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Amc Entertainment Inc · S-4/A · On 6/17/97

Filed On 6/17/97 · SEC File 333-25755 · Accession Number 912057-97-20592

  As Of               Filer                 Filing     On/For/As Docs:Pgs              Issuer               Agent

 6/17/97  Amc Entertainment Inc             S-4/A                  9:292                                    912057

Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction · Form S-4
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-4/A       Pre-Effective Amendment to Registration of           263  1,471K 
                          Securities Issued in a                                 
                          Business-Combination Transaction                       
 2: EX-5        Opinion re: Legality                                   3     13K 
 3: EX-8        Opinion re: Tax Matters                               17     39K 
 4: EX-11       Statement re: Computation of Earnings Per Share        2     17K 
 5: EX-23.1     Consent of Experts or Counsel                          1      8K 
 6: EX-23.2     Consent of Experts or Counsel                          1      5K 
 7: EX-23.5     Consent of Experts or Counsel                          1      6K 
 8: EX-27       Financial Data Schedule                                2     10K 
 9: EX-99       Form of Proxy Card                                     2      8K

S-4/A · Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Accounting Treatment Amce AMCE Class B Stock AMCE Common Stock and Class B Stock AMCE Reasons for the Merger Amce Special Meeting, The Available Information Background of the Merger Business of DI Business of the Company Capitalization of the Company Capital lease obligations Cash and equivalents Certain Federal Income Tax Consequences Certain Transactions Company, The Compensation of Management Condensed Pro Forma Financial Statements Controlling Stockholders Conversion Convertible Preferred Stock Derivative Action Settlement Agreement, The Description of AMCE Capital Stock Di Pre-Merger Action Plan Di Reasons for the Merger DI Special Meeting Dissenters' Rights Dividend and Liquidation Rights Dividends and Price Range of AMCE Common Stock Durwood, Inc Effective Time Employment Contracts, Termination of Employment and Change in Control Arrangements Exhibits and Financial Statement Schedules Expenses Experts General General Effects of the Merger Income taxes Incorporation by Reference Indemnification Agreement Indemnification Agreement, The Indemnification of Directors and Officers Index to Financial Statements Information About Di Information about the Company Interests of Certain Persons in the Merger Legal Matters Legal Proceedings Liquidity and Capital Resources Long-Term Incentive Plan Management and Operations of AMCE After the Merger Management of the Company Management's Discussion and Analysis of Financial Condition and Results of Operations Market for and Dividends on DI Stock Market Values and Dividends Material Terms of the Merger Merger Agreement, The Merger Consideration Merger, The Note Offering Notes to Condensed Pro Forma Financial Statements Notes to Consolidated Financial Statements Option/SAR Grants in Last Fiscal Year Organization and Ownership of AMCE and DI Other Other Agreements Other Indemnification Peter C. Brown Pro Forma Per Share Data Proxies Proxy Statement Reasons for Recommendations Recent Note Offering and Amendment to Credit Facility Registration Registration Agreement Registration Agreement, The Registration Expenses Report of Independent Accountants Report of KPMG Reports of Advisors Requisite Voting Percentage in General and in Certain Extraordinary Matters Risk Factors Secondary Offering Security Ownership of DI Selected Financial Data Stanley H. Durwood Stock Agreement Stock Agreement, The Stockholder Proposals Subsequent Meetings of the Special Committee Summary Summary Financial Data Synopsis Table of Contents Tax Matters The Amce Special Meeting The Company The Derivative Action Settlement Agreement The Indemnification Agreement The Merger The Merger Agreement The Registration Agreement The Stock Agreement Undertakings Voting Rights Years
1	1st Page
"	Peter C. Brown
5	Stanley H. Durwood
8	Durwood, Inc
10	Proxy Statement
12	Table of Contents
14	Summary
"	Synopsis
17	The Merger
"	General
21	The Indemnification Agreement
"	The Stock Agreement
22	Certain Federal Income Tax Consequences
"	Accounting Treatment
"	AMCE Reasons for the Merger
23	Di Reasons for the Merger
"	Dissenters' Rights
24	The Derivative Action Settlement Agreement
25	The Company
28	Recent Note Offering and Amendment to Credit Facility
"	Note Offering
29	Market Values and Dividends
30	Summary Financial Data
33	Amce
34	Pro Forma Per Share Data
35	Risk Factors
"	Controlling Stockholders
37	The Amce Special Meeting
38	Proxies
40	Background of the Merger
"	Organization and Ownership of AMCE and DI
43	Subsequent Meetings of the Special Committee
46	Reports of Advisors
47	Report of KPMG
"	Reasons for Recommendations
51	Material Terms of the Merger
"	The Merger Agreement
"	Effective Time
"	Merger Consideration
52	Di Pre-Merger Action Plan
54	Expenses
55	Secondary Offering
"	Tax Matters
56	The Registration Agreement
"	Registration
"	Registration Expenses
57	Other Indemnification
58	Other Agreements
59	General Effects of the Merger
"	AMCE Class B Stock
61	Management and Operations of AMCE After the Merger
62	Interests of Certain Persons in the Merger
65	Capitalization of the Company
66	Information about the Company
"	Dividends and Price Range of AMCE Common Stock
67	Selected Financial Data
69	Management's Discussion and Analysis of Financial Condition and Results of Operations
73	Liquidity and Capital Resources
76	Other
77	Business of the Company
86	Legal Proceedings
88	Management of the Company
"	Years
91	Compensation of Management
93	Option/SAR Grants in Last Fiscal Year
94	Long-Term Incentive Plan
97	Employment Contracts, Termination of Employment and Change in Control Arrangements
99	Certain Transactions
100	Description of AMCE Capital Stock
"	AMCE Common Stock and Class B Stock
"	Voting Rights
101	Dividend and Liquidation Rights
"	Convertible Preferred Stock
102	Conversion
105	Information About Di
117	Business of DI
"	Security Ownership of DI
"	Market for and Dividends on DI Stock
119	Requisite Voting Percentage in General and in Certain Extraordinary Matters
124	DI Special Meeting
"	Stockholder Proposals
"	Legal Matters
"	Experts
125	Incorporation by Reference
126	Available Information
127	Index to Financial Statements
128	Condensed Pro Forma Financial Statements
131	Notes to Condensed Pro Forma Financial Statements
133	Report of Independent Accountants
139	Notes to Consolidated Financial Statements
"	Cash and equivalents
146	Capital lease obligations
171	Income taxes
207	Stock Agreement
217	Registration Agreement
232	Indemnification Agreement
250	Item 20. Indemnification of Directors and Officers
"	Item 21. Exhibits and Financial Statement Schedules
256	Item 22. Undertakings

