-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VIdOXcXbHSvApgc9IfKOgHyJgpsucWz74DFUjEG0TtQhGvJg8HfYAW6noCpBi14A 4aNXMgFMUWV5QW22y78+7Q== 0000722077-99-000004.txt : 19990212 0000722077-99-000004.hdr.sgml : 19990212 ACCESSION NUMBER: 0000722077-99-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMC ENTERTAINMENT INC CENTRAL INDEX KEY: 0000722077 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE THEATERS [7830] IRS NUMBER: 431304369 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08747 FILM NUMBER: 99529178 BUSINESS ADDRESS: STREET 1: 106 W 14TH ST STREET 2: P O BOX 419615 CITY: KANSAS CITY STATE: MO ZIP: 64105-1977 BUSINESS PHONE: 8162214000 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ......... to ........... Commission File Number 1-8747 AMC ENTERTAINMENT INC. (Exact name of registrant as specified in its charter) Delaware 43-1304369 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 106 West 14th Street P.O. Box 419615 Kansas City, Missouri 64141-6615 (Address of principal executive offices) (Zip Code) (816) 221-4000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No __ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Number of Shares Title of Each Class of Common Stock Outstanding as of December 31, 1998 Common Stock, 66 2/3 cents par value 19,427,098 Class B Stock, 66 2/3 cents par value 4,041,993 1 AMC ENTERTAINMENT INC. AND SUBSIDIARIES INDEX Page Number PART I - FINANCIAL INFORMATION Item 1.Financial Statements Consolidated Statements of Operations 3 Consolidated Balance Sheets 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 7 Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3.Quantitative and Qualitative Disclosures About Market Risk 23 PART II - OTHER INFORMATION Item 1.Legal Proceedings 23 Item 4.Submission of Matters to a Vote of Security Holders 26 Item 6.Exhibits and Reports on Form 8-K 27 Signatures 29 2 AMC ENTERTAINMENT INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
Thirteen Thirty-nine Weeks Ended Weeks Ended December 31,January 1, December 31, January 1, 1998 1998 1998 1998 ---- ---- ---- ---- (Unaudited) (Unaudited) Revenues Admissions $165,812 $140,317 $509,571 $411,034 Concessions 77,436 64,049 239,998 189,476 Other 14,003 11,473 35,784 29,380 -------- -------- -------- -------- Total revenues 257,251 215,839 785,353 629,890 Expenses Film exhibition costs 88,839 75,583 278,243 227,563 Concession costs 13,356 10,903 38,499 30,810 Other 113,239 85,822 331,634 244,074 -------- -------- -------- -------- Total cost of operations 215,434 172,308 648,376 502,447 General and administrative 14,517 15,041 44,717 41,893 Depreciation and amortization 23,100 17,227 64,472 50,116 Impairment of long-lived assets - - - 46,998 -------- -------- -------- -------- Total expenses 253,051 204,576 757,565 641,454 -------- -------- -------- -------- Operating income (loss) 4,200 11,263 27,788 (11,564) Other expense (income) Interest expense Corporate borrowings 7,270 7,552 19,844 20,513 Capital lease obligations 2,079 2,318 6,373 7,007 Investment income (434) (124) (1,085) (805) Gain on disposition of assets (901) (864) (2,259) (3,360) -------- -------- -------- -------- Earnings (loss) before income taxes (3,814) 2,381 4,915 (34,919) Income tax provision (2,100) 950 1,800 (14,150) -------- -------- -------- -------- Net earnings (loss) $ (1,714)$ 1,431 $ 3,115 $(20,769) ======== ======== ======== ======== Preferred dividends - 1,198 - 3,849 -------- -------- -------- -------- Net earnings (loss) for common shares $ (1,714) $ 233 $ 3,115 $(24,618) ======== ======== ======== ======== Earnings (loss) per share: Basic $ (.07) $ .01 $.13 $(1.34) ======== ======== ======== ======== Diluted $ (.07) $ .01 $.13 $(1.34) ======== ======== ======== ======== See Notes to Consolidated Financial Statements. 3
AMC ENTERTAINMENT INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
December 31, April 2, 1998 1998 ---- ---- (Unaudited) ASSETS Current assets: Cash and equivalents $ 34,277 $9,881 Receivables, net of allowance for doubtful accounts of $698 as of December 31, 1998 and $706 as of April 2, 1998 22,352 13,018 Reimbursable construction advances 16,180 58,488 Other current assets 28,407 25,736 -------- -------- Total current assets 101,216 107,123 Property, net 675,321 562,158 Intangible assets, net 20,113 22,066 Other long-term assets 107,802 104,433 -------- -------- Total assets $904,452 $795,780 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 82,158 $ 72,633 Construction payables 7,313 24,588 Accrued expenses and other liabilities 96,071 72,598 Current maturities of capital lease obligations 3,998 4,017 -------- -------- Total current liabilities 189,540 173,836 Corporate borrowings 452,030 348,990 Capital lease obligations 45,428 50,605 Other long-term liabilities 80,849 82,894 -------- -------- Total liabilities 767,847 656,325 Stockholders' equity: $1.75 Cumulative Convertible Preferred Stock, 66 2/3 cents par value;1,800,331 shares issued and outstanding as of April 2, 1998(aggregate liquidation preference of $45,008 as of April 2, 1998) - 1,200 Common Stock, 66 2/3 cents par value; 19,447,598 and 15,376,811 shares issued as of December 31, 1998 and April 2, 1998, respectively 12,965 10,251 Convertible Class B Stock, 66 2/3 cents par value; 4,041,993 and 5,015,657 shares issued and outstanding as of December 31, 1998 and April 2, 1998, respectively 2,695 3,344 Additional paid-in capital 106,713 107,676 Foreign currency translation adjustment (801) (3,689) Retained earnings 24,157 21,042 -------- -------- 145,729 139,824 Less: Employee notes for Common Stock purchases (8,755) - Common Stock in treasury, at cost, 20,500 shares as of December 31, 1998 and April 2, 1998 (369) (369) -------- -------- Total stockholders' equity 136,605 139,455 -------- -------- Total liabilities and stockholders' equity $904,452 $795,780 ======== ======== See Notes to Consolidated Financial Statements. 4
AMC ENTERTAINMENT INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except per share data)
Thirty-nine Weeks Ended December 31,January 1, 1998 1998 ---- ---- (Unaudited) INCREASE (DECREASE) IN CASH AND EQUIVALENTS Cash flows from operating activities: Net earnings (loss) $3,115 $(20,769) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Impairment of long-lived assets - 46,998 Depreciation and amortization 64,472 50,116 Deferred income taxes - (19,270) Gain on disposition of long-term assets (2,259) (3,360) Change in assets and liabilities: Receivables (9,334) (5,620) Other current assets (2,671) (4,360) Accounts payable (1,207) 5,519 Accrued expenses and other liabilities 29,780 33,974 Other, net 561 499 -------- -------- Net cash provided by operating activities 82,457 83,727 -------- -------- Cash flows from investing activities: Capital expenditures (177,063) (293,507) Proceeds from sale/leasebacks - 214,300 Investments in real estate - (4,347) Net change in reimbursable construction advances 42,308 (54,083) Preopening expenditures (6,723) (6,567) Proceeds from disposition of long-term assets 10,150 7,357 Other, net (9,480) (6,971) -------- -------- Net cash used in investing activities (140,808) (143,818) -------- -------- Cash flows from financing activities: Net borrowings under revolving credit facility 103,000 70,000 Repurchase of 11 7/8% Senior and 12 5/8% Senior Subordinated Notes - (5,817) Principal payments under capital lease and other obligations (5,196) (2,561) Cash overdrafts 10,732 17,863 Change in construction payables (17,275) 14,985 Funding of employee notes for Common Stock purchases, net (8,579) - Proceeds from exercise of stock options - 22 Dividends paid on $1.75 on preferred stock - (3,884) Deferred financing costs and other (98) (1,663) -------- -------- Net cash provided by financing activities 82,584 88,945 -------- -------- Effect of exchange rate changes on cash and equivalents 163 (44) -------- -------- Net increase in cash and equivalents 24,396 28,810 Cash and equivalents at beginning of period 9,881 24,715 -------- -------- Cash and equivalents at end of period $ 34,277 $ 53,525 ======== ======== 5
AMC ENTERTAINMENT INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Thirty-nine Weeks Ended December 31,January 1, 1998 1998 ---- ---- (Unaudited) Cash paid during the period for: Interest (net of amounts capitalized of $5,585 and $5,879) $ 26,134 $ 27,568 Income taxes paid 2,913 11,720 6 See Notes to Consolidated Financial Statements.
AMC ENTERTAINMENT INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 (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") (collectively with AMCE, unless the context otherwise requires, the "Company"), is principally involved in the theatrical exhibition business throughout the United States and in Japan, Portugal, Spain, China (Hong Kong) and Canada. 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"). Prior to fiscal 1998, NCN was consolidated with the Company as of a fiscal period end that was one period earlier than the Company's fiscal period end. Beginning in fiscal year 1998, this one-period reporting lag was eliminated and NCN results for 1998 include activity for forty-four weeks. The accompanying unaudited consolidated financial statements have been prepared in response to the requirements of Form 10-Q and should be read in conjunction with the Company's annual report on Form 10-K for the year (52 weeks) ended April 2, 1998. In the opinion of management, these interim financial statements reflect all adjustments (consisting primarily 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 thirteen and thirty-nine weeks ended December 31, 1998 are not necessarily indicative of the results to be expected for the fiscal year (52 weeks) ending April 1, 1999. 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 - STOCKHOLDERS' EQUITY During the thirty-nine weeks ended December 31, 1998, various holders of the Company's Convertible Preferred Stock converted 1,796,485 shares into 3,097,113 shares of Common Stock at a conversion rate of 1.724 shares of Common Stock for each share of Convertible Preferred Stock. On April 14, 1998, the Company redeemed the remaining 3,846 shares of Convertible Preferred Stock at a redemption price of $25.75 per share plus accrued and unpaid dividends. On August 11, 1998, the Company and its Co-Chairman and Chief Executive Officer, Mr. Stanley H. Durwood, together with his six children (the "Durwood Family Stockholders") completed a registered secondary offering of 3,300,000 shares of Common Stock (the "Secondary Offering") owned by the Durwood Family Stockholders. In connection with the Secondary Offering, Mr. Stanley H. Durwood converted 500,000 shares of Convertible Class B Stock to 500,000 shares of Common Stock. Additionally, pursuant to an agreement with his children, Mr. Stanley H. Durwood converted 473,664 shares of Convertible Class B Stock to Common Stock for delivery to his children. On August 11, 1998, the Company loaned one of its officers $5,625,000 to purchase 375,000 shares of Common Stock of the Company in the Secondary Offering. On September 14, 1998, the Company loaned $3,765,000 to another of its officers to purchase 250,000 shares of Common Stock of the Company. The 250,000 shares were purchased in the open market and unused proceeds of $811,000 were repaid to the Company leaving a remaining unpaid principal balance of $2,954,000. The loans are unsecured and are due in August and September of 2003, respectively, may be prepaid in part or full without penalty, and are represented by promissory notes which bear interest at a rate (5.57% per annum) at least equal to the applicable federal rate prescribed by Section 1274 (d) of the Internal Revenue Code in effect on the date of such loans, payable at maturity. The Company's Board of Directors has also approved a loan under terms similar to those described above to Mr. Stanley H. Durwood not to exceed $10,000,000 to purchase up to 500,000 shares of the Company's Common Stock. Mr. Durwood's eligibility to participate in this program expires in March, 1999. NOTE 3 - EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share:
Thirteen Weeks Ended Thirty-nine Weeks Ended December 31,January 1, December 31,January 1, 1998 1998 1998 1998 ---- ---- ---- ---- (in thousands, except per share data) Numerator: Net earnings (loss) $ (1,714) $ 1,431 $3,115 $ (20,769) Less: Preferred dividends - 1,198 - 3,849 -------- -------- -------- -------- Net earnings (loss) for basic and diluted earnings per share $ (1,714) $ 233 $3,115 $ (24,618) ======== ======== ======== ======== Denominator: Shares for basic earnings per share - average shares outstanding 23,469 18,543 23,348 18,310 Stock options - 246 174 - -------- -------- -------- -------- Shares for diluted earnings per share 23,469 18,789 23,522 18,310 ======== ======== ======== ======== Basic earnings per share $(0.07) $ 0.01 $ 0.13 $(1.34) ======== ======== ======== ======== Diluted earnings per share $(0.07) $ 0.01 $ 0.13 $(1.34) ======== ======== ======== ========
During the thirteen weeks ended July 2, 1998, all outstanding shares of Convertible Preferred Stock were either converted or redeemed. During the thirteen weeks ended December 31, 1998 and the thirty-nine weeks ended January 1, 1998, dividends and shares issuable upon conversion of Convertible Preferred Stock, shares issuable upon exercise of options to purchase shares of Common Stock, and contingently issuable shares were excluded from the earnings per share calculation because they were anti- dilutive. NOTE 4 - COMPREHENSIVE INCOME During the current year, the Company adopted the provisions of Statement of Financial Accounting Standards No. 130 ("SFAS 130"), Reporting Comprehensive Income. The adoption of this statement had no impact on the Company's consolidated financial position, results of operations or cash flows. SFAS 130 requires disclosure of comprehensive income and its components in a company's financial statements. SFAS 130 requires foreign currency translation adjustments to be included in other comprehensive income. The components of comprehensive income for the thirteen and thirty-nine weeks ended December 31, 1998 and January 1, 1998 are as follows:
Thirteen Weeks Ended Thirty-nine Weeks Ended December 31, January 1, December 31,January 1, 1998 1998 1998 1998 ---- ---- ---- ---- (in thousands) Net earnings (loss) $ (1,714) $ 1,431 $ 3,115 $(20,679) Foreign currency translation adjustment 1,660 (396) 2,888 (1,112) -------- -------- -------- -------- Comprehensive income $ (54) $ 1,035 $ 6,003 $(21,791) ======== ======== ======== ========
NOTE 5 - INTERNAL USE SOFTWARE During fiscal 1999, the Company early adopted Statement of Position 98- 1 ("SOP 98-1"), Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires companies to capitalize certain internal-use software costs once certain criteria are met. Adoption of this statement did not have a material impact on the Company's consolidated financial position, results of operations or cash flows. NOTE 6 - CORPORATE BORROWINGS On January 27, 1999, the Company sold $225 million of Senior Subordinated Notes due 2011 (the "Notes") in a private offering. The Notes bear interest at the rate of 9 1/2% per annum, payable in February and August. The Notes are redeemable at the option of the Company, in whole or in part, at any time on or after February 1, 2004 at 104.75% of the principal amount thereof, declining ratably to 100% of the principal amount thereof on or after February 1, 2007, plus in each case interest accrued to the redemption date. Upon a change of control (as defined in the Note Indenture), the Company will be required to make an offer to repurchase each 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 Notes are unsecured senior subordinated indebtedness of the Company ranking equally with the Company's 9 1/2% Senior Subordinated Notes due 2009. 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, engage in transactions with affiliates, consolidate, merge or sell substantially all of the Company's assets. The Note Indenture also requires the Company to use its best efforts to consummate a registered offer to exchange the Notes (the "Exchange Offer") for notes of AMCE with terms identical in all material respects to the Notes or to cause a shelf registration statement with respect to the Notes to become effective. In the event that certain deadlines relating to the foregoing undertakings, as specified in the Notes are not met, the interest rate borne by the Notes could increase by as much as 1.0% per annum. The Company anticipates meeting such deadlines. Costs related to the issuance of the Notes were capitalized and will be charged to interest expense, following the interest method, over the life of the securities. Issuance costs are estimated to be $5,700,000. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section contains certain "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by use of statements that include words or phrases such as the Company or its management "believes," "expects," "anticipates," "intends," "plans," "foresees" or other words or phrases of similar import. Similarly, statements that describe the Company's objectives, plans or goals also are forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual results to differ materially from the expectations of the Company include, among others: (i) the Company's ability to enter into various financing programs; (ii) the performance of films licensed by the Company; (iii) competition; (iv) construction delays; (v) the ability to open new theatres and screens as currently planned; (vi) general economic conditions, including adverse changes in inflation and prevailing interest rates; (vii) demographic changes; (viii) increases in the demand for real estate; and (ix) changes in real estate, zoning and tax laws. Readers are urged to consider these factors carefully in evaluating the forward-looking statements. The forward-looking statements included herein are made only as of the date of this Form 10-Q and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. Operating Results Set forth in the table below is a summary of revenues, cost of operations, general and administrative, and depreciation and amortization expenses attributable to the Company's domestic and international theatrical exhibition operations and the Company's on-screen advertising business.
Thirteen Thirty-nine Weeks Ended Weeks Ended December 31,January 1, December 31, January 1, 12/31/98 1/1/98 % Change 12/31/98 1/1/98 % Change ---- ---- ---- ---- ---- ---- (Dollars in thousands) Revenues Domestic Admissions $157,114 $134,924 16.4% $488,516 $394,839 23.7% Concessions 75,333 62,839 19.9 235,140 185,975 26.4 Other 6,955 5,735 21.3 15,937 12,862 23.9 --------- ------- ---- -------- ------- ---- 239,402 203,498 17.6 739,593 593,676 24.6 International Admissions 8,698 5,393 61.3 21,055 16,195 30.0 Concessions 2,103 1,210 73.8 4,858 3,501 38.8 Other 214 42 * 278 60 * ------- ---- ----___ ------ ------- ---- 11,015 6,645 65.8 26,191 19,756 32.6 On-screen advertising and other 6,834 5,696 20.0 19,569 16,458 18.9 ----- ------ ---- -------- -------- ---- Total revenues $257,251 $215,839 19.2% $785,353 $629,890 24.7% ======== ======== ====== ========= ======== ===== Cost of Operations Domestic Film exhibition costs $ 84,074$ 72,713 15.6% $266,865 $218,770 22.0% Concession costs 12,665 10,411 21.7 36,977 29,476 25.4 Rent 39,280 25,702 52.8 114,056 68,356 66.9 Other 63,089 53,905 17.0 192,728 155,312 24.1 --------- ------- ---- ------- -------- ----- 199,108 162,731 22.4 610,626 471,914 29.4 International Film exhibition costs 4,765 2,870 66.0 11,378 8,793 29.4 Concession costs 691 492 40.4 1,522 1,334 14.1 Rent 2,383 1,414 68.5 5,009 4,386 14.2 Other 3,835 1,349 * 6,950 4,281 62.3 -------- --------- --- ---- ------ ---- 11,674 6,125 90.6 24,859 18,794 32.3 On-screen advertising and other 4,652 3,452 34.8 12,891 11,739 9.8 -------- -------- ---- -------- -------- ---- Total cost of operations $215,434 $172,308 25.0 %$648,376 $502,447 29.0% ======== ======== ===== ======== ========= ==== General and Administrative Corporate and domestic $11,006 $12,280 (10.4)% $34,548 $33,440 3.3% International 2,171 1,660 30.8 6,602 4,804 37.4 On-screen advertising and other 1,340 1,101 21.7 3,567 3,649 (2.2) ------- ------ ----- ------ ------ ---- Total general and administrative $14,517 $15,041 (3.5)% $44,717 $41,893 6.7% ------ ------- ---- -------- ------- ----- Depreciation and Amortization Corporate and domestic$21,499 $16,023 34.2% $60,724 $46,427 30.8% International 1,023 601 70.2 2,051 1,888 8.6 On-screen advertising and other 578 603 (4.1) 1,697 1,801 (5.8) ------ ------ ----- ----- -------- ----- Total depreciation and amortization $23,100 $17,227 34.1% $64,472 $50,116 28.6% ----- -------- ------ ------- -------- ----- *Percentage change in excess of 100%.
Thirteen weeks ended December 31, 1998 and January 1, 1998. Revenues. Total revenues increased 19.2%, or $41,412,000, during the thirteen weeks ended December 31, 1998 compared to the thirteen weeks ended January 1, 1998. Total domestic revenues increased 17.6%, or $35,904,000, from the prior year. Admissions revenues increased 16.4%, or $22,190,000, due to a 13.7% increase in attendance, which contributed $18,471,000 of the increase, and a 2.4% increase in average ticket prices, which contributed $3,719,000 of the increase. Attendance at megaplexes (theatres with predominantly stadium- style seating) increased as a result of the addition of 22 new megaplexes with 519 screens since January 1, 1998 offset by a 1.6% decrease in attendance at comparable megaplexes (theatres opened before the third quarter of fiscal year 1998). Attendance at multiplexes (theatres generally without stadium-style seating) decreased due to a 13.3% decrease in attendance at comparable multiplexes and the closure or sale of 15 multiplexes with 90 screens since January 1, 1998. The decline in attendance at comparable multiplexes was related primarily to certain multiplexes experiencing competition from new megaplexes operated by the Company and other competing theatre circuits, a trend the Company generally anticipates will continue. The increase in average ticket prices was due to price increases and the growing number of megaplexes in the Company's theatre circuit, which yield higher average ticket prices than multiplexes. Concessions revenues increased 19.9%, or $12,494,000, due to the increase in total attendance, which contributed $8,602,000 of the increase, and a 5.4% increase in average concessions per patron, which contributed $3,892,000 of the increase. The increase in average concessions per patron was attributable to the increasing number of megaplexes in the Company's theatre circuit, where concession spending per patron is higher than in multiplexes. Total international revenues increased 65.8%, or $4,370,000, from the prior year. Admissions revenues increased 61.3%, or $3,305,000, due primarily to increases in attendance from the addition of a 24-screen megaplex in Spain, a 16-screen megaplex in Japan, an 11-screen megaplex in China (Hong Kong) and two new megaplexes with a total of 44 screens in Canada during the thirteen weeks ended December 31, 1998. Attendance at comparable international megaplexes increased 2.7% for the thirteen weeks ended December 31, 1998 compared to the thirteen weeks ended January 1, 1998. Concessions revenues increased 73.8%, or $893,000, due primarily to the increase in total attendance. International revenues were positively impacted by the weakening of the U.S. dollar, although this did not have a material impact on consolidated net earnings. On-screen advertising and other revenues increased 20.0%, or $1,138,000, from the prior year due primarily to an increase in the number of screens served. Cost of Operations. Total cost of operations increased 25.0%, or $43,126,000, during the thirteen weeks ended December 31, 1998 compared to the thirteen weeks ended January 1, 1998. Total domestic cost of operations increased 22.4%, or $36,377,000, from the prior year. Film exhibition costs increased 15.6%, or $11,361,000, due to higher attendance, which contributed $11,959,000 of the increase, offset by a decrease in the percentage of admissions paid to film distributors, which reduced film exhibition costs by $598,000. As a percentage of admissions revenues, film exhibition costs were 53.5% in the current year compared with 53.9% in the prior year. Concession costs increased 21.7%, or $2,254,000, due to the increase in concessions revenues, which contributed $2,070,000 of the increase, and an increase in concession costs as a percentage of concessions revenues, which produced an increase in concession costs of $184,000. As a percentage of concessions revenues, concession costs were 16.8% in the current year compared with 16.6% in the prior year. Rent expense increased 52.8%, or $13,578,000, due to the higher number of screens in operation, the growing number of megaplexes in the Company's theatre circuit, which generally have higher rent per screen than multiplexes, and the sale and lease back during November and December of the prior year of the real estate assets associated with 13 megaplexes, including seven theatres opened during fiscal 1998, to Entertainment Properties Trust ("EPT"), a real estate investment trust (the "Sale and Lease Back Transaction"). Other cost of operations increased 17.0%, or $9,184,000, from the prior year due to the higher number of screens in operation. As a percentage of revenues, other cost of operations was 26.3% during the current year as compared with 26.5% in the prior year. Total international cost of operations increased 90.6%, or $5,549,000, from the prior year. Film exhibition costs increased 66.0%, or $1,895,000, due to higher attendance and an increase in the percentage of admissions paid to film distributors. Rent expense increased 68.5%, or $969,000, and other cost of operations increased $2,486,000, from the prior year, primarily due to the increased number of international screens in operation. International cost of operations were negatively impacted by the weakening of the U.S. dollar, although this did not have a material impact on consolidated net earnings. On-screen advertising and other cost of operations increased 34.8%, or $1,200,000, due to an increase in the number of screens served. General and Administrative. General and administrative expenses decreased 3.5%, or$524,000, during the thirteen weeks ended December 31, 1998. Corporate and domestic general and administrative expenses decreased 10.4%, or $1,274,000, primarily due to a decrease in bonus expense which resulted from a decline in the Company's profitability. International general and administrative expenses increased 30.8%, or $511,000, primarily due to the Company's international expansion program. On-screen advertising and other general and administrative expenses increased 21.7%, or $239,000, due to an increase in the number of screens served. Depreciation and Amortization. Depreciation and amortization increased 34.1%, or $5,873,000, during the thirteen weeks ended December 31, 1998. This increase was caused by an increase in employed theatre assets resulting from the Company's expansion plan, which was partially offset by lower depreciation and amortization as a result of reduced carrying amounts of impaired multiplex assets. Interest Expense. Interest expense decreased 5.3%, or $521,000, during the thirteen weeks ended December 31, 1998 compared to the prior year, primarily due to a decrease in capital lease obligations. Gain on Disposition of Assets. Gain on disposition of assets increased $37,000 from a gain of $864,000 in the prior year to a gain of $901,000 during the thirteen weeks ended December 31, 1998. The prior and current year results both include the sales of one of the Company's multiplexes. Income Tax Provision. The provision for income taxes decreased $3,050,000 to a benefit of $2,100,000 during the thirteen weeks ended December 31, 1998 from an expense of $950,000 in the prior year. The effective tax rate was 55.1% for the thirteen weeks ended December 31, 1998 compared to 39.9% for the thirteen weeks ended January 1, 1998. The change in the effective tax rate is primarily due to a change in the expected annual effective tax rate for the current fiscal year from the prior year. The Company adjusts its expected annual effective tax rate on a quarterly basis based on current projections of non-deductible expenses and pre-tax earnings or losses. Net Earnings. Net earnings decreased $3,145,000 during the thirteen weeks ended December 31, 1998 to a loss of $1,714,000 from earnings of $1,431,000 in the prior year. Net loss per common share, after deducting preferred dividends, was $.07 compared to earnings of $.01 in the prior year. Thirty-nine Weeks Ended December 31, 1998 and January 1, 1998 Revenues. Total revenues increased 24.7%, or $155,463,000, during the thirty-nine weeks ended December 31, 1998 compared to the thirty-nine weeks ended January 1, 1998. Total domestic revenues increased 24.6%, or $145,917,000, from the prior year. Admissions revenues increased 23.7%, or $93,677,000, due to a 20.0% increase in attendance, which contributed $78,920,000 of the increase, and a 3.1% increase in average ticket prices, which contributed $14,757,000 of the increase. Attendance at megaplexes increased as a result of the addition of 22 new megaplexes with 519 screens since January 1, 1998. Attendance at comparable megaplexes (theatres opened before the first quarter of fiscal year 1998) was essentially unchanged from the prior year. Attendance at multiplexes decreased due to a 8.0% decrease in attendance at comparable multiplexes and the closure or sale of 15 multiplexes with 90 screens since January 1, 1998. The decline in attendance at comparable multiplexes was related primarily to certain multiplexes experiencing competition from new megaplexes operated by the Company and other competing theatre circuits, a trend the Company generally anticipates will continue. The increase in average ticket prices was due to price increases and the growing number of megaplexes in the Company's theatre circuit, which yield higher average ticket prices than multiplexes. Concessions revenues increased 26.4%, or $49,165,000, due to the increase in total attendance, which contributed $37,173,000 of the increase, and a 5.4% increase in average concessions per patron, which contributed $11,992,000 of the increase. The increase in average concessions per patron was attributable to the increasing number of megaplexes in the Company's theatre circuit, where concession spending per patron is higher than in multiplexes. Total international revenues increased by 32.6%, or $6,435,000, from the prior year. Admissions revenues increased 30.0%, or $4,860,000, due primarily to increases in attendance from the addition of a 24-screen megaplex in Spain, a 16-screen megaplex in Japan, an 11-screen megaplex in China (Hong Kong) and two new megaplexes with a total of 44 screens in Canada during the thirteen weeks ended December 31, 1998. Attendance at comparable international megaplexes increased 17.5% for the thirty-nine weeks ended December 31, 1998 compared to the thirty-nine weeks ended January 1, 1998. Concessions revenues increased 38.8%, or $1,357,000, due primarily to the increase in total attendance. International revenues were negatively impacted by a stronger U.S. dollar, compared to the prior year, although this did not have a material impact on consolidated net earnings. On-screen advertising and other revenues increased 18.9%, or $3,111,000, due to an increase in the number of screens served, offset by a change in the number of periods included in the results of operations of the Company's on-screen advertising business. Cost of Operations. Total cost of operations increased 29.0%, or $145,929,000, during the thirty-nine weeks ended December 31, 1998 compared to the thirty-nine weeks ended January 1, 1998. Total domestic cost of operations increased 29.4%, or $138,712,000, from the prior year. Film exhibition costs increased 22.0%, or $48,095,000, due to higher attendance, which contributed $51,905,000 of the increase, offset by a decrease in the percentage of admissions paid to film distributors, which caused a decrease of $3,810,000. As a percentage of admissions revenues, film exhibition costs decreased to 54.6% in the current year compared with 55.4% in the prior year. Film exhibition costs in the first thirteen weeks of the prior year included the effects of a change in attendance patterns and the popularity of films released during the period which had higher film exhibition terms. Attendance was more concentrated in the early weeks for the films released during the first quarter of the prior year, which typically results in higher film exhibition costs. Attendance patterns during the first thirteen weeks of the current year were more evenly distributed than in the prior year. The 25.4%, or $7,501,000, increase in concession costs is attributable to the increase in concessions revenues, which contributed $7,792,000 of the increase, offset by a decrease in concession costs as a percentage of concessions revenue, which produced a decrease in concession costs of $291,000. As a percentage of concessions revenues, concession costs decreased from 15.8% to 15.7%. Rent expense increased 66.9%, or $45,700,000, due to the higher number of screens in operation, the growing number of megaplexes in the Company's circuit, which generally have higher rent per screen than multiplexes, and the Sale and Lease Back Transaction. Other cost of operations increased 24.1%, or $37,416,000. Other cost of operations includes $2,801,000 of theatre closure expense related to actual and estimated lease exit costs on five multiplexes during the current year. As a percentage of total revenues, other cost of operations decreased from 26.2% in the prior year to 26.1% in the current year. Total international cost of operations increased 32.3%, or $6,065,000, from the prior year. Film exhibition costs increased 29.4%, or $2,585,000, due to higher attendance offset by a decrease in the percentage of admissions paid to film distributors. Rent expense increased 14.2%, or $623,000, and other cost of operations increased 62.3%, or $2,669,000, from the prior year primarily due to the increased number of international screens in operation. International cost of operations were positively impacted by a stronger U.S. dollar, compared to the prior year, although this did not have a material impact on consolidated net earnings. On-screen advertising and other cost of operations increased 9.8%, or $1,152,000, due to an increase in the number of screens served offset by the decrease in the number of periods included in the results of operations of the Company's on-screen advertising business. General and Administrative. General and administrative expenses increased 6.7%, or $2,824,000, during the thirty-nine weeks ended December 31, 1998. Corporate and domestic general and administrative expenses increased 3.3%, or $1,108,000, primarily due to increased payroll and other costs associated with the Company's expansion program. International general and administrative expenses increased 37.4%, or $1,798,000, primarily due to the Company's international expansion program. On-screen advertising and other general and administrative costs decreased 2.2%, or $82,000, primarily due to the change in the number of periods included in the results of operations for the Company's on-screen advertising business. Depreciation and Amortization. Depreciation and amortization increased 28.6%, or $14,356,000, during the thirty-nine weeks ended December 31, 1998. This increase was caused by an increase in employed theatre assets resulting from the Company's expansion plan which was partially offset by reduced depreciation and amortization as a result of the reduced carrying amount of impaired multiplex assets. Impairment of Long-lived Assets. During the thirty-nine weeks ended January 1, 1998, the Company recognized a non-cash impairment loss of $46,998,000 ($27,728,000 after tax, or $1.51 per share) on 59 multiplex theatres with 412 screens in 14 states (primarily California, Texas, Missouri, Arizona and Florida) including a loss of $523,000 associated with 10 theatres that were included in impairment losses recognized in previous periods. The expected future cash flows of these theatres, undiscounted and without interest charges, were less than the carrying value of the theatre assets. The summer of 1997 was the first summer film season, generally the highest grossing period for the film industry, that a significant number of megaplexes of the Company and its competitors were operating (the first megaplex, Grand 24, was opened by the Company in May 1995). During this period, the financial results of certain multiplexes of the Company were significantly less than anticipated at the beginning of fiscal 1998 due primarily to competition from the newer megaplex theatres. As a result, the Company initiated a review of its portfolio of theatres to identify those theatres which are not expected to provide an adequate financial return in the future. The Company anticipates that certain of its multiplexes may be disposed of or closed in the intermediate term, but continues to evaluate its future plans for such theatres. Closure or other dispositions of certain multiplexes could result in expenses related to lease exit costs which are primarily comprised of expected payments to landlords or conversion costs. Such expenses could aggregate up to $32 million over the next four years. Interest Expense. Interest expense decreased 4.7%, or $1,303,000, during the thirty-nine weeks ended December 31, 1998, primarily due to a reduction in capital lease obligations. Gain on Disposition of Assets. Gain on disposition of assets decreased $1,101,000 to a gain of $2,259,000 during the thirty-nine weeks ended December 31, 1998 from a gain of $3,360,000 in the prior year and includes the sale of three of the Company's multiplexes during the current period and two during the prior period. Income Tax Provision. The provision for income taxes increased $15,950,000 to an expense of$1,800,000 during the current year from a benefit of $14,150,000 in the prior year. The effective tax rate was 36.6% during the current year compared to 40.5% in the prior year. The change in the effective tax rate is primarily due to a change in the expected annual effective tax rate for the current fiscal year from the prior year. The Company adjusts its expected annual effective tax rate on a quarterly basis based on current projections of non-deductible expenses and pre-tax earnings or losses. Net Earnings. Net earnings increased $23,884,000 during the thirty- nine weeks ended December 31, 1998 to earnings of $3,115,000 from a loss of $20,769,000 in the prior year. Net earnings per common share, after deducting preferred dividends, was $.13 compared to a loss of $1.34 in the prior year. LIQUIDITY AND CAPITAL RESOURCES 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 admissions revenues. The Company is only occasionally required to make advance payments or non-refundable guaranties of film rentals. Film distributors generally release during the summer and holiday seasons the films which they anticipate will be the most successful. Consequently, the Company typically generates higher revenues during such periods. Cash flows from operating activities, as reflected in the Consolidated Statements of Cash Flows, were $82,457,000 and $83,727,000 for the thirty-nine weeks ended December 31, 1998 and January 1, 1998, respectively. The Company is currently expanding its domestic theatre circuit and entering select international markets. During the current fiscal year, the Company opened 15 megaplexes with 327 screens and acquired four multiplexes with 29 screens. The Company plans to continue this expansion by opening 24 screens in one megaplex during the remainder of fiscal 1999. In addition, the Company sold three multiplexes with 17 screens, closed five multiplexes with 32 screens and discontinued operating one managed theatre with one screen resulting in a circuit total of 59 megaplexes with 1,314 screens and 180 multiplexes with 1,434 screens as of December 31, 1998. The costs of constructing new theatres are funded by the Company through internally generated cash flow or borrowed funds. The Company generally leases its theatres pursuant to long-term non-cancelable operating leases which require the developer, who owns the property, to reimburse the Company for a portion of the construction costs. However, the Company may decide to own the real estate assets of new theatres and, following construction, sell and leaseback the real estate assets pursuant to long- term non-cancelable operating leases. During fiscal 1999, 13 new theatres with 277 screens were leased from developers. Historically, the Company has owned and paid for the equipment necessary to fixture a theatre. However, the Company has recently entered into a master lease agreement for up to $25,000,000 of equipment necessary to fixture certain theatres. The master lease agreement has an initial term of six years and includes early termination and purchase options. The Company classifies these leases as operating leases. As of December 31, 1998, the Company had construction in progress of $57,052,000 and reimbursable construction advances (amounts due from developers on leased theatres) of $16,180,000. The Company had 10 megaplexes with 242 screens under construction on December 31, 1998. During the thirty-nine weeks ended December 31, 1998, the Company had capital expenditures of $177,063,000 and estimates that total capital expenditures for 1999 will aggregate approximately $290 million. The Company estimates that total capital expenditures for 2000 will aggregate approximately $310 million. Included in these amounts are real estate assets which the Company plans to place into sale and leaseback or other comparable financing programs, which will have the effect of reducing the Company's net cash outlays. On August 11, 1998, the Company loaned one of its officers $5,625,000 to purchase 375,000 shares of Common Stock of the Company in the Secondary Offering. On September 14, 1998, the Company loaned $3,765,000 to another of its officers to purchase 250,000 shares of Common Stock of the Company. The 250,000 shares were purchased in the open market and unused proceeds of $811,000 were repaid to the Company leaving a remaining unpaid principal balance of $2,954,000. The loans are unsecured and are due in August and September of 2003, respectively, may be prepaid in part or full without penalty, and are represented by promissory notes which bear interest at a rate (5.57% per annum) at least equal to the applicable federal rate prescribed by Section 1274 (d) of the Internal Revenue Code in effect on the date of such loans, payable at maturity. The Company's Board of Directors has also approved a loan under the same terms described above to Mr. Stanley H. Durwood not to exceed $10,000,000 to purchase up to 500,000 shares of the Company's Common Stock. Mr. Durwood's eligibility to participate in this program expires in March, 1999. On January 27, 1999, the company sold $225 million aggregate principal amount of 9 1/2% Senior Subordinated Notes due 2011 (the "Notes") in a private offering. Net proceeds from the issuance of the Notes (approximately $219.3 million) were used to reduce borrowings under the Credit Facility. The Notes bear interest at the rate of 9 1/2% per annum, payable in February and August. The Notes are redeemable at the option of the Company, in whole or in part, at any time on or after February 1, 2004 at 104.75% of the principal amount thereof, declining ratably to 100% of the principal amount thereof on or after February 1, 2007, plus in each case interest accrued to the redemption date. Upon a change of control (as defined in the Note Indenture), the Company will be required to make an offer to repurchase each 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 Notes are unsecured senior subordinated indebtedness of the Company ranking equally with the Company's 9 1/2% Senior Subordinated Notes due 2009. The Company has entered into a registration rights agreement in which it has agreed to use its best efforts to (i) file and cause to become effective by June 26, 1999, 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. If the Exchange Offer registration statement is not consummated by July 26, 1999, the Company has agreed that it will file a shelf registration statement with respect to the Notes. In the event that (a) neither the Exchange Offer registration statement nor the shelf registration statement is filed on or prior to April 27, 1999, (b) neither the Exchange Offer registration statement nor the shelf registration statement is declared effective on or prior to June 26, 1999, (c) neither the Exchange Offer is consummated nor a shelf registration statement, with respect to the Notes, is declared effective on or prior to July 26, 1999 or (d) after either the Exchange Offer registration statement or the shelf registration statement has been declared effective, such registration statement thereafter ceases to be effective or usable (subject to certain exceptions) in connection with the Exchange Offer, in the case of the Exchange Offer registration statement, or resales of Notes in the case of a shelf registration statement, in accordance with and during the periods specified in the registration rights agreement (each such event referred to in clauses (a) through (d), a ("Registration Default"), interest ("Special Interest") will accrue on the principal amount of the Notes (in addition to the stated interest on the Notes) from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured. Special Interest will accrue at a rate of 0.50% per annum during the 90-day period immediately following the occurrence of such Registration Default and shall increase by 0.50% per annum at the end of each subsequent 30 day period, but in no event shall such rate exceed 1.0% per annum. The Company's Credit Facility 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. The Credit Facility matures on April 10, 2004. The commitment thereunder will be reduced by $25 million on each of December 31, 2002, March 31, 2003, June 30, 2003 and September 30, 2003 and by $50 million on December 31, 2003. As of December 31, 1998, the Company had outstanding borrowings of $253 million under the Credit Facility at an average interest rate of 6.85% per annum, and $165,000,000 was available for borrowing under the Credit Facility. The total commitment under the Credit Facility is $425 million, but the facility contains covenants that limit the Company's ability to incur debt (whether under the Credit Facility or from other sources). The Company believes that, as of December 31, 1998, after giving effect to the use of the net proceeds from the sale of the Notes, it would have had available approximately $183 million additional borrowing capacity under the Credit Facility. The Company is in the process of negotiating with its banks to increase its capacity to utilize the bank commitment or otherwise incur debt. Subject to favorable market conditions, the Company also plans to sell and leaseback the real estate assets associated with newly constructed megaplex theatres, which would be an additional source of financing. Covenants under the Credit Facility impose limitations on indebtedness, creation of liens, change of control, transactions with affiliates, mergers, investments, guaranties, asset sales, dividends, business activities and pledges. In addition, the Credit Facility contains certain financial covenants. Covenants under the Indenture relating to the Company's 9 1/2 % Senior Subordinated Notes due 2009 impose limitations on the incurrence of indebtedness, dividends, purchases or redemptions of stock, transactions with affiliates, and mergers and sale of assets, and require the Company to make an offer to purchase the 9 1/2% Senior Subordinated Notes due 2009 upon the occurrence of a change in control, as defined in the Indenture. As of December 31, 1998, the Company was in compliance with all financial covenants relating to the Credit Facility. During fiscal 1998, the Company sold the real estate assets associated with 13 megaplex theatres, including seven theatres opened during fiscal 1998, to EPT for an aggregate purchase price of $283,800,000. Proceeds from the Sale and Lease Back Transaction were applied to reduce indebtedness under the Company's Credit Facility. The Company leased the real estate assets associated with the theatres from EPT pursuant to non-cancelable operating leases with terms ranging from 13 to 15 years with options to extend for up to an additional 20 years. The Company has granted an option to EPT to acquire one megaplex theatre for the cost to the Company of developing and constructing such property. In addition, for a period of five years subsequent to November 1997, EPT will have a right of first refusal and first offer to purchase and lease back to the Company the real estate assets associated with any megaplex theatre and related entertainment property owned or ground-leased by the Company, exercisable upon the Company's intended disposition of such property. As of December 31, 1998, the Company had one open megaplex and one megaplex under construction that would be subject to EPT's right of first refusal and first offer to purchase should the Company seek to dispose of such megaplexes. The leases are triple net leases that require the Company to pay substantially all expenses associated with the operation of the theatres, such as taxes and other governmental charges, insurance, utilities, service, maintenance and any ground lease payments. The Company believes that cash generated from operations, existing cash and equivalents, amounts received from sale and lease back transactions and the available commitment amount under its Credit Facility will be sufficient to fund operations and planned capital expenditures for the next 12 months. However, a failure to amend the Credit Facility as contemplated and or enter into sale and lease back transactions could adversely affect the Company's ability to continue its expansion program. During the thirty-nine weeks ended December 31, 1998, various holders of the Company's Convertible Preferred Stock converted 1,796,485 shares into 3,097,113 shares of Common Stock at a conversion rate of 1.724 shares of Common Stock for each share of Convertible Preferred Stock. On April 14, 1998, the Company redeemed the remaining 3,846 shares of Convertible Preferred Stock at a redemption price of $25.75 per share plus accrued and unpaid dividends. Preferred Stock dividend payments decreased $3,884,000 during the thirty-nine weeks ended December 31, 1998 compared to the prior year as a result of the conversions. Year 2000 - State of Readiness Potential Impact on Company. The failure of information