Agreement Regarding Forgiveness of Debt - AMC Entertainment Inc. and Peter C. Brown
AGREEMENT REGARDING FORGIVENESS OF DEBT
THIS AGREEMENT (this "Agreement") is made and entered into effective as of June 6, 2002, by and between AMC ENTERTAINMENT INC., a Delaware corporation (the "Company"), and PETER C. BROWN ("Brown").
WHEREAS, in 1998 the Compensation Committee and the Board of the Directors of the Company unanimously authorized the issuance of a Promissory Note to Brown on August 11, 1998 in order for him to acquire 375,000 shares of the Company's common stock (the "Shares"). The purpose was to: (i) to assist the Company in the support of a secondary offering being sold to the public in August of 1998; and (ii) to enable Brown to increase his holdings in the Company's common stock and thereby more closely align his financial interests with other common shareholders;
WHEREAS, the Board desires to recognize the leadership of Brown during the Company's 2002 fiscal year. During this period, the exhibition industry was in turmoil; in fact twelve exhibition companies filed bankruptcy. All publicly-traded companies were included in these filings, with the sole exception of the Company;
WHEREAS, the Board recognizes a series of highly effective management initiatives have been introduced: (i) Company-wide pricing adjustments, (ii) aggressive closing of under-performing theatres, (iii) restructuring of operations which without minimizing the efficiency of the Company, and simultaneously maintaining a high level of employee enthusiasm and participation, resulting in general administrative expenses of approximately $20,000,000;
WHEREAS, under Brown's leadership, the Company completed a series of transactions during fiscal year 2002 including (i) an investment by Apollo Advisors of $250,000,000 in convertible preferred stock of the Company, (ii) the issuance of $175,000,000 of senior subordinated notes, (iii) the sale of 10,350,000 shares of the Company's common stock in a secondary offering for $108,000,000, (iv) the acquisition of the General Cinema Theatres chain out of bankruptcy and (v) the acquisition of the Gulf States Theatres chain in Louisiana;
WHEREAS, the shareholders have benefited from the above initiatives as is illustrated by the increase in the market price of the Company's common stock. For example, the price was $6.24 per share on March 29, 2001, $13.64 per share on March 28, 2002, and $15.49 per share on May 10, 2002; and
WHEREAS, as a result of the above, the Compensation Committee and the Board of Directors have determined it to be in the best interests of the Company to reward Brown by forgiving the previously authorized loan, in which the current aggregate amount is $6,921,244.01 (principal and accrued interest) (the "Indebtedness"), and to make further payments to Brown in additional compensation in an amount to approximately equal the income taxes Brown would incur due to such loan forgiveness, "grossed up" to take into account the receipt of such additional compensation. The forgiveness is conditioned upon the fact that Brown agrees not to sell purchased shares for a period of eighteen months from the date hereof;
NOW, THEREFORE, this Agreement is made in consideration of the premises and mutual covenants set forth herein; and each of the parties to this Agreement agrees as follows:
1. Forgiveness of Indebtedness. In exchange for the services provided by Brown to the Company and for the agreements set forth in this Agreement, the Company hereby (i) forgives the aggregate amount of the Indebtedness by canceling any notes representing the Indebtedness and (ii) pays Brown contemporaneously herewith an amount approximately equal to the amount of Brown's income taxes resulting from the forgiveness of the Indebtedness grossed up to take into account the receipt of such additional compensation; provided, such amount shall be reduced by applicable withholding taxes.
2. Lock-Up. In consideration of the forgiveness of the Indebtedness and the payment described in paragraph 1, Brown agrees to not sell any of the Shares for a period of eighteen months from the date of this Agreement.
3. Miscellaneous. This Agreement shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. This Agreement may be executed in more than one counterpart, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the first date set forth above.
AMC Entertainment Inc.
/s/ CRAIG R. RAMSEY
Craig R. Ramsey
Executive Vice President,
Chief Financial Officer and
/s/ PETER C. BROWN
Peter C. Brown