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 17, 1997

REGISTRATION NO. 333-25755

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

--------------

AMENDMENT NO. 1
TO

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

--------------

AMC ENTERTAINMENT INC.

(Exact Name of Registrant as specified in its charter)

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DELAWARE 7832 43-1304369
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification
Number)

106 WEST 14TH STREET
KANSAS CITY, MISSOURI 64105
(816) 221-4000

(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

----------------

PETER C. BROWN
PRESIDENT AND CHIEF FINANCIAL OFFICER
AMC ENTERTAINMENT INC.
106 WEST 14TH STREET, SUITE 1700
KANSAS CITY, MISSOURI 64105
(816) 221-4000

(Name, address, including zip code, and telephone number, including
area code, of agent for service)

----------------

WITH A COPY TO:

RAYMOND F. BEAGLE, JR.
LATHROP & GAGE L.C.
2345 GRAND AVENUE, SUITE 2800
KANSAS CITY, MISSOURI 64108-2684
(816) 292-2000

----------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

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AMC ENTERTAINMENT INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF
REGULATION S-K SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM S-4

· Enlarge/Download Table

FORM S-4 REGISTRATION
STATEMENT ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
------------------------------------------------------------------------ --------------------------------------------------

A. Information about the Transaction

1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus................... Front of Registration Statement; Outside Front
Cover of Proxy Information Statement/Prospectus

2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Available Information; Table of Contents;
Incorporation by Reference

3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information............................ Summary; Selected Financial Data: Risk Factors

4. Terms of the Transaction.......................... The Merger; Information about the
Company--Description of AMCE Capital Stock;
Comparison of Rights of Holders of AMCE Stock and
DI Stock

5. Pro Forma Financial Information................... Index to Financial Statements

6. Material Contacts with the Company Being
Acquired......................................... The Merger--Background of the Merger

7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters.... Not Applicable

8. Interests of the Named Experts and Counsel........ Experts; Legal Matters

9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Comparison of Rights of Holders of AMCE Stock and
DI Stock--The Board of Directors

B. Information about the Registrant

10. Information with Respect to
S-3 Registrants.................................. Not Applicable

11. Incorporation of Certain Information by
Reference........................................ Not Applicable

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AMC ENTERTAINMENT INC.
CROSS-REFERENCE SHEET (CONTINUED)
PURSUANT TO ITEM 501(B) OF
REGULATION S-K SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM S-4

· Enlarge/Download Table

12. Information with Respect to S-2 or S-3
Registrants...................................... Summary; Information about the Company--Business
of the Company-- Dividends and Price Range of
Common Stock--Selected Financial Data--
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Index to
Financial Statements

13. Incorporation of Certain Information by
Reference........................................ Incorporation by Reference

14. Information with Respect to Registrants Other Than
S-2 or S-3 Registrants........................... Not Applicable

C. Information about the Company Being Acquired

15. Information with Respect to
S-3 Companies.................................... Not Applicable

16. Information with Respect to S-2 and S-3
Companies........................................ Not Applicable

17. Information with Respect to Companies Other Than
S-2 or S-3 Companies............................. Information about DI--Business--Selected Financial
Data--Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Index to Financial Statements

D. Voting and Management Information

18. Information if Proxies, Consents or Authorizations
are to be Solicited.............................. The AMCE Special Meeting; The Merger-- Dissenters'
Rights--Interests of Certain Persons in the
Merger; Information about the Company--Management
of the Company--Certain Transactions; Information
about DI--Security Ownership; DI Special Meeting

19. Information if Proxies, Consents or Authorizations
are not to be Solicited, or in an Exchange
Offer............................................ Not Applicable

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AMC ENTERTAINMENT INC.
106 WEST 14TH STREET
KANSAS CITY, MISSOURI 64105

June 25, 1997

To Our Stockholders:

On behalf of the Board of Directors, I cordially invite you to attend a
special meeting of the stockholders (the "AMCE Special Meeting") of AMC
Entertainment Inc. ("AMCE" or the "Company") to be held at 2:00 p.m., local time
on July 29, 1997, at the offices of Lathrop & Gage L.C., 2345 Grand Avenue, 24th
Floor, Kansas City, Missouri.

