Employment Agreement - AMC Entertainment Inc. and Peter C. Brown
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