technology (?IT?) and embedded, or ?non-IT??systems, because of the Year 2000 issue or otherwise, could adversely affect the Company's operations. If not corrected, many computer-based systems and theatre equipment, such as air conditioning systems and fire and sprinkler systems, could encounter difficulty differentiating between the year 1900 and the year 2000 and interpreting other dates, resulting in system malfunctions, corruption of data or system failure. Additionally, the Company relies upon outside third parties (?business partners") to supply many of the products and services that it needs in its business. Such products include films which it exhibits and concession products which it sells. Attendance at the Company's theatres could be severely impacted if one or more film producers are unable to produce new films because of Year 2000 issues. The Company could suffer other business disruptions and loss of revenues if any other types of material business partners fail to supply the goods or services necessary for the Company's operations. IT Systems. The Company utilizes a weighted methodology to evaluate the readiness of its corporate and theatre level IT systems. For this purpose, corporate and theatre system types include commercial off-the-shelf software, custom in-house developed software, ticketing system software, concession system software and hardware systems such as workstations and servers. The Company has weighted each corporate and theatre system based on its overall importance to the organization. The Company's readiness is evaluated in terms of a five-phase process utilized in the Year 2000 strategic plan (the "Plan") with appropriate weighting given to each phase based on its relative importance to IT system Year 2000 readiness. The phases may generally be described as follows: (i) develop company-wide awareness; (ii) inventory and assess internal systems and business partners, and develop contingency plans for systems that cannot be renovated; (iii) renovate critical systems and contact material business partners; (iv) validate and test critical systems, analyze responses from critical business partners and develop contingency plans for non-compliant partners; and (v) implement renovated systems and contingency plans. The Company has placed a high level of importance on its corporate and theatre software systems and a lesser degree of importance on its hardware systems when evaluating Year 2000 readiness. As a result, the Company has focused more of its initial efforts toward Year 2000 readiness with respect to its software systems than it has with respect to its hardware systems. Additionally, the Company believes that the assessment, validation and testing and implementation phases are the most important phases in its Plan. Based on the weighting methodology described above, the Company has assessed 91% of its corporate IT systems and as of December 31, 1998 has renovated 62% of those systems that require renovation as a result of the Year 2000 issue. In the aggregate, as of December 31, 1998, 72% of the Company's corporate IT systems have been tested and verified as being Year 2000 ready. The percentage of corporate IT systems that have been tested and verified as being Year 2000 ready assumes that a significant component of commercial-off-the-shelf software, the recently installed Oracle financial applications, is Year 2000 ready. This system was warranted to be Year 2000 ready when purchased. Although the Company has plans to test and verify the Oracle financial applications to validate that the implementation is in fact Year 2000 ready, it does not believe that it has a significant risk with respect to the Oracle financial applications. Based on the weighting methodology described above, the Company has assessed 81% of its theatre IT systems and as of December 31, 1998 has renovated 51% of those systems that require renovation as a result of the Year 2000 issue. In the aggregate, as of December 31, 1998, 35% of the Company's theatre IT systems have been tested and verified as being Year 2000 ready. Overall, the Company has assessed its Plan with respect to IT systems as being 63% complete as of December 31, 1998. Although, no assurance can be given, the Company does not believe that it has material exposure to the Year 2000 issue with respect to its internal IT systems. Non-IT Systems. The Company's non-IT systems are currently being assessed. Based on budgeted and expended personnel hours, assessment of non- IT systems was approximately 80% complete as of December 31, 1998. The Company's revised goals are to complete assessment and develop a plan of remediation for non-IT systems by March 1, 1999 and to commence remediation by April 30, 1999. Third Parties. The Company is in the process of identifying and assessing potential Year 2000 readiness risks associated with its outside business partners. Based on budgeted and expended personnel hours, assessment of third parties was approximately 31% complete as of December 31, 1998. The Company's revised goals are to complete its inventory of business partners and to communicate with material business partners regarding their Year 2000 readiness by March 31, 1999, and to develop contingency plans for dealing with non-ready partners by April 30, 1999. Contingency Planning. Although the Company presently does not have all contingency plans in place to address the possibility that either it or its material business partners may not be Year 2000 ready, it has started a process to develop such plans and expects that contingency plans will be in place by April 30, 1999. The Company has the ability to issue theatre tickets manually in the event of a system failure. Costs. Although a definitive estimate of costs associated with required modifications to address the Year 2000 issue cannot be made until the Company has at least completed the assessment phase of its Plan, presently management does not expect such costs to be material to the Company's results of operations, liquidity or financial condition. The total amount expended from July 1, 1996 through December 31, 1998 was approximately $230,000. Based on information presently known, the total amount expected to be expended on the Year 2000 effort for IT systems is approximately $1,600,000, primarily comprised of software upgrades and replacement costs, internal personnel hours and consulting costs. To date, the Year 2000 effort has been funded primarily from the existing IT budget. Readers are cautioned that forward looking statements contained in this section should be read in conjunction with the Company's disclosures under the heading ?Forward Looking Statements". In addition to the factors listed therein which could cause actual results to be different from those anticipated, the following special factors could affect the Company's ability to be Year 2000 ready: (i) the Company's ability to implement the Plan, (ii) cooperation and participation by business partners, (iii) the availability and cost of trained personnel and the ability to recruit and retain them and (iv) the ability to locate all system coding requiring correction. Euro Conversion A single currency called the euro was introduced in Europe on January 1, 1999. Eleven of the fifteen member countries of the European Union adopted the euro as their common legal currency on that date. Fixed conversion rates between these participating countries' existing currencies (the "legacy currencies") and the euro were established as of that date. The legacy currencies are scheduled to remain legal tender as denominations of the euro until January 1, 2002. During this transition period, parties may pay for items using either the euro or a participating country's legacy currency. The Company currently operates one theatre in Portugal and one theatre in Spain. Both countries are member countries that adopted as of January 1, 1999. The Company has implemented necessary changes to accounting, operational, and payment systems to accommodate the introduction of the euro. The Company does not anticipate that the conversion will have a material impact on its consolidated financial position, results of operations or cash flows. New Accounting Pronouncements During fiscal 1999, the Emerging Issues Task Force (EITF) released Issue No. 97-10, The Effect of Lessee Involvement in Asset Construction. Issue No. 97-10 is applicable to entities involved on behalf of an owner- lessor with the construction of an asset that will be leased to the lessee when construction of the asset is completed. The Company typically is responsible for directly paying project costs that are in excess of an agreed upon amount to be paid for by the owner-lessor. Generally, these project costs paid by the Company include elements that are considered to be structural in nature as defined by Issue No. 97-10. As a result, the Company believes it would be considered the owner of these projects during construction. The consensus reached in Issue No. 97-10 applies to construction projects committed to after May 21, 1998 and also to those projects that were committed to on May 21, 1998 if construction does not commence by December 31, 1999. Unless the Company changes the manner in which it contracts for the construction of theatres, the Company believes that Issue No. 97-10 will require certain of its future operating leases to be recorded on its Balance Sheet as lease financing obligations. The Company is in the process of evaluating the impact of Issue 97-10 on its consolidated financial position, results of operations and cash flows. During fiscal 1999, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for Derivative Instruments and Hedging Activities. The statement requires companies to recognize all derivatives as either assets or liabilities, with the instruments measured at fair value. The accounting for changes in fair value of a derivative depends on the intended use of the derivative and the resulting designation. The statement is effective for all fiscal years beginning after June 15, 1999. The statement will become effective for the Company in fiscal 2001. Adoption of this statement is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows. During fiscal 1999, the American Institute of Certified Public Accountants issued Statement of Position 98-5 ("SOP 98-5"), Reporting on the Costs of Start-up Activities. SOP 98-5 requires costs of start-up activities to be expensed when incurred. The Company currently capitalizes such costs and amortizes them over a two-year period. SOP 98-5 is effective for fiscal years beginning after December 15, 1998. The Company will adopt this statement in fiscal 2000, which will result in a cumulative effect adjustment to the Company's results of operations and financial position based on balances as of April 1, 1999. Had the Company adopted SOP 98-5 at the beginning of fiscal 1999, such adjustment would have been approximately $10.6 million, before taxes. During fiscal 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131 ("SFAS 131"), Disclosures About Segments of an Enterprise and Related Information and Statement of Financial Accounting Standards No. 132 ("SFAS 132"), Employers' Disclosures about Pensions and Other Postretirement Benefits. SFAS 131 requires new disclosures of segment information in a company's financial statements and is effective for fiscal years beginning after December 15, 1997. SFAS 132 requires disclosures about pension and other postretirement benefit plans in a company's financial statements and is effective for fiscal years beginning after December 15, 1997. These statements will become effective for the Company in fiscal 1999. Adoption of these statements will not impact the Company's consolidated financial position, results of operations or cash flows. Other A subsidiary of the Company is involved with the pre-development of a retail/entertainment district in downtown Kansas City, Missouri known as the "Power & Light District." Under the terms of the subsidiary's agreement with the Tax Increment Financing Commission of Kansas City, Missouri and the City of Kansas City, Missouri, the subsidiary is required to engage a developer and meet certain financial and other conditions in order to receive assistance in financing the project. In the event that the Company is not successful in meeting those requirements, carrying costs related to the project will have to be expensed. Carrying costs related to the project were approximately $3 million as of December 31, 1998. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. PART II - OTHER INFORMATION Item 1. Legal Proceedings. As previously disclosed in the Company's Form 10-Q's for the quarters ended July 2, 1998 and October 1, 1998, in the summer of 1998, the Civil Rights Division of the Department of Justice ("DOJ") threatened to sue the Company based on an alleged pattern or practice of violations of Title III of the Americans with Disabilities Act of 1990 (the "ADA") at its newly constructed and renovated theatres having stadium-style seating. Since that time, the Company has been engaging in discussions with the DOJ in an effort to ascertain the DOJ's position and resolve this matter on a reasonable basis. However, on January 29, 1999, the Company was notified that the DOJ had filed suit in the United States District Court for the Central District of California, United States of America v. AMC Entertainment Inc. and American Multi-Cinema, Inc. The complaint alleges that the Company has designed, constructed and operated two of its motion picture theatres in the Los Angeles area and unidentified theatres elsewhere that have stadium-style seating in violation of DOJ regulations implementing Title III of the ADA and related "Standards for Accessible Design" (the "Standards"). The complaint alleges various types of non-compliance with the DOJ's Standards, but relates primarily to issues relating to lines of sight. The DOJ seeks declaratory and injunctive relief regarding existing and future theatres with stadium-style seating, compensatory damages and a civil penalty. The current DOJ position appears to be that theatres must provide wheelchair seating locations and transfer seats with viewing angles to the screen that are at the median or better, counting all seats in the auditorium. Heretofore, the Company has attempted to conform to the evolving standards imposed by the DOJ and believes its theatres are in substantial compliance with the ADA. However, the Company believes that the DOJ's current position has no basis in the ADA or related regulations and is an attempt to amend the ADA regulations without complying with the Administrative Procedures Act. The Company intends to file an answer denying the allegations and asserting that the DOJ is engaging in unlawful rulemaking. A similar suit recently has been filed by another exhibitor, Cinemark USA, Inc. v. United States Department of Justice, United States District Court for the Northern District of Texas, Case No. 399CV0183-L. Although no assurances can be given, based on existing precedent involving stadiums or stadium seating, the Company believes that an adverse decision in this matter is not likely to have a material adverse effect on its financial condition, liquidity or results of operations. However, there have been only a few cases involving stadiums or stadium seating. In an unrelated action filed on March 5, 1998 in the United States District Court for the District of Arizona, Howard Bell v. AMC 24 Theatres, CIV 98 0390, a private plaintiff is alleging that the Company has violated the ADA for not dispersing accessible seating or providing accessible signage at a megaplex located in Phoenix, Arizona. On October 16, 1998, another private plaintiff filed suit in the United States District Court for the District of Southern Florida, Barbara Harris v. American Multi-Cinema, Inc., CIV 98-2472, alleging that the Company has violated the ADA by failing to provide comparable seating for wheel chair patrons. Both suits seek an injunction against continued operation of the megaplex in violation of the ADA. On November 30, 1998, Cyndi Soto filed suit in the United States District Court for the Central District of California, Cyndi Soto v. American Multi-Cinema, Inc. and JANSS/TYS Long Beach Associates, CV989547SLRNBX, alleging that one of the Company's theatres violated the ADA and California law by failing to remove certain barriers to access. The suit seeks an unspecified amount of general, special and punitive damages under California law and an injunction requiring the Company remove the alleged barriers. The Company has filed an answer denying the allegations in the Bell suit and expects to file an answer denying the allegations in the Harris suit. On July 27, 1998, in the United States District Court for the Northern District of California, Drexler Technology Corporation filed actions against each of Sony Corporation and its affiliated companies and Dolby Laboratories, Inc., and has included as defendants various motion picture distributors and exhibitors, including AMC, Drexler Technology Corp. v. Sony corp. et al, C98-02936, and Drexler Technology Corp. v. Dolby Labs. et al, C98-02935. These actions allege infringement of two patents relating to optical data storage and retrieval systems, which are allegedly infringed by the encoding of digital sound on motion picture films. These infringement allegations are based on the production, distribution and exhibition of film with Sony Dynamic Digital Sound (SDDS) or Dolby Digital technology. Plaintiff seeks an injunction against continued use of this technology and also seeks damages. AMC has filed counter claims alleging that plaintiff's patents are invalid. The court has ordered that the issues of liability and damages be tried separately, but has not set a trial date. AMC currently utilizes SDDS systems with respect to 2,338 of its screens and owns 136 portable systems employing Dolby Digital technology. AMC is the beneficiary of indemnification arrangements with respect to these actions. Pursuant to AMC's contractual arrangements with Sony Cinema Products Corporation ("Sony Cinema"), a subsidiary of Sony Corporation of America, Sony Cinema is obligated to indemnify, defend and hold harmless AMC from and against any and all liabilities, damages, losses, costs and expenses (including attorneys' fees) suffered or incurred by AMC in connection with any third party claim for alleged infringement of any patent, trademark or similar right relating to the SDDS systems. The agreement with Sony Cinema provides that Sony Cinema at its expense and option, shall (i) settle or defend against such a claim, (ii) procure for AMC the right to use the SDDS systems in a manner that will cause them to perform as originally intended under the agreement between AMC and Sony Cinema; (iii) replace or modify the SDDS systems to avoid infringement; or (iv) remove the SDDS systems from AMC's facilities (at such time and in such manner as to not disrupt AMC's business operations) and refund to AMC the purchase price less depreciation. Dolby Laboratories has agreed (i) to defend, indemnify and hold AMC harmless from any losses arising out of the Drexler v. Dolby Labs. action and (ii) in the event the Dolby Digital technology is found to infringe one or more of the Drexler patents, to procure for AMC at Dolby's expense the right to make, use and sell the Dolby Digital technology or to modify it so that it is non-infringing. As a result, although no assurance can be given, the Company believes that these actions will not have a material adverse effect on the Company's financial condition, liquidity or results of operations. As previously reported in its quarterly report on Form 10-Q for the quarter ended October 1, 1998, on September 2, 1998 the Company was served with a lawsuit filed in Canada in the Ontario Court (General Division) against the Company and its subsidiary, AMC Entertainment International, Inc. (1107656 Ontario Inc. v. AMC Entertainment Inc. and AMC Entertainment International Inc., 98-CV- 154393). The lawsuit arose in connection with a decision by the Company not to execute a lease for a proposed theatre at an entertainment center being planned by the plaintiff in Markham, Ontario. Plaintiff's petition claimed that the alleged lease was consistent with the terms of a prior offer to lease executed in 1997 by the plaintiff and AMC Entertainment International, Inc. and alleged that the lease had been fully negotiated and agreed to by the parties. Plaintiff alleged the Company's action resulted in the wrongful repudiation of the offer to lease and alleged lease for the proposed theatre and forced the plaintiff to abandon plans for the entertainment center. Plaintiff claimed damages of $32,200,000 (Canadian) (approximately $20,700,000 U.S. at current exchange rates), of which $2,200,000 (approximately $1,400,000 U.S.) was based on lost development costs allegedly incurred and $30,000,000 (approximately $19,300,000 U.S.) in lost profits. Subsequently, the Company and plaintiff entered into a lease for a theatre, and plaintiff agreed to file a motion to dismiss the lawsuit with prejudice. The suit was dismissed on November 5, 1998. The Company is party to various legal proceedings in the ordinary course of business, none of which is expected to have a material adverse effect on the Company. Item 4. Submission of Matters To a Vote of Security Holders (a) The Company held its Annual Meeting of Stockholders on November 12, 1998. (b) At the meeting, the following matters were voted upon by the stockholders: (i)The election of Directors for the upcoming year. (ii)A proposal to ratify the appointment of PricewaterhouseCoopers LLP as independent public accountants of the Company for the fiscal year ending April 1, 1999. (iii)A proposal to amend the AMC Entertainment Inc. 1994 Stock Option and Incentive Plan. The Board of Directors of the Company is composed of seven (7) members. Five (5) of the directors are elected by the holders of Class B Stock, voting as a class, and two (2) of the directors are elected by the holders of Common Stock, voting as a class. The following were the nominees of management voted upon and elected by the holders of the Company's Class B Stock and Common Stock as of the record date: Class B Stock Common Stock Stanley H. Durwood William T. Grant, II Peter C. Brown John P. Mascotte Philip M. Singleton Charles J. Egan, Jr. Paul E. Vardeman All of the shares of Class B Stock (4,041,993 shares) were voted for the nominees of management. In the election of directors by the holders of Common Stock, there were 15,949,962 votes "for" William T. Grant, II and 63,072 votes "against" and 15,950,262 "for" John P. Mascotte and 62,772 "against". The total votes cast concerning the ratification of the appointment of PricewaterhouseCoopers LLP were as follows: 56,413,679 voted "for", 15,134 voted "against" and 4,151 "abstentions". The total votes cast concerning the proposal regarding the Proposed Amendments to the AMC Entertainment Inc. 1994 Stock Option and Incentive Plan were as follows: 53,456,897 "for", 2,837,989 voted "against", 11,830 "abstentions" and 126,248 broker non-votes. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION 3.1 Amended and Restated Certificate of Incorporation of AMC Entertainment Inc. (as amended on December 2, 1997) (Incorporated by reference from Exhibit 3.1 to AMCE's Form 10-Q (File No. 1-8747) dated January 1, 1998). 3.2 Bylaws of AMC Entertainment Inc. (Incorporated by reference from Exhibit 3.3 to AMCE's Form 10-Q (File No. 0-12429) for the quarter ended December 26, 1996). 4.1(a) 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 (Incorporated by reference from Exhibit 4.3 to the Company's Registration Statement on Form S-4 (File No. 333-25755) filed April 24, 1997). 4.1(b) Second Amendment, dated January 16, 1998, to Amended and Restated Credit Agreement dated as of April 10, 1997 (Incorporated by Reference from Exhibit 4.2 to the Company's Form 10-Q (File No. 1-8747) for the quarter ended January 1, 1998). 4.2(a) Indenture dated March 19, 1997, respecting AMC Entertainment Inc.'s 9 1/2% Senior Subordinated Notes due 2009 (Incorporated by reference from Exhibit 4.1 to the Company's Form 8-K (File No. 1-8747) dated March 19, 1997). 4.2(b) First Supplemental Indenture respecting AMC Entertainment Inc.'s 9 1/2% Senior Subordinated Notes due 2009 (Incorporated by reference from Exhibit 4.4(b) to Amendment No. 2. to the Company's Registration Statement on Form S-4 (File No.333-29155) filed August 4, 1997). *4.3 Indenture dated January 27, 1999, respecting AMC Entertainment Inc.'s 9 1/2% Senior Subordinated Notes due 2011. *4.4 Registration Rights Agreement, dated January 27, 1999, respecting AMC Entertainment Inc.'s 9 1/2% Senior Subordinated Notes due 2011. 4.5 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. *10.1 Employment agreement between AMC Entertainment Inc. and Peter C. Brown dated January 1, 1999 *10.2 Employment agreement between AMC Entertainment Inc., American Multi-Cinema, Inc. and Philip M. Singleton dated January 1, 1999 *10.3 Employment agreement between AMC Entertainment Inc., American Multi-Cinema, Inc. and Richard M. Fay dated February 1, 1999. *10.4 Employment agreement between AMC Entertainment Inc., American Multi-Cinema, Inc. and Richard T. Walsh dated February 1, 1999. *10.5 AMC Entertainment Inc. 1994 Stock Option and Incentive Plan, as amended. *10.6 Form of Non-Qualified (Non-ISO) Stock Option Agreement used in November 13, 1998 option grants to Mr. Stanley H. Durwood, Mr. Peter C. Brown and Mr. Philip M. Singleton. *27 Financial Data Schedule _______ * Filed herewith (b) Reports on Form 8-K On January 15, 1999, the Company filed a Form 8-K reporting under Item 5(a) the Company's plans to make a private offering of $225 million of Senior Subordinated Notes. On January 15, 1999, the Company filed a Form 8-K reporting under Item 5(a) the earnings for the third quarter of fiscal 1999 and under Item 5(b) the Company's unaudited Consolidated Statements of Operations for the thirteen and thirty-nine weeks ended December 31, 1998 and January 1, 1998 and the unaudited Consolidated Balance Sheets as of December 31, 1998 and April 2, 1998. On January 25, 1999, the Company filed a Form 8-K reporting under item 5(a) the Company's completion of a private offering of $225 million of Senior Subordinated Notes. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMC ENTERTAINMENT INC. Date: February 10, 1999 /s/ Peter C. Brown Peter C. Brown Co-Chairman of the Board, President and Chief Financial Officer Date: February 10, 1999 /s/ Richard L. Obert Richard L. Obert Senior Vice President- Chief Accounting and Information Officer EX-27 2
5 The schedule contains summary financial information extracted from the Consolidated Financial Statements of AMC Entertainment Inc. as of and for the thirty-nine weeks ended December 31, 1998, submitted in response to the requirements to Form 10-Q and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS APR-01-1999 DEC-31-1998 34,277 0 39,230 698 0 101,216 1,045,762 370,441 904,452 189,540 497,458 0 0 12,965 123,640 904,452 239,998 785,353 38,499 648,376 64,472 0 26,217 4,915 1,800 3,115 0 0 0 3,115 0.13 0.13
EX-4.3 3 INDENTURE EXHIBIT 4.3 EXECUTION COPY AMC Entertainment Inc. 9 1/2% Senior Subordinated Notes due 2011 INDENTURE Dated as of January 27, 1999 The Bank of New York Trustee INDENTURE dated as of January 27, 1999, between AMC Entertainment Inc., a Delaware corporation (the "Company") and The Bank of New York, a New York banking corporation, as Trustee (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's 9 1/2% Senior Subordinated Notes due 2011, to be issued, from time to time, in one or more series as in this Indenture provided (the "Initial Securities") and, if and when issued pursuant to a registered or private exchange for the Initial Securities, the Company's 9 1/2% Senior Subordinated Notes due 2011 (the "Exchange Securities") and if and when issued pursuant to a private exchange for Initial Securities, the Company's 9 1/2% Senior Subordinated Notes due 2011 (the "Private Exchange Securities" and, together with the Initial Securities and the Exchange Securities, the "Securities"): ARTICLE I Definitions and Incorporation by Reference SECTION 1.01. Definitions. "9 1/2% Notes due 2009" means the Company's 9 1/2% Senior Subordinated Notes due 2009. "Acquired Indebtedness" of any particular Person means Indebtedness of any other Person existing at the time such other Person merged with or into or became a Subsidiary of such particular Person or assumed by such particular Person in connection with the acquisition of assets from any other Person, and not incurred by such other Person in connection with, or in contemplation of, such other Person merging with or into such particular Person or becoming a Subsidiary of such particular Person or such acquisition. "Affiliate" means, with respect to any specified Person, (1) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person or (ii) any other Person that owns, directly or indirectly, ten percent or more of such Person's Capital Stock or any officer or director of any such Person or other Person or with respect to any natural Person, any person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and controlled" have meanings correlative to the foregoing. "Bankruptcy Laws" means the bankruptcy laws of the United States and the law of any other jurisdiction relating to bankruptcy, insolvency, winding up, liquidation, reorganization or relief of debtors. "Board of Directors" means the Board of Directors of the Company or any committee of such Board of Directors duly authorized to act under the Indenture. "Board Resolution" means a copy of a resolution, certified by the Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day other than a Saturday or Sunday or other day on which banks in New York, New York, Kansas City, Missouri, or the city in which the Trustee's Office is located are authorized or required to be closed or, if no Security is outstanding, the city in which the principal corporate trust office of the Trustee is located. "Capital Lease Obligation" of any Person means any obligations of such Person and its Subsidiaries on a consolidated basis under any capital lease of a real or personal property which, in accordance with GAAP, has been recorded as a capitalized lease obligation (together with Indebtedness in the form of operating leases entered into by the Company or its Subsidiaries after May 21, 1998 and required to be reflected on a consolidated balance sheet pursuant to EITF 97-10). "Capital Stock" of any Person means any and all shares, interests, participations or other equivalents (however designated) of such Person's capital stock, any rights (other than debt securities convertible into capital stock), warrants or options to acquire such capital stock, whether now outstanding or issued after the date of the Indenture. "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any United States domestic commercial bank having capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having one of the two highest rating categories obtainable from Moody's or S&P in each case maturing within six months after the date of acquisition and (vi) readily marketable direct obligations issued by any State of the United States of America or any political subdivision thereof having one of the two highest rating categories obtainable from Moody's or S&P. "Change of Control" means the occurrence of, after the date of the Indenture, either of the following events (a) any Person (other than a Permitted Holder) or any Persons (other than any Permitted Holders) acting together that would constitute a group (for purposes of Section 13(d) of the Exchange Act, or any successor provision thereto) (a "Group"), together with any Affiliates thereof (other than any Permitted Holders) shall beneficially own (as defined in Rule 13d-3 under the Exchange Act, or any successor provision thereto) at least 50% of the aggregate voting power of all classes of Capital Stock of the Company entitled to vote generally in the election of directors (the determination of aggregate voting power to recognize that the Company's Class B Stock, par value 66 2/3 cents per share, currently has ten votes per share and the Company's Common Stock, par value 66 2/3 cents per share, currently has one vote per share) or (b) any Person (other than a Permitted Holder) or Group (other than any Permitted Holders) together with any Affiliates thereof (other than any Permitted Holders) shall succeed in having a sufficient number of its nominees who are not management nominees elected to the Board of Directors of the Company such that such nominees when added to any existing director remaining on the Board of Directors of the Company after such election who is an Affiliate (other than any Permitted Holder) of such Group, will constitute a majority of the Board of Directors of the Company. "Closing Date" means the date on which the Original Securities are originally issued under the Indenture. "Company" means the Person named as the "Company" in the first paragraph of this Indenture, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. To the extent necessary to comply with the requirements of the provisions of Trust Indenture Act Sections 310 through 317 as they are applicable to the Company, the term "Company" shall include any other obligor with respect to the Securities for the purposes of complying with such provisions. "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 nonrecurring 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 Financial Accounting Standard Number 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 or motion picture theatre by another Person shall be accounted for on a "pooling of interests" basis and not as a purchase; provided, further, that, solely with respect to calculations of the Consolidated EBITDA Ratio: (i) Consolidated EBITDA shall include the effects of incremental contributions the Company reasonably believes in good faith could have been achieved during the relevant period as a result of a Theatre Completion had such Theatre Completion occurred as of the beginning of the relevant period; provided, however, that such incremental contributions were identified and quantified in good faith in an Officers' Certificate delivered to the Trustee at the time of any calculation of the Consolidated EBITDA Ratio, (ii) Consolidated EBITDA shall be calculated on a pro forma basis after giving effect to any motion picture theatre or screen that was permanently or indefinitely closed for business at any time on or subsequent to the first day of such period as if such theatre or screen was closed for the entire period, and (iii) all preopening expense and theatre closure expense which reduced Consolidated Net Income during any applicable period shall be added to Consolidated EBITDA. "Consolidated EBITDA Ratio" of any Person means, for any period, the ratio of Consolidated EBITDA to Consolidated Interest Expense for such period (other than any non-cash Consolidated Interest Expense attributable to any amortization or write-off of deferred financial costs); provided that, in making such computation, (A) the Consolidated Interest Expense attributable to interest on any Indebtedness computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period and (B) with respect to any Indebtedness which bears, at the option of such Person, a fixed or floating rate of interest, such Person shall apply, at its option, either the fixed or floating rate. "Consolidated Interest Expense" of any Person means, without duplication, for any period, as applied to any Person, (A) the sum of (a) the aggregate of the interest expense on Indebtedness of such Person and its consolidated Subsidiaries for such period, on a consolidated basis, including, without limitation, (i) amortization of debt discount, (ii) the net cost under Interest Rate Protection Agreements (including amortization of discounts), (iii) the interest portion of any deferred payment obligation and (iv) accrued interest, plus (b) the interest component of the Capital Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its consolidated Subsidiaries during such period, minus (B) the cash interest income (exclusive of deferred financing fees) of such Person and its consolidated subsidiaries during such period, in each case as determined in accordance with GAAP consistently applied. "Consolidated Net Income (Loss)" of any Person means, for any period, the consolidated net income (or loss) of such Person and its consolidated Subsidiaries for such period as determined in accordance with GAAP, adjusted, to the extent included in calculating such net income (loss), 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. "Construction Indebtedness" means Indebtedness incurred by the Company or its Subsidiaries in connection with the construction of motion picture theatres or screens. "Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution of this Indenture is located at 101 Barclay Street, 21 W, New York, New York 10286. "Credit Facility" means that certain Amended and Restated Credit Agreement, dated as of April 10, 1997, among the Company, The Bank of Nova Scotia, as administrative agent, Bank of America National Trust and Savings Association, as document agent, and the various other financial institutions thereto, as the same may be amended from time to time, together with any extension, revisions, refinancing or replacement thereof by a lender or syndicate of lenders. "Currency Hedging Obligations" means the obligations of any Person pursuant to an arrangement designed to protect such Person against fluctuations in currency exchange rates. "Debt Rating" means the rating assigned to the Securities by Moody's or S&P, as the case may be. "Default" means any event which is, or after notice or the passage of time or both, would be, an Event of Default. "Designated Senior Indebtedness" means (i) all Senior Indebtedness under the Credit Facility and (ii) any other Senior Indebtedness (a) which at the time of determination exceeds $30 million in aggregate principal amount, (b) which is specifically designated in the instrument evidencing such Senior Indebtedness as "Designated Senior Indebtedness" by the Company and (c) as to which the Trustee has been given written notice of such designation. The "authorized representative" of Designated Senior Indebtedness shall be the agent under the Credit Facility (initially, The Bank of Nova Scotia) or other representative, designated in writing by the Company to the Trustee, of the holders of any class or issue of Designated Senior Indebtedness. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fair Market Value" means, with respect to any asset or property, the sale value that would be obtained in an arm's length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy. "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied. "Guarantee" means, with respect to any Person, any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Guaranteed Indebtedness" of any Person means, without duplication, all Indebtedness of any other Person referred to in the definition of Indebtedness 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. "Holder" or "Securityholder" means the Person in whose name a Security is registered on the Security register described in Section 2.04. as the registered holder of any Security. "Indebtedness" means, with respect to any Person, without duplication, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, excluding any trade payables and other accrued current liabilities incurred in the ordinary course of business, but including, without limitation, all obligations of such Person in connection with any letters of credit and acceptances issued under letter of credit facilities, acceptance facilities or other similar facilities, now or hereafter outstanding, (ii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), but excluding trade accounts payable arising in the ordinary course of business, (iv) every obligation of such Person issued or contracted for as payment in consideration of the purchase by such Person or a Subsidiary of such Person of the Capital Stock or substantially all of the assets of another Person or in consideration for the merger or consolidation with respect to which such Person or a Subsidiary of such Person was a party, (v) all Indebtedness referred to in clauses (i) through (iv) above of other Persons and all dividends of other Persons, the payment of which is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, (vi) all Guaranteed Indebtedness of such Person, (vii) all obligations under Interest Rate Protection Agreements of such Person, (viii) all Currency Hedging Obligations of such Person (ix) all Capital Lease Obligations of such Person, and (x) any amendment, supplement, modification, deferral, renewal, extension or refunding of any liability of the types referred to in clauses (i) through (ix) above. "Indenture" means this instrument as originally executed (including all exhibits and schedules hereto) and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Interest Rate Protection Agreement" means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, option or future contract or other similar agreement or arrangement designed to protect the Company or any of its Subsidiaries against fluctuations in interest rates. "Investment Grade Status" exists as of a date and thereafter if at such date either (i) the Debt Rating of Moody's is at least Baa3 (or the equivalent) or higher or (ii) the Debt Rating of S&P is at least BBB- (or the equivalent) or higher. "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. Reservation of title under an operating lease by the lessor and the interest of the lessee therein are not Liens as used herein. "Maturity" means, with respect to any Security, the date on which the principal of such Security becomes due and payable as provided in such Security or the Indenture, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Moody's" means Moody's Investors Service, Inc. or any successor to the rating agency business thereof. "Non-Payment Default" means any event of default with respect to any Designated Senior Indebtedness (other than a Payment Default) pursuant to which the Maturity thereof may be accelerated. "Non-Recourse Indebtedness" means Indebtedness as to which (i) none of the Company or any of its Subsidiaries (a) provides credit support (including any undertaking, agreement or instrument which would constitute Indebtedness) or (b) is directly or indirectly liable 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 Company 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. "Obligations" means any principal (including reimbursement obligations and guarantees), premium, if any, interest (including interest accruing on or after the filing of, or which would have accrued but for the filing of, any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), penalties, fees, expenses, indemnifications, reimbursements, claims for rescission, damages, gross-up payments and other liabilities payable under the documentation governing any Indebtedness or otherwise. "Officer" means the Chairman of the Board, any Co-Chairman of the Board, President, the Chief Executive Officer, any Executive Vice President, any Senior Vice President and the Chief Financial Officer of the Company. "Officers' Certificate" means a certificate signed by two Officers. Each such certificate shall include the statements provided for in Trust Indenture Act Section 314(e) to the extent applicable. "Opinion of Counsel" means a written opinion of counsel to the Company or any other Person reasonably satisfactory to the Trustee. "Payment Default" means any default in payment (whether at stated maturity, upon scheduled installment, by acceleration or otherwise) of principal of, premium, if any, or interest in respect of any Senior Indebtedness beyond any applicable grace periods. "Permitted Holder" means (i) Mr. 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) Mr. Stanley H. Durwood's estate, or any trust established by Mr. Stanley H. Durwood, during any period of administration prior to the distribution of assets to beneficiaries who are Persons described in clause (iii) below, (iii) any trust which is established 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 Company or any Subsidiary or any Person holding securities of the Company 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 Company held by any Person listed in this clause (iv), then such securities shall no longer be deemed to be held by a Permitted Holder. "Permitted Indebtedness" means the following: (i) Indebtedness of the Company under the Original Securities or upon an exchange of such Original Securities for Exchange Securities or Private Exchange Securities, such Exchange Securities or Private Exchange Securities; (ii) Indebtedness of the Company under the Credit Facility in an aggregate principal amount at any one time outstanding not to exceed $425 million; (iii) Indebtedness of the Company or any of its Subsidiaries outstanding on the Closing Date; (iv) Indebtedness of the Company or any of its Subsidiaries consisting of Permitted Interest Rate Protection Agreements; (v) Indebtedness of the Company or any of its Subsidiaries to any one or the other of them; (vi) Indebtedness incurred to renew, extend, refinance or refund (each, a "refinancing") any Indebtedness outstanding on the Closing Date in an aggregate principal amount not to exceed the principal amount of the Indebtedness so refinanced plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness so refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing by means of a tender offer or privately negotiated repurchase, plus the expenses of the Company incurred in connection with such refinancing; (vii) Indebtedness of any Subsidiary incurred in connection with the Guarantee of any Indebtedness of the Company; (viii) Indebtedness relating to Currency Hedging Obligations entered into solely to protect the Company or any of its Subsidiaries from fluctuations in currency exchange rates and not to speculate on such fluctuations; (ix) Capital Lease Obligations of the Company or any of its Subsidiaries; (x) Indebtedness of the Company or any of its Subsidiaries in connection with one or more standby letters of credit or performance bonds issued in the ordinary course of business or pursuant to self-insurance obligations; (xi) Indebtedness represented by property, liability and workers' compensation insurance (which may be in the form of letters of credit); (xii) Acquired Indebtedness, provided that such Indebtedness, if incurred by the Company, would be in compliance with Section 4.05; (xiii) Indebtedness of the Company or any of its Subsidiaries to an Unrestricted Subsidiary for money borrowed; provided that (a) such Indebtedness is subordinated in right of payment to the Securities by incorporation by reference of and in accordance with the provisions set forth in Schedule I hereto and (b) the Weighted Average Life of such Indebtedness is greater than the Weighted Average Life of the Securities; (xiv) Construction Indebtedness in an aggregate principal amount that does not exceed $100 million; and (xv) Indebtedness not otherwise permitted to be incurred pursuant to clauses (i) through (xiv) above which, together with any other Indebtedness pursuant to this clause (xv), has an aggregate principal amount that does not exceed $100 million at any time outstanding. "Permitted Interest Rate Protection Agreements" means, with respect to any Person, Interest Rate Protection Agreements entered into in the ordinary course of business by such Person that are designed to protect such Person against fluctuations in interest rates with respect to Permitted Indebtedness and that have a notional amount no greater than the payment due with respect to Permitted Indebtedness hedged thereby. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, estate, unincorporated organization or government or any agency or political subdivision thereof. "Redeemable Capital Stock" means any Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or otherwise, is or upon the happening of an event or passage of time would be required to be redeemed prior to the final Stated Maturity of the Securities or is redeemable at the option of the holder thereof at any time prior to such final Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity at the option of the holder thereof. "Representative" means the trustee, agent or representative expressly authorized to act in such capacity, if any, for an issue of Senior Indebtedness. "Restricted Payments Computation Period" means the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the Closing Date to the last day of the Company's fiscal quarter preceding the date of the applicable proposed Restricted Payment. "S&P" means Standard & Poor's Ratings Service or any successor to the rating agency business thereof. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Senior Indebtedness" means (1) all obligations of the Company, now or hereafter existing, under or in respect of the Credit Facility, whether for principal, premium, if any, interest (including interest accruing after the filing of, or which would have accrued but for the filing of, a petition by or against the Company under the Bankruptcy Laws, whether or not such interest is allowed as a claim after such filing in any proceeding under such law), fees, expenses, indemnities, gross-ups or other payments thereunder and (ii) the principal of, premium, if any, and interest on all other Indebtedness of the Company (other than the Securities and the 9 1/2% Notes due 2009), whether outstanding on the date of the Indenture or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Securities. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) Indebtedness evidenced by the Securities and the 9 1/2% Notes due 2009, (ii) Indebtedness of the Company that is expressly subordinated in right of payment to any Senior Indebtedness of the Company, the Securities or the Indebtedness evidenced by the 9 1/2% Notes due 2009, (iii) Indebtedness of the Company that by operation of law is subordinate to any general unsecured obligations of the Company, (iv) Indebtedness of the Company to the extent incurred in violation of any covenant of the Indenture, (v) any liability for federal, state or local taxes or other taxes, owed or owing by the Company, (vi) trade account payables owed or owing by the Company, (vii) amounts owed by the Company for compensation to employees or for services rendered to the Company, (viii) Indebtedness of the Company to any Subsidiary or any other Affiliate of the Company and (ix) Indebtedness which when incurred and without respect to any election under Section 1111(b) of Title 11 of the United States Code is without recourse to the Company or any Subsidiary. "Stated Maturity," when used with respect to any Security or any installment of interest thereof, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of interest is due and payable. "Subsidiary" of any person means (i) any corporation of which more than 50% of the outstanding shares of Capital Stock 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 Company. Notwithstanding the foregoing, for purposes hereof, an Unrestricted Subsidiary shall not be deemed a Subsidiary of the Company other than for purposes of the definition of "Unrestricted Subsidiary" unless the Company shall have designated in writing to the Trustee an Unrestricted Subsidiary as a Subsidiary. A designation of an Unrestricted Subsidiary as a Subsidiary may not thereafter be rescinded. "Theatre Completion" means any motion picture theatre or screen which was first opened for business during any applicable period. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. 77aaa-77bbbb) as in effect on the date of this Indenture; provided, however, that, in the event the TIA is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendments, the Trust Indenture Act of 1939 as so amended. "Trust Officer" means any officer within the Corporate Trust Administration department of the Trustee (or any successor group of the trustee) with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument, until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "U.S. Dollars", "United States Dollars"; "US$" and the symbol "$" each mean currency of the United States of America. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "Unrestricted Subsidiary" means a Subsidiary of the Company designated in writing to the Trustee (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. "Weighted Average Life" means, as of any date, with respect to any debt security, the quotient obtained by dividing (i) the sum of the products of the number of years from such date to the dates of each successive scheduled principal payment (including any sinking fund payment requirements) of such debt security multiplied by the amount of such principal payment, by (ii) the sum of all such principal payments. "Wholly-Owned Subsidiary" of any Person means a Subsidiary of such Person, all of the Capital Stock (other than Directors' qualifying shares) or other ownership interests of which shall at the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person or by such Person and one or more Wholly- Owned Subsidiaries of such Person. SECTION 1.02. Other Definitions. Term Defined in Section "Bankruptcy Order" 6.01 "Change of Control Offer" 4.09 "Change of Control Payment Date" 4.09 "Change of Control Purchase Price" 4.10 "covenant defeasance option" 8.01 "Custodian" 6.01 "Event of Default" 6.01 "Exchange Security" Appendix A "Global Security" Appendix A "Initial Blockage Period" 10.02 "legal defeasance option" 8.01 "Legal Holiday" 11.08 "OID" 2.01 "Original Securities 2.01 "Paying Agent" 2.04 "Payment Blockage Period" 10.03 "Permitted Junior Securities" 10.02 "Private Exchange Security" Appendix A "Registered Exchange Offer Appendix A "Registrar" 2.04 "Restricted Payments" 4.06 "Shelf Registration statement Appendix A "Subordinated Obligations" 10.01 "Surviving Entity" 5.01 "U.S. Government Obligations" 8.02 SECTION 1.03. Incorporation by Reference of Trust Indenture Act. Prior to the effectiveness of the registration statement relating to the Registered Exchange Offer or the Shelf Registration Statement, this Indenture shall incorporate and be governed by the provisions of the TIA. After the effectiveness of either the registration statement relating to the Registered Exchange Offer or the Shelf Registration statement, this Indenture shall be subject to the provisions of the TIA that are required to be a part of this Indenture and shall, to the extent applicable, be governed by such provisions. The following TIA terms have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured Indebtedness shall not be deemed to be subordinate or junior to secured Indebtedness merely by virtue of its nature as unsecured Indebtedness; and (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP. ARTICLE II The Securities SECTION 2.01. Amount of Securities; Issuable in Series. As provided for in Appendix A hereto, the aggregate principal amount of the Initial Securities which may be authenticated and delivered under this Indenture is $325,000,000. All Securities shall be substantially identical in all respects other than issue prices, issuance dates and denominations. The Securities may be issued in one or more series; provided, however, that any Securities issued with original issue discount ("OID") for Federal income tax purposes shall not be issued as part of the same series as any Securities that are issued with a different amount of OID or are not issued with OID. Subject to Section 2.03, the Trustee shall authenticate Securities for original issue on the Closing Date in the aggregate principal amount of $225,000,000 (the "Original Securities"). With respect to any Securities issued after the Closing Date (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, Original Securities pursuant to Section 2.07, 2.09 or 3.06 or Appendix A), there shall be established in or pursuant to a resolution of the Board of Directors, and subject to Section 2.03, set forth, or determined in the manner provided in an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of such Securities: (1) whether such Securities shall be issued as part of a new or existing series of Securities and the title of such Securities (which shall distinguish the Securities of the series from Securities of any other series); (2) the aggregate principal amount of such Securities that may be authenticated and delivered under this Indenture, which shall be in an aggregate principal amount not to exceed $100,000,000 (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the same series pursuant to Section 2.07, 2.09 or 3.06 or Appendix A and except for Securities which, pursuant to Section 2.03, are deemed never to have been authenticated and delivered hereunder); (3) the issue price and issuance date of such Securities, including the date from which interest on such Securities shall accrue; (4) if applicable, that such Securities shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the respective depositories for such Global Securities, the form of any legend or legends that shall be borne by any such Global Security in addition to or in lieu of that set forth in Exhibit 1 to Appendix A and any circumstances in addition to or in lieu of those set forth in Section 2.3 of Appendix A in which any such Global Security may be exchanged in whole or in part for Securities registered, and any transfer of such Global Security in whole or in part may be registered, in the name or names of Persons other than the depository for such Global Security or a nominee thereof; and (5) if applicable, that such Securities shall not be issued in the form of Initial Securities subject to Appendix A, but shall be issued in the form of Private Exchange Securities or Exchange Securities as set forth in Exhibit A. If any of the terms of any series are established by action taken pursuant to a resolution of the Board of Directors, a copy of an appropriate record of such action shall be certified by the Secretary or any Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate or the trust indenture supplemental hereto setting forth the terms of the series. SECTION 2.02. Form and Dating. Provisions relating to the Initial Securities of each series, the Private Exchange Series and the Exchange Securities are set forth in Appendix A, which is hereby incorporated in and expressly made part of this Indenture. The Initial Securities of each series and the Trustee's certificate of authentication shall be substantially in the form of Exhibit 1 to Appendix A which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Securities, the Private Exchange Series and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Indenture. The Securities of each series may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage, provided that any such notation, legend or endorsement is in a form reasonably acceptable to the Company. Each Security shall be dated the date of its authentication. The terms of the Securities of each series set forth in Exhibit 1 to Appendix A and Exhibit A are part of the terms of this Indenture. SECTION 2.03. Execution and Authentication. Two Officers (or one Officer and the Vice President and Secretary of the Company) shall sign the Securities for the Company by manual or facsimile signature. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Securities and may be in facsimile form. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a written order of the Company in the form of an Officers' Certificate for the authentication and delivery of such Securities, and the Trustee in accordance with such written order of the Company shall authenticate and deliver such Securities. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.04. Registrar and Paying Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Regis- trar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any of its domestically incorporated Wholly-Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent. The Company initially appoints the Trustee as Registrar and Paying Agent in connection with the Securities. SECTION 2.05. Paying Agent To Hold Money in Trust. Prior to each due date of the principal and interest on any Security, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal and interest so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Security- holders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Wholly-Owned Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.06. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.07. Replacement Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that such Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security. Every replacement Security is an additional obligation of the Company. SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancelation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities and deliver them in exchange for temporary Securities. SECTION 2.10. Cancelation. The Company at any time may deliver Securities to the Trustee for cancelation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel (subject to the record reten- tion requirements of the Exchange Act) all Securities surrendered for registration of transfer, exchange, payment or cancelation and deliver canceled Securities to the Company upon a written direction of the Company. Except as expressly permitted herein, the Company may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancelation. SECTION 2.11. Defaulted Interest. If the Company defaults in a payment of interest on the Securities, the Company shall pay the defaulted interest (plus interest on such defaulted interest at the rate borne by the Securities to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the persons who are Securityholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that neither the Company nor the Trustee shall have any responsibility for any defect in the "CUSIP" number that appears on any Security, check, advice of payment or redemption notice, and any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. ARTICLE III Redemption SECTION 3.01. Notices to Trustee. If the Company elects to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee in writing of the redemption date, the principal amount of Securities to be redeemed and that such redemption is being made pursuant to paragraph 5 of the Securities. The Company shall give each notice to the Trustee provided for in this Section at least 45 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate and an Opinion of Counsel from the Company to the effect that such redemption will comply with the conditions herein. SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than all the Securities are to be redeemed, not more than 60 days prior to the Redemption Date, the Trustee shall select the Securities to be redeemed pro rata or by lot or by a method that complies with applicable legal and securities exchange requirements, if any, and that the Trustee considers fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed. SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a date for redemption of Securities, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed. The notice shall identify the Securities (or portion thereof) to be redeemed and shall state (including CUSIP numbers if any): (1) the redemption date; (2) the redemption price; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) if fewer than all the outstanding Securities are to be redeemed, or if a Security is to be redeemed in part only, the identification and principal amounts of the particular Securities (or portion thereof) to be redeemed; (6) that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; and (7) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities. At the Company's written request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section at least 45 days before the redemption date. SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date that is on or prior to the date of redemption). Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. Prior to the redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Wholly-Owned Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date that is on or prior to the date of redemption) on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption that have been delivered by the Company to the Trustee for cancelation. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE IV Covenants SECTION 4.01. Payment of Securities. The Company shall promptly pay the principal of and interest on the Securities, in immediately available funds, on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture. The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the rate borne by the Securities to the extent lawful. SECTION 4.02. Corporate Existence. Subject to Article Five, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence and corporate power and authority of the Company and each Subsidiary; provided, however, that the Company shall not be required to preserve any such corporate existence and corporate power and authority if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries taken as a whole. SECTION 4.03. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary and (b) all material lawful claims for labor, materials and supplies, which, if unpaid, might by law become a Lien upon the property of the Company or any Subsidiary that could produce a material adverse effect on the Consolidated financial condition of the Company; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 4.04. Maintenance of Properties. The Company will cause all properties owned by the Company or any Subsidiary or used or held for use in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times, except, in every case, as and to the extent that the Company may be prevented by fire, strikes, lockouts, acts of God, inability to obtain labor or materials, governmental restrictions, enemy action, civil commotion or unavoidable casualty or similar causes beyond the control of the Company; provided, however, that nothing in this Section shall prevent the Company from discontinuing the maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. SECTION 4.05. Limitation on Consolidated Indebtedness. The Company will not, and will not permit any of its Subsidiaries to, create, incur, assume or guarantee, or in any other manner become directly or indirectly liable for the payment of, any Indebtedness (excluding Permitted Indebtedness) unless at the time of such event and after giving effect thereto on a pro forma basis the Company's Consolidated EBITDA Ratio for the four (4) full fiscal quarters immediately preceding such event, taken as one period calculated on the assumption that such Indebtedness had been incurred on the first day of such four-quarter period, is greater than or equal to 1.75:1. SECTION 4.06. Limitation on Restricted Payments. The Company shall not directly or indirectly: (A)declare or pay any dividend on, or make any distribution in respect of, any shares of the Company's or any Subsidiary's Capital Stock (excluding dividends or distributions payable in shares of its Capital Stock or in options, warrants or other rights to purchase such Capital Stock, but including dividends or distributions payable in Redeemable Capital Stock or in options, warrants or other rights to purchase Redeemable Capital Stock (other than dividends on such Redeemable Capital Stock payable in shares of such Redeemable Capital Stock)) held by any Person other than the Company or any of its Wholly-Owned Subsidiaries; or (B)purchase, redeem or acquire or retire for value any Capital Stock of the Company or any Affiliate thereof (other than any Wholly-Owned Subsidiary of the Company) or any options, warrants or other rights to acquire such Capital Stock; (such payments or any other actions described in (A) and (B) above are collectively referred to as "Restricted Payments") unless at the time of and after giving effect to the proposed Restricted Payment (the amount of any such Restricted Payment, if other than cash, as determined by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution), (1) no Default or Event of Default shall have occurred and be continuing, (2) the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the provisions of Section 4.05 and (3) the aggregate amount of all Restricted Payments declared or made after the Closing Date (including the proposed Restricted Payment) does not exceed the sum of: (I)(x) Consolidated EBITDA for the Restricted Payments Computation Period minus (y) 1.75 times Consolidated Interest Expense for the Restricted Payments Computation Period; (II) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Board of Directors, whose determination shall be conclusive, except that for any property whose Fair Market Value exceeds $10 million such Fair Market Value shall be confirmed by an independent appraisal obtained by the Company), received after the Closing Date by the Company from the issuance or sale (other than to any of its Subsidiaries) of shares of Capital Stock of the Company (other than Redeemable Capital Stock) or warrants, options or rights to purchase such shares of Capital Stock; (III) the aggregate net proceeds, including the Fair Market Value of property other than cash (as determined by the Board of Directors, whose determination shall be conclusive, except that for any property whose Fair Market Value exceeds $10 million such Fair Market Value shall be confirmed by an independent appraisal obtained by the Company), received after the Closing Date by the Company from debt securities that have been converted into or exchanged for Capital Stock of the Company (other than Redeemable Capital Stock) to the extent such debt securities were originally sold for such net proceeds plus the aggregate cash received by the Company at the time of such conversion; and (IV) $100 million. Notwithstanding the foregoing limitation, the Company may (a) pay dividends on its Capital Stock within sixty days of the declaration thereof if, on the declaration date, such dividends could have been paid in compliance with the foregoing limitation or (b) acquire, redeem or retire Capital Stock in exchange for, or in connection with a substantially concurrent issuance of, Capital Stock of the Company (other than Redeemable Capital Stock). SECTION 4.07. Limitation on Transactions with Affiliates. (a) The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly enter into or suffer to exist any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with any Affiliate of the Company (other than a Wholly- Owned Subsidiary of the Company) involving aggregate consideration in excess of $5 million unless (A) such transaction or series of transactions is on terms that are no less favorable to the Company or such Subsidiary, as the case may be, than would be available at the time of such transaction or series of transactions in a comparable transaction in an arm's-length dealing with an unaffiliated third party, (B) such transaction or series of transactions is in the best interests of the Company and (C) with respect to a transaction or series of transactions involving aggregate payments equal to or greater than $50 million, a majority of disinterested members of the Board of Directors determines that such transaction or series of transactions complies with clauses (A) and (B) above, as evidenced by a Board Resolution. (b)Notwithstanding the foregoing limitation, the Company and its Subsidiaries may enter into or suffer to exist the following: (i) any transaction pursuant to any contract in existence on the Closing Date; (ii) any Restricted Payment permitted to be made pursuant to the provisions of Section 4.06; (iii) any transaction or series of transactions between the Company and one or more of its Subsidiaries or between two or more of its Subsidiaries (provided that no more than 5% of the equity interest in any such Subsidiary is owned, directly or indirectly (other than by direct or indirect ownership of an equity interest in the Company), by any Affiliate of the Company other than a Subsidiary) and (iv) the payment of compensation (including amounts paid pursuant to employee benefit plans) for the personal services of officers, directors and employees of the Company or any of its Subsidiaries. SECTION 4.08. Limitation on Senior Subordinated Indebtedness. The Company will not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Indebtedness and senior in right of payment to the Securities. SECTION 4.09. Change of Control. Upon the occurrence of a Change of Control, the Company will be required to make an offer (a "Change of Control Offer") to purchase all outstanding Securities at a purchase price equal to 101% (the "Change of Control Purchase Price") of their principal amount plus accrued and unpaid interest, if any, to the date of purchase. Within 30 days following the date upon which the Change of Control occurred, the Company must send, by first class mail, a notice to each Holder, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer. Such notice will state, among other things, the purchase date, which must be no earlier than 30 days nor later than 60 days from the date such notice is mailed, other than as may be required by law (the "Change of Control Payment Date"). The Change of Control Offer is required to remain open for at least 20 Business Days and until the close of business on the Change of Control Payment Date. In the event that the Company makes a Change of Control Offer to purchase the Securities pursuant to this Section 4.09, the Company will comply with any applicable securities laws and regulations, including any applicable requirements of Section 14(e) of, and Rule l4e-1 under, the Exchange Act. SECTION 4.10. Provision of Financial Information. (a) Whether or not the Company is subject to the reporting requirements of the Exchange Act, or any successor provision thereto, the Company will furnish without cost to each Holder of Securities and file with the Commission and the Trustee (i) within 90 days after the end of each fiscal year of the Company (x) audited year-end consolidated financial statements (including a balance sheet, income statement and statement of cash flows) prepared in accordance with GAAP and (y) the information described in Item 303 of Regulation S-K under the Securities Act, with respect to such period, and (ii) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Company, (x) unaudited quarterly consolidated financial statements (including a balance sheet, income statement and statement of cash flows) prepared in accordance with GAAP and (y) the information described in Item 303 of Regulation S-K under the Securities Act, with respect to such period. The Company may satisfy this obligation by furnishing copies of reports filed by it under Section 13(d) or 15 of the Exchange Act. (b) In addition, unless it is then subject to the reporting requirements of Section 13(d) or 15 of the Exchange Act, the Company will furnish to any prospective purchaser of Securities or beneficial owner of Securities in connection with any sale thereof the information required by Rule 144A(d)(4) under the Securities Act, until such time as the Company has either exchanged the Securities for the Exchange Securities or until such time as the Holders thereof have disposed of such Securities pursuant to a Shelf Registration statement. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 4.11. Statement as to Compliance. The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year ending after the date hereof (the fiscal year as of the date hereof is the 52/53 week period ending on the Thursday nearest March 31), a brief certificate of its principal executive officer, principal financial officer or principal accounting officer stating whether, to such officer's knowledge, the Company is in compliance with all covenants and conditions to be complied with by it under this Indenture; provided that the first such certificate shall be delivered no later than June 30, 1999. For purposes of this Section 4.11, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. When a Default has occurred and is continuing or if the Trustee, any Holder or the trustee for or the holder of any other evidence of Indebtedness of the Company or any Subsidiary gives any notice or takes any other action with respect to a claimed default, the Company shall deliver to the Trustee an Officers' Certificate specifying such Default, notice or other action within 10 Business Days of its occurrence. SECTION 4.12. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any covenant or condition set forth in Sections 4.03 to 4.09 and Section 4.10(a), if before the time for such compliance, the Holders of a majority in aggregate principal amount of the Securities at the time outstanding shall, by written direction of such Holders, waive such compliance in such instance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. SECTION 4.13. Fall-away of Certain Covenants. In the event that the Securities attain Investment Grade Status and no Event of Default or Default shall have occurred and be continuing at such time (the occurrence of the foregoing events, being collectively referred to as the "Fall-away Event"), upon the request of the Company the covenants described under Sections 5.01(c) and 4.05 to 4.08 will no longer be applicable to the Company and its Subsidiaries; provided that the Company delivers to the Trustee (i) an Officers' Certificate certifying that the Fall-away Event shall have occurred and (ii) a letter from Moody's or S&P, as the case may be, dated not more than three days prior to the date such covenants are to become subject to this Section 4.13, verifying the Investment Grade Status of the Securities. SECTION 4.14. OID Certificate. The Company shall file with the Trustee promptly after the end of each calendar year (i) a written notice specifying the amount of original issue discount (including daily rates and accrual periods) accrued on outstanding Securities as of the end of such year and (ii) such other specific information relating to such original issue discount as may then be relevant under the Internal Revenue Code of 1986, as amended from time to time. SECTION 4.15. Further Instruments and Acts. Upon request of the Trustee, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. ARTICLE V Successor Company SECTION 5.01. Consolidation . The Company shall not, in a single transaction or through a series of related transactions, consolidate with or merge with or into any other Person (other than any Wholly-Owned Subsidiary) or sell, assign, transfer, lease or otherwise dispose of all or substantially all of its properties and assets to any Person (other than any Wholly-Owned Subsidiary) or group of affiliated Persons unless at the time and after giving effect thereto: (a)either (A) the Company shall be the continuing corporation or (B) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer, lease or disposition the properties and assets of the Company substantially as an entirety (the "Surviving Entity") shall be a corporation duly organized and validly existing under the laws of the United States of America, any state thereof or the District of Columbia and shall, in either case, expressly assume all the obligations of the Company under the Securities and the Indenture, (b)immediately before and immediately after giving effect to such transaction on a pro forma basis, no Default or Event of Default shall have occurred and be continuing, and (c)immediately before and immediately after giving effect to such transaction on a pro forma basis, except in the case of the consolidation or merger of any Subsidiary with or into the Company, the Company (or the Surviving Entity if the Company is not the continuing corporation) could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.05 hereof (determined in either case on a Consolidated basis). In connection with any consolidation, merger, transfer or lease contemplated hereby, the Company shall deliver, or cause to be delivered, to the Trustee, in the form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, transfer or lease and the supplemental indenture in respect thereto comply with the provisions described herein and that all conditions precedent herein provided for or relating to such transaction have been complied with. SECTION 5.02. Successor Substituted. Upon any consolidation or merger or any transfer of all or substantially all of the assets of the Company in accordance with Section 5.01, the successor corporation formed by such a consolidation or into which the Company is merged or to which such transfer is made shall succeed to, shall be substituted for and may exercise every right and power of the Company under the Securities and this Indenture, with the same effect as if such successor corporation had been named as the Company herein. In the event of any transaction (other than a lease) described and listed in Section 5.01 in which the Company is not the continuing corporation, the successor Person formed or remaining shall succeed to, be substituted for and may exercise every right and power of the Company, and the Company shall be discharged from all obligations and covenants under the Securities and this Indenture. ARTICLE VI Defaults and Remedies SECTION 6.01Events of Default. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a)default in the payment of any interest on any Security when it becomes due and payable, whether or not such payment shall be prohibited by Article Ten, and continuance of such default for a period of 30 days; (b)default in the payment of the principal of or premium, if any, on any Security at its Maturity (upon acceleration, optional redemption, required purchase or otherwise), whether or not such payment, redemption or purchase shall be prohibited by Article Ten; (c)default in the performance, or breach, of any covenant or warranty of the Company contained in this Indenture (other than a default in the performance, or breach, of a covenant or warranty which is specifically dealt with in clause (a) or (b) above) and continuance of such default or breach for a period of 60 days after written notice shall have been given to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in aggregate principal amount of the Securities then outstanding; (d)(A) one or more defaults in the payment of principal of or premium, if any, on Indebtedness of the Company or its Wholly- Owned subsidiary, American Multi-Cinema, Inc., a Missouri corporation ("AMC") aggregating $5 million or more, when the same becomes due and payable at the stated maturity thereof, and such default or defaults shall have continued after any applicable grace period and shall not have been cured or waived or (B) Indebtedness of the Company or AMC aggregating $5 million or more shall have been accelerated or otherwise declared due and payable, or required to be prepaid or repurchased (other than by regularly scheduled prepayment) prior to the stated maturity thereof; (e)any holder of any Indebtedness in excess of $5 million in the aggregate of the Company or AMC shall notify the Trustee of the intended sale or disposition of any assets of the Company or AMC that have been pledged to or for the benefit of such Person to secure such Indebtedness or shall commence proceedings, or take action (including by way of set-off) to retain in satisfaction of any such Indebtedness, or to collect on, seize, dispose of or apply, any such asset of the Company or AMC pursuant to the terms of any agreement or instrument evidencing any such Indebtedness of the Company or AMC or in accordance with applicable law; (f)one or more final judgments or orders shall be rendered against the Company or AMC for the payment of money, either individually or in an aggregate amount, in excess of $5 million and shall not be discharged and either (A) an enforcement proceeding shall have been commenced by any creditor upon such judgment or order or (B) there shall have been a period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, was not in effect; and (g)the Company or AMC pursuant to or under or within the meaning of any Bankruptcy Law: (1)commences a voluntary case or proceeding; (2)consents to the entry of a Bankruptcy Order in an involuntary case or proceeding or the commencement of any case against it; (3)consents to the appointment of a Custodian of it or for any substantial part of its property; (4)makes a general assignment for the benefit of its creditors or files a proposal or other scheme of arrangement involving the rescheduling or composition of its indebtedness; (5)files a petition in bankruptcy or an answer or consent seeking reorganization or relief; or (6)consents to the filing of such petition in bankruptcy or the appointment of or taking possession by a Custodian; or (h)a court of competent jurisdiction in any involuntary case or proceeding enters a Bankruptcy Order against the Company or AMC, and such Bankruptcy Order remains unstayed and in effect for 60 consecutive days; or (i)a Custodian shall be appointed out of court with respect to the Company or AMC, or with respect to all or any substantial part of the property of the Company or AMC. "Custodian" means any receiver, interim receiver, receiver and manager, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law or any other person with like powers. "Bankruptcy Order" means any court order made in a proceeding pursuant to or within the meaning of any Bankruptcy Law, containing an adjudication of bankruptcy or insolvency, or providing for liquidation, winding up, dissolution or reorganization, or appointing a Custodian of a debtor or of all or any substantial part of a debtor's property, or providing for the staying, arrangement, adjustment or composition of indebtedness or other relief of a debtor. SECTION 6.02. Acceleration; Rescission and Annulment. If an Event of Default (other than an Event of Default specified in Section 6.01(g), (h) or (i)) occurs and is continuing, then and in every such case the Trustee, by notice to the Company, or the Holders of not less than 25% in principal amount of the Securities outstanding, by notice to the Company and the Trustee, may declare the principal of all the Securities to be due and payable; provided, however, that so long as any Indebtedness permitted to be incurred pursuant to the Credit Facility shall be outstanding (including letters of credit and bankers' acceptances), no such acceleration shall be effective until the earlier of (i) acceleration of any such Indebtedness under the Credit Facility and (ii) five Business Days after the giving of written notice to the Company and an authorized representative of the holders of Designated Senior Indebtedness of such acceleration. If an Event of Default specified in Section 6.01(g), (h) or (i) occurs and is continuing, then the principal of all the Securities shall automatically become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Company will deliver to the Trustee, within 10 days after the occurrence thereof, notice of any default or acceleration referred to in Sections 6.01(c) and 6.01(d). At any time after a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Securities outstanding, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (a)the Company has paid or deposited, or caused to be paid or deposited, with the Trustee a sum sufficient to pay (1)all overdue interest on all Securities, (2)the principal of (and premium, if any, on) any Securities that has become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, (3)to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Securities, and (4)all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (b)all Events of Default, other than the non-payment of principal of the Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 6.04. No such rescission shall affect any subsequent default or impair any right consequent thereon. Notwithstanding the preceding paragraph, in the event of a declaration of acceleration in respect of the Securities because an Event of Default specified in Section 6.01(d) shall have occurred and be continuing, such declaration of acceleration shall be automatically annulled if the Indebtedness that is the subject of such Event of Default, (1) is Indebtedness in the form of an operating lease entered into by the Company or its Subsidiaries after May 21, 1998 and required to be reflected on a consolidated balance sheet pursuant to EITF 97-10, (2) has been discharged or the holders thereof have rescinded their declaration of acceleration in respect of such Indebtedness, and (3) written notice of such discharge or rescission, as the case may be, shall have been given to the Trustee by the Company and countersigned by the holders of such Indebtedness or a trustee, fiduciary or agent for such holders, within 30 days after such declaration of acceleration in respect of the Securities, and no other Event of Default has occurred during such 30 day period which has not been cured or waived during such period. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in aggregate principal amount of the Securities then outstanding by notice to the Trustee may waive an existing Default and its consequences except (i) a Default in the payment of the principal of or interest on a Security, (ii) a Default arising from a failure to make or consummate a Change of Control Offer in accordance with the provisions of Section 4.09, or (iii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05. Control by Majority. The Holders of a majority in aggregate principal amount of the Securities then outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee with respect to the Securities. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided, however, that subject to Section 315 of the TIA, the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to reasonable indemni- fication against all losses and expenses caused by taking or not taking such action. SECTION 6.06. Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) such Holder shall have previously given to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in aggregate principal amount of the Securities then outstanding shall have made a written request, and such Holder of or Holders shall have offered reasonable indemnity, to the Trustee to pursue such proceeding as trustee; and (3) the Trustee has failed to institute such proceeding and has not received from the Holders of at least a majority in aggregate principal amount of the Securities outstanding a direction inconsistent with such request, within 60 days after such notice, request and offer. The foregoing limitations on the pursuit of remedies by a Securityholder shall not apply to a suit instituted by a Holder of Securities for the enforcement of payment of the principal of or interest on such Security on or after the applicable due date specified in such Security. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article Six, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to holders of Senior Indebtedness to the extent required by Article Ten; THIRD: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and FOURTH: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Company shall mail to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including rea- sonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in aggregate principal amount of the Securities. SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE VII Trustee SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers. (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA and the provisions of this Article Seven shall apply to the Trustee in its role as Registrar, Paying Agent and Security Custodian. (i) The Trustee shall not be deemed to have notice of a Default or an Event of Default unless (a) the Trustee has received written notice thereof from the Company or any Holder or (b) a Trust Officer shall have actual knowledge thereof. SECTION 7.02. Rights of Trustee. Subject to 315(a)-(d) of the TIA: (a) the Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. The Trustee may, however, in its discretion make such further inquiry or investigation into such facts or matters as it may see fit and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute wilful misconduct or negligence. (e) The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty unless so specified herein. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar or co-registrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity, priority or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default or Event of Default within 90 days after it is known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default or Event of Default in payment of principal of or interest on any Security, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.06. Reports by Trustee to Holders. As promptly as practicable after each December 31 beginning with December 31, 1999, and in any event prior to March 31 in each year, the Trustee shall mail to each Securityholder a brief report dated as of December 31 each year that complies with TIA 313(a), if and to the extent required by such subsection. The Trustee shall also comply with TIA 313(b) and (c). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee and any predecessor Trustee from time to time such compensation for its services as shall from time to time be agreed to in writing by the Company and the Trustee. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company shall indemnify the Trustee against any and all loss, liability or expense (including reasonable attorneys' fees) incurred by it in connection with the acceptance and administration of this trust and the performance of its duties hereunder. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee may have separate counsel and the Company shall pay the fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own wilful misconduct, negligence or bad faith. The Company need not pay for any settlement made by the Trustee without the Company's consent, such consent not to be unreasonably withheld. All indemnifications and releases from liability granted hereunder to the Trustee shall extend to its officers, directors, employees, agents, successors and assigns. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities. The Company's payment obligations pursuant to this Section shall survive the resignation or removal of the Trustee and the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(g), (h) or (i) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. The provisions of this Section shall survive the termination of this Indenture. SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company. The Holders of a majority in aggregate principal amount of the Securities then outstanding may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns, is removed by the Company or by the Holders of a majority in aggregate principal amount of the Securities then outstanding and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in aggregate principal amount of the Securities then outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder who has been a bona fide Holder of a Security for at least six months may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any such successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA 310(a). The Trustee shall have (or, in the case of a corporation included in a bank holding company system, the related bank holding company shall have) a combined capital and surplus of at least $50,000,000 as set forth in its (or its related bank holding company's) most recent published annual report of condition. The Trustee shall comply with TIA 310(b), subject to the penultimate paragraph thereof; provided, however, that there shall be excluded from the operation of TIA 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA 310(b)(1) are met. For purposes of this Section 7.10 and clause (i) of the first proviso contained in TIA Section 310(b), the Indenture dated as of March 19, 1997 as amended, among the Company and The Bank of New York, providing for the issuance of the 9 1/2% Notes due 2009, is hereby deemed to be specifically described. SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA 311(a), excluding any creditor relationship listed in TIA 311(b). A Trustee who has resigned or been removed shall be subject to TIA 311(a) to the extent indicated. ARTICLE VIII Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancelation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article Three and the Company irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding Securities, including interest thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.07), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company. (b) Subject to Sections 8.01(c) and 8.02, the Company at any time may terminate (i) all of its obligations under the Securities and this Indenture ("legal defeasance option") or (ii) its obligations under Section 5.01(c), Article Ten and Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09 and 4.10(a), and the operation of Sections 6.01 (c) through (f) ("covenant defeasance option"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Sections 6.01(c) (with respect to the covenants of Article Four identified in the immediately preceding paragraph and the provisions of 5.01(c)), 6.01(d), (e) or (f). Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. (c) Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.04, 2.05, 2.06, 2.07, 2.09, 4.11, 7.07, 7.08, 8.05 and 8.06 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.07 and 8.05 shall survive. SECTION 8.02. Conditions to Defeasance. The Company may exercise its legal defeasance option or its covenant defeasance option only if: (1)The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 7.10 who shall agree to comply with the provisions of this Article Eight applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (A) cash in U.S. Dollars in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, cash in U.S. Dollars in an amount, or (C) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, the principal of (and premium, if any) and interest on the outstanding Securities on the Stated Maturity (or redemption date, if applicable) of such principal (and premium, if any) or installment of interest; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to said payments with respect to the Securities. Before such a deposit, the Company may give the Trustee, in accordance with Section 3.01 hereof, a notice of its election to redeem all of the outstanding Securities at a future date in accordance with Article Three which notice shall be irrevocable. For this purpose, "U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. (2)No Default or Event of Default shall have occurred and be continuing on the date of such deposit or, insofar as Section 6.01(g), (h) or (i) is concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period). (3)the deposit does not constitute a default hereunder or under any other material agreement binding on the Company and is not prohibited by Article Ten; (4) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (5) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (6) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (7) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article Eight have been complied with. SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article Eight. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. Money and securities so held in trust are not subject to Article Ten. SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors. SECTION 8.05. Indemnity for Government Obligations. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations. SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article Eight by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article Eight until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article Eight; provided, however, that, if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE IX Amendments SECTION 9.01. Without Consent of Holders. The Company and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to comply with Article Five; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (4) to make any change in Article Ten that would limit or terminate the benefits available to any holder of Senior Indebtedness (or Representatives therefor) under Article Ten; (5) to add Guarantees with respect to the Securities or to secure the Securities; (6) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (7) to comply with any requirements of the SEC in connection with qualifying, or maintaining the qualification of, this Indenture under the TIA; or (8) to make any change that does not adversely affect the rights of any Securityholder. An amendment under this Section may not make any change that adversely affects the rights under Article Ten of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or their Representative) consent to such change. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.02. With Consent of Holders. The Company and the Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding (including consents obtained in connection with a tender offer or exchange offer for the Securities). However, without the consent of each Securityholder affected thereby, an amendment may not: (a) change the Stated Maturity of the principal of, or any installment of interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the coin or currency in which the principal of any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the redemption date); or (b) reduce the amount of, or change the coin or currency of, or impair the right to institute suit for the enforcement of, the Change of Control Purchase Price; or (c) reduce the percentage in principal amount of the outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; or (d) modify any of the provisions of this Section or Sections 6.04, 6.07 and 4.12, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security affected thereby; or (e)modify any of the provisions of this Indenture relating to the subordination of the Securities in a manner adverse to any Holder. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. An amendment under this Section may not make any change that adversely affects the rights under Article Ten of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or their Representative) consent to such change. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver becomes effective upon the execution of such amendment or waiver by the Trustee. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. Such record date shall be a date not more than 30 days prior to the first solicitation of holders generally in connection therewith and no later than the date such solicitation is completed. If a record date is fixed, then notwithstanding the immediately preceding paragraph or Section 316(c) of the TIA, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 180 days after such record date. For all purposes of the Indenture, all Initial Securities, Exchange Securities and Private Exchange Securities shall vote together as one series of Securities under the Indenture. SECTION 9.05. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver such Security to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return such Security to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article Nine if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. SECTION 9.07. Payment for Consent. Neither the Company nor any Affiliate of the Company shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. ARTICLE X Subordination SECTION 10.01. Agreement To Subordinate. The Company covenants and agrees, and each Holder of a Security, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article, the Obligations in respect of the Securities (the "Subordinated Obligations") are hereby expressly made subordinate and postponed to and subject in right of payment as provided in this Article to the prior payment in full in cash or Cash Equivalents of all Senior Indebtedness. The Securities shall in all respects rank pari passu with the 9 1/2% Notes due 2009 and any future senior subordinated Indebtedness and senior to all existing and future junior subordinated Debt of the company, and only Senior Indebtedness shall rank senior to the Securities in accordance with the provisions set forth herein. All provisions of this Article Ten shall be subject to Section 10.11. This Article Ten shall constitute a continuing offer to all Persons who, in reliance upon such Article, become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness, and such holders are made obligee hereunder and they or each of them may enforce such provisions. SECTION 10.02. Liquidation, Dissolution, Bankruptcy. In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its assets, whether voluntary or involuntary from any source, or (b) any liquidation, dissolution or other winding-up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshaling of assets or liabilities of the Company, then and in any such event: (1) the holders of Senior Indebtedness shall receive payment in full in cash or Cash Equivalents of all amounts due on or in respect of all Senior Indebtedness, or provision shall be made for such payment in full in cash or Cash Equivalents to the satisfaction of the holders of Senior Indebtedness, before the Holders of the Securities are entitled to receive any payment or distribution of any kind or character from any source (other than a payment or distribution in the form of equity securities or subordinated securities of the Company or any successor obligor with respect to the Senior Indebtedness provided for by a plan of reorganization or readjustment that, in the case of any such subordinated securities, are subordinate in right of payment to all Senior Indebtedness that may at the time be outstanding to at least the same extent as the Securities are so subordinated as provided in this Article (such equity securities or subordinated securities hereinafter being "Permitted Junior Securities")) on account of the Subordinated Obligations or on account of the purchase or redemption or other acquisition of Securities; and (2) any payment or distribution of assets of the Company of any kind or character from any source, whether in cash, property or securities (other than a payment or distribution in the form of Permitted Junior Securities), including by way of set-off or enforcement of any guarantee or otherwise, which the Trustee or the Holders would be entitled to receive but for the provisions of this Article shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their authorized representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness held or represented by each, to the extent necessary to make payment in full in cash or Cash Equivalents of all Senior Indebtedness of the Company remaining unpaid, after giving effect to any concurrent payment or distribution, or provision therefor to the satisfaction of the holders of the Senior Indebtedness, to or for the holders of such Senior Indebtedness; and (3) any Taxes that have been withheld or deducted from any payment or distribution in respect of the Securities, or any Taxes that ought to have been withheld or deducted from any such payment or distribution that have been remitted to the relevant taxing authority, shall not be considered to be an amount that a Holder or the Trustee is entitled to receive for the purposes of Section 10.02(2). The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the conveyance, transfer, lease or other disposal of its properties and assets substantially as an entirety to another Person upon the terms and conditions set forth in Article Five shall not be deemed a dissolution, winding-up, liquidation, reorganization, assignment for the benefit of creditors or marshaling of assets and liabilities of the Company for the purposes of this Section if the Person formed by such consolidation or into which the Company is merged or the Person which acquires such assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance, transfer, lease or disposal, comply with the conditions set forth in Article Five. SECTION 10.03. Default on Senior Indebtedness. (a) Unless Section 10.02 shall be applicable, upon (1) the occurrence of a Payment Default and (2) receipt by the Trustee from the Company or a holder of Senior Indebtedness of written notice of such occurrence, no payment (other than any payments made pursuant to the provisions contained in Section 8.02 from monies or U.S. Government Obligations previously deposited with the Trustee) or distribution of any assets of the Company of any kind or character from any source, whether in cash, property or securities (other than Permitted Junior Securities), shall be made by the Company including by way of set-off or enforcement of any guarantee or otherwise, on account of the Subordinated Obligations or on account of the purchase or redemption, deposit for defeasance or other acquisition of Securities unless and until such Payment Default shall have been cured or waived in writing or shall have ceased to exist or such Senior Indebtedness shall have been discharged or paid in full in cash or Cash Equivalents, after which the Company shall resume making any and all required payments in respect of the Securities, including any missed payments. (b) Unless Section 10.02 shall be applicable, upon (1) the occurrence of a Non-payment Default and (2) receipt by the Trustee from an authorized representative of the holders of Designated Senior Indebtedness of written notice of such occurrence, then no payment (other than any payments made pursuant to the provisions contained in Section 8.02 from monies or U.S. Government Obligations previously deposited with the Trustee) or distribution of any assets of the Company of any kind or character from any source, whether in cash, property or securities (other than Permitted Junior Securities), shall be made by the Company including by way of set-off or enforcement of any guarantee or otherwise, on account of the Subordinated Obligations or on account of the purchase or redemption, deposit for defeasance or other acquisition of Securities for a period (the "Payment Blockage Period") commencing on the date of receipt by the Trustee of such notice from an authorized representative of the holders of Designated Senior Indebtedness or the Company at the direction of such representative unless and until (subject to any blockage of payments that may then be in effect under subsection (a) of this Section) (w) more than 179 days shall have elapsed since receipt of such written notice by the Trustee, (x) such Non-payment Default shall have been cured or waived in writing or shall have ceased to exist, (y) such Designated Senior Indebtedness has been discharged or paid in full in cash or Cash Equivalents or (z) such Payment Blockage Period shall have been terminated by written notice to the Trustee from an authorized representative of the holders of Designated Senior Indebtedness initiating such Payment Blockage Period or from the holders of at least a majority in principal amount of such Designated Senior Indebtedness), after which, in the case of clause (w), (x), (y) or (z), the Company shall resume making any and all required payments in respect of the Securities, including any missed payments. Notwithstanding any other provision of this Indenture, in no event shall a Payment Blockage Period extend beyond 179 days from the date of the receipt by the Trustee of the notice referred to in clause (2) above (the "Initial Blockage Period"). No more than one Payment Blockage Period may be commenced during any period of 365 consecutive days. Notwithstanding any other provision of this Indenture, no event of default with respect to Designated Senior Indebtedness which existed or was continuing on the date of the commencement of any Payment Blockage Period initiated by an authorized representative of the holders of Designated Senior Indebtedness for such Designated Senior Indebtedness shall be, or be made, the basis for the commencement of a second Payment Blockage Period for such Designated Senior Indebtedness, whether or not within the Initial Blockage Period, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days. (c)In the event that, notwithstanding the foregoing provisions of this Section, the Company shall make any payment to the Trustee (which is not paid over to Holders of Securities) prohibited by the foregoing provisions of this Section, then and in such event such payment shall be paid over to the authorized representatives of such Designated Senior Indebtedness initiating the Payment Blockage Period, to be held in trust for distribution to the holders of Senior Indebtedness or, to the extent amounts are not then due in respect of Senior Indebtedness, prompt return to the Company, or otherwise as a court of competent jurisdiction shall direct. SECTION 10.04. Payment Permitted. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent the Company, at any time except during the pendency of any event referred to in clause (a), (b) or (c) of Section 10.02 or under the conditions described in Section 10.03, from making payments at any time of principal of (and premium, if any) or interest on the Securities. SECTION 10.05. Subrogation. After all Senior Indebtedness is paid in full and until the Securities are paid in full, Securityholders shall be subrogated (equally and ratably with the holders of all indebtedness of the Company which by its express terms is subordinated and postponed to Senior Indebtedness to the same extent as the Securities are subordinated and postponed and which is entitled to like rights of subrogation) to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness. A distribution made under this Article Ten to holders of Senior Indebtedness that otherwise would have been made to Securityholders is not, as between the Company and Securityholders, a payment by the Company on such Senior Indebtedness. SECTION 10.06. Relative Rights. This Article Ten defines the relative rights of Securityholders and holders of Senior Indebtedness. Nothing in this Indenture shall: (1) impair, as between the Company and Securityholders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms; or (2) affect the relative rights against the Company of Securityholders and creditors of the Company other than the holders of Senior Indebtedness; or (3) except as set forth in Section 6.02 prevent the Trustee or any Securityholder from exercising its available remedies upon a Default or an Event of Default, subject to the rights of holders of Senior Indebtedness to receive distributions otherwise payable to Securityholders. SECTION 10.07. Subordination May Not Be Impaired by Company. (a) No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. (b) Without in any way limiting the generality of subsection (a) of this Section, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any one or more of the following: (1) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, the terms of Senior Indebtedness or the terms of any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding (including any increase in the aggregate principal amount of any indebtedness thereunder, it being understood that any such additional indebtedness shall not constitute Senior Indebtedness to the extent incurred in violation of Section 4.05 of this Indenture); (2) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (3) release any Person liable in any manner for the collection of Senior Indebtedness; and (4) exercise or refrain from exercising any rights against the Company and/or any other Person. (c) If the Trustee on behalf of the Holders or any Holders should fail to file a proof of claim in any bankruptcy, insolvency, receivership or similar proceeding relating to the Company at least 30 days before the expiration of the time to file such claim or claims, each holder of Senior Indebtedness (or its representative) is hereby authorized to file an appropriate claim for and on behalf of all or any of the Holders. SECTION 10.08. Rights of Trustee and Paying Agent. Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than one Business Day prior to the date of such payment, a Trust Officer receives notice satisfactory to it that payments may not be made under this Article Ten. The Company, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness may give the notice; provided, however, that, if an issue of Senior Indebtedness has a Representative, only the Representative may give the notice. The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article Ten with respect to any Senior Indebtedness that may at any time be held by it, to the same extent as any other holder of such Senior Indebtedness; and nothing in Article Seven shall deprive the Trustee of any of its rights as such holder. Nothing in this Article Ten shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 10.09. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their Representative (if any). SECTION 10.10. Article Ten Not To Prevent Events of Default or Limit Right To Accelerate. The failure to make a payment pursuant to the Securities by reason of any provision in this Article Ten shall not be construed as preventing the occurrence of a Default. Nothing in this Article Ten shall have any effect on the right of the Secu- rityholders or the Trustee to accelerate the maturity of the Securities; provided, however, that, so long as any Indebtedness permitted by this Indenture to be incurred pursuant to the Credit Facility shall be outstanding (including letters of credit and bankers' acceptances), upon the occurrence and during the continuance of an Event of Default under this Indenture, neither the Trustee nor any Holder shall be entitled to accelerate all or any of the Subordinated Obligations until the earlier to occur of the fifth Business Day following receipt by the Company and by an authorized representative of the holders of Designated Senior Indebtedness of a written declaration of acceleration as provided in Section 6.02 and the date of acceleration of any such Indebtedness under the Credit Facility. SECTION 10.11. Trust Moneys Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust under Article Eight by the Trustee and which were deposited in accordance with the terms of Article Eight and not in violation of Section 10.03 for the payment of principal of and interest on the Securities shall not be subordinated to the prior payment of any Senior Indebtedness or subject to the restrictions set forth in this Article Ten, and none of the Securityholders shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness or any other creditor of the Company. SECTION 10.12. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article Ten, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders or (iii) upon the Representatives for the holders of Senior Indebtedness for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Ten. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article Ten, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article Ten, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial deter- mination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article Ten. SECTION 10.13. Trustee To Effectuate Subordination. Each Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Senior Indebtedness as provided in this Article Ten and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 10.14. Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness shall be entitled by virtue of this Article Ten or otherwise. SECTION 10.15. Reliance by Holders of Senior Indebtedness on Subordination Provisions. Each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. ARTICLE XI Miscellaneous SECTION 11.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision that is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 11.02. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail or sent by facsimile (with a hard copy delivered in person or by mail promptly thereafter) and addressed as follows: if to the Company: AMC Entertainment Inc. 106 West 14th Street Kansas City, Missouri 64105 Attention of: Secretary if to the Trustee: The Bank of New York 101 Barclay Street 21W New York, NY 10286 Attention of: Corporate Trust Administration The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 11.03. Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA 312(c). SECTION 11.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 11.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 11.06. When Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities that the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 11.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent or co- registrar may make reasonable rules for their functions. SECTION 11.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the States of New York or Missouri. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 11.09. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. SECTION 11.10. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such lia- bility. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 11.11. Successors. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 11.12. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 11.13. Reliance on Financial Data. In computing any amounts under this Indenture, (i) to the extent relevant in computing any amounts under this Indenture, the Company shall use audited financial statements of the Company, its Subsidiaries, any Person that would become a Subsidiary in connection with the transaction that requires the computation and any Person from which the Company or a Subsidiary has acquired an operating business, or is acquiring an operating business in connection with the transaction that requires the computation (each such Person whose financial statements are relevant in computing any particular amount, a "Relevant Person") for the period or portions of the period to which the computation relates for which audited financial statements are available on the date of computation and unaudited financial statements and other current financial data based on the books and records of the Relevant Person or Relevant Persons, as the case may be, to the extent audited financial statements for the period or any portion of the period to which the computation relates are not available on the date of computation, and (ii) the Company shall be permitted to rely in good faith on the financial statements and other financial data derived from the books and records of any Relevant Person that are available on the date of the computation. SECTION 11.14. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 11.15. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. AMC ENTERTAINMENT INC., by /s/ Peter C. Brown Name: Peter C. Brown Title: Co-Chairman of the Board and President THE BANK OF NEW YORK, as Trustee by /s/ Mary La Gumina Name: Mary La Gumina Title: Assistant Vice President SCHEDULE I PROVISIONS FOR INTER-COMPANY SUBORDINATED DEBT 1.1 Certain Definitions. Unless otherwise defined in this Schedule I, terms defined in the Indenture in respect of the 9 1/2% Senior Subordinated Notes due 2011 dated as of January 27, 1999 (the "Indenture") between AMC Entertainment Inc. (the "Company") and The Bank of New York, as trustee (the "Trustee") and used herein have the meanings attributed to such terms in the Indenture. As used herein, (a) the term "Relevant Obligor" means the obligor creating, incurring, assuming or suffering to exist any indebtedness under clause (xiii) under the definition of Permitted Indebtedness under the Indenture and (b) the term "Permitted Junior Securities" means equity securities other than Redeemable Capital Stock or subordinated securities of the Relevant Obligor or any successor obligor provided for by a plan of reorganization or readjustment that, in the case of any such subordinated securities, are subordinate in right of payment to all Securities and Indenture Obligations to at least the same extent as the indebtedness evidenced by this agreement or instrument is so subordinated as provided herein. 2.1 Agreement to Subordinate. The Relevant Obligor and the relevant creditor who is owed such indebtedness (the "Relevant Creditor") agree that the indebtedness represented by this agreement or instrument (including, without limitation, principal, interest, premium, fees, penalties, indemnities and "post-petition interest" in bankruptcy) is subordinate and junior in right of payment, to the extent and in the manner provided in this Section 2, to the prior payment in full of all Securities and Indenture Obligations of the Company. The Relevant Obligor agrees to hold the benefit of these provisions as incorporated in this agreement or this instrument as trustee for and on behalf of the Trustee and the Holders and the Relevant Obligor shall be a party to the agreement or instrument in such capacity and shall give the Relevant Creditor (and the Relevant Obligor on its own behalf) one dollar as valuable consideration in respect of the agreements given to it in such capacity as trustee. The provisions of this Section 2 are for the benefit of the Holders, and such Holders are hereby made obligees hereunder to the same extent as if their names were written herein as such, and they (collectively or singly) may proceed to enforce such provisions. 2.2 Liquidation; Dissolution; Bankruptcy. (a) In the event of any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Relevant Obligor or to its assets, whether voluntary or involuntary from any source, or (b) any liquidation, dissolution or other winding-up of the Relevant Obligor, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshaling of assets or liabilities of the Relevant Obligor; then, and in any such event: (i)the Trustee and the Holders shall be entitled to receive payment in full of all Securities and Indenture Obligations before the Relevant Creditor shall be entitled to receive any payment (other than in Permitted Junior Securities) of principal of or interest on, or any other amount owing in respect of, the indebtedness evidenced by this agreement or instrument; (ii)until payment in full of all the Securities and Indenture Obligations, any distribution of assets of any kind or character (other than in Permitted Junior Securities) to which the Relevant Creditor would be entitled but for this Section 2 shall be paid by the Relevant Obligor or by any receiver, trustee in bankruptcy, liquidating trustee, agents or other Persons making such payment or distribution to, or if received by the Relevant Creditor shall be held for the benefit of and shall be forthwith paid or delivered to, the Trustee and Holders in respect of the Securities and Indenture Obligations; and (iii)in the event that, notwithstanding the foregoing, any payment or distribution of assets of the Relevant Obligor of any kind or character, whether in cash, property or securities (other than in Permitted Junior Securities), shall be received by the Relevant Creditor before all the Securities and Indenture Obligations are paid in full, such payment or distribution shall be held in trust for the benefit of and shall be paid over to the Trustee and the Holders in respect of the Securities and Indenture Obligations, for application to the payment of all Securities and Indenture Obligations until all Securities and Indenture Obligations shall have been paid in full after giving effect to any concurrent payment or distribution to the Trustee or the Holders in respect of such Securities and Indenture Obligations. (b) If the Relevant Creditor does not file proper claims or proofs of claim in the form required in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Relevant Obligor or its property prior to 45 days before the expiration of the time to file such claims, then (i) upon the request of the Trustee, the Relevant Creditor shall file such claims and proofs of claim in respect of the indebtedness evidenced by this agreement or instrument and execute and deliver such powers of attorney, assignments and proofs of claim as may be directed by the Trustee to enable it to enforce any and all claims upon or in respect of the indebtedness evidenced by this agreement or instrument and to collect and receive any and all payments or distributions which may be payable or deliverable at any time upon or in respect of the indebtedness evidenced by this agreement or instrument, and (ii) whether or not the Trustee shall take the action described in clause (i) above, the Trustee shall nevertheless be deemed to have such powers of attorney as may be necessary to file appropriate claims and proofs of claim and otherwise exercise the powers described above. For purpose of this Section 2, "payment in full" means the receipt on an irrevocable basis of cash or Cash Equivalents in an amount equal to the unpaid principal amount of the indebtedness and premium, if any, and interest thereon to the date of such payment, together with all other amounts owing with respect to such indebtedness. 2.3 Securities and Indenture Obligations. (a) The Relevant Obligor shall not pay any principal, interest or premium on the indebtedness evidenced by this agreement or instrument, acquire the indebtedness evidenced by this agreement or instrument for cash or property other than capital stock (other than in Permitted Junior Securities) of the Relevant Obligor, or make any loans, advances or extensions of credit to the Relevant Creditor with respect to the indebtedness evidenced by this agreement or instrument, or pay or acquire any obligation or liability upon which the Relevant Creditor is the obligor, and the Relevant Creditor shall not demand, accept or receive any payment of any principal, interest or premium on the indebtedness evidenced by this agreement or instrument or any such cash, property (other than capital stock (other than in Permitted Junior Securities) of the Relevant Obligor), loans, advances or extensions of credit at any time when: (i) a default in the payment of any Securities and Indenture Obligations has occurred, whether at maturity or at a date fixed for prepayment or by declaration of an acceleration or otherwise, and such default either (A) shall be continuing or (B) shall not have been cured and shall have been waived by the Holders on the express condition that payments on and acquisitions of the indebtedness evidenced by this agreement or instrument by the Relevant Obligor be prohibited pursuant to this clause (i); or (ii) any default (other than as described in clause (i) of this Section 2.3(a)) under any agreement or instrument evidencing Securities and Indenture Obligations shall have occurred and either (x) shall be continuing or (y) shall not have been cured and shall have been waived by the Holders on the express condition that payments on or acquisition of the indebtedness evidenced by this agreement or instrument be prohibited pursuant to this clause (ii); or (iii) any Payment Default or Non-payment Default shall have occurred and shall not have been cured or waived; or (iv) such payment of principal, interest or premium on the indebtedness evidenced by this agreement or instrument, or acquisition of the indebtedness evidenced by this agreement or instrument for cash or property other than capital stock of the Relevant Obligor would cause a Default or Event of Default under the Indenture. (b) If at any time when a payment on the indebtedness evidenced by this agreement or instrument is due, the Relevant Obligor would (but for this subsection (b)) be prohibited by Section 2.3(a) from making such payment, the Relevant Obligor shall nonetheless be obligated to make such payment if all of the Holders with respect to which any default shall have occurred shall have consented thereto in writing. (c) If, notwithstanding the foregoing, any payment of any kind or character, whether in cash, property or otherwise, shall be received by the Relevant Creditor before all the Securities and Indenture Obligations are paid in full, such payment shall be held in trust for the benefit of and shall be paid over to the Trustee and the Holders in respect of the Securities and Indenture Obligations for application to the payment of all such Securities and Indenture Obligations until all Securities and Indenture Obligations shall have been paid in full after giving effect to any concurrent payment or distribution to the Trustee or the Holders in respect of such Securities and Indenture Obligations. 2.4. Subrogation. After all Securities and Indenture Obligations are paid in full and until the indebtedness evidenced by this agreement or instrument is paid in full, the Relevant Creditor shall be subrogated to the rights of the Holders. For purposes of this Section 2.4, a distribution made under this Section 2 to Holders which otherwise would have been made to the Relevant Creditor, or a payment made by the Relevant Creditor to Holders in respect of a turnover obligation under this Section 2, is not, as between the Relevant Obligor and such Holders, a payment by the Relevant Obligor on account of Securities and Indenture Obligations. 2.5. Relative Rights. This Section 2 defines the relative rights of the Relevant Creditor on the one hand and the Holders on the other hand. Nothing in this Section 2 shall: (a) impair, as between the Relevant Obligor and the Relevant Creditor, the obligation of the Relevant Obligor, which is absolute and unconditional, to pay the principal of and interest on the indebtedness evidenced by this agreement or instrument in accordance with its terms; or (b) affect the relative rights of the Relevant Creditor on the one hand and creditors of the Relevant Obligor other than the Holders on the other hand; or (c) affect the relative rights of the Holders among themselves; or (d) prevent the Relevant Creditor from exercising its available remedies upon a default, subject to Section 2.3 hereof and the rights of the Holders to receive cash, property or other assets otherwise payable to the Relevant Creditor. 2.6. Subordination May Not Be Impaired. (a) No right of the Trustee or any Holder to enforce the subordination of indebtedness evidenced by this agreement or instrument shall in any way be prejudiced or impaired by any act or failure to act by the Relevant Obligor or by any act or failure to act in good faith, by the Trustee or any Holder or by any non-compliance by the Relevant Obligor with the terms, provisions or covenants herein, regardless of any knowledge thereof which the Trustee or any such Holder may have or be otherwise charged with. Neither the subordination of the indebtedness represented by this agreement or instrument as herein provided nor the rights of the Trustee and the Holders with respect hereto shall be affected by any extension, renewal or modification of the terms, or the granting of any security in respect of, any Securities and Indenture Obligations or any exercise or non-exercise of any right, power or remedy with respect thereto. (b) The Relevant Creditor agrees that all indebtedness evidenced by this agreement or instrument will be unsecured by any Lien upon or with respect to any property of the Relevant Obligor, and that the Relevant Creditor will not permit to subsist any Liens upon its claim in respect of or upon the proceeds of the indebtedness represented by this agreement or instrument. (c) The Relevant Creditor agrees not to exercise any offset or counterclaim or similar right in respect of the indebtedness evidenced by this agreement or instrument except to the extent payment of such indebtedness is permitted and will not assign or otherwise dispose of this agreement or instrument or the indebtedness which it evidences unless the assignee or acquiror, as the case may be, agrees to be bound by the terms of this Section 2. 2.7 Relevant Creditor Entitled to Rely. Upon any payment or distribution pursuant to this Section 2, the Relevant Creditor shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 2.2 are pending, (ii) upon a certificate of the liquidating trustee or agent or other person in such proceedings making such payment or distribution to the Relevant Creditor or its representative, if any, or (iii) upon a certificate of the Trustee for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the Holders, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 2. 3. Miscellaneous. (a) The provisions contained herein may not be amended or modified in any respect, nor may any of the terms or provisions hereof be waived, except by an instrument signed by the Relevant Obligor, the Relevant Creditor and the Trustee. (b) The provisions contained herein shall be binding upon each of the parties to this agreement or instrument and their respective successors and assigns and shall inure to the benefit of the Trustee and each and every Holder and their respective successors and assigns. (c) The provisions contained herein shall be governed by and construed in accordance with the laws of the State of New York. (d) The Relevant Creditor and the Relevant Obligor each hereby irrevocably agrees that any suits, actions or proceedings arising out of or in connection with the provisions contained herein may be brought in any state or federal court sitting in The City of New York and submits and attorneys to the non-exclusive jurisdiction of each such court. APPENDIX A PROVISIONS RELATING TO INITIAL SECURITIES AND EXCHANGE SECURITIES 1. Definitions 1.1 Definitions For the purposes of this Appendix A the following terms shall have the meanings indicated below: "Definitive Security" means a certificated Initial Security or an Exchange Security or Private Exchange Security bearing, if required, the restricted securities legend set forth in Section 2.3(c). "Depository" means The Depository Trust Company, its nominees and their respective successors. "Distribution Compliance Period", with respect to any Securities, means the period of 40 consecutive days beginning on and including the later of (i) the day on which such Securities are first offered to persons other than distributors (as defined in Regulation S under the Securities Act) in reliance on Regulation S and (ii) the Closing Date with respect to such Securities. "Exchange Securities" means the 9 1/2% Senior Subordinated Notes due 2011 to be issued pursuant to this Indenture in connection with a Registered Exchange Offer pursuant to the Registration Agreement. "IAI" means an institutional "accredited investor" as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Initial Purchasers" means Salomon Smith Barney Inc. and NationsBanc Montgomery Securities LLC. "Initial Securities" means the 9 1/2% Senior Subordinated Notes due 2011, to be originally issued from time to time, excluding Exchange Securities and Private Exchange Securities, in one or more series as provided for in this Indenture. "New Securities" shall have the meaning set forth in Section I of the Registration Agreement. "Original Securities" means Initial Securities in the aggregate principal amount of $225,000,000 issued on January 27, 1999. "Private Exchange" means the offer by the Company, pursuant to Section 2 of the Registration Agreement dated January 21, 1999, or pursuant to any similar provision of any other Registration Agreement, to issue and deliver to certain purchasers, in exchange for the Initial Securities held by such purchasers as part of their initial distribution, a like aggregate principal amount of Private Exchange Securities. "Private Exchange Securities" means those New Securities to be issued pursuant to this Indenture in connection with a Private Exchange pursuant to a Registration Agreement. "Purchase Agreement" means the Purchase Agreement dated January 21, 1999, between the Company and the Initial Purchasers relating to the Original Securities, or any similar agreement relating to any future sale of Initial Securities by the Company. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registered Exchange Offer" means the offer by the Company, pursuant to a Registration Agreement, to certain Holders of Initial Securities, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of Exchange Securities registered under the Securities Act. "Registration Agreement" means the Registration Rights Agreement dated January 21, 1999, between the Company and the Initial Purchasers relating to the Original Securities, or any similar agreement relating to any additional Initial Securities. "Rule 144A Securities" means all Initial Securities offered and sold to QIBs in reliance on Rule 144A. "Securities" means the Initial Securities, the Exchange Securities and the Private Exchange Securities, treated as a single class. "Securities Act" means the Securities Act of 1933, as amended. "Securities Custodian" means the custodian with respect to a Global Security (as appointed by the Depository) or any successor person thereto, who shall initially be the Trustee. "Shelf Registration Statement" means a registration statement issued by the Company in connection with the offer and sale of Initial Securities or Private Exchange Securities pursuant to a Registration Agreement. "Transfer Restricted Securities" means Definitive Securities and any other Securities that bear or are required to bear the legend set forth in Section 2.3(c) hereto. 1.2 Other Definitions Defined in Term Section: "Agent Members"2.1(b) "Global Security"2.1(a) "Regulation S" 2.1 "Rule 144A"2.1 2. The Securities 2.1 Form and Dating The Initial Securities will be offered and sold by the Company, from time to time, pursuant to one or more Purchase Agreements. Unless registered under the Securities Act, the Initial Securities will be resold, initially only to QIBs in reliance on Rule 144A under the Securities Act ("Rule 144A") and in reliance on Regulation S under the Securities Act ("Regulation S"). Initial Securities may thereafter be transferred to, among others, QIBs, purchasers in reliance on Regulation S and IAIs under Rule 501(a)(1), (2), (3) or (7) under the Securities Act, subject to the restrictions on transfers set forth herein. (a) Global Securities. Except as provided in Section 2.4, Securities shall be in the form of one or more permanent global Securities in definitive, fully registered form ( each a "Global Security") in each case without interest coupons and with the global securities legend and, except as otherwise provided herein, the restricted securities legend set forth in Exhibit 1 hereto. The Initial Securities shall be deposited on behalf of the purchasers of the Initial Securities represented thereby with the Securities Custodian, and registered in the name of the Depository or a nominee of the Depository, duly executed by the Company and authenticated by the Trustee as provided in this Indenture. The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided. (b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a Global Security deposited with or on behalf of the Depository. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b) and pursuant to an order of the Company, authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depository for such Global Security or Global Securities or the nominee of such Depository and (b) shall be delivered by the Trustee to such Depository or pursuant to such Depository's instructions or held by the Trustee as Securities Custodian. Members of, or participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository or by the Trustee as Securities Custodian or under such Global Security, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Security. (c) Definitive Securities. Except as provided in Section 2.4, owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of certificated Securities. 2.2 Authentication. The Trustee shall authenticate and deliver: (1) Original Securities for original issue in an aggregate principal amount of $225,000,000, (2) additional Initial Securities, if and when issued, in an aggregate principal amount of up to $100,000,000, and (3) the Exchange Securities for issue only in a Registered Exchange Offer or a Private Exchange, respectively, pursuant to a Registration Agreement, for a like principal amount of Initial Securities, in each case upon a written order of the Company signed by two Officers or by an Officer and either a Treasurer or an Assistant Treasurer or a Secretary or an Assistant Secretary of the Company. Such order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities, Exchange Securities or Private Exchange Securities. The aggregate principal amount of Securities outstanding at any time may not exceed $325,000,000 except as provided in Section 2.08 of this Indenture. 2.3 Transfer and Exchange.(a) Transfer and Exchange of Definitive Securities. When Definitive Securities are presented to the Registrar or a co-registrar with a request: (x) to register the transfer of such Definitive Securities; or (y) to exchange such Definitive Securities for an equal principal amount of Definitive Securities of other authorized denominations, the Registrar or co-registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Securities surrendered for transfer or exchange: (i) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar or co-registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (ii) are being transferred or exchanged pursuant to an effective registration statement under the Securities Act or pursuant to clause (A), (B) or (C) below, and are accompanied by the following additional information and documents, as applicable: (A) if such Definitive Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect; or (B) if such Definitive Securities are being transferred to the Company, a certification to that effect; or (C) if such Definitive Securities are being transferred pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act, (i) a certification to that effect and (ii) if the Company so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(c)(i). (b) Transfer and Exchange of Global Securities. (i) The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. A transferor of a beneficial interest in a Global Security shall deliver a written order given in accordance with the Depository's procedures containing information regarding the participant account of the Depository to be credited with a beneficial interest in the Global Security and such account shall be credited in accordance with such instructions with a beneficial interest in the Global Security and the account of the Person making the transfer shall be debited by an amount equal to the beneficial interest in the Global Security being transferred. In the case of a transfer of a beneficial interest in a Global Security to an IAI, the transferee must furnish a signed letter to the Trustee containing certain representations and agreements (the form of which letter can be obtained from the Trustee or the Company and is attached as Exhibit B). (ii) If the proposed transfer is a transfer of a beneficial interest in one Global Security to a beneficial interest in another Global Security, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Security to which such interest is being transferred in an amount equal to the principal amount of the interest to be so transferred, and the Registrar shall reflect on its books and records the date and a corresponding decrease in the principal amount of Global Security from which such interest is being transferred. (iii) Notwithstanding any other provisions of this Appendix A (other than the provisions set forth in Section 2.4), a Global Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (iv) In the event that a Global Security is exchanged for Securities in definitive registered form pursuant to Section 2.4 prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Securities intended to ensure that such transfers comply with Rule 144A, Regulation S or such other applicable exemption from registration under the Securities Act, as the case may be) and such other procedures as may from time to time be adopted by the Company. (c) Legend. (i) Except as permitted by the following paragraphs (ii), (iii), (iv) and (v), each certificate evidencing the Global Securities and the Definitive Securities (and all Securities issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a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a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (K)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT." Each Definitive Security will also bear the following additional legend: "IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS." (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Security) pursuant to Rule 144 under the Securities Act: (A) in the case of any Transfer Restricted Security that is a Definitive Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Security that does not bear the legends set forth above and rescind any restriction on the transfer of such Transfer Restricted Security; and (B) in the case of any Transfer Restricted Security that is represented by a Global Security, the Registrar shall permit the beneficial owner thereof to exchange such Transfer Restricted Security for a beneficial interest in a Global Security that does not bear the legends set forth above and rescind any restriction on the transfer of such Transfer Restricted Security, in either case, if the Holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Initial Security). (iii) After a transfer of any Initial Securities or Private Exchange Securities, as the case may be, during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities or Private Exchange Securities, all requirements pertaining to restricted legends on such Initial Security or such Private Exchange Securities will cease to apply, and a global Initial Security or Private Exchange Security without restricted legends will be available to the transferee of the beneficial interests in such Initial Securities or Private Exchange Securities. Upon the occurrence of any of the circumstances described in this paragraph, the Company will deliver an Officers' Certificate to the Trustee instructing the Trustee to issue Securities without legends. (iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which certain Holders of such Initial Securities are offered Exchange Securities in exchange for their Initial Securities, Exchange Securities in global form without restrictive legends will be available to Holders or beneficial owners that exchange such Initial Securities (or beneficial interests therein) in such Registered Exchange Offer. Upon the occurrence of any of the circumstances described in this paragraph, the Company will deliver an Officers' Certificate to the Trustee instructing the Trustee to issue Securities without restricted legends. (v) Upon the consummation of a Private Exchange with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Private Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will continue to apply, and Private Exchange Securities in global form with, to the extent required by applicable law, the Restricted Securities Legend set forth in Exhibit 1 hereto will be available to Holders that exchange such Initial Securities in such Private Exchange. (d) Cancelation or Adjustment of Global Security. At such time as all beneficial interests in a Global Security have either been exchanged for certificated or Definitive Securities, redeemed, repurchased or canceled, such Global Security shall be returned by the Depository to the Trustee for cancelation or retained and canceled by the Trustee. At any time prior to such cancelation, if any beneficial interest in a Global Security is exchanged for certificated or Definitive Securities, redeemed, repurchased or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such Global Security) with respect to such Global Security, by the Trustee or the Securities Custodian, to reflect such reduction. (e) Obligations with Respect to Transfers and Exchanges of Securities. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate certificated Securities, Definitive Securities and Global Securities at the Registrar's or co-registrar's request. (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant to Sections 3.06 and 9.05 of this Indenture). (iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of any Security for a period beginning 15 days before the mailing of a notice of redemption or an offer to repurchase Securities or 15 days before an interest payment date. (iv) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. (v) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. (f) No Obligation of the Trustee. (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in the Depository or any other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption or repurchase) or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to the registered Holders (which shall be the Depository or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depository subject to the applicable rules and pro- cedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depository participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. 