At the AMCE Special Meeting, you will be asked to approve and adopt an
Agreement and Plan of Merger and Reorganization dated as of March 31, 1997 (the
"Merger Agreement") by and between AMCE and Durwood, Inc. ("DI"), pursuant to
which DI will be merged into AMCE, with AMCE remaining as the surviving
corporation (the "Merger"). DI, which is wholly owned by the Durwood family, is
the majority stockholder of AMCE, owning 2,641,951, or 38.8%, of the outstanding
shares of AMCE Common Stock, and 11,157,000, or 100%, of the outstanding shares
of AMCE Class B Stock. In the aggregate, these shares represent 96.5% of the
combined voting power of AMCE's outstanding shares of voting stock as of May 19,
1997.

The Merger was proposed to AMCE by the Durwood family in connection with our
efforts to dissolve DI and a family partnership, American Associated Enterprises
("AAE"), that owns shares of DI Class B Stock, so that we may hold our interests
in AMCE directly in the form of a marketable security instead of indirectly
through DI and AAE. The accompanying notice and Proxy Statement describe the
effect that the Merger would have on my family's interest in AMCE.

SHARES OF AMCE STOCK HELD BY STOCKHOLDERS OTHER THAN DI WILL REMAIN ISSUED
AND OUTSTANDING AND WILL NOT BE EXCHANGED IN THE MERGER. HOLDERS OF AMCE STOCK
SHOULD NOT SURRENDER THEIR SHARES IN CONNECTION WITH THE MERGER.

Pursuant to the Merger Agreement and a settlement of a stockholders'
derivative suit in which my son, Mr. Edward D. Durwood, and I are defendants
and/or agreements with AMCE, I and members of my family have agreed to seek the
Merger and to sell at least 3,000,000 shares of AMCE Common Stock within one
year after the closing of the Merger in a public secondary offering (which will
be made only by means of a prospectus).

The AMCE Board of Directors believes that the Merger, which would have no
tax effect on AMCE or its public stockholders, would be beneficial to AMCE and
its stockholders because, among other reasons, it would increase the voting
interest of the stockholders who are not members of my family and simplify the
corporate structure of AMCE. In addition, the sale by members of my family of
AMCE shares in the public secondary offering contemplated to occur following the
Merger will increase the public "float" and liquidity of the AMCE Common Stock
and, as a result, may reduce the volatility of daily stock price changes, narrow
the bid/asked spread and increase the interest of institutional investors in the
AMCE Common Stock. These effects, over time, may enhance shareholder value.

If the Merger is consummated, based on shares outstanding as of May 19,
1997, unaffiliated stockholders (i.e., persons other than members of the Durwood
family) will own approximately 4.2 million, or 32.3%, of AMCE's outstanding
shares of Common Stock, and their voting interest in AMCE will have increased
from 3.5% to 6.6%. If, after the Merger, the secondary offering is consummated,
unaffiliated stockholders will own approximately 7.2 million, or 53.4%, of
AMCE's outstanding shares of Common Stock, based on shares outstanding as of May
19, 1997, and their voting interest in AMCE will have increased from 6.6% after
the Merger to 12.3% after the secondary offering. The enclosed Proxy Statement
describes the effect of these transactions on the Durwood family's interest in
AMCE and also

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describes how the voting interest of unaffiliated stockholders in AMCE will
increase further if shares of AMCE's $1.75 Cumulative Convertible Preferred
Stock are fully converted.

The accompanying Proxy Statement also describes provisions of an agreement
between me and my children that could result in post-Merger adjustments pursuant
to which I would deliver additional shares to them. Generally, I have agreed to
pay them up to $20 million in shares of AMCE Common Stock if the price they
receive for the 2.5 million shares to be sold by them in the secondary offering
is less than $18 per share. I have also agreed to indemnify them from any
unexpected gift tax and other matters related to the Merger and secondary
offering.

Upon the recommendation of a special committee of the Board of Directors
consisting of Messrs. Charles J. Egan, Jr. and Paul E. Vardeman (the "Special
Committee"), our new outside directors, Messrs. William T. Grant, II and John P.
Mascotte, and the full AMCE Board of Directors has unanimously approved the
Agreement and Plan of Merger and Reorganization and is requesting your approval.

The Board of Directors and the Special Committee believe that the Merger is
fair and in the best interest of AMCE and its unaffiliated stockholders and
recommend that you vote FOR the proposal to approve the Merger Agreement.

Furman Selz LLC, the Special Committee's financial advisor, has rendered an
opinion to the Special Committee to the effect that, as of the date of its
opinion, the consideration to be paid by AMCE is fair, from a financial point of
view, to AMCE.

Details of the Merger and other important information concerning AMCE in the
Merger and DI appear in the accompanying Notice and Proxy Statement. Please give
this material your careful attention. If you have questions concerning the AMCE
Special Meeting, please feel free to contact D.F. King & Co., Inc. our proxy
solicitors, at (800) 290-6431.

A CONDITION TO THE MERGER IS THAT THE MERGER AGREEMENT BE APPROVED BY THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF SHARES OF AMCE COMMON STOCK
PRESENT OR REPRESENTED BY PROXY AND VOTING AT THE SPECIAL MEETING, OTHER THAN
DI, MEMBERS OF MY FAMILY AND DIRECTORS AND OFFICERS OF AMCE. THEREFORE, YOUR
VOTE IS IMPORTANT. Whether or not you plan to attend the AMCE Special Meeting,
please complete, sign and date the accompanying proxy card and return it in the
enclosed postage prepaid envelope. If you attend the AMCE Special Meeting, you
may vote in person even if you have previously returned your proxy card. Your
prompt cooperation will be greatly appreciated.

