMC from October 30, 1986.
Mr. Rolando B. Rodriguez has served as Senior Vice President in charge of
operations for the South Division of AMC since April 2, 1996. Previously, Mr.
Rodriguez served as Vice President and South Division Operations Manager of AMC
from July 1, 1994, as Assistant South Division Operations Manager of AMC from
February 12, 1993, as South Division Senior Operations Manager from March 29,
1992, and as South Division Operations Manager from August 6, 1989.
Mr. Richard L. Obert has served as Senior Vice President-Chief Accounting
and Information Officer of AMCE and AMC since November 9, 1995, and prior
thereto served as Vice President and Chief Accounting Officer of AMCE and AMC
from January 9, 1989.
Mr. Charles P. Stilley has served as President of AMC Realty, Inc., a
wholly-owned subsidiary of AMC, since February 9, 1993, and prior thereto served
as Senior Vice President of AMC Realty, Inc. from March 3, 1986.
Mr. Richard M. Fay has served as President-AMC Film Marketing, a division of
AMC, since September 8, 1995. Previously, Mr. Fay served as Senior Vice
President and Assistant General Sales Manager of Sony Pictures from 1994 until
he joined AMC. From 1991 to 1994, Mr. Fay served as Vice President and Head Film
Buyer for the eastern division of United Artists Theatre Circuit, Inc.
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<PAGE>
COMPENSATION OF DIRECTORS
Effective November 14, 1996, AMCE's non-employee directors each receive an
annual fee of $32,000 for service on the AMCE Board and an additional $4,000 for
each committee of the AMCE Board on which he serves, and, in addition, will
receive $1,500 and $1,000, respectively, for each Board and Board committee
meeting which he attends.
During the fiscal year ended March 28, 1996, Messrs. Charles J. Egan, Jr.
and Paul E. Vardeman received annual cash compensation of $20,000 each for their
service as members of the Boards of AMCE and AMC and $24,000 each for their
service as members of the Audit Committee of the Boards of AMCE and AMC. They
also received $900 per hour for attending meetings of (i) any board of directors
on which they served, (ii) the Audit Committee after the twelfth meeting during
the fiscal year and (iii) any other committee on which they served. Under the
foregoing arrangements Messrs. Charles J. Egan, Jr. and Paul E. Vardeman
received $115,000 and $106,100, respectively, for their services.
The AMCE Board has also authorized that Messrs. Charles J. Egan, Jr. and
Paul E. Vardeman be paid reasonable compensation for their services as members
of the Special Committee appointed to consider a proposed merger of AMCE and DI.
For Fiscal 1996, Messrs. Charles J. Egan, Jr. and Paul E. Vardeman each received
$30,000 for their services related to the Special Committee.
COMPENSATION OF MANAGEMENT
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 March 28, 1996, March 30, 1995 and March 31, 1994,
respectively.
SUMMARY COMPENSATION TABLE*
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------
AWARDS--
ANNUAL COMPENSATION SECURITIES
------------------------------------------------------ UNDERLYING
NAME AND PRINCIPAL OTHER ANNUAL OPTIONS/ ALL OTHER
POSITION FISCAL YEAR SALARY BONUS COMPENSATION(1) SARS(#) COMPENSATION(2)
- ------------------------- ----------- ---------- ---------- ----------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Stanley H. Durwood....... 1996 $ 492,634 $ 275,000 N/A -- --
Chief Executive 1995 452,088 108,949 N/A 22,500 --
Officer 1994 436,800 263,400 N/A -- --
Peter C. Brown........... 1996 257,439 137,500 N/A -- $ 4,726
Chief Financial 1995 234,836 55,433 N/A 4,500 4,657
Officer 1994 227,016 135,000 N/A 150,000 4,675
Philip M. Singleton...... 1996 285,311 154,000 N/A -- 4,686
Chief Operating 1995 273,247 64,149 N/A 4,500 4,663
Officer 1994 264,142 153,600 $ 51,930 150,000 59,564
Richard T. Walsh......... 1996 207,204 80,000 N/A 2,250 4,620
Senior Vice President 1995 200,855 35,500 217,112 -- 63,464
1994 170,982 66,000 N/A 30,000 3,400
Frank T. Stryjewski(3)... 1996 192,209 74,000 N/A 2,250 4,620
Senior Vice President 1995 189,840 43,000 N/A -- 4,716
1994 171,098 74,250 N/A 30,000 3,400
</TABLE>
79
<PAGE>
- --------------
(1) N/A denotes not applicable. The fiscal year which began on April 1, 1994 and
ended March 30, 1995 ("fiscal 1995") includes a lump sum payment and gross
up of taxes on moving expenses totaling $209,408 paid to Mr. Richard T.
Walsh. The fiscal year which began on April 2, 1993 and ended on March 31,
1994 ("fiscal 1994") includes gross-up of taxes of $43,285 on moving
expenses paid to Mr. Philip M. Singleton. For the fiscal years presented,
excluding Mr. Richard T. Walsh in fiscal 1995 and Mr. Philip M. Singleton in
fiscal 1994, perquisites and other personal benefits did not exceed the
lesser of $50,000 or ten percent of total annual salary and bonus.
(2) For fiscal 1996, All Other Compensation includes AMC's contributions under
AMC's 401(k) Plan and the Executive Savings Plan, both of which are defined
contribution plans, in the aggregate amount of $4,726 for Mr. Peter C.
Brown, $4,686 for Mr. Philip M. Singleton, $4,620 for Mr. Richard T. Walsh
and $4,620 for Mr. Frank T. Stryjewski. For fiscal 1995, All Other
Compensation includes AMC's contributions to such plans in the amount of
$4,657 for Mr. Peter C. Brown, $4,663 for Mr. Philip M. Singleton, $4,786
for Mr. Richard T. Walsh and $4,716 for Mr. Frank T. Stryjewski. In
addition, moving expense for Mr. Richard T. Walsh is included in the amount
of $58,678. For fiscal 1994, the totals include AMC's contributions to such
plans in the amount of $4,675 for Mr. Peter C. Brown, $4,708 for Mr. Philip
M. Singleton, $3,400 for Mr. Richard T. Walsh and $3,400 for Mr. Frank T.
Stryjewski. In addition, moving expense for Mr. Philip M. Singleton is
included in the amount of $54,856.
(3) Mr. Frank T. Stryjewski resigned from AMC effective April 18, 1996.
* As of March 28, 1996, the Named Executive Officers held performance share
awards under AMCE's 1994 Stock Option and Incentive Plan entitling them to
receive shares of AMCE Common Stock at the end of a three-year period from
the date of grant upon satisfaction of performance goals. See "--Long-Term
Incentive Plans Awards in Last Fiscal Year." The number of shares issuable
to each such person (and the value of such shares as of March 28, 1996)
under awards in effect as of March 28, 1996, upon attainment of threshold,
target and maximum performance goals is as follows: Threshold--Mr. Stanley
H. Durwood--30,000 shares ($723,750); Mr. Peter C. Brown-- 6,000 shares
($144,750); Mr. Philip M. Singleton--6,000 shares ($144,750); Mr. Richard T.
Walsh-- 3,000 shares ($72,375); and Mr. Frank T. Stryjewski--3,000 shares
($72,375); Target--Mr. Stanley H. Durwood--45,000 shares ($1,085,625); Mr.
Peter C. Brown--9,000 shares ($217,125); Mr. Philip M. Singleton--9,000
shares ($217,125); Mr. Richard T. Walsh--4,500 shares ($108,563) and Mr.
Frank T. Stryjewski--4,500 shares ($108,563); Maximum--Mr. Stanley H.
Durwood--90,000 shares ($2,171,250); Mr. Peter C. Brown--18,000 shares
($434,250); Mr. Philip M. Singleton--18,000 shares ($434,250); Mr. Richard
T. Walsh--9,000 shares ($217,125); and Mr. Frank T. Stryjewski-- 9,000
shares ($217,125). Mr. Frank T. Stryjewski resigned from AMC effective April
18, 1996. The performance shares held by Mr. Stryjewski were subsequently
canceled.
80
<PAGE>
OPTION GRANTS
The following table provides certain information concerning individual
grants of stock options made during the last completed fiscal year under the AMC
Entertainment Inc. 1994 Stock Option and Incentive Plan (the "Incentive Plan")
to each of the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(3)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED(2) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ------------------------------- --------------- ----------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stanley H. Durwood............. -- -- -- -- -- --
Peter C. Brown................. -- -- -- -- -- --
Philip M. Singleton............ -- -- -- -- -- --
Richard T. Walsh............... 2,250 9.70% $ 14.50 06/27/05 $ 20,520 $ 51,998
Frank T. Stryjewski(1)......... 2,250 9.70% 14.50 06/27/05 20,520 51,998
</TABLE>
- --------------
(1) Mr. Frank T. Stryjewski resigned from AMC effective April 18, 1996. The
options granted to Mr. Stryjewski in fiscal 1996 have expired unexercised.
(2) The stock options granted during the fiscal year ended March 28, 1996 are
eligible for exercise based upon a vesting schedule. After the first
anniversary of the grant date, 50% of the options will be eligible for
exercise. After the second anniversary of the grant date, all options are
fully vested. Vesting of options will accelerate upon the optionee's death,
disability or retirement, or upon the optionee's termination of employment
within one year after the occurrence of certain change in control events.
The Compensation Committee of the AMCE Board may permit accelerated exercise
of options if certain extraordinary events occur, such as a merger or
liquidation of AMCE, the sale of substantially all of the assets of AMCE, a
subsidiary or a division, or a change in control of AMCE. With the consent
of the Compensation Committee, optionees may satisfy tax withholding
obligations by electing to have shares otherwise issuable upon exercise of
an option withheld.
(3) These columns show the hypothetical gains of "option spreads" of the
outstanding options granted based on assumed annual compound stock
appreciation rates of five percent and ten percent over the options' terms.
The five percent and ten percent assumed rates of appreciation are mandated
by the rules of the Commission and do not represent the Company's estimate
or projections of the future prices of AMCE Common Stock.
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<PAGE>
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 March 28, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS/SARS AT
FY-END(#) VALUE OF UNEXERCISED
---------------------------- IN-THE-MONEY OPTIONS/SARS AT
SHARES FY-END($)(2)
ACQUIRED ON VALUE (SHARES) -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE PRICE EXERCISABLE UNEXERCISABLE
- --------------------------- --------------- ------------- ------------ -------------- --------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stanley H. Durwood......... -- -- 11,250 11,250 $ 11.750 $ 139,219 $ 139,219
Peter C. Brown............. -- -- 75,000 75,000 9.250 1,115,625 1,115,625
2,250 2,250 11.750 27,844 27,844
Philip M. Singleton........ -- -- 75,000 75,000 9.250 1,115,625 1,115,625
2,250 2,250 11.750 27,844 27,844
Richard T. Walsh........... -- -- 15,000 15,000 9.375 221,250 221,250
0 2,250 14.500 0 21,656
Frank T. Stryjewski(1)..... -- -- 15,000 15,000 9.375 221,250 221,250
0 2,250 14.500 0 21,656
</TABLE>
- --------------
(1) Mr. Frank T. Stryjewski resigned from AMC effective April 18, 1996. The
unexercisable options outstanding as of March 28, 1996 have expired
unexercised.
(2) Values for "in-the-money" outstanding options represent the positive spread
between the respective exercise prices of the outstanding options and the
value of AMCE Common Stock as of March 28, 1996.
LONG-TERM INCENTIVE PLAN
The following table provides certain information concerning shares
("Performance Shares") issuable under performance stock awards approved by the
Compensation Committee during the last completed fiscal year for each of the
Named Executive Officers.
LONG-TERM INCENTIVE PLANS AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAYOUT UNDER
NUMBER(1) OF OTHER PERIOD UNTIL NON-STOCK PRICE BASED PLANS
SHARES, UNITS MATURATION OR -------------------------------------------
NAME OR OTHER RIGHTS(#) PAYOUT THRESHOLD(#) TARGET(#) MAXIMUM(#)
- ------------------------------- ------------------- ------------------ --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Stanley H. Durwood............. -- -- -- -- --
Peter C. Brown................. -- -- -- -- --
Philip M. Singleton............ -- -- -- -- --
Richard T. Walsh............... 9,000 3 years 3,000 4,500 9,000
Frank T. Stryjewski(2)......... 9,000 3 years 3,000 4,500 9,000
</TABLE>
- --------------
(1) Maximum number of shares issuable under awards made during the fiscal year.
(2) Mr. Frank T. Stryjewski resigned from AMC effective April 18, 1996. The
Performance Shares for Mr. Stryjewski were subsequently canceled.
82
<PAGE>
The foregoing table shows the number of Performance Shares issuable to a
participant at the end of a three-year performance period ending April 2, 1998
(the "Performance Period") at Threshold, Target and Maximum levels of
performance.
A participant's eligibility to receive up to one-half of the maximum number
of Performance Shares issuable under an award is based upon changes in the
"private market value per share" of AMCE Common Stock ("PMVPS") over the
Performance Period. PMVPS is determined on a fully diluted basis (assuming
exercise of all outstanding shares of AMCE's Convertible Preferred Stock, AMCE
Class B Stock, options and other rights to acquire shares of AMCE Common Stock),
based on a multiple of theatre EBITDA (theatre EBITDA is consolidated EBITDA
less National Cinema Network, Inc. EBITDA), plus the book value of National
Cinema Network, Inc., plus cash and equivalents, investments and investments in
other long-term assets, less corporate borrowings, capitalized lease obligations
and the carrying value of minority interests. EBITDA is earnings before
interest, taxes, depreciation and amortization. National Cinema Network, Inc. is
a subsidiary of AMCE.
A participant's eligibility to receive up to the remaining one-half of the
maximum number of Performance Shares issuable under an award is based upon
changes in "total return to stockholders" ("TRS"), which is measured by
increases in the market value of an investment in shares of AMCE Common Stock,
assuming reinvestment of any dividends received.
PMVPS and TRS are referred to individually and collectively herein as
"Performance Criterion" and "Performance Criteria," respectively.
Such Performance Criteria will be measured against changes in the Standard &
Poor's 500 Index ("S&P 500") over the Performance Period. Required achievement
levels over the Performance Period for both PMVPS and TRS are as set forth
below:
<TABLE>
<C> <S>
Maximum: 2,000 basis points higher than the percentage change in the S&P 500 over the
Performance Period;
Target: 750 basis points higher than the percentage change in the S&P 500 over the
Performance Period;
Threshold: No difference between the percentage change in the S&P 500 and the
percentage change in the Performance Criterion over the Performance Period.
</TABLE>
Generally, no shares will be issued with respect to performance over the
Performance Period as measured by a Performance Criterion if such performance
does not at least meet the Threshold achievement level over the Performance
Period. If performance as so measured by a Performance Criterion falls between
the Threshold and Target achievement levels, the number of Performance Shares
issuable under an Award with respect to that Performance Criterion will be
determined to the nearest whole number of shares, so that the actual Award will
be at the same percentage between the Threshold and Target award levels as the
actual achievement level falls between the Threshold and Target achievement
levels. Similarly, if performance falls between Target and Maximum achievement
levels, the number of Performance Shares will be determined to the nearest whole
number of shares, so that the actual award will be at the same percentage
between the Target and Maximum award levels as the actual achievement level
falls between the Target and Maximum levels. In no event will the number of
Performance Shares issuable under an award with respect to a Performance
Criterion exceed the number of Performance Shares issuable upon attaining the
Maximum achievement level over the Performance Period with respect to such
Performance Criterion.
The right to receive Performance Shares will be accelerated and such
Performance Shares issued, based on the achievement levels of the Performance
Criteria measured to the date of termination, in the event of a participant's
death, disability or retirement, or termination of employment within one year
after the occurrence of certain change of control events. The Compensation
Committee of the AMCE Board
83
<PAGE>
may waive performance goals if certain extraordinary events occur, such as a
merger or liquidation of AMCE, the sale of substantially all of the assets of
AMCE, a subsidiary or a division, or a change in control of AMCE.
With the consent of the Compensation Committee, a Grantee may satisfy his
tax withholding obligations by electing to have Performance Shares otherwise
issuable withheld.
Until Performance Shares are issued, participants have no dividend or voting
rights with respect to Performance Shares.
DEFINED BENEFIT RETIREMENT AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS
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 each participant. 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 under the Retirement Plan upon
completion of five years of vesting service.
AMC also sponsors a Supplemental Executive Retirement Plan to provide the
same level of retirement benefits that would have been provided under the
Retirement Plan had the federal tax law not been changed in the Omnibus Budget
Reconciliation Act of 1993, which reduced the amount of compensation which can
be taken into account in a qualified retirement plan from $235,840 (in 1993)
(the "Old Limit") to $150,000 (in 1995 and 1996).
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 and the Supplemental Executive Retirement Plan, assuming
retirement in calendar 1996 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. The following table assumes the Old Limit would have been
increased to $250,000 in 1996.
<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.................................... $ 17,716 $ 23,621 $ 29,527 $ 35,432 $ 41,337
$150,000.................................... $ 21,466 $ 28,621 $ 35,777 $ 42,932 $ 50,087
$175,000.................................... $ 25,216 $ 33,621 $ 42,027 $ 50,432 $ 58,837
$200,000.................................... $ 28,966 $ 38,621 $ 48,277 $ 57,932 $ 67,587
$225,000.................................... $ 32,716 $ 43,621 $ 54,527 $ 65,432 $ 76,337
$250,000.................................... $ 36,466 $ 48,621 $ 60,777 $ 72,932 $ 85,087
</TABLE>
As of December 31, 1996, the years of credited service under the Retirement
Plan for each of the Named Executive Officers were: Mr. Peter C. Brown, 6 years;
Mr. Philip M. Singleton, 23 years; Mr. Richard T. Walsh, 22 years; and Mr. Frank
T. Stryjewski(1), 17 years. The final amount distributed to Mr. Stanley H.
Durwood in fiscal 1995 from the Company's Retirement Plan was $42,067, and was
not included in the Summary Compensation Table. In addition, the benefit Mr.
Stanley H. Durwood accrued under the Supplemental Executive Retirement Plan was
$18,724 in fiscal 1996 and is not included in the Summary Compensation Table.
- --------------
(1) Mr. Frank T. Stryjewski resigned from AMC effective April 18, 1996.
84
<PAGE>
AMC established a Retirement Enhancement Plan ("REP") with an effective date
of March 29, 1996 for the benefit of officers who from time to time may be
designated as eligible participants therein by the Board of Directors. The REP
is a non-qualified deferred compensation plan designed to provide an unfunded
retirement benefit to an eligible participant in an amount equal to (i) sixty
percent (60%) of his or her average compensation (including paid and deferred
incentive compensation) during the last three full years of employment, less
(ii) the sum of (A) such participant's benefits under the Retirement Plan and
Social Security, and (B) the amount of a straight life annuity commencing at the
participant's normal retirement date attributable to AMC's contributions under
the Supplemental Executive Retirement Plan, the 401(k) Savings Plan, the
Non-qualified Deferred Compensation Plan and the Executive Savings Plan. The
base amount in clause (i) will be reduced on a pro rata basis if the participant
completes fewer than twenty-five (25) years of service. The REP benefit vests
upon the Participant's attainment of age 55 or completion of fifteen (15) years
of service, whichever is later, and may commence to a vested participant
retiring on or after age 55 (who has participated in the plan for at least 5
years) on an actuarially reduced basis (6 2/3% for each of the first five years
by which commencement precedes age 65 and an additional 3 1/3% for each year by
which commencement precedes age 60). Benefits commence at a participant's normal
retirement date (I.E., the later of age 65 or the participant's completion of
five years of service with AMC) whether or not the participant continues to be
employed by AMC. The accrued benefit payable upon total and permanent disability
is not reduced by reason of early commencement. Participants become fully vested
in their rights under the REP if their employment is terminated without cause or
as a result of a change in control, as defined in the REP. No death, disability
or retirement benefit is payable prior to a participant's early retirement date
or prior to the date any severance payments to which the participant is entitled
cease.
Presently, Mr. Stanley H. Durwood, Mr. Peter C. Brown and Mr. Philip M.
Singleton have been designated as eligible to participate in the REP. The amount
payable to Mr. Stanley H. Durwood with respect to fiscal 1997 under the REP is
estimated at approximately $350,000. The estimated annual amounts that Mr. Brown
and Mr. Singleton will be eligible to receive under the REP at age 65 are
$207,000 and $199,000, respectively; such amounts are based on certain
assumptions respecting their future compensation amounts and the amounts of AMC
contributions under other plans. Actual amounts received by such individuals
under the REP may be different than those estimated.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Mr. Stanley H. Durwood has an employment agreement with AMCE and AMC dated
January 26, 1996 retaining him as Chairman and Chief Executive Officer and
President. It provides for an annual base salary of no less than $500,000, plus
payments and awards under AMC's Executive Incentive Program ("EIP"), the
Incentive Plan and other bonus plans in effect for Executive Officers at a level
reflecting his position, plus such other amounts as may be paid under any other
compensatory arrangement as determined in the sole discretion of the
Compensation Committee. Mr. Durwood's current annual base salary is $510,000.
The Company has also agreed to use its best efforts to provide Mr. Durwood up to
$5,000,000 in life insurance and to pay the premiums thereon and taxes resulting
from such payment. Mr. Durwood's employment agreement has a term of three years
and is automatically extended one year on its anniversary date, January 26, so
that as of such date each year the agreement has a three-year term. The
employment agreement is terminable without severance if he engages in
intentional misconduct or a knowing violation of law or breaches his duty of
loyalty to the Company. The agreement also is terminable (i) by Mr. Durwood, in
the event of the Company's breach, and (ii) by the Company, without cause or in
the event of Mr. Durwood's death or disability, in each case with severance
payments equal to three times the sum of his annual base salary in effect at the
time of termination plus the average of annual incentive or discretionary cash
bonuses paid during the three fiscal years preceding the year of termination.
The Company may elect to pay such severance payments in monthly installments
over a period of three years or in a lump sum after discounting such amount to
its
85
<PAGE>
then present value. The aggregate amount payable under this employment
agreement, assuming termination with severance occurred as of April 3, 1997, was
approximately $1,916,000.
Messrs. Peter C. Brown and Philip M. Singleton each have employment
agreements with AMC dated September 26, 1994, providing for annual base salaries
of no less than $227,000 and $266,000, respectively, and bonuses resulting from
the EIP or other bonus arrangement, if any, as determined from time to time at
the sole discretion of the Compensation Committee upon the recommendation of the
Chairman of the Board. The current annual base salaries of Messrs. Brown and
Singleton are $255,000 and $285,700, respectively. Each employment agreement has
a term of two years. On each September 27, commencing in 1995, one year shall be
added to the term of each employment agreement, so that each employment
agreement shall always have a two-year term as of each anniversary date. Each
employment agreement terminates without severance upon such employee's
resignation, death or his disability as defined in his employment agreement, or
upon AMC's good faith determination that such employee has been dishonest or has
committed a breach of trust respecting AMC. AMC may terminate each employment
agreement at any time, with severance payments in an amount equal to twice the
annual base salary of such employee on the date of termination. Each employee
may terminate his employment agreement if Mr. Stanley H. Durwood shall fail to
control AMC as defined in the employment agreement and receive severance
payments in an amount equal to twice his annual base salary on the date of
termination. AMC may elect to pay any severance payments in a lump sum after
discounting such amount to its then present value, or over a two-year period.
The aggregate value of all severance benefits to be paid to such employee shall
not exceed 299% of such employee's "base amount" as defined in the Code for the
five-year period immediately preceding the date of termination. The aggregate
amount payable under these employment agreements, assuming termination by reason
of a change of control and payment in a lump sum as of April 3, 1997, was
approximately $992,000.
Mr. Richard M. Fay has an employment agreement with AMC dated April 16, 1996
which provides for an annual base salary of $275,000 and, in the first year of
the employment agreement, an additional $50,000 for costs associated with
relocation. Mr. Fay's current annual base salary is $275,000. Mr. Fay is also
eligible to receive payments resulting from the EIP or other bonus arrangement,
if any, as determined from time to time in the sole discretion of the
Compensation Committee of the Board of Directors of AMC upon the recommendation
of the Chief Executive Officer of AMC. The employment agreement has a term of
three years, from September 8, 1995 through September 7, 1998. The employment
agreement terminates without severance upon Mr. Fay's resignation, death or
disability as defined in his employment agreement, or upon AMC's good faith
determination that Mr. Fay has been dishonest or has committed a breach of trust
respecting AMC. AMC may terminate the employment agreement at any time, with
severance payments in an amount equal to, at AMC's option, either (i) Mr. Fay's
base salary per month in effect at the time of termination, payable over the
remaining term of his employment, or (ii) the net present value of the monthly
payments described in (i) above, payable within 30 days of the date of
termination. Any severance payable to Mr. Fay shall be reduced by any wages,
compensation or income, cash or otherwise, received by Mr. Fay from sources
other than AMC during the remaining term of his employment agreement following
the date of termination. The aggregate amount payable under this employment
agreement, assuming termination with severance occurred as of April 3, 1997, was
approximately $366,000.
As permitted by the Incentive Plan, stock options and Performance Share
awards granted to participants thereunder provide for acceleration upon the
termination of employment within one year after the occurrence of certain change
in control events, whether such termination is voluntary or involuntary, or with
or without cause. See "--Option/SAR Grants in Last Fiscal Year" and "--Long-Term
Incentive Plans--Awards in Last Fiscal Year." In addition, the Compensation
Committee may permit acceleration upon the occurrence of certain extraordinary
transactions which may not constitute a change of control.
86
<PAGE>
AMC maintains a severance pay plan for full-time salaried nonbargaining
employees with at least 90 days of service. For an eligible employee who is
subject to the Fair Labor Standards Act ("FLSA") overtime pay requirements (a
"nonexempt eligible employee"), the plan provides for severance pay in the case
of involuntary termination of employment due to layoff of the greater of two
week's basic pay or one week's basic pay multiplied by the employee's full years
of service up to no more than twelve weeks' basic pay. There is no severance pay
for a voluntary termination, unless up to two weeks' pay is authorized in lieu
of notice. There is no severance pay for an involuntary termination due to an
employee's misconduct. Only two weeks' severance pay is paid for an involuntary
termination due to substandard performance. For an eligible employee who is
exempt from the FLSA overtime pay requirements, severance pay is discretionary
(at the Department Head/Supervisor level), but will not be less than the amount
that would be paid to a nonexempt eligible employee.
CERTAIN TRANSACTIONS
Since their formation, AMCE and AMC have been members 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 the sole Director of DI and Chairman of the Board, Chief Executive
Officer and a Director of AMCE and AMC. There have been transactions involving
AMCE or its subsidiaries and the DI affiliated group in prior years. AMCE
intends to ensure that all transactions with DI or other related parties are
fair, reasonable and in the best interests of the Company. In that regard, the
Audit Committee of the AMCE Board reviews all material proposed transactions
between the Company and DI or other related parties to determine that, in their
best business judgment, such transactions meet that standard. The Audit
Committee consists of Messrs. Egan, Grant and Mascotte, none 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 2, 1993 or involve receivables that remain
outstanding as of April 3, 1997.
Certain corporate departments of AMC perform general and administrative
services for DI and its subsidiaries. AMC charged DI and its subsidiaries
$116,000 for such services for fiscal 1996 and 1995 and $196,000 for fiscal
1994.
Periodically, the Company and DI reconcile any accounts owed by one company
to the other. Charges to the intercompany account have included the allocation
of the Company's general and administrative expenses and payments made by the
Company on behalf of DI. The largest balance owed by DI and its subsidiaries to
the Company during each of fiscal years 1994, 1995 and 1996 was $1,423,000,
$831,000 and $795,000, respectively. As of April 3, 1997, DI and its
subsidiaries owed the Company $181,000. Of the 1994 amount, $843,000 consisted
of payments by the Company to DI under the federal income tax sharing agreement
between DI and the Company which was terminated on March 3, 1994.
Ms. Marjorie D. Grant, a Vice President of AMC and the sister of Mr. Stanley
H. Durwood, has an employment agreement with AMCE providing for an annual base
salary of no less than $110,000, an automobile and, at the sole discretion of
the Chief Executive Officer of AMCE, a year-end bonus. Ms. Grant's current
annual base salary is $110,000. Ms. Grant's employment agreement, executed July
1, 1996, terminates on June 30, 1999, or upon her death or disability. The
agreement provides that in the event Mr. Stanley H. Durwood fails to control the
management of AMCE by reason of its sale, merger or consolidation, or because of
his death or disability, or for any other reason, then AMCE and Ms. Grant would
each have the option to terminate the agreement. In such event, AMCE would pay
to Ms. Grant in cash a sum equal to the aggregate cash compensation, exclusive
of bonus, to the end of the term of her employment under the agreement, after
discounting such amount to its then present value using a discount rate equal to
the prime rate of interest published in THE WALL STREET JOURNAL on the date of
termination. The aggregate amount payable under the employment agreement,
assuming termination
87
<PAGE>
by reason of a change of control and payment in a lump sum as of April 3, 1997,
was approximately $225,000.
Since July 1992, Mr. Jeffery W. Journagan, a son-in-law of Mr. Stanley H.
Durwood, has been employed by a subsidiary of AMCE. Mr. Journagan's current
salary is approximately $75,000 and he received a bonus for fiscal 1996 in the
amount of $21,600.
In January 1987, AMC loaned $200,000 to Mr. Donald P. Harris, one of the
named Executive Officers in fiscal 1995, in connection with the purchase of his
principal residence. Principal on the note originally was due on January 1,
1992, but the note was extended to January 16, 1997 and the interest rate was
increased from 6% to 7 1/2%. The employment of Mr. Harris by the Company or its
affiliates ceased effective as of October 1, 1995. Mr. Harris paid AMC $110,249,
the remaining amount of the principal and accrued interest on the loan, on
October 1, 1995.
The Company and Mr. Edward D. Durwood entered into an Agreement and General
Release effective October 5, 1995, pursuant to which Mr. Edward D. Durwood was
terminated as President, Vice Chairman of the Board and Director of AMCE and AMC
upon the recommendation of the Compensation Committee without cause with the
consent of the Company's Board of Directors. The Company paid Mr. Edward D.
Durwood $498,398 in severance. The Agreement and General Release also provides
for mutual releases between the Company and Mr. Durwood.
AMC and Mr. Donald P. Harris entered into an Agreement and Release effective
October 1, 1995, pursuant to which Mr. Harris resigned as President--AMC Film
Marketing, Inc. AMC paid Mr. Harris $467,850 in severance. Mr. Harris paid AMC
$110,249, the remaining amount of the principal and accrued interest on a loan
he had previously received from AMC. The Agreement and Release also provided for
mutual releases between AMC and Mr. Harris.
In November 1995, AMC purchased the principal residence of Mr. Richard M.
Fay, an Executive Officer, for $500,000. AMC is currently marketing the
residence and intends to sell it.
During fiscal 1996, the Company retained Polsinelli, White, Vardeman &
Shalton, P.C., of which Mr. Vardeman, then a director of both AMCE and AMC, is a
director, officer and shareholder, to provide certain legal services to a
subsidiary of AMC.
For a description of certain employment agreements between the Company and
Messrs. Stanley H. Durwood, Peter C. Brown, Philip M. Singleton and Richard M.
Fay, see "--Management of the Company--Employment Contracts, Termination of
Employment and Change in Control Arrangements."
FEDERAL INCOME TAXES
DI and AMCE entered into an agreement dated July 1, 1983, pursuant to which,
so long as DI and AMCE filed a consolidated federal income tax return, AMCE paid
to DI the amount of tax that would be payable calculated as if AMCE filed a
separate consolidated federal income tax return for such period and all prior
taxable periods; provided, however, that if such return reflected a refund due
to AMCE, DI was obligated to pay AMCE an amount equal to such refund when and if
the DI consolidated group is able to realize AMCE's tax benefit in the future.
Due to AMCE's issuance of Convertible Preferred Stock on March 3, 1994, AMCE is
no longer eligible to file a consolidated federal income return with DI. The
agreement still applies to all tax years for which DI and AMCE previously filed
a consolidated federal income tax return.
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<PAGE>
DESCRIPTION OF AMCE CAPITAL STOCK
The authorized capital stock of AMCE consists of 45,000,000 shares of AMCE
Common Stock of which 6,583,969 shares were outstanding as of April 3, 1997
(12,725,312 after giving effect to the Merger), 30,000,000 shares of AMCE Class
B Stock of which 11,157,000 shares were outstanding as of April 3, 1997
(5,015,657 after giving effect to the Merger) and 10,000,000 shares of Preferred
Stock, par value 66 2/3 CENTS per share, of which 3,303,600 shares of
Convertible Preferred Stock were issued and outstanding as of April 3, 1997.
AMCE COMMON STOCK AND CLASS B STOCK
VOTING RIGHTS. The holders of AMCE Common Stock are entitled to one vote
per share and, except for the election of directors, vote together as a single
class with the AMCE Class B Stock, subject to the right to vote as a separate
class as required by law and on certain charter amendments affecting the number
of authorized shares of AMCE Common Stock or the par value or relative powers,
preferences or special rights thereof.
The holders of AMCE Class B Stock are entitled to ten votes per share and,
except for the election of directors, vote together with the AMCE Common Stock
as a single class, subject to the right to vote as a separate class as required
by law and on certain charter amendments affecting the number of authorized
shares of AMCE Class B Stock or the par value or relative powers, preferences or
special rights thereof.
Holders of AMCE 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
AMCE Board. So long as any shares of AMCE Class B Stock remain outstanding,
holders of AMCE Class B Stock, voting separately as a single class, with each
share of AMCE Class B Stock having one vote for such purpose, generally have the
right to elect 75% of the AMCE Board (with any fraction of one-half or more
rounded up). If the total number of shares of AMCE Class B Stock outstanding
becomes less than 12 1/2% of the aggregate number of shares of AMCE Common Stock
and AMCE Class B Stock outstanding, then so long as shares of AMCE Common Stock
are listed on the AMEX, the 75% of the AMCE Board otherwise elected by holders
of AMCE Class B Stock will be elected by holders of AMCE Common Stock and AMCE
Class B Stock voting together as a single class, with each share of AMCE Common
Stock having one vote per share and each share of AMCE Class B Stock having ten
votes per share. In the event that no shares of AMCE Class B Stock remain
outstanding, the holders of AMCE Common Stock may elect all of the AMCE Board,
with each share having one vote for such purpose. Holders of AMCE Common Stock
and AMCE Class B Stock do not have cumulative voting rights in elections of
directors.
CONVERSION RIGHTS. Each holder of AMCE Class B Stock is entitled to convert
all or any portion of such holder's shares of AMCE Class B Stock into the same
number of shares of AMCE Common Stock. Upon approval of the holders of a
majority of the outstanding shares of AMCE Class B Stock, a pro rata percentage
of shares of AMCE Class B Stock of each holder of record will be automatically
converted into the same number of shares of AMCE Common Stock. AMCE's
Certificate of Incorporation requires AMCE to reserve and keep available a
sufficient number of authorized but unissued shares of AMCE Common Stock to
permit conversion of all outstanding shares of AMCE Class B Stock.
PREEMPTIVE RIGHTS. Holders of AMCE Common Stock and AMCE Class B Stock have
no preemptive rights.
DIVIDEND AND LIQUIDATION RIGHTS. Holders of AMCE Common Stock and AMCE
Class B Stock are entitled to receive, pro rata per share, such dividends as the
AMCE Board may from time to time declare out of funds 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
AMCE, holders of AMCE Common Stock and AMCE Class B Stock are entitled to
receive, pro rata per share, any
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<PAGE>
remaining assets of AMCE 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 AMCE to
holders of AMCE Common Stock or AMCE 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. AMCE may not merge or consolidate unless the terms
and conditions of the merger or consolidation provide that holders of AMCE
Common Stock and AMCE Class B Stock then outstanding receive, pro rata per
share, consideration of equal value.
CONVERTIBLE PREFERRED STOCK
RANKING. The Convertible Preferred Stock ranks, with respect to dividend
rights and rights on liquidation, winding-up and dissolution, senior to the AMCE
Common Stock and AMCE Class B Stock.
DIVIDENDS. Holders of shares of the Convertible Preferred Stock are
entitled to receive, when, as and if declared by the AMCE Board out of funds of
AMCE legally available for payment, cash dividends at an annual rate of $1.75
per share of Convertible Preferred Stock. Dividends on the Convertible Preferred
Stock are cumulative. No dividends may be paid or set apart for such payment on
the AMCE Common Stock or AMCE Class B Stock (except certain stock dividends) and
no shares of AMCE Common Stock or AMCE Class B Stock 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 Stock.
LIQUIDATION RIGHTS. In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of AMCE, before any payment or
distribution of assets is made on the AMCE Common Stock and AMCE Class B Stock,
the holders of the Convertible Preferred Stock 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.
VOTING RIGHTS. Except as indicated below or as expressly required by
applicable law, the holders of the Convertible Preferred Stock have no voting
rights. If the equivalent of six full quarterly dividends payable on the
Convertible Preferred Stock are in arrears, the authorized number of directors
of AMCE will be increased by two and the holders of the Convertible Preferred
Stock will be entitled to elect two directors until all dividends in arrears on
the Convertible Preferred Stock 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 AMCE
Board will be reduced by the number of directors elected by the holders of the
Convertible Preferred Stock.
The vote or consent of the holders of two-thirds of the outstanding shares
of Convertible Preferred Stock 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 securities senior to the Convertible Preferred Stock as to
dividend and liquidation rights. Furthermore, the vote or consent of the holders
of a majority of the outstanding shares of Convertible Preferred Stock 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 securities on parity with
the Convertible Preferred Stock as to dividend and liquidation rights.
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<PAGE>
The vote or consent of the holders of two-thirds of the outstanding shares
of Convertible Preferred Stock, voting as a class, will be required to authorize
an amendment to AMCE's 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.
OPTIONAL REDEMPTION. Shares of Convertible Preferred Stock are redeemable
in whole or in part at the option of AMCE at redemption prices commencing at $26
per share (as of March 15, 1997) and declining by $.25 per share every 12 months
thereafter until March 15, 2001, when such price will become and remain $25 per
share. Shares called for redemption may be converted by the holders thereof
prior to the redemption date as discussed below under "--Conversion."
CONVERSION. Shares of the Convertible Preferred Stock are convertible at
any time at the option of the holder thereof into such number of whole shares of
AMCE Common Stock as is equal to the aggregate liquidation preference of the
shares of Convertible Preferred Stock surrendered for conversion divided by the
initial conversion price of $14.50. Upon the surrender of any shares of
Convertible Preferred Stock for conversion, in lieu of issuing the AMCE Common
Stock issuable upon conversion of the Convertible Preferred Stock, AMCE may, at
its option, pay to the holder of such shares of Convertible Preferred Stock an
amount in cash equal to the then Market Value (as defined below) of the number
of shares of AMCE Common Stock into which such shares of Convertible Preferred
Stock are then convertible.
The initial conversion price per share of AMCE Common Stock is subject to
adjustment (under formulae set forth in the Certificate of Designations for the
Convertible Preferred Stock) in certain events, including: (i) the issuance of
AMCE Common Stock as a dividend or distribution on the AMCE Common Stock, (ii)
certain subdivisions and combinations of the AMCE Common Stock, (iii) the
issuance to all holders of AMCE Common Stock of certain rights or warrants to
purchase AMCE Common Stock at a price per share less than the then current
market price per share and (iv) the distribution to all holders of AMCE Common
Stock of evidences of indebtedness of AMCE, shares of capital stock of AMCE
(other than AMCE 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
AMCE or paid in cash out of the current or retained earnings of AMCE). 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.
SPECIAL CONVERSION RIGHTS. The Convertible Preferred Stock has a special
conversion right that becomes effective upon the occurrence of certain types of
significant transactions affecting ownership or control of AMCE or the market
for AMCE Common Stock. The special conversion right is intended to provide
limited loss protection to holders of Convertible Preferred Stock in certain
circumstances, while not giving holders a veto power over significant
transactions affecting ownership or control of AMCE. 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 Stock will be entitled to a special
conversion right if a "Change of Control" or "Fundamental Change" (as defined
below) occurs. However, if the majority of the value of the consideration
received in a transaction by holders of AMCE Common Stock is "Marketable Stock"
(as defined below) or if the holders of "Voting" Stock (as defined below) of
AMCE hold a majority of the Voting Stock of AMCE's successor, the transaction
will not be a Fundamental Change, and holders of the Convertible Preferred Stock
will not have special conversion rights as the result of that transaction.
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A special conversion right will permit a holder of the Convertible Preferred
Stock, at the holder's option during the 30-day period described in the
following paragraph, to convert all, but not less than all, of the holder's
Convertible Preferred Stock at a conversion price equal to the Special
Conversion Price (as defined below). A holder exercising a special conversion
right will receive AMCE 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 AMCE Common Stock into which the holder's Convertible
Preferred Stock would have been convertible at the Special Conversion Price. In
either case, however, AMCE or its successor may, at its option, elect to pay the
holder cash equal to the Market Value of the number of shares of AMCE Common
Stock into which the holder's Convertible Preferred Stock is convertible at the
Special Conversion Price.
As used in this section, a "Change of Control" with respect to AMCE shall be
deemed to have occurred at the first time after the issuance of the Convertible
Preferred Stock that (i) a majority of the AMCE Board, over a two-year period,
is replaced from the directors who constituted the AMCE Board at the beginning
of such period, which replacement shall not have been approved by the AMCE Board
(or replacement directors approved by the AMCE Board), 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 AMCE, 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 AMCE or any subsidiary of AMCE or any person holding securities of AMCE 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 AMCE representing 50% or
more of the combined voting power of the then outstanding securities of AMCE
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors.
As used in this section, the term "DI affiliates" means (i) 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 in this section, a "Fundamental Change" with respect to AMCE means
(i) the occurrence of any transaction or event in connection with which (a)
66 2/3% or more of the outstanding AMCE Common Stock or (b) securities of AMCE
representing 50% or more of the combined voting power of the then outstanding
securities of AMCE 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 (ii) the conveyance, sale,
lease, assignment, transfer or other disposal of all or substantially all of
AMCE'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 AMCE Board) of the
consideration received by holders of AMCE Common Stock consists of Marketable
Stock or (b) any consolidation or merger of AMCE in which the holders of Voting
Stock of AMCE 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 to
determine whether or not a Fundamental Change has occurred.
As used in this section, "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
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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 AMCE Class B Stock presently are entitled to elect more than 50% of
the AMCE Board, the AMCE Class B Stock is presently the only Voting Stock of
AMCE for purposes of this definition.
As used in this section, "Special Conversion Price" means the higher of (i)
the Market Value of AMCE Common Stock or (ii) $9.80 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 $9.80 to the initial
conversion price, without giving effect to any such adjustment). As used in this
section, "Market Value" of AMCE Common Stock or any other Marketable Stock is
the average of the last reported sales prices of the AMCE 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 in this section, the term "Marketable Stock" means AMCE Common Stock
or common stock of any corporation that is the successor to all or substantially
all of the business or assets of AMCE 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.
INFORMATION ABOUT DI
SELECTED FINANCIAL DATA
The following table sets forth selected data regarding DI's five most recent
fiscal years and the interim periods ended December 26, 1996 and December 28,
1995. Operating results for the interim period ending December 26, 1996 are not
necessarily indicative of the results that may be expected for the entire fiscal
year ending April 3, 1997. The historical financial information for each of the
fiscal years specified below has been derived from DI's consolidated financial
statements for such periods. The unaudited pro forma financial information of DI
as of and for the fiscal year ended March 28, 1996 and for the interim period
ended December 26, 1996 has been adjusted to give effect to the Merger as set
forth in the Notes to DI's Condensed Pro Forma Financial Statements included
elsewhere herein. Such pro forma information does not purport to represent what
DI's results of operations would have been had the Merger occurred on the dates
presented or to project DI'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 DI's Consolidated Financial Statements and the Notes
thereto included elsewhere in this Proxy-Information Statement/Prospectus. The
historical and pro forma financial data set forth below should be read in
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<PAGE>
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" of DI and DI's Consolidated Financial Statements and
the Notes thereto included elsewhere in this Proxy-Information
Statement/Prospectus.
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
-------------------------------------------------------------
DECEMBER 26, 1996 DECEMBER 26, 1996 DECEMBER 28, 1995
PRO FORMA(1)(2)(4) ACTUAL(1)(2) ACTUAL(1)(2)
------------------- ------------------- -------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total revenues................. $ 527,555 $ 527,555 $ 492,861
Total cost of operations....... 417,527 417,527 371,420
Depreciation and
amortization................. 37,543 37,276 30,581
General and administrative
expenses..................... 39,933 39,992 38,594
---------- ---------- ----------
Operating income............... 32,552 32,760 52,266
Interest expense............... 15,036 15,770 24,571
Investment income.............. 664 1,893 6,981
Gain (loss) on disposition of
assets......................... (84) (84) 23
---------- ---------- ----------
Earnings before income taxes,
extraordinary item and
minority interest............ 18,096 18,799 34,699
Income tax provision........... 7,285 7,530 14,300
Earnings before extraordinary
item and minority interest... $ 10,811 $ 11,269 20,399
Extraordinary item............. -- -- (19,350)
---------- ---------- ----------
Earnings before minority
interest..................... -- 11,269 1,049
Minority interest.............. 6,145 4,548
---------- ---------- ----------
Net earnings (loss)............ -- $ 5,124 $ (3,499)
---------- ---------- ----------
---------- ---------- ----------
Earnings per share before
extraordinary item:
Primary...................... $ 28.57 $ 31.41 $ 81.57
Fully diluted................ 28.24 31.09 80.67
Earnings (loss) per share:
Primary...................... -- $ 31.41 $ (21.36)
Fully diluted................ -- 31.09 (21.36)
Common dividends per share..... $ -- $ -- $ --
Weighted average number of
shares outstanding
Primary...................... 161 161 161
Fully diluted................ 161 161 161
BALANCE SHEET DATA
Cash, equivalents and
investments.................. $ 18,436 $ 19,866 $ 24,673
Total assets................... 639,740 638,544 465,334
Total debt (including
capitalized lease
obligations)................. 330,701 330,701 198,830
Stockholders' equity........... 63,609 61,723 44,363
OTHER FINANCIAL DATA
EBITDA (3)..................... $ 70,095 $ 70,036 $ 82,847
Capital expenditures........... 163,645 163,645 72,496
</TABLE>
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<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------------------------------------------------------------
MARCH 28, MARCH 28, MARCH 30, MARCH 31, APRIL 1, APRIL 2,
1996 1996 1995 1994 1993 1992
PROFORMA(1)(2)(4) ACTUAL(1)(2) ACTUAL(1)(2) ACTUAL(1)(2) ACTUAL(1)(2) ACTUAL(1)(2)
----------------- ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total revenues................. $ 657,872 $ 657,872 $ 564,667 $ 587,458 $ 404,475 $ 406,495
Total cost of operations....... 496,567 496,567 435,915 449,177 310,835 323,957
Depreciation and
amortization.................. 43,886 43,537 37,569 37,701 27,834 31,041
General and administrative
expenses...................... 48,750 49,274 39,870 40,324 38,062 42,595
Estimated loss on future
disposition of assets......... -- -- -- -- 2,500 3,000
----------------- ------------ ------------ ------------ ------------ ------------
Operating income............... 68,669 68,494 51,313 60,256 25,244 5,902
Interest expense............... 28,828 29,805 36,814 37,093 32,040 32,237
Investment income.............. 7,052 7,432 10,838 2,196 8,592 9,447
Gain (loss) on disposition of
assets........................ (222) (220) 142 296 9,627 8,735
----------------- ------------ ------------ ------------ ------------ ------------
Earnings (loss) before income
taxes, extraordinary item and
minority interest............. 46,671 45,901 25,195 25,655 11,423 (8,153)
Income tax provision........... 19,300 19,360 (10,160) 4,808 3,700 1,100
----------------- ------------ ------------ ------------ ------------ ------------
Earnings (loss) before
extraordinary item and
minority interest............. $ 27,371 26,541 35,355 20,847 7,723 (9,253)
-----------------
-----------------
Extraordinary item............. -- (19,350) -- -- (8,183) --
----------------- ------------ ------------ ------------ ------------ ------------
Earnings (loss) before minority
interest...................... -- 7,191 35,355 20,847 (460) (9,253)
Minority interest.............. -- 7,168 11,559 773 66 (721)
Net earnings (loss)............ -- $ 23 $ 23,796 $ 20,074 $ (526) $ (8,532)
----------------- ------------ ------------ ------------ ------------ ------------
----------------- ------------ ------------ ------------ ------------ ------------
Earnings (loss) per share
before extraordinary item:
Primary...................... $ 103.93 $ 98.78 $ 147.85 $ 123.92 $ 32.81 $ (53.35)
Fully diluted................ 102.49 97.34 132.39 127.78 32.81 (53.35)
Earnings (loss) per share:
Primary...................... -- $ .05 $ 147.85 $ 123.92 $ (4.86) $ (53.35)
Fully diluted................ -- $ (.02) 132.39 123.78 (4.86) (53.35)
Common dividends per share..... $ -- $ -- $ -- $ -- $ -- $ --
Weighted average number of
shares outstanding
Primary...................... 161 161 161 161 161 161
Fully diluted................ 161 161 161 161 161 161
BALANCE SHEET DATA
Cash, equivalents and
investments................... -- $ 12,888 $ 142,754 $ 152,979 $ 50,596 $ 36,865
Total assets................... -- 481,827 521,735 500,060 370,229 375,190
Total debt (including
capitalized lease
obligations).................. -- 188,172 267,548 268,233 255,346 263,668
Stockholders' equity........... -- 47,476 46,891 23,095 6,719 16,202
OTHER FINANCIAL DATA
EBITDA(3)...................... $ 112,555 $ 112,031 $ 88,882 $ 97,957 $ 55,578 $ 39,943
Capital expenditures........... 120,796 120,796 56,701 10,672 8,773 21,048
</TABLE>
- --------------
(1) Fiscal 1996, 1995 and 1994 include the effects from the acquisition of EEP
on May 28, 1993.
(2) Fiscal 1992 includes 53 weeks. All other years have 52 weeks.
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(3) Represents operating income plus depreciation and amortization plus
estimated loss on future disposition of assets. EBITDA is a financial
measure commonly used in the motion picture exhibition 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.
(4) See the Company's Condensed Pro Forma Financial Statements and the Notes
thereto included elsewhere herein.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
DI is principally a holding company. Its primary subsidiary is AMCE which,
through its subsidiaries, is principally involved in the theatrical exhibition
industry throughout the United States and in Japan and Portugal. AMCE is also
involved in the business of providing on-screen advertising and other services
to AMC and other theatre circuits through a wholly-owned subsidiary, National
Cinema Network, Inc. Delta, DI's only subsidiary other than the Company, is
engaged in real estate and investment activities.
As a result of the commencement of international operations during fiscal
1997, DI has decided to begin disaggregating its domestic and international
exhibition operations and DI's on-screen advertising and other business in order
to provide more information as to revenues, cost of operations, depreciation and
amortization, and general and administrative expenses as set forth in the table
below for the thirty-nine week periods ended December 26, 1996 and December 28,
1995.
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
------------------------------
DECEMBER 26, DECEMBER 28,
1996 1995 % CHANGE
-------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Domestic
Admissions.................................. $ 337,528 $ 324,737 3.9%
Concessions................................. 158,322 148,323 6.7
Other....................................... 12,549 10,691 17.4
-------------- -------------- ---
508,399 483,751 5.1
International
Admissions.................................. 7,171 -- --
Concessions................................. 1,033 -- --
Other....................................... 2 -- --
-------------- -------------- ---
8,206 -- --
On-screen advertising and other............... 10,950 9,110 20.2
-------------- -------------- ---
Total revenues............................ $ 527,555 $ 492,861 7.0%
-------------- -------------- ---
-------------- -------------- ---
COST OF OPERATIONS
Domestic
Film rentals................................ $ 173,009 $ 166,054 4.2%
Concession merchandise...................... 25,966...... 22,891 13.4
Rent........................................ 54,288 47,979 13.1
Other....................................... 145,582 128,974 12.9
-------------- -------------- ---
398,845 365,898 9.0
International
Film rentals................................ 4,331 -- --
Concession merchandise...................... 309 -- --
Rent........................................ 3,222 -- --
Other....................................... 3,290 -- --
-------------- -------------- ---
11,152 -- --
On-screen advertising and other............... 7,530 5,522 36.4
-------------- -------------- ---
Total cost of operations.................. $ 417,527 $ 371,420 12.4%
-------------- -------------- ---
-------------- -------------- ---
</TABLE>
97
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<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
--------------------------------
DECEMBER 26, DECEMBER 28,
1996 1995 % CHANGE
--------------- --------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
DEPRECIATION AND AMORTIZATION
Domestic and corporate........................ $ 35,351 $ 29,679 19.1%
International................................. 647 -- --
On-screen advertising and other............... 1,278 902 41.7
--------------- --------------- ---
Total depreciation and amortization....... $ 37,276 $ 30,581 21.9%
--------------- --------------- ---
--------------- --------------- ---
GENERAL AND ADMINISTRATIVE
Domestic and corporate........................ $ 30,511 $ 32,307 (5.6)%
International................................. 4,890 2,756 77.4
On-screen advertising and other............... 4,591 3,531 30.0
--------------- --------------- ---
Total general and administrative
expenses................................ $ 39,992 $ 38,594 3.6%
--------------- --------------- ---
--------------- --------------- ---
</TABLE>
THIRTY-NINE WEEKS ENDED DECEMBER 26, 1996 AND DECEMBER 28, 1995
REVENUES. Total revenues increased 7.0%, or $34,694,000, during the
thirty-nine weeks ended December 26, 1996 compared to the thirty-nine weeks
ended December 28, 1995.
Total domestic revenues increased 5.1% from the prior year. Admissions
revenues increased 3.9% due to a 3.5% increase in average ticket prices and a
0.4% increase in attendance. Attendance and admissions revenue increased during
the period due to the addition of new theatres, primarily megaplexes. This
increase in attendance from new theatres was partially offset by a decrease in
attendance at same theatres (theatres opened prior to fiscal 1996) which caused
a 9.7% decrease in admissions revenues at same theatres. Additionally,
attendance decreased due to closed theatres. The decline in attendance at same
theatres was due to competitive factors and a lack of popular films from the
Company's key suppliers when compared to the prior year. Concessions revenues at
domestic theatres increased by 6.7% due to a 6.3% increase in average
concessions per patron and the increase in total attendance. The increase in
average concessions per patron is attributable to higher consumption at new
megaplex theatres and new concessions products.
Total international revenues were the result of admissions and concessions
revenues from the Company's first theatre in Japan, the Canal City 13 located in
Fukuoka, Japan, which opened during the first quarter of fiscal 1997. Admissions
and concessions revenues accounted for 87% and 13% of total international
revenues, respectively. The Company's initial attendance was negatively impacted
by film distributors in Japan who restricted the Company's ability to obtain
film product until approximately two weeks after its competitors had received
it. This delay in releasing films to the Company has generally been eliminated.
On-screen advertising and other revenues increased 20.2% due primarily to an
increase in revenues generated by the Company's on-screen advertising business,
which resulted from an increase in the number of screens served.
COST OF OPERATIONS. Total cost of operations increased 12.4%, or
$46,107,000, during the thirty-nine weeks ended December 26, 1996 compared to
the thirty-nine weeks ended December 28, 1995.
Total domestic cost of operations increased 9.0% from the prior year. Film
rentals expense increased 4.2% due to higher admissions revenues. As a
percentage of admissions revenues, film rentals expense increased from 51.1% to
51.3%. The 13.4% increase in concessions merchandise expense is attributable to
the increase in concessions revenues. As a percentage of concessions revenues,
concessions merchandise expense increased from 15.4% to 16.4% due primarily to
increases
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in raw popcorn costs and lower margins on new concessions products. Rent expense
increased 13.1% due to the higher number of screens in operation. Other cost of
operations increased 12.9% from the same period in the prior year due to the
higher number of screens in operation, $1,921,000 of advertising expenses
associated with the opening of new theatres and higher expenses associated with
the Company's theatre management development program.
Total international cost of operations were the result of expenses
associated with the Company's theatre in Japan. As a percentage of admissions
revenues, film rentals expense was 60.4% because film rentals in Japan are
generally higher than those domestically. Concessions merchandise expense was
30.0% of concessions revenues due to the high procurement costs of concessions
products sourced from the United States. As a percentage of total revenues, rent
expense was 39.3% as a result of low attendance and admissions revenues and the
higher real estate costs in Japan.
On-screen advertising and other cost of operations increased 36.4% as a
result of the higher number of screens served and related start-up expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
21.9%, or $6,695,000, during the thirty-nine weeks ended December 26, 1996. This
increase was caused by an increase in employed theatre assets resulting from the
Company's expansion program.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 3.6%, or $1,398,000, during the thirty-nine weeks ended December 26,
1996.
Domestic and corporate general and administrative expenses decreased 5.6%
primarily due to a decrease in the current year's bonus expense related to the
decline in the Company's operating performance and severance payments for two
former executive officers during the prior year. These decreases in general and
administrative expenses were partially offset by increased expenses related to
the Company's expansion program.
International general and administrative expenses increased 77.4% due
primarily to payroll, rent and other expenses to support the Company's
international operations and costs associated with the Company's international
expansion program.
General and administrative expenses associated with on-screen advertising
and other increased 30.0% due primarily to an increase in payroll and related
costs.
OPERATING INCOME. Operating income decreased 37.3%, or $19,506,000, during
the thirty-nine weeks ended December 26, 1996. Operating income decreased due to
a reduction of operating income from same theatres, which was partially offset
by an increase in operating income from new theatres, primarily megaplexes,
added to the domestic circuit and a decrease in domestic and corporate general
and administrative expenses. Additionally, operating income was reduced by
operating losses from the Company's theatre in Japan, increases in international
general and administrative expenses and operating losses from the Company's
on-screen advertising business.
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INTEREST EXPENSE. Interest expense decreased 35.8%, or $8,801,000, during
the thirty-nine weeks ended December 26, 1996 compared to the corresponding
period for the prior year. The decrease in interest expense resulted from lower
rates under the Company's Credit Facility, which was partially offset by an
increase in average outstanding borrowings related to the Company's expansion
program.
INVESTMENT INCOME. Investment income decreased 72.9%, or $5,088,000, during
the thirty-nine weeks ended December 26, 1996 due to a decrease in outstanding
cash and investments compared to the same period in the prior year. Cash and
investments decreased as a result of AMCE's redemption of substantially all of
its Senior Notes and 12 5/8% Senior Subordinated Notes on December 28, 1995. The
decrease in investment income was partially offset by a gain on sale of
available for sale investments of $1,094,000 recorded during the current year.
EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND MINORITY
INTEREST. Earnings before income taxes, extraordinary item and minority
interest decreased by 45.8%, or $15,900,000, during the thirty-nine weeks ended
December 26, 1996 due primarily to the $19,506,000 decrease in operating income.
NET EARNINGS. Net earnings before extraordinary item and minority interest
decreased $9,130,000 during the thirty-nine weeks ended December 26, 1996 to
$11,269,000 from $20,399,000 in the same period in the previous year. Net
earnings for the period were $5,124,000 compared to a loss of $3,499,000 in the
same period in the previous year, which included an extraordinary item (a loss
of $19,350,000 in connection with the early extinguishment of debt). Net
earnings before extraordinary item per common share was $31.41 compared to
earnings of $81.57 for the same period in the previous year. Net earnings per
common share was $31.41 compared to a loss of $21.36 for the same period in the
previous year.
<TABLE>
<CAPTION>
YEARS (52 WEEKS ENDED)
----------------------------------------------------------------------------------
MARCH 28, % OF TOTAL MARCH 30, % OF TOTAL MARCH 31, % OF TOTAL
1996 REVENUES 1995 REVENUES 1994 REVENUES
----------- ------------- ----------- ------------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Admissions......... $ 431,361 66% $ 371,145 66% $ 389,454 66%
Concessions........ 196,645 30 169,120 30 176,274 30
Other.............. 29,866 4 24,402 4 21,730 4
----------- ----- ----------- ----- ----------- -----
Total.............. $ 657,872 100% $ 564,667 100% $ 587,458 100%
----------- ----- ----------- ----- ----------- -----
----------- ----- ----------- ----- ----------- -----
Cost of Operations
Film rentals....... $ 215,099 33% $ 182,669 32% $ 197,461 34%
Concession
merchandise...... 32,641 5 26,453 5 26,349 4
Rent............... 64,813 10 60,076 11 58,443 10
Other.............. 184,014 28 166,717 29 166,924 28
----------- ----- ----------- ----- ----------- -----
Total.............. $ 496,567 76% $ 435,915 77% $ 449,177 76%
----------- ----- ----------- ----- ----------- -----
----------- ----- ----------- ----- ----------- -----
</TABLE>
YEARS (52 WEEKS) ENDED MARCH 28, 1996 AND MARCH 30, 1995
REVENUES. Total revenues for the year (52 weeks) ended March 28, 1996
increased 16.5%, or $93,205,000, to $657,872,000 compared to $564,667,000 for
the year (52 weeks) ended March 30, 1995. Admissions revenues increased 16.2%
due to a 11.1% increase in attendance and a 4.4% increase in average ticket
prices. The increase in attendance resulted from the popularity of films
licensed during fiscal 1996 and the net addition of 89 screens since fiscal 1995
at new and higher performing locations. Attendance during the prior fiscal year
was impacted by a dispute with a major distributor over film
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<PAGE>
licensing terms, which resulted in the Company's licensing that distributor's
films for a smaller number of its theatres than it otherwise would have. In
fiscal 1996, the Company licensed that distributor's films for what it considers
to be a more acceptable number of the Company's theatres. Concessions revenues
and average concessions revenues per patron increased 16.3% and 4.2%,
respectively, in fiscal 1996. The increase in concessions revenues was primarily
attributable to the increase in attendance.
COST OF OPERATIONS. Total cost of operations increased 13.9%, or
$60,652,000, in fiscal 1996 to $496,567,000 from $435,915,000 in fiscal 1995. As
a percentage of total revenues, cost of operations was 76% and 77% in fiscal
1996 and 1995, respectively. Film rentals expense increased 17.8% in fiscal 1996
due to higher attendance levels and a .7% increase in the percentage of
admissions paid to film distributors. Concessions merchandise, rent and other
costs of operations increased 11.1% from the prior year due to increases in
payroll, concessions merchandise, rent and other theatre operating expenses
associated with the increase in admissions and concessions revenues and from the
higher number of screens in operation.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
15.9%, or $5,968,000, to $43,537,000 in fiscal 1996 from $37,569,000 in fiscal
1995. This increase resulted primarily from the reduction, effective December
30, 1994, in the estimated lives of lease rights and location premiums on
certain smaller theatres to correspond to the base terms of the theatre leases,
an increase in employed theatre assets and the recognition of an impairment loss
of $1,799,000 in connection with the adoption of Statement of Financial
Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. See Note 1 of DI's "Notes to
Consolidated Financial Statements."
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 23.6%, or $9,404,000, to $49,274,000 in fiscal 1996 from $39,870,000
in fiscal 1995. The increase in general and administrative expenses is primarily
attributable to payroll and other costs associated with the Company's
development of theatres in the United States and certain international markets,
additional bonus expenses related to improved profitability of the Company and
severance payments for two former executive officers. As a percentage of total
revenues, general and administrative expenses increased to 7.5% in fiscal 1996
from 7.1% in fiscal 1995.
INTEREST EXPENSE. Interest expense decreased 19.0%, or $7,009,000, to
$29,805,000 in fiscal 1996 from $36,814,000 in fiscal 1995. The decrease in
interest expense resulted from higher amounts of capitalized interest from
increased construction activities and lower interest rates under AMCE's new
Credit Facility. See Note 6 of DI's "Notes to Consolidated Financial
Statements."
INVESTMENT INCOME. Investment income decreased 31.4%, or $3,406,000, to
$7,432,000 in fiscal 1996 from $10,838,000 in fiscal 1995 due primarily to a net
gain of $1,407,000 recorded in fiscal 1995 from the sales of stock of TPI
Enterprises, Inc. and AmeriHealth, Inc. and a decrease of $1,599,000 in interest
income in fiscal 1996.
EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND MINORITY
INTEREST. Earnings before income taxes, extraordinary item and minority
interest increased 82.2%, or $20,706,000, to $45,901,000 in fiscal 1996 from
$25,195,000 in fiscal 1995. The Company recorded a $19,350,000 extraordinary
loss, net of income tax benefit of $13,400,000, related to extinguishment of
debt in fiscal 1996. See Note 6 of DI's "Notes to Consolidated Financial
Statements."
NET EARNINGS. For the year (52 weeks) ended March 28, 1996, the Company
recorded net earnings of $23,000, a $23,773,000 decrease from net earnings of
$23,796,000 for the year (52 weeks) ended March 30, 1995. Net earnings per
common share was $.05 in fiscal 1996 compared to $147.85 in fiscal 1995. The
decrease in net earnings was impacted by an extraordinary loss of $19,350,000
incurred as a result of AMCE's repurchase of Senior and 12 5/8% Senior
Subordinated Notes in fiscal 1996. Also, in
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<PAGE>
fiscal 1996 the Company had a tax expense of $19,360,000, as opposed to a tax
benefit of $10,160,000 in fiscal 1995. The fiscal 1995 tax benefit resulted from
a $19,028,000 reduction in the deferred tax valuation allowance established
under Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME
TAXES. Earnings per share before extraordinary item was $98.78 in fiscal 1996
compared to $147.85 in fiscal 1995.
YEARS (52 WEEKS) ENDED MARCH 30, 1995, AND MARCH 31, 1994
REVENUES. Total revenues for the year (52 weeks) ended March 30, 1995
decreased 3.9%, or $22,791,000, to $564,667,000 compared to $587,458,000 for the
year (52 weeks) ended March 31, 1994. Admissions revenues decreased 4.7% due to
a 4.4% decrease in attendance and a .3% decrease in average ticket prices.
Attendance during fiscal 1995 was impacted by a dispute with a major distributor
over film licensing terms, which resulted in the Company licensing that
distributor's films for a smaller number of its theatres than it would have
otherwise. Concessions revenues decreased by 4.1% in fiscal 1995. The decrease
in concessions revenues was primarily attributable to the decrease in
attendance.
COST OF OPERATIONS. Total cost of operations decreased 3.0%, or
$13,262,000, in fiscal 1995 to $435,915,000 from $449,177,000 in fiscal 1994. As
a percentage of total revenues, cost of operations was 77% and 76% in fiscal
1995 and 1994, respectively. Film rentals expense decreased 7.5% in fiscal 1995
due to lower attendance levels and a 1.5% decrease in the percentage of
admissions paid to film distributors. Concession, rent and other costs of
operations increased .6% from the prior year.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization decreased .4%,
or $132,000, to $37,569,000 in fiscal 1995 from $37,701,000 in fiscal 1994.
Effective December 30, 1994, the Company reduced the estimated lives of lease
rights and location premiums on certain smaller theatres to correspond to the
base terms of the theatre leases. The effect of this change in accounting
estimate was to increase amortization expense in fiscal 1995 by $1,542,000.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased 1.1%, or $454,000, to $39,870,000 in fiscal 1995 from $40,324,000 in
fiscal 1994. The decrease was primarily the result of decreases in legal fees,
insurance premiums and bonuses under incentive programs offset by additional
professional and consulting and travel and entertainment expenses and the costs
related to the restructuring of division offices. As a percentage of total
revenues, general and administrative expenses increased to 7.1% in fiscal 1995
from 6.9% in fiscal 1994.
INTEREST EXPENSE. Interest expense decreased .8%, or $279,000, to
$36,814,000 in fiscal 1995 from $37,093,000 in fiscal 1994. The decrease in
interest expense resulted primarily from borrowings on the $40 million Credit
Facility during the first half of fiscal 1994. The Credit Facility was not
utilized in fiscal 1995.
INVESTMENT INCOME. Investment income increased $8,642,000 to $10,838,000 in
fiscal 1995 from $2,196,000 in fiscal 1994. This increase was the result of
additional interest income of $6,004,000 and an increase in other investment
income of $2,638,000 in fiscal 1995. The increase in interest income was due to
additional cash and investments as a result of the March 3, 1994, sale of
preferred stock. The increase in other investment income was primarily due to
the gains on sales of stock of TPI Enterprises, Inc. and AmeriHealth, Inc.
EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND MINORITY
INTEREST. Earnings before income taxes, extraordinary item and minority
interest decreased 1.8%, or $460,000, to $25,195,000 in fiscal 1995 from
$25,655,000 in fiscal 1994.
INCOME TAX PROVISION. The income tax provision in fiscal 1995 reflects a
benefit of $10,160,000 which is a decrease of $14,968,000 from the tax expense
of $4,808,000 in fiscal 1994. This decrease in income tax provision resulted
primarily from a $19,028,000 reduction in the deferred tax asset valuation
102
<PAGE>
allowance established under Statement of Financial Accounting Standards No. 109,
ACCOUNTING FOR INCOME TAXES. Based on the Company's positive earnings in recent
years and the expectation of continued earnings, management believes that the
uncertainties that led to the establishment of the valuation allowance have been
removed with respect to the realization of deferred tax assets. Accordingly, the
valuation allowance was eliminated.
NET EARNINGS. For the year (52 weeks) ended March 30, 1995, the Company
recorded net earnings of $23,796,000, a $3,722,000 increase from net earnings of
$20,074,000 for the year (52 weeks) ended March 31, 1994. Net earnings per
common share in fiscal 1995 were $147.85 compared to net earnings per common
share of $123.92 in fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
The forward-looking statements included in this section, which reflect
management's best judgment based on factors currently known, involve risks and
uncertainties. Actual results could differ materially from those anticipated in
the forward-looking statements included herein as a result of a number of
factors, including but not limited to the Company's ability to enter into
various financing programs, competition from other companies, changes in
economic climate, increase in demand for real estate, demographic changes,
changes in real estate, zoning and tax laws, the performance of films licensed
by the Company and other risks and uncertainties.
The Company's revenues are collected in cash, principally through box office
admissions and theatre concessions sales. The Company has an operating "float"
which partially finances its operations and which generally permits the Company
to maintain a smaller 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. The Company is only
occasionally required to make advance payments or non-refundable guarantees of
film rentals. Film distributors generally release films which they anticipate
will be the most successful during the summer and holiday seasons. Consequently,
the Company typically generates higher revenues during such periods. Cash flow
from operating activities, as reflected in the Consolidated Statements of Cash
Flows, was $79,604,000, $38,271,000 and $65,132,000 in fiscal years 1996, 1995
and 1994, respectively, and was $50,196,000 and $56,423,000 for the thirty-nine
weeks ended December 26, 1996 and December 28, 1995, respectively.
During the current fiscal year, the Company has continued its expansion
program by opening 14 leased theatres with 244 screens, two owned theatres with
46 screens and one theatre with 24 screens leased pursuant to a ground lease.
Included in these openings is the Company's first theatre in Japan, the Canal
City 13 in Fukuoka, which opened in April 1996, and the Company's first theatre
in Portugal, the Arrabida 20 in Porto, which opened in late December, 1996. In
addition, the Company closed 14 leased theatres with 72 screens and one owned
theatre with four screens, resulting in a circuit total of 1,957 screens in 228
theatres as of April 3, 1997. The Company has under construction 15 new leased
theatre locations totaling 362 screens, four new owned theatres with 104
screens, two theatres with 48 screens leased pursuant to a ground lease and
additions to four existing theatres for 46 new screens. All of these theatres
and screens will be located in the United States.
During fiscal 1996 and the thirty-nine weeks ended December 26, 1996, the
Company had capital expenditures of $120,796,000 and $163,645,000, respectively,
primarily for the development of new theatres and the addition of screens at
existing locations. The Company estimates that capital expenditures for the
fourth quarter of fiscal 1997 were approximately $77 million. The Company has
plans to open approximately 700 screens during fiscal 1998. If these planned
screens are opened as scheduled, the Company estimates that total capital
expenditures for fiscal 1998 will aggregate approximately $400 million. Included
in these amounts are assets which the Company anticipates placing into
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<PAGE>
sale/leaseback or other comparable financing programs which will have the effect
of reducing the Company's net cash outlays (see discussion below).
On December 28, 1995, AMCE completed the redemption of substantially all of
its Senior Notes and the 12 5/8% Senior Subordinated Notes and entered into the
Credit Facility. AMCE redeemed $99,383,000 of the Senior Notes at a total price
of $1,117.90 per $1,000 principal amount and $95,096,000 of its 12 5/8% Senior
Subordinated Notes at a total price of $1,144.95 per $1,000 principal amount.
AMCE utilized cash and investments along with borrowings of $130,000,000 under
the Credit Facility to redeem the Senior Notes and the 12 5/8% Senior
Subordinated Notes.
As a part of the refinancing plan, the Company entered into the Credit
Facility, which was amended and restated as of April 10, 1997. The Credit
Facility matures in 2004, permits borrowings at interest rates based on either
the bank's base rate or LIBOR and requires an annual commitment fee based on
margin ratios that could result in a rate of .1875% to .375% on the unused
portion of the commitment. As of April 3, 1997, the Company had outstanding
borrowings of $110,000,000 under the Credit Facility at an average interest rate
of 6.4% per annum.
Prior to its April 10, 1997 amendment and restatement, the Credit Facility
contained a covenant that generally limited the Company's capital expenditures.
This covenant has been eliminated.
Covenants of the Credit Facility impose limitations on the incurrence of
additional indebtedness, creation of liens, change of control, transactions with
affiliates, mergers, investments, guaranties, asset sales, business activities
and pledges. The Company is required to maintain (i) maximum net indebtedness to
consolidated EBITDA ratio, as defined in the terms of the Credit Facility
(generally, the ratio of the principal amount of outstanding indebtedness (less
cash and equivalents) to earnings before interest, taxes, depreciation,
amortization and other noncash charges) of 5.25 to 1 during the first four years
of the Credit Facility, a ratio of 4.75 to 1 during the fifth year , a ratio of
4.25 to 1 in the sixth year and a ratio of 4.0 to 1 thereafter, and (ii) a
minimum cash flow coverage ratio, as defined in the Credit Facility (generally,
the ratio of consolidated EBITDA for the most recent four quarters to the sum of
(A) consolidated interest expense for such period, (B) amounts paid as
dividends, for the optional repurchase or redemption of subordinated debt or
capital stock, or with respect to the principal amount of capitalized lease
obligations during such period, plus (C) the current portion of debt with an
original maturity in excess of one year), of 1.40 to 1. If the Company prepays,
defeases or repurchases more than $10 million of the Notes or any other
subordinated debt incurred after April 10, 1997, it is required to maintain a
maximum net senior indebtedness to EBITDA ratio, as defined in the Credit
Facility, of 4.5 to 1 during the first four years of the Credit Facility and 4.0
to 1 thereafter.
On March 19, 1997, the Company sold $200 million aggregate principal amount
of its Notes in the Note Offering. Net proceeds from the issuance of the Notes
(approximately $193.8 million) were used to reduce borrowings under the Credit
Facility. Amounts repaid under the Credit Facility will again be available for
borrowing thereunder, and the Company intends to utilize this increased
availability to continue with its current expansion program.
The Notes bear interest at the rate of 9 1/2% per annum, payable in March
and September. The Notes are redeemable at the option of the Company, in whole
or in part, at any time on or after March 15, 2002 at 104.75% of the principal
amount thereof, declining ratably to 100% of the principal amount thereof on or
after March 15, 2006, plus in each case interest accrued to the redemption date.
Upon a change of control (as defined in the Note Indenture), each holder of the
Notes will have the right to require the Company to repurchase such holder's
Notes at a price equal to 101% of the principal amount thereof plus accrued and
unpaid interest to the date of repurchase. The Notes are subordinated to all
existing and future senior indebtedness (as defined in the Note Indenture) of
the Company.
The Company has agreed to use its best efforts to (i) file and cause to
become effective by August 16, 1997, a registration statement relating to a
registered offer to exchange the Notes (the
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<PAGE>
"Exchange Offer") for notes of AMCE with terms identical in all material
respects to the Notes and (ii) cause the Exchange Offer to be consummated by
September 15, 1997. If the Exchange Offer registration statement is not declared
effective by August 16, 1997, the Company has agreed that in lieu thereof it
will use its best efforts to cause to become effective by September 15, 1997 a
shelf registration statement with respect to the Notes. In the event that either
(a) the Exchange Offer registration statement is not filed on or prior to June
17, 1997, (b) the Exchange Offer registration statement is not declared
effective on or prior to August 16, 1997 or (c) the Exchange Offer is not
consummated or a shelf registration statement, with respect to the Notes, is not
declared effective on or prior to September 15, 1997, the interest rate borne by
the Notes will increase by 0.50% per annum following June 17, 1997 in the case
of clause (a) above, following August 16, 1997 in the case of clause (b) above
and following September 15, 1997 in the case of clause (c) above. The aggregate
amount of such increase will in no event exceed 1.00% per annum. Upon (x) the
filing of the Exchange Offer registration statement after June 17, 1997, (y) the
effectiveness of the Exchange Offer registration statement after August 16, 1997
or (z) the consummation of the Exchange Offer or the effectiveness of a shelf
registration statement, as the case may be, after September 15, 1997, the
interest rate borne by the Notes from the date of filing, effectiveness or
consummation, as the case may be, will be reduced to 9 1/2%.
The Note Indenture contains certain covenants that, among other things,
restrict the ability of the Company and its subsidiaries to: incur additional
indebtedness; pay dividends or make distributions in respect of their capital
stock; purchase or redeem capital stock; enter into transactions with
stockholders or certain affiliates; or consolidate, merge or sell all or
substantially all of the Company's assets, other than in certain transactions
between the Company and one or more of its wholly-owned subsidiaries and other
than the Merger. All of these limitations are subject to a number of important
qualifications. The Note Indenture does not impose any limitation on the
incurrence by the Company and its subsidiaries of liabilities that are not
considered "Indebtedness" under the Note Indenture, such as those that would be
incurred under certain sale/leaseback transactions; nor does the Note Indenture
impose any limitation on the amount of liabilities incurred by subsidiaries, if
any, that might be designated as Unrestricted Subsidiaries (as defined therein).
Furthermore, there are no restrictions on the ability of the Company and its
subsidiaries to make advances to, or invest in, other entities (including
unaffiliated entities) and no restrictions on the ability of the Company's
subsidiaries to enter into agreements restricting their ability to pay dividends
or otherwise transfer funds to the Company. If the Notes attain "investment
grade status" (as defined in the Note Indenture), the covenants in the Note
Indenture limiting the Company's ability to incur indebtedness, pay dividends,
acquire stock or engage in transactions with affiliates will cease to apply.
The Company may pursue other financing programs in connection with its
expansion plan. The Company is currently negotiating the Sale/Leaseback
Transaction with respect to certain of its theatres, including theatres which
are scheduled to open in fiscal 1998, the net proceeds of which, if consummated,
are expected to be approximately $170 million. The theatres, if any, sold in the
proposed Sale/ Leaseback Transaction would be leased back by the Company
pursuant to an operating lease. The estimated net proceeds of approximately $170
million from the Sale/Leaseback Transaction, if consummated, would be applied to
reduce outstanding indebtedness under the Credit Facility. To the extent that
the net proceeds are so applied, the amount available for borrowing under the
Credit Facility would be increased and the Company would utilize any such
increased availability to continue its expansion program. If the Sale/Leaseback
Transaction occurs, the Company anticipates that the resulting increase in rent
would be partially offset by decreases in depreciation and amortization and
interest expense.
The Company believes that cash generated from operations, existing cash and
equivalents, amounts which the Company received from the Note Offering and that
it anticipates receiving for assets placed in the Sale/Leaseback Transaction and
other offerings and the unused commitment amount under its Credit Facility will
be sufficient to fund operations and planned capital expenditures through the
end of fiscal 1998.
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During the thirty-nine weeks ended December 26, 1996, various holders of
Convertible Preferred Stock converted 676,400 shares into 1,166,109 shares of
AMCE Common Stock at a conversion rate of 1.724 shares of AMCE Common Stock for
each share of Convertible Preferred Stock. Convertible Preferred Stock dividend
payments decreased 13.5%, or $711,000, to $4,539,000 for the thirty-nine weeks
ended December 26, 1996 from $5,250,000 for the same period in the previous year
as a result of the conversions. Future conversions will continue to reduce the
amount of dividends paid by the Company and increase the number of shares of
AMCE Common Stock outstanding.
On January 10, 1997, the Company purchased the 20% minority interest in the
common stock of AMC Philadelphia, Inc., an 80% owned subsidiary, for $7,400,000
in cash. The Company utilized borrowings on its Credit Facility to finance the
purchase. Management does not believe that the acquisition will have a
significant effect on the Company's results of operations.
OTHER
Congress recently passed legislation to increase the federal minimum hourly
wage paid to hourly wage employees over a two-year period. This recent
legislation will increase the aggregate average hourly wage paid by the Company.
The Company intends to relieve the cost pressure from the minimum wage increase
by pursuing better labor and operating efficiencies as well as some price
adjustments for theatres in certain markets. Such legislation is not expected to
have a material adverse effect on the Company's results of operations, liquidity
or financial position.
IMPACT OF INFLATION
Historically, the principal impact of inflation and changing prices upon the
Company has been to increase the costs of the construction of new theatres, the
purchase of theatre equipment and the utility and labor costs incurred in
connection with continuing theatre operations. Film rentals expense, the largest
cost of operations of the Company, is customarily paid as a percentage of
admissions revenues and hence, while the film rentals expense may increase on an
absolute basis, the percentage of admissions revenues represented by such
expense is not directly affected by inflation. Except as set forth above,
inflation and changing prices have not had a significant impact on the Company's
total revenues and results of operations.
RECENTLY ISSUED FINANCIAL ACCOUNTING PRONOUNCEMENTS
During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION.
The Statement allows companies to measure compensation cost in connection with
employee stock compensation plans using a fair value based method or to continue
to use an intrinsic value based method to account for stock options and awards.
The Company currently plans to continue using the intrinsic value based method.
BUSINESS OF DI
DI was formed in 1947 and originally was primarily engaged directly in the
ownership and operation of motion picture theatres. Following AMC's formation in
1968, DI and its subsidiaries developed real estate, leased theatre equipment
and other property to AMC, sold concession items to AMC and engaged in various
investment activities. During the past five years, DI has acted primarily as a
holding company for Mr. Stanley H. Durwood and the other Durwood Family
Stockholders for the stock of AMCE. DI's other assets as of December 26, 1996
consisted primarily of cash and equivalents, promissory notes from various
persons, life insurance policies on the life of Mr. Stanley H. Durwood and stock
of Delta and its subsidiaries.
The Merger Agreement provides that at the Effective Time DI will have no
right, title or interest in any property or assets other than stock of the
Company. Prior to the Effective Time of the Merger, all of DI's
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assets, other than stock of AMCE, will be contributed to Delta. DI's other
subsidiaries, other than AMCE and its subsidiaries, have been merged into Delta
and Delta has agreed to assume certain DI liabilities. Delta's shares will be
distributed to DI's shareholders prior to the Effective Time so that at the
Effective Time, DI's sole assets will consist of shares of stock of AMCE and its
beneficial interest in certain tax credits and operating loss carryforwards.
SECURITY OWNERSHIP OF DI
The following table sets forth certain information as of April 3, 1997 with
respect to beneficial ownership of DI's capital stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
TITLE OF CLASS NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------- -------------------------- ------------------- --------------------
<S> <C> <C> <C>
Class A............ Stanley H. Durwood 119,500(1) 99.6%
Class A............ Harvard College 500 .4%
Class B............ Edward D. Durwood 40,784(2) 100 %
</TABLE>
- --------------
(1) These shares are held in a revocable inter vivos trust and a revocable
voting trust established by Mr. Stanley H. Durwood for his benefit.
(2) These shares are held by AAE, a Missouri limited partnership of which Mr.
Stanley H. Durwood is the preferred limited partner and the Durwood Children
are the general partners. See "The Merger-- General Effects of the Merger."
Mr. Edward D. Durwood, as managing general partner, has voting authority
over these shares.
MARKET FOR AND DIVIDENDS ON DI STOCK
DI's stock has never traded. DI has not paid a dividend on its shares of
stock in the last five years.
COMPARISON OF RIGHTS OF HOLDERS
OF AMCE COMMON AND CLASS B STOCK AND DI STOCK
AMCE and DI are incorporated in the States of Delaware and Missouri,
respectively. The rights of the shareholders of DI are currently governed by
Missouri law (primarily GBCLM) and by DI's Articles of Incorporation, as amended
("DI's Articles of Incorporation"), and its Bylaws, as amended ("DI's Bylaws").
The shareholders of DI will, upon consummation of the Merger, become
stockholders of AMCE, and their rights will be governed by Delaware law
(primarily the DGCL) and by AMCE's Certificate of Incorporation and its Bylaws,
as amended ("AMCE's Bylaws"). A summary of certain material differences between
the rights of holders of AMCE Common Stock and AMCE Class B Stock and the rights
of holders of DI stock is set forth below.
AUTHORIZED AND ISSUED STOCK
As of April 3, 1997, DI had 200,000 shares of stock authorized, consisting
of 150,000 shares of DI Class A Stock, par value $100 per share, of which
120,000 shares were issued and outstanding, and 50,000 shares of DI Class B
Stock, par value $100 per share, of which 40,784 shares were issued and
outstanding.
As of April 3, 1997, AMCE had 85,000,000 shares of stock authorized,
consisting of 45,000,000 shares of AMCE Common Stock, of which 6,583,969 shares
were issued and outstanding; 30,000,000 shares of AMCE Class B Stock, of which
11,157,000 shares were issued and outstanding; and 10,000,000 shares of
Preferred Stock, of which 3,303,600 shares of Convertible Preferred Stock were
issued and outstanding.
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DIVIDEND AND LIQUIDATION RIGHTS
Under DI's Articles of Incorporation, holders of DI Class A Stock are
entitled to receive, when, as and if declared by the DI Board of Directors,
dividends not to exceed $25.50 per share annually, on a noncumulative basis,
before any dividends are declared and paid upon the DI Class B Stock. In
addition, after dividends equal to $25.50 per share annually have been declared
and paid on the DI Class B Stock, dividends not to exceed $19.50 per share
annually are to be paid to holders of DI Class A Stock on a noncumulative basis
before any additional dividends are paid on the DI Class B Stock. After annual
dividends in the aggregate amount of $45.00 per share are declared and paid upon
the DI Class A Stock, there is no limitation on the amount of additional
dividends that may be declared and paid on the DI Class B Stock for such year.
Upon the liquidation of DI, after the debts of DI have been paid, holders of
DI Class A Stock are entitled to receive $255 per share plus any declared and
unpaid dividends on such stock before any payment is made to the holders of the
DI Class B Stock. In addition, the holders of DI Class A Stock are entitled to
receive $195 per share after $255 per share plus any declared and unpaid
dividends thereon (not to exceed $25.50 per share annually) has been set aside
for payment to the holders of the DI Class B Stock. Thereafter, the holders of
DI Class B Stock are entitled to receive all the remaining assets of DI
available for distribution to shareholders.
The dividend and liquidation rights of holders of AMCE Common Stock and AMCE
Class B Stock are described under "Description of Capital Stock--AMCE Common and
Class B Stock--Dividend and Liquidation Rights."
REDEMPTION
DI's Articles of Incorporation provide that the DI Class A Stock is
redeemable at the option of DI at a redemption price of $255 per share, plus
$195 per share after assets have been set aside sufficient to redeem all shares
of DI Class B Stock at a price of $255 per share, together with any declared and
unpaid dividends thereon. Notwithstanding the above, the shares of DI Class A
Stock held by the initial individual holder thereof are not redeemable under any
circumstances. DI Class B Stock is not redeemable by DI.
AMCE Common Stock and AMCE Class B Stock are not redeemable by AMCE.
PREEMPTIVE RIGHTS
Holders of DI Class A Stock, DI Class B Stock, AMCE Common Stock and AMCE
Class B Stock have no preemptive rights.
VOTING RIGHTS
IN GENERAL. Holders of DI Class A Stock and DI Class B Stock are entitled
to one vote for each share held of record with respect to all matters submitted
to a vote of DI shareholders, except that, in the election of directors, the
shareholders are entitled to cumulative voting. (Because DI has only one
director, however, cumulative voting has no effect.) See "Description of Capital
Stock--AMCE Common Stock and Class B Stock--Voting Rights" for a description of
the general voting rights of AMCE Common Stock and AMCE Class B Stock. Neither
the holders of AMCE Common Stock nor the holders of AMCE Class B Stock have
cumulative voting rights in the election of directors.
REQUISITE VOTING PERCENTAGE IN GENERAL AND IN CERTAIN EXTRAORDINARY
MATTERS. Both the GBCLM and the DGCL generally provide that the affirmative
vote of a majority of the shares represented (either in person or by proxy) and
entitled to vote at a shareholders' meeting at which a quorum is present is
required for routine shareholder action other than the election of directors.
With respect to the election of directors, the GBCLM grants cumulative voting
rights in the election of directors unless the
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corporation's articles of incorporation or bylaws provide otherwise. (As stated
above, DI has only one director, so cumulative voting has no effect.) Under the
DGCL, unless a corporation's certificate of incorporation or bylaws provide
otherwise, directors are elected by a plurality of the votes of the
stockholders; if a separate vote by class is required, the affirmative vote of a
majority of a quorum of that class is required. For mergers, consolidations and
transactions involving the disposition of substantially all of a corporation's
assets, the GBCLM requires the affirmative vote of two-thirds of the outstanding
shares entitled to vote; the DGCL requires the affirmative vote of a majority of
outstanding shares entitled to vote for such extraordinary transactions. Under
the GBCLM and the DGCL, amendments to a corporation's articles or certificate of
incorporation require the affirmative vote of a majority of outstanding shares
entitled to vote, and the affirmative vote of a majority of the outstanding
shares of any class entitled to vote thereon as a class. Under the GBCLM, a
class is entitled to vote on various types of amendments, including those which
change the authorized number or par value of shares of the class, effect an
exchange or cancellation of shares of the class, change the designations,
preferences, limitations or relative rights of the shares of the class or create
a new class of shares having rights superior to those of the class. Under the
DGCL, a class is entitled to vote as a class on amendments which change the
authorized number or par value of shares of the class or alter or change the
powers, preferences or special rights of the shares of the class so as to affect
them adversely.
Both the GBCLM and the DGCL permit a corporation to require a greater
affirmative vote on any matters in its articles or certificate of incorporation
or its by-laws, but DI and AMCE do not require any such greater voting
requirement in their respective Articles or Certificate of Incorporation or
Bylaws, except that AMCE's Certificate of Designations respecting the
Convertible Preferred Stock requires the approval of the holders of two-thirds
of the outstanding shares of Convertible Preferred Stock for the authorization,
issuance or increase in the authorized amount of any additional class of
securities senior to the Convertible Preferred Stock as to dividend and
liquidation rights or for any amendment to AMCE's Certificate of Incorporation
if the amendment would change the authorized number, the par value or the rights
pertaining to the shares of Convertible Preferred Stock. See "Information about
the Company-- Description of Capital Stock--Convertible Preferred Stock--Voting
Rights."
TRANSACTIONS WITH INTERESTED SHAREHOLDERS. The GBCLM and the DGCL both
contain provisions that restrict a corporation from engaging in certain
"business combinations" with an "interested" shareholder. Such provisions,
however do not apply to certain types of corporations. Under the GBCLM, such
provisions do not apply to, among others, a corporation with less than 100
shareholders or, unless its articles of incorporation provide otherwise, a
corporation that does not have a class of voting stock registered with the
Commission. DI has less than 100 shareholders and, furthermore, DI does not have
a class of stock registered with the Commission, so the Missouri "business
combination" statutes do not apply to DI.
The business combination statutes of the DGCL would generally apply to AMCE,
and DI is an "interested stockholder" of AMCE; however, the DGCL "interested
stockholder" provisions do not apply to transactions occurring more than three
years after the date on which the interested stockholder became an interested
stockholder. DI has been an "interested stockholder" of AMCE for more than three
years, so the DGCL interested stockholder provisions would not apply to any
business combinations between AMCE and DI, including the Merger. The "interested
stockholder" provisions of the DGCL also do not apply to transactions between
AMCE and Mr. Stanley H. Durwood, because he has also been an "interested
stockholder" of AMCE for more than three years.
The "interested stockholder" provisions of the DGCL are summarized below.
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Under the DGCL, a corporation may not engage in any "business combination"
(defined below) with an "Interested Stockholder" (defined below) 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 either the business combination or the transaction
which resulted in the stockholder becoming an Interested Stockholder;
(ii) upon consummation of the transaction which resulted in the
stockholder becoming an Interested Stockholder, such stockholder owns at
least 85% of the voting stock of the corporation (excluding shares that are
(A) owned by persons who are directors and also officers or (B) part of
certain employee stock plans) 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 paragraphs, an "Interested Stockholder" is any
person (other than the corporation or its subsidiaries) that, with certain
exceptions, (i) is the owner of 15% or more of the outstanding voting stock of
the corporation, or (ii) 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.
As used in the preceding paragraphs, a "business combination" is:
(i) a merger or consolidation;
(ii) a sale, lease, exchange, mortgage, pledge, transfer or other
disposition of a corporation's assets having an aggregate market value equal
to either ten percent or more of the aggregate market value of all of the
corporation's assets, determined on a consolidated basis, or ten percent or
more of the aggregate market value of all of the corporation's outstanding
stock;
(iii) a transaction which results in the issuance or transfer of shares
of the corporation's stock, except pursuant to (a) the exercise of rights to
purchase stock offered, (b) a parent-subsidiary merger, (c) a dividend or
distribution paid or made pro rata to all stockholders of the corporation,
(d) an offer by the corporation to purchase stock, made on the same terms to
all stockholders, or (e) any issuance or transfer of stock by the
corporation;
(iv) a reclassification of securities, recapitalization or other
transaction which increases an Interested Stockholder's proportionate
interest; or
(v) receipt by an Interested Stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits from the
corporation.
SPECIAL MEETINGS OF SHAREHOLDERS
Both the GBCLM and the DGCL provide that special meetings of stockholders
may be called by a corporation's board of directors or by such persons as may be
authorized in the corporation's charter documents or by-laws. DI's Bylaws
provide that DI's President or the holders of not less than one-fifth of all the
outstanding shares entitled to vote at such meeting may call special meetings of
the DI shareholders. AMCE's Bylaws provide that AMCE's Chairman of the Board may
call special meetings of the AMCE stockholders.
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SHAREHOLDER ACTION BY WRITTEN CONSENT
The GBCLM permits the shareholders of DI to act without a meeting if a
consent in writing setting forth the action so taken is signed by all of the
shareholders entitled to vote with respect to the subject matter thereof. The
DGCL and AMCE's Bylaws permit the stockholders of AMCE to act without a meeting,
without prior notice and without a vote, if a consent in writing setting forth
the actions so taken is signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize such
actions at a meeting at which all shares entitled to vote with respect to the
subject matter thereof were present and voted.
THE BOARD OF DIRECTORS
NUMBER ON THE BOARD AND REMOVAL OF DIRECTORS. The Board of Directors of DI
consists of a single director. The GBCLM permits DI shareholders, by majority
vote, to remove a director or the entire DI Board of Directors with or without
cause.
The number of directors constituting the AMCE Board presently is seven,
except during a "default period," as defined in the Certificate of Designations
respecting the Convertible Preferred Stock, when the number would be increased
by two and the two additional directors would be elected by the holders of
Convertible Preferred Stock. Under AMCE's Certificate of Incorporation, any
director may be removed either with 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, except that if the director
was elected by the holders of AMCE Class B Stock and if there are no shares of
AMCE Class B Stock outstanding, then the affirmative vote of the holders of a
majority of all outstanding shares of AMCE Common Stock are required for
removal.
FILLING VACANCIES ON THE BOARD OF DIRECTORS. Both the GBCLM and the DGCL
permit the board of directors of a corporation, by majority vote, to fill
vacancies on the board and newly-created directorships resulting from an
increase in board size without a vote of stockholders, until the next election
of directors by the stockholders. The GBCLM permits such action unless
prohibited by the corporation's articles of incorporation or by-laws. DI's
Bylaws expressly provide such authorization with respect to vacancies created by
death, resignation or otherwise; however, because DI has a single director,
action by the shareholders of DI would be necessary to fill a vacancy on the DI
Board. The DGCL permits the board to fill such vacancies and newly-created
directorships unless the corporation's certificate of incorporation or by-laws
provide otherwise. AMCE's Certificate of Incorporation provides that if a
director ceases to be a director by reason of death, resignation or disability,
the vacancy shall be filled by a majority of the remaining directors elected by
the holders of the same class of stock which elected the former director or, if
applicable, by the sole remaining director so elected, except that if the
director was elected by the holders of AMCE Class B Stock and there are no
shares of Class B Stock outstanding, the vacancy shall be filled by the
affirmative vote of the holders of a majority of all outstanding shares of AMCE
Common Stock. In addition, under the DGCL, if, at the time of filling any
vacancy or newly-created directorship, the directors then in office constitute
less than a majority of the entire board (as constituted immediately prior to
any such increase), the Delaware Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten (10) percent of the shares
entitled to vote for directors, summarily order an election to be held to fill
any such vacancies or newly-created directorships or to replace the directors
chosen by the directors then in office. Unless the exception under Delaware law
is applicable, a director elected by other directors in each case holds office
until the next election of the class for which such director was chosen.
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
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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. AMCE's Certificate of Incorporation includes provisions
which eliminate the personal liability of directors to AMCE or its stockholders
for monetary damages for breach of fiduciary duty to the fullest extent
permitted by the DGCL, as it may be amended from time to time. These provisions
of AMCE's Certificate of Incorporation, however, would not, as stated above,
affect directors' liabilities based on violations of federal laws and would
otherwise only affect claims for monetary damages, so that equitable remedies,
such as injunctions or rescission, would still be available for breaches of
fiduciary duty. In addition, these provisions apply only to claims against a
director arising out of his or her role as a director; if the director is also
an officer, they do not affect his or her liability as an officer. Neither the
GBCLM nor DI's Articles of Incorporation or Bylaws contain similar provisions
that would expressly permit DI to eliminate or limit the personal liability of
its directors to the corporation and its shareholders for monetary damages for
such director's breach of his or her fiduciary duty.
INDEMNIFICATION. Both the GBCLM and the DGCL provide that indemnification
of a person who (i) is a party, or is threatened to be made a party, to legal
proceedings by reason of the fact that such person is or was a director, officer
or agent of a corporation or (ii) is or was serving as a director, officer,
employee or agent of a 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 in the proceeding giving rise to the claim for indemnification) and
permissive in others. Under the GBCLM and the DGCL, permissive indemnification
is subject to authorization (i) by the board of directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceedings, or (ii) if such a quorum is not obtainable or, even if obtainable,
if a quorum of disinterested directors so directs, by independent legal counsel
in a written opinion, or (iii) by the stockholders. The standard of conduct
required of a person seeking indemnification from a corporation is generally the
same under Missouri and Delaware law and 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 interest 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, both the GBCLM and the DGCL provide 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 determines 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.
DI's Bylaws contain provisions requiring indemnification of each director
and officer and each person who, at the request of DI, served as a director or
officer of a corporation in which DI owned stock against liabilities and
expenses (including certain amounts paid in compromise settlements) incurred in
connection with any action or claim in which such person is made a party by
reason of being or having been such director or officer, except for matters in
which such person is finally adjudged to have been liable for negligence or
misconduct in the performance of his or her duties as a director or as an
officer. AMCE's Certificate of Incorporation contains provisions requiring
indemnification, to the fullest extent permitted by the DGCL, of each director
and officer and each person who serves, at the request of AMCE, as the director
or officer of another corporation or as AMCE's representative in a partnership
or other entity. AMCE's Certificate of Incorporation also provides for mandatory
advance payment of indemnifiable expenses by AMCE in certain circumstances.
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BYLAWS
Under the GBCLM, the bylaws of a corporation may be made, altered, amended,
suspended or repealed by the shareholders, unless and to the extent that such
power is vested in the board of directors by the articles of incorporation. DI's
Articles of Incorporation provide that DI's Bylaws may be amended either by the
shareholders or by the Board of Directors, unless the shareholders, at the time
they enact any bylaw, expressly provide otherwise with respect to such bylaw.
Under the DGCL, the authority to amend or repeal bylaws is placed exclusively in
the stockholders of a corporation, unless the corporation's certificate of
incorporation confers the authority on the directors as well. AMCE's Certificate
of Incorporation expressly authorizes the AMCE Board to make, amend or repeal
AMCE's Bylaws.
DISSENTERS' RIGHTS
The GBCLM and the DGCL both set forth procedures under which shareholders
may dissent from, and receive payment in the amount of the fair value of their
shares in connection with, most mergers, consolidations and exchanges or sales
of all or substantially all of a corporation's assets. The GBCLM also permits
shareholders to dissent from control shares acquisitions that are approved by
shareholders of a corporation. The rights of DI shareholders to dissent from the
Merger under the GBCLM are summarized above under "The Merger--Dissenters'
Rights." The DGCL provides, however, that no such dissenters' rights are
available with respect to a merger or consolidation if the shares entitled to
receive notice of and to vote on the merger or consolidation are either listed
on a national securities exchange or held of record by more than 2,000
stockholders ("Public Shares") or if the corporation is the surviving
corporation and no vote of its stockholders is required for such transaction,
unless the holders thereof are required by the terms of an agreement of merger
or consolidation to accept for their shares anything other than (i) shares of
the surviving or resulting corporation, (ii) public shares of any corporation,
(iii) cash in lieu of fractional shares of such corporations, or (iv) any
combination of the consideration described in clauses (i), (ii) and (iii). Under
the DGCL, holders of AMCE Common Stock have no dissenters' rights with respect
to the Merger.
The foregoing does not purport to be a complete description of the
differences between the statutory and other rights of shareholders of DI and
stockholders of AMCE. Such differences can be determined in full by reference to
the GBCLM, the DGCL, the common law of each of Missouri and Delaware, DI's
Articles of Incorporation and Bylaws and AMCE's Certificate of Incorporation and
Bylaws.
DI SPECIAL MEETING
This Proxy--Information Statement/Prospectus is also furnished to
shareholders of DI in connection with the DI Special Meeting to be held on
, 1997 at , at . As of the DI Record Date, there were
120,000 shares of DI Class A Stock outstanding and 40,784 shares of DI Class B
Stock outstanding and entitled to vote at the DI Special Meeting. Each share of
DI Class A Stock and DI Class B Stock is entitled to one vote on any matter
presented at the DI Special Meeting.
The DI Special Meeting is being called to vote upon the Merger Agreement in
order to effect the Merger as described in this Proxy--Information
Statement/Prospectus. The presence in person or by proxy of holders of DI Class
A Stock and DI Class B Stock owning 50% of shares of DI Class A and DI Class B
Stock entitled to notice of and to vote at the DI Special Meeting is necessary
to constitute a quorum. The Merger may be approved only on the affirmative vote
of the holders of two-thirds of all the outstanding shares of DI Class A Stock
and DI Class B Stock entitled to vote, voting as a class, and by the affirmative
vote of the holders of a majority of the shares of DI Class A Stock and DI Class
B Stock, each voting separately as a class.
This Proxy--Information Statement/Prospectus is being made available to
shareholders of DI on or about , 1997.
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STOCKHOLDER PROPOSALS
AMCE stockholders who wish to present proposals for action at the AMCE
Annual Meeting of Stockholders to be held in 1997 should submit their proposals
to AMCE at its address set forth on the first page of this Proxy--Information
Statement/Prospectus. Proposals must be received by AMCE no later than ,
1997, for consideration for inclusion in the next year's Proxy Statement and
proxy.
LEGAL MATTERS
Certain legal matters in connection with the legality of the shares of AMCE
Common Stock and Class B Stock offered hereby have been passed upon by Richards,
Layton & Finger, P.A., Wilmington, Delaware, who have acted as special counsel
to AMCE in connection with such matters. The firm is also counsel to the
defendants in the Derivative Action.
Chadbourne & Parke LLP has served as special tax counsel for the Company in
connection with the Merger.
EXPERTS
The consolidated financial statements of the Company as of March 28, 1996
and March 30, 1995 and for the three years ended March 28, 1996 appearing in
this Proxy--Information Statement/Prospectus have been audited by Coopers &
Lybrand L.L.P., 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 of DI as of March 28, 1996 and March
30, 1995 and for the three years ended March 28, 1996 appearing in this
Proxy--Information Statement/Prospectus have been audited by Coopers & Lybrand
L.L.P., 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.
A representative of Coopers & Lybrand L.L.P. will be at the AMCE Special
Meeting to answer questions by stockholders and will have the opportunity to
make a statement if so desired.
INCORPORATION BY REFERENCE
The following documents filed by AMCE with the Commission (File No.
01-12429) are incorporated in this Proxy--Information Statement/Prospectus by
reference and hereby made a part hereof:
1. AMCE's Annual Report on Form 10-K for the fiscal year ended March 28,
1996; and
2. All other reports filed pursuant to Section 13(a) of the Exchange Act
since March 28, 1996.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Proxy--Information
Statement/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 Proxy-- Information Statement/Prospectus.
AMCE will provide without charge to each person to whom a copy of its
Proxy--Information Statement/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: Ms. Nancy L. Gallagher, Vice
President and Secretary, 106 West 14th Street, Kansas City, Missouri 64105
(telephone: (816) 221-4000).
114
<PAGE>
AVAILABLE INFORMATION
AMCE has filed with the Commission a registration statement on Form S-4
(together with all amendments, exhibits, schedules and supplements thereto, the
"Registration Statement") under the Securities Act with respect to the shares
offered hereby. This Proxy--Information Statement/Prospectus, which forms a part
of the Registration Statement, does not contain all the information set forth in
the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement. Statements
contained in this Proxy--Information Statement/Prospectus as to the contents of
certain documents are not necessarily complete and, in each instance where
reference is made to a document filed as an exhibit to the Registration
Statement, each such statement is qualified by such reference. The Registration
Statement (and the exhibits thereto) can be inspected and copied at prescribed
rates at the public reference facilities maintained by the Commission at its
principal office at Judiciary Plaza, 450 Fifth Street, N.W. Room 1024,
Washington, D.C. 20549, or at its regional offices at Citicorp Center, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661, and at Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can also
be obtained from the Commission at prescribed rates through its Public Reference
Section at Judiciary Plaza, 450 Fifth Street, N.W. Washington, D.C. 20549.
AMCE is subject to the informational requirements of the Exchange Act, and,
in accordance therewith, files reports and other information with the
Commission. Such reports and other information can be inspected and copied at
prescribed rates at the public reference facilities mentioned above. The
Commission also maintains an Internet site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission.
AMCE Common Stock and Convertible Preferred Stock are listed on the AMEX and
AMCE Common Stock is listed also on the Pacific Stock Exchange. AMCE's periodic
reports and proxy statements filed under the Exchange Act as well as other
information concerning AMCE can be requested at the American Stock Exchange, 86
Trinity Place, New York, New York 10086 and at the Pacific Stock Exchange, 301
Pine Street, Suite 1104, San Francisco, California 94104.
DI is not subject to the informational requirements of the Exchange Act.
115
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
AMC ENTERTAINMENT INC.
PRO FORMA FINANCIAL STATEMENTS:
Condensed Pro Forma Financial Statements................................................................... F-3
Condensed Pro Forma Consolidated Statement of Operations for the thirty-nine weeks ended December 26,
1996..................................................................................................... F-4
Condensed Pro Forma Consolidated Statement of Operations for the year (52 weeks) ended March 28, 1996...... F-5
Condensed Pro Forma Consolidated Balance Sheet as of December 26, 1996..................................... F-6
Notes to Condensed Pro Forma Financial Statements.......................................................... F-7
UNAUDITED FINANCIAL STATEMENTS:
Consolidated Statements of Operations for the thirty-nine weeks ended December 26, 1996 and December 28,
1995..................................................................................................... F-10
Consolidated Balance Sheets as of December 26, 1996 and March 28, 1996..................................... F-11
Consolidated Statements of Cash Flows for the thirty-nine weeks ended December 26, 1996 and December 28,
1995..................................................................................................... F-12
Notes to Consolidated Financial Statements................................................................. F-13
AUDITED FINANCIAL STATEMENTS:
Report of Independent Accountants.......................................................................... F-16
Consolidated Statements of Operations for the years (52 weeks) ended March 28, 1996, March 30, 1995 and
March 31, 1994........................................................................................... F-17
Consolidated Balance Sheets as of March 28, 1996 and March 30, 1995........................................ F-18
Consolidated Statements of Cash Flows for the years (52 weeks) ended March 28, 1996, March 30, 1995 and
March 31, 1994........................................................................................... F-19
Consolidated Statements of Stockholders' Equity for the years (52 weeks) ended March 28, 1996, March 30,
1995 and March 31, 1994.................................................................................. F-21
Notes to Consolidated Financial Statements................................................................. F-22
DURWOOD, INC.
PRO FORMA FINANCIAL STATEMENTS:
Condensed Pro Forma Financial Statements................................................................... F-39
Condensed Pro Forma Consolidated Statement of Operations for the thirty-nine weeks ended December 26,
1996..................................................................................................... F-40
Condensed Pro Forma Consolidated Statement of Operations for the year (52 weeks) ended March 28, 1996...... F-41
Condensed Pro Forma Consolidated Balance Sheet as of December 26, 1996..................................... F-42
Notes to Condensed Pro Forma Financial Statements.......................................................... F-43
UNAUDITED FINANCIAL STATEMENTS:
Consolidated Statements of Operations for the thirty-nine weeks ended December 26, 1996 and December 28,
1995..................................................................................................... F-46
Consolidated Balance Sheets as of December 26, 1996 and March 28, 1996..................................... F-47
Consolidated Statements of Cash Flows for the thirty-nine weeks ended December 26, 1996 and December 28,
1995..................................................................................................... F-48
</TABLE>
F-1
<PAGE>
<TABLE>
<S> <C>
Notes to Consolidated Financial Statements................................................................. F-50
AUDITED FINANCIAL STATEMENTS
Report of Independent Accountants.......................................................................... F-52
Consolidated Statements of Operations for the years (52 weeks) ended March 28, 1996, March 30, 1995 and
March 31, 1994........................................................................................... F-53
Consolidated Balance Sheets as of March 28, 1995 and March 30, 1995........................................ F-54
Consolidated Statements of Cash Flows for the years (52 weeks) ended March 28, 1996, March 30, 1995 and
March 31, 1994........................................................................................... F-55
Consolidated Statements of Stockholders' Equity for the years (52 weeks) ended March 28, 1996, March 30,
1995 and March 31, 1994.................................................................................. F-57
Notes to Consolidated Financial Statements................................................................. F-58
</TABLE>
F-2
<PAGE>
AMC ENTERTAINMENT INC.
CONDENSED PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited Condensed Pro Forma Statements of Operations and
Balance Sheet have been prepared giving effect to the Merger and Note Offering.
The Condensed Pro Forma Statements of Operations for the thirty-nine weeks ended
December 26, 1996 and the year (52 weeks) ended March 28, 1996 assume that the
Merger and Note Offering occurred on March 31, 1995. The Condensed Pro Forma
Balance Sheet assumes that the Merger and Note Offering occurred on December 26,
1996.
The unaudited Condensed Pro Forma Financial Statements do not purport to
represent the Company's financial position or results of operations had the
above transactions in fact occurred on such dates. In addition, the unaudited
Condensed Pro Forma Financial Statements are not intended to be indicative of
the Company's future financial position or results of operations.
The unaudited Condensed Pro Forma Financial Statements should be read in
conjunction with the historical financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.
F-3
<PAGE>
AMC ENTERTAINMENT INC.
CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
THIRTY-NINE WEEKS ENDED DECEMBER 26, 1996
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA AMCE
PRO FORMA PRO FORMA PRO FORMA FOR MERGER AND
AMCE ADJUSTMENTS AMCE FOR ADJUSTMENTS FOR NOTE OFFERING
ACTUAL(1) FOR MERGER(2) MERGER NOTE OFFERING COMBINED
----------- ------------- ----------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
Revenues............................. $ 527,555 $ -- $ 527,555 $ -- $ 527,555
Cost of operations................... 417,527 -- 417,527 -- 417,527
Depreciation and amortization........ 37,543 -- 37,543 -- 37,543
General and administrative
expenses............................ 39,933 -- 39,933 -- 39,933
----------- ------------- ----------- ------- -----------------
Operating income................... 32,552 -- 32,552 -- 32,552
Interest expense..................... 15,036 -- 15,036 7,430 (4) 22,466
Other income, net.................... 580 -- 580 -- 580
----------- ------------- ----------- ------- -----------------
Earnings before income taxes......... 18,096 -- 18,096 (7,430) 10,666
Income tax provision................. 7,285 -- 7,285 (2,601 (5) 4,684
----------- ------------- ----------- ------- -----------------
Earnings before extraordinary item... $ 10,811 $ -- $ 10,811 $ (4,829 ) $ 5,982
----------- ------------- ----------- ------- -----------------
----------- ------------- ----------- ------- -----------------
Preferred dividends.................. 4,454 4,454 4,454
----------- ----------- -----------------
Net earnings for common shares before
extraordinary item.................. $ 6,357 $ 6,357 $ 1,528
----------- ----------- -----------------
----------- ----------- -----------------
Earnings per share before
extraordinary item:
Primary............................ $ .36 $ .36 $ .09
----------- ----------- -----------------
----------- ----------- -----------------
Fully diluted...................... $ .36 $ .36 $ .09
----------- ----------- -----------------
----------- ----------- -----------------
Weighted average number of shares
outstanding:
Primary............................ 17,659 17,659 17,659
----------- ----------- -----------------
----------- ----------- -----------------
Fully diluted...................... 17,861 17,861 17,861
----------- ----------- -----------------
----------- ----------- -----------------
</TABLE>
See Notes to Condensed Pro Forma Financial Statements.
F-4
<PAGE>
AMC ENTERTAINMENT INC.
CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR (52 WEEKS) ENDED MARCH 28, 1996
(IN THOUSANDS EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA AMCE
PRO FORMA PRO FORMA PRO FORMA FOR MERGER AND
AMCE ADJUSTMENTS AMCE FOR ADJUSTMENTS FOR NOTE OFFERING
ACTUAL(1) FOR MERGER(2) MERGER NOTE OFFERING COMBINED
----------- -------------- ----------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
Revenues............................ $ 657,872 $ -- $ 657,872 $ -- $ 657,872
Cost of operations.................. 496,567 -- 496,567 -- 496,567
Depreciation and amortization....... 43,886 -- 43,886 -- 43,886
General and administrative
expenses........................... 48,750 -- 48,750 -- 48,750
----------- -------------- ----------- -------- -----------------
Operating income.................. 68,669 -- 68,669 -- 68,669
Interest expense.................... 28,828 -- 28,828 17,821 (4) 46,649
Other income, net................... 6,830 -- 6,830 -- 6,830
----------- -------------- ----------- -------- -----------------
Earnings before income taxes and
extraordinary item................. 46,671 -- 46,671 (17,821) 28,850
Income tax provision................ 19,300 -- 19,300 (6,237 (5) 13,063
----------- -------------- ----------- -------- -----------------
Earnings before extraordinary
item............................... $ 27,371 $ -- $ 27,371 $ (11,584 ) $ 15,787
----------- -------------- ----------- -------- -----------------
----------- -------------- ----------- -------- -----------------
Preferred dividends................. 7,000 7,000 7,000
----------- ----------- -----------------
Net earnings for common shares
before extraordinary item.......... $ 20,371 $ 20,371 $ 8,787
----------- ----------- -----------------
----------- ----------- -----------------
Earnings per share before
extraordinary item:
Primary........................... $ 1.21 $ 1.21 $ .53
----------- ----------- -----------------
----------- ----------- -----------------
Fully diluted..................... $ 1.20 $ 1.20 $ .53
----------- ----------- -----------------
----------- ----------- -----------------
Weighted average number of shares
outstanding:
Primary........................... 16,795 16,795 16,513
----------- ----------- -----------------
----------- ----------- -----------------
Fully diluted..................... 17,031 17,031 16,513
----------- ----------- -----------------
----------- ----------- -----------------
</TABLE>
See Notes to Condensed Pro Forma Financial Statements.
F-5
<PAGE>
AMC ENTERTAINMENT INC.
CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 26, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA AMCE
PRO FORMA PRO FORMA PRO FORMA FOR MERGER AND
AMCE ADJUSTMENTS FOR AMCE FOR ADJUSTMENTS FOR NOTE OFFERING
ACTUAL(1) MERGER(2) MERGER NOTE OFFERING COMBINED
----------- ---------------- ----------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets.................. $ 62,158 $ -- $ 62,158 $ -- $ 62,158
Property, net................... 487,326 -- 487,326 -- 487,326
Intangible assets, net.......... 32,250 -- 32,250 -- 32,250
Other long-term assets.......... 58,006 -- 58,006 5,150(6) 63,156
----------- ------- ----------- ---------------- -----------------
Total assets.................. $ 639,740 $ -- $ 639,740 $ 5,150 $ 644,890
----------- ------- ----------- ---------------- -----------------
----------- ------- ----------- ---------------- -----------------
Liabilities and Stockholders'
Equity
Current liabilities............. $ 107,165 $ 1,000(3) $ 108,165 $ -- $ 108,165
Corporate borrowings:
Credit Facility............... 265,000 -- 265,000 (193,788 (7) 71,212
9 1/2% Senior Subordinated
Notes due 2009.............. -- -- -- 198,938(8) 198,938
Capital lease obligations and
other long-term debt........ 62,284 -- 62,284 -- 62,284
Other long-term liabilities..... 40,579 -- 40,579 -- 40,579
----------- ------- ----------- ---------------- -----------------
475,028 1,000 476,028 5,150 481,178
Stockholders' equity............ 164,712 (1,000 (3) 163,712 -- 163,712
----------- ------- ----------- ---------------- -----------------
$ 639,740 $ -- $ 639,740 $ 5,150 $ 644,890
----------- ------- ----------- ---------------- -----------------
----------- ------- ----------- ---------------- -----------------
</TABLE>
See Notes to Condensed Pro Forma Financial Statements.
F-6
<PAGE>
AMC ENTERTAINMENT INC.
NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
(1) The amounts presented hereunder were taken from the Company's December 26,
1996 and March 28, 1996 Consolidated Financial Statements.
(2) Prior to the Merger, all assets of DI, other than DI's equity interest in
the Company, will be transferred to DI's subsidiary, Delta Properties, Inc.
("Delta"), which will agree to assume DI's liabilities. Delta's stock then
will be distributed to the DI shareholders. See "Durwood, Inc. Condensed Pro
Forma Financial Statements." As a result, management expects that the Merger
will be accounted for as a corporate reorganization and that, accordingly,
the recorded balances for consolidated assets, liabilities, total
stockholders' equity and results of operations of the Company would not be
affected.
(3) Represents expenses associated with the Merger. These nonrecurring charges
have not been reflected in the Condensed Pro Forma Statements of Operations.
(4) Represents the addition to interest expense for the issuance of the Notes,
including accretion of debt discount and amortization of debt issuance
costs, and the reduction of interest expense associated with the reduction
of outstanding indebtedness under the Credit Facility from the net proceeds
from the Note Offering. If the Note Offering had occurred on March 31, 1995,
the excess net proceeds would have been available for investment. Interest
income from this use of proceeds would have been approximately $968,000 for
the thirty-nine weeks ended December 26, 1996 (assuming a rate of 4.7%) and
$8,928,000 for the year (52 weeks) ended March 28, 1996 (assuming a rate of
5.4%).
(5) Represents the adjustment to income taxes at the statutory rate of 35% for
fiscal 1997 and fiscal 1996.
(6) Represents deferred debt issuance costs associated with the Note Offering.
(7) Represents the reduction of outstanding indebtedness under the Company's
Credit Facility from the net proceeds from the Note Offering.
(8) Represents the issuance of the Notes, net of debt discount of approximately
$1.1 million.
F-7
<PAGE>
(This page has been left blank intentionally.)
F-8
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THIRTY-NINE WEEKS ENDED
DECEMBER 26, 1996 AND DECEMBER 28, 1995
F-9
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
--------------------------
<S> <C> <C>
DECEMBER 26, DECEMBER 28,
1996 1995
------------ ------------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
Revenues
Admissions.............................................. $ 344,699 $ 324,737
Concessions............................................. 159,355 148,323
Other................................................... 23,501 19,801
------------ ------------
Total revenues........................................ 527,555 492,861
Expenses
Film rentals............................................ 177,340 166,054
Concession merchandise.................................. 26,275 22,891
Other................................................... 213,912 182,475
------------ ------------
Total cost of operations.............................. 417,527 371,420
Depreciation and amortization............................. 37,543 30,842
General and administrative expenses....................... 39,933 38,086
------------ ------------
Total expenses........................................ 495,003 440,348
------------ ------------
Operating income...................................... 32,552 52,513
Other expense (income)
Interest expense
Corporate borrowings.................................. 7,657 16,404
Capitalized leases.................................... 7,379 8,106
Investment income....................................... (664 ) (6,624 )
Loss (gain) on disposition of assets.................... 84 (21 )
------------ ------------
Earnings before income taxes and extraordinary item....... 18,096 34,648
Income tax provision...................................... 7,285 14,300
------------ ------------
Earnings before extraordinary item........................ 10,811 20,348
Extraordinary item--Loss on early extinguishment of debt
(net of income tax benefit of $13,400).................. -- (19,350 )
------------ ------------
Net earnings (loss)....................................... $ 10,811 $ 998
------------ ------------
------------ ------------
Preferred dividends....................................... 4,454 5,250
------------ ------------
Net earnings (loss) for common shares..................... $ 6,357 $ (4,252 )
------------ ------------
------------ ------------
Earnings (loss) per share before extraordinary item:
Primary................................................. $ .36 $ .90
------------ ------------
------------ ------------
Fully diluted........................................... $ .36 $ .89
------------ ------------
------------ ------------
Earnings (loss) per share:
Primary................................................. $ .36 $ (.25 )
------------ ------------
------------ ------------
Fully diluted........................................... $ .36 $ (.25 )
------------ ------------
------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-10
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER MARCH 28,
26, 1996 1996
----------- ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents.............................................. $ 18,436 $ 10,795
Receivables, net of allowance for doubtful accounts of $806 as of
December 26, 1996, and $801 as of March 28, 1996................ 27,967 20,503
Other current assets.............................................. 15,755 15,179
----------- ---------
Total current assets............................................ 62,158 46,477
Property, net....................................................... 487,326 355,485
Intangible assets, net.............................................. 32,250 36,483
Other long-term assets.............................................. 58,006 45,013
----------- ---------
Total assets.................................................... $ 639,740 $ 483,458
----------- ---------
----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 57,433 $ 59,353
Accrued expenses and other liabilities............................ 46,315 43,319
Current maturities of corporate borrowings and capital lease
obligations..................................................... 3,417 2,904
----------- ---------
Total current liabilities....................................... 107,165 105,576
Corporate borrowing................................................. 271,112 126,127
Capital lease obligations........................................... 56,172 59,141
Other long-term liabilities......................................... 40,579 33,696
----------- ---------
Total liabilities............................................... 475,028 324,540
Stockholders' equity:
Cumulative Convertible Preferred Stock; 3,323,600 shares issued
and outstanding as of December 26, 1996 and 4,000,000 shares
issued and outstanding as of March 28, 1996 (aggregate
liquidation preference of $83,090 as of December 26, 1996, and
$100,000 as of March 28, 1996).................................. 2,216 2,667
Common Stock; 6,569,989 shares issued as of December 26, 1996, and
5,388,880 shares issued as of March 28, 1996.................... 4,380 3,593
Convertible Class B Stock; 11,157,000 shares issued and
outstanding..................................................... 7,438 7,438
Additional paid-in-capital........................................ 107,791 107,986
Foreign currency translation adjustment........................... (619) --
Retained earnings................................................. 43,875 37,603
----------- ---------
165,081 159,287
Less--Common Stock in treasury, at cost, 20,500 shares as of
December 26, 1996 and March 28, 1996............................ 369 369
----------- ---------
Total stockholders' equity...................................... 164,712 158,918
----------- ---------
Total liabilities and stockholders' equity...................... $ 639,740 $ 483,458
----------- ---------
----------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
F-11
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
--------------------------
<S> <C> <C>
DECEMBER 26, DECEMBER 28,
1996 1995
------------ ------------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings............................................ $ 10,811 $ 998
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization......................... 37,543 30,842
Loss (gain) on sale of other long-term assets......... 84 (21 )
Extraordinary item.................................... -- 19,350
Change in assets and liabilities:
Receivables......................................... (7,464 ) (10,144 )
Other current assets................................ (576 ) 3,737
Accounts payable.................................... 7,012 9,400
Accrued expenses and other liabilities.............. 8,891 4,517
Other, net............................................ 274 2,887
------------ ------------
Total adjustments..................................... 45,764 60,568
------------ ------------
Net cash provided by operating activities............... 56,575 61,566
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................... (163,645 ) (72,496 )
Purchase of real estate held for sale................... (7,692 ) --
Purchases of available for sale investments............. -- (424,134 )
Proceeds from maturities of available for sale
investments........................................... -- 493,278
Proceeds from disposition of other long-term assets..... 1,129 949
Other, net.............................................. (8,678 ) (6,790 )
------------ ------------
Net cash used in investing activities................... (178,886 ) (9,193 )
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of Senior and Senior Subordinated Notes...... -- (220,734 )
Net borrowings under revolving credit facility.......... 145,000 130,000
Principal payments under capital lease obligations and
other................................................. (2,119 ) (2,243 )
Cash overdrafts......................................... (8,133 ) --
Proceeds from exercise of stock options................. 141 878
Dividends paid on preferred stock....................... (4,539 ) (5,250 )
Deferred financing costs and other...................... -- (3,570 )
------------ ------------
Net cash provided by (used in) financing activities..... 130,350 (100,919 )
------------ ------------
Effect of exchange rate changes on cash and
equivalents........................................... (398 ) --
------------ ------------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS........... 7,641 (48,546 )
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD............... 10,795 71,233
------------ ------------
CASH AND EQUIVALENTS AT END OF PERIOD..................... $ 18,436 $ 22,687
------------ ------------
------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amounts capitalized of $1,955 and
$2,260)................................................. $ 16,134 $ 29,291
Income taxes paid......................................... 5,327 9,295
</TABLE>
See Notes to Consolidated Financial Statements.
F-12
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 26, 1996
(UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
AMC Entertainment Inc. ("AMCE") is a holding company which, through its
direct and indirect subsidiaries, including American Multi-Cinema, Inc. ("AMC")
and its subsidiaries (collectively with AMCE, unless the context otherwise
requires, the "Company"), is principally involved in the operation of motion
picture theatres throughout the United States and in Japan and Portugal. The
Company is also involved in the business of providing on-screen advertising and
other services to AMC and other theatre circuits through a wholly-owned
subsidiary, National Cinema Network, Inc. ("NCN").
The accompanying unaudited consolidated financial statements should be read
in conjunction with the Company's annual audited consolidated financial
statements for the year (52 weeks) ended March 28, 1996 included elsewhere
herein. In the opinion of management, these interim financial statements reflect
all adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of the Company's financial position and results of operations.
Due to the seasonal nature of the Company's business, results for the
thirty-nine weeks ended December 26, 1996, are not necessarily indicative of the
results to be expected for the fiscal year (53 weeks) ending April 3, 1997.
The year-end consolidated balance sheet data was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles.
Certain amounts have been reclassified from prior period consolidated
financial statements to conform with the current year presentation.
NOTE 2--EARNINGS PER SHARE
Primary earnings per share is computed by dividing net earnings less
preferred dividends by the sum of the weighted average number of common shares
outstanding and outstanding stock options, when their effect is dilutive. The
average shares used in the computations were 17,659,000 and 16,795,000 for the
thirty-nine weeks ended December 26, 1996 and December 28, 1995, respectively.
On a fully diluted basis, net earnings and shares outstanding are adjusted to
assume conversion of the Cumulative Convertible Preferred Stock, if dilutive.
The average shares used in the computations were 17,861,000 and 16,922,000 for
the thirty-nine weeks ended December 26, 1996 and December 28, 1995,
respectively.
NOTE 3--MERGER WITH PARENT
In May 1996, the Company announced that it was negotiating with its majority
stockholder, Durwood, Inc. ("DI"), to merge DI into the Company with the Company
remaining as the surviving entity. As currently proposed, stockholders of DI
would exchange their shares of DI stock for shares of the Company's stock.
Although the outstanding shares of the Company's Common Stock will increase and
the outstanding shares of its Class B Stock will decrease if the merger is
effected, no aggregate increase in total outstanding shares is expected because
the shares of the Company owned by DI will be canceled and the shares of the
Company held by other stockholders would not be exchanged in the merger. The
Company has appointed a special committee of non-management directors to
consider and negotiate the Merger. A condition to the transaction will be that
it is approved by the holders of a majority of the shares of Common Stock, other
than DI, members of the Durwood family and officers and directors of the
Company.
F-13
<PAGE>
(This page has been left blank intentionally.)
F-14
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT ACCOUNTANTS
YEARS (52 WEEKS) ENDED
MARCH 28, 1996, MARCH 30, 1995 AND MARCH 31, 1994
F-15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF AMC ENTERTAINMENT INC.
KANSAS CITY, MISSOURI
We have audited the accompanying consolidated balance sheets of AMC
Entertainment Inc. and subsidiaries as of March 28, 1996, and March 30, 1995,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years (52 weeks) in the period ended March 28,
1996. 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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of AMC
Entertainment Inc. and subsidiaries as of March 28, 1996, and March 30, 1995,
and the consolidated results of their operations and their cash flows for each
of the three years (52 weeks) in the period ended March 28, 1996, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
May 17, 1996
F-16
<PAGE>
AMC ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995 AND MARCH 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
Admissions............................................ $ 431,361 $ 371,145 $ 389,454
Concessions........................................... 196,645 169,120 176,274
Other................................................. 29,866 24,399 21,725
----------- ----------- -----------
Total revenues.................................... 657,872 564,664 587,453
Expenses
Film rentals.......................................... 215,099 182,669 197,461
Concession merchandise................................ 32,641 26,453 26,349
Other................................................. 248,827 226,793 225,367
----------- ----------- -----------
Total cost of operations.......................... 496,567 435,915 449,177
Depreciation and amortization......................... 43,886 37,913 38,048
General and administrative expenses................... 48,750 39,807 39,492
----------- ----------- -----------
Total expenses.................................... 589,203 513,635 526,717
----------- ----------- -----------
Operating income.................................. 68,669 51,029 60,736
Other expense (income)
Interest expense
Corporate borrowings................................ 18,099 24,502 25,699
Capitalized leases.................................. 10,729 11,406 10,676
Investment income..................................... (7,052) (10,013) (1,156)
Minority interest..................................... -- -- (1,599)
(Gain) loss on disposition of assets.................. 222 156 (296)
----------- ----------- -----------
Earnings before income taxes and extraordinary item..... 46,671 24,978 27,412
Income tax provision.................................... 19,300 (9,000) 12,100
----------- ----------- -----------
Earnings before extraordinary item...................... 27,371 33,978 15,312
Extraordinary item--Loss on extinguishment of debt (net
of income tax benefit of $13,400)..................... (19,350) -- --
----------- ----------- -----------
Net earnings............................................ $ 8,021 $ 33,978 $ 15,312
----------- ----------- -----------
----------- ----------- -----------
Preferred dividends..................................... 7,000 7,000 538
----------- ----------- -----------
Net earnings for common shares.......................... $ 1,021 $ 26,978 $ 14,774
----------- ----------- -----------
----------- ----------- -----------
Earnings per share before extraordinary item:
Primary............................................... $ 1.21 $ 1.63 $ .89
----------- ----------- -----------
----------- ----------- -----------
Fully diluted......................................... $ 1.20 $ 1.45 $ .89
----------- ----------- -----------
----------- ----------- -----------
Earnings per share:
Primary............................................... $ 0.06 $ 1.63 $ .89
----------- ----------- -----------
----------- ----------- -----------
Fully diluted......................................... $ 0.06 $ 1.45 $ .89
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-17
<PAGE>
AMC ENTERTAINMENT INC.
CONSOLIDATED BALANCE SHEETS
MARCH 28, 1996 AND MARCH 30, 1995
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents.............................................. $ 10,795 $ 71,233
Investments....................................................... -- 69,144
Receivables, net of allowance for doubtful accounts of $801 as of
March 28, 1996, and $1,529 as of March 30, 1995................. 20,503 8,572
Other current assets.............................................. 15,179 12,069
----------- -----------
Total current assets.......................................... 46,477 161,018
Property, net....................................................... 355,485 279,904
Intangible assets, net.............................................. 36,483 42,926
Other long-term assets.............................................. 45,013 38,306
----------- -----------
Total assets.................................................. $ 483,458 $ 522,154
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 59,353 $ 29,047
Accrued expenses and other liabilities............................ 43,319 33,794
Current maturities of corporate borrowings and capital lease
obligations..................................................... 2,904 2,516
----------- -----------
Total current liabilities..................................... 105,576 65,357
Corporate borrowings................................................ 126,127 200,183
Capital lease obligations........................................... 59,141 64,805
Other long-term liabilities......................................... 33,696 34,421
----------- -----------
Total liabilities............................................. 324,540 364,766
Commitments and contingencies
Stockholders' equity
Cumulative Convertible Preferred Stock; 4,000,000 shares issued
and outstanding (aggregate liquidation preference of
$100,000)....................................................... 2,667 2,667
Common Stock; 5,388,880 and 5,306,380 shares issued as of March
28, 1996, and March 30, 1995, respectively...................... 3,593 3,538
Convertible Class B Stock; 11,157,000 shares issued and
outstanding..................................................... 7,438 7,438
Additional paid-in capital........................................ 107,986 107,163
Retained earnings................................................. 37,603 36,582
----------- -----------
159,287 157,388
Less--Common Stock in treasury, at cost, 20,500 shares as of March
28, 1996........................................................ 369 --
----------- -----------
Total stockholders' equity.................................... 158,918 157,388
----------- -----------
Total liabilities and stockholders' equity.................... $ 483,458 $ 522,154
----------- -----------
----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-18
<PAGE>
AMC ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995 AND MARCH 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.......................................... $ 8,021 $ 33,978 $ 15,312
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization--property............. 34,508 29,647 29,074
--other long-term
assets............................................ 9,378 8,266 7,075
Deferred income taxes............................... (1,328) (21,285) (4,023)
Gain on sale of available for sale investments...... -- (1,407) --
Extraordinary item.................................. 19,350 -- --
Minority interest................................... -- -- 1,599
Gain (loss) on sale of long-term assets............. 222 156 (296)
Change in assets and liabilities, net of effects
from acquisition:
Receivables....................................... (11,931) 625 (2,843)
Other current assets.............................. 10,167 (578) 412
Accounts payable.................................. 7,458 341 5,187
Accrued expenses and other liabilities............ 7,640 (5,763) 11,892
Other, net.......................................... 2,968 204 291
----------- ----------- -----------
Total adjustments............................... 78,432 10,206 48,368
----------- ----------- -----------
Net cash provided by operating activities............. 86,453 44,184 63,680
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................. (120,796) (56,403) (10,651)
Purchases of available for sale investments........... (424,134) (314,368) --
Proceeds from maturities of available for sale
investments......................................... 493,278 364,374 --
Proceeds from sales of available for sale
investments......................................... -- 11,689 --
Net purchase of short-term investments................ -- -- (93,041)
Purchase of partnership interest, net of cash
acquired............................................ -- -- (8,486)
Proceeds from disposition of long-term assets......... 2,243 70 1,270
Other, net............................................ (7,045) (1,516) (597)
----------- ----------- -----------
Net cash provided by (used in) investing activities... (56,454) 3,846 (111,505)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit facility........ 120,000 -- --
Principal payments under capital lease obligations.... (2,455) (2,088) (1,700)
Repayment of acquired subsidiary indebtedness......... -- -- (37,000)
Repurchase of Senior and Senior Subordinated Notes.... (220,734) -- --
Cash overdrafts....................................... 22,848 -- --
Other repayments...................................... (404) (34) (1,720)
Proceeds from exercise of stock options............... 878 239 1,321
Proceeds from issuance of preferred stock............. -- -- 95,600
Dividends paid on preferred stock..................... (7,000) (7,233) --
Deferred financing costs and other.................... (3,570) -- (354)
----------- ----------- -----------
Net cash provided by (used in) financing activities... (90,437) (9,116) 56,147
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS......... (60,438) 38,914 8,322
CASH AND EQUIVALENTS AT BEGINNING OF YEAR............... 71,233 32,319 23,997
----------- ----------- -----------
CASH AND EQUIVALENTS AT END OF YEAR..................... $ 10,795 $ 71,233 $ 32,319
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-19
<PAGE>
AMC ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995 AND MARCH 31, 1994
(IN THOUSANDS)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During 1995 and 1994, capital lease obligations of $1,363 and $5,219,
respectively were incurred in connection with property acquired.
On May 28, 1993, a subsidiary of American Multi-Cinema, Inc. ("AMC"),
acquired a fifty percent partnership interest in Exhibition Enterprises
Partnership ("EEP") from TPI Entertainment, Inc. Together with the fifty percent
partnership interest already owned by AMC, EEP became a wholly-owned subsidiary.
Cash and equivalents held by EEP as of May 28, 1993, totaled $9,014. Liabilities
assumed from the May 28, 1993, transaction follow:
<TABLE>
<CAPTION>
1994
-----------
<S> <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>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash paid during the period for:
Interest (net of amounts capitalized of $3,003, $870
and $49)............................................ $ 34,775 $ 35,878 $ 35,742
Income taxes, net..................................... 9,787 14,822 13,659
</TABLE>
See Notes to Consolidated Financial Statements.
F-20
<PAGE>
AMC ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK CLASS B STOCK ADDITIONAL RETAINED
----------------------- ----------------------- ------------------------ PAID-IN EARNINGS
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT)
---------- ----------- ---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, April 2, 1993... -- -- 4,539,380 $ 3,026 11,730,000 $ 7,820 $ 12,800 $ (5,475)
Net earnings........... -- -- -- -- -- -- -- 15,312
Exercise of options on
Common Stock......... -- -- 154,450 103 -- -- 1,218 --
Net proceeds from sale
of Preferred Stock... 4,000,000 2,667 -- -- -- -- 92,933 --
Conversion of Class B
Stock................ -- -- 573,000 382 (573,000) (382) -- --
---------- ----------- ---------- ----------- ----------- ----------- ----------- -----------
Balance, March 31, 1994.. 4,000,000 2,667 5,266,830 3,511 11,157,000 7,438 106,951 9,837
Net earnings........... -- -- -- -- -- -- -- 33,978
Exercise of options on
Common Stock......... -- -- 39,550 27 -- -- 212 --
Dividends declared:
$1.75 Preferred
Stock.............. -- -- -- -- -- -- -- (7,233)
---------- ----------- ---------- ----------- ----------- ----------- ----------- -----------
Balance, March 30, 1995.. 4,000,000 2,667 5,306,380 3,538 11,157,000 7,438 107,163 36,582
Net earnings........... -- -- -- -- -- -- -- 8,021
Exercise of options on
Common Stock......... -- -- 82,500 55 -- -- 823 --
Dividends declared:
$1.75 Preferred
Stock.............. -- -- -- -- -- -- -- (7,000)
Acquisition of Common
Stock in Treasury.... -- -- -- -- -- -- -- --
---------- ----------- ---------- ----------- ----------- ----------- ----------- -----------
BALANCE, MARCH 28,
1996................... 4,000,000 $ 2,667 5,388,880 $ 3,593 11,157,000 $ 7,438 $ 107,986 $ 37,603
---------- ----------- ---------- ----------- ----------- ----------- ----------- -----------
---------- ----------- ---------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
COMMON STOCK
IN TREASURY TOTAL
---------------------- STOCKHOLDERS'
SHARES AMOUNT EQUITY
--------- ----------- --------------
<S> <C> <C> <C>
Balance, April 2, 1993... -- $ -- $ 18,171
Net earnings........... -- -- 15,312
Exercise of options on
Common Stock......... -- -- 1,321
Net proceeds from sale
of Preferred Stock... -- -- 95,600
Conversion of Class B
Stock................ -- -- --
--------- ----------- --------------
Balance, March 31, 1994.. -- -- 130,404
Net earnings........... -- -- 33,978
Exercise of options on
Common Stock......... -- -- 239
Dividends declared:
$1.75 Preferred
Stock.............. -- -- (7,233)
--------- ----------- --------------
Balance, March 30, 1995.. -- -- 157,388
Net earnings........... -- -- 8,021
Exercise of options on
Common Stock......... -- -- 878
Dividends declared:
$1.75 Preferred
Stock.............. -- -- (7,000)
Acquisition of Common
Stock in Treasury.... (20,500) (369) (369)
--------- ----------- --------------
BALANCE, MARCH 28,
1996................... (20,500) $ (369) $ 158,918
--------- ----------- --------------
--------- ----------- --------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-21
<PAGE>
AMC ENTERTAINMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
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 of motion
picture theatres throughout the United States.
Approximately 84% of AMCE's outstanding voting securities are owned by
Durwood, Inc. ("DI"). See Note 13 for further description of AMCE's related
party transactions.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Although these estimates are based on
management's knowledge of current events and actions it may undertake in the
future, they may ultimately differ from actual results.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of AMCE and all subsidiaries. Minority interest in AMC
Philadelphia, Inc., an 80% owned subsidiary, with a book value of $5,000,000 and
$3,583,000, as of March 28, 1996, and March 30, 1995, respectively, is recorded
as a liability. 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 1996, 1995 and 1994 fiscal years
each reflect a 52-week period. Fiscal year 1997 will reflect a 53-week period.
REVENUES AND FILM RENTAL COSTS: Revenues are recognized when admissions and
concessions sales are received at the theatres. Film rental costs are recognized
based on the applicable box office receipts and the terms of the film licenses.
CASH AND EQUIVALENTS: Cash and equivalents consists of cash on hand and
temporary cash investments with original maturities of less than thirty days.
The Company invests excess cash in deposits with major banks and in temporary
cash investments. 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. Under the
Company's cash management system, checks issued but not presented to banks
frequently result in overdraft balances for accounting purposes and are
classified within accounts payable in the balance sheet. The amount of these
checks included in accounts payable as of March 28, 1996 was $22,848,000.
INVESTMENTS: Effective April 1, 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 115 ("SFAS 115"), ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. Upon adoption, the Company
classified its debt and equity securities as available for sale which did not
have a material impact to the consolidated financial statements. In accordance
with SFAS 115, prior years' financial statements have not been restated to
reflect the change in accounting method.
As of March 30, 1995, investments in available for sale debt securities are
carried at amortized cost which approximates market value due to the short-term
nature of the securities.
For purposes of determining gross realized gains and losses, the cost of
securities sold is determined upon specific identification.
F-22
<PAGE>
AMC ENTERTAINMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 1--THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REFUNDABLE CONSTRUCTION ADVANCES: Included in receivables as of March 28,
1996, and March 30, 1995, is $12,117,000 and $1,723,000, respectively, 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 construction or shortly after
completion.
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.
INTANGIBLE ASSETS: Intangible assets are recorded at cost and are comprised
of lease rights, which are amounts assigned to theatre leases assumed under
favorable terms, and location premiums on acquired theatres which are being
amortized on a straight-line basis over the estimated remaining useful life of
the theatre.
Effective December 30, 1994, the Company reduced the estimated lives of
lease rights and location premiums on certain smaller theatres to correspond to
the base terms of the theatre leases. This change in accounting estimate was
made to better match the estimated life of the intangible assets with the life
of the theatre due to the Company's strategic plans to primarily own and operate
larger theatres. The effect of this change in estimate was to increase
amortization expense in 1995 by $1,542,000 and decrease net earnings by
$876,000, or $.05 per share. Accumulated amortization on intangible assets as of
March 28, 1996, and March 30, 1995, was $36,035,000 and $29,960,000,
respectively.
OTHER LONG-TERM ASSETS: Other long-term assets are comprised principally of
costs incurred in connection with the issuance of debt securities which are
being amortized over the respective life of the issue; investments in real
estate; investments in partnerships and corporate joint ventures accounted for
under the equity method; and long-term deferred income taxes.
INCOME TAXES: Income taxes are calculated in accordance with Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), ACCOUNTING FOR INCOME
TAXES. The statement requires that deferred income taxes 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.
The Company, pursuant to a tax sharing agreement, joined with DI in filing a
consolidated federal income tax return through March 3, 1994. Upon issuance of
the Cumulative Convertible Preferred Stock, DI no longer owns the requisite 80%
of the Company. The Company has filed a separate consolidated federal income tax
return after that date. The provisions of the tax sharing agreement will remain
effective
F-23
<PAGE>
AMC ENTERTAINMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 1--THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
for any changes to taxable income for years covered under such agreement. Prior
to March 3, 1994, the Company's provision for income tax expense was computed as
if it filed a separate consolidated return.
EARNINGS PER SHARE: Primary earnings per share is computed by dividing net
earnings for common shares by the sum of the weighted average number of common
shares outstanding and outstanding stock options, when their effect is dilutive.
The average shares used in the computations were 16,795,000 in 1996, 16,593,000
in 1995 and 16,521,000 in 1994. On a fully diluted basis, both net earnings and
shares outstanding are adjusted to assume the conversion of Cumulative
Convertible Preferred Stock, if dilutive. The average shares used in the
computations were 17,031,000 in 1996, 23,509,000 in 1995 and 16,550,000 in 1994.
CHANGES IN ACCOUNTING PRINCIPLES: During the fourth quarter of 1996, the
Company adopted Statement of Financial Accounting Standards No. 121, ACCOUNTING
FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
OF. This Statement establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles and goodwill related to
those assets to be held and used. In connection with the adoption of this
Statement, the Company reviewed the assets and related intangibles of its motion
picture theatres for impairment on a disaggregated basis. The expected future
cash flows of certain theatres, undiscounted and without interest charges, were
less than the carrying value of the assets. As a result, the Company recognized
an impairment loss of $1,799,000. The impairment loss represents the amount by
which the carrying value of the theatre assets, including intangibles, exceeded
the estimated fair value of those assets. The estimated fair value of assets was
determined as the present value of estimated expected future cash flows. The
loss is included in depreciation and amortization in the Consolidated Statements
of Operations.
PRESENTATION: Certain amounts have been reclassified from prior period
consolidated financial statements to conform with the current year presentation.
NOTE 2--ACQUISITION
Prior to May 28, 1993, Exhibition Enterprises Partnership ("EEP" or the
"Partnership") was a partnership jointly owned by a subsidiary of AMC and TPI
Entertainment, Inc. ("TPIE"), a wholly-owned subsidiary of TPI Enterprises, Inc.
("TPI"). On April 19, 1991, the Partnership acquired the ownership interest in
57 movie theatres (56 theatres previously purchased by TPIE from AMC in 1989 and
1990 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 50% ownership of EEP on the equity method.
On May 28, 1993, a subsidiary of AMC acquired a fifty percent partnership
interest in EEP from TPI for $17,500,000 in cash. The acquisition also required
the repayment of $37,000,000 in EEP bank indebtedness. The acquisition was
accounted for under the purchase method of accounting and EEP was consolidated,
for financial reporting purposes, as a wholly-owned subsidiary. Pro forma
financial information of the Company for 1994 has been omitted as the effect is
immaterial.
F-24
<PAGE>
AMC ENTERTAINMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 3--INVESTMENTS
Investments as of March 30, 1995 consist of U.S. Treasury obligations with
contractual maturities within one year. The carrying value of these investments
approximates fair value, and therefore, there are no unrealized gains or losses.
Proceeds and gross realized gains from the sales in 1995 of equity
securities classified as other long-term assets as of March 30, 1995, were
$11,689,000 and $1,407,000, respectively.
NOTE 4--PROPERTY
A summary of property is as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Property owned:
Land................................................ $ 35,610 $ 30,112
Buildings and improvements.......................... 146,061 105,370
Furniture, fixtures and equipment................... 205,761 173,328
Leasehold improvements.............................. 146,152 122,276
--------- ---------
533,584 431,086
Less--accumulated depreciation and amortization..... 213,654 192,204
--------- ---------
319,930 238,882
Property leased under capitalized leases:
Buildings........................................... 67,274 69,723
Less--accumulated amortization...................... 31,719 28,701
--------- ---------
35,555 41,022
--------- ---------
Net Property.......................................... $ 355,485 $ 279,904
--------- ---------
--------- ---------
</TABLE>
Included in property is $35,289,000 and $26,104,000 of construction in
progress as of March 28, 1996, and March 30, 1995, respectively.
F-25
<PAGE>
AMC ENTERTAINMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 5--OTHER ASSETS AND LIABILITIES
Other assets and liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Other current assets:
Prepaid rent.......................................... $ 6,412 $ 5,974
Prepaid income taxes.................................. 3,074 515
Deferred income taxes................................. 3,207 3,330
Other................................................. 2,486 2,250
--------- ---------
$ 15,179 $ 12,069
--------- ---------
--------- ---------
Other long-term assets:
Investments in real estate............................ $ 6,922 $ 4,277
Investments in partnerships and corporate joint
ventures............................................ 1,121 1,327
Deferred charges, net................................. 6,203 6,991
Deferred income taxes................................. 24,506 23,055
Other................................................. 6,261 2,656
--------- ---------
$ 45,013 $ 38,306
--------- ---------
--------- ---------
Accrued expenses and other liabilities:
Taxes other than income............................... $ 7,110 $ 5,860
Interest.............................................. 841 3,893
Payroll and vacation.................................. 6,149 5,794
Casualty claims and premiums.......................... 2,034 2,268
Deferred income....................................... 11,634 10,070
Accrued bonus......................................... 7,634 3,293
Other................................................. 2,917 2,616
--------- ---------
$ 38,319 $ 33,794
--------- ---------
--------- ---------
</TABLE>
NOTE 6--BORROWINGS AND CAPITAL LEASE OBLIGATIONS
DEBT SECURITIES: On December 28, 1995, the Company completed the redemption
of $99,383,000 of its outstanding 11 7/8% Senior Notes Due 2000 at a price of
$1,117.90 per $1,000 principal amount and $95,096,000 of its outstanding 12 5/8
% Senior Subordinated Notes Due 2002 at a price of $1,144.95 per $1,000
principal amount. In addition, the terms of the Indentures governing the
remaining Senior and Senior Subordinated Notes were amended to eliminate certain
restrictive covenants. Sources of funds for the redemption were cash and
investments on hand and borrowings on the Company's new revolving credit
facility. Premiums paid to redeem the Senior and Senior Subordinated Notes,
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
$19,350,000, net of income tax benefit of $13,400,000. The extraordinary loss
reduced earnings per share by $1.15 for the year (52 weeks) ended March 28,
1996.
The discounts on the remaining Senior and Senior Subordinated Notes are
being amortized to interest expense following the interest method of
amortization. Costs related to the issuance of the debt
F-26
<PAGE>
AMC ENTERTAINMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 6--BORROWINGS AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
securities were capitalized and are charged to expense, following the interest
method, over the lives of the respective securities. Unamortized issuance costs
of $175,000 and $6,201,000 as of March 28, 1996, and March 30, 1995,
respectively, are included in other long-term assets.
LINE OF CREDIT: In connection with the redemption of Senior Notes and
Senior Subordinated Notes, the Company entered into a new loan agreement to
provide a revolving credit facility of up to $425 million (the "Credit
Facility"). The Credit Facility will mature on December 26, 2002. The commitment
thereunder will reduce by $25 million on each of September 30, 2001, December
31, 2001, March 31, 2002 and June 30, 2002, and by $50 million on September 30,
2002. Under the Credit Facility, the Company has the option to borrow at rates
based on either the bank's base rate or LIBOR and is required to pay an annual
commitment fee based on margin ratios, as defined in the loan agreement, that
could result in a rate of .25% or .375% on the unused amount of the commitment.
The Credit Facility includes several financial covenants. The Company is
required to maintain a maximum net indebtedness to consolidated earnings before
interest, taxes, depreciation and amortization ("EBITDA") ratio, as defined in
the loan agreement, of 4.50 to 1 during the first four years of the Credit
Facility and a ratio, as defined in the loan agreement, of 4.0 to 1 thereafter,
and a minimum cash flow coverage ratio of 1.40 to 1. In addition, the Credit
Facility (i) generally limits the Company's capital expenditures and investments
to $150 million, subject to certain adjustments, per year, (ii) generally limits
investments in entities which are unrestricted subsidiaries, are not guarantors
of the Credit Facility, or are not wholly-owned subsidiaries of the Company, to
$100 million in the aggregate, plus the greater of 25% of free cash flow or 50%
of consolidated net income (minus 100% of consolidated net income if negative),
as defined in the Credit Facility, and (iii) imposes limitations on the
incurrence of additional indebtedness, creation of liens, a change of control,
transactions with affiliates, mergers, investments, guaranties and asset sales.
As of March 28, 1996, the Company was in compliance with all financial covenants
relating to the Credit Facility.
Costs related to the establishment of the Credit Facility were capitalized
and are charged to interest expense over the life of the Credit Facility.
Unamortized issuance costs of $3,208,000 as of March 28, 1996 are included in
other long-term assets.
F-27
<PAGE>
AMC ENTERTAINMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 6--BORROWINGS AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
SUMMARY OF BORROWINGS: The Company is obligated under notes, capital leases
and other indebtedness as follows (in thousands):
<TABLE>
<CAPTION>
TOTALS
RATES OF MATURITY DUE IN --------------------
INTEREST DATES FISCAL 1997 1996 1995
------------- --------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
SENIOR DEBT
Credit Facility............. 5.8% December, 2002 $ -- $ 120,000 $ --
Senior notes................ 11.875% August, 2000 -- 614 99,510
Capital lease obligations... 7.25% to 20% Serially to 2,881 62,022 67,282
2025
Other indebtedness.......... Various Various 23 658 1,306
------------- --------- ---------
Total senior debt..... 2,904 183,294 168,098
SUBORDINATED DEBT
Senior subordinated notes... 12.625% August, 2002 -- 4,878 99,406
------------- --------- ---------
Total borrowings...... $ 2,904 $ 188,172 $ 267,504
------------- --------- ---------
------------- --------- ---------
</TABLE>
Minimum annual payments required under existing capital lease obligations,
net present value thereof, and maturities of total indebtedness as of March 28,
1996, are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL LEASE OBLIGATIONS
-------------------------------------
<S> <C> <C> <C> <C> <C>
MINIMUM NET
LEASE LESS PRESENT OTHER
PAYMENTS INTEREST VALUE INDEBTEDNESS TOTAL
----------- ----------- ----------- ------------- ---------
1997............................... $ 12,910 $ 10,029 $ 2,881 $ 23 $ 2,904
1998............................... 13,022 9,461 3,561 26 3,587
1999............................... 13,027 8,766 4,261 30 4,291
2000............................... 12,392 8,040 4,352 34 4,386
2001............................... 11,939 7,293 4,646 655 5,301
Thereafter......................... 81,271 38,950 42,321 125,382 167,703
----------- ----------- ----------- ------------- ---------
Total........................ $ 144,561 $ 82,539 $ 62,022 $ 126,150 $ 188,172
----------- ----------- ----------- ------------- ---------
----------- ----------- ----------- ------------- ---------
</TABLE>
LETTER OF CREDIT: The Company maintains a letter of credit in the normal
course of its business. The unused portion of the letter of credit was
$2,000,000 as of March 28, 1996.
NOTE 7--STOCKHOLDERS' EQUITY
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. Common stockholders voting as a class are presently entitled to elect
two of the five members of AMCE's Board of Directors with Class B stockholders
electing the remainder.
F-28
<PAGE>
AMC ENTERTAINMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 7--STOCKHOLDERS' EQUITY (CONTINUED)
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.
CUMULATIVE CONVERTIBLE PREFERRED STOCK: The Company has authorized
10,000,000 shares of Cumulative Convertible Preferred Stock (66 2/3 CENTS par
value) (the "Convertible Preferred"). Dividends are payable quarterly at an
annual rate of $1.75 per share. The Convertible Preferred has preference in
liquidation in the amount of $25 per share plus accrued and unpaid dividends.
The Convertible Preferred is convertible at the option of the holder into shares
of Common Stock at a conversion price of $14.50 per share of Common Stock,
subject to change in certain events. In lieu of conversion the Company may, at
its option, pay to the holder cash equal to the then market value of the Common
Stock. After March 15, 1997, the Company may redeem in whole or in part the
Convertible Preferred at a redemption price beginning at $26.00 per share,
declining ratably to $25.00 per share after March 15, 2001.
STOCK OPTION AND INCENTIVE PLANS
1983 PLAN: In June 1983, AMCE adopted a stock option plan (the "1983 Plan")
for selected employees. This plan provided 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 could be sold under the plan could not
exceed 750,000 shares. The 1983 Plan provided that the exercise price could not
be less than the fair market value of the stock at the date of grant and
unexercised options expired no later than ten years after date of grant.
Pursuant to the terms of the 1983 Plan, no further options may be granted under
this plan.
1984 PLAN: In September 1984, AMCE adopted a non-qualified stock option
plan (the "1984 Plan"). This plan provided for the grant of rights to purchase
shares of Common Stock under non-qualified stock option agreements. The number
of shares which could be sold under the plan could not exceed 750,000 shares.
The 1984 Plan provided that the exercise price would be determined by the
Company's Stock Option Committee and that the options expired no later than ten
years after date of grant. Pursuant to the terms of the 1984 Plan, no further
options may be granted under this plan.
1994 PLAN: In November 1994, AMCE adopted a stock option and incentive plan
(the "1994 Plan"). This plan provides for three basic types of awards: (i)
grants of stock options which are either incentive or non-qualified stock
options, (ii) grants of stock awards, which are either performance or restricted
stock awards, and (iii) performance unit awards. The number of shares of Common
Stock which may be sold or granted under the plan may not exceed 1,000,000
shares. The 1994 Plan provides that the exercise price for stock options 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.
F-29
<PAGE>
AMC ENTERTAINMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 7--STOCKHOLDERS' EQUITY (CONTINUED)
Pertinent information relating to stock options is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
NUMBER OPTION PRICE NUMBER OPTION PRICE NUMBER OPTION PRICE
OF SHARES PER SHARE OF SHARES PER SHARE OF SHARES PER SHARE
----------- -------------- ----------- ------------ ----------- ------------
Outstanding at
beginning of
year............... 776,500 $9.25-$11.75 813,300 $4.67-$11.13 242,750 $4.67-$11.13
Granted.............. 23,250 $14.50 36,500 $11.75 725,000 $9.25-$9.375
Cancelled............ (229,750) $9.375-$14.50 (33,750) $9.375 --
Exercised............ (82,500) $9.375-$11.13 (39,550) $4.67-$9.375 (154,450) $4.67-$9.00
----------- -------------- ----------- ------------ ----------- ------------
Outstanding at end of
year............... 487,500 $9.25-$14.50 776,500 $9.25-$11.75 813,300 $4.67-$11.13
----------- -------------- ----------- ------------ ----------- ------------
----------- -------------- ----------- ------------ ----------- ------------
Exercisable at end of
year............... 233,250 $9.25-$11.75 230,000 $9.25-$11.75 88,300 $4.67-$11.13
----------- -------------- ----------- ------------ ----------- ------------
----------- -------------- ----------- ------------ ----------- ------------
Available for grant
at end of year..... 746,500 817,500 252,529
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Expiration dates for outstanding stock options as of March 28, 1996, are as
follows:
<TABLE>
<CAPTION>
NUMBER OPTION PRICE
FISCAL YEAR OF SHARES PER SHARE
- ------------------------------------------------- ----------- --------------
<S> <C> <C>
2004............................................. 435,000 $ 9.25-$9.375
2005............................................. 31,500 11.75
2006............................................. 21,000 14.50
-----------
Total options outstanding........................ 487,500
-----------
-----------
</TABLE>
F-30
<PAGE>
AMC ENTERTAINMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 8--INCOME TAXES
Income taxes reflected in the Consolidated Statements of Operations for the
three years ended March 28, 1996, are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal...................................... $ 5,134 $ 7,738 $ 13,977
State........................................ 2,094 4,547 2,146
--------- --------- ---------
Total current.............................. 7,228 12,285 16,123
Deferred:
Federal...................................... (1,121) (1,238) (5,203)
State........................................ (207) (255) (1,071)
Change in valuation allowance................ -- (19,792) 2,251
--------- --------- ---------
Total deferred........................... (1,328) (21,285) (4,023)
--------- --------- ---------
Total provision................................ 5,900 (9,000) 12,100
Tax benefit of extraordinary
item--extinguishment of debt................. 13,400 -- --
--------- --------- ---------
Total provision before extraordinary item...... $ 19,300 $ (9,000) $ 12,100
--------- --------- ---------
--------- --------- ---------
</TABLE>
The effective tax rate on income before extraordinary items was 41.4%,
(36.0%) and 44.1% in 1996, 1995 and 1994, respectively. The difference between
the effective rate and the U.S. federal income tax statutory rate of 35% in
1996, 1995 and 1994 is accounted for as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Tax on earnings before provision for income tax and
extraordinary items at statutory rates...................... $ 16,335 $ 8,742 $ 9,594
Add (subtract) tax effect of:
State income taxes, net of federal tax benefit.............. 3,163 2,973 699
Change in valuation allowance............................... -- (19,792) 2,251
Other, net.................................................. (198) (923) (444)
--------- --------- ---------
Income tax provision before extraordinary item................ $ 19,300 $ (9,000) $ 12,100
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-31
<PAGE>
AMC ENTERTAINMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 8--INCOME TAXES (CONTINUED)
The significant components of deferred income tax assets and liabilities as
of March 28, 1996, and March 30, 1995, are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
DEFERRED INCOME TAX DEFERRED INCOME TAX
---------------------- ----------------------
ASSETS LIABILITIES ASSETS LIABILITIES
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Accrued reserves and liabilities.................. $ 5,323 $ 343 $ 5,775 $ 297
Investments in partnerships....................... -- 419 -- 456
Capital leases.................................... 10,852 -- 10,767 --
Depreciation...................................... 7,842 -- 6,797 --
Deferred rents.................................... 5,266 -- 4,287 --
Other............................................. 683 1,491 240 728
--------- ----------- --------- -----------
Total............................................. 29,966 2,253 27,866 1,481
Less: Current deferred income taxes............... 3,702 495 3,952 622
--------- ----------- --------- -----------
Total noncurrent deferred income taxes............ $ 26,264 $ 1,758 $ 23,914 $ 859
--------- ----------- --------- -----------
--------- ----------- --------- -----------
Net noncurrent deferred income taxes.............. $ 24,506 $ 23,055
--------- ---------
--------- ---------
</TABLE>
SFAS 109 requires that a valuation allowance be provided 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. Based upon
positive earnings in recent years and the expectation that taxable income will
continue for the foreseeable future, management believes it is more likely than
not that the Company will realize its deferred tax assets and, accordingly, no
valuation allowance has been provided as of March 28, 1996 and March 30, 1995.
NOTE 9--LEASES
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, 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.
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 12 new theatres with 200 screens have been finalized. The scheduled
completion of construction and theatre openings are at various dates during
fiscal 1997. The estimated minimum rental payments that may be required under
the terms of these leases total approximately $294 million.
F-32
<PAGE>
AMC ENTERTAINMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 9--LEASES (CONTINUED)
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 as of March 28, 1996 (in thousands):
<TABLE>
<S> <C>
Fiscal year:
1997......................................................... $ 62,497
1998......................................................... 73,549
1999......................................................... 81,973
2000......................................................... 81,755
2001......................................................... 80,143
Thereafter................................................... 1,052,254
----------
Total minimum payments required................................ $1,432,171
----------
----------
</TABLE>
The Company records rent expense on a straight-line basis over the term of
the lease. Included in long-term liabilities as of March 28, 1996, and March 30,
1995, is $12,858,000 and $10,537,000, respectively, of deferred rent
representing pro rata future minimum rental payments for leases with scheduled
rent increases.
Rent expense is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Minimum rentals................................ $ 63,099 $ 58,374 $ 56,813
Percentage rentals based on revenues........... 2,354 1,970 1,968
Equipment rentals.............................. 876 647 692
--------- --------- ---------
$ 66,329 $ 60,991 $ 59,473
--------- --------- ---------
--------- --------- ---------
</TABLE>
NOTE 10--EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT PLANS: 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 10--EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the plan's funded status as of December 31,
1995 and 1994 (plan valuation dates) and the amounts included in the
Consolidated Balance Sheets as of March 28, 1996, and March 30, 1995 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation, including
vested benefits of $10,041 and $7,699.................................. $ 10,205 $ 7,856
--------- ---------
--------- ---------
Projected benefit obligation for service rendered to date................ $ 17,051 $ 12,512
Plan assets at fair value................................................ (9,580) (8,291)
--------- ---------
Projected benefit obligation in excess of plan assets.................... 7,471 4,221
Unrecognized net gain (loss) from past experience different from that
assumed and effects of changes in assumptions.......................... (1,509) 1,117
Unrecognized net obligation upon adoption being recognized over 15
years.................................................................. (1,588) (1,764)
--------- ---------
Pension liability included in Consolidated Balance Sheets................ $ 4,374 $ 3,574
--------- ---------
--------- ---------
</TABLE>
Net pension expense includes the following components (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Service cost...................................... $ 855 $ 1,261 $ 1,157
Interest cost..................................... 966 971 852
Actual return on plan assets...................... (1,630) 55 (864)
Net amortization and deferral..................... 1,096 (190) 698
--------- --------- ---------
Net pension expense............................... $ 1,287 $ 2,097 $ 1,843
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company also sponsors a non-contributory Supplemental Executive
Retirement Plan (the "SERP") which provides certain employees additional pension
benefits. The actuarial present value of accumulated plan benefits related to
the SERP was $379,000 and $224,000 as of March 28, 1996 and March 30, 1995,
respectively, which is reflected in the Consolidated Balance Sheet.
The weighted average discount rate used to measure the plans' projected
benefit obligations was 7.00%, 7.75% and 5.75% for 1996, 1995 and 1994,
respectively. The rate of increase in future compensation levels was 6.0% for
1996 and 1995 and 6.5% for 1994 and the expected long-term rate of return on
assets was 8.5% for 1996, 1995 and 1994.
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 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 expense under the thrift savings plan was $1,032,000,
$1,015,000 and $907,000 for 1996, 1995 and 1994, respectively.
F-34
<PAGE>
AMC ENTERTAINMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 10--EMPLOYEE BENEFIT PLANS (CONTINUED)
OTHER RETIREMENT BENEFITS: 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 amounts included in the Consolidated Balance
Sheets as of March 28, 1996, and March 30, 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................................. $ 557 $ 791
Fully eligible active plan participants.................................. 438 332
Other active plan participants........................................... 1,292 1,397
--------- ---------
Accumulated postretirement benefit obligation.............................. 2,287 2,520
Unrecognized net obligation upon adoption being recognized over 20 years... (747) (797)
Unrecognized loss.......................................................... 105 (521)
--------- ---------
Postretirement benefit liability included in the Consolidated Balance
Sheets................................................................... $ 1,645 $ 1,202
--------- ---------
--------- ---------
</TABLE>
Postretirement expense includes the following components (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Service cost........................................... $ 192 $ 188 $ 175
Interest cost.......................................... 208 202 169
Net amortization and deferral.......................... 66 66 94
----- ----- -----
Postretirement expense................................. $ 466 $ 456 $ 438
----- ----- -----
----- ----- -----
</TABLE>
For measurement purposes, the annual rate of increase in the per capita cost
of covered health care benefits assumed for 1996 was 8.5% for medical and 6.0%
for dental. The rates were assumed to decrease gradually to 5.0% for medical and
3.0% for dental at 2020 and remain at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amounts 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
March 28, 1996, by $456,000 and the aggregate of the service and interest cost
components of postretirement expense for 1996 by $144,000. The weighted-average
discount rate used in determining the accumulated postretirement benefit
obligation was 7.00%, 7.75% and 7.25% for 1996, 1995 and 1994, respectively.
F-35
<PAGE>
AMC ENTERTAINMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 11--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 financial condition or
results of operations of the Company.
NOTE 12--FUTURE DISPOSITION OF ASSETS
The Company has provided reserves for estimated losses from discontinuing
the operation of fast food restaurants, for theatres which have been or are
expected 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 to operate specialty fast food restaurants. The
Company discontinued operating the restaurants due to unprofitability. The
Company continues to sublease 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 twelve years. As of March 28, 1996, the base rents
aggregate approximately $884,000 annually, and $8,314,000 over the remaining
term of the leases. As of March 28, 1996, the Company has subleased
approximately 77% of the space with remaining terms ranging from five months to
144 months. Non-cancellable subleases currently aggregate approximately $650,000
annually, and $2,730,000 over the remaining term of the subleases.
As of March 28, 1996, the Company remains obligated under lease commitments
for two closed theatres and for a closed office with remaining terms of up to
five years. The current leasing costs of these closed locations approximate
$354,000 annually, and $951,000 over the remaining term of the leases.
Non-cancellable subleases currently aggregate approximately $58,000 annually,
and $92,000 over the remaining term of the subleases.
NOTE 13--TRANSACTIONS WITH RELATED PARTIES
The Company and DI maintain intercompany accounts. Charges to the
intercompany accounts include the allocation of AMC general and administrative
expense of $116,000, $116,000 and $196,000 in 1996, 1995 and 1994, respectively,
and payments made by AMC on behalf of DI. As of March 28, 1996, DI and non-AMCE
subsidiaries owed the Company $795,000. As of March 30, 1995, the Company owed
DI and non-AMCE subsidiaries $37,000.
NOTE 14--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 was practicable to estimate
that value.
The carrying value of cash and equivalents and investments in debt
securities approximates fair value because of the short duration of those
instruments. The fair value of 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.
F-36
<PAGE>
AMC ENTERTAINMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 14--FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Company's financial instruments are as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------
<S> <C> <C> <C> <C>
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
Financial assets:
Cash and equivalents........... $ 10,795 $ 10,795 $ 71,233 $ 71,233
Investments.................... -- -- 69,144 69,144
Financial liabilities:
Cash overdrafts................ $ 22,848 $ 22,848 $ -- $ --
Corporate borrowings........... 126,150 126,992 200,222 215,952
</TABLE>
F-37
<PAGE>
AMC ENTERTAINMENT INC.
STATEMENTS OF OPERATIONS BY QUARTER
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 29, JUNE 30, SEPT. 28, SEPT. 29, DEC. 28, DEC. 29, MARCH 28, MARCH 30,
1995 1994 1995 1994 1995 1994 1996 1995
--------- --------- ----------- ----------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues.............. $ 153,810 $ 128,481 $ 185,066 $ 164,591 $ 155,426 $ 142,625 $ 163,570 $ 128,967
Total cost of operations.... 120,001 101,435 136,883 125,839 119,508 108,001 120,175 100,640
Depreciation and
amortization.............. 9,972 8,360 10,471 9,801 10,399 8,977 13,044(3) 10,775(1)
General and administrative
expenses.................. 10,223 9,620 13,695 9,983 10,637 9,777 14,195 10,427
--------- --------- ----------- ----------- --------- --------- ----------- -----------
Operating income............ 13,614 9,066 24,017 18,968 14,882 15,870 16,156 7,125
Interest expense............ 8,309 8,960 8,318 9,321 7,883 8,931 4,318 8,696
Investment income........... 2,226 2,563 2,440 2,954 1,958 2,064 428 2,432
Gain (loss) on disposition
of assets................. (15) 2 (123) (77) 159 (4) (243) (77)
--------- --------- ----------- ----------- --------- --------- ----------- -----------
Earnings before income taxes
and extraordinary item.... 7,516 2,671 18,016 12,524 9,116 8,999 12,023 784
Income tax provision........ 3,100 1,100 7,400 5,100 3,800 3,600 5,000 (18,800)(2)
--------- --------- ----------- ----------- --------- --------- ----------- -----------
Earnings before
extraordinary item........ 4,416 1,571 10,616 7,424 5,316 5,399 7,023 19,584
Extraordinary item--Loss on
extinguishment of debt
(net of income tax benefit
of $13,400)............... -- -- -- -- (19,350) -- -- --
--------- --------- ----------- ----------- --------- --------- ----------- -----------
Net earnings (loss)......... $ 4,416 $ 1,571 $ 10,616 $ 7,424 $ (14,034) $ 5,399 $ 7,023 $ 19,584
--------- --------- ----------- ----------- --------- --------- ----------- -----------
--------- --------- ----------- ----------- --------- --------- ----------- -----------
Preferred dividends......... 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750
--------- --------- ----------- ----------- --------- --------- ----------- -----------
Net earnings (loss) for
common shares............. $ 2,666 $ (179) $ 8,866 $ 5,674 $ (15,784) $ 3,649 $ 5,273 $ 17,834
--------- --------- ----------- ----------- --------- --------- ----------- -----------
--------- --------- ----------- ----------- --------- --------- ----------- -----------
Earnings (loss) per share
before extraordinary item:
Primary................... $ .16 $ (.01) $ .53 $ .34 $ .21 $ .22 $ .31 $ 1.07
--------- --------- ----------- ----------- --------- --------- ----------- -----------
--------- --------- ----------- ----------- --------- --------- ----------- -----------
Fully diluted............. $ .16 $ (.01) $ .45 $ .32 $ .21 $ .22 $ .29 $ .83
--------- --------- ----------- ----------- --------- --------- ----------- -----------
--------- --------- ----------- ----------- --------- --------- ----------- -----------
Earnings (loss) per share:
Primary................... $ .16 $ (.01) $ .53 $ .34 $ (.93) $ .22 $ .31 $ 1.07
--------- --------- ----------- ----------- --------- --------- ----------- -----------
--------- --------- ----------- ----------- --------- --------- ----------- -----------
Fully diluted............. $ .16 $ (.01) $ .45 $ .32 $ (.93) $ .22 $ .29 $ .83
--------- --------- ----------- ----------- --------- --------- ----------- -----------
--------- --------- ----------- ----------- --------- --------- ----------- -----------
<CAPTION>
FISCAL YEAR
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Total revenues.............. $ 657,872 $ 564,664
Total cost of operations.... 496,567 435,915
Depreciation and
amortization.............. 43,886 37,913
General and administrative
expenses.................. 48,750 39,807
--------- ---------
Operating income............ 68,669 51,029
Interest expense............ 28,828 35,908
Investment income........... 7,052 10,013
Gain (loss) on disposition
of assets................. (222) (156)
--------- ---------
Earnings before income taxes
and extraordinary item.... 46,671 24,978
Income tax provision........ 19,300 (9,000)
--------- ---------
Earnings before
extraordinary item........ 27,371 33,978
Extraordinary item--Loss on
extinguishment of debt
(net of income tax benefit
of $13,400)............... (19,350) --
--------- ---------
Net earnings (loss)......... $ 8,021 $ 33,978
--------- ---------
--------- ---------
Preferred dividends......... 7,000 7,000
--------- ---------
Net earnings (loss) for
common shares............. $ 1,021 $ 26,978
--------- ---------
--------- ---------
Earnings (loss) per share
before extraordinary item:
Primary................... $ 1.21 $ 1.63
--------- ---------
--------- ---------
Fully diluted............. $ 1.20 $ 1.45
--------- ---------
--------- ---------
Earnings (loss) per share:
Primary................... $ .06 $ 1.63
--------- ---------
--------- ---------
Fully diluted............. $ .06 $ 1.45
--------- ---------
--------- ---------
</TABLE>
- --------------
(1) During the fourth quarter of 1995, the Company reduced the estimated lives
of lease rights and location premiums on certain smaller theatres to
correspond to the base term of the theatre lease. This change in accounting
estimate resulted in an increase in amortization expense of $1,542.
(2) During the fourth quarter of 1995, the Company reduced the deferred tax
asset valuation allowance established under Statement of Financial
Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES. Based on the
Company's positive earnings in recent years and the expectation of continued
earnings, management believes uncertainty was removed with respect to the
realization of deferred tax assets. Accordingly, the valuation allowance was
reduced.
(3) During the fourth quarter of 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. As a result,
the Company recognized an impairment loss of $1,799.
F-38
<PAGE>
DURWOOD, INC.
CONDENSED PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited Condensed Pro Forma Statements of Operations and
Balance Sheet have been prepared giving effect to certain pre-merger activities
which will take place prior to the Merger of Durwood, Inc. ("DI") with the
Company. The Condensed Pro Forma Statements of Operations for the thirty-nine
weeks ended December 26, 1996 and the year (52 weeks) ended March 28, 1996
assume that the pre-merger activities occurred on March 31, 1995. The Condensed
Pro Forma Financial Balance Sheet assumes that the pre-merger activities
occurred on December 26, 1996.
The unaudited Condensed Pro Forma Financial Statements do not purport to
represent DI's financial position or results of operations had the above
transaction in fact occurred on such dates.
The unaudited Condensed Pro Forma Financial Statements should be read in
conjunction with the historical financial statements of DI.
F-39
<PAGE>
DURWOOD, INC.
CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
THIRTY-NINE WEEKS ENDED DECEMBER 26, 1996
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
DURWOOD, INC. PRE-MERGER ADJUSTED
ACTUAL (1) ACTIVITIES DURWOOD, INC.
-------------- ----------- --------------
<S> <C> <C> <C>
Revenues............................................................ $ 527,555 $ -- $ 527,555
Cost of operations.................................................. 417,527 -- 417,527
Depreciation and amortization....................................... 37,276 267(2) 37,543
General and administrative expenses................................. 39,992 (59)(2) 39,933
-------------- ----------- --------------
Operating income.................................................. 32,760 (208) 32,552
Interest expense.................................................... 15,770 (734)(2) 15,036
Other, net.......................................................... 1,809 (1,229)(2) 580
-------------- ----------- --------------
Earnings before income taxes, extraordinary item and minority
interest.......................................................... 18,799 (703) 18,096
Income tax provision................................................ 7,530 (245)(2) 7,285
-------------- ----------- --------------
Earnings before extraordinary item and minority interest............ $ 11,269 $ (458) $ 10,811
-------------- ----------- --------------
-------------- ----------- --------------
Earnings per share before extraordinary item:
Primary........................................................... $ 31.41 $ 28.57
-------------- --------------
-------------- --------------
Fully diluted..................................................... $ 31.09 $ 28.24
-------------- --------------
-------------- --------------
Weighted average number of shares outstanding:
Primary........................................................... 161 161
-------------- --------------
-------------- --------------
Fully diluted..................................................... 161 161
-------------- --------------
-------------- --------------
</TABLE>
See Notes to Condensed Pro Forma Financial Statements.
F-40
<PAGE>
DURWOOD, INC.
CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR (52 WEEKS) ENDED MARCH 28, 1996
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
DURWOOD, INC. PRE-MERGER ADJUSTED
ACTUAL (1) ACTIVITIES DURWOOD, INC.
-------------- ----------- --------------
<S> <C> <C> <C>
Revenues............................................................ $ 657,872 $ -- $ 657,872
Cost of operations.................................................. 496,567 -- 496,567
Depreciation and amortization....................................... 43,537 349(2) 43,886
General and administrative expenses................................. 49,274 (524)(2) 48,750
-------------- ----------- --------------
Operating income.................................................. 68,494 175 68,669
Interest expense.................................................... 29,805 (977)(2) 28,828
Other, net.......................................................... 7,212 (382)(2) 6,830
-------------- ----------- --------------
Earnings before income taxes, extraordinary item and minority
interest.......................................................... 45,901 770 46,671
Income tax provision................................................ 19,360 (60)(2) 19,300
-------------- ----------- --------------
Earnings before extraordinary item and minority interest............ $ 26,541 $ 830 $ 27,371
-------------- ----------- --------------
-------------- ----------- --------------
Extraordinary item--Loss on extinguishment of debt.................. 19,350 -- 19,350
-------------- ----------- --------------
Earnings per share before extraordinary item:
Primary........................................................... $ 98.78 $ 103.93
-------------- --------------
-------------- --------------
Fully diluted..................................................... $ 97.34 $ 102.34
-------------- --------------
-------------- --------------
Weighted average number of shares outstanding:
Primary........................................................... 161 161
-------------- --------------
-------------- --------------
Fully diluted..................................................... 161 161
-------------- --------------
-------------- --------------
</TABLE>
See Notes to Condensed Pro Forma Financial Statements.
F-41
<PAGE>
DURWOOD, INC.
CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 26, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
DURWOOD, INC. PRE-MERGER ADJUSTED
ACTUAL (1) ACTIVITIES DURWOOD, INC.
-------------- ----------- --------------
<S> <C> <C> <C>
Assets
Current assets.................................................... $ 63,011 $ (853)(2) $ 62,158
Property, net..................................................... 484,163 3,163(2) 487,326
Intangible assets, net............................................ 32,250 -- 32,250
Other long-term assets............................................ 59,120 (1,114)(2) 58,006
-------------- ----------- --------------
Total assets.................................................... $ 638,544 $ 1,196 $ 639,740
-------------- ----------- --------------
-------------- ----------- --------------
Liabilities and Stockholders' Equity
Current liabilities............................................... $ 107,855 $ (690)(2) $ 107,165
Corporate borrowings.............................................. 271,112 -- 271,112
Capital lease obligations......................................... 56,172 -- 56,172
Other long-term liabilities....................................... 40,579 -- 40,579
-------------- ----------- --------------
475,718 (690) 475,028
Minority interest................................................. 101,103 -- 101,103
Stockholders' equity.............................................. 61,723 1,886(2) 63,609
-------------- ----------- --------------
$ 638,544 $ 1,196 $ 639,740
-------------- ----------- --------------
-------------- ----------- --------------
</TABLE>
See Notes to Condensed Pro Forma Financial Statements.
F-42
<PAGE>
DURWOOD, INC.
NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
(1) The amounts presented hereunder were taken from Durwood, Inc.'s ("DI")
December 26, 1996 and March 28, 1996 Consolidated Financial Statements.
(2) Prior to the Merger with AMC Entertainment Inc. (the "Company"), certain
pre-merger activities will take place whereby all assets and liabilities of
DI, other than DI's equity interest in the Company, will be transferred to
DI's subsidiary, Delta Properties, Inc. ("Delta"), which will agree to
assume DI's liabilities. Delta's stock then will be distributed to the DI
shareholders.
F-43
<PAGE>
(This page has been left blank intentionally.)
F-44
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THIRTY-NINE WEEKS ENDED
DECEMBER 26, 1996 AND DECEMBER 28, 1995
F-45
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
------------------------------
DECEMBER 26, DECEMBER 28,
1996 1995
-------------- --------------
(UNAUDITED)
<S> <C> <C>
Revenues
Admissions...................................................................... $ 344,699 $ 324,737
Concessions..................................................................... 159,355 148,323
Other........................................................................... 23,501 19,801
-------------- --------------
Total revenues................................................................ 527,555 492,861
Expenses
Film rentals.................................................................... 177,340 166,054
Concession merchandise.......................................................... 26,275 22,891
Other........................................................................... 213,912 182,475
-------------- --------------
Total cost of operations...................................................... 417,527 371,420
Depreciation and amortization..................................................... 37,276 30,581
General and administrative expenses............................................... 39,992 38,594
-------------- --------------
Total expenses................................................................ 494,795 440,595
-------------- --------------
Operating income.................................................................. 32,760 52,266
Other expense (income)............................................................
Interest expense
Corporate borrowings.......................................................... 8,391 16,465
Capitalized leases............................................................ 7,379 8,106
Investment income............................................................... (1,893) (6,981)
Loss (gain) on disposition of assets............................................ 84 (23)
-------------- --------------
Earnings before income taxes, extraordinary item and minority interest............ 18,799 34,699
Income tax provision.............................................................. 7,530 14,300
-------------- --------------
Earnings before extraordinary item and minority interest.......................... 11,269 20,399
Extraordinary item--Loss on early extinguishment of debt (net of income tax
benefit of $13,400)............................................................. -- (19,350)
-------------- --------------
Earnings before minority interest................................................. 11,269 1,049
Minority interest................................................................. 6,145 4,548
-------------- --------------
Net earnings (loss)............................................................... $ 5,124 $ (3,499)
-------------- --------------
-------------- --------------
Earnings per share before extraordinary item:
Primary......................................................................... $ 31.41 $ 81.57
-------------- --------------
-------------- --------------
Fully diluted................................................................... $ 31.09 $ 80.67
-------------- --------------
-------------- --------------
Earnings (loss) per share:
Primary......................................................................... $ 31.41 $ (21.36)
-------------- --------------
-------------- --------------
Fully diluted................................................................... $ 31.09 $ (21.36)
-------------- --------------
-------------- --------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-46
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 28,
1996
DECEMBER 26, -----------
1996
--------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents............................................................... $ 19,866 $ 12,888
Receivables, net of allowance for doubtful accounts of $806 as of December 26,
1996, and $801 as of March 28, 1996.............................................. 28,516 19,866
Other current assets............................................................... 14,629 13,697
-------------- -----------
Total current assets............................................................. 63,011 46,451
Property, net........................................................................ 484,163 352,055
Intangible assets, net............................................................... 32,250 36,483
Other long-term assets............................................................... 59,120 46,838
-------------- -----------
Total assets..................................................................... $ 638,544 $ 481,827
-------------- -----------
-------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................... $ 57,433 $ 59,353
Accrued expenses and other liabilities............................................. 47,005 43,409
Current maturities of corporate borrowings and
capital lease obligations........................................................ 3,417 2,904
-------------- -----------
Total current liabilities........................................................ 107,855 105,666
Corporate borrowing.................................................................. 271,112 126,127
Capital lease obligations............................................................ 56,172 59,141
Other long-term liabilities.......................................................... 40,579 33,696
-------------- -----------
Total liabilities................................................................ 475,718 324,630
Minority interest.................................................................... 101,103 109,721
Stockholders' equity:
Common Stock; 120,000 shares issued and outstanding................................ 12,000 12,000
Class B Stock; 40,784 shares issued and outstanding................................ 4,078 4,078
Foreign currency translation adjustment............................................ (483) --
Retained earnings.................................................................. 46,118 30,836
Unrealized gain on available for sale investments, net of income taxes of $6 and
$391............................................................................. 10 562
-------------- -----------
Total stockholders' equity....................................................... 61,723 47,476
-------------- -----------
Total liabilities and stockholders' equity....................................... $ 638,544 $ 481,827
-------------- -----------
-------------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-47
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
------------------------------
DECEMBER 26, DECEMBER 28,
1996 1995
-------------- --------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings...................................................................... $ 5,124 $ (3,499)
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization................................................... 37,276 30,581
Loss (gain) on sale of other long-term assets................................... 84 (23)
Gain on sale of available for sale investments.................................. (1,094) --
Extraordinary item.............................................................. -- 19,350
Minority interest............................................................... 1,607 (702)
Change in assets and liabilities:
Receivables................................................................... (8,650) (10,083)
Other current assets.......................................................... (932) 3,222
Accounts payable.............................................................. 7,012 9,437
Accrued expenses and other liabilities........................................ 9,491 5,245
Other, net...................................................................... 278 2,895
-------------- --------------
Total adjustments............................................................. 45,072 59,922
-------------- --------------
Net cash provided by operating activities......................................... 50,196 56,423
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.............................................................. (163,645) (72,496)
Purchase of real estate held for sale............................................. (7,692) --
Purchases of available for sale investments....................................... -- (424,134)
Proceeds from maturities of available for sale investments........................ -- 493,278
Proceeds from sale of available for sale investments.............................. 1,094 --
Proceeds from disposition of other long-term assets............................... 1,129 959
Other, net........................................................................ (8,523) (7,057)
-------------- --------------
Net cash used in investing activities............................................. (177,637) (9,450)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of Senior and Senior Subordinated Notes................................ -- (220,734)
Net borrowings under revolving credit facility.................................... 145,000 130,000
Principal payments under capital lease obligations and other...................... (2,119) (2,243)
Cash overdrafts................................................................... (8,133) --
Increase in minority interest from issuance of AMC Entertainment
Inc. common stock............................................................... 69 637
Deferred financing costs and other................................................ -- (3,570)
-------------- --------------
Net cash provided by (used in) financing activities............................... 134,817 (95,910)
-------------- --------------
Effect of exchange rate changes on cash and equivalents........................... (398) --
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS................................... 6,978 (48,937)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD....................................... 12,888 73,610
-------------- --------------
CASH AND EQUIVALENTS AT END OF PERIOD............................................. $ 19,866 $ 24,673
-------------- --------------
-------------- --------------
</TABLE>
F-48
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
------------------------------
DECEMBER 26, DECEMBER 28,
1996 1995
-------------- --------------
(UNAUDITED)
<S> <C> <C>
Cash paid during the period for:
Interest (net of amounts capitalized of $1,955 and $2,260)........................ $ 16,868 $ 29,350
Income taxes paid................................................................. 5,331 9,085
</TABLE>
See Notes to Consolidated Financial Statements.
F-49
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 26, 1996
(UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
Durwood, Inc. (the "Company" or "DI") is principally a holding company. Its
primary subsidiary, AMC Entertainment Inc. ("AMCE") through its wholly-owned
subsidiary, American Multi-Cinema, Inc. ("AMC"), is principally involved in the
operation of motion picture theatres throughout the United States and in Japan
and Portugal. Other subsidiaries of DI are engaged in real estate and investment
activities. AMCE is also involved in the business of providing on-screen
advertising and other services to AMC and other theatre circuits through a
wholly-owned subsidiary, National Cinema Network, Inc. ("NCN").
The accompanying unaudited consolidated financial statements should be read
in conjunction with the Company's annual audited consolidated financial
statements for the year (52 weeks) ended March 28, 1996 included elsewhere
herein. In the opinion of management, these interim financial statements reflect
all adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of the Company's financial position and results of operations.
Due to the seasonal nature of AMCE's business, results for the thirty-nine weeks
ended December 26, 1996, are not necessarily indicative of the results to be
expected for the fiscal year (53 weeks) ending April 3, 1997.
The year-end consolidated balance sheet data was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles.
Certain amounts have been reclassified from prior period consolidated
financial statements to conform with the current year presentation.
NOTE 2--EARNINGS PER SHARE
Earnings per share is computed by dividing the parent company net earnings
plus the Company's proportionate interest in AMCE's earnings for common shares
by the weighted average number of common shares outstanding. The average shares
used in the computations were 161,000 for the thirty-nine weeks ended December
26, 1996 and December 28, 1995, respectively. On a fully-diluted basis, the
Company's proportionate interest in AMCE's earnings are adjusted to assume
conversion of AMCE's Cumulative Convertible Preferred Stock, if dilutive. The
average shares used in the computations were 161,000 for the thirty-nine weeks
ended December 26, 1996 and December 28, 1995, respectively.
NOTE 3--MERGER WITH SUBSIDIARY
In May 1996, AMCE announced that it was negotiating with DI, to merge DI
into AMCE with AMCE remaining as the surviving entity. As currently proposed,
stockholders of DI would exchange their shares of DI stock for shares of AMCE's
stock. Prior to the Merger, all assets and liabilities of DI, other than DI's
equity interest in the Company, will be transferred to DI's subsidiary, Delta
Properties, Inc. ("Delta"), which will agree to assume DI's liabilities. Delta's
stock then will be distributed to the DI shareholders. A condition to the Merger
will be that it be approved by the holders of a majority of the shares of Common
Stock of AMCE, other than DI, members of the Durwood family and officers and
directors of AMCE and the holders of a majority of the shares of Common Stock of
DI.
NOTE 4--CONVERSION OF AMCE PREFERRED STOCK
During the thirty-nine weeks ended December 26, 1996, various holders of
AMCE's Cumulative Convertible Preferred stock converted 676,400 shares into
1,166,109 shares of AMCE Common Stock at a conversion rate of 1.724 shares of
Common Stock for each share of Convertible Preferred Stock. The conversions
reduced minority interest which resulted in an increase in the equity of the
Company of $10,158,000.
F-50
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT ACCOUNTANTS
YEARS (52 WEEKS) ENDED
MARCH 28, 1996, MARCH 30, 1995 AND MARCH 31, 1994
F-51
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF DURWOOD, INC.
KANSAS CITY, MISSOURI
We have audited the accompanying consolidated balance sheets of Durwood,
Inc. and subsidiaries as of March 28, 1996, and March 30, 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years (52 weeks) in the period ended March 28, 1996. 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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Durwood, Inc.
and subsidiaries as of March 28, 1996, and March 30, 1995, and the consolidated
results of their operations and their cash flows for each of the three years (52
weeks) in the period ended March 28, 1996, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
May 31, 1996
F-52
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenues
Admissions................................................ $ 431,361 $ 371,145 $ 389,454
Concessions............................................... 196,645 169,120 176,274
Other..................................................... 29,866 24,402 21,730
--------- --------- ---------
Total revenues........................................ 657,872 564,667 587,458
Expenses
Film rentals.............................................. 215,099 182,669 197,461
Concession merchandise.................................... 32,641 26,453 26,349
Other..................................................... 248,827 226,793 225,367
--------- --------- ---------
Total cost of operations.............................. 496,567 435,915 449,177
Depreciation and amortization............................. 43,537 37,569 37,701
General and administrative expenses....................... 49,274 39,870 40,324
--------- --------- ---------
Total expenses........................................ 589,378 513,354 527,202
--------- --------- ---------
Operating income...................................... 68,494 51,313 60,256
Other expense (income)
Interest expense
Corporate borrowings.................................... 19,076 25,408 26,417
Capitalized leases...................................... 10,729 11,406 10,676
Investment income......................................... (7,432) (10,838) (2,196)
Loss on disposition of assets............................. 220 142 (296)
--------- --------- ---------
Earnings before income taxes, extraordinary item and
minority interest......................................... 45,901 25,195 25,655
Income tax provision........................................ 19,360 (10,160) 4,808
--------- --------- ---------
Earnings before extraordinary item and minority interest.... 26,541 35,355 20,847
Extraordinary item--Loss on extinguishment of debt
(net of income tax benefit of $13,400).................... (19,350) -- --
--------- --------- ---------
Earnings before minority interest........................... 7,191 35,355 20,847
Minority interest........................................... 7,168 11,559 773
--------- --------- ---------
Net earnings................................................ $ 23 $ 23,796 $ 20,074
--------- --------- ---------
--------- --------- ---------
Earnings per share before extraordinary item:
Primary................................................... $ 98.78 $ 147.85 $ 123.92
--------- --------- ---------
--------- --------- ---------
Fully diluted............................................. $ 97.34 $ 132.39 $ 123.78
--------- --------- ---------
--------- --------- ---------
Earnings (loss) per share:
Primary................................................... $ .05 $ 147.85 $ 123.92
--------- --------- ---------
--------- --------- ---------
Fully diluted............................................. $ (.02) $ 132.39 $ 123.78
--------- --------- ---------
--------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
F-53
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 28, 1996 AND MARCH 30, 1995
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents................................................ $ 12,888 $ 73,610
Investments......................................................... -- 69,144
Receivables, net of allowance for doubtful accounts of $801 as of
March 28, 1996, and $1,529 as of March 30, 1995................... 19,866 8,942
Other current assets................................................ 13,697 11,554
--------- ---------
Total current assets............................................ 46,451 163,250
Property, net......................................................... 352,055 276,145
Intangible assets, net................................................ 36,483 42,926
Other long-term assets................................................ 46,838 39,414
--------- ---------
Total assets.................................................... $ 481,827 $ 521,735
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 59,353 $ 29,010
Accrued expenses and other liabilities.............................. 43,409 34,580
Current maturities of corporate borrowings and capital lease
obligations....................................................... 2,904 2,516
--------- ---------
Total current liabilities....................................... 105,666 66,106
Corporate borrowings.................................................. 126,127 200,227
Capital lease obligations............................................. 59,141 64,805
Other long-term liabilities........................................... 33,696 34,421
--------- ---------
Total liabilities............................................... 324,630 365,559
Minority interest..................................................... 109,721 109,285
Commitments and contingencies
Stockholders' equity
Common Stock; 120,000 shares issued and outstanding................. 12,000 12,000
Class B Stock; 40,784 shares issued and outstanding................. 4,078 4,078
Retained earnings................................................... 30,836 30,813
Unrealized gain on available for sale investments, net of income
taxes
of $391........................................................... 562 --
--------- ---------
Total stockholders' equity...................................... 47,476 46,891
--------- ---------
Total liabilities and stockholders' equity...................... $ 481,827 $ 521,735
--------- ---------
--------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
F-54
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.................................................... $ 23 $ 23,796 $ 20,074
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization--property....................... 34,159 29,304 28,726
--other long-term assets.......... 9,378 8,266 7,075
Deferred income taxes......................................... (1,328) (21,285) (4,023)
Gain on sale of available for sale investments................ -- (1,407) --
Extraordinary item............................................ 19,350 -- --
Minority interest............................................. 168 4,326 3,971
(Gain)/loss on sale of other long-term assets................. 220 142 (296)
Change in assets and liabilities
Receivables................................................. (10,924) 644 (2,845)
Other current assets........................................ 11,134 (63) (1,040)
Accounts payable............................................ 7,495 219 5,210
Accrued expenses and other liabilities...................... 6,944 (6,081) 7,555
Other, net.................................................... 2,985 410 725
---------- ---------- ----------
Total adjustments......................................... 79,581 14,475 45,058
---------- ---------- ----------
Net cash provided by operating activities....................... 79,604 38,271 65,132
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................ (120,796) (56,701) (10,672)
Purchases of available for sale investments..................... (424,134) (314,368) --
Proceeds from maturities of available for sale investments...... 493,278 364,374 --
Proceeds from sales of available for sale investments........... -- 11,689 --
Net purchase of short-term investments.......................... -- -- (93,041)
Purchase of partnership interest, net of cash acquired.......... -- -- (8,486)
Proceeds from disposition of other long-term assets............. 2,265 70 1,270
Other, net...................................................... (7,217) (1,532) (118)
---------- ---------- ----------
Net cash provided by (used in) investing activities............. (56,604) 3,532 (111,047)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit facility.................. 120,000 -- --
Principal payments under capital lease obligations.............. (2,455) (2,088) (1,700)
Repayment of acquired subsidiary indebtedness................... -- -- (37,000)
Repurchase of Senior and Senior Subordinated Notes.............. (220,734) -- --
Cash overdrafts................................................. 22,848 -- --
Other repayments................................................ (448) (34) (1,720)
Increase in minority interest from issuance of AMC Entertainment
Inc. common and preferred stock............................... 637 100 99,729
Change in investment in AMC Entertainment Inc. due to Issuance
of AMC Entertainment Inc. Preferred Stock..................... -- -- (3,698)
Deferred financing costs and other.............................. (3,570) -- (354)
---------- ---------- ----------
Net cash provided by (used in) financing activities............. (83,722) (2,022) 55,257
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS................... (60,722) 39,781 9,342
CASH AND EQUIVALENTS AT BEGINNING OF YEAR......................... 73,610 33,829 24,487
---------- ---------- ----------
CASH AND EQUIVALENTS AT END OF YEAR............................... $ 12,888 $ 73,610 $ 33,829
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-55
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
(IN THOUSANDS)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
<TABLE>
<CAPTION>
1996 1995 1994
----------- --------- ---------
<S> <C> <C> <C>
Capital lease obligations incurred in connection with properties
acquired.......................................................... $ -- $ 1,363 $ 5,219
</TABLE>
On May 28, 1993, a subsidiary of American Multi-Cinema, Inc. ("AMC"),
acquired a fifty percent partnership interest in Exhibition Enterprises
Partnership ("EEP") from TPI Entertainment, Inc. Together with the fifty percent
partnership interest already owned by AMC, EEP became a wholly-owned subsidiary.
Cash and equivalents held by EEP as of May 28, 1993, totaled $9,014. Liabilities
assumed from the May 28, 1993, transaction follow:
<TABLE>
<S> <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>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash paid during the period for:
Interest (net of amounts capitalized of $3,003, $870 and
$49)....................................................... $ 35,762 $ 36,784 $ 36,460
Income taxes, net............................................ 9,573 13,905 13,659
</TABLE>
See Notes to Consolidated Financial Statements.
F-56
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNREALIZED
GAIN
COMMON STOCK CLASS B STOCK ON AVAILABLE TOTAL
-------------------- -------------------- RETAINED FOR SALE STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT EARNINGS INVESTMENTS EQUITY
--------- --------- --------- --------- --------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 2, 1993.............. 120,000 $ 12,000 40,784 $ 4,078 $ (9,359) $ -- $ 6,719
Net earnings...................... -- -- -- -- 20,074 -- 20,074
Change in investment in AMC
Entertainment Inc. from issuance
of preferred stock.............. -- -- -- -- (3,698) -- (3,698)
--------- --------- --------- --------- --------- ------------- --------------
Balance, March 31, 1994............. 120,000 12,000 40,784 4,078 7,017 -- 23,095
Net earnings...................... -- -- -- -- 23,796 -- 23,796
--------- --------- --------- --------- --------- ------------- --------------
Balance, March 30, 1995............. 120,000 12,000 40,784 4,078 30,813 -- 46,891
Net earnings...................... -- -- -- -- 23 -- 23
Change in unrealized gain on
available for sale investments,
net of income taxes of $391..... -- -- -- -- -- 562 562
--------- --------- --------- --------- --------- ------------- --------------
Balance, March 28, 1996............. 120,000 $ 12,000 40,784 $ 4,078 $ 30,836 $ 562 $ 47,476
--------- --------- --------- --------- --------- ------------- --------------
--------- --------- --------- --------- --------- ------------- --------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-57
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 1--THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
Durwood, Inc. (the "Company" or "DI") is principally a holding company. Its
primary subsidiary, AMC Entertainment Inc. ("AMCE") through its wholly-owned
subsidiary, American Multi-Cinema, Inc. ("AMC"), is principally involved in the
operation of motion picture theatres throughout the United States. Other
subsidiaries of DI are engaged in real estate and investment activities.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Although these estimates are based on management's knowledge
of current events and actions it may undertake in the future, they may
ultimately differ from actual results.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of DI and all
subsidiaries, all of which are wholly-owned, except AMCE, in which the Company
owns 83.50% and 83.82% of AMCE common stock as of March 28, 1996, and March 30,
1995, respectively. 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 1996, 1995 and 1994 fiscal years each reflect a
52-week period. Fiscal year 1997 will reflect a 53-week period.
REVENUES AND FILM RENTAL COSTS
Revenues are recognized when admissions and concessions sales are received
at the theatres. Film rental costs are recognized based on the applicable box
office receipts and the terms of the film licenses.
CASH AND EQUIVALENTS
Cash and equivalents consists of cash on hand and temporary cash investments
with original maturities of less than thirty days. The Company invests excess
cash in deposits with major banks and in temporary cash investments. 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. Under the Company's cash
management system, checks issued but not presented to banks frequently result in
overdraft balances for accounting purposes and are classified within accounts
payable in the balance sheet. The amount of these checks included in accounts
payable as of March 28, 1996 was $22,848,000.
INVESTMENTS
Effective April 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 115 ("SFAS 115"), ACCOUNTING FOR CERTAIN
INVESTMENTS IN DEBT AND EQUITY SECURITIES.
F-58
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 1--THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Upon adoption, the Company classified its debt and equity securities as
available for sale which did not have a material impact to the consolidated
financial statements. In accordance with SFAS 115, prior years financial
statements have not been restated to reflect the change in accounting method.
Investment securities are classified as available for sale and are carried at
fair value. As of March 30, 1995, investments in debt securities are carried at
amortized cost which approximates market value due to the short-term nature of
the securities. The difference between cost and fair value, as adjusted for
income taxes, is classified as an unrealized gain in stockholders' equity.
For purpose of determining gross realized gains and losses, the cost of
securities sold is determined upon specific identification.
REFUNDABLE CONSTRUCTION ADVANCES
Included in receivables as of March 28, 1996, and March 30, 1995, is
$12,117,000 and $1,723,000, respectively, 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 construction or shortly after completion.
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 disposal are credited or charged to operations currently.
INTANGIBLE ASSETS
Intangible assets are recorded at cost and are comprised of lease rights,
which are amounts assigned to theatre leases assumed under favorable terms, and
location premiums on acquired theatres which are being amortized on a
straight-line basis over the estimated remaining useful life of the theatre.
Effective December 30, 1994, AMCE reduced the estimated lives of lease
rights and location premiums on certain smaller theatres to correspond to the
base terms of the theatre leases. This change in accounting estimate was made to
better match the estimated life of the intangible assets with the life of the
theatre due to AMCE's strategic plans to primarily own and operate larger
theatres. The effect of this change in estimate was to increase amortization
expense in 1995 by $1,542,000 and decrease net earnings by $876,000, or $5.44
per share. Accumulated amortization on intangible assets as of March 28, 1996,
and March 30, 1995, was $36,035,000 and $29,960,000, respectively.
F-59
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 1--THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER LONG-TERM ASSETS
Other long-term assets are comprised principally of costs incurred in
connection with the issuance of debt securities which are being amortized over
the respective life of the issue; investments in real estate; investments in
partnerships and corporate joint ventures accounted for under the equity method;
and long-term deferred income taxes.
MINORITY INTEREST
Minority interest represents the 16.50% and 16.18% separate public ownership
of the common stock of AMCE as of March 28, 1996, and March 30, 1995,
respectively, and the 100% separate public ownership of the preferred stock of
AMCE.
INCOME TAXES
Income taxes are calculated in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), ACCOUNTING FOR INCOME TAXES. The
statement requires that deferred income taxes 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.
The Company, pursuant to a tax sharing agreement, joined with AMCE in filing
a consolidated federal income tax return through March 3, 1994. Upon the
issuance of AMCE's Cumulative Convertible Preferred Stock, the Company no longer
owns the requisite 80% of AMCE. The Company has filed a separate consolidated
federal income tax return after that date. The provisions of the tax sharing
agreement will remain effective for any changes to taxable income for years
covered under such agreement.
EARNINGS PER SHARE
Earnings per share is computed by dividing the parent company net earnings
plus the Company's proportionate interest in AMCE's earnings for common shares
by the weighted average number of common shares outstanding. The average shares
used in the computations were 161,000 in 1996, 1995 and 1994. On a fully-diluted
basis, the Company's proportionate interest in AMCE's earnings are adjusted to
assume conversion of AMCE's $1.75 Cumulative Convertible Preferred Stock, if
dilutive. The average shares used in the computations were 161,000 in 1996, 1995
and 1994.
CHANGES IN ACCOUNTING PRINCIPLES
During the fourth quarter of 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. This Statement
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to those assets to be held
and used. In connection with the adoption of this Statement, the Company
reviewed the assets and related intangibles of its motion picture theatres for
impairment on a disaggregated basis. The expected future cash flows of certain
theatres, undiscounted and without interest charges, were less than the carrying
value of the assets. As a result, the Company recognized an impairment loss of
$1,799,000. The impairment loss represents the amount by which the carrying
value of the theatre assets, including intangibles, exceeded
F-60
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 1--THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the estimated fair value of those assets. The estimated fair value of assets was
determined as the present value of estimated expected future cash flows. The
loss is included in depreciation and amortization in the Consolidated Statements
of Operations.
PRESENTATION
Certain amounts have been reclassified from prior period consolidated
financial statements to conform with the current year presentation.
NOTE 2--ACQUISITION
Prior to May 28, 1993, Exhibition Enterprises Partnership ("EEP" or the
"Partnership") was a partnership jointly owned by a subsidiary of AMC and TPI
Entertainment, Inc. ("TPIE"), a wholly-owned subsidiary of TPI Enterprises, Inc.
("TPI"). On April 19, 1991, the Partnership acquired the ownership interest in
57 movie theatres (56 theatres previously purchased by TPIE from AMC in 1989 and
1990 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 50% ownership of EEP on the equity method.
On May 28, 1993, a subsidiary of AMC acquired a fifty percent partnership
interest in EEP from TPI for $17,500,000 in cash. The acquisition also required
the repayment of $37,000,000 in EEP bank indebtedness. The acquisition was
accounted for under the purchase method of accounting and EEP was consolidated,
for financial reporting purposes, as a wholly-owned subsidiary. Pro forma
financial information of the Company for 1994 has been omitted as the effect is
immaterial.
NOTE 3--INVESTMENTS
Investments as of March 28, 1996, consist of equity securities classified as
other long-term assets and are recorded at fair value. The gross unrealized gain
on investments as of March 28, 1996 was $953,000.
Investments as of March 30, 1995, consist of U.S. Treasury obligations with
contractual maturities within one year. The carrying value of these investments
approximates fair value, and therefore, there are no unrealized gains or losses.
Proceeds and gross realized gains from the sales in 1995 of equity
securities classified as other long-term assets as of March 30, 1995, were
$11,689,000 and $1,407,000, respectively.
F-61
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 4--PROPERTY
A summary of property is as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Property owned:
Land................................................ $ 34,673 $ 29,175
Buildings and improvements.......................... 139,616 98,925
Furniture, fixtures and equipment................... 205,761 173,370
Leasehold improvements.............................. 146,164 122,288
--------- ---------
526,214 423,758
Less--accumulated depreciation and amortization..... 209,714 188,635
--------- ---------
316,500 235,123
Property leased under capitalized leases:
Buildings........................................... 67,274 69,723
Less--accumulated amortization...................... 31,719 28,701
--------- ---------
35,555 41,022
--------- ---------
Net Property.......................................... $ 352,055 $ 276,145
--------- ---------
--------- ---------
</TABLE>
Included in property is $35,289,000 and $26,104,000 of construction in
progress as of March 28, 1996, and March 30, 1995, respectively.
F-62
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 5--OTHER ASSETS AND LIABILITIES
Other assets and liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Other current assets:
Prepaid rent........................................... $ 6,412 $ 5,974
Prepaid income taxes................................... 1,592 --
Deferred income taxes.................................. 3,207 3,330
Other.................................................. 2,486 2,250
--------- ---------
$ 13,697 $ 11,554
--------- ---------
--------- ---------
Other long-term assets:
Available for sale investments......................... $ 956 $ 3
Investments in real estate............................. 6,922 4,277
Investments in partnerships and corporate joint
ventures............................................. 1,208 1,431
Deferred charges, net.................................. 6,203 6,991
Deferred income taxes.................................. 24,115 23,055
Other.................................................. 7,434 3,657
--------- ---------
$ 46,838 $ 39,414
--------- ---------
--------- ---------
Accrued expenses and other liabilities:
Taxes other than income................................ $ 7,110 $ 5,860
Interest............................................... 841 3,893
Payroll and vacation................................... 6,149 5,794
Casualty claims and premiums........................... 2,034 2,268
Current income taxes payable........................... -- 693
Deferred income........................................ 11,634 10,070
Accrued bonus.......................................... 7,634 3,293
Other.................................................. 3,007 2,709
--------- ---------
$ 38,409 $ 34,580
--------- ---------
--------- ---------
</TABLE>
NOTE 6--BORROWINGS AND CAPITAL LEASE OBLIGATIONS
DEBT SECURITIES
On December 28, 1995, AMCE completed the redemption of $99,383,000 of its
outstanding 11 7/8% Senior Notes Due 2000 at a price of $1,117.90 per $1,000
principal amount and $95,096,000 of its outstanding 12 5/8% Senior Subordinated
Notes Due 2002 at a price of $1,144.95 per $1,000 principal amount. In addition,
the terms of the Indentures governing the remaining Senior and Senior
Subordinated Notes were amended to eliminate certain restrictive covenants.
Sources of funds for the redemption were cash and investments on hand and
borrowings on AMCE's new revolving credit facility. Premiums paid to redeem the
Senior and Senior Subordinated Notes, 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 $19,350,000, net of income tax benefit of
$13,400,000. The extraordinary loss reduced earnings per share by $98.73 for the
year (52 weeks) ended March 28, 1996.
F-63
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 6--BORROWINGS AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
The discounts on the remaining Senior and Senior Subordinated Notes 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 expense, following the interest method, over the
lives of the respective securities. Unamortized issuance costs of $175,000 and
$6,201,000 as of March 28, 1996, and March 30, 1995, respectively, are included
in other long-term assets.
LINE OF CREDIT
In connection with the redemption of Senior Notes and Senior Subordinated
Notes, AMCE entered into a new loan agreement to provide a revolving credit
facility of up to $425 million (the "Credit Facility"). The Credit Facility will
mature on December 26, 2002. The commitment thereunder will reduce by $25
million on each of September 30, 2001, December 31, 2001, March 31, 2002 and
June 30, 2002, and by $50 million on September 30, 2002. Under the Credit
Facility, AMCE has the option to borrow at rates based on either the bank's base
rate or LIBOR and is required to pay an annual commitment fee based on margin
ratios, as defined in the loan agreement, that could result in a rate of .25% or
.375% on the unused amount of the commitment.
The Credit Facility includes several financial covenants. AMCE is required
to maintain a maximum net indebtedness to consolidated earnings before interest,
taxes, depreciation and amortization ("EBITDA") ratio, as defined in the loan
agreement, of 4.50 to 1 during the first four years of the Credit Facility and a
ratio, as defined in the loan agreement, of 4.0 to 1 thereafter, and a minimum
cash flow coverage ratio of 1.40 to 1. In addition, the Credit Facility (i)
generally limits AMCE's capital expenditures and investments to $150 million,
subject to certain adjustments, per year, (ii) generally limits investments in
entities which are unrestricted subsidiaries, are not guarantors of the Credit
Facility, or are not wholly-owned subsidiaries of AMCE, to $100 million in the
aggregate, plus the greater of 25% of free cash flow or 50% of consolidated net
income (minus 100% of consolidated net income if negative), as defined in the
Credit Facility, and (iii) imposes limitations on the incurrence of additional
indebtedness, creation of liens, a change of control, transactions with
affiliates, mergers, investments, guaranties and asset sales. As of March 28,
1996, AMCE was in compliance with all financial covenants relating to the Credit
Facility.
Costs related to the establishment of the Credit Facility were capitalized
and are charged to interest expense over the life of the Credit Facility.
Unamortized issuance costs of $3,208,000 as of March 28, 1996 are included in
other long-term assets.
F-64
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 6--BORROWINGS AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
SUMMARY OF BORROWINGS
The Company is obligated under notes, capital leases and other indebtedness
as follows (in thousands):
<TABLE>
<CAPTION>
DUE IN TOTALS
RATES OF MATURITY FISCAL --------------------
INTEREST DATES 1997 1996 1995
------------- --------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
SENIOR DEBT
Credit Facility................... 5.8% December, 2002 $ -- $ 120,000 $ --
Senior notes...................... 11.875% August, 2000 -- 614 99,510
Capital lease obligations......... 7.25% to 20% Serially to 2,881 62,022 67,282
2025
Other indebtedness................ Various Various 23 658 1,350
----------- --------- ---------
Total senior debt............. 2,904 183,294 168,142
SUBORDINATED DEBT
Senior subordinated notes......... 12.625% August, 2002 -- 4,878 99,406
----------- --------- ---------
Total borrowings.............. $ 2,904 $ 188,172 $ 267,548
----------- --------- ---------
----------- --------- ---------
</TABLE>
Minimum annual payments required under existing capital lease obligations,
net present value thereof, and maturities of total indebtedness as of March 28,
1996, are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL LEASE OBLIGATIONS
-------------------------------------
<S> <C> <C> <C> <C> <C>
MINIMUM NET
LEASE LESS PRESENT OTHER
PAYMENTS INTEREST VALUE INDEBTEDNESS TOTAL
----------- ----------- ----------- ------------- ---------
1997............... $ 12,910 $ 10,029 $ 2,881 $ 23 $ 2,904
1998............... 13,022 9,461 3,561 26 3,587
1999............... 13,027 8,766 4,261 30 4,291
2000............... 12,392 8,040 4,352 34 4,386
2001............... 11,939 7,293 4,646 655 5,301
Thereafter......... 81,271 38,950 42,321 125,382 167,703
----------- ----------- ----------- ------------- ---------
Total.......... $ 144,561 $ 82,539 $ 62,022 $ 126,150 $ 188,172
----------- ----------- ----------- ------------- ---------
----------- ----------- ----------- ------------- ---------
</TABLE>
LETTER OF CREDIT
The Company maintains a letter of credit in the normal course of its
business. The unused portion of the letter of credit was $2,000,000 as of March
28, 1996.
F-65
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 7--STOCKHOLDERS' EQUITY
CAPITAL STOCK
The authorized capital stock of Durwood, Inc. consists of two classes of
stock. The Class A Common Stock (the "Common Stock") has a $100 par value with
150,000 shares authorized of which 120,000 shares are issued and outstanding.
The Class B Common Stock (the "Class B Stock") has a $100 par value with 50,000
shares authorized of which 40,784 shares are issued and outstanding. Both
classes of stock are entitled to one vote per share.
The Common Stock has preference as to dividends and liquidation. Annual
dividends are first paid on the Common Stock up to $25.50 per share before any
dividends are declared on the Class B Stock. If payment of dividends on the
Class B Stock reaches $25.50 per share, further dividends may be declared on the
Common Stock up to $19.50 per share before further dividends are paid on the
Class B Stock.
The Common Stock is entitled to receive $255 per share in the event of
liquidation (after payment of declared dividends) before any liquidating
distribution is made on the Class B Stock. If the liquidating distribution
reaches $255 per share on the Class B Stock, the Common Stock is entitled to
receive any remaining distributions up to another $195 per share. Afterward, any
remaining assets are distributed to holders of Class B Stock.
The Common Stock cannot be redeemed or purchased by the Company during the
lifetime of Stanley H. Durwood (President and sole Director of Durwood, Inc.),
thereafter, it can be redeemed or purchased by the Company at a price which
approximates its maximum liquidation value. The Class B Stock is nonredeemable.
CUMULATIVE CONVERTIBLE PREFERRED STOCK OF SUBSIDIARY
AMCE has authorized 10,000,000 shares of Cumulative Convertible Preferred
Stock (66 2/3 CENTS par value) (the "Convertible Preferred"). Dividends are
payable quarterly at an annual rate of $1.75 per share. The Convertible
Preferred has preference in liquidation in the amount of $25 per share plus
accrued and unpaid dividends. The Convertible Preferred is convertible at the
option of the holder into shares of AMCE Common Stock at a conversion price of
$14.50 per share of AMCE Common Stock, subject to change in certain events. In
lieu of conversion AMCE may, at its option, pay to the holder cash equal to the
then market value of the AMCE Common Stock. After March 15, 1997, AMCE may
redeem in whole or in part the Convertible Preferred at a redemption price
beginning at $26.00 per share, declining ratably to $25.00 per share after March
15, 2001.
STOCK OPTION AND INCENTIVE PLANS
The Company's primary subsidiary, AMCE, offers various stock option and
incentive plans as follows:
1983 PLAN
In June 1983, AMCE adopted a stock option plan (the "1983 Plan") for
selected employees. This plan provided for the grant of rights to purchase
shares of AMCE Common Stock under both incentive and non-incentive stock option
agreements. The number of shares which could be sold under the plan could not
exceed 750,000 shares. The 1983 Plan provided that the exercise price may not be
less than
F-66
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 7--STOCKHOLDERS' EQUITY (CONTINUED)
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. Pursuant to the terms of the
1983 Plan, no further options may be granted under this plan.
1984 PLAN
In September 1984, AMCE adopted a non-qualified stock option plan (the "1984
Plan"). This plan provided for the grant of rights to purchase shares of AMCE
Common Stock under non-qualified stock option agreements. The number of shares
which could be sold under the plan could not exceed 750,000 shares. The 1984
Plan provided that the exercise price will be determined by AMCE's Stock Option
Committee and that the options expire no later than ten years after date of
grant. Pursuant to the terms of the 1984 Plan, no further options may be granted
under this plan.
1994 PLAN
In November 1994, AMCE adopted a stock option and incentive plan (the "1994
Plan"). This plan provides for three basic types of awards: (i) grants of stock
options which are either incentive or non-qualified stock options, (ii) grants
of stock awards, which are either performance or restricted stock awards, and
(iii) performance unit awards. The number of shares of AMCE Common Stock which
may be sold or granted under the plan may not exceed 1,000,000 shares. The 1994
Plan provides that the exercise price for stock options 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.
Pertinent information relating to stock options is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
NUMBER OPTION PRICE NUMBER OPTION PRICE NUMBER OPTION PRICE
OF SHARES PER SHARE OF SHARES PER SHARE OF SHARES PER SHARE
----------- ------------- ----------- ------------ ----------- ------------
Outstanding at beginning of year......... 776,500 $9.25-$11.75 813,300 $4.67-$11.13 242,750 $4.67-$11.13
Granted.................................. 23,250 $14.50 36,500 $11.75 725,000 $9.25-9.375
Canceled................................. (229,750) $9.375-$14.50 (33,750) $9.375 --
Exercised................................ (82,500) $9.375-$11.13 (39,550) $4.67-$9.375 (154,450) $4.67-$9.00
----------- ----------- -----------
Outstanding at end of year............... 487,500 $9.25-$14.50 776,500 $9.25-$11.75 813,300 $4.67-$11.13
----------- ----------- -----------
----------- ----------- -----------
Exercisable at end of year............... 233,250 $9.25-$11.75 230,000 $9.25-$11.75 88,300 $4.67-$11.13
----------- ----------- -----------
----------- ----------- -----------
Available for grant at end of year....... 746,500 817,500 252,529
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Expiration dates for outstanding stock options as of March 28, 1996, are as
follows:
<TABLE>
<CAPTION>
NUMBER OPTION PRICE
FISCAL YEAR OF SHARES PER SHARE
- -------------------------------------------------- ----------- ------------
<S> <C> <C>
2004.............................................. 435,000 $9.25-$9.375
2005.............................................. 31,500 $11.75
2006.............................................. 21,000 $14.50
-----------
Total options outstanding......................... 487,500
-----------
-----------
</TABLE>
F-67
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 8--INCOME TAXES
Income taxes reflected in the Consolidated Statements of Operations are as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal....................................................... $ 5,194 $ 6,563 $ 7,814
State......................................................... 2,094 4,562 2,094
--------- --------- ---------
Total current............................................. 7,288 11,125 9,908
Deferred:
Federal....................................................... (1,429) (1,957) 390
State......................................................... (271) (300) 80
Change in valuation allowance................................. 372 (19,028) (5,570)
--------- --------- ---------
Total deferred............................................ (1,328) (21,285) (5,100)
--------- --------- ---------
Total provision................................................. 5,960 (10,160) 4,808
Tax benefit of extraordinary item--extinguishment of debt....... 13,400 -- --
--------- --------- ---------
Total provision before extraordinary item....................... $ 19,360 $ (10,160) $ 4,808
--------- --------- ---------
--------- --------- ---------
</TABLE>
The effective tax rate on income before extraordinary item and minority
interest was 42.2%, (40.3%) and 18.7% in 1996, 1995, and 1994, respectively. The
difference between the effective rate and the U.S. federal income tax statutory
rate of 35% is accounted for as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Tax on earnings before provision for income tax, extraordinary
item and minority interest at statutory rates................ $ 16,065 $ 8,818 $ 8,979
Add (subtract) tax effect of:
State income taxes, net of federal tax benefit............... 3,118 2,983 1,413
Change in valuation allowance................................ 372 (19,028) (5,570)
Income tax credits........................................... -- (1,282) --
Other, net................................................... (195) (1,651) (14)
--------- --------- ---------
Income tax provision........................................... $ 19,360 $ (10,160) $ 4,808
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-68
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 8--INCOME TAXES (CONTINUED)
The significant components of deferred income tax assets and liabilities as
of March 28, 1996, and March 30, 1995, are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
DEFERRED INCOME TAX DEFERRED INCOME TAX
---------------------- ----------------------
ASSETS LIABILITIES ASSETS LIABILITIES
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Accrued reserves and liabilities.................. $ 5,323 $ 343 $ 5,777 $ 297
Investments in partnerships....................... -- 419 -- 920
Capital leases.................................... 10,852 -- 10,767 --
Depreciation...................................... 7,842 -- 6,795 --
Deferred rents.................................... 5,266 -- 4,287 --
Tax credits carryforward.......................... 619 -- 563 --
State net operating loss carryforwards............ 868 -- 870 --
Other............................................. 2,089 1,882 1,792 728
--------- ----------- --------- -----------
Total............................................. 32,859 2,644 30,851 1,945
Less: Valuation allowance......................... 2,893 -- 2,521 --
--------- ----------- --------- -----------
Net............................................... 29,966 2,644 28,330 1,945
Less: Current deferred income taxes............... 3,702 495 3,952 622
--------- ----------- --------- -----------
Total noncurrent deferred income taxes............ $ 26,264 $ 2,149 $ 24,378 $ 1,323
--------- ----------- --------- -----------
--------- ----------- --------- -----------
Net noncurrent deferred income taxes.............. $ 24,115 $ 23,055
--------- ---------
--------- ---------
</TABLE>
SFAS 109 requires that a valuation allowance be provided 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. As of
March 28, 1996 and March 30, 1995, management believed it was more likely than
not that certain deferred tax assets related to tax credit carryforwards and
certain future deductible amounts would not be realized due to uncertainties as
to the timing and amounts of future taxable income. Accordingly, a valuation
allowance of $2,893,000 and $2,521,000 was established related to the deferred
tax assets of DI as of March 28, 1996 and March 30, 1995, respectively. Based
upon positive earnings of AMCE in recent years and the expectation that taxable
income will continue for the foreseeable future, management believes it is more
likely than not that AMCE will realize its deferred tax assets and, accordingly,
no valuation allowance has been provided as of March 28, 1996 and March 30,
1995, for AMCE's deferred tax assets.
NOTE 9--LEASES
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
F-69
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 9--LEASES (CONTINUED)
substantially all, taxes, maintenance, insurance and certain other operating
expenses. Assets held under capital leases are included in property.
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 12 new theatres with 200 screens have been finalized. The scheduled
completion of construction and theatre openings are at various dates during
fiscal 1997. The estimated minimum rental payments that may be required under
the terms of these leases total approximately $294 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 as of March 28, 1996 (in thousands):
<TABLE>
<S> <C>
Fiscal year:
1997................................................. $ 62,497
1998................................................. 73,549
1999................................................. 81,973
2000................................................. 81,755
2001................................................. 80,143
Thereafter........................................... 1,052,254
----------
Total minimum payments required........................ $1,432,171
----------
----------
</TABLE>
The Company records rent expense on a straight-line basis over the term of
the lease. Included in long-term liabilities as of March 28, 1996, and March 30,
1995, is $12,858,000 and $10,537,000, respectively, of deferred rent
representing PRO RATA future minimum rental payments for leases with scheduled
rent increases.
Rent expense is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Minimum rentals................................ $ 63,099 $ 58,374 $ 56,813
Percentage rentals based on revenues........... 2,354 1,970 1,968
Equipment rentals.............................. 876 647 692
--------- --------- ---------
$ 66,329 $ 60,991 $ 59,473
--------- --------- ---------
--------- --------- ---------
</TABLE>
NOTE 10--EMPLOYEE BENEFIT PLANS
Employees of the Company are included in the benefit plans offered to AMC
employees. Descriptions of these plans are as follows:
DEFINED BENEFIT PLANS
AMC sponsors a non-contributory defined benefit pension plan covering, after
a minimum of one year of employment, all employees age 21 years or older, who
have completed 1,000 hours of service in
F-70
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 10--EMPLOYEE BENEFIT PLANS (CONTINUED)
their first 12 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 (not exceeding 35) 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.
The following table sets forth the plan's funded status as of December 31,
1995 and 1994 (plan valuation dates) and the amounts included in the
Consolidated Balance Sheets as of March 28, 1996, and March 30, 1995 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation, including
vested benefits of $10,041 and $7,699.................................. $ 10,205 $ 7,856
--------- ---------
--------- ---------
Projected benefit obligation for service rendered to date................ $ 17,051 $ 12,512
Plan assets at fair value................................................ (9,580) (8,291)
--------- ---------
Projected benefit obligation in excess of plan assets.................... 7,471 4,221
Unrecognized net gain (loss) from past experience different from that
assumed and effects of changes in assumptions.......................... (1,509) 1,117
Unrecognized net obligation upon adoption being recognized over 15
years.................................................................. (1,588) (1,764)
--------- ---------
Pension liability included in Consolidated Balance Sheets................ $ 4,374 $ 3,574
--------- ---------
--------- ---------
</TABLE>
Net pension expense includes the following components (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Service cost...................................... $ 855 $ 1,261 $ 1,157
Interest cost..................................... 966 971 852
Actual return on plan assets...................... (1,630) 55 (864)
Net amortization and deferral..................... 1,096 (190) 698
--------- --------- ---------
Net pension expense............................... $ 1,287 $ 2,097 $ 1,843
--------- --------- ---------
--------- --------- ---------
</TABLE>
AMC also sponsors a non-contributory supplemental executive retirement plan
(the "SERP") which provides certain employees additional pension benefits. The
actuarial present value of accumulated plan benefits related to the SERP was
$379,000 and $224,000 as of March 28, 1996 and March 30, 1995, respectively,
which is reflected in the Consolidated Balance Sheet.
The weighted average discount rate used to measure the plans' projected
benefit obligation was 7.00%, 7.75% and 5.75% for 1996, 1995, and 1994,
respectively. The rate of increase in future compensation levels was 6.0% for
1996 and 1995 and 6.5% for 1994. The expected long-term rate of return on assets
was 8.5% for 1996, 1995 and 1994.