2.4 Certificated Securities. (a)A Global Security deposited with the Depository or with the Trustee as Securities Custodian pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of certificated Securities in an aggregate principal amount equal to the principal amount of such Global Security, in exchange for such Global Security, only if(i) the Depository notifies the Company that it is unwilling or unable to continue as a Depository for such Global Security or if at any time the Depository ceases to be a "clearing agency" registered under the Exchange Act, and a successor depositary is not appointed by the Company within 90 days of such notice, or (ii) a Default or an Event of Default has occurred and is continuing or (iii) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of certificated Securities under this Indenture. (b) Any Global Security that is transferable to the beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by the Depository to the Trustee located in the Borough of Manhattan, The City of New York, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Security, an equal aggregate principal amount of certificated Securities of authorized denominations. Certificated Securities issued in exchange for any portion of a Global Security transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 and any integral multiple thereof and registered in such names as the Depository shall direct. Any certificated Initial Security delivered in exchange for an interest in the Global Security shall, except as otherwise provided by Section 2.3(c), bear the restricted securities legend set forth in Exhibit 1 hereto. (c) The registered Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action that a Holder is entitled to take under this Indenture or the Securities. (d) In the event of the occurrence of any of the events specified in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available to the Trustee a reasonable supply of certificated Securities in definitive, fully registered form without interest coupons. EXHIBIT 1 To APPENDIX A [FORM OF FACE OF INITIAL SECURITY] [Global Securities Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Securities Legend] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a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a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o.Up to $__________ 9 1/2% Senior Subordinated Note due 2011 CUSIP No. ______ AMC Entertainment Inc., a Delaware corporation, promises to pay to Cede & Co., or registered assigns, the principal sum as set forth on the Schedule of Increases or Decreases annexed hereto on February 1, 2011. Interest Payment Dates: February 1 and August 1. Record Dates: January 15 and July 15. Additional provisions of this Security are set forth on the other side of this Security. IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed. AMC ENTERTAINMENT INC., by Name: Title: by Name: Title: [CORPORATE SEAL] TRUSTEE'S CERTIFICATE OF AUTHENTICATION Dated: BANK OF NEW YORK, as Trustee, certifies that this is one of the Securities referred to in the Indenture. By:_________________________ Authorized Signatory [FORM OF REVERSE SIDE OF INITIAL SECURITY] 9 1/2% Senior Subordinated Note due 2011 1. Interest (a) AMC Entertainment Inc., a Delaware corporation (such corporation, and its successors under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on February 1 and August 1 of each year in immediately available funds. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from January 27, 1999. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the rate borne by the Securities to the extent lawful. (b) Special Interest. The holder of this Security is entitled to the benefits of a Registration Agreement, dated as of January 21, 1999, between the Company and the Purchasers named therein (the "Registration Agreement"). Capitalized terms used in this paragraph (b) but not defined herein have the meanings assigned to them in the Registration Agreement. In the event that (i) neither the Exchange Offer Registration Statement nor the Shelf Registration Statement has been filed with the Commission on or prior to the 90th day following the date of the original issuance of the Securities, (ii) neither the Exchange Offer Registration Statement nor the Shelf Registration Statement has been declared effective on or prior to the 150th day following the date of the original issuance of the Securities, (iii) neither the Registered Exchange Offer has been consummated nor the Shelf Registration Statement has been declared effective on or prior to the 180th day following the date of the original issuance of the Securities, or (iv) after the Exchange Offer Registration Statement or the Shelf Registration Statement has been declared effective, such Registration Statement thereafter ceases to be effective or usable in connection with the Exchange Offer, in the case of the Exchange Offer Registration Statement, or resales of the Securities, in the case of the Shelf Registration Statement, at any time that the Company is obligated to maintain the effectiveness thereof pursuant to the Registration Agreement (each such event referred to in clauses (i) through (iv) above being referred to herein as a "Registration Default"), interest (the "Special Interest") shall accrue (in addition to stated interest on the Securities) from and including the date on which the first such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured, at a rate per annum equal to .50% of the principal amount of the Securities; provided, however, that such rate per annum shall increase by .50% per annum from and including the 91st day after the first such Registration Default (and each successive 30th day thereafter) unless and until all Registration Defaults have been cured; provided further, however, that in no event shall the Special Interest accrue at a rate in excess of 1.00% per annum. The Special Interest will be payable in cash semiannually in arrears each February 1 and August 1, in immediately available funds. 2. Method of Payment The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the January 15 or July 15 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Security (including principal, premium and interest), by mailing a check to the registered address of each Holder thereof; provided, however, that payments on the Securities may also be made, in the case of a Holder of at least $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar Initially, The Bank of New York, a New York banking association (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly-Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Company issued the Securities under an Indenture dated as of January 27, 1999 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Securities are senior subordinated unsecured obligations of the Company limited to $325,000,000 aggregate principal amount at any one time outstanding (subject to Sections 2.01 and 2.08 of the Indenture). The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, 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. These limitations are subject to significant exceptions, and most would cease to be effective if the Securities attain Investment Grade Status. 5. Optional Redemption Except as set forth below, the Securities may not be redeemable prior to February 1, 2004. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after February 1 of the years set forth below: Period 2004 2005 2006 2007 and thereafter Redemption Price 104.750% 103.167% 101.583% 100.000% 6. Sinking Fund The Securities are not subject to any sinking fund. 7. Notice of Redemption Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his or her registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 8. Subordination The Securities are subordinated to Senior Indebtedness of the Company. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 9.Repurchase of Securities at the Option of Holders upon Change of Control Upon a Change of Control, the Company will be required to make an offer, subject to certain conditions specified in the Indenture, to repurchase all or any part of the Securities of each Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 10. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorse- ments or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 11. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 12. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 13. Discharge and Defeasance Subject to certain conditions, the Company at any time may terminate some of or all its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 14. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended without prior notice to any Securityholder but with the written consent of the Holders of at least a majority in aggregate principal amount of the outstanding Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder of Securities, the Company and the Trustee may amend the Indenture or the Securities (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article Five of the Indenture; (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities; (iv) to make certain changes in the subordination provisions; (v) to add Guarantees with respect to the Securities; (vi) to secure the Securities; (vii) to add additional covenants or to surrender rights and powers conferred on the Company; (viii) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA; or (ix) to make any change that does not adversely affect the rights of any Securityholder. 15. Defaults and Remedies If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding, subject to certain limitations, may declare all the Securities to be immediately due and payable. Certain events of bankruptcy or insolvency are Events of Default and shall result in the Securities being immediately due and payable upon the occurrence of such Events of Default without any further act of the Trustee or any Holder. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Securities then outstanding may direct the Trustee in its exercise of any trust or power under the Indenture. The Holders of a majority in aggregate principal amount of the Securities then outstanding, by written notice to the Company and the Trustee, may rescind any declaration of acceleration and its consequences if the rescission would not conflict with any judgment or decree, and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. 16. Trustee Dealings with the Company Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 17. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 18. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 19. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20. Governing Law THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 21. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder of Securities upon written request and without charge to the Holder a copy of the Indenture which has in it the text of this Security. ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ____________________________________________________________ Date: ________________ Your Signature: _____________________ ____________________________________________________________ Sign exactly as your name appears on the other side of this Security. In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being transferred in accordance with its terms: CHECK ONE BOX BELOW (1)Gto the Company; or (2)Gpursuant to an effective registration statement under the Securities Act of 1933; or (3)Gto a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (4)Goutside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or (5)Gto an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee or the Company); or (6)Gpursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (4), (5) or (6) is checked, the Trustee may require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933. __________________________ Your Signature Signature Guarantee: Date: ___________________ __________________________ Signature must be guaranteedSignature of Signature by a participant in aGuarantee recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee ____________________________________________________________ [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The initial principal amount of this Global Security is $[ ]. The following increases or decreases in this Global Security have been made: Date of Exchange Amount of decrease in Principal Amount of this Global Security Amount of increase in Principal Amount of this Global Security Principal amount of this Global Security following such decrease or increase Signature of authorized signatory of Trustee or Securities Custodian OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.11 (Change of Control) of the Indenture, check the box: ___ / / If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.11 of the Indenture, state the amount: $ Date: __________________ Your Signature: __________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee:_______________________________________ Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee. EXHIBIT A [FORM OF FACE OF SECURITY] No.Up to $__________ 9 1/2% Senior Subordinated Note due 2011 CUSIP No. ______ AMC Entertainment Inc., a Delaware corporation, promises to pay to Cede & Co., or registered assigns, the principal sum as set forth on the Schedule of Increases or Decreases annexed hereto on February 1, 2011. Interest Payment Dates: February 1 and August 1. Record Dates: January 15 and July 15. Additional provisions of this Security are set forth on the other side of this Security. IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed. AMC ENTERTAINMENT INC., by Name: Title: by Name: Title: [CORPORATE SEAL] TRUSTEE'S CERTIFICATE OF AUTHENTICATION Dated: THE BANK OF NEW YORK, as Trustee, certifies that this is one of the Securities referred to in the Indenture. By:_________________________ Authorized Signatory [FORM OF REVERSE SIDE OF SECURITY] 9 1/2% Senior Subordinated Note due 2011 1. Interest. AMC Entertainment Inc., a Delaware corporation (such corporation, and its successors under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on February 1 and August 1 of each year in immediately available funds. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from January 27, 1999. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the rate borne by the Securities to the extent lawful. 2. Method of Payment The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the January 15 or July 15 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Security (including principal, premium and interest), by mailing a check to the registered address of each Holder thereof; provided, however, that payments on the Securities may also be made, in the case of a Holder of at least $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar Initially, The Bank of New York, a New York banking association (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly-Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Company issued the Securities under an Indenture dated as of January 27, 1999 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Securities are senior subordinated unsecured obligations of the Company limited to $325,000,000 aggregate principal amount at any one time outstanding (subject to Sections 2.01 and 2.08 of the Indenture). The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, 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. These limitations are subject to significant exceptions, and most would cease to be effective if the Securities attain Investment Grade Status. 5. Optional Redemption Except as set forth below, the Securities may not be redeemable prior to February 1, 2004. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after February 1 of the years set forth below: Period Redemption Price 2004 104.750% 2005 103.167% 2006 101.583% 2007 and thereafter 100.000% 6. Sinking Fund The Securities are not subject to any sinking fund. 7. Notice of Redemption Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his or her registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 8. Subordination The Securities are subordinated to Senior Indebtedness of the Company. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 9.Repurchase of Securities at the Option of Holders upon Change of Control Upon a Change of Control, the Company will be required to make an offer, subject to certain conditions specified in the Indenture, to repurchase all or any part of the Securities of each Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 10. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorse- ments or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 11. Persons Deemed Owners The registered Holder of this Security may be treated as the owner of it for all purposes. 12. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 13. Discharge and Defeasance Subject to certain conditions, the Company at any time may terminate some of or all its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 14. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended without prior notice to any Securityholder but with the written consent of the Holders of at least a majority in aggregate principal amount of the outstanding Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder of Securities, the Company and the Trustee may amend the Indenture or the Securities (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article Five of the Indenture; (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities; (iv) to make certain changes in the subordination provisions; (v) to add Guarantees with respect to the Securities; (vi) to secure the Securities; (vii) to add additional covenants or to surrender rights and powers conferred on the Company; (viii) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA; or (ix) to make any change that does not adversely affect the rights of any Securityholder. 15. Defaults and Remedies If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding, subject to certain limitations, may declare all the Securities to be immediately due and payable. Certain events of bankruptcy or insolvency are Events of Default and shall result in the Securities being immediately due and payable upon the occurrence of such Events of Default without any further act of the Trustee or any Holder. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Securities then outstanding may direct the Trustee in its exercise of any trust or power under the Indenture. The Holders of a majority in aggregate principal amount of the Securities then outstanding, by written notice to the Company and the Trustee, may rescind any declaration of acceleration and its consequences if the rescission would not conflict with any judgment or decree, and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. 16. Trustee Dealings with the Company Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 17. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 18. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 19. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20. Governing Law THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 21. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder of Securities upon written request and without charge to the Holder a copy of the Indenture which has in it the text of this Security. ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ____________________________________________________________ Date: ________________ Your Signature: _____________________ ____________________________________________________________ Sign exactly as your name appears on the other side of this Security. Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee. OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.11 (Change of Control) of the Indenture, check the box: ___ / / If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.11 of the Indenture, state the amount: $ Date: __________________ Your Signature: __________________ (Sign exactly as your name appears on the other side of the Security) Signature Guarantee:_______________________________________ Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee. EXHIBIT B Form of Transferee Letter of Representation AMC Entertainment Inc. In care of [ ] [ ] [ ] Ladies and Gentlemen: This certificate is delivered to request a transfer of $[ ] principal amount of the 9 1/2% Senior Subordinated Notes due 2011 (the "Securities") of AMC Entertainment Inc. (the "Company"). Upon transfer, the Securities would be registered in the name of the new beneficial owner as follows: Name:________________________ Address:_____________________ Taxpayer ID Number:__________ The undersigned represents and warrants to you that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")), purchasing for our own account or for the account of such an institutional "accredited investor" at least $250,000 principal amount of the Securities, and we are acquiring the Securities not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we invest in or purchase securities similar to the Securities in the normal course of our business. We, and any accounts for which we are acting, are each able to bear the economic risk of our or its investment. 2. We understand that the Securities have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Securities to offer, sell or otherwise transfer such Securities prior to the date that is two years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement that has been declared effective under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act ("Rule 144A"), to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that is purchasing for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act, (e) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional "accredited investor," in each case in a minimum principal amount of Securities of $250,000, or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to the offer, sale or other transfer prior to the Resale Restriction Termination Date of the Securities pursuant to clause (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Company and the Trustee. TRANSFEREE:_________________, by:_______________________ EX-4.4 4 REGISTRATION RIGHTS EXHIBIT 4.4 Execution Copy AMC Entertainment Inc. 9-1/2% Senior Subordinated Notes Due 2011 REGISTRATION RIGHTS AGREEMENT New York, New York January 27, 1999 Salomon Smith Barney Inc. NationsBanc Montgomery Securities LLC As Representatives of the Initial Purchasersc/o Salomon Smith Barney Inc. 388 Greenwich Street New York, New York 10013 Dear Sirs: AMC Entertainment Inc., a corporation organized under the laws of Delaware (the "Company"), proposes to issue and sell to certain purchasers (the "Initial Purchasers"), upon the terms set forth in a purchase agreement of even date herewith (the "Purchase Agreement"), its 9-1/2% Senior Subordinated Notes Due 2011 (the "Securities") relating to the initial placement of the Securities (the "Initial Placement"). To induce the Initial Purchasers to enter into the Purchase Agreement and to satisfy a condition of your obligations thereunder, the Company agrees with you for your benefit and the benefit of the holders from time to time of the Securities (including the Initial Purchasers) (each a "Holder" and, together, the "Holders"), as follows: 1. Definitions. Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Affiliate" of any specified Person shall mean any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified Person. For purposes of this definition, control of a Person shall mean 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" shall have meanings correlative to the foregoing. "Broker-Dealer" shall mean any broker or dealer registered as such under the Exchange Act. "Business Day" shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City. "Commission" shall mean the Securities and Exchange Commission. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Exchange Offer Registration Period" shall mean the one-year period following the consummation of the Registered Exchange Offer, exclusive of any period during which any stop order shall be in effect suspending the effectiveness of the Exchange Offer Registration Statement. "Exchange Offer Registration Statement" shall mean a registration statement of the Company on an appropriate form under the Act with respect to the Registered Exchange Offer, all amendments and supplements to such registration statement, including post-effective amendments thereto, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Exchanging Dealer" shall mean any Holder (which may include any Initial Purchaser) that is a Broker-Dealer and elects to exchange for New Securities any Securities that it acquired for its own account as a result of market-making activities or other trading activities (but not directly from the Company or any Affiliate of the Company). "Final Memorandum" shall have the meaning set forth in the Purchase Agreement. "Holder" shall have the meaning set forth in the preamble hereto. "Indenture" shall mean the Indenture relating to the Securities, dated as of January 27, 1999, between the Company and The Bank of New York, as trustee, as the same may be amended from time to time in accordance with the terms thereof. "Initial Placement" shall have the meaning set forth in the preamble hereto. "Initial Purchaser" shall have the meaning set forth in the preamble hereto. "Losses" shall have the meaning set forth in Section 6(d) hereof. "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of Securities registered under a Registration Statement. "Managing Underwriters" shall mean the investment banker or investment bankers and manager or managers that shall administer an underwritten offering. "New Securities" shall mean debt securities of the Company identical in all material respects to the Securities (except that the cash interest and interest rate step-up provisions and the transfer restrictions shall be modified or eliminated, as appropriate) and to be issued under the Indenture or the New Securities Indenture. "New Securities Indenture" shall mean an indenture between the Company and the New Securities Trustee, identical in all material respects to the Indenture (except that the cash interest and interest rate step-up provisions will be modified or eliminated, as appropriate). "New Securities Trustee" shall mean a bank or trust company reasonably satisfactory to the Initial Purchasers, as trustee with respect to the New Securities under the New Securities Indenture. "Prospectus" shall mean the prospectus included in any 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 under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Securities or the New Securities covered by such Registration Statement, and all amendments and supplements thereto and all material incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble hereto. "Registered Exchange Offer" shall mean the proposed offer of the Company to issue and deliver to the Holders of the Securities that are not prohibited by any law or policy of the Commission from participating in such offer, in exchange for the Securities, a like aggregate principal amount of the New Securities. "Registration Statement" shall mean any Exchange Offer Registration Statement or Shelf Registration Statement that covers any of the Securities or the New Securities pursuant to the provisions of this Agreement, any amendments and supplements to such registration statement, including post- effective amendments (in each case including the Prospectus contained therein), all exhibits thereto and all material incorporated by reference therein. "Securities" shall have the meaning set forth in the preamble hereto. "Shelf Registration" shall mean a registration effected pursuant to Section 3 hereof. "Shelf Registration Period" has the meaning set forth in Section 3(b) hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 3 hereof which covers some or all of the Securities or New Securities, as applicable, on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Trustee" shall mean the trustee with respect to the Securities under the Indenture. "underwriter" shall mean any underwriter of Securities in connection with an offering thereof under a Shelf Registration Statement. 2. Registered Exchange Offer. (a) The Company shall prepare and, not later than 90 days following the date of the original issuance of the Securities (or if such 90th day is not a Business Day, the next succeeding Business Day), shall file with the Commission the Exchange Offer Registration Statement with respect to the Registered Exchange Offer. The Company shall use its best efforts to cause the Exchange Offer Registration Statement to become effective under the Act within 150 days of the date of the original issuance of the Securities (or if such 150th day is not a Business Day, the next succeeding Business Day). (b) Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Securities for New Securities (assuming that such Holder is not an Affiliate of the Company, acquires the New Securities in the ordinary course of such Holder's business, has no arrangements with any Person to participate in the distribution of the New Securities and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such New Securities from and after their receipt without any limitations or restrictions under the Act and without material restrictions under the securities laws of a substantial proportion of the several states of the United States. (c) In connection with the Registered Exchange Offer, the Company shall: (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (ii) keep the Registered Exchange Offer open for not less than 30 days and not more than 45 days after the date notice thereof is mailed to the Holders (or, in each case, longer if required by applicable law); (iii) use its best efforts to keep the Exchange Offer Registration Statement continuously effective under the Act, supplemented and amended as required, under the Act to ensure that it is available for sales of New Securities by Exchanging Dealers during the Exchange Offer Registration Period; (iv) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan in New York City, which may be the Trustee, the New Securities Trustee or an Affiliate of either of them; (v) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last Business Day on which the Registered Exchange Offer is open; (vi) prior to effectiveness of the Exchange Offer Registration Statement, provide a supplemental letter to the Commission (A) stating that the Company is conducting the Registered Exchange Offer in reliance on the position of the Commission in Exxon Capital Holdings Corporation (pub. avail. May 13, 1988) and, Morgan Stanley and Co., Inc. (pub. avail. June 5, 1991); and (B) including a representation that the Company has not entered into any arrangement or understanding with any Person to distribute the New Securities to be received in the Registered Exchange Offer and that, to the best of the Company's information and belief, each Holder participating in the Registered Exchange Offer is acquiring the New Securities in the ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the New Securities; and (vii) comply in all respects with all applicable laws. (d) As soon as practicable after the close of the Registered Exchange Offer, the Company shall: (i) accept for exchange all Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer; (ii) deliver to the Trustee for cancelation in accordance with Section 4(s) all Securities so accepted for exchange; and (iii) cause the New Securities Trustee promptly to authenticate and deliver to each Holder of Securities a principal amount of New Securities equal to the principal amount of the Securities of such Holder so accepted for exchange. (e) Each Holder hereby acknowledges and agrees that any Broker- Dealer and any such Holder using the Registered Exchange Offer to participate in a distribution of the New Securities (x) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission in Morgan Stanley and Co., Inc. (pub. avail. June 5, 1991) and Exxon Capital Holdings Corporation (pub. avail. May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993 and similar no-action letters; and (y) must comply with the registration and prospectus delivery requirements of the Act in connection with any secondary resale transaction and such transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K under the Act if the resales are of New Securities obtained by such Holder in exchange for Securities acquired by such Holder directly from the Company or one of its Affiliates. Accordingly, each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that, at the time of the consummation of the Registered Exchange Offer: (i) any New Securities received by such Holder will be acquired in the ordinary course of business; (ii) such Holder will have no arrangement or understanding with any Person to participate in the distribution of the Securities or the New Securities within the meaning of the Act; and (iii) such Holder is not an Affiliate of the Company (or if it is, that it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable). (f) If any Initial Purchaser determines that it is not eligible to participate in the Registered Exchange Offer with respect to the exchange of Securities constituting any portion of an unsold allotment, at the request of such Initial Purchaser, the Company shall issue and deliver to such Initial Purchaser or the Person purchasing New Securities registered under a Shelf Registration Statement as contemplated by Section 3 hereof from such Initial Purchaser, in exchange for such Securities, a like principal amount of New Securities. The Company shall use its best efforts to cause the CUSIP Service Bureau to issue the same CUSIP number for such New Securities as for New Securities issued pursuant to the Registered Exchange Offer. 3. Shelf Registration. (a) If (i) due to any change in law or applicable interpretations thereof by the Commission's staff, the Company determines upon advice of its outside counsel that it is not permitted to effect the Registered Exchange Offer as contemplated by Section 2 hereof; or (ii) for any other reason the Registered Exchange Offer is not consummated within 180 days of the date hereof; (iii) any Initial Purchaser so requests with respect to Securities that are not eligible to be exchanged for New Securities in the Registered Exchange Offer and that are held by it following consummation of the Registered Exchange Offer; (iv) any Holder (other than an Initial Purchaser) is not eligible to participate in the Registered Exchange Offer; or (v) in the case of any Initial Purchaser that participates in the Registered Exchange Offer or acquires New Securities pursuant to Section 2(f) hereof, such Initial Purchaser does not receive freely tradeable New Securities in exchange for Securities constituting any portion of an unsold allotment (it being understood that (x) the requirement that an Initial Purchaser deliver a Prospectus containing the information required by Item 507 or 508 of Regulation S-K under the Act in connection with sales of New Securities acquired in exchange for such Securities shall result in such New Securities being not "freely tradeable"; and (y) the requirement that an Exchanging Dealer deliver a Prospectus in connection with sales of New Securities acquired in the Registered Exchange Offer in exchange for Securities acquired as a result of market-making activities or other trading activities shall not result in such New Securities being not "freely tradeable"), the Company shall effect a Shelf Registration Statement in accordance with subsection (b) below. (b) (i) The Company shall as promptly as practicable (but in no event more than 90 days after so required or requested pursuant to this Section 3), file with the Commission and thereafter shall use its best efforts to cause to be declared effective under the Act a Shelf Registration Statement relating to the offer and sale of the Securities or the New Securities, as applicable, by the Holders thereof from time to time in accordance with the methods of distribution elected by such Holders and set forth in such Shelf Registration Statement; provided, however, that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all of the provisions of this Agreement applicable to such Holder; and provided further, that with respect to New Securities received by an Initial Purchaser in exchange for Securities constituting any portion of an unsold allotment, the Company may, if permitted by current interpretations by the Commission's staff, file a post-effective amendment to the Exchange Offer Registration Statement containing the information required by Item 507 or 508 of Regulation S-K, as applicable, in satisfaction of its obligations under this subsection with respect thereto, and any such Exchange Offer Registration Statement, as so amended, shall be referred to herein as, and governed by the provisions herein applicable to, a Shelf Registration Statement. (ii) The Company shall use its best efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended as required by the Act, in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years after the Closing Date or such shorter period that will terminate when all the Securities or New Securities, as applicable, covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (in any such case, such period being called the "Shelf Registration Period"). The Company shall be deemed not to have used its best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless (A) such action is required by applicable law; or (B) such action is taken by the Company in good faith and for valid business reasons (not including avoidance of the Company's obligations hereunder), including the acquisition or divestiture of assets, so long as the Company promptly thereafter complies with the requirements of Section 4(k) hereof, if applicable. (iii) The Company shall cause the Shelf Registration Statement and the related Prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement or such amendment or supplement, (A) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission; and (B) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 4. Additional Registration Procedures. In connection with any Shelf Registration Statement and, to the extent applicable, any Exchange Offer Registration Statement, the following provisions shall apply. (a) The Company shall: (i) furnish to you, not less than five Business Days prior to the filing thereof with the Commission, a copy of any Exchange Offer Registration Statement and any Shelf Registration Statement, and each amendment thereof and each amendment or supplement, if any, to the Prospectus included therein (including all documents incorporated by reference therein after the initial filing) and shall use its best efforts to reflect in each such document, when so filed with the Commission, such comments as you reasonably propose; (ii) include the information set forth in Annex A hereto on the facing page of the Exchange Offer Registration Statement, in Annex B hereto in the forepart of the Exchange Offer Registration Statement in a section setting forth details of the Exchange Offer, in Annex C hereto in the underwriting or plan of distribution section of the Prospectus contained in the Exchange Offer Registration Statement, and in Annex D hereto in the letter of transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by an Initial Purchaser, include the information required by Item 507 or 508 of Regulation S-K, as applicable, in the Prospectus contained in the Exchange Offer Registration Statement; and (iv) in the case of a Shelf Registration Statement, include the names of the Holders that propose to sell Securities pursuant to the Shelf Registration Statement as selling security holders. (b) The Company shall ensure that: (i) any Registration Statement and any amendment thereto and any Prospectus forming part thereof and any amendment or supplement thereto complies in all material respects with the Act and the rules and regulations thereunder; and (ii) any Registration Statement and any amendment thereto does not, when it becomes effective, 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. (c) The Company shall advise you, the Holders of Securities covered by any Shelf Registration Statement and any Exchanging Dealer under any Exchange Offer Registration Statement that has provided in writing to the Company a telephone or facsimile number and address for notices, and, if requested by you or any such Holder or Exchanging Dealer, shall confirm such advice in writing (which notice pursuant to clauses: (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the Prospectus until the Company shall have remedied the basis for such suspension): (i) when a Registration Statement and any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for any amendment or supplement to the Registration Statement or the Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included therein for sale in any jurisdiction or the initiation of any proceeding for such purpose; and (v) of the happening of any event that requires any change in the Registration Statement or the Prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading. (d) The Company shall use its best efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement or the qualification of the securities therein for sale in any jurisdiction at the earliest possible time. (e) The Company shall furnish to each Holder of Securities covered by any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including all material incorporated therein by reference, and, if the Holder so requests in writing, all exhibits thereto (including exhibits incorporated by reference therein). (f) The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities covered by any Shelf Registration Statement, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request. The Company consents to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of securities in connection with the offering and sale of the securities covered by the Prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement. (g) The Company shall furnish to each Exchanging Dealer which so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including all material incorporated by reference therein, and, if the Exchanging Dealer so requests in writing, all exhibits thereto (including exhibits incorporated by reference therein). (h) The Company shall promptly deliver to each Initial Purchaser, each Exchanging Dealer and each other Person required to deliver a Prospectus during the Exchange Offer Registration Period, without charge, as many copies of the Prospectus included in such Exchange Offer Registration Statement and any amendment or supplement thereto as any such Person may reasonably request. The Company consents to the use of the Prospectus or any amendment or supplement thereto by any Initial Purchaser, any Exchanging Dealer and any such other Person that may be required to deliver a Prospectus following the Registered Exchange Offer in connection with the offering and sale of the New Securities covered by the Prospectus, or any amendment or supplement thereto, included in the Exchange Offer Registration Statement. (i) Prior to the Registered Exchange Offer or any other offering of Securities pursuant to any Registration Statement, the Company shall arrange, if necessary, for the qualification of the Securities or the New Securities for sale under the laws of such jurisdictions as any Holder shall reasonably request and will maintain such qualification in effect so long as required; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the Initial Placement, the Registered Exchange Offer or any offering pursuant to a Shelf Registration Statement, in any such jurisdiction where it is not then so subject. (j) The Company shall cooperate with the Holders of Securities to facilitate the timely preparation and delivery of certificates representing New Securities or Securities to be issued or sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request. (k) Upon the occurrence of any event contemplated by subsections (c)(ii) through (v) above, the Company shall promptly prepare a post-effective amendment to the applicable Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that, as thereafter delivered to initial purchasers of the securities included therein, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. In such circumstances, the period of effectiveness of the Exchange Offer Registration Statement provided for in Section 2 and the Shelf Registration Statement provided for in Section 3(b) shall each be extended by the number of days from and including the date of the giving of a notice of suspension pursuant to Section 4(c) to and including the date when the Initial Purchasers, the Holders of the Securities and any known Exchanging Dealer shall have received such amended or supplemented Prospectus pursuant to this Section. (l) Not later than the effective date of any Registration Statement, the Company shall provide a CUSIP number for the Securities or the New Securities, as the case may be, registered under such Registration Statement and provide the Trustee with printed certificates for such Securities or New Securities, in a form eligible for deposit with The Depository Trust Company. (m) The Company shall comply with all applicable rules and regulations of the Commission and shall make generally available to its security holders as soon as practicable after the effective date of the applicable Registration Statement an earnings statement satisfying the provisions of Section 11(a) of the Act. (n) The Company shall cause the Indenture or the New Securities Indenture, as the case may be, to be qualified under the Trust Indenture Act in a timely manner. (o) The Company may require each Holder of securities to be sold pursuant to any Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of such securities as the Company may from time to time reasonably require for inclusion in such Registration Statement. The Company may exclude from such Shelf Registration Statement the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request. (p) In the case of any Shelf Registration Statement, the Company shall enter into such agreements and take all other appropriate actions (including if requested an underwriting agreement in customary form) in order to expedite or facilitate the registration or the disposition of the Securities, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 6 (or such other provisions and procedures acceptable to the Majority Holders and the Managing Underwriters, if any, with respect to all parties to be indemnified pursuant to Section 6). (q) In the case of any Shelf Registration Statement, the Company shall: (i) make reasonably available for inspection by the Holders of Securities to be registered thereunder, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by the Holders or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries; (ii) cause the Company's officers, directors and employees to supply all relevant information reasonably requested by the Holders or any such underwriter, attorney, accountant or agent in connection with any such Registration Statement as is customary for similar due diligence examinations; provided, however, that any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by the Holders or any such underwriter, attorney, accountant or agent, unless such disclosure is made in connection with a court proceeding or required by law, or such information becomes available to the public generally or through a third party without an accompanying obligation of confidentiality; (iii) make such representations and warranties to the Holders of Securities registered thereunder and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement; (iv) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters, if any) addressed to each selling Holder and the underwriters, if any, covering such matters as are customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters; (v) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each selling Holder of Securities registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; and (vi) deliver such documents and certificates as may be reasonably requested by the Majority Holders and the Managing Underwriters, if any, including those to evidence compliance with Section 4(k) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. The actions set forth in clauses (iii), (iv), (v) and (vi) of this Section shall be performed at (A) the effectiveness of such Registration Statement and each post-effective amendment thereto; and (B) each closing under any underwriting or similar agreement as and to the extent required thereunder. (r) In the case of any Exchange Offer Registration Statement, the Company shall: (i) make reasonably available for inspection by said Initial Purchaser, and any attorney, accountant or other agent retained by such Initial Purchaser, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries; (ii) cause the Company's officers, directors and employees to supply all relevant information reasonably requested by such Initial Purchaser or any such attorney, accountant or agent in connection with any such Registration Statement as is customary for similar due diligence examinations; provided, however, that any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by such Initial Purchaser or any such attorney, accountant or agent, unless such disclosure is made in connection with a court proceeding or required by law, or such information becomes available to the public generally or through a third party without an accompanying obligation of confidentiality; (iii) make such representations and warranties to such Initial Purchaser, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement; (iv) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to such Initial Purchaser and its counsel, addressed to such Initial Purchaser, covering such matters as are customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Initial Purchaser or its counsel; (v) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to such Initial Purchaser, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings, or if requested by such Initial Purchaser or its counsel in lieu of a "cold comfort" letter, an agreed-upon procedures letter under Statement on Auditing Standards No. 35, covering matters requested by such Initial Purchaser or its counsel; and (vi) deliver such documents and certificates as may be reasonably requested by such Initial Purchaser or its counsel, including those to evidence compliance with Section 4(k) and with conditions customarily contained in underwriting agreements. The foregoing actions set forth in clauses (iii), (iv), (v), and (vi) of this Section shall be performed at the close of the Registered Exchange Offer and the effective date of any post-effective amendment to the Exchange Offer Registration Statement. (s) If a Registered Exchange Offer is to be consummated, upon delivery of the Securities by Holders to the Company (or to such other Person as directed by the Company) in exchange for the New Securities, the Company shall mark, or caused to be marked, on the Securities so exchanged that such Securities are being canceled in exchange for the New Securities. In no event shall the Securities be marked as paid or otherwise satisfied. (t) The Company will use its best efforts (i) if the Securities have been rated prior to the initial sale of such Securities, to confirm such ratings will apply to the Securities or the New Securities, as the case may be, covered by a Registration Statement; or (ii) if the Securities were not previously rated, to cause the Securities covered by a Registration Statement to be rated with at least one nationally recognized statistical rating agency, if so requested by Majority Holders with respect to the related Registration Statement or by any Managing Underwriters. (u) In the event that any Broker-Dealer shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Rules of Fair Practice and the By-Laws of the National Association of Securities Dealers, Inc.) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, assist such Broker-Dealer in complying with the requirements of such Rules and By-Laws, including, without limitation, by: (i) if such Rules or By-Laws shall so require, engaging a "qualified independent underwriter" (as defined in such Rules) to participate in the preparation of the Registration Statement, to exercise usual standards of due diligence with respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities; (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 6 hereof; and (iii) providing such information to such Broker-Dealer as may be required in order for such Broker-Dealer to comply with the requirements of such Rules. (v) The Company shall use its best efforts to take all other steps necessary to effect the registration of the Securities or the New Securities, as the case may be, covered by a Registration Statement. 5. Registration Expenses. The Company shall bear all expenses incurred in connection with the performance of its obligations under Sections 2, 3 and 4 hereof and, in the event of any Shelf Registration Statement, will reimburse the Holders for the reasonable fees and disbursements of one firm or counsel designated by the Majority Holders to act as counsel for the Holders in connection therewith, and, in the case of any Exchange Offer Registration Statement, will reimburse the Initial Purchasers for the reasonable fees and disbursements of counsel acting in connection therewith. 6. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Holder of Securities or New Securities, as the case may be, covered by any Registration Statement (including each Initial Purchaser and, with respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer), the directors, officers, employees and agents of each such Holder and each Person who controls any such Holder within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any such Holder specifically for inclusion therein. This indemnity agreement will be in addition to any liability which the Company may otherwise have. The Company also agrees to indemnify or contribute as provided in Section 6(d) to Losses of each underwriter of any Securities or New Securities, as the case may be, registered under a Shelf Registration Statement, their directors, officers, employees or agents and each Person who controls such underwriter on substantially the same basis as that of the indemnification of the Initial Purchasers and the selling Holders provided in this Section 6(a) and shall, if requested by any Holder, enter into an underwriting agreement reflecting such agreement, as provided in Section 4(p) hereof. With respect to any untrue statement or omission of material fact made in any preliminary Prospectus, the indemnity agreement contained in this Section 6(a) shall not inure to the benefit of any indemnified person from whom the person asserting any such loss, claim, damage or liability purchased the securities concerned, to the extent that any such loss, claim, damage or liability of such indemnified person occurs under the circumstance where it shall have been determined by a court of competent jurisdiction by final and nonappealable judgment that (w) the Company had previously furnished copies of the Final Prospectus to such indemnified person, (x) delivery of the Final Prospectus was required by the Act to be made to such person, (y) the untrue statement or omission of a material fact contained in the preliminary Prospectus was corrected in the Final Prospectus and (z) there was not sent or given to such person, at or prior to the written confirmation of the sale of such securities to such person, a copy of the Final Prospectus. (b) Each Holder of securities covered by a Registration Statement (including each Initial Purchaser and, with respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer) severally agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs such Registration Statement and each Person who controls the Company within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to each such Holder, but only with reference to written information relating to such Holder furnished to the Company by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any such Holder may otherwise have. (c) Promptly after receipt by an indemnified party under this Section 6 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses; and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party; (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action; or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section is unavailable to or insufficient to hold harmless an indemnified party for any reason, then each applicable indemnifying party shall have a joint and several obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which such indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from the Initial Placement and the Registration Statement which resulted in such Losses; provided, however, that in no case shall any Initial Purchaser or any subsequent Holder of any Security or New Security be responsible, in the aggregate, for any amount in excess of the purchase discount or commission applicable to such Security, or in the case of a New Security, applicable to the Security that was exchangeable into such New Security, as set forth on the cover page of the Final Memorandum, nor shall any underwriter be responsible for any amount in excess of the underwriting discount or commission applicable to the securities purchased by such underwriter under the Registration Statement which resulted in such Losses. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the sum of (x) the total net proceeds from the Initial Placement (before deducting expenses) as set forth on the cover page of the Final Memorandum and (y) the total amount of additional interest which the Company was not required to pay as a result of registering the securities covered by the Registration Statement which resulted in such Losses. Benefits received by the Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions as set forth on the cover page of the Final Memorandum, and benefits received by any other Holders shall be deemed to be equal to the value of receiving Securities or New Securities, as applicable, registered under the Act. Benefits received by any underwriter shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus forming a part of the Registration Statement which resulted in such Losses. Relative fault shall be determined by reference to, among other things, whether any alleged untrue statement or omission relates to information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each Person who controls a Holder within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each Person who controls the Company within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). (e) The provisions of this Section will remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Company or any of the officers, directors or controlling Persons referred to in this Section hereof, and will survive the sale by a Holder of securities covered by a Registration Statement. 7. Underwritten Registrations. (a) If any of the Securities or New Securities, as the case may be, covered by any Shelf Registration Statement are to be sold in an underwritten offering, the Managing Underwriters shall be selected by the Majority Holders. (b) No Person may participate in any underwritten offering pursuant to any Shelf Registration Statement, unless such Person (i) agrees to sell such Person's Securities or New Securities, as the case may be, on the basis reasonably provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements; and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 8. No Inconsistent Agreements. The Company has not, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. 9. Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, qualified, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Majority Holders (or, after the consummation of any Registered Exchange Offer in accordance with Section 2 hereof, of New Securities); provided that, with respect to any matter that directly or indirectly affects the rights of any Initial Purchaser hereunder, the Company shall obtain the written consent of each such Initial Purchaser against which such amendment, qualification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Securities or New Securities, as the case may be, are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by the Majority Holders, determined on the basis of Securities or New Securities, as the case may be, being sold rather than registered under such Registration Statement. 10. Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first- class mail, telex, telecopier or air courier guaranteeing overnight delivery: (a) if to a Holder, at the most current address given by such holder to the Company in accordance with the provisions of this Section, which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to Salomon Smith Barney Inc; (b) if to you, initially at the respective addresses set forth in the Purchase Agreement; and (c) if to the Company, initially at its address set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given when received. The Initial Purchasers or the Company by notice to the other parties may designate additional or different addresses for subsequent notices or communications. 11. Successors. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including, without the need for an express assignment or any consent by the Company thereto, subsequent Holders of Securities and the New Securities. The Company hereby agrees to extend the benefits of this Agreement to any Holder of Securities and the New Securities, and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto. 12. Counterparts. This agreement may be in signed counterparts, each of which shall an original and all of which together shall constitute one and the same agreement. 13. Headings. The headings used herein are for convenience only and shall not affect the construction hereof. 14. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. 15. Severability. In the event that any one of more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. 16. Securities Held by the Company, etc. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities or New Securities is required hereunder, Securities or New Securities, as applicable, held by the Company or its Affiliates (other than subsequent Holders of Securities or New Securities if such subsequent Holders are deemed to be Affiliates solely by reason of their holdings of such Securities or New Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a building agreement among the Company and the several Initial Purchasers. Very truly yours, AMC Entertainment Inc. By: /s/ Peter C. Brown Name: Peter C. Brown Title:Co-Chairman, President & CFO The foregoing Agreement is hereby confirmed and accepted as of the date first above written. SALOMON SMITH BARNEY INC. NATIONSBANC MONTGOMERY SECURITIES LLC By: SALOMON SMITH BARNEY INC. By: /s/ David J. Wirdnam Name: David J. Wirdnam Title: Vice President ANNEX A Each Broker-Dealer that receives New Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Broker-Dealer will not be deemed to admit that it is an "underwriter: within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Broker-Dealer in connection with resales of New Securities received in exchange for Securities where such Securities were acquired by such Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date (as defined herein) and ending on the close of business one year after the Expiration Date, it will make this Prospectus available to any Broker-Dealer for use in connection with any such resale. See "Plan of Distribution". ANNEX B Each Broker-Dealer that receives New Securities for its own account in exchange for Securities, where such Securities were acquired by such Broker- Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. See "Plan of Distribution". ANNEX C PLAN OF DISTRIBUTION Each Broker-Dealer that receives New Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Broker-Dealer in connection with resales of New Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date and ending on the close of business one year after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any Broker-Dealer for use in connection with any such resale. In addition, until __________, 199__, all dealers effecting transactions in the New Securities may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of New Securities by brokers-dealers. New Securities received by Broker-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Broker-Dealer and/or the purchasers of any such New Securities. Any Broker-Dealer that resells New Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit of any such resale of New Securities and any commissions or concessions received by any such Persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of one year after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any Broker-Dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holder of the Securities) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Securities (including any Broker-Dealers) against certain liabilities, including liabilities under the Securities Act. ANNEX D Rider A CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: Address: Rider B If the undersigned is not a Broker-Dealer, the undersigned represents that it acquired the New Securities in the ordinary course of its business, it is not engaged in, and does not intend to engage in, a distribution of New Securities and it has no arrangements or understandings with any Person to participate in a distribution of the New Securities. If the undersigned is a Broker-Dealer that will receive New Securities for its own account in exchange for Securities, it represents that the Securities to be exchanged for New Securities were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus in connection with any resale of such New Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. EX-10.1 5 PCB EMPLOYMENT AGRMT EXHIBIT 10.1 EMPLOYMENT AGREEMENT This Employment Agreement is entered into as of January 1, 1999 by and between AMC ENTERTAINMENT INC., a Delaware corporation (the "Company"), and PETER C. BROWN ("Employee"). In consideration of the mutual promises and covenants contained herein, the parties hereto agree as follows: 1.Position and Duties. During the Term (as defined in Section 2) of his employment by the Company under this Agreement, Employee shall devote his full time and attention to the business of the Company as Co-Chairman of the Board, President and Chief Financial Officer as directed by the Company's Chief Executive Officer or its Board of Directors. Notwithstanding the foregoing, Employee shall be permitted, to the extent such activities do not substantially interfere with the performance by Employee of his duties and responsibilities under this Agreement, (i) to manage Employee's personal financial and legal affairs, (ii) to serve on corporate, civic or charitable boards or committees, and (iii) to serve as Chairman of the Board of Trustees and/or as a Trustee of Entertainment Properties Trust. 2.Term. The term of this Agreement shall commence as of January 1, 1999 and shall terminate on December 31, 2001 or sooner as provided in Section 6 below (such period, as it may be extended, the "Term"). On each January 1 hereafter, commencing in 2000, one year shall be added to the Term of Employee's employment with the Company under this Agreement, so that as of each January 1 the Term of Employee's employment hereunder shall be three (3) years. 3.Compensation. (a)Base Salary. During the Term of his employment by the Company under this Agreement, Employee shall receive an annual salary of $400,000.00 ("Base Salary") (less withholding for applicable taxes), payable in accordance with the Company's payroll procedures for its salaried employees, subject to such increases as may be approved by the Compensation Committee of the Company's Board of Directors. (b)Bonus. In addition to Base Salary, Employee shall be eligible to receive an annual bonus (the "Bonus") as determined from time to time in the sole discretion of the Compensation Committee of the Company's Board of Directors based on the Company's applicable incentive compensation program, as such may exist from time to time. (c)Benefits. During the Term of Employee's employment by the Company under this Agreement, Employee also shall be eligible for the benefits offered by the Company from time to time to the Company's other executive officers (such as group insurance, pension plans, thrift plans, stock purchase plans and the like). Nothing herein shall be construed so as to prevent the Company from modifying or terminating any employee benefit plans or programs it may adopt from time to time. (d)Automobile. During the Term of Employee's employment by the Company under this Agreement, the Company shall provide Employee with a Company owned or leased automobile or an equivalent automobile allowance. 4.Expense Reimbursements. During the Term of Employee's employment by the Company under this Agreement, the Company shall reimburse Employee for business travel and entertainment expenses reasonably incurred by Employee on behalf of the Company in accordance with the Company's procedures, as such may exist from time to time. 5.Termination. Employee's employment by the Company under this Agreement shall be terminated upon the earliest to occur of the following events: (a)Resignation. Employee's resignation, retirement or other voluntary departure. (b)Death. The death of Employee. (c)Disability. If, as a result of Employee's incapacity due to physical or mental illness, (i) Employee shall not have been regularly performing his duties and obligations hereunder for a period of one hundred twenty (120) consecutive days (a "Disability"), (ii) the Company has given Employee the written Notice of Termination pursuant to Section 6(a) hereof, and (iii) within thirty (30) days after the Company gives Employee such written Notice of Termination (which may occur before or after the end of such 120 day period), Employee shall not have returned to the performance of his duties and obligations hereunder on a regular basis. (d)Cause. Employee is terminated for Cause. For purposes of this Agreement, "Cause" is defined as (i) the willful and continued failure by Employee to perform substantially his duties with the Company (other than any such failure resulting from his incapacity due to physical or mental illness), or (ii) the willful engaging by Employee in misconduct which is materially and demonstrably injurious to the Company. For purposes of this Agreement, no act, or failure to act, on the part of Employee shall be considered "willful" unless such act was committed, or such failure to act occurred, in bad faith and without reasonable belief that Employee's act or failure to act was in the best interests of the Company. (e)Without Cause. The employment of Employee by the Company under this Agreement may be terminated without Cause with severance at any time by the Company's Chief Executive Officer with the approval of the Company's Board of Directors in its sole discretion. (f)The Company's Material Breach. Employee terminates his employment by the Company hereunder for a Material Breach of this Agreement by the Company. For purposes of this Agreement, a "Material Breach" by the Company shall be deemed to occur upon (i) a failure by the Company to comply with any material provisions of this Agreement which has not been cured within thirty (30) days after written notice of such noncompliance has been given to the Company by Employee, (ii) any purported termination of Employee which is not effected pursuant to a Notice of Termination, as defined in Sections 6 and 11 below (and for purposes of this Agreement no such purported termination shall be effective), or (iii) the assignment to Employee of any duties inconsistent in any material respect with Section 1 of this Agreement, or any other actions by the Company that results in a material diminution of Employee's position, authority, duties or responsibilities, other than an action that is not taken in bad faith and is remedied by the Company promptly after receipt of notice thereof from Employee. Employee must notify the Company in writing within thirty (30) days of becoming aware of the occurrence of a Material Breach in order to receive the payments described in Section 7(c) below. (g)Change of Control. Employee terminates his employment by the Company hereunder in the event of a Change of Control. Employee must not be the Person or part of the Group (or an Affiliate of such Person or Group) which effected the Change in Control, and must notify the Company in writing of such termination within sixty (60) days after the occurrence of a Change of Control, in order to receive the payments described in Section 7(c) below. For purposes of this Agreement a "Change of Control" of the Company means the occurrence of either of the following events during the Term: (a) any Person (other than a Permitted Holder) or any Persons (other than any Permitted Holders) acting together that would constitute a Group, together with any Affiliates thereof (other than any Permitted Holders), shall obtain beneficial ownership of at least 50% of the aggregate voting power of all classes of capital stock of the Company entitled to vote generally in the election of directors (the determination of aggregate voting power to recognize that the Company's Class B Stock currently has ten votes per share and the Company's Common Stock currently has one vote per share), or (b) any Person (other than a Permitted Holder) or Group (other than any Permitted Holders), together with any Affiliates thereof (other than any Permitted Holders), shall succeed in having a sufficient number of its nominees (who are not management nominees) elected to the Board of Directors of the Company such that such nominees, when added to any existing director(s) remaining on the Board of Directors of the Company after such election who is an Affiliate (other than a Permitted Holder) of such Group, will constitute a majority of the Board of Directors of the Company. Unless otherwise specifically defined in this Section 5(g), all terms used in this Section 5(g) shall have the meaning used in Section 13(d) of the Securities Exchange Act of 1934 and regulations promulgated thereunder (or any successor provisions to such law or regulations). "Affiliate" means, with respect to any specified Person, (i) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person or (ii) any other Person that owns, directly or indirectly, ten percent or more of such Person's Capital Stock or any officer or director of any such Person or other Person or with respect to any natural Person, any person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Capital Stock" of any Person means any and all shares, interests, participations or other equivalents (however designated) of such Person's capital stock, any rights (other than debt securities convertible into capital stock), warrants or options to acquire such capital stock, whether now outstanding or issued after the date of this Agreement. "Permitted Holder" means (i) Stanley H. Durwood, his spouse (collectively, the "Durwood Family") and any Affiliate of any member of the Durwood Family (other than any lineal descendant of Stanley H. Durwood), (ii) Stanley H. Durwood's estate, (iii) the 1992 Durwood, Inc. Voting Trust dated December 12, 1992 and any successor voting trust, and (iv) any Subsidiary, any employee benefit plan, stock purchase plan, stock option plan or other stock incentive plan or program, retirement plan or automatic reinvestment plan or any substantially similar plan of the Company or any Subsidiary or any Person holding securities of the Company 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 Company held by any Person listed in this clause (iv), then such securities shall no longer be deemed to be held by a Permitted Holder. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, estate, unincorporated organization or government or any agency or political subdivision thereof. "Subsidiary" means (i) any corporation of which more than 50% of the outstanding shares of Capital Stock having ordinary voting power for the election of directors is owned directly or indirectly by the Company and (ii) any partnership, limited liability company, association, joint venture or other entity in which the Company, directly or indirectly, has more than a 50% equity interest. 6.Termination Procedure. (a)Notice of Termination. Any termination of Employee by the Company or by Employee (other than termination pursuant to Section 5(a) or (b) hereof) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 11. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee under the provisions so indicated. (b)Date of Termination. "Date of Termination" shall mean (i) if Employee's employment is terminated by Employee's resignation, retirement or other voluntary departure, the date of such event, (ii) if Employee's employment by the Company is terminated by his death, the date of death, (iii) if Employee's employment by the Company is terminated pursuant to Section 5(c) hereof, thirty (30) days after Notice of Termination is given (provided that Employee shall not have again become available for service to the Company on a regular basis during such thirty (30) day period), (iv) if Employee's employment by the Company is terminated for Cause, the date specified in the Notice of Termination, and (v) if Employee's employment by the Company is terminated for any other reason, the date on which a Notice of Termination is given. 7.Compensation During Disability or Upon Termination. (a)Disability. During any period that Employee fails to perform his duties under this Agreement as a result of incapacity due to physical or mental illness (a "disability period"), Employee shall continue to receive his Base Salary at the rate then in effect for such period until his employment by the Company is terminated pursuant to Section 5(c) hereof, provided that payments so made to Employee during the first 180 days of any such disability period shall be reduced by the sum of the amounts, if any, paid to Employee at or prior to the time of any such payment under disability benefit plans of the Company or under the Social Security disability insurance program, and which amounts were not previously applied to reduce any such payment. Employee shall also receive a pro rata portion of the Bonus described in Section 3(b) pursuant to the Company's applicable incentive compensation program (the amount of such pro rated Bonus to be determined as though the target level was attained, multiplied by a fraction, the numerator of which is the number of completed months in the then current Bonus program year and the denominator of which is 12), as such may exist from time to time. Employee shall also receive the compensation payments described in Section 7(c)(iii) below. (b)Termination for Cause, Death or Employee Resignation. If Employee's employment by the Company is terminated for Cause, by Employee's death or by Employee's resignation, retirement or other voluntary departure, the Company shall pay Employee his accrued but unpaid Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and the Company shall have no further obligations to Employee under this Agreement. If Employee's employment by the Company is terminated by Employee's death, Employee shall also receive (i) a pro rata portion of the Bonus described in Section 3(b) pursuant to the Company's applicable incentive compensation program (the amount of such pro rated Bonus to be determined as though the target level was attained, multiplied by a fraction, the numerator of which is the number of months in the current Bonus program year and the denominator of which is 12), as such may exist from time to time, and (ii) the compensation payments described in Section 7(c)(iii) below. (c)Termination without Cause or by Employee for Material Breach or Change of Control. If Employee's employment by the Company is terminated without Cause or by Employee following a Material Breach by the Company or Change of Control, Employee shall be entitled to receive the compensation payments described in (i), (ii) and (iii) below; provided, that Employee also must have timely notified the Company as provided in Sections 5(f) and (g), as applicable, in order to receive such payments. All amounts under this Section 7(c) shall be reduced by withholding for applicable taxes, if any. (i)A lump-sum cash payment equal to the lesser of Employee's Base Amount (as defined below) multiplied by 2.99 or 150% of Employee's current Base Salary multiplied by 3. "Base Amount" means Employee's average annual earnings reported on Form W-2 for Employee's last five tax years. (ii)A lump-sum cash payment equal to the difference between (A) the value of all vested and unvested stock options granted by AMCE to Employee which have an exercise price per share less than the closing price per share of the Company's Common Stock as reported on the American Stock Exchange or other stock exchange or automated quotation system (the "Closing Price") on the Date of Termination and (B) the exercise price of such options. For purposes of determining the option value, the Company's stock price as described above as of the Date of Termination will be used. Upon such payment by the Company to Employee, all such options will be cancelled. (iii)If Employee's note dated August 11, 1998 payable to the Company in the original principal amount of $5,625,000, the proceeds of which were used by Employee to purchase shares of the Company's Common Stock (the "Note"), is outstanding on the Date of Termination, then one of the following provisions shall apply: (A)Stock Redemption and Note Forgiveness. If the Company is so permitted under the Delaware General Corporation Law and the terms of any of its applicable loan agreements, debt covenants or other agreements, the Company shall redeem all of the 375,000 shares of the Company's Common Stock purchased by Employee with the proceeds of the Note which Employee owns on the Date of Termination, at a redemption price per share equal to the Closing Price per share on the Date of Termination, and the aggregate redemption price shall be applied by the Company towards payment of the Note. If the aggregate redemption price is greater than the amount of unpaid principal and accrued interest on the Note, the Company shall pay an amount equal to such excess to Employee. If the aggregate unpaid principal and accrued interest on the Note exceeds the redemption price, then the Company shall forgive a portion of such excess amount, determined as follows: multiply (1) the difference (expressed as a positive number) between (x) an amount equal to the Closing Price per share on the Date of Termination multiplied by 375,000 and (y) the amount of outstanding principal and accrued interest on the Note on the Date of Termination, by (2) a ratio, the numerator of which is the number of shares of the Company's Common Stock redeemed by the Company pursuant to this paragraph and the denominator of which is 375,000. The Company shall also pay to Employee an amount equal to the federal, state and city income taxes and excise taxes, if any, required to be paid by Employee based upon the forgiveness of such portion of the Note; or (B)Note Forgiveness If Stock Redemption Not Permitted. If the Company is not permitted under the terms of the Delaware General Corporation Law or any of its loan agreements, debt covenants or other agreements to redeem all of the 375,000 shares of the Company's Common Stock purchased by Employee with the proceeds of the Note which Employee owns on the Date of Termination, and if the amount of unpaid principal and accrued interest on the Note on the Date of Termination exceeds the value of such shares (determined by the Closing Price per share on the Date of Termination), then the Company shall forgive a portion of such excess amount, determined as follows: multiply (1) the difference (expressed as a positive number) between (x) an amount equal to the Closing Price per share on the Date of Termination multiplied by 375,000 and (y) the amount of outstanding principal and accrued interest on the Note on the Date of Termination, by (2) a ratio, the numerator of which is the number of shares of the Company's Common Stock purchased by Employee with the proceeds of the Note which Employee owns on the Date of Termination and the denominator of which is 375,000. The Company shall also pay to Employee an amount equal to the federal, state and city income taxes and excise taxes, if any, required to be paid by Employee based upon the forgiveness of such portion of the Note. 8.Confidentiality. Employee acknowledges that he knows and in the future will know information relating to the Company and its affiliated companies and their respective operations that is confidential or a trade secret. Such information includes information, whether obtained in writing, in conversation or otherwise, concerning corporate strategy, intent and plans, business operations, pricing, costs, budgets, equipment, the status, scope and term of pending acquisitions, negotiations and transactions, the terms of existing or proposed business arrangements, contracts and obligations, and corporate and financial reports. Such confidential or trade secret information shall not, however, include information in the public domain unless Employee has, without authority, made it public. Employee shall (a) not disclose such information to anyone except in confidence and as is necessary to the performance of his duties for the Company, (b) keep such information confidential, (c) take appropriate precautions to maintain the confidentiality of such information, and (d) not use such information for personal benefit or the benefit of any competitor or any other person. Upon termination of his employment by the Company under this Agreement, Employee shall return all materials in his possession or under his control that were prepared by or relate to the Company or its affiliates, including, but not limited to, materials containing confidential information, files, memorandums, price lists, reports, budgets and handbooks. Employee's obligation under this Section 8 shall survive the termination of Employee's employment by the Company under this Agreement. 9.Equitable Remedies. The parties acknowledge that irreparable damage will result to the Company from any violation of Section 8 above by Employee. The parties expressly agree that, in addition to any and all remedies available to the Company for any such violation, the Company shall have the remedy of restraining order and injunction and any such equitable relief as may be declared or issued by a court to enforce the provisions of Section 8 above and Employee agrees not to claim in any such equitable proceeding that a remedy at law is available to the Company. Notwithstanding anything contained herein to the contrary and if, and only if, any provision of the type contained in Section 8 above, as the case may be, is enforceable in the jurisdiction in question, if any one or more of the provisions contained in such Section shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, such provision shall be construed by limiting and reducing it so as to be enforceable to the extent compatible with the applicable law in such jurisdiction as it shall then appear. 10.Successors: Binding Agreement. (a)Company Successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all the business and/or assets of the Company, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. (b)Employee's Successors. This Agreement and all rights hereunder shall be binding upon, inure to the benefit of and be enforceable by Employee's personal or legal representatives, heirs, successors and permitted assigns. 11.Notices. All notices, requests, demand or other communications under this Agreement shall be in writing addressed as follows: (a)If to the Company, to: Raymond F. Beagle, Jr. Lathrop & Gage L.C. 2345 Grand Boulevard Kansas City, Missouri 64108 (b)If to Employee, to: Peter C. Brown AMC Entertainment Inc. 106 West 14th Street P.O. Box 419615 Kansas City, Missouri 64141-6615 Any such notice, request, demand or other communication shall be effective as of the date of actual delivery thereof. Either party may change such notice address by written notice as provided herein. 12.Total Compensation. The compensation to be paid to Employee under this Agreement shall be in full payment for all services rendered by Employee in any capacity to the Company or any affiliate of the Company. 13.Additional Potential Compensation. Nothing in this Agreement shall prohibit the Company from awarding additional compensation to Employee if it is determined that such compensation is warranted based on Employee's performance. 14.Other Provisions. This Agreement shall be governed by the laws of the State of Missouri. This Agreement represents the entire agreement of the parties hereto and shall not be amended except by a written agreement signed by all the parties hereto. This Agreement supersedes any prior oral or written agreements or understandings between the Company or any affiliate of the Company and Employee. This Agreement shall not be assignable by one party without the prior written consent of the other party, except by the Company if it complies with Section 10 above. In the event one or more of the provision contained in this Agreement or any application thereof shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provision of this Agreement or any other application thereof shall not in any way be affected or impaired thereby. Section headings herein have no legal significance. 15.Arbitration. Any legal dispute, controversy or claim related to this Agreement or breach thereof, shall, in lieu of being submitted to a court of law, be submitted to arbitration, in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The award of the arbitrators shall be final and binding upon the parties. The parties hereto agree that (i) three arbitrators shall be selected pursuant to the rules and procedures of the American Arbitration Association, (ii) at least one arbitrator shall be a licensed attorney, (iii) the arbitrators shall have the power to award injunctive relief or to direct specific performance, (iv) the arbitrators will not have the authority to award punitive damages, (v) each of the parties shall bear its own attorneys' fees, costs and expenses and an equal share of the arbitrators' and administrative fees of arbitration, (vi) the arbitrators will not have the authority to award attorneys' fees other than to direct or confirm in the award that each party shall pay its own fees, and (vii) the arbitrators shall award to the prevailing party a sum equal to that party's share of the arbitrators' and administrative fees of arbitration. Nothing in this Section shall be construed as providing Employee a cause of action, remedy or procedure that Employee would not otherwise have under this Agreement or the law. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year first above written. AMC ENTERTAINMENT INC., a Delaware corporation By: /s/ Stanley H. Durwood Stanley H. Durwood, Co-Chairman of the Board and Chief Executive Officer /s/ Peter C. Brown PETER C. BROWN, EMPLOYEE EX-10.2 6 PMS EMPLOYMENT AGRMT EXHIBIT 10.2 EMPLOYMENT AGREEMENT This Employment Agreement is entered into as of January 1, 1999 by and among AMC ENTERTAINMENT INC., a Delaware corporation ("AMCE"), AMERICAN MULTI- CINEMA, INC., a Missouri corporation ("AMC" and, collectively with AMCE, the "Company"), and PHILIP M. SINGLETON ("Employee"). In consideration of the mutual promises and covenants contained herein, the parties hereto agree as follows: 1.Position and Duties. During the Term (as defined in Section 2) of his employment by the Company under this Agreement, Employee shall devote his full time and attention to the business of the Company as President and Chief Operating Officer of AMC as directed by any Co-Chairman of the Board of AMCE or the Board of Directors of AMC. Notwithstanding the foregoing, Employee shall be permitted, to the extent that such activities do not substantially interfere with the performance by Employee of his duties and responsibilities under this Agreement, (i) to manage Employee's personal financial and legal affairs and (ii) to serve on corporate, civic or charitable boards or committees. 2.Term. The term of this Agreement shall commence as of January 1, 1999 and shall terminate on December 31, 2001 or sooner as provided in Section 6 below (such period, as it may be extended, the "Term"). On each January 1 hereafter, commencing in 2000, one year shall be added to the Term of Employee's employment with the Company under this Agreement, so that as of each January 1 the Term of Employee's employment hereunder shall be three (3) years. 3.Compensation. (a)Base Salary. During the Term of his employment by the Company under this Agreement, Employee shall receive an annual salary of $375,000.00 ("Base Salary") (less withholding for applicable taxes), payable in accordance with the Company's payroll procedures for its salaried employees, subject to such increases as may be approved by the Compensation Committee of AMC's Board of Directors. (b)Bonus. In addition to Base Salary, Employee shall be eligible to receive an annual bonus (the "Bonus") as determined from time to time in the sole discretion of the Compensation Committee of AMC's Board of Directors based on the Company's applicable incentive compensation program, as such may exist from time to time. (c)Benefits. During the Term of Employee's employment by the Company under this Agreement, Employee also shall be eligible for the benefits offered by the Company from time to time to the Company's other executive officers (such as group insurance, pension plans, thrift plans, stock purchase plans and the like). Nothing herein shall be construed so as to prevent the Company from modifying or terminating any employee benefit plans or programs it may adopt from time to time. (d)Automobile. During the Term of Employee's employment by the Company under this Agreement, the Company shall provide Employee with a Company owned or leased automobile or an equivalent automobile allowance. 4.Expense Reimbursements. During the Term of Employee's employment by the Company under this Agreement, the Company shall reimburse Employee for business travel and entertainment expenses reasonably incurred by Employee on behalf of the Company in accordance with the Company's procedures, as such may exist from time to time. 5.Termination. Employee's employment by the Company under this Agreement shall be terminated upon the earliest to occur of the following events: (a)Resignation. Employee's resignation, retirement or other voluntary departure. (b)Death. The death of Employee. (c)Disability. If, as a result of Employee's incapacity due to physical or mental illness, (i) Employee shall not have been regularly performing his duties and obligations hereunder for a period of one hundred twenty (120) consecutive days (a "Disability"), (ii) the Company has given Employee the written Notice of Termination pursuant to Section 6(a) hereof, and (iii) within thirty (30) days after the Company gives Employee such written Notice of Termination (which may occur before or after the end of such 120 day period), Employee shall not have returned to the performance of his duties and obligations hereunder on a regular basis. (d)Cause. Employee is terminated for Cause. For purposes of this Agreement, "Cause" is defined as (i) the willful and continued failure by Employee to perform substantially his duties with the Company (other than any such failure resulting from his incapacity due to physical or mental illness), or (ii) the willful engaging by Employee in misconduct which is materially and demonstrably injurious to the Company. For purposes of this Agreement, no act, or failure to act, on the part of Employee shall be considered "willful" unless such act was committed, or such failure to act occurred, in bad faith and without reasonable belief that Employee's act or failure to act was in the best interests of the Company. (e)Without Cause. The employment of Employee by the Company under this Agreement may be terminated without Cause with severance at any time by any Co-Chairman of the Board of AMCE or the Board of Directors of AMC in such officer's/its sole discretion. (f)The Company's Material Breach. Employee terminates his employment by the Company hereunder for a Material Breach of this Agreement by the Company. For purposes of this Agreement, a "Material Breach" by the Company shall be deemed to occur upon (i) a failure by the Company to comply with any material provisions of this Agreement which has not been cured within thirty (30) days after written notice of such noncompliance has been given to the Company by Employee, or (ii) any purported termination of Employee which is not effected pursuant to a Notice of Termination, as defined in Sections 6 and 11 below (and for purposes of this Agreement no such purported termination shall be effective). Employee must notify the Company in writing within thirty (30) days of becoming aware of the occurrence of a Material Breach in order to receive the payments described in Section 7(c) below. (g)Change of Control. Employee terminates his employment by the Company hereunder in the event of a Change of Control. Employee must not be the Person or part of the Group (or an Affiliate of such Person or Group) which effected the Change in Control, and must notify the Company in writing of such termination within sixty (60) days after the occurrence of a Change of Control, in order to receive the payments described in Section 7(c) below. For purposes of this Agreement a "Change of Control" of the Company means the occurrence of either of the following events during the Term: (a) any Person (other than a Permitted Holder) or any Persons (other than an Permitted Holders) acting together that would constitute a Group, together with any Affiliates thereof (other than any Permitted Holders), shall obtain beneficial ownership of at least 50% of the aggregate voting power of all classes of capital stock of the Company entitled to vote generally in the election of directors (the determination of aggregate voting power to recognize that the Company's Class B Stock currently has ten votes per share and the Company's Common Stock currently has one vote per share), or (b) any Person (other than a Permitted Holder) or Group (other than any Permitted Holders), together with any Affiliates thereof (other than any Permitted Holders), shall succeed in having a sufficient number of its nominees (who are not management nominees) elected to the Board of Directors of the Company such that such nominees, when added to any existing director(s) remaining on the Board of Directors of the Company after such election who is an Affiliate (other than a Permitted Holder) of such Group, will constitute a majority of the Board of Directors of the Company. Unless otherwise specifically defined in this Section 5(g), all terms used in this Section 5(g) shall have the meaning used in Section 13(d) of the Securities Exchange Act of 1934 and regulations promulgated thereunder (or any successor provisions to such law or regulations). "Affiliate" means, with respect to any specified Person, (i) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person or (ii) any other Person that owns, directly or indirectly, ten percent or more of such Person's Capital Stock or any officer or director of any such Person or other Person or with respect to any natural Person, any person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Capital Stock" of any Person means any and all shares, interests, participations or other equivalents (however designated) of such Person's capital stock, any rights (other than debt securities convertible into capital stock), warrants or options to acquire such capital stock, whether now outstanding or issued after the date of this Agreement. "Permitted Holder" means (i) Stanley H. Durwood, his spouse (collectively, the "Durwood Family") and any Affiliate of any member of the Durwood Family (other than any lineal descendant of Stanley H. Durwood), (ii) Stanley H. Durwood's estate, (iii) the 1992 Durwood, Inc. Voting Trust dated December 12, 1992 and any successor voting trust, and (iv) any Subsidiary, any employee benefit plan, stock purchase plan, stock option plan or other stock incentive plan or program, retirement plan or automatic reinvestment plan or any substantially similar plan of the Company or any Subsidiary or any Person holding securities of the Company 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 Company held by any Person listed in this clause (iv), then such securities shall no longer be deemed to be held by a Permitted Holder. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, estate, unincorporated organization or government or any agency or political subdivision thereof. "Subsidiary" means (i) any corporation of which more than 50% of the outstanding shares of Capital Stock having ordinary voting power for the election of directors is owned directly or indirectly by the Company and (ii) any partnership, limited liability company, association, joint venture or other entity in which the Company, directly or indirectly, has more than a 50% equity interest. 