I am gratified by your continued support of the Company.

Sincerely,

Stanley H. Durwood
Chairman and Chief Executive Officer

Enclosures

--------------------------------------------------------------------------------

NO MATTER HOW MANY OR FEW SHARES YOU OWN, YOUR VOTE IS IMPORTANT. PLEASE SIGN,
DATE AND MAIL THE ENCLOSED PROXY CARD TODAY!

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AMC ENTERTAINMENT INC.

106 WEST 14TH STREET

KANSAS CITY, MISSOURI 64105

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD JULY 29, 1997

To the Stockholders of AMC ENTERTAINMENT INC.

Notice is hereby given that a special meeting of stockholders of AMC
Entertainment Inc., a Delaware corporation ("AMCE" or the "Company"), will be
held at the offices of Lathrop & Gage L.C., 2345 Grand Avenue, 24th Floor,
Kansas City, Missouri, on July 29, 1997, at 2:00 p.m., local time for the
following purposes:

1. To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger and Reorganization dated March 31, 1997 by and between AMCE
and Durwood, Inc. ("DI"), pursuant to which DI will be merged into AMCE, with
AMCE remaining as the surviving corporation (the "Merger"). In the Merger, (i)
shares of AMCE Common Stock and AMCE $1.75 Cumulative Convertible Preferred
Stock held by AMCE stockholders other than DI will remain issued and outstanding
and will not be exchanged, (ii) each share of AMCE Common Stock and AMCE Class B
Stock held by DI will be canceled, (iii) each share of DI Class A Stock
presently held by Mr. Stanley H. Durwood, the trust created pursuant to the
Revocable Trust Agreement of Mr. Stanley H. Durwood dated August 14, 1989, as
amended (the "1989 Trust"), or the 1992 Durwood, Inc. Voting Trust dated
December 12, 1992 (the "1992 Trust") will be converted into and exchanged for
32.142857 shares of AMCE Class B Stock, so that the 119,500 shares of DI Class A
Stock presently held by Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust
will be convertible into and exchangeable for an aggregate of 3,841,071 shares
of AMCE Class B Stock, (iv) each share of DI Class A Stock presently held by or
for the benefit of persons other than Mr. Stanley H. Durwood, the 1989 Trust or
the 1992 Trust will be converted into and exchanged for 32.142857 shares of AMCE
Common Stock, so that the 500 shares of DI Class A Stock presently held by
persons other than Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust will
be convertible into and exchangeable for an aggregate of 16,071 shares of AMCE
Common Stock, (v) each share of DI Class B Stock to be held by Mr. Stanley H.
Durwood, the 1989 Trust or the 1992 Trust will be converted into and exchanged
for 243.767528 shares of AMCE Class B Stock, so that the 4,818.4664 shares of DI
Class B Stock to be held by Mr. Stanley H. Durwood, the 1989 Trust or the 1992
Trust will be convertible into and exchangeable for an aggregate of 1,174,586
shares of AMCE Class B Stock, and (vi) each share of DI Class B Stock to be held
by the children of Mr. Stanley H. Durwood will be converted into and exchanged
for 243.767341 shares of AMCE Common Stock, so that the 35,965.5336 shares of DI
Class B Stock to be held by the children of Mr. Stanley H. Durwood will be
convertible into and exchangeable for an aggregate of 8,767,223 shares of AMCE
Common Stock, all as more fully described in the accompanying Proxy Statement;
and

2. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.

DI, which is wholly owned by the Durwood family, is the majority stockholder
of AMCE, owning 2,641,951, or 38.8%, of the outstanding shares of AMCE Common
Stock as of May 19, 1997, and 11,157,000, or 100%, of the outstanding shares of
AMCE Class B Stock as of such date.

Holders of AMCE Common Stock and Class B Stock at the close of business on
June 19, 1997, are entitled to notice of and to vote at the special meeting, or
any adjournment or adjournments thereof. A complete list of such stockholders
will be open to the examination of any stockholder at AMCE's principal executive
offices at 106 West 14th Street, Kansas City, Missouri 64105, for a period of
ten

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(10) days prior to the meeting. The meeting may be adjourned from time to time
without notice other than by announcement at the meeting.

A CONDITION TO THE MERGER IS THAT THE MERGER AGREEMENT BE APPROVED BY THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF SHARES OF AMCE COMMON STOCK
PRESENT OR REPRESENTED BY PROXY AND VOTING AT THE SPECIAL MEETING, OTHER THAN
DI, MEMBERS OF THE DURWOOD FAMILY AND DIRECTORS AND OFFICERS OF AMCE. THEREFORE,
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF
SHARES YOU HOLD. WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE MEETING IN PERSON,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN
THE ENCLOSED RETURN ENVELOPE. EACH PROXY GRANTED MAY BE REVOKED BY THE
STOCKHOLDER APPOINTING SUCH PROXY AT ANY TIME BEFORE IT IS VOTED. IF YOU RECEIVE
MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE REGISTERED IN DIFFERENT NAMES
OR ADDRESSES, EACH SUCH PROXY CARD SHOULD BE SIGNED AND RETURNED TO ASSURE THAT
ALL YOUR SHARES WILL BE VOTED.

The Notice, the accompanying Proxy Statement and the Proxy enclosed herewith
were sent to you by order of the Board of Directors of AMCE.

Nancy L. Gallagher

Vice President and Secretary

Kansas City, Missouri

June 25, 1997

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DURWOOD, INC.