F-71
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 10--EMPLOYEE BENEFIT PLANS (CONTINUED)
A limited number of employees are covered by collective bargaining
agreements under which payments are made to a union-administered fund.
401(K) PLAN
AMC sponsors a voluntary thrift savings plan covering the same employees
eligible for the pension plan. Since inception of the savings plan, AMC has
matched 50% of each eligible employee's elective contributions, limited to 3% of
the employee's salary.
The Company's expense under the thrift savings plan was $1,032,000,
$1,015,000 and $907,000 for 1996, 1995, and 1994, respectively.
OTHER RETIREMENT BENEFITS
AMC 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. AMC 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 amounts included in the Consolidated Balance
Sheets as of March 28, 1996, and March 30, 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................................. $ 557 $ 791
Fully eligible active plan participants.................................. 438 332
Other active plan participants........................................... 1,292 1,397
--------- ---------
Accumulated postretirement benefit obligation.............................. 2,287 2,520
Unrecognized net obligation upon adoption being recognized over 20 years... (747) (797)
Unrecognized loss.......................................................... 105 (521)
--------- ---------
Postretirement benefit liability included in the Consolidated Balance
Sheets................................................................... $ 1,645 $ 1,202
--------- ---------
--------- ---------
</TABLE>
F-72
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 10--EMPLOYEE BENEFIT PLANS (CONTINUED)
Postretirement expense includes the following components (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Service cost........................................... $ 192 $ 188 $ 175
Interest cost.......................................... 208 202 169
Net amortization and deferral.......................... 66 66 94
----- ----- -----
Postretirement expense................................. $ 466 $ 456 $ 438
----- ----- -----
----- ----- -----
</TABLE>
For measurement purposes, the annual rate of increase in the per capita cost
of covered health care benefits assumed for 1996 was 8.5% for medical and 6.0%
for dental. The rates were assumed to decrease gradually to 5.0% for medical and
3.0% for dental at 2020 and remain at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amounts 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
March 28, 1996, by $456,000 and the aggregate of the service and interest cost
components of postretirement expense for 1996 by $144,000. The weighted-average
discount rate used in determining the accumulated postretirement benefit
obligation was 7.00%, 7.75% and 7.25% for 1996, 1995, and 1994, respectively.
NOTE 11--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 financial condition or
results of operations of the Company.
NOTE 12--FUTURE DISPOSITION OF ASSETS
The Company has provided reserves for estimated losses from discontinuing
the operation of fast food restaurants, for theatres which have been or are
expected to be closed and for other future dispositions of assets.
In conjunction with the opening of certain new theatres in fiscal 1986
through fiscal 1988, the Company expanded its food services by leasing
additional space adjacent to those theatres 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 twelve years. As of March 28,
1996, the base rents aggregate approximately $884,000 annually, and $8,314,000
over the remaining term of the leases. As of March 28, 1996, the Company has
subleased approximately 77% of the space with remaining terms ranging from five
months to 144 months. Non-cancellable subleases currently aggregate
approximately $650,000 annually, and $2,730,000 over the remaining term of the
subleases.
As of March 28, 1996, the Company remains obligated under lease commitments
for two closed theatres and for a closed office with remaining terms of up to
five years. The current leasing costs of these closed locations approximates
$354,000 annually, and $951,000 over the remaining term of the
F-73
<PAGE>
DURWOOD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS (52 WEEKS) ENDED MARCH 28, 1996, MARCH 30, 1995, AND MARCH 31, 1994
NOTE 12--FUTURE DISPOSITION OF ASSETS (CONTINUED)
leases. Non-cancellable subleases currently aggregate approximately $58,000
annually, and $92,000 over the remaining term of the subleases.
NOTE 13--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 was practicable to estimate
that value.
The carrying value of cash and equivalents and investments in debt
securities approximates fair value because of the short duration of those
instruments. The fair value of available for sale investments was based upon
quoted market prices. The fair value of 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 are as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
------------------------ --------------------
<S> <C> <C> <C> <C>
CARRYING CARRYING FAIR
AMOUNT FAIR VALUE AMOUNT VALUE
--------- ------------- --------- ---------
Financial assets:
Cash and equivalents....................... $ 12,888 $ 12,888 $ 73,610 $ 73,610
Investments................................ -- -- 69,144 69,144
Available for sale investments............. 956 956 3 3
Financial liabilities:
Cash overdrafts............................ $ 22,848 $ 22,848 $ -- $ --
Corporate borrowings....................... 126,150 126,992 200,266 215,996
</TABLE>
F-74
<PAGE>
ANNEX I
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization (the "Agreement") is
made as of March 31, 1997 by AMC Entertainment Inc., a Delaware corporation
("AMCE"), and Durwood, Inc., a Missouri corporation ("DI"). This Agreement
constitutes a binding contract between AMCE and DI in accordance with the terms
hereof and the applicable provisions of both the Delaware General Corporation
Law and The General and Business Corporation Law of Missouri. The Agreement is
entered into for substantial business reasons which are more fully described in
the statements of actions taken by the respective Boards of Directors of the
parties whereby the Agreement was authorized, and the parties intend that the
merger contemplated by the Agreement shall constitute a reorganization in which
no taxable income, gain or loss is recognized pursuant to Section 368(a)(1)(A)
and related sections of the Internal Revenue Code of 1986, as amended (the "Tax
Code"). The terms and conditions of the Agreement are as follows:
WITNESSETH:
WHEREAS, AMCE is a corporation duly organized and validly existing under the
laws of the State of Delaware, with authorized capital stock consisting of (i)
45,000,000 shares of Common Stock, par value 66 2/3 CENTS per share ("AMCE
Common Stock"), 6,549,489 shares of which are issued and outstanding, (ii)
30,000,000 shares of Class B Stock, par value 66 2/3 CENTS per share ("AMCE
Class B Stock"), 11,157,000 shares of which are issued and outstanding, and
(iii) 10,000,000 shares of Preferred Stock, par value 66 2/3 CENTS per share
("AMCE Preferred Stock"), of which 3,323,600 shares of $1.75 Cumulative
Convertible Preferred Stock ("AMCE Convertible Preferred Stock") are issued and
outstanding; and
WHEREAS, DI is a corporation duly organized and validly existing under the
laws of the State of Missouri, with authorized capital stock consisting of (i)
150,000 shares of Class A Stock, par value $100 per share ("DI Class A Stock"),
120,000 shares of which are issued and outstanding, and (ii) 50,000 shares of
Class B Stock, par value $100 per share ("DI Class B Stock"), 40,784 shares of
which are issued and outstanding; and
WHEREAS, prior to the Merger (as defined herein) becoming effective, DI has
advised AMCE that DI intends to convert 6,141,343 shares of AMCE Class B Stock
into a like number of shares of AMCE Common Stock pursuant to the terms of the
AMCE Class B Stock; and
WHEREAS, the Special Committee of the Board of Directors of AMCE composed of
directors who are not officers or employees of AMCE formed for the purpose of
evaluating and negotiating the terms of the Merger (the "Special Committee") has
recommended that the full Board of Directors of AMCE approve and adopt the
Agreement and such Board has reviewed, approved and adopted this Agreement and
deemed it advisable and in the best interests of AMCE that DI be merged into and
with AMCE pursuant to the terms and conditions set forth herein; and
WHEREAS, the Board of Directors of DI has reviewed and approved this
Agreement and deems it advisable and in the best interests of DI that DI be
merged into and with AMCE pursuant to the terms and conditions set forth herein;
and
WHEREAS, the Boards of Directors of AMCE and DI have directed that this
Agreement be submitted to the stockholders of AMCE and DI, respectively, for
their approval;
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NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
and covenants set forth herein, the parties hereto do hereby agree and covenant
as follows:
I. THE MERGER
1.1. NAMES OF CORPORATIONS. The names of the corporations proposing to
merge are:
AMC Entertainment Inc.
and Durwood, Inc.
1.2. MERGER. At the Effective Time (as defined below), subject to the
terms and conditions of this Agreement and in accordance with applicable law,
AMCE and DI shall merge into a single corporation by DI merging with and into
AMCE (the "Merger").
1.3. NAME OF SURVIVING CORPORATION. The name of AMCE, which is to be the
surviving corporation, shall not be changed as a result of the Merger.
1.4. CLOSING; EFFECTIVE TIME. Unless this Agreement has been terminated
under Section 6.4, a closing (the "Closing") shall take place as promptly as
practicable following satisfaction or waiver of the last of the conditions set
forth in Articles IV and V. The Merger shall become effective immediately upon
the filing of this Agreement, or a certificate of merger in lieu thereof, with
the Secretary of State of Delaware in accordance with applicable law. The time
of such effectiveness is referred to herein as the "Effective Time". At the
Closing, or as soon thereafter as practicable, the parties shall cause the
Merger to be consummated as provided in this Section 1.4.
1.5. EFFECT OF MERGER. (a) At the Effective Time, the separate existence
of DI shall cease. The existence of AMCE shall continue unaffected and
unimpaired by the Merger, and AMCE shall after the Effective Time have all of
the rights, privileges, immunities and powers and shall be subject to all of the
duties and liabilities of a corporation organized under the Delaware General
Corporation Law.
(b) At the Effective Time, AMCE shall have and thereafter possess all of the
rights, privileges, immunities, powers and franchises, of a public as well as of
a private nature, of each of the merging corporations, and all property, real,
personal and mixed, and all debts due on whatever account, including
subscriptions to shares, and all other choses in action, and every other
interest of or belonging to or due to either of the merging corporations shall
be taken and deemed to be transferred to and vested or remain in AMCE without
further act or deed (and the title to any real estate, or any interest therein,
vested in either of the merging corporations shall not revert or be in any way
impaired by reason of the Merger).
(c) AMCE shall, upon the Effective Time and thereafter, be responsible and
liable for all the liabilities and obligations of each of the merging
corporations, and any claim existing or action or proceeding pending by or
against either of such corporations may be prosecuted to judgment as if the
Merger had not taken place or, in the case of DI, AMCE may be substituted in
place of DI. Neither the rights of creditors nor any liens upon the property of
either of the merging corporations shall be impaired by the Merger.
1.6. CONVERSION OF SHARES. (a) Prior to the Effective Time, DI shall
convert 6,141,343 shares of AMCE Class B Stock into a like number of shares of
AMCE Common Stock.
(b) At the Effective Time, by virtue of the Merger and without any action on
the part of AMCE, DI or the holder of any of the following securities:
(i) Each share of AMCE Common Stock issued and outstanding immediately
prior to the Effective Time, other than those shares owned by DI, and each
share of AMCE Common Stock held in the treasury of AMCE immediately prior to
the Effective Time, shall continue to be one share of AMCE Common Stock.
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(ii) Each share of AMCE Class B Stock issued and outstanding immediately
prior to the Effective Time, other than those shares owned by DI, and each
share of AMCE Class B Stock held in the treasury of AMCE immediately prior
to the Effective Time, shall continue to be one share of AMCE Class B Stock.
(iii) Each share of AMCE Convertible Preferred Stock issued and
outstanding immediately prior to the Effective Time shall continue to be one
share of AMCE Convertible Preferred Stock.
(iv) Each other share of AMCE Preferred Stock, if any, issued and
outstanding immediately prior to the Effective Time shall continue to be one
share of AMCE Preferred Stock.
(v) Each share of AMCE Common Stock and AMCE Class B Stock which
immediately prior to the Effective Time is owned of record by DI shall
continue to be one share of AMCE Common Stock and AMCE Class B Stock,
respectively, and shall be held in the treasury of AMCE until the Board of
Directors of AMCE determines otherwise.
(vi) Each share of DI Class A Stock which immediately prior to the
Effective Time is owned of record by Harvard College ("Harvard") shall be
converted into and become 32.142857 shares of AMCE Common Stock.
(vii) Each share of DI Class A Stock issued and outstanding immediately
prior to the Effective Time, other than those shares owned of record by
Harvard, shall be converted into and become 32.142857 shares of AMCE Class B
Stock.
(viii) Each share of DI Class B Stock which immediately prior to the
Effective Time is owned of record by Stanley H. Durwood, individually, as
Trustee of the 1992 Durwood, Inc. Voting Trust dated December 12, 1992 (the
"1992 Trust") and as Trustee under the Stanley H. Durwood Trust Agreement
dated August 14, 1989 (the "1989 Trust"), shall be converted into and become
243.767528 shares of AMCE Class B Stock.
(ix) Each share of DI Class B Stock which immediately prior to the
Effective Time is owned of record by any person other than Stanley H.
Durwood, the 1992 Trust or the 1989 Trust shall be converted into and become
243.767341 shares of AMCE Common Stock.
(x) Each share of DI Class A Stock and DI Class B Stock held in the
treasury of DI shall be canceled and retired and no payment shall be made
with respect thereto.
(c) At the Effective Time, the holders of certificates representing shares
of DI Class A Stock and DI Class B Stock outstanding at such time shall cease to
have any rights with respect to such Stock and such holders' sole rights shall
be to receive the number of shares of AMCE Common Stock or AMCE Class B Stock
into which their shares of DI Class A Stock or DI Class B Stock shall have been
converted by the Merger as provided herein.
(d) No fraction of a share of AMCE Common Stock and AMCE Class B Stock shall
be issued in connection with the Merger but in lieu thereof each holder of
shares of DI Class A Stock and DI Class B Stock otherwise entitled to a fraction
of a share of AMCE Common Stock or AMCE Class B Stock shall be paid by AMCE, as
a convenience and not as a separately bargained for consideration, an amount of
cash equal to such fraction multiplied by the average of the high and low
reported prices of one share of AMCE Common Stock on the AMEX (as defined in
Section 2.1(n)) on the trading day immediately preceding the Effective Time. No
such holder shall be entitled to dividends or other rights in respect of any
fractional share.
1.7. EXCHANGE OF CERTIFICATES. After the Effective Time, each holder of a
certificate theretofore representing outstanding shares of DI Class A Stock or
DI Class B Stock, upon surrender of the same to AMCE's transfer agent (the
"Transfer Agent"), shall be entitled to receive in exchange therefor
certificates representing the number of full shares of AMCE Common Stock or AMCE
Class B Stock into which
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the shares of DI Class A Stock or DI Class B Stock have been converted pursuant
to the provisions of Section 1.6 of this Agreement.
As soon as practicable after the Effective Time, the Transfer Agent shall
send a notice and transmittal form to each record holder of an outstanding
certificate which prior to the Effective Time evidenced shares of DI Class A
Stock or DI Class B Stock which shall have been converted into AMCE Common Stock
or AMCE Class B Stock pursuant to the provisions of Section 1.6 of this
Agreement, advising such stockholder of the terms of such conversion and the
procedure for surrendering to the Transfer Agent such certificate in exchange
for certificates evidencing AMCE Common Stock or AMCE Class B Stock. Until so
surrendered, each outstanding certificate which, prior to the Effective Time,
represented DI Class A Stock or DI Class B Stock (other than shares held in the
treasury of DI) will be deemed for all corporate purposes of AMCE to evidence
ownership of the number of full shares of AMCE Common Stock or AMCE Class B
Stock into which the shares of DI Class A Stock or DI Class B Stock represented
thereby were converted; provided, however, that, until outstanding certificates
formerly representing DI Class A Stock or DI Class B Stock are so surrendered,
no dividend or other distribution payable to holders of record of AMCE Common
Stock or AMCE Class B Stock as of any date subsequent to the Effective Time
shall be paid to the holders of such outstanding certificates in respect
thereof. Upon surrender of certificates of DI Class A Stock or DI Class B Stock,
there shall be paid to the record holder of the certificates of AMCE Common
Stock or AMCE Class B Stock, respectively, issued in exchange therefor (i) at
the time of such surrender, the amount of dividends theretofore payable with
respect to such full shares of AMCE Common Stock or AMCE Class B Stock as of any
date subsequent to the Effective Time which have not yet been paid to a public
official pursuant to abandoned property, escheat or similar laws and (ii) at the
appropriate payment date, the amount of dividends with a record date after the
Effective Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such shares of AMCE Common Stock or AMCE Class B Stock.
No interest shall be payable with respect to the payment of such dividends on
surrender of outstanding certificates. If any certificate evidencing shares of
AMCE Common Stock or AMCE Class B Stock is to be issued in a name other than
that in which the certificate surrendered in exchange therefor is registered, it
shall be a condition of the issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and that
the person requesting such exchange pay to the Transfer Agent any transfer or
other taxes required by reason of the issuance of a Certificate for shares of
AMCE Common Stock or AMCE Class B Stock in any name other than that of the
registered holder of the certificate surrendered or establish to the
satisfaction of the Transfer Agent that such tax has been paid or is not
payable.
1.8. CHANGES IN CAPITALIZATION. If, between the date of this Agreement and
the Effective Time, the outstanding shares of AMCE Common Stock or AMCE Class B
Stock shall be changed into a different number of shares or a different class by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or a stock dividend thereon shall be
declared with a record date within such period, the number of shares of AMCE
Common Stock or AMCE Class B Stock into which the shares of DI Class A Stock or
DI Class B Stock will be converted shall be appropriately adjusted.
1.9. CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS, OFFICERS. The
Certificate of Incorporation and By-laws of AMCE shall not be changed by or as a
result of the Merger. The directors and officers of AMCE prior to the Merger
shall continue in such offices after the Merger.
1.10. FURTHER ACTION. Each of the merging corporations shall take all
actions and do all things necessary, proper, or advisable under the laws of the
States of Delaware and Missouri to consummate and make effective the Merger
contemplated herein; provided, the binding effect of this Agreement shall be
subject to its approval by the requisite vote of the stockholders of each of the
merging corporations, or to its approval by the written consent of the
stockholders of each of the merging corporations in lieu of a vote, and to the
approval by the holders of a majority of the outstanding shares of AMCE Common
Stock (other than DI, the 1992 Trust, the 1989 Trust, members of the Durwood
Family (as defined below),
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spouses of the members of the Durwood Family, children of members of the Durwood
Family sharing the same household, and directors and officers of AMCE (the
"Durwood Stockholders")) present and voting at the AMCE Stockholder Meeting (as
hereinafter defined), in each case, in accordance with the requirements of the
laws of the States of Delaware and Missouri, respectively. As used herein, the
"Durwood Family" shall mean Stanley H. Durwood, Carol D. Journagan, Edward D.
Durwood, Thomas A. Durwood, Elissa D. Grodin, Brian H. Durwood and Peter J.
Durwood.
II. REPRESENTATIONS AND WARRANTIES
2.1. REPRESENTATIONS AND WARRANTIES OF DI. DI represents and warrants to
AMCE as follows:
(a) ORGANIZATION AND QUALIFICATION. DI is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Missouri, has all necessary power and authority to own its properties and
to carry on its business as now owned and operated by it, and is duly
qualified to do business and is in good standing as a foreign corporation in
each state where the nature of its business or of its properties makes such
qualification necessary.
(b) CAPITAL STOCK. The authorized capital stock of DI consists of
150,000 shares of DI Class A Stock, of which 120,000 shares are issued and
outstanding, and 50,000 shares of DI Class B Stock, of which 40,784 shares
are issued and outstanding. All outstanding shares of DI Class A Stock and
DI Class B Stock have been duly authorized, validly issued, fully paid and
nonassessable and have not been issued in violation of any preemptive rights
or of any federal or state securities law. Immediately prior to the
Effective Time, there will be no more than 120,000 shares of DI Class A
Stock and 40,784 shares of DI Class B Stock issued and outstanding. There
are no outstanding subscriptions, options, rights, warrants, convertible
securities or other agreements or commitments obligating DI to issue, pledge
or to transfer from treasury any additional shares of its capital stock of
any class. Neither DI nor any Subsidiary has agreed to register the sale of
any securities under the Securities Act (as hereinafter defined).
(c) SUBSIDIARIES. Schedule 2.1(c) contains a true and complete list of
all DI's subsidiaries (other than AMCE and its subsidiaries) (each such
subsidiary of DI shall hereinafter separately be called a "Subsidiary" and
collectively called the "Subsidiaries") as of the date hereof. As of the
date hereof, except as set forth on Schedule 2.1(c), DI does not own
directly or indirectly, any interest or investment (whether equity or debt)
in any corporation, partnership, business, trust or other entity, except the
Subsidiaries. Prior to the Effective Time, DI's entire interest in all of
the Subsidiaries shall be distributed to DI's stockholders in accordance
with the DI Pre-Merger Action Plan attached hereto as Exhibit A (the
"Pre-merger Action Plan"). At the Effective Time, DI will not own, directly
or indirectly, any interest or investment (whether equity or debt) in any
corporation, partnership, business, trust or other entity other than AMCE
Common Stock and AMCE Class B Stock.
(d) FINANCIAL STATEMENTS. DI has previously furnished to AMCE the
consolidated balance sheet of DI and its Subsidiaries as of March 28, 1996,
together with the related statements of income, stockholders equity and cash
flow, for the fiscal year ending on such date, certified by Coopers &
Lybrand L.L.P., independent certified public accountants, whose opinions
with respect to such consolidated financial statements are included
therewith. DI has also previously furnished to AMCE the unaudited
consolidated balance sheet of DI and its Subsidiaries as of December 26,
1996, together with the related unaudited statement of income for the
39-week period ending on such date, certified by the President of DI. The
foregoing financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied (except as may
be indicated therein or on the notes thereto and except that the unaudited
interim financial statements do not include footnote disclosures) and fairly
present the consolidated financial position and consolidated results of the
operations of DI and its Subsidiaries as at and for the dates and periods
shown thereon, subject, in the case of the unaudited interim financial
statements, to normal year-end audit adjustments.
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(e) NO MATERIAL CHANGE. Except as set forth on Schedule 2.1(e) and in
the Pre-Merger Action Plan, since December 26, 1996, there has not been any:
(i) Material transaction by DI or any of its Subsidiaries;
(ii) Capital expenditures by DI or any of its Subsidiaries;
(iii) Material adverse change in the financial condition,
liabilities, assets, business or prospects of DI or of DI and its
Subsidiaries taken as a whole;
(iv) Any unfair or unlawful employment or labor practice, claim or
charge, organizing effort, or conduct which might materially interfere
with or disrupt operations of DI or of DI and its Subsidiaries taken as a
whole;
(v) Declaration, setting aside or payment of a dividend or other
distribution in respect of the capital stock of DI or any of its
Subsidiaries;
(vi) Direct or indirect redemption, purchase or other acquisition by
DI or any of its Subsidiaries of any shares of such capital stock;
(vii) Increase in the salary or other compensation payable or to
become payable by DI or any of its Subsidiaries to any of such
corporation's officers or directors, or the declaration, payment, or
commitment or obligation of any kind for the payment by DI or any of its
Subsidiaries of a bonus or other additional salary or compensation to any
such person;
(viii) Sale or transfer of any asset of DI or any of its
Subsidiaries;
(ix) Loan by DI or any of its Subsidiaries to any person or entity
or guaranty by DI or any of its Subsidiaries of any loan;
(x) Mortgage, pledge or other encumbrance of any asset of DI or any
of its Subsidiaries;
(xi) Waiver or release of any right or claim of DI or any of its
Subsidiaries;
(xii) Any change in any accounting principle or election used for
financial reporting or tax purposes by DI or any Subsidiary; or
(xiii) Agreement by DI or any of its Subsidiaries to do any of the
things described in the foregoing clauses.
(f) LIABILITIES. At the Effective Time DI will not have any material
debt, liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due.
(g) TAXES. Each of DI and its Subsidiaries has (i) filed all returns,
declarations, reports, information returns and statements of whatsoever kind
("Tax Returns") in respect of all federal, state, local, foreign and other
taxes, including interest, penalties and additions to tax with respect
thereto ("Taxes"), that they are required to file through the date hereof
and shall prepare and file all such Tax Returns required to be filed after
the date hereof and on or before the Effective Time and (ii) paid or
provided for the payment of all Taxes due and owing for the periods covered
by such Tax Returns and all Taxes, if any, required to be paid for which no
return is required. True copies of all federal, state, local and foreign Tax
Returns relating to DI's last three taxable years ended March 28, 1996 have
been delivered to AMCE. Neither DI nor any Subsidiary has been audited by
the Internal Revenue Service or any state, local or foreign taxing
jurisdiction since the year ended April 1, 1993, and no agreements or
consents extending the period during which any Taxes may be assessed or
collected are now in force. As of the date hereof, no material adjustments
have been proposed by the Internal Revenue Service or by any other taxing
authority with respect to any open tax years or tax returns.
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(h) PROPERTIES AND ASSETS. DI and its Subsidiaries do not own or hold
any interest in any real property or tangible assets. At the Effective Time,
DI will have no right, title or interest in any property or assets (other
than AMCE Common Stock and AMCE Class B Stock).
(i) LEASES. Except as set forth on Schedule 2.2(i), DI and its
Subsidiaries are not parties to or bound by (whether as lessor, lessee or
guarantor) any lease of real property or personalty.
(j) ACCURATE BOOKS AND RECORDS. The books and records of DI and its
Subsidiaries contain a complete and accurate description of all transactions
of DI and the Subsidiaries.
(k) INSURANCE. All premiums due and payable prior to the date hereof
on the life insurance policies reflected in Schedule 2.1(k) ("Life Insurance
Policies") have been paid and AMCE will have no liability for premiums on
such Life Insurance Policies. All outstanding loans made under the Life
Insurance Policies and the net cash surrender value thereof, net of policy
loans, as of December 31, 1996 are set forth on Schedule 2.1(k).
(l) COMPLIANCE WITH LAW. DI and its Subsidiaries have substantially
complied with, and are not in violation of, any applicable federal, state or
local statutes, laws or regulations (including, without limitation, any
applicable building, zoning or other law, ordinance or regulation).
(m) LITIGATION. (i) There is no suit, action, arbitration, or legal,
administrative or other proceeding or governmental investigation pending, or
to the best knowledge of DI and its Subsidiaries, threatened against DI or
any of its Subsidiaries, (ii) neither DI nor any of its Subsidiaries is in
default with respect to any order, writ, court, department, agency or
instrumentality applicable to it, and (iii) neither DI nor any of its
Subsidiaries is presently engaged in any legal action to recover monies due
or damages sustained by it.
(n) NO CONSENTS; NO DEFAULT. Except as may be required by the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act"), the Securities Act of 1933, as amended, and
the rules and regulations thereunder (the "Securities Act"), state
securities laws, The General and Business Corporation Law of Missouri, the
Delaware General Corporation Law and the rules and regulations of the
American Stock Exchange , Inc. (the "AMEX") and the Pacific Stock Exchange,
respectively, there is no requirement applicable to DI or any of the
Subsidiaries to make any filing with, or to obtain any permit,
authorization, consent or approval of, any governmental or regulatory
authority as a condition to the lawful consummation by DI of the
transactions contemplated by this Agreement and the Pre-Merger Action Plan.
Neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated in this Agreement and the Pre-Merger Action
Plan will result in or constitute any of the following:
(i) A conflict or breach of any provisions of the Articles of
Incorporation or By-laws (or other similar governing instruments) of DI
or any of the Subsidiaries;
(ii) A default or an event that, with notice or lapse of time or
both, would be a default, under any license, lease, franchise, promissory
note, conditional sales contract, commitment, indenture, mortgage, deed
of trust or other agreement, instrument or arrangement to which DI or any
of its Subsidiaries is a party or by which DI, its Subsidiaries or any of
their respective properties may be bound, or a violation of any
applicable law or governmental regulation;
(iii) An event that would permit any party to terminate any
agreement or to accelerate the maturity of any indebtedness or other
obligation of DI or any of its Subsidiaries; or
(iv) The creation or imposition of any lien, charge or encumbrance
on any of the properties of DI or any of its Subsidiaries.
(o) AUTHORIZATION; VALID AGREEMENT. DI has the corporate power and
authority to execute and deliver this Agreement and, subject to receiving
the requisite stockholder approval, to perform
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its obligations hereunder. The execution and delivery of this Agreement by
DI has been duly authorized by its Board of Directors and no further
corporate authorization is required for the consummation of the transactions
contemplated hereby or by the Pre-Merger Action Plan, except for the
approval of the stockholders of DI as required under The General and
Business Corporation Law of Missouri. This Agreement has been duly and
validly executed and delivered by DI and constitutes a valid and binding
agreement of DI, enforceable against DI in accordance with its terms, except
as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or other similar laws affecting creditors' rights generally and equitable
principles.
(p) NO MATERIAL MISSTATEMENTS OR OMISSIONS. None of the
representations or warranties made by DI in this Agreement and no statement
by DI or, to the best knowledge of DI, any other person, contained in any
document, certificate or other writing furnished by DI to AMCE contains any
untrue statement of a material fact or omits any material fact necessary to
make the statements herein or therein, in light of the circumstances under
which they were made, not misleading.
(q) FINDERS AND INVESTMENT BANKERS. None of DI, any of its
Subsidiaries or any of such corporations' respective officers or directors
has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the
transactions contemplated hereby.
(r) EMPLOYEE BENEFITS.
(i) There are no Company Benefit Plans (as defined below). Neither
DI nor any of its Subsidiaries nor any ERISA Affiliate (as defined below)
of either DI or any of its Subsidiaries maintains, sponsors, contributes
to or is required to contribute to an Employee Benefit Plan (as defined
below) or a fringe benefit plan subject to Section 6039D of the Tax Code,
and neither DI nor any of its Subsidiaries nor any ERISA Affiliate of
either DI or any of its Subsidiaries has any liability (contingent or
otherwise) arising under or with respect to any such plan.
(ii) (A) None of the employees of DI or any Subsidiary is
represented in his or her capacity as an employee of such company by any
labor organization; (B) neither DI or any Subsidiary has recognized any
labor organization nor has any labor organization been elected as the
collective bargaining agent of any of their employees, nor has DI or any
Subsidiary signed any collective bargaining agreement or union contract
recognizing any labor organization as the bargaining agent of any of
their employees; and (C) as of the date hereof, there is no active or
current union organization activity involving the employees of DI or any
Subsidiary.
(iii) For the purposes of this Agreement: (A) the term "Company
Benefit Plan" shall include all employee benefit arrangements or payroll
practices, including without limitation, severance pay, sick leave,
vacation pay, salary continuation for disability, scholarship programs,
stock option or restricted stock plans maintained by DI or any Subsidiary
(whether formal or informal, whether for the benefit of a single
individual or for more than one individual and whether for the benefit of
current or former employees or their beneficiaries) on behalf of DI (or
any Subsidiary) or any of the employees of DI (or any Subsidiary) or to
which or under which or pursuant to which DI (or any Subsidiary) has
contributed or is obligated to make contributions on behalf of DI (or any
Subsidiary) or any employees of DI (or any Subsidiary); (B) the term
"Employee Benefit Plan" shall have the meaning ascribed to such term by
section 3(3) of ERISA; (C) the term "ERISA" shall refer to the Employee
Retirement Income Security Act of 1974, as amended; and (D) the term
"ERISA Affiliate" shall refer to any trade or business (whether or not
incorporated) under common control with any person within the meaning of
Section 414 (b), (c), (m) or (o) of the Tax Code) (provided that AMCE and
its subsidiaries shall not be deemed to be ERISA Affiliates of DI).
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(iv) Schedule 2.1(r) sets forth a true and complete list of all
employees of DI and its Subsidiaries and their current rates of
compensation.
(s) CONTRACTS AND AGREEMENTS. Schedule 2.1(s) identifies each
contract, lease, guarantee or other agreement (a "Contract") in effect on
the date of this Agreement to which DI or any of its Subsidiaries is a party
or by which any of their assets or properties are bound. None of DI or the
Subsidiaries are in default under any of such contracts, agreements,
understandings or leases and each is enforceable against the other party
thereto in accordance with its terms. There have been delivered or made
available to AMCE true and complete copies of all of the Contracts. At the
Effective Time, the only Contract binding upon DI will be this Agreement.
(t) ADEQUACY OF RESERVES. Any reserves set forth on the consolidated
financial statements of DI for the 39-week period ended December 26, 1996,
are adequate and sufficient to cover all liabilities with respect to which
such reserves were established.
(u) AGREEMENTS WITH INSIDERS. Set forth in Schedule 2.1(u) is a true
and complete list of every Contract to which DI or any Subsidiary is a party
or bound or by which any of the assets or properties of DI or any Subsidiary
is bound and (i) to which any Insider (as defined below) or Affiliate (as
defined below) of DI is a party or (ii) which benefits any Insider or
Affiliate of DI. For purposes of this Agreement:
(A) "INSIDER" shall mean each Durwood Stockholder or any Associate or
Relative of a Durwood Stockholder;
(B) an "AFFILIATE" of a specified person is a person that directly or
indirectly, though one or more intermediaries, controls, or is controlled
by, or is under common control with, the person specified (other than
AMCE and its majority-owned subsidiaries);
(C) the term "ASSOCIATE" used to indicate a relationship with any
person means (I) any corporation, partnership, joint venture or other
entity of which such person is an officer or partner or is directly or
indirectly, through one or more intermediaries, the beneficial owner of
10% or more of (1) any class or type of equity securities or other
profits interest or (2) the combined voting power of interests ordinarily
entitled to vote for management or otherwise (other than AMCE and its
majority-owned subsidiaries), and (II) any trust or other estate in which
such person has a substantial beneficial interest or as to which such
person serves as trustee or in a similar fiduciary capacity; and
(D) a "RELATIVE" of a person shall mean such person's spouse, such
person's parents, sisters, brothers, children and the spouses of the
foregoing, and any member of the immediate household of the foregoing.
2.2. REPRESENTATIONS AND WARRANTIES OF AMCE. AMCE represents and warrants
to DI as follows:
(a) ORGANIZATION AND QUALIFICATION. AMCE is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware.
(b) CAPITAL STOCK. On the date hereof the authorized capital stock of
AMCE consists of (i) 45,000,000 shares of AMCE Common Stock, of which
6,549,489 shares are issued and outstanding, (ii) 30,000,000 shares of AMCE
Class B Stock, of which 11,157,000 shares are issued and outstanding and
(iii) 10,000,000 shares of AMCE Preferred Stock, of which 3,323,600 shares
of AMCE Convertible Preferred Stock are issued and outstanding. At the
Effective Time all of the shares of AMCE Common Stock and AMCE Class B Stock
issued in the Merger pursuant to Section 1.6(b) hereof will be duly
authorized, validly issued, fully paid and nonassessable and not issued in
violation of any preemptive rights of AMCE's stockholders.
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(c) ENFORCEABILITY OF AGREEMENT. AMCE has the corporate power and
authority to execute and deliver this Agreement and, subject to receiving
the requisite approval of AMCE's stockholders, to perform its obligations
hereunder. This Agreement has been duly and validly executed and delivered
by AMCE and constitutes the valid and binding obligations of AMCE,
enforceable against it in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other
similar laws effecting creditors' rights generally and equitable principles.
The execution, delivery and performance of this Agreement and the
transactions contemplated by this Agreement have been duly authorized by the
Board of Directors of AMCE.
(d) NO VIOLATION. Assuming compliance with the requirements of the
Exchange Act, the Securities Act, state securities laws, The General and
Business Corporation Law of Missouri and the Delaware General Corporation
Law and the rules and regulations of the AMEX and the Pacific Stock
Exchange, respectively, none of the execution or delivery of this Agreement
by AMCE, the consummation by AMCE of the transactions contemplated hereby or
the fulfillment of the terms hereof will conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a default
under the organizational documents of AMCE or under any material agreement
or instrument under which AMCE is obligated, or violate any law to which
AMCE is subject.
2.3. REPRESENTATIONS AND WARRANTIES. All representations, warranties and
covenants made by DI contained in this Agreement and the schedules hereto and
any certificate, instrument or document delivered pursuant to this Agreement or
in connection with the transactions contemplated hereby shall be deemed material
and to have been relied upon by the parties, notwithstanding any investigation
made by AMCE.
III. COVENANTS AND AGREEMENTS
3.1. AFFIRMATIVE COVENANTS. Between the date hereof and the Effective
Time, except as otherwise contemplated by the Pre-Merger Action Plan, DI shall
conduct its business in the ordinary course as heretofore conducted. DI shall,
and shall cause any Subsidiary to, afford to officers, employees, counsel,
accountants and other authorized representatives of AMCE ("Representatives"), in
order to evaluate the transactions contemplated by this Agreement, reasonable
access, during normal business hours throughout the period prior to the
Effective Time to its properties, books and records (including, without
limitation, the work papers of independent accountants) and, during such period,
shall, and shall cause any Subsidiary to, furnish promptly to such
Representatives all information concerning its business, properties and
personnel as may reasonably be requested, provided that no investigation
pursuant to this Section 3.1 shall affect or be deemed to modify any of the
respective representations or warranties made by DI.
3.2. NEGATIVE COVENANTS. Between the date hereof and the Effective Time,
except as contemplated by the Pre-Merger Action Plan, DI shall not:
(a) Amend its certificate of incorporation, articles of incorporation,
by-laws, or other charter documents; make any change in its authorized,
issued or outstanding capital stock; issue any shares of capital stock;
grant any stock options or right to acquire shares of any class of its
capital stock or any security convertible into any class of capital stock;
purchase, redeem, retire or otherwise acquire any shares of any class of its
capital stock or any security convertible into any class of its capital
stock; or agree to do any of the foregoing;
(b) Declare, set aside or pay any dividend or other distribution in
respect of any class of its capital stock;
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(c) Adopt, enter into, or amend any employment contract or any bonus,
stock option, profit sharing, pension, retirement, incentive, or similar
employee benefit program or arrangement or grant any salary or wage
increase;
(d) Incur or guarantee any indebtedness for borrowed money or guarantee
any other obligation of any other person;
(e) Pay or incur any obligation or liability, absolute or contingent,
other than liabilities incurred in the ordinary and usual course of
business;
(f) Mortgage, pledge or subject to lien or other encumbrance any of its
properties or assets;
(g) Sell or transfer any of its properties or assets or cancel, release
or assign any indebtedness owed to it or any claims held by it;
(h) Make any investments of a capital nature either by property
transfers, or otherwise, or purchase any property or assets;
(i) Enter into or amend any material agreement;
(j) Merge or consolidate with any other corporation, acquire any stock
or acquire any assets of any other person, corporation or other business
organization, or enter into any discussions with any person concerning, or
agree to do, any of the foregoing; or
(k) Reorganize, restructure, recapitalize, liquidate or file a voluntary
petition in bankruptcy or enter into any composition with its creditors or
file a voluntary winding up petition.
3.3. REASONABLE EFFORTS. DI and AMCE shall: (i) promptly make their
respective filings and thereafter make any other submissions required under all
applicable laws with respect to the Merger and the other transactions
contemplated hereby and (ii) use their respective reasonable efforts to promptly
take, or cause to be taken, all other actions and do, or cause to be done, all
other things necessary, proper or appropriate to consummate and make effective
the transactions contemplated by this Agreement.
3.4. PUBLICITY. Except as may be required by applicable law or any listing
agreement with a national securities exchange (or similar agreement), DI and
AMCE agree that they will consult with each other concerning any proposed press
release or public announcement pertaining to the Merger.
3.5. REPRESENTATIONS AND WARRANTIES. Neither DI nor AMCE will, or will
allow any of their respective subsidiaries (other than, in the case of DI, AMCE)
to, take any action that would cause any of the representations and warranties
set forth herein not to be true and correct in all material respects at and as
of the Effective Time.
3.6. FURTHER ASSURANCES. At and after the Effective Time, the officers and
directors of AMCE will be authorized to execute and deliver, in the name and on
behalf of DI, any deeds, bills of sale, assignments or assurances and to take
and do, in the name and on behalf of DI, any other actions and things to vest,
perfect or confirm of record or otherwise in AMCE any and all right, title and
interest in, to and under any of the rights, properties or assets of DI acquired
or to be acquired by AMCE as a result of, or in connection with, the Merger.
3.7 NOTIFICATION OF CERTAIN MATTERS. Between the date hereof and the
Effective Time, each of AMCE and DI will give prompt notice in writing to the
other of: (i) any information that indicates that any representation and
warranty contained herein was not true and correct as of the date hereof or will
not be true and correct as of the Effective Time, (ii) the occurrence, or
failure to occur, of any event which occurrence or failure to occur will result,
or has a reasonable prospect of resulting, in the failure to satisfy a condition
specified in Articles IV or V hereof, (iii) any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection with the transactions
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contemplated by this Agreement, (iv) any notice or other communication from any
governmental or regulatory agency or authority in connection with the
transactions contemplated by this Agreement, or (v) any actions, suits, claims,
investigations or proceedings commenced or, to its knowledge, threatened against
AMCE or DI or any Subsidiaries or which relate to the Merger or the consummation
of the transactions contemplated by this Agreement or the Pre-Merger Action
Plan.
3.8 FILING. DI and AMCE agree that:
(i) AMCE shall prepare and file with the Securities and Exchange
Commission (the "SEC") as soon as is reasonably practicable a registration
statement on form S-4 (or another appropriate form) (the "Registration
Statement") and preliminary proxy materials with respect to the Merger, and
use all reasonable efforts to have the Registration Statement declared
effective by the SEC under the Securities Act and the preliminary proxy
materials cleared by the SEC under the Exchange Act;
(ii) AMCE and DI shall take all such action as may be required under
state blue-sky or securities laws in connection with the transactions
contemplated by this Agreement;
(iii) AMCE and DI shall cooperate with one another in determining
whether any filings are required to be made or consents required to be
obtained in any foreign jurisdiction or under the regulatory laws of any
state prior to the Effective Time in connection with the consummation of the
transactions contemplated by this Agreement, and in making any such filings
promptly and in seeking to obtain timely any such consents; and
(iv) AMCE shall use its reasonable efforts to have listed for trading on
the AMEX and, if AMCE Common Stock is still listed on the Pacific Stock
Exchange, on the Pacific Stock Exchange, the AMCE Common Stock to be issued
pursuant to the Merger.
3.9 PROXY STATEMENT. DI covenants and agrees with AMCE that at the time
the Registration Statement (including the definitive proxy materials contained
therein (the "Proxy Statement") and all other related proxy soliciting material
filed with the SEC) or any post-effective amendment thereto becomes effective,
and at all times subsequent to such effectiveness up to and including the
Effective Time, any information regarding DI, any Insider or any Affiliate of DI
set forth in the Registration Statement, any amendments or supplements thereto,
the Proxy Statement and in any other proxy soliciting material to be used by
AMCE and DI in connection with the transactions contemplated hereby,
(i) will comply as to form in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the SEC thereunder; and
(ii) will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made therein
not misleading.
3.10 PRE-MERGER ACTION PLAN. DI shall cause all actions contemplated by
the Pre-Merger Action Plan to occur at the times contemplated by the Pre-Merger
Action Plan.
IV. AMCE CONDITIONS OF MERGER
The obligations of AMCE to consummate the Merger are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions,
each of which may be waived by AMCE as provided herein except as otherwise
required by applicable law:
4.1. STOCKHOLDER APPROVAL. The Merger shall have been approved by the
affirmative vote of the holders of the requisite number of the outstanding
shares of AMCE Common Stock, AMCE Class B Stock, DI Class A Stock and DI Class B
Stock, and, in addition, shall have been approved by the holders of a majority
of the outstanding shares of AMCE Common Stock (excluding the Durwood
Stockholders) present and voting at the meeting of stockholders called to
consider the Merger (the "AMCE Stockholder Meeting").
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4.2. DI CORPORATE ACTION. All corporate action necessary to authorize the
execution, delivery and performance of this Agreement and the consummation of
the Merger and the transactions contemplated hereby and by the Pre-Merger Action
Plan shall have been duly and validly taken by DI.
4.3. REGISTRATION OF AMCE COMMON STOCK AND AMCE CLASS B STOCK. Prior to
the first date on which the Proxy Statement is mailed to AMCE stockholders, the
SEC shall have declared the Registration Statement effective and, at or prior to
the time required, any required approvals of state securities administrators
shall have been obtained. At the Effective Time, no stop order or similar
restraining order shall have been threatened or entered by the SEC or any state
securities administrator.
4.4. AMEX LISTING. The shares of AMCE Common Stock to be issued pursuant
to the Merger shall have been approved for listing by the AMEX for trading on
the AMEX and, if AMCE Common Stock is still listed on the Pacific Stock
Exchange, such shares shall have been approved for listing for trading on such
exchange.
4.5. GOVERNMENTAL FILINGS AND CONSENTS. All governmental filings required
to be made prior to the Effective Time with, and all governmental consents
required to be obtained prior to the Effective Time from, governmental and
regulatory authorities in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and by
the Pre-Merger Action Plan shall have been made or obtained.
4.6. CONSENTS OF THIRD PARTIES. DI and AMCE shall have received all
requisite consents, approvals and agreements of third parties necessary to
ensure that neither the Merger nor any transactions contemplated herein or by
the Pre-Merger Action Plan shall violate any provision of any material
agreement, instrument, order, judgment or decree to which DI or any of its
Subsidiaries or AMCE is a party or by which any of them or their property may be
bound, or shall give rise to any right to accelerate any material indebtedness
of DI or any of its Subsidiaries or AMCE.
4.7. LITIGATION. There shall be no litigation, proceedings or actions
pending or threatened concerning the Merger that in the judgment of the Board of
Directors of AMCE acting with the recommendation of the Special Committee
renders consummation of the Merger inadvisable.
4.8. DISSENTING STOCK. No dissenters' rights shall have been exercised by
the holders of any shares of DI Class A Stock or DI Class B Stock.
4.9. STOCK AGREEMENT. The Durwood Family, the 1992 Trust, the 1989 Trust
and Delta Properties, Inc. shall have entered into a Stock Agreement with AMCE
in form and substance identical to Exhibit B attached hereto (the "Stock
Agreement"), and such agreement shall remain in full force and effect at the
Effective Time.
4.10. REGISTRATION AGREEMENT. The Durwood Family, the 1992 Trust, the 1989
Trust and Delta Properties, Inc. shall have entered into a Registration
Agreement (the "Registration Agreement") with AMCE in form and substance
identical to Exhibit C attached hereto and such agreement shall remain in full
force and effect at the Effective Time.
4.11. INDEMNIFICATION AGREEMENT. The Durwood Family, the 1992 Trust, the
1992 Trust and Delta Properties, Inc. shall at the time and on the date this
Agreement is executed and delivered have executed and delivered to AMCE an
Indemnification Agreement (the "Indemnification Agreement") in form and
substance identical to Exhibit D attached hereto and such agreement shall remain
in full force and effect at the Effective Time.
4.12 HARVARD CONSENT. Harvard shall have executed and delivered to AMCE an
instrument in form and substance identical to Exhibit E, and such instrument
shall remain in full force and effect at the Effective Time.
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4.13. FAIRNESS OPINION. AMCE shall have received from Furman Selz
Incorporated an opinion in form and substance satisfactory to AMCE confirming
the fairness of the Merger consideration to AMCE from a financial point of view.
4.14. AUDITORS' LETTER. AMCE shall have received from Coopers & Lybrand
L.L.P., certified public accountants, "comfort letters" dated the date of
mailing of the Proxy Statement and the date on which the Effective Time occurs
covering matters customary to transactions similar to the Merger in form and
substance satisfactory to AMCE.
4.15. REPRESENTATION AND WARRANTIES. The representations and warranties of
DI set forth in Article II hereof shall be true and correct in all material
respects as of the date of this Agreement and (having been deemed to be made
again at and as of the Effective Time) as of the Effective Time as though made
as of the Effective Time, except for those made as of a specified date, which
shall remain true and correct as of such date, and except as otherwise
contemplated by this Agreement, and the President of DI shall certify to that
effect to AMCE.
4.16. PERFORMANCE OF OBLIGATIONS. DI shall have performed in all material
respects all obligations required to be performed by it under this Agreement
prior to the Effective Time, and AMCE shall have received a certificate signed
by the Chief Executive Officer, the President or a Vice President of DI to that
effect.
4.17. TAX OPINION. AMCE shall have received the opinions of Chadbourne &
Parke, LLP in form satisfactory to AMCE to the effect that, for federal income
tax purposes, assuming consummation of the Merger in accordance with this
Agreement, the Merger will constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the Tax Code and no income, gain or loss will be
recognized by AMCE or DI as a result of the Merger, which opinions shall be
dated within two days of the date of the Proxy Statement and the date of the
Merger.
4.18. OPINION OF COUNSEL. Blackwell Sanders Matheny Weary & Lombardi L.C.
shall have furnished to AMCE and the Special Committee its opinion as at the
date of the Closing in form and substance and as to such matters as are
reasonably satisfactory to AMCE.
4.19. CONVERSION OF SHARES BY DI. DI shall have converted 6,141,343 shares
of AMCE Class B Stock into a like number of shares of AMCE Common Stock.
V. DI CONDITIONS OF MERGER
The obligations of DI to consummate the Merger are subject to the
satisfaction at or prior to the Closing, of each of the following conditions,
each of which may be waived by DI as provided herein except as otherwise
required by applicable law.
5.1. STOCKHOLDER APPROVAL. The Merger shall have been approved by the
affirmative vote of the holders of the requisite number of the outstanding
shares of AMCE Common Stock, AMCE Class B Stock, DI Class A Stock and DI Class B
Stock and, in addition, shall have been approved by the holders of a majority of
the outstanding shares of AMCE Common Stock (excluding the Durwood Stockholders)
present and voting at the AMCE Stockholders Meeting.
5.2 AMCE CORPORATE ACTION. All corporate action necessary to authorize the
execution, delivery and performance of this Agreement and the consummation of
the Merger and the transactions contemplated hereby shall have been duly and
validly taken by AMCE.
5.3. REGISTRATION OF AMCE COMMON STOCK AND AMCE CLASS B STOCK. Prior to
the first date on which the Proxy Statement is mailed to AMCE stockholders, the
SEC shall have declared the Registration Statement effective and, at or prior to
the time required, any required approvals of state securities administrators
shall have been obtained. At the Effective Time, no stop order or similar
restraining order shall have been threatened or entered by the SEC or any state
securities administrator.
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5.4. AMEX LISTING. The AMCE Common Stock to be issued pursuant to the
Merger shall have been approved for listing by the AMEX for trading on the AMEX
and, if AMCE Common Stock is still listed on the Pacific Stock Exchange, such
shares shall have been approved for listing for trading on such Exchange.
5.5. GOVERNMENTAL FILINGS AND CONSENTS. All governmental filings required
to be made prior to the Effective Time with, and all governmental consents
required to be obtained prior to the Effective Time from, governmental and
regulatory authorities in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and by
the Pre-Merger Action Plan shall have been made or obtained.
5.6. CONSENTS OF THIRD PARTIES. AMCE shall have received all requisite
consents, approvals and agreements of third parties necessary to ensure that
neither the Merger nor any transactions contemplated herein or by the
transactions contemplated by the Pre-Merger Action Plan shall violate any
provision of any material agreement, instrument, order, judgment or decree to
which AMCE or any of its subsidiaries is a party or by which any of them, or
their property, may be bound, or shall give rise to any right to accelerate any
material indebtedness of AMCE or any of its subsidiaries.
5.7. LITIGATION. There shall be no litigation, proceedings or actions
pending or threatened concerning the Merger that in the judgment of the Board of
Directors of DI renders consummation of the Merger inadvisable.
5.8. REPRESENTATIONS AND WARRANTIES. The representations and warranties of
AMCE set forth in Article II hereof shall be true and correct in all material
respects as of the date of this Agreement and as of the Effective Time as though
made on and (having been deemed to be made again at and as of the Effective
Time) as of the Effective Time, except for those made as of a specified date,
which shall remain true and correct of such date, and, except as otherwise
contemplated by this Agreement, and the President, Chief Executive Officer or a
Vice President of AMCE shall certify to that effect to the other party.
5.9. PERFORMANCE OF OBLIGATIONS. AMCE shall have performed in all material
respects all obligations required to be performed by it under this Agreement
prior to the Effective Time, and DI shall have received a certificate signed by
the Chief Executive Officer, the President or a Vice President of AMCE to that
effect.
5.10. TAX OPINION. DI and its shareholders shall have received the
opinions of Chadbourne & Parke, LLP in form reasonably satisfactory to DI to the
effect that, for federal income tax purposes, assuming consummation of the
Merger in accordance with this Agreement, (i) the Merger will constitute a
reorganization within the meaning of Section 368(a)(1)(A) of the Tax Code and
(ii) except for cash received in lieu of fractional shares or in payment of
Credit Amounts (as defined in the Indemnification Agreement), no income, gain or
loss will be recognized by DI or its shareholders as a result of the Merger,
which opinions shall be dated within two days of the date of the Proxy Statement
and the date of the Merger.
5.11 REGISTRATION AGREEMENT. AMCE shall have entered into the Registration
Agreement, and the Registration Agreement shall remain in full force and effect
at the Effective Time.
5.12. STOCK AGREEMENT. AMCE shall have entered into the Stock Agreement
and such agreement shall remain in full force and effect at the Effective Time.
5.13. INDEMNIFICATION AGREEMENT. AMCE shall have entered into the
Indemnification Agreement and such agreement shall remain in full force and
effect at the Effective Time.
5.14 HARVARD CONSENT. Harvard shall have executed and delivered to AMCE an
instrument in form and substance identical to Exhibit E, and such instrument
shall remain in full force and effect at the Effective Time.
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VI. AMENDMENT, DEFERRAL, TERMINATION AND SURVIVAL
6.1. AMENDMENT. The parties to this Agreement, by mutual consent of the
Board of Directors of DI and Board of Directors of AMCE acting with the
recommendation of the Special Committee, may amend, modify or supplement this
Agreement in such manner as may be agreed upon by them in writing, at any time
before or after approval by the stockholders of each of AMCE and DI; PROVIDED,
HOWEVER, that no such amendment, modification or supplement shall, (i) if agreed
to after approval by the stockholders of AMCE, change the amount or nature of
the consideration to be received by stockholders of DI, or in the judgment of
the Board of Directors of AMCE acting with the recommendation of the Special
Committee otherwise have a material adverse effect on the rights of AMCE
stockholders or (ii) be effective unless approved by a majority of the members
of the Durwood Family (for which purpose each member shall have one vote).
6.2. WAIVER OF CONDITIONS; FAILURE OF CONDITIONS. The conditions to each
of the party's obligation to consummate the Merger are for the sole benefit of
such party and may be waived by such party in whole or in part to the extent
permitted by applicable law. In the event of a failure of the conditions set
forth in Sections 4.3 and 5.3, the parties will in good faith endeavor to
negotiate amendments to this Agreement that enable the parties to achieve the
objectives of the transactions contemplated hereby notwithstanding the failures
of such conditions.
6.3. DEFERRAL. Notwithstanding adoption and approval of this Agreement by
the stockholders of each of AMCE and DI, consummation of the transactions
provided for herein may be deferred by the Board of Directors of DI or the Board
of Directors of AMCE acting with the recommendation of the Special Committee at
any time prior to the Effective Time, if either such Board of Directors
determines that such deferral would be in the best interests of DI or AMCE,
respectively, or their stockholders.
6.4. TERMINATION. This Agreement may be terminated and the Merger and
other transactions provided for by the Agreement may be abandoned at any time
prior to the Effective Time, whether before or after approval by the
stockholders of each of DI and AMCE, by action of the Board of Directors of DI
or the Board of Directors of AMCE acting with the recommendation of the Special
Committee, if either such Board of Directors determines that the completion of
the transactions provided for herein would for any reason be inadvisable or not
in the best interests of DI or AMCE, respectively, or their stockholders.
6.5 SURVIVAL. The agreement of the parties contained in Sections 1.6, 1.7
and 7.1 hereof shall survive the consummation of the Merger and the agreements
of the parties contained in Section 7.1 hereof shall survive termination of this
Agreement.
VII. MISCELLANEOUS
7.1. EXPENSES. As used herein, "Expenses" shall mean, with respect to a
party, all expenses of such party incident to preparing, entering into and
carrying out this Agreement, the agreements referred to in Sections 4.9, 4.10
and 4.11 hereof and all other agreements, documents, instruments or certificates
contemplated hereby, or thereby, and the consummation of the Merger. If the
Merger is not consummated for any reason (other than as a result of the Board of
Directors of AMCE terminating this Agreement pursuant to Section 6.4 for a
Specified Reason (as defined below) or Without Cause (as defined below)), DI
shall pay and be responsible for all of its Expenses and all of AMCE's Expenses.
If this Agreement is terminated by the Board of Directors of AMCE pursuant to
Section 6.4 for a Specified Reason or Without Cause, DI shall pay and be
responsible for all of its Expenses and 50% of AMCE's Expenses. As used herein,
(x) a "Specified Reason" shall mean any of the following bases for a
determination by the Board of Directors of AMCE to terminate this Agreement
pursuant to Section 6.4: (i) that it is in the best interests of AMCE to pursue
an unrelated transaction and the transactions contemplated by this Agreement
would adversely impact such unrelated transaction, (ii) that a condition set
forth in Sections 4.5 or 4.6 hereof has failed due to facts or circumstances
unknown on the date of this Agreement to, and beyond the control of, AMCE, DI or
any member of the Durwood Family, (iii) that a
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condition set forth in Section 4.7 has failed (unless DI or any member of the
Durwood Family is a plaintiff (or is otherwise involved in a role adverse to
AMCE, the Board of Directors of AMCE or the Special Committee) in any
litigation, action or proceeding described therein), or (iv) that a condition
set forth in Section 4.15 has failed as a result of facts or circumstances
unknown on the date of this Agreement to, and beyond the control of, AMCE, DI or
any member of the Durwood Family and (y) "Without Cause" shall mean a
determination of the Board of Directors of AMCE to terminate this Agreement
pursuant to Section 6.4 without having a reasonable basis for such action.
7.2. NOTICES. Any notice, request, consent, waiver or other communication
required or permitted hereunder shall be effective only if it is in writing and
personally delivered or sent by certified or registered mail, postage prepaid,
addressed as follows:
<TABLE>
<S> <C>
To: AMC Entertainment Inc. Suite 1700 Power & Light Bldg.
106 West 14th Street
Post Office Box 419615
Kansas City, MO 64141-6615
With information copies to: Charles J. Egan, Jr., Esq.
Hallmark Cards, Incorporated
2501 McGee Trafficway
Kansas City, MO 64141-6126
The Honorable Paul E. Vardeman
Polsinelli, White, Vardeman &
Shalton
Suite 1000, Plaza Steppes
700 West 47th Street
Kansas City, MO 64112-1802
To: Durwood, Inc. Suite 1700 Power & Light Bldg.
106 West 14th Street
Post Office Box 419615
Kansas City, MO 64141-6615
With information copies to: Robert C. Kopple, Esq.
Kopple & Klinger
2029 Century Park East
Suite 1040
Los Angeles, CA 90067
Glenn Kurlander, Esq.
Schiff Hardin & Waite
150 East 52nd Street
Suite 2900
New York, New York 10022
Raymond F. Beagle, Jr., Esq.
Lathrop & Gage L.C.
2345 Grand Boulevard, 24th Floor
Kansas City, Missouri 64108-2684
</TABLE>
or such other person or address as the addressee may have specified in a notice
duly given to the sender as provided herein. Such notice or communication shall
be deemed to have been given upon receipt thereof.
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7.3. WAIVER. No delay or failure on the part of any party in exercising
any rights hereunder, and no partial or single exercise thereof, will constitute
a waiver of such rights or of any other rights hereunder.
7.4. BINDING EFFECT. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
assigns.
7.5. ENTIRE AGREEMENT. This Agreement and the Exhibits hereto constitute
the entire agreement among the parties hereto pertaining to the subject matter
hereof and supersede all prior or contemporaneous, written or verbal agreements,
understandings and negotiations in connection herewith.
7.6. AMENDMENTS. This Agreement cannot be modified, amended or terminated,
except as provided in Article VI by an instrument in writing signed by all the
parties hereto; provided, however, that any provision of this Agreement may be
waived only in writing by the party to be charged with the waiver.
7.7. 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.
7.8. 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, except to the extent that the
laws of the State of Delaware relate to the Merger.
7.9. HEADINGS. The headings to the paragraphs to 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.
7.10. EXHIBITS. All exhibits and schedules attached to this Agreement are
incorporated herein by this reference.
7.11. 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.
7.12. 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.
7.13. ASSIGNMENT. Neither this Agreement nor any of the rights, interests,
or obligations hereunder may be assigned by any party hereto without the prior
written consent of the other party.
7.14. ACCOUNTING TERMS. All accounting terms used herein that are not
expressly defined in this Agreement shall have the respective meanings given to
them in accordance with United States generally accepted accounting principles
on the date hereof.
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IN WITNESS WHEREOF, this Agreement and Plan of Merger has been signed on
behalf of AMC Entertainment Inc. by Peter C. Brown, its President, and on behalf
of Durwood, Inc. by Stanley H. Durwood, its President, and the corporate seal of
each corporation has been affixed hereto and attested to by the Secretary of
each corporation, respectively, on the date first above written.
AMC ENTERTAINMENT INC.
By: /s/ PETER C. BROWN
-----------------------------------
Peter C. Brown, President
(SEAL)
ATTEST:
/s/ NANCY L. GALLAGHER
- -------------------------------------------
Nancy L. Gallagher, Secretary
DURWOOD, INC.
By: /s/ STANLEY H. DURWOOD
-----------------------------------
Stanley H. Durwood, President
(SEAL)
ATTEST:
/s/ NANCY L. GALLAGHER
- -------------------------------------------
Nancy L. Gallagher, Secretary
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EXHIBIT A TO MERGER AGREEMENT
DI PRE-MERGER ACTION PLAN
It is anticipated that Durwood, Inc. ("DI") will undertake certain actions
before the merger with AMC Entertainment Inc. ("AMCE"), as described below.
Several of these pre-merger transactions involve the four DI subsidiaries
other than AMCE: Delta Properties, Inc. ("DPI"), Crosstown Development, Inc.,
Kansas City Downtown Redevelopment Corporation and Entertainment Group, Inc.
(collectively, the "non-AMCE subsidiaries").
1. All non-AMCE subsidiaries of DI will be merged into DPI before the end of
the current fiscal year.
2. DPI and DI will eliminate all intercompany debt before the end of the
current fiscal year.
3. All assets (other than shares of AMCE capital stock) and all liabilities of
DI will be transferred from DI to DPI before the end of the current fiscal
year. The DI shareholders shall negotiate the allocation of the relative
benefits and burdens of such assets and liabilities among the DI
shareholders (who ultimately will be the shareholders of DPI-5, below) in a
manner consistent with the Durwood Family Settlement Agreement.
4. AAE will be liquidated and its assets distributed in the manner set forth in
the Durwood Family Settlement Agreement.
5. DI will pay as a dividend or otherwise distribute all shares of stock of DPI
to the DI shareholders in the same ratio as the AMCE capital stock to be
received in the merger.
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EXHIBIT B TO MERGER AGREEMENT
STOCK AGREEMENT
THIS AGREEMENT, dated as of , 199 , is between (i) AMC
Entertainment Inc., a Delaware corporation ("AMCE"), (ii) Stanley H. Durwood,
individually, and as trustee of the 1992 Durwood, Inc. Voting Trust dated
December 12, 1992 (the "1992 Trust"), and as trustee of the Trust created
pursuant to the Stanley H. Durwood Trust Agreement dated August 14, 1989 (the
"1989 Trust"), Carol D. Journagan, Edward D. Durwood, Thomas A. Durwood, Elissa
D. Grodin, Brian H. Durwood, Peter J. Durwood (all persons and entities referred
to in this clause (ii) are referred to herein collectively as the "Family
Stockholders") and each Authorized Assignee (as defined below) of such Family
Stockholder (each such Family Stockholder and Authorized Assignee a
"Stockholder" and collectively "Stockholders") and (iii) solely for purposes of
Section 5.3 hereof, Delta Properties, Inc., a Missouri corporation.
WITNESSETH:
WHEREAS, Family Stockholders own (directly or indirectly) stock of Durwood,
Inc., a Missouri corporation ("DI"), which is party to an Agreement and Plan of
Merger and Reorganization among DI and AMCE (the "Merger Agreement"), providing
for the merger ("Merger") of DI into AMCE; and
WHEREAS, pursuant to the Merger, Family Stockholders will acquire shares of
AMCE's common stock, par value 66 2/3 CENTS per share (the "Common Stock") and
shares of AMCE's Class B Stock, par value 66 2/3 CENTS per share (the "Class B
Stock"); and
WHEREAS, the parties anticipate that a portion of the shares of Common Stock
received in the Merger (or the shares of Common Stock received upon the
conversion of shares of Class B Stock received in the Merger) will be offered in
a secondary offering registered under the Securities Act of 1933, as amended
(the "1933 ACT") pursuant to and as contemplated by the Registration Agreement
(the "Secondary Offering"); and
WHEREAS, AMCE requires that this Agreement be made as a condition precedent
to the Merger and its agreement to file a registration statement in connection
with the Secondary Offering.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
and agreements set forth herein and for other good and valuable consideration
the receipt of which is hereby acknowledged, the parties, intending to be
legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms, not otherwise defined
herein, have the meanings set forth below.
"ADJUSTED BASIS" shall have the meaning specified in the Registration
Agreement.
"AFFILIATE" of a specified person means a person (other than AMCE or a
majority-owned subsidiary of AMCE) that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, the person specified. For purposes of this definition, control of a person
means the power, direct or indirect, to direct or cause the direction of the
management and policies of such person whether by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"ASSOCIATE" of any person means (i) a corporation or organization (other
than AMCE or a majority-owned subsidiary of AMCE) of which such person is an
officer or partner or is, directly or indirectly, the
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beneficial owner of 10% or more of any class of equity securities; (ii) any
trust or other estate in which such person has a substantial beneficial
ownership interest or as to which such person serves as trustee or in a similar
fiduciary capacity; or (iii) any relative or spouse of such person, or any
relative of such spouse, who has the same home as such person or who is a
director or officer of AMCE or any of its parents or subsidiaries.
"AUTHORIZED ASSIGNEE" of a Stockholder means (i) any person or entity (other
than a Charitable Assignee, except as provided in clause (ii) below) to which
Voting Securities are transferred by gift or otherwise without fair
consideration or (ii) if such Stockholder is a Family Stockholder, to the extent
such Stockholder (and its Authorized Assignees) transfers more than 5% in the
aggregate of the shares of Class B Stock or Common Stock received by such Family
Stockholder in the Merger (or Common Stock received upon the conversion of such
Class B Stock) ("Merger Shares") to Charitable Assignees, those Charitable
Assignees receiving shares in excess of such threshold.
"CHARITABLE ASSIGNEE" of a Stockholder shall mean any charitable
organization, including charitable remainder and charitable lead trusts, a
transfer of property to which by such Stockholder would qualify, at least in
part, for an income, gift or estate tax charitable deduction under the Internal
Revenue Code of 1986, as amended.
"DURWOOD CHILDREN" means Family Stockholders (other than Stanley H. Durwood,
the 1992 Trust and the 1989 Trust), and any Authorized Assignee of a Family
Stockholder (other than Authorized Assignees of Stanley H. Durwood, the 1992
Trust and the 1989 Trust that are not Family Stockholders).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EFFECTIVE DATE" shall mean the date on which the Effective Time (as defined
in the Merger Agreement) occurs.
"GROUP" means two or more persons acting as a partnership, limited
partnership, syndicate, or other group for the purpose of acquiring, holding, or
disposing of securities of AMCE.
"INDEMNIFICATION AGREEMENT" has the meaning specified in the Merger
Agreement.
"MERGER EXPENSES" shall mean those Expenses (as defined in the Merger
Agreement) not paid by Stanley H. Durwood, the 1989 Trust and the 1992 Trust
pursuant to Section 2(c) of the Indemnification Agreement.
"PERMITTED ASSIGNEE" shall have the meaning specified in the Registration
Agreement.
"REGISTRATION AGREEMENT" means the Registration Agreement dated the date
hereof among AMCE and the Family Stockholders.
"RESTRICTED PERIOD" shall mean a period commencing the date hereof and
ending three years after the Effective Date.
"VOTING SECURITIES" means Common Stock, Class B Stock and any other
securities of AMCE that may be issued from time to time having general voting
power under ordinary circumstances in the election of directors and any other
security of AMCE convertible into, or exercisable for, any such security.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS: Each
Stockholder, severally, as to himself, herself or itself, and not jointly,
hereby represents and warrants to AMCE as follows:
(a) Such Stockholder has full legal right, power and authority to enter
into and perform this Agreement and the Registration Agreement. This
Agreement and the Registration Agreement are valid and binding obligations
of such Stockholder enforceable against such Stockholder in accordance with
their terms, except that such enforcement may be subject to (i) bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
(b) Neither the execution and delivery of this Agreement or the
Registration Agreement by such Stockholder nor the consummation by such
Stockholder of the transactions contemplated hereby or thereby conflicts
with or constitutes a violation of or default under any statute, law,
regulation, order or decree applicable to such Stockholder, or any material
contract, commitment, agreement, arrangement or restriction of any kind to
which such Stockholder is a party or by which such Stockholder is bound.
Section 2.2 REPRESENTATIONS AND WARRANTIES OF AMCE. AMCE hereby represents
and warrants to Stockholders as follows:
(a) AMCE has full legal right, power and authority to enter into and
perform this Agreement and the Registration Agreement. The execution and
delivery of this Agreement and the Registration Agreement by AMCE and the
consummation by AMCE of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on behalf of
AMCE. This Agreement and the Registration Agreement are valid and binding
obligations of AMCE enforceable against AMCE in accordance with their terms,
except that such enforcement may be subject to (i) bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(b) Neither the execution and delivery of this Agreement or the
Registration Agreement by AMCE nor the consummation by AMCE of the
transactions contemplated hereby or thereby conflicts with or constitutes a
violation of or default under the charter or bylaws of AMCE, any statute,
law, regulation, order or decree applicable to AMCE, or any material
contract, commitment, agreement, arrangement or restriction of any kind to
which AMCE is a party or by which AMCE is bound.
ARTICLE III
LIMITATIONS AND RESTRICTIONS
Section 3.1 RESTRICTIONS ON CERTAIN ACTIONS BY STOCKHOLDERS. Each of the
Durwood Children severally agrees that during the Restricted Period, such
Stockholder will not, nor will it permit any of its Affiliates or Associates
(other than Stanley H. Durwood, the 1992 Trust and the 1989 Trust) from and
after the date that such person becomes an Affiliate or Associate to, unless in
any such case specifically invited to do so by the Board of Directors of AMCE,
directly or indirectly, alone or in concert with others:
(a) become a member of a Group (other than a Group composed solely of
Stockholders) or make any public or private proposal with respect to an
extraordinary transaction involving AMCE or any of its subsidiaries;
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<PAGE>
(b) solicit, or participate in any "solicitation" of, "proxies" or
become a "participant" in any "election contest" (as such terms are defined
or used in Regulation 14A under the Exchange Act) with respect to AMCE; or
(c) deposit any shares of Common Stock in a voting trust (where the
trustees thereof are not such Stockholder or Permitted Assignees of such
Stockholder) or, except as specifically contemplated by this Agreement,
subject them to a voting agreement or other agreement or arrangement with
respect to the voting of such shares of Common Stock.
The foregoing limitations shall not restrict directors of AMCE who are also
Stockholders from taking such action as directors as they deem necessary,
advisable or proper to fulfill their fiduciary duties to AMCE and its
stockholders.
Section 3.2 VOTING. (a) During the Restricted Period, each of the Durwood
children, severally, shall grant the proxy set forth in paragraph (b) below, and
shall take no action to revoke or interfere with the exercise of such proxy or
to vote shares subject to the proxy in a manner inconsistent with the proxy.
(b) Each of the Durwood Children hereby appoints the Secretary and each
Assistant Secretary of AMCE, and each of them, as such Durwood Child's proxy and
attorney, with full power of substitution, to vote all shares of Common Stock
owned by such Durwood Child from time to time for each candidate for the Board
of Directors of AMCE in the same proportion as the aggregate votes cast in such
elections by all other holders of Common Stock not affiliated with AMCE, its
directors and officers. This proxy will remain in effect during the Restricted
Period and is coupled with an interest and irrevocable during the Restricted
Period. This proxy will automatically terminate upon the conclusion of the
Restricted Period.
Section 3.3 RESTRICTIONS ON TRANSFER. Each Stockholder severally agrees
not to sell, assign, pledge, hypothecate, transfer, grant an option with respect
to or otherwise dispose of any interest in Voting Securities, or enter into an
agreement, arrangement or understanding with respect to the foregoing
(individually and collectively, "Transfer"), except in compliance with the 1933
Act. Each Stockholder severally acknowledges that shares of Common Stock and
Class B Stock received in the Merger will be subject to limitations on Transfer
imposed by Rule 145 under the 1933 Act and may not be sold except in a
registered offering, pursuant to Rule 145 under the 1933 Act or in a transaction
otherwise exempt from registration under the 1933 Act and that certificates
evidencing Voting Securities of AMCE which it will receive as a result of the
Merger (and any shares subsequently acquired by such Stockholder) may bear an
appropriate legend to such effect (and to the effect that Authorized Assignees
are required to become parties to this Agreement and to the effect that the
Company has a right of first refusal in connection with certain sales thereof)
and that AMCE will give stop transfer instructions to its transfer agent
regarding Voting Securities held by such Stockholder.
Section 3.4 TRANSFERS BY GIFT. Subject to the next sentence, each
Stockholder severally agrees that during the Restricted Period such Stockholder
will not transfer Voting Securities to any Authorized Assignee unless such
person or entity agrees by instrument in form and substance reasonably
satisfactory to AMCE to be bound by the provisions of this Agreement as a
"Stockholder". It is understood and agreed that (subject to the requirements set
forth in the definition of Permitted Assignees in the Registration Agreement)
other transferees of Voting Securities shall not be required to agree to be
bound by the provisions of this Agreement and that each Family Stockholder may
transfer up to 5% in the aggregate of its Merger Shares to Charitable Assignees
free and clear of the provisions of this Agreement.
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ARTICLE IV
RIGHT OF FIRST REFUSAL
Section 4.1 RIGHT OF FIRST REFUSAL.
(a) In the event that during the Restricted Period one of the Durwood
Children desires to sell all or part of its holding of Voting Securities (the
"Shares") in a transaction that is exempt from the registration requirements of
the 1933 Act other than in brokers' transactions within the meaning of Section
4(4) thereof, AMCE shall first be given the opportunity, in the following
manner, to purchase (or cause a corporation, entity, person or group designated
by AMCE to purchase) all, but not less than all, of such Shares sought to be
sold.
(b) Such Durwood Child shall deliver a written notice (the "Notice") to AMCE
of such intention, describing the proposed terms for sale of the Shares,
identifying the offeror, identifying the proposed price of the Shares, and
setting forth the other terms and conditions of such offer or proposed sale.
(c) AMCE shall have the right for 5 business days (which period shall be
extended by the amount of time taken to determine the value of non-cash
consideration pursuant to the next sentence) from the receipt of the Notice (the
"Decision Period"), exercisable by written notice in accordance with Section 7.8
hereof, to elect to purchase (or to designate a corporation, entity, person or
group to purchase) all, but not less than all, of the Shares specified in the
Notice for cash at the price set forth therein and upon the terms and conditions
in the Notice.
If the purchase price specified in the Notice includes any property other
than cash, the purchase price shall be deemed to be the amount of any cash
included in the purchase price plus the value (as may be mutually agreed by the
Durwood Child and AMCE, or, if they are unable to agree, as determined by an
independent, nationally recognized investment banking firm mutually selected by
the Durwood Child and AMCE and the fees and expenses of such firm shall be borne
equally by the Durwood Child and AMCE) of the other property included in the
price; and in such event AMCE's notice of exercise of the right to elect to
purchase provided for herein shall set forth the purchase price so determined.
(d) If AMCE does not exercise its right to elect to purchase by the end of
the Decision Period, the Durwood Child shall be free to sell or agree to sell
the Shares specified in the Notice to the third party making the offer described
in the Notice, at the price specified therein or at any price in excess thereof
and on the other terms and conditions specified in the Notice. If the Durwood
Child shall not so sell all of the Shares within 90 days after the expiration of
the Decision Period, the provisions of this Agreement including, without
limitation, this Article IV, shall thereafter apply to the Shares not so sold.
(e) If AMCE exercises its right to purchase specified in paragraph (c) of
this Article IV, the closing of the purchase of the Shares shall take place
within 30 days after receipt by the Durwood Child of the notice of exercise at a
place, time, and date specified by AMCE. At the closing, AMCE shall deliver to
the Durwood Child cash or immediately available funds in an amount equal to the
purchase price set forth in the Notice, and the Durwood Child shall deliver to
AMCE certificates representing the Shares, which Shares shall be free and clear
of all liens, security interests and other encumbrances, duly endorsed in blank
or accompanied by stock powers duly executed and otherwise in form acceptable
for transfer of the Shares on the books of AMCE, together with all necessary
stock transfer stamps.
ARTICLE V
SECONDARY OFFERING
Section 5.1 CONSUMMATION OF SECONDARY OFFERING. The Stockholders agree to
use their best efforts to cause the Secondary Offering to be consummated during
the period beginning the date that is six months and one day from the Effective
Date and ending the date (the "Deadline Date") that is six
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months from such date (provided that such six-month period ending on the
Deadline Date shall be extended by the length of any Postponement Period (as
defined in the Registration Agreement)).
Section 5.2 NUMBER OF SHARES. Subject to the terms and conditions of the
Registration Agreement, each Stockholder severally agrees that it will sell a
number of shares of Common Stock in the Secondary Offering equal to the number
of shares of Common Stock set forth next to such Stockholder's name in Exhibit A
to the Registration Agreement, subject to reduction or increase pursuant to the
Registration Agreement.
Section 5.3 FAILURE TO CONSUMMATE. In the event that the Merger is
consummated and the Secondary Offering is not consummated pursuant to the
Registration Agreement on or prior to the Deadline Date, other than as a result
of the breach by AMCE of the Registration Agreement, Stanley H. Durwood, the
1992 Trust, the 1989 Trust and Delta shall jointly and severally (i) pay to AMCE
a fee equal to an aggregate of $2,000,000 to compensate AMCE for the diversion
of its officers and other employees in connection with the Secondary Offering
and (ii) reimburse AMCE for all of its Merger Expenses.
ARTICLE VI
TAX MATTERS
Section 6.1 REPRESENTATIONS. Each Stockholder hereby severally represents
and warrants to AMCE that such Stockholder has no plan or intention, and as of
the Effective Date will have no plan or intention to sell, exchange, or
otherwise dispose of a number of shares of Common Stock or Class B Stock
received in the Merger that would reduce (i) the ownership by such Stockholder
of Common Stock received in the Merger to a number of shares equal to less than
50% of the number of shares of Common Stock received by such Stockholder in the
Merger or (ii) the ownership by such Stockholder of Class B Stock received by
such Stockholder in the Merger to a number of shares equal to less than 50% of
the number of shares of Class B Stock received by such Stockholder in the Merger
(plus, in the case of Stanley H. Durwood, the 1989 Trust and the 1992 Trust,
collectively, a number of shares of Class B Stock equal to the sum of (x) 65% of
the number of shares of Common Stock received by Harvard College in the Merger,
plus (y) a number of shares of Class B Stock equal to the Specified Percentage
of the total number of shares of Class B Stock and Common Stock issued in the
Merger).
Section 6.2 COVENANTS. Each Stockholder hereby severally covenants that
for a period of two years from the Effective Date, he, she or it will not sell,
exchange, or otherwise dispose of a number of shares of Common Stock or Class B
Stock received by the Stockholder in the Merger that would reduce (i) the
ownership by such Stockholder of Common Stock received in the Merger to a number
of shares equal to less than 50% of the number of shares of Common Stock
received by such Stockholder in the Merger (provided that such Stockholder may
sell, exchange or otherwise dispose of a number of shares of Common Stock in
excess of the number otherwise permitted by this clause (i) if another
Stockholder agrees by written instrument reasonably satisfactory to AMCE to
reduce the number of shares of Common Stock such other Stockholder is permitted
to sell pursuant to this clause (i) by a like number of shares and all other
Stockholders consent in writing thereto) or (ii) the ownership by such
Stockholder of Class B Stock received by such Stockholder in the Merger to a
number of shares equal to less than 50% of the number of shares of Class B Stock
received by such Stockholder in the Merger (plus, in the case of Stanley H.
Durwood, the 1989 Trust and the 1992 Trust, collectively, a number of shares of
Class B Stock equal to the sum of (x) 65% of the number of shares of Common
Stock received by Harvard College in the Merger, plus (y) a number of shares of
Class B Stock equal to the Specified Percentage of the total number of shares of
Class B Stock and Common Stock issued in the Merger).
Section 6.3 DEFINITIONS. As used herein, a "Specified Percentage" of a
number of shares of Common Stock and Class B Stock shall mean a percentage of
such shares equal to the product (expressed as a percentage) of (A) a fraction
having a numerator of $1,125,000 and a denominator equal to the sum of the value
of all shares of Common Stock and Class B Stock issued in the Merger (as
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determined by AMCE in good faith, such determination to be conclusive and
binding on the parties in the absence of manifest error), plus $1,125,000,
multiplied by (B) 1.25. Immediately prior to the execution and delivery of this
Agreement, AMCE shall have delivered to the 1989 Trust, the 1992 Trust and
Stanley H. Durwood written notice of its determination of the Specified
Percentage.
ARTICLE VII
MISCELLANEOUS
Section 7.1 HOLDBACK AGREEMENT. The Stockholders agree in connection with
any registration of an underwritten offering of securities of AMCE during the
Restricted Period, including the Secondary Offering, upon the request of AMCE or
the underwriters managing such offering, not to sell, make any short sale of,
loan, grant any option for the purchase of, or otherwise dispose of any Voting
Securities without the prior written consent of AMCE or such underwriters, as
the case may be, for such period of time as AMCE or the underwriters may specify
(a "Holdback Period"), provided that the aggregate of Holdback Periods for any
365-day period shall not exceed 180 days.
Section 7.2 INTERPRETATION. For all purposes of this Agreement, the terms
AMCE "Common Stock" and "Class B Stock" shall include any securities of any
issuer entitled to vote generally for the election of directors of such issuer
which securities the holders of AMCE Common Stock or Class B Stock shall have
received or as a matter of right are entitled to receive as a result of (i) any
capital reorganization or reclassification of the capital stock of AMCE, (ii)
any consolidation, merger or share exchange of AMCE with or into another
corporation, or (iii) any sale of all or substantially all the assets of AMCE.
Section 7.3 ENFORCEMENT. (a) Stockholders, on the one hand, and AMCE, on
the other, acknowledge and agree that irreparable damage would occur if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, the parties will be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically its provisions in any court of the United States or
any state having jurisdiction, this being in addition to any other remedy to
which they may be entitled at law or in equity.
(b) No failure or delay on the part of either party in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.
Section 7.4 ENTIRE AGREEMENT. This Agreement, the Merger Agreement, the
Registration Agreement and the Indemnification Agreement (as defined in the
Merger Agreement) and, with respect to the Family Stockholders only, that
certain Durwood Family Settlement Agreement dated as of January 22, 1996,
constitute the entire understanding of the parties with respect to the
transactions contemplated herein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to the transactions
contemplated hereby except that the Durwood Family Settlement Agreement shall
not be deemed to be amended by this Agreement and shall remain in full force and
effect. This Agreement may be amended only by an agreement in writing executed
by all the parties.
Section 7.5 SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction to be unenforceable, the remaining provisions
shall remain in full force and effect. It is declared to be the intention of the
parties that they would have executed the remaining provisions without including
any that may be declared unenforceable.
Section 7.6 HEADING. Descriptive headings are for convenience only and
will not control or affect the meaning or construction of any provision of this
Agreement.
Section 7.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and each such executed counterpart will be an original instrument.
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Section 7.8 NOTICES. All notices, consents, requests, instructions,
approvals and other communications provided for in this Agreement and all legal
process in regard to this Agreement will be validly given, made or served, if in
writing and delivered personally, by telecopy (except for legal process) or sent
by registered mail postage paid:
<TABLE>
<S> <C>
If to AMCE: AMC Entertainment Inc.
106 W. 14th Street
Kansas City, Missouri 64101
Attention: Corporate Secretary
Fax:
with copies to: Charles J. Egan, Jr., Esq.
Hallmark Cards, Incorporated
2501 McGee Trafficway
Kansas City, MO 64141-6126
The Honorable Paul E. Vardeman
Polsinelli, White, Vardeman & Shalton
Suite 1000, Plaza Steppes
700 West 47th Street
Kansas City, MO 64112-1802
If a Stockholder or Delta: to the address set forth next to
such Stockholder's or Delta's name
on the signature pages hereto
With information copies of notices
to a Stockholder (other than Stanley
H. Durwood, the 1992 Trust or the
1989 Trust) or Delta to: Robert C. Kopple, Esq.
Kopple & Klinger
2029 Century Park East
Suite 1040
Los Angles, CA 90067
Glenn Kurlander, Esq.
Schiff Hardin & Waite
150 East 52nd Street
Suite 2900
New York, New York 10022
With information copies of notices
to Stanley H. Durwood, the 1992
Trust, the 1989 Trust or Delta to: Raymond F. Beagle, Jr., Esq.
Lathrop & Gage L.C.
2345 Grand Boulevard, 24th Floor
Kansas City, Missouri 64108-2684
</TABLE>
or to such other address or telecopy number as any party may, from time to time,
designate in a written notice given in a like manner. Notice shall be deemed
given upon receipt thereof.
A1-28
<PAGE>
Section 7.9 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the successors, heirs, legatees, devisees and
personal and legal representatives of the parties and Authorized Assignees of
Stockholders; provided, however, that no party may assign this Agreement (other
than an assignment by a Stockholder to an Authorized Assignee as provided
herein) without the prior written consent of all other parties.
Section 7.10 GOVERNING LAW.
(a) This Agreement will be governed by and construed and enforced in
accordance with the internal laws of the State of Missouri without giving effect
to the conflict of laws principles thereof.
(b) Each party hereto hereby consents to, and confers exclusive jurisdiction
upon, the courts of the State of Missouri and the Federal courts of the United
States of America located in the City of Kansas City, Missouri, and appropriate
appellate courts therefrom, over any action, suit or proceeding arising out of
or relating to this Agreement. Each party covenants that it will not commence
any action, suit or proceeding arising out of or relating to this Agreement in
any other jurisdiction. Nothing in this paragraph shall affect the rights of a
party to enforce a judgment rendered by the courts referred to in the first
sentence of this paragraph in any other jurisdiction. Each party hereto hereby
waives, and agrees not to assert, as a defense in any such action, suit or
proceeding that it is not subject to such jurisdiction or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
this Agreement may not be enforced in or by said courts or that its property is
exempt or immune from execution, that the suit, action or proceeding is brought
in an inconvenient forum, or that the venue of the suit, action or proceeding is
improper. Service of process in any such action, suit or proceeding may be
served on any party anywhere in the world, whether within or without the State
of Missouri by mailing a copy thereof by registered or certified mail, postage
prepaid, to such party at its address provided in Section 7.8 of this Agreement,
provided that service of process may be accomplished in any other manner
permitted by applicable law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first referred to above.
AMC ENTERTAINMENT INC.
By
--------------------------------------
Peter C. Brown
President
<TABLE>
<CAPTION>
ADDRESS: STOCKHOLDERS
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Suite 1700
Power & Light Building
106 West 14th Street --------------------------------------------
P.O. Box 419615 Stanley H. Durwood
Kansas City, Missouri 64141-6615
1323 Granite Creek Drive --------------------------------------------
Blue Springs, MO 64015 Carol D. Journagan
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
ADDRESS: STOCKHOLDERS
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
3001 West 68th Street --------------------------------------------
Shawnee Mission, KS 66208 Edward D. Durwood
P.O. Box 7208 --------------------------------------------
Rancho Santa Fe, CA 92067 Thomas A. Durwood
187 Chestnut Hill Road --------------------------------------------
Wilton, CT 06897 Elissa D. Grodin
655 N.W. Altishan Place --------------------------------------------
Beaverton, OR 97006 Brian H. Durwood
666 West End Avenue --------------------------------------------
New York, NY 10025 Peter J. Durwood
Suite 1700
Power & Light Building
106 West 14th Street --------------------------------------------
P.O. Box 419615 Stanley H. Durwood, as trustee of the 1992 Trust
Kansas City, Missouri 64141-6615
Suite 1700
Power & Light Building
106 West 14th Street --------------------------------------------
P.O. Box 419615 Stanley H. Durwood, as trustee of the 1989 Trust
Kansas City, Missouri 64141-6615
Suite 1700 DELTA PROPERTIES, INC.
Power & Light Building
106 West 14th Street
P.O. Box 419615 --------------------------------------------
Kansas City, Missouri 64141-6615
</TABLE>
A1-30
<PAGE>
EXHIBIT C TO MERGER AGREEMENT
REGISTRATION AGREEMENT
THIS REGISTRATION AGREEMENT (the "Agreement") is made and entered into this
day of , 199 , between (i) AMCE Entertainment Inc., a Delaware
corporation (the "Company"), (ii) Stanley H. Durwood, individually and as
trustee of the 1992 Durwood, Inc. Voting Trust dated December 12, 1992 (the
"1992 Trust"), and the Trust created pursuant to the Stanley H. Durwood Trust
Agreement dated August 14, 1989 (the "1989 Trust"), Carol D. Journagan, Edward
D. Durwood, Thomas A. Durwood, Elissa D. Grodin, Brian H. Durwood, Peter J.
Durwood (the "Family Stockholders") and each Permitted Assignee (as herein
defined) of such Family Stockholder listed on Exhibit A to this Agreement from
time to time (each such Family Stockholder and Permitted Assignee a
"Stockholder" and collectively "Stockholders") and (iii) solely for purposes of
Section 4 hereof, Delta Properties, Inc., a Missouri corporation.
The Company has agreed to provide to the Stockholders the registration
rights ("Registration Rights") set forth in this Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following respective meanings:
"ADJUSTED BASIS" shall mean, as of a specified date with respect to a
specified number of shares of Common Stock or Class B Stock, the number of
shares of Common Stock and Class B Stock that a record holder of such specified
number of shares on [insert date of Merger Agreement] would hold on such
specified date, after giving effect to all stock dividends and splits and all
subdivisions, combinations or reclassifications of such class of securities the
record date of which occurs between [insert date of Merger Agreement] and such
specified date.
"CHARITABLE ASSIGNEE" of a Stockholder shall mean any charitable
organization, including charitable remainder and charitable lead trusts, a
transfer of property to which by such Stockholder would qualify, at least in
part, for an income, gift or estate tax charitable deduction under the Internal
Revenue Code of 1986, as amended.
"CLASS B STOCK" shall mean the Class B Stock, par value 66 2/3 CENTS per
share, of the Company.
"COMMISSION" shall mean the Securities and Exchange Commission, or any other
federal agency at the time administering the Exchange Act or the Securities Act,
whichever is the relevant statute for the particular purpose.
"COMMON STOCK" shall mean the Common Stock, par value 66 2/3 CENTS per
share, of the Company.
"DI" shall mean Durwood, Inc., a Missouri corporation, which is to be merged
into the Company in the Merger.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2(a).
"EFFECTIVE DATE" shall mean the date on which the Commission declares a
Registration effective or on which a Registration otherwise becomes effective.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, or any
successor thereto, as the same shall be amended from time to time.
The term "HOLDER" shall mean a Stockholder and such of its respective
Permitted Assignees who acquire Registrable Securities, directly or indirectly,
from such Stockholder or from any Permitted Assignee of such Stockholder.
A1-31
<PAGE>
"MERGER" shall mean the merger of DI with and into the Company pursuant to
the Agreement and Plan of Merger and Reorganization dated as of March 31, 1997
between the Company and DI (the "Merger Agreement").
"PERMITTED ASSIGNEES" of a Stockholder shall mean any of the following
persons and entities to which Registrable Securities are transferred by such
Stockholder by gift prior to the date the Registration Statement is first filed
with the Commission that at the time of such transfer agree by instrument in
form and substance reasonably satisfactory to the Company to be bound by the
provisions of (x) this Agreement and (y) the Stock Agreement, in each case as a
"Stockholder": (i) another Stockholder, (ii) the spouse of a Stockholder, (iii)
a lineal descendant of a Stockholder, including an adopted child, and any spouse
of a lineal descendant (each, a "Family Member"), (iv) a trust established by
one or more Stockholders or Family Members of one or more Stockholders
principally for the benefit of one or more Stockholders or Family Members of
Stockholders and/or one or more Charitable Assignees, (v) the estate of such
Stockholder and (vi) any Charitable Assignee. Upon the transfer of shares of
Registrable Securities by a Stockholder to a Permitted Assignee of such
Stockholder as provided herein prior to the date the Registration Statement is
first filed with the Commission, Exhibit A hereto will be deemed to be amended
without further action of the parties hereto (x) to reduce the number of shares
of Registrable Securities set forth next to such Stockholder's name on Exhibit A
by the number of shares so transferred that will be subject to this Agreement,
(y) if such Permitted Assignee's name is not listed on Exhibit A, to add the
name of such Permitted Assignee to Exhibit A as a Stockholder, and (z) to set
forth the number of shares of Registrable Securities so transferred that will be
subject to this Agreement (or to increase the number of shares so listed by the
number of shares so transferred that will be subject to this Agreement) next to
such Permitted Assignee's name on Exhibit A. Notwithstanding any provision of
this Agreement to the contrary, a Family Stockholder may transfer to or for the
benefit of one or more Charitable Assignees in the aggregate up to five percent
(5%) of the number of shares of Common Stock or Class B Stock received by such
Family Stockholder in the Merger (or shares of Common Stock issued upon
conversion of such Class B Stock), free and clear of all the provisions of this
Agreement, and such Charitable Assignees may elect after the date of transfer
(but otherwise at a time consistent with the provisions of this Agreement) to
participate in the Registration (in which case such Charitable Assignee shall be
deemed to be a Permitted Assignee (except that such Charitable Assignee need not
agree to be bound by the provisions of the Stock Agreement)); provided that if
any such Charitable Assignee elects to participate in the Registration, (i) such
Charitable Assignee must then agree by instrument in form and substance
satisfactory to the Company to be bound by this Agreement and (ii) the
provisions of the preceding sentence shall apply.
The term "PERSON" shall mean a corporation, association, partnership
(general, limited or limited liability), organization, business, limited
liability company, individual, government or political subdivision thereof or
governmental agency.
"PROSPECTUS" shall mean the prospectus included in a Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective Registration
Statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
prospectus, including post-effective amendments, and all documents and materials
incorporated by reference in such prospectus.
"REGISTRABLE SECURITIES" shall mean the shares of Common Stock (on an
Adjusted Basis), listed on Exhibit A hereto and acquired by Stockholders
pursuant to the Merger or upon conversion of shares of the Class B Stock
acquired by Stockholders pursuant to the Merger.
"REGISTRATION" shall have the meaning set forth in Section 2(a).
"REGISTRATION EXPENSES" shall have the meaning set forth in Section 4
hereof.
A1-32
<PAGE>
"REGISTRATION STATEMENT" shall mean a registration statement of the Company
that covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference in such registration statement.
"SECURITIES ACT" shall mean the Securities Act of 1933, or any successor
thereto, as the same shall be amended from time to time.
"STOCK AGREEMENT" shall have the meaning set forth in the Merger Agreement.
The term "UNDERWRITTEN OFFERING" shall mean a distribution of securities
subject to registration under the Securities Act in which securities are sold to
an underwriter for reoffering to the public.
Section 2. REGISTRATION.
(a) REGISTRATION. Subject to the consummation of the Merger and the
effectiveness of the Registration, each Stockholder agrees to participate in a
registered underwritten secondary offering of at least 3,000,000 shares (on an
Adjusted Basis) in the aggregate of Registrable Securities on the terms and
conditions set forth in this Agreement and to sell such number of shares of
Common Stock in such underwritten offering as is set forth next to each
Stockholder's name on Exhibit A, subject to increase or reduction as set forth
below. The Stockholders agree that the underwriters for the Registration will
use their reasonable efforts in light of market conditions to sell at least 70%
of the shares sold in such secondary offering to institutional (as opposed to
retail) investors. The Company agrees (subject to the performance by the
Stockholders of their obligations hereunder) to use its reasonable efforts to
file a Registration Statement on a form selected by the Company to register
under the Securities Act for sale to the public in an underwritten offering the
number of shares of Registrable Securities owned by each Stockholder set forth
next to such Stockholder's name on Exhibit A hereto (on an Adjusted Basis) from
time to time (the "Registration") or such smaller or greater number of shares of
Registrable Securities as shall be agreed by the Company and such Stockholder in
writing, PROVIDED that (x) the number of shares of Registrable Securities of a
Stockholder set forth on Exhibit A may be decreased without the consent of the
Company by written notice to the Company reasonably satisfactory to the Company
from such Stockholder if (1) the number of shares of Registrable Securities of
another Stockholder set forth on Exhibit A is at the same time increased by a
like number of shares or (2) such shares are transferred to a Permitted Assignee
of such Stockholder and such Permitted Assignee becomes a party hereto as a
Stockholder and such shares so transferred are set forth next to such Permitted
Assignee's name on Exhibit A hereto, (y) the number of shares of Registrable
Securities of a Stockholder set forth on Exhibit A may be decreased without the
consent of the Company by written notice to the Company reasonably satisfactory
to the Company from such Stockholder so long as after giving effect thereto the
Registration covers at least 3,000,000 shares of Common Stock (on an Adjusted
Basis) and (z) the number of shares of Registrable Securities of a Family
Stockholder set forth in Exhibit A may be increased without the consent of the
Company by written notice to the Company from such Family Stockholder so long as
after giving effect thereto the Registration covers no more than 5,000,000
shares of Common Stock (on an Adjusted Basis). Should more than one Family
Stockholder seek to increase the number of Registrable Securities as permitted
above and as a result the number of shares sought to be included in the
Registration exceeds 5,000,000 shares (on an Adjusted Basis), the number of
shares, if any, that Stanley H. Durwood, the 1992 Trust and the 1989 Trust have
sought to include in the Registration above the number listed on Exhibit A (on
an Adjusted Basis) shall be reduced to the extent necessary to reduce the
aggregate number of shares sought to be included in the Registration to
5,000,000 shares (on an Adjusted Basis), and if such number of shares still
exceeds 5,000,000, the Company shall allocate the increased number of shares to
be included in the Registration among such Family Stockholders (other than
Stanley H. Durwood, the 1992 Trust and the 1989 Trust) seeking an increase on a
pro rata basis or in such other manner as such Family Stockholders may agree. In
the event of any increase or decrease in the number of Registrable Securities of
a Stockholder as set forth above, Exhibit A hereto shall be
A1-33
<PAGE>
deemed amended to increase or decrease, accordingly, the number of shares of
Registrable Securities set forth next to such Stockholder's name. The Company
shall (subject to the performance by the Stockholders of their obligations
hereunder) use its reasonable efforts to cause the Registration to be declared
effective under the Securities Act as promptly as practicable on or after the
date that is six months and one day from the date of the Merger and to keep the
Registration effective under the Securities Act for a period ending on the date
that is six months from such date (provided that such six month period shall be
extended by the length of any Postponement Period (as defined below)) or such
shorter period ending when all Registrable Securities covered by the
Registration have been sold (the "Effectiveness Period").
(b) SUPPLEMENTS AND AMENDMENTS. The Company shall supplement and amend the
Registration Statement, prior to the Effective Date and during the Effectiveness
Period, if (i) required by the rules, regulations or instructions applicable to
the registration form used for such Registration, (ii) otherwise required by the
Securities Act or (iii) reasonably requested by the holders of a majority in
aggregate principal amount of the Registrable Securities covered by such
Registration Statement or by any underwriter of such Registrable Securities.
(c) SELECTION OF UNDERWRITERS. The managing underwriters for the
Registration shall be selected jointly by the Company and the Family
Stockholders (other than the 1992 Trust and the 1989 Trust) acting by majority
vote (for which purpose each such Family Stockholder shall have one vote).
(d) CONDITIONS TO THE OBLIGATIONS OF COMPANY. The Company shall be
entitled to postpone (or if already filed may withdraw such Registration
Statement), for an aggregate of up to 180 days (together with any period
described in the last sentence of Section 3(b) hereof, a "Postponement Period"),
the filing of the Registration Statement otherwise required to be prepared and
filed by it pursuant hereto if, as a result of the Registration the Company
would be required to prepare any financial statements other than those it
customarily prepares or the Company determines in its reasonable business
judgment that such registration and offering would interfere with any material
financing, acquisition, corporate reorganization or other material corporate
transaction or development involving the Company and gives the Stockholders
written notice of such determination.
Section 3. REGISTRATION PROCEDURES.
(a) In connection with the Company's obligations with respect to the
Registration, the Company shall (subject to the performance by the Stockholders
of their obligations hereunder):
(i) prepare and file with the Commission a Registration Statement which
shall permit the disposition of the Registrable Securities, in an
underwritten offering, and use its reasonable efforts to cause such
Registration Statement to become effective as provided in this Agreement;
PROVIDED, HOWEVER, before filing the Registration Statement or Prospectus or
any amendments or supplements thereto (including documents that would be
incorporated therein by reference after the initial filing of the
Registration Statement), the Company shall afford the Counsel (as defined
below) and the managing underwriters, an opportunity to review copies of all
such documents proposed to be filed; PROVIDED, FURTHER, that the Company
shall not file any Registration Statement or related Prospectus or any
amendments or supplements thereto (including such documents incorporated by
reference) if such counsel for all such holders, or the managing
underwriters shall reasonably object, in writing, on a timely basis
(PROVIDED that any such objecting party and the Company use their best
efforts promptly to resolve such party's objections on a basis reasonably
satisfactory to such party and the Company which will permit such filing);
(ii) prepare and file with the Commission such amendments,
post-effective amendments and supplements to such Registration Statement and
the Prospectus included therein as may be necessary to effect and maintain
the effectiveness of such Registration Statement for the applicable
A1-34
<PAGE>
period specified herein and furnish to the Stockholders copies of any such
supplement or amendment prior to its being used or filed with the
Commission;
(iii) for a reasonable period prior to the filing of such Registration
Statement, and throughout the Effectiveness Period, make available for
inspection by the Counsel and the counsel for the managing underwriters such
financial and other information and books and records of the Company, and
cause the officers, employees, counsel and independent certified public
accountants of the Company to respond to such inquiries, as shall be
reasonably necessary, in the judgment of the respective counsel referred to
in such Section, to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act; provided, however, that each such party
shall be required to maintain in confidence and not to disclose to any other
person any information or records reasonably designated by the Company in
writing as being confidential, until such time as (A) such information
becomes a matter of public record (whether by virtue of its inclusion in
such Registration Statement or otherwise), or (B) such person shall be
required so to disclose such information pursuant to a subpoena or order of
any court or other governmental agency or body having jurisdiction over the
matter (subject to the requirements of such order, and only after such
person shall have given the Company prompt written notice of such
requirement), or (C) such information is required to be set forth in such
Registration Statement or the Prospectus included therein or in an amendment
to such Registration Statement or an amendment or supplement to such
Prospectus in order that such Registration Statement, Prospectus, amendment
or supplement, as the case may be, does not contain an untrue statement of a
material fact or omit to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing;
(iv) notify the Stockholders and the managing underwriters thereof and,
if requested by any such person, confirm such advice in writing, (A) when
such Registration Statement or the Prospectus included therein or any
Prospectus amendment or supplement or post-effective amendment has been
filed, and, with respect to such Registration Statement or any
post-effective amendment, when the same has become effective, (B) of any
comments by the Commission and by the blue sky or securities commissioner or
regulator of any state with respect thereto or any request by the Commission
for amendments or supplements to such Registration Statement or Prospectus
or for additional information, (C) of the issuance by the Commission of any
stop order suspending the effectiveness of such Registration Statement or
the initiation or threatening of any proceedings for that purpose, (D) if at
any time the representations and warranties of the Company contemplated by
Section 3(a)(xi) hereof cease to be true and correct in all material
respects, (E) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose, or (F) at any time when a Prospectus is required to be
delivered under the Securities Act, that such Registration Statement,
Prospectus, Prospectus amendment or supplement or post-effective amendment,
or any document incorporated by reference in any of the foregoing, contains
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
(v) use its reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of such Registration Statement or any
post-effective amendment thereto at the earliest practicable date;
(vi) if requested by the managing underwriters or the holders of a
majority of the Registrable Securities covered by the Registration,
incorporate in a Prospectus supplement or post-effective amendment such
information as is required by the applicable rules and regulations of the
Commission and as such managing underwriters or such holders specify should
be included therein relating to the terms of the sale of such Registrable
Securities, including, without limitation, information with
A1-35
<PAGE>
respect to the principal amount of Registrable Securities being sold by such
holders or to any underwriters, the name and description of such holders or
underwriter, the offering price of such Registrable Securities and any
discount, commission or other compensation payable in respect thereof, the
purchase price being paid therefor by such underwriters and with respect to
any other terms of the offering of the Registrable Securities to be sold by
such holders or to such underwriters; and make all required filings of such
Prospectus supplement or post-effective amendment after notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(vii) furnish to each Stockholder, each underwriter of holders of
Registrable Securities participating in the Registration thereof and the
Counsel an executed copy of such Registration Statement, each such amendment
or supplement thereto (in each case, upon request, including all exhibits
thereto and documents incorporated by reference therein) and furnish each
such holder and underwriter such number of copies of the Prospectus included
in such Registration Statement (including each preliminary Prospectus and
any summary Prospectus) as such holder or underwriter may reasonably
request; the Company hereby consents to the use of such Prospectus
(including such preliminary and summary Prospectus) and any amendment or
supplement thereto by each such holder and underwriter, in each case in the
form most recently provided to such party by the Company, in connection with
the offering and sale of the Registrable Securities covered by the
Prospectus (including such preliminary and summary Prospectus) or any
supplement or amendment thereto;
(viii) use its reasonable efforts to (A) register or qualify the
Registrable Securities to be included in such Registration Statement under
such state securities laws or blue sky laws of such jurisdictions as any
holder of such Registrable Securities and underwriter thereof shall
reasonably request, (B) keep such registrations or qualifications in effect
and comply with such laws so as to permit the continuance of offers, sales
and dealings therein in such jurisdictions during the period such
Registration Statement is required to be kept effective and for so long as
may be necessary to enable any such holder or underwriter to complete its
distribution of Securities pursuant to such Registration Statement as
contemplated hereby and (C) take any and all other actions as may be
reasonably necessary or advisable to enable each such holder and underwriter
to consummate the disposition in such jurisdictions of such Registrable
Securities; PROVIDED, HOWEVER, that the Company shall not be required for
any such purpose to (I) qualify as a foreign corporation in any jurisdiction
where it would not otherwise be required to qualify but for the requirements
of this Section 3(a)(viii), (II) consent to general service of process in
any such jurisdiction, (III) subject itself to taxation in any such
jurisdiction or (IV) make any changes to the Company's Certificate of
Incorporation or By-laws or any agreement between the Company and its
stockholders;
(ix) cooperate with the holders of the Registrable Securities and the
managing underwriters to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which
Registrable Securities shall not bear any restrictive legends; and enable
such Registrable Securities to be registered in such names as the managing
underwriters may request at least two business days prior to any sale of the
Registrable Securities to the underwriters;
(x) enter into one or more underwriting agreements, or similar
agreements, as appropriate, with customary provisions applicable to such
agreements, PROVIDED that any such underwriting agreements shall contain an
agreement of the underwriters to indemnify and hold harmless the Company
against any and all losses, claims, damages, and liabilities caused by any
untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement or Prospectus relating to the Registrable
Securities if a copy of the current Prospectus, as amended or supplemented,
was furnished to the underwriters and/or the holders of such Registrable
Securities by the Company but was not provided to a purchaser and such
current Prospectus would have cured the defect giving rise to such loss,
claim, damage or liability, or shall contain a substantially similar
agreement acceptable to the Company; and
A1-36
<PAGE>
(xi) (A) make such representations and warranties to the holders of
such Registrable Securities and the underwriters thereof in form, substance
and scope as are customarily made in connection with an offering of equity
securities pursuant to a Registration Statement filed on the form applicable
to the Registration; (B) obtain an opinion of counsel to the Company in
customary form and covering such matters, of the type customarily covered by
such an opinion, as the managing underwriters, and as the holders of at
least a majority in aggregate principal amount of the Registrable Securities
covered by the Registration, may reasonably request, addressed to such
holder or holders and the underwriters thereof; (C) obtain "comfort" letters
and updates thereof from the independent certified public accountants of the
Company addressed to the selling holders of Registrable Securities and the
underwriters thereof, such letters to be in customary form and covering
matters of the type customarily covered in "comfort" letters to underwriters
in connection with underwritten offerings; (D) deliver such documents and
certificates, including officer's certificates, as may be reasonably
requested by the holders of at least a majority in aggregate principal
amount of the Registrable Securities being sold and the managing
underwriters thereof to evidence the accuracy of the representations and
warranties made pursuant to clause (A) above and the compliance with or
satisfaction of any agreements or conditions contained in the underwriting
agreement or other agreement entered into by the Company; and (E) undertake
such obligations relating to expense reimbursement, indemnification and
contribution as are provided in Sections 4 and 5 hereof.
(b) In the event that the Company would be required, pursuant to Section
3(a)(iv)(F) above, to notify the selling holders of Registrable Securities, and
the managing underwriters thereof, the Company shall prepare and furnish to each
such holder and to each underwriter a reasonable number of copies of a
Prospectus supplemented or amended so that, as thereafter delivered to
purchasers of Registrable Securities, such Prospectus shall not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing. Each holder of Registrable Securities
agrees that upon receipt of any notice from the Company pursuant to Section
3(a)(iv)(F) hereof, such holder shall forthwith discontinue the disposition of
Registrable Securities pursuant to the Registration Statement applicable to such
Registrable Securities until such holder shall have received copies of such
amended or supplemented Prospectus, and if so directed by the Company, such
holder shall deliver to the Company (at the Company's expense) all copies, other
than permanent file copies, then in such holder's possession of the Prospectus
covering such Registrable Securities at the time of receipt of such notice. In
the event the Company shall give such notice, the Company shall extend the
period during which such Registration Statement shall be maintained effective as
provided in Section 2(a) hereof by the number of days during the period from and
including the date of the giving of such notice to the date when the Company
shall make available to each holder of Registrable Securities covered by the
Registration Statement such amended or supplemented Prospectus.
(c) The Company may require each holder of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding such holder (and, in the case of Stanley H. Durwood,
regarding DI, its subsidiaries (other than the Company), American Associated
Enterprises, a Missouri limited partnership ("AAE"), the 1989 Trust and the 1992
Trust) and the method of distribution of such Registrable Securities as the
Company may from time to time reasonably request in writing. Each such holder
agrees to notify the Company as promptly as practicable of any inaccuracy or
change in information previously furnished by such holder to the Company or of
the occurrence of any event in either case as a result of which any Prospectus
relating to such registration contains or would contain an untrue statement of a
material fact regarding such holder or the method of distribution of such
Registrable Securities or omits to state any material fact regarding such holder
or the intended method of distribution of such Registrable Securities required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing, and promptly to furnish to the
Company any additional information required to correct and update any previously
furnished
A1-37
<PAGE>
information or required so that such Prospectus shall not contain, with respect
to such holder or the method of distribution of such Registrable Securities, an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.
(d) In connection with the Registration, the Family Stockholders (other than
the 1992 Trust and the 1989 Trust) acting by majority vote (for which purpose
each such Family Stockholder shall have one vote) thereby shall designate a
single counsel (the "Counsel"), which shall be reasonably satisfactory to the
Company, to represent the collective interests of all of the holders of the
Registrable Securities covered by the Registration Statement in the Registration
and in their dealings with the Company.
(e) The Company may require each holder of Registrable Securities covered by
a Registration Statement promptly to furnish in writing to the Company such
information regarding such holder (and, in the case of Stanley H. Durwood,
regarding DI, its subsidiaries (other than the Company), AAE, the 1989 Trust and
the 1992 Trust), the plan of distribution of the Registrable Securities and
other information as the Company may from time to time reasonably request or as
may be legally required in connection with such Registration.
Section 4. REGISTRATION EXPENSES.
Stanley H. Durwood, the 1989 Trust, the 1992 Trust and Delta shall bear and
pay (jointly and severally), promptly upon request being made therefor, all
expenses incident to the Company's performance of or compliance with this
Agreement whether or not the public offering contemplated by the Registration is
consummated, including, without limitation, (a) all Commission and any NASD
registration and filing fees and expenses, (b) all fees and expenses in
connection with the qualification of the Registrable Securities for offering and
sale under the state securities and blue sky laws referred to in Section
3(a)(viii) hereof, including reasonable fees and disbursements of counsel for
the underwriters in connection with such qualifications (in the event that such
counsel performs such functions), (c) all expenses relating to the preparation,
printing, distribution and reproduction of the Registration Statement required
to be filed hereunder, each Prospectus included therein or prepared for
distribution pursuant hereto, each amendment or supplement to the foregoing, the
certificates representing the Registrable Securities and all other documents
relating hereto, (d) messenger and delivery expenses, (e) fees and expenses of
any escrow agent or custodian, (f) fees, disbursements and expenses of counsel
and independent certified public accountants of the Company (including the
expenses of any opinions or "comfort" letters required by or incident to such
performance and compliance), and fees, expenses and disbursements of any other
persons, including special experts, retained by the Company in connection with
such registration (collectively, the "Registration Expenses"). Each holder of
the Registrable Securities being registered severally shall also pay (i) its
respective pro rata portion of all underwriting discounts and commissions
attributable to the sale of such Registrable Securities and the reasonable fees
and disbursements of the Counsel and (ii) the entire amount of the fees and
expenses of any counsel or other advisors or experts retained by such holder.
The Company shall pay all of its internal expenses (including, without
limitation, all salaries and expenses of the Company's officers and employees
performing legal or accounting duties).
Section 5. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall, and it hereby
agrees to, indemnify and hold harmless each holder of Registrable Securities to
be included in the Registration (other than Stanley H. Durwood, the 1992 Trust
and the 1989 Trust) from and against any and all losses, claims, damages and
liabilities to which such holder may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages and liabilities (or actions
in respect thereof) and related expenses (including without limitation
reasonable attorneys' fees and expenses) ("Losses") arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in a Registration Statement under which such Registrable Securities
were registered under the Securities Act, or any preliminary, final or summary
Prospectus contained therein or furnished by the Company to
A1-38
<PAGE>
any such holder, or any amendment or supplement thereto, or arise out of or are
based upon any omission or alleged omission to state therein a material fact
necessary to make the statements therein not misleading; PROVIDED, HOWEVER, that
(A) the Company shall not be obligated to indemnify any such person in any such
case to the extent that any such Losses are caused by an untrue statement or
alleged untrue statement or omission or alleged omission made in such
Registration Statement, or preliminary, final or summary Prospectus, or
amendment or supplement based upon written information furnished to the Company
by any holder of Registrable Securities expressly for use therein, (B) the
Company shall not be liable to any such holder under the indemnity agreement in
this subsection (a) with respect to any preliminary Prospectus to the extent
that any such Loss of such holder results from the fact that such person sold
Registrable Securities to a person as to whom it shall be established that there
was not sent or given at or prior to the written confirmation of such sale, a
copy of the Prospectus or of the Prospectus as then amended or supplemented if
the Company has previously furnished copies thereof in sufficient quantity to
such holder or underwriter and the loss, claim, damage or liability of such
holder or underwriter results from an untrue statement or omission of a material
fact contained in the preliminary Prospectus which was corrected in the
Prospectus or in the Prospectus as amended or supplemented and (C) the Company
shall not be obligated to indemnify any such holder with respect to any sales
occurring after the Company has given notice under Section 3(a)(iv)(F) to such
holder and the managing underwriters and prior to the delivery by the Company of
any amended or supplemented Prospectus.