6.Termination Procedure. (a)Notice of Termination. Any termination of Employee by the Company or by Employee (other than termination pursuant to Section 5(a) or (b) hereof) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 11. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee under the provisions so indicated. (b)Date of Termination. "Date of Termination" shall mean (i) if Employee's employment is terminated by Employee's resignation, retirement or other voluntary departure, the date of such event, (ii) if Employee's employment by the Company is terminated by his death, the date of death, (iii) if Employee's employment by the Company is terminated pursuant to Section 5(c) hereof, thirty (30) days after Notice of Termination is given (provided that Employee shall not have again become available for service to the Company on a regular basis during such thirty (30) day period), (iv) if Employee's employment by the Company is terminated for Cause, the date specified in the Notice of Termination, and (v) if Employee's employment by the Company is terminated for any other reason, the date on which a Notice of Termination is given. 7.Compensation During Disability or Upon Termination. (a)Disability. During any period that Employee fails to perform his duties under this Agreement as a result of incapacity due to physical or mental illness (a "disability period"), Employee shall continue to receive his Base Salary at the rate then in effect for such period until his employment by the Company is terminated pursuant to Section 5(c) hereof, provided that payments so made to Employee during the first 180 days of any such disability period shall be reduced by the sum of the amounts, if any, paid to Employee at or prior to the time of any such payment under disability benefit plans of the Company or under the Social Security disability insurance program, and which amounts were not previously applied to reduce any such payment. Employee shall also receive a pro rata portion of the Bonus described in Section 3(b) pursuant to the Company's applicable incentive compensation program (the amount of such pro rated Bonus to be determined as though the target level was attained, multiplied by a fraction, the numerator of which is the number of completed months in the then current Bonus program year and the denominator of which is 12), as such may exist from time to time. Employee shall also receive the compensation payments described in Section 7(c)(iii) below. (b)Termination for Cause, Death or Employee Resignation. If Employee's employment by the Company is terminated for Cause, by Employee's death or by Employee's resignation, retirement or other voluntary departure, the Company shall pay Employee his accrued but unpaid Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and the Company shall have no further obligations to Employee under this Agreement. If Employee's employment by the Company is terminated by Employee's death, Employee shall also receive (i) a pro rata portion of the Bonus described in Section 3(b) pursuant to the Company's applicable incentive compensation program (the amount of such pro rated Bonus to be determined as though the target level was attained, multiplied by a fraction, the numerator of which is the number of months in the current Bonus program year and the denominator of which is 12), as such may exist from time to time, and (ii) the compensation payments described in Section 7(c)(iii) below. (c)Termination without Cause or by Employee for Material Breach or Change of Control. If Employee's employment by the Company is terminated without Cause or by Employee following a Material Breach by the Company or Change of Control, Employee shall be entitled to receive the compensation payments described in (i), (ii) and (iii) below; provided, that Employee also must have timely notified the Company as provided in Sections 5(f) and (g), as applicable, in order to receive such payments. All amounts under this Section 7(c) shall be reduced by withholding for applicable taxes, if any. (i)A lump-sum cash payment equal to the lesser of Employee's Base Amount (as defined below) multiplied by 2.99 or 150% of Employee's current Base Salary multiplied by 3. "Base Amount" means Employee's average annual earnings reported on Form W-2 for Employee's last five tax years. (ii)A lump-sum cash payment equal to the difference between (A) the value of all vested and unvested stock options granted by AMCE to Employee which have an exercise price per share less than the closing price per share of AMCE's Common Stock as reported on the American Stock Exchange or other stock exchange or automated quotation system (the "Closing Price") on the Date of Termination and (B) the exercise price of such options. For purposes of determining the option value, AMCE's stock price as described above as of the Date of Termination will be used. Upon such payment by the Company to Employee, all such options will be cancelled. (iii)If Employee's note dated September 14, 1998 payable to AMCE in the original principal amount of $3,765,000, the proceeds of which were used by Employee to purchase shares of AMCE's Common Stock (the "Note"), is outstanding on the Date of Termination, then one of the following provisions shall apply: (A)Stock Redemption and Note Forgiveness. If AMCE is so permitted under the Delaware General Corporation Law and the terms of any of its applicable loan agreements, debt covenants or other agreements, AMCE shall redeem all of the 250,000 shares of AMCE's Common Stock purchased by Employee with the proceeds of the Note which Employee owns on the Date of Termination, at a redemption price per share equal to the Closing Price per share on the Date of Termination, and the aggregate redemption price shall be applied by AMCE towards payment of the Note. If the aggregate redemption price is greater than the amount of unpaid principal and accrued interest on the Note, AMCE shall pay an amount equal to such excess to Employee. If the aggregate unpaid principal and accrued interest on the Note exceeds the redemption price, then AMCE shall forgive a portion of such excess amount, determined as follows: multiply (1) the difference (expressed as a positive number) between (x) an amount equal to the Closing Price per share on the Date of Termination multiplied by 250,000 and (y) the amount of outstanding principal and accrued interest on the Note on the Date of Termination, by (2) a ratio, the numerator of which is the number of shares of AMCE's Common Stock redeemed by AMCE pursuant to this paragraph and the denominator of which is 250,000. AMCE shall also pay to Employee an amount equal to the federal, state and city income taxes and excise taxes, if any, required to be paid by Employee based upon the forgiveness of such portion of the Note; or (B)Note Forgiveness If Stock Redemption Not Permitted. If AMCE is not permitted under the terms of the Delaware General Corporation Law or any of its loan agreements, debt covenants or other agreements to redeem all of the 250,000 shares of AMCE's Common Stock purchased by Employee with the proceeds of the Note which Employee owns on the Date of Termination, and if the amount of unpaid principal and accrued interest on the Note on the Date of Termination exceeds the value of such shares (determined by the Closing Price per share on the Date of Termination), then AMCE shall forgive a portion of such excess amount, determined as follows: multiply (1) the difference (expressed as a positive number) between (x) an amount equal to the Closing Price per share on the Date of Termination multiplied by 250,000 and (y) the amount of outstanding principal and accrued interest on the Note on the Date of Termination, by (2) a ratio, the numerator of which is the number of shares of AMCE's Common Stock purchased by Employee with the proceeds of the Note which Employee owns on the Date of Termination and the denominator of which is 250,000. AMCE shall also pay to Employee an amount equal to the federal, state and city income taxes and excise taxes, if any, required to be paid by Employee based upon the forgiveness of such portion of the Note. 8.Confidentiality. Employee acknowledges that he knows and in the future will know information relating to the Company and its affiliated companies and their respective operations that is confidential or a trade secret. Such information includes information, whether obtained in writing, in conversation or otherwise, concerning corporate strategy, intent and plans, business operations, pricing, costs, budgets, equipment, the status, scope and term of pending acquisitions, negotiations and transactions, the terms of existing or proposed business arrangements, contracts and obligations, and corporate and financial reports. Such confidential or trade secret information shall not, however, include information in the public domain unless Employee has, without authority, made it public. Employee shall (a) not disclose such information to anyone except in confidence and as is necessary to the performance of his duties for the Company; (b) keep such information confidential; (c) take appropriate precautions to maintain the confidentiality of such information; and (d) not use such information for personal benefit or the benefit of any competitor or any other person. Upon termination of his employment by the Company under this Agreement, Employee shall return all materials in his possession or under his control that were prepared by or relate to the Company or its affiliates, including, but not limited to, materials containing confidential information, files, memorandums, price lists, reports, budgets and handbooks. Employee's obligation under this Section 8 shall survive the termination of Employee's employment by the Company under this Agreement. 9.Equitable Remedies. The parties acknowledge that irreparable damage will result to the Company from any violation of Section 8 above by Employee. The parties expressly agree that, in addition to any and all remedies available to the Company for any such violation, the Company shall have the remedy of restraining order and injunction and any such equitable relief as may be declared or issued by a court to enforce the provisions of Section 8 above and Employee agrees not to claim in any such equitable proceeding that a remedy at law is available to the Company. Notwithstanding anything contained herein to the contrary and if, and only if, any provision of the type contained in Section 8 above, as the case may be, is enforceable in the jurisdiction in question, if any one or more of the provisions contained in such Section shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, such provision shall be construed by limiting and reducing it so as to be enforceable to the extent compatible with the applicable law in such jurisdiction as it shall then appear. 10.Successors: Binding Agreement. (a)Company Successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all the business and/or assets of the Company, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. (b)Employee's Successors. This Agreement and all rights hereunder shall be binding upon, inure to the benefit of and be enforceable by Employee's personal or legal representatives, heirs, successors and permitted assigns. 11.Notices. All notices, requests, demand or other communications under this Agreement shall be in writing addressed as follows: (a)If to the Company, to: Raymond F. Beagle, Jr. Lathrop & Gage L.C. 2345 Grand Boulevard Kansas City, Missouri 64108 (b)If to Employee, to: Philip M. Singleton 11713 High Drive Leawood, Kansas 66211 Any such notice, request, demand or other communication shall be effective as of the date of actual delivery thereof. Either party may change such notice address by written notice as provided herein. 12.Total Compensation. The compensation to be paid to Employee under this Agreement shall be in full payment for all services rendered by Employee in any capacity to the Company or any affiliate of the Company. 13.Additional Potential Compensation. Nothing in this Agreement shall prohibit the Company from awarding additional compensation to Employee if it is determined that such compensation is warranted based on Employee's performance. 14.Other Provisions. This Agreement shall be governed by the laws of the State of Missouri. This Agreement represents the entire agreement of the parties hereto and shall not be amended except by a written agreement signed by all the parties hereto. This Agreement supersedes any prior oral or written agreements or understandings between the Company or any affiliate of the Company and Employee. This Agreement shall not be assignable by one party without the prior written consent of the other party, except by the Company if it complies with Section 10 above. In the event one or more of the provision contained in this Agreement or any application thereof shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provision of this Agreement or any other application thereof shall not in any way be affected or impaired thereby. Section headings herein have no legal significance. 15.Arbitration. Any legal dispute, controversy or claim related to this Agreement or breach thereof, shall, in lieu of being submitted to a court of law, be submitted to arbitration, in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The award of the arbitrators shall be final and binding upon the parties. The parties hereto agree that (i) three arbitrators shall be selected pursuant to the rules and procedures of the American Arbitration Association, (ii) at least one arbitrator shall be a licensed attorney, (iii) the arbitrators shall have the power to award injunctive relief or to direct specific performance, (iv) the arbitrators will not have the authority to award punitive damages, (v) each of the parties shall bear its own attorneys' fees, costs and expenses and an equal share of the arbitrators' and administrative fees of arbitration, (vi) the arbitrators will not have the authority to award attorneys' fees other than to direct or confirm in the award that each party shall pay its own fees, and (vii) the arbitrators shall award to the prevailing party a sum equal to that party's share of the arbitrators' and administrative fees of arbitration. Nothing in this Section shall be construed as providing Employee a cause of action, remedy or procedure that Employee would not otherwise have under this Agreement or the law. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year first above written. AMC ENTERTAINMENT INC., a Delaware corporation By: /s/ Stanley H. Durwood Stanley H. Durwood, Co-Chairman of the Board and Chief Executive Officer AMERICAN MULTI-CINEMA, INC., a Missouri corporation By: /s/ Stanley H. Durwood Stanley H. Durwood, Chairman of the Board and Chief Executive Officer /s/ Philip M. Singleton PHILIP M. SINGLETON, EMPLOYEE EX-10.3 7 RMF EMPLOYMENT AGRMT EXHIBIT 10.3 EMPLOYMENT AGREEMENT This Employment Agreement is entered into as of February 1, 1999 by and among AMC ENTERTAINMENT INC., a Delaware corporation ("AMCE"), AMERICAN MULTI-CINEMA, INC., a Missouri corporation ("AMC" and, collectively with AMCE, the "Company"), and RICHARD M. FAY ("Employee"). In consideration of the mutual promises and covenants contained herein, the parties hereto agree as follows: 1.Duties. During the Term (as defined in Section 2) of his employment by the Company under this Agreement, Employee shall devote his full time and attention to the business of the Company as directed by AMC's President and Chief Operating Officer or such officer's designee. 2.Term. The term of this Agreement shall commence as of February 1, 1999 and shall terminate on January 31, 2001 or sooner as provided in Section 6 below (such period, as it may be extended, the "Term"). On each February 1 hereafter, commencing in 2000, one year shall be added to the Term of Employee's employment with the Company under this Agreement, so that as of each February 1 the Term of Employee's employment hereunder shall be two (2) years. 3.Compensation. (a)Base Salary. During the Term of his employment by the Company under this Agreement, Employee shall receive an annual salary of $285,031.00 ("Base Salary") (less withholding for applicable taxes), payable in accordance with the Company's payroll procedures for its salaried employees, subject to such increases as may be approved by AMC's President and Chief Operating Officer with the approval of any Co-Chairman of the Board of AMCE. (b)Bonus. In addition to Base Salary, Employee shall be eligible to "receive an annual bonus (the "Bonus") as determined from time to time in the sole discretion of AMC's President and Chief Operating Officer with the approval of any Co-Chairman of the Board of AMCE based on the Company's applicable incentive compensation program, as such may exist from time to time. (c)Benefits. During the Term of Employee's employment by the Company under this Agreement, Employee also shall be eligible for the benefits offered by the Company from time to time to the Company's other executive officers (such as group insurance, pension plans, thrift plans, stock purchase plans and the like). Nothing herein shall be construed so as to prevent the Company from modifying or terminating any employee benefit plans or programs it may adopt from time to time. (d)Automobile. During the Term of Employee's employment by the Company under this Agreement, the Company shall provide Employee with a Company owned or leased automobile or an equivalent automobile allowance. 4.Expense Reimbursements. During the Term of Employee's employment by the Company under this Agreement, the Company shall reimburse Employee for business travel and entertainment expenses reasonably incurred by Employee on behalf of the Company in accordance with the Company's procedures, as such may exist from time to time. 5.Termination. Employee's employment by the Company under this Agreement shall be terminated upon the earliest to occur of the following events: (a)Resignation. Employee's resignation, retirement or other voluntary departure. (b)Death. The death of Employee. (c)Disability. If, as a result of Employee's incapacity due to physical or mental illness, (i) Employee shall not have been regularly performing his duties and obligations hereunder for a period of one hundred twenty (120) consecutive days (a "Disability"), (ii) the Company has given Employee the written Notice of Termination pursuant to Section 6(a) hereof, and (iii) within thirty (30) days after the Company gives Employee written notice of termination (which may occur before or after the end of such 120 day period), Employee shall not have returned to the performance of his duties and obligations hereunder on a regular basis. (d)Cause. Employee is terminated for Cause. For purposes of this Agreement, "Cause" is defined as (i) the willful and continued failure by Employee to perform substantially his duties with the Company (other than any such failure resulting from his incapacity due to physical or mental illness), or (ii) the willful engaging by Employee in misconduct which is materially and demonstrably injurious to the Company. For purposes of this Agreement, no act, or failure to act, on the part of Employee shall be considered "willful" unless done, or omitted to be done, in bad faith and without reasonable belief that Employee's act or omission was in the best interests of the Company. (e)Without Cause. The employment of Employee may be terminated without cause with severance at any time by AMC's President and Chief Operating Officer with the approval of any Co-Chairman of the Board of AMCE. (f)Change of Control. Employee may terminate his employment hereunder due to the occurrence of any one or more of the events described in clauses (i), (ii) and (iii) below subsequent to a Change of Control (as defined below), provided that Employee has given the Company the written Notice of Termination pursuant to Section 6(a) hereof within sixty (60) days of the occurrence of any such event: (i)a substantial adverse alteration in Employee's responsibilities from those in effect immediately prior to the Change of Control; (ii)a reduction in Employee's Base Salary below the rate that is in effect immediately prior to the Change of Control; or (iii)a material reduction in the benefits provided to Employee by the Company prior to the Change of Control. For purposes of this Agreement a "Change of Control" of the Company means the occurrence of either of the following events during the Term: (a) any Person (other than a Permitted Holder) or any Persons (other than an Permitted Holders) acting together that would constitute a Group, together with any Affiliates thereof (other than any Permitted Holders), shall obtain beneficial ownership of at least 50% of the aggregate voting power of all classes of capital stock of the Company entitled to vote generally in the election of directors (the determination of aggregate voting power to recognize that the Company's Class B Stock currently has ten votes per share and the Company's Common Stock currently has one vote per share), or (b) any Person (other than a Permitted Holder) or Group (other than any Permitted Holders), together with any Affiliates thereof (other than any Permitted Holders), shall succeed in having a sufficient number of its nominees (who are not management nominees) elected to the Board of Directors of the Company such that such nominees, when added to any existing director(s) remaining on the Board of Directors of the Company after such election who is an Affiliate (other than a Permitted Holder) of such Group, will constitute a majority of the Board of Directors of the Company. Unless otherwise specifically defined in this Section 5(g), all terms used in this Section 5(g) shall have the meaning used in Section 13(d) of the Securities Exchange Act of 1934 and regulations promulgated thereunder (or any successor provisions to such law or regulations). "Affiliate" means, with respect to any specified Person, (i) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person or (ii) any other Person that owns, directly or indirectly, ten percent or more of such Person's Capital Stock or any officer or director of any such Person or other Person or with respect to any natural Person, any person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Capital Stock" of any Person means any and all shares, interests, participations or other equivalents (however designated) of such Person's capital stock, any rights (other than debt securities convertible into capital stock), warrants or options to acquire such capital stock, whether now outstanding or issued after the date of this Agreement. "Permitted Holder" means (i) Stanley H. Durwood, his spouse (collectively, the "Durwood Family") and any Affiliate of any member of the Durwood Family (other than any lineal descendant of Stanley H. Durwood), (ii) Stanley H. Durwood's estate, (iii) the 1992 Durwood, Inc. Voting Trust dated December 12, 1992 and any successor voting trust, and (iv) any Subsidiary, any employee benefit plan, stock purchase plan, stock option plan or other stock incentive plan or program, retirement plan or automatic reinvestment plan or any substantially similar plan of the Company or any Subsidiary or any Person holding securities of the Company 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 Company held by any Person listed in this clause (iv), then such securities shall no longer be deemed to be held by a Permitted Holder. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, estate, unincorporated organization or government or any agency or political subdivision thereof. "Subsidiary" means (i) any corporation of which more than 50% of the outstanding shares of Capital Stock having ordinary voting power for the election of directors is owned directly or indirectly by the Company and (ii) any partnership, limited liability company, association, joint venture or other entity in which the Company, directly or indirectly, has more than a 50% equity interest. 6.Termination Procedure. (a)Notice of Termination. Any termination of Employee by the Company or by Employee (other than termination pursuant to Section 5(a) or (b) hereof) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 11. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee under the provisions so indicated. (b)Date of Termination. "Date of Termination" shall mean (i) if Employee's employment by the Company is terminated by Employee's resignation, retirement or other voluntary departure, the date of such event, (ii) if Employee's employment by the Company is terminated by his death, the date of death, (iii) if Employee's employment by the Company is terminated pursuant to Section 5(c) hereof, thirty (30) days after Notice of Termination is given (provided that Employee shall not have again become available for service to the Company on a regular basis during such thirty (30) day period), (iv) if Employee's employment by the Company is terminated for Cause, the date specified in the Notice of Termination, and (v) if Employee's employment by the Company is terminated for any other reason, the date on which a Notice of Termination is given. 7.Compensation During Disability or Upon Termination. (a)Disability. During any period that Employee fails to perform his duties under this Agreement as a result of incapacity due to physical or mental illness (a "disability period"), Employee shall continue to receive his Base Salary at the rate then in effect for such period until his employment by the Company is terminated pursuant to Section 5(d) hereof, provided that payments so made to Employee during the first 180 days of any such disability period shall be reduced by the sum of the amounts, if any, paid to Employee at or prior to the time of any such payment under disability benefit plans of the Company or under the Social Security disability insurance program, and which amounts were not previously applied to reduce any such payment. Employee shall also receive a pro rata portion of the Bonus described in Section 3(b) pursuant to the Company's applicable incentive compensation program (the amount of such pro rated Bonus to be determined as though the target level was attained, multiplied by a fraction, the numerator of which is the number of completed months in the then current Bonus program year and the denominator of which is 12), as such may exist from time to time. (b)Termination for Cause, Death or Employee Resignation. If Employee's employment by the Company should be terminated for Cause, by Employee's death or by Employee's resignation, retirement or other voluntary departure, the Company shall pay Employee his accrued but unpaid Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and the Company shall have no further obligations to Employee under this Agreement. If Employee's employment by the Company is terminated by Employee's death, Employee shall also receive a pro rata portion of the Bonus described in Section 3(b) pursuant to the Company's applicable incentive compensation program (the amount of such pro rated Bonus to be determined as though the target level was attained, multiplied by a fraction, the numerator of which is the number of completed months in the then current Bonus program year and the denominator of which is 12), as such may exist from time to time. (c)Termination Without Cause or After a Change of Control. If Employee's employment by the Company is terminated without Cause or subsequent to a Change of Control as provided in Section 5(f) of this Agreement, the Company shall pay to Employee a lump sum amount equal to two years Base Salary (less withholdings for applicable taxes) of Employee in effect on the Date of Termination. 8.Confidentiality. Employee acknowledges that he knows and in the future will know information relating to the Company and its affiliated companies and their respective operations that is confidential or a trade secret. Such information includes information, whether obtained in writing, in conversation or otherwise, concerning corporate strategy, intent and plans, business operations, pricing, costs, budgets, equipment, the status, scope and term of pending acquisitions, negotiations and transactions, the terms of existing or proposed business arrangements, contracts and obligations, and corporate and financial reports. Such confidential or trade secret information shall not, however, include information in the public domain unless Employee has, without authority, made it public. Employee shall (a) not disclose such information to anyone except in confidence and as is necessary to the performance of his duties for the Company; (b) keep such information confidential; (c) take appropriate precautions to maintain the confidentiality of such information; and (d) not use such information for personal benefit or the benefit of any competitor or any other person. Upon termination of his employment by the Company under this Agreement, Employee shall return all materials in his possession or under his control that were prepared by or relate to the Company or its affiliates, including, but not limited to, materials containing confidential information, files, memorandums, price lists, reports, budgets and handbooks. Employee's obligation under this Section 8 shall survive the termination of Employee's employment by the Company under this Agreement. 9.Equitable Remedies. The parties acknowledge that irreparable damage will result to the Company from any violation of Section 8 above by Employee. The parties expressly agree that, in addition to any and all remedies available to the Company for any such violation, the Company shall have the remedy of restraining order and injunction and any such equitable relief as may be declared or issued by a court to enforce the provisions of Section 8 above and Employee agrees not to claim in any such equitable proceeding that a remedy at law is available to the Company. Notwithstanding anything contained herein to the contrary and if, and only if, any provision of the type contained in Section 8 above, as the case may be, is enforceable in the jurisdiction in question, if any one or more of the provisions contained in such Section shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, such provision shall be construed by limiting and reducing it so as to be enforceable to the extent compatible with the applicable law in such jurisdiction as it shall then appear. 10.Successors: Binding Agreement. (a)Company Successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all the business and/or assets of the Company, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. (b)Employee's Successors. This Agreement and all rights hereunder shall be binding upon, inure to the benefit of and be enforceable by Employee's personal or legal representatives, heirs, successors and permitted assigns. 11.Notices. All notices, requests, demand or other communications under this Agreement shall be in writing addressed as follows: (a)If to the Company, to: Raymond F. Beagle, Jr. Lathrop & Gage L.C. 2345 Grand Boulevard Kansas City, Missouri 64108 (b)If to Employee, to: Richard M. Fay 5481 Collingswood Circle Calabasas, California 91302 Any such notice, request, demand or other communication shall be effective as of the date of actual delivery thereof. Either party may change such notice address by written notice as provided herein. 12.Total Compensation. The compensation to be paid to Employee under this Agreement shall be in full payment for all services rendered by Employee in any capacity to the Company or any affiliate of the Company. 13.Additional Potential Compensation. Nothing in this Agreement shall prohibit the Company from awarding additional compensation to Employee if it is determined that such compensation is warranted based on Employee's performance. 14.Other Provisions. This Agreement shall be governed by the laws of the State of Missouri. This Agreement represents the entire agreement of the parties hereto and shall not be amended except by a written agreement signed by all the parties hereto. This Agreement supersedes any prior oral or written agreements or understandings between the Company or any affiliate of the Company and Employee. This Agreement shall not be assignable by one party without the prior written consent of the other party, except by the Company if it complies with Section 10 above. In the event one or more of the provision contained in this Agreement or any application thereof shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provision of this Agreement or any other application thereof shall not in any way be affected or impaired thereby. Section headings herein have no legal significance. 15.Arbitration. Any legal dispute, controversy or claim related to this Agreement or breach thereof, shall, in lieu of being submitted to a court of law, be submitted to arbitration, in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The award of the arbitrators shall be final and binding upon the parties. The parties hereto agree that (i) three arbitrators shall be selected pursuant to the rules and procedures of the American Arbitration Association, (ii) at least one arbitrator shall be a licensed attorney, (iii) the arbitrators shall have the power to award injunctive relief or to direct specific performance, (iv) the arbitrators will not have the authority to award punitive damages, (v) each of the parties shall bear its own attorneys' fees, costs and expenses and an equal share of the arbitrators' and administrative fees of arbitration, (vi) the arbitrators will not have the authority to award attorneys' fees other than to direct or confirm in the award that each party shall pay its own fees, and (vii) the arbitrators shall award to the prevailing party a sum equal to that party's share of the arbitrators' and administrative fees of arbitration. Nothing in this Section shall be construed as providing Employee a cause of action, remedy or procedure that Employee would not otherwise have under this Agreement or the law. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year first above written. AMC ENTERTAINMENT INC., a Delaware corporation By: /s/ Peter C. Brown Peter C. Brown, Co-Chairman of the Board and President AMERICAN MULTI-CINEMA, INC., a Missouri corporation By: /s/ Philip M. Singleton Philip M. Singleton, President /s/ Richard M. Fay RICHARD M. FAY, EMPLOYEE EX-10.4 8 RTW EMPLOYMNET AGRMT EXHIBIT 10.4 EMPLOYMENT AGREEMENT This Employment Agreement is entered into as of February 1, 1999 by and among AMC ENTERTAINMENT INC., a Delaware corporation ("AMCE"), AMERICAN MULTI-CINEMA, INC., a Missouri corporation ("AMC" and, collectively with AMCE, the "Company"), and RICHARD T. WALSH ("Employee"). In consideration of the mutual promises and covenants contained herein, the parties hereto agree as follows: 1.Duties. During the Term (as defined in Section 2) of his employment by the Company under this Agreement, Employee shall devote his full time and attention to the business of the Company as directed by AMC's President and Chief Operating Officer or such officer's designee. 2.Term. The term of this Agreement shall commence as of February 1, 1999 and shall terminate on January 31, 2001 or sooner as provided in Section 6 below (such period, as it may be extended, the "Term"). On each February 1 hereafter, commencing in 2000, one year shall be added to the Term of Employee's employment with the Company under this Agreement, so that as of each February 1 the Term of Employee's employment hereunder shall be two (2) years. 3.Compensation. (a)Base Salary. During the Term of his employment by the Company under this Agreement, Employee shall receive an annual salary of $230,041.00 ("Base Salary") (less withholding for applicable taxes), payable in accordance with the Company's payroll procedures for its salaried employees, subject to such increases as may be approved by AMC's President and Chief Operating Officer with the approval of any Co-Chairman of the Board of AMCE. (b)Bonus. In addition to Base Salary, Employee shall be eligible to "receive an annual bonus (the "Bonus") as determined from time to time in the sole discretion of AMC's President and Chief Operating Officer with the approval of any Co-Chairman of the Board of AMCE based on the Company's applicable incentive compensation program, as such may exist from time to time. (c)Benefits. During the Term of Employee's employment by the Company under this Agreement, Employee also shall be eligible for the benefits offered by the Company from time to time to the Company's other executive officers (such as group insurance, pension plans, thrift plans, stock purchase plans and the like). Nothing herein shall be construed so as to prevent the Company from modifying or terminating any employee benefit plans or programs it may adopt from time to time. (d)Automobile. During the Term of Employee's employment by the Company under this Agreement, the Company shall provide Employee with a Company owned or leased automobile or an equivalent automobile allowance. 4.Expense Reimbursements. During the Term of Employee's employment by the Company under this Agreement, the Company shall reimburse Employee for business travel and entertainment expenses reasonably incurred by Employee on behalf of the Company in accordance with the Company's procedures, as such may exist from time to time. 5.Termination. Employee's employment by the Company under this Agreement shall be terminated upon the earliest to occur of the following events: (a)Resignation. Employee's resignation, retirement or other voluntary departure. (b)Death. The death of Employee. (c)Disability. If, as a result of Employee's incapacity due to physical or mental illness, (i) Employee shall not have been regularly performing his duties and obligations hereunder for a period of one hundred twenty (120) consecutive days (a "Disability"), (ii) the Company has given Employee the written Notice of Termination pursuant to Section 6(a) hereof, and (iii) within thirty (30) days after the Company gives Employee written notice of termination (which may occur before or after the end of such 120 day period), Employee shall not have returned to the performance of his duties and obligations hereunder on a regular basis. (d)Cause. Employee is terminated for Cause. For purposes of this Agreement, "Cause" is defined as (i) the willful and continued failure by Employee to perform substantially his duties with the Company (other than any such failure resulting from his incapacity due to physical or mental illness), or (ii) the willful engaging by Employee in misconduct which is materially and demonstrably injurious to the Company. For purposes of this Agreement, no act, or failure to act, on the part of Employee shall be considered "willful" unless done, or omitted to be done, in bad faith and without reasonable belief that Employee's act or omission was in the best interests of the Company. (e)Without Cause. The employment of Employee may be terminated without cause with severance at any time by AMC's President and Chief Operating Officer with the approval of any Co- Chairman of the Board of AMCE. (f)Change of Control. Employee may terminate his employment hereunder due to the occurrence of any one or more of the events described in clauses (i), (ii) and (iii) below subsequent to a Change of Control (as defined below), provided that Employee has given the Company the written Notice of Termination pursuant to Section 6(a) hereof within sixty (60) days of the occurrence of any such event: (i)a substantial adverse alteration in Employee's responsibilities from those in effect immediately prior to the Change of Control; (ii)a reduction in Employee's Base Salary below the rate that is in effect immediately prior to the Change of Control; or (iii)a material reduction in the benefits provided to Employee by the Company prior to the Change of Control. For purposes of this Agreement a "Change of Control" of the Company means the occurrence of either of the following events during the Term: (a) any Person (other than a Permitted Holder) or any Persons (other than an Permitted Holders) acting together that would constitute a Group, together with any Affiliates thereof (other than any Permitted Holders), shall obtain beneficial ownership of at least 50% of the aggregate voting power of all classes of capital stock of the Company entitled to vote generally in the election of directors (the determination of aggregate voting power to recognize that the Company's Class B Stock currently has ten votes per share and the Company's Common Stock currently has one vote per share), or (b) any Person (other than a Permitted Holder) or Group (other than any Permitted Holders), together with any Affiliates thereof (other than any Permitted Holders), shall succeed in having a sufficient number of its nominees (who are not management nominees) elected to the Board of Directors of the Company such that such nominees, when added to any existing director(s) remaining on the Board of Directors of the Company after such election who is an Affiliate (other than a Permitted Holder) of such Group, will constitute a majority of the Board of Directors of the Company. Unless otherwise specifically defined in this Section 5(g), all terms used in this Section 5(g) shall have the meaning used in Section 13(d) of the Securities Exchange Act of 1934 and regulations promulgated thereunder (or any successor provisions to such law or regulations). "Affiliate" means, with respect to any specified Person, (i) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person or (ii) any other Person that owns, directly or indirectly, ten percent or more of such Person's Capital Stock or any officer or director of any such Person or other Person or with respect to any natural Person, any person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Capital Stock" of any Person means any and all shares, interests, participations or other equivalents (however designated) of such Person's capital stock, any rights (other than debt securities convertible into capital stock), warrants or options to acquire such capital stock, whether now outstanding or issued after the date of this Agreement. "Permitted Holder" means (i) Stanley H. Durwood, his spouse (collectively, the "Durwood Family") and any Affiliate of any member of the Durwood Family (other than any lineal descendant of Stanley H. Durwood), (ii) Stanley H. Durwood's estate, (iii) the 1992 Durwood, Inc. Voting Trust dated December 12, 1992 and any successor voting trust, and (iv) any Subsidiary, any employee benefit plan, stock purchase plan, stock option plan or other stock incentive plan or program, retirement plan or automatic reinvestment plan or any substantially similar plan of the Company or any Subsidiary or any Person holding securities of the Company 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 Company held by any Person listed in this clause (iv), then such securities shall no longer be deemed to be held by a Permitted Holder. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, estate, unincorporated organization or government or any agency or political subdivision thereof. "Subsidiary" means (i) any corporation of which more than 50% of the outstanding shares of Capital Stock having ordinary voting power for the election of directors is owned directly or indirectly by the Company and (ii) any partnership, limited liability company, association, joint venture or other entity in which the Company, directly or indirectly, has more than a 50% equity interest. 6.Termination Procedure. (a)Notice of Termination. Any termination of Employee by the Company or by Employee (other than termination pursuant to Section 5(a) or (b) hereof) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 11. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee under the provisions so indicated. (b)Date of Termination. "Date of Termination" shall mean (i) if Employee's employment by the Company is terminated by Employee's resignation, retirement or other voluntary departure, the date of such event, (ii) if Employee's employment by the Company is terminated by his death, the date of death, (iii) if Employee's employment by the Company is terminated pursuant to Section 5(c) hereof, thirty (30) days after Notice of Termination is given (provided that Employee shall not have again become available for service to the Company on a regular basis during such thirty (30) day period), (iv) if Employee's employment by the Company is terminated for Cause, the date specified in the Notice of Termination, and (v) if Employee's employment by the Company is terminated for any other reason, the date on which a Notice of Termination is given. 7.Compensation During Disability or Upon Termination. (a)Disability. During any period that Employee fails to perform his duties under this Agreement as a result of incapacity due to physical or mental illness (a "disability period"), Employee shall continue to receive his Base Salary at the rate then in effect for such period until his employment by the Company is terminated pursuant to Section 5(d) hereof, provided that payments so made to Employee during the first 180 days of any such disability period shall be reduced by the sum of the amounts, if any, paid to Employee at or prior to the time of any such payment under disability benefit plans of the Company or under the Social Security disability insurance program, and which amounts were not previously applied to reduce any such payment. Employee shall also receive a pro rata portion of the Bonus described in Section 3(b) pursuant to the Company's applicable incentive compensation program (the amount of such pro rated Bonus to be determined as though the target level was attained, multiplied by a fraction, the numerator of which is the number of completed months in the then current Bonus program year and the denominator of which is 12), as such may exist from time to time. (b)Termination for Cause, Death or Employee Resignation. If Employee's employment by the Company should be terminated for Cause, by Employee's death or by Employee's resignation, retirement or other voluntary departure, the Company shall pay Employee his accrued but unpaid Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, and the Company shall have no further obligations to Employee under this Agreement. If Employee's employment by the Company is terminated by Employee's death, Employee shall also receive a pro rata portion of the Bonus described in Section 3(b) pursuant to the Company's applicable incentive compensation program (the amount of such pro rated Bonus to be determined as though the target level was attained, multiplied by a fraction, the numerator of which is the number of completed months in the then current Bonus program year and the denominator of which is 12), as such may exist from time to time. (c)Termination Without Cause or After a Change of Control. If Employee's employment by the Company is terminated without Cause or subsequent to a Change of Control as provided in Section 5(f) of this Agreement, the Company shall pay to Employee a lump sum amount equal to two years Base Salary (less withholdings for applicable taxes) of Employee in effect on the Date of Termination. 8.Confidentiality. Employee acknowledges that he knows and in the future will know information relating to the Company and its affiliated companies and their respective operations that is confidential or a trade secret. Such information includes information, whether obtained in writing, in conversation or otherwise, concerning corporate strategy, intent and plans, business operations, pricing, costs, budgets, equipment, the status, scope and term of pending acquisitions, negotiations and transactions, the terms of existing or proposed business arrangements, contracts and obligations, and corporate and financial reports. Such confidential or trade secret information shall not, however, include information in the public domain unless Employee has, without authority, made it public. Employee shall (a) not disclose such information to anyone except in confidence and as is necessary to the performance of his duties for the Company; (b) keep such information confidential; (c) take appropriate precautions to maintain the confidentiality of such information; and (d) not use such information for personal benefit or the benefit of any competitor or any other person. Upon termination of his employment by the Company under this Agreement, Employee shall return all materials in his possession or under his control that were prepared by or relate to the Company or its affiliates, including, but not limited to, materials containing confidential information, files, memorandums, price lists, reports, budgets and handbooks. Employee's obligation under this Section 8 shall survive the termination of Employee's employment by the Company under this Agreement. 9.Equitable Remedies. The parties acknowledge that irreparable damage will result to the Company from any violation of Section 8 above by Employee. The parties expressly agree that, in addition to any and all remedies available to the Company for any such violation, the Company shall have the remedy of restraining order and injunction and any such equitable relief as may be declared or issued by a court to enforce the provisions of Section 8 above and Employee agrees not to claim in any such equitable proceeding that a remedy at law is available to the Company. Notwithstanding anything contained herein to the contrary and if, and only if, any provision of the type contained in Section 8 above, as the case may be, is enforceable in the jurisdiction in question, if any one or more of the provisions contained in such Section shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, such provision shall be construed by limiting and reducing it so as to be enforceable to the extent compatible with the applicable law in such jurisdiction as it shall then appear. 10.Successors: Binding Agreement. (a)Company Successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all the business and/or assets of the Company, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. (b)Employee's Successors. This Agreement and all rights hereunder shall be binding upon, inure to the benefit of and be enforceable by Employee's personal or legal representatives, heirs, successors and permitted assigns. 11.Notices. All notices, requests, demand or other communications under this Agreement shall be in writing addressed as follows: (a)If to the Company, to: Raymond F. Beagle, Jr. Lathrop & Gage L.C. 2345 Grand Boulevard Kansas City, Missouri 64108 (b)If to Employee, to: Richard T. Walsh 23 Wrangler Lane Canoga Park, California 91307 Any such notice, request, demand or other communication shall be effective as of the date of actual delivery thereof. Either party may change such notice address by written notice as provided herein. 12.Total Compensation. The compensation to be paid to Employee under this Agreement shall be in full payment for all services rendered by Employee in any capacity to the Company or any affiliate of the Company. 