106 WEST 14TH STREET

KANSAS CITY, MISSOURI 64105

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD JULY 29, 1997

To the Shareholders of Durwood, Inc.:

A special meeting of the shareholders of Durwood, Inc. ("DI") will be held
at the corporate headquarters of DI, 106 West 14th Street, Kansas City, Missouri
on July 29, 1997, at 1:00 p.m. local time to consider and vote upon a proposal
to approve and adopt an Agreement and Plan of Merger and Reorganization dated
March 31, 1997 by and between AMC Entertainment Inc. ("AMCE" or the "Company")
and DI, pursuant to which DI will be merged into AMCE, with AMCE remaining as
the surviving corporation (the "Merger").

In the Merger, (i) shares of AMCE Common Stock and AMCE $1.75 Cumulative
Convertible Preferred Stock held by AMCE stockholders other than DI will remain
issued and outstanding and will not be exchanged, (ii) each share of AMCE Common
Stock and AMCE Class B Stock held by DI will be canceled, (iii) each share of DI
Class A Stock presently held by Mr. Stanley H. Durwood, the trust created
pursuant to the Revocable Trust Agreement of Mr. Stanley H. Durwood dated August
14, 1989, as amended (the "1989 Trust"), or the 1992 Durwood, Inc. Voting Trust
dated December 12, 1992 (the "1992 Trust") will be converted into and exchanged
for 32.142857 shares of AMCE Class B Stock, so that the 119,500 shares of DI
Class A Stock presently held by Mr. Stanley H. Durwood, the 1989 Trust or the
1992 Trust will be convertible into and exchangeable for an aggregate of
3,841,071 shares of AMCE Class B Stock, (iv) each share of DI Class A Stock
presently held by or for the benefit of persons other than Mr. Stanley H.
Durwood, the 1989 Trust or the 1992 Trust will be converted into and exchanged
for 32.142857 shares of AMCE Common Stock, so that the 500 shares of DI Class A
Stock presently held by persons other than Mr. Stanley H. Durwood, the 1989
Trust and the 1992 Trust will be convertible into and exchangeable for an
aggregate of 16,071 shares of AMCE Common Stock, (v) each share of DI Class B
Stock to be held by Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust
will be converted into and exchanged for 243.767528 shares of AMCE Class B
Stock, so that the 4,818.4664 shares of DI Class B Stock to be held by Mr.
Stanley H. Durwood, the 1989 Trust or the 1992 Trust will be convertible into
and exchangeable for an aggregate of 1,174,586 shares of AMCE Class B Stock, and
(vi) each share of DI Class B Stock to be held by the children of Mr. Stanley H.
Durwood will be converted into and exchanged for 243.767341 shares of AMCE
Common Stock, so that the 35,965.5336 shares of DI Class B Stock to be held by
the children of Mr. Stanley H. Durwood will be convertible into and exchangeable
for an aggregate of 8,767,223 shares of AMCE Common Stock, all as more fully
described in the accompanying Information Statement/Prospectus.

The close of business on June 19, 1997, has been designated as the record
date for the determination of shareholders entitled to notice of and to vote at
the special meeting or any adjournment thereof.

By Order of the Board of Directors

Kansas City, Missouri

June 25, 1997

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SUBJECT TO COMPLETION
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

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PRELIMINARY PROXY--INFORMATION STATEMENT/PROSPECTUS
DATED JUNE 17, 1997

AMC ENTERTAINMENT INC.
---------

PROXY STATEMENT

For Special Meeting of Stockholders of AMC Entertainment Inc.
to be Held on July 29, 1997,
and
INFORMATION STATEMENT

For Special Meeting of Shareholders of Durwood, Inc.
to be Held on July 29, 1997
and
PROSPECTUS FOR 8,783,294 SHARES OF AMC ENTERTAINMENT INC.
COMMON STOCK, PAR VALUE 66 2/3 CENTS PER SHARE, AND 5,015,657 SHARES OF AMC
ENTERTAINMENT INC. CLASS B STOCK, PAR VALUE 66 2/3 CENTS PER SHARE

-------------

This Proxy--Information Statement/Prospectus is being furnished as a proxy
statement to holders of Common Stock, par value 66 2/3 CENTS per share ("AMCE
Common Stock" or "Common Stock"), of AMC Entertainment Inc., a Delaware
corporation ("AMCE" or the "Company"), in connection with the solicitation of
proxies by the AMCE Board of Directors (the "AMCE Board") for use at a special
meeting of AMCE stockholders (the "AMCE Special Meeting") to be held on July 29,
1997, at the offices of Lathrop & Gage L.C., 2345 Grand Avenue, 24th Floor,
Kansas City, Missouri, commencing at 2:00 p.m., local time, and at any
adjournments, postponements or continuations thereof.

This Proxy--Information Statement/Prospectus is also being furnished as an
information statement and prospectus to holders of Class A Common Stock, par
value $100 per share ("DI Class A Stock"), and Class B Common Stock, par value
$100 per share ("DI Class B Stock"), of Durwood, Inc., a Missouri corporation
("DI"), in connection with a special meeting of DI shareholders (the "DI Special
Meeting"), to be held on July 29, 1997, at the corporate headquarters of DI, 106
West 14th Street, Kansas City, Missouri, commencing at 1:00 p.m., local time,
and at any adjournments, postponements or continuations thereof.