(b) INDEMNIFICATION BY THE HOLDERS. Each Stockholder shall, and hereby
agrees to, severally and not jointly, indemnify and hold harmless the Company,
and all other holders of Registrable Securities, against any Losses to which the
Company or such other holders of Registrable Securities may become subject,
under the Securities Act or otherwise, to the same extent as the foregoing
indemnity by the Company contained in (a), but only with reference to
information relating to such Stockholder furnished to the Company by such
Stockholder expressly for use in such Registration Statement, or any
preliminary, final or summary Prospectus and, where such Stockholder is Stanley
H. Durwood, the 1989 Trust or the 1992 Trust, with reference to information
relating to DI, its subsidiaries (other than the Company), AAE, the 1989 Trust,
the 1992 Trust and Stanley H. Durwood; provided, however, that no such holder
shall be required to indemnify under this Section 5(b) for any amounts in excess
of the dollar amount of the proceeds to be received by such holder from the sale
of such holder's Registrable Securities pursuant to such Registration. Such
information shall be deemed to have been so furnished for use therein by a
Stockholder if it relates to such Stockholder (or, in the case of Stanley H.
Durwood, the 1989 Trust or the 1992 Trust, where it relates to Stanley H.
Durwood, the 1989 Trust, the 1992 Trust, DI, its subsidiaries (other than the
Company) or AAE) and if such Registration Statement was available for review by
such Stockholder (or the legal counsel for such Stockholder) a reasonable time
before being filed and not objected to in writing by such Stockholder prior to
the filing thereof.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified party
under subsection (a) or (b) above of written notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 5, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall relieve it from liability which it may have to any indemnified party
only to the extent the indemnifying party is prejudiced thereby. In case any
such action shall be brought against any indemnified party and it shall notify
an indemnifying party of the commencement thereof, such indemnifying party shall
be entitled to participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, such
indemnifying party shall pay the fees and disbursements of such counsel and
shall not be liable to such indemnified party for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party unless (i) the indemnifying party and the indemnified party
shall have mutually agreed to the retention of such counsel or (ii) the
A1-39
<PAGE>
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all such indemnified parties. Such firm
shall be designated in writing by the managing underwriter if the named parties
to such proceeding include the managing underwriter and by the Family
Stockholders (other than the 1992 Trust and the 1989 Trust) acting by majority
vote (in which each such Family Stockholder shall have one vote) in the case of
parties indemnified pursuant to paragraph (a) above and by the Company in the
case of parties indemnified pursuant to paragraph (b) above. The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent not to be unreasonably withheld, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. No indemnifying party shall,
without the prior written consent of the indemnified party not to be
unreasonably withheld, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) CONTRIBUTION. Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 5(a) or Section 5(b) are
unavailable to or insufficient to hold harmless an indemnified party in respect
of any Losses referred to therein, then each indemnifying party under such
paragraph, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such Losses in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnifying party and the indemnified party,
but also the relative fault of the indemnifying party and the indemnified party
in connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by such indemnifying party or by such indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
Notwithstanding the provisions of this Section 5(d), no holder shall be
required to contribute any amount in excess of the amount by which the dollar
amount of the proceeds received by such holder from the sale of any Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) exceeds the amount of any damages which such holder 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 Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The holders' obligations in this Section 5(d) to contribute
shall be several in proportion to the principal amount of Registrable Securities
registered or underwritten, as the case may be, by them and not joint.
(e) The obligations of the Company under this Section 5 shall extend, upon
the same terms and conditions, to each officer, director and partner of each
holder and each person, if any, who controls any holder within the meaning of
either Section 20 of the Exchange Act or Section 15 of the Securities Act; and
the obligations of the Stockholders contemplated by this Section 5 shall be in
addition to any liability which the Stockholders may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company (including any person who, with his consent, is named in any
Registration Statement as about to become a director of the Company) and to each
person, if any, who controls the Company within the meaning of the Securities
Act.
A1-40
<PAGE>
(f) The obligations of the Company and each Stockholder under this Section
5 shall terminate on the Termination Date (as defined below), except that such
obligations shall survive in respect to any claim for indemnification made under
this Section 5 prior to the Termination Date until such claim for
indemnification is finally resolved. As used herein "Termination Date" means the
March 31 that is two years after the March 31 occurring immediately after the
date on which the Effective Time (defined in the Merger Agreement) occurs.
Section 6. UNDERWRITING REQUIREMENTS.
Each holder of Registrable Securities hereby agrees (i) to sell such
holder's Registrable Securities on a basis consistent with this Agreement and as
provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (ii) to complete and execute all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
Section 7. MISCELLANEOUS.
(a) SPECIFIC PERFORMANCE. The parties hereto acknowledge that there may be
no adequate remedy at law if any party fails to perform any of its obligations
hereunder and that each party may be irreparably harmed by any such failure, and
accordingly agree that each party, in addition to any other remedy to which it
may be entitled at law or in equity, shall be entitled to compel specific
performance of the obligations of any other party under this Agreement in
accordance with the terms and conditions of this Agreement, in any court of the
United States or any State thereof having jurisdiction.
(b) NOTICES. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows: if to the Company, to it
at 106 West 14th Street, Kansas City, Missouri 64101, Attention: Corporate
Secretary, if to Delta, to it at 106 West 14th Street, Kansas City, Missouri
64101, and if to a Stockholder, to such Stockholder at the address set forth on
the signature page hereof next to such Stockholder's signature, provided that
such addresses may be changed by written notice as provided in this paragraph.
Information copies of all notices given to a Stockholder (other than Stanley H.
Durwood, the 1992 Trust or the 1989 Trust) or to Delta shall be given to:
<TABLE>
<S> <C>
Robert C. Kopple, Esq.
Kopple & Klinger
2029 Century Park East
Suite 1040
Los Angeles, CA 90067
Glenn Kurlander, Esq.
Schiff Hardin & Waite
150 East 52nd Street
Suite 2900
New York, New York 10022
Information copies of all notices
given
to Stanley H. Durwood, the 1992
Trust, the 1989 Trust, or Delta
should be given to: Raymond F. Beagle, Jr., Esq.
Lathrop & Gage L.C.
2345 Grand Boulevard, 24th Floor
Kansas City, Missouri 64108-2684
</TABLE>
A1-41
<PAGE>
<TABLE>
<S> <C>
Information copies of all notices
given
to the Company should be given to: Charles J. Egan, Jr., Esq.
Hallmark Cards, Incorporated
2501 McGee Trafficway
Kansas City, MO 64141-6126
The Honorable Paul E. Vardeman
Polsinelli, White, Vardeman &
Shalton
Suite 1000, Plaza Steppes
700 West 47th Street
Kansas City, MO 64112-1802
</TABLE>
(c) THIRD PARTY BENEFICIARIES: HOLDERS ENTITLED AND BOUND. This agreement
shall be binding upon and inure to the benefit of the parties, their successors,
heirs, legatees, devisees and personal and legal representatives, and any
transferee that is a Permitted Assignee. No party may assign its rights under
this Agreement (except to a Permitted Assignee as provided herein) without the
consent of the other parties hereto.
(d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) SURVIVAL. The respective indemnities, agreements, representations and
warranties and each other provision set forth in this Agreement or made pursuant
hereto shall remain in full force and effect regardless of any investigation (or
statement as to the results thereof) made by or on behalf of any holder of
Registrable Securities, any director, officer or partner of such holder, any
agent or underwriter or any director, officer or partner thereof, or any
controlling person of any of the foregoing, and shall survive the transfer of
Registrable Securities by such holder.
(f) LAW GOVERNING; CONSENT TO JURISDICTION.
(I) This Agreement shall be governed by and construed in accordance with
the laws of the State of Missouri without giving effect to the conflicts of laws
principles thereof.
(II) Each party hereto hereby consents to, and confers exclusive
jurisdiction upon, the courts of the State of Missouri and the Federal courts of
the United States of America located in the City of Kansas City, Missouri, and
appropriate appellate courts therefrom, over any action, suit or proceeding
arising out of or relating to this Agreement. Each party covenants that it will
not commence any action, suit or proceeding arising out of or relating to this
Agreement in any other jurisdiction. Nothing in this paragraph shall affect the
rights of a party to enforce a judgment rendered by the courts referred to in
the first sentence of this paragraph in any other jurisdiction. Each party
hereto hereby waives, and agrees not to assert, as a defense in any such action,
suit or proceeding that it is not subject to such jurisdiction or that such
action, suit or proceeding may not be brought or is not maintainable in said
courts or that this Agreement may not be enforced in or by said courts or that
its property is exempt or immune from execution, that the suit, action or
proceeding is brought in an inconvenient forum, or that the venue of the suit,
action or proceeding is improper. Service of process in any such action, suit or
proceeding may be served on any party anywhere in the world, whether within or
without the State of Missouri by mailing a copy thereof by registered or
certified mail, postage prepaid, to such party at its address provided in
Section 7(b) of this Agreement, provided that service of process may be
accomplished in any other manner permitted by applicable law.
A1-42
<PAGE>
(g) HEADINGS. The descriptive headings of the several Sections and
paragraphs of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement.
(h) ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the Stock Agreement, the
Indemnification Agreement and the Merger Agreement and, with respect to the
Family Stockholders, that certain Durwood Family Settlement Agreement dated as
of January 22, 1996 contain the entire understanding of the parties with respect
to the transactions contemplated hereby. This Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter, except that the Durwood Family Settlement Agreement shall not be deemed
to be amended by this Agreement and shall remain in full force and effect. This
Agreement may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and the
Family Stockholders acting by majority vote (for which purpose each Family
Stockholder (other than the 1992 Trust and the 1989 Trust) shall have one vote).
Each holder of any Registrable Securities at the time or thereafter outstanding
shall be bound by any amendment or waiver effected pursuant to this Section
7(h), whether or not any notice, writing or marking indicating such amendment or
waiver appears on such Registrable Securities or is delivered to such holder.
(i) INSPECTION. For so long as this Agreement shall be in effect, this
Agreement and a complete list of the names and addresses of all the holders of
Registrable Securities shall be made available for inspection and copying on any
business day by any holder of Registrable Securities at the offices of the
Company at the address thereof set forth in Section 7(b) above.
(j) SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
A1-43
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
<TABLE>
<S> <C> <C>
AMC ENTERTAINMENT INC.
By:
-----------------------------------------
Peter C. Brown
PRESIDENT
DELTA PROPERTIES, INC.
By:
-----------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ADDRESS
---------------------------------------
<C> <S>
Suite 1700
Power & Light Building
------------------------------------------- 106 West 14th Street
Stanley H. Durwood P.O. Box 419615
Kansas City, Missouri 64141-6615
------------------------------------------- 1323 Granite Creek Drive Blue Springs,
Carol D. Journagan MO 64015
------------------------------------------- 3001 West 68th Street
Edward D. Durwood Shawnee Mission, KS 66208
------------------------------------------- P.O. Box 7208
Thomas A. Durwood Rancho Santa Fe, CA 92067
------------------------------------------- 187 Chestnut Hill Road
Elissa D. Grodin Wilton, CT 06897
------------------------------------------- 655 N.W. Altishan Place
Brian H. Durwood Beaverton, OR 97006
------------------------------------------- 666 West End Avenue
Peter J. Durwood New York, NY 10025
Suite 1700
Power & Light Building
------------------------------------------- 106 West 14th Street
Stanley H. Durwood, as trustee of the 1992 Trust P.O. Box 419615
Kansas City, Missouri 64141-6615
Suite 1700
Power & Light Building
------------------------------------------- 106 West 14th Street
Stanley H. Durwood, as trustee of the 1989 Trust P.O. Box 419615
Kansas City, Missouri 64141-6615
</TABLE>
A1-44
<PAGE>
EXHIBIT A TO REGISTRATION AGREEMENT
<TABLE>
<S> <C> <C>
Stanley H. Durwood *
1989 Trust *
1992 Trust *
--------------------------
500,000 shares,
collectively
- --------------
Carol D. Journagan 416,666.67 shares
Edward D. Durwood 416,666.67 shares
Thomas A. Durwood 416,666.67 shares
Elissa D. Grodin 416,666.67 shares
Brian H. Durwood 416,666.67 shares
Peter J. Durwood 416,666.67 shares
</TABLE>
A1-45
<PAGE>
EXHIBIT D TO MERGER AGREEMENT
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated as of March 31, 1997 by (i) AMC
Entertainment Inc., a Delaware corporation ("AMCE"), (ii) Stanley H. Durwood,
individually, and as trustee of the 1992 Durwood, Inc. Voting Trust dated
December 12, 1992 (the "1992 Trust") and as trustee of the Trust created
pursuant to the Stanley H. Durwood Trust Agreement dated August 14, 1989 (the
"1989 Trust"), Carol D. Journagan, Edward D. Durwood, Thomas A. Durwood, Elissa
D. Grodin, Brian H. Durwood and Peter J. Durwood (all persons and entities
listed in this clause (ii) are referred to herein as the "Durwood Parties") and
(iii) Delta Properties, Inc., a Missouri corporation ("Delta"). Capitalized
terms used herein and not defined herein are used as defined in the Merger
Agreement (as defined below).
WHEREAS, contemporaneously with the execution and delivery hereof AMCE and
Durwood, Inc., a Missouri corporation ("DI"), are entering into an Agreement and
Plan of Merger and Reorganization dated as of the date hereof (the "Merger
Agreement") pursuant to which, subject to the conditions and the terms contained
therein, DI would merge with and into AMCE, with AMCE being the surviving
corporation; and
WHEREAS, the Durwood Parties are direct and indirect stockholders of DI and
desire that the Merger be consummated; and
WHEREAS, prior to or following the execution and delivery hereof, DI has
transferred or will transfer to Delta certain of its assets and the Durwood
Parties and DI would not be willing to enter into this Agreement unless Delta
undertakes certain obligations set forth herein and in consideration for such
transfer to it; and
WHEREAS, the Registration Statement and Proxy Statement will contain
information regarding AMCE, DI and certain Durwood Parties and entities and
persons affiliated with the Durwood Parties; and
WHEREAS, the Merger Agreement will contain representations, warranties,
covenants and agreements of AMCE and DI; and
WHEREAS, AMCE would not be willing to enter into the Merger Agreement and
consummate the Merger, and the Durwood Parties would not be willing to cause DI
to enter into the Merger Agreement and consummate the Merger, unless the parties
hereto agree to indemnify each other on the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
and covenants set forth herein, the parties hereto do hereby agree and covenant
as follows:
1. INDEMNITIES REGARDING REGISTRATION STATEMENT AND PROXY STATEMENT.
(a) Each Durwood Party severally agrees to provide AMCE with such
information as to such Durwood Party as is necessary for AMCE to complete the
Registration Statement and the Offering Materials (as defined below) in
accordance with the requirements of the Securities Act. Each Durwood Party
severally covenants that the information supplied or to be supplied by such
Durwood Party (and, in the case of Stanley H. Durwood, the 1992 Trust and the
1989 Trust) in writing for inclusion in, and which is included in, the
Registration Statement or any amendment or supplement thereto, or the Offering
Materials which concerns such Durwood Party (the "Durwood Party Information"),
will not, at the respective times such documents are filed with the SEC and at
the Effective Time, and, in the case of the Registration Statement or any
amendment or supplement thereto, when the same becomes effective, and, in the
case of the Offering Materials, at the time of mailing thereof to AMCE's
stockholders, contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any Durwood Party
Information regarding a Durwood Party included in any such document will be
deemed
A1-46
<PAGE>
to have been so supplied in writing by such Durwood Party specifically for
inclusion therein if such document was available for review by such Durwood
Party (or the legal counsel of such Durwood Party) a reasonable time before such
document was filed and not objected to in writing by such Durwood Party prior to
the filing thereof. If at any time prior to the Effective Time a Durwood Party
obtains actual knowledge (without duty of investigation) of any event or
circumstance relating to the Durwood Entities (as defined below) which should be
set forth in an amendment or supplement to the Registration Statement or
Offering Materials, as required by applicable law, such Durwood Party shall
promptly inform AMCE. AMCE and its affiliates, officers, directors, employees,
agents, successors and assigns shall be indemnified and held harmless by each
Durwood Party severally and in the case of Durwood Party Information concerning
Stanley H. Durwood, the 1992 Trust or the 1989 Trust, by the SHD Indemnitors (as
defined below), jointly and severally, for any and all Losses (as defined
herein) actually suffered or incurred by them arising out of or resulting from
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or the Offering Materials, 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 light of the circumstances under
which they were made, not misleading, if the statement or omission was made in
reliance upon and in conformity with the Durwood Party Information supplied by
such Durwood Party (or in the case of indemnification by the SHD Indemnitors, by
any SHD Indemnitor).
(b) Stanley H. Durwood, the 1992 Trust and the 1989 Trust (the "SHD
Indemnitors") agree (jointly and severally) to provide AMCE with such
information as to DI, Subsidiaries of DI (other than AMCE) and American
Associated Enterprises, a Missouri limited partnership ("AAE") (DI, Subsidiaries
of DI (other than AMCE) and AAE are referred to as the "DI Persons" and the
Durwood Parties and the DI Persons are referred to as the "Durwood Entities") as
is necessary for AMCE to complete the Registration Statement and the Offering
Materials in accordance with the requirements of the Securities Act. The SHD
Indemnitors covenant that the information supplied or to be supplied in writing
for inclusion in, and which is included in, the Registration Statement or any
amendment or supplement thereto, or the Offering Materials, which concerns the
DI Persons (the "DI Person Information"), will not, at the respective times such
documents are filed with the SEC and at the Effective Time, and, in the case of
the Registration Statement or any amendment or supplement thereto, when the same
becomes effective, and, in the case of the Offering Materials, at the time of
mailing thereof to AMCE's stockholders, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Any DI Person Information included in any such document will be
deemed to have been so supplied in writing specifically for inclusion therein if
such document was available for review by Stanley H. Durwood (or his legal
counsel) a reasonable time before such document was filed and not objected to in
writing by Stanley H. Durwood prior to the filing thereof. AMCE and its
affiliates, officers, directors, employees, agents, successors and assigns shall
be indemnified and held harmless by the SHD Indemnitors (jointly and severally)
for any and all Losses actually suffered or incurred by them arising out of or
resulting from any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or the Offering Materials, 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 light of the
circumstances under which they were made, not misleading, if the statement or
omission was made in reliance upon and in conformity with the DI Person
Information.
(c) Each Durwood Party (other than the SHD Indemnitors) shall be indemnified
and held harmless by AMCE for any and all Losses actually suffered or incurred
by them arising out of or resulting from any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Offering Materials, 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 light of the circumstances under which they were made, not
misleading, in each case except to the extent that the statement or omission was
A1-47
<PAGE>
made in reliance upon and in conformity with the Durwood Party Information or
the DI Person Information.
(d) As used herein, "Offering Materials" means the Proxy Statement and
prospectus relating to the Merger included in the Registration Statement, and
each of the other documents mailed to stockholders of AMCE in connection with
the Merger.
(e) If for any reason, other than in accordance with the terms of this
Section 1, the indemnification provided for in this Section 1 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above in respect of any Losses referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses in such proportion as is
appropriate to reflect its relative fault in connection with the statements or
omissions which resulted in such Losses, as well as any other relevant equitable
considerations, but not in excess of amounts, if any, such indemnifying party
would have been required to pay if such indemnification had been available. The
relative fault 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 relates to information supplied by
such indemnifying Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Durwood Parties agree that it would not be just and equitable if
contribution pursuant to this subsection (e) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable consideration referred to above in this subsection (e). No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(f) The obligations of AMCE under this Section 1 shall be in addition to
any liability which AMCE may otherwise have, and the obligations of the Durwood
Parties under this Section 1 shall be in addition to any liability which the
Durwood Parties may otherwise have.
(g) The obligations of AMCE and the Durwood Parties under this Section 1
shall terminate on the Termination Date (as defined below), except that such
obligations shall survive in respect to any claim for indemnification made under
this Section 1 prior to the Termination Date until such claim for
indemnification is finally resolved. As used herein "Termination Date" means the
March 31 that is two years after the March 31 occurring immediately after the
date on which the Effective Time occurs.
2. INDEMNIFICATION FOR BREACHES OF MERGER AGREEMENT AND LIABILITIES.
(a) If the Effective Time occurs, AMCE shall indemnify and hold harmless the
Durwood Parties (other than the SHD Indemnitors) and their Permitted Assignees
(as defined in the form of Registration Agreement attached as Exhibit C to the
Merger Agreement) against and in respect of any and all liabilities, losses,
damages, claims, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) determined on a net after-tax basis ("Losses")
which may be incurred by such Durwood Parties or Permitted Assignees based upon,
resulting from or arising out of the breach of any representation, warranty,
covenant or agreement of AMCE contained in the Merger Agreement (for this
purpose, and notwithstanding Section 6.5 of the Merger Agreement, as if all
representations, warranties, covenants and agreements had survived the
consummation of the Merger).
(b) If the Effective Time occurs, the SHD Indemnitors shall (jointly and
severally) indemnify and hold harmless AMCE against and in respect of any and
all Losses which may be incurred by AMCE (i) based upon, resulting from or
arising out of the breach of any representation, warranty, covenant or agreement
of DI contained in the Merger Agreement (for this purpose, and notwithstanding
Section 6.5 of the Merger Agreement, as if all representations, warranties,
covenants and agreements had survived the consummation of the Merger) or (ii)
based upon, resulting from, arising out of or constituting any liability or
obligation of DI or its Subsidiaries, known or unknown, fixed, contingent or
otherwise.
A1-48
<PAGE>
(c) If the Effective Time occurs, the SHD Indemnitors and Delta shall
(jointly and severally) pay and indemnify and hold harmless AMCE from and
against all of DI's Expenses and one-half of AMCE's Expenses.
(d) If the Effective Time occurs, the SHD Indemnitors shall (jointly and
severally) indemnify and hold harmless AMCE from and against, (i) any Taxes
attributable to DI or any of its Subsidiaries for taxable periods ending on or
prior to the Effective Time, including without limitation any Taxes attributable
to the transactions contemplated by the Pre-Merger Action Plan, and (ii) all
Losses incurred by AMCE in connection therewith. For purposes of this Agreement,
"Taxes" shall mean all taxes, including, without limitation, all net income,
gross income, gross receipts, sales, use, value-added, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupation, property or other taxes and customs
duties of any kind whatsoever, together with any interest, penalties and
additions to tax or additional amounts relating thereto, imposed by any
governmental authority (domestic or foreign).
(e) If the Effective Time does not occur, the SHD Indemnitors and Delta
shall (jointly and severally) indemnify and hold harmless AMCE against and in
respect of Losses which may be incurred by AMCE as a result of the breach by DI
of any representation, warranty, covenant or agreement in the Merger Agreement
(without regard to Section 6.4 thereof).
(f) If the Effective Time occurs, each Durwood Party shall (severally and
not jointly) indemnify and hold harmless AMCE against and in respect of Losses
which may be incurred by AMCE as a result of the breach by such Durwood Party of
a representation, warranty, covenant or agreement contained in Article VI of the
Stock Agreement.
(g) Each SHD Indemnitor agrees that he or it will not transfer Voting
Securities (as defined in the Stock Agreement) to any person or entity (other
than in the Secondary Offering (as defined in the form of Stock Agreement
attached as Exhibit B to the Merger Agreement), to a Charitable Assignee (as
defined below) or otherwise in arms-length sales for fair consideration) unless
the transferee agrees by instrument in form and substance satisfactory to AMCE
to be bound by the provisions of this Agreement as an SHD Indemnitor and to
guarantee the performance by Stanley H. Durwood, the 1992 Trust and the 1989
Trust of their obligations under this Agreement and under Section 5 of the
Registration Agreement and Section 5.3 of the Stock Agreement (an "Instrument");
PROVIDED, HOWEVER, that an SHD Indemnitor may not transfer more than 5% of the
shares of AMCE Class B Stock or AMCE Common Stock received by it in the Merger
(or AMCE Common Stock received upon conversion of such AMCE Class B Stock) to
Charitable Assignees unless the Charitable Assignees receiving shares in excess
of such threshold enter into an Instrument. As used herein, a "Charitable
Assignee" of a Stockholder shall mean any charitable organization, including
charitable remainder and charitable lead trusts, a transfer of property to which
by such Stockholder would qualify, at least in part, for an income, gift or
estate tax charitable deduction under the Tax Code.
(i) The obligations of AMCE, Delta and the Durwood Parties under this
Section 2 shall terminate on the Termination Date, except that such obligations
shall survive in respect to any claim for indemnification made under this
Section 2 prior to the Termination Date until such claim for indemnification is
finally resolved.
(j) AMCE agrees that it will not seek to hold Delta's stockholders liable
(in their capacities as such) for Delta's obligations under or arising from this
Agreement, the Merger Agreement, the Stock Agreement or the Registration
Agreement or the transactions contemplated hereby or thereby.
3. PROCEDURE FOR INDEMNIFICATION.
(a) The party seeking indemnification pursuant to Sections 1 or 2 is
referred to as the "Indemnified Party" and the party from whom indemnification
is sought under Sections 1 or 2 is referred to as the "Indemnifying Party."
A1-49
<PAGE>
(b) The Indemnified Party shall give prompt written notice to the
Indemnifying Party of any claim for indemnification under Sections 1 or 2 above
relating to a claim or demand of a third party with respect to which it is
seeking indemnification hereunder. The failure to give such prompt notice shall
not relieve the Indemnifying Party of its indemnity obligations hereunder with
respect thereto, except to the extent that the Indemnifying Party is materially
prejudiced by such failure. The Indemnifying Party shall have the right to
defend and to direct the defense against any such claim or demand (other than
one made pursuant to Section 2(d)), in its name or in the name of the
Indemnified Party, as the case may be, at the expense of the Indemnifying Party,
and with the counsel selected by the Indemnifying Party and approved by the
Indemnified Party (such approval not to be unreasonably withheld), PROVIDED that
the Indemnifying Party may not settle or compromise any such claim or demand
without the consent of the Indemnified Party (which consent may not be
unreasonably withheld) if injunctive or other equitable relief would be imposed
against the Indemnified Party as a result thereof. Notwithstanding anything in
this Agreement to the contrary, the Indemnified Party shall cooperate with the
Indemnifying Party, and keep the Indemnifying Party fully informed in the
defense of such claim or demand. The Indemnified Party shall have the right to
participate in the defense of any claim or demand with counsel employed by it at
the expense of the Indemnified Party. The Indemnifying Party shall have no
indemnification obligations with respect to any such claim or demand which shall
be settled by the Indemnified Party without the prior written consent of the
Indemnifying Party.
4. OTHER AGREEMENTS
(a) NO AMENDMENT. The Durwood Parties covenant that the Durwood Family
Settlement Agreement dated as of January 22, 1996 by and among Stanley H.
Durwood, in the capacities specified therein, Carol D. Journagan, Edward D.
Durwood, Thomas A. Durwood, Elissa D. Grodin, Brian H. Durwood and Peter J.
Durwood (the "Durwood Family Agreement") will not be amended without the prior
written consent of AMCE, which consent will not be unreasonably withheld. Each
Durwood Party hereby represents and warrants to AMCE that attached hereto as
EXHIBIT A is a true, correct and complete copy of the Durwood Family Agreement
as in effect on the date hereof.
(b) EXECUTION OF OTHER AGREEMENTS. Each Durwood Party agrees to execute
and deliver (and to cause Delta to execute and deliver) the Stock Agreement and
the Registration Agreement at the Closing.
(c) ESCROW AGREEMENT. Each Durwood Party agrees that at the Closing it
will execute and deliver an Escrow Agreement substantially in the form of
Exhibit B hereto pursuant to which such Durwood Party shall deposit in escrow
50% of the shares of AMCE Common Stock and AMCE Class B Stock received in the
Merger by such Durwood Party (plus, in the case of Stanley H. Durwood, the 1989
Trust and the 1992 Trust, collectively, a number of shares of AMCE Class B Stock
equal to the sum of (x) 65% of the number of shares of AMCE Common Stock
received by Harvard in the Merger, plus (y) a number of shares of AMCE Class B
Stock equal to the Specified Percentage (as defined in the form of Stock
Agreement attached as Exhibit B to the Merger Agreement) of the total number of
shares of AMCE Class B Stock and AMCE Common Stock issued in the Merger). Such
shares shall be held in Escrow for a period of two years from the date of the
Closing. Such Durwood Party shall retain the right to vote (subject to the Stock
Agreement) and be entitled to receive all cash dividends or other distributions
paid in respect of shares deposited in Escrow, but all dividends paid in capital
stock of AMCE or other securities shall be held in Escrow until the end of such
two-year period.
(d) NO TRANSFERS. Each Durwood Party agrees that except as set forth in
the Pre-Merger Action Plan, prior to the Merger it will not directly or
indirectly transfer any interest he, she or it has in DI, AAE or AMCE, including
without limitation any right to receive shares of AMCE Common Stock or AMCE
Class B Stock in the Merger.
(e) APPLICATION OF CREDIT AMOUNTS. Credit Amounts (as defined below)
outstanding from time to time shall be applied to satisfy (to the extent of the
Credit Amounts then outstanding) the obligations of the SHD Indemnitors pursuant
to Sections 2(c) and 2(e) of this Agreement, Section 4 of the Registration
Agreement and Section 5.3 of the Stock Agreement (the "Specified Sections"). As
promptly as practicable following the Termination Date, AMCE shall pay to the
SHD Indemnitors an amount equal to the
A1-50
<PAGE>
Credit Amount then outstanding (and not applied to satisfy liabilities under the
Specified Sections), provided that in the event AMCE has made claims pursuant to
the Specified Sections prior to such date that have not been resolved, AMCE may
withhold from such payment the amount of such claims until such claims are
finally resolved (whereupon it shall as promptly as practicable pay to the SHD
Indemnitors any portion of such Credit Amounts not applied to such claims). In
the event that a Credit Amount arises after the Termination Date, AMCE shall
promptly pay to the SHD Indemnitors the amount of such Credit Amount. All
payments to SHD Indemnitors pursuant to this paragraph (e) shall be made pro
rata based on the total number of shares of AMCE Class B Stock received by each
SHD Indemnitor in the Merger. As used herein, "Credit Amounts" shall mean the
amounts of any net tax benefit, as and when finally determined, actually
realized by AMCE from time to time following the Merger solely as a result of
(and which would not have been realized but for) (i) the utilization by AMCE for
federal income tax purposes of DI's alternative minimum tax credit carryforwards
and (ii) the utilization by AMCE for Missouri income tax purposes of DI's
Missouri net operating loss carryforwards.
(f) DI TAX RETURNS. Without limiting the obligations of the SHD
Indemnitors pursuant to Section 2(d) above, AMCE will cause to be prepared and
filed (at the expense of the SHD Indemnitors) all income tax returns of DI not
heretofore filed, and the Durwood Parties and Delta shall make available to AMCE
all books and records of DI necessary in the preparation of such returns. The
SHD Indemnitors shall pay all Taxes due and payable under such returns.
5. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS: Each Durwood Party and
Delta, severally, as to himself, herself or itself, and not jointly, hereby
represents and warrants to AMCE as follows:
(i) Such Durwood Party (or Delta, as the case may be) has full legal
right, power and authority to enter into and perform this Agreement. This
Agreement is a valid and binding obligation of such Durwood Party (or Delta,
as the case may be) enforceable against such Durwood Party (or Delta, as the
case may be) in accordance with its terms, except that such enforcement may
be subject to (x) bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (y) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in
equity or at law).
(ii) Neither the execution and delivery of this Agreement nor the
consummation by such Durwood Party (or Delta, as the case may be) of the
transactions contemplated hereby conflicts with or constitutes a violation
of or default under any statute, law, regulation, order or decree applicable
to such Durwood Party (or Delta, as the case may be), or any material
contract, commitment, agreement, arrangement or restriction of any kind to
which such Durwood Party (or Delta, as the case may be) is a party or by
which such Durwood Party (or Delta, as the case may be) is bound.
(b) REPRESENTATIONS AND WARRANTIES OF AMCE. AMCE hereby represents and
warrants to the Durwood Parties as follows:
(i) AMCE has full legal right, power and authority to enter into and
perform this Agreement. The execution and delivery of this Agreement and the
consummation by AMCE of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on behalf of AMCE. This
Agreement is a valid and binding obligation of AMCE enforceable against AMCE
in accordance with its terms, except that such enforcement may be subject to
(x) bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (y) general principles of equity (regardless
of whether such enforcement is considered in a proceeding in equity or at
law).
(ii) Neither the execution and delivery of this Agreement by AMCE nor
the consummation by AMCE of the transactions contemplated hereby conflicts
with or constitutes a violation of or default under the charter or bylaws of
AMCE, any statute, law, regulation, order or decree applicable to AMCE, or
any material contract, commitment, agreement, arrangement or restriction of
any kind to which AMCE is a party or by which AMCE is bound.
A1-51
<PAGE>
6. NOTICES. Any notice, request, consent, waiver or other communication
required or permitted hereunder shall be effective only if it is in writing and
personally delivered or sent by certified or registered mail, postage prepaid,
addressed as follows:
<TABLE>
<S> <C> <C>
To: AMC Entertainment Inc.: Suite 1700 Power & Light Bldg.
106 West 14th Street
Post Office Box 419615
Kansas City, MO 64141-6615
Attention: Corporate Secretary
To: any Durwood Party: to the address set forth next to
such Durwood Party's name on
the signature page hereof
To: Delta Properties, Inc.: Suite 1700 Power & Light Bldg.
106 West 14th Street
P.O. Box 419615
Kansas City, MO 64141-6615
Attention: Corporate Secretary
</TABLE>
or such other address as may be specified in a notice duly given as provided
herein. Such notice or communication shall be deemed to have been given upon
receipt thereof. Information copies of all notices given a Durwood Party (other
than Stanley H. Durwood, the 1992 Trust or the 1989 Trust) or Delta shall be
given to:
<TABLE>
<S> <C> <C>
Robert C. Kopple, Esq.
Kopple & Klinger
2029 Century Park East
Suite 1040
Los Angeles, A 90067
Glenn Kurlander, Esq.
Schiff Hardin & Waite
150 East 52nd Street
Suite 2900
New York, New York 10022
</TABLE>
Information copies of all notices given to Stanley H. Durwood, the 1992
Trust, the 1989 Trust or Delta should be given to:
<TABLE>
<S> <C> <C>
Raymond F. Beagle, Jr., Esq.
Lathrop & Gage L.C.
2345 Grand Boulevard, 24th Floor
Kansas City, Missouri 64108-2684
</TABLE>
Information copies of all notices given to AMCE shall be given to:
<TABLE>
<S> <C> <C>
Charles J. Egan, Jr., Esq.
Hallmark Cards, Incorporated
2501 McGee Trafficway
Kansas City, MO 64141-6126
The Honorable Paul E. Vardeman
Polsinelli, White, Vardeman & Shalton
Suite 1000, Plaza Steppes
700 West 47th Street
Kansas City, MO 64112-1802
</TABLE>
A1-52
<PAGE>
7. WAIVER. No delay or failure on the part of any party in exercising any
rights hereunder, and no partial or single exercise thereof, will constitute a
waiver of such rights or of any other rights hereunder.
8. BINDING EFFECT. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors, assigns,
heirs, legatees, devisees, and personal and legal representations.
9. ENTIRE AGREEMENT. This Agreement, the Merger Agreement, the
Registration Agreement and the Stock Agreement and, with respect to the Durwood
Parties only, the Durwood Family Agreement constitute the entire agreement among
the parties hereto pertaining to the subject matter hereof. This Agreement
supersedes all prior or contemporaneous, written or verbal agreements,
understandings and negotiations in connection herewith, except that the Durwood
Family Agreement shall not be deemed to be amended by this Agreement and shall
remain in full force and effect.
10. AMENDMENTS. This Agreement cannot be modified, amended or terminated,
except as provided by an instrument in writing signed by all the parties hereto;
PROVIDED, HOWEVER, that any provision of this Agreement may be waived only in
writing by the party to be charged with the waiver.
11. 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.
12. GOVERNING LAW; CONSENT TO JURISDICTION.
(a) This Agreement shall be construed in accordance with, and governed by,
the laws of the State of Missouri without giving the effect to conflicts of laws
principles thereof.
(b) Each party hereto hereby consents to, and confers exclusive jurisdiction
upon, the courts of the State of Missouri and the Federal courts of the United
States of America located in the City of Kansas City, Missouri, and appropriate
appellate courts therefrom, over any action, suit or proceeding arising out of
or relating to this Agreement. Each party covenants that it will not commence
any action, suit or proceeding arising out of or relating to this Agreement in
any other jurisdiction. Nothing in this paragraph shall affect the rights of a
party to enforce a judgment rendered by the courts referred to in the first
sentence of this paragraph in any other jurisdiction. Each party hereto hereby
waives, and agrees not to assert, as a defense in any such action, suit or
proceeding that it is not subject to such jurisdiction or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
this Agreement may not be enforced in or by said courts or that its property is
exempt or immune from execution, that the suit, action or proceeding is brought
in an inconvenient forum, or that the venue of the suit, action or proceeding is
improper. Service of process in any such action, suit or proceeding may be
served on any party anywhere in the world, whether within or without the State
of Missouri, by mailing a copy thereof by registered or certified mail, postage
prepaid, to such party at its address provided in Section 6 of this Agreement,
provided that service of process may be accomplished in any other manner
permitted by applicable law.
13. HEADINGS. The headings to the paragraphs to 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.
14. 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.
15. ASSIGNMENT. Neither this Agreement nor any of the rights, interests,
or obligations hereunder may be assigned by any party hereto without the prior
written consent of the other party.
A1-53
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed on behalf of AMC
Entertainment Inc. by Peter C. Brown, its President, by Delta and by each
Durwood Party, respectively, on the date first above written.
AMC ENTERTAINMENT INC.
By: /s/ PETER C. BROWN
- --------------------------------------------------------------------------------
Peter C. Brown, President and
Chief Financial Officer
DELTA PROPERTIES, INC.
By: /s/ PETER C. BROWN
- --------------------------------------------------------------------------------
Peter C. Brown, Senior Vice
President
<TABLE>
<S> <C>
Suite 1700
Power & Light Building
106 West 14th Street /s/ STANLEY H. DURWOOD
P.O. Box 419615 --------------------------------------
Kansas City, Missouri 64141-6615 Stanley H. Durwood
/s/ CAROL D. JOURNAGAN
1323 Granite Creek Drive --------------------------------------
Blue Springs, MO 64015 Carol D. Journagan
/s/ EDWARD D. DURWOOD
3001 West 68th Street --------------------------------------
Shawnee Mission, KS 66208 Edward D. Durwood
/s/ THOMAS A. DURWOOD
P.O. Box 7208 --------------------------------------
Rancho Santa Fe, CA 92067 Thomas A. Durwood
/s/ ELISSA D. GRODIN
187 Chestnut Hill Road --------------------------------------
Wilton, CT 06897 Elissa D. Grodin
/s/ BRIAN H. DURWOOD
655 N.W. Altishan Place --------------------------------------
Beaverton, OR 97006 Brian H. Durwood
/s/ PETER J. DURWOOD
666 West End Avenue --------------------------------------
New York, NY 10025 Peter J. Durwood
Suite 1700
Power & Light Building /s/ STANLEY H. DURWOOD
106 West 14th Street --------------------------------------
P.O. Box 419615 Stanley H. Durwood, as trustee of the 1992
Kansas City, Missouri 64141-6615 Trust
Suite 1700
Power & Light Building /s/ STANLEY H. DURWOOD
106 West 14th Street --------------------------------------
P.O. Box 419615 Stanley H. Durwood, as trustee of the 1989
Kansas City, Missouri 64141-6615 Trust
</TABLE>
A1-54
<PAGE>
EXHIBIT B TO INDEMNIFICATION AGREEMENT
ESCROW AGREEMENT
This Escrow Agreement is entered into on [date], by and among (i) AMC
Entertainment Inc., a Delaware corporation ("AMCE"), (ii) Stanley H. Durwood,
individually, and as trustee of the 1992 Durwood, Inc. Voting Trust dated
December 12, 1992 (the "1992 Trust") and as trustee of the Trust created
pursuant to the Stanley H. Durwood Trust Agreement dated August 14, 1989 (the
"1989 Trust"), Carol D. Journagan, Edward D. Durwood, Thomas A. Durwood, Elissa
D. Grodin, Brian H. Durwood and Peter J. Durwood (all persons and entities
listed in this clause (ii) are referred to herein as the "Durwood Parties") and
(iii) , a corporation (the "Escrow Agent").
WHEREAS, AMCE, the Durwood Parties and Delta Properties, Inc., a Missouri
corporation, are parties to an Indemnification Agreement dated as of [insert
date] (the "Indemnification Agreement"); and
WHEREAS, Section 4(c) of the Indemnification Agreement provides that certain
shares of AMCE Common Stock and AMCE Class B Stock be deposited in escrow for
two years; and
WHEREAS, the Escrow Agent is willing to establish an escrow account on the
terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, the parties hereto agree as follows:
1. The Escrow Agent hereby acknowledges receipt of certificates
representing the shares of AMCE Common Stock and Class B Stock listed on Exhibit
A hereto (the "Shares") from the Durwood Party whose name is set forth next to
such Shares on Exhibit A, in escrow, pursuant to this Escrow Agreement. The
Durwood Parties placing Shares in escrow is referred to herein as the "Owner" of
such Shares and of all Additional Shares (as defined below) issued or paid as
dividends or other distributions thereon. The Escrow Agent agrees to hold and
dispose of the Shares and any Additional Shares in accordance with the terms and
conditions of this Escrow Agreement.
2. The Escrow Agent shall hold the Shares and all shares of capital stock
of AMCE or other securities issued or paid as dividends or other distributions
on the Shares ("Additional Shares") and release them only as set forth in
Section 3 below.
All dividends and other distributions (other than Additional Shares) on
Shares received by the Escrow Agent will be immediately distributed to the Owner
of such Shares. Each Durwood Party severally agrees to immediately forward the
Escrow Agent for deposit in escrow all Additional Shares received by such
Durwood Party while the relevant Shares remain in escrow hereunder.
The Escrow Agent shall maintain a ledger setting forth the number of Shares
placed in escrow by each Durwood Party and all Additional Shares issued in
respect of such Shares and deposited in escrow.
3. The Escrow Agent shall distribute the Shares and Additional Shares as
follows:
(a) Subject to paragraphs (b) and (c) below, all Shares and Additional
Shares shall be released from escrow and distributed to the Durwood Party
that is the Owner thereof promptly following the second anniversary of the
date hereof.
(b) Shares and Additional Shares shall be released from escrow, in whole
or in part, from time to time upon the Escrow Agent's receipt of a joint
written notice of AMCE and the Durwood Party that is the Owner of such
Shares and Additional Shares in accordance with such notice.
(c) If the Escrow Agent is notified of a claim against or in respect of
Shares or Additional Shares or if a claim is made against the Escrow Agent
in respect of Shares or Additional Shares,
A1-55
<PAGE>
such Shares and Additional Shares shall continue to be held, and not
released from escrow, except pursuant to the final unappealable order (or an
order for which the time to appeal has expired without an appeal having been
made) of a court of competent jurisdiction.
4. It is understood and agreed that the duties of the Escrow Agent are
purely ministerial in nature. It is further agreed that:
(a) the Escrow Agent may conclusively rely and shall be protected in
acting or refraining from acting upon any document, instrument, certificate,
instruction or signature believed by it to be genuine and may assume and
shall be protected in assuming that any person purporting to give any notice
or instructions in accordance with this Escrow Agreement or in connection
with any transaction to which this Escrow Agreement relates has been duly
authorized to do so. The Escrow Agent shall not be obligated to make any
inquiry as to the authority, capacity, existence or identity of any person
purporting to have executed any such document or instrument or have made any
such signature or purporting to give any such notice or instructions;
(b) in the event that the Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall receive instructions with respect to the
Shares and Additional Shares which, in its sole opinion, are in conflict
with either other instructions received by it or any provision of the Escrow
Agreement, it shall, without liability of any kind, be entitled to hold the
Shares and Additional Shares pending the resolution of such uncertainty to
the Escrow Agent's sole satisfaction, by final judgment of a court or courts
of competent jurisdiction or otherwise, or the Escrow Agent, at its option,
may, in final satisfaction of its duties hereunder, deposit the relevant
Shares and Additional Shares with the clerk of any other court of competent
jurisdiction;
(c) the Escrow Agent undertakes to perform only such duties as are
expressly set forth herein and shall not be bound in any way by any
agreement between AMCE and the Durwood Parties (whether or not the Escrow
Agent has knowledge thereof);
(d) The Escrow Agent shall not be liable for any action taken by it in
good faith and believed by it to be authorized or within the rights or
powers conferred upon it by this Escrow Agreement (provided that the Escrow
Agent shall be liable for its gross negligence and willful misconduct), and
may consult with counsel of its own choice and shall have full and complete
authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such counsel;
and
(e) the Escrow Agent shall not assume any responsibility or liability
for any transactions between AMCE and the Durwood Parties.
5. AMCE agrees to indemnify the Escrow Agent, its directors, officers,
agents and employees and any person who "controls" the Escrow Agent within the
meaning of Section 15 of the Securities Act of 1933, as amended (collectively
the "Indemnified Parties") against, and hold them harmless from, any and all
loss, liability, cost, damage and expense, including, without limitation, costs
of investigation and reasonable counsel fees and expenses, which any of the
Indemnified Parties may suffer or incur by reason of any action, claim or
proceeding brought against any of the Indemnified Parties, arising out of or
relating in any way to this Escrow Agreement or any transaction to which this
Escrow Agreement relates, other than any action, claim or proceeding to the
extent resulting from the gross negligence or willful misconduct of such
Indemnified Party. The provisions of this paragraph shall survive the
termination of this Escrow Agreement.
6. This Escrow Agreement may be altered, amended or terminated only with
the written consent of AMCE, the Durwood Parties and the Escrow Agent. Should
AMCE and the Durwood Parties attempt to change this Escrow Agreement in a manner
which, in the Escrow Agent's sole opinion, is undesirable, the Escrow Agent may
resign as Escrow Agent upon two weeks' written notice to AMCE and the Durwood
Parties; otherwise, notwithstanding any provision hereof to the contrary, it may
resign as
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<PAGE>
Escrow Agent at any time upon 60 days' written notice to AMCE and the Durwood
Parties. In the case of the Escrow Agent's resignation, its only duty shall be
to hold and dispose of the Shares and Additional Shares in accordance with the
original provisions of this Escrow Agreement until a successor escrow agent
shall be appointed by AMCE and the Durwood Parties acting by majority vote (in
which each such party shall have one vote) and a written notice of the name and
address of such successor escrow agent shall be given to the Escrow Agent by
AMCE and the Durwood Parties, whereupon the Escrow Agent's only duty shall be to
turn over, in accordance with the written instructions of AMCE and the Durwood
Parties, to the successor escrow agent the Shares and Additional Shares and any
documentation related thereto. In the event that a successor escrow agent shall
not have been appointed and the Escrow Agent shall not have turned over to the
successor escrow agent the Shares and Additional Shares within the time periods
specified above, or the Escrow Agent's written notice of resignation, as the
case may be, the Escrow Agent may deposit the Shares and Additional Shares with
the clerk of any other court of competent jurisdiction, at which time the Escrow
Agent's duties hereunder shall terminate.
7. The Escrow Agent shall be entitled to a fee of [fees to be inserted].
The fees will be payable by AMCE.
8. THIS ESCROW AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF WITHOUT APPLICATION TO THE PRINCIPLES OF
CONFLICTS OF LAWS. This Escrow Agreement shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that any
assignment or transfer by any party of its rights under this Escrow Agreement
shall be void (as against the Escrow Agent or otherwise) unless:
(a) written notice thereof shall be given to the Escrow Agent, AMCE and
the Durwood Parties; and
(b) the Escrow Agent, AMCE and the Durwood Parties shall have consented,
in writing, to such assignment or transfer.
9. All notices, requests, demands and other communications to be given in
connection with this Escrow Agreement shall be in writing, shall be delivered by
hand, overnight delivery service or by facsimile transmission, shall be deemed
given when received and shall be addressed to the Escrow Agent at the address
listed below or to AMCE and the Durwood Parties at the respective addresses
listed on the signature pages or to such other addresses as they shall designate
from time to time in writing, forwarded in like manner; PROVIDED, HOWEVER, that
if any notice given by telecopy is received other than during the regular
business hours of the recipient, it shall be deemed to have been given on the
opening of business on the next business day of the recipient
If to the Escrow Agent:
[name]
[address]
Attention:
Telecopier No.:
A1-57
<PAGE>
Information copies of all notices given a Durwood party (other than Stanley
H. Durwood, the 1992 Trust or the 1989 Trust) shall be given to:
Robert C. Kopple, Esq.
Kopple & Klinger
2029 Century Park East
Suite 1040
Los Angeles, A 90067
Glenn Kurlander, Esq.
Schiff Hardin & Waite
Schiff Hardin & Waite
150 East 52nd Street
Suite 2900
New York, New York 10022
Information copies of all notices given to Stanley H. Durwood, the 1992
Trust or the 1989 Trust should be given to:
Raymond F. Beagle, Jr., Esq.
Lathrop & Gage L.C.
2345 Grand Boulevard, 24th Floor
Kansas City, Missouri 64108-2684
Information copies of all notices given to AMCE shall be given to:
Charles J. Egan, Jr., Esq.
Hallmark Cards, Incorporated
2501 McGee Trafficway
Kansas City, MO 64141-6126
The Honorable Paul E. Vardeman
Polsinelli, White, Vardeman & Shalton
Suite 1000, Plaza Steppes
700 West 47th Street
Kansas City, MO 64112-1802
10. If any provision of this Escrow Agreement or the application thereof to
any person or circumstance shall be determined to be invalid or unenforceable,
the remaining provisions of this Escrow Agreement or the application of such
provision to persons or circumstances other than those to which it is held
invalid or unenforceable shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law.
11. This Escrow Agreement may be executed in several counterparts or by
separate instruments, and all of such counterparts or instruments shall
constitute one agreement, binding on all the parties hereto.
12. All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural as the context may require.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Escrow Agreement as
of the day and year first above written.
<TABLE>
<S> <C>
[Escrow Agent]
By: ----------------------------------------
Name:
Title:
Suite 1700
Power & Light Building AMC ENTERTAINMENT INC.
106 West 14th Street
P.O. Box 419615 By: ----------------------------------------
Kansas City, Missouri 64141-6615
Suite 1700
Power & Light Building
106 West 14th Street --------------------------------------------
P.O. Box 419615 Stanley H. Durwood
Kansas City, Missouri 64141-6615
1323 Granite Creek Drive --------------------------------------------
Blue Springs, MO 64015 Carol D. Journagan
3001 West 68th Street --------------------------------------------
Shawnee Mission, KS 66208 Edward D. Durwood
P.O. Box 7208 --------------------------------------------
Rancho Santa Fe, CA 92067 Thomas A. Durwood
187 Chestnut Hill Road --------------------------------------------
Wilton, CT 06897 Elissa D. Grodin
655 N.W. Altishan Place --------------------------------------------
Beaverton, OR 97006 Brian H. Durwood
666 West End Avenue --------------------------------------------
New York, NY 10025 Peter J. Durwood
Suite 1700
Power & Light Building --------------------------------------------
106 West 14th Street Stanley H. Durwood, as trustee of the 1992
P.O. Box 419615 Trust
Kansas City, Missouri 64141-6615
Suite 1700
Power & Light Building --------------------------------------------
106 West 14th Street Stanley H. Durwood, as trustee of the 1989
P.O. Box 419615 Trust
Kansas City, Missouri 64141-6615
</TABLE>
A1-59
<PAGE>
EXHIBIT A
Names Shares
A1-60
<PAGE>
ANNEX 2
March 13, 1997
Special Committee to the Board of Directors
AMC Entertainment Inc.
106 West 14th Street
Kansas City, Missouri 64105
Gentlemen:
We understand that AMC Entertainment Inc. ("AMC") is considering entering
into an Agreement and Plan of Merger and Reorganization (the "Merger Agreement")
substantially in the form of the Merger Agreement which was furnished to us on
March 11, 1997, whereby, among other things, (i) Durwood, Inc. ("DI") shall
merge with and into AMC, (ii) the separate existence of DI shall cease, (iii)
each share of DI Class A Stock which is owned by Harvard College shall be
converted into and become 32.142857 shares of AMC Common Stock, (iv) each share
of DI Class A Stock issued and outstanding other than those shares owned by
Harvard College shall be converted into and become 32.142857 shares of AMC Class
B Stock, (v) each share of DI Class B Stock which is owned by Stanley H.
Durwood, individually, as Trustee of the 1992 Durwood, Inc. Voting Trust dated
December 12, 1992 and as Trustee under the Stanley H. Durwood Trust Agreement
dated August 14, 1989 (collectively "SHD Trust") shall be converted into and
become 243.767528 shares of AMC Class B Stock and (vi) each share of DI Class B
Stock which is owned by any person other than SHD Trust shall be converted into
243.767341 shares of AMC Common Stock. Accordingly, shareholders of DI shall
effectively receive an aggregate 8,783,294 shares of AMC Common Stock and
5,015,657 shares of AMC Class B Stock (the "Merger Consideration"). The terms
and conditions of the transaction (the "Proposed Merger") are set forth in more
detail in the Merger Agreement and related documents.
We have been asked by the Special Committee to the Board of Directors of AMC
to render our opinion with respect to the fairness, from a financial point of
view, to AMC, of the consideration to be paid in the Proposed Merger.
In conducting our analysis and arriving at our opinion as expressed herein,
we have reviewed and analyzed, among other things, the following:
(i) the form of the Merger Agreement furnished to us on March 11, 1997;
(ii) the form of the Indemnification Agreement furnished to us on March 11,
1997;
(iii) the form of the Stock Agreement furnished to us on March 11, 1997;
(iv) the form of the Registration Agreement furnished to us on March 11,
1997;
(v) DI's consolidated financial statements for the years ended March 31,
1994, March 30, 1995 and March 28, 1996 and for the thirty-nine weeks
ended December 26, 1996;
(vi) AMC's Annual Reports to shareholders and Form 10-Ks for the fiscal
years ended March 31, 1994 through March 28, 1996 and the Quarterly
Report on Form 10-Q for the quarter ended December 26, 1996;
A2-1
<PAGE>
(vii) the trading history of AMC's Common Stock from January 2, 1992 through
March 7, 1997 and a comparison of that trading history with those of
other companies that we deemed relevant; and
(viii) a comparison of the historical and projected financial results and
financial condition of AMC with those of other companies and
businesses that we deemed relevant.
In addition, in arriving at our opinion, we have held discussions with DI's
and AMC's managements concerning their businesses, operations, assets, financial
conditions and prospects. We also undertook such other studies, analyses and
investigations as we deemed appropriate.
In arriving at our opinion, although we have visited certain properties and
facilities of AMC, we have not made, obtained or assumed any responsibility for
any independent evaluation or appraisal of such properties and facilities or of
the assets and liabilities (contingent or otherwise) of AMC or DI. We have been
informed and have assumed that, at the time of the Proposed Merger, DI will have
no liabilities except for a contingent liability which, we are informed, is
remote. We are further informed that certain shareholders of DI will indemnify
AMC against the existence of any such liabilities for a period of two years
after the March 31 occurring immediately after the Effective Date, as defined in
the Indemnification Agreement. We have relied upon the accuracy and completeness
of the financial and other information supplied to or otherwise used by us in
arriving at our opinion and have not attempted independently to verify, or
undertaken any obligation to verify, such information. We have further relied
upon the assurances of the managements of DI and AMC that they were not aware of
any facts that would make such information inaccurate or misleading. We are
informed that Chadbourne & Park LLP, special tax counsel, will render an opinion
to the effect that the Proposed Merger will qualify as a reorganization in which
no taxable income, gain or loss will be recognized by AMC or DI pursuant to
Section 368(a)(1)(A) and related sections of the Internal Revenue Code of 1986,
as amended, and we have assumed that result. We have also been informed that the
Securities and Exchange Commission has not objected to the Company's proposed
accounting for the Proposed Merger at existing carrying amounts and we have
therefore assumed that for accounting purposes, the Proposed Merger will be
accounted for as a pooling-of-interests.
We have also taken into account our assessment of general economic, market
and financial conditions and our experience in similar transactions, as well as
our experience in securities valuation in general. Our opinion is necessarily
based upon conditions as they exist and can be evaluated on the date hereof.
We do not express any view as to what the value of AMC's stock will be when
issued to DI stockholders pursuant to the Proposed Merger, or the price at which
AMC's stock will trade prior to or subsequent to the closing of the Proposed
Merger. This letter is for the benefit and use of the Special Committee to the
Board of Directors of AMC in its consideration of the Proposed Merger. This
letter does not constitute a recommendation of the Proposed Merger over any
other alternative transactions which may be available to AMC and does not
address the underlying business decision of the Board of Directors of AMC to
proceed with or effect the Proposed Merger. Furthermore, this letter does not
constitute a recommendation by our firm to any stockholder to vote in favor of
the Proposed Merger.
As you are aware, we have acted as financial advisor to the Special
Committee to the Board of Directors of AMC in connection with the Proposed
Merger and will receive a fee for our services which is contingent upon the
consummation of the Proposed Merger. We also, from time to time, may in the
future perform certain other financial advisory and securities underwriting
services for AMC for which we may receive a fee. In the ordinary course of our
business, we may trade in the equity securities of AMC for our own account and
for the accounts of our customers and, accordingly, may at any time hold a long
or short position in such securities. AMC has agreed to indemnify us for certain
liabilities that may arise out of the rendering of this opinion.
A2-2
<PAGE>
Based upon and subject to the foregoing, it is our opinion as investment
bankers that, as of the date hereof, the Merger Consideration to be paid by AMC
in the Proposed Merger is fair, from a financial point of view, to AMC.
Very truly yours,
Furman Selz LLC
A2-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
AMC Entertainment Inc. is incorporated in Delaware. Under Section 145 of the
Delaware General Corporation Law, 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 Delaware General Corporation Law 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, or 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.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- --------------------------------------------------------------------------------------------------
<S> <C>
* 2.1. Agreement and Plan of Merger dated as of March 31, 1997 between AMC Entertainment Inc. and
Durwood, Inc. (together with Exhibit A, "Pre-Merger Action Plan")
* 2.2. Form of Stock Agreement to be entered into among AMC Entertainment Inc. and Stanley H. Durwood,
Carol D. Journagan, Edward D. Durwood, Thomas A. Durwood, Elissa D. Grodin, Brian H. Durwood and
Peter J. Durwood ("Durwood Family Stockholders")
* 2.3. Form of Registration Agreement to be entered into between AMC Entertainment Inc. and the Durwood
Family Stockholders
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- --------------------------------------------------------------------------------------------------
* 2.4.(a) Indemnification Agreement dated as of March 31, 1997 among AMC Entertainment Inc., the Durwood
Family Stockholders and Delta Properties, Inc., together with Exhibit B thereto (Escrow
Agreement)
<S> <C>
2.4.(b) Durwood Family Settlement Agreement(22)
* 2.4.(c) First Amendment to Durwood Family Settlement Agreement
2.5. Articles of Merger dated March 31, 1994 between American Multi-Cinema, Inc. and its wholly-owned
subsidiaries Cinema Enterprises, Inc. and Cinema Enterprises II, Inc. and related Plan and
Agreement of Liquidation and Merger (1)
2.6. Stock Purchase, Release and Settlement Agreement dated January 10, 1997 between American
Multi-Cinema, Inc. and H. Donald Busch respecting AMC Philadelphia, Inc.(2)
* 2.7.(a) Plan and Agreement of Liquidation and Merger dated March 31, 1997 between AMC Realty, Inc. and its
subsidiary AMC Canton Realty, Inc.
* 2.7.(b) Certificate of Ownership and Merger dated March 31, 1997 between AMC Realty, Inc. and its
subsidiary AMC Canton Realty, Inc.
* 2.8.(a) Plan and Agreement of Liquidation and Merger dated March 31, 1997 between AMC Philadelphia, Inc.
and its subsidiary Budco Theatres, Inc.
* 2.8.(b) Certificate of Ownership and Merger dated March 31, 1977 between AMC Philadelphia, Inc. and its
subsidiary Budco Theatres, Inc. (Delaware)
* 2.8.(c) Articles of Merger dated March 31, 1977 between AMC Philadelphia, Inc. and Budco Theatres, Inc.
(Pennsylvania)
* 2.9.(a) Plan and Agreement of Liquidation and Merger dated March 31, 1997 between American Multi-Cinema,
Inc. and its subsidiary AMC Philadelphia, Inc.
* 2.9.(b) Certificate of Ownership and Merger merging AMC Philadelphia, Inc., a Delaware Corporation, into
American Multi-Cinema, Inc., a Missouri Corporation (Delaware)
* 2.9.(c) Articles of Merger between AMC Philadelphia, Inc., and American Multi-Cinema, Inc. (Missouri)
3.1. Amended and Restated Certificate of Incorporation of AMC Entertainment Inc.(2)
3.2. Certificate of Designations relating to $1.75 Cumulative Convertible Preferred Stock(3)
3.3. Bylaws of AMC Entertainment Inc.(20)
4.1.(a) Indenture among AMC Entertainment Inc., as issuer, American Multi-Cinema, Inc., AMC Realty, Inc.,
Conservco, Inc., AMC Canton Realty, Inc., AMC Philadelphia, Inc., Budco Theatres, Inc. and
Concord Cinema, Inc. (collectively "Guarantors") and United States Trust Company of New York, as
Trustee, respecting AMC Entertainment Inc.'s 11 7/8% Senior Notes due 2000(6)
4.1.(b) First Supplemental Indenture dated as of March 31, 1993, pursuant to which AMC Film Marketing,
Inc. became a Guarantor(5)
4.1.(c) Fourth Supplemental Indenture dated as of March 31, 1994, pursuant to which American Multi-Cinema,
Inc. assumed the obligations of Cinema Enterprises, Inc., Cinema Enterprises II, Inc. and
Exhibition Enterprises Partnership under the Senior Note Indenture and related guarantees of
such entities(1)
4.1.(d) Fifth Supplemental Indenture dated December 28, 1995, respecting AMC Entertainment Inc.'s 11 7/8%
Senior Notes due 2000(17)
4.1.(e) Sixth Supplemental Indenture dated March 28, 1996, respecting AMC Entertainment Inc.'s 11 7/8%
Senior Notes due 2000(18)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- --------------------------------------------------------------------------------------------------
4.2.(a) Indenture among AMC Entertainment Inc., as issuer, American Multi-Cinema, Inc., AMC Realty, Inc.,
Conservco, Inc., AMC Canton Realty, Inc., AMC Philadelphia, Inc., Budco Theatres, Inc. and
Concord Cinema, Inc. (collectively "Guarantors") and The Bank of New York, as Trustee,
respecting AMC Entertainment Inc.'s 12 5/8% Senior Subordinated Notes due 2002(6)
<S> <C>
4.2.(b) First Supplemental Indenture dated as of March 31, 1993, pursuant to which AMC Film Marketing,
Inc. became a Guarantor(5)
4.2.(c) Fourth Supplemental Indenture dated as of March 31, 1994, pursuant to which American Multi-Cinema,
Inc. assumed the obligations of Cinema Enterprises, Inc., Cinema Enterprises II, Inc. and
Exhibition Enterprises Partnership under the Senior Subordinated Note Indenture and related
guarantees of such entities(1)
4.2.(d) Fifth Supplemental Indenture dated December 28, 1995, respecting AMC Entertainment Inc.'s 12 5/8%
Senior Subordinated Notes due 2002(17)
4.2.(e) Sixth Supplemental Indenture dated March 28, 1996, respecting AMC Entertainment Inc.'s 12 5/8%
Senior Subordinated Notes due 2002(18)
* 4.3. Amended and Restated Credit Agreement Dated as of April 10, 1997, among AMC Entertainment Inc., as
the Borrower, The Bank of Nova Scotia, as Administrative Agent and Bank of America National
Trust and Savings Association, as Documentation Agent and Various Financial Institutions, as
Lenders together with the following exhibits thereto; significant subsidiary guarantee, form of
notes, form of pledge agreement and form of subsidiary pledge agreement.
4.4. Indenture dated March 19, 1997, respecting AMC Entertainment Inc.'s 9 1/2% Senior Subordinated
Notes due 2009(21)
4.5. Registration Rights Agreement respecting 9 1/2% Senior Subordinated Notes due 2009(21)
4.6. In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, certain instruments respecting long
term debt of the Registrant have been omitted but will be furnished to the Commission upon
request
** 5. Form of Opinion of Richards, Layton & Finger, P.A., as to legality of shares issued in the Merger
(executed opinion to be filed by amendment).
** 8. Form of Opinion of Chadbourne & Parke L.L.P. as to tax matters.
10.1. AMC Entertainment Inc. 1983 Stock Option Plan(7)
10.2. Federal Income Tax Allocation Agreement dated as of July 1, 1983, between Durwood, Inc. and AMC
Entertainment Inc.(7)
10.3. AMC Entertainment Inc. 1984 Employee Stock Purchase Plan(8)
10.4. AMC Entertainment Inc. 1984 Employee Stock Option Plan(9)
10.5.(a) AMC Entertainment Inc. 1994 Stock Option and Incentive Plan , as amended(20)
10.5.(b) Form of Performance Stock Award Agreement(14)
10.5.(c) Form of Non-Qualified (NON-ISO) Stock Option Agreement(20)
10.6. American Multi-Cinema, Inc. Savings Plan, a defined contribution 401(k) plan, restated January 1,
1989, as amended(4)
10.7.(a) Defined Benefit Retirement Income Plan for Certain Employees of American Multi-Cinema, Inc. dated
January 1, 1989, as amended(4)
10.7.(b) AMC Supplemental Executive Retirement Plan dated January 1, 1994 (14)
10.8. Employment Agreement between American Multi-Cinema, Inc. and Philip M. Singleton(16)
10.9. Employment Agreement between American Multi-Cinema, Inc. and Peter C. Brown(16)
10.10. Disability Compensation Provisions respecting Stanley H. Durwood (4)
10.11. Executive Medical Expense Reimbursement and Supplemental Accidental Death or Dismemberment
Insurance Plan, as restated effective as of February 1, 1991(4)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- --------------------------------------------------------------------------------------------------
10.12. Division Operations Incentive Program(4)
<S> <C>
10.13. Agreement and General Release between Edward D. Durwood and American Multi-Cinema, Inc.(15)
10.14. Agreement and General Release between Donald P. Harris and American Multi-Cinema, Inc.(15)
10.15. 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.(5)
10.16. 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.(5)
10.17. Assignment and Assumption Agreement between Cinema Enterprises II, Inc. and TPI Entertainment,
Inc.(5)
10.18. 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.(5)
10.19. 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 (5)
10.20. Promissory Note dated June 16, 1993, made by Thomas L. Velde and Katherine G. Terwilliger, husband
and wife, payable to American Multi-Cinema, Inc.(5)
10.21. Second Mortgage dated June 16, 1993, among Thomas L. Velde, Katherine G. Terwilliger and American
Multi-Cinema, Inc.(5)
10.22. Summary of American Multi-Cinema, Inc. Executive Incentive Program(13)
10.23. AMC Non-Qualified Deferred Compensation Plans(2)
10.24. Employment Agreement between AMC Entertainment Inc., American Multi-Cinema, Inc. and Stanley H.
Durwood(18)
10.25. Real Estate Contract dated November 1, 1995 among Richard M. Fay, Mary B. Fay and American
Multi-Cinema, Inc.(18)
*10.26. American Multi-Cinema, Inc. Retirement Enhancement Plan
10.27. Employment Agreement between American Multi-Cinema, Inc. and Richard M. Fay(19)
*10.28. American Multi-Cinema, Inc. Executive Savings Plan
*11. Computation of Per Share Earnings
13. Incorporated portions of the Annual Stockholder's Report for the fiscal year ended March 28,
1996(18).
16. Letter regarding change in certifying accountant(6)
*21. Subsidiaries of AMC Entertainment Inc.
*23.1. Consent of Coopers & Lybrand L.L.P.
*23.2. Consent of Coopers & Lybrand L.L.P. regarding Durwood, Inc.
**23.3. Form of Consent of Richards, Layton & Finger, P.A. to the use of their opinion filed as Exhibit 5
(incorporated as Exhibit 5) (executed opinion to be filed by amendment).
**23.4 Form of Consent of Chadbourne & Parke L.L.P. to the use of their opinion filed as Exhibit 8
(incorporated in Exhibit 8) (executed opinion to be filed by Amendment)
24. Power of Attorney (included after signature page)
*99. Form of Proxy Card to be used at Special Meeting
</TABLE>
- --------------
(1) Incorporated by reference from AMCE's Form 10-K report for fiscal year
ended March 31, 1994 (File No. 0-12429)
II-4
<PAGE>
(2) Incorporated by reference from Amendment No. 2 to AMCE's Registration
Statement on Form S-2 (File No. 33-51693) filed February 18, 1994
(3) Incorporated by reference from AMCE's Form 8-K (File No. 01-12429) dated
April 7, 1994
(4) Incorporated by reference from AMCE's Form S-1 (File No. 33-48586) filed
June 12, 1992, as amended
(5) Incorporated by reference from AMCE's Form 10-K report for fiscal year
ended April 1, 1993 (File No. 01-12429)
(6) Incorporated by reference from AMCE's Form 10-Q (File No. 01-12429) dated
July 2, 1992
(7) Incorporated by reference from AMCE's Form S-1 (File No. 2-84675) filed
June 22, 1983
(8) Incorporated by reference from AMCE's Form S-8 (File No. 2-97523) filed
July 3, 1984
(9) Incorporated by reference from AMCE's S-8 and S-3 (File No. 2-97522) filed
July 3, 1984
(10) Not used.
(11) Incorporated by reference from AMCE's Form S-8 (File No. 2-92048) filed
July 3, 1985
(12) Incorporated by reference from AMCE's Form 8-K (File No. 0-12429) dated
March 4, 1991
(13) Incorporated by reference from AMCE's Registration Statement on Form S-2
(File No. 33-51693) filed December 23, 1993
(14) Incorporated by reference from AMCE's Form 10-K (File No. 1-12429) report
for fiscal year ended March 30, 1995
(15) Incorporated by reference from AMCE's Form 10-Q (File No. 0-12429) for the
quarter ended September 28, 1995
(16) Incorporated by reference from AMCE's Form 10-Q (File No. 1-08747) for the
quarter ended September 29, 1994
(17) Incorporated by reference from AMCE's Form 10-Q (File No. 0-12429) for the
quarter ended December 28, 1995
(18) Incorporated by reference from AMCE's Form 10-K (File No. 0-12429) for the
fiscal year ended March 28, 1996
(19) Incorporated by reference from AMCE's Form 10-Q (File No. 0-12429) for the
quarter ended June 27, 1996
(20) Incorporated by reference from AMCE's Form 10-Q (File No. 0-12429) for the
quarter ended December 26, 1996
(21) Incorporated by reference from AMCE's Form 8-K (File No. 0-12429) dated
March 28, 1997.
(22) Incorporated by reference from Exhibit 99.1 to Schedule 13-D of Durwood
Inc. and Stanley H. Durwood dated May 3, 1996.
* Filed herewith
** To be filed by Amendment
(c) Item 4(b) Information.
The report of Furman Selz LLC is furnished as part of the Proxy--Information
Statement/Prospectus.
II-5
<PAGE>
ITEM 22. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that is filed
pursuant to the paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as part of an
amendment to this Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment 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.
(3) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy--Information
Statement/Prospectus pursuant to Item 4, 10(b), 11, or 13 of Form S-4, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
this Registration Statement through the date of responding to the request.
(4) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
(5) Insofar as indemnification for liabilities under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its 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 Act and will be governed by the final adjudication of
such issue.
II-6
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Peter C. Brown and Richard L. Obert, and
each of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments or post-effective amendments to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each such attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each such attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, AMC
Entertainment Inc. has duly caused this 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 24th day of April, 1997.
AMC ENTERTAINMENT INC.
By: /s/ PETER C. BROWN,
------------------------------------------
PRESIDENT AND CHIEF FINANCIAL OFFICER
II-7
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
TITLE DATE
---------------------------- -------------------
/s/ STANLEY H. DURWOOD Chairman of the Board, Chief
- ---------------------------- Executive Officer and April 24, 1997
Stanley H. Durwood Director
/s/ PAUL E. VARDEMAN
- ---------------------------- Director April 24, 1997
Paul E. Vardeman
/s/ CHARLES J. EGAN, JR.
- ---------------------------- Director April 24, 1997
Charles J. Egan, Jr.
/s/ WILLIAM T. GRANT, II
- ---------------------------- Director April 24, 1997
William T. Grant, II
/s/ JOHN P. MASCOTTE
- ---------------------------- Director April 24, 1997
John P. Mascotte
/s/ PETER C. BROWN
- ---------------------------- President, Chief Financial April 24, 1997
Peter C. Brown Officer and Director
/s/ PHILIP M. SINGLETON Executive Vice President,
- ---------------------------- Chief Operating Officer April 24, 1997
Philip M. Singleton and Director
/s/ RICHARD L. OBERT Senior Vice President--Chief
- ---------------------------- Accounting and Information April 24, 1997
Richard L. Obert Officer
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
2.1. Agreement and Plan of Merger dated as of March 31, 1997 between AMC Entertainment Inc. and Durwood,
Inc. (together with Exhibit A, "Pre-Merger Action Plan")
2.2. Form of Stock Agreement to be entered into among AMC Entertainment Inc. and Stanley H. Durwood, Carol
D. Journagan, Edward D. Durwood, Thomas A. Durwood, Elissa D. Grodin, Brian H. Durwood and Peter J.
Durwood ("Durwood Family Stockholders")
2.3. Form of Registration Agreement to be entered into between AMC Entertainment Inc. and the Durwood
Family Stockholders
2.4.(a) Indemnification Agreement dated as of March 31, 1997 among AMC Entertainment Inc., the Durwood Family
Stockholders and Delta Properties, Inc., together with Exhibit B thereto (Escrow Agreement)
2.4.(c) First Amendment to Durwood Family Settlement Agreement
2.7.(a) Plan and Agreement of Liquidation and Merger dated March 31, 1997 between AMC Realty, Inc. and its
subsidiary AMC Canton Realty, Inc.
2.7.(b) Certificate of Ownership and Merger dated March 31, 1997 between AMC Realty, Inc. and its subsidiary
AMC Canton Realty, Inc.
2.8.(a) Plan and Agreement of Liquidation and Merger dated March 31, 1997 between AMC Philadelphia, Inc. and
its subsidiary Budco Theatres, Inc.
2.8.(b) Certificate of Ownership and Merger dated March 31, 1977 between AMC Philadelphia, Inc. and its
subsidiary Budco Theatres, Inc. (Delaware)
2.8.(c) Articles of Merger dated March 31, 1977 between AMC Philadelphia, Inc. and Budco Theatres, Inc.
(Pennsylvania)
2.9.(a) Plan and Agreement of Liquidation and Merger dated March 31, 1997 between American Multi-Cinema, Inc.
and its subsidiary AMC Philadelphia, Inc.
2.9.(b) Certificate of Ownership and Merger merging AMC Philadelphia, Inc., a Delaware Corporation, into
American Multi-Cinema, Inc., a Missouri Corporation (Delaware)
2.9.(c) Articles of Merger between AMC Philadelphia, Inc., and American Multi-Cinema, Inc. (Missouri)
4.3. Amended and Restated Credit Agreement Dated as of April 10, 1997, among AMC Entertainment Inc., as
the Borrower, The Bank of Nova Scotia, as Administrative Agent and Bank of America National Trust
and Savings Association, as Documentation Agent and Various Financial Institutions, as Lenders
together with the following exhibits thereto; significant subsidiary guarantee, form of notes, form
of pledge agreement and form of subsidiary pledge agreement.
10.26. American Multi-Cinema, Inc. Retirement Enhancement Plan
10.28. American Multi-Cinema, Inc. Executive Savings Plan
11. Computation of Per Share Earnings
21. Subsidiaries of AMC Entertainment Inc.
23.1. Consent of Coopers & Lybrand L.L.P.
23.2. Consent of Coopers & Lybrand L.L.P. regarding Durwood, Inc.
99. Form of Proxy Card to be used at Special Meeting
</TABLE>
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization (the "AGREEMENT")
is made as of March 31, 1997 by AMC Entertainment Inc., a Delaware corporation
("AMCE"), and Durwood, Inc., a Missouri corporation ("DI"). This Agreement
constitutes a binding contract between AMCE and DI in accordance with the terms
hereof and the applicable provisions of both the Delaware General Corporation
Law and The General and Business Corporation Law of Missouri. The Agreement is
entered into for substantial business reasons which are more fully described in
the statements of actions taken by the respective Boards of Directors of the
parties whereby the Agreement was authorized, and the parties intend that the
merger contemplated by the Agreement shall constitute a reorganization in which
no taxable income, gain or loss is recognized pursuant to Section 368(a)(1)(A)
and related sections of the Internal Revenue Code of 1986, as amended (the "TAX
CODE"). The terms and conditions of the Agreement are as follows:
WITNESSETH:
WHEREAS, AMCE is a corporation duly organized and validly existing
under the laws of the State of Delaware, with authorized capital stock
consisting of (i) 45,000,000 shares of Common Stock, par value 66 2/3CENTS per
share ("AMCE COMMON STOCK"), 6,549,489 shares of which are issued and
outstanding, (ii) 30,000,000 shares of Class B Stock, par value 66 2/3CENTS
per share ("AMCE CLASS B STOCK"), 11,157,000 shares of which are issued and
outstanding, and (iii) 10,000,000 shares of Preferred Stock, par value 66
2/3CENTS per share ("AMCE PREFERRED STOCK"), of which 3,323,600 shares of $1.75
Cumulative Convertible Preferred Stock ("AMCE CONVERTIBLE PREFERRED STOCK") are
issued and outstanding; and
WHEREAS, DI is a corporation duly organized and validly existing under
the laws of the State of Missouri, with authorized capital stock consisting of
(i) 150,000 shares of Class A Stock, par value $100 per share ("DI CLASS A
STOCK"), 120,000 shares of which are issued and outstanding, and (ii) 50,000
shares of Class B Stock, par value $100 per share ("DI CLASS B STOCK"), 40,784
shares of which are issued and outstanding; and
WHEREAS, prior to the Merger (as defined herein) becoming effective,
DI has advised AMCE that DI intends to convert 6,141,343 shares of AMCE Class B
Stock into a like number of shares of AMCE Common Stock pursuant to the terms of
the AMCE Class B Stock; and
WHEREAS, the Special Committee of the Board of Directors of AMCE
composed of directors who are not officers or employees of AMCE formed for the
purpose of evaluating and negotiating the terms of the Merger (the "SPECIAL
COMMITTEE") has recommended that the full Board of Directors of AMCE approve and
adopt the Agreement and such Board has reviewed, approved and adopted this
Agreement and deemed it advisable and in the best interests of AMCE that DI be
merged into and with AMCE pursuant to the terms and conditions set forth herein;
and
<PAGE>
2
WHEREAS, the Board of Directors of DI has reviewed and approved this
Agreement and deems it advisable and in the best interests of DI that DI be
merged into and with AMCE pursuant to the terms and conditions set forth herein;
and
WHEREAS, the Boards of Directors of AMCE and DI have directed that
this Agreement be submitted to the stockholders of AMCE and DI, respectively,
for their approval;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and covenants set forth herein, the parties hereto do hereby agree
and covenant as follows:
I. THE MERGER
1.1. NAMES OF CORPORATIONS. The names of the corporations proposing
to merge are:
AMC Entertainment Inc.
and
Durwood, Inc.
1.2. MERGER. At the Effective Time (as defined below), subject to
the terms and conditions of this Agreement and in accordance with applicable
law, AMCE and DI shall merge into a single corporation by DI merging with and
into AMCE (the "MERGER").
1.3. NAME OF SURVIVING CORPORATION. The name of AMCE, which is to be
the surviving corporation, shall not be changed as a result of the Merger.
1.4. CLOSING; EFFECTIVE TIME. Unless this Agreement has been
terminated under Section 6.4, a closing (the "CLOSING") shall take place as
promptly as practicable following satisfaction or waiver of the last of the
conditions set forth in Articles IV and V. The Merger shall become effective
immediately upon the filing of this Agreement, or a certificate of merger in
lieu thereof, with the Secretary of State of Delaware in accordance with
applicable law. The time of such effectiveness is referred to herein as the
"EFFECTIVE TIME". At the Closing, or as soon thereafter as practicable, the
parties shall cause the Merger to be consummated as provided in this
Section 1.4.
l.5. EFFECT OF MERGER. (a) At the Effective Time, the separate
existence of DI shall cease. The existence of AMCE shall continue unaffected
and unimpaired by the Merger, and AMCE shall after the Effective Time have all
of the rights, privileges, immunities and powers and shall be subject to all of
the duties and liabilities of a corporation organized under the Delaware General
Corporation Law.
(b) At the Effective Time, AMCE shall have and thereafter possess all
of the rights, privileges, immunities, powers and franchises, of a public as
well as of a private nature, of each of the merging corporations, and all
property, real, personal and mixed, and all debts due on whatever account,
including subscriptions to shares, and all other choses in action, and every
<PAGE>
3
other interest of or belonging to or due to either of the merging corporations
shall be taken and deemed to be transferred to and vested or remain in AMCE
without further act or deed (and the title to any real estate, or any interest
therein, vested in either of the merging corporations shall not revert or be in
any way impaired by reason of the Merger).
(c) AMCE shall, upon the Effective Time and thereafter, be
responsible and liable for all the liabilities and obligations of each of the
merging corporations, and any claim existing or action or proceeding pending by
or against either of such corporations may be prosecuted to judgment as if the
Merger had not taken place or, in the case of DI, AMCE may be substituted in
place of DI. Neither the rights of creditors nor any liens upon the property of
either of the merging corporations shall be impaired by the Merger.
1.6. CONVERSION OF SHARES. (a) Prior to the Effective Time, DI shall
convert 6,141,343 shares of AMCE Class B Stock into a like number of shares of
AMCE Common Stock.
(b) At the Effective Time, by virtue of the Merger and without any
action on the part of AMCE, DI or the holder of any of the following securities:
(i) Each share of AMCE Common Stock issued and outstanding
immediately prior to the Effective Time, other than those shares owned
by DI, and each share of AMCE Common Stock held in the treasury of
AMCE immediately prior to the Effective Time, shall continue to be one
share of AMCE Common Stock.
(ii) Each share of AMCE Class B Stock issued and outstanding
immediately prior to the Effective Time, other than those shares owned
by DI, and each share of AMCE Class B Stock held in the treasury of
AMCE immediately prior to the Effective Time, shall continue to be one
share of AMCE Class B Stock.
(iii) Each share of AMCE Convertible Preferred Stock issued and
outstanding immediately prior to the Effective Time shall continue to
be one share of AMCE Convertible Preferred Stock.
(iv) Each other share of AMCE Preferred Stock, if any, issued
and outstanding immediately prior to the Effective Time shall continue
to be one share of AMCE Preferred Stock.
(v) Each share of AMCE Common Stock and AMCE Class B Stock
which immediately prior to the Effective Time is owned of record by DI
shall continue to be one share of AMCE Common Stock and AMCE Class B
Stock, respectively, and shall be held in the treasury of AMCE until
the Board of Directors of AMCE determines otherwise.
<PAGE>
4
(vi) Each share of DI Class A Stock which immediately prior to
the Effective Time is owned of record by Harvard College ("HARVARD")
shall be converted into and become 32.142857 shares of AMCE Common
Stock.
(vii) Each share of DI Class A Stock issued and outstanding
immediately prior to the Effective Time, other than those shares owned
of record by Harvard, shall be converted into and become 32.142857
shares of AMCE Class B Stock.
(viii) Each share of DI Class B Stock which immediately prior to
the Effective Time is owned of record by Stanley H. Durwood,
individually, as Trustee of the 1992 Durwood, Inc. Voting Trust dated
December 12, 1992 (the "1992 TRUST") and as Trustee under the
Stanley H. Durwood Trust Agreement dated August 14, 1989 (the "1989
TRUST"), shall be converted into and become 243.767528 shares of AMCE
Class B Stock.
(ix) Each share of DI Class B Stock which immediately prior to
the Effective Time is owned of record by any person other than
Stanley H. Durwood, the 1992 Trust or the 1989 Trust shall be
converted into and become 243.767341 shares of AMCE Common Stock.
(x) Each share of DI Class A Stock and DI Class B Stock held
in the treasury of DI shall be canceled and retired and no payment
shall be made with respect thereto.
(c) At the Effective Time, the holders of certificates representing
shares of DI Class A Stock and DI Class B Stock outstanding at such time shall
cease to have any rights with respect to such Stock and such holders' sole
rights shall be to receive the number of shares of AMCE Common Stock or AMCE
Class B Stock into which their shares of DI Class A Stock or DI Class B Stock
shall have been converted by the Merger as provided herein.
(d) No fraction of a share of AMCE Common Stock and AMCE Class B
Stock shall be issued in connection with the Merger but in lieu thereof each
holder of shares of DI Class A Stock and DI Class B Stock otherwise entitled to
a fraction of a share of AMCE Common Stock or AMCE Class B Stock shall be paid
by AMCE, as a convenience and not as a separately bargained for consideration,
an amount of cash equal to such fraction multiplied by the average of the high
and low reported prices of one share of AMCE Common Stock on the AMEX (as
defined in Section 2.1(n)) on the trading day immediately preceding the
Effective Time. No such holder shall be entitled to dividends or other rights
in respect of any fractional share.
1.7. EXCHANGE OF CERTIFICATES. After the Effective Time, each holder
of a certificate theretofore representing outstanding shares of DI Class A Stock
or DI Class B Stock, upon surrender of the same to AMCE's transfer agent (the
"TRANSFER AGENT"), shall be entitled to receive in exchange therefor
certificates representing the number of full shares of AMCE Common Stock or AMCE
Class B Stock into which the shares of DI Class A Stock or DI Class B Stock have
been converted pursuant to the provisions of Section 1.6 of this Agreement.
<PAGE>
5
As soon as practicable after the Effective Time, the Transfer Agent shall send a
notice and transmittal form to each record holder of an outstanding certificate
which prior to the Effective Time evidenced shares of DI Class A Stock or DI
Class B Stock which shall have been converted into AMCE Common Stock or AMCE
Class B Stock pursuant to the provisions of Section 1.6 of this Agreement,
advising such stockholder of the terms of such conversion and the procedure for
surrendering to the Transfer Agent such certificate in exchange for certificates
evidencing AMCE Common Stock or AMCE Class B Stock. Until so surrendered, each
outstanding certificate which, prior to the Effective Time, represented DI
Class A Stock or DI Class B Stock (other than shares held in the treasury of DI)
will be deemed for all corporate purposes of AMCE to evidence ownership of the
number of full shares of AMCE Common Stock or AMCE Class B Stock into which the
shares of DI Class A Stock or DI Class B Stock represented thereby were
converted; provided, however, that, until outstanding certificates formerly
representing DI Class A Stock or DI Class B Stock are so surrendered, no
dividend or other distribution payable to holders of record of AMCE Common Stock
or AMCE Class B Stock as of any date subsequent to the Effective Time shall be
paid to the holders of such outstanding certificates in respect thereof. Upon
surrender of certificates of DI Class A Stock or DI Class B Stock, there shall
be paid to the record holder of the certificates of AMCE Common Stock or AMCE
Class B Stock, respectively, issued in exchange therefor (i) at the time of such
surrender, the amount of dividends theretofore payable with respect to such full
shares of AMCE Common Stock or AMCE Class B Stock as of any date subsequent to
the Effective Time which have not yet been paid to a public official pursuant to
abandoned property, escheat or similar laws and (ii) at the appropriate payment
date, the amount of dividends with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to such shares of AMCE Common Stock or AMCE Class B Stock. No interest
shall be payable with respect to the payment of such dividends on surrender of
outstanding certificates. If any certificate evidencing shares of AMCE Common
Stock or AMCE Class B Stock is to be issued in a name other than that in which
the certificate surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange pay to the Transfer Agent any transfer or other taxes
required by reason of the issuance of a Certificate for shares of AMCE Common
Stock or AMCE Class B Stock in any name other than that of the registered holder
of the certificate surrendered or establish to the satisfaction of the Transfer
Agent that such tax has been paid or is not payable.
1.8. CHANGES IN CAPITALIZATION. If, between the date of this
Agreement and the Effective Time, the outstanding shares of AMCE Common Stock or
AMCE Class B Stock shall be changed into a different number of shares or a
different class by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend thereon
shall be declared with a record date within such period, the number of shares of
AMCE Common Stock or AMCE Class B Stock into which the shares of DI Class A
Stock or DI Class B Stock will be converted shall be appropriately adjusted.
1.9. CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS, OFFICERS. The
Certificate of Incorporation and By-laws of AMCE shall not be changed by or as a
result of the Merger. The directors and officers of AMCE prior to the Merger
shall continue in such offices after the Merger.
<PAGE>
6
1.10. FURTHER ACTION. Each of the merging corporations shall take
all actions and do all things necessary, proper, or advisable under the laws of
the States of Delaware and Missouri to consummate and make effective the Merger
contemplated herein; provided, the binding effect of this Agreement shall be
subject to its approval by the requisite vote of the stockholders of each of the
merging corporations, or to its approval by the written consent of the
stockholders of each of the merging corporations in lieu of a vote, and to the
approval by the holders of a majority of the outstanding shares of AMCE Common
Stock (other than DI, the 1992 Trust, the 1989 Trust, members of the Durwood
Family (as defined below), spouses of the members of the Durwood Family,
children of members of the Durwood Family sharing the same household, and
directors and officers of AMCE (the "DURWOOD STOCKHOLDERS")) present and voting
at the AMCE Stockholder Meeting (as hereinafter defined), in each case, in
accordance with the requirements of the laws of the States of Delaware and
Missouri, respectively. As used herein, the "DURWOOD FAMILY" shall mean Stanley
H. Durwood, Carol D. Journagan, Edward D. Durwood, Thomas A. Durwood, Elissa D.
Grodin, Brian H. Durwood and Peter J. Durwood.
II. REPRESENTATIONS AND WARRANTIES
2.1. REPRESENTATIONS AND WARRANTIES OF DI. DI represents and warrants
to AMCE as follows:
(a) ORGANIZATION AND QUALIFICATION. DI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Missouri, has all necessary power and authority to own its properties and to
carry on its business as now owned and operated by it, and is duly qualified to
do business and is in good standing as a foreign corporation in each state where
the nature of its business or of its properties makes such qualification
necessary.
(b) CAPITAL STOCK. The authorized capital stock of DI consists of
150,000 shares of DI Class A Stock, of which 120,000 shares are issued and
outstanding, and 50,000 shares of DI Class B Stock, of which 40,784 shares are
issued and outstanding. All outstanding shares of DI Class A Stock and DI Class
B Stock have been duly authorized, validly issued, fully paid and nonassessable
and have not been issued in violation of any preemptive rights or of any federal
or state securities law. Immediately prior to the Effective Time, there will be
no more than 120,000 shares of DI Class A Stock and 40,784 shares of DI Class B
Stock issued and outstanding. There are no outstanding subscriptions, options,
rights, warrants, convertible securities or other agreements or commitments
obligating DI to issue, pledge or to transfer from treasury any additional
shares of its capital stock of any class. Neither DI nor any Subsidiary has
agreed to register the sale of any securities under the Securities Act (as
hereinafter defined).
(c) SUBSIDIARIES. Schedule 2.1(c) contains a true and complete list
of all DI's subsidiaries (other than AMCE and its subsidiaries) (each such
subsidiary of DI shall hereinafter separately be called a "SUBSIDIARY" and
collectively called the "SUBSIDIARIES") as of the date hereof. As of the date
hereof, except as set forth on Schedule 2.1(c), DI does not own directly or
indirectly, any interest or investment (whether equity or debt) in any
corporation, partnership, business, trust or other entity, except the
Subsidiaries. Prior to the Effective Time, DI's entire interest in all of the
Subsidiaries shall be distributed to DI's stockholders in accordance with the DI
Pre-Merger Action Plan attached hereto as Exhibit A (the "PRE-MERGER ACTION
PLAN"). At the Effective Time, DI will not own, directly or indirectly, any
interest or investment (whether equity
<PAGE>
7
or debt) in any corporation, partnership, business, trust or other entity other
than AMCE Common Stock and AMCE Class B Stock.
(d) FINANCIAL STATEMENTS. DI has previously furnished to AMCE the
consolidated balance sheet of DI and its Subsidiaries as of March 28, 1996,
together with the related statements of income, stockholders equity and cash
flow, for the fiscal year ending on such date, certified by Coopers & Lybrand
L.L.P., independent certified public accountants, whose opinions with respect to
such consolidated financial statements are included therewith. DI has also
previously furnished to AMCE the unaudited consolidated balance sheet of DI and
its Subsidiaries as of December 26, 1996, together with the related unaudited
statement of income for the 39-week period ending on such date, certified by the
President of DI. The foregoing financial statements have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as may be indicated therein or on the notes thereto and except that the
unaudited interim financial statements do not include footnote disclosures) and
fairly present the consolidated financial position and consolidated results of
the operations of DI and its Subsidiaries as at and for the dates and periods
shown thereon, subject, in the case of the unaudited interim financial
statements, to normal year-end audit adjustments.
(e) NO MATERIAL CHANGE. Except as set forth on Schedule 2.1(e) and
in the Pre-Merger Action Plan, since December 26, 1996, there has not been any:
(i) Material transaction by DI or any of its Subsidiaries;
(ii) Capital expenditures by DI or any of its Subsidiaries;
(iii) Material adverse change in the financial condition,
liabilities, assets, business or prospects of DI or of DI and its
Subsidiaries taken as a whole;
(iv) Any unfair or unlawful employment or labor practice, claim
or charge, organizing effort, or conduct which might materially
interfere with or disrupt operations of DI or of DI and its
Subsidiaries taken as a whole;
(v) Declaration, setting aside or payment of a dividend or
other distribution in respect of the capital stock of DI or any of its
Subsidiaries;
(vi) Direct or indirect redemption, purchase or other
acquisition by DI or any of its Subsidiaries of any shares of such
capital stock;
(vii) Increase in the salary or other compensation payable or
to become payable by DI or any of its Subsidiaries to any of such
corporation's officers or directors, or the declaration, payment, or
commitment or obligation of any kind for the payment by DI or any of
its Subsidiaries of a bonus or other additional salary or compensation
to any such person;
(viii) Sale or transfer of any asset of DI or any of its
Subsidiaries;
(ix) Loan by DI or any of its Subsidiaries to any person or
entity or guaranty by DI or any of its Subsidiaries of any loan;
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8
(x) Mortgage, pledge or other encumbrance of any asset of DI or
any of its Subsidiaries;
(xi) Waiver or release of any right or claim of DI or any of its
Subsidiaries;
(xii) Any change in any accounting principle or election used for
financial reporting or tax purposes by DI or any Subsidiary; or
(xiii) Agreement by DI or any of its Subsidiaries to do any of the
things described in the foregoing clauses.
(f) LIABILITIES. At the Effective Time DI will not have any material
debt, liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due.
(g) TAXES. Each of DI and its Subsidiaries has (i) filed all returns,
declarations, reports, information returns and statements of whatsoever kind
("TAX RETURNS") in respect of all federal, state, local, foreign and other
taxes, including interest, penalties and additions to tax with respect thereto
("TAXES"), that they are required to file through the date hereof and shall
prepare and file all such Tax Returns required to be filed after the date hereof
and on or before the Effective Time and (ii) paid or provided for the payment of
all Taxes due and owing for the periods covered by such Tax Returns and all
Taxes, if any, required to be paid for which no return is required. True copies
of all federal, state, local and foreign Tax Returns relating to DI's last three
taxable years ended March 28, 1996 have been delivered to AMCE. Neither DI nor
any Subsidiary has been audited by the Internal Revenue Service or any state,
local or foreign taxing jurisdiction since the year ended April 1, 1993, and no
agreements or consents extending the period during which any Taxes may be
assessed or collected are now in force. As of the date hereof, no material
adjustments have been proposed by the Internal Revenue Service or by any other
taxing authority with respect to any open tax years or tax returns.
(h) PROPERTIES AND ASSETS. DI and its Subsidiaries do not own or
hold any interest in any real property or tangible assets. At the Effective
Time, DI will have no right, title or interest in any property or assets (other
than AMCE Common Stock and AMCE Class B Stock).
(i) LEASES. Except as set forth on Schedule 2.2(i), DI and its
Subsidiaries are not parties to or bound by (whether as lessor, lessee or
guarantor) any lease of real property or personalty.
(j) ACCURATE BOOKS AND RECORDS. The books and records of DI and its
Subsidiaries contain a complete and accurate description of all transactions of
DI and the Subsidiaries.
(k) INSURANCE. All premiums due and payable prior to the date hereof
on the life insurance policies reflected in Schedule 2.1(k) ("LIFE INSURANCE
POLICIES") have been paid and
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9
AMCE will have no liability for premiums on such Life Insurance Policies. All
outstanding loans made under the Life Insurance Policies and the net cash
surrender value thereof, net of policy loans, as of December 31, 1996 are set
forth on Schedule 2.1(k).
(l) COMPLIANCE WITH LAW. DI and its Subsidiaries have substantially
complied with, and are not in violation of, any applicable federal, state or
local statutes, laws or regulations (including, without limitation, any
applicable building, zoning or other law, ordinance or regulation).
(m) LITIGATION. (i) There is no suit, action, arbitration, or legal,
administrative or other proceeding or governmental investigation pending, or to
the best knowledge of DI and its Subsidiaries, threatened against DI or any of
its Subsidiaries, (ii) neither DI nor any of its Subsidiaries is in default with
respect to any order, writ, court, department, agency or instrumentality
applicable to it, and (iii) neither DI nor any of its Subsidiaries is presently
engaged in any legal action to recover monies due or damages sustained by it.
(n) NO CONSENTS; NO DEFAULT. Except as may be required by the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "EXCHANGE ACT"), the Securities Act of 1933, as amended, and the
rules and regulations thereunder (the "SECURITIES ACT"), state securities laws,
The General and Business Corporation Law of Missouri, the Delaware General
Corporation Law and the rules and regulations of the American Stock Exchange ,
Inc. (the "AMEX") and the Pacific Stock Exchange, respectively, there is no
requirement applicable to DI or any of the Subsidiaries to make any filing with,
or to obtain any permit, authorization, consent or approval of, any governmental
or regulatory authority as a condition to the lawful consummation by DI of the
transactions contemplated by this Agreement and the Pre-Merger Action Plan.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated in this Agreement and the Pre-Merger Action Plan will
result in or constitute any of the following:
(i) A conflict or breach of any provisions of the Articles of
Incorporation or By-laws (or other similar governing instruments) of
DI or any of the Subsidiaries;
(ii) A default or an event that, with notice or lapse of time
or both, would be a default, under any license, lease, franchise,
promissory note, conditional sales contract, commitment, indenture,
mortgage, deed of trust or other agreement, instrument or arrangement
to which DI or any of its Subsidiaries is a party or by which DI, its
Subsidiaries or any of their respective properties may be bound, or a
violation of any applicable law or governmental regulation;
(iii) An event that would permit any party to terminate any
agreement or to accelerate the maturity of any indebtedness or other
obligation of DI or any of its Subsidiaries; or
(iv) The creation or imposition of any lien, charge or
encumbrance on any of the properties of DI or any of its Subsidiaries.
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10
(o) AUTHORIZATION; VALID AGREEMENT. DI has the corporate power and
authority to execute and deliver this Agreement and, subject to receiving the
requisite stockholder approval, to perform its obligations hereunder. The
execution and delivery of this Agreement by DI has been duly authorized by its
Board of Directors and no further corporate authorization is required for the
consummation of the transactions contemplated hereby or by the Pre-Merger Action
Plan, except for the approval of the stockholders of DI as required under The
General and Business Corporation Law of Missouri. This Agreement has been duly
and validly executed and delivered by DI and constitutes a valid and binding
agreement of DI, enforceable against DI in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
other similar laws affecting creditors' rights generally and equitable
principles.
(p) NO MATERIAL MISSTATEMENTS OR OMISSIONS. None of the
representations or warranties made by DI in this Agreement and no statement by
DI or, to the best knowledge of DI, any other person, contained in any document,
certificate or other writing furnished by DI to AMCE contains any untrue
statement of a material fact or omits any material fact necessary to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading.
(q) FINDERS AND INVESTMENT BANKERS. None of DI, any of its
Subsidiaries or any of such corporations' respective officers or directors has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
hereby.
(r) EMPLOYEE BENEFITS.
(i) There are no Company Benefit Plans (as defined below).
Neither DI nor any of its Subsidiaries nor any ERISA Affiliate (as
defined below) of either DI or any of its Subsidiaries maintains,
sponsors, contributes to or is required to contribute to an Employee
Benefit Plan (as defined below) or a fringe benefit plan subject to
Section 6039D of the Tax Code, and neither DI nor any of its
Subsidiaries nor any ERISA Affiliate of either DI or any of its
Subsidiaries has any liability (contingent or otherwise) arising under
or with respect to any such plan.
(ii) (A) None of the employees of DI or any Subsidiary is
represented in his or her capacity as an employee of such company by
any labor organization; (B) neither DI or any Subsidiary has
recognized any labor organization nor has any labor organization been
elected as the collective bargaining agent of any of their employees,
nor has DI or any Subsidiary signed any collective bargaining
agreement or union contract recognizing any labor organization as the
bargaining agent of any of their employees; and (C) as of the date
hereof, there is no active or current union organization activity
involving the employees of DI or any Subsidiary.
(iii) For the purposes of this Agreement: (A) the term "Company
Benefit Plan" shall include all employee benefit arrangements or
payroll practices,
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11
including without limitation, severance pay, sick leave, vacation pay,
salary continuation for disability, scholarship programs, stock option
or restricted stock plans maintained by DI or any Subsidiary (whether
formal or informal, whether for the benefit of a single individual or
for more than one individual and whether for the benefit of current or
former employees or their beneficiaries) on behalf of DI (or any
Subsidiary) or any of the employees of DI (or any Subsidiary) or to
which or under which or pursuant to which DI (or any Subsidiary) has
contributed or is obligated to make contributions on behalf of DI (or
any Subsidiary) or any employees of DI (or any Subsidiary); (B) the
term "Employee Benefit Plan" shall have the meaning ascribed to such
term by section 3(3) of ERISA; (C) the term "ERISA" shall refer to the
Employee Retirement Income Security Act of 1974, as amended; and
(D) the term "ERISA AFFILIATE" shall refer to any trade or business
(whether or not incorporated) under common control with any person
within the meaning of Section 414 (b), (c), (m) or (o) of the Tax Code
) (provided that AMCE and its subsidiaries shall not be deemed to be
ERISA Affiliates of DI).
(iv) Schedule 2.1(r) sets forth a true and complete list of all
employees of DI and its Subsidiaries and their current rates of
compensation.
(s) CONTRACTS AND AGREEMENTS. Schedule 2.1(s) identifies each
contract, lease, guarantee or other agreement (a "CONTRACT") in effect on the
date of this Agreement to which DI or any of its Subsidiaries is a party or by
which any of their assets or properties are bound. None of DI or the
Subsidiaries are in default under any of such contracts, agreements,
understandings or leases and each is enforceable against the other party thereto
in accordance with its terms. There have been delivered or made available to
AMCE true and complete copies of all of the Contracts. At the Effective Time,
the only Contract binding upon DI will be this Agreement.
(t) ADEQUACY OF RESERVES. Any reserves set forth on the consolidated
financial statements of DI for the 39-week period ended December 26, 1996, are
adequate and sufficient to cover all liabilities with respect to which such
reserves were established.
(u) AGREEMENTS WITH INSIDERS. Set forth in Schedule 2.1(u) is a true
and complete list of every Contract to which DI or any Subsidiary is a party or
bound or by which any of the assets or properties of DI or any Subsidiary is
bound and (i) to which any Insider (as defined below) or Affiliate (as defined
below) of DI is a party or (ii) which benefits any Insider or Affiliate of DI.
For purposes of this Agreement:
(A) "INSIDER" shall mean each Durwood Stockholder or any
Associate or Relative of a Durwood Stockholder;
(B) an "AFFILIATE" of a specified person is a person that
directly or indirectly, though one or more intermediaries, controls,
or is controlled by, or is under common control with, the person
specified (other than AMCE and its majority-owned subsidiaries);
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12
(C) the term "ASSOCIATE" used to indicate a relationship with
any person means (I) any corporation, partnership, joint venture or
other entity of which such person is an officer or partner or is
directly or indirectly, through one or more intermediaries, the
beneficial owner of 10% or more of (1) any class or type of equity
securities or other profits interest or (2) the combined voting power
of interests ordinarily entitled to vote for management or otherwise
(other than AMCE and its majority-owned subsidiaries), and (II) any
trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or in
a similar fiduciary capacity; and
(D) a "RELATIVE" of a person shall mean such person's spouse,
such person's parents, sisters, brothers, children and the spouses of
the foregoing, and any member of the immediate household of the
foregoing.
2.2. REPRESENTATIONS AND WARRANTIES OF AMCE. AMCE represents and
warrants to DI as follows:
(a) ORGANIZATION AND QUALIFICATION. AMCE is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
(b) CAPITAL STOCK. On the date hereof the authorized capital stock
of AMCE consists of (i) 45,000,000 shares of AMCE Common Stock, of which
6,549,489 shares are issued and outstanding, (ii) 30,000,000 shares of AMCE
Class B Stock, of which 11,157,000 shares are issued and outstanding and
(iii) 10,000,000 shares of AMCE Preferred Stock, of which 3,323,600 shares of
AMCE Convertible Preferred Stock are issued and outstanding. At the Effective
Time all of the shares of AMCE Common Stock and AMCE Class B Stock issued in the
Merger pursuant to Section 1.6(b) hereof will be duly authorized, validly
issued, fully paid and nonassessable and not issued in violation of any
preemptive rights of AMCE's stockholders.
(c) ENFORCEABILITY OF AGREEMENT. AMCE has the corporate power and
authority to execute and deliver this Agreement and, subject to receiving the
requisite approval of AMCE's stockholders, to perform its obligations hereunder.
This Agreement has been duly and validly executed and delivered by AMCE and
constitutes the valid and binding obligations of AMCE, enforceable against it in
accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other similar laws effecting
creditors' rights generally and equitable principles. The execution, delivery
and performance of this Agreement and the transactions contemplated by this
Agreement have been duly authorized by the Board of Directors of AMCE.
(d) NO VIOLATION. Assuming compliance with the requirements of the
Exchange Act, the Securities Act, state securities laws, The General and
Business Corporation Law of Missouri and the Delaware General Corporation Law
and the rules and regulations of the AMEX and the Pacific Stock Exchange,
respectively, none of the execution or delivery of this Agreement by AMCE, the
consummation by AMCE of the transactions contemplated hereby or the fulfillment
of the terms hereof will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under the organizational
documents of AMCE or under
<PAGE>
13
any material agreement or instrument under which AMCE is obligated, or violate
any law to which AMCE is subject.
2.3. REPRESENTATIONS AND WARRANTIES. All representations, warranties
and covenants made by DI contained in this Agreement and the schedules hereto
and any certificate, instrument or document delivered pursuant to this Agreement
or in connection with the transactions contemplated hereby shall be deemed
material and to have been relied upon by the parties, notwithstanding any
investigation made by AMCE.
III. COVENANTS AND AGREEMENTS
3.1. AFFIRMATIVE COVENANTS. Between the date hereof and the Effective
Time, except as otherwise contemplated by the Pre-Merger Action Plan, DI shall
conduct its business in the ordinary course as heretofore conducted. DI shall,
and shall cause any Subsidiary to, afford to officers, employees, counsel,
accountants and other authorized representatives of AMCE ("REPRESENTATIVES"), in
order to evaluate the transactions contemplated by this Agreement, reasonable
access, during normal business hours throughout the period prior to the
Effective Time to its properties, books and records (including, without
limitation, the work papers of independent accountants) and, during such period,
shall, and shall cause any Subsidiary to, furnish promptly to such
Representatives all information concerning its business, properties and
personnel as may reasonably be requested, provided that no investigation
pursuant to this Section 3.1 shall affect or be deemed to modify any of the
respective representations or warranties made by DI.
3.2. NEGATIVE COVENANTS. Between the date hereof and the Effective
Time, except as contemplated by the Pre-Merger Action Plan, DI shall not:
(a) Amend its certificate of incorporation, articles of
incorporation, by-laws, or other charter documents; make any change in its
authorized, issued or outstanding capital stock; issue any shares of capital
stock; grant any stock options or right to acquire shares of any class of its
capital stock or any security convertible into any class of capital stock;
purchase, redeem, retire or otherwise acquire any shares of any class of its
capital stock or any security convertible into any class of its capital stock;
or agree to do any of the foregoing;
(b) Declare, set aside or pay any dividend or other distribution in
respect of any class of its capital stock;
(c) Adopt, enter into, or amend any employment contract or any bonus,
stock option, profit sharing, pension, retirement, incentive, or similar
employee benefit program or arrangement or grant any salary or wage increase;
(d) Incur or guarantee any indebtedness for borrowed money or
guarantee any other obligation of any other person;
(e) Pay or incur any obligation or liability, absolute or contingent,
other than liabilities incurred in the ordinary and usual course of business;
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14
(f) Mortgage, pledge or subject to lien or other encumbrance any of
its properties or assets;
(g) Sell or transfer any of its properties or assets or cancel,
release or assign any indebtedness owed to it or any claims held by it;
(h) Make any investments of a capital nature either by property
transfers, or otherwise, or purchase any property or assets;
(i) Enter into or amend any material agreement;
(j) Merge or consolidate with any other corporation, acquire any
stock or acquire any assets of any other person, corporation or other business
organization, or enter into any discussions with any person concerning, or agree
to do, any of the foregoing; or
(k) Reorganize, restructure, recapitalize, liquidate or file a
voluntary petition in bankruptcy or enter into any composition with its
creditors or file a voluntary winding up petition.
3.3. REASONABLE EFFORTS. DI and AMCE shall: (i) promptly make their
respective filings and thereafter make any other submissions required under all
applicable laws with respect to the Merger and the other transactions
contemplated hereby and (ii) use their respective reasonable efforts to promptly
take, or cause to be taken, all other actions and do, or cause to be done, all
other things necessary, proper or appropriate to consummate and make effective
the transactions contemplated by this Agreement.
3.4. PUBLICITY. Except as may be required by applicable law or any
listing agreement with a national securities exchange (or similar agreement), DI
and AMCE agree that they will consult with each other concerning any proposed
press release or public announcement pertaining to the Merger.
3.5. REPRESENTATIONS AND WARRANTIES. Neither DI nor AMCE will, or
will allow any of their respective subsidiaries (other than, in the case of DI,
AMCE) to, take any action that would cause any of the representations and
warranties set forth herein not to be true and correct in all material respects
at and as of the Effective Time.
3.6. FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of AMCE will be authorized to execute and deliver, in the
name and on behalf of DI, any deeds, bills of sale, assignments or assurances
and to take and do, in the name and on behalf of DI, any other actions and
things to vest, perfect or confirm of record or otherwise in AMCE any and all
right, title and interest in, to and under any of the rights, properties or
assets of DI acquired or to be acquired by AMCE as a result of, or in connection
with, the Merger.
3.7 NOTIFICATION OF CERTAIN MATTERS. Between the date hereof and the
Effective Time, each of AMCE and DI will give prompt notice in writing to the
other of: (i) any information that indicates that any representation and
warranty contained herein was not true and correct as of the date hereof or will
not be true and correct as of the Effective Time, (ii) the
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15
occurrence, or failure to occur, of any event which occurrence or failure to
occur will result, or has a reasonable prospect of resulting, in the failure
to satisfy a condition specified in Articles IV or V hereof, (iii) any notice
or other communication from any third party alleging that the consent of such
third party is or may be required in connection with the transactions
contemplated by this Agreement, (iv) any notice or other communication from
any governmental or regulatory agency or authority in connection with the
transactions contemplated by this Agreement, or (v) any actions, suits,
claims, investigations or proceedings commenced or, to its knowledge,
threatened against AMCE or DI or any Subsidiaries or which relate to the
Merger or the consummation of the transactions contemplated by this Agreement
or the Pre-Merger Action Plan.
3.8 FILING. DI and AMCE agree that:
(i) AMCE shall prepare and file with the Securities and
Exchange Commission (the "SEC") as soon as is reasonably practicable a
registration statement on form S-4 (or another appropriate form) (the
"REGISTRATION STATEMENT") and preliminary proxy materials with respect
to the Merger, and use all reasonable efforts to have the Registration
Statement declared effective by the SEC under the Securities Act and
the preliminary proxy materials cleared by the SEC under the Exchange
Act;
(ii) AMCE and DI shall take all such action as may be required
under state blue-sky or securities laws in connection with the
transactions contemplated by this Agreement;
(iii) AMCE and DI shall cooperate with one another in determining
whether any filings are required to be made or consents required to be
obtained in any foreign jurisdiction or under the regulatory laws of
any state prior to the Effective Time in connection with the
consummation of the transactions contemplated by this Agreement, and
in making any such filings promptly and in seeking to obtain timely any
such consents; and
(iv) AMCE shall use its reasonable efforts to have listed for
trading on the AMEX and, if AMCE Common Stock is still listed on the
Pacific Stock Exchange, on the Pacific Stock Exchange, the AMCE Common
Stock to be issued pursuant to the Merger.
3.9 PROXY STATEMENT. DI covenants and agrees with AMCE that at the
time the Registration Statement (including the definitive proxy materials
contained therein (the "PROXY STATEMENT") and all other related proxy soliciting
material filed with the SEC) or any post-effective amendment thereto becomes
effective, and at all times subsequent to such effectiveness up to and including
the Effective Time, any information regarding DI, any Insider or any Affiliate
of DI set forth in the Registration Statement, any amendments or supplements
thereto, the Proxy Statement and in any other proxy soliciting material to be
used by AMCE and DI in connection with the transactions contemplated hereby,
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16
(i) will comply as to form in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules
and regulations of the SEC thereunder; and
(ii) will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements made therein not misleading.