13.Additional Potential Compensation. Nothing in this Agreement shall prohibit the Company from awarding additional compensation to Employee if it is determined that such compensation is warranted based on Employee's performance. 14.Other Provisions. This Agreement shall be governed by the laws of the State of Missouri. This Agreement represents the entire agreement of the parties hereto and shall not be amended except by a written agreement signed by all the parties hereto. This Agreement supersedes any prior oral or written agreements or understandings between the Company or any affiliate of the Company and Employee. This Agreement shall not be assignable by one party without the prior written consent of the other party, except by the Company if it complies with Section 10 above. In the event one or more of the provision contained in this Agreement or any application thereof shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provision of this Agreement or any other application thereof shall not in any way be affected or impaired thereby. Section headings herein have no legal significance. 15.Arbitration. Any legal dispute, controversy or claim related to this Agreement or breach thereof, shall, in lieu of being submitted to a court of law, be submitted to arbitration, in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The award of the arbitrators shall be final and binding upon the parties. The parties hereto agree that (i) three arbitrators shall be selected pursuant to the rules and procedures of the American Arbitration Association, (ii) at least one arbitrator shall be a licensed attorney, (iii) the arbitrators shall have the power to award injunctive relief or to direct specific performance, (iv) the arbitrators will not have the authority to award punitive damages, (v) each of the parties shall bear its own attorneys' fees, costs and expenses and an equal share of the arbitrators' and administrative fees of arbitration, (vi) the arbitrators will not have the authority to award attorneys' fees other than to direct or confirm in the award that each party shall pay its own fees, and (vii) the arbitrators shall award to the prevailing party a sum equal to that party's share of the arbitrators' and administrative fees of arbitration. Nothing in this Section shall be construed as providing Employee a cause of action, remedy or procedure that Employee would not otherwise have under this Agreement or the law. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year first above written. AMC ENTERTAINMENT INC., a Delaware corporation By: /s/ Peter C. Brown Peter C. Brown, Co-Chairman of the Board and President AMERICAN MULTI-CINEMA, INC., a Missouri corporation By: /s/ Philip M. Singleton Philip M. Singleton, President /s/ Richard T. Walsh RICHARD T. WALSH, EMPLOYEE EX-10.5 9 STOCK OPTION EXHIBIT 10.5 APPENDIX AMC ENTERTAINMENT INC. 1994 STOCK OPTION AND INCENTIVE PLAN, AS AMENDED 1. PURPOSE The AMC Entertainment Inc. 1994 Stock Option and Incentive Plan is intended to incorporate stock-based and results-oriented awards into the ongoing compensation packages of executives and managers and to thereby increase the alignment of the interests of such persons and stockholders. The Plan is intended to foster in participants a strong incentive to exert maximum effort for the continued success and growth of the Company and its Subsidiaries and the enhancement of stockholders' interests, to aid in retaining individuals who exert such efforts and to assist in attracting the best available individuals in the future. 2. DEFINITIONS When used herein, the following terms shall have the meaning set forth below: 2.1 "AMC" means American Multi-Cinema, Inc., a wholly-owned subsidiary of the Company. 2.2 "AWARD" means an Option, a Stock Award or a Performance Unit. 2.3 "BOARD" means the Board of Directors of the Company. 2.4 A"CHANGE OF CONTROL EVENT" shall be deemed to have occurred at the first time that (a) a majority of the Board of Directors of the Company, over a two-year period, is replaced from the directors who constituted the Board of Directors of the Company at the beginning of such period, which replacement shall not have been approved by the Board of Directors of the Company (or replacement directors approved by the Board of Directors of the Company), as constituted at the beginning of such period, or (b) a person or entity or group of persons or entities acting in concert as a partnership or other group (other than the DI affiliates, any Subsidiary, any employee stock purchase plan, stock option plan or other stock incentive plan or program, retirement plan or automatic reinvestment plan or any substantially similar plan of the Company or any Subsidiary or any person holding securities of the Company for or pursuant to the terms of any such employee benefit plan) shall, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, have become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 50% or more of the combined voting power of the then outstanding securities of the Company ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of Directors. 2.5 "CODE" means the Internal Revenue Code of 1986 as amended from time to time. 36 2.6 "COMMITTEE" means the Board's Compensation Committee, or such other committee of Directors as may be designated by the Board, authorized to administer this Plan. The Committee shall consist of not fewer than two (2) Directors and shall be constituted so as to permit the Plan to comply with Rule 16b-3 or any successor provision of similar import. 2.7 "COMMON STOCK" means the Company's Common Stock, par value 66 2/3 CENTS per share. 2.8 "COMPANY" means AMC Entertainment Inc., a corporation organized and existing under the laws of the State of Delaware, or such Company by whatever name it may at the time have. 2.9 "DI AFFILIATES" means (a) Mr. Stanley H. Durwood, his spouse and any of his lineal descendants and their respective spouses (collectively the Durwood Family), (b) any controlled affiliate of any member of the Durwood Family and (c) 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) or one or more charitable organizations. 2.10 "DIRECTOR" means a member of the Board. 2.11 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time. 2.12 "FAIR MARKET VALUE" means with respect to the Company's Shares the closing sales price of the Shares, as reported on the American Stock Exchange, or, if not so reported, on the NASDAQ/National Market System, or, if not so reported, the closing sales price as reported by any other appropriate reporting system of general circulation, on the date for which the value is to be determined, or if there is no closing sales price on such date, then on the last day for which transactions in Shares were so reported prior to the date on which the value is to be determined. 2.13 "GRANTEE" means a person to whom an Award is made. 2.14 "INCENTIVE STOCK OPTION" or "ISO" means an Option awarded under the Plan which meets the terms and conditions established by Code Section 422 and applicable regulations thereunder for such an Option. 2.15 "NON-QUALIFIED STOCK OPTION"or "NQSO" means an Option awarded under the Plan which by its terms and conditions is not an ISO. 2.16 "Option" means the right to purchase, at a price, for a term, under conditions, and for cash or other considerations (which may include a note from the Grantee) fixed by the Committee in accordance with such restrictions as the Plan and the Committee impose, a number of Shares specified by the Committee (subject to limitations imposed by this Plan). An Option can be either an ISO or NQSO or a combination thereof. 2.17 "PLAN" means the Company's 1994 Stock Option and Incentive Plan. 2.18 "PERFORMANCE UNIT" means an Award payable only in cash and valued by reference to designated criteria (other than Shares) established by the Committee. 2.19 "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act, as amended from time to time. 2.20 "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. 37 2.21 "SHARES" means shares of the Company's Common Stock or if by reason of the adjustment provisions hereof any rights under an Award under the Plan pertain to any other security, such other security. 2.22 "STOCK AWARD" means the grant of a right to receive, at a time or times fixed by the Committee in accordance with the Plan and subject to such other limitations and restrictions as the Plan and the Committee impose, the number of Shares specified by the Committee. A Stock Award may be either a "Performance Stock Award", under which the receipt of Shares, subject to provisions of the Plan permitting acceleration, will be conditioned on the attainment by the Company or a Subsidiary or a division during a performance period of performance goals established by the Committee, or a "Restricted Stock Award", under which the receipt of Shares, subject to provisions of the Plan permitting acceleration, is conditioned on the continued employment of the Grantee or such other conditions as the Committee may impose, or both. 2.23 "SUBSIDIARY" means any business, including AMC, whether or not incorporated, in which the Company, at the time an Award is granted or in other cases at the time of reference, owns directly or indirectly not less than 50% of the equity interest. 2.24 "SUCCESSOR" means the legal representative of the estate of a deceased Grantee or the person or persons who shall acquire the right to exercise an Option, to receive Shares issuable in satisfaction of a Stock Award or to receive other amounts payable under an Award, by bequest or inheritance or by reason of the death of the Grantee or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employment Retirement Income Security Act, or the rules thereunder, and other transferees approved in advance by the Committee. 2.25 "TAX DATE" means the date on which the amount of tax to be withheld with respect to an Option or Stock Award is determined. 2.26 "TERM" means the period during which a particular Option may be exercised or the period during which the conditions and/or restrictions placed on an Award are in effect. 3. ADMINISTRATION OF THE PLAN 3.1 The Plan shall be administered by the Committee. 3.2 The Committee shall have plenary authority, subject to provisions of the Plan, to: (a) determine when and to whom Awards shall be granted; (b) determine the form of each Award, its Term, the amount of the Award or the number of Shares covered by it, if any, the participation by a Grantee in other plans, and any other terms or conditions of each such Award, including the time and conditions of exercise or vesting; (c) determine whether Awards will be granted singly or in combination or tandem; (d) determine the performance goals, if any, that will be applicable to the Award and eliminate or reduce an Award otherwise payable that is based on performance goals; (e) accelerate the vesting, exercise, or payment of an Award when such action(s) would be in the best interests of the Company; and (f) take any and all other action it deems necessary or advisable for the proper operation or administration of the Plan. The Committee also shall have the authority to grant Awards in replacement of Awards previously granted under the Plan or any other plan of the Company or a Subsidiary. The Committee's actions in making Awards and fixing their size, Term, and other terms and conditions shall be final and conclusive on all persons. 38 3.3 The Committee shall have the sole responsibility for construing and interpreting the Plan, for establishing (and amending) such rules and regulations as it deems necessary or desirable for the proper administration of the Plan, and for resolving all questions arising under the Plan. Any decision or action taken by the Committee arising out of or in connection with the construction, administration, interpretation and effect of the Plan and of its rules and regulations shall, to the extent permitted by law, be within its absolute discretion, except as otherwise specifically provided herein, and shall be conclusive and binding upon all Grantees, all Successors, and any other person, whether that person is claiming under or through any Grantee or otherwise. 3.4 The Committee may designate one of its members as Chairman. It shall hold its meetings at such times and places as it may determine. All determinations of the Committee shall be made by a majority of its members. Any determination reduced to writing and signed by all members shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may make such rules and regulations for the conduct of its business as it shall deem advisable. 3.5 The Committee, in its discretion, may delegate its authority and duties under the Plan to the Chief Executive Officer and/or to other senior officers of the Company under such conditions and/or limitations as the Committee may establish; provided, however, that only the Committee may establish performance goals and select and grant Awards to Grantees who are subject to Section 16 of the Exchange Act. 3.6 Service on the Committee shall constitute service as a Director, so that the members of the Committee shall be entitled to indemnification and reimbursement as Directors pursuant to its Bylaws and to any agreements between the Company and its Directors providing for indemnification. 3.7 The Committee shall regularly inform the Board as to its actions with respect to all Awards under the Plan and the terms and conditions of such Awards in a manner, at such times, and in such form as the Board may reasonably request. 4. ELIGIBILITY Awards may be made under the Plan to employees who are corporate or field executives or senior managers, including executive officers of the Company and its Subsidiaries, and other managers, including field and theatre managers. Officers shall be employees for this purpose, whether or not they also are Directors. A Director who is not an employee shall not be eligible to receive an Award. Awards may be made to eligible employees whether or not they have received prior Awards under the Plan or under any previously adopted plan, and whether or not they are participants in other benefit plans of the Company, AMC or any other Subsidiary. 39 5. SHARES SUBJECT TO PLAN; LIMITATIONS 5.1 The Company hereby reserves 1,000,000 Shares for issuance in connection with Awards under the Plan, subject to adjustment under Section 20. During the Plan no Grantee may receive Options to acquire more than 425,000 Shares, Stock Awards entitling the Grantee to receive more than 150,000 Shares or cash awards aggregating more than $2.5 million under Performance Units. During any 12 month period no Grantee may receive Options to acquire more than 150,000 Shares or Performance Units for cash awards aggregating more than $800,000. No Grantee may receive a Stock Award or Awards entitling the Grantee to receive free of conditions more than 30,000 Shares with respect to any 12 month period, but determined on an annualized basis so that more than 30,000 Shares may be received at one time free of conditions with respect to a performance period exceeding 12 months in duration. 5.2 Any Shares related to Awards which (a) terminate by expiration, forfeiture, cancellation or otherwise without the issuance of such Shares, or (b) are settled in cash in lieu of Shares, shall be available again for grant under the Plan, provided the Participant received no other benefits of ownership of such Award other than voting rights, if any. Notwithstanding the foregoing, no Shares which are used by a Participant for the full or partial payment to the Company of the purchase price of Shares upon exercise of an Option, or for any withholding taxes due as a result of such exercise, may become available for Awards under the Plan. The Shares available for issuance under the Plan may be authorized and unissued shares or treasury shares. 6. GRANTING OF OPTIONS 6.1 Subject to the terms of the Plan, the Committee may from time to time grant Options to persons eligible under Section 4 above and shall designate such Options as ISOs or NQSOs. 6.2 Pursuant to Code Section 422 and applicable regulations, an Option shall not be deemed to be an ISO to the extent that the aggregate Fair Market Value, as determined on the date or dates of grant, of Shares with respect to which such ISO is exercisable for the first time by any individual during any calendar year (under all stock option incentive plans of the Company or a Subsidiary) exceeds $100,000. ISOs which first become exercisable during a calendar year shall be taken into account in the order granted. Options that exceed the $100,000 limit shall be treated as NQSOs. 6.3 The purchase price of each Share subject to Option shall be fixed by the Committee, provided the purchase price for Shares subject to an Option shall not be less than 100% of the Fair Market Value of the Shares on the date the Option is granted. 6.4 Notwithstanding Section 6.3 above, pursuant to Code Section 422 and applicable regulations, the minimum purchase price of an ISO shall be 110% of the Fair Market Value of the Shares on the date the ISO is granted with respect to Grantees who at the time of Award are deemed to own 10% or more of the voting power of the Company's outstanding Shares. 6.5 Each Option shall expire and all rights to purchase Shares thereunder shall cease on the date fixed by the Committee. 6.6 Notwithstanding Section 6.5 above, pursuant to Code Section 422 and applicable regulations, an ISO shall expire and all rights to purchase Shares thereunder shall cease no later than the fifth anniversary of the date on which the ISO was granted with respect to Grantees who at the 40 time of Award are deemed to own 10% or more of the voting power of the Company, and no later than the tenth anniversary of the date on which the ISO was granted with respect to other Grantees. 6.7 No Option shall become exercisable prior to the expiration of six months after the date of its grant, unless otherwise determined by the Committee or permitted by the Plan, and, subject to the limitations in the Plan, each Option shall be exercisable for the number of Shares fixed by the Committee. 7. STOCK AWARDS 7.1 The Committee may grant eligible employees Stock Awards which shall entitle Grantees to receive Shares in the future for no cash consideration and which may be subject to such terms, conditions and restrictions, if any, as the Committee may deem appropriate, including, without limitation, satisfaction of performance goals, restrictions on transferability and continued employment. 7.2 Subject to provisions of the Plan permitting acceleration, the receipt of Shares under Stock Awards granted to persons subject to Section 16 of the Exchange Act will be conditioned on the attainment during a performance period of performance goals established by the Committee based on criterion described in Section 9. 7.3 At the time of grant of a Stock Award, the Grantee shall receive written evidence of the Award in such form as may be approved by the Committee but shall not be entitled to issuance or delivery of a stock certificate evidencing the Shares covered by the Award until the Committee certifies that performance goals have been met and the lapse of any restrictions that may have been imposed pursuant to the Award. Upon the attainment of such goals and the lapse of any restrictions, a certificate or certificates representing the number of Shares covered by the Award, free and clear of all restrictions, shall be issued and registered in the name of, and delivered to, the Grantee. 7.4 Unless otherwise determined by the Committee or provided in the Plan, no Shares may be issued under Restricted Stock Awards unless the Grantee remains employed by the Company or a Subsidiary for one year after the date of the Award. 8. PERFORMANCE UNITS 8.1 The Committee may grant Awards in the form of Performance Units. 8.2 Amounts payable under a Performance Unit may be payable at a specified date or dates or upon attaining performance conditions. Subject to provisions of the Plan permitting acceleration, a Performance Unit granted to persons subject to Section 16 of the Exchange Act will be conditioned on the attainment during a performance period of performance goals established by the Committee based on criteria described in Section 9. 9. PERFORMANCE GOALS Performance Stock and Performance Unit Awards made to persons subject to Section 16 of the Exchange Act shall be based on performance goals established by the Committee not later than 90 days after the start of a performance period of 12 months duration or longer with respect 41 to which such an Award is made. The Committee may not increase the compensation payable under an Award that is otherwise due upon attainment of a performance goal. The Committee shall certify that the performance goals have been achieved before payment of any such Award. Performance goals established by the Committee shall be based upon, as the Committee deems appropriate, one or more of the following business criteria: (i) Company or Subsidiary EBITDA (earnings before interest, taxes, depreciation and amortization); (ii) Company or Subsidiary earnings or earnings per Share; (iii) public market prices of Shares; (iv) division operating income, or "DOI" (operating income less general and administrative expenses and extraordinary expenses); (v) division level EBITDA (DOI less national film, home office and international general and administrative expenses plus capitalized lease adjustments; (vi) private market value of Shares on a fully-diluted basis (assuming full exercise of all outstanding shares of preferred stock, Class B stock, options and other rights to acquire Shares), based on a constant multiple of theatre level EBITDA (Company EBITDA less National Cinema Network, Inc. EBITDA), plus the book value of National Cinema Network, Inc., cash, cash equivalents and investments and investments in other long-term assets, less corporate borrowings, capitalized lease obligations and the carrying value of minority interests in other long-term liabilities; (vii) return to stockholders, measured by increases in the market value of an investment in Shares, assuming reinvestment of dividends received; and (viii) return on assets within a participant's span of responsibility; and the Committee may, in its discretion, determine whether an Award will be paid under any one or more of such business criteria. In setting performance goals, such criteria may be measured against one or more of the following: (i) the prior year or years' performance of the Company, a Subsidiary, or a division or other operations-based unit or span of a participant's responsibility; (ii) the performance of a broad-based group of stock such as, but not limited to, the Standard and Poor's 500 Index; and (iii) the performance of a peer group of two or more companies. Such performance goals may be (but need not be) different for each performance period. The Committee may set different (or the same) goals for different Grantees and for different Awards, and performance goals may include standards for minimum attainment, target attainment, and maximum attainment. In all cases, however, performance goals shall include a minimum performance standard below which no part of the relevant Award will be earned. 10. NON-TRANSFERABILITY OF RIGHTS Except for assignments made with the Committee's prior approval, no Award, no rights under any Award, and no payment under the Plan shall be assignable or transferable otherwise than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employment Retirement Income Security Act, or the rules thereunder, and the rights and the benefits of any such Award may be exercised during the lifetime of the Grantee only by his or her guardian or legal representative or Successor. 11. DEATH, DISABILITY, RETIREMENT AND OTHER TERMINATION OF EMPLOYMENT 11.1 Subject to the terms of the Plan, the Committee may make such provisions concerning exercise or lapse of Awards upon the Grantee's death, disability, retirement, or other termination of employment as it shall in its discretion determine, provided that: (a) except as provided in paragraph (b) below, no provision shall permit an ISO to be exercised after the date three months following the Grantee's termination of employment, 42 (b) no provision shall permit an Option to be exercised after the date which is twelve months following a Grantee's death or disability, (c) no provision shall permit a NQSO to be exercised after the date which is three years following the Grantee's retirement from the Company or a Subsidiary, (d) except as provided in paragraphs (b) and (c) above, no provision shall permit a NQSO to be exercised after the date which is six months following a Grantee's termination of employment, (e) except as provided in paragraph (f) below or as permitted by Sections 12 or 20, all Stock Awards shall be canceled and forfeited if a Grantee's employment is terminated, and (f) in the event of Grantee's death, disability or retirement, the Grantee (or his Successor) shall be entitled immediately to be issued a certificate or certificates for all of the Shares represented by his Stock Award(s), free and clear of all performance goal requirements and restrictions, based in each case on the extent to which performance goals have been achieved, measured through the date of termination. For purposes of this Section 11, the term "disability" shall mean "long term disability", as defined in the AMC Long Term Disability Plan, or any comparable plan of the Company or AMC, or, if there is no such plan, the inability of the Grantee to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to last for a continuous period of not less than twelve months as determined by the Committee based on the opinion of a qualified physician (or other medical certificate) and other evidence acceptable to the Committee, and the term "retirement" shall mean "normal retirement" or, with the approval of the Committee, "early retirement" pursuant to the applicable terms of the AMC Defined Benefit Retirement Plan or any comparable plan of the Company or a Subsidiary covering a Grantee. 11.2 Unless the Committee determines otherwise, Options which pursuant to their terms are exercisable following termination of a Grantee's employment: (a) may be exercised only to the extent exercisable upon the date such employment terminates, if such termination is other than by reason of the Grantee's death, disability or retirement, and (b) shall be accelerated if not yet vested and shall be exercisable in full, free and clear of all restrictions, if such termination is by reason of the Grantee's death, disability or retirement. 11.3 Transfers of employment between the Company and a Subsidiary, or between Subsidiaries, shall not constitute termination of employment for purposes of any Award. The Committee may specify in the terms and conditions of an Award whether any authorized leave of absence or absence for military or governmental service or for any other reason shall constitute a termination of employment for purposes of the Award and the Plan. 12. PROVISIONS RELATING TO CHANGE IN CONTROL The Committee may provide, at the time of an Award or thereafter, that if a Change of Control Event occurs or if termination results from such Change of Control Event, (a) any restrictions on Stock Awards shall lapse immediately and (b) outstanding Options shall become 43 exercisable immediately. The Committee may also waive, at the time of an Award or thereafter, the satisfaction of performance goals with respect to Performance Stock Awards and Performance Units upon the occurrence of a Change in Control Event or upon termination resulting from a Change in Control Event, and authorize the issuance of Shares represented by Stock Awards or the payment of amounts under Performance Unit Awards, based in each case on the extent to which performance goals have been achieved, measured through the date a Change in Control Event or termination resulting therefrom occurs. 13. WRITING EVIDENCING AWARDS Each Award granted under the Plan shall be evidenced by a writing which may, but need not, be in the form of an agreement to be signed by the Grantee. The writing shall set forth the nature and size of the Award, its Term, the other terms and conditions thereof, other than those set forth in the Plan, and such other information as the Committee directs. Acceptance of, or receipt of the benefits of, an Award by the Grantee shall be conclusively presumed to be assent to the terms and conditions set forth therein, whether or not the writing is in the form of an agreement to be signed by the Grantee. 14. EXERCISE OF RIGHTS UNDER AWARDS 14.1 A person entitled to exercise an Option may do so by delivery of a written notice to that effect specifying the number of Shares with respect to which the Option is being exercised and any other information the Committee may prescribe. 14.2 The notice of exercise shall be accompanied by payment in full of the purchase price for any Shares to be purchased, with such payment being made in cash, certified or bank cashier's check or money order or in Shares having a Fair Market Value equivalent to the purchase price of such Shares to be purchased, or a combination thereof. If approved by the Committee, payment of the purchase price of an Option may also be made by Note, provided that unless the Shares issued are treasury shares at least the par value of the Shares issued shall be paid in cash or equivalent or Shares as provided above. The Committee shall establish appropriate methods for accepting Shares and may impose such conditions as it deems appropriate on the use of such Shares to exercise an Option. 14.3 Upon exercise of an Option, or after grant of a Stock Award but before a distribution of Shares in satisfaction thereof, the Grantee may request in writing that the Shares to be issued in satisfaction of the Award be issued in the name of the Grantee and another person as joint tenants with right of survivorship or as tenants in common. 14.4 All notices or requests to the Company provided for herein shall be delivered to the Secretary of the Company. 15. EFFECTIVE DATE AND DURATION OF THE PLAN AND DATE OF AWARD 15.1 The Plan shall become effective on November 10, 1994, provided any Awards granted hereunder shall be subject to approval of any governmental body having jurisdiction over the Company with respect to this Plan within the time limits applicable to any such governmental approvals. 44 15.2 The Plan shall remain in effect until all Awards have been exercised or satisfied in accordance herewith, but no Awards may be granted under the Plan after the date of the first stockholders' meeting held in 1999 or December 31, 1999, whichever first occurs. The terms of any Award may be amended at any time prior to the end of its Term in accordance with and subject to the limitations of the Plan. 15.3 The date of an Award shall be the date on which the Committee's determination to grant the same is final, or such later date as shall be specified by the Committee in connection with its determination. 16. AMENDMENTS TO AWARDS The Committee may at any time unilaterally amend or terminate and cash out any unexercised or unpaid Award, whether earned or unearned, including, but not by way of limitation, Awards earned but not yet paid, and/or substitute another Award of the same or different type, to the extent it deems appropriate; provided, however, that any amendment to (but not termination of) an outstanding Award which, in the opinion of the Committee, is materially adverse to the Grantee, or any amendment or termination which, in the opinion of the Committee, may subject the Grantee to liability under Section 16 of the Exchange Act, shall require the Grantee's consent. It shall be conclusively presumed that any adjustment for changes in capitalization as provided for herein are not adverse to a Grantee. 17. STOCKHOLDER STATUS No person shall have any rights as a stockholder by virtue of the grant of an Award under the Plan, except with respect to Shares actually issued to that person. 18. POSTPONEMENT OR NON-EXERCISE The Company shall not be required to issue any certificate or certificates for Shares upon the exercise of an Option or upon the vesting of a Stock Award granted under the Plan prior to (a) the obtaining of any approval from any governmental agency which the Company shall, in its sole discretion, determine to be necessary or advisable, (b) the taking of any action in order to comply with restrictions or regulations incident to the maintenance of a public market for its Shares, and (c) the completion of any registration or other qualification of such Shares under any state or Federal law or rulings or regulations of any governmental body which the Company shall, in its sole discretion, determine to be necessary or advisable. The Company shall not be obligated by virtue of any terms and conditions of any Award or any provisions of the Plan to recognize the exercise of an Option or to sell or issue shares in violation of the Securities Act or the law of any government having jurisdiction thereof. Any postponement or delay by the Company in recognizing the exercise of any Option or in issuing any Shares under a Stock Award or otherwise hereunder shall not extend the Term of an Option nor shorten the Term of any restriction attached to any Stock Award and neither the Company nor its directors or officers shall have any obligation or liability to the Grantee of an Award, to a Successor or to any other person with respect to any Shares as to which the Option shall lapse because of such postponement or as to which issuance under a Stock Award was delayed. 45 19. TERMINATION, SUSPENSION OR MODIFICATION OF PLAN The Board may terminate, suspend or modify the Plan at any time and in any manner, provided, however, that without stockholder approval the Board will not adopt an amendment that requires stockholder approval under Section 162(m) of the Code. No termination or suspension of the Plan shall adversely affect any right acquired by any Grantee or any Successor under an Award granted before the date of such termination or suspension except to the extent permitted in Section 16 of the Exchange Act. 20. ADJUSTMENTS FOR CORPORATE CHANGES 20.1 In the event of a recapitalization, stock split, stock dividend, combination or exchange of shares, merger, consolidation, rights offering, reorganization or liquidation, or any other change in the corporate structure or shares of the Company, the Committee may (a) make such equitable adjustments, designed to protect against dilution or enlargement, as it may deem appropriate in the number and kind of Shares authorized by the Plan and, with respect to outstanding Awards, in performance goals and in the number and kind of Shares covered by Awards and in the Option price, and (b) make such arrangements, which shall be binding upon the holders of unexpired Options and outstanding Stock Awards, for the substitution of new Options or Stock Awards for any unexpired Options or Stock Awards then outstanding under the Plan or for the assumption of any such unexpired Options and outstanding Stock Awards. 20.2 In the event that the Company agrees (a) to sell or otherwise dispose of all or substantially all of the Company's assets, or (b) to be wholly or partially liquidated, or (c) to participate in a merger, consolidation or reorganization, or (d) to sell or otherwise dispose of substantially all the assets of, or a majority interest in, a Subsidiary or division, then the Committee may determine that any and all Options granted under the Plan, in situations involving an event described in clauses (a) through (c), and any and all Options granted to employees of the affected Subsidiary or division, in situations described in clause (d), shall be immediately exercisable in full, and any and all Shares issuable pursuant to Stock Awards or cash payable under Performance Units made under the Plan, in situations involving an event described in clauses (a) through (c), and any and all Shares issuable pursuant to Stock Awards or cash payable under Performance Units granted to employees of the affected Subsidiary or division, in situations described in clause (d), shall be immediately issuable or paid in full, as the case may be, based in each case on the extent to which performance goals have been achieved to the date of the event described in clause (a), (b), (c) or (d) above. The Committee may also determine that any Options not exercised, and any Stock Awards or Performance Units with respect to which any restrictions shall not have lapsed or conditions shall not have been satisfied, prior to any such event, or within such period of time thereafter (not to exceed 120 days) as the Committee shall determine, shall terminate. 20.3 The grant of any Award pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets or the business, assets or stock of a Subsidiary. 21. NON-UNIFORM DETERMINATION The Committee's determination under the Plan including, without limitation, determination of the persons to receive Awards, the form, amount and type of Awards, the terms and provisions of 46 Awards and the written material evidencing such Awards, any amendments to the terms and provisions of any Awards, and the granting or rejecting of applications for delivery of Shares need not be uniform and may be made selectively among otherwise eligible employees whether or not such employees are similarly situated. 22. TAXES 22.1 The Company may pay, withhold or require a Grantee to remit to it amounts sufficient to satisfy the Company's federal, state, local or other tax withholding obligations attributable to any Awards after giving notice to the person entitled to receive such amount, and the Company may defer making payment of any Award if any such tax, charge or assessment may be pending until indemnified to its satisfaction. 22.2 Subject to the consent of the Committee, in connection with (a) the exercise of a Non-Qualified Stock Option or (b) satisfaction of conditions and/or lapse of restrictions on a Stock Award, a Grantee may elect to tender back to the Company Shares received pursuant to (a) or (b), having a Fair Market Value sufficient to satisfy all or part of the Company's total federal, state, local and other tax withholding obligations associated with the transaction. Any such election shall be made by a Grantee by delivering written notice to the Secretary of the Company together with such information and documents as the Committee may prescribe. The Committee must approve any election, may suspend or terminate the right to make elections, or may provide with respect to any Award under this Plan that the right to make elections shall not apply to such Award. 22.3 If, pursuant to the provisions of the Code, the Tax Date of an Award is deferred and a Grantee elects to have Shares withheld, the full number of Option Shares or Stock Award Shares may be issued but the Grantee shall enter into an agreement unconditionally obligating him or her to tender back to the Company the proper number of Shares on the Tax Date. 23. NONCOMPETITION AND FORFEITURE PROVISION If the Committee so determines, an Award may specify that a Grantee shall forfeit all unexercised, unearned, and/or unpaid Awards, including, but not limited to, Awards earned but not yet paid if, in the opinion of the Committee, the Grantee, at any time during the period of Grantee's employment and for one (1) year thereafter, without the written consent of the Committee, engages directly or indirectly in any manner or capacity as principal, agent, partner, officer, director, employee, or otherwise, in any business or activity competitive with the business conducted by the Company, in the geographic area in which the Company does business, or in any manner which is inimical to the best interests of the Company. 24. TENURE Nothing in the Plan or in any agreement entered into pursuant to the Plan shall confer upon any participant the right to continue in the employment of the Company or any Subsidiary or affect any right which the Company or Subsidiary has to terminate the employment of such participant. An employee terminated for cause, as determined by the Company, shall forfeit all of his rights under the Plan, except as to Options already exercised and Awards on which restrictions have already lapsed. 47 25. APPLICATION OF PROCEEDS The proceeds received by the Company from the sale of its Shares under the Plan shall be used for general corporate purposes of the Company and its Subsidiaries. 26. OTHER ACTIONS Nothing in the Plan shall be construed to limit the authority of the Company to exercise its corporate rights and powers, including, by way of illustration and not by way of limitation, the right to grant options or pay bonuses for proper corporate purposes otherwise than under the Plan to any employee or any other person, firm, corporation, association or other entity, or to grant options to, or assume options of, any person in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of all or any part of the business and assets of any person, firm, corporation, association or other entity. 27. GENDER AND NUMBER Except when otherwise indicated by the context, words in the masculine gender when used in the Plan shall include the feminine gender, the singular shall include the plural, and the plural shall include the singular. 28. REQUIREMENTS OF LAW, GOVERNING LAW The granting of Awards and the issuance of Shares shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. The Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Missouri. 29. EFFECT ON OTHER PLANS Participation in this Plan shall not affect an employee's eligibility to participate in any other benefit or incentive plan of the Company or a Subsidiary. Any Awards made pursuant hereto shall not be used in determining the benefits provided under any other plan of the Company or a Subsidiary unless specifically provided therein. 48 EX-10.6 10 ISO EXHIBIT 10.6 FORM OF NON-QUALIFIED (NON-ISO) STOCK OPTION AGREEMENT This Stock Option Agreement (the "Agreement"), made as of the ____ day of __________, 19__ (the "Date of Grant"), by and between AMC Entertainment Inc. ("AMCE") and________________ (the "Grantee"), evidences the grant, by AMCE, of a Stock Option (the "Option") to the Grantee on such date and the Grantee's acceptance of the Option in accordance with the provisions of the AMCE 1994 Stock Option and Incentive Plan, as amended (the "Plan"). AMCE and the Grantee agree as follows: 1.Shares Optioned and Option Price. The Grantee shall have an option to purchase 35,000 shares of AMCE Common Stock for $_____ per share, subject to the terms and conditions of this Agreement and of the Plan, the provisions of which are hereby incorporated herein by reference. The shares subject to the Option are not, nor are they intended to be, Incentive Stock Option (ISO) shares as described in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). 2.Vesting. This Option is fully vested as of the Date of Grant. 3.Exercise Period. The Option may be exercised from time to time with respect to all or any number of the then unexercised shares as to which the Option has vested under section 2, on any regular business day of AMCE at its then executive offices, until the earliest to occur of the following dates: (a) the tenth anniversary of the Date of Grant; (b) the first anniversary of the date of the Grantee's termination of employment with AMCE and all Subsidiaries (as defined in the Plan) on account of death or disability; (c) the third anniversary of the Grantee's retirement; (d) the date three (3) months following the date upon which the Grantee's employment with AMCE and all Subsidiaries terminates for any reason other than those described in subsections (b) or (c) next above or in (e) below; or (e) the date Grantee is terminated for cause, provided that for purposes of this Option no termination of employment occurring within one year after the occurrence of a Change in Control Event shall be deemed a termination for cause. 4.Exercise. (a) During the period that the Option is exercisable, it may be exercised in full or in part by the Grantee, his or her legal representatives, guardian or Successor, as defined in the Plan, by delivering or mailing written notice of the exercise to the Secretary of AMCE. The written notice shall be signed by each person entitled to exercise the Option and shall specify the address and Social Security number of each such person. If any person other than the Grantee purports to be entitled to exercise all or any portion of the Option, the written notice shall be accompanied by proof, satisfactory to the Secretary of AMCE, of that entitlement. (b) The written notice shall be accompanied by full payment of the exercise price for the shares as to which the Option is exercised either (i) in cash, certified or bank cashier's check or money order, payable to AMCE, (ii) in shares of AMCE Common Stock that have been held by the Grantee for at least six months and evidenced by certificates either endorsed or with stock powers attached transferring ownership to AMCE, with an aggregate Fair Market Value (as defined in the Plan) equal to said exercise price on the date the written notice is received by the Secretary, or (iii) in any combination of the foregoing. (c) Notwithstanding the provisions of subsection (b) next above, shares acquired through the exercise of an Incentive Stock Option granted under the Plan or any predecessor stock option plan providing for options on shares of AMCE Common Stock may be used as payment at exercise hereunder only if such shares have been held for at least 12 months following such acquisition. (d) The written notice of exercise will be effective and the Option shall be deemed exercised to the extent specified in the notice on the date that the written notice (together with required accompaniments respecting payment of the exercise price) is received by the Secretary of AMCE at its then executive offices during regular business hours. 5.Transfer of Shares; Tax Withholding. (a) As soon as practicable after receipt of an effective written notice of exercise and full payment of the exercise price as provided in section 4 above, the Secretary of AMCE shall cause ownership of the appropriate number of shares of AMCE Common Stock to be transferred to the person or persons exercising the Option by having a certificate or certificates for such number of shares registered in the name of such person or persons and shall have each certificate delivered to the appropriate person. Notwithstanding the foregoing, if AMCE or a Subsidiary requires reimbursement of any tax required by law to be withheld with respect to shares of AMCE Common Stock, the Secretary shall not transfer ownership of shares until the required payment is made. (b) Subject to the approval of the Committee and to the provisions of the Plan, the Grantee may satisfy his tax withholding obligations hereunder by electing to have shares otherwise issuable upon exercise of this Option withheld, which shares shall have a Fair Market Value on the date of exercise equal to the amount of Grantee's tax withholding liability resulting from such exercise. Any such election shall be made at or prior to exercise of the Option by delivering written notice thereof to the Secretary of the Company. 6.Transferability. Except for assignments made with the Committee's prior written approval (which may be denied or conditioned in the sole discretion of the Committee), the rights under this Agreement may not be transferred except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in the Code or Title I of the Employment Retirement Income Security Act, or the rules promulgated thereunder. The rights under this Agreement may be exercised during the lifetime of the Grantee only by the Grantee (or by his guardian, legal representative or Successor, as defined in the Plan). The terms of this Option shall be binding upon the executors, administrators, heirs, successors, and assigns of the Grantee. 7.Authorized Leave. Authorized leaves of absence from AMCE or a Subsidiary shall not constitute a termination of employment for purposes of the Agreement. For purposes of this Agreement, an authorized leave of absence shall be an absence while the Grantee is on military leave, sick leave, or other bona fide leave of absence so long as the Grantee's right to employment with AMCE or a Subsidiary is guaranteed by statute, contract, or company policy. 8.Requirements of Law. This Option may not be exercised if the issuance of shares of AMCE Common Stock upon such exercise would constitute a violation of any applicable federal or state securities or other law or valid regulation. The Grantee, as a condition to his exercise of this Option, shall represent to AMCE that the shares of AMCE Common Stock to be acquired by exercise of this Option are being acquired for investment and not with a present view to distribution or resale, unless counsel for AMCE is then of the opinion that such a representation is not required under the Securities Act of 1933 or any other applicable law, regulation, or rule of any governmental agency. 9.Forfeiture. To the extent this Option is unexercised, it will be forfeited along with all rights thereunder effective as of the date the Committee determines that the Grantee, at any time during the period of the Grantee's employment and for one (1) year thereafter, without the Committee's written consent, engaged directly or indirectly in any manner or capacity as principal, agent, partner, officer, director, employee, or otherwise, in any business or activity competitive with the business conducted by AMCE or its Subsidiaries, in the geographic area in which AMCE or its Subsidiaries does business, or in any manner which is inimical to the best interests of AMCE. IN WITNESS WHEREOF, The Compensation Committee of the Board of Directors has approved this Agreement and AMCE, by its duly authorized officer, and the Grantee have signed this Agreement as of the date first above written. AMC ENTERTAINMENT INC. By: ________________________________________ Co-Chairman & Chief Executive Officer ________________________________________ Grantee APPROVED Member of the Compensation Committee Member of the Compensation Committee Member of the Compensation Committee The Grantee acknowledges receipt of copies of the Plan and the Prospectus respecting the Plan. The Grantee represents that he is familiar with the terms and provisions of the Plan and Prospectus. The Grantee hereby accepts this Option subject to all the terms and provisions of the Plan, including but not limited to Section 20 ("Adjustments for Corporate Changes") thereof. The Grantee hereby agrees to accept as binding, conclusive, and final all decisions and interpretations of the Board of Directors and, where applicable, the Committee (as defined in the Plan), respecting any questions arising under the Plan. Grantee -----END PRIVACY-ENHANCED MESSAGE-----