This Proxy--Information Statement/Prospectus relates to the proposed merger
of DI into AMCE (the "Merger"). DI, which is wholly owned by the Durwood family,
is the majority stockholder of AMCE, owning 2,641,951, or 38.8%, of the
outstanding shares of AMCE Common Stock as of May 19, 1997, and 11,157,000, or
100%, of the outstanding shares of AMCE Class B Stock as of such date. The
Merger will be effected pursuant to the terms of an Agreement and Plan of Merger
and Reorganization dated as of March 31, 1997, between AMCE and DI (the "Merger
Agreement"), pursuant to which DI will be merged into AMCE, with AMCE remaining
as the surviving corporation. SHARES OF AMCE STOCK HELD BY STOCKHOLDERS OTHER
THAN DI WILL REMAIN ISSUED AND OUTSTANDING AND WILL NOT BE EXCHANGED IN THE
MERGER. HOLDERS OF AMCE STOCK SHOULD NOT SURRENDER THEIR SHARES IN CONNECTION
WITH THE MERGER.

Immediately prior to the Merger, DI will convert 6,141,343 shares of AMCE
Class B Stock into shares of AMCE Common Stock, so that at the Effective Time
(as defined herein) of the Merger, DI will own 5,015,657 shares of AMCE Class B
Stock and 8,783,294 shares of AMCE Common Stock. In the Merger, (i) each share
of AMCE Common Stock and AMCE Class B Stock held by DI will be canceled, (ii)
each share of DI Class A Stock presently held by Mr. Stanley H. Durwood, the
trust created pursuant to the Revocable Trust Agreement of Mr. Stanley H.
Durwood dated August 14, 1989, as amended (the "1989 Trust"), or the 1992
Durwood, Inc. Voting Trust dated December 12, 1992 (the "1992 Trust") will be
converted into and exchanged for 32.142857 shares of AMCE's Class B Stock, par
value 66 2/3 CENTS per share ("AMCE Class B Stock" or "Class B Stock"), so that
the 119,500 shares of DI Class A Stock presently held by Mr. Stanley H. Durwood,
the 1989 Trust or the 1992 Trust will be convertible into and exchangeable for
an aggregate of 3,841,071 shares of AMCE Class B Stock, (iii) each share of DI
Class A Stock presently held by or for the benefit of persons other than Mr.
Stanley H. Durwood, the 1989 Trust or the 1992 Trust will be converted into and
exchanged for 32.142857 shares of AMCE Common Stock, so that the 500

(CONTINUED ON NEXT PAGE)

SEE "RISK FACTORS" AT PAGE 22 FOR A DISCUSSION OF CERTAIN MATTERS.

-----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Proxy--Information Statement/Prospectus is , 1997.

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shares of DI Class A Stock presently held by persons other than Mr. Stanley H.
Durwood, the 1989 Trust or the 1992 Trust will be convertible into and
exchangeable for an aggregate of 16,071 shares of AMCE Common Stock, (iv) each
share of DI Class B Stock to be held by Mr. Stanley H. Durwood, the 1989 Trust
or the 1992 Trust will be converted into and exchanged for 243.767528 shares of
AMCE Class B Stock, so that the 4,818.4664 shares of DI Class B Stock to be held
by Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust will be convertible
into and exchangeable for an aggregate of 1,174,586 shares of AMCE Class B
Stock, and (v) each share of DI Class B Stock to be held by the children of Mr.
Stanley H. Durwood will be converted into and exchanged for 243.767341 shares of
AMCE Common Stock, so that the 35,965.5336 shares of DI Class B Stock to be held
by the children of Mr. Stanley H. Durwood will be convertible into and
exchangeable for an aggregate of 8,767,223 shares of AMCE Common Stock.

In connection with the Merger, AMCE has filed a Registration Statement on
Form S-4 (the "Registration Statement"), of which this Proxy--Information
Statement/Prospectus is a part, with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), covering the AMCE Common Stock and AMCE Class B Stock
issuable in the Merger to holders of shares of DI Class A Stock and DI Class B
Stock.

Holders of AMCE Common Stock and AMCE Class B Stock generally vote as a
class on all matters other than the election of directors, with each share of
AMCE Common Stock having one vote per share and each share of AMCE Class B Stock
having ten votes per share. Subject to provisions of AMCE's Amended and Restated
Certificate of Incorporation ("Certificate of Incorporation") which apply if
outstanding shares of AMCE Class B Stock cease to represent in excess of 12 1/2%
of the combined number of outstanding shares of AMCE Common Stock and AMCE Class
B Stock, holders of AMCE Class B Stock are entitled to elect, voting as a class,
75% of the AMCE Board of Directors, and holders of AMCE Common Stock are
entitled to elect, voting as a class, 25% of the AMCE Board of Directors. Each
share of AMCE Class B Stock is convertible into one share of AMCE Common Stock.
Subject to the prior rights of holders of shares of AMCE $1.75 Cumulative
Convertible Preferred Stock ("Convertible Preferred Stock"), holders of AMCE
Common Stock and AMCE Class B Stock are entitled to receive, pro rata per share,
such dividends as may be declared by the AMCE Board. Holders of AMCE Common
Stock and AMCE Class B Stock are entitled to receive, pro rata per share,
consideration of equal value in any merger or consolidation. See "Information
about the Company--Description of AMCE Capital Stock."

This Proxy--Information Statement/Prospectus is first being mailed on or
about June 25, 1997 to all stockholders of AMCE of record on June 19, 1997 (the
"AMCE Record Date"), whether or not such stockholders are entitled to vote at
the AMCE Special Meeting.

This Proxy--Information Statement/Prospectus and accompanying form of proxy
are first being mailed on or about June 25, 1997 to all shareholders of DI of
record on June 19, 1997 (the "DI Record Date").