3.10 PRE-MERGER ACTION PLAN. DI shall cause all actions contemplated
by the Pre-Merger Action Plan to occur at the times contemplated by the
Pre-Merger Action Plan.
IV. AMCE CONDITIONS OF MERGER
The obligations of AMCE to consummate the Merger are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions,
each of which may be waived by AMCE as provided herein except as otherwise
required by applicable law:
4.1. STOCKHOLDER APPROVAL. The Merger shall have been approved by the
affirmative vote of the holders of the requisite number of the outstanding
shares of AMCE Common Stock, AMCE Class B Stock, DI Class A Stock and DI Class B
Stock, and, in addition, shall have been approved by the holders of a majority
of the outstanding shares of AMCE Common Stock (excluding the Durwood
Stockholders) present and voting at the meeting of stockholders called to
consider the Merger (the "AMCE STOCKHOLDER MEETING").
4.2. DI CORPORATE ACTION. All corporate action necessary to authorize
the execution, delivery and performance of this Agreement and the consummation
of the Merger and the transactions contemplated hereby and by the Pre-Merger
Action Plan shall have been duly and validly taken by DI.
4.3. REGISTRATION OF AMCE COMMON STOCK AND AMCE CLASS B STOCK. Prior
to the first date on which the Proxy Statement is mailed to AMCE stockholders,
the SEC shall have declared the Registration Statement effective and, at or
prior to the time required, any required approvals of state securities
administrators shall have been obtained. At the Effective Time, no stop order
or similar restraining order shall have been threatened or entered by the SEC or
any state securities administrator.
4.4. AMEX LISTING. The shares of AMCE Common Stock to be issued
pursuant to the Merger shall have been approved for listing by the AMEX for
trading on the AMEX and, if AMCE Common Stock is still listed on the Pacific
Stock Exchange, such shares shall have been approved for listing for trading on
such exchange.
4.5. GOVERNMENTAL FILINGS AND CONSENTS. All governmental filings
required to be made prior to the Effective Time with, and all governmental
consents required to be obtained prior to the Effective Time from, governmental
and regulatory authorities in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and by
the Pre-Merger Action Plan shall have been made or obtained.
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17
4.6. CONSENTS OF THIRD PARTIES. DI and AMCE shall have received all
requisite consents, approvals and agreements of third parties necessary to
ensure that neither the Merger nor any transactions contemplated herein or by
the Pre-Merger Action Plan shall violate any provision of any material
agreement, instrument, order, judgment or decree to which DI or any of its
Subsidiaries or AMCE is a party or by which any of them or their property may be
bound, or shall give rise to any right to accelerate any material indebtedness
of DI or any of its Subsidiaries or AMCE.
4.7. LITIGATION. There shall be no litigation, proceedings or actions
pending or threatened concerning the Merger that in the judgment of the Board of
Directors of AMCE acting with the recommendation of the Special Committee
renders consummation of the Merger inadvisable.
4.8. DISSENTING STOCK. No dissenters' rights shall have been
exercised by the holders of any shares of DI Class A Stock or DI Class B Stock.
4.9. STOCK AGREEMENT. The Durwood Family, the 1992 Trust, the 1989
Trust and Delta Properties, Inc. shall have entered into a Stock Agreement with
AMCE in form and substance identical to EXHIBIT B attached hereto (the "STOCK
AGREEMENT"), and such agreement shall remain in full force and effect at the
Effective Time.
4.10. REGISTRATION AGREEMENT. The Durwood Family, the 1992 Trust,
the 1989 Trust and Delta Properties, Inc. shall have entered into a Registration
Agreement (the "REGISTRATION AGREEMENT") with AMCE in form and substance
identical to EXHIBIT C attached hereto and such agreement shall remain in full
force and effect at the Effective Time.
4.11. INDEMNIFICATION AGREEMENT. The Durwood Family, the 1992 Trust,
the 1992 Trust and Delta Properties, Inc. shall at the time and on the date
this Agreement is executed and delivered have executed and delivered to AMCE
an Indemnification Agreement (the "INDEMNIFICATION AGREEMENT") in form and
substance identical to EXHIBIT D attached hereto and such agreement shall remain
in full force and effect at the Effective Time.
4.12 HARVARD CONSENT. Harvard shall have executed and delivered to
AMCE an instrument in form and substance identical to EXHIBIT E, and such
instrument shall remain in full force and effect at the Effective Time.
4.13. FAIRNESS OPINION. AMCE shall have received from Furman Selz
Incorporated an opinion in form and substance satisfactory to AMCE confirming
the fairness of the Merger consideration to AMCE from a financial point of view.
4.14. AUDITORS' LETTER. AMCE shall have received from Coopers &
Lybrand L.L.P., certified public accountants, "comfort letters" dated the date
of mailing of the Proxy Statement and the date on which the Effective Time
occurs covering matters customary to transactions similar to the Merger in form
and substance satisfactory to AMCE.
4.15. REPRESENTATION AND WARRANTIES. The representations and
warranties of DI set forth in Article II hereof shall be true and correct in all
material respects as of the date of
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this Agreement and (having been deemed to be made again at and as of the
Effective Time) as of the Effective Time as though made as of the Effective
Time, except for those made as of a specified date, which shall remain true and
correct as of such date, and except as otherwise contemplated by this Agreement,
and the President of DI shall certify to that effect to AMCE.
4.16. PERFORMANCE OF OBLIGATIONS. DI shall have performed in all
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Time, and AMCE shall have received a
certificate signed by the Chief Executive Officer, the President or a Vice
President of DI to that effect.
4.17. TAX OPINION. AMCE shall have received the opinions of Chadbourne
& Parke, LLP in form satisfactory to AMCE to the effect that, for federal income
tax purposes, assuming consummation of the Merger in accordance with this
Agreement, the Merger will constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the Tax Code and no income, gain or loss will be
recognized by AMCE or DI as a result of the Merger, which opinions shall be
dated within two days of the date of the Proxy Statement and the date of the
Merger.
4.18. OPINION OF COUNSEL. Blackwell Sanders Matheny Weary & Lombardi
L.C. shall have furnished to AMCE and the Special Committee its opinion as at
the date of the Closing in form and substance and as to such matters as are
reasonably satisfactory to AMCE.
4.19. CONVERSION OF SHARES BY DI. DI shall have converted 6,141,343
shares of AMCE Class B Stock into a like number of shares of AMCE Common Stock.
V. DI CONDITIONS OF MERGER
The obligations of DI to consummate the Merger are subject to the
satisfaction at or prior to the Closing, of each of the following conditions,
each of which may be waived by DI as provided herein except as otherwise
required by applicable law.
5.1. STOCKHOLDER APPROVAL. The Merger shall have been approved by the
affirmative vote of the holders of the requisite number of the outstanding
shares of AMCE Common Stock, AMCE Class B Stock, DI Class A Stock and DI Class B
Stock and, in addition, shall have been approved by the holders of a majority of
the outstanding shares of AMCE Common Stock (excluding the Durwood Stockholders)
present and voting at the AMCE Stockholders Meeting.
5.2 AMCE CORPORATE ACTION. All corporate action necessary to
authorize the execution, delivery and performance of this Agreement and the
consummation of the Merger and the transactions contemplated hereby shall have
been duly and validly taken by AMCE.
5.3. REGISTRATION OF AMCE COMMON STOCK AND AMCE CLASS B STOCK. Prior
to the first date on which the Proxy Statement is mailed to AMCE stockholders,
the SEC shall have declared the Registration Statement effective and, at or
prior to the time required, any required approvals of state securities
administrators shall have been obtained. At the Effective
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19
Time, no stop order or similar restraining order shall have been threatened or
entered by the SEC or any state securities administrator.
5.4. AMEX LISTING. The AMCE Common Stock to be issued pursuant to the
Merger shall have been approved for listing by the AMEX for trading on the AMEX
and, if AMCE Common Stock is still listed on the Pacific Stock Exchange, such
shares shall have been approved for listing for trading on such Exchange.
5.5. GOVERNMENTAL FILINGS AND CONSENTS. All governmental filings
required to be made prior to the Effective Time with, and all governmental
consents required to be obtained prior to the Effective Time from, governmental
and regulatory authorities in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and by
the Pre-Merger Action Plan shall have been made or obtained.
5.6. CONSENTS OF THIRD PARTIES. AMCE shall have received all
requisite consents, approvals and agreements of third parties necessary to
ensure that neither the Merger nor any transactions contemplated herein or by
the transactions contemplated by the Pre-Merger Action Plan shall violate any
provision of any material agreement, instrument, order, judgment or decree to
which AMCE or any of its subsidiaries is a party or by which any of them, or
their property, may be bound, or shall give rise to any right to accelerate any
material indebtedness of AMCE or any of its subsidiaries.
5.7. LITIGATION. There shall be no litigation, proceedings or actions
pending or threatened concerning the Merger that in the judgment of the Board of
Directors of DI renders consummation of the Merger inadvisable.
5.8. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of AMCE set forth in Article II hereof shall be true and correct in
all material respects as of the date of this Agreement and as of the Effective
Time as though made on and (having been deemed to be made again at and as of the
Effective Time) as of the Effective Time, except for those made as of a
specified date, which shall remain true and correct of such date, and, except as
otherwise contemplated by this Agreement, and the President, Chief Executive
Officer or a Vice President of AMCE shall certify to that effect to the other
party.
5.9. PERFORMANCE OF OBLIGATIONS. AMCE shall have performed in all
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Time, and DI shall have received a certificate
signed by the Chief Executive Officer, the President or a Vice President of AMCE
to that effect.
5.10. TAX OPINION. DI and its shareholders shall have received the
opinions of Chadbourne & Parke, LLP in form reasonably satisfactory to DI to
the effect that, for federal income tax purposes, assuming consummation of the
Merger in accordance with this Agreement, (i) the Merger will constitute a
reorganization within the meaning of Section 368(a)(1)(A) of the Tax Code and
(ii) except for cash received in lieu of fractional shares or in payment of
Credit Amounts (as defined in the Indemnification Agreement), no income, gain or
loss will be recognized by DI or its shareholders as a result of the Merger,
which opinions shall be dated within two days of the date of the Proxy Statement
and the date of the Merger.
<PAGE>
20
5.11 REGISTRATION AGREEMENT. AMCE shall have entered into the
Registration Agreement, and the Registration Agreement shall remain in full
force and effect at the Effective Time.
5.12. STOCK AGREEMENT. AMCE shall have entered into the Stock
Agreement and such agreement shall remain in full force and effect at the
Effective Time.
5.13. INDEMNIFICATION AGREEMENT. AMCE shall have entered into the
Indemnification Agreement and such agreement shall remain in full force and
effect at the Effective Time.
5.14 HARVARD CONSENT. Harvard shall have executed and delivered to
AMCE an instrument in form and substance identical to EXHIBIT E, and such
instrument shall remain in full force and effect at the Effective Time.
VI. AMENDMENT, DEFERRAL, TERMINATION AND SURVIVAL
6.1. AMENDMENT. The parties to this Agreement, by mutual consent of
the Board of Directors of DI and Board of Directors of AMCE acting with the
recommendation of the Special Committee, may amend, modify or supplement this
Agreement in such manner as may be agreed upon by them in writing, at any time
before or after approval by the stockholders of each of AMCE and DI; PROVIDED,
HOWEVER, that no such amendment, modification or supplement shall, (i) if agreed
to after approval by the stockholders of AMCE, change the amount or nature of
the consideration to be received by stockholders of DI, or in the judgment of
the Board of Directors of AMCE acting with the recommendation of the Special
Committee otherwise have a material adverse effect on the rights of AMCE
stockholders or (ii) be effective unless approved by a majority of the members
of the Durwood Family (for which purpose each member shall have one vote).
6.2. WAIVER OF CONDITIONS; FAILURE OF CONDITIONS. The conditions to
each of the party's obligation to consummate the Merger are for the sole benefit
of such party and may be waived by such party in whole or in part to the extent
permitted by applicable law. In the event of a failure of the conditions set
forth in Sections 4.3 and 5.3, the parties will in good faith endeavor to
negotiate amendments to this Agreement that enable the parties to achieve the
objectives of the transactions contemplated hereby notwithstanding the failures
of such conditions.
6.3. DEFERRAL. Notwithstanding adoption and approval of this
Agreement by the stockholders of each of AMCE and DI, consummation of the
transactions provided for herein may be deferred by the Board of Directors of DI
or the Board of Directors of AMCE acting with the recommendation of the Special
Committee at any time prior to the Effective Time, if either such Board of
Directors determines that such deferral would be in the best interests of DI or
AMCE, respectively, or their stockholders.
6.4. TERMINATION. This Agreement may be terminated and the Merger and
other transactions provided for by the Agreement may be abandoned at any time
prior to the Effective Time, whether before or after approval by the
stockholders of each of DI and AMCE,
<PAGE>
21
by action of the Board of Directors of DI or the Board of Directors of AMCE
acting with the recommendation of the Special Committee, if either such Board of
Directors determines that the completion of the transactions provided for herein
would for any reason be inadvisable or not in the best interests of DI or AMCE,
respectively, or their stockholders.
6.5 SURVIVAL. The agreement of the parties contained in Sections
1.6, 1.7 and 7.1 hereof shall survive the consummation of the Merger and the
agreements of the parties contained in Section 7.1 hereof shall survive
termination of this Agreement.
VII. MISCELLANEOUS
7.1. EXPENSES. As used herein, "EXPENSES" shall mean, with respect to
a party, all expenses of such party incident to preparing, entering into and
carrying out this Agreement, the agreements referred to in Sections 4.9, 4.10
and 4.11 hereof and all other agreements, documents, instruments or certificates
contemplated hereby, or thereby, and the consummation of the Merger. If the
Merger is not consummated for any reason (other than as a result of the Board of
Directors of AMCE terminating this Agreement pursuant to Section 6.4 for a
Specified Reason (as defined below) or Without Cause (as defined below)), DI
shall pay and be responsible for all of its Expenses and all of AMCE's Expenses.
If this Agreement is terminated by the Board of Directors of AMCE pursuant to
Section 6.4 for a Specified Reason or Without Cause, DI shall pay and be
responsible for all of its Expenses and 50% of AMCE's Expenses. As used herein,
(x) a "SPECIFIED REASON" shall mean any of the following bases for a
determination by the Board of Directors of AMCE to terminate this Agreement
pursuant to Section 6.4: (i) that it is in the best interests of AMCE to pursue
an unrelated transaction and the transactions contemplated by this Agreement
would adversely impact such unrelated transaction, (ii) that a condition set
forth in Sections 4.5 or 4.6 hereof has failed due to facts or circumstances
unknown on the date of this Agreement to, and beyond the control of, AMCE, DI or
any member of the Durwood Family, (iii) that a condition set forth in Section
4.7 has failed (unless DI or any member of the Durwood Family is a plaintiff (or
is otherwise involved in a role adverse to AMCE, the Board of Directors of AMCE
or the Special Committee) in any litigation, action or proceeding described
therein), or (iv) that a condition set forth in Section 4.15 has failed as a
result of facts or circumstances unknown on the date of this Agreement to, and
beyond the control of, AMCE, DI or any member of the Durwood Family and (y)
"WITHOUT CAUSE" shall mean a determination of the Board of Directors of AMCE to
terminate this Agreement pursuant to Section 6.4 without having a reasonable
basis for such action.
7.2. NOTICES. Any notice, request, consent, waiver or other
communication required or permitted hereunder shall be effective only if it is
in writing and personally delivered or sent by certified or registered mail,
postage prepaid, addressed as follows:
To: AMC Entertainment Inc. Suite 1700 Power & Light Bldg.
106 West 14th Street
Post Office Box 419615
Kansas City, MO 64141-6615
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22
With information copies to: Charles J. Egan, Jr., Esq.
Hallmark Cards, Incorporated
2501 McGee Trafficway
Kansas City, MO 64141-6126
The Honorable Paul E. Vardeman
Polsinelli, White, Vardeman & Shalton
Suite 1000, Plaza Steppes
700 West 47th Street
Kansas City, MO 64112-1802
To: Durwood, Inc. Suite 1700 Power & Light Bldg.
106 West 14th Street
Post Office Box 419615
Kansas City, MO 64141-6615
With information copies to: Robert C. Kopple, Esq.
Kopple & Klinger
2029 Century Park East
Suite 1040
Los Angeles, CA 90067
Glenn Kurlander, Esq.
Schiff Hardin & Waite
150 East 52nd Street
Suite 2900
New York, New York 10022
Raymond F. Beagle, Jr., Esq.
Lathrop & Gage L.C.
2345 Grand Boulevard, 24th Floor
Kansas City, Missouri 64108-2684
or such other person or address as the addressee may have specified in a notice
duly given to the sender as provided herein. Such notice or communication shall
be deemed to have been given upon receipt thereof.
7.3. WAIVER. No delay or failure on the part of any party in
exercising any rights hereunder, and no partial or single exercise thereof, will
constitute a waiver of such rights or of any other rights hereunder.
7.4. BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
7.5. ENTIRE AGREEMENT. This Agreement and the Exhibits hereto
constitute the entire agreement among the parties hereto pertaining to the
subject matter hereof and supersede
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23
all prior or contemporaneous, written or verbal agreements, understandings and
negotiations in connection herewith.
7.6. AMENDMENTS. This Agreement cannot be modified, amended or
terminated, except as provided in Article VI by an instrument in writing signed
by all the parties hereto; provided, however, that any provision of this
Agreement may be waived only in writing by the party to be charged with the
waiver.
7.7. 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.
7.8. 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, except to the extent
that the laws of the State of Delaware relate to the Merger.
7.9. HEADINGS. The headings to the paragraphs to 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.
7.10. EXHIBITS. All exhibits and schedules attached to this Agreement
are incorporated herein by this reference.
7.11. 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.
7.12. 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.
7.13. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests, or obligations hereunder may be assigned by any party hereto without
the prior written consent of the other party.
7.14. ACCOUNTING TERMS. All accounting terms used herein that are not
expressly defined in this Agreement shall have the respective meanings given to
them in accordance with United States generally accepted accounting principles
on the date hereof.
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24
IN WITNESS WHEREOF, this Agreement and Plan of Merger has been signed
on behalf of AMC Entertainment Inc. by Peter C. Brown, its President, and on
behalf of Durwood, Inc. by Stanley H. Durwood, its President, and the corporate
seal of each corporation has been affixed hereto and attested to by the
Secretary of each corporation, respectively, on the date first above written.
AMC ENTERTAINMENT INC.
By: /s/ Peter C. Brown
--------------------------------
Peter C. Brown, President
(SEAL)
ATTEST:
/s/ Nancy L. Gallagher
- ---------------------------------
Nancy L. Gallagher, Secretary
DURWOOD, INC.
By: /s/ Stanley H. Durwood
---------------------------------
Stanley H. Durwood, President
(SEAL)
ATTEST:
/s/ Nancy L. Gallagher
- ---------------------------------
Nancy L. Gallagher, Secretary
<PAGE>
EXHIBIT A TO MERGER AGREEMENT
DI PRE-MERGER ACTION PLAN
It is anticipated that Durwood, Inc. ("DI") will undertake certain actions
before the merger with AMC Entertainment Inc. ("AMCE"), as described below.
Several of these pre-merger transactions involve the four DI subsidiaries other
than AMCE: Delta Properties, Inc. ("DPI"), Crosstown Development, Inc., Kansas
City Downtown Redevelopment Corporation and Entertainment Group, Inc.
(collectively, the "non-AMCE subsidiaries").
1. All non-AMCE subsidiaries of DI will be merged into DPI before the end of
the current fiscal year
2. DPI and DI will eliminate all intercompany debt before the end of the
current fiscal year.
3. All assets (other than shares of AMCE capital stock) and all liabilities
of DI will be transferred from DI to DPI before the end of the current
fiscal year. The DI shareholders shall negotiate the allocation of the
relative benefits and burdens of such assets and liabilities among the DI
shareholders (who ultimately will be the shareholders of DPI--see 5, below)
in a manner consistent with the Durwood Family Settlement Agreement.
4. AAE will be liquidated and its assets distributed in the manner set forth
in the Durwood Family Settlement Agreement.
5. DI will pay as a dividend or otherwise distribute all shares of stock of
DPI to the DI shareholders in the same ratio as the AMCE capital stock to
be received in the merger.
<PAGE>
EXHIBIT 2.2
STOCK AGREEMENT
THIS AGREEMENT, dated as of ______________, 199__, is between (i) AMC
Entertainment Inc., a Delaware corporation ("AMCE"), (ii) Stanley H. Durwood,
individually, and as trustee of the 1992 Durwood, Inc. Voting Trust dated
December 12, 1992 (the "1992 TRUST"), and as trustee of the Trust created
pursuant to the Stanley H. Durwood Trust Agreement dated August 14, 1989 (the
"1989 TRUST"), Carol D. Journagan, Edward D. Durwood, Thomas A. Durwood, Elissa
D. Grodin, Brian H. Durwood, Peter J. Durwood (all persons and entities referred
to in this clause (ii) are referred to herein collectively as the "FAMILY
STOCKHOLDERS") and each Authorized Assignee (as defined below) of such Family
Stockholder (each such Family Stockholder and Authorized Assignee a
"STOCKHOLDER" and collectively "STOCKHOLDERS") and (iii) solely for purposes of
Section 5.3 hereof, Delta Properties, Inc., a Missouri corporation.
WITNESSETH:
WHEREAS, Family Stockholders own (directly or indirectly) stock of
Durwood, Inc., a Missouri corporation ("DI"), which is party to an Agreement and
Plan of Merger and Reorganization among DI and AMCE (the "MERGER AGREEMENT"),
providing for the merger ("MERGER") of DI into AMCE; and
WHEREAS, pursuant to the Merger, Family Stockholders will acquire
shares of AMCE's common stock, par value 66 2/3CENTS per share (the "COMMON
STOCK") and shares of AMCE's Class B Stock, par value 66 2/3CENTS per share (the
"CLASS B STOCK"); and
WHEREAS, the parties anticipate that a portion of the shares of Common
Stock received in the Merger (or the shares of Common Stock received upon the
conversion of shares of Class B Stock received in the Merger) will be offered in
a secondary offering registered under the Securities Act of 1933, as amended
(the "1933 ACT") pursuant to and as contemplated by the Registration Agreement
(the "SECONDARY OFFERING"); and
WHEREAS, AMCE requires that this Agreement be made as a condition
precedent to the Merger and its agreement to file a registration statement in
connection with the Secondary Offering.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein and for other good and valuable
consideration the receipt of which is hereby acknowledged, the parties,
intending to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms, not otherwise defined
herein, have the meanings set forth below.
<PAGE>
2
"ADJUSTED BASIS" shall have the meaning specified in the Registration
Agreement.
"AFFILIATE" of a specified person means a person (other than AMCE or a
majority-owned subsidiary of AMCE) that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, the person specified. For purposes of this definition, control of a
person means the power, direct or indirect, to direct or cause the direction of
the management and policies of such person whether by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"ASSOCIATE" of any person means (i) a corporation or organization
(other than AMCE or a majority-owned subsidiary of AMCE) of which such person is
an officer or partner or is, directly or indirectly, the beneficial owner of 10%
or more of any class of equity securities; (ii) any trust or other estate in
which such person has a substantial beneficial ownership interest or as to which
such person serves as trustee or in a similar fiduciary capacity; or (iii) any
relative or spouse of such person, or any relative of such spouse, who has the
same home as such person or who is a director or officer of AMCE or any of its
parents or subsidiaries.
"AUTHORIZED ASSIGNEE" of a Stockholder means (i) any person or entity
(other than a Charitable Assignee, except as provided in clause (ii) below) to
which Voting Securities are transferred by gift or otherwise without fair
consideration or (ii) if such Stockholder is a Family Stockholder, to the extent
such Stockholder (and its Authorized Assignees) transfers more than 5% in the
aggregate of the shares of Class B Stock or Common Stock received by such Family
Stockholder in the Merger (or Common Stock received upon the conversion of such
Class B Stock) ("MERGER SHARES") to Charitable Assignees, those Charitable
Assignees receiving shares in excess of such threshold.
"CHARITABLE ASSIGNEE" of a Stockholder shall mean any charitable
organization, including charitable remainder and charitable lead trusts, a
transfer of property to which by such Stockholder would qualify, at least in
part, for an income, gift or estate tax charitable deduction under the Internal
Revenue Code of 1986, as amended.
"DURWOOD CHILDREN" means Family Stockholders (other than Stanley H.
Durwood, the 1992 Trust and the 1989 Trust), and any Authorized Assignee of a
Family Stockholder (other than Authorized Assignees of Stanley H. Durwood, the
1992 Trust and the 1989 Trust that are not Family Stockholders).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EFFECTIVE DATE" shall mean the date on which the Effective Time (as
defined in the Merger Agreement) occurs.
"GROUP" means two or more persons acting as a partnership, limited
partnership, syndicate, or other group for the purpose of acquiring, holding, or
disposing of securities of AMCE.
<PAGE>
3
"INDEMNIFICATION AGREEMENT" has the meaning specified in the Merger
Agreement.
"MERGER EXPENSES" shall mean those Expenses (as defined in the Merger
Agreement) not paid by Stanley H. Durwood, the 1989 Trust and the 1992 Trust
pursuant to Section 2(c) of the Indemnification Agreement.
"PERMITTED ASSIGNEE" shall have the meaning specified in the
Registration Agreement.
"REGISTRATION AGREEMENT" means the Registration Agreement dated the
date hereof among AMCE and the Family Stockholders.
"RESTRICTED PERIOD" shall mean a period commencing the date hereof and
ending three years after the Effective Date.
"VOTING SECURITIES" means Common Stock, Class B Stock and any other
securities of AMCE that may be issued from time to time having general voting
power under ordinary circumstances in the election of directors and any other
security of AMCE convertible into, or exercisable for, any such security.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS: Each
Stockholder, severally, as to himself, herself or itself, and not jointly,
hereby represents and warrants to AMCE as follows:
(a) Such Stockholder has full legal right, power and authority to
enter into and perform this Agreement and the Registration Agreement. This
Agreement and the Registration Agreement are valid and binding obligations of
such Stockholder enforceable against such Stockholder in accordance with their
terms, except that such enforcement may be subject to (i) bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
(b) Neither the execution and delivery of this Agreement or the
Registration Agreement by such Stockholder nor the consummation by such
Stockholder of the transactions contemplated hereby or thereby conflicts with or
constitutes a violation of or default under any statute, law, regulation, order
or decree applicable to such Stockholder, or any material contract, commitment,
agreement, arrangement or restriction of any kind to which such Stockholder is a
party or by which such Stockholder is bound.
Section 2.2 REPRESENTATIONS AND WARRANTIES OF AMCE. AMCE hereby
represents and warrants to Stockholders as follows:
<PAGE>
4
(a) AMCE has full legal right, power and authority to enter into and
perform this Agreement and the Registration Agreement. The execution and
delivery of this Agreement and the Registration Agreement by AMCE and the
consummation by AMCE of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on behalf of AMCE. This
Agreement and the Registration Agreement are valid and binding obligations of
AMCE enforceable against AMCE in accordance with their terms, except that such
enforcement may be subject to (i) bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).
(b) Neither the execution and delivery of this Agreement or the
Registration Agreement by AMCE nor the consummation by AMCE of the transactions
contemplated hereby or thereby conflicts with or constitutes a violation of or
default under the charter or bylaws of AMCE, any statute, law, regulation, order
or decree applicable to AMCE, or any material contract, commitment, agreement,
arrangement or restriction of any kind to which AMCE is a party or by which AMCE
is bound.
ARTICLE III
LIMITATIONS AND RESTRICTIONS
Section 3.1 RESTRICTIONS ON CERTAIN ACTIONS BY STOCKHOLDERS. Each of
the Durwood Children severally agrees that during the Restricted Period, such
Stockholder will not, nor will it permit any of its Affiliates or Associates
(other than Stanley H. Durwood, the 1992 Trust and the 1989 Trust) from and
after the date that such person becomes an Affiliate or Associate to, unless in
any such case specifically invited to do so by the Board of Directors of AMCE,
directly or indirectly, alone or in concert with others:
(a) become a member of a Group (other than a Group composed solely of
Stockholders) or make any public or private proposal with respect to an
extraordinary transaction involving AMCE or any of its subsidiaries;
(b) solicit, or participate in any "solicitation" of, "proxies" or
become a "participant" in any "election contest" (as such terms are defined or
used in Regulation 14A under the Exchange Act) with respect to AMCE; or
(c) deposit any shares of Common Stock in a voting trust (where the
trustees thereof are not such Stockholder or Permitted Assignees of such
Stockholder) or, except as specifically contemplated by this Agreement, subject
them to a voting agreement or other agreement or arrangement with respect to the
voting of such shares of Common Stock.
The foregoing limitations shall not restrict directors of AMCE who are
also Stockholders from taking such action as directors as they deem necessary,
advisable or proper to fulfill their fiduciary duties to AMCE and its
stockholders.
<PAGE>
5
Section 3.2 VOTING. (a) During the Restricted Period, each of the
Durwood children, severally, shall grant the proxy set forth in paragraph (b)
below, and shall take no action to revoke or interfere with the exercise of such
proxy or to vote shares subject to the proxy in a manner inconsistent with the
proxy.
(b) Each of the Durwood Children hereby appoints the Secretary and
each Assistant Secretary of AMCE, and each of them, as such Durwood Child's
proxy and attorney, with full power of substitution, to vote all shares of
Common Stock owned by such Durwood Child from time to time for each candidate
for the Board of Directors of AMCE in the same proportion as the aggregate votes
cast in such elections by all other holders of Common Stock not affiliated with
AMCE, its directors and officers. This proxy will remain in effect during the
Restricted Period and is coupled with an interest and irrevocable during the
Restricted Period. This proxy will automatically terminate upon the conclusion
of the Restricted Period.
Section 3.3 RESTRICTIONS ON TRANSFER. Each Stockholder severally
agrees not to sell, assign, pledge, hypothecate, transfer, grant an option with
respect to or otherwise dispose of any interest in Voting Securities, or enter
into an agreement, arrangement or understanding with respect to the foregoing
(individually and collectively, "TRANSFER"), except in compliance with the 1933
Act. Each Stockholder severally acknowledges that shares of Common Stock and
Class B Stock received in the Merger will be subject to limitations on Transfer
imposed by Rule 145 under the 1933 Act and may not be sold except in a
registered offering, pursuant to Rule 145 under the 1933 Act or in a transaction
otherwise exempt from registration under the 1933 Act and that certificates
evidencing Voting Securities of AMCE which it will receive as a result of the
Merger (and any shares subsequently acquired by such Stockholder) may bear an
appropriate legend to such effect (and to the effect that Authorized Assignees
are required to become parties to this Agreement and to the effect that the
Company has a right of first refusal in connection with certain sales thereof)
and that AMCE will give stop transfer instructions to its transfer agent
regarding Voting Securities held by such Stockholder.
Section 3.4 TRANSFERS BY GIFT. Subject to the next sentence, each
Stockholder severally agrees that during the Restricted Period such Stockholder
will not transfer Voting Securities to any Authorized Assignee unless such
person or entity agrees by instrument in form and substance reasonably
satisfactory to AMCE to be bound by the provisions of this Agreement as a
"Stockholder". It is understood and agreed that (subject to the requirements
set forth in the definition of Permitted Assignees in the Registration
Agreement) other transferees of Voting Securities shall not be required to agree
to be bound by the provisions of this Agreement and that each Family Stockholder
may transfer up to 5% in the aggregate of its Merger Shares to Charitable
Assignees free and clear of the provisions of this Agreement.
<PAGE>
6
ARTICLE IV
RIGHT OF FIRST REFUSAL
Section 4.1 RIGHT OF FIRST REFUSAL.
(a) In the event that during the Restricted Period one of the Durwood
Children desires to sell all or part of its holding of Voting Securities (the
"SHARES") in a transaction that is exempt from the registration requirements of
the 1933 Act other than in brokers' transactions within the meaning of Section
4(4) thereof, AMCE shall first be given the opportunity, in the following
manner, to purchase (or cause a corporation, entity, person or group designated
by AMCE to purchase) all, but not less than all, of such Shares sought to be
sold.
(b) Such Durwood Child shall deliver a written notice (the "NOTICE")
to AMCE of such intention, describing the proposed terms for sale of the Shares,
identifying the offeror, identifying the proposed price of the Shares, and
setting forth the other terms and conditions of such offer or proposed sale.
(c) AMCE shall have the right for 5 business days (which period shall
be extended by the amount of time taken to determine the value of non-cash
consideration pursuant to the next sentence) from the receipt of the Notice (the
"DECISION PERIOD"), exercisable by written notice in accordance with Section 7.8
hereof, to elect to purchase (or to designate a corporation, entity, person or
group to purchase) all, but not less than all, of the Shares specified in the
Notice for cash at the price set forth therein and upon the terms and conditions
in the Notice.
If the purchase price specified in the Notice includes any property
other than cash, the purchase price shall be deemed to be the amount of any cash
included in the purchase price plus the value (as may be mutually agreed by the
Durwood Child and AMCE, or, if they are unable to agree, as determined by an
independent, nationally recognized investment banking firm mutually selected by
the Durwood Child and AMCE and the fees and expenses of such firm shall be borne
equally by the Durwood Child and AMCE) of the other property included in the
price; and in such event AMCE's notice of exercise of the right to elect to
purchase provided for herein shall set forth the purchase price so determined.
(d) If AMCE does not exercise its right to elect to purchase by the
end of the Decision Period, the Durwood Child shall be free to sell or agree to
sell the Shares specified in the Notice to the third party making the offer
described in the Notice, at the price specified therein or at any price in
excess thereof and on the other terms and conditions specified in the Notice.
If the Durwood Child shall not so sell all of the Shares within 90 days after
the expiration of the Decision Period, the provisions of this Agreement
including, without limitation, this Article IV, shall thereafter apply to the
Shares not so sold.
(e) If AMCE exercises its right to purchase specified in paragraph
(c) of this Article IV, the closing of the purchase of the Shares shall take
place within 30 days after receipt
<PAGE>
7
by the Durwood Child of the notice of exercise at a place, time, and date
specified by AMCE. At the closing, AMCE shall deliver to the Durwood Child cash
or immediately available funds in an amount equal to the purchase price set
forth in the Notice, and the Durwood Child shall deliver to AMCE certificates
representing the Shares, which Shares shall be free and clear of all liens,
security interests and other encumbrances, duly endorsed in blank or accompanied
by stock powers duly executed and otherwise in form acceptable for transfer of
the Shares on the books of AMCE, together with all necessary stock transfer
stamps.
ARTICLE V
SECONDARY OFFERING
Section 5.1 CONSUMMATION OF SECONDARY OFFERING. The Stockholders
agree to use their best efforts to cause the Secondary Offering to be
consummated during the period beginning the date that is six months and one day
from the Effective Date and ending the date (the "DEADLINE DATE") that is six
months from such date (provided that such six-month period ending on the
Deadline Date shall be extended by the length of any Postponement Period (as
defined in the Registration Agreement)).
Section 5.2 NUMBER OF SHARES. Subject to the terms and conditions of
the Registration Agreement, each Stockholder severally agrees that it will sell
a number of shares of Common Stock in the Secondary Offering equal to the number
of shares of Common Stock set forth next to such Stockholder's name in Exhibit A
to the Registration Agreement, subject to reduction or increase pursuant to the
Registration Agreement.
Section 5.3 FAILURE TO CONSUMMATE. In the event that the Merger is
consummated and the Secondary Offering is not consummated pursuant to the
Registration Agreement on or prior to the Deadline Date, other than as a result
of the breach by AMCE of the Registration Agreement, Stanley H. Durwood, the
1992 Trust, the 1989 Trust and Delta shall jointly and severally (i) pay to AMCE
a fee equal to an aggregate of $2,000,000 to compensate AMCE for the diversion
of its officers and other employees in connection with the Secondary Offering
and (ii) reimburse AMCE for all of its Merger Expenses.
ARTICLE VI
TAX MATTERS
Section 6.1 REPRESENTATIONS. Each Stockholder hereby severally
represents and warrants to AMCE that such Stockholder has no plan or intention,
and as of the Effective Date will have no plan or intention to sell, exchange,
or otherwise dispose of a number of shares of Common Stock or Class B Stock
received in the Merger that would reduce (i) the ownership by such Stockholder
of Common Stock received in the Merger to a number of shares equal to less than
50% of the number of shares of Common Stock received by such Stockholder in the
Merger or (ii) the ownership by such Stockholder of Class B Stock received by
such Stockholder in the Merger to a number of shares equal to less than 50% of
the number of shares of Class B Stock received by such Stockholder in the Merger
(plus, in the case of Stanley H. Durwood, the 1989
<PAGE>
8
Trust and the 1992 Trust, collectively, a number of shares of Class B Stock
equal to the sum of (x) 65% of the number of shares of Common Stock received by
Harvard College in the Merger, plus (y) a number of shares of Class B Stock
equal to the Specified Percentage of the total number of shares of Class B Stock
and Common Stock issued in the Merger).
Section 6.2 COVENANTS. Each Stockholder hereby severally covenants
that for a period of two years from the Effective Date, he, she or it will not
sell, exchange, or otherwise dispose of a number of shares of Common Stock or
Class B Stock received by the Stockholder in the Merger that would reduce (i)
the ownership by such Stockholder of Common Stock received in the Merger to a
number of shares equal to less than 50% of the number of shares of Common Stock
received by such Stockholder in the Merger (provided that such Stockholder may
sell, exchange or otherwise dispose of a number of shares of Common Stock in
excess of the number otherwise permitted by this clause (i) if another
Stockholder agrees by written instrument reasonably satisfactory to AMCE to
reduce the number of shares of Common Stock such other Stockholder is permitted
to sell pursuant to this clause (i) by a like number of shares and all other
Stockholders consent in writing thereto) or (ii) the ownership by such
Stockholder of Class B Stock received by such Stockholder in the Merger to a
number of shares equal to less than 50% of the number of shares of Class B Stock
received by such Stockholder in the Merger (plus, in the case of Stanley H.
Durwood, the 1989 Trust and the 1992 Trust, collectively, a number of shares of
Class B Stock equal to the sum of (x) 65% of the number of shares of Common
Stock received by Harvard College in the Merger, plus (y) a number of shares of
Class B Stock equal to the Specified Percentage of the total number of shares of
Class B Stock and Common Stock issued in the Merger).
Section 6.3 DEFINITIONS. As used herein, a "SPECIFIED PERCENTAGE"
of a number of shares of Common Stock and Class B Stock shall mean a percentage
of such shares equal to the product (expressed as a percentage) of (A) a
fraction having a numerator of $1,125,000 and a denominator equal to the sum of
the value of all shares of Common Stock and Class B Stock issued in the Merger
(as determined by AMCE in good faith, such determination to be conclusive and
binding on the parties in the absence of manifest error), plus $1,125,000,
multiplied by (B) 1.25. Immediately prior to the execution and delivery of this
Agreement, AMCE shall have delivered to the 1989 Trust, the 1992 Trust and
Stanley H. Durwood written notice of its determination of the Specified
Percentage.
ARTICLE VII
MISCELLANEOUS
Section 7.1 HOLDBACK AGREEMENT. The Stockholders agree in connection
with any registration of an underwritten offering of securities of AMCE during
the Restricted Period, including the Secondary Offering, upon the request of
AMCE or the underwriters managing such offering, not to sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise dispose of any
Voting Securities without the prior written consent of AMCE or such
underwriters, as the case may be, for such period of time as AMCE or the
underwriters may
<PAGE>
9
specify (a "HOLDBACK PERIOD"), provided that the aggregate of Holdback Periods
for any 365-day period shall not exceed 180 days.
Section 7.2 INTERPRETATION. For all purposes of this Agreement, the
terms AMCE "Common Stock" and "Class B Stock" shall include any securities of
any issuer entitled to vote generally for the election of directors of such
issuer which securities the holders of AMCE Common Stock or Class B Stock shall
have received or as a matter of right are entitled to receive as a result of
(i) any capital reorganization or reclassification of the capital stock of AMCE,
(ii) any consolidation, merger or share exchange of AMCE with or into another
corporation, or (iii) any sale of all or substantially all the assets of AMCE.
Section 7.3 ENFORCEMENT. (a) Stockholders, on the one hand, and
AMCE, on the other, acknowledge and agree that irreparable damage would occur if
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. Accordingly, the parties will
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically its provisions in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they may be entitled at law or in equity.
(b) No failure or delay on the part of either party in the exercise
of any power, right or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.
Section 7.4 ENTIRE AGREEMENT. This Agreement, the Merger Agreement,
the Registration Agreement and the Indemnification Agreement (as defined in the
Merger Agreement) and, with respect to the Family Stockholders only, that
certain Durwood Family Settlement Agreement dated as of January 22, 1996,
constitute the entire understanding of the parties with respect to the
transactions contemplated herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to the
transactions contemplated hereby except that the Durwood Family Settlement
Agreement shall not be deemed to be amended by this Agreement and shall remain
in full force and effect. This Agreement may be amended only by an agreement in
writing executed by all the parties.
Section 7.5 SEVERABILITY. If any provision of this Agreement is held
by a court of competent jurisdiction to be unenforceable, the remaining
provisions shall remain in full force and effect. It is declared to be the
intention of the parties that they would have executed the remaining provisions
without including any that may be declared unenforceable.
Section 7.6 HEADING. Descriptive headings are for convenience only
and will not control or affect the meaning or construction of any provision of
this Agreement.
Section 7.7 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, and each such executed counterpart will be an original
instrument.
<PAGE>
10
Section 7.8 NOTICES. All notices, consents, requests, instructions,
approvals and other communications provided for in this Agreement and all legal
process in regard to this Agreement will be validly given, made or served, if in
writing and delivered personally, by telecopy (except for legal process) or sent
by registered mail postage paid:
If to AMCE: AMC Entertainment Inc.
106 W. 14th Street
Kansas City, Missouri 64101
Attention: Corporate Secretary
Fax:
with copies to: Charles J. Egan, Jr., Esq.
Hallmark Cards, Incorporated
2501 McGee Trafficway
Kansas City, MO 64141-6126
The Honorable Paul E. Vardeman
Polsinelli, White, Vardeman & Shalton
Suite 1000, Plaza Steppes
700 West 47th Street
Kansas City, MO 64112-1802
If a Stockholder or Delta: to the address set forth next to
such Stockholder's or Delta's name
on the signature pages hereto
With information copies of notices
to a Stockholder (other than Stanley
H. Durwood, the 1992 Trust or the
1989 Trust) or Delta to: Robert C. Kopple, Esq.
Kopple & Klinger
2029 Century Park East
Suite 1040
Los Angles, CA 90067
Glenn Kurlander, Esq.
Schiff Hardin & Waite
150 East 52nd Street
Suite 2900
New York, New York 10022
With information copies of notices
to Stanley H. Durwood, the 1992
Trust, the 1989 Trust or Delta to: Raymond F. Beagle, Jr., Esq.
Lathrop & Gage L.C.
2345 Grand Boulevard, 24th Floor
Kansas City, Missouri 64108-2684
<PAGE>
11
or to such other address or telecopy number as any party may, from time to time,
designate in a written notice given in a like manner. Notice shall be deemed
given upon receipt thereof.
Section 7.9 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the successors, heirs, legatees, devisees and
personal and legal representatives of the parties and Authorized Assignees of
Stockholders; provided, however, that no party may assign this Agreement (other
than an assignment by a Stockholder to an Authorized Assignee as provided
herein) without the prior written consent of all other parties.
Section 7.10 GOVERNING LAW.
(a) This Agreement will be governed by and construed and enforced in
accordance with the internal laws of the State of Missouri without giving effect
to the conflict of laws principles thereof.
(b) Each party hereto hereby consents to, and confers exclusive
jurisdiction upon, the courts of the State of Missouri and the Federal courts of
the United States of America located in the City of Kansas City, Missouri, and
appropriate appellate courts therefrom, over any action, suit or proceeding
arising out of or relating to this Agreement. Each party covenants that it will
not commence any action, suit or proceeding arising out of or relating to this
Agreement in any other jurisdiction. Nothing in this paragraph shall affect the
rights of a party to enforce a judgment rendered by the courts referred to in
the first sentence of this paragraph in any other jurisdiction. Each party
hereto hereby waives, and agrees not to assert, as a defense in any such action,
suit or proceeding that it is not subject to such jurisdiction or that such
action, suit or proceeding may not be brought or is not maintainable in said
courts or that this Agreement may not be enforced in or by said courts or that
its property is exempt or immune from execution, that the suit, action or
proceeding is brought in an inconvenient forum, or that the venue of the suit,
action or proceeding is improper. Service of process in any such action, suit
or proceeding may be served on any party anywhere in the world, whether within
or without the State of Missouri by mailing a copy thereof by registered or
certified mail, postage prepaid, to such party at its address provided in
Section 7.8 of this Agreement, provided that service of process may be
accomplished in any other manner permitted by applicable law.
<PAGE>
12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first referred to above.
AMC ENTERTAINMENT INC.
By
-----------------------------------
Peter C. Brown
President
ADDRESS: STOCKHOLDERS
Suite 1700
Power & Light Building
106 West 14th Street
P.O. Box 419615 --------------------------------------
Kansas City, Missouri 64141-6615 Stanley H. Durwood
1323 Granite Creek Drive --------------------------------------
Blue Springs, MO 64015 Carol D. Journagan
3001 West 68th Street --------------------------------------
Shawnee Mission, KS 66208 Edward D. Durwood
P.O. Box 7208 --------------------------------------
Rancho Santa Fe, CA 92067 Thomas A. Durwood
187 Chestnut Hill Road --------------------------------------
Wilton, CT 06897 Elissa D. Grodin
655 N.W. Altishan Place --------------------------------------
Beaverton, OR 97006 Brian H. Durwood
666 West End Avenue --------------------------------------
New York, NY 10025 Peter J. Durwood
<PAGE>
13
Suite 1700
Power & Light Building
106 West 14th Street
P.O. Box 419615 ---------------------------------------
Kansas City, Missouri 64141-6615 Stanley H. Durwood, as trustee of the
1992 Trust
Suite 1700
Power & Light Building
106 West 14th Street
P.O. Box 419615 ---------------------------------------
Kansas City, Missouri 64141-6615 Stanley H. Durwood, as trustee of the
1989 Trust
Suite 1700 DELTA PROPERTIES, INC.
Power & Light Building
106 West 14th Street
P.O. Box 419615 ---------------------------------------
Kansas City, Missouri 64141-6615
<PAGE>
EXHIBIT 2.3
REGISTRATION AGREEMENT
THIS REGISTRATION AGREEMENT (the "AGREEMENT") is made and entered into
this ___ day of ___________, 199__, between (i) AMCE Entertainment Inc., a
Delaware corporation (the "COMPANY"), (ii) Stanley H. Durwood, individually and
as trustee of the 1992 Durwood, Inc. Voting Trust dated December 12, 1992 (the
"1992 TRUST"), and the Trust created pursuant to the Stanley H. Durwood Trust
Agreement dated August 14, 1989 (the "1989 TRUST"), Carol D. Journagan, Edward
D. Durwood, Thomas A. Durwood, Elissa D. Grodin, Brian H. Durwood, Peter J.
Durwood (the "FAMILY STOCKHOLDERS") and each Permitted Assignee (as herein
defined) of such Family Stockholder listed on Exhibit A to this Agreement from
time to time (each such Family Stockholder and Permitted Assignee a
"STOCKHOLDER" and collectively "STOCKHOLDERS") and (iii) solely for purposes of
Section 4 hereof, Delta Properties, Inc., a Missouri corporation.
The Company has agreed to provide to the Stockholders the registration
rights ("REGISTRATION RIGHTS") set forth in this Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
Section 1. CERTAIN DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
following respective meanings:
"ADJUSTED BASIS" shall mean, as of a specified date with respect to a
specified number of shares of Common Stock or Class B Stock, the number of
shares of Common Stock and Class B Stock that a record holder of such specified
number of shares on [insert date of Merger Agreement] would hold on such
specified date, after giving effect to all stock dividends and splits and all
subdivisions, combinations or reclassifications of such class of securities the
record date of which occurs between [insert date of Merger Agreement] and such
specified date.
"CHARITABLE ASSIGNEE" of a Stockholder shall mean any charitable
organization, including charitable remainder and charitable lead trusts, a
transfer of property to which by such Stockholder would qualify, at least in
part, for an income, gift or estate tax charitable deduction under the Internal
Revenue Code of 1986, as amended.
"CLASS B STOCK" shall mean the Class B Stock, par value 66 2/3CENTS
per share, of the Company.
"COMMISSION" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular purpose.
<PAGE>
2
"COMMON STOCK" shall mean the Common Stock, par value 66 2/3 CENTS per
share, of the Company.
"DI" shall mean Durwood, Inc., a Missouri corporation, which is to be
merged into the Company in the Merger.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in
Section 2(a).
"EFFECTIVE DATE" shall mean the date on which the Commission declares
a Registration effective or on which a Registration otherwise becomes effective.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, or any
successor thereto, as the same shall be amended from time to time.
The term "HOLDER" shall mean a Stockholder and such of its respective
Permitted Assignees who acquire Registrable Securities, directly or indirectly,
from such Stockholder or from any Permitted Assignee of such Stockholder.
"MERGER" shall mean the merger of DI with and into the Company
pursuant to the Agreement and Plan of Merger and Reorganization dated as of
_________, 1997 between the Company and DI (the "MERGER AGREEMENT").
"PERMITTED ASSIGNEES" of a Stockholder shall mean any of the following
persons and entities to which Registrable Securities are transferred by such
Stockholder by gift prior to the date the Registration Statement is first filed
with the Commission that at the time of such transfer agree by instrument in
form and substance reasonably satisfactory to the Company to be bound by the
provisions of (x) this Agreement and (y) the Stock Agreement, in each case as a
"Stockholder": (i) another Stockholder, (ii) the spouse of a Stockholder,
(iii) a lineal descendant of a Stockholder, including an adopted child, and any
spouse of a lineal descendant (each, a "FAMILY MEMBER"), (iv) a trust
established by one or more Stockholders or Family Members of one or more
Stockholders principally for the benefit of one or more Stockholders or Family
Members of Stockholders and/or one or more Charitable Assignees, (v) the estate
of such Stockholder and (vi) any Charitable Assignee. Upon the transfer of
shares of Registrable Securities by a Stockholder to a Permitted Assignee of
such Stockholder as provided herein prior to the date the Registration Statement
is first filed with the Commission, Exhibit A hereto will be deemed to be
amended without further action of the parties hereto (x) to reduce the number of
shares of Registrable Securities set forth next to such Stockholder's name on
Exhibit A by the number of shares so transferred that will be subject to this
Agreement, (y) if such Permitted Assignee's name is not listed on Exhibit A, to
add the name of such Permitted Assignee to Exhibit A as a Stockholder, and
(z) to set forth the number of shares of Registrable Securities so transferred
that will be subject to this Agreement (or to increase the number of shares so
listed by the number of shares so transferred that will be subject to this
Agreement) next to such Permitted Assignee's name on Exhibit A. Notwithstanding
any provision of this Agreement to the contrary, a Family Stockholder may
transfer to or for the benefit of one or more Charitable Assignees in the
aggregate up to five percent (5%) of the number of shares of Common Stock or
Class B Stock received by such Family Stockholder in the Merger (or shares of
Common Stock
<PAGE>
3
issued upon conversion of such Class B Stock), free and clear of all the
provisions of this Agreement, and such Charitable Assignees may elect after the
date of transfer (but otherwise at a time consistent with the provisions of this
Agreement) to participate in the Registration (in which case such Charitable
Assignee shall be deemed to be a Permitted Assignee (except that such Charitable
Assignee need not agree to be bound by the provisions of the Stock Agreement));
provided that if any such Charitable Assignee elects to participate in the
Registration, (i) such Charitable Assignee must then agree by instrument in form
and substance satisfactory to the Company to be bound by this Agreement and (ii)
the provisions of the preceding sentence shall apply.
The term "PERSON" shall mean a corporation, association, partnership
(general, limited or limited liability), organization, business, limited
liability company, individual, government or political subdivision thereof or
governmental agency.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
Registration Statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the prospectus, including post-effective amendments, and all
documents and materials incorporated by reference in such prospectus.
"REGISTRABLE SECURITIES" shall mean the shares of Common Stock (on an
Adjusted Basis), listed on Exhibit A hereto and acquired by Stockholders
pursuant to the Merger or upon conversion of shares of the Class B Stock
acquired by Stockholders pursuant to the Merger.
"REGISTRATION" shall have the meaning set forth in Section 2(a).
"REGISTRATION EXPENSES" shall have the meaning set forth in Section 4
hereof.
"REGISTRATION STATEMENT" shall mean a registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference in such registration statement.
"SECURITIES ACT" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"STOCK AGREEMENT" shall have the meaning set forth in the Merger
Agreement.
The term "UNDERWRITTEN OFFERING" shall mean a distribution of
securities subject to registration under the Securities Act in which securities
are sold to an underwriter for reoffering to the public.
<PAGE>
4
Section 2. REGISTRATION.
(a) REGISTRATION. Subject to the consummation of the Merger and the
effectiveness of the Registration, each Stockholder agrees to participate in a
registered underwritten secondary offering of at least 3,000,000 shares (on an
Adjusted Basis) in the aggregate of Registrable Securities on the terms and
conditions set forth in this Agreement and to sell such number of shares of
Common Stock in such underwritten offering as is set forth next to each
Stockholder's name on Exhibit A, subject to increase or reduction as set forth
below. The Stockholders agree that the underwriters for the Registration will
use their reasonable efforts in light of market conditions to sell at least 70%
of the shares sold in such secondary offering to institutional (as opposed to
retail) investors. The Company agrees (subject to the performance by the
Stockholders of their obligations hereunder) to use its reasonable efforts to
file a Registration Statement on a form selected by the Company to register
under the Securities Act for sale to the public in an underwritten offering the
number of shares of Registrable Securities owned by each Stockholder set forth
next to such Stockholder's name on Exhibit A hereto (on an Adjusted Basis) from
time to time (the "REGISTRATION") or such smaller or greater number of shares of
Registrable Securities as shall be agreed by the Company and such Stockholder in
writing, PROVIDED that (x) the number of shares of Registrable Securities of a
Stockholder set forth on Exhibit A may be decreased without the consent of the
Company by written notice to the Company reasonably satisfactory to the Company
from such Stockholder if (1) the number of shares of Registrable Securities of
another Stockholder set forth on Exhibit A is at the same time increased by a
like number of shares or (2) such shares are transferred to a Permitted Assignee
of such Stockholder and such Permitted Assignee becomes a party hereto as a
Stockholder and such shares so transferred are set forth next to such Permitted
Assignee's name on Exhibit A hereto, (y) the number of shares of Registrable
Securities of a Stockholder set forth on Exhibit A may be decreased without the
consent of the Company by written notice to the Company reasonably satisfactory
to the Company from such Stockholder so long as after giving effect thereto the
Registration covers at least 3,000,000 shares of Common Stock (on an Adjusted
Basis) and (z) the number of shares of Registrable Securities of a Family
Stockholder set forth in Exhibit A may be increased without the consent of the
Company by written notice to the Company from such Family Stockholder so long as
after giving effect thereto the Registration covers no more than 5,000,000
shares of Common Stock (on an Adjusted Basis). Should more than one Family
Stockholder seek to increase the number of Registrable Securities as permitted
above and as a result the number of shares sought to be included in the
Registration exceeds 5,000,000 shares (on an Adjusted Basis), the number of
shares, if any, that Stanley H. Durwood, the 1992 Trust and the 1989 Trust have
sought to include in the Registration above the number listed on Exhibit A (on
an Adjusted Basis) shall be reduced to the extent necessary to reduce the
aggregate number of shares sought to be included in the Registration to
5,000,000 shares (on an Adjusted Basis), and if such number of shares still
exceeds 5,000,000, the Company shall allocate the increased number of shares to
be included in the Registration among such Family Stockholders (other than
Stanley H. Durwood, the 1992 Trust and the 1989 Trust) seeking an increase on a
pro rata basis or in such other manner as such Family Stockholders may agree.
In the event of any increase or decrease in the number of Registrable Securities
of a Stockholder as set forth above, Exhibit A hereto shall be deemed amended to
increase or decrease, accordingly, the number of shares of Registrable
Securities set forth next to such Stockholder's name. The Company shall
(subject to
<PAGE>
5
the performance by the Stockholders of their obligations hereunder) use its
reasonable efforts to cause the Registration to be declared effective under the
Securities Act as promptly as practicable on or after the date that is six
months and one day from the date of the Merger and to keep the Registration
effective under the Securities Act for a period ending on the date that is six
months from such date (provided that such six month period shall be extended by
the length of any Postponement Period (as defined below)) or such shorter period
ending when all Registrable Securities covered by the Registration have been
sold (the "EFFECTIVENESS PERIOD").
(b) SUPPLEMENTS AND AMENDMENTS. The Company shall supplement and
amend the Registration Statement, prior to the Effective Date and during the
Effectiveness Period, if (i) required by the rules, regulations or instructions
applicable to the registration form used for such Registration, (ii) otherwise
required by the Securities Act or (iii) reasonably requested by the holders of a
majority in aggregate principal amount of the Registrable Securities covered by
such Registration Statement or by any underwriter of such Registrable
Securities.
(c) SELECTION OF UNDERWRITERS. The managing underwriters for the
Registration shall be selected jointly by the Company and the Family
Stockholders (other than the 1992 Trust and the 1989 Trust) acting by majority
vote (for which purpose each such Family Stockholder shall have one vote).
(d) CONDITIONS TO THE OBLIGATIONS OF COMPANY. The Company shall be
entitled to postpone (or if already filed may withdraw such Registration
Statement), for an aggregate of up to 180 days (together with any period
described in the last sentence of Section 3(b) hereof, a "POSTPONEMENT PERIOD"),
the filing of the Registration Statement otherwise required to be prepared and
filed by it pursuant hereto if, as a result of the Registration the Company
would be required to prepare any financial statements other than those it
customarily prepares or the Company determines in its reasonable business
judgment that such registration and offering would interfere with any material
financing, acquisition, corporate reorganization or other material corporate
transaction or development involving the Company and gives the Stockholders
written notice of such determination.
Section 3. REGISTRATION PROCEDURES.
(a) In connection with the Company's obligations with respect to the
Registration, the Company shall (subject to the performance by the Stockholders
of their obligations hereunder):
(i) prepare and file with the Commission a Registration
Statement which shall permit the disposition of the Registrable Securities,
in an underwritten offering, and use its reasonable efforts to cause such
Registration Statement to become effective as provided in this Agreement;
PROVIDED, HOWEVER, before filing the Registration Statement or Prospectus
or any amendments or supplements thereto (including documents that would be
incorporated therein by reference after the initial filing of the
Registration Statement), the Company shall afford the Counsel (as defined
below) and the managing underwriters, an opportunity to review copies of
all such documents proposed to be filed; PROVIDED, FURTHER, that the
Company shall not file any Registration Statement
<PAGE>
6
or related Prospectus or any amendments or supplements thereto (including
such documents incorporated by reference) if such counsel for all such
holders, or the managing underwriters shall reasonably object, in writing,
on a timely basis (PROVIDED that any such objecting party and the Company
use their best efforts promptly to resolve such party's objections on a
basis reasonably satisfactory to such party and the Company which will
permit such filing);
(ii) prepare and file with the Commission such amendments,
post-effective amendments and supplements to such Registration Statement
and the Prospectus included therein as may be necessary to effect and
maintain the effectiveness of such Registration Statement for the
applicable period specified herein and furnish to the Stockholders copies
of any such supplement or amendment prior to its being used or filed with
the Commission;
(iii) for a reasonable period prior to the filing of such
Registration Statement, and throughout the Effectiveness Period, make
available for inspection by the Counsel and the counsel for the managing
underwriters such financial and other information and books and records of
the Company, and cause the officers, employees, counsel and independent
certified public accountants of the Company to respond to such inquiries,
as shall be reasonably necessary, in the judgment of the respective counsel
referred to in such Section, to conduct a reasonable investigation within
the meaning of Section 11 of the Securities Act; provided, however, that
each such party shall be required to maintain in confidence and not to
disclose to any other person any information or records reasonably
designated by the Company in writing as being confidential, until such time
as (A) such information becomes a matter of public record (whether by
virtue of its inclusion in such Registration Statement or otherwise), or
(B) such person shall be required so to disclose such information pursuant
to a subpoena or order of any court or other governmental agency or body
having jurisdiction over the matter (subject to the requirements of such
order, and only after such person shall have given the Company prompt
written notice of such requirement), or (C) such information is required to
be set forth in such Registration Statement or the Prospectus included
therein or in an amendment to such Registration Statement or an amendment
or supplement to such Prospectus in order that such Registration Statement,
Prospectus, amendment or supplement, as the case may be, does not contain
an untrue statement of a material fact or omit to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(iv) notify the Stockholders and the managing underwriters
thereof and, if requested by any such person, confirm such advice in
writing, (A) when such Registration Statement or the Prospectus included
therein or any Prospectus amendment or supplement or post-effective
amendment has been filed, and, with respect to such Registration Statement
or any post-effective amendment, when the same has become effective, (B) of
any comments by the Commission and by the blue sky or securities
<PAGE>
7
commissioner or regulator of any state with respect thereto or any request
by the Commission for amendments or supplements to such Registration
Statement or Prospectus or for additional information, (C) of the issuance
by the Commission of any stop order suspending the effectiveness of such
Registration Statement or the initiation or threatening of any proceedings
for that purpose, (D) if at any time the representations and warranties of
the Company contemplated by Section 3(a)(xi) hereof cease to be true and
correct in all material respects, (E) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or (F) at any time when a
Prospectus is required to be delivered under the Securities Act, that such
Registration Statement, Prospectus, Prospectus amendment or supplement or
post-effective amendment, or any document incorporated by reference in any
of the foregoing, contains an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances
then existing;
(v) use its reasonable efforts to obtain the withdrawal of any
order suspending the effectiveness of such Registration Statement or any
post-effective amendment thereto at the earliest practicable date;
(vi) if requested by the managing underwriters or the holders
of a majority of the Registrable Securities covered by the Registration,
incorporate in a Prospectus supplement or post-effective amendment such
information as is required by the applicable rules and regulations of the
Commission and as such managing underwriters or such holders specify should
be included therein relating to the terms of the sale of such Registrable
Securities, including, without limitation, information with respect to the
principal amount of Registrable Securities being sold by such holders or to
any underwriters, the name and description of such holders or underwriter,
the offering price of such Registrable Securities and any discount,
commission or other compensation payable in respect thereof, the purchase
price being paid therefor by such underwriters and with respect to any
other terms of the offering of the Registrable Securities to be sold by
such holders or to such underwriters; and make all required filings of such
Prospectus supplement or post-effective amendment after notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(vii) furnish to each Stockholder, each underwriter of holders
of Registrable Securities participating in the Registration thereof and the
Counsel an executed copy of such Registration Statement, each such amendment
or supplement thereto (in each case, upon request, including all exhibits
thereto and documents incorporated by reference therein) and furnish each
such holder and underwriter such number of copies of the Prospectus included
in such Registration Statement (including each preliminary Prospectus and
any summary Prospectus) as such holder or underwriter may reasonably
request; the Company hereby consents to the use of such Prospectus
(including such preliminary and summary Prospectus) and any amendment or
supplement
<PAGE>
8
thereto by each such holder and underwriter, in each case in the form most
recently provided to such party by the Company, in connection with the
offering and sale of the Registrable Securities covered by the Prospectus
(including such preliminary and summary Prospectus) or any supplement or
amendment thereto;
(viii) use its reasonable efforts to (A) register or qualify the
Registrable Securities to be included in such Registration Statement under
such state securities laws or blue sky laws of such jurisdictions as any
holder of such Registrable Securities and underwriter thereof shall
reasonably request, (B) keep such registrations or qualifications in effect
and comply with such laws so as to permit the continuance of offers, sales
and dealings therein in such jurisdictions during the period such
Registration Statement is required to be kept effective and for so long as
may be necessary to enable any such holder or underwriter to complete its
distribution of Securities pursuant to such Registration Statement as
contemplated hereby and (C) take any and all other actions as may be
reasonably necessary or advisable to enable each such holder and
underwriter to consummate the disposition in such jurisdictions of such
Registrable Securities; PROVIDED, HOWEVER, that the Company shall not be
required for any such purpose to (I) qualify as a foreign corporation in
any jurisdiction where it would not otherwise be required to qualify but
for the requirements of this Section 3(a)(viii), (II) consent to general
service of process in any such jurisdiction, (III) subject itself to
taxation in any such jurisdiction or (IV) make any changes to the Company's
Certificate of Incorporation or By-laws or any agreement between the
Company and its stockholders;
(ix) cooperate with the holders of the Registrable Securities
and the managing underwriters to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold,
which Registrable Securities shall not bear any restrictive legends; and
enable such Registrable Securities to be registered in such names as the
managing underwriters may request at least two business days prior to any
sale of the Registrable Securities to the underwriters;
(x) enter into one or more underwriting agreements, or similar
agreements, as appropriate, with customary provisions applicable to such
agreements, PROVIDED that any such underwriting agreements shall contain an
agreement of the underwriters to indemnify and hold harmless the Company
against any and all losses, claims, damages, and liabilities caused by any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement or Prospectus relating to the Registrable
Securities if a copy of the current Prospectus, as amended or supplemented,
was furnished to the underwriters and/or the holders of such Registrable
Securities by the Company but was not provided to a purchaser and such
current Prospectus would have cured the defect giving rise to such loss,
claim, damage or liability, or shall contain a substantially similar
agreement acceptable to the Company; and
<PAGE>
9
(xi) (A) make such representations and warranties to the
holders of such Registrable Securities and the underwriters thereof in
form, substance and scope as are customarily made in connection with an
offering of equity securities pursuant to a Registration Statement filed
on the form applicable to the Registration; (B) obtain an opinion of counsel
to the Company in customary form and covering such matters, of the type
customarily covered by such an opinion, as the managing underwriters, and
as the holders of at least a majority in aggregate principal amount of the
Registrable Securities covered by the Registration, may reasonably request,
addressed to such holder or holders and the underwriters thereof;
(C) obtain "comfort" letters and updates thereof from the independent
certified public accountants of the Company addressed to the selling
holders of Registrable Securities and the underwriters thereof, such
letters to be in customary form and covering matters of the type
customarily covered in "comfort" letters to underwriters in connection with
underwritten offerings; (D) deliver such documents and certificates,
including officer's certificates, as may be reasonably requested by the
holders of at least a majority in aggregate principal amount of the
Registrable Securities being sold and the managing underwriters thereof to
evidence the accuracy of the representations and warranties made pursuant
to clause (A) above and the compliance with or satisfaction of any
agreements or conditions contained in the underwriting agreement or other
agreement entered into by the Company; and (E) undertake such obligations
relating to expense reimbursement, indemnification and contribution as are
provided in Sections 4 and 5 hereof.
(b) In the event that the Company would be required, pursuant to
Section 3(a)(iv)(F) above, to notify the selling holders of Registrable
Securities, and the managing underwriters thereof, the Company shall prepare and
furnish to each such holder and to each underwriter a reasonable number of
copies of a Prospectus supplemented or amended so that, as thereafter delivered
to purchasers of Registrable Securities, such Prospectus shall not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing. Each holder of Registrable
Securities agrees that upon receipt of any notice from the Company pursuant to
Section 3(a)(iv)(F) hereof, such holder shall forthwith discontinue the
disposition of Registrable Securities pursuant to the Registration Statement
applicable to such Registrable Securities until such holder shall have received
copies of such amended or supplemented Prospectus, and if so directed by the
Company, such holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such holder's possession of
the Prospectus covering such Registrable Securities at the time of receipt of
such notice. In the event the Company shall give such notice, the Company shall
extend the period during which such Registration Statement shall be maintained
effective as provided in Section 2(a) hereof by the number of days during the
period from and including the date of the giving of such notice to the date when
the Company shall make available to each holder of Registrable Securities
covered by the Registration Statement such amended or supplemented Prospectus.
(c) The Company may require each holder of Registrable Securities as
to which any registration is being effected to furnish to the Company such
information regarding
<PAGE>
10
such holder (and, in the case of Stanley H. Durwood, regarding DI, its
subsidiaries (other than the Company), American Associated Enterprises, a
Missouri limited partnership ("AAE"), the 1989 Trust and the 1992 Trust) and the
method of distribution of such Registrable Securities as the Company may from
time to time reasonably request in writing. Each such holder agrees to notify
the Company as promptly as practicable of any inaccuracy or change in
information previously furnished by such holder to the Company or of the
occurrence of any event in either case as a result of which any Prospectus
relating to such registration contains or would contain an untrue statement of a
material fact regarding such holder or the method of distribution of such
Registrable Securities or omits to state any material fact regarding such holder
or the intended method of distribution of such Registrable Securities required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing, and promptly to furnish to the
Company any additional information required to correct and update any previously
furnished information or required so that such Prospectus shall not contain,
with respect to such holder or the method of distribution of such Registrable
Securities, an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.
(d) In connection with the Registration, the Family Stockholders
(other than the 1992 Trust and the 1989 Trust) acting by majority vote (for
which purpose each such Family Stockholder shall have one vote) thereby shall
designate a single counsel (the "COUNSEL"), which shall be reasonably
satisfactory to the Company, to represent the collective interests of all of the
holders of the Registrable Securities covered by the Registration Statement in
the Registration and in their dealings with the Company.
(e) The Company may require each holder of Registrable Securities
covered by a Registration Statement promptly to furnish in writing to the
Company such information regarding such holder (and, in the case of Stanley H.
Durwood, regarding DI, its subsidiaries (other than the Company), AAE, the 1989
Trust and the 1992 Trust), the plan of distribution of the Registrable
Securities and other information as the Company may from time to time reasonably
request or as may be legally required in connection with such Registration.
Section 4. REGISTRATION EXPENSES.
Stanley H. Durwood, the 1989 Trust, the 1992 Trust and Delta shall
bear and pay (jointly and severally), promptly upon request being made therefor,
all expenses incident to the Company's performance of or compliance with this
Agreement whether or not the public offering contemplated by the Registration is
consummated, including, without limitation, (a) all Commission and any NASD
registration and filing fees and expenses, (b) all fees and expenses in
connection with the qualification of the Registrable Securities for offering and
sale under the state securities and blue sky laws referred to in
Section 3(a)(viii) hereof, including reasonable fees and disbursements of
counsel for the underwriters in connection with such qualifications (in the
event that such counsel performs such functions), (c) all expenses relating to
the preparation, printing, distribution and reproduction of the Registration
Statement required to be filed hereunder, each Prospectus included therein or
prepared for distribution pursuant hereto, each
<PAGE>
11
amendment or supplement to the foregoing, the certificates representing the
Registrable Securities and all other documents relating hereto, (d) messenger
and delivery expenses, (e) fees and expenses of any escrow agent or custodian,
(f) fees, disbursements and expenses of counsel and independent certified public
accountants of the Company (including the expenses of any opinions or "comfort"
letters required by or incident to such performance and compliance), and fees,
expenses and disbursements of any other persons, including special experts,
retained by the Company in connection with such registration (collectively, the
"Registration Expenses"). Each holder of the Registrable Securities being
registered severally shall also pay (i) its respective pro rata portion of all
underwriting discounts and commissions attributable to the sale of such
Registrable Securities and the reasonable fees and disbursements of the Counsel
and (ii) the entire amount of the fees and expenses of any counsel or other
advisors or experts retained by such holder. The Company shall pay all of its
internal expenses (including, without limitation, all salaries and expenses of
the Company's officers and employees performing legal or accounting duties).
Section 5. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall, and it hereby
agrees to, indemnify and hold harmless each holder of Registrable Securities to
be included in the Registration (other than Stanley H. Durwood, the 1992 Trust
and the 1989 Trust) from and against any and all losses, claims, damages and
liabilities to which such holder may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages and liabilities (or actions
in respect thereof) and related expenses (including without limitation
reasonable attorneys' fees and expenses) ("LOSSES") arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in a Registration Statement under which such Registrable Securities
were registered under the Securities Act, or any preliminary, final or summary
Prospectus contained therein or furnished by the Company to any such holder, or
any amendment or supplement thereto, or arise out of or are based upon any
omission or alleged omission to state therein a material fact necessary to make
the statements therein not misleading; PROVIDED, HOWEVER, that (A) the Company
shall not be obligated to indemnify any such person in any such case to the
extent that any such Losses are caused by an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration Statement,
or preliminary, final or summary Prospectus, or amendment or supplement based
upon written information furnished to the Company by any holder of Registrable
Securities expressly for use therein, (B) the Company shall not be liable to any
such holder under the indemnity agreement in this subsection (a) with respect to
any preliminary Prospectus to the extent that any such Loss of such holder
results from the fact that such person sold Registrable Securities to a person
as to whom it shall be established that there was not sent or given at or prior
to the written confirmation of such sale, a copy of the Prospectus or of the
Prospectus as then amended or supplemented if the Company has previously
furnished copies thereof in sufficient quantity to such holder or underwriter
and the loss, claim, damage or liability of such holder or underwriter results
from an untrue statement or omission of a material fact contained in the
preliminary Prospectus which was corrected in the Prospectus or in the
Prospectus as amended or supplemented and (C) the Company shall not be obligated
to indemnify any such holder with respect to any sales occurring after the
Company has given
<PAGE>
12
notice under Section 3(a)(iv)(F) to such holder and the managing underwriters
and prior to the delivery by the Company of any amended or supplemented
Prospectus.
(b) INDEMNIFICATION BY THE HOLDERS. Each Stockholder shall, and
hereby agrees to, severally and not jointly, indemnify and hold harmless the
Company, and all other holders of Registrable Securities, against any Losses to
which the Company or such other holders of Registrable Securities may become
subject, under the Securities Act or otherwise, to the same extent as the
foregoing indemnity by the Company contained in (a), but only with reference to
information relating to such Stockholder furnished to the Company by such
Stockholder expressly for use in such Registration Statement, or any
preliminary, final or summary Prospectus and, where such Stockholder is Stanley
H. Durwood, the 1989 Trust or the 1992 Trust, with reference to information
relating to DI, its subsidiaries (other than the Company), AAE, the 1989 Trust,
the 1992 Trust and Stanley H. Durwood; provided, however, that no such holder
shall be required to indemnify under this Section 5(b) for any amounts in excess
of the dollar amount of the proceeds to be received by such holder from the sale
of such holder's Registrable Securities pursuant to such Registration. Such
information shall be deemed to have been so furnished for use therein by a
Stockholder if it relates to such Stockholder (or, in the case of Stanley H.
Durwood, the 1989 Trust or the 1992 Trust, where it relates to Stanley H.
Durwood, the 1989 Trust, the 1992 Trust, DI, its subsidiaries (other than the
Company) or AAE) and if such Registration Statement was available for review by
such Stockholder (or the legal counsel for such Stockholder) a reasonable time
before being filed and not objected to in writing by such Stockholder prior to
the filing thereof.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of written notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 5, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall relieve it from liability which it may have to any indemnified party
only to the extent the indemnifying party is prejudiced thereby. In case any
such action shall be brought against any indemnified party and it shall notify
an indemnifying party of the commencement thereof, such indemnifying party shall
be entitled to participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, such
indemnifying party shall pay the fees and disbursements of such counsel and
shall not be liable to such indemnified party for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party unless (i) the indemnifying party and the indemnified party
shall have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties) include both
the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all
<PAGE>
13
such indemnified parties. Such firm shall be designated in writing by the
managing underwriter if the named parties to such proceeding include the
managing underwriter and by the Family Stockholders (other than the 1992 Trust
and the 1989 Trust) acting by majority vote (in which each such Family
Stockholder shall have one vote) in the case of parties indemnified pursuant to
paragraph (a) above and by the Company in the case of parties indemnified
pursuant to paragraph (b) above. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent not to be
unreasonably withheld, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. No indemnifying party shall, without the prior written
consent of the indemnified party not to be unreasonably withheld, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) CONTRIBUTION. Each party hereto agrees that, if for any reason
the indemnification provisions contemplated by Section 5(a) or Section 5(b) are
unavailable to or insufficient to hold harmless an indemnified party in respect
of any Losses referred to therein, then each indemnifying party under such
paragraph, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such Losses in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnifying party and the indemnified party,
but also the relative fault of the indemnifying party and the indemnified party
in connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or by such indemnified party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Notwithstanding the provisions of this Section 5(d), no holder shall
be required to contribute any amount in excess of the amount by which the dollar
amount of the proceeds received by such holder from the sale of any Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) exceeds the amount of any damages which such holder 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 Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The holders' obligations in this Section 5(d) to contribute
shall be several in proportion to the principal amount of Registrable Securities
registered or underwritten, as the case may be, by them and not joint.
(e) The obligations of the Company under this Section 5 shall extend,
upon the same terms and conditions, to each officer, director and partner of
each holder and each
<PAGE>
14
person, if any, who controls any holder within the meaning of either Section 20
of the Exchange Act or Section 15 of the Securities Act; and the obligations of
the Stockholders contemplated by this Section 5 shall be in addition to any
liability which the Stockholders may otherwise have and shall extend, upon the
same terms and conditions, to each officer and director of the Company
(including any person who, with his consent, is named in any Registration
Statement as about to become a director of the Company) and to each person, if
any, who controls the Company within the meaning of the Securities Act.
(f) The obligations of the Company and each Stockholder under this
Section 5 shall terminate on the Termination Date (as defined below), except
that such obligations shall survive in respect to any claim for
indemnification made under this Section 5 prior to the Termination Date until
such claim for indemnification is finally resolved. As used herein
"Termination Date" means the March 31 that is two years after the March 31
occurring immediately after the date on which the Effective Time (defined in
the Merger Agreement) occurs.
Section 6. UNDERWRITING REQUIREMENTS.
Each holder of Registrable Securities hereby agrees (i) to sell such
holder's Registrable Securities on a basis consistent with this Agreement and as
provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (ii) to complete and execute all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
Section 7. MISCELLANEOUS.
(a) SPECIFIC PERFORMANCE. The parties hereto acknowledge that there
may be no adequate remedy at law if any party fails to perform any of its
obligations hereunder and that each party may be irreparably harmed by any such
failure, and accordingly agree that each party, in addition to any other remedy
to which it may be entitled at law or in equity, shall be entitled to compel
specific performance of the obligations of any other party under this Agreement
in accordance with the terms and conditions of this Agreement, in any court of
the United States or any State thereof having jurisdiction.
(b) NOTICES. All notices, requests, claims, demands, waivers and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand, if delivered personally or by courier,
or three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows: if to the Company, to it
at 106 West 14th Street, Kansas City, Missouri 64101, Attention: Corporate
Secretary, if to Delta, to it at 106 West 14th Street, Kansas City, Missouri
64101, and if to a Stockholder, to such Stockholder at the address set forth on
the signature page hereof next to such Stockholder's signature, provided that
such addresses may be changed by written notice as provided in this paragraph.
Information copies of all notices given to a Stockholder (other than Stanley H.
Durwood, the 1992 Trust or the 1989 Trust) or to Delta shall be given to:
<PAGE>
15
Robert C. Kopple, Esq.
Kopple & Klinger
2029 Century Park East
Suite 1040
Los Angeles, CA 90067
Glenn Kurlander, Esq.
Schiff Hardin & Waite
150 East 52nd Street
Suite 2900
New York, New York 10022
Information copies of all notices given
to Stanley H. Durwood, the 1992 Trust,
the 1989 Trust, or Delta should be
given to: Raymond F. Beagle, Jr., Esq.
Lathrop & Gage L.C.
2345 Grand Boulevard, 24th Floor
Kansas City, Missouri 64108-2684
Information copies of all notices given
to the Company should be given to: Charles J. Egan, Jr., Esq.
Hallmark Cards, Incorporated
2501 McGee Trafficway
Kansas City, MO 64141-6126
The Honorable Paul E. Vardeman
Polsinelli, White, Vardeman &
Shalton
Suite 1000, Plaza Steppes
700 West 47th Street
Kansas City, MO 64112-1802
(c) THIRD PARTY BENEFICIARIES: HOLDERS ENTITLED AND BOUND. This
agreement shall be binding upon and inure to the benefit of the parties, their
successors, heirs, legatees, devisees and personal and legal representatives,
and any transferee that is a Permitted Assignee. No party may assign its rights
under this Agreement (except to a Permitted Assignee as provided herein) without
the consent of the other parties hereto.
(d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) SURVIVAL. The respective indemnities, agreements,
representations and warranties and each other provision set forth in this
Agreement or made pursuant hereto shall
<PAGE>
16
remain in full force and effect regardless of any investigation (or statement
as to the results thereof) made by or on behalf of any holder of Registrable
Securities, any director, officer or partner of such holder, any agent or
underwriter or any director, officer or partner thereof, or any controlling
person of any of the foregoing, and shall survive the transfer of Registrable
Securities by such holder.
(f) LAW GOVERNING; CONSENT TO JURISDICTION.
(I) This Agreement shall be governed by and construed in
accordance with the laws of the State of Missouri without giving effect to the
conflicts of laws principles thereof.
(II) Each party hereto hereby consents to, and confers exclusive
jurisdiction upon, the courts of the State of Missouri and the Federal courts of
the United States of America located in the City of Kansas City, Missouri, and
appropriate appellate courts therefrom, over any action, suit or proceeding
arising out of or relating to this Agreement. Each party covenants that it will
not commence any action, suit or proceeding arising out of or relating to this
Agreement in any other jurisdiction. Nothing in this paragraph shall affect the
rights of a party to enforce a judgment rendered by the courts referred to in
the first sentence of this paragraph in any other jurisdiction. Each party
hereto hereby waives, and agrees not to assert, as a defense in any such action,
suit or proceeding that it is not subject to such jurisdiction or that such
action, suit or proceeding may not be brought or is not maintainable in said
courts or that this Agreement may not be enforced in or by said courts or that
its property is exempt or immune from execution, that the suit, action or
proceeding is brought in an inconvenient forum, or that the venue of the suit,
action or proceeding is improper. Service of process in any such action, suit
or proceeding may be served on any party anywhere in the world, whether within
or without the State of Missouri by mailing a copy thereof by registered or
certified mail, postage prepaid, to such party at its address provided in
Section 7(b) of this Agreement, provided that service of process may be
accomplished in any other manner permitted by applicable law.
(g) HEADINGS. The descriptive headings of the several Sections and
paragraphs of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement.
(h) ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the Stock
Agreement, the Indemnification Agreement and the Merger Agreement and, with
respect to the Family Stockholders, that certain Durwood Family Settlement
Agreement dated as of January 22, 1996 contain the entire understanding of the
parties with respect to the transactions contemplated hereby. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to its subject matter, except that the Durwood Family Settlement
Agreement shall not be deemed to be amended by this Agreement and shall remain
in full force and effect. This Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only by a written instrument
duly executed by the Company and the Family Stockholders acting by majority vote
(for which purpose each Family Stockholder (other than the 1992 Trust and the
<PAGE>
17
1989 Trust) shall have one vote). Each holder of any Registrable Securities at
the time or thereafter outstanding shall be bound by any amendment or waiver
effected pursuant to this Section 7(h), whether or not any notice, writing or
marking indicating such amendment or waiver appears on such Registrable
Securities or is delivered to such holder.
(i) INSPECTION. For so long as this Agreement shall be in effect,
this Agreement and a complete list of the names and addresses of all the holders
of Registrable Securities shall be made available for inspection and copying on
any business day by any holder of Registrable Securities at the offices of the
Company at the address thereof set forth in Section 7(b) above.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained in this Agreement, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired thereby.
<PAGE>
18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
AMC ENTERTAINMENT INC.
By:
--------------------------------
Peter C. Brown
President
DELTA PROPERTIES, INC.
By:
--------------------------------
Address:
--------
Suite 1700
Power & Light Building
106 West 14th Street
P.O. Box 419615
Kansas City, Missouri 64141-6615
- ----------------------------------
Stanley H. Durwood
1323 Granite Creek Drive
Blue Springs, MO 64015
- ----------------------------------
Carol D. Journagan
3001 West 68th Street
Shawnee Mission, KS 66208
- ----------------------------------
Edward D. Durwood
P.O. Box 7208
Rancho Santa Fe, CA 92067
- ----------------------------------
Thomas A. Durwood
<PAGE>
19
187 Chestnut Hill Road
Wilton, CT 06897
- ----------------------------------
Elissa D. Grodin
655 N.W. Altishan Place
Beaverton, OR 97006
- ----------------------------------
Brian H. Durwood
666 West End Avenue
New York, NY 10025
- ----------------------------------
Peter J. Durwood
Suite 1700
Power & Light Building
106 West 14th Street
P.O. Box 419615
Kansas City, Missouri 64141-6615
- ----------------------------------
Stanley H. Durwood, as trustee of
the 1992 Trust
Suite 1700
Power & Light Building
106 West 14th Street
P.O. Box 419615
Kansas City, Missouri 64141-6615
- ----------------------------------
Stanley H. Durwood, as trustee of
the 1989 Trust
<PAGE>
EXHIBIT A
Stanley H. Durwood *
1989 Trust *
1992 Trust *
---------------
*500,000 shares, collectively
Carol D. Journagan 416,666.67 shares
Edward D. Durwood 416,666.67 shares
Thomas A. Durwood 416,666.67 shares
Elissa D. Grodin 416,666.67 shares
Brian H. Durwood 416,666.67 shares
Peter J. Durwood 416,666.67 shares
<PAGE>
(Indem, DOC) EXHIBIT 2.4
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated as of March 31, 1997 by (i) AMC
Entertainment Inc., a Delaware corporation ("AMCE"), (ii) Stanley H. Durwood,
individually, and as trustee of the 1992 Durwood, Inc. Voting Trust dated
December 12, 1992 (the "1992 TRUST") and as trustee of the Trust created
pursuant to the Stanley H. Durwood Trust Agreement dated August 14, 1989 (the
"1989 TRUST"), Carol D. Journagan, Edward D. Durwood, Thomas A. Durwood, Elissa
D. Grodin, Brian H. Durwood and Peter J. Durwood (all persons and entities
listed in this clause (ii) are referred to herein as the "DURWOOD PARTIES") and
(iii) Delta Properties, Inc., a Missouri corporation ("DELTA"). Capitalized
terms used herein and not defined herein are used as defined in the Merger
Agreement (as defined below).
WHEREAS, contemporaneously with the execution and delivery hereof AMCE
and Durwood, Inc., a Missouri corporation ("DI"), are entering into an Agreement
and Plan of Merger and Reorganization dated as of the date hereof (the "MERGER
AGREEMENT") pursuant to which, subject to the conditions and the terms contained
therein, DI would merge with and into AMCE, with AMCE being the surviving
corporation; and
WHEREAS, the Durwood Parties are direct and indirect stockholders of
DI and desire that the Merger be consummated; and
WHEREAS, prior to or following the execution and delivery hereof, DI
has transferred or will transfer to Delta certain of its assets and the Durwood
Parties and DI would not be willing to enter into this Agreement unless Delta
undertakes certain obligations set forth herein and in consideration for such
transfer to it; and
WHEREAS, the Registration Statement and Proxy Statement will contain
information regarding AMCE, DI and certain Durwood Parties and entities and
persons affiliated with the Durwood Parties; and
WHEREAS, the Merger Agreement will contain representations,
warranties, covenants and agreements of AMCE and DI; and
WHEREAS, AMCE would not be willing to enter into the Merger Agreement
and consummate the Merger, and the Durwood Parties would not be willing to cause
DI to enter into the Merger Agreement and consummate the Merger, unless the
parties hereto agree to indemnify each other on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and covenants set forth herein, the parties hereto do hereby agree
and covenant as follows:
<PAGE>
2
1. INDEMNITIES REGARDING REGISTRATION STATEMENT AND PROXY STATEMENT.
(a) Each Durwood Party severally agrees to provide AMCE with such
information as to such Durwood Party as is necessary for AMCE to complete the
Registration Statement and the Offering Materials (as defined below) in
accordance with the requirements of the Securities Act. Each Durwood Party
severally covenants that the information supplied or to be supplied by such
Durwood Party (and, in the case of Stanley H. Durwood, the 1992 Trust and the
1989 Trust) in writing for inclusion in, and which is included in, the
Registration Statement or any amendment or supplement thereto, or the Offering
Materials which concerns such Durwood Party (the "DURWOOD PARTY INFORMATION"),
will not, at the respective times such documents are filed with the SEC and at
the Effective Time, and, in the case of the Registration Statement or any
amendment or supplement thereto, when the same becomes effective, and, in the
case of the Offering Materials, at the time of mailing thereof to AMCE's
stockholders, contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any Durwood Party
Information regarding a Durwood Party included in any such document will be
deemed to have been so supplied in writing by such Durwood Party specifically
for inclusion therein if such document was available for review by such Durwood
Party (or the legal counsel of such Durwood Party) a reasonable time before such
document was filed and not objected to in writing by such Durwood Party prior to
the filing thereof. If at any time prior to the Effective Time a Durwood Party
obtains actual knowledge (without duty of investigation) of any event or
circumstance relating to the Durwood Entities (as defined below) which should be
set forth in an amendment or supplement to the Registration Statement or
Offering Materials, as required by applicable law, such Durwood Party shall
promptly inform AMCE. AMCE and its affiliates, officers, directors, employees,
agents, successors and assigns shall be indemnified and held harmless by each
Durwood Party severally and in the case of Durwood Party Information concerning
Stanley H. Durwood, the 1992 Trust or the 1989 Trust, by the SHD Indemnitors (as
defined below), jointly and severally, for any and all Losses (as defined
herein) actually suffered or incurred by them arising out of or resulting from
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or the Offering Materials, 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 light of the circumstances under
which they were made, not misleading, if the statement or omission was made in
reliance upon and in conformity with the Durwood Party Information supplied by
such Durwood Party (or in the case of indemnification by the SHD Indemnitors, by
any SHD Indemnitor).
(b) Stanley H. Durwood, the 1992 Trust and the 1989 Trust (the "SHD
INDEMNITORS") agree (jointly and severally) to provide AMCE with such
information as to DI, Subsidiaries of DI (other than AMCE) and American
Associated Enterprises, a Missouri limited partnership ("AAE") (DI, Subsidiaries
of DI (other than AMCE) and AAE are referred to as the "DI PERSONS" and the
Durwood Parties and the DI Persons are referred to as the "DURWOOD ENTITIES") as
is necessary for AMCE to complete the Registration Statement and the Offering
<PAGE>
3
Materials in accordance with the requirements of the Securities Act. The SHD
Indemnitors covenant that the information supplied or to be supplied in writing
for inclusion in, and which is included in, the Registration Statement or any
amendment or supplement thereto, or the Offering Materials, which concerns the
DI Persons (the "DI PERSON INFORMATION"), will not, at the respective times such
documents are filed with the SEC and at the Effective Time, and, in the case of
the Registration Statement or any amendment or supplement thereto, when the same
becomes effective, and, in the case of the Offering Materials, at the time of
mailing thereof to AMCE's stockholders, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Any DI Person Information included in any such document will be
deemed to have been so supplied in writing specifically for inclusion therein if
such document was available for review by Stanley H. Durwood (or his legal
counsel) a reasonable time before such document was filed and not objected to in
writing by Stanley H. Durwood prior to the filing thereof. AMCE and its
affiliates, officers, directors, employees, agents, successors and assigns shall
be indemnified and held harmless by the SHD Indemnitors (jointly and severally)
for any and all Losses actually suffered or incurred by them arising out of or
resulting from any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or the Offering Materials, 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 light of the
circumstances under which they were made, not misleading, if the statement or
omission was made in reliance upon and in conformity with the DI Person
Information.
(c) Each Durwood Party (other than the SHD Indemnitors) shall be
indemnified and held harmless by AMCE for any and all Losses actually suffered
or incurred by them arising out of or resulting from any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or the Offering Materials, 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 light of the circumstances under which they were
made, not misleading, in each case except to the extent that the statement or
omission was made in reliance upon and in conformity with the Durwood Party
Information or the DI Person Information.
(d) As used herein, "OFFERING MATERIALS" means the Proxy Statement
and prospectus relating to the Merger included in the Registration Statement,
and each of the other documents mailed to stockholders of AMCE in connection
with the Merger.
(e) If for any reason, other than in accordance with the terms of
this Section 1, the indemnification provided for in this Section 1 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any Losses referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such Losses in such proportion as is
appropriate to reflect its relative fault in connection with the statements or
omissions which resulted in such Losses, as well as any other relevant equitable
considerations, but not in excess of amounts, if any, such indemnifying party
would have been required to pay if such indemnification had been available. The
relative fault shall be determined by reference to, among other things, whether
the untrue or
<PAGE>
4
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by such indemnifying
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Durwood
Parties agree that it would not be just and equitable if contribution pursuant
to this subsection (e) were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable consideration
referred to above in this subsection (e). No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(f) The obligations of AMCE under this Section 1 shall be in addition
to any liability which AMCE may otherwise have, and the obligations of the
Durwood Parties under this Section 1 shall be in addition to any liability which
the Durwood Parties may otherwise have.
(g) The obligations of AMCE and the Durwood Parties under this
Section 1 shall terminate on the Termination Date (as defined below), except
that such obligations shall survive in respect to any claim for indemnification
made under this Section 1 prior to the Termination Date until such claim for
indemnification is finally resolved. As used herein "TERMINATION DATE" means
the March 31 that is two years after the March 31 occurring immediately after
the date on which the Effective Time occurs.
2. INDEMNIFICATION FOR BREACHES OF MERGER AGREEMENT AND LIABILITIES.
(a) If the Effective Time occurs, AMCE shall indemnify and hold
harmless the Durwood Parties (other than the SHD Indemnitors) and their
Permitted Assignees (as defined in the form of Registration Agreement attached
as Exhibit C to the Merger Agreement) against and in respect of any and all
liabilities, losses, damages, claims, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) determined on a net
after-tax basis ("LOSSES") which may be incurred by such Durwood Parties or
Permitted Assignees based upon, resulting from or arising out of the breach of
any representation, warranty, covenant or agreement of AMCE contained in the
Merger Agreement (for this purpose, and notwithstanding Section 6.5 of the
Merger Agreement, as if all representations, warranties, covenants and
agreements had survived the consummation of the Merger).
(b) If the Effective Time occurs, the SHD Indemnitors shall (jointly
and severally) indemnify and hold harmless AMCE against and in respect of any
and all Losses which may be incurred by AMCE (i) based upon, resulting from or
arising out of the breach of any representation, warranty, covenant or agreement
of DI contained in the Merger Agreement (for this purpose, and notwithstanding
Section 6.5 of the Merger Agreement, as if all representations, warranties,
covenants and agreements had survived the consummation of the Merger) or (ii)
based upon, resulting from, arising out of or constituting any liability or
obligation of DI or its Subsidiaries, known or unknown, fixed, contingent or
otherwise.
<PAGE>
5
(c) If the Effective Time occurs, the SHD Indemnitors and Delta shall
(jointly and severally) pay and indemnify and hold harmless AMCE from and
against all of DI's Expenses and one-half of AMCE's Expenses.
(d) If the Effective Time occurs, the SHD Indemnitors shall (jointly
and severally) indemnify and hold harmless AMCE from and against, (i) any Taxes
attributable to DI or any of its Subsidiaries for taxable periods ending on or
prior to the Effective Time, including without limitation any Taxes attributable
to the transactions contemplated by the Pre-Merger Action Plan, and (ii) all
Losses incurred by AMCE in connection therewith. For purposes of this
Agreement, "Taxes" shall mean all taxes, including, without limitation, all net
income, gross income, gross receipts, sales, use, value-added, ad valorem,
transfer, franchise, profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupation, property or other taxes and customs
duties of any kind whatsoever, together with any interest, penalties and
additions to tax or additional amounts relating thereto, imposed by any
governmental authority (domestic or foreign).
(e) If the Effective Time does not occur, the SHD Indemnitors and
Delta shall (jointly and severally) indemnify and hold harmless AMCE against and
in respect of Losses which may be incurred by AMCE as a result of the breach by
DI of any representation, warranty, covenant or agreement in the Merger
Agreement (without regard to Section 6.4 thereof).
(f) If the Effective Time occurs, each Durwood Party shall (severally
and not jointly) indemnify and hold harmless AMCE against and in respect of
Losses which may be incurred by AMCE as a result of the breach by such Durwood
Party of a representation, warranty, covenant or agreement contained in Article
VI of the Stock Agreement.
(g) Each SHD Indemnitor agrees that he or it will not transfer Voting
Securities (as defined in the Stock Agreement) to any person or entity (other
than in the Secondary Offering (as defined in the form of Stock Agreement
attached as Exhibit B to the Merger Agreement), to a Charitable Assignee (as
defined below) or otherwise in arms-length sales for fair consideration) unless
the transferee agrees by instrument in form and substance satisfactory to AMCE
to be bound by the provisions of this Agreement as an SHD Indemnitor and to
guarantee the performance by Stanley H. Durwood, the 1992 Trust and the 1989
Trust of their obligations under this Agreement and under Section 5 of the
Registration Agreement and Section 5.3 of the Stock Agreement (an
"INSTRUMENT"); PROVIDED, HOWEVER, that an SHD Indemnitor may not transfer more
than 5% of the shares of AMCE Class B Stock or AMCE Common Stock received by it
in the Merger (or AMCE Common Stock received upon conversion of such AMCE Class
B Stock) to Charitable Assignees unless the Charitable Assignees receiving
shares in excess of such threshold enter into an Instrument. As used herein, a
"CHARITABLE ASSIGNEE" of a Stockholder shall mean any charitable organization,
including charitable remainder and charitable lead trusts, a transfer of
property to which by such Stockholder would qualify, at least in part, for an
income, gift or estate tax charitable deduction under the Tax Code.
<PAGE>
6
(i) The obligations of AMCE, Delta and the Durwood Parties under this
Section 2 shall terminate on the Termination Date, except that such obligations
shall survive in respect to any claim for indemnification made under this
Section 2 prior to the Termination Date until such claim for indemnification is
finally resolved.
(j) AMCE agrees that it will not seek to hold Delta's stockholders
liable (in their capacities as such) for Delta's obligations under or arising
from this Agreement, the Merger Agreement, the Stock Agreement or the
Registration Agreement or the transactions contemplated hereby or thereby.
3. PROCEDURE FOR INDEMNIFICATION.
(a) The party seeking indemnification pursuant to Sections 1 or 2 is
referred to as the "INDEMNIFIED PARTY" and the party from whom indemnification
is sought under Sections 1 or 2 is referred to as the "INDEMNIFYING PARTY."
(b) The Indemnified Party shall give prompt written notice to the
Indemnifying Party of any claim for indemnification under Sections 1 or 2 above
relating to a claim or demand of a third party with respect to which it is
seeking indemnification hereunder. The failure to give such prompt notice shall
not relieve the Indemnifying Party of its indemnity obligations hereunder with
respect thereto, except to the extent that the Indemnifying Party is materially
prejudiced by such failure. The Indemnifying Party shall have the right to
defend and to direct the defense against any such claim or demand (other than
one made pursuant to Section 2(d)), in its name or in the name of the
Indemnified Party, as the case may be, at the expense of the Indemnifying Party,
and with the counsel selected by the Indemnifying Party and approved by the
Indemnified Party (such approval not to be unreasonably withheld), PROVIDED that
the Indemnifying Party may not settle or compromise any such claim or demand
without the consent of the Indemnified Party (which consent may not be
unreasonably withheld) if injunctive or other equitable relief would be imposed
against the Indemnified Party as a result thereof. Notwithstanding anything in
this Agreement to the contrary, the Indemnified Party shall cooperate with the
Indemnifying Party, and keep the Indemnifying Party fully informed in the
defense of such claim or demand. The Indemnified Party shall have the right to
participate in the defense of any claim or demand with counsel employed by it at
the expense of the Indemnified Party. The Indemnifying Party shall have no
indemnification obligations with respect to any such claim or demand which shall
be settled by the Indemnified Party without the prior written consent of the
Indemnifying Party.
4. OTHER AGREEMENTS
(a) NO AMENDMENT. The Durwood Parties covenant that the Durwood
Family Settlement Agreement dated as of January 22, 1996 by and among
Stanley H. Durwood, in the capacities specified therein, Carol D.
Journagan, Edward D. Durwood, Thomas A. Durwood, Elissa D. Grodin,
Brian H. Durwood and Peter J. Durwood (the "DURWOOD FAMILY AGREEMENT")
will not be amended without the
<PAGE>
7
prior written consent of AMCE, which consent will not be unreasonably
withheld. Each Durwood Party hereby represents and warrants to AMCE
that attached hereto as EXHIBIT A is a true, correct and complete copy
of the Durwood Family Agreement as in effect on the date hereof.
(b) EXECUTION OF OTHER AGREEMENTS. Each Durwood Party agrees to
execute and deliver (and to cause Delta to execute and deliver) the
Stock Agreement and the Registration Agreement at the Closing.
(c) ESCROW AGREEMENT. Each Durwood Party agrees that at the
Closing it will execute and deliver an Escrow Agreement substantially
in the form of Exhibit B hereto pursuant to which such Durwood Party
shall deposit in escrow 50% of the shares of AMCE Common Stock and
AMCE Class B Stock received in the Merger by such Durwood Party (plus,
in the case of Stanley H. Durwood, the 1989 Trust and the 1992 Trust,
collectively, a number of shares of AMCE Class B Stock equal to the
sum of (x) 65% of the number of shares of AMCE Common Stock received
by Harvard in the Merger, plus (y) a number of shares of AMCE Class B
Stock equal to the Specified Percentage (as defined in the form of
Stock Agreement attached as Exhibit B to the Merger Agreement) of the
total number of shares of AMCE Class B Stock and AMCE Common Stock
issued in the Merger). Such shares shall be held in Escrow for a
period of two years from the date of the Closing. Such Durwood Party
shall retain the right to vote (subject to the Stock Agreement) and be
entitled to receive all cash dividends or other distributions paid in
respect of shares deposited in Escrow, but all dividends paid in
capital stock of AMCE or other securities shall be held in Escrow
until the end of such two-year period.
(d) NO TRANSFERS. Each Durwood Party agrees that except as set
forth in the Pre-Merger Action Plan, prior to the Merger it will not
directly or indirectly transfer any interest he, she or it has in DI,
AAE or AMCE, including without limitation any right to receive shares
of AMCE Common Stock or AMCE Class B Stock in the Merger.
(e) APPLICATION OF CREDIT AMOUNTS. Credit Amounts (as defined
below) outstanding from time to time shall be applied to satisfy (to
the extent of the Credit Amounts then outstanding) the obligations of
the SHD Indemnitors pursuant to Sections 2(c) and 2(e) of this
Agreement, Section 4 of the Registration Agreement and Section 5.3 of
the Stock Agreement (the "SPECIFIED SECTIONS"). As promptly as
practicable following the Termination Date, AMCE shall pay to the SHD
Indemnitors an amount equal to the Credit Amount then outstanding (and
not applied to satisfy liabilities under the Specified Sections),
provided that in the event AMCE has made claims pursuant to the
Specified Sections prior to such date that have not been resolved,
AMCE may withhold from such payment the amount of such claims until
such claims are finally resolved (whereupon it
<PAGE>
8
shall as promptly as practicable pay to the SHD Indemnitors any
portion of such Credit Amounts not applied to such claims). In the
event that a Credit Amount arises after the Termination Date, AMCE
shall promptly pay to the SHD Indemnitors the amount of such Credit
Amount. All payments to SHD Indemnitors pursuant to this paragraph
(e) shall be made pro rata based on the total number of shares of AMCE
Class B Stock received by each SHD Indemnitor in the Merger. As used
herein, "CREDIT AMOUNTS" shall mean the amounts of any net tax
benefit, as and when finally determined, actually realized by AMCE
from time to time following the Merger solely as a result of (and
which would not have been realized but for) (i) the utilization by
AMCE for federal income tax purposes of DI's alternative minimum tax
credit carryforwards and (ii) the utilization by AMCE for Missouri
income tax purposes of DI's Missouri net operating loss carryforwards.
(f) DI TAX RETURNS. Without limiting the obligations of the SHD
Indemnitors pursuant to Section 2(d) above, AMCE will cause to be
prepared and filed (at the expense of the SHD Indemnitors) all income
tax returns of DI not heretofore filed, and the Durwood Parties and
Delta shall make available to AMCE all books and records of DI
necessary in the preparation of such returns. The SHD Indemnitors
shall pay all Taxes due and payable under such returns.
5. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS: Each Durwood
Party and Delta, severally, as to himself, herself or itself, and not jointly,
hereby represents and warrants to AMCE as follows:
(i) Such Durwood Party (or Delta, as the case may be) has full legal
right, power and authority to enter into and perform this Agreement. This
Agreement is a valid and binding obligation of such Durwood Party (or Delta, as
the case may be) enforceable against such Durwood Party (or Delta, as the case
may be) in accordance with its terms, except that such enforcement may be
subject to (x) bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (y) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
(ii) Neither the execution and delivery of this Agreement nor the
consummation by such Durwood Party (or Delta, as the case may be) of the
transactions contemplated hereby conflicts with or constitutes a violation of or
default under any statute, law, regulation, order or decree applicable to such
Durwood Party (or Delta, as the case may be), or any material contract,
commitment, agreement, arrangement or restriction of any kind to which such
Durwood Party (or Delta, as the case may be) is a party or by which such Durwood
Party (or Delta, as the case may be) is bound.
<PAGE>
9
(b) REPRESENTATIONS AND WARRANTIES OF AMCE. AMCE hereby represents
and warrants to the Durwood Parties as follows:
(i) AMCE has full legal right, power and authority to enter into and
perform this Agreement. The execution and delivery of this Agreement and the
consummation by AMCE of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on behalf of AMCE. This Agreement
is a valid and binding obligation of AMCE enforceable against AMCE in accordance
with its terms, except that such enforcement may be subject to (x) bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and (y)
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(ii) Neither the execution and delivery of this Agreement by AMCE nor
the consummation by AMCE of the transactions contemplated hereby conflicts with
or constitutes a violation of or default under the charter or bylaws of AMCE,
any statute, law, regulation, order or decree applicable to AMCE, or any
material contract, commitment, agreement, arrangement or restriction of any kind
to which AMCE is a party or by which AMCE is bound.
6. NOTICES. Any notice, request, consent, waiver or other
communication required or permitted hereunder shall be effective only if it is
in writing and personally delivered or sent by certified or registered mail,
postage prepaid, addressed as follows:
To: AMC Entertainment Inc.: Suite 1700 Power & Light Bldg.
106 West 14th Street
Post Office Box 419615
Kansas City, MO 64141-6615
Attention: Corporate Secretary
To: any Durwood Party: to the address set forth next to
such Durwood Party's name on
the signature page hereof
To: Delta Properties, Inc.: Suite 1700 Power & Light Bldg.
106 West 14th Street
P.O. Box 419615
Kansas City, MO 64141-6615
Attention: Corporate Secretary
or such other address as may be specified in a notice duly given as provided
herein. Such notice or communication shall be deemed to have been given upon
receipt thereof. Information copies of all notices given a Durwood Party (other
than Stanley H. Durwood, the 1992 Trust or the 1989 Trust) or Delta shall be
given to:
<PAGE>
10
Robert C. Kopple, Esq.
Kopple & Klinger
2029 Century Park East
Suite 1040
Los Angeles, A 90067
Glenn Kurlander, Esq.
Schiff Hardin & Waite
150 East 52nd Street
Suite 2900
New York, New York 10022
Information copies of all notices given to Stanley H. Durwood, the
1992 Trust, the 1989 Trust or Delta should be given to:
Raymond F. Beagle, Jr., Esq.
Lathrop & Gage L.C.
2345 Grand Boulevard, 24th Floor
Kansas City, Missouri 64108-2684
Information copies of all notices given to AMCE shall be given to:
Charles J. Egan, Jr., Esq.
Hallmark Cards, Incorporated
2501 McGee Trafficway
Kansas City, MO 64141-6126
The Honorable Paul E. Vardeman
Polsinelli, White, Vardeman & Shalton
Suite 1000, Plaza Steppes
700 West 47th Street
Kansas City, MO 64112-1802
7. WAIVER. No delay or failure on the part of any party in
exercising any rights hereunder, and no partial or single exercise thereof, will
constitute a waiver of such rights or of any other rights hereunder.
8. BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors,
assigns, heirs, legatees, devisees, and personal and legal representations.
9. ENTIRE AGREEMENT. This Agreement, the Merger Agreement, the
Registration Agreement and the Stock Agreement and, with respect to the Durwood
Parties only, the Durwood Family Agreement constitute the entire agreement among
the parties hereto pertaining to the subject matter hereof. This Agreement
supersedes all prior or contemporaneous, written or
<PAGE>
11
verbal agreements, understandings and negotiations in connection herewith,
except that the Durwood Family Agreement shall not be deemed to be amended by
this Agreement and shall remain in full force and effect.
10. AMENDMENTS. This Agreement cannot be modified, amended or
terminated, except as provided by an instrument in writing signed by all the
parties hereto; PROVIDED, HOWEVER, that any provision of this Agreement may be
waived only in writing by the party to be charged with the waiver.
11. 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.
12. GOVERNING LAW; CONSENT TO JURISDICTION.
(a) This Agreement shall be construed in accordance with, and
governed by, the laws of the State of Missouri without giving the effect to
conflicts of laws principles thereof.
(b) Each party hereto hereby consents to, and confers exclusive
jurisdiction upon, the courts of the State of Missouri and the Federal courts of
the United States of America located in the City of Kansas City, Missouri, and
appropriate appellate courts therefrom, over any action, suit or proceeding
arising out of or relating to this Agreement. Each party covenants that it will
not commence any action, suit or proceeding arising out of or relating to this
Agreement in any other jurisdiction. Nothing in this paragraph shall affect the
rights of a party to enforce a judgment rendered by the courts referred to in
the first sentence of this paragraph in any other jurisdiction. Each party
hereto hereby waives, and agrees not to assert, as a defense in any such action,
suit or proceeding that it is not subject to such jurisdiction or that such
action, suit or proceeding may not be brought or is not maintainable in said
courts or that this Agreement may not be enforced in or by said courts or that
its property is exempt or immune from execution, that the suit, action or
proceeding is brought in an inconvenient forum, or that the venue of the suit,
action or proceeding is improper. Service of process in any such action, suit
or proceeding may be served on any party anywhere in the world, whether within
or without the State of Missouri, by mailing a copy thereof by registered or
certified mail, postage prepaid, to such party at its address provided in
Section 6 of this Agreement, provided that service of process may be
accomplished in any other manner permitted by applicable law.
13. HEADINGS. The headings to the paragraphs to 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.
14. 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.
<PAGE>
12
15. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests, or obligations hereunder may be assigned by any party hereto without
the prior written consent of the other party.
<PAGE>
13
IN WITNESS WHEREOF, this Agreement has been signed on behalf of AMC
Entertainment Inc. by Peter C. Brown, its President, by Delta and by each
Durwood Party, respectively, on the date first above written.
AMC ENTERTAINMENT INC.
By: /s/ Peter C. Brown
----------------------------------------
DELTA PROPERTIES, INC.
By: /s/ Peter C. Brown
----------------------------------------
Suite 1700
Power & Light Building
106 West 14th Street /s/ Stanley H. Durwood
P.O. Box 419615 -------------------------------------------
Kansas City, Missouri 64141-6615 Stanley H. Durwood
/s/ Carol D. Journagan
1323 Granite Creek Drive -------------------------------------------
Blue Springs, MO 64015 Carol D. Journagan
/s/ Edward D. Durwood
3001 West 68th Street -------------------------------------------
Shawnee Mission, KS 66208 Edward D. Durwood
/s/ Thomas A. Durwood
P.O. Box 7208 -------------------------------------------
Rancho Santa Fe, CA 92067 Thomas A. Durwood
/s/ Elissa D. Grodin
187 Chestnut Hill Road -------------------------------------------
Wilton, CT 06897 Elissa D. Grodin
/s/ Brian H. Durwood
655 N.W. Altishan Place -------------------------------------------
Beaverton, OR 97006 Brian H. Durwood
/s/ Peter J. Durwood
666 West End Avenue -------------------------------------------
New York, NY 10025 Peter J. Durwood
<PAGE>
14
Suite 1700
Power & Light Building
106 West 14th Street /s/ Stanley H. Durwood
P.O. Box 419615 -------------------------------------------
Kansas City, Missouri 64141-6615 Stanley H. Durwood, as trustee of the 1992
Trust
Suite 1700
Power & Light Building
106 West 14th Street /s/ Stanley H. Durwood
P.O. Box 419615 -------------------------------------------
Kansas City, Missouri 64141-6615 Stanley H. Durwood, as trustee of the 1989
Trust
<PAGE>
EXHIBIT B TO INDEMNIFICATION AGREEMENT
ESCROW AGREEMENT
This Escrow Agreement is entered into on [date], by and among (i) AMC
Entertainment Inc., a Delaware corporation ("AMCE"), (ii) Stanley H. Durwood,
individually, and as trustee of the 1992 Durwood, Inc. Voting Trust dated
December 12, 1992 (the "1992 TRUST") and as trustee of the Trust created
pursuant to the Stanley H. Durwood Trust Agreement dated August 14, 1989 (the
"1989 TRUST"), Carol D. Journagan, Edward D. Durwood, Thomas A. Durwood, Elissa
D. Grodin, Brian H. Durwood and Peter J. Durwood (all persons and entities
listed in this clause (ii) are referred to herein as the "DURWOOD PARTIES") and
(iii)______, a ______ corporation (the "ESCROW AGENT").
WHEREAS, AMCE, the Durwood Parties and Delta Properties, Inc., a
Missouri corporation, are parties to an Indemnification Agreement dated as of
[insert date] (the "INDEMNIFICATION AGREEMENT"); and
WHEREAS, Section 4(c) of the Indemnification Agreement provides that
certain shares of AMCE Common Stock and AMCE Class B Stock be deposited in
escrow for two years; and
WHEREAS, the Escrow Agent is willing to establish an escrow account
on the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. The Escrow Agent hereby acknowledges receipt of certificates
representing the shares of AMCE Common Stock and Class B Stock listed on
Exhibit A hereto (the "SHARES") from the Durwood Party whose name is set forth
next to such Shares on Exhibit A, in escrow, pursuant to this Escrow Agreement.
The Durwood Parties placing Shares in escrow is referred to herein as the
"OWNER" of such Shares and of all Additional Shares (as defined below) issued or
paid as dividends or other distributions thereon. The Escrow Agent agrees to
hold and dispose of the Shares and any Additional Shares in accordance with the
terms and conditions of this Escrow Agreement.