----------------

THIS PROXY--INFORMATION STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION IN SUCH JURISDICTION. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROXY--INFORMATION STATEMENT/ PROSPECTUS IN CONNECTION WITH THE OFFERING MADE
HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY AMCE, DI OR ANY OTHER PERSON. NEITHER
THE DELIVERY OF THIS PROXY--INFORMATION STATEMENT/PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF AMCE OR DI SINCE SUCH DATE. ALL INFORMATION
REGARDING AMCE IN THIS PROXY--INFORMATION STATEMENT/PROSPECTUS HAS BEEN SUPPLIED
BY AMCE, AND ALL INFORMATION REGARDING DI HAS BEEN SUPPLIED BY DI.

----------------

THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
MS. NANCY L. GALLAGHER, VICE PRESIDENT AND SECRETARY OF AMCE, 106 WEST 14TH
STREET, KANSAS CITY, MISSOURI 64105 (TELEPHONE: (816) 221-4000). IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JULY 22,
1997.

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TABLE OF CONTENTS

SUMMARY............................................................................. 1
Synopsis...................................................................... 1
The Merger.................................................................... 4
The Company................................................................... 12
Recent Note Offering and Amendment to Credit Facility......................... 15
Durwood, Inc.................................................................. 16
Market Values and Dividends................................................... 16
Summary Financial Data........................................................ 17
Pro Forma Per Share Data...................................................... 21
RISK FACTORS........................................................................ 22
THE AMCE SPECIAL MEETING............................................................ 24
THE MERGER.......................................................................... 27
Background of the Merger...................................................... 27
Reports of Advisors........................................................... 33
Reasons for Recommendation.................................................... 34
Material Terms of the Merger.................................................. 38
The Merger Agreement........................................................ 38
The Stock Agreement......................................................... 42
The Registration Agreement.................................................. 43
The Indemnification Agreement............................................... 44
General Effects of the Merger................................................. 46
Management and Operations of AMCE After the Merger............................ 48
Certain Federal Income Tax Consequences....................................... 48
Interests of Certain Persons in the Merger.................................... 49
Dissenters' Rights............................................................ 50
Accounting Treatment.......................................................... 51
CAPITALIZATION OF THE COMPANY....................................................... 52
INFORMATION ABOUT THE COMPANY....................................................... 53
Dividends and Price Range of AMCE Common Stock................................ 53
Selected Financial Data....................................................... 54
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................... 56
Business of the Company....................................................... 64
Management of the Company..................................................... 75
Certain Transactions.......................................................... 86
Description of AMCE Capital Stock............................................. 87
INFORMATION ABOUT DI................................................................ 92
Selected Financial Data....................................................... 92
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................... 95
Business of DI................................................................ 104
Security Ownership of DI...................................................... 104
Market for and Dividends on DI Stock.......................................... 104
COMPARISON OF AND RIGHTS OF HOLDERS OF AMCE COMMON AND CLASS B STOCK AND DI STOCK... 105
DI SPECIAL MEETING.................................................................. 111
STOCKHOLDER PROPOSALS............................................................... 111
LEGAL MATTERS....................................................................... 111
EXPERTS............................................................................. 111

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TABLE OF CONTENTS

INCORPORATION BY REFERENCE.......................................................... 112
AVAILABLE INFORMATION............................................................... 113
INDEX TO FINANCIAL STATEMENTS....................................................... F-1

Annex 1 - Agreement and Plan of Merger and Reorganization (the "Merger Agreement") A1-1
Exhibit A to Merger Agreement - DI Pre-Merger Action Plan A1-20
Exhibit B to Merger Agreement - Stock Agreement A1-21
Exhibit C to Merger Agreement - Registration Agreement A1-31
Exhibit D to Merger Agreement - Indemnification Agreement A1-46
Exhibit B to Indemnification Agreement - Escrow Agreement A1-55

Annex 2 - Opinion of Furman Selz LLC A2-1

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SUMMARY

THE FOLLOWING IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION AND CONSOLIDATED
FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, CONTAINED ELSEWHERE IN THIS
PROXY-- INFORMATION STATEMENT/PROSPECTUS AND THE EXHIBITS HERETO. STOCKHOLDERS
ARE URGED TO READ THIS PROXY--INFORMATION STATEMENT/PROSPECTUS, INCLUDING
EXHIBITS, IN ITS ENTIRETY. COPIES OF THE MERGER AGREEMENT, THE REGISTRATION
AGREEMENT, THE STOCK AGREEMENT AND THE INDEMNIFICATION AGREEMENT REFERRED TO
HEREIN ARE SET FORTH IN ANNEX 1 HERETO, AND THE SUMMARIES OF SUCH DOCUMENTS
CONTAINED HEREIN ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE FULL TEXTS
OF SUCH AGREEMENTS.