2. The Escrow Agent shall hold the Shares and all shares of capital
stock of AMCE or other securities issued or paid as dividends or other
distributions on the Shares ("ADDITIONAL SHARES") and release them only as set
forth in Section 3 below.
All dividends and other distributions (other than Additional Shares)
on Shares received by the Escrow Agent will be immediately distributed to the
Owner of such Shares. Each Durwood Party severally agrees to immediately forward
the Escrow Agent for deposit in escrow all Additional Shares received by such
Durwood Party while the relevant Shares remain in escrow hereunder.
<PAGE>
2
The Escrow Agent shall maintain a ledger setting forth the number of
Shares placed in escrow by each Durwood Party and all Additional Shares issued
in respect of such Shares and deposited in escrow.
3. The Escrow Agent shall distribute the Shares and Additional
Shares as follows:
(a) Subject to paragraphs (b) and (c) below, all Shares and
Additional Shares shall be released from escrow and distributed to the Durwood
Party that is the Owner thereof promptly following the second anniversary of the
date hereof.
(b) Shares and Additional Shares shall be released from escrow, in
whole or in part, from time to time upon the Escrow Agent's receipt of a joint
written notice of AMCE and the Durwood Party that is the Owner of such Shares
and Additional Shares in accordance with such notice.
(c) If the Escrow Agent is notified of a claim against or in respect
of Shares or Additional Shares or if a claim is made against the Escrow Agent in
respect of Shares or Additional Shares, such Shares and Additional Shares shall
continue to be held, and not released from escrow, except pursuant to the final
unappealable order (or an order for which the time to appeal has expired without
an appeal having been made ) of a court of competent jurisdiction.
4. It is understood and agreed that the duties of the Escrow Agent
are purely ministerial in nature. It is further agreed that:
(a) the Escrow Agent may conclusively rely and shall be protected in
acting or refraining from acting upon any document, instrument, certificate,
instruction or signature believed by it to be genuine and may assume and shall
be protected in assuming that any person purporting to give any notice or
instructions in accordance with this Escrow Agreement or in connection with any
transaction to which this Escrow Agreement relates has been duly authorized to
do so. The Escrow Agent shall not be obligated to make any inquiry as to the
authority, capacity, existence or identity of any person purporting to have
executed any such document or instrument or have made any such signature or
purporting to give any such notice or instructions;
(b) in the event that the Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall receive instructions with respect to the
Shares and Additional Shares which, in its sole opinion, are in conflict with
either other instructions received by it or any provision of the Escrow
Agreement, it shall, without liability of any kind, be entitled to hold the
Shares and Additional Shares pending the resolution of such uncertainty to the
Escrow Agent's sole satisfaction, by final judgment of a court or courts of
competent jurisdiction or otherwise, or the Escrow Agent, at its option, may, in
final satisfaction of its duties hereunder, deposit the relevant Shares and
Additional Shares with the clerk of any other court of competent jurisdiction;
<PAGE>
3
(c) the Escrow Agent undertakes to perform only such duties as are
expressly set forth herein and shall not be bound in any way by any agreement
between AMCE and the Durwood Parties (whether or not the Escrow Agent has
knowledge thereof);
(d) The Escrow Agent shall not be liable for any action taken by it
in good faith and believed by it to be authorized or within the rights or powers
conferred upon it by this Escrow Agreement (provided that the Escrow Agent shall
be liable for its gross negligence and willful misconduct), and may consult with
counsel of its own choice and shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel; and
(e) the Escrow Agent shall not assume any responsibility or liability
for any transactions between AMCE and the Durwood Parties.
5. AMCE agrees to indemnify the Escrow Agent, its directors,
officers, agents and employees and any person who "controls" the Escrow Agent
within the meaning of Section 15 of the Securities Act of 1933, as amended
(collectively the "INDEMNIFIED PARTIES") against, and hold them harmless from,
any and all loss, liability, cost, damage and expense, including, without
limitation, costs of investigation and reasonable counsel fees and expenses,
which any of the Indemnified Parties may suffer or incur by reason of any
action, claim or proceeding brought against any of the Indemnified Parties,
arising out of or relating in any way to this Escrow Agreement or any
transaction to which this Escrow Agreement relates, other than any action, claim
or proceeding to the extent resulting from the gross negligence or willful
misconduct of such Indemnified Party. The provisions of this paragraph shall
survive the termination of this Escrow Agreement.
6. This Escrow Agreement may be altered, amended or terminated only
with the written consent of AMCE, the Durwood Parties and the Escrow Agent.
Should AMCE and the Durwood Parties attempt to change this Escrow Agreement in a
manner which, in the Escrow Agent's sole opinion, is undesirable, the Escrow
Agent may resign as Escrow Agent upon two weeks' written notice to AMCE and the
Durwood Parties; otherwise, notwithstanding any provision hereof to the
contrary, it may resign as Escrow Agent at any time upon 60 days' written notice
to AMCE and the Durwood Parties. In the case of the Escrow Agent's resignation,
its only duty shall be to hold and dispose of the Shares and Additional Shares
in accordance with the original provisions of this Escrow Agreement until a
successor escrow agent shall be appointed by AMCE and the Durwood Parties acting
by majority vote (in which each such party shall have one vote) and a written
notice of the name and address of such successor escrow agent shall be given to
the Escrow Agent by AMCE and the Durwood Parties, whereupon the Escrow Agent's
only duty shall be to turn over, in accordance with the written instructions of
AMCE and the Durwood Parties, to the successor escrow agent the Shares and
Additional Shares and any documentation related thereto. In the event that a
successor escrow agent shall not have been appointed and the Escrow Agent shall
not have turned over to the successor escrow agent the Shares and Additional
Shares within the time periods specified above, or the Escrow Agent's
<PAGE>
4
written notice of resignation, as the case may be, the Escrow Agent may deposit
the Shares and Additional Shares with the clerk of any other court of competent
jurisdiction, at which time the Escrow Agent's duties hereunder shall terminate.
7. The Escrow Agent shall be entitled to a fee of [fees to be
inserted]. The fees will be payable by AMCE.
8. THIS ESCROW AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF __________ WITHOUT APPLICATION TO THE
PRINCIPLES OF CONFLICTS OF LAWS. This Escrow Agreement shall be binding upon the
parties hereto and their respective successors and assigns; provided, however,
that any assignment or transfer by any party of its rights under this Escrow
Agreement shall be void (as against the Escrow Agent or otherwise) unless:
(a) written notice thereof shall be given to the Escrow Agent, AMCE
and the Durwood Parties; and
(b) the Escrow Agent, AMCE and the Durwood Parties shall have
consented, in writing, to such assignment or transfer.
9. All notices, requests, demands and other communications to be
given in connection with this Escrow Agreement shall be in writing, shall be
delivered by hand, overnight delivery service or by facsimile transmission,
shall be deemed given when received and shall be addressed to the Escrow Agent
at the address listed below or to AMCE and the Durwood Parties at the respective
addresses listed on the signature pages or to such other addresses as they shall
designate from time to time in writing, forwarded in like manner; PROVIDED,
HOWEVER, that if any notice given by telecopy is received other than during the
regular business hours of the recipient, it shall be deemed to have been given
on the opening of business on the next business day of the recipient
If to the Escrow Agent:
[name]
[address]
Attention:
Telecopier No.:
<PAGE>
5
Information copies of all notices given a Durwood party (other than
Stanley H. Durwood, the 1992 Trust or the 1989 Trust) shall be given to:
Robert C. Kopple, Esq.
Kopple & Klinger
2029 Century Park East
Suite 1040
Los Angeles, A 90067
Glenn Kurlander, Esq.
Schiff Hardin & Waite
Schiff Hardin & Waite
150 East 52nd Street
Suite 2900
New York, New York 10022
Information copies of all notices given to Stanley H. Durwood, the
1992 Trust or the 1989 Trust should be given to:
Raymond F. Beagle, Jr., Esq.
Lathrop & Gage L.C.
2345 Grand Boulevard, 24th Floor
Kansas City, Missouri 64108-2684
Information copies of all notices given to AMCE shall be given to:
Charles J. Egan, Jr., Esq.
Hallmark Cards, Incorporated
2501 McGee Trafficway
Kansas City, MO 64141-6126
The Honorable Paul E. Vardeman
Polsinelli, White, Vardeman & Shalton
Suite 1000, Plaza Steppes
700 West 47th Street
Kansas City, MO 64112-1802
10. If any provision of this Escrow Agreement or the application
thereof to any person or circumstance shall be determined to be invalid or
unenforceable, the remaining provisions of this Escrow Agreement or the
application of such provision to persons or circumstances other than those to
which it is held invalid or unenforceable shall not be affected thereby and
shall be valid and enforceable to the fullest extent permitted by law.
<PAGE>
6
11. This Escrow Agreement may be executed in several counterparts or
by separate instruments, and all of such counterparts or instruments shall
constitute one agreement, binding on all the parties hereto.
12. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as the context may
require.
IN WITNESS WHEREOF, the undersigned have executed this Escrow
Agreement as of the day and year first above written.
[Escrow Agent]
By:
--------------------------------
Name:
Title:
Suite 1700
Power & Light Building AMC ENTERTAINMENT INC.
106 West 14th Street
P.O. Box 419615 By:
Kansas City, Missouri 64141-6615 --------------------------------
Suite 1700
Power & Light Building
106 West 14th Street
P.O. Box 419615 -----------------------------------
Kansas City, Missouri 64141-6615 Stanley H. Durwood
1323 Granite Creek Drive -----------------------------------
Blue Springs, MO 64015 Carol D. Journagan
3001 West 68th Street -----------------------------------
Shawnee Mission, KS 66208 Edward D. Durwood
P.O. Box 7208 -----------------------------------
Rancho Santa Fe, CA 92067 Thomas A. Durwood
187 Chestnut Hill Road -----------------------------------
Wilton, CT 06897 Elissa D. Grodin
<PAGE>
7
655 N.W. Altishan Place -----------------------------------
Beaverton, OR 97006 Brian H. Durwood
666 West End Avenue -----------------------------------
New York, NY 10025 Peter J. Durwood
Suite 1700
Power & Light Building
106 West 14th Street
P.O. Box 419615 -----------------------------------
Kansas City, Missouri 64141-6615 Stanley H. Durwood, as trustee of
the 1992 Trust
Suite 1700
Power & Light Building
106 West 14th Street
P.O. Box 419615 -----------------------------------
Kansas City, Missouri 64141-6615 Stanley H. Durwood, as trustee of
the 1989 Trust
<PAGE>
EXHIBIT A
NAMES SHARES
<PAGE>
FIRST AMENDMENT
TO
DURWOOD FAMILY SETTLEMENT AGREEMENT
THIS AMENDMENT is made as of this 18th day of March 1997 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 herein,
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").
WHEREAS, the parties entered into a certain agreement entitled the "Durwood
Family Settlement Agreement" dated as of January 22, 1996 ("Settlement
Agreement") regarding, among other things, the liquidation of American
Associated Enterprises, a Missouri limited partnership ("AAE"), and the merger
of Durwood, Inc., a Missouri corporation ("DI"), with and into AMC
Entertainment, Inc., a Delaware corporation ("AMCE"); and
WHEREAS, the parties desire to amend various provisions of the Settlement
Agreement to conform to the proposed provisions of various other agreements
negotiated by the parties and others in connection with the aforesaid merger;
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
agreements, promises, covenants and representations hereinafter set forth, the
parties, intending to be bound legally, hereby agree as follows:
1. Capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in the Settlement Agreement.
2. The first two sentences of Section 3(a) of the Settlement Agreement
shall be, and hereby are, amended in their entirety, as follows:
The Partners agree to effect all of the actions set forth in the "DI
Pre-Merger Action Plan" attached hereto as EXHIBIT "A" and
incorporated herein by reference, or such variations of such actions
as shall be agreed upon in writing by the Partners (and AMCE pursuant
to Section 4(a) of the Indemnification Agreement among AMCE, the
Partners and Delta). The Partners agree (i) that all of the assets of
DI (other than the shares of AMCE Common Stock
<PAGE>
and AMCE Class B Stock owned by DI) and all of the liabilities of DI
shall be transferred to Delta prior to distribution of the capital
stock of Delta by DI to its shareholders as contemplated by the
provisions of Section 3(b) of this Agreement, and (ii) that the
shareholders of DI (who ultimately will be the shareholders of Delta
following such distribution) shall negotiate an amendment to this
Agreement allocating the relative benefits and burdens of such assets
and liabilities so transferred as amongst themselves.
3. The first sentence of Section 5 of the Settlement Agreement shall be,
and hereby is, amended in its entirety as follows:
For the three-year period following the Effective Time, each Durwood
Child, severally, shall irrevocably appoint the secretary and each
assistant secretary of AMCE as proxy and attorney, with full power of
substitution, to vote all shares of AMCE Common Stock owned by such
Durwood Child from time to time for each candidate for the Board of
Directors of AMCE in the same proportion as the aggregate votes cast
in such elections by all other holders of AMCE Common Stock not
affiliated with AMCE, its directors and officers, and shall take no
action to revoke or interfere with the exercise of such proxy or to
vote the shares subject to such proxy in any manner inconsistent with
the proxy.
4. The third sentence of Section 17 of the Settlement Agreement shall be,
and hereby is, amended in its entirety as follows:
In addition, if for any reason the Merger Agreement shall not have
been executed on or before March 31, 1997, or the Merger shall not
have been consummated on or before September 30, 1997, the Durwood
Children shall have the right to terminate this Agreement.
5. Except as expressly modified by this Amendment, each party hereby
expressly reserves all of its rights, remedies and defenses under, arising out
of or related to the Settlement Agreement, the transactions contemplated thereby
and all applicable laws, whether at law or in equity.
6. Except as expressly modified by this Amendment the Settlement
Agreement shall remain in full force and effect in accordance with its terms and
is hereby ratified and confirmed in all respects by the parties hereto.
2
<PAGE>
7. This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
First Amendment to Settlement Agreement on the date first above written.
Date: March 22, 1997 /s/ S. H. Durwood
----------------------------------------
Stanley H. Durwood, individually
and as trustee of the aforesaid
trusts.
Date: March 22, 1997 /s/ Carol D. Journagan
----------------------------------------
Carol D. Journagan
Date: March 25, 1997 /s/ Elissa D. Grodin
----------------------------------------
Elissa D. Grodin
Date: March 23, 1997 /s/ Edward D. Durwood
----------------------------------------
Edward D. Durwood
Date: March 21, 1997 /s/ Brian H. Durwood
----------------------------------------
Brian H. Durwood
Date: March 24, 1997 /s/ Thomas A. Durwood
----------------------------------------
Thomas A. Durwood
Date: March 22, 1997 /s/ Peter J. Durwood
----------------------------------------
Peter J. Durwood
3
<PAGE>
PLAN AND AGREEMENT OF LIQUIDATION AND MERGER
This Plan and Agreement of Liquidation and Merger (the "Plan") is made on
March 31, 1997, by AMC Realty, Inc., a Delaware corporation ("AMCR"), and AMC
Canton Realty, Inc., a Delaware corporation ("Canton"). On the Effective Date
(as defined in paragraph 4 below), AMCR shall own all of the shares of the sole
class of stock of Canton. It is intended that the merger contemplated by the
Plan shall constitute a liquidation of Canton in which no taxable gain or loss
is recognized pursuant to Section 332 of the Internal Revenue Code of 1986, as
amended. The terms and conditions of the Plan are as follows:
1. NAMES OF CORPORATIONS. The names of the corporations proposing to
merge are:
AMC Realty, Inc.
and
AMC Canton Realty, Inc.
2. MERGER. On the Effective Date AMCR and Canton shall merge into a
single corporation by Canton merging into AMCR.
3. NAME OF SURVIVING CORPORATION. The name of AMC Realty, Inc., which is
to be the surviving corporation, shall not be changed as a result of the merger.
4. EFFECTIVE DATE. The merger shall be effected at the close of business
on April 2, 1997 (the "Effective Date").
5. EFFECT OF MERGER. (a) On the Effective Date, the separate existence
of Canton shall cease, except to the extent that its separate existence may be
continued by law. The existence of AMCR shall continue unaffected and
unimpaired by the merger, and AMCR shall after the Effective Date have all of
the rights, privileges, immunities and powers, and shall be subject to all of
the duties and liabilities, of a corporation organized under the General
Corporation Law of Delaware.
(b) On the Effective Date, AMCR shall have and thereafter possess
all the rights, privileges, immunities, powers and franchises, of a public as
well as of private nature, of Canton,
<PAGE>
and all property, real, personal and mixed, and all debts due on whatever
account and all other choses in action, and every other interest of or belonging
to or due to Canton shall be taken and deemed to be transferred to and vested or
remain in AMCR without further act or deed (and the title to any real estate, or
any interest therein, vested in the merging corporations shall not revert or be
in any way impaired by reason of the merger).
(c) Upon the Effective Date and thereafter, AMCR shall be
responsible and liable for all the liabilities and obligations of Canton, and
any claim existing or action or proceeding pending by or against any of such
entities may be prosecuted to judgment as if such merger had not taken place or,
in the case of Canton, AMCR may be substituted in its place. Neither the
rights of creditors nor any liens upon the property of the merging corporations
shall be impaired by the merger.
(d) The respective officers of Canton are hereby authorized to
execute all deeds, assignments and other documents which may be necessary to
effect the full and complete transfer of the properties of such corporations to
AMCR. The officers of AMCR are hereby authorized to execute and deliver any and
all documents which may be required of it in order for it to assume or otherwise
comply with any liability or obligation of Canton. If at any time AMCR shall
determine that any further documents are necessary or desirable to vest in it,
according to the terms hereof, the title to any property, rights, privileges,
immunities, powers or franchises of Canton, then the officers of such entities
shall execute and deliver all such documents and do all things necessary to vest
in and confirm to AMCR title and possession to all such property, rights,
privileges, immunities, powers and franchises, and to otherwise carry out the
purposes of this Plan.
6. CANCELLATION OF SHARES. (a) The manner and basis of cancelling the
shares of stock of the merging corporations shall be as follows:
(i) On the Effective Date, each share of the authorized $1.00 par
value common stock of AMCR, whether or not issued and outstanding, shall
continue to be one share of the $1.00 par value common stock of AMCR.
(ii) On the Effective Date, each of the one thousand (1,000) shares of
the $1.00 par value common stock of Canton which are issued and outstanding
(whether or not such shares are in all respects validly issued) and owned of
record by AMCR shall be cancelled.
7. ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS; OFFICERS. The Articles
of Incorporation and Bylaws of AMCR shall not be changed by or as a result of
the merger. The directors and officers of AMCR prior to the merger shall
continue in such offices after the merger.
8. FURTHER ACTION. Each of the merging corporations shall take all
actions and do all things necessary, proper, or advisable under the laws of the
State of Delaware to consummate and make effective the merger contemplated
herein.
2
<PAGE>
IN WITNESS WHEREOF, this Plan and Agreement of Liquidation and Merger has
been signed on behalf of AMC Realty, Inc. by Peter C. Brown, its Executive Vice
President and on behalf of AMC Canton Realty, Inc. by Peter C. Brown, its
Executive Vice President, and the corporate seal of each corporation has been
affixed hereto and attested to by the Secretary of each corporation,
respectively, on the date first above written.
AMC REALTY, INC.
By: /s/ Peter C. Brown
Peter C. Brown, Executive Vice President
(SEAL)
ATTEST:
/s/ Nancy L. Gallagher
Nancy L. Gallagher, Secretary
AMC CANTON REALTY, INC.
By: /s/ Peter C. Brown
Peter C. Brown, Executive Vice President
(SEAL)
ATTEST:
/s/ Nancy L. Gallagher
Nancy L. Gallagher, Secretary
3
<PAGE>
EXHIBIT 2.7b
CERTIFICATE OF OWNERSHIP AND MERGER
-----------------------------------
Pursuant to the provisions of the General Corporation Law of Delaware, the
undersigned, AMC Realty, Inc., a Delaware corporation ("AMCR"), and AMC Canton
Realty, Inc., a Delaware corporation, ("Canton"), each certifies as follows:
1. AMCR, pursuant to Section 253 of the General Corporation Law of
Delaware, has adopted a Plan and Agreement of Liquidation and Merger (the
"Plan"), a copy of which is attached hereto and incorporated herein by this
reference, pursuant to which Canton shall be merged into and with AMCR.
2. On March 28, 1997, the Board of Directors of AMCR, by statement of
unanimous consent to action, adopted the following resolutions approving the
Plan and Agreement of Liquidation and Merger:
WHEREAS, it is in the best interests of this corporation to enter into
a Plan and Agreement of Liquidation and Merger with AMC Canton Realty, Inc.
("Canton"), a Delaware corporation, pursuant to which Canton will be merged
into and with this corporation;
NOW, THEREFORE, BE IT RESOLVED, that the Plan and Agreement of
Liquidation and Merger (the "Plan") dated this date between this
corporation and Canton, a copy of which is attached hereto and incorporated
herein by this reference, be, and it hereby is, adopted and approved in all
respects as and for a binding obligation of this corporation; and
FURTHER RESOLVED, that the Chairman, or any Executive Vice President
of this corporation be, and each of such officers hereby is, authorized and
directed in the name of and on behalf of this corporation, and under its
corporate seal attested by its Secretary or any Assistant Secretary, to
execute, seal, verify, acknowledge and deliver the Plan substantially in
the form attached hereto, with such changes therefrom, if any, as the
officer executing the same may approve, such approval to be conclusively
evidenced by the signature of such officer; and
FURTHER RESOLVED, that the Chairman, or any Executive Vice President
of this corporation be, and each of such officers hereby is, authorized and
directed in the name of and on behalf of this corporation to cause a
document entitled "Certificate of Ownership and Merger" to be prepared,
executed, acknowledged and
<PAGE>
filed with the Delaware Secretary of State in accordance with the
provisions of the General Corporation Law of the State of Delaware and to
take such other action, including the making of one or more filings with
the appropriate government agencies or offices of other states in which
this corporation or Canton is qualified to transact business, as may be
necessary or appropriate to cause the merger to be effective in Delaware
and such other states; and
FURTHER RESOLVED, that the officers of this corporation be, and they
hereby are, authorized and directed, in the name of and on behalf of this
corporation and under its corporate seal, to execute and deliver all such
further agreements, certificates and other instruments and to take all such
further actions as any such officer may consider necessary or appropriate
in order to effect the merger of Canton into this corporation in accordance
with the terms, conditions and provisions of the Plan and to carry out the
purpose and intent of these resolutions.
3. AMCR owns all of the outstanding shares of the sole class of stock of
Canton. AMCR shall maintain its ownership of at least 90% of the outstanding
shares of each class of stock of Canton until the issuance of a Certificate of
Merger by the Delaware Secretary of State.
IN WITNESS WHEREOF, this Certificate of Ownership and Merger has been
executed on behalf of AMC Realty, Inc. by Peter C. Brown, Executive Vice
President of the corporation, and on behalf of AMC Canton Realty, Inc. by Peter
C. Brown, Executive Vice President of the corporation, and the corporate seal of
each such corporation has been affixed hereto and attested to by the Secretary
of the respective corporation on March 31, 1997.
AMC REALTY, INC.
By: /s/ Peter C. Brown
Peter C. Brown, Executive Vice President
(SEAL)
ATTEST:
/s/ Nancy L. Gallagher
Nancy L. Gallagher, Secretary
<PAGE>
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
I, the undersigned, a notary public, do hereby certify that on the 31st day
of March, 1997, personally appeared before me Peter C. Brown, who, being by me
first duly sworn, declared that he is the Executive Vice President of AMC
Realty, Inc., a Delaware corporation, that he signed the foregoing document as
Executive Vice President of said corporation, and that the statements contained
therein are true.
In witness whereof, I have hereunto set my hand and affixed my official
seal the day and year last above written.
/s/ Susan Diane Slusler
Notary Public in and for said County and State
My Commission expires:
- ----------------------------
3
<PAGE>
AMC CANTON REALTY, INC.
By: /s/ Peter C. Brown
Peter C. Brown, Executive Vice President
(SEAL)
ATTEST:
/s/ Nancy L. Gallagher
Nancy L. Gallagher, Secretary
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
I, the undersigned, a notary public, do hereby certify that on the 31st day
of March, 1997, personally appeared before me Peter C. Brown, who, being by me
first duly sworn, declared that he is the Executive Vice President of AMC Canton
Realty, Inc., a Delaware corporation, that he signed the foregoing document as
Executive Vice President of said corporation, and that the statements contained
therein are true.
In witness whereof, I have hereunto set my hand and affixed my official
seal the day and year last above written.
/s/ Susan Diane Slusler
Notary Public in and for said County and State
My Commission expires:
- ----------------------------
4
<PAGE>
EXHIBIT 2.8A
PLAN AND AGREEMENT OF LIQUIDATION AND MERGER
--------------------------------------------
This Plan and Agreement of Liquidation and Merger (the "Plan") is made on
March 31, 1997, by AMC Philadelphia, Inc., a Delaware corporation ("AMCP") and
Budco Theatres, Inc., a Pennsylvania corporation ("Budco"). On the Effective
Date (as defined in paragraph 4 below), AMCP shall own all of the shares of the
sole class of stock of Budco. It is intended that the merger contemplated by
the Plan shall constitute a liquidation of Budco in which no taxable gain or
loss is recognized pursuant to Section 332 of the Internal Revenue Code of 1986,
as amended. The terms and conditions of the Plan are as follows:
1. NAMES OF CORPORATIONS. The names of the corporations proposing to
merge are:
AMC Philadelphia, Inc.
and
Budco Theatres, Inc.
2. MERGER. On the Effective Date AMCP and Budco shall merge into a
single corporation by Budco merging into AMCP.
3. NAME OF SURVIVING CORPORATION. The name of AMC Philadelphia, Inc.
which is to be the surviving corporation, shall not be changed as a result of
the merger.
4. EFFECTIVE DATE. The merger shall be effected at the close of business
on April 2, 1997 (the "Effective Date").
5. EFFECT OF MERGER. (a) On the Effective Date, the separate existence
of Budco shall cease, except to the extent that its separate existence may be
continued by law. The existence of AMCP shall continue unaffected and
unimpaired by the merger, and AMCP shall after the Effective Date have all of
the rights, privileges, immunities and powers, and shall be subject to all of
the duties and liabilities, of a corporation organized under the General
Corporation Law of Delaware.
<PAGE>
(b) On the Effective Date, AMCP shall have and thereafter possess all
the rights, privileges, immunities, powers and franchises, of a public as well
as of a private nature, of Budco, and all property, real, personal and mixed,
and all debts due on whatever account and all other choses in action, and every
other interest of or belonging to or due to Budco shall be taken and deemed to
be transferred to and vested or remain in AMCP without further act or deed (and
the title to any real estate, or any interest therein, vested in the merging
corporations shall not revert or be in any way impaired by reason of the
merger).
(c) Upon the Effective Date and thereafter, AMCP shall be responsible
and liable for all liabilities and obligations of Budco, and any claim existing
or action or proceeding pending by or against any of such entities may be
prosecuted to judgement as if such merger had not taken place or, in the case of
Budco, AMCP may be substituted in its place. Neither the rights of creditors
nor any liens upon the property of the merging corporations shall be impaired by
the merger.
(d) The respective officers of Budco are hereby authorized to execute
all deeds, assignments and other documents which may be necessary to effect the
full and complete transfer of the properties of such corporations to AMCP. The
officers of AMCP are hereby authorized to execute and deliver any and all
documents which may be required of it in order for it to assume or otherwise
comply with any liability or obligation of Budco. If at any time AMCP shall
determine that any further documents are necessary or desirable to vest in it,
according to the terms hereof, the title to any property, rights, privileges,
immunities, powers or franchises of Budco, then the officers of such entities
shall execute and deliver all such documents and do all things necessary to vest
in and confirm to AMCP title and possession of all such property, rights,
privileges, immunities, powers and franchises, and to otherwise carry out the
purposes of this Plan.
6. CANCELLATION OF SHARES. (a) The manner and basis of cancelling the
shares of stock of the merging corporations shall be as follows:
(i) On the Effective Date, each share of the authorized $1.00 par
value common stock of AMCP, whether or not issued and outstanding, shall
continue to be one share of the $1.00 par value common stock of AMCP.
(ii) On the Effective Date, each of the seven thousand five hundred
(7,500) shares of the $1.00 par value common stock of Budco which are issued and
outstanding (whether or not such shares are in all respects validly issued) and
owned of record by AMCP shall be cancelled.
7. ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS; OFFICERS. The Articles
of Incorporation and Bylaws of AMCP shall not be changed by or as a result of
the merger. The directors and officers of AMCP prior to the merger shall
continue in such officers after the merger.
8. FURTHER ACTION. Each of the merging corporations shall take all
actions and do all things necessary, proper or advisable under the laws of the
States of Delaware and Pennsylvania to consummate and make effective the merger
contemplated herein.
-2-
<PAGE>
IN WITNESS WHEREOF, this Plan and Agreement of Liquidation and Merger has
been signed on behalf of AMC Philadelphia, Inc. by Peter C. Brown, its Executive
Vice President and on behalf of Budco Theatres, Inc. by Peter C. Brown, its
Executive Vice President, and the corporate seal of each corporation has been
affixed hereto and attested to by the Secretary of each corporation,
respectively, on the date first above written.
AMC PHILADELPHIA, INC.
By: /s/ Peter C. Brown
Peter C. Brown, Executive Vice President
(SEAL)
ATTEST:
/s/ Nancy L. Gallagher
Nancy L. Gallagher, Secretary
BUDCO THEATRES, INC.
By: /s/ Peter C. Brown
Peter C. Brown, Executive Vice President
(SEAL)
ATTEST:
/s/ Nancy L. Gallagher
Nancy L. Gallagher, Secretary
-3-
<PAGE>
EXHIBIT 2.8B
CERTIFICATE OF OWNERSHIP AND MERGER
-----------------------------------
Pursuant to the provisions of the General Corporation Law of Delaware, the
undersigned, AMC Philadelphia, Inc., a Delaware corporation ("AMCP") and Budco
Theatres, Inc., a Pennsylvania corporation ("Budco"), each certifies as follows:
1. AMCP, pursuant to Section 253 of the General Corporation Law of
Delaware, has adopted a Plan and Agreement of Liquidation and Merger (the
"Plan"), a copy of which is attached hereto and incorporated herein by this
reference, pursuant to which Budco shall be merged into and with AMCP.
2. On March 28, 1997, the Board of AMCP, by statement of unanimous
consent to action, adopted the following resolutions approving the Plan and
Agreement of Liquidation and Merger:
WHEREAS, it is in the best interests of this corporation to enter
into a Plan and Agreement of Liquidation and Merger with Budco
Theatres, Inc. ("Budco"), a Pennsylvania corporation, pursuant to
which Budco will be merged into and with this corporation;
NOW, THEREFORE, BE IT RESOLVED, that the Plan and Agreement of
Liquidation and Merger (the "Plan") dated this date between this
corporation and Budco, a copy of which is attached hereto and
incorporated herein by this reference, be, and it hereby is, adopted
and approved in all respects as and for a binding obligation of this
corporation; and
FURTHER RESOLVED, that the Chairman, or any Executive Vice
President of this corporation be, and each of such officers hereby is,
authorized and directed in the name of and on behalf of this
corporation, and under its corporate seal attested by its Secretary or
any Assistant Secretary, to execute, seal, verify, acknowledge and
deliver the Plan substantially in the form attached hereto, with such
changes therefrom, if any, as the officer executing the same may
approve, such approval to be conclusively evidenced by the signature
of such officer; and
FURTHER RESOLVED, that the Chairman, or any Executive Vice
President of this corporation be, and each of such officers hereby is,
authorized and directed in the name of and on behalf of this
corporation to cause a document entitled "Certificate of Ownership and
Merger" to be prepared, executed, acknowledged and
<PAGE>
filed with the Delaware Secretary of State in accordance with the
provisions of the General Corporation Law of the State of Delaware and to
take such other action, including the making of one or more filings with
the appropriate government agencies or offices of such states in which this
corporation or Budco is qualified to transact business, as may be necessary
or appropriate to cause the merger to be effective in Delaware and such
other states; and
FURTHER RESOLVED, that the officers of this corporation be, and
they hereby are, authorized and directed, in the name of and on behalf
of this corporation and under its corporate seal, to execute and
deliver all such further agreements, certificates and other
instruments and to take all such further actions as such officer may
consider necessary or appropriate in order to effect the merger of
Budco into this corporation in accordance with the terms, conditions
and provisions of the Plan and to carry out the purpose and intent of
these resolutions.
3. AMCP owns all of the outstanding shares of the sole class of stock of
Budco. AMCP shall maintain its ownership of at least 90% of the outstanding
shares of each class of stock of Budco until the issuance of a Certificate of
Merger by the Delaware Secretary of State.
IN WITNESS WHEREOF, this Certificate of Ownership and Merger has been
executed on behalf of AMC Philadelphia, Inc. by Peter C. Brown, Executive Vice
President of the corporation, and on behalf of Budco Theatres, Inc. by Peter C.
Brown, Executive Vice President of the corporation, and the corporate seal of
each such corporation has been affixed hereto and attested to by the Secretary
of the respective corporations on March 31, 1997.
AMC PHILADELPHIA, INC.
By: /s/ Peter C. Brown
Peter C. Brown, Executive Vice President
(SEAL)
ATTEST:
/s/ Nancy L. Gallagher
Nancy L. Gallagher, Secretary
-2-
<PAGE>
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
I, the undersigned, a notary public, do hereby certify that on the 31st
day of March, 1997, personally appeared before me, Peter C. Brown, who, being by
me first duly sworn, declared that he is the Executive Vice President of AMC
Philadelphia, Inc., a Delaware corporation, that he signed the foregoing
document as Executive Vice President of said corporation, and that the
statements contained therein are true.
In witness whereof, I have hereunto set my hand and affixed my official
seal the day and year last above written.
/s/ Susan Diane Slusler
Notary Public in and for said County and State
My Commission expires:
- --------------------------
-3-
<PAGE>
BUDCO THEATRES, INC.
By: /s/ Peter C. Brown
Peter C. Brown, Executive Vice President
(SEAL)
ATTEST:
/s/ Nancy L. Gallagher
Nancy L. Gallagher, Secretary
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
I, the undersigned, a notary public, do hereby certify that on the 31st day
of March, 1997, personally appeared before me, Peter C. Brown, who, being by me
first duly sworn, declared that he is the Executive Vice President of Budco
Theatres, Inc., a Pennsylvania corporation, that he signed the foregoing
document as Executive Vice President of said corporation, and that the
statements contained therein are true.
In witness whereof, I have hereunto set my hand and affixed my official
seal the day and year last above written.
/s/ Susan Diane Slusler
Notary Public in and for said County and State
My Commission expires:
- --------------------------
-4-
<PAGE>
EXHIBIT 2.8c
Microfilm Number Filed with the Department of State on
----- -----
-------------------------------------------
Secretary of the Commonwealth
ARTICLES OF MERGER-DOMESTIC BUSINESS CORPORATION
DSCB:15-1926 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. Section 1926 (relating to
articles of merger or consolidation), the undersigned business corporations,
desiring to effect a merger, hereby state that:
1. The name of the corporation surviving the merger is:
AMC Philadelphia, Inc.
2. The surviving corporation is a qualified foreign business corporation
incorporated under the laws of Delaware and the (a) address of its current
registered office in this Commonwealth or (b) name of its commercial
registered office provider and the county of venue is (the Department is
hereby authorized to correct the following information to conform to the
records of the Department):
(a) 1635 Market St., Philadelphia, PA 19103, Philadelphia County
(b) c/o C T Corporation System
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. The name and the address of the registered office in this Commonwealth or
name of its commercial registered office provider and the county of venue
of each other domestic business corporation and qualified foreign business
corporation which is a party to the plan of merger are as follows:
c/o C T Corporation Systems, 1635 Market St., Philadelphia, PA 19103,
Philadelphia County
4. The plan of merger shall be effective upon filing these Articles of Merger
in the Department of State.
5. The manner in which the plan of merger was adopted by each domestic
corporation is as follows:
Budco Theatres, Inc. Adopted by action of the board of directors of the
corporation pursuant to 15 Pa.C.S. Section
1924(b)(2).
<PAGE>
6. The plan was authorized, adopted or approved, as the case may be, by the
foreign business corporation (or each of the foreign corporations) party to
the plan in accordance with the laws of the jurisdiction in which it is
incorporated.
7. The plan of merger is set forth in full in Exhibit A attached hereto and
made a part hereof.
IN TESTIMONY WHEREOF, the undersigned corporation or each undersigned
corporation has caused these Articles of Merger to be signed by a duly
authorized officer thereof this 31st day of March, 1997.
AMC PHILADELPHIA, INC.
BY: /s/ Peter C. Brown
TITLE: Executive Vice President
BUDCO THEATRES, INC.
BY: /s/ Peter C. Brown
TITLE: Executive Vice President
<PAGE>
EXHIBIT 2.9a
PLAN AND AGREEMENT OF LIQUIDATION AND MERGER
--------------------------------------------
This Plan and Agreement of Liquidation and Merger (the "Plan") is made on
March 31, 1997, by American Multi-Cinema, a Missouri corporation ("AMC") and AMC
Philadelphia, Inc., a Delaware corporation ("AMCP"). On the Effective Date (as
defined in paragraph 4 below), AMC shall own all of the shares of the sole class
of stock of AMCP. It is intended that the merger contemplated by the Plan shall
constitute a liquidation of AMCP in which no taxable gain or loss is recognized
pursuant to Section 332 of the Internal Revenue Code of 1986, as amended. The
terms and conditions of the Plan are as follows:
1. NAMES OF CORPORATIONS. The names of the corporations proposing to
merge are:
American Multi-Cinema, Inc.
and
AMC Philadelphia, Inc.
2. MERGER. On the Effective Date AMC and AMCP shall merge into a single
corporation by AMCP merging into AMC.
3. NAME OF SURVIVING CORPORATION. The name of American Multi-Cinema,
Inc. which is to be the surviving corporation, shall not be changed as a result
of the merger.
4. EFFECTIVE DATE. The merger shall be effected at the close of business
on April 2, 1997 (the "Effective Date").
5. EFFECT OF MERGER. (a) On the Effective Date, the separate existence
of AMCP shall cease, except to the extent that its separate existence may be
continued by law. The existence of AMC shall continue unaffected and unimpaired
by the merger, and AMC shall after the Effective Date have all of the rights,
privileges, immunities and powers, and shall be subject to all of the duties and
liabilities, of a corporation organized under the General Corporation Law of
Delaware.
<PAGE>
(b) On the Effective Date, AMC shall have and thereafter possess all
the rights, privileges, immunities, powers and franchises, of a public as well
as of a private nature, of AMCP, and all property, real, personal and mixed, and
all debts due on whatever account and all other choses in action, and every
other interest of or belonging to or due to AMCP shall be taken and deemed to be
transferred to and vested or remain in AMC without further act or deed (and the
title to any real estate, or any interest therein, vested in the merging
corporations shall not revert or be in any way impaired by reason of the
merger).
(c) Upon the Effective Date and thereafter, AMC shall be responsible
and liable for all liabilities and obligations of AMCP, and any claim existing
or action or proceeding pending by or against any of such entities may be
prosecuted to judgement as if such merger had not taken place or, in the case of
AMCP, AMC may be substituted in its place. Neither the rights of creditors nor
any liens upon the property of the merging corporations shall be impaired by the
merger.
(d) The respective officers of AMCP are hereby authorized to execute
all deeds, assignments and other documents which may be necessary to effect the
full and complete transfer of the properties of such corporations to AMC. The
officers of AMC are hereby authorized to execute and deliver any and all
documents which may be required of it in order for it to assume or otherwise
comply with any liability or obligation of AMCP. If at any time AMC shall
determine that any further documents are necessary or desirable to vest in it,
according to the terms hereof, the title to any property, rights, privileges,
immunities, powers or franchises of AMCP, then the officers of such entities
shall execute and deliver all such documents and do all things necessary to vest
in and confirm to AMC title and possession of all such property, rights,
privileges, immunities, powers and franchises, and to otherwise carry out the
purposes of this Plan.
6. CANCELLATION OF SHARES. (a) The manner and basis of cancelling the
shares of stock of the merging corporations shall be as follows:
(i) On the Effective Date, each share of the authorized $.0625 par
value common stock of AMC, whether or not issued and outstanding, shall continue
to be one share of the $.0625 par value common stock of AMC.
(ii) On the Effective Date, each of the two thousand four hundred
(2,400) shares of the $1.00 par value common stock of AMCP which are issued and
outstanding (whether or not such shares are in all respects validly issued) and
owned of record by AMC shall be cancelled.
7. ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS; OFFICERS. The Articles
of Incorporation and Bylaws of AMC shall not be changed by or as a result of the
merger. The directors and officers of AMC prior to the merger shall continue in
such officers after the merger.
8. FURTHER ACTION. Each of the merging corporations shall take all
actions and do all things necessary, proper or advisable under the laws of the
States of Missouri and Delaware to consummate and make effective the merger
contemplated herein.
-2-
<PAGE>
IN WITNESS WHEREOF, this Plan and Agreement of Liquidation and Merger has
been signed on behalf of American Multi-Cinema, Inc. by Peter C. Brown, its
Executive Vice President and on behalf of AMC Philadelphia, Inc. by Peter C.
Brown, its Executive Vice President, and the corporate seal of each corporation
has been affixed hereto and attested to by the Secretary of each corporation,
respectively, on the date first above written.
AMERICAN MULTI-CINEMA, INC.
By: /s/ Peter C. Brown
Peter C. Brown, Executive Vice President
(SEAL)
ATTEST:
/s/ Nancy L. Gallagher
Nancy L. Gallagher, Secretary
AMC PHILADELPHIA, INC.
By: /s/ Peter C. Brown
Peter C. Brown, Executive Vice President
(SEAL)
ATTEST:
/s/ Nancy L. Gallagher
Nancy L. Gallagher, Secretary
-3-
<PAGE>
EXHIBIT 2.9b
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
AMC PHILADELPHIA, INC., A DELAWARE CORPORATION
INTO
AMERICAN MULTI-CINEMA, INC., A MISSOURI CORPORATION
---------------------------------------------------
American Multi-Cinema, Inc., a corporation organized and existing under the
laws of the state of Missouri,
DOES HEREBY CERTIFY:
FIRST: That this corporation was incorporated on the 25th day of
July, 1968, pursuant to The General and Business Corporation Law of the State of
Missouri.
SECOND: Pursuant to Section 351.458 of The General and Business
Corporation Law of the State of Missouri, a foreign subsidiary corporation may
merge into a corporation organized and existing under the laws of the State of
Missouri.
THIRD: American Multi-Cinema, Inc. owns all of the outstanding shares
of the sole class of stock of AMC Philadelphia, Inc., a corporation incorporated
on the 1st day of December, 1986, pursuant to the General Corporation Law of the
State of Delaware.
FOURTH: That this corporation, by the following resolutions of its
Board of Directors, duly adopted by unanimous written consent of its members,
filed with the minutes of the Board on the 28th day of March, 1997, determined
to and did merge into itself said AMC Philadelphia, Inc.:
WHEREAS, it is in the best interests of this corporation to enter
into a Plan and Agreement of Liquidation and Merger with AMC
Philadelphia, Inc. ("AMCP"), a Delaware corporation, pursuant to which
AMCP will be merged into and with this corporation;
NOW, THEREFORE, BE IT RESOLVED, that the Plan and Agreement of
Liquidation and Merger (the "Plan") dated this date between this
corporation and AMCP, a copy of which is attached hereto and
incorporated herein by this reference, be, and it hereby is, adopted
and approved in all respects as and for a binding obligation of this
corporation; and
<PAGE>
FURTHER RESOLVED, that the Chairman, or any Executive Vice
President of this corporation be, and each of such officers hereby is,
authorized and directed in the name of and on behalf of this
corporation, and under its corporate seal attested by its Secretary or
any Assistant Secretary, to execute, seal, verify, acknowledge and
deliver the Plan substantially in the form attached hereto, with such
changes therefrom, if any, as the officer executing the same may
approve, such approval to be conclusively evidenced by the signature
of such officer; and
FURTHER RESOLVED, that the Chairman, or any Executive Vice
President of this corporation be, and each of such officers hereby is,
authorized and directed in the name of and on behalf of this
corporation to cause a document entitled "Articles of Merger" to be
prepared, executed, acknowledged and filed with the Missouri Secretary
of State in accordance with the provisions of The General and Business
Corporation Law of Missouri and to take such other action, including
the making of one or more filings with the appropriate government
agencies or offices of such states in which this corporation or AMCP
is qualified to transact business, as may be necessary or appropriate
to cause the merger to be effective in Missouri and such other states;
and
FURTHER RESOLVED, that the officers of this corporation be, and
they hereby are, authorized and directed, in the name of and on behalf
of this corporation and under its corporate seal, to execute and
deliver all such further agreements, certificates and other
instruments and to take all such further actions as such officer may
consider necessary or appropriate in order to effect the merger of
AMCP into this corporation in accordance with the terms, conditions
and provisions of the Plan and to carry out the purpose and intent of
these resolutions.
FIFTH: That this corporation survives the merger and may be served
with the process in the State of Delaware in any proceeding for enforcement of
any obligation of AMC Philadelphia, Inc. as well as for enforcement of any
obligation of the surviving corporation arising from the merger, including any
suit or other proceeding to enforce the right of any stockholder as determined
in appraisal proceedings pursuant to the provisions of Section 262 of Title 8
of the Delaware Code, and it does hereby irrevocably appoint the Secretary of
State of Delaware as its agent to accept service of process in any suit or other
proceeding. The address to which a copy of such process shall be mailed by the
Secretary of State of Delaware is 106 W. 14th Street, Suite 1700, Kansas City,
Missouri 64105 until the surviving corporation shall have hereafter designated
in writing to the said Secretary of State a different address for such purpose.
Service of such process may be made by personally delivering to and leaving with
the Secretary of State of Delaware duplicate copies of such process, one of
which copies the Secretary of State of Delaware shall forthwith send by
registered mail to American Multi-Cinema, Inc. at the above address.
-2-
<PAGE>
IN WITNESS WHEREOF, this Certificate of Ownership and Merger has been
executed on behalf of American Multi-Cinema, Inc. by Peter C. Brown, Executive
Vice President of the corporation, and on behalf of AMC Philadelphia, Inc. by
Peter C. Brown, Executive Vice President of the corporation, and the corporate
seal of each such corporation has been affixed hereto and attested to by the
Secretary of the respective corporations on March 31, 1997.
AMERICAN MULTI-CINEMA, INC.
By: /s/ Peter C. Brown
Peter C. Brown, Executive Vice President
(SEAL)
ATTEST:
/s/ Nancy L. Gallagher
Nancy L. Gallagher, Secretary
-3-
<PAGE>
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
I, the undersigned, a notary public, do hereby certify that on the 31st day
of March, 1997, personally appeared before me, Peter C. Brown, who, being by me
first duly sworn, declared that he is the Executive Vice President of American
Multi-Cinema, Inc., a Missouri corporation, that he signed the foregoing
document as Executive Vice President of said corporation, and that the
statements contained therein are true.
In witness whereof, I have hereunto set my hand and affixed my official
seal the day and year last above written.
/s/ Susan Diane Slusler
Notary Public in and for said County and State
My Commission expires:
- --------------------------
-4-
<PAGE>
AMC PHILADELPHIA, INC.
By: /s/ Peter C. Brown
Peter C. Brown, Executive Vice President
(SEAL)
ATTEST:
/s/ Nancy L. Gallagher
Nancy L. Gallagher, Secretary
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
I, the undersigned, a notary public, do hereby certify that on the 31st day
of March, 1997, personally appeared before me, Peter C. Brown, who, being by me
first duly sworn, declared that he is the Executive Vice President of AMC
Philadelphia, Inc., a Delaware corporation, that he signed the foregoing
document as Executive Vice President of said corporation, and that the
statements contained therein are true.
In witness whereof, I have hereunto set my hand and affixed my official
seal the day and year last above written.
/s/ Susan Diane Slusler
Notary Public in and for said County and State
My Commission expires:
- --------------------------
-5-
<PAGE>
EXHIBIT 2.9c
ARTICLES OF MERGER
------------------
Pursuant to the provisions of The General and Business Corporation Law of
Missouri, the undersigned, American Multi-Cinema, Inc., a Missouri corporation
("AMC") and AMC Philadelphia, Inc., a Delaware corporation ("AMCP"), each
certifies as follows:
1. AMC, pursuant to Section 351.447 of The General and Business
Corporation Law of Missouri, has adopted a Plan and Agreement of Liquidation and
Merger (the "Plan"), a copy of which is attached hereto and incorporated herein
by this reference, pursuant to which AMCP shall be merged into and with AMC.
2. On March 28, 1997, the Board of AMC, by statement of unanimous consent
to action, adopted the following resolutions approving the Plan and Agreement of
Liquidation and Merger:
WHEREAS, it is in the best interests of this corporation to enter into
a Plan and Agreement of Liquidation and Merger with AMC Philadelphia, Inc.
("AMCP"), a Delaware corporation, pursuant to which AMCP will be merged into
and with this corporation;
NOW, THEREFORE, BE IT RESOLVED, that the Plan and Agreement of
Liquidation and Merger (the "Plan") dated this date between this corporation
and AMCP, a copy of which is attached hereto and incorporated herein by this
reference, be, and it hereby is, adopted and approved in all respects as and
for a binding obligation of this corporation; and
FURTHER RESOLVED, that the Chairman, or any Executive Vice President of
this corporation be, and each of such officers hereby is, authorized and
directed in the name of and on behalf of this corporation, and under its
corporate seal attested by its Secretary or any Assistant Secretary, to
execute, seal, verify, acknowledge and deliver the Plan substantially in the
form attached hereto, with such changes therefrom, if any, as the officer
executing the same may approve, such approval to be conclusively evidenced
by the signature of such officer; and
FURTHER RESOLVED, that the Chairman, or any Executive Vice President
of this corporation be, and each of such officers hereby is, authorized
and directed in the name of and on behalf of this corporation to cause a
document entitled "Articles of Merger" to be prepared, executed,
acknowledged and filed with the
<PAGE>
Missouri Secretary of State in accordance with the provisions of The General
and Business Corporation Law of Missouri and to take such other action,
including the making of one or more filings with the appropriate government
agencies or offices of such states in which this corporation or AMCP is
qualified to transact business, as may be necessary or appropriate to cause
the merger to be effective in Missouri and such other states; and
FURTHER RESOLVED, that the officers of this corporation be, and they
hereby are, authorized and directed, in the name of and on behalf of this
corporation and under its corporate seal, to execute and deliver all such
further agreements, certificates and other instruments and to take all such
further actions as such officer may consider necessary or appropriate in
order to effect the merger of AMCP into this corporation in accordance with
the terms, conditions and provisions of the Plan and to carry out the
purpose and intent of these resolutions.
3. AMC owns all of the outstanding shares of the sole class of stock of
AMCP. AMC shall maintain its ownership of at least 90% of the outstanding
shares of each class of stock of AMCP until the issuance of a Certificate of
Merger by the Missouri Secretary of State.
IN WITNESS WHEREOF, these Articles of Merger has been executed on behalf of
American Multi-Cinema, Inc. by Peter C. Brown, Executive Vice President of the
corporation, and on behalf of AMC Philadelphia, Inc. by Peter C. Brown,
Executive Vice President of the corporation, and the corporate seal of each such
corporation has been affixed hereto and attested to by the Secretary of the
respective corporations on March 31, 1997.
AMERICAN MULTI-CINEMA, INC.
By: /s/ Peter C. Brown
Peter C. Brown, Executive Vice President
(SEAL)
ATTEST:
/s/ Nancy L. Gallagher
Nancy L. Gallagher, Secretary
-2-
<PAGE>
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
I, the undersigned, a notary public, do hereby certify that on the 31st day
of March, 1997, personally appeared before me, Peter C. Brown, who, being by me
first duly sworn, declared that he is the Executive Vice President of American
Multi-Cinema, Inc., a Missouri corporation, that he signed the foregoing
document as Executive Vice President of said corporation, and that the
statements contained therein are true.
In witness whereof, I have hereunto set my hand and affixed my official
seal the day and year last above written.
/s/ Susan Diane Slusler
Notary Public in and for said County and State
My Commission expires:
- --------------------------
-3-
<PAGE>
AMC PHILADELPHIA, INC.
By: /s/ Peter C. Brown
Peter C. Brown, Executive Vice President
(SEAL)
ATTEST:
/s/ Nancy L. Gallagher
Nancy L. Gallagher, Secretary
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
I, the undersigned, a notary public, do hereby certify that on the 31st day
of March, 1997, personally appeared before me, Peter C. Brown, who, being by me
first duly sworn, declared that he is the Executive Vice President of AMC
Philadelphia, Inc., a Delaware corporation, that he signed the foregoing
document as Executive Vice President of said corporation, and that the
statements contained therein are true.
In witness whereof, I have hereunto set my hand and affixed my official
seal the day and year last above written.
/s/ Susan Diane Slusler
Notary Public in and for said County and State
My Commission expires:
- --------------------------
-4-
<PAGE>
Execution Copy
U.S. $425,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT,
DATED AS OF APRIL 10, 1997
AMONG
AMC ENTERTAINMENT INC.,
AS THE BORROWER,
THE BANK OF NOVA SCOTIA,
AS ADMINISTRATIVE AGENT,
AND
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS DOCUMENTATION AGENT,
AND
<PAGE>
VARIOUS FINANCIAL INSTITUTIONS,
AS LENDERS
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . 2
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Use of Defined Terms . . . . . . . . . . . . . . . . . . . 27
1.3 Accounting and Financial Determinations. . . . . . . . . . 27
ARTICLE II
COMMITMENTS. . . . . . . . . . . . . 27
2.1 Commitments. . . . . . . . . . . . . . . . . . . . . . . . 27
2.2 Total Commitment Amount; Reduction of Total
Commitment Amount . . . . . . . . . . . . . . . . . . . . . . . 28
2.2.1 Total Commitment Amount . . . . . . . . . . . . . 28
2.2.2 Reduction of Total Commitment Amount. . . . . . . 28
2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.4 Termination. . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE III
LOANS AND NOTES. . . . . . . . . . . . 31
3.1 Borrowing Procedure. . . . . . . . . . . . . . . . . . . . 31
3.2 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.3 Principal Payments and Prepayments . . . . . . . . . . . . 32
3.4 Interest . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.5 Post-Maturity Rates. . . . . . . . . . . . . . . . . . . . 33
3.6 Payment Dates. . . . . . . . . . . . . . . . . . . . . . . 34
3.7 Payments, Computations, etc. . . . . . . . . . . . . . . . 34
3.8 Proration of Payments. . . . . . . . . . . . . . . . . . . 35
3.9 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE IV
LETTERS OF CREDIT . . . . . . . . . . . 36
4.1 Issuance Requests. . . . . . . . . . . . . . . . . . . . . 36
4.2 Issuances and Extensions . . . . . . . . . . . . . . . . . 37
4.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.4 Other Lenders' Participation . . . . . . . . . . . . . . . 38
4.5 Disbursements. . . . . . . . . . . . . . . . . . . . . . . 39
4.6 Reimbursement. . . . . . . . . . . . . . . . . . . . . . . 39
<PAGE>
4.7 Deemed Disbursements . . . . . . . . . . . . . . . . . . . 40
4.8 Nature of Reimbursement Obligations. . . . . . . . . . . . 40
ARTICLE V
BASE RATE AND FIXED RATE
OPTIONS FOR THE LOANS . . . . . . . . . . 41
5.1 Elections. . . . . . . . . . . . . . . . . . . . . . . . . 41
5.2 Fixed Rate Lending Unlawful. . . . . . . . . . . . . . . . 43
5.3 Deposits Unavailable . . . . . . . . . . . . . . . . . . . 44
5.4 Capital Adequacy; Increased Costs, etc.. . . . . . . . . . 44
5.5 Funding Losses . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE VI
CONDITIONS TO EXTENSIONS OF CREDIT. . . . . . . 46
6.1 Conditions to Initial Extension of Credit. . . . . . . . . 46
6.1.1 Resolutions, etc. . . . . . . . . . . . . . . . . 46
6.1.2 Delivery of Notes . . . . . . . . . . . . . . . . 47
6.1.3 Opinion of Counsel. . . . . . . . . . . . . . . . 47
6.1.4 Closing Fees, Expenses, etc. . . . . . . . . . . 47
6.1.5 Significant Subsidiary Guaranty . . . . . . . . . 47
6.1.6 Satisfactory Legal Form . . . . . . . . . . . . . 47
6.1.7 Compliance with Warranties, Non-Default, etc. . . 48
6.1.8 New Subordinated Notes Indenture. . . . . . . . . 48
6.1.9 Existing Credit Agreement . . . . . . . . . . . . 48
6.1.10 New Subordinated Notes. . . . . . . . . . . . . . 48
6.1.11 Financial Information . . . . . . . . . . . . . . 48
6.1.12 Litigation. . . . . . . . . . . . . . . . . . . . 48
6.2 All Extensions of Credit . . . . . . . . . . . . . . . . . 49
6.2.1 Compliance with Warranties, Non-Default, etc. . . 49
6.2.2 Absence of Litigation, etc. . . . . . . . . . . . 49
6.2.3 Extension of Credit Request.. . . . . . . . . . . 49
ARTICLE VII
WARRANTIES, ETC. . . . . . . . . . . . 49
7.1 Organization, Power, Authority, etc. . . . . . . . . . . . 49
7.2 Due Authorization. . . . . . . . . . . . . . . . . . . . . 50
7.3 Validity, etc. . . . . . . . . . . . . . . . . . . . . . . 50
7.4 Financial Information. . . . . . . . . . . . . . . . . . . 50
7.5 Absence of Certain Defaults. . . . . . . . . . . . . . . . 51
7.6 Litigation, etc. . . . . . . . . . . . . . . . . . . . . . 51
<PAGE>
7.7 Use of Proceeds; Regulation U. . . . . . . . . . . . . . . 51
7.8 Government Regulation. . . . . . . . . . . . . . . . . . . 52
7.9 Certain Contractual Obligations or Organic Documents . . . 52
7.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.11 Employee Benefit Plans . . . . . . . . . . . . . . . . . . 52
7.12 Labor Controversies. . . . . . . . . . . . . . . . . . . . 52
7.13 Subsidiaries and Significant Subsidiaries. . . . . . . . . 53
7.14 Intellectual Property. . . . . . . . . . . . . . . . . . . 53
7.15 Ownership of Properties; Liens . . . . . . . . . . . . . . 53
7.16 Accuracy of Information. . . . . . . . . . . . . . . . . . 53
7.17 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.18 Environmental Warranties . . . . . . . . . . . . . . . . . 54
7.19 Restrictions on or Relating to Subsidiaries. . . . . . . . 55
ARTICLE VIII
COVENANTS . . . . . . . . . . . . . 56
8.1 Certain Affirmative Covenants. . . . . . . . . . . . . . . 56
8.1.1 Financial Information, etc. . . . . . . . . . . . 56
8.1.2 Maintenance of Existences; Ownership of AMC
Capital Stock; Asset Ownership.. . . . . . . . . . . 57
8.1.3 Foreign Qualification . . . . . . . . . . . . . . 58
8.1.4 Payment of Taxes, etc . . . . . . . . . . . . . . 58
8.1.5 Insurance.. . . . . . . . . . . . . . . . . . . . 58
8.1.6 Notice of Default, Litigation, etc. . . . . . . . 58
8.1.7 Performance of Loan Documents.. . . . . . . . . . 59
8.1.8 Books and Records.. . . . . . . . . . . . . . . . 59
8.1.9 Significant Subsidiary Guaranty; Pledge of
Shares of Significant Subsidiaries; Pledge of
Intercompany Indebtedness. . . . . . . . . . . . . . 59
8.1.10 Environmental Covenant. . . . . . . . . . . . . . 61
8.2 Certain Negative Covenants . . . . . . . . . . . . . . . . 61
8.2.1 Indebtedness for Borrowed Money . . . . . . . . . 61
8.2.2 Liens . . . . . . . . . . . . . . . . . . . . . . 62
8.2.3 Financial Condition . . . . . . . . . . . . . . . 63
8.2.4 Take or Pay Contracts . . . . . . . . . . . . . . 64
8.2.5 Consolidation, Merger, etc. . . . . . . . . . . . 64
8.2.6 Modification, etc. of Subordinated Debt . . . . . 65
8.2.7 Transactions with Affiliates. . . . . . . . . . . 65
8.2.8 Sale or Discount of Receivables . . . . . . . . . 65
<PAGE>
8.2.9 Limitation on Certain Payments; Limitation on
Restriction of Subsidiary Dividends and
Distributions. . . . . . . . . . . . . . . . . . . . 65
8.2.10 Inconsistent Agreements . . . . . . . . . . . . . 66
8.2.11 Investments . . . . . . . . . . . . . . . . . . . 66
8.2.12 Guaranties. . . . . . . . . . . . . . . . . . . . 67
8.2.13 Business Activities . . . . . . . . . . . . . . . 68
8.2.14 Asset Sales . . . . . . . . . . . . . . . . . . . 68
8.2.15 Limitation on Issuances of Guaranties of
Indebtedness. . . . . . . . . . . . . . . . . . . . 69
8.2.16 Negative Pledges. . . . . . . . . . . . . . . . . 69
8.2.17 Fiscal Year . . . . . . . . . . . . . . . . . . . 70
ARTICLE IX
EVENTS OF DEFAULT . . . . . . . . . . . 70
9.1 Events of Default. . . . . . . . . . . . . . . . . . . . . 70
9.1.1 Non-Payment of Liabilities. . . . . . . . . . . . 70
9.1.2 Non-Performance of Certain Covenants. . . . . . . 70
9.1.3 Non-Performance of Other Obligations. . . . . . . 70
9.1.4 Bankruptcy, Insolvency, etc.. . . . . . . . . . . 71
9.1.5 Certain Defaults on Other Indebtedness, Leases
or Preferred Stock. . . . . . . . . . . . . . . . . . 71
9.1.6 Change in Control . . . . . . . . . . . . . . . . 72
9.1.7 Breach of Warranty. . . . . . . . . . . . . . . . 72
9.1.8 ERISA . . . . . . . . . . . . . . . . . . . . . . 72
9.1.9 Judgments . . . . . . . . . . . . . . . . . . . . 73
9.1.10 Loan Documents. . . . . . . . . . . . . . . . . . 73
9.2 Action if Bankruptcy . . . . . . . . . . . . . . . . . . . 73
9.3 Action if Other Event of Default . . . . . . . . . . . . . 73
ARTICLE X
THE AGENTS. . . . . . . . . . . . . 74
10.1 Actions . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.2 Funding Reliance, etc. . . . . . . . . . . . . . . . . . . 75
10.3 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . 75
10.4 Successor . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.5 Loans by the Agents . . . . . . . . . . . . . . . . . . . . 76
10.6 Credit Decisions. . . . . . . . . . . . . . . . . . . . . . 76
10.7 Copies, etc. . . . . . . . . . . . . . . . . . . . . . . . 77
ARTICLE XI
MISCELLANEOUS . . . . . . . . . . . . 77
<PAGE>
11.1 Waivers, Amendments, etc. . . . . . . . . . . . . . . . . . 77
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 78
11.3 Costs and Expenses. . . . . . . . . . . . . . . . . . . . . 78
11.4 Indemnification . . . . . . . . . . . . . . . . . . . . . . 79
11.5 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . 80
11.6 Severability. . . . . . . . . . . . . . . . . . . . . . . . 80
11.7 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . 80
11.8 Execution in Counterparts; Effectiveness. . . . . . . . . . 80
11.9 Governing Law; Entire Agreement . . . . . . . . . . . . . . 80
11.10 Successors and Assigns. . . . . . . . . . . . . . . . . . . 81
11.11 Sale and Transfers, etc., of Loans and Notes;
Participations in Loans and Notes. . . . . . . . . . . . . . . 81
11.12 Other Transactions. . . . . . . . . . . . . . . . . . . . . 83
11.13 Collateral. . . . . . . . . . . . . . . . . . . . . . . . . 83
11.14 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . 83
11.15 Consent to Jurisdiction and Service of Process. . . . . . . 83
11.16 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 84
SCHEDULE I Lenders
SCHEDULE II Unrestricted Subsidiaries
EXHIBIT A Disclosure Schedule
EXHIBIT B Form of Extension of Credit Request
EXHIBIT C Form of Continuation/Conversion Notice
EXHIBIT D Form of Compliance Certificate
EXHIBIT E Form of Significant Subsidiary Guaranty
EXHIBIT F Form of Opinion of Counsel to the Borrower and each
Significant Subsidiary
EXHIBIT G Form of Applicable Margin Determination Ratio Certificate
EXHIBIT H Form of Note
EXHIBIT I Form of Pledge Agreement
EXHIBIT J Form of Subsidiary Pledge Agreement
EXHIBIT K Form of Assignment Agreement
EXHIBIT L Form of Intercompany Note
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of
April 10, 1997, is among AMC ENTERTAINMENT INC., a Delaware corporation (the
"BORROWER"), the undersigned financial institutions (collectively, the "LENDERS"
and individually, each a "LENDER"), THE BANK OF NOVA SCOTIA, a Canadian
chartered bank acting through its Atlanta agency ("BNS"), as administrative
agent (in such capacity, together with its successors and assigns in such
capacity, the "ADMINISTRATIVE AGENT"), and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national banking association, as documentation agent (in
such capacity, together with its successors and assigns in such capacity, the
"DOCUMENTATION AGENT").
W I T N E S S E T H:
WHEREAS, the Borrower is engaged through various Subsidiaries and
Unrestricted Subsidiaries in the theatrical exhibition industry;
WHEREAS, the Borrower, the Administrative Agent and the Lenders entered
into a Credit Agreement dated as of December 27, 1995 (such Credit Agreement, as
amended to the date hereof, being herein referred to as the "EXISTING CREDIT
AGREEMENT") pursuant to which the Lenders have made revolving loans to the
Borrower;
WHEREAS, the Borrower, the Administrative Agent and the Lenders desire that
the Existing Credit Agreement be amended and restated on the terms and
conditions set forth herein to, among other things, set forth the terms and
conditions under which the Lenders hereafter will extend Loans to and issue
Letters of Credit for the benefit of the Borrower; it being the intention of the
Borrower, the Administrative Agent and the Lenders that this Agreement and the
execution and delivery of any substituted promissory notes not effect a novation
of the obligations of the Borrower to the Lenders under the Existing Credit
Agreement but merely a restatement and, where applicable, a substitution of the
terms governing and evidencing such obligations hereafter; and
<PAGE>
WHEREAS, the Borrower desires to obtain from the Lenders, and the Lenders
are willing to extend, on the terms and subject to the conditions hereinafter
set forth (including ARTICLE VI), financing to the Borrower on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the Existing Credit Agreement is hereby amended and
restated in its entirety, and the parties hereto agree, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINED TERMS. The following terms (whether
or not underscored) when used in this Agreement, including its preamble and
recitals, shall, except where the context otherwise requires, have the following
meanings (such definitions to be equally applicable to the singular and plural
forms thereof):
"ADMINISTRATIVE AGENT" is defined in the PREAMBLE.
"AFFECTED LENDER" means a Lender that notifies the Administrative Agent
under SECTION 5.2 or SECTION 5.3 that it is so affected.
"AFFILIATE" of any Person means any other Person which, directly or
indirectly, controls or is controlled by or under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Multiemployer Plan or Pension Plan). A Person shall be
deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power:
(a) to vote 10% or more of the securities having ordinary voting power for
the election of directors, general partners or managers of such Person; or
(b) to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
2
<PAGE>
"AGENTS" means, collectively, the Administrative Agent and the
Documentation Agent.
"AGGREGATE OUTSTANDING LIABILITIES" means, as at any date of determination
thereof and without duplication, the sum of (a) the aggregate principal amount
of all outstanding Loans hereunder PLUS (b) the aggregate amount of all Letter
of Credit Outstandings.
"AGREEMENT" means, at any date, this Credit Agreement as originally in
effect on the Effective Date, and as thereafter from time to time amended,
supplemented or otherwise modified and in effect on such date.
"AMC" means American Multi-Cinema, Inc., a Missouri corporation and a
Subsidiary of the Borrower.
"AMC PHILADELPHIA" means AMC Philadelphia, Inc., a Delaware corporation.
"APPLICABLE MARGIN" means, for any Loan, the amount indicated below for
each type of Loan based upon the Applicable Margin Determination Ratio as
computed on the Applicable Margin Determination Ratio Certificate most recently
submitted pursuant to SECTION 8.1.1(f):
LIBO Base
Applicable Margin Rate Rate
Determination Ratio Loans Loans
- ------------------- ----- -----
Greater than or equal to 4.50 1.750% 0.750%
Greater than or equal to 4.00
and less than 4.50 1.500% 0.500%
Greater than or equal to 3.50
and less than 4.00 1.250% 0.250%
Greater than or equal to 3.00
and less than 3.50 1.000% 0.000%
Greater than or equal to 2.50
and less than 3.00 0.750% 0.000%
Greater than or equal to 2.00
and less than 2.50 0.625% 0.000%
Less than 2.00 0.500% 0.000%;
3
<PAGE>
PROVIDED, HOWEVER, that if, as set forth on such most recently submitted
Applicable Margin Determination Ratio Certificate, (a) the Net Senior
Indebtedness to Consolidated EBITDA Ratio is greater than or equal to 2:00:1 and
less than 2.50:1, then each of the margins listed above for LIBO Rate Loans
shall be reduced by 0.125% and (b) the Net Senior Indebtedness to Consolidated
EBITDA Ratio is less than 2.00:1, then each of the margins listed above for LIBO
Rate Loans shall be reduced by 0.250%.
"APPLICABLE MARGIN DETERMINATION RATIO" means, at any date, the ratio of:
(a) Net Indebtedness of the Borrower and its Consolidated
Subsidiaries as computed on the Applicable Margin Determination Ratio
Certificate then most recently submitted pursuant to SECTION 8.1.1(f);
to
(b) Consolidated EBITDA of the Borrower and its Consolidated
Subsidiaries for the prior four Fiscal Quarters ending on the last day of
the Fiscal Quarter preceding such date as computed on the most recent
Applicable Margin Determination Ratio Certificate delivered pursuant to
SECTION 8.1.1(f).
"APPLICABLE MARGIN DETERMINATION RATIO CERTIFICATE" means a certificate
duly executed by an Authorized Officer of the Borrower substantially in the form
of EXHIBIT G hereto, with required insertions.
"APPROVAL" means each and every approval, consent, filing and registration
by or with any Federal, state or other regulatory authority necessary to
authorize or permit the execution, delivery or performance of this Agreement,
the Notes or any other Loan Document or for the validity or enforceability
hereof or thereof.
"ASSET SALE" means any direct or indirect sale, conveyance, transfer, lease
or other disposition to any Person (including any Unrestricted Subsidiary) other
than the Borrower, a Guarantor or a Wholly-Owned Subsidiary in one transaction
or a series of related transactions, of (i) any Capital Stock of any Subsidiary
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of the Borrower or (ii) any other property or asset of the Borrower or any
Subsidiary of the Borrower other than, in each case, (x) sales of Capital Stock
of Unrestricted Subsidiaries, (y) transfers of assets that constitute
Investments in Unrestricted Subsidiaries permitted by SECTION 8.2.11(vi) and (z)
sales of property or assets in the ordinary course of business.
"ASSIGNEES" is defined in SECTION 11.11(b).
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in substantially the
form of EXHIBIT J hereto.
"AUTHORIZED OFFICER" means, relative to any Loan Party, those of its
officers whose signatures and incumbency shall have been certified to the
Administrative Agent and the Lenders pursuant to SECTION 6.1.1 or otherwise in a
manner satisfactory to the Administration Agent.
"BASE RATE" means at any time the greater of (i) the rate of interest most
recently announced by BNS in Atlanta as its base rate (of which announcements
the Administrative Agent shall give notice promptly to the Lenders and to the
Borrower) and (ii) the Federal Funds Rate plus 0.50%. The Base Rate is not
necessarily intended to be the lowest rate of interest charged by BNS in
connection with extensions of credit. Changes in the rate of interest on any
Loan maintained as a Base Rate Loan shall take effect simultaneously with each
change in the Base Rate.
"BASE RATE LOAN" is defined in SECTION 5.1.
"BNS" is defined in the PREAMBLE.
"BORROWER" is defined in the PREAMBLE.
"BORROWING" means the Loans of the same type and, in the case of Fixed Rate
Loans, having the same Interest Period made by all Lenders on the same Business
Day and pursuant to the same Extension of Credit Request in accordance with
SECTION 3.1.
"BUSINESS DAY" means:
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(a) any day which is neither a Saturday or Sunday nor a legal holiday
in the States of New York, Missouri or Georgia on which banks are
authorized or required to be closed in New York City, Kansas City (Mo.) or
Atlanta; and
(b) relative to the date of
(i) making or continuing any portion of any Loans as, or
converting any portion of any Loans from or into, Fixed Rate Loans,
(ii) making any payment or prepayment of principal of or payment
of interest on the portion of the principal amount of the Loans being
maintained as Fixed Rate Loans, and
(iii) the Borrower giving any notice (or the number of Business
Days to elapse prior to the effectiveness thereof) in connection with
any matter referred to in CLAUSE (b)(i) or (b)(ii),
a banking business day of BNS at, and on which dealings in Dollars are
carried on in the interbank eurodollar market of, BNS's LIBOR Office.
"CAPITAL EXPENDITURES" means, with respect to any Person for any period,
the aggregate amount of all expenditures during such period which are required
to be included in property, plant or equipment or a similar fixed asset account
on a consolidated balance sheet of such Person and its Subsidiaries prepared in
accordance with GAAP (excluding assets acquired pursuant to Capitalized Lease
Obligations and all capitalized interest).
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
partnership interests, participations, rights in, or other equivalents (however
designated and whether voting or non-voting) of such Person's capital stock or
such other equity interests, whether outstanding on the Effective Date or issued
after such date, and any and all rights, warrants or options exchangeable for or
convertible into such capital stock or such other equity interests, including
all Preferred Stock of such Person.
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"CAPITALIZED LEASE OBLIGATION" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under GAAP, and, for the purposes of
this Agreement, the amount of such obligation at any date shall be the
capitalized amount thereof at such date, determined in accordance with GAAP.
"CASH EQUIVALENTS" means, at any time: (i) any evidence of Indebtedness
with a maturity of 360 days or less issued or directly and fully guaranteed or
insured by the United States or guaranteed by a government that is a member of
the OECD ("OECD COUNTRY") or any agency, instrumentality, state or political
subdivision thereof which is rated "A-1" or better by Standard & Poor's Ratings
Group; (ii) certificates of deposit or bankers' acceptances with a maturity of
360 days or less of, or dollar deposits in, any financial institution that is a
member of the Federal Reserve System or an applicable central bank of an OECD
Country having combined capital and surplus and undivided profits of not less
than $500,000,000; (iii) commercial paper with a maturity of 270 days or less
issued by a corporation (other than an Affiliate of the Borrower) organized
under the laws of any state of the United States or the District of Columbia and
rated at least A-1 (or its equivalent) by Standard & Poor's Ratings Group or at
least Prime-1 (or its equivalent) by Moody's Investors Service, Inc.; (iv) money
market mutual funds registered with the SEC meeting the requirements of Rule
2a-7 promulgated under the Investment Company Act of 1940, as amended; and (v)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the government of the
United States or issued by any agency thereof and backed by the full faith and
credit of the government of the United States, in each case maturing within one
year from the date of acquisition, PROVIDED that the terms of such agreements
comply with the guidelines set forth in the Federal Financial Agreements of
Depository Institutions with Securities Dealers and Others, as adopted by the
Comptroller of the Currency.
"CASH FLOW COVERAGE RATIO" means, as of the end of any Fiscal Quarter, the
ratio of (x) Consolidated EBITDA for the
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Borrower and its Consolidated Subsidiaries for the four most recent Fiscal
Quarters ended on such date to (y) the sum of (i) Consolidated Interest Expense
for such four Fiscal Quarters, PLUS (ii) the current portion of Indebtedness
with an original maturity exceeding one year (other than the portion of the
Liabilities to be paid in connection with the scheduled reduction of the Total
Commitment Amount on the Commitment Termination Date) as of the last day of such
Fiscal Quarter, PLUS (iii) the amount of all cash dividends on Capital Stock
paid by the Borrower or Subsidiaries to Persons other than the Borrower, any
Guarantor or any Wholly-Owned Subsidiary during such period, PLUS (iv) amounts
paid by the Borrower, or Subsidiaries to Persons other than the Borrower, any
Guarantor or any Wholly-Owned Subsidiary in respect of optional repurchases and
redemptions of Subordinated Debt (other than the Old Subordinated Notes) and
Capital Stock during such four Fiscal Quarters (PROVIDED, that there shall be
excluded from this CLAUSE (iv) all amounts paid by AMC Philadelphia or AMC to H.
Donald Busch or his estate ("BUSCH") to repurchase all of the shares held by
Busch in AMC Philadelphia in any optional repurchase of such shares by AMC
Philadelphia or AMC, but only to the extent that the purchase price paid by AMC
Philadelphia or AMC therefor is not greater than the purchase price that AMC
Philadelphia would be obligated to pay in the event of the exercise by Busch of
his right to require AMC Philadelphia to repurchase such stock pursuant to
Section 5 of the Stockholders' Agreement dated December 30, 1986 among AMC, AMC
Philadelphia and Busch, assuming such mandatory repurchase occurred at the same
time as such optional repurchase), PLUS (v) amounts paid during such four Fiscal
Quarters with respect to Capitalized Lease Obligations attributable to principal
(without duplication of amounts in CLAUSE (ii) above).
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"CHANGE IN CONTROL" means:
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(a) the direct or indirect sale, lease, exchange or other transfer of
all or substantially all of the assets of the Borrower to any Person or
entity or group of Persons or entities acting in concert as a partnership
or other "group" (a "GROUP OF PERSONS") with the effect that the Durwood
Interests are the beneficial owners (within the meaning of the Exchange Act
as in effect on the Effective Date) of less than 50% of the votes eligible
to be cast on any matter of the then outstanding Voting Stock of the
resulting, surviving or transferee Person or Persons;
(b) the merger or consolidation of the Borrower with or into another
corporation with the effect that the Durwood Interests are the beneficial
owners (within the meaning of the Exchange Act as in effect on the
Effective Date) of less than 50% of the votes eligible to be cast on any
matter of the then outstanding Voting Stock of the surviving corporation of
such merger or the corporation resulting from such consolidation;
(c) the replacement of a majority of the Board of Directors of the
Borrower, over a two-year period, from the directors who constituted the
Board of Directors of the Borrower at the beginning of such period, which
replacement shall not have been approved by the Board of Directors of the
Borrower (or replacement directors approved by the Board of Directors of
the Borrower), as constituted at the beginning of such period;
(d) a Person or Group of Persons other than the Durwood Interests
shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases, merger or consolidation or otherwise, have
become the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of Voting Stock of the Borrower (on a fully-diluted basis)
having 33-1/3% of the votes eligible to be cast on any matter by such
Voting Stock; or
(e) for so long as the New Subordinated Notes Indenture shall be in
effect, any other "Change of Control" (as defined in the New Subordinated
Note Indenture).
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It is understood that, for purposes of determining the votes eligible to be cast
by any Voting Stock of the Borrower, in all matters in which the Borrower's
Class B Stock, par value $0.66-2/3 per share ("CLASS B STOCK"), and Common
Stock, par value $0.66-2/3 per share ("COMMON STOCK"), are entitled to vote
together as a single class, on the date hereof each outstanding share of Common
Stock has one vote and each outstanding share of Class B Stock has ten votes.
"COMMITMENT" means, relative to any Lender, such Lender's obligation to
make Loans and to issue (in the case of the Issuer), or participate in (in the
case of all Lenders), Letters of Credit pursuant to SECTION 2.1.
"COMMITMENT TERMINATION DATE" means the earliest of
(a) April 10, 2004;
(b) five Business Days after notice is given by the Borrower to the
Administrative Agent for purposes of designating a Commitment Termination
Date pursuant to this clause, PROVIDED that, on such designated Commitment
Termination Date, no Loans are outstanding and all outstanding Letters of
Credit have been collateralized pursuant to SECTION 4.7 or cancelled;
(c) immediately and without further action upon the occurrence of any
Default described in SECTION 9.1.4 with respect to the Borrower or any
Significant Subsidiary;
(d) immediately when any other Event of Default shall have occurred
and be continuing and either the Loans shall be declared to be due and
payable pursuant to SECTION 9.3 or, in the absence of such declaration, the
giving of notice by the Administrative Agent, acting at the direction of
the Required Lenders, to the Borrower that the Commitments have been
terminated;
(e) any date that the Total Commitment Amount is reduced to zero
pursuant to SECTION 2.2.2; and
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(f) immediately and without further action upon the occurrence of a
Change in Control.
"COMPLIANCE CERTIFICATE" means a certificate duly executed by the chief
executive or financial Authorized Officer of the Borrower in the form of EXHIBIT
D hereto, with appropriate insertions, together with such changes as the
Required Lenders may from time to time request for purposes of monitoring the
Borrower's compliance herewith.
"CONSOLIDATED EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period increased (to the extent
deducted in determining Consolidated Net Income) by the sum of: (i) all income
taxes of such Person and its Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary,
unusual or non-recurring gains or losses); (ii) Consolidated Interest Expense of
such Person and its Subsidiaries for such period; (iii) depreciation expense of
such Person and its Subsidiaries for such period; (iv) amortization expense of
such Person and its Subsidiaries for such period including amortization of
capitalized debt issuance costs; and (v) any other non-cash charges of such
Person and its Subsidiaries for such period (including non-cash expenses
recognized in accordance with SFAS No. 106), all determined on a consolidated
basis in accordance with GAAP; PROVIDED, HOWEVER, that, for purposes of this
definition, all transactions involving the acquisition of any Person by another
Person shall be accounted for on a "pooling of interests" basis and not as a
purchase.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, without duplication, (i) the sum of (a) the cash and non-cash interest
expense of such Person and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP consistently applied, including (v)
capitalized interest, (w) any amortization of debt discount, (x) the net cost
under Interest Rate Protection Obligations (including any amortization of
discounts), (y) the interest portion of any deferred payment obligation and (z)
all accrued interest, and (b) the aggregate amount of the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person and its Subsidiaries during
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such period as determined on a consolidated basis in accordance with GAAP
consistently applied less (ii) the interest income (exclusive of deferred
financing fees) of such Person and its Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP consistently applied.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the consolidated net income (or loss) of such Person and its
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income, by excluding all
extraordinary gains or losses (net of reasonable fees and expenses relating to
the transaction giving rise thereto) of such Person and its Subsidiaries;
PROVIDED, that for purposes of calculating "Consolidated Net Income" for
purposes of SECTION 8.2.11(vi), there shall be excluded net income (or loss) of
any Person combined with such Person or one of its Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of such
combination.
"CONSOLIDATED SUBSIDIARY" of any Person means, at any time, every
Subsidiary which is included as a consolidated subsidiary of such Person in the
financial statements contained in the then most recent annual or periodic report
filed by such Person with the SEC on Form 10-K, 10-Q or 8-K pursuant to the
Exchange Act, as then in effect (or any comparable forms or under similar
Federal statutes then in force), and in the most recent financial statements of
such Person furnished to the stockholders of such Person and certified by the
independent certified public accountants of such Person.
"CONTINUATION/CONVERSION NOTICE" means a notice of continuation or
conversion and certificate duly executed by any Authorized Officer of the
Borrower substantially in the form of EXHIBIT C hereto.
"CONTRACTUAL OBLIGATION" means, relative to any Person, any provision of
any security issued by such Person or of any Instrument or undertaking to which
such Person is a party or by which it or any of its property is bound.
"CREDIT EXPOSURE" is defined in SECTION 11.11(a).
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"CURRENCY HEDGING OBLIGATIONS" means the obligations of any Person pursuant
to an arrangement designed to protect such Person against fluctuations in
currency exchange rates.
"DEFAULT" means any Event of Default or any condition or event which, after
notice or lapse of time or both, would constitute an Event of Default.
"DISBURSEMENT DATE" is defined in SECTION 4.5.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule attached hereto as
EXHIBIT A, as it may be amended, supplemented, or otherwise modified from time
to time by the Borrower with the consent of the Required Lenders.
"DISQUALIFIED STOCK" means, with respect to any Person, any Capital Stock
of such Person which, by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund or
otherwise, or is exchangeable for Indebtedness (other than Subordinated Debt),
or is redeemable at the option of the holder thereof, in whole or in part.
"DOCUMENTATION AGENT" is defined in the PREAMBLE.
"DOLLAR" and the sign "$" mean lawful money of the United States.
"DOMESTIC OFFICE" means, relative to any Lender, the office of such Lender
designated as such in SCHEDULE I hereto or designated in an Assignment Agreement
or such other office of such Lender (or any successor or assign of such Lender)
within the United States of America as may be designated from time to time by
notice from such Lender to the Borrower and the Administrative Agent.
"DURWOOD INTERESTS" means (i) Stanley H. Durwood, his spouse and any of his
lineal descendants and their respective spouses (collectively, the "DURWOOD
FAMILY") and any Affiliate of any member of the Durwood Family, (ii) Stanley H.
Durwood's estate, or any trust established by Stanley H. Durwood, during any
period
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of administration prior to the distribution of assets to beneficiaries who are
Persons described in CLAUSE (iii) below, (iii) any trust which is solely 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) or solely for the benefit of
one or more charitable organizations or solely for the benefit of a combination
of members of the Durwood Family and one or more charitable organizations and
(iv) any Subsidiary, 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 Borrower or any Subsidiary or any
Person holding securities of the Borrower for or pursuant to the terms of any
such employee benefit plan; PROVIDED, that if any lender or other Person shall
foreclose on or otherwise realize upon or exercise any remedy with respect to
any security interest in or Lien on any securities of the Borrower held by any
Person listed in this CLAUSE (iv), then such securities shall no longer be
deemed to be held by Durwood Interests.
"EFFECTIVE DATE" means the date this Agreement becomes effective pursuant
to SECTION 11.8.
"ENVIRONMENTAL LAWS" means all applicable federal, state or local statutes,
laws, ordinances, codes, rules, regulations and guidelines (including consent
decrees and administrative orders) relating to public health and safety and
protection of the environment.
"EQUIPMENT NOTES" means installment purchase obligations evidenced by a
note, bond, debenture or other evidence of Indebtedness issued or entered into
in connection with the acquisition of fixtures, furniture or equipment by the
Borrower or a Subsidiary of the Borrower in the ordinary course of business and
used or useable by the Borrower and its Subsidiaries in the business of the
Borrower and its Subsidiaries and required to be classified and accounted for as
indebtedness in accordance with GAAP.
"ERISA" is defined in SECTION 7.11.
"EVENT OF DEFAULT" is defined in SECTION 9.1.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"EXISTING CREDIT AGREEMENT" is defined in the RECITALS.
"EXTENSION OF CREDIT" means the making of a Loan or the issuance or Stated
Expiry Date extension by the Issuer of a Letter of Credit.
"EXTENSION OF CREDIT DATE" means the date on which a Borrowing is, or is to
be, consummated, or a Letter of Credit is to be issued or its Stated Expiry Date
extended, as the context requires.
"EXTENSION OF CREDIT REQUEST" means any Extension of Credit Request
substantially in the form of EXHIBIT B delivered pursuant to SECTION 3.1.
"FAIR MARKET VALUE" means, with respect to any asset or property, the price
that could be negotiated in an arm's length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value shall be
determined by the Board of Directors of the Borrower acting in good faith.
"FEDERAL FUNDS RATE" means, for any day, a fluctuating interest rate PER
ANNUM equal to
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of
New York; or
(b) if such rate is not so published for any day which is a Business
Day, the average of the quotations for such day on such transactions
received by BNS from three federal funds brokers of recognized standing
selected by it.
"FISCAL QUARTER" means any quarter of a Fiscal Year.
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"FISCAL YEAR" means any period of 52/53 weeks ending on the Thursday
closest to March 31; references to a Fiscal Year with a number corresponding to
any calendar year (E.G., the "1997 FISCAL YEAR") refer to the Fiscal Year ending
on the Thursday closest to March 31 occurring during such calendar year.
"FIXED RATE LOAN" is defined in SECTION 5.1.
"FREE CASH FLOW" as of any date means (i) Consolidated EBITDA, MINUS (ii)
Consolidated Interest Expense, MINUS (iii) all Capital Expenditures actually
made and all Investments (other than Investments in Cash Equivalents permitted
by SECTION 8.2.11(iv)) made in Special Entities by the Borrower and its
Subsidiaries (without double-counting Investments made in Special Entities with
Capital Expenditures made by such Special Entities with the proceeds of such
Investments) (PROVIDED, that (A) with respect to any Investment in a Special
Entity made after December 27, 1995 (x) upon any return of cash with respect to
such Investment, an amount equal to the lesser of the return of cash with
respect to such Investment and the initial amount of such Investment, in either
case, less the cost of disposition of such Investment, shall reduce the amount
of Investments made in Special Entities for purposes of this CLAUSE (iii) and
(y) if any such Special Entity subsequently becomes a Guarantor, the amount of
any Investment not previously applied pursuant to CLAUSE (x) above to reduce the
amount of Investments made in Special Entities pursuant to this CLAUSE (iii)
shall reduce the amount of Investments made in Special Entities for purposes of
this CLAUSE (iii) and (B) any Capital Expenditures made with respect to property
sold by the Borrower or its Subsidiaries in a manner permitted under this
Agreement and contemporaneously leased back to the Borrower or the applicable
Subsidiary on fair market terms shall reduce the amount of Capital Expenditures
made for purposes of this CLAUSE (iii)) MINUS (iv) all taxes paid in cash, in
each case, from December 27, 1995 to the date of determination.
"F.R.S. BOARD" means the Board of Governors of the Federal Reserve System
(or any successor).
"FUNDED DEBT" is defined in SECTION 2.2.2(d).
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"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are applicable as of the date of
determination.
"GROUP OF PERSONS" is defined in the definition of "CHANGE IN CONTROL".
"GUARANTOR" means a Subsidiary that has executed a counterpart of the
Significant Subsidiary Guaranty pursuant to SECTION 8.1.9.
"GUARANTY" means any agreement, undertaking or arrangement by which any
Person guarantees, endorses or otherwise becomes or is contingently liable upon
(by direct or indirect agreement, contingent or otherwise, to provide funds for
payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise
to assure a creditor against loss) the debt, obligation or other liability of
any other Person (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other distributions upon
the shares of any other Person. The amount of the obligor's obligation under
any guaranty shall (subject to any limitation set forth therein) be deemed to be
the outstanding principal amount (or maximum outstanding principal amount, if
larger) of the debt, obligation or other liability thereby guaranteed.
"HAZARDOUS MATERIAL" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource Conservation
and Recovery Act;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance within
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the meaning of any other applicable federal, state or local law,
regulation, ordinance or requirement (including consent decrees and
administrative orders) relating to or imposing liability or standards of
conduct concerning any hazardous, toxic or dangerous waste, substance or
material, all as amended or hereafter amended.
"HEREIN", "HEREOF", "HERETO", "HEREUNDER" and similar terms refer to this
Agreement and not to any particular Section or provision of this Agreement.
"IMPERMISSIBLE QUALIFICATION" means, relative to the opinion by independent
public accountants as to any financial statement of the Borrower, any
qualification or exception to such opinion that:
(a) is of a "going concern" or similar nature;
(b) relates to the limited scope of examination of matters relevant
to such financial information; or
(c) relates to the treatment or classification of any item in such
financial statement and which, as a condition to its removal, would require
an adjustment to such item the effect of which would be to cause a default
of any obligations under SECTION 8.2.3.
"INCLUDING" means including without limiting the generality of any
description preceding such term.
"INDEBTEDNESS" means, with respect to any Person, without duplication, (i)
all obligations for borrowed money, (ii) all obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii) all Capitalized Lease
Obligations and Equipment Notes, (iv) all obligations under or in respect of
Currency Hedging Obligations and Interest Rate Protection Obligations of such
Person, (v) all obligations issued or assumed as the deferred purchase price of
property, all conditional sale obligations (as determined under GAAP) and all
obligations under any title retention agreement, (vi) all obligations issued or
contracted for as payment in consideration of the purchase by such Person of the
stock or substantially all the assets of
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another Person or a merger or consolidation, (vii) all obligations for the
reimbursement of any obligor on any letter of credit (including the Letters of
Credit), banker's acceptance or similar credit transactions, (viii) all
obligations of the type referred to in CLAUSES (i) through (vii) above of other
Persons and all dividends of other Persons for the payment of which, in either
case, such Person is directly or indirectly responsible or liable as obligor,
guarantor or otherwise, and (ix) all obligations of the type referred to in
CLAUSES (i) through (viii) above of other Persons which are secured by any Lien
on any property or asset of such Person, the amount of such obligation being
deemed to be the lesser of the value of such property or asset or the amount of
the obligation so secured; PROVIDED, HOWEVER, that "Indebtedness" shall not
include any Non-Recourse Indebtedness, any obligations under any operating
leases (as determined under GAAP), trade accounts payable arising in the
ordinary course of business and trade letters of credit issued in support of
trade accounts payable arising in the ordinary course of business.
"INDEMNIFIED LIABILITIES" is defined in SECTION 11.4.
"INSTRUMENT" means any document or writing (whether by formal agreement,
letter or otherwise) under which any obligation is evidenced, assumed or
undertaken, or any right to any Lien is granted or perfected.
"INTEREST PERIOD" means, relative to any Fixed Rate Loan, the period which
shall begin on (and include) the date on which such Fixed Rate Loan is made or
continued as, or converted into, a Fixed Rate Loan pursuant to SECTION 5.1, and,
unless the final maturity of such Fixed Rate Loan is accelerated, shall end on
(but exclude) the day which numerically corresponds to such date one, two, three
or six months thereafter, in either case as the Borrower may select in its
relevant notice pursuant to SECTION 5.1; PROVIDED, HOWEVER, that:
(a) the Borrower shall not be permitted to select Interest Periods to
be in effect at any one time which have expiration dates occurring on more
than eight different dates;
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(b) absent such selection, the Borrower shall be deemed to have
selected an Interest Period of one month, PROVIDED, that if another
duration shall be required in order to comply with CLAUSE (a), such Loan
shall be a Base Rate Loan for such duration;
(c) if there exists no numerically corresponding day in such month,
such Interest Period shall end on the last Business Day of such month;
(d) if such Interest Period would otherwise end on a day which is not
a Business Day, such Interest Period shall end on the Business Day next
following such numerically corresponding day (unless such next following
Business Day is the first Business Day of a calendar month, in which case
such Interest Period shall end on the preceding Business Day); and
(e) no Interest Period shall end later than April 10, 2004.
"INTEREST RATE PROTECTION OBLIGATIONS" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include interest rate swaps, caps, floors, collars and
similar agreements.
"INVESTMENT" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution to (by means of transfers of
cash or other property to others or payments for property or services for the
account or use of others, or otherwise), or purchase or acquisition of Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any other Person. The term "Investment" shall not include any
Guaranty or any payment under a lease to which such Person is a lessee,
including prepaid rent; PROVIDED, HOWEVER, that if and to the extent that any
payment is
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made under any Guaranty permitted by SECTION 8.2.12(i) or (ii), each such
payment shall constitute an "Investment" hereunder.
"ISSUANCE REQUEST" means a properly completed application for a Letter of
Credit on the Issuer's standard form, executed by the chief executive,
accounting or financial Authorized Officer of the Borrower.
"ISSUER" means any affiliate, unit or agency of BNS.
"LENDER" is defined in the PREAMBLE.
"LENDER PARTIES" is defined in SECTION 11.4.
"LETTER OF CREDIT" has the meaning assigned to that term in SECTION 4.1.
"LETTER OF CREDIT OUTSTANDINGS" means, at any time, an amount equal to the
sum of
(a) the aggregate Stated Amount at such time of all Letters of Credit
then outstanding and undrawn (as such aggregate Stated Amount shall be
adjusted, from time to time, as a result of drawings, the issuance of
Letters of Credit, or otherwise),
PLUS
(b) the aggregate amount at such time of all unpaid and outstanding
Reimbursement Obligations.
"LIABILITIES" means all obligations (monetary or otherwise) of the Borrower
or any other Loan Party under this Agreement, the Letters of Credit, the Notes
and each other Loan Document, whether for principal, interest, costs, fees,
expenses or otherwise, and all other obligations of the Borrower or any other
Loan Party to the Agents or the Lenders, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing or due or to become due.
"LIBO RATE" means, with respect to any Fixed Rate Loan for any Interest
Period, the rate PER ANNUM determined by the
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Administrative Agent at which dollar deposits in immediately available funds are
offered to BNS's LIBOR Office two Business Days prior to the beginning of such
Interest Period by prime banks in the interbank eurodollar market as at or about
the relevant local time of such LIBOR Office, for delivery on the first day of
such Interest Period, for the number of days comprised therein and in an amount
equal to the amount of the Fixed Rate Loans for such Interest Period. "Relevant
local time" shall mean 11:00 a.m., local time, in London, England, when the
LIBOR Office selected by the Administrative Agent to determine the LIBO Rate is
located in Europe, or 10:00 a.m., Nassau, Bahamas time, when such LIBOR Office
is located in North America.
"LIBO RATE (RESERVE ADJUSTED)" means, relative to any portion of a Loan to
be made, continued or maintained as, or converted into, a Fixed Rate Loan for
any Interest Period, a rate PER ANNUM (rounded upwards, if necessary, to the
nearest 1/16th of 1%) determined pursuant to the following formula:
LIBO Rate = LIBO Rate
-----------------------------
(Reserve Adjusted) 1 - LIBOR Reserve Percentage.
The Administrative Agent shall determine the LIBO Rate (Reserve Adjusted) for
each Interest Period, applicable to Fixed Rate Loans comprising all or part of
any Borrowing, conversion or continuation and promptly notify the Borrower
thereof (which determination shall, in the absence of demonstrable error, be
conclusive on the Borrower) and, if requested by the Borrower, deliver a
statement showing the computation used by the Administrative Agent in
determining any such rate.
"LIBOR OFFICE" means, relative to any Lender, the office of such Lender
designated as such in SCHEDULE I hereto or designated in an Assignment Agreement
or such other domestic or foreign office or offices of such Lender (as
designated from time to time by notice from such Lender to the Borrower and the
Administrative Agent).
"LIBOR RESERVE PERCENTAGE" means, relative to each Interest Period, a
percentage (expressed as a decimal) equal to the daily average during such
Interest Period of the percentages in effect on each day of such Interest
Period, as prescribed by the F.R.S.
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Board, for determining the maximum reserve requirements applicable to
"Eurocurrency Liabilities" pursuant to Regulation D or any other applicable
regulation of the F.R.S. Board which prescribes reserve requirements applicable
to "Eurocurrency Liabilities" as presently defined in Regulation D as applicable
to any Lender or any participant of such Lender with respect to such
participation.
"LIEN" means any mortgage, lien (statutory or other), pledge, security
interest, encumbrance, claim, hypothecation, assignment for security, deposit
arrangement or preference or other security agreement of any kind or nature
whatsoever. A Person shall be deemed to own subject to a Lien any property
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to Indebtedness of such Person. The right of a distributor
to the return of its film held by a Person under a film licensing agreement is
not a Lien as used herein. Unless an operating lease is intended as security,
reservation of title thereunder by the lessor and the interest of the lessee
therein are not Liens as used herein.
"LOAN DOCUMENT" means this Agreement and each Instrument from time to time
executed and delivered to the Administrative Agent or any Lender pursuant
hereto, whether or not mentioned herein, including the Notes, the Extension of
Credit Requests, the Issuance Requests, the Significant Subsidiary Guaranty, any
Guaranty delivered to the Administrative Agent pursuant to SECTION 8.2.15, any
Pledge Agreement and each Subsidiary Pledge Agreement.
"LOAN PARTY" means the Borrower, each Guarantor and any other party (other
than any Agent or Lender) that executes and delivers a Loan Document.
"LOANS" is defined in SECTION 2.1(a).
"MATERIALLY ADVERSE EFFECT" means, relative to any occurrence of whatever
nature (including any adverse determination in any litigation, arbitration or
governmental investigation or proceeding), a materially adverse effect, on a
consolidated basis for the Borrower and its Subsidiaries taken as
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a whole, in accordance with GAAP (i) on the financial condition, operations,
properties or business of the Borrower and its Subsidiaries, (ii) on the ability
of the Borrower or any other Loan Party to perform any of its payment or other
material obligations under this Agreement or any Loan Document or (iii) on the
value of, or on the ability of the Administrative Agent to realize on, any
collateral security for the Liabilities.
"MATURITY" means, (i) relative to any Loan, the date on which such Loan is
stated to be due and payable, in whole or in part (in accordance with the Note
evidencing such Loan, this Agreement or otherwise), or such earlier date when
such Loan (or any portion thereof) shall be or become due and payable, in whole
or in part, in accordance with the terms of this Agreement, whether by required
prepayment, declaration or otherwise and (ii) relative to any Reimbursement
Obligation, the Disbursement Date with respect thereto.
"MULTIEMPLOYER PLAN" means a pension plan described in ERISA section
4001(a)(3) to which the Borrower or any Subsidiary is, or within the six years
preceding the date of this Agreement has been, obligated to contribute.
"NET CASH PROCEEDS" means, (i) with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents, including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations with respect to
Indebtedness are financed or sold with recourse to the Borrower or any of its
Subsidiaries) net of (a) brokerage commissions and other reasonable fees and
expenses (including reasonable fees and expenses of counsel and investment
bankers) related to such Asset Sale, (b) provisions for all taxes payable as a
result of such Asset Sale, (c) payments made to retire Indebtedness secured by
the current assets subject to such Asset Sale to the extent required pursuant to
the terms of such Indebtedness and (d) amounts required to be paid to any Person
(other than the Borrower or any Subsidiary of the Borrower) having a beneficial
interest in the assets subject to the Asset Sale, and (ii) with respect to any
incurrence of Indebtedness by Borrower or any Subsidiary, the proceeds thereof
in cash or Cash Equivalents net of underwriting discount, private placement fees
and other
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reasonable fees and expenses (including reasonable fees and expenses of counsel
and investment bankers) related to such incurrence of Indebtedness.
"NET INDEBTEDNESS" means, with respect to the Borrower at any time, (i) the
outstanding principal amount of Indebtedness of Borrower and its Consolidated
Subsidiaries (determined on a consolidated basis) as of such time MINUS (ii)
cash and Cash Equivalents of the Borrower and its Consolidated Subsidiaries
(determined on a consolidated basis) at such time.
"NET INDEBTEDNESS TO CONSOLIDATED EBITDA RATIO" means, as of the last day
of any Fiscal Quarter, the ratio of (i) Net Indebtedness of the Borrower and its
Consolidated Subsidiaries as of such date to (ii) Consolidated EBITDA for the
Borrower and its Consolidated Subsidiaries for the four most recent Fiscal
Quarters ended on such date.
"NET SENIOR INDEBTEDNESS TO CONSOLIDATED EBITDA RATIO" means, as of the
last day of any Fiscal Quarter, the ratio of (i) Net Indebtedness (other than
Subordinated Debt) of the Borrower and its Consolidated Subsidiaries as of such
date to (ii) Consolidated EBITDA for the Borrower and its Consolidated
Subsidiaries for the four most recent Fiscal Quarters ended on such date.
"NEW SUBORDINATED NOTE INDENTURE" means the Indenture dated as of March 19,
1997 pursuant to which the New Subordinated Notes were issued, among the
Borrower, the guarantors named therein and the New Subordinated Note Trustee, as
amended, supplemented or otherwise modified and in effect from time to time.
"NEW SUBORDINATED NOTE TRUSTEE" means The Bank of New York, in its capacity
as trustee under the New Subordinated Note Indenture, or any successor trustee
appointed in accordance with the New Subordinated Note Indenture.
"NEW SUBORDINATED NOTES" means the Borrower's $200,000,000 9 1/2% Senior
Subordinated Notes due March 15, 2009 issued pursuant to the New Subordinated
Note Indenture.
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"NON-RECOURSE INDEBTEDNESS" means Indebtedness as to which (i) neither the
Borrower nor any of its Subsidiaries (a) provides credit support (including any
undertaking, agreement or instrument which would constitute Indebtedness), (b)
is directly or indirectly liable or (c) constitutes the lender (in each case,
other than pursuant to and in compliance with SECTION 8.2.11) and (ii) no
default with respect to such Indebtedness (including any rights which the
holders thereof may have to take enforcement action against the relevant
Unrestricted Subsidiary or its assets) would permit (upon notice, lapse of time
or both) any holder of any other Indebtedness of the Borrower or its
Subsidiaries (other than Non-Recourse Indebtedness) to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity; PROVIDED, HOWEVER, that notwithstanding the
foregoing, Guaranties permitted by SECTION 8.2.12(i)(z) of Capitalized Lease
Obligations shall not cause such Capitalized Lease Obligations to not be
Non-Recourse Indebtedness.
"NOTE" means a promissory note of Borrower delivered to each Lender
substantially in the form of EXHIBIT H hereto (as such promissory note may be
amended, endorsed or otherwise modified from time to time) and all other
promissory notes accepted from time to time in substitution, replacement or
renewal therefor.
"OECD" means the Organization for Economic Cooperation and Development.
"OLD SUBORDINATED NOTES" means the Borrower's 12-5/8% Senior Subordinated
Notes due 2002 issued pursuant to the Old Subordinated Note Indenture,
$4,878,000 of which are outstanding on the date hereof.
"OLD SUBORDINATED NOTE INDENTURE" means the Indenture dated as of August 1,
1992, pursuant to which the Old Subordinated Notes were issued, among the
Borrower, the guarantors named therein and the Old Subordinated Note Trustee, as
amended, supplemented or otherwise modified and in effect on the date hereof.
"OLD SUBORDINATED NOTE TRUSTEE" means The Bank of New York, in its capacity
as trustee under the Old Subordinated Note
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Indenture, or any successor trustee appointed in accordance with the Old
Subordinated Note Indenture.
"ORGANIC DOCUMENT" means, relative to any Person, its certificate of
incorporation, certificate of limited partnership, limited liability company
operating agreement, partnership agreement, and/or by-laws and all shareholder
agreements, voting trusts and similar arrangements applicable to any of its
authorized Capital Stock.
"PARTICIPANT" is defined in SECTION 11.11(a).
"PBGC" means the Pension Benefit Guaranty Corporation, a United States
corporation, and any entity succeeding to any or all of its functions under
ERISA.
"PENSION PLAN" means a "pension plan", as such term is defined in section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer
Plan), and to which the Borrower or any Subsidiary may have any liability,
including any liability by reason of having been a substantial employer within
the meaning of section 4063 of ERISA at any time during the six years preceding
this Agreement, or by reason of being deemed to be a contributing sponsor under
section 4069 of ERISA.
"PERCENTAGE" means, relative to any Lender, the percentage set forth
opposite its name on Schedule I hereto or in an Assignment Agreement, as such
percentage may be adjusted from time to time.
"PERSON" means any natural person, corporation, partnership, limited
liability company, firm, association, trust, government, governmental agency or
any other entity, whether acting in an individual, fiduciary or other capacity.
"PLEDGE AGREEMENT" means a Pledge Agreement between the Borrower and the
Administrative Agent substantially in the form of EXHIBIT I hereto, as amended,
supplemented or otherwise modified from time to time.
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"PREFERRED STOCK" means, with respect to any Person, any Capital Stock of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Capital
Stock of any other class of such Person.
"REGULATORY CHANGE" means, relative to any Lender, any change after the
date hereof in any (or the adoption hereafter of any new):
(a) United States Federal or state law or foreign law applicable to
such Lender; or
(b) rule, regulation, interpretation, directive or request (whether
or not having the force of law) applying to such Lender of any court or
governmental authority charged with the interpretation or administration of
any law referred to in CLAUSE (a) or of any fiscal, monetary or other
authority having jurisdiction over such Lender.
"REIMBURSEMENT OBLIGATION" is defined in SECTION 4.6.
"RELEASE" means a "release", as such term is defined in CERCLA.
"REPORTABLE EVENT" is defined in SECTION 7.11.
"REQUIRED LENDERS" means, at any time, Lenders holding at least 51% of the
then aggregate outstanding principal amount of Loans or, if no such principal
amount is outstanding, Lenders having, in the aggregate, a Percentage of 51% or
more of the Total Commitment Amount.
"RESOURCE CONSERVATION AND RECOVERY ACT" means the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901, ET SEQ., as in effect from time to
time.
"SEC" means the Securities and Exchange Commission (or any governmental
body or agency succeeding to the functions of such Commission).
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"SENIOR NOTE INDENTURE" means the Indenture dated as of August 1, 1992,
pursuant to which the Senior Notes were issued, among the Borrower, the
guarantors named therein and the Senior Note Trustee, as amended, supplemented
or otherwise modified and in effect on the date hereof.
"SENIOR NOTE TRUSTEE" means United States Trust Company of New York, in its
capacity as trustee under the Senior Note Indenture, or any successor trustee
appointed in accordance with the Senior Note Indenture.
"SENIOR NOTES" means the Borrower's 11-7/8% Senior Notes due 2000 issued
pursuant to the Senior Note Indenture, $617,000 of which are outstanding on the
date hereof.
"SIGNIFICANT SUBSIDIARY" means AMC and any other Wholly-Owned Subsidiary
whose assets exceed 5% of the consolidated assets of the Borrower and its
Consolidated Subsidiaries or any other Wholly-Owned Subsidiary so designated by
the Borrower after the Effective Date.
"SIGNIFICANT SUBSIDIARY GUARANTY" means that certain guaranty, executed by
each Person that is a Significant Subsidiary on the Effective Date, each other
Significant Subsidiary required to execute the same pursuant to SECTION 8.1.9
and any other Person that executes the same, substantially in the form of
EXHIBIT E hereto (as such may be amended, supplemented or otherwise modified and
in effect from time to time).
"SPECIAL ENTITY" means any Unrestricted Subsidiary and any other Person
that is not a Guarantor or a Wholly-Owned Subsidiary.
"STATED AMOUNT" of each outstanding Letter of Credit means the maximum
amount that thereafter could be drawn under such Letter of Credit.
"STATED EXPIRY DATE" has the meaning assigned to that term in SECTION 4.1.
"SUBORDINATED DEBT" means the Old Subordinated Notes, the New Subordinated
Notes and Guaranties thereof as provided in the
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Old Subordinated Note Indenture and the New Subordinated Note Indenture and all
other unsecured Indebtedness of the Borrower or any Guarantor for money borrowed
(A) (i) which is subordinated in right of payment to the
Liabilities (including any extensions or increases thereof and
including all interest thereon accruing after the commencement of any
proceedings referred to in SECTION 9.1.4) pursuant to subordination
terms no less favorable to the Agents and Lenders than the
subordination terms governing the New Subordinated Notes pursuant to
the New Subordinated Note Indenture,
(ii) which has a scheduled maturity of, and has no payments of
principal or payments to any sinking or similar fund scheduled earlier
than, one year after the date set forth in CLAUSE (a) of the
definition of "Commitment Termination Date", and
(iii) which is subject to such other terms and provisions
(including acceleration, covenant and default provisions) that are
less restrictive to the Borrower and its Subsidiaries than the terms
and provisions of this Agreement and the other Loan Documents
(PROVIDED, that the terms governing such Subordinated Debt shall not
include any cross-default provisions, but only cross-acceleration
provisions);
OR
(B) (i) which is subordinated in right of payment to the
Liabilities (including any extensions or increases thereof and
including all interest thereon accruing after the commencement of any
proceedings referred to in SECTION 9.1.4) pursuant to subordination
terms (x) substantially similar to the subordination terms governing
the New Subordinated Notes pursuant to the New Subordinated Note
Indenture, or (y) prevalent in the market for similar types of
transactions at the time such Subordinated Debt is issued,
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(ii) which has a scheduled maturity of, and has no payments of
principal or payments to any sinking or similar fund scheduled earlier
than, one year after the date set forth in CLAUSE (a) of the
definition of "Commitment Termination Date", and
(iii) which in any event is subject to, and is only entitled to
the benefits of, such terms and provisions (including acceleration,
interest rate, sinking fund, covenant and default) satisfactory in
form and substance to the Administrative Agent and which has terms of
payment and holders satisfactory to the Administrative Agent, in each
case as evidenced by its written approval thereof.
"SUBSIDIARY" of any Person means (i) any corporation of which more than 50%
of the outstanding shares of Capital Stock of which having ordinary voting power
for the election of directors is owned directly or indirectly by such Person,
and (ii) any partnership, limited liability company, association, joint venture
or other entity in which such Person, directly or indirectly, has more than a
50% equity interest, and, except as otherwise indicated herein, references to
Subsidiaries shall refer to Subsidiaries of the Borrower. Notwithstanding the
foregoing, for purposes of the Loan Documents, an Unrestricted Subsidiary shall
not be deemed a Subsidiary of the Borrower other than for purposes of the
definition of "Unrestricted Subsidiary," unless the Borrower shall have
designated in writing to the Administrative Agent an Unrestricted Subsidiary as
a Subsidiary. A designation of an Unrestricted Subsidiary as a Subsidiary may
not thereafter be rescinded.
"SUBSIDIARY PLEDGE AGREEMENT" means a Subsidiary Pledge Agreement between a
Significant Subsidiary that is a Wholly-Owned Subsidiary and the Administrative
Agent substantially in the form of EXHIBIT J hereto, as amended, supplemented or
otherwise modified from time to time.
"TAXES" is defined in SECTION 3.10.
"TOTAL COMMITMENT AMOUNT" is defined in SECTION 2.2.1.
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"TPI" means TPI Enterprises, Inc.
"TPIE" means TPI Entertainment, Inc.
"TRANSFEREE" is defined in SECTION 11.11(c).
"TYPE" means, relative to the outstanding principal amount of all or any
portion of a Loan, the portion thereof, if any, being maintained as a Base Rate
Loan or a Fixed Rate Loan.
"UNFUNDED BENEFIT LIABILITIES" means, with respect to any Pension Plan at
any time, the amount of unfunded benefit liabilities as determined under ERISA
section 4001(a)(18).
"UNITED STATES" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"UNRESTRICTED SUBSIDIARY" means a Subsidiary of the Borrower designated in
writing to the Administrative Agent (i) whose properties and assets, to the
extent they secure Indebtedness, secure only Non-Recourse Indebtedness, (ii)
that has no Indebtedness other than Non-Recourse Indebtedness and (iii) that has
no Subsidiaries. Notwithstanding the foregoing, no Subsidiary may be designated
an Unrestricted Subsidiary by the Borrower if at the time of such designation it
is a Significant Subsidiary.