AS USED HEREIN, THE TERM "COMPANY" MEANS AMC ENTERTAINMENT INC. ("AMCE")
AND, UNLESS THE CONTEXT OTHERWISE REQUIRES, ITS SUBSIDIARIES, INCLUDING AMERICAN
MULTI-CINEMA, INC. ("AMC") AND ITS SUBSIDIARIES. REFERENCES TO (I) "MR. STANLEY
H. DURWOOD" INCLUDE, IF THE CONTEXT REQUIRES, MR. STANLEY H. DURWOOD
INDIVIDUALLY AND AS TRUSTEE OF THE 1992 DURWOOD, INC. VOTING TRUST DATED
DECEMBER 12, 1992 (THE "1992 TRUST") AND AS TRUSTEE OF THE TRUST CREATED
PURSUANT TO THE REVOCABLE TRUST AGREEMENT OF MR. STANLEY H. DURWOOD DATED AUGUST
14, 1989, AS AMENDED (THE "1989 TRUST"), (II) "DURWOOD FAMILY STOCKHOLDERS"
MEANS MR. STANLEY H. DURWOOD AND HIS CHILDREN, MRS. CAROL D. JOURNAGAN, MR.
EDWARD D. DURWOOD, MR. THOMAS A. DURWOOD, MRS. ELISSA D. GRODIN, MR. BRIAN H.
DURWOOD AND MR. PETER J. DURWOOD (COLLECTIVELY, THE "DURWOOD CHILDREN"), (III)
"UNAFFILIATED STOCKHOLDERS" MEANS STOCKHOLDERS OF AMCE OTHER THAN THE DURWOOD
FAMILY STOCKHOLDERS, (IV) "DI" MEANS DURWOOD, INC., A MISSOURI CORPORATION, (V)
"DELTA" MEANS DELTA PROPERTIES, INC., A MISSOURI CORPORATION AND A SUBSIDIARY OF
DI, (VI) "AAE" MEANS AMERICAN ASSOCIATED ENTERPRISES, A MISSOURI LIMITED
PARTNERSHIP, AND (VI) THE PERCENTAGE "VOTING INTEREST" OR "VOTING POWER" OF A
STOCKHOLDER OR GROUP OF STOCKHOLDERS OF AMCE MEANS THE PERCENTAGE DERIVED BY
DIVIDING THE NUMBER OF VOTES ATTRIBUTABLE TO SHARES OF AMCE COMMON STOCK OR AMCE
CLASS B STOCK OWNED BY THAT STOCKHOLDER OR GROUP BY THE NUMBER OF VOTES
ATTRIBUTABLE TO ALL OUTSTANDING SHARES OF AMCE COMMON STOCK AND CLASS B STOCK,
WITH EACH SHARE OF AMCE COMMON STOCK HAVING ONE VOTE PER SHARE AND EACH SHARE OF
AMCE CLASS B STOCK HAVING TEN VOTES PER SHARE.

Except as otherwise noted, stockholdings and voting interests in AMCE are
based on shares outstanding as of May 19, 1997 and do not reflect any
conversions into AMCE Common Stock of the 3,175,800 shares of Convertible
Preferred Stock outstanding on such date. Shares of Convertible Preferred Stock
are presently convertible into Common Stock at the ratio of 1.724 shares of
Common Stock for each share of Convertible Preferred Stock.

SYNOPSIS

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THE COMPANY..................... The Company is primarily engaged in the theatrical
exhibition business. As of April 3, 1997, it operated 228
theatres with an aggregate of 1,957 screens located in 23
states, the District of Columbia, Portugal and Japan.

DURWOOD, INC.................... DI is a holding company whose principal shareholders are
Mr. Stanley H. Durwood and AAE. Mr. Stanley H. Durwood
owns 119,500, or 99%, of the 120,000 outstanding shares of
DI Class A Stock, representing approximately 75% of the
voting power of DI, and AAE owns 40,784, or 100%, of the
outstanding shares of DI Class B Stock, representing
approximately 25% of the voting power of DI. AAE's
partners are Mr. Stanley H. Durwood and the Durwood
Children. Mr. Stanley H. Durwood is the sole director of
DI and his son, Mr. Edward D. Durwood, is the managing
general partner of AAE. DI's principal asset consists of
AMCE stock and at

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present it has no significant business activity other than
the ownership of such AMCE stock.

DI, which is wholly owned by the Durwood family, is the
majority stockholder of AMCE, owning 2,641,951, or 38.8%,
of the outstanding shares of AMCE Common Stock as of May
19, 1997, and 11,157,000, or 100%, of the outstanding
shares of AMCE Class B Stock as of such date.

DATE, TIME AND PLACE OF AMCE
SPECIAL MEETING............... The AMCE Special Meeting will be held on Tuesday, July 29,
1997 at 2:00 p.m., local time, at the offices of Lathrop &
Gage L.C., 2345 Grand Avenue, 24th Floor, Kansas City,
Missouri.

AMCE RECORD DATE; STOCKHOLDERS
ENTITLED TO VOTE.............. The AMC Board has set June 19, 1997 as the record date for
the AMCE Special Meeting (the "AMCE Record Date"). Holders
of AMCE Common Stock and AMCE Class B Stock on the AMCE
Record Date will be entitled to vote at the AMCE Special
Meeting. On the AMCE Record Date, there were [6,804,296]
shares of AMCE Common Stock outstanding, each of which
will be entitled to one vote on each matter properly
submitted to stockholders at the AMCE Special Meeting, and
11,157,000 shares of AMCE Class B Stock outstanding, each
of which will be entitled to ten votes on each matter
properly submitted to stockholders at the AMCE Special
Meeting.

DATE, TIME AND PLACE OF DI
SPECIAL MEETING............... The DI Special Meeting will be held on July 29, 1997 at
1:00 p.m., local time, at the corporate headquarters of
DI, 106 West 14th Street, Kansas City, Missouri.

DI RECORD DATE; SHAREHOLDERS
ENTITLED TO VOTE.............. The record date for the DI Special Meeting is June 19,
1997 (the "DI Record Date"). Holders of DI Class A stock
and DI Class B Stock on the DI Record Date will be
entitled to vote at the DI Special Meeting. Each share of