"VOTING STOCK" of any Person means outstanding securities of all classes of
such Person ordinarily (and apart from rights accruing under special
circumstances) having the right to elect directors.
"WELFARE PLAN" means a "welfare plan", as such term is defined in section
3(1) of ERISA.
"WHOLLY-OWNED SUBSIDIARY" means any Subsidiary of the Borrower of which
100% of the outstanding Capital Stock is owned by the Borrower or another
Wholly-Owned Subsidiary of the Borrower, except for (i) directors' qualifying
shares and (ii) Preferred Stock which (x) is not convertible into any other
class of Capital Stock and (y) has no right to vote on or consent to any matter
except (1) as expressly required by law and (2) the
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right to appoint a director in the event of a default in the payment of
dividends or distributions thereunder (it being understood that if any right
described in this CLAUSE (2) becomes exercisable, any Subsidiary affected by
such right shall no longer constitute a Wholly-Owned Subsidiary).
SECTION 1.2 USE OF DEFINED TERMS. Terms for which meanings are provided
in this Agreement shall, unless otherwise defined or the context otherwise
requires, have such meanings when used in the Exhibits hereto, each Note, each
Extension of Credit Request, Continuation/Conversion Notice, Compliance
Certificate, notice and other communication delivered from time to time in
connection with this Agreement or any other Loan Document.
SECTION 1.3 ACCOUNTING AND FINANCIAL DETERMINATIONS. Where the character
or amount of any asset or liability or item of income or expense is required to
be determined, or any accounting computation is required to be made, for the
purpose of this Agreement (including SECTION 8.2.3), such determination or
calculation shall, to the extent applicable and except as otherwise specified in
this Agreement, be made in accordance with GAAP as used in, and consistently
applied with, the financial statements referred to in SECTION 7.4.
ARTICLE II
COMMITMENTS
SECTION 2.1 COMMITMENTS. (a) Subject to the terms and conditions of this
Agreement (including ARTICLE VI), each Lender severally and for itself alone
agrees that it will, from time to time on any Business Day occurring during the
period commencing on the Effective Date and continuing to (but not including)
the Commitment Termination Date, make loans (relative to each Lender, its
"LOANS") to the Borrower equal to its Percentage of the aggregate amount of the
Borrowing requested from all Lenders on each such Business Day; PROVIDED,
HOWEVER, that no Lender shall be permitted (in the case of CLAUSE (a) below) or
required to make any Loan if, after giving effect thereto, the Aggregate
Outstanding Liabilities at any one time from
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(i) all Lenders would exceed the Total Commitment Amount; or
(ii) such Lender would exceed its Percentage of the Total Commitment
Amount.
Subject to the terms hereof, the Borrower may from time to time prior to the
Commitment Termination Date borrow, prepay and reborrow amounts pursuant to the
Commitments.
(b) From time to time on any Business Day, the Issuer, severally and for
itself alone, on the terms and subject to the conditions hereinafter set forth,
hereby agrees to issue, and each Lender, severally and for itself alone, on the
terms and subject to the conditions hereinafter set forth, hereby agrees to
participate in, the Letters of Credit, in accordance with ARTICLE IV; PROVIDED,
THAT at no time shall any Lender's Percentage of the Aggregate Outstanding
Liabilities exceed such Lender's Percentage of the Total Commitment Amount.
SECTION 2.2 TOTAL COMMITMENT AMOUNT; REDUCTION OF TOTAL COMMITMENT AMOUNT.
SECTION 2.2.1 TOTAL COMMITMENT AMOUNT. The aggregate amount (the "TOTAL
COMMITMENT AMOUNT") of all Commitments on any date on or prior to the Commitment
Termination Date shall be $425,000,000, subject to reduction as provided in
SECTION 2.2.2.
SECTION 2.2.2 REDUCTION OF TOTAL COMMITMENT AMOUNT. The Total Commitment
Amount is subject to permanent reduction from time to time pursuant to this
SECTION 2.2.2.
(a) VOLUNTARY REDUCTIONS. The Borrower may, from time to time, on
not less than three Business Days' prior notice to the Administrative
Agent, voluntarily reduce the Total Commitment Amount; PROVIDED that all
partial reductions of such amount shall be in a minimum amount of
$5,000,000 or any larger integral multiple of $1,000,000 and the Borrower
may not reduce the Total Commitment Amount to an amount that is less than
the Aggregate Outstanding Liabilities.
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(b) SCHEDULED MANDATORY REDUCTIONS. On each date set forth below,
the Total Commitment Amount shall automatically and permanently be reduced
by the amount set forth opposite such date:
DATE AMOUNT
---- ------
December 31, 2002 $25,000,000
March 31, 2003 $25,000,000
June 30, 2003 $25,000,000
September 30, 2003 $25,000,000
December 31, 2003 $50,000,000
Commitment Termination Date $275,000,000.
Voluntary reductions of the Total Commitment Amount pursuant to SECTION
2.2.2(a) and mandatory reductions of the Total Commitment Amount pursuant
to SECTIONS 2.2.2(c) and (d) shall diminish the amount of scheduled
reductions to the Total Commitment Amount thereafter occurring pursuant to
this SECTION 2.2.2(b) in inverse order of scheduled occurrence.
(c) MANDATORY REDUCTIONS WITH NET CASH PROCEEDS OF ASSET SALES. The
Total Commitment Amount shall be reduced by an amount equal to the Net Cash
Proceeds of all Asset Sales; PROVIDED, that the foregoing shall not apply
to (i) Asset Sales that result in Net Cash Proceeds of less than $2,500,000
in a single transaction or a series of related transactions, (ii) Net Cash
Proceeds that are reinvested within 360 days after the related Asset Sale
in assets of a kind used or useable in lines of business permitted by
SECTION 8.2.13, (iii) Net Cash Proceeds resulting from sales of Investments
permitted under SECTION 8.2.11(iv), (iv) Net Cash Proceeds resulting from
any Asset Sale if the assets sold in such Asset Sale are contemporaneously
leased back to the Borrower or the applicable Subsidiary on fair market
terms pursuant to an operating lease (as determined under GAAP as of the
date such lease is entered into) (it being understood that the Total
Commitment Amount shall be reduced by the Net Cash Proceeds of any Asset
Sale of assets which are leased back pursuant to a lease giving rise to a
Capitalized Lease Obligation) or (v) Net Cash Proceeds
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resulting from sales of Capital Stock of Subsidiaries so long as no Event
of Default exists at the time of such Asset Sale or would result therefrom.
It is understood and agreed that any Net Cash Proceeds held by the Borrower
pending reinvestment or application hereunder shall be invested in
Investments permitted under SECTION 8.2.11(iv) while so held, to the extent
practicable.
(d) MANDATORY REDUCTIONS RESULTING FROM RECEIPT OF NET CASH PROCEEDS
OF SENIOR DEBT INCURRENCES. The Total Commitment Amount shall be reduced
by an amount equal to the Net Cash Proceeds of all Funded Debt (other than
Subordinated Debt) incurred after the Effective Date by the Borrower and
its Subsidiaries; PROVIDED, HOWEVER, that the Total Commitment Amount shall
not be so reduced to the extent that the aggregate principal amount of all
such Funded Debt incurred by the Borrower and its Subsidiaries does not
exceed $40,000,000 at any one time outstanding. When used in this SECTION
2.2.2(d), "FUNDED DEBT" means all Indebtedness of the Borrower and its
Subsidiaries (other than Indebtedness permitted under SECTION 8.2.1(iii))
(i) for borrowed money, (ii) evidenced by bonds, debentures, notes or other
similar instruments and (iii) in respect of all obligations for the
reimbursement of any obligor on any letter of credit, banker's acceptance
or similar credit transaction.
SECTION 2.3 FEES. (a) The Borrower agrees to pay the Administrative Agent
for the account of each Lender, for the period (including any portion thereof
when its Commitment is suspended by reason of the Borrower's inability to
satisfy any condition of ARTICLE VI) commencing on the Effective Date and
continuing through the Commitment Termination Date, a commitment fee at the PER
ANNUM rate specified in the table below opposite the Applicable Margin
Determination Ratio computed in the Applicable Margin Determination Ratio
Certificate then most recently delivered based on such Lender's Percentage times
the daily average of the excess of the Total Commitment Amount over the
Aggregate Outstanding Liabilities. Such commitment fees shall be payable by the
Borrower in arrears to each Lender on the last day of each Fiscal Quarter for
the Fiscal Quarter then ended (or, if such day is not a Business Day, on the
next succeeding
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Business Day), commencing with the first such day following the Effective Date,
and on the Commitment Termination Date.
APPLICABLE MARGIN DETERMINATION RATIO RATE
- ------------------------------------- ----
Greater than or equal to 4.50 0.3750%
Greater than or equal to 4.00
and less than 4.50 0.3500%
Greater than or equal to 3.50
and less than 4.00 0.3250%
Greater than or equal to 3.00
and less than 3.50 0.2750%
Greater than or equal to 2.50
and less than 3.00 0.2250%
Greater than or equal to 2.00
and less than 2.50 0.2000%
Less than 2.00 0.1875%.
(b) The Borrower agrees to pay to the Administrative Agent, for the account
of the Lenders, a fee for each Letter of Credit (computed for the actual number
of days elapsed on the basis of a 360-day year) for the period from and
including the date of the issuance of such Letter of Credit to (but not
including) the date upon which such Letter of Credit expires, at the PER ANNUM
rate specified in the table below opposite the Applicable Margin Determination
Ratio computed in the Applicable Margin Determination Ratio Certificate then
most recently delivered multiplied by the face amount of each Letter of Credit.
Such fees shall be payable by the Borrower in arrears on the last day of each
Fiscal Quarter (or, if such day is not a Business Day, on the next succeeding
Business Day), and on the Commitment Termination Date for any period then ending
for which such fee shall not theretofore have been paid, commencing on the first
such date after the issuance of such Letter of Credit.
APPLICABLE MARGIN DETERMINATION RATIO RATE
- ------------------------------------- ----
Greater than or equal to 4.50 1.670%
Greater than or equal to 4.00
and less than 4.50 1.420%
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Greater than or equal to 3.50
and less than 4.00 1.170%
Greater than or equal to 3.00
and less than 3.50 0.920%
Greater than or equal to 2.50
and less than 3.00 0.670%
Greater than or equal to 2.00
and less than 2.50 0.545%
Less than 2.00 0.420%.
(c) The Borrower agrees to pay to the Administrative Agent, for the account
of the Issuer, a fronting fee for each Letter of Credit (computed for the actual
number of days elapsed on the basis of a 360-day year) for the period from and
including the date of issuance of such Letter of Credit to (but not including)
the date upon which such Letter of Credit expires, of 0.08% per annum of the
face amount of such Letter of Credit. Such fees shall be payable by the
Borrower in arrears on the last day of each Fiscal Quarter (or, if such day is
not a Business Day, on the next succeeding Business Day), and on the Commitment
Termination Date for any period then ending for which such fee shall not
theretofore have been paid, commencing on the first such date after the issuance
of such Letter of Credit.
SECTION 2.4 TERMINATION. The Commitments shall terminate and each Lender
shall be relieved of its obligations to make any Loan, and to issue, or
participate in, any Letter of Credit, on the Commitment Termination Date.
ARTICLE III
LOANS AND NOTES
SECTION 3.1 BORROWING PROCEDURE. By furnishing an Extension of Credit
Request to the Administrative Agent on or before 11:00 a.m., Atlanta time, on
not less than three (or on the same day in the case of a Base Rate Loan) nor
more than five Business Days' notice before the date of any Borrowing requested
in such Extension of Credit Request, the Borrower may from time to time
irrevocably request that Loans constituting a Borrowing be made by all Lenders
in the aggregate in a minimum amount of
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$5,000,000 or any larger integral multiple of $1,000,000. Subject to the terms
and conditions of this Agreement, each Borrowing shall be made on the Business
Day, and shall be comprised of the type of Loans, specified in the Extension of
Credit Request therefor. On such Business Day and subject to such terms and
conditions, each Lender shall provide the Administrative Agent with funds, on or
before 11:00 a.m. (or 12:00 noon in the case of a Base Rate Loan), Atlanta time,
in an amount equal to such Lender's Percentage of the requested Borrowing by
transferring same day or immediately available funds to such account as the
Administrative Agent shall specify from time to time by notice to the Lenders.
To the extent funds are received from the Lenders, on or before 2:30 p.m.,
Atlanta time, the Administrative Agent shall make available the proceeds of each
Borrowing by wire transfer of such proceeds to such transferees, or to such
accounts of the Borrower, as the Borrower shall have specified in the Extension
of Credit Request therefor. No Lender's obligation to make any Loan shall be
affected by any other Lender's failure to make any Loan.
SECTION 3.2 NOTES. All Loans made by each Lender shall be evidenced by a
Note payable to the order of such Lender in a maximum principal amount equal to
such Lender's Percentage of the original Total Commitment Amount. The Borrower
hereby irrevocably authorizes each Lender to make (or cause to be made)
appropriate notations on the grid attached to such Lender's Note (or on a
continuation of such grid attached to any such Note and made a part thereof),
which notations, if made, shall evidence, INTER ALIA, the date of, the
outstanding principal of, and the interest rate (including any conversions
thereof pursuant to SECTION 5.1) and Interest Period applicable to, the Loans
evidenced thereby. Any such notation on any such grid (or on any such
continuation) indicating the outstanding principal amount of such Lender's Loans
shall be rebuttable presumptive evidence of the principal amount thereof owing
and unpaid, but the failure to record any such amount on such grid (or on any
such continuation) shall not limit or otherwise affect the obligations of the
Borrower hereunder or under such Note to make payments of principal of or
interest on such Loans when due.
SECTION 3.3 PRINCIPAL PAYMENTS AND PREPAYMENTS. The Borrower will repay
the outstanding principal amount of the Notes
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on or before the Commitment Termination Date. In addition, the Borrower:
(a) may make a voluntary prepayment in part in an aggregate principal
amount of not less than $5,000,000 or any larger integral multiple of
$1,000,000, or in full of the outstanding principal amount of the Loans
from time to time at any time upon at least three Business Days' prior
notice (or same day notice in the case of a Base Rate Loan) to the
Administrative Agent; and
(b) shall, on each date when any reduction in the Total Commitment
Amount shall become effective pursuant to SECTION 2.2.2, make a mandatory
prepayment of Loans and/or provide cash collateral to the Issuer for
Letters of Credit outstanding in an aggregate amount equal to the excess,
if any, of the Aggregate Outstanding Liabilities over the Total Commitment
Amount as so reduced.
Each prepayment of any Loans made pursuant to this Section shall be without
premium or penalty, except as may be required by SECTION 5.5. All interest
accrued on the principal amount of Loans prepaid shall be paid on the date of
such prepayment. No voluntary prepayment of principal of the Loans prior to the
Commitment Termination Date shall cause a reduction in the Total Commitment
Amount.
Each prepayment of the Loans shall, except as the Borrower may otherwise
have notified the Administrative Agent, be applied, to the extent of such
prepayment, (x) first, to Base Rate Loans, and (y) second, to Fixed Rate Loans.
SECTION 3.4 INTEREST. The Borrower agrees to pay interest on the
principal amount of the Loans from time to time unpaid prior to and at Maturity
(whether by required prepayment, declaration or otherwise) at a rate PER ANNUM:
(a) on that portion of the Loans being maintained from time to time as
Base Rate Loans, equal to the sum of the Base Rate from time to time in
effect PLUS the Applicable Margin, and
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(b) on that portion of the Loans being maintained from time to time as
one or more Fixed Rate Loans during each applicable Interest Period, equal
to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period
PLUS the Applicable Margin.
SECTION 3.5 POST-MATURITY RATES. After the Maturity of all or any portion
of the principal amount of the Loans or Reimbursement Obligations or after any
other Liabilities shall have become due (whether by acceleration or otherwise),
the Borrower shall pay interest (after as well as before judgment) on the
principal amount of all types of Loans so matured or on such other Liabilities,
as the case may be, at a rate PER ANNUM which is determined by increasing each
of the Applicable Margins set forth in CLAUSES (a) and (b) of SECTION 3.4 by 2%
PER ANNUM for Loans so matured and, to the extent permitted by applicable law,
at a rate PER ANNUM equal to the Base Rate plus 2% for Reimbursement Obligations
and at a rate PER ANNUM equal to the Base Rate plus 3.125% for such other
Liabilities.
SECTION 3.6 PAYMENT DATES. Interest accrued on the Loans prior to
Maturity (as aforesaid) shall be payable, without duplication:
(a) on that portion of the Loans being maintained as Base Rate Loans,
on the last day of each month (or, if such day is not a Business Day, on
the next succeeding Business Day);
(b) on that portion of the Loans being maintained as one or more
Fixed Rate Loans, on the last day of each applicable Interest Period (and,
if such Interest Period shall exceed three months, on the three-month
anniversary of the first day of such Interest Period); and
(c) on that portion of the Loans being converted into a Base Rate
Loan or a Fixed Rate Loan on a day when interest would not otherwise have
been payable pursuant to CLAUSE (a) or (b), on the date of such conversion.
Interest on the Loans and other monetary Liabilities shall be payable at
Maturity (as aforesaid) and, thereafter, on demand.
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SECTION 3.7 PAYMENTS, COMPUTATIONS, ETC. Unless otherwise expressly
provided herein, all payments by the Borrower pursuant to this Agreement, the
Notes, each Letter of Credit or any other Loan Document, whether in respect of
principal or interest, shall be made by the Borrower to the Administrative Agent
for the account of the Lenders PRO RATA according to their respective unpaid
principal amounts. The payment of all fees referred to in SECTIONS 2.3(a) and
(b) shall be made by the Borrower to the Administrative Agent for the account of
the Lenders entitled thereto PRO RATA according to their Percentages. All other
amounts payable to any Agent or Lender under this Agreement or any other Loan
Document shall be paid to the Administrative Agent for the account of the Person
entitled thereto. All such payments required to be made to the Administrative
Agent shall be made, without set-off, deduction or counterclaim, not later than
12:00 noon, Atlanta time, on the date due, in same day or immediately available
funds, to such account as the Administrative Agent shall specify from time to
time by notice to the Borrower. Funds received after that time shall be deemed
to have been received by the Administrative Agent on the next following Business
Day. The Administrative Agent shall promptly remit in same day or immediately
available funds to each Lender its share, if any, of such payments received by
the Administrative Agent for the account of such Lender. All interest and fees
shall be computed on the basis of the actual number of days (including the first
day but excluding the last day) occurring during the period for which such
interest or fee is payable over a year comprised of 360 days. Whenever any
payment to be made shall otherwise be due on a day which is not a Business Day,
such payment shall (except as otherwise required by CLAUSE (d) of the definition
of the term "INTEREST PERIOD" with respect to payments then due of principal of
or interest on any Notes being maintained as Fixed Rate Loans) be made on the
next succeeding Business Day and such extension of time shall be included in
computing interest, if any, in connection with such payment.
SECTION 3.8 PRORATION OF PAYMENTS. If any Lender shall obtain any payment
or other recovery (whether voluntary, involuntary, by application of set-off, or
otherwise) on account of principal of or interest or fee on any Loan,
Reimbursement Obligation or Letter of Credit or Commitment (other than pursuant
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to the terms of SECTION 5.4 or 5.5) in excess of its PRO RATA share of payments
then or therewith obtained by all Lenders upon principal of and interest and
fees on all Loans, Reimbursement Obligations, Commitments and Letters of Credit,
such Lender shall purchase from the other Lenders such participations in Loans
held by them and/or Letters of Credit as shall be necessary to cause such
purchasing Lender to share the excess payment or other recovery ratably with
each of them; PROVIDED, HOWEVER, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing Lender,
the purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section may, to
the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to SECTION 3.9) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the amount of such
participation. If under any applicable bankruptcy, insolvency or other similar
law, any Lender receives a secured claim in lieu of a setoff to which this
Section applies, such Lender shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of the Lenders entitled under this Section to share in the benefits of any
recovery on such secured claim.
SECTION 3.9 SETOFF. In addition to and not in limitation of any rights of
any Lender under applicable law, each Lender shall, upon the occurrence of any
Default described in SECTION 9.1.4 or upon the occurrence of any Event of
Default, have the right to set off, appropriate and apply to the payment of the
Liabilities owing to it any and all balances, credits, deposits, accounts or
moneys of the Borrower then maintained with such Lender; PROVIDED, HOWEVER, that
any such appropriation and application shall be subject to the provisions of
SECTION 3.8.
SECTION 3.10 TAXES. All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future income, stamp
or other taxes, fees, duties, withholding or other charges of any nature
whatsoever imposed by any taxing authority, other than taxes
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imposed on or measured by any Lender's net income or receipts (such non-excluded
items being hereinafter referred to as "TAXES"). In the event that any
withholding or deduction from any payment to be made by the Borrower hereunder
is required in respect of any Taxes pursuant to any applicable law, rule or
regulation, then the Borrower will:
(a) pay to the relevant authority the full amount required to be so
withheld or deducted;
(b) promptly forward to the Administrative Agent an official receipt
or other documentation satisfactory to the Administrative Agent evidencing
such payment to such authority; and
(c) pay to the Administrative Agent for the account of the Lenders
such additional amount or amounts as is necessary to ensure that the net
amount actually received by each Lender, after giving effect to any credit
against Taxes received by each such Lender as a result of such withholding
or deduction, will equal the full amount such Lender would have received
had no such withholding or deduction been required. Each such Lender shall
determine such additional amount or amounts payable to it (which
determination shall, in the absence of demonstrable error, be conclusive
and binding on the Borrower).
Upon the request of the Borrower, each Lender that is organized under the laws
of a jurisdiction other than the United States or any state thereof shall, prior
to the due date of any payments under the Notes, execute and deliver to the
Borrower, on or about the first scheduled payment date in each Fiscal Year, a
United States Internal Revenue Service Form 1001 or Form 4224 (or any successor
form), appropriately completed.
ARTICLE IV
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LETTERS OF CREDIT
SECTION 4.1 ISSUANCE REQUESTS. By delivering an Issuance Request to the
Administrative Agent and the Issuer on or before 12:00 noon, Atlanta time, the
Borrower may request, from time to time prior to the Commitment Termination Date
and on not less than three (3) nor more than ten (10) Business Days' prior
notice, that the Issuer issue an irrevocable standby or commercial (trade)
letter of credit in such form as may be requested by the Borrower and approved
by the Issuer (each a "LETTER OF CREDIT"), in support of financial obligations
of the Borrower incurred in the Borrower's ordinary course of business and which
are described in such Issuance Request. Each Letter of Credit shall by its
terms: (a) be issued in a Stated Amount which, when added (without duplication)
to the sum of all other Aggregate Outstanding Liabilities on such day (after
giving effect to the incurrence or repayment of any Aggregate Outstanding
Liabilities on such day) would not exceed the Total Commitment Amount; (b) be
issued in a Stated Amount which, when added (without duplication) to the sum of
all other Letter of Credit Outstandings on such day (after giving effect to the
incurrence or repayment of any other Letter of Credit Outstandings on such day)
would not exceed $25,000,000; and (c) be stated to expire on a date (its "STATED
EXPIRY DATE") no later than the earlier of one year from its date of issuance
and 30 days prior to the Commitment Termination Date. So long as no Default has
occurred and is continuing, by delivery to the Issuer and the Administrative
Agent of an Issuance Request at least three (3) but not more than ten (10)
Business Days prior to the Stated Expiry Date of any Letter of Credit, the
Borrower may request the Issuer to extend the Stated Expiry Date of such Letter
of Credit for one or more additional periods, each such period to expire not
later than the earlier of one year from its date of extension and 30 days prior
to the Commitment Termination Date. Notwithstanding anything to the contrary
herein, the Issuer shall not be obligated to issue any Letter of Credit payable
in a currency other than Dollars.
SECTION 4.2 ISSUANCES AND EXTENSIONS. On the terms and subject to the
conditions of this Agreement (including ARTICLE VI), the Issuer shall issue
Letters of Credit, and extend, one or more times, the Stated Expiry Dates of
outstanding
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Letters of Credit, in accordance with the Issuance Requests made therefor. Upon
such issuance or extension, the Issuer shall promptly notify the Administrative
Agent thereof. The Issuer will make available the original of each Letter of
Credit which it issues in accordance with the Issuance Request therefor to the
beneficiary thereof and will promptly notify the beneficiary under any Letter of
Credit of any extension of the Stated Expiry Date thereof.
SECTION 4.3 EXPENSES. The Borrower agrees to pay to the Issuer all
agreed upon administrative expenses of the Issuer in connection with the
issuance, maintenance, modification (if any) and administration of each Letter
of Credit issued by the Issuer upon demand from time to time.
SECTION 4.4 OTHER LENDERS' PARTICIPATION. Each Letter of Credit issued
pursuant to SECTION 4.2 shall, effective upon its issuance and without further
action, be issued on behalf of all Lenders (including the Issuer) PRO RATA
according to their respective Percentages. Each Lender shall, to the extent of
its Percentage, be deemed irrevocably to have participated in the issuance of
such Letter of Credit and shall be responsible to reimburse promptly the Issuer
for Reimbursement Obligations which have not been reimbursed by the Borrower in
accordance with SECTION 4.5, or which have been reimbursed by the Borrower but
must be returned, restored or disgorged by the Issuer for any reason, and each
Lender shall, to the extent of its Percentage, be entitled to receive from the
Administrative Agent a ratable portion of the letter of credit fees received by
the Administrative Agent pursuant to SECTION 2.3(b), with respect to each Letter
of Credit. In the event that (i) the Borrower shall fail to reimburse the
Issuer, and if for any reason Loans shall not be made to fund any Reimbursement
Obligation, all as provided in SECTION 4.5 and in an amount equal to the amount
of any drawing honored by the Issuer under a Letter of Credit issued by it, or
(ii) the Issuer must for any reason return or disgorge all or any portion of
such reimbursement, or (iii) the Borrower shall fail to fully cash collateralize
any Letter of Credit after the Commitment Termination Date pursuant to SECTION
4.7 and a payment under or draw upon such Letter of Credit is made, the Issuer
shall promptly notify the Administrative Agent who shall promptly notify each
Lender of the unreimbursed amount of such drawing and
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of such Lender's respective participation therein. Each Lender shall make
available to the Issuer, whether or not any Default shall have occurred and be
continuing, and whether or not any other conditions specified in SECTION 6.2 are
satisfied, an amount equal to its respective participation in same day or
immediately available funds at the office of the Issuer specified in such notice
not later than 11:00 A.M., Atlanta time, on the Business Day (under the laws of
the jurisdiction of the Issuer) after the date notified by the Issuer. In the
event that any Lender fails to make available to the Issuer the amount of such
Lender's participation in such Letter of Credit as provided herein, the Issuer
shall be entitled to recover such amount on demand from such Lender together
with interest at the daily average Federal Funds Rate PLUS, if such Lender has
not paid the Issuer the amount of its participation in full within four (4)
Business Days from the date of such demand by the Administrative Agent (and
commencing on such fourth Business Day), 1% per annum. The Issuer shall
distribute to each other Lender which has paid all amounts payable by it under
this ARTICLE IV with respect to any Letter of Credit issued by such Issuer, such
other Lender's Percentage of all payments received by the Issuer from the
Borrower in reimbursement of drawings honored by the Issuer under the Letter of
Credit when such payments are received.
SECTION 4.5 DISBURSEMENTS. The Issuer will notify the Borrower and the
Administrative Agent promptly of the presentment for payment under or draw upon
any Letter of Credit, together with notice of the date (a "DISBURSEMENT DATE")
such payment shall be made; PROVIDED, HOWEVER, that the failure of the Issuer to
so notify the Borrower and the Administrative Agent shall not affect the rights
of the Issuer or the Lenders to be reimbursed under the terms of this Agreement
in any manner whatsoever. Subject to the terms and provisions of such Letter of
Credit, the Issuer shall make such payment to the beneficiary (or its designee)
of such Letter of Credit. Prior to 12:00 noon, Atlanta time, on the
Disbursement Date, the Borrower will reimburse the Issuer for all amounts which
it has disbursed under the Letter of Credit. To the extent the Issuer is not
reimbursed in full in accordance with the THIRD SENTENCE of this SECTION 4.5,
the Borrower's Reimbursement Obligation shall accrue interest at the Default
Rate, payable on demand. In the event the Issuer is not reimbursed by the
Borrower on the Disbursement Date, or if the
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Issuer must for any reason return or disgorge such reimbursement, the Lenders
(including the Issuer) shall, on the terms and subject to the conditions of this
Agreement, fund the Reimbursement Obligation therefor by making, on the next
Business Day, Loans which are Base Rate Loans as provided in SECTION 3.1 (the
Borrower being deemed to have given a timely Extension of Credit Request
therefor for such amount) that shall be payable on demand and that shall accrue
interest until paid in full at the Default Rate.
SECTION 4.6 REIMBURSEMENT. The Borrower's obligation (a "REIMBURSEMENT
OBLIGATION") under SECTION 4.5 to reimburse the Issuer with respect to each
payment or disbursement (including interest thereon) and, without duplication,
to repay Loans pursuant to SECTION 4.5 and each Lender's obligation to make
participation payments in each drawing which has not been reimbursed by the
Borrower, shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim, or defense to payment which the
Borrower may have or have had against any Lender or any beneficiary of a Letter
of Credit, including any defense based upon the occurrence of any Default, any
draft, demand or certificate or other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient (even if
notified thereof by the Borrower), the failure of any payment or disbursement to
conform to the terms of the applicable Letter of Credit (if, in the Issuer's
good faith opinion, such payment or disbursement is determined to be
appropriate) or any non-application or misapplication by the beneficiary of the
proceeds of such payment or disbursement, or the legality, validity, form,
regularity, or enforceability of such Letter of Credit; PROVIDED, HOWEVER, that
nothing herein shall adversely affect the right of the Borrower to commence any
proceeding against the Issuer for any wrongful payment or disbursement made by
the Issuer under a Letter of Credit as a result of acts or omissions
constituting gross negligence or wilful misconduct on the part of the Issuer.
SECTION 4.7 DEEMED DISBURSEMENTS. Upon the occurrence of the Commitment
Termination Date, an amount equal to that portion of Letter of Credit
Outstandings attributable to undrawn Letters of Credit outstanding on the
Commitment Termination Date (and not returned undrawn to the Issuer by the
beneficiaries thereof on or
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prior to the Commitment Termination Date) shall automatically, without demand
upon or notice to the Borrower, be deemed to have been paid or disbursed by the
Issuer under the Letters of Credit (notwithstanding that such amount may not in
fact have been so paid or disbursed), and the Borrower shall be immediately
obligated to reimburse the Issuer the amount deemed to have been so paid or
disbursed by the Issuer. Any amounts so received by the Issuer from the
Borrower pursuant to this SECTION 4.7 shall be held as collateral security for
the repayment of the Borrower's obligations in connection with the Letters of
Credit issued by the Issuer. At any time when any such Letter of Credit shall
terminate and all liabilities of the Issuer thereunder are either terminated or
paid or reimbursed to the Issuer in full, the Liabilities of the Borrower under
this SECTION 4.7 shall be reduced accordingly (subject, however, to
reinstatement in the event any payment in respect of any such Letter of Credit
is recovered in any manner from the Issuer), and the Issuer will return to the
Borrower the aggregate amount deposited by the Borrower with the Issuer in
respect of such Letter of Credit and not theretofore applied by the Issuer to
any Reimbursement Obligation arising from such Letter of Credit, together with
all earnings thereon pursuant to the immediately succeeding sentence. All
amounts on deposit pursuant to this SECTION 4.7 shall, until their application
to any Reimbursement Obligation or their return to the Borrower, as the case may
be, bear interest at the daily average Federal Funds Rate from time to time in
effect, which interest shall be held by the Issuer as additional collateral
security for the repayment of the Liabilities in connection with the Letters of
Credit issued by the Issuer.
SECTION 4.8 NATURE OF REIMBURSEMENT OBLIGATIONS. The Borrower shall
assume all risks of the acts, omissions, or misuse of any Letter of Credit by
the beneficiary thereof. Without limiting the foregoing and without limiting
SECTION 4.6, the Issuer shall not be responsible for the following:
(a) the form, validity, sufficiency, accuracy, genuineness, or legal
effect of any document submitted to the Issuer by any party in connection
with the application for and issuance of a Letter of Credit, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent, or forged;
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(b) the form, validity, sufficiency, accuracy, genuineness, or legal
effect of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder
or proceeds thereof in whole or in part, which may prove to be invalid or
ineffective for any reason;
(c) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(d) errors, omissions, interruptions, or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex, or otherwise;
or
(e)any loss or delay in the transmission or delivery of any document
or draft required in order to make a payment or disbursement under a Letter
of Credit or of the proceeds thereof.
None of the foregoing shall affect, impair, or prevent the vesting of any of the
rights or powers granted the Issuer or any Lender hereunder. In furtherance and
extension, and not in limitation or derogation, of any of the foregoing, any
action taken or omitted to be taken by the Issuer in good faith shall be binding
upon the Borrower and shall not put the Issuer under any resulting liability to
the Borrower. Any of the foregoing notwithstanding, the Borrower may have a
claim against the Issuer, and the Issuer may be liable to the Borrower, to the
extent, but only to the extent, of any direct, as opposed to consequential or
exemplary, damages suffered by the Borrower which were caused by the Issuer's
gross negligence or wilful misconduct.
ARTICLE V
BASE RATE AND FIXED RATE
OPTIONS FOR THE LOANS
SECTION 5.1 ELECTIONS. The Loans comprising any Borrowing may be made as
a loan having a fluctuating rate of interest determined by reference to the Base
Rate ("BASE RATE LOANS") or,
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at the Borrower's election made in accordance with this Section, as a loan (a
"FIXED RATE LOAN") having for each particular Interest Period a fixed rate of
interest determined by reference to the LIBO Rate (Reserve Adjusted), as
specified in the Extension of Credit Request for such Loan. The Borrower may
from time to time irrevocably elect by delivering to the Administrative Agent a
Continuation/Conversion Notice, on not less than one (or not less than three if
a Loan is to be continued as, or converted into, a Fixed Rate Loan) nor more
than five Business Days' notice:
(a) that all, or any portion in a minimum amount of $5,000,000 or any
larger integral multiple of $1,000,000, of the outstanding principal amount
of any Borrowing be converted from Base Rate Loans into Fixed Rate Loans or
from Fixed Rate Loans into Base Rate Loans; and
(b) on the expiration of the Interest Period applicable to any Fixed
Rate Loans, that all, or any portion in a minimum amount of $5,000,000 or
any larger integral multiple of $1,000,000, of the outstanding principal
amount of such Fixed Rate Loans be continued as Fixed Rate Loans or be
converted into Base Rate Loans (in the absence of the delivery of a
Continuation/Conversion Notice pursuant to this clause, the Borrower will
be deemed to have requested that such Fixed Rate Loans be converted into
Base Rate Loans);
PROVIDED, HOWEVER, that:
(i) no portion of the outstanding principal amount of any Loans may be
continued as, or be converted into, Fixed Rate Loans if, after giving
effect to such action, the Interest Period applicable thereto shall extend
beyond the date of any prepayment required by SECTION 3.3, unless a
sufficient principal amount of other Loans are being maintained as Base
Rate Loans to permit such prepayment to be applied in full to such Base
Rate Loans;
(ii) no portion of the outstanding principal amount of any Loans may
be continued as, or be converted into, a Fixed
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Rate Loan when any Default has occurred and is continuing; and
(iii) no portion of the outstanding principal amount of any Loans may
be made or continued as, or be converted into, Base Rate Loans or Fixed
Rate Loans unless, after giving effect to such action, the principal amount
of Loans of each type outstanding from each Lender then being so made,
continued or converted shall be equal to such Lender's Percentage of the
outstanding principal amount of all Loans then being so made, continued or
converted.
Each Continuation/Conversion Notice requesting that all, or any portion, of the
principal amount of the Loans be continued as, or be converted into, Fixed Rate
Loans shall specify the duration of the Interest Period commencing upon such
continuation or conversion.
Each Lender may, if it so elects, fulfill its commitment to make or
maintain any portion of the principal amount of a Loan as, or to convert any
portion of the principal amount of a Loan into, one or more Fixed Rate Loans by
causing a foreign branch or Affiliate of such Lender to make or maintain any
such Fixed Rate Loan; PROVIDED, HOWEVER, that in such event such Fixed Rate Loan
shall be deemed to have been made by such Lender, and the obligation of the
Borrower to repay such Fixed Rate Loan shall nevertheless be to such Lender and
shall be deemed to be held by it, to the extent of such Fixed Rate Loan, for the
account of such foreign branch or Affiliate.
The Borrower understands that, if it elects that any portion of the
principal amount of a Borrowing be made, continued as or be converted into, a
Fixed Rate Loan, each Lender may (while being entitled to fund all or any
portion of such Fixed Rate Loan as it may see fit) wish to be able to fund such
Fixed Rate Loan by purchasing Dollar deposits in its LIBOR Office's interbank
eurodollar market. Accordingly, in connection with any determination to be made
for purposes of SECTION 5.2, 5.3, 5.4 or 5.5, it shall be conclusively assumed
that such Lender has elected to fund all Fixed Rate Loans by purchasing Dollar
deposits in such interbank eurodollar market.
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SECTION 5.2 FIXED RATE LENDING UNLAWFUL. If as the result of any
Regulatory Change any Affected Lender shall determine (which determination
shall, in the absence of demonstrable error, be conclusive and binding on the
Borrower) that it is unlawful for the Affected Lender to make, continue or
maintain a Loan as, or to convert a Loan into, one or more Fixed Rate Loans, the
obligation of the Affected Lender under SECTION 5.1 to make, continue or
maintain any portion of the principal amount of a Loan as, or to convert such
Loan into, one or more Fixed Rate Loans shall, upon such determination (and
telephonic notice thereof confirmed in writing to the Administrative Agent and
the Borrower), forthwith terminate, and the Administrative Agent shall, by
telephonic notice confirmed in writing to the Borrower and each Lender, declare
that such obligation has so terminated, and any portion of the principal amount
of a Loan then maintained as one or more Fixed Rate Loans by the Affected Lender
shall automatically convert into a Base Rate Loan. If circumstances
subsequently change so that the Affected Lender shall determine that it is no
longer so affected, the obligation of the Affected Lender under SECTION 5.1 to
make or continue Loans as, or to convert Loans into, Fixed Rate Loans shall,
upon such determination (and telephonic notice thereof confirmed in writing to
the Administrative Agent and the Borrower), forthwith be reinstated, and the
Administrative Agent shall, by notice to the Borrower and each Lender, declare
that such obligation has been so reinstated.
SECTION 5.3 DEPOSITS UNAVAILABLE. If prior to the date on which all or
any portion of the principal amount of any Loan is to be made, continued as, or
be converted into, a Fixed Rate Loan, any Affected Lender or the Administrative
Agent shall determine for any reason whatsoever (which determination shall, in
the absence of demonstrable error, be conclusive and binding on the Borrower)
that:
(a) Dollar deposits in the relevant amount and for the relevant
Interest Period are not available to the Affected Lender in its relevant
market; or
(b) by reason of circumstances affecting BNS in its relevant market,
adequate means do not exist for
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ascertaining the interest rate applicable hereunder to Fixed Rate Loans;
the Administrative Agent (after receipt of notice from the Affected Lender, in
the case of CLAUSE (a) above) shall promptly give telephonic notice of such
determination confirmed in writing to each Lender and the Borrower, and:
(i) the obligation under SECTION 5.1 of the Affected Lender (in the
case of CLAUSE (a) above) or all Lenders (in the case of CLAUSE (b) above)
to make, continue any portion of the principal amount of a Loan as, or to
convert a Loan into, one or more Fixed Rate Loans shall, upon such
notification, forthwith terminate; and
(ii) the portion of all Loans then maintained as Fixed Rate Loans by
the Affected Lender (in the case of CLAUSE (a) above) or all Lenders (in
the case of CLAUSE (b) above) shall on the expiration of the Interest
Period applicable thereto automatically convert into Base Rate Loans.
If circumstances subsequently change so that the Administrative Agent or the
Affected Lender, as the case may be, shall no longer be so affected, the
Administrative Agent shall promptly give telephonic notice thereof confirmed in
writing to the Borrower and each of the Lenders, and the obligations of the
Affected Lender or all Lenders, as the case may be, under SECTION 5.1 to make or
continue Loans as, or convert Loans into, Fixed Rate Loans shall be reinstated,
and the Administrative Agent shall, by notice to the Borrower and each Lender,
declare that such obligations have been so reinstated.
SECTION 5.4 CAPITAL ADEQUACY; INCREASED COSTS, ETC. The Borrower further
agrees to reimburse each Lender for any increase in the cost to such Lender of
making, continuing or maintaining (or of its obligation to make, continue or
maintain) any portion of the principal amount of any of its Loans as, or of
converting (or of its obligation to convert) any portion of the principal amount
of any of its Loans into, Fixed Rate Loans or issuing or maintaining or
participating in any Letter of Credit and for any reduction in the amount of any
sum receivable by such Lender hereunder in respect of making, continuing or
maintaining any
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portion of the principal amount of any of its Loans as, or converting any
portion of the principal amount of any Loans into, Fixed Rate Loans, or issuing
or maintaining or participating in any Letter of Credit, in either case, from
time to time by reason of:
(a) to the extent not included in the calculation of the LIBO Rate
(Reserve Adjusted), the adoption or compliance with any capital adequacy,
reserve, special deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by, such Lender, under or
pursuant to any law, treaty, rule, regulation (including any F.R.S. Board
Regulation) or requirement in effect on the date hereof or as the result of
any Regulatory Change; or
(b) any Regulatory Change which shall subject such Lender to any tax
(other than taxes on net income or receipts), levy, impost, charge, fee,
duty, deduction or withholding of any kind whatsoever or change the
taxation of any Loan made or maintained as a Fixed Rate Loan or any Letter
of Credit or participation therein and the interest thereon (other than any
change which affects, and to the extent that it affects, the taxation of
net income or receipts).
In any such event, such Lender shall promptly notify the Administrative Agent
and the Borrower thereof stating the reasons therefor and the additional amount
required fully to compensate such Lender for such increased cost or reduced
amount. Such additional amounts shall be payable on demand after receipt of
such notice. A statement as to any such increased cost or reduced amount or any
change therein (including calculations thereof in reasonable detail) shall be
submitted by such Lender to the Administrative Agent and the Borrower and shall,
in the absence of demonstrable error, be conclusive and binding on the Borrower.
SECTION 5.5 FUNDING LOSSES. In the event any Lender shall incur any loss
or expense (including any loss or expense incurred by reason of the liquidation,
or reemployment of deposits or other funds acquired by such Lender to make,
continue or maintain any portion of the principal amount of any Loan as, or to
convert
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any portion of the principal amount of any Loan into, a Fixed Rate Loan) as a
result of:
(a) payment or prepayment of the principal amount of any Fixed Rate
Loan on a date other than the scheduled last day of the Interest Period
applicable thereto, whether pursuant to SECTION 3.3 or otherwise;
(b) any conversion of all or any portion of the outstanding principal
amount of any Fixed Rate Loan to a Base Rate Loan pursuant to SECTION 5.1
prior to the expiration of the Interest Period then applicable thereto; or
(c) a Loan not being made, continued as, or converted into, a Fixed
Rate Loan in accordance with an Extension of Credit Request or the
Continuation/Conversion Notice given therefor (other than as the result of
a default by such Lender in complying with such Extension of Credit Request
or such Continuation/Conversion Notice);
then, upon the request of such Lender to the Borrower (with copies to the
Administrative Agent), the Borrower shall pay directly to such Lender such
amount as will (in the reasonable determination of such Lender) reimburse such
Lender for such loss or expense. A certificate as to any such loss or expense
(including calculations thereof in reasonable detail) shall be submitted by the
Lender to the Administrative Agent and the Borrower and shall, in the absence of
demonstrable error, be conclusive on the Borrower.
ARTICLE VI
CONDITIONS TO EXTENSIONS OF CREDIT
SECTION 6.1 CONDITIONS TO INITIAL EXTENSION OF CREDIT. The obligations of
the Lenders to fund the initial Extension of Credit shall be subject to the
prior or concurrent satisfaction of each of the following conditions:
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SECTION 6.1.1 RESOLUTIONS, ETC. The Administrative Agent shall have
received:
(a) a certificate, dated the date of the initial Extension of Credit,
of the Secretary or an Assistant Secretary of the Borrower and each other
Loan Party as to
(i) resolutions of its Board of Directors then in full force and
effect authorizing the execution, delivery and performance of the Loan
Documents to be executed by it hereunder, and
(ii) the incumbency and signatures of those of its officers
authorized to act with respect to this Agreement and each Loan
Document executed by it;
upon which certificate the Administrative Agent and each Lender may
conclusively rely until the Administrative Agent shall have received a
further certificate of the Secretary or an Assistant Secretary of such Loan
Party cancelling or amending such prior certificate; and
(b) such other documents (certified if requested) as the
Administrative Agent or the Required Lenders may reasonably request, as
soon as practicable after the execution of this Agreement, with respect to
any Organic Document, Contractual Obligation or Approval.
SECTION 6.1.2 DELIVERY OF NOTES. The Borrower shall have delivered to the
Administrative Agent, for the account of each Lender, a Note, dated the date of
the initial Extension of Credit, duly executed and delivered and conforming to
the requirements of SECTION 3.2.
SECTION 6.1.3 OPINION OF COUNSEL. The Administrative Agent shall have
received an opinion, dated the date of the initial Extension of Credit,
addressed to the Administrative Agent and all Lenders from Lathrop & Gage L.C.,
counsel to the Borrower and each Significant Subsidiary, substantially in the
form of EXHIBIT F hereto.
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SECTION 6.1.4 CLOSING FEES, EXPENSES, ETC. The Administrative Agent
shall have received for its own account, or for the account of each Lender, as
the case may be, all fees and expenses due and payable pursuant to SECTION 2.3
or SECTION 11.3, if then invoiced.
SECTION 6.1.5 SIGNIFICANT SUBSIDIARY GUARANTY. The Administrative Agent
shall have received the Significant Subsidiary Guaranty, dated the date of the
initial Extension of Credit, duly executed by each Person that is a Significant
Subsidiary as of the date of the initial Borrowing.
SECTION 6.1.6 SATISFACTORY LEGAL FORM. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower and each Significant
Subsidiary shall be satisfactory in form and substance to the Administrative
Agent and its counsel; the Administrative Agent and its counsel shall have
received all information, and such counterpart originals or such certified or
other copies of such materials, as the Administrative Agent or its counsel may
request; and all legal matters incident to the transactions contemplated by this
Agreement shall be satisfactory to counsel to the Administrative Agent.
SECTION 6.1.7 COMPLIANCE WITH WARRANTIES, NON-DEFAULT, ETC. The
representations and warranties set forth in ARTICLE VII shall have been true and
correct as of the date initially made, and on the date (and after giving effect
to the incurrence) of the initial Extension of Credit:
(a) such representations and warranties shall be true and correct
with the same effect as if then made;
(b) no Default shall have then occurred and be continuing; and
(c) since March 28, 1996 there shall have been no occurrence (other
than changes that are seasonal in nature) which, individually or in the
aggregate, would reasonably be expected to have a Materially Adverse
Effect.
SECTION 6.1.8 NEW SUBORDINATED NOTES INDENTURE. The Administrative Agent
shall have received a copy, certified as
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true and correct by the Secretary of the Borrower, of the New Subordinated Notes
Indenture.
SECTION 6.1.9 EXISTING CREDIT AGREEMENT. All Indebtedness under the
Existing Credit Agreement shall be paid in full.
SECTION 6.1.10 NEW SUBORDINATED NOTES. The Administrative Agent shall
have received evidence satisfactory to it that the Borrower has issued the New
Subordinated Notes on terms and conditions satisfactory to the Administrative
Agent for gross proceeds of not less than $150,000,000.
SECTION 6.1.11 FINANCIAL INFORMATION. Each Agent and each Lender shall
have received (i) a balance sheet at the close of Borrower's Fiscal Year ended
March 28, 1996, together with statements of operations, shareholders' equity and
cash flows for such Fiscal Year, for the Borrower and its Consolidated
Subsidiaries certified without Impermissible Qualification by Coopers & Lybrand
LLP and (ii) a balance sheet at the close of Borrower's Fiscal Quarter ended
December 26, 1996, together with statements of operations, shareholders' equity
and cash flows for the period commencing at the close of the previous Fiscal
Year and ending at the close of such Fiscal Quarter, for the Borrower and its
Consolidated Subsidiaries certified by the chief accounting or financial
Authorized Officer of the Borrower.
SECTION 6.1.12 LITIGATION. No litigation, arbitration or governmental
investigation or proceeding shall be pending which seeks to enjoin any
transactions contemplated hereby or purports to affect the legality, validity or
enforceability of this Agreement or any other Loan Document.
SECTION 6.2 ALL EXTENSIONS OF CREDIT. The obligations of the Lenders to
make any Loan or issue any Letter of Credit (including the initial Loans and
Letters of Credit) shall also be subject to the satisfaction of each of the
conditions precedent set forth in SECTIONS 6.2.1 through 6.2.3.
SECTION 6.2.1 COMPLIANCE WITH WARRANTIES, NON-DEFAULT, ETC. The
representations and warranties set forth in ARTICLE VII shall have been true and
correct as of the date initially made, and on
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the date (and after giving effect to the incurrence) of such Loan or Letter of
Credit:
(a) such representations and warranties shall be true and correct with
the same effect as if then made;
(b) no Default shall have then occurred and be continuing; and
(c) since March 28, 1996 there shall have been no occurrence (other
than changes that are seasonal in nature) which, individually or in the
aggregate, would reasonably be expected to have a Materially Adverse
Effect.
SECTION 6.2.2 ABSENCE OF LITIGATION, ETC. No labor controversy,
litigation, arbitration or governmental investigation or proceeding shall be
pending or, to the knowledge of the Borrower, threatened against the Borrower or
any Subsidiary which was not disclosed by the Borrower to the Lenders pursuant
to SECTION 7.6 or 7.12 (or prior to the date of the Loans most recently made
hereunder, if any, pursuant to SECTION 8.1.6), and no development shall have
occurred in any labor controversy, litigation, arbitration or governmental
investigation or proceeding so disclosed, which, in either event, would
reasonably be expected to have a Materially Adverse Effect.
SECTION 6.2.3 EXTENSION OF CREDIT REQUEST. The Administrative Agent shall
have received an Extension of Credit Request for such Loan or Letter of Credit.
ARTICLE VII
WARRANTIES, ETC.
In order to induce the Lenders and the Agents to enter into this Agreement
and to make Loans and issue or participate in Letters of Credit hereunder, the
Borrower represents and warrants to each Agent and each Lender as follows:
SECTION 7.1 ORGANIZATION, POWER, AUTHORITY, ETC. Each Loan Party is a
corporation validly organized and existing and in good
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standing under the laws of the state of its incorporation, is duly qualified to
do business and in good standing as a foreign corporation in each jurisdiction
where the nature of its business makes such qualification necessary and where
the failure to so qualify would reasonably be expected to have a Materially
Adverse Effect and has full power and authority to own and hold under lease its
property and conduct its business substantially as presently conducted by it.
Each Loan Party has full power and authority to enter into and to perform its
obligations under this Agreement and each Loan Document to which each is a party
and, in the case of Borrower, to borrow the Loans hereunder.
SECTION 7.2 DUE AUTHORIZATION. The execution and delivery by each Loan
Party of each Loan Document to which it is a party, the performance by each Loan
Party of its respective obligations under each such Loan Document and the
borrowings hereunder by the Borrower have been duly authorized by all necessary
corporate action, do not require any Approval, do not and will not conflict
with, result in any violation of, or constitute any default under, any provision
of any Organic Document or material Contractual Obligation (except as disclosed
in ITEM 1 ("MATERIAL CONTRACTUAL OBLIGATIONS") of EXHIBIT A) of such Loan Party
(or any other material Contractual Obligation) or any present law or
governmental regulation or court decree or order applicable to any Loan Party
and will not result in or require the creation or imposition of any Lien on any
of the properties of any Loan Party pursuant to the provisions of any
Contractual Obligation, other than Liens in favor of the Administrative Agent
and the Lenders pursuant to the Loan Documents.
SECTION 7.3 VALIDITY, ETC. This Agreement is, and each other Loan
Document executed by any Loan Party will on the due execution and delivery
thereof by such Loan Party be, the legal, valid and binding obligation of such
Loan Party enforceable in accordance with its terms, subject, as to enforcement,
only to bankruptcy, insolvency, reorganization, moratorium or other similar laws
at the time in effect affecting the enforceability of the rights of creditors
generally, and by general equitable principles which may limit the right to
obtain the remedy of specific performance of executory covenants.
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SECTION 7.4 FINANCIAL INFORMATION. All balance sheets, the statements of
operations, of shareholders' equity and of cash flows and other financial
information of the Borrower which have been or shall hereafter be furnished by
or on behalf of the Borrower to the Lenders for the purposes of or in connection
with this Agreement or any transaction contemplated hereby pursuant to SECTION
6.1.11, SECTION 8.1.1(a) or SECTION 8.1.1(b) (except SECTION 8.1.1(a)(iii))
(including the financial information referred to below) have been or will be
prepared in accordance with GAAP consistently applied throughout the periods
involved (except as disclosed therein) and do or will present fairly the
consolidated financial condition of the Persons covered thereby as at the dates
thereof and the results of their operations for the periods then ended,
including the consolidated balance sheet at March 28, 1996, and the consolidated
statements of earnings, of shareholders' equity and of cash flows, for the
Fiscal Year then ended, of the Borrower and its Consolidated Subsidiaries.
Since March 28, 1996, there has been no occurrence (other than changes that are
seasonal in nature) which, individually or in the aggregate, would reasonably be
expected to have a Materially Adverse Effect.
SECTION 7.5 ABSENCE OF CERTAIN DEFAULTS. Neither the Borrower nor any
Subsidiary is in default: (a) in the payment of (or in the performance of any
material obligation applicable to) any Indebtedness outstanding in a principal
amount exceeding $6,500,000; or (b) under any law, governmental regulation,
court decree or order which would reasonably be expected to have a Materially
Adverse Effect.
SECTION 7.6 LITIGATION, ETC. Except as described in ITEM 2 ("LITIGATION")
of EXHIBIT A, no litigation, arbitration or governmental investigation or
proceeding against the Borrower or any Subsidiary or to which any of the
properties of any thereof is subject is pending or, to the best knowledge of the
Borrower, threatened (i) which, if adversely determined, would result in a
liability not covered by insurance in excess of $6,500,000 or (ii) which
purports to affect the legality, validity or enforceability of this Agreement,
the other Loan Documents or the transactions contemplated hereby or thereby.
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SECTION 7.7 USE OF PROCEEDS; REGULATION U.
(a) The proceeds of the Loans and Letters of Credit will be used to
refinance the Existing Credit Agreement and for general corporate purposes.
(b) The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock, and less than 25% of the assets of the Borrower consists
of margin stock. No part of the proceeds of any Loan or Letter of Credit will
be used, directly or indirectly, to purchase or carry any margin stock or to
extend credit for the purpose of purchasing or carrying any margin stock. If
requested by the Administrative Agent, the Borrower will furnish a statement to
the foregoing effect in conformity with the requirements of Federal Reserve Form
U-1 to each Lender. Terms for which meanings are provided in Regulation U of
the F.R.S. Board or any regulations substituted therefor, as from time to time
in effect, are used in this Section with such meanings.
SECTION 7.8 GOVERNMENT REGULATION. Neither the Borrower nor any
Subsidiary nor any Unrestricted Subsidiary is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as amended, or a
"public utility" within the meaning of the Federal Power Act, as amended.
SECTION 7.9 CERTAIN CONTRACTUAL OBLIGATIONS OR ORGANIC DOCUMENTS. Neither
the Borrower nor any Subsidiary is a party or subject to any Contractual
Obligation or Organic Document which would reasonably be expected to have a
Materially Adverse Effect.
SECTION 7.10 TAXES. The Borrower and all Subsidiaries have filed all tax
returns and reports required by law to have been filed by them and have paid all
taxes and governmental charges thereby shown to be owing, except any such taxes
or charges which are being contested in good faith by appropriate proceedings
and
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for which adequate reserves in accordance with GAAP have been set aside on their
books.
SECTION 7.11 EMPLOYEE BENEFIT PLANS. Each Pension Plan complies in all
material respects with all applicable requirements of law and regulations, and,
except as set forth in ITEM 3 of EXHIBIT A, no "REPORTABLE EVENT", such term
being used herein with the meaning provided for it in section 4043 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), has
occurred with respect to any Pension Plan which constitutes an Event of Default
of the type described in SECTION 9.1.8. No steps have been taken to terminate
any Pension Plan where the Unfunded Benefit Liabilities on the date of such
termination or the date of the institution of such steps exceed $6,500,000, and
neither the Borrower nor any Subsidiary or Unrestricted Subsidiary has withdrawn
or partially withdrawn from any Multiemployer Plan or initiated steps to do so
where as a result thereof the Borrower or Subsidiary or Unrestricted Subsidiary
could be required to make withdrawal liability payments in excess of $6,500,000.
No contribution failure has occurred with respect to any Pension Plan sufficient
to give rise to a lien under section 302(f) of ERISA. Neither the Borrower nor
any Subsidiary or Unrestricted Subsidiary has any contingent liability with
respect to any post-retirement benefit under a Welfare Plan, other than
liability for continuation coverage described in Part 6 of title I of ERISA,
except as listed on ITEM 3 of EXHIBIT A.
SECTION 7.12 LABOR CONTROVERSIES. There are no labor controversies
pending or, to the best of the Borrower's knowledge, threatened against the
Borrower or any Subsidiary, which would reasonably be expected to have a
Materially Adverse Effect.
SECTION 7.13 SUBSIDIARIES AND SIGNIFICANT SUBSIDIARIES. The Borrower has
no Subsidiaries or Significant Subsidiaries except those identified in ITEM 4
("EXISTING SUBSIDIARIES AND SIGNIFICANT SUBSIDIARIES") of EXHIBIT A and those
disclosed to the Agents and Lenders pursuant to SECTION 8.1.1(d). All
Unrestricted Subsidiaries existing on the Effective Date are listed on SCHEDULE
II hereto.
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SECTION 7.14 INTELLECTUAL PROPERTY. The Borrower owns and possesses or
has a license or other right to use all such patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service mark
rights and copyrights as the Borrower considers necessary for the conduct of the
businesses of the Borrower or Subsidiaries as now conducted without any
infringement upon rights of others which would reasonably be expected to have a
Materially Adverse Effect. There is no individual patent, patent license,
trademark, trademark license, trade name, trade name license, copyright or
copyright license used by the Borrower in the conduct of its business the loss
of which would reasonably be expected to have a Materially Adverse Effect except
as may be disclosed in ITEM 5 ("MATERIAL INTELLECTUAL PROPERTY") of EXHIBIT A.
SECTION 7.15 OWNERSHIP OF PROPERTIES; LIENS. Each of Borrower and each
Subsidiary has good and marketable title to or good leasehold interests in all
of its material properties and assets, real and personal, of any nature
whatsoever, free and clear of all Liens except as permitted pursuant to SECTION
8.2.2.
SECTION 7.16 ACCURACY OF INFORMATION. All factual information heretofore
or contemporaneously furnished by the Borrower to the Agents or the Lenders in
connection with execution and delivery of this Agreement and the various
transactions contemplated hereby, to the best of the Borrower's knowledge, has
been, and all other such factual information hereafter furnished by the Borrower
to the Agents or the Lenders will be, true and accurate in every material
respect on the date as of which such information is dated or certified and as of
the date of execution and delivery of this Agreement and not incomplete by
omitting to state any material fact necessary to make such information not
misleading. All projections and pro forma financial information contained in
any materials furnished by the Borrower or any Subsidiary to the Agents or the
Lenders are based on good faith estimates and assumptions by the management of
the Borrower or the applicable Subsidiary, it being recognized by the Agents and
the Lenders, however, that projections and statements as to future events are
not to be viewed as fact and that actual results during the period or periods
covered by any such projections or statements may differ
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from the projected results and that the differences may be material.
SECTION 7.17 SOLVENCY. Neither the Borrower nor any of the Significant
Subsidiaries after giving effect to the execution, delivery and performance of
this Agreement and the other Loan Documents and the consummation of the
transactions contemplated hereby and thereby, is (i) insolvent, (ii) engaged in
business for which any property left with such entity is an unreasonably small
capital or (iii) incurring debts beyond its ability to pay such debts as they
mature. When used herein, "insolvent" means, with respect to any Person, that
such Person has a financial condition such that the sum of such Person's debts
is greater than the value, both at fair valuation and at present fair salable
value, of such Person's property.
SECTION 7.18 ENVIRONMENTAL WARRANTIES. Except as set forth in ITEM 6
("ENVIRONMENTAL MATTERS") of EXHIBIT A:
(a) all facilities and property (including underlying groundwater)
owned or leased by the Borrower or any of its Subsidiaries have been, and
continue to be, owned or leased by the Borrower and its Subsidiaries in
material compliance with all Environmental Laws;
(b) there have been no past, and there are no pending or threatened
(i) claims, complaints, notices or requests for information
received by the Borrower or any of its Subsidiaries with respect to
any alleged violation of any Environmental Law that, singly or in the
aggregate, would reasonably be expected to have a Materially Adverse
Effect, or
(ii) complaints, notices or inquiries to the Borrower or any of
its Subsidiaries regarding potential liability under any Environmental
Law that, singly or in the aggregate, would reasonably be expected to
have a Materially Adverse Effect;
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(c) there have been no Releases of Hazardous Materials at, on or
under any property now or previously owned or leased by the Borrower or any
of its Subsidiaries that, singly or in the aggregate, have, or may
reasonably be expected to have, a Materially Adverse Effect;
(d) the Borrower and its Subsidiaries have been issued and are in
material compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters and necessary for
their businesses;
(e) no property now or previously owned or leased by the Borrower or
any of its Subsidiaries is listed or proposed for listing (with respect to
owned property only) on the National Priorities List pursuant to CERCLA or,
to the Borrower's best knowledge, on the CERCLIS or on any similar state
list of sites requiring investigation or clean-up;
(f) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any property now or
previously owned or leased by the Borrower or any of its Subsidiaries that,
singly or in the aggregate, have, or may reasonably be expected to have, a
Materially Adverse Effect;
(g) neither Borrower nor any Subsidiary has directly transported or
directly arranged for the transportation of any Hazardous Material to any
location which is listed or proposed for listing on the National Priorities
List pursuant to CERCLA, on the CERCLIS or on any similar state list or
which is the subject of federal, state or local enforcement actions or
other investigations, which may lead to material claims against the
Borrower or such Subsidiary thereof for any remedial work, damage to
natural resources or personal injury, including claims under CERCLA;
(h) there are no polychlorinated biphenyls or friable asbestos
present at any property now or previously owned or leased by the Borrower
or any Subsidiary that, singly or in
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the aggregate, have, or may reasonably be expected to have, a Materially
Adverse Effect; and
(i) no conditions exist at, on or under any property now or
previously owned or leased by the Borrower which, with the passage of time,
or the giving of notice or both, would give rise to liability under any
Environmental Law.
SECTION 7.19 RESTRICTIONS ON OR RELATING TO SUBSIDIARIES. There does not
exist any encumbrance or restriction on the ability of any Subsidiary to (a) pay
dividends or make any other distributions on its Capital Stock owned by the
Borrower or any Subsidiary, or pay any Indebtedness owed to the Borrower or any
Subsidiary, (b) make loans or advances to the Borrower or (c) transfer any of
its assets or properties to the Borrower, except for such encumbrances or
restrictions existing by reason of or under (i) applicable law and (ii) this
Agreement or the other Loan Documents.
ARTICLE VIII
COVENANTS
SECTION 8.1 CERTAIN AFFIRMATIVE COVENANTS. The Borrower agrees with the
Agents and the Lenders that, until the Commitments shall have terminated and all
of the Liabilities have been paid and performed in full or while any Letter of
Credit remains outstanding , the Borrower will perform the obligations set forth
in this SECTION 8.1.
SECTION 8.1.1 FINANCIAL INFORMATION, ETC. The Borrower will furnish, or
will cause to be furnished, to the Administrative Agent and each Lender copies
of the following financial statements, reports and information:
(a) promptly when available and in any event within 90 days after the
close of each Fiscal Year
(i) a balance sheet at the close of such Fiscal Year, and
statements of operations, of shareholders' equity and of cash flows
for such Fiscal Year, of the
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Borrower and its Consolidated Subsidiaries certified without
Impermissible Qualification by independent public accountants of
recognized standing selected by the Borrower and reasonably acceptable
to the Required Lenders,
(ii) a Compliance Certificate calculated as of the close of such
Fiscal Year,
(iii) a projected financial statement of the Borrower and its
Consolidated Subsidiaries for the following Fiscal Year, and
(iv) the report filed by the Borrower with the SEC on Form 10-K
for such Fiscal Year;
(b) promptly when available and in any event within 45 days after the
close of each of the first three Fiscal Quarters of each Fiscal Year
(i) a balance sheet at the close of such Fiscal Quarter and
statements of operations, of income and of cash flows for the period
commencing at the close of the previous Fiscal Year and ending with
the close of such Fiscal Quarter, of the Borrower and its Consolidated
Subsidiaries certified by the chief accounting or financial Authorized
Officer of the Borrower,
(ii) a Compliance Certificate calculated as of the close of such
Fiscal Quarter, and
(iii) the report filed by the Borrower with the SEC on Form 10-Q
for each such Fiscal Quarter;
(c) promptly upon receipt thereof and upon request of the
Administrative Agent or any Lender, copies of all management letters
submitted to the Borrower by independent public accountants in connection
with each annual or interim audit made by such accountants of the books of
the Borrower or any Subsidiary;
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(d) promptly upon the incorporation or acquisition thereof,
information regarding the creation or acquisition of any new Subsidiary;
(e) promptly when available and in any event within ten days of
publication, all material filings with the SEC;
(f) within 45 days after the close of each Fiscal Quarter, an
Applicable Margin Determination Ratio Certificate; and
(g) such other information with respect to the financial condition,
business, property, assets, revenues and operations of the Borrower and
Subsidiaries as the Administrative Agent or any Lender may from time to
time reasonably request.
SECTION 8.1.2 MAINTENANCE OF EXISTENCES; OWNERSHIP OF AMC CAPITAL STOCK;
ASSET OWNERSHIP.
(a) Except as permitted by SECTIONS 8.2.5 and 8.2.14, the Borrower
will cause to be done at all times all things necessary to maintain and
preserve the corporate (or partnership, as the case may be) existences of
the Borrower and each Subsidiary, and to comply in all material respects
with all applicable laws, rules, regulations and orders.
(b) The Borrower will continue to own and hold directly, free and
clear of all Liens other than Liens granted to the Administrative Agent for
the benefit of the Lenders pursuant to the Loan Documents, legal and
beneficial ownership of 100% of the outstanding shares of Capital Stock of
AMC.
(c) The Borrower shall cause at least 75% of the consolidated assets
of the Borrower and its Consolidated Subsidiaries to be owned legally and
beneficially, free and clear of all Liens other than Liens permitted by
SECTION 8.2.2, by Wholly-Owned Subsidiaries or the Borrower.
SECTION 8.1.3 FOREIGN QUALIFICATION. The Borrower will, and will cause
each Subsidiary to, cause to be done at all times
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all things necessary to be duly qualified to do business and in good standing as
a foreign corporation in each jurisdiction where the nature of its business
makes such qualification necessary and where the failure to so qualify would
reasonably be expected to have a Materially Adverse Effect, and to comply in all
material respects with all applicable laws, rules, regulations and orders.
SECTION 8.1.4 PAYMENT OF TAXES, ETC. The Borrower will, and will cause
each Subsidiary to, pay and discharge, prior to becoming delinquent, all
federal, state and local taxes, assessments and other governmental charges or
levies against or on any of its property, as well as claims of any kind which,
if unpaid, might become a Lien in a material amount upon any of its properties;
PROVIDED, HOWEVER, that the foregoing shall not require the Borrower or any
Subsidiary to pay or discharge any such tax, assessment, charge, levy or Lien so
long as it shall contest the validity thereof in good faith by appropriate
proceedings and shall set aside on its books adequate reserves in accordance
with GAAP with respect thereto.
SECTION 8.1.5 INSURANCE. The Borrower will, and will cause each
Subsidiary to, maintain or cause to be maintained, with a company or companies
rated A- or better by A.M. Best and Company, insurance with respect to its
properties and business against such casualties and contingencies and of such
types and in such amounts as is customary in the case of similar businesses and
in any event as required by applicable law and will, upon request of the
Administrative Agent, furnish to the Administrative Agent at reasonable
intervals a certificate of an Authorized Officer of the Borrower setting forth
the nature and extent of all insurance maintained by the Borrower and its
Subsidiaries in accordance with this Section.
SECTION 8.1.6 NOTICE OF DEFAULT, LITIGATION, ETC. The Borrower will give
prompt notice (with a description in reasonable detail) to the Administrative
Agent and each Lender of:
(a) the occurrence of any Default;
(b) the occurrence of any litigation, arbitration or governmental
investigation or proceeding previously not
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disclosed by the Borrower to the Lenders which has been instituted or, to
the knowledge of the Borrower, is threatened against the Borrower or any
Subsidiary or to which any of their respective properties is subject which
if adversely determined would result in a liability to the Borrower or any
Subsidiary not covered by such Borrower's or Subsidiary's insurers in
excess of $6,500,000;
(c) any material development which shall occur in any labor
controversy, litigation, arbitration or governmental investigation or
proceeding previously disclosed by the Borrower to the Lenders;
(d) the occurrence of any event which would reasonably be expected to
have a Materially Adverse Effect;
(e) the occurrence of a Reportable Event under, or the institution of
steps by the Borrower or any Subsidiary to terminate, any Pension Plan, or
there is a partial or complete withdrawal (as described in ERISA section
4203 or 4205) by the Borrower or any Subsidiary from a Multiemployer Plan
where as a result the Borrower or any Subsidiary could be liable for
payments of $500,000 or more; and
(f) the failure to make a required contribution to any Pension Plan if
such failure is sufficient to give rise to a Lien under section 302(f) of
ERISA, or the taking of any action with respect to a Pension Plan which
could result in the requirement that the Borrower or any Subsidiary furnish
a bond or other security to the PBGC or such Pension Plan.
SECTION 8.1.7 PERFORMANCE OF LOAN DOCUMENTS. The Borrower will, and will
cause each Loan Party to, perform promptly and faithfully all of its obligations
under each Loan Document executed by it.
SECTION 8.1.8 BOOKS AND RECORDS. The Borrower will, and will cause each
Subsidiary to, keep books and records reflecting all of its business affairs and
transactions in accordance with GAAP and permit each Lender or any of its
representatives, at reasonable times and intervals and as arranged through the
chief financial officer or chief legal officer of the Borrower, to
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visit all of its offices, discuss its financial matters with its officers and
independent accountants, examine (and, at the expense of the Borrower, photocopy
extracts from) any of its books or other corporate records. The Borrower shall
pay the reasonable fees of such accountants incurred in connection with the
Administrative Agent's exercise of its rights pursuant to this Section.
SECTION 8.1.9 SIGNIFICANT SUBSIDIARY GUARANTY; PLEDGE OF SHARES OF
SIGNIFICANT SUBSIDIARIES; PLEDGE OF INTERCOMPANY INDEBTEDNESS. The Borrower
agrees to promptly notify the Administrative Agent each time a Wholly-Owned
Subsidiary becomes a Significant Subsidiary and to cause such Significant
Subsidiary to deliver to the Administrative Agent a duly executed counterpart to
the Significant Subsidiary Guaranty along with an opinion of counsel, similar in
form and substance to the opinion respecting the Significant Subsidiary Guaranty
delivered pursuant to SECTION 6.1.3, as to the due authorization, execution and
delivery of the Significant Subsidiary Guaranty by such Significant Subsidiary
and as to the enforceability of the Significant Subsidiary Guaranty against such
Significant Subsidiary and a certificate of the type required by SECTION
6.1.1(a), each in form and substance reasonably acceptable to the Administrative
Agent; PROVIDED, HOWEVER, that a Significant Subsidiary shall not have to
execute a counterpart to the Significant Subsidiary Guaranty (or deliver such
opinion or certificate) if it has already executed a Guaranty conforming to the
requirements of SECTION 8.2.15 and such Guaranty is then in effect. If at any
time the Net Senior Indebtedness to Consolidated EBITDA Ratio exceeds 3.75:1,
Borrower shall forthwith (i) pledge to the Administrative Agent, for its benefit
and the ratable benefit of the Lenders, all of the Capital Stock owned by it of
each of its direct Subsidiaries and all Indebtedness of each Subsidiary owing to
it pursuant to a Pledge Agreement, (ii) cause all Indebtedness of each
Subsidiary or the Borrower owing to the Borrower or any Subsidiary to be
evidenced by a note in substantially the form of EXHIBIT L, (iii) cause each
Guarantor to pledge to the Administrative Agent, for its benefit and the ratable
benefit of the Lenders, the Capital Stock of each Subsidiary owned by such
Guarantor and all Indebtedness of the Borrower or any other Subsidiary owing to
such Guarantor, pursuant to a Subsidiary Pledge Agreement and (iv) deliver, and
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shall cause each Guarantor to forthwith deliver, to the Administrative Agent
certificates representing 100% of the issued and outstanding shares of Capital
Stock of each Subsidiary owned by the Borrower or such Guarantor, accompanied by
duly executed assignments separate from certificate, undated and in blank, and
notes evidencing all Indebtedness referred to above, duly endorsed to the order
of the Administrative Agent, and an opinion of counsel to each party executing a
Pledge Agreement or a Subsidiary Pledge Agreement, as the case may be, in form
and substance reasonably satisfactory to the Administrative Agent, as to the due
authorization, execution and delivery of such Loan Document by each party
thereto, to the enforceability of such Loan Document against each such party and
to the perfection, free from adverse claims (in the case of pledged stock) or
prior to other Liens (in the case of pledged notes), of the security interest
granted to the Administrative Agent thereunder (IT BEING UNDERSTOOD that such
opinion may contain reasonable exceptions and assumptions thereto, including
exceptions and assumptions similar to those set forth in the opinion delivered
pursuant to SECTION 6.1.3). Any such pledge shall be released if at any time
thereafter the Net Senior Indebtedness to Consolidated EBITDA Ratio shall be
less than 3.75:1 for two consecutive Fiscal Quarters and there shall be no
Default that has occurred and is then continuing, and in the event of such
release the immediately preceding sentence shall again apply.
SECTION 8.1.10 ENVIRONMENTAL COVENANT. The Borrower will, and will cause
each of its Subsidiaries to,
(a) use and operate all of its facilities and properties in material
compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in material compliance
therewith, and handle all Hazardous Materials in material compliance with
all applicable Environmental Laws;
(b) immediately notify the Administrative Agent and provide copies
upon receipt of all written claims, complaints, notices or inquiries
relating to the condition of its facilities and properties or compliance
with Environmental Laws, and shall promptly use its best efforts
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to cure and have dismissed with prejudice to the satisfaction of the
Administrative Agent any actions and proceedings relating to compliance
with Environmental Laws; and
(c) provide such information and certifications as the Administrative
Agent may reasonably request from time to time to demonstrate compliance
with this SECTION 8.1.10.
SECTION 8.2 CERTAIN NEGATIVE COVENANTS. The Borrower agrees with the
Agents and the Lenders that, until the Commitments shall have terminated and all
of the Liabilities have been paid and performed in full and while any Letter of
Credit remains outstanding, the Borrower will perform the obligations set forth
in this SECTION 8.2.
SECTION 8.2.1 INDEBTEDNESS FOR BORROWED MONEY. The Borrower will not,
and will not permit any Subsidiary to, incur or permit to exist any
Indebtedness, except that the Borrower may, and may permit any Subsidiary to,
incur or permit to exist any or all of the following: (i) the Liabilities and
Guaranties thereof; (ii) Subordinated Debt; (iii) Indebtedness of the
Borrower, any Wholly-Owned Subsidiary of the Borrower or any Guarantor owing
to the Borrower, any Wholly-Owned Subsidiary of the Borrower or any
Guarantor; (iv) Indebtedness outstanding on the Effective Date and listed on
ITEM 7 of EXHIBIT A and refinancings thereof, PROVIDED that such Indebtedness
is not increased as the result of any such refinancing and that none of the
Senior Notes nor the Old Subordinated Notes may be refinanced; (v)
Indebtedness of the Borrower or Subsidiaries to Persons other than the
Borrower or any Subsidiary in an aggregate principal amount not to exceed
$40,000,000 at any one time outstanding; (vi) Indebtedness permitted as
Investments under SECTION 8.2.11(v) or (vi); (vii) Interest Rate Protection
Obligations relating to Indebtedness of such Person (which Indebtedness is
otherwise permitted to exist by this SECTION 8.2.1) to the extent the
notional principal amount of such Interest Rate Protection Obligations does
not exceed the principal amount of Indebtedness to which such Interest Rate
Obligations relate; (viii) contingent Indebtedness represented by Guaranties
permitted under SECTION 8.2.12; (ix) Capitalized Lease Obligations; and (x)
Currency Hedging Obligations relating to
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arrangements to protect the Borrower from fluctuations in currency exchange
rates.
SECTION 8.2.2 LIENS. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Lien upon any of its
property or assets, whether now owned or hereafter acquired, except that the
Borrower may, and may permit any Subsidiary to, create, incur or suffer to exist
any or all of the following:
(a) Liens in favor of the Administrative Agent and the Lenders to
secure the Liabilities;
(b) Liens which were granted prior to the Effective Date in (and only
in) assets identified in ITEM 7 ("ONGOING INDEBTEDNESS") and ITEM 8
("LIENS") of EXHIBIT A;
(c) Liens in (and only in) stock or assets permitted to be acquired
under the terms of this Agreement granted to secure Indebtedness at the
time of such acquisition (or within one year thereof) or incurred to
finance the acquisition of such stock or assets, PROVIDED that, in either
case, such Indebtedness is permitted under SECTION 8.2.1(v);
(d) statutory and common law banker's Liens and rights of setoff on
bank deposits;
(e) Liens for taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable without penalty or
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside
on its books;
(f) Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums not overdue
or being diligently contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with GAAP have been set aside on
its books;
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(g) non-material Liens incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance or other
forms of governmental insurance or benefits, or to secure performance of
tenders, statutory obligations, leases and contracts (other than for
borrowed money) entered into in the ordinary course of business or to
secure obligations on surety or appeal bonds;
(h) judgment Liens in existence less than 30 days after the entry
thereof or with respect to which execution has been stayed or the payment
of which is covered in full (subject to a customary deductible) by
insurance maintained with insurance companies of the type specified in
SECTION 8.1.5;
(i) Liens existing on any assets at the date of acquisition of such
assets, which assets are permitted to be acquired under the terms of this
Agreement and are acquired after the Effective Date;
(j) Liens granted to secure Indebtedness incurred to refinance any
Indebtedness (other than the Senior Notes, the Old Subordinated Notes and
the New Subordinated Notes) secured by Liens permitted by CLAUSES (c), (c)
and (i) of this SECTION 8.2.2 (PROVIDED, that such Indebtedness is not
increased as the result of such refinancing and that such Liens attach only
to the same assets subject to Lien prior to the refinancing);
(k) Liens granted to secure Indebtedness permitted by SECTION 8.2.1(v)
or in connection with Capitalized Lease Obligations or operating leases;
and
(l) Zoning restrictions, easements, licenses, covenants, reservations,
utility company rights, restrictions on the use of real property or minor
irregularities of title incident thereto which do not in the aggregate
materially detract from the value of the property or assets of the Borrower
and its Subsidiaries taken as a whole, or materially impair the operation
of their business, taken as a whole.
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SECTION 8.2.3 FINANCIAL CONDITION. The Borrower will not permit:
(a) the Net Indebtedness to Consolidated EBITDA Ratio at the end of
any Fiscal Quarter ending during any period set forth below to exceed the
ratio set forth below across from such period:
Period Ratio
------ -----
Effective Date to March 29, 2001 5.25:1
March 30, 2001 to March 28, 2002 4.75:1
March 29, 2002 to April 3, 2003 4.25:1
Thereafter 4.00:1;
(b) the Cash Flow Coverage Ratio at the end of any Fiscal Quarter to
be less than 1.40:1; and
(c) if the Borrower prepays, defeases or repurchases any Subordinated
Debt (other than the Old Subordinated Notes and up to $10,000,000 principal
amount of New Subordinated Notes), the Net Senior Indebtedness to
Consolidated EBITDA Ratio to exceed the ratio set forth below across from
such period:
Period Ratio
------ -----
Effective Date to March 29, 2001 4.50:1
Thereafter 4.00:1.
SECTION 8.2.4 TAKE OR PAY CONTRACTS. The Borrower will not, and will not
permit any Subsidiary to, enter into or be a party to any arrangement for the
purchase of materials, supplies, other property or services if such arrangement
by its express terms requires that payment be made by the Borrower or such
Subsidiary regardless of whether such materials, supplies, other property or
services are delivered or furnished to it.
SECTION 8.2.5 CONSOLIDATION, MERGER, ETC. The Borrower will not, and will
not permit any Subsidiary to, consolidate with or merge into or with any other
Person, or sell, transfer, lease
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or sell and lease back or otherwise dispose of all or substantially all of its
assets to any Person, without prior written consent of the Required Lenders,
except: (a) the sale or other disposition of all or substantially all of the
assets of a Subsidiary to a Guarantor, to a Wholly-Owned Subsidiary or to the
Borrower; (b) the consolidation with or merger into a Guarantor, a Wholly-Owned
Subsidiary or the Borrower of any Subsidiary, provided that such Guarantor,
Wholly-Owned Subsidiary or the Borrower is the survivor of such consolidation or
merger, or, in the case of mergers or consolidations involving Subsidiaries and
Wholly-Owned Subsidiaries or Guarantors, the surviving entity of such
consolidation or merger thereupon becomes a Guarantor or Wholly-Owned
Subsidiary; (c) as set forth in ITEM 9 of the Disclosure Schedule; (d) non
Wholly-Owned Subsidiaries may merge or consolidate with each other as long as
the survivor continues to be a Subsidiary and as long as the resulting economic
ownership of such survivor on a consolidated basis is equal to or greater than
the sum of the consolidated economic ownership of the non Wholly-Owned
Subsidiaries prior to such merger or consolidation; and (e) the sale or other
disposition of all or substantially all of the assets of a Subsidiary (other
than a Significant Subsidiary) as long as such sale or other disposition is an
"Asset Sale" permitted pursuant to the provisions of SECTION 8.2.14.
SECTION 8.2.6 MODIFICATION, ETC. OF SUBORDINATED DEBT. The Borrower will
not amend any term or provision, including any subordination provision,
covenant, event of default or right of acceleration or any sinking fund
provision or term of required repayment or redemption (except any amendment
which extends the date or reduces the amount of any required repayment or
redemption), contained in or applicable to any Instrument evidencing or
applicable to any Subordinated Debt of the Borrower or any Significant
Subsidiary, if such amendment would cause such Subordinated Debt not to be
"Subordinated Debt" pursuant to the definition of "Subordinated Debt" hereunder.
SECTION 8.2.7 TRANSACTIONS WITH AFFILIATES. The Borrower will not, and
will not permit any Subsidiary to, enter into, or cause, suffer or permit to
exist any transaction, arrangement or contract with any of its Affiliates
(except for Guarantors and
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Wholly-Owned Subsidiaries) which is on terms which are not on an arm's-length
basis.
SECTION 8.2.8 SALE OR DISCOUNT OF RECEIVABLES. Except as permitted by
SECTION 8.2.5, the Borrower will not, and will not permit any Subsidiary to,
directly or indirectly, sell with recourse, or discount or otherwise sell for
less than the face value thereof, any of its notes or accounts receivable in an
aggregate amount for all such sales or discounts by the Borrower and its
Subsidiaries in any Fiscal Year in excess of $100,000.
SECTION 8.2.9 LIMITATION ON CERTAIN PAYMENTS; LIMITATION ON RESTRICTION OF
SUBSIDIARY DIVIDENDS AND DISTRIBUTIONS. If any Default or Event of Default then
exists or would result therefrom, the Borrower shall not (a) declare or pay any
dividends or other distributions on any of its Capital Stock to the holders
thereof, (b) purchase or redeem any Capital Stock or any warrants, options or
other rights in respect of Capital Stock, (c) make any other distribution to
shareholders as such, (d) redeem, prepay, defease or repurchase any Subordinated
Debt or any obligations under any Capitalized Lease Obligation or (e) set aside
funds for any of the foregoing. The Borrower will not, and will not permit any
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary to (a) pay dividends or make other distributions on its Capital Stock
owned by the Borrower or any Subsidiary, or pay any Indebtedness owed to the
Borrower or any Subsidiary, (b) make loans or advances to the Borrower or (c)
transfer any of its assets or properties to the Borrower, except for such
encumbrances or restrictions existing by reason of or under (i) applicable law
and (ii) this Agreement or the other Loan Documents.
SECTION 8.2.10 INCONSISTENT AGREEMENTS. The Borrower will not, and will
not permit any Subsidiary to, enter into any agreement containing any provision
which would be violated or breached by any borrowing by the Borrower hereunder
or by the performance by the Borrower or any Subsidiary of their respective
obligations hereunder or under any other Loan Document.
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SECTION 8.2.11 INVESTMENTS. The Borrower will not, and will not permit
any Subsidiary to, make or permit to remain outstanding any Investment in any
Person, except that the Borrower may, and may permit any Subsidiary to, make or
permit to remain outstanding any or all of the following:
(i) Investments outstanding on the Effective Date as set forth in ITEM
10 ("INVESTMENTS") on EXHIBIT A;
(ii) advances or extensions of credit on terms customary in the
industry in the form of accounts or other receivables incurred or pre-paid
film rentals, and loans and advances made in settlement of such accounts
receivable, all in the ordinary course of business on a basis consistent
with past practice;
(iii) Investments in the Borrower, any Guarantor or any Wholly-Owned
Subsidiary of the Borrower;
(iv) any Investment in Cash Equivalents, PROVIDED that, in the case of
all of the foregoing obligations, they mature within 12 months of the date
of purchase (unless required to mature earlier pursuant to the definition
of "Cash Equivalents");
(v) so long as no Default or Event of Default has occurred and is
continuing or would result from such Investment, Investments by the
Borrower or any Subsidiary of the Borrower in another Person, if (x) as a
result of such Investment (A) such other Person becomes a Wholly-Owned
Subsidiary of the Borrower or a Guarantor or (B) such other Person is
merged or consolidated with or into, or transfers or conveys all or
substantially all of its assets to, the Borrower or a Wholly-Owned
Subsidiary of the Borrower or a Guarantor and (y) such other Person is
engaged substantially only in the lines of business permitted under SECTION
8.2.13;
(vi) Investments (without double-counting Investments made by
Subsidiaries to the extent that such Investments are made with the proceeds
of Investments by the Borrower or other Subsidiaries otherwise permitted
under this CLAUSE
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(vi)) by the Borrower or any Subsidiary in an amount not exceeding in the
aggregate from December 27, 1995 to the Commitment Termination Date, the
sum of (w) $100,000,000 plus (or minus if a negative number) (x) the
greater of (i) 25% of Free Cash Flow or (ii) 50% of Consolidated Net Income
(or 100% of Consolidated Net Income if a loss) calculated on a cumulative
basis from December 27, 1995 to the date of determination plus (y) the
aggregate Net Cash Proceeds from the issuance or sale of Capital Stock
(excluding Disqualified Stock) of the Borrower to any Person (other than a
Subsidiary) from December 27, 1995 to the date of determination plus (z)
with respect to any such Investment made after December 27, 1995, an amount
equal to the lesser of the return of cash with respect to any such
Investment and the initial amount of such Investment, in either case, less
the cost of disposition of such Investment;
(vii) loans or advances to employees of the Borrower or any Subsidiary
in the ordinary course of their businesses, consistent with past practices,
not to exceed $1,000,000 in aggregate amount at any time outstanding; and
(viii) refundable construction advances made with respect to the
construction of motion picture exhibition theatres in the ordinary course
of business on a basis consistent with past practice.
SECTION 8.2.12 GUARANTIES. Except as described in ITEM 11 ("GUARANTIES")
of EXHIBIT A, neither the Borrower nor any Subsidiary will enter into any
Guaranty prior to the Commitment Termination Date, except that the Borrower and
any Subsidiary may enter into any or all of the following (subject, in the case
of Guaranties of Indebtedness of the Borrower, to SECTION 8.2.15):
(i) Guaranties relating to (x) operating lease obligations on which
the Borrower or any Subsidiary or Unrestricted Subsidiary of the Borrower
is lessee, (y) Capitalized Lease Obligations on which the Borrower or any
Subsidiary is lessee and (z) Capitalized Lease Obligations of any
Unrestricted Subsidiary relating to leased property in service outside the
United States;
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(ii) Guaranties of operating obligations of any Subsidiary or
Unrestricted Subsidiary, such as construction agreements in connection with
a theater;
(iii) any Significant Subsidiary Guaranty;
(iv) Guaranties by the Borrower or its Subsidiaries not to exceed
$25,000,000 in aggregate amount at any time outstanding;
(v) contingent obligations arising or existing as the result of the
sale or other disposition of theatres;
(vi) Guaranties by any Significant Subsidiary of the Senior Notes, the
New Subordinated Notes and the Old Subordinated Notes (PROVIDED that all
such Guaranties of the New Subordinated Notes and the Old Subordinated
Notes shall be subordinated to the prior payment in full in cash of the
Liabilities in form and substance satisfactory to the Administrative
Agent); and
(vii) Guaranties by AMC as set forth in (A) that certain Partnership
Interest Purchase Agreement dated May 28, 1993, among AMC certain other
parties, TPI and TPIE and (B) that certain Mutual Release and
Indemnification Agreement dated May 28, 1993 among AMC, TPI and TPIE and
certain other parties.
SECTION 8.2.13 BUSINESS ACTIVITIES. The Borrower will not, and will not
permit any Subsidiary to, engage in any type of business except the theatrical
exhibition, media, communications, leisure, and entertainment industries;
specialty retailing and food service as they relate to the theater exhibition
business; and real estate and related services related to or necessary to
support the aforementioned activities.
SECTION 8.2.14 ASSET SALES. (a) The Borrower shall not, and shall not
permit any Subsidiary to, engage in any Asset Sale (x) unless at least 85% of
the consideration received by the Borrower or such Subsidiary from such Asset
Sale is in cash or Cash Equivalents, (y) unless the consideration received by
the Borrower or such Subsidiary is at least equal to the Fair Market
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Value of the shares or assets sold or otherwise disposed of in such Asset Sale
and (z) if and to the extent that the aggregate Net Cash Proceeds from all Asset
Sales from and after December 27, 1995 would be in excess of $50,000,000;
PROVIDED, that (i) CLAUSES (x) and (y) of this SECTION 8.2.14(a) shall not apply
to any Asset Sale where the Fair Market Value of the shares or assets sold or
otherwise disposed of in such Asset Sale is less than $2,500,000 or to like kind
exchanges of theatres for other theatres, (ii) CLAUSE (z) of this SECTION
8.2.14(a) shall not apply to any Asset Sale if the assets sold in such Asset
Sale are contemporaneously leased back to the Borrower or the applicable
Subsidiary on fair market terms (whether pursuant to an operating lease or a
lease giving rise to Capitalized Lease Obligations), (iii) this SECTION
8.2.14(a) shall not apply to sales of Capital Stock of Subsidiaries and (iv) for
purposes of CLAUSE (z) of this SECTION 8.2.14(a), the Fair Market Value of
property received by the Borrower or any Subsidiary in any like kind exchange of
theatres for other theatres shall be deemed to be Net Cash Proceeds from such
transaction.
(b) The Net Cash Proceeds of each Asset Sale shall, to the extent not
invested in activities permitted by SECTION 8.2.13, be applied pursuant to
SECTION 2.2.2(c) (subject to the PROVISO to the first sentence thereof).
SECTION 8.2.15 LIMITATION ON ISSUANCES OF GUARANTIES OF INDEBTEDNESS. The
Borrower will not permit any Subsidiary, directly or indirectly, to guaranty,
assume or in any other manner become liable with respect to any Indebtedness of
the Borrower unless (i) such Subsidiary simultaneously executes and delivers to
the Administrative Agent a Guaranty of the Liabilities (accompanied by certified
resolutions, an incumbency certificate and an opinion of counsel, as to the due
execution and delivery of such Guaranty by such Subsidiary and as to the
enforceability of such Guaranty against such Subsidiary, all in form and
substance similar to those delivered pursuant to SECTIONS 6.1.1 and 6.1.3 and
reasonably satisfactory to the Administrative Agent) on the same terms as the
Guaranty of such Indebtedness except that if such Indebtedness is by its terms
subordinated to the Liabilities, any such assumption, Guaranty or other
liability of such Subsidiary with respect to such Indebtedness shall be
subordinated to such Subsidiary's
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assumption, Guaranty or other liability with respect to the Liabilities to the
same extent as such Indebtedness is subordinated to the Liabilities and (ii)
such Subsidiary waives and will not in any manner whatsoever claim or take the
benefit or advantage of, any rights of reimbursement, indemnity or subrogation
or any other rights against the Borrower or any other Subsidiary as a result of
any payment by such Subsidiary under such Guaranty of the Liabilities; PROVIDED,
that a Subsidiary shall not have to execute a Guaranty under this Section if it
has already executed a counterpart to the Significant Subsidiary Guaranty and
such Subsidiary's obligations thereunder are then in effect.
SECTION 8.2.16 NEGATIVE PLEDGES. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any agreement (other than this
Agreement and the other Loan Documents) prohibiting (i) the creation or
assumption of any Lien upon its properties, revenues or assets, whether now
owned or hereafter acquired (other than (x) negative pledges in lease agreements
prohibiting the creation of liens on assets subject to such lease agreements
(and other than on stock or notes) of the Borrower and its Subsidiaries, (y)
until the amendment referred to in the last sentence of this Section is
obtained, the negative pledge in Section 11(c) of the Guaranty of the Borrower
dated as of July 25, 1996 in favor of Clip Funding, Limited Partnership (the
"CLIP FUNDING GUARANTY") and (z) after the amendment referred to in the last
sentence of this Section is obtained, the negative pledge in Section 11(c) of
the Clip Funding Guaranty, as amended by such amendment), or (ii) the ability of
Borrower and its Subsidiaries to amend or modify this Agreement or any other
Loan Document. The Borrower agrees that it will, within 60 days of the
Effective Date, obtain an amendment to the Clip Funding Guaranty, executed by
Clip Funding and the Borrower, in form and substance satisfactory to the
Administrative Agent, to permit the Liens contemplated by SECTION 8.1.9 and
other Liens of the type described in SECTION 8.2.2(a).
SECTION 8.2.17 FISCAL YEAR. The Borrower will not change its Fiscal Year.
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ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1 EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" shall mean
each of the following events:
SECTION 9.1.1 NON-PAYMENT OF LIABILITIES. The Borrower shall default in
the payment or prepayment when due of any principal of any Loan, the Borrower
shall default in the payment when due of any Reimbursement Obligation under any
Letter of Credit, or the Borrower shall default (and such default shall continue
unremedied for a period of three Business Days) in the payment when due, whether
at stated maturity, by acceleration or otherwise, of interest on any Loan, of
any commitment fee, Letter of Credit fee, fronting fee or of any other
Liability.
SECTION 9.1.2 NON-PERFORMANCE OF CERTAIN COVENANTS. The Borrower shall
default in the performance and observance of any of its obligations under
SECTION 8.1.2(b) or (c), 8.1.9 or 8.2.
SECTION 9.1.3 NON-PERFORMANCE OF OTHER OBLIGATIONS. The Borrower shall
default in the due performance and observance of any other agreement contained
herein or in any other Loan Document, and such default shall continue unremedied
for a period of 30 days after notice thereof shall have been given to the
Borrower by the Administrative Agent or any Lender.
SECTION 9.1.4 BANKRUPTCY, INSOLVENCY, ETC. The Borrower or any
Significant Subsidiary or any Guarantor shall become insolvent or generally fail
to pay, or admit in writing its inability to pay, debts as they become due; or
the Borrower or any Significant Subsidiary or any Guarantor shall apply for,
consent to, or acquiesce in, the appointment of a trustee, receiver,
sequestrator or other custodian for the Borrower or such Significant Subsidiary
or such Guarantor or any property of any thereof, or make a general assignment
for the benefit of creditors; or, in the absence of such application, consent or
acquiescence, a trustee, receiver, sequestrator or other custodian shall be
appointed for the Borrower or any Significant Subsidiary or any Guarantor or for
a substantial part of the property of any thereof and not be discharged within
60 days; or
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any bankruptcy, reorganization, debt arrangement, or other case or proceeding
under any bankruptcy or insolvency law, or any dissolution, winding up or
liquidation proceeding, shall be commenced in respect of the Borrower or any
Significant Subsidiary or any Guarantor, and, if such case or proceeding is not
commenced by the Borrower or such Significant Subsidiary or such Guarantor, such
case or proceeding shall be consented to or acquiesced in by the Borrower or
such Significant Subsidiary or such Guarantor or shall result in the entry of an
order for relief or shall remain for 60 days undismissed; or the Borrower or any
Significant Subsidiary or any Guarantor shall take any corporate action to
authorize, or in furtherance of, any of the foregoing.
SECTION 9.1.5 CERTAIN DEFAULTS ON OTHER INDEBTEDNESS, LEASES OR PREFERRED
STOCK. Any default shall occur under the terms applicable to any Indebtedness,
operating lease or Preferred Stock outstanding in a principal amount exceeding
$6,500,000 of the Borrower or any Subsidiary representing any borrowing or
financing or arising under any other lease or material agreement, and such
default shall:
(i) consist of the failure to pay Indebtedness at the maturity
thereof; or
(ii) continue without being cured or waived (so long as such cure or
waiver did not involve any payment of principal of such Indebtedness or
amounts other than previously-contracted dividends or distributions with
respect to such Preferred Stock) for a period of time sufficient to permit
acceleration of Indebtedness or mandatory redemption of such Preferred
Stock; or
(iii) consist of any default under the terms applicable to any such
capital or operating lease of the Borrower or any Subsidiary with aggregate
remaining lease payments exceeding $6,500,000 which results in the loss of
use of the property subject to such lease or involves a default (that is
not cured or waived or if cured or waived involved the payment of an amount
in excess of $6,500,000) under the terms applicable to any such capital or
operating
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lease of the Borrower or Subsidiary with aggregate remaining lease payments
exceeding $25,000,000; or
(iv) enable the holders of any Preferred Stock to appoint any members
of the board of directors (or similar governing body) of, or vote on or
consent to any matter (except as expressly provided otherwise by law)
concerning, the Borrower or any Subsidiary.
SECTION 9.1.6 CHANGE IN CONTROL. Any Change in Control shall occur.
SECTION 9.1.7 BREACH OF WARRANTY. Any warranty of the Borrower in any
Loan Document or in any writing furnished after the date of this Agreement by or
on behalf of the Borrower to the Lenders for the purposes of or in connection
with this Agreement is or shall be incorrect in any material respect when made,
and the Borrower shall not have taken corrective measures with respect thereto
satisfactory to the Required Lenders within 30 days after notice thereof to the
Borrower by the Administrative Agent or any Lender.
SECTION 9.1.8 ERISA. Any of the following events shall occur:
(i) Any Pension Plan shall be terminated (or steps shall be instituted
to effect such termination), but only if such Pension Plan has any Unfunded
Benefit Liabilities at the date of such termination or the date of the
institution of such steps, as the case may be, in excess of $6,500,000.
(ii) The Borrower or any Subsidiary or Unrestricted Subsidiary shall
withdraw or partially withdraw from a Multiemployer Plan (or shall
institute steps to effect such withdrawal or partial withdrawal), if as a
result thereof the Borrower or any Subsidiary could be required to make
withdrawal liability payments in excess of $6,500,000 in the aggregate.
(iii) Any Reportable Event (other than any Reportable Event as to
which the requirement of giving notice to the PBGC within 30 days has been
waived) shall occur with
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respect to a Pension Plan, and there shall exist a liability or obligation
of the Borrower or any Subsidiary in excess of $6,500,000 with respect to
such Reportable Event.
(iv) A contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a lien under section 302(f) of ERISA securing an
obligation in excess of $6,500,000.
SECTION 9.1.9 JUDGMENTS. A final judgment to the extent not covered by
insurance that, with other such outstanding final judgments against the Borrower
and its Subsidiaries exceeds an aggregate of $6,500,000 shall be rendered
against the Borrower or any Subsidiary and if, within 60 days after entry
thereof, such judgment shall not have been discharged or otherwise satisfied or
execution thereof stayed pending appeal, or if, within 60 days after the
expiration of any such stay, such judgment shall not have been discharged or
otherwise satisfied.
SECTION 9.1.10 LOAN DOCUMENTS. Any Loan Document shall cease to be in
full force and effect or the Borrower or any other Loan Party shall assert in
writing that such Loan Document or any term thereof is not the legal, valid and
binding obligation of any Loan Party that is a party thereto.
SECTION 9.2 ACTION IF BANKRUPTCY. If any Event of Default described in
SECTION 9.1.4 shall occur, the Commitments (if not theretofore terminated) shall
automatically terminate and the outstanding principal amount of all outstanding
Loans and all other Liabilities shall automatically be and become immediately
due and payable, and the Borrower shall become immediately obligated to deliver
to the Issuer in accordance with SECTION 4.7 cash collateral in an amount equal
to the Stated Amount of all Letters of Credit then outstanding, without notice
or demand.
SECTION 9.3 ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default
(other than an Event of Default described in SECTION 9.1.4) shall occur for any
reason, whether voluntary or involuntary, and be continuing, the Administrative
Agent, upon the direction of the Required Lenders shall, without notice or
demand, declare all or any portion of the outstanding principal amount of the
Loans to be due and payable and any or all other
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Liabilities to be due and payable and/or the Commitments (if not theretofore
terminated) to be terminated, whereupon the full unpaid amount of such Loans and
any and all other Liabilities which shall be so declared due and payable shall
be and become immediately due and payable, and the Borrower shall become
immediately obligated to deliver to the Issuer in accordance with SECTION 4.7
cash collateral in an amount equal to the Stated Amount of all Letters of Credit
then outstanding, without further notice, demand, or presentment and/or, as the
case may be, the Commitments shall terminate.
ARTICLE X
THE AGENTS
SECTION 10.1 ACTIONS. Each Lender hereby appoints BNS as Administrative
Agent under and for purposes of this Agreement and each other Loan Document.
Each Lender authorizes the Administrative Agent to act on behalf of such Lender
under this Agreement and any other Loan Document and, in the absence of other
written instructions from the Required Lenders received from time to time by the
Administrative Agent (with respect to which the Administrative Agent agrees that
it will, subject to the last two sentences of this Section, comply in good faith
except as otherwise advised by counsel), to exercise such powers hereunder and
thereunder as are specifically delegated to or required of the Administrative
Agent by the terms hereof and thereof, together with such powers as may be
reasonably incidental thereto. The parties hereto acknowledge that the
Documentation Agent has no responsibilities in its capacity as Agent pursuant to
any Loan Document. Each Lender agrees (which agreement shall survive any
termination of this Agreement) to indemnify each Agent, PRO RATA according to
such Lender's Percentage, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, or
disbursements of any kind or nature whatsoever which may at any time be imposed
on, incurred by, or asserted against such Agent in any way relating to or
arising out of this Agreement, the Notes or any other Loan Document, including
the reimbursement of such Agent for all reasonable out-of-pocket expenses
(including reasonable attorneys' fees) and
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the reasonably allocated costs of in-house counsel and legal staff incurred by
such Agent hereunder or in connection herewith or in enforcing the Liabilities
of the Borrower under this Agreement or any other Loan Document, in all cases as
to which such Agent is not reimbursed by the Borrower; PROVIDED that no Lender
shall be liable for the payment of any portion of such Liabilities, losses,
damages, penalties, actions, judgments, suits, costs, expenses, or disbursements
determined by a court of competent jurisdiction in a final proceeding to have
resulted solely from such Agent's gross negligence or willful misconduct. The
Administrative Agent shall not be required to take any action hereunder or under
any other Loan Document, or to prosecute or defend any suit in respect of this
Agreement or any other Loan Document, unless it is indemnified to its
satisfaction by the Lenders against loss, costs, liability, and expense. If any
indemnity in favor of the Administrative Agent shall become impaired, it may
call for additional indemnity and cease to do the acts indemnified against until
such additional indemnity is given. If the Administrative Agent has received
indemnification payments from the Borrower and/or the Lenders in an amount equal
to the full amount of all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements specified in the
third sentence of this SECTION 10.1 with respect to a particular matter, then,
to the extent any indemnification payments made by the Lenders pursuant to this
SECTION 10.1 are subsequently recovered from the Borrower with respect to such
matter, the Administrative Agent will promptly refund such previously paid
indemnity payments to the Lenders, without interest.
SECTION 10.2 FUNDING RELIANCE, ETC. Unless the Administrative Agent
shall have been notified by telephone, confirmed in writing, by any Lender by
5:00 p.m., Atlanta time, on the day prior to the Extension of Credit Date of any
Loan to be made, that such Lender will not make available the amount which would
constitute its Percentage of such Borrowing on the date specified therefor, the
Administrative Agent may assume that such Lender has made such amount available
to the Administrative Agent and, in reliance upon such assumption, make
available to the Borrower a corresponding amount. If such amount is made
available by such Lender to the Administrative Agent on a date after the date of
such Borrowing, such Lender shall pay to the
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Administrative Agent on demand interest on such amount at the daily average
Federal funds rate quoted by the Administrative Agent for the number of days
from and including the date of such Borrowing to the date on which such amount
becomes immediately available to the Administrative Agent. A statement of the
Administrative Agent submitted to any Lender with respect to any amounts owing
under this paragraph shall be conclusive, in the absence of demonstrable error.
If such amount is not in fact made available to the Administrative Agent by such
Lender within three Business Days after the date of such Borrowing, the
Administrative Agent shall be entitled to recover such amount, with interest
thereon at the rate PER ANNUM then applicable to the Loans comprising such
Borrowing, within five Business Days after demand, from the Borrower.
SECTION 10.3 EXCULPATION. None of the Agents nor any of their respective
directors, officers, employees, or agents shall be liable to any Lender for any
action taken or omitted to be taken by it under this Agreement or any other Loan
Document, or in connection herewith or therewith, except for actions or
omissions to act which are determined by a court of competent jurisdiction in a
final proceeding to have resulted solely from such Agent's own willful
misconduct or gross negligence, nor responsible for any recitals or warranties
herein or therein, nor for the effectiveness, enforceability, validity, or due
execution of this Agreement or any other Loan Document, nor for the creation,
perfection or priority of any Liens purported to be created by any Loan
Document, or the validity, enforceability, existence, value or sufficiency of
any collateral security, nor to make any inquiry respecting the performance by
the Borrower of its obligations hereunder or thereunder. Each Agent shall be
entitled to rely upon advice of counsel concerning legal matters and upon any
notice, consent, certificate, statement, or writing which they believe to be
genuine and to have been presented by a proper Person.
SECTION 10.4 SUCCESSOR. Each Agent may resign as such at any time upon at
least 30 days' prior notice to the Borrower and all Lenders. If the
Documentation Agent resigns, no successor shall be appointed. If the
Administrative Agent at any time shall resign, the Required Lenders may appoint
another Lender as a successor Administrative Agent which shall thereupon become
the
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Administrative Agent hereunder. If no successor Administrative Agent shall have
been so appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the retiring Administrative Agent's giving
notice of resignation, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, which shall be one of the
Lenders or a commercial banking institution organized under the laws of the
United States and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall be entitled to receive from the retiring Administrative Agent such
documents of transfer and assignment as such successor Administrative Agent may
reasonably request, and shall thereupon succeed to and become vested with all
rights, powers, privileges, and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement, other than liabilities that have accrued prior
to the appointment of such successor Administrative Agent. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this ARTICLE X and SECTION 11.3 shall continue to inure to its
benefit as to any action taken or omitted to be taken by it while it was
Administrative Agent hereunder.
SECTION 10.5 LOANS BY THE AGENTS. Each Agent shall have the same rights
and powers with respect to (i) the Loans made by it or any of its Affiliates,
and (ii) the Notes held by it or any of its Affiliates as any Lender and may
exercise the same as if it were not an Agent. Each Agent and its Affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with, the Borrower or any Subsidiary or Affiliate of the Borrower as if
such Agent was not an Agent hereunder.
SECTION 10.6 CREDIT DECISIONS. Each Lender acknowledges that it has,
independently of the Agents and the other Lenders, and based on the financial
information referred to in SECTION 7.4 and such other documents, information,
and investigations as it has deemed appropriate, made its own credit decision to
extend its Commitment. Each Lender also acknowledges that it will,
independently of the Agents and the other Lenders, and based on such other
documents, information, and investigations as it shall
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deem appropriate at any time, continue to make its own credit decisions as to
exercising or not exercising from time to time any rights and privileges
available to it under this Agreement or any other Loan Document.
SECTION 10.7 COPIES, ETC. The Administrative Agent shall give prompt
notice to each Lender of each notice or request required or permitted to be
given to the Administrative Agent by the Borrower pursuant to the terms of this
Agreement (unless concurrently delivered to the Lenders by the Borrower). The
Administrative Agent will distribute to each Lender each Instrument received for
its account and copies of all other communications received by the
Administrative Agent from the Borrower for distribution to the Lenders by the
Administrative Agent in accordance with the terms of this Agreement (unless
concurrently delivered to the Lenders by the Borrower).
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 WAIVERS, AMENDMENTS, ETC. The provisions of this Agreement
and of each other Loan Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and consented to
by the Borrower and the Required Lenders; PROVIDED, HOWEVER, that no such
amendment, modification or waiver which would:
(i) modify any requirement hereunder that any particular action be
taken by all the Lenders or by the Required Lenders, shall be effective
unless consented to by each Lender;
(ii) modify SECTION 6.1 or this SECTION 11.1, change the definition of
"Required Lenders," increase the Total Commitment Amount or the Percentage
of any Lender, reduce any fees described in ARTICLE II or extend the
Commitment Termination Date shall be made without the consent of each
Lender;
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(iii) amend, modify or release any Guaranty or any Subsidiary
therefrom shall be made without the consent of each Lender;
(iv) extend the due date for, or reduce the amount of, any payment or
prepayment of principal of or interest on any Loan (or reduce the principal
amount of or rate of interest on any Loan) shall be made without the
consent of the holder of the Note evidencing such Loan;
(v) release any substantial portion of any collateral security, except
otherwise as specifically provided herein or in any other Loan Document,
shall be made without the consent of each Lender;
(vi) affect adversely the interests, rights or obligations of the
Issuer in its capacity as Issuer shall be made without the consent of the
Issuer; or
(vii) affect adversely the interests, rights or obligations of any
Agent in its capacity as Agent shall be made without consent of such Agent.
No failure or delay on the part of any Agent, the Issuer or any Lender in
exercising any power or right under this Agreement or any other Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power or right preclude any other or further exercise thereof or the
exercise of any other power or right. No notice to or demand on the Borrower in
any case shall entitle it to any notice or demand in similar or other
circumstances. No waiver or approval by any Agent, the Issuer or any Lender
under this Agreement or any other Loan Document shall, except as may be
otherwise stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 11.2 NOTICES. All notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing or by facsimile and addressed, delivered or transmitted to it at its
address or facsimile number set forth (x) in the case of the Borrower, below its
signature
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hereto and (y) in the case of any Agent, the Issuer or any Lender, below its
name on SCHEDULE I hereto or in an Assignment Agreement or, in any case, at such
other address or facsimile number as may be designated by such party in a notice
to the other parties. Any notice, if mailed and properly addressed with postage
prepaid or if properly addressed and sent by pre-paid courier service, shall be
deemed given when received; any notice, if transmitted by facsimile, shall be
deemed given when transmitted.
SECTION 11.3 COSTS AND EXPENSES. The Borrower agrees to pay all
reasonable expenses of the Administrative Agent for the structuring and
syndication of the credit facilities set forth in this Agreement, for the
negotiation, preparation, execution, and delivery of this Agreement and each
other Loan Document, including schedules and exhibits (including the allocated
costs and expenses of in-house counsel and legal staff), and any amendments,
waivers, consents, supplements, or other modifications to this Agreement or any
other Loan Document as may from time to time hereafter be required (including
the reasonable fees and expenses of counsel for the Administrative Agent from
time to time incurred in connection therewith and the allocated costs of
in-house counsel and legal staff), whether or not the transactions contemplated
hereby are consummated, and all costs in connection with the perfection and
administration of any Lien granted pursuant to any Loan Document, and to pay all
expenses of the Administrative Agent (including reasonable fees and expenses of
counsel to the Administrative Agent and the allocated costs of in-house counsel
and legal staff) incurred in connection with the preparation and review of the
form of any Instrument relevant to this Agreement or any other Loan Document and
the consideration of legal questions relevant hereto and thereto or to any
restructuring or "work-out" of any Liabilities. The Borrower also agrees to
reimburse each Lender upon demand for all reasonable out-of-pocket expenses
(including attorneys' fees and legal expenses and allocated costs of in-house
counsel and legal staff) incurred by such Lender in enforcing the obligations of
any Loan Party under this Agreement or any other Loan Document.
SECTION 11.4 INDEMNIFICATION. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitments,
the Borrower hereby indemnifies,
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exonerates and holds the Issuer, each Agent and each Lender and each of their
respective officers, directors, employees, and agents (the "LENDER PARTIES")
free and harmless from and against any and all actions, causes of action, suits,
losses, costs, liabilities and damages, and expenses actually incurred in
connection therewith (irrespective of whether such Lender Party is a party to
the action for which indemnification hereunder is sought), including reasonable
attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by
the Lender Parties or any of them as a result of, or arising out of, or relating
to
(i) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Loan or Letter of Credit;
(ii) the entering into and performance of this Agreement and any other
Loan Document by any of the Lender Parties; or
(iii) any investigation, litigation, or proceeding related to any
acquisition or proposed acquisition by the Borrower or any Subsidiary of
all or any portion of the stock or all or substantially all the assets of
any Person, whether or not such Agent or such Lender is party thereto,
except for any such Indemnified Liabilities arising for the account of a
particular Lender Party by reason of the relevant Lender Party's breach of this
Agreement or of any Loan Document or gross negligence or willful misconduct, and
if and to the extent that the foregoing undertaking may be unenforceable for any
reason, the Borrower hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
SECTION 11.5 SURVIVAL. The obligations of the Borrower under SECTIONS
5.4, 5.5, 11.3, and 11.4, and the obligations of the Lenders under SECTION 10.1,
shall in each case survive any termination of this Agreement, the payment in
full of the Liabilities and the termination of the Commitments. The
representations and warranties made by each Loan Party in this Agreement and in
each other Loan Document shall survive the
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execution and delivery of this Agreement and each such other Loan Document.
SECTION 11.6 SEVERABILITY. Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall, as
to such provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
SECTION 11.7 HEADINGS. The various headings of this Agreement and of each
other Loan Document are inserted for convenience only and shall not affect the
meaning or interpretation of this Agreement or such other Loan Document or any
provisions hereof or thereof.
SECTION 11.8 EXECUTION IN COUNTERPARTS; EFFECTIVENESS. This Agreement may
be executed by the parties hereto in several counterparts, each of which shall
be deemed to be an original and all of which shall constitute together but one
and the same agreement. This Agreement shall become effective when counterparts
hereof executed on behalf of the Borrower and each Lender (or notice thereof
satisfactory to the Administrative Agent) shall have been lodged with the
Administrative Agent and notice thereof shall have been given by the
Administrative Agent to the Borrower and each Lender.
SECTION 11.9 GOVERNING LAW; ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES
AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. THIS AGREEMENT, THE
NOTES AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE
PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 11.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED, HOWEVER, that (i) the Borrower may not assign
or transfer its
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rights or obligations hereunder without the prior written consent of the
Administrative Agent and all Lenders and (ii) the rights of sale, assignment,
participation and transfer by the Lenders are subject to SECTION 11.11.
SECTION 11.11 SALE AND TRANSFERS, ETC., OF LOANS AND NOTES; PARTICIPATIONS
IN LOANS AND NOTES.
(a) Each Lender may at any time sell to one or more banks or other
entities ("PARTICIPANTS") participating interests in all or any portion of
its Commitment, Loans and participations in Letters of Credit or any other
rights or interest of such Lender hereunder (in respect of any Lender, its
"CREDIT EXPOSURE"). In the event of any such sale by a Lender of
participating interests to a Participant, such Lender shall notify the
Borrower of the identity of such Participant, such Lender's obligations
under this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain
the holder of any such Note for all purposes under this Agreement, and the
Borrower and the Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Except in the case of the sale of a
participation to a Lender or an Affiliate of a Lender, any participation
permitted hereunder shall be in a minimum amount of at least $5,000,000,
and the relevant participation agreement shall not permit the Participant
to transfer, pledge, assign, sell participations in or otherwise encumber
its portion of the Commitment, Loans or participations in Letters of
Credit. Each Lender agrees that any agreement between such Lender and any
such Participant in respect of such participating interest shall not
restrict such Lender's right to agree to any amendment, supplement or
modification to the Agreement or any of the Loan Documents except to extend
the final maturity of any Note, reduce the rate or extend the time of
payment of interest thereon or any fees owed to the Lenders under this
Agreement or any of the Loan Documents, or reduce the principal amount of
any Note or release any collateral or Guaranty. The Borrower hereby
acknowledges and agrees that any such disposition described in this Section
will give
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rise to a direct obligation of the Borrower to the Transferee, and such
Participant shall, for purposes of SECTIONS 3.7, 3.8, 3.9, 3.10, 5.4, and
5.5, be considered a Lender and may rely on, and possess all rights under,
any opinions, certificates, or other Instruments delivered under or in
connection with this Agreement or any other Loan Document; PROVIDED,
HOWEVER, that the Borrower shall only be required to deliver information
and data required pursuant to this Agreement to the Lender selling or
granting a participation in (in whole or in part) its Credit Exposure.
(b) Any Lender may at any time assign and delegate to one or more
banks or other entities ("ASSIGNEES") all or any part of its Credit
Exposure, provided that (i) unless assigned to an Affiliate of such Lender
or another Lender, it assigns all or, if less than all, a portion of its
Credit Exposure in an amount not less than $10,000,000, (ii) each
assignment and delegation shall be of a constant, and not a varying,
percentage of such Lender's Credit Exposure and (iii) any Assignee (other
than an affiliate of such Lender or another Lender) must be acceptable to
the Issuer and the Administrative Agent and acceptable to the Borrower,
whose consent shall not be unreasonably withheld, and the Issuer's, the
Administrative Agent's and Borrower's decisions respecting the same shall
be made promptly; PROVIDED, that the Borrower, the Issuer and the
Administrative Agent shall be entitled to continue to deal solely and
directly with the assignor Lender in connection with the interests so
assigned and delegated to the Assignee until a fee of $3,500 shall have
been delivered to the Administrative Agent by the assignor Lender or the
Assignee, written notice of such assignment and delegation shall have been
given to an Administrative Agent and the Borrower by the Assignee and such
assignor Lender and the Assignee shall have delivered to the Borrower and
the Administrative Agent an Assignment Agreement, accepted by the
Administrative Agent. Upon receipt of such an Assignment Agreement, the
Administrative Agent shall, if such Assignment Agreement has been fully
executed and completed and the fee referred to above has been paid, record
the information contained therein in the Administrative Agent's records.
From and after the date the Administrative Agent accepts such
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Assignment Agreement, the Assignee shall, to the extent that rights and
obligations hereunder have been assigned and delegated in connection with
such Assignment Agreement, be deemed automatically to have become a party
hereto and shall have the same rights and benefits of a Lender hereunder
and the assignor Lender, to the extent that rights and obligations
hereunder have been assigned and delegated in connection with such
Assignment Agreement, shall be released from its obligations hereunder. In
the event of any assignment, the Borrower shall, at its sole cost and
expense, prepare and deliver to the assignor Lender and to the Assignee new
Notes reflecting such assignment. Notwithstanding the foregoing provisions
of this SECTION 11.11(b), any Lender may at any time assign all or any
portion of its Loans and Note to a Federal Reserve Bank (but no such
assignment shall release any Lender from any of its obligations hereunder).
(c) Subject to SECTION 11.16, the Borrower authorizes each Lender to
disclose to any Participant or Assignee (each, a "TRANSFEREE") and any
prospective Transferee any and all financial information in such Lender's
possession concerning the Borrower and any Subsidiary which has been
delivered to such Lender by the Borrower or any Subsidiary pursuant to this
Agreement or which has been delivered to such Lender by the Borrower or any
Subsidiary in connection with such Lender's credit evaluation of the
Borrower or any Subsidiary prior to entering into this Agreement.
SECTION 11.12 OTHER TRANSACTIONS. Nothing contained herein shall preclude
any Agent or any other Lender from engaging in any transaction, in addition to
those contemplated by this Agreement or any other Loan Document, with the
Borrower or any of its Affiliates in which the Borrower or such Affiliate is not
restricted hereby from engaging with any other Person.
SECTION 11.13 COLLATERAL. Each of the Lenders represents to the Agents
and each of the other Lenders that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U of the F.R.S. Board) as collateral in
the extension or maintenance of the credit provided for in this Agreement.
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<PAGE>
SECTION 11.14 WAIVER OF JURY TRIAL. THE AGENTS, THE LENDERS AND THE
BORROWER HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN), OR ACTIONS OF THE AGENTS, THE LENDERS, OR THE BORROWER.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS AND THE LENDERS ENTERING
INTO THIS AGREEMENT.
SECTION 11.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. Any
judicial proceedings brought against the Borrower with respect to this Agreement
or any other Loan Document may be brought in any state or federal court of
competent jurisdiction in the State of New York or the State of Missouri, and by
the execution and delivery of this Agreement the Borrower accepts the
nonexclusive jurisdiction of the aforesaid courts. Service of process may be
made by any means authorized by federal law or the law of New York, or Missouri,
as the case may be. A copy of any such process so served shall be mailed by
registered mail to the Borrower at its address set forth below its signature
hereto or at such other address as may be designated by the Borrower in a notice
to the Lenders. Nothing herein shall limit the right of the Administrative
Agent or any Lender to bring proceedings against the Borrower in the courts of
any other jurisdiction.
SECTION 11.16 CONFIDENTIALITY. Each Lender and Agent agrees (on behalf of
itself and each of its subsidiaries, affiliates, directors, officers, employees
and representatives) to use reasonable precautions to keep confidential, in
accordance with customary procedures for handling confidential information of
this nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Borrower pursuant to this Agreement
which is identified by the Borrower as being confidential at the time the same
is delivered to the Lenders or the Agents, PROVIDED that nothing herein shall
limit the disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process, (ii) to counsel for any of the
Lenders or Agents, (iii) to bank examiners, auditors, accountants or other
professional advisors, (iv) to the Agents or any other Lender, (v) in connection
with
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any litigation to which any one or more of the Lenders is a party, (vi) to any
director, officer, employee, subsidiary or affiliate of any Lender, (vii) to any
Transferee (or prospective Transferee), so long as such Person agrees in writing
to be bound by the terms of this SECTION 11.16 and (viii) if required or
appropriate in any report, statement or testimony submitted to any governmental
authority having or claiming to have jurisdiction over such Lender or Agent; and
PROVIDED finally that in no event shall any Lender or Agent be obligated or
required to return any materials furnished by the Borrower.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
AMC ENTERTAINMENT INC.
By /s/ Peter C. Brown
--------------------------------------
Name: Peter C.Brown
Title: President and Chief Financial
Officer
Address: 106 West 14th Street
Kansas City, Missouri
64105-1977
Facsimile No.: (816) 421-5744
Attention: Peter C. Brown
S-1
<PAGE>
THE BANK OF NOVA SCOTIA, as
Administrative Agent
By /s/ A.S. Norsworthy
--------------------------------------
Name: Amanda Norsworthy
Title: Senior Team Leader
-- Loan Operations
S-2
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Documentation Agent
By /s/ Madeline W. Lee
--------------------------------------
Name: Madeline W. Lee
Title: Vice President
S-3
<PAGE>
THE BANK OF NOVA SCOTIA, AS A
LENDER AND AS ISSUER
By /s/ A.S. Norsworthy
--------------------------------------
Name: Amanda Norsworthy
Title: Senior Team Leader --
Loan Operations
S-4
<PAGE>
THE CHASE MANHATTAN BANK
By /s/ Tracey A. Navin
--------------------------------------
Name: Tracey A. Navin
Title: Vice President
S-5
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ Madeline W. Lee
--------------------------------------
Name: Madeline W. Lee
Title: Vice President
S-6
<PAGE>
BANK OF AMERICA ILLINOIS
By /s/ Jonathan M. Kitei
--------------------------------------
Name: Jonathan M. Kitei
Title: Attorney In Fact
S-7
<PAGE>
THE BANK OF NEW YORK
By /s/ Jerome Kapelus
--------------------------------------
Name: Jerome Kapelus
Title: Vice President
S-8
<PAGE>
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By /s/ Hachiro Hossoda
--------------------------------------
Name: Hachiro Hossoda
Title: Senior Vice President
S-9
<PAGE>
CANADIAN IMPERIAL BANK OF COMMERCE
By /s/ Matthew Jones
--------------------------------------
Name: Matthew Jones
Title: Director, CIBC Wood Gundy
Securities Corp., as agent
S-10
<PAGE>
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By /s/ Jim F. Redman
--------------------------------------
Name: Jim F. Redman
Title: Senior Vice President
S-11
<PAGE>
UNITED STATES NATIONAL BANK OF OREGON
By /s/ David Wynde
--------------------------------------
Name: David Wynde
Title: Senior Vice President
S-12
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By /s/ Christine P. Bell
--------------------------------------
Name: Christine P. Bell
Title: Vice President
S-13
<PAGE>
THE DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH
By /s/ Ryoichi Yamauchi
--------------------------------------
Name: Ryoichi Yamauchi
Title: Senior Vice President
S-14
<PAGE>
THE FUJI BANK, LIMITED
By /s/ Peter L. Chinnici
--------------------------------------
Name: Peter L. Chinnici
Title: Joint General Manager
S-15
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By /s/ Jeffrey Cole
--------------------------------------
Name: Jeffrey Cole
Title: Senior Vice President
S-16
<PAGE>
THE LONG-TERM CREDIT BANK OF
JAPAN LTD., CHICAGO BRANCH
By /s/ Armund J. Schoen, Jr.
--------------------------------------
Name: Armund J. Schoen, Jr.
Title: Vice President and
Deputy General Manager
S-17
<PAGE>
THE SAKURA BANK, LIMITED
By /s/ Shunji Sakurai
--------------------------------------
Name: Shunji Sakurai
Title: Joint General Manager
S-18
<PAGE>
THE SUMITOMO TRUST AND BANKING
CO., LTD., NEW YORK BRANCH
By /s/ Suraj Bhatia
-------------------------------------
Name: Suraj Bhatia
Title: Senior Vice President
Manager, Corporate Finance
Dept.
S-19
<PAGE>
BANK HAPOALIM, B.M.
By /s/ Paul Watson
-------------------------------------
Name: Paul Watson
Title: Vice President
By /s/ John Rie
-------------------------------------
Name: John Rie
Title: Vice President/SLO
S-20
<PAGE>
THE SUMITOMO BANK, LTD.
By /s/ Hiroyuki Iwami
--------------------------------------
Name: Hiroyuki Iwami
Title: Joint General Manager
S-21
<PAGE>
EXHIBIT E
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNIFICANT SUBSIDIARY GUARANTY
from
the
UNDERSIGNED SUBSIDIARIES
of
AMC ENTERTAINMENT INC.
to
THE BANK OF NOVA SCOTIA,
as Administrative Agent
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SIGNIFICANT SUBSIDIARY GUARANTY
THIS GUARANTY, dated as of April 10, 1997 (this "GUARANTY"), is executed by
the undersigned in favor of THE BANK OF NOVA SCOTIA, as Administrative Agent for
the Lenders party to the Credit Agreement referred to below (the "ADMINISTRATIVE
AGENT").
W I T N E S S E T H:
WHEREAS, AMC ENTERTAINMENT INC., a Delaware corporation (the "DEBTOR"), has
entered into an Amended and Restated Credit Agreement, dated as of April 10,
1997 (together with all amendments and other modifications, if any, thereafter
made thereto, the "CREDIT AGREEMENT"), with various financial institutions
(herein, together with their respective successors and assigns, collectively
called the "LENDERS" and individually called a "LENDER"), and THE BANK OF NOVA
SCOTIA, as Administrative Agent for the Lenders (the "ADMINISTRATIVE AGENT"),
pursuant to which the Lenders have agreed to make loans to the Debtor;
WHEREAS, each of the undersigned will benefit from the making of such loans
and is willing to guaranty the Liabilities (as defined below), as hereinafter
set forth;
NOW THEREFORE, FOR VALUE RECEIVED, and in consideration of any loan or
other financial accommodation heretofore or hereafter at any time made or
granted to the Debtor under or in connection with the Credit Agreement, each of
the undersigned hereby jointly and severally unconditionally guarantees the full
and prompt payment when due, whether by acceleration or otherwise, and at all
times thereafter, of all obligations (monetary or otherwise) of the Debtor to
the Lenders and the Administrative Agent under or in connection with the Credit
Agreement, the Notes (as defined in the Credit Agreement) and any other Loan
Document (as defined in the Credit Agreement) and all Interest Rate Protection
Obligations (as defined in the Credit Agreement) and Currency Hedging
Obligations (as defined in the Credit Agreement), in each case howsoever
created, arising or evidenced, whether direct or indirect, primary or secondary,
absolute or contingent, joint or several, or now or hereafter existing or due or
to become due
<PAGE>
(including in all cases all such amounts which would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation of Sections 502(b)
and 506(b) of the United States Bankruptcy Code, 11 U.S.C. Section 502(b) and
Section 506(b)) (all such obligations being hereinafter collectively called the
"LIABILITIES"), under and in connection with the Credit Agreement and each of
the undersigned further agrees to pay all reasonable expenses (including
attorneys' fees and legal expenses) paid or incurred by the Administrative Agent
in endeavoring to collect the Liabilities, or any part thereof, and in enforcing
this Guaranty.
Each of the undersigned agrees that, in the event of the dissolution or
insolvency of the Debtor or such undersigned, or the inability or failure of the
Debtor or such undersigned to pay debts as they become due, or an assignment by
the Debtor or such undersigned for the benefit of creditors, or the commencement
of any case or proceeding in respect of the Debtor or such undersigned under any
bankruptcy, insolvency or similar laws, and if such event shall occur at a time
when any of the Liabilities may not then be due and payable, such undersigned
will pay to the Administrative Agent for the benefit of the Lenders forthwith
the full amount which would be payable hereunder by such undersigned if all
Liabilities were then due and payable.
To secure all obligations of each of the undersigned hereunder, the
Administrative Agent and each Lender shall have a right to, and may, without
demand or notice of any kind, at any time and from time to time when any amount
shall be due and payable by such undersigned hereunder, set off, appropriate and
apply toward the payment of such amount, in such order of application as the
Administrative Agent or such Lender may elect, any and all balances, credits,
deposits (general or special, time or demand, provisional or final), accounts or
moneys of or in the name of such undersigned now or hereafter with the
Administrative Agent or such Lender or any agent or bailee for the
Administrative Agent or such Lender.
This Guaranty shall in all respects be a continuing, absolute and
unconditional Guaranty, and shall remain in full force and effect
(notwithstanding, without limitation, the
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<PAGE>
dissolution of any of the undersigned or that at any time or from time to time
no Liabilities may be outstanding), until all Commitments (as defined in the
Credit Agreement) have terminated and all Liabilities (including any extensions
or renewals of any thereof) and all interest thereon and all expenses (including
attorneys' fees and legal expenses) paid or incurred by the Administrative Agent
or any Lender in endeavoring to collect the Liabilities and in enforcing this
Guaranty shall have been finally paid in full.
Each of the undersigned further agrees that, if at any time all or any part
of any payment theretofore applied by the Administrative Agent or any Lender to
any of the Liabilities is or must be rescinded or returned by the Administrative
Agent or such Lender for any reason whatsoever (including, without limitation,
the insolvency, bankruptcy or reorganization of the Debtor or any of the
undersigned), such Liabilities shall, for the purposes of this Guaranty, to the
extent that such payment is or must be rescinded or returned, be deemed to have
continued in existence, notwithstanding such application by the Administrative
Agent or such Lender, and this Guaranty shall continue to be effective or be
reinstated, as the case may be, as to such Liabilities, all as though such
application by the Administrative Agent or such Lender had not been made.
Each of the undersigned agrees that the Administrative Agent or any Lender
may, from time to time, at its sole discretion and without notice to the
undersigned (or any of them), take any or all of the following actions without
impairing the obligation of such undersigned under this Guaranty: (a) retain or
obtain a lien upon or a security interest in any property to secure any of the
Liabilities or any obligation hereunder; (b) retain or obtain the primary or
secondary obligation of any obligor or obligors, in addition to the undersigned,
with respect to any of the Liabilities; (c) extend or renew for one or more
periods (whether or not longer than the original period), alter or exchange any
of the Liabilities, or release or compromise any obligation of any of the
undersigned hereunder or any obligation of any nature of any other obligor with
respect to any of the Liabilities; (d) release or fail to perfect its lien upon
or security interest in, or impair, surrender, release or permit any
substitution or exchange for, all or any part of any property securing any of
the
-3-
<PAGE>
Liabilities or any obligation hereunder, or extend or renew for one or more
periods (whether or not longer than the original period) or release, compromise,
alter or exchange any obligations of any nature of any obligor with respect to
any such property; and (e) resort to the undersigned (or any of them) for
payment of any of the Liabilities, whether or not the Administrative Agent or
such Lender (i) shall have resorted to any property securing any of the
Liabilities or any obligation hereunder or (ii) shall have proceeded against any
other of the undersigned or any other obligor primarily or secondarily obligated
with respect to any of the Liabilities (all of the actions referred to in
preceding CLAUSES (i) and (ii) being hereby expressly waived by the
undersigned).
Any amounts received by the Administrative Agent or any Lender from
whatsoever source on account of the Liabilities may be applied by it toward the
payment of the Liabilities.
Until such time as the Lenders shall have received payment of the full
amount of all Liabilities and of all obligations of the undersigned hereunder
and all Commitments have terminated, no payment made by or for the account of
the undersigned (or any of them) pursuant to this Guaranty shall entitle any of
the undersigned by subrogation or otherwise to any payment by the Debtor or from
or out of any property of the Debtor and none of the undersigned shall exercise
any right or remedy against the Debtor or any property of the Debtor by reason
of any performance by such undersigned of this Guaranty.
Each of the undersigned hereby expressly waives: (a) notice of the
acceptance by the Administrative Agent or any Lender of this Guaranty;
(b) notice of the existence or creation or non-payment of all or any of the
Liabilities; (c) presentment, demand, notice of dishonor, protest and all other
notices whatsoever; and (d) all diligence in collection or protection of or
realization upon the Liabilities or any thereof, any obligation hereunder, or
any security for or guaranty of any of the foregoing.
The creation or existence, with or without notice to the undersigned, from
time to time of Liabilities in excess of the amount to which the right of
recovery under this Guaranty is
-4-
<PAGE>
limited shall not in any way affect or impair the rights of the Administrative
Agent or the Lenders and the obligation of the undersigned under this Guaranty.
The Lenders may, from time to time, without notice to the undersigned (or
any of them), assign or transfer any or all of the Liabilities or any interest
therein; and, notwithstanding any such assignment or transfer or any subsequent
assignment or transfer thereof, such Liabilities shall be and remain Liabilities
for the purposes of this Guaranty, and each and every immediate and successive
assignee or transferee of any of the Liabilities or of any interest therein
shall, to the extent of the interest of such assignee or transferee in the
Liabilities, be entitled to the benefits of this Guaranty to the same extent as
if such assignee or transferee were a Lender.
No delay on the part of the Administrative Agent or any Lender in the
exercise of any right or remedy shall operate as a waiver thereof, and no single
or partial exercise by the Administrative Agent or any Lender of any right or
remedy shall preclude other or further exercise thereof or the exercise of any
other right or remedy; nor shall any modification or waiver of any of the
provisions of this Guaranty be binding upon the Administrative Agent or any
Lender except as expressly set forth in a writing duly signed and delivered on
behalf of the Administrative Agent. No action of the Administrative Agent or
any Lender permitted hereunder shall in any way affect or impair the rights of
the Administrative Agent or any Lender and the obligations of the undersigned
under this Guaranty. For the purposes of this Guaranty, Liabilities shall
include all obligations of the Debtor to the Administrative Agent or any Lender
under and in connection with the Credit Agreement, notwithstanding any right or
power of the Debtor or anyone else to assert any claim or defense as to the
invalidity or unenforceability of any such obligation, and no such claim or
defense shall affect or impair the obligations of the undersigned hereunder.
The obligations of the undersigned under this Guaranty shall be absolute and
unconditional irrespective of any circumstance whatsoever which might constitute
a legal or equitable discharge or defense of the undersigned (or any of them).
Each of the undersigned hereby acknowledges that there are no conditions to the
effectiveness of this Guaranty.
-5-
<PAGE>
Pursuant to the Credit Agreement, (a) this Guaranty has been delivered to
the Administrative Agent and (b) the Administrative Agent may enforce this
Guaranty on behalf of itself and each of the Lenders. All payments by each of
the undersigned pursuant to this Guaranty shall be made to the Administrative
Agent for the ratable benefit of the Lenders.
Each of the undersigned hereby warrants and represents to the
Administrative Agent and the Lenders that such undersigned now has and will
continue to have independent means of obtaining information concerning the
affairs, financial condition and business of the Debtor. Neither the
Administrative Agent nor any Lender shall have any duty or responsibility to
provide the undersigned (or any of them) with any credit or other information
concerning the affairs, financial condition or business of the Debtor which may
come into the possession of the Administrative Agent or any Lender.
The undersigned hereby further warrant and represent to the Administrative
Agent and the Lenders that (a) the execution and delivery of this Guaranty, and
the performance by each of the undersigned of its obligations hereunder, are
within the corporate right, power, authority and capacity of such undersigned
and have been duly authorized by all necessary corporate action on the part of
such undersigned, (b) this Guaranty has been duly executed and delivered on
behalf of each of the undersigned and is the legal, valid and binding obligation
of such undersigned, enforceable in accordance with its terms, subject, as to
enforcement, only to bankruptcy, insolvency, reorganization, moratorium or other
similar laws at the time in effect affecting the enforcement of the rights of
creditors generally, and by general equitable principles which may limit the
right to obtain the remedy of specific performance of executory covenants, and
(c) the making and performance of this Guaranty do not and will not contravene
or conflict with the charter or by-laws of such undersigned or violate or
constitute a default under any law, any presently existing requirement or
restriction imposed by judicial, arbitral or any governmental instrumentality or
any agreement, instrument or indenture by which such undersigned is bound.
-6-
<PAGE>
Anything else in this Guaranty notwithstanding, each of the undersigned
shall be liable under this Guaranty only for the maximum amount of such
liability that can be incurred by such undersigned without rendering this
Guaranty, as it relates to such undersigned, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer, and not for any
greater amount; PROVIDED, HOWEVER, that the foregoing limitation shall not be
construed, as between the Lenders and any other creditor of the Debtor or any of
the undersigned whose claim is subordinated to the claim of the Lenders with
respect to the Liabilities, to adversely affect the extent of such
subordination.
This Guaranty shall be binding upon the undersigned, and upon the
successors and assigns of the undersigned; and to the extent that the Debtor or
any of the undersigned is either a partnership or a corporation, all references
herein to the Debtor and to such of the undersigned, respectively, shall be
deemed to include any successor or successors, whether immediate or remote, to
such partnership or corporation. The term "undersigned" as used herein shall
mean all parties executing this Guaranty and each of them, and all such parties
shall, subject to the limitation on right of recovery in the immediately
preceding paragraph, be jointly and severally obligated hereunder.
This Guaranty may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, and such counterparts shall
together constitute one and the same Guaranty. At any time after the date of
this Guaranty, one or more additional persons or entities may become parties
hereto by executing and delivering to the Administrative Agent a counterpart of
this Guaranty. Immediately upon such execution and delivery (and without any
further action), each such additional person or entity will become a party to,
and will be bound by all of the terms of, this Guaranty.
THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK. Whenever possible each provision of
this Guaranty shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Guaranty shall be prohibited
by or invalid under such law, such provision shall be ineffective to
-7-
<PAGE>
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Guaranty.
THE UNDERSIGNED HEREBY EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS GUARANTY OR
UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, AND AGREE THAT ANY SUCH ACTION
OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
Each of the undersigned agrees that any judicial proceedings brought
against such undersigned with respect to this Guaranty may be brought in any
state or federal court of competent jurisdiction in the State of New York and,
by the execution and delivery of this Guaranty, each of the undersigned accepts
the nonexclusive jurisdiction of the aforesaid courts. Service of process may
be made by any means authorized by federal law or the law of New York, as the
case may be. A copy of any such process so served shall be mailed by registered
mail to such undersigned at 106 West 14th Street, Kansas City, Missouri
64105-1977, Telecopy No.: (816) 421-5744, Attention Peter C. Brown, the address,
if any, opposite its signature on any counterpart signature page hereto or at
such other address as may be designated by such undersigned in a notice to the
Administrative Agent. Nothing herein shall limit the right of the
Administrative Agent to bring proceedings against any of the undersigned in the
courts of any other jurisdiction.
-8-
<PAGE>
SIGNED AND DELIVERED as of this 10th day of April, 1997.
AMERICAN MULTI-CINEMA, INC.
By: /s/ Peter C. Brown
-------------------------------------
Title: Executive Vice President and
--------------------------------
Chief Financial Officer
The undersigned is executing a
counterpart hereof for purposes of
becoming a party hereto:
----------------------------------------
By:
-------------------------------------
Address: Title:
---------------------------------
- --------------------------------
- --------------------------------
-9-
<PAGE>
EXHIBIT H
NOTE
$___________ _________________________, 199_
FOR VALUE RECEIVED, the undersigned, AMC ENTERTAINMENT INC., a Delaware
corporation (the "BORROWER"), promises to pay to the order of
_________________ (the "LENDER") on the Commitment Termination Date (as
defined in the Credit Agreement referred to below) the principal sum of
_________________________ DOLLARS ($___________) or, if less, the outstanding
principal amount of all Loans made by the Lender to the Borrower pursuant to
that certain Amended and Restated Credit Agreement, dated as of April 10,
1997 (together with all amendments, if any, thereafter from time to time made
thereto, the "CREDIT AGREEMENT"), among the Borrower, and the Lender as one
of the Lenders thereto, various financial institutions, and THE BANK OF NOVA
SCOTIA, as Administrative Agent for the Lenders (in such capacity, the
"ADMINISTRATIVE AGENT"), as such Loans are entered by the holder hereof in
the appropriate column of the grid (the "GRID") attached to this Note. All
payments on account of the principal hereof shall also be endorsed by the
holder hereof on the Grid. Failure to record any such amounts on the Grid
shall not limit or otherwise affect the obligations of the Borrower to make
payments of principal or interest on this Note when due.
The unpaid principal amount of this Note from time to time outstanding
shall bear interest as provided in SECTION 3.4 and SECTION 3.5 of the Credit
Agreement.
All payments of principal of and interest on this Note shall be payable in
lawful currency of the United States of America at the offices of the
Administrative Agent at 600 Peachtree Street, Suite 2700, Atlanta, Georgia 30308
in immediately available funds.
This Note is one of the Notes referred to in, and evidences indebtedness
incurred under, the Credit Agreement, to which reference is made for a statement
of the terms and conditions on which the Borrower is permitted and required to
make prepayments of
<PAGE>
principal of this Note and on which the indebtedness
evidenced hereby may be declared to be immediately due and payable.
AMC ENTERTAINMENT INC.
By:
--------------------------------------------
Title:
--------------------------------------
2
<PAGE>
GRID
Loans made by the Lender to AMC Entertainment Inc. described in that certain
Credit Agreement, dated as of April 10, 1997, and payments of principal of such
loans.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Portion of Principal
Balance Maintained
---------------------
Applicable
Amount of Outstanding Fixed Rate
Amount of Principal Principal Base Fixed Interest Notation
Date Loan Payment Balance Rate Loan Rate Loan Period Made By
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT I
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "PLEDGE AGREEMENT"), dated as of _________ __,
_____, is made by AMC ENTERTAINMENT INC., a Delaware corporation (the
"BORROWER"), in favor of THE BANK OF NOVA SCOTIA, as administrative agent
(together with any successor thereto in such capacity, the "ADMINISTRATIVE
AGENT") for each of the Lender Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to an Amended and Restated Credit Agreement, dated as of
April 10, 1997 (together with all amendments and other modifications, if any,
from time to time thereafter made thereto, the "CREDIT AGREEMENT"), among the
Borrower, the various financial institutions (individually a "LENDER" and
collectively the "LENDERS") as are, or may from time to time become, parties
thereto and the Administrative Agent, the Lenders have extended Commitments to
make Loans to the Borrower;
WHEREAS, the Borrower is required to execute and deliver this Pledge
Agreement;
WHEREAS, the Borrower has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lenders to make Loans to the
Borrower pursuant to the Credit Agreement, the Borrower agrees, for the benefit
of each Lender Party, as follows:
ARTICLE
DEFINITIONS
SECTION CERTAIN TERMS. The following terms (whether or not underscored)
when used in this Pledge Agreement, including
<PAGE>
its preamble and recitals, shall have the following meanings (such definitions
to be equally applicable to the singular and plural forms thereof):
"ADMINISTRATIVE AGENT" is defined in the PREAMBLE.
"BORROWER" is defined in the PREAMBLE.
"COLLATERAL" is defined in SECTION 2.1.
"CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"DISTRIBUTIONS" means all stock dividends, liquidating dividends, shares of
stock resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock constituting Collateral, but shall not include Dividends.
"DIVIDENDS" means cash dividends and cash distributions with respect to any
Pledged Shares or other Pledged Property made in the ordinary course of business
and not a liquidating dividend.
"LENDER" is defined in the FIRST RECITAL.
"LENDER PARTY" means, as the context may require, any Lender or the
Administrative Agent and each of its respective successors, transferees and
assigns.
"LENDERS" is defined in the FIRST RECITAL.
"PLEDGE AGREEMENT" is defined in the PREAMBLE.
"PLEDGED NOTES" is defined in SECTION 2.1(a).
"PLEDGED PROPERTY" means all Pledged Shares and all Pledged Notes now or
from time to time hereafter delivered by the Borrower to the Administrative
Agent for the purpose of pledge under this Pledge Agreement or any other Loan
Document, and all proceeds of any of the foregoing.
2
<PAGE>
"PLEDGED SHARES" is defined in SECTION 2.1(b).
"U.C.C." means the Uniform Commercial Code as in effect in the State of New
York.
SECTION CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined herein or
the context otherwise requires, terms used in this Pledge Agreement, including
its preamble and recitals, have the meanings provided in the Credit Agreement.
SECTION U.C.C. DEFINITIONS. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the U.C.C.
are used in this Pledge Agreement, including its preamble and recitals, with
such meanings.
ARTICLE
PLEDGE
SECTION GRANT OF SECURITY INTEREST. The Borrower hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Administrative Agent, for its benefit and the ratable benefit of each of the
Lender Parties, and hereby grants to the Administrative Agent, for its benefit
and the ratable benefit of the Lender Parties, a continuing security interest
in, all of the following property, now or hereafter existing or acquired (the
"COLLATERAL"):
(a) all promissory notes evidencing Indebtedness of each Subsidiary
owing to the Borrower (the "PLEDGED NOTES");
(b) all issued and outstanding shares of or other equity interests in
Capital Stock held beneficially or of record by the Borrower of each direct
Subsidiary of the Borrower (the "PLEDGED SHARES");
(c) all other Pledged Property, whether now or hereafter delivered to
the Administrative Agent in connection with this Pledge Agreement;
3
<PAGE>
(d) all Dividends, Distributions, interest and other payments and
rights with respect to any Pledged Property; and
(e) all proceeds of any of the foregoing.
SECTION 2.2 SECURITY FOR LIABILITIES. This Pledge Agreement secures the
payment in full of all Liabilities now or hereafter existing under the Credit
Agreement, the Notes and each other Loan Document to which the Borrower is or
may become a party, whether for principal, interest, costs, fees, expenses or
otherwise.
SECTION 2.3 DELIVERY OF PLEDGED PROPERTY. All certificates or instruments
representing or evidencing any Collateral, including all Pledged Shares and all
Pledged Notes, shall be delivered to and held by or on behalf of (and, in the
case of the Pledged Notes, endorsed to the order of) the Administrative Agent
pursuant hereto, shall be in suitable form for transfer by delivery, and shall
be accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION 2.4 DIVIDENDS ON PLEDGED SHARES AND PAYMENTS ON PLEDGED NOTES.
In the event that any Dividend is to be paid on any Pledged Share or any payment
of principal or interest is to be made on any Pledged Note at a time when no
Default or Event of Default has occurred and is continuing, such Dividend or
payment may be paid directly to the Borrower, and upon such payment to the
Borrower the security interest therein granted under this Pledge Agreement shall
terminate. If any such Default or Event of Default has occurred and is
continuing, then any such Dividend or payment shall be paid directly to the
Administrative Agent.
SECTION 2.5 CONTINUING SECURITY INTEREST. This Pledge Agreement shall
create a continuing security interest in the Collateral and shall
(a) remain in full force and effect until payment in full of all
Liabilities and the termination of all Commitments,
4
<PAGE>
(b) be binding upon the Borrower and its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the
Administrative Agent hereunder, to the benefit of the Administrative Agent
and each other Lender Party.
Without limiting the foregoing CLAUSE (c), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Pledge Agreement) or otherwise, subject, however,
to any contrary provisions in such assignment or transfer, and to the provisions
of Section 11.11(b) and Article X of the Credit Agreement.
SECTION 2.6 TERMINATION OF SECURITY INTEREST; RELEASE OF COLLATERAL. Upon
the payment in full of all Liabilities and the termination of all Commitments,
the security interest granted herein shall terminate and all rights to the
Collateral shall revert to the Borrower. Further, the Administrative Agent
shall release the Collateral in accordance with Section 8.1.9 of the Credit
Agreement and may release any of the Collateral with the prior written consent
of all Lenders. Upon any such termination or release of Collateral, the
Administrative Agent will, at the Borrower's sole expense, deliver to the
Borrower, without any representation, warranty or recourse of any kind
whatsoever, all certificates and instruments representing or evidencing all
Pledged Shares and all Pledged Notes, together with all other Collateral held by
the Administrative Agent hereunder, and execute and deliver to the Borrower such
documents as the Borrower shall reasonably request to evidence such termination
or release.
ARTICLE
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 WARRANTIES, ETC. The Borrower represents and warrants to each
Lender Party, as at the date of each pledge and
5
<PAGE>
delivery hereunder (including each pledge and delivery of Pledged Shares and
each pledge and delivery of a Pledged Note) by the Borrower to the
Administrative Agent of any Collateral, as set forth in this Article.
SECTION 3.1.1. OWNERSHIP, NO LIENS, ETC. The Borrower is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign) the Collateral, free and clear of all liens,
security interests, options or other charges or encumbrances, except any lien or
security interest granted pursuant hereto in favor of the Administrative Agent.
SECTION 3.1.2. VALID SECURITY INTEREST. The delivery of the Collateral to
the Administrative Agent and the filing of appropriate U.C.C. financing
statements is effective to create a valid, perfected, first priority security
interest in the Collateral and all proceeds thereof, securing the Liabilities.
No further filing or other action will be necessary to perfect or protect such
security interest.
SECTION 3.1.3. AS TO PLEDGED SHARES. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly authorized and
validly issued, fully paid, and non-assessable, and constitute all of the issued
and outstanding shares of capital stock or other equity interest held
beneficially or of record by the Borrower of each of the Borrower's direct
Subsidiaries.
SECTION 3.1.4. AS TO PLEDGED NOTES. In the case of each Pledged Note, all
of such Pledged Notes have been duly authorized, executed, endorsed, issued and
delivered, and are the legal, valid and binding obligation of the issuers
thereof, and are not in default.
SECTION 3.1.5. AUTHORIZATION, APPROVAL, ETC. No authorization, approval,
or other action by, and no notice to or filing with, any governmental authority,
regulatory body or any other Person is required either
(a) for the pledge by the Borrower of any Collateral pursuant to this
Pledge Agreement or for the execution,
6
<PAGE>
delivery, and performance of this Pledge Agreement by the Borrower, or
(b) for the exercise by the Administrative Agent of the voting or
other rights provided for in this Pledge Agreement, or, except with respect
to any Pledged Shares, as may be required in connection with a disposition
of such Pledged Shares by laws affecting the offering and sale of
securities generally, the remedies in respect of the Collateral pursuant to
this Pledge Agreement.
SECTION 3.1.6. COMPLIANCE WITH LAWS. The Borrower is in compliance with
the requirements of all applicable laws, rules, regulations and orders of every
governmental authority, the non-compliance with which might have a Materially
Adverse Effect.
SECTION 3.1.7. ADDRESS. The address of the location of the records of the
Borrower concerning the Collateral and the address of the Borrower's chief
executive office is as set forth below its signature hereto.
ARTICLE IV
COVENANTS
SECTION 4.1 PROTECT COLLATERAL; FURTHER ASSURANCES, ETC. The Borrower
will not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Administrative Agent hereunder or as
permitted under the Credit Agreement). The Borrower will warrant and defend the
right and title herein granted unto the Administrative Agent in and to the
Collateral (and all right, title, and interest represented by the Collateral)
against the claims and demands of all Persons whomsoever. The Borrower agrees
that at any time, and from time to time, at the expense of the Borrower, the
Borrower will promptly execute and deliver all further Instruments, and take all
further action, that may be necessary or desirable, or that the Administrative
Agent may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the
Administrative Agent to exercise and enforce its rights and remedies hereunder
with respect to any Collateral.
7
<PAGE>
SECTION 4.2 STOCK POWERS, ETC. The Borrower agrees that all Pledged Shares
(and all other shares of capital stock constituting Collateral) delivered by the
Borrower pursuant to this Pledge Agreement will be accompanied by duly executed
undated blank stock powers, or other equivalent instruments of transfer
acceptable to the Administrative Agent. The Borrower will, from time to time
upon the request of the Administrative Agent, promptly deliver to the
Administrative Agent such stock powers, instruments, and similar documents,
satisfactory in form and substance to the Administrative Agent, with respect to
the Collateral as the Administrative Agent may reasonably request and will, from
time to time upon the request of the Administrative Agent after the occurrence
of any Event of Default, promptly transfer any Pledged Shares or other shares of
common stock constituting Collateral into the name of any nominee designated by
the Administrative Agent.
SECTION 4.3 CONTINUOUS PLEDGE. Subject to SECTIONS 2.4 and 2.6,
the Borrower will, at all times, keep pledged to the Administrative Agent
pursuant hereto all Pledged Shares and all other shares of capital stock
constituting Collateral, all Dividends and Distributions with respect thereto,
all Pledged Notes, all interest, principal and other proceeds received by the
Administrative Agent with respect to the Pledged Notes, and all other Collateral
and other securities, instruments, proceeds, and rights from time to time
received by or distributable to the Borrower in respect of any Collateral.
SECTION 4.4 VOTING RIGHTS; DIVIDENDS, ETC. The Borrower agrees:
(a) after any Default or Event of Default shall have occurred and be
continuing, promptly upon receipt thereof by the Borrower and without any
request therefor by the Administrative Agent, to deliver (properly endorsed
where required hereby or requested by the Administrative Agent) to the
Administrative Agent all Dividends, Distributions, all interest, all
principal, all other cash payments, and all proceeds of the Collateral, all
of which shall be held by the Administrative Agent as additional Collateral
for use in accordance with SECTION 6.3; and
8
<PAGE>
(b) after any Event of Default shall have occurred and be continuing
and the Administrative Agent has notified the Borrower of the
Administrative Agent's intention to exercise its voting power under this
SECTION 4.4(b)
(i) the Administrative Agent may exercise (to the exclusion of
the Borrower) the voting power and all other incidental rights of
ownership with respect to any Pledged Shares or other shares of
capital stock constituting Collateral and the Borrower hereby grants
the Administrative Agent an irrevocable proxy, exercisable under such
circumstances, to vote the Pledged Shares and such other Collateral;
and
(ii) promptly to deliver to the Administrative Agent such
additional proxies and other documents as may be necessary to allow
the Administrative Agent to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments and proceeds
which may at any time and from time to time be held by the Borrower but which
the Borrower is then obligated to deliver to the Administrative Agent, shall,
until delivery to the Administrative Agent, be held by the Borrower separate and
apart from its other property in trust for the Administrative Agent. The
Administrative Agent agrees that unless an Event of Default shall have occurred
and be continuing and the Administrative Agent shall have given the notice
referred to in SECTION 4.4(b), the Borrower shall have the exclusive voting
power with respect to any shares of capital stock (including any of the Pledged
Shares) constituting Collateral and the Administrative Agent shall, upon the
written request of the Borrower, promptly deliver such proxies and other
documents, if any, as shall be reasonably requested by the Borrower which are
necessary to allow the Borrower to exercise voting power with respect to any
such share of capital stock (including any of the Pledged Shares) constituting
Collateral; PROVIDED, HOWEVER, that no vote shall be cast, or consent, waiver,
or ratification given, or action taken by the Borrower that would impair any
Collateral or be inconsistent with or violate any provision of the Credit
Agreement or any other Loan Document (including this Pledge Agreement).
9
<PAGE>
SECTION 4.5 ADDITIONAL UNDERTAKINGS. The Borrower will not, without the
prior written consent of the Administrative Agent:
(a) enter into any agreement amending, supplementing or waiving any
provision of any Pledged Note (including any underlying Instrument pursuant
to which such Pledged Note is issued) or compromising or releasing or
extending the time for payment of any obligation of the maker thereof; or
(b) take or omit to take any action the taking or the omission of
which would result in any impairment or alteration of any obligation of the
maker of any Pledged Note or other instrument constituting Collateral.
SECTION 4.6 OFFICES; FURTHER ASSURANCES. The Borrower shall keep its
chief executive office and the office where it keeps its records concerning the
Collateral at the address set forth below its signature hereto, or, upon 30
days' prior written notice to the Administrative Agent, at such other location
in which all actions required by the next sentence have been taken. The
Borrower agrees that, from time to time at its expense, it will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that the Administrative Agent may
request, in order to perfect, preserve and protect any security interest granted
or purported to be granted hereby or to enable the Administrative Agent to
exercise and enforce its rights and remedies hereunder. The Borrower hereby
authorizes the Administrative Agent to file one or more financing or
continuation statements, and amendments thereto, without the signature of the
Borrower where permitted by law. A carbon, photographic or other reproduction
of this Pledge Agreement shall be sufficient as a financing statement where
permitted by law.
ARTICLE V
THE ADMINISTRATIVE AGENT
SECTION 5.1 ADMINISTRATIVE AGENT APPOINTED ATTORNEY-IN-FACT. The Borrower
hereby irrevocably appoints the
10
<PAGE>
Administrative Agent the Borrower's attorney-in-fact, with full authority in the
place and stead of the Borrower and in the name of the Borrower or otherwise, at
any time that an Event of Default has occurred and is continuing, to take any
action and to execute any instrument which the Administrative Agent may deem
necessary or advisable to accomplish the purposes of this Pledge Agreement,
including:
(a) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with CLAUSE (a) above; and
(c) to file any claims or take any action or institute any
proceedings which the Administrative Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the
rights of the Administrative Agent with respect to any of the Collateral.
The Borrower hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2 ADMINISTRATIVE AGENT MAY PERFORM. If the Borrower fails to
perform any agreement contained herein, the Administrative Agent may itself
perform, or cause performance of, such agreement, and the expenses of the
Administrative Agent incurred in connection therewith shall be payable by the
Borrower pursuant to SECTION 6.4.
SECTION 5.3 ADMINISTRATIVE AGENT HAS NO DUTY. The powers conferred on the
Administrative Agent hereunder are solely to protect its interest (on behalf of
the Lender Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or responsibility
for (a) ascertaining or taking
11
<PAGE>
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Pledged Property, whether or not the
Administrative Agent has or is deemed to have knowledge of such matters, or (b)
taking any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral.
SECTION 5.4 REASONABLE CARE. The Administrative Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; PROVIDED, HOWEVER, the Administrative Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
any of the Collateral, if it takes such action for that purpose as the Borrower
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of Default, but failure of the
Administrative Agent to comply with any such request at any time shall not in
itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1 CERTAIN REMEDIES. If any Event of Default shall have occurred
and be continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party
on default under the U.C.C. (whether or not the U.C.C. applies to the
affected Collateral) and also may, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Administrative Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Administrative Agent may deem commercially reasonable. The
Borrower agrees that, to the extent notice of sale shall be required by
law, at least ten days' prior notice to the Borrower of the time and place
of any public sale or the time after which any private sale is to be made
shall
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constitute reasonable notification. The Administrative Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. The Administrative Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(b) The Administrative Agent may
(i) transfer all or any part of the Collateral into the name
of the Administrative Agent or its nominee, with or without disclosing
that such Collateral is subject to the lien and security interest
hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Administrative Agent of any amount due or to
become due thereunder,
(iii) enforce collection of any of the Collateral by suit
or otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or
not longer than the original period) any obligations of any nature of
any party with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Borrower's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Borrower)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2 COMPLIANCE WITH RESTRICTIONS. The Borrower agrees that in any
sale of any of the Collateral whenever an Event of Default shall have occurred
and be continuing, the
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Administrative Agent is hereby authorized to comply with any limitation or
restriction in connection with such sale as it may be advised by counsel is
necessary in order to avoid any violation of applicable law (including
compliance with such procedures as may restrict the number of prospective
bidders and purchasers, require that such prospective bidders and purchasers
have certain qualifications, and restrict such prospective bidders and
purchasers to persons who will represent and agree that they are purchasing for
their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and the Borrower further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall the Administrative Agent be liable nor accountable
to the Borrower for any discount allowed by reason of the fact that such
Collateral is sold in compliance with any such limitation or restriction.
SECTION 6.3 APPLICATION OF PROCEEDS. All cash proceeds received by the
Administrative Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Administrative Agent, be held by the Administrative Agent as additional
collateral security for, or then or at any time thereafter be applied (after
payment of any amounts payable to the Administrative Agent pursuant to Section
11.3 of the Credit Agreement and SECTION 6.4) in whole or in part by the
Administrative Agent against, all or any part of the Liabilities in such order
as the Administrative Agent shall elect.
Any surplus of such cash or cash proceeds held by the Administrative Agent
and remaining after payment in full of all the Liabilities, and the termination
of all Commitments, shall be paid over to the Borrower or to whomsoever may be
lawfully entitled to receive such surplus.
SECTION 6.4 INDEMNITY AND EXPENSES. The Borrower hereby indemnifies and
holds harmless the Administrative Agent from and against any and all claims,
losses, and liabilities arising out of or resulting from this Pledge Agreement
(including enforcement
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of this Pledge Agreement), except claims, losses or liabilities resulting from
the Administrative Agent's gross negligence or wilful misconduct. Upon demand,
the Borrower will pay to the Administrative Agent the amount of any and all
reasonable expenses, including the reasonable fees and disbursements of its
counsel and of any experts and agents, which the Administrative Agent may incur
in connection with:
(a) the administration of this Pledge Agreement, the Credit Agreement
and each other Loan Document;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the
Administrative Agent hereunder; or
(d) the failure by the Borrower to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1 LOAN DOCUMENT. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2 AMENDMENTS, ETC. No amendment to or waiver of any provision
of this Pledge Agreement nor consent to any departure by the Borrower herefrom
shall in any event be effective unless the same shall be in writing and signed
by the Administrative Agent, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it is
given.
SECTION 7.3 PROTECTION OF COLLATERAL. The Administrative Agent may from
time to time, at its option, perform any act which
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the Borrower agrees hereunder to perform and which the Borrower shall fail to
perform after being requested in writing so to perform (it being understood that
no such request need be given after the occurrence and during the continuance of
an Event of Default) and the Administrative Agent may from time to time take any
other action which the Administrative Agent reasonably deems necessary for the
maintenance, preservation or protection of any of the Collateral or of its
security interest therein.
SECTION 7.4 SECTION CAPTIONS. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.5 SEVERABILITY. Whenever possible each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Pledge Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Pledge Agreement.
SECTION 7.6 GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS PLEDGE AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK. THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE
ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER
HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT
THERETO.
IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
AMC ENTERTAINMENT INC.
By __________________________________
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Title:
THE BANK OF NOVA SCOTIA, as
Administrative Agent
By __________________________________
Title:
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ATTACHMENT 1
to
Pledge Agreement
Item A. PLEDGED NOTES
Issuer Description
- ------ -----------
Item B. PLEDGED SHARES
Issuer Common Stock
- ------ ------------------------------------------
Authorized Outstanding % of Shares
Shares Shares Pledged
---------- ----------- -----------
<PAGE>
EXHIBIT J
SUBSIDIARY PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "PLEDGE AGREEMENT"), dated as of ________ __,
____, is made by [NAME OF SIGNIFICANT SUBSIDIARY], a ______________ (the
"PLEDGOR"), in favor of THE BANK OF NOVA SCOTIA, as administrative agent
(together with any successor thereto in such capacity, the "ADMINISTRATIVE
AGENT") for each of the Lender Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to an Amended and Restated Credit Agreement, dated as of
April 10, 1997 (together with all amendments and other modifications, if any,
from time to time thereafter made thereto, the "CREDIT AGREEMENT"), among AMC
ENTERTAINMENT INC., a Delaware corporation (the "BORROWER"), the various
financial institutions (individually a "LENDER" and collectively the "LENDERS")
as are, or may from time to time become, parties thereto and the Administrative
Agent, the Lenders have extended Commitments to make Loans to the Borrower;
WHEREAS, the Pledgor has guaranteed all obligations of the Borrower under
or in connection with the Credit Agreement pursuant to a Significant Subsidiary
Guaranty dated as of April __, 1997 (together with all amendments and other
modifications, if any, from time to time thereafter made thereto, the
"GUARANTY");
WHEREAS, the Pledgor is required to execute and deliver this Pledge
Agreement;
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
WHEREAS, it is in the best interests of the Pledgor to execute this Pledge
Agreement inasmuch as the Pledgor will derive substantial direct and indirect
benefits from the Loans made from time to time to the Borrower by the Lenders
pursuant to the Credit Agreement;
<PAGE>
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lenders to make Loans to the
Borrower pursuant to the Credit Agreement, the Pledgor agrees, for the benefit
of each Lender Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 CERTAIN TERMS. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"ADMINISTRATIVE AGENT" is defined in the PREAMBLE.
"BORROWER" is defined in the FIRST RECITAL.
"COLLATERAL" is defined in SECTION 2.1.
"CREDIT AGREEMENT" is defined in the FIRST RECITAL.
"DISTRIBUTIONS" means all stock dividends, liquidating dividends, shares of
stock resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock constituting Collateral, but shall not include Dividends.
"DIVIDENDS" means cash dividends and cash distributions with respect to any
Pledged Shares or other Pledged Property made in the ordinary course of business
and not a liquidating dividend.
"LENDER" is defined in the FIRST RECITAL.
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"LENDER PARTY" means, as the context may require, any Lender or the
Administrative Agent and each of its respective successors, transferees and
assigns.
"LENDERS" is defined in the FIRST RECITAL.
"PLEDGE AGREEMENT" is defined in the PREAMBLE.
"PLEDGED NOTES" is defined in SECTION 2.1(a).
"PLEDGED PROPERTY" means all Pledged Shares and all Pledged Notes now or
from time to time hereafter delivered by the Pledgor to the Administrative Agent
for the purpose of pledge under this Pledge Agreement or any other Loan
Document, and all proceeds of any of the foregoing.
"PLEDGED SHARES" is defined in SECTION 2.1(b).
"PLEDGOR" is defined in the PREAMBLE.
"SECURED OBLIGATIONS" is defined in SECTION 2.2.
"U.C.C." means the Uniform Commercial Code as in effect in the State of New
York.
SECTION 1.2 CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined herein
or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3 U.C.C. DEFINITIONS. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the U.C.C.
are used in this Pledge Agreement, including its preamble and recitals, with
such meanings.
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ARTICLE II
PLEDGE
SECTION 2.1 GRANT OF SECURITY INTEREST. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Administrative Agent, for its benefit and the ratable benefit of each of the
Lender Parties, and hereby grants to the Administrative Agent, for its benefit
and the ratable benefit of the Lender Parties, a continuing security interest
in, all of the following property, now or hereafter existing or acquired (the
"COLLATERAL"):
(a) all promissory notes evidencing Indebtedness of the Borrower and
each Subsidiary of the Borrower to the Pledgor (the "PLEDGED NOTES");
(b) all issued and outstanding shares of or other equity interests in
Capital Stock held beneficially or of record by the Pledgor of each direct
Subsidiary of the Pledgor (the "PLEDGED SHARES");
(c) all other Pledged Property, whether now or hereafter delivered to
the Administrative Agent in connection with this Pledge Agreement;
(d) all Dividends, Distributions, interest and other payments and
rights with respect to any Pledged Property; and
(e) all proceeds of any of the foregoing.
SECTION 2.2 SECURITY FOR OBLIGATIONS. This Pledge Agreement secures the
payment in full of all obligations of the Pledgor now or hereafter existing
under the Guaranty, and all obligations of the Pledgor now or hereafter existing
under this Pledge Agreement and each other Loan Document to which it is or may
become a party (all such obligations of the Pledgor being the "SECURED
OBLIGATIONS").
SECTION 2.3 DELIVERY OF PLEDGED PROPERTY. All certificates or instruments
representing or evidencing any Collateral,
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including all Pledged Shares and all Pledged Notes, shall be delivered to and
held by or on behalf of (and, in the case of the Pledged Notes, endorsed to the
order of) the Administrative Agent pursuant hereto, shall be in suitable form
for transfer by delivery, and shall be accompanied by all necessary instruments
of transfer or assignment, duly executed in blank.
SECTION 2.4 DIVIDENDS ON PLEDGED SHARES AND PAYMENTS ON PLEDGED NOTES.
In the event that any Dividend is to be paid on any Pledged Share or any payment
of principal or interest is to be made on any Pledged Note at a time when no
Default or Event of Default has occurred and is continuing, such Dividend or
payment may be paid directly to the Pledgor, and upon payment thereof to the
Pledgor, the security interest therein granted under this Pledge Agreement shall
terminate. If any such Default or Event of Default has occurred and is
continuing, then any such Dividend or payment shall be paid directly to the
Administrative Agent.
SECTION 2.5 CONTINUING SECURITY INTEREST. This Pledge Agreement shall
create a continuing security interest in the Collateral and shall
(a) remain in full force and effect until payment in full of all
Secured Obligations and the termination of all Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the
Administrative Agent hereunder, to the benefit of the Administrative Agent
and each other Lender Party.
Without limiting the foregoing CLAUSE (c), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Pledge Agreement) or otherwise, subject, however,
to any contrary provisions in such assignment or transfer, and to the provisions
of Section 11.11(b) and Article X of the Credit Agreement.
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SECTION 2.6 TERMINATION OF SECURITY INTEREST; RELEASE OF COLLATERAL. Upon
the payment in full of all Secured Obligations and the termination of all
Commitments, the security interest granted herein shall terminate and all rights
to the Collateral shall revert to the Pledgor. Further, the Administrative
Agent shall release the Collateral in accordance with Section 8.1.9 of the
Credit Agreement and may release any of the Collateral with the prior written
consent of all Lenders. Upon any such termination or release of Collateral, the
Administrative Agent will, at the Pledgor's sole expense, deliver to the
Pledgor, without any representation, warranty or recourse of any kind
whatsoever, all certificates and instruments representing or evidencing all
Pledged Shares and all Pledged Notes, together with all other Collateral held by
the Administrative Agent hereunder, and execute and deliver to the Pledgor such
documents as the Pledgor shall reasonably request to evidence such termination
or release.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 WARRANTIES, ETC. The Pledgor represents and warrants to each
Lender Party, as at the date of each pledge and delivery hereunder (including
each pledge and delivery of Pledged Shares and each pledge and delivery of a
Pledged Note) by the Pledgor to the Administrative Agent of any Collateral, as
set forth in this Article.
SECTION 3.1.1. ORGANIZATION, POWER, AUTHORITY, ETC. The Pledgor is a
corporation validly organized and existing and in good standing under the laws
of its state of incorporation. The Pledgor has full power and authority to
enter into and perform its obligations under this Pledge Agreement.
SECTION 3.1.2. DUE AUTHORIZATION. The execution and delivery by the
Pledgor of this Pledge Agreement and the performance by the Pledgor of its
obligations hereunder have been duly authorized by all necessary corporate
action, do not require any Approval, do not and will not conflict with, result
in any violation of, or constitute any default under, any provision of any
Organic Document or material Contractual Obligation or any
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present law or governmental regulation or court decree or order applicable to
any Loan Party and will not result in or require the creation or imposition of
any Lien on any of the properties of any Loan Party pursuant to the provisions
of any Contractual Obligation, other than the security interest granted to the
Administrative Agent hereunder.
SECTION 3.1.3. VALIDITY, ETC. This Pledge Agreement is the legal, valid
and binding obligation of the Pledgor enforceable in accordance with its terms,
subject, as to enforcement, only to bankruptcy, insolvency, reorganization,
moratorium or other similar laws at the time in effect affecting the
enforceability of the rights of creditors generally, and by general equitable
principles which may limit the right to obtain the remedy of specific
performance of executory covenants.
SECTION 3.1.4. OWNERSHIP, NO LIENS, ETC. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign) the Collateral, free and clear of all liens,
security interests, options or other charges or encumbrances, except any lien or
security interest granted pursuant hereto in favor of the Administrative Agent.
SECTION 3.1.5. VALID SECURITY INTEREST. The delivery of the Collateral to
the Administrative Agent and/or the filing of appropriate U.C.C. financing
statements is effective to create a valid, perfected, first priority security
interest in the Collateral and all proceeds thereof, securing the Secured
Obligations. No further filing or other action will be necessary to perfect or
protect such security interest.
SECTION 3.1.6. AS TO PLEDGED SHARES. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly authorized and
validly issued, fully paid, and non-assessable, and constitute all of the issued
and outstanding shares of capital stock or other equity interest held
beneficially or of record by the Pledgor of each direct Subsidiary of the
Pledgor.
SECTION 3.1.7. AS TO PLEDGED NOTES. In the case of each Pledged Note, all
of such Pledged Notes have been duly
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authorized, executed, endorsed, issued and delivered, and are the legal, valid
and binding obligation of the issuers thereof, and are not in default.
SECTION 3.1.8. AUTHORIZATION, APPROVAL, ETC. No authorization, approval,
or other action by, and no notice to or filing with (other than appropriate
U.C.C. financing statements), any governmental authority, regulatory body or any
other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance of this
Pledge Agreement by the Pledgor, or
(b) for the exercise by the Administrative Agent of the voting or
other rights provided for in this Pledge Agreement, or, except with respect
to any Pledged Shares, as may be required in connection with a disposition
of such Pledged Shares by laws affecting the offering and sale of
securities generally, the remedies in respect of the Collateral pursuant to
this Pledge Agreement.
SECTION 3.1.9. COMPLIANCE WITH LAWS. The Pledgor is in compliance with
the requirements of all applicable laws, rules, regulations and orders of every
governmental authority, the non-compliance with which might have a Materially
Adverse Effect.
SECTION 3.1.10. ADDRESS. The address of the location of the records of
the Pledgor concerning the Collateral and the address of the Pledgor's chief
executive office is as set forth below its signature hereto.
ARTICLE IV
COVENANTS
SECTION 4.1 PROTECT COLLATERAL; FURTHER ASSURANCES, ETC. The Pledgor will
not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Administrative Agent hereunder or as
permitted under the Credit
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Agreement). The Pledgor will warrant and defend the right and title herein
granted unto the Administrative Agent in and to the Collateral (and all right,
title, and interest represented by the Collateral) against the claims and
demands of all Persons whomsoever. The Pledgor agrees that at any time, and
from time to time, at the expense of the Pledgor, the Pledgor will promptly
execute and deliver all further Instruments, and take all further action, that
may be necessary or desirable, or that the Administrative Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Administrative Agent to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
SECTION 4.2 STOCK POWERS, ETC. The Pledgor agrees that all Pledged Shares
(and all other shares of capital stock constituting Collateral) delivered by the
Pledgor pursuant to this Pledge Agreement will be accompanied by duly executed
undated blank stock powers, or other equivalent instruments of transfer
acceptable to the Administrative Agent. The Pledgor will, from time to time
upon the request of the Administrative Agent, promptly deliver to the
Administrative Agent such stock powers, instruments, and similar documents,
satisfactory in form and substance to the Administrative Agent, with respect to
the Collateral as the Administrative Agent may reasonably request and will, from
time to time upon the request of the Administrative Agent after the occurrence
of any Event of Default, promptly transfer any Pledged Shares or other shares of
common stock constituting Collateral into the name of any nominee designated by
the Administrative Agent.
SECTION 4.3 CONTINUOUS PLEDGE. Subject to SECTIONS 2.4 and 2.6,
the Pledgor will, at all times, keep pledged to the Administrative Agent
pursuant hereto all Pledged Shares and all other shares of capital stock
constituting Collateral, all Dividends and Distributions with respect thereto,
all Pledged Notes, all interest, principal and other proceeds received by the
Administrative Agent with respect to the Pledged Notes, and all other Collateral
and other securities, instruments, proceeds, and rights from time to time
received by or distributable to the Pledgor in respect of any Collateral.
9
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SECTION 4.4 VOTING RIGHTS; DIVIDENDS, ETC. The Pledgor agrees:
(a) after any Default or Event of Default shall have occurred and be
continuing, promptly upon receipt thereof by the Pledgor and without any
request therefor by the Administrative Agent, to deliver (properly endorsed
where required hereby or requested by the Administrative Agent) to the
Administrative Agent all Dividends, Distributions, all interest, all
principal, all other cash payments, and all proceeds of the Collateral, all
of which shall be held by the Administrative Agent as additional Collateral
for use in accordance with SECTION 6.3; and
(b) after any Event of Default shall have occurred and be continuing
and the Administrative Agent has notified the Pledgor of the Administrative
Agent's intention to exercise its voting power under this SECTION 4.4(b)
(i) the Administrative Agent may exercise (to the exclusion of
the Pledgor) the voting power and all other incidental rights of
ownership with respect to any Pledged Shares or other shares of
capital stock constituting Collateral and the Pledgor hereby grants
the Administrative Agent an irrevocable proxy, exercisable under such
circumstances, to vote the Pledged Shares and such other Collateral;
and
(ii) promptly to deliver to the Administrative Agent such
additional proxies and other documents as may be necessary to allow
the Administrative Agent to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Pledgor but which the
Pledgor is then obligated to deliver to the Administrative Agent, shall, until
delivery to the Administrative Agent, be held by the Pledgor separate and apart
from its other property in trust for the Administrative Agent. The
Administrative Agent agrees that unless an Event of Default shall have occurred
and be continuing and the Administrative Agent shall have given the notice
referred to in SECTION 4.4(b),
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the Pledgor shall have the exclusive voting power with respect to any shares of
capital stock (including any of the Pledged Shares) constituting Collateral and
the Administrative Agent shall, upon the written request of the Pledgor,
promptly deliver such proxies and other documents, if any, as shall be
reasonably requested by the Pledgor which are necessary to allow the Pledgor to
exercise voting power with respect to any such share of capital stock (including
any of the Pledged Shares) constituting Collateral; PROVIDED, HOWEVER, that no
vote shall be cast, or consent, waiver, or ratification given, or action taken
by the Pledgor that would impair any Collateral or be inconsistent with or
violate any provision of the Credit Agreement or any other Loan Document
(including this Pledge Agreement).
SECTION 4.5 ADDITIONAL UNDERTAKINGS. The Pledgor will not, without the
prior written consent of the Administrative Agent:
(a) enter into any agreement amending, supplementing or waiving any
provision of any Pledged Note (including any underlying Instrument pursuant
to which such Pledged Note is issued) or compromising or releasing or
extending the time for payment of any obligation of the maker thereof; or
(b) take or omit to take any action the taking or the omission of
which would result in any impairment or alteration of any obligation of the
maker of any Pledged Note or other instrument constituting Collateral.
SECTION 4.6 OFFICES; FURTHER ASSURANCES. The Pledgor shall keep its chief
executive office and the office where it keeps its records concerning the
Collateral at the address set forth below its signature hereto, or, upon 30
days' prior written notice to the Administrative Agent, at such other location
in which all actions required by the next sentence have been taken. The Pledgor
agrees that, from time to time at its expense, it will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Administrative Agent may request, in
order to perfect, preserve and protect any security interest granted or
purported to be granted hereby or to enable the Administrative Agent to exercise
and enforce its rights and remedies hereunder. The Pledgor hereby authorizes
the Administrative Agent to file
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one or more financing or continuation statements, and amendments thereto,
without the signature of the Pledgor where permitted by law. A carbon,
photographic or other reproduction of this Pledge Agreement shall be sufficient
as a financing statement where permitted by law.
ARTICLE V
THE ADMINISTRATIVE AGENT
SECTION 5.1 ADMINISTRATIVE AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor
hereby irrevocably appoints the Administrative Agent the Pledgor's
attorney-in-fact, with full authority in the place and stead of the Pledgor and
in the name of the Pledgor or otherwise, at any time that an Event of Default
has occurred and is continuing, to take any action and to execute any instrument
which the Administrative Agent may deem necessary or advisable to accomplish the
purposes of this Pledge Agreement, including:
(a) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with CLAUSE (a) above; and
(c) to file any claims or take any action or institute any
proceedings which the Administrative Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the
rights of the Administrative Agent with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2 ADMINISTRATIVE AGENT MAY PERFORM. If the Pledgor fails to
perform any agreement contained herein, the Administrative Agent may itself
perform, or cause performance of,
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such agreement, and the expenses of the Administrative Agent incurred in
connection therewith shall be payable by the Pledgor pursuant to SECTION 6.4.
SECTION 5.3 ADMINISTRATIVE AGENT HAS NO DUTY. The powers conferred on the
Administrative Agent hereunder are solely to protect its interest (on behalf of
the Lender Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or responsibility
for (a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether or not the Administrative Agent has or is deemed to have
knowledge of such matters, or (b) taking any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral.
SECTION 5.4 REASONABLE CARE. The Administrative Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; PROVIDED, HOWEVER, the Administrative Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
any of the Collateral, if it takes such action for that purpose as the Pledgor
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of Default, but failure of the
Administrative Agent to comply with any such request at any time shall not in
itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1 CERTAIN REMEDIES. If any Event of Default shall have occurred
and be continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the
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rights and remedies of a secured party on default under the U.C.C. (whether
or not the U.C.C. applies to the affected Collateral) and also may, without
notice except as specified below, sell the Collateral or any part thereof
in one or more parcels at public or private sale, at any of the
Administrative Agent's offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Administrative Agent may
deem commercially reasonable. The Pledgor agrees that, to the extent
notice of sale shall be required by law, at least ten days' prior notice to
the Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Administrative Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. The
Administrative Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was
so adjourned.
(b) The Administrative Agent may
(i) transfer all or any part of the Collateral into the name of
the Administrative Agent or its nominee, with or without disclosing
that such Collateral is subject to the lien and security interest
hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Administrative Agent of any amount due or to
become due thereunder,
(iii) enforce collection of any of the Collateral by suit
or otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or
not longer than the original period) any obligations of any nature of
any party with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
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(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2 COMPLIANCE WITH RESTRICTIONS. The Pledgor agrees that in any
sale of any of the Collateral whenever an Event of Default shall have occurred
and be continuing, the Administrative Agent is hereby authorized to comply with
any limitation or restriction in connection with such sale as it may be advised
by counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and the Pledgor further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall the Administrative Agent be liable nor accountable
to the Pledgor for any discount allowed by reason of the fact that such
Collateral is sold in compliance with any such limitation or restriction.
SECTION 6.3 APPLICATION OF PROCEEDS. All cash proceeds received by the
Administrative Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Administrative Agent, be held by the Administrative Agent as additional
collateral security for, or then or at any time thereafter be applied (after
payment of any amounts payable to the Administrative Agent pursuant to Section
11.3 of the Credit Agreement and SECTION 6.4) in whole or in part by the
Administrative Agent against, all or any part of the Secured Obligations in such
order as the Administrative Agent shall elect.
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Any surplus of such cash or cash proceeds held by the Administrative Agent
and remaining after payment in full of all the Secured Obligations, and the
termination of all Commitments, shall be paid over to the Pledgor or to
whomsoever may be lawfully entitled to receive such surplus.
SECTION 6.4 INDEMNITY AND EXPENSES. The Pledgor hereby indemnifies and
holds harmless the Administrative Agent from and against any and all claims,
losses, and liabilities arising out of or resulting from this Pledge Agreement
(including enforcement of this Pledge Agreement), except claims, losses or
liabilities resulting from the Administrative Agent's gross negligence or wilful
misconduct. Upon demand, the Pledgor will pay to the Administrative Agent the
amount of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the
Administrative Agent may incur in connection with:
(a) the administration of this Pledge Agreement, the Credit Agreement
and each other Loan Document;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the
Administrative Agent hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1 LOAN DOCUMENT. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
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SECTION 7.2 AMENDMENTS, ETC. No amendment to or waiver of any provision
of this Pledge Agreement nor consent to any departure by the Pledgor herefrom
shall in any event be effective unless the same shall be in writing and signed
by the Administrative Agent, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it is
given.
SECTION 7.3 PROTECTION OF COLLATERAL. The Administrative Agent may from
time to time, at its option, perform any act which the Pledgor agrees hereunder
to perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Administrative Agent may from time to time take any other action which the
Administrative Agent reasonably deems necessary for the maintenance,
preservation or protection of any of the Collateral or of its security interest
therein.
SECTION 7.4 ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be in writing or by facsimile and, if to the
Pledgor, mailed or transmitted or delivered to it at the address set forth below
its signature hereto, or, if to the Administrative Agent, mailed or delivered to
it, addressed to it at the address of the Administrative Agent specified in the
Credit Agreement or, as to either party, at such other address or facsimile
number as shall be designated by such party in a written notice to each other
party complying as to delivery with the terms of this Section. Any notice, if
mailed and properly addressed with postage prepaid or properly addressed and
sent by pre-paid courier service, shall be deemed given when received; any
notice, if transmitted by facsimile, shall be deemed given when received.
SECTION 7.5 SECTION CAPTIONS. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.6 SEVERABILITY. Whenever possible each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Pledge Agreement shall be
prohibited by or
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invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Pledge Agreement.
SECTION 7.7 GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS PLEDGE AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK. THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE
ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER
HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT
THERETO.
SECTION 7.8 FORUM SELECTION AND CONSENT TO JURISDICTION. Any judicial
proceedings brought against the Pledgor with respect to this Pledge Agreement
may be brought in any state or federal court of competent jurisdiction in the
State of New York or the State of Missouri, and by the execution and delivery of
this Pledge Agreement, the Pledgor accepts the nonexclusive jurisdiction of the
aforesaid courts. Service of process may be made by any means authorized by
federal law or the law of the State of New York, or Missouri, as the case may
be. A copy of any such process so served shall be mailed by registered mail to
the Pledgor at its address set forth below its signature hereto or at such other
address as may be designated by the Pledgor in a notice to the Administrative
Agent. Nothing herein shall limit the right of the Administrative Agent to
bring proceedings against the Pledgor in the courts of any other jurisdiction.
SECTION 7.9 WAIVER OF JURY TRIAL. THE LENDER PARTIES AND THE
PLEDGOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH, THIS PLEDGE AGREEMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
THE LENDER PARTIES OR THE PLEDGOR. THE PLEDGOR ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH
OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT
THIS
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PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER PARTIES ENTERING INTO THE
CREDIT AGREEMENT AND EACH OTHER SUCH LOAN DOCUMENT.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
[NAME OF SIGNIFICANT SUBSIDIARY]
By ____________________________________
Title:
Address: _____________________________
_____________________________
Facsimile No.:
_______________________________________
Attention: ___________________________
THE BANK OF NOVA SCOTIA, as
Administrative Agent
By ____________________________________
Title:
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ATTACHMENT 1
to
Pledge Agreement
Item A. PLEDGED NOTES
Pledged Note Issuer Description
- ------------------- -----------
Item B. PLEDGED SHARES
Pledged Share Issuer Common Stock
- -------------------- -----------------------------------------
Authorized Outstanding % of Shares
Shares Shares Pledged
---------- ----------- -----------
<PAGE>
AMERICAN MULTI-CINEMA, INC.
RETIREMENT ENHANCEMENT PLAN
EFFECTIVE MARCH 29, 1996
<PAGE>
PREAMBLE
WHEREAS, American Multi-Cinema, Inc. ("AMC") desires to retain the
services of certain executives in their executive capacities with AMC or its
affiliates and to provide appropriate total retirement compensation to those
executives; and
WHEREAS, the Company desires to adopt a nonqualified retirement plan,
effective March 29, 1996, to provide a select group of executives and their
beneficiaries with supplemental retirement benefits.
NOW, THEREFORE, effective March 29, 1996 the American Multi-Cinema, Inc.
Retirement Enhancement Plan shall be adopted as hereinafter set forth.
SECTION 1
DEFINITIONS
When used herein, the following terms shall have the meanings set forth
below unless the context clearly indicates otherwise:
1.1 "ACCRUED BENEFIT" means the Normal Retirement Benefit calculated
pursuant to Section 3.2 as of any date of determination. For purposes of
determining the Accrued Benefit, Final Average Compensation shall be
determined using the last three (3) full years of employment with the
Company prior to the date of determination, and the numerator of the
fraction described in Section 3.2(b) shall be the Participant's Years of
Service as of the date of determination.
1.2 "ACTUARIAL EQUIVALENT" means the equivalent actuarial value,
determined using the actuarial factors selected by the Administrator, based
upon the advice of the consulting actuary retained by the Administrator.
1.3 "ADMINISTRATOR" means the Compensation Committee of the Board of
Directors or such other person or persons as may be designated by the Board.
1.4 "AFFILIATE" means any trade or business entity, or a predecessor
company of such entity, if any, which is a member of a controlled group of
corporations of which the Company is also a member.
1.5 "BASIC RETIREMENT PLAN" means the Defined Benefit Retirement Income
Plan for Certain Employees of American Multi-Cinema, Inc., as amended from
time to time.
1.6 "BASIC RETIREMENT PLAN BENEFIT" means the actuarially equivalent
annual benefit to which a Participant is entitled from the Basic Retirement
Plan. The Basic Retirement Plan Benefit is based upon the accrued monthly
benefit to which a Participant is
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entitled, payable in the form of a single life annuity commencing on the
Participant's normal retirement date and ending on the first day of the month
during which the Participant's death occurs. The Basic Retirement Plan
Benefit assumes immediate commencement with applicable reductions for early
commencement based upon such reduction factors as are applied under the Basic
Retirement Plan.
1.7 "BOARD OF DIRECTORS" means the board of directors of the Company.
1.8 "COMPANY" means American Multi-Cinema, Inc. and any successor to
it.
1.9 "COMPENSATION" means the Participant's annual base salary,
including salary deferrals under employee benefit plans maintained by the
Company and described in Section 401(k) and/or Section 125 of the Internal
Revenue Code of 1986, as amended (the "Code") and including bonuses earned
and paid (or deferred) by the Company and each Affiliate for the fiscal year.
1.10 "EARLY RETIREMENT DATE" means the date on which the Participant
attains age 55 or is credited with 15 years of service, whichever is later,
but in no event earlier than the date five (5) years following such
Participant's initial date of participation hereunder.
1.11 "EFFECTIVE DATE" means March 29, 1996, the first day of the
Company's 1997 fiscal year.
1.12 "ENHANCEMENT PLAN BENEFIT" means the benefit payable in
accordance with the Plan.
1.13 "FINAL AVERAGE COMPENSATION" means the average of the
Participant's Compensation earned during the last three (3) full years of
employment with the Company prior to commencing payments under the Plan,
which average shall not be recalculated if a Participant works beyond his
Normal Retirement Date.
1.14 "NORMAL RETIREMENT DATE" means the date on which the Participant
attains age 65, but in no event earlier than the date as of which the
Participant has completed five (5) Years of Service with the Company, whether
before or after the Effective Date.
1.15 "OFFICER" means an employee of the Company who has been appointed
by the Board of Directors to a position as a corporate officer at or above
the title of Vice President.
1.16 "PARTICIPANT" means any Officer who meets the eligibility
requirements of, and is designated and approved as set forth in, Section 2.1.
1.17 "PLAN" means this American Multi-Cinema, Inc. Retirement
Enhancement Plan.
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1.18 "SURVIVING SPOUSE" means the spouse of an active or retired
Participant who is legally married to the Participant on the Participant's
date of death.
1.19 "TOTAL AND PERMANENT DISABILITY" or "DISABILITY" means the
apparently total and permanent disability of a Participant to perform the
usual duties of his employment with the Company in a reasonably efficient
manner, as determined by the Administrator in its sole discretion. Such
incapacity may be determined to exist when certified by a physician who is
mutually acceptable to the Administrator and the Participant or based upon a
determination of disability by the Social Security Administration.
1.20 "YEAR OF SERVICE" means each calendar year prior to a
Participant's Normal Retirement Date during which the employee is credited
with employment on a full-time basis, provided that the employee is employed
by the Company or an Affiliate for the entire calendar year. In the year
which contains the employee's employment (or reemployment) commencement date
or death, disability or retirement date, such employee's Years of Service
shall also include a partial Year of Service (expressed in terms of completed
months) for the applicable portion of the year to be considered.
SECTION II
ELIGIBILITY TO PARTICIPATE
2.1 ELIGIBILITY. An Officer of the Company shall be eligible to become
a Participant of the Plan at such time, if any, as he or she is designated
and approved for participation by the Board of Directors, in its discretion.
The Officers designated as Participants as of the Effective Date are
shown on Exhibit A attached hereto.
SECTION III
ELIGIBILITY FOR AND AMOUNT OF BENEFITS
3.1 ELIGIBILITY. Each Participant is eligible to receive an
Enhancement Plan Benefit beginning on or after the Participant's Early
Retirement Date or Normal Retirement Date, unless the Enhancement Plan
Benefit is forfeited as hereinafter provided.
3.2 NORMAL RETIREMENT BENEFIT.
(a) The Enhancement Plan Benefit of a Participant who reaches his
Normal Retirement Date shall be an annual amount payable monthly for the
life of the Participant commencing on the first day of the month following
such Normal Retirement Date equal to (i) minus (ii) minus (iii) minus (iv),
where (i), (ii), (iii) and (iv) are:
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(i) Sixty percent (60%) of the Participant's Final Average
Compensation;
(ii) the Participant's Basic Retirement Plan Benefit;
(iii) the Participant's Primary Social Security benefit at age 65
or, if later, the Participant's Normal Retirement Date;
(iv) an amount equal to an annual annuity commencing at the Normal
Retirement Date attributable to the Company's contributions (but not
attributable to the Participant's contributions, as applicable) to the
AMC SERP Plan adopted effective January 1, 1994, the American
Multi-Cinema, Inc. 401(k) Savings Plan, the AMC Nonqualified Deferred
Compensation Plan, and the American Multi-Cinema, Inc. Executive Savings
Plan.
(b) If a Participant has completed fewer than 25 Years of Service, the
benefit calculated in Subsection (a)(i) above shall be adjusted by
multiplying the benefit by a fraction, the numerator of which is the
Participant's Years of Service at retirement and the denominator of which is
25.
3.3 EARLY RETIREMENT BENEFIT. A Participant who has attained his Early
Retirement Date and has retired thereafter (or whose employment has
terminated previously under the circumstances described in Section 3.8(c))
shall receive a monthly retirement benefit in an amount equal to his Accrued
Benefit, reduced by six and two-thirds percent (6 2/3%) for each of the first
five years by which commencement precedes age 65 and an additional three and
one-third percent (3 1/3%) for each year by which such commencement precedes
age 60. In each case, such reductions shall be applied on a pro-rata basis
for less than full years.
3.4 DEFERRED RETIREMENT BENEFIT. A Participant's Accrued Benefit shall
commence at his Normal Retirement Date whether or not the Participant
continues to be employed by the Company. Any Participant who attained age 65
prior to the Effective Date shall commence receipt of his Accrued Benefit
under the Plan as of the Effective Date, based on the provisions of Section
3.2 as though the Effective Date were such Participant's Normal Retirement
Date and the date of commencement of the Participant's benefits under each of
the benefit sources described in Section 3.2. In calculating such
Participant's Accrued Benefit hereunder, the amounts attributable to each
benefit source under Section 3.2 shall be determined using the actual benefit
payable from such benefit source, if payments from such source already have
commenced at the time of calculation. If such amount from each benefit source
is not payable in the form of a life annuity, the amount determined under
Sections 3.2(a)(ii), 3.2(a)(iii) and 3.2(a)(iv) as appropriate shall be the
amount of an actuarially equivalent life annuity commencing on the later of
the date such benefit commences and the date the Enhancement Plan Benefits
commence.
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3.5 DEATH WHILE ACTIVELY EMPLOYED AND PRIOR TO COMMENCEMENT OF
BENEFITS. If a Participant dies while still actively employed but before he
has commenced his Enhancement Plan Benefit, the Participant's Surviving
Spouse, if any, shall be entitled to receive a monthly benefit for life
commencing on the first of the month coincident with or following the later
of (a) the Participant's death and (b) the date the Participant would have
first become eligible to receive his Enhancement Plan Benefit under Section
3.1 based on his Years of Service at the time of his death. The amount of
this benefit shall be 50% of the Participant's Accrued Benefit actuarially
reduced for payment as a 50% Joint & Contingent annuity, and further reduced,
as applicable, under Section 3.3 for commencement before the Participant's
attainment of age 65.
3.6 DEATH AFTER COMMENCEMENT OF BENEFITS. If a Participant dies after
he has commenced his Enhancement Plan Benefit, his beneficiary shall be
entitled to receive the amount payable, if any, under the form of benefit
elected by such Participant. If a Participant dies after he has retired but
prior to commencement of his benefit, his election under Section 4.1 shall be
void and his Surviving Spouse shall be entitled to the benefit described in
Section 3.5.
3.7 DISABILITY BENEFIT. Upon Total and Permanent Disability, a
Participant shall be entitled to an immediate annual disability benefit,
payable for the life of the Participant, equal to his Accrued Benefit
determined under Section 3.2 as of his date of disability but without
reduction by reason of early commencement, payable commencing as of the first
day of the month following the date of such disability, but reduced by the
monthly benefit amount, if any, under any long term disability plan or policy
provided by the Company.
3.8 FORFEITURE ON TERMINATION OF EMPLOYMENT.
(a) If a Participant's employment with the Company or an Affiliate
terminates for any reason (or no reason), without the Company's express
written consent, prior to such Participant's Early Retirement Date, the
Participant shall forfeit all right to benefits under the Plan.
(b) If a Participant's employment is terminated by the Company at
any time, including after his Early Retirement Date or Normal Retirement
Date, for Cause, the Participant shall forfeit all benefit rights under the
Plan. Termination by the Company of "for Cause" means termination upon:
(i) the willful and continued failure by the Participant to
substantially perform his duties with the Company (other than any such
failure resulting from disability) after a written demand for
substantial performance is delivered to the Participant by the Company,
which demand specifically identifies the manner in which the Company
believes the Participant has not substantially performed his duties, or
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<PAGE>
(ii) the willful engaging by the Participant in conduct that is
demonstrably and materially injurious to the Company, monetarily or
otherwise.
(c) If a Participant's employment is terminated at any time, either at
the request of the Company (other than for Cause), or if such termination of
employment is deemed by the Company to occur as a result of Change of
Control, the Participant shall be entitled to receive his Accrued Benefit
under Section 3.2 or 3.3 as applicable.
A "Change in Control of the Company" shall be deemed to have occurred if:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than the Company, the Durwood Interests, any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, or any company owned, directly or indirectly, by the shareholders
of the Company in substantially the same proportions as their ownership of
stock of the Company), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of the Company representing 50% or more of the combined voting power of
the Company's then outstanding securities. The "Durwood Interests" means
(i) Stanley H. Durwood, his spouse and any of his lineal descendants and
their respective spouses (collectively, the "Durwood Family") and any
Affiliate of any member of the Durwood Family, (ii) Stanley H. Durwood's
estate, or any trust established by Stanley H. Durwood, during any period
of administration prior to the distribution of assets to beneficiaries
who are Persons described in clause (iii) below, and (iii) any trust which
is solely 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) or solely for the benefit of one or more charitable organizations
or solely for the benefit of a combination of members of the Durwood
Family and one or more charitable organizations;
(ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors and any
new director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described by
clause (i), (iii) or (iv) of this paragraph) whose election by the Board
or nomination for election by the Company's shareholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof;
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other company, other than (A) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or
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<PAGE>
by being converted into voting securities of the surviving entity) more
than 50% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such merger
or consolidation or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than 50% of the combined
voting power of the Company's then outstanding securities; or
(iv) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets.
3.9 MAXIMUM ANNUAL PAYMENT. In the event the payment of all or any
portion of an annual Enhancement Plan Benefit would be nondeductible by the
Company or any Affiliate in any year under the terms of Section 162(m) of the
Code, such nondeductible amount shall be deferred and paid in a lump sum as
soon as practicable in the immediately following year.
SECTION IV
FORM AND COMMENCEMENT BENEFITS
4.1 FORM OF BENEFITS. Upon commencement of benefits pursuant to
Sections 3.2, 3.3 or 3.4, a Participant shall be deemed to have elected to
receive his Enhancement Plan Benefit as a life annuity or, prior to
commencement of such benefit, the Participant may request payment of his
Enhancement Plan Benefit in any other form acceptable to the Administrator.
Such alternative form of annuity shall be the Actuarial Equivalent of the
Participant's Accrued Benefit payable as a life annuity. Such election shall
be made in accordance with procedures established by the Administrator and
failure to make an election will be deemed to be an election of the life
annuity form of benefit.
4.2 COMMENCEMENT OF BENEFITS. An Enhancement Plan Benefit payable to a
Participant pursuant to paragraphs 3.2 or 3.3 shall commence to be paid on
the first day of the month coincident with or next following the
Participant's retirement on or after his Early Retirement Date and, in any
event, coincident or next following his Normal Retirement Date, unless
calculation of the benefit or other circumstances as reasonably determined by
the Administrator cause a delay in such payment. In the event payment of a
Participant's benefit is delayed more than thirty (30) days beyond the date
the Participant otherwise would be entitled to the payment hereunder, the
amount of such payment(s) shall be increased by an interest factor equal to
the then actuarially assumed rate of return under the Basic Retirement Plan.
An Enhancement Plan Benefit payable to a Surviving Spouse pursuant to
paragraph 3.4 or 3.5 shall commence as set forth in paragraph 3.4 or 3.5. In
the event a Participant is entitled to severance payments under a severance
payment agreement, benefits under this Plan will not commence until payments
under the severance payment agreement have ceased.
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SECTION V
AMENDMENT AND TERMINATION
5.1 AMENDMENT OR TERMINATION. The Company reserves the right to amend
or terminate the Plan by, or pursuant to, action of the Board of Directors
when, in the sole opinion of the Company, an amendment or termination is
advisable. Any amendment or termination shall be made pursuant to a
resolution of the Board of Directors and shall be effective as of the date of
such action. No amendment or termination of the Plan shall directly or
indirectly deprive any Participant or Surviving Spouse of all or any portion
of any Enhancement Plan Benefit currently being paid or payable under the
Plan, nor shall an amendment or termination reduce the amount of any benefit
considered to be accrued under the Plan to the date of amendment or
termination.
SECTION VI
ADMINISTRATION
6.1 ADMINISTRATOR. The Plan shall be administered by the
Administrator, which shall have the authority to interpret the Plan, to
determine eligibility hereunder, to determine the nature and amount of
benefits and to decide and settle disputes relative to the rights of any
party under the Plan, all in its sole discretion. Any construction or
interpretation of the Plan and any determination of fact in administering
the Plan made in good faith by the Administrator shall be final and
conclusive upon all parties for all Plan purposes. All interpretations of
the Plan or determinations of entitlement to benefits shall be in writing,
signed by authority of the Administrator.
6.2 CLAIMS PROCEDURE.
(a) The Administrator shall prescribe a form for the presentation
of claims under the terms of this Plan.
(b) Upon presentation to the Administrator of a claim on the
prescribed form, the Administrator shall make a determination of the validity
thereof. If the determination is adverse to the claimant, the Administrator
shall furnish to the claimant within 90 days after the receipt of the claim a
written notice setting forth the following:
(i) the specific reason or reasons for the denial;
(ii) specific references to pertinent provisions of the Plan on
which the denial is based;
(iii) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of why
such material or information is necessary; and
9
<PAGE>
(iv) appropriate information as to the steps to be taken if the
claimant wishes to submit his or her claim for review.
(c) In the event of a denial of a claim, the claimant or his or
her duly authorized representative may appeal such denial to the
Administrator for a full and fair review of the adverse determination.
Claimant's request for review must be in writing and made to the
Administrator within 60 days after receipt by claimant of the written
notification required under Section 6.2(b); provided, however, such 60-day
period shall be extended if circumstances so warrant. Claimant or his or her
duly authorized representative may submit issues and comments in writing
which shall be given full consideration by the Administrator in its review.
(d) The Administrator may, in its sole discretion, conduct a
hearing. A request for a hearing made by claimant will be given full
consideration. At such hearing, the claimant shall be entitled to appear and
present evidence and be represented by counsel.
(e) A decision on a request for review shall be made by the
Administrator not later than 60 days after receipt of the request; provided,
however, in the event of a hearing or other special circumstances, such
decision shall be made not later than 120 days after receipt of such request.
If it is necessary to extend the period of time for making a decision beyond
60 days after the receipt of the request, the claimant shall be notified in
writing of the extension of time prior to the beginning of such extension.
(f) The Administrator's decision on review shall state in writing
the specific reasons and references to the Plan provisions on which it is
based. Such decision shall be promptly provided to the claimant. If the
decision on review is not furnished in accordance with the foregoing, the
claim shall be deemed denied on review.
SECTION VII
MISCELLANEOUS
7.1 NO EFFECT ON EMPLOYMENT RIGHTS. Nothing contained herein will
confer upon any Participant the right to be retained in the service of the
Company or any Affiliate nor limit the right of the Company or any Affiliate
to discharge or otherwise deal with a Participant without regard to the
existence of the Plan.
7.2 FUNDING. The Plan at all times shall be entirely unfunded and
unsecured and no provisions shall at any time be made with respect to
segregating any assets of the Company for payment of benefits hereunder. No
Participant, Surviving Spouse or any other person shall have any interest in
any particular assets of the Company by reason of the right to receive a
benefit under the Plan. To the extent that the Participant or any other
person
10
<PAGE>
acquires a right to receive benefits under this Plan, such right shall be no
greater than the right of any unsecured general creditor of the Company.
7.3 SPENDTHRIFT PROVISIONS. No benefit payable under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge prior to actual receipt thereof by
the payee, and any attempt so to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge prior to such receipt shall be void; and
the Company shall not be liable in any manner for or subject to the debts,
contracts, liabilities, engagements or torts of any person entitled to any
benefit under the Plan.
7.4 STATE LAW. The Plan is established under and will be construed
according to the laws of the State of Missouri, to the extent that such laws
are not preempted by the Employee Retirement Income Security Act of 1974
("ERISA") and valid regulations promulgated thereunder.
7.5 INCAPACITY OF RECIPIENT. In the event a Participant or Surviving
Spouse is declared incompetent and a conservator or other person legally
charged with the care of the person or the estate of the Participant or
Surviving Spouse is appointed, any benefits under the Plan to which such
Participant or Surviving Spouse is entitled shall be paid to the conservator
or other person legally charged with the care of the Participant. Except as
provided in the preceding sentence, should the Administrator, in its
discretion, determine that a Participant or Surviving Spouse is unable to
manage personal affairs, the Administrator may make distributions to any
person for the benefit of the Participant or Surviving Spouse.
7.6 UNCLAIMED BENEFIT. Each Participant shall keep the Company
informed of a current address and the current address of the Participant's
Surviving Spouse. The Administrator shall not be obligated to search for the
whereabouts of any person. If the location of a Participant is not made
known to the Company within three (3) years after the date on which any
payment of the Participant's Enhancement Plan Benefit may be made, such
benefit shall be forfeited but will be reinstated if a claim therefore is
filed by the Participant or his legal representative.
7.7 SELECT GROUP. This Plan is "maintained primarily for the purpose
of providing deferred compensation to a select group of management or highly
compensated employees" of the Company and is intended to qualify as a "Top
Hat" plan under ERISA.
7.8 GENDER AND NUMBER. The masculine gender, where appearing herein,
shall be deemed to include the feminine gender, and the singular shall be
deemed to include the plural, unless the context clearly indicates to the
contrary.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed
by its authorized officers this twentieth day of December, 1996.
AMERICAN MULTI-CINEMA, INC.
11
<PAGE>
ATTEST:
/s/ Nancy L. Gallagher /s/ Peter C. Brown
- ---------------------- ------------------------------
Nancy L. Gallagher Peter C. Brown
Secretary Executive Vice President
12
<PAGE>
EXHIBIT A
PARTICIPANTS ON THE EFFECTIVE DATE OF THE PLAN
Chairman & CEO S. Durwood
EVP & COO P. Singleton
EVP & CFO P. Brown
13
<PAGE>
AMERICAN MULTI-CINEMA, INC.
EXECUTIVE SAVINGS PLAN
EFFECTIVE JANUARY 1, 1990
INCORPORATING AMENDMENTS ONE THROUGH FOUR
<PAGE>
AMERICAN MULTI-CINEMA, INC.
EXECUTIVE SAVINGS PLAN
Table of Contents
Article Page
- ------- ----
INTRODUCTION 1
I DEFINITIONS 1
II PARTICIPATION 2
III CONTRIBUTIONS 4
IV LIFE INSURANCE 4
V BENEFIT PAYMENTS 4
VI CLAIMS PROCEDURE 5
VII ADMINISTRATION 6
VIII AMENDMENT OR TERMINATION 6
IX MISCELLANEOUS 7
<PAGE>
AMERICAN MULTI-CINEMA, INC.
EXECUTIVE SAVINGS PLAN
INTRODUCTION
American Multi-Cinema, Inc. (the "Sponsoring Employer") has adopted this
Plan, effective as of January 1, 1990, 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. IRC Section 401(k) Savings
Plan because of the IRC Section 401(k) average deferral percentage
nondiscrimination tests and/or any reduction in their group term life insurance
coverage provided by the Sponsoring Employer and its affiliates.
ARTICLE I.
DEFINITIONS
Whenever used in this Plan, the following terms shall have the meanings set
forth below:
1.1 "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.
1.2 "Beneficiary" means the person or persons named by a Participant, on a
form supplied by the Insurer, to receive benefits upon the Participant's death
in accordance with the terms of any insurance policy issued to the Participant
as a result of his participation in this Plan.
1.3 "Compensation" means the total annual gross earnings paid to an
Employee by an Employer as reported on Treasury Department Form W-2 for the
immediately preceding Plan Year up to two hundred thousand dollars ($200,000),
as such amount is adjusted by the Secretary of the Treasury pursuant to Section
401(a)(17) of the Internal Revenue Code or after December 31, 1993 as would have
been adjusted under the law in effect prior to the enactment of the Omnibus
Budget Reconciliation Act of 1993, excluding extraordinary earnings, such as
moving allowances, housing allowances, automobile and other expense
reimbursements, imputed income for group term life insurance and other fringe
benefits. Compensation for the purposes of this Plan shall also include any
salary reduction contributions made by an Employee to the American Multi-Cinema,
Inc. 401(k) Savings Plan, any Plan maintained by the
<PAGE>
Sponsoring Employer under IRC Section 125 and, from and after January 1, 1994,
any nonqualified deferred compensation plan.
1.4 "Employee" means an individual who is employed by an Employer.
1.5 "Employer" means the Sponsoring Employer and any of its affiliated
companies which is an adopting employer under the American Multi-Cinema, Inc.
401(k) Savings Plan, and their successors and assigns.
1.6 "Highly Compensated Employee" means an Employee who is highly
compensated within the meaning of Section 414(q) of the Internal Revenue Code
and the regulations and rulings thereunder.
1.7 "Insurer" means the Confederation Life Insurance Company of Toronto,
Ontario, Canada or any other life insurance company that is authorized to issue
a life insurance policy under this Plan by the Sponsoring Employer.
1.8 "Participant" means an Employee who is eligible to participate in this
Plan and is making the required contributions under this Plan.
1.9 "Plan" means the American Multi-Cinema, Inc. Executive Savings Plan as
set forth in this document, as amended from time to time.
1.10 "Plan Year" means the calendar year.
1.11 "Sponsoring Employer" means American Multi-Cinema, Inc., its
successors and assigns.
ARTICLE II.
PARTICIPATION
2.1 ELIGIBILITY. Each full-time, salaried Employee who is not represented
by a collective bargaining representative shall be eligible to participate in
this Plan, provided:
(a) the Employee is a participant in the American Multi-Cinema, Inc.
401(k) Savings Plan,
(b) the Employee is a Highly Compensated Employee; and
(c) the Employee is making the maximum deferrals which are permitted
under the Plan by the Sponsoring Employer (because of the IRC Section 401(k)
average deferral percentage test).
2
<PAGE>
2.2 ENTRY DATE. Each Highly Compensated Employee of an Employer may
become a Participant in this Plan as of any January 1 or July 1 coincident with
or next following the date the Employee satisfies the eligibility requirements
of Section 2.1, by submitting a written election to participate in the Plan and
by agreeing to make the employee contributions required by Article III. Such
election shall be on forms prescribed by the Administrator and shall be returned
to the Administrator prior to the January 1 or July 1 when the Highly
Compensated Employee elects to commence participation in the Plan.
2.3 CESSATION OR SUSPENSION OF PARTICIPATION. A Highly Compensated
Employee who has elected to become a Participant shall continue to be a
Participant until the first to occur of the following:
(a) The date when the Employee elects to discontinue making
contributions pursuant to Article III hereof,
(b) The date when the Employee discontinues making salary deferral
contributions to the American Multi-Cinema, Inc. 401(k) Savings Plan for any
reason,
(c) The date he is no longer an Employee, or
(d) The date the Plan is terminated pursuant to Article VIII hereof.
A Participant shall not cease to be a Participant solely because he is no
longer a Highly Compensated Employee. However, a Participant who ceases to be a
Highly Compensated Employee will cease to be a Participant unless he agrees to
continue to limit his annual elective deferral contributions under the
Sponsoring Employer's 401(k) Savings Plan to four percent (4%) of his
compensation as defined under that plan.
A Participant may elect to suspend his participation in this Plan at any
time by notifying the Sponsoring Employer, in writing, to discontinue his
contributions under Section 3.1 hereof as soon as reasonably practicable. When
the Participant's contributions are discontinued, the Employer will also reduce
the Participant's Compensation in an amount equal to the three percent (3%)
increase which is included in his Compensation at such time as a result of his
participation in this Plan. The suspended Participant may reenter this Plan as
of any January 1 or July 1 after a twelve (12) consecutive month period of
suspension from participation, provided the Participant satisfies the same terms
and conditions that apply at such time to a new eligible Employee under Section
2.1 hereof.
A Participant whose participation in the American Multi-Cinema, Inc. 401(k)
Savings Plan is suspended for twelve (12) months because of an in-service
hardship
3
<PAGE>
withdrawal from such plan shall also be suspended from participation in this
Plan. When the Participant's salary deferral contributions to the American
Multi-Cinema, Inc. 401(k) Plan cease, the Employer will reduce the Participant's
Compensation in an amount equal to the three percent (3%) increase which is
included in his Compensation as a result of his participation in this Plan. The
suspended Participant may reenter this Plan as of the date his salary deferral
contributions to the American Multi-Cinema, Inc. 401(k) Savings Plan are resumed
(generally, the January 1 or July 1 after a twelve (12) consecutive month period
of suspension of participation).
ARTICLE III.
CONTRIBUTIONS
3.1 PARTICIPANT CONTRIBUTIONS. Each Participant shall, as a condition of
Plan participation, contribute four percent (4%) of his Compensation to this
Plan. Contributions shall be withheld from the Participant's Compensation
through payroll deduction on an after-tax basis.
3.2 EMPLOYER CONTRIBUTIONS. The Employers shall not make any
contributions to the Plan. However, the Compensation paid by the Employers to a
Participant shall be increased by three percent (3%) during such period as the
Participant makes contributions pursuant to Section 3.1 hereof.
ARTICLE IV.
LIFE INSURANCE
4.1 PURCHASE. All contributions by a Participant shall be paid by payroll
deduction, which the Employers shall forward to the Insurer as premiums for an
individual universal life insurance policy with the Participant as the owner and
insured under the policy.
4.2 TERMS. All policies purchased with contributions under the Plan shall
be flexible premium adjustable life insurance policies issued by an Insurer
(sometimes called "universal life insurance"). A specimen copy of the life
insurance policy which shall initially be used by this Plan is attached hereto
and incorporated herein by reference. Each Participant shall elect the amount
of life insurance coverage to be provided under his policy under the options
made available by the Insurer for this purpose. Any contributions not required
for the cost of such insurance or for commissions and other expense charges
under the policy shall be deposited in an accumulation account under the policy.
ARTICLE V.
BENEFIT PAYMENTS
4
<PAGE>
5.1 DURING PARTICIPATION. Withdrawals and loans shall be permitted in
accordance with the terms of the policies.
5.2 DEATH. Proceeds under a policy shall be paid to the Participant's
designated Beneficiary in accordance with the terms of the policy upon the death
of the Participant.
5.3 CESSATION OF PARTICIPATION. If an Employee ceases to be a Participant
pursuant to Section 2.3, he shall have the following options:
(a) to continue his policy by arranging for the payment of premiums
other than through an Employer;
(b) to convert his policy to a paid up status with a reduced amount
of life insurance as provided by the policy;
(c) to convert his policy to an annuity;
(d) to surrender his policy for its cash value; or
(e) any combination of the above as permitted by the policy.
ARTICLE VI.
CLAIMS PROCEDURE
6.1 DENIAL OF PARTICIPATION. Any Employee who is denied the right to
participate in this Plan may appeal such decision in writing to the
Administrator. If such appeal is denied, the Administrator will notify the
Employee of his decision, in writing, within 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, a
description of any additional material or information necessary to perfect such
claim, and information as to the steps to be taken if the Employee wishes to
resubmit the claim.
6.2 DENIAL OF BENEFITS. Any Participant or Beneficiary who is denied
benefits under his insurance policy may appeal such decision in writing to the
Insurer. If such appeal is denied, the Insurer will notify the Participant or
Beneficiary of its decision, in writing, within 60 days of the date the Insurer
received the appeal. Such notice shall set forth the specific reasons for the
denial, specific references to pertinent policy provisions, a description of any
additional material or information necessary to perfect such claim, and
information as to the steps to be taken if the Participant or Beneficiary wishes
to resubmit the claim.
5
<PAGE>
ARTICLE VII.
ADMINISTRATION
7.1 ADMINISTRATION. The administration of the Plan shall be under the
supervision of the Administrator, as defined in Section 1.1 hereof. It shall be
the principal duty of the Administrator to insure that the Plan is carried out
in accordance with its terms.
7.2 POWERS AND DUTIES. The Administrator shall have the following powers
and duties, to be exercised in its sole and exclusive discretion:
(a) to make and enforce such rules and regulations as shall be deemed
necessary or proper for the efficient administration of the Plan; and
(b) to interpret the Plan, any interpretation thereof in good faith
to be final and conclusive; and
(c) to decide any questions concerning the Plan and the eligibility
of any Employee to participate in the Plan; and
(d) to allocate and delegate his responsibilities under the Plan and
to designate other persons to carry out any of his responsibilities under the
Plan.
ARTICLE VIII.
AMENDMENT OR TERMINATION
8.1 AMENDMENT. The Sponsoring Employer reserves the right at any time or
times to amend the Plan to any extent and in any manner that it may deem
advisable.
8.2 NOTICE OF AMENDMENT. Within a reasonable period of time after any
amendment of this Plan, the Administrator shall furnish each Participant with a
written summary of the amendment (or a copy of the amendment).
8.3 TERMINATION. The Sponsoring Employer has established the Plan with
the intention and expectation that it will be continued indefinitely, but has no
obligation to continue the Plan for any length of time and may terminate the
Plan at any time.
8.4 EFFECT OF TERMINATION. Upon termination of the Plan the Employers
shall notify all the Participants that all the elections for contributions with
respect to the Plan shall terminate and the compensation increases described in
Section 3.2 hereof shall be discontinued.
6
<PAGE>
ARTICLE IX.
MISCELLANEOUS
9.1 CONSTRUCTION. Nothing in this Plan shall be construed as giving to
any Participant or other person any legal or equitable right against the
Administrator, the Sponsoring Employer or any other Employer, except as
expressly provided herein, and this Plan shall not be deemed to constitute an
employment contract between an Employer and a Participant. Nothing contained in
this Plan shall be deemed to give a Participant or an Employee the right to be
retained in the service of an Employer.
9.2 EXPENSES. All costs and expenses incurred in administering the Plan
shall be paid by the Sponsoring Employer. However, any expense charges under
any insurance policy shall be paid from the Participants' after-tax premium
contributions.
9.3 GOVERNING LAW. This Plan shall be construed and enforced in
accordance with the laws of the State of Missouri, except to the extent such
laws are preempted by the Employee Retirement Income Security Act of 1974.
9.4 NONGENDER CLAUSE. The masculine gender when used in this Plan shall
be deemed to include the feminine gender.
IN WITNESS WHEREOF, the Sponsoring Employer hereby executes this Plan this
22nd day of January, 1990, to be effective as of January 1, 1990.
ATTEST: (SEAL) AMERICAN MULTI-CINEMA, INC.
By: /s/ Nancy Gallagher By: /s/ Steven Zell
------------------------------- -------------------------------
Secretary Senior Vice President-Finance
7
<PAGE>
Exhibit 11
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
STATEMENTS REGARDING COMPUTATION OF PER SHARE EARNINGS
YEARS (52) WEEKS ENDED MARCH 28, 1996, MARCH 30, 1995 AND MARCH 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Net earnings before extraordinary item $ 27,371 $ 33,978 $ 15,312
Extraordinary item (19,350) - -
-------- -------- --------
Net earnings 8,021 33,978 15,312
Preferred dividends (7,000) (7,000) (538)
-------- -------- --------
Net earnings for common shares $ 1,021 $ 26,978 $ 14,774
-------- -------- --------
-------- -------- --------
Average shares for primary earnings per share:
Weighted average number of shares outstanding 16,513 16,456 16,365
Stock options and other dilutive items 282 137 156
-------- -------- --------
Total shares outstanding 16,795 16,593 16,521
-------- -------- --------
-------- -------- --------
Primary earnings per share before extraordinary item $ 1.21 $ 1.63 $ 0.89
-------- -------- --------
-------- -------- --------
Primary earnings per share $ .06 $ 1.63 $ 0.89
-------- -------- --------
-------- -------- --------
FULLY DILUTED EARNINGS PER SHARE:
Net earnings before extraordinary item $ 27,371 $ 33,978 $ 15,312
Extraordinary item (19,350) - -
-------- -------- --------
Net earnings 8,021 33,978 15,312
Preferred dividends (7,000) n/a (538)
-------- -------- --------
Net earnings for common shares $ 1,021 $ 33,978 $ 14,774
-------- -------- --------
-------- -------- --------
Weighted average number of shares outstanding 16,513 16,456 16,365
Stock options and other dilutive items 518 157 185
Shares issuable upon conversion of preferred stock n/a 6,896 n/a
-------- -------- --------
Total shares outstanding 17,031 23,509 16,550
-------- -------- --------
-------- -------- --------
Fully diluted earnings per share
before extraordinary item $ 1.20 (1) $ 1.45 (2) $ 0.89 (1)
-------- -------- --------
-------- -------- --------
Fully diluted earnings per share $ 0.06 (1) $ 1.45 (2) $ 0.89 (1)
-------- -------- --------
-------- -------- --------
</TABLE>
(1) Fully diluted earnings per share for 1996 and 1994 excludes conversion of
preferred stock.
(2) Fully diluted earnings per share for 1995 includes conversion of preferred
stock.
<PAGE>
EXHIBIT 11. (Continued)
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
STATEMENTS REGARDING COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(Unaudited)
Thirty-nine
Weeks Ended
December 26, December 28,
1996 1995
---- ----
PRIMARY EARNINGS PER SHARE
Net earnings before extraordinary item $ 10,811 $ 20,348
Extraordinary item - (19,350)
-------- --------
Net earnings 10,811 998
Preferred dividends (4,454) (5,250)
-------- --------
Net earnings (loss) for common shares $ 6,357 $ (4,252)
-------- --------
-------- --------
Average shares for primary earnings per share:
Weighted average number of shares outstanding 17,410 16,509
Stock options whose effect is dilutive 249 286
-------- --------
Total shares outstanding 17,659 16,795
-------- --------
-------- --------
Primary earnings per share before extraordinary item $ .36 $ .90
-------- --------
-------- --------
Primary earnings (loss) per share $ .36 $ (.25)
-------- --------
-------- --------
FULLY DILUTED EARNINGS PER SHARE
Net earnings before extraordinary item $ 10,811 $ 20,348
Extraordinary item - (19,350)
-------- --------
Net earnings 10,811 998
Preferred dividends (4,454) (5,250)
-------- -------
Net earnings (loss) for common shares $ 6,357 $ (4,252)
-------- --------
Average shares for fully diluted earnings per share:
Weighted average number of shares outstanding 17,410 16,509
Stock options and awards whose effect is dilutive 451 413
Shares issuable upon conversion of preferred stock N/A N/A
-------- --------
Total shares outstanding 17,861 16,922
-------- --------
-------- --------
Fully diluted earnings per share before
extraordinary item $ .36(1) $ .89(1)
-------- --------
-------- --------
Fully diluted earnings (loss) per share $ .36(1) (.25)(1)
-------- --------
-------- --------
(1) Shares from conversion of preferred stock are excluded from the fully
diluted earnings per share calculation because they are anti-dilutive.
<PAGE>
Exhibit 21
AMC ENTERTAINMENT INC. AND ITS SUBSIDIARIES
AMC Entertainment Inc.
American Multi-Cinema, Inc.
AMC Realty, Inc.
Centertainment, Inc.
AMC Entertainment International, Inc.
AMC Entertainment International Limited
AMC Entertainment Espana S.A.
Actividades Multi-Cinemas E Espectaculos, LDA
AMC Theatres of U.K., Limited
AMC De Mexico, S.A., De C.V.
AMC Europe S.A.
National Cinema Network, Inc.
All subsidiaries are wholly-owned.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion and incorporation by reference in this
registration statement on Form S-4 of AMC Entertainmanet Inc. of our report
dated May 17, 1996 on our audits of the financial statements and financial
statement schedules of AMC Entertainment Inc. as of March 28, 1996 and
March 30, 1995 and for the year (52 weeks) ended March 28, 1996, March 30,
1995 and March 31, 1994 which report is included in this Form S-4 and AMC
Entertainment Inc.'s Annual Report in Form 10-K for the year ended March 28,
1996. We also consent to the reference to our Firm under the caption
"Experts."
/s/ Coopers & Lybrand L.L.P
Kansas City, Missouri
April 24, 1997
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
report dated May 31, 1996, on our audits of the financial statements of
Durwood, Inc. We also consent to the reference to our firm under the caption
"Experts."
/s/ Coopers & Lybrand L.L.P
Kansas City, Missouri
April 24, 1997
<PAGE>
EXHIBIT 99
AMC ENTERTAINMENT INC.
106 West 14th Street - Kansas City, Missouri 64105
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Messrs. Stanley H. Durwood and Peter C. Brown,
jointly and severally, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and vote, as designated
below, all of the Common Stock of AMC Entertainment Inc. which the undersigned
is entitled to vote at the Special Meeting of Stockholders to be held on
________________, 1997 and at any adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
1. PROPOSAL to approve Agreement and Plan of Merger and Reorganization dated
as of March 31, 1977 between AMC Entertainment Inc. and Durwood, Inc. set
forth as Annex 1 to the accompanying Proxy Statement.
/ / FOR / / AGAINST / / ABSTAIN
2. In their discretion, the Proxies are authorized to vote on such other
business as may properly come before the meeting
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" PROPOSAL 1.
Please date and sign exactly as name appears. When
shares are held by joint tenants, both must sign.
When signing as an attorney, executor, administrator,
trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name
by President or other authorized officer. If a
partnership, please sign in partnership name by
authorized person.
Date__________________________________________, 1997
Signature___________________________________________
Signature (if held jointly)_________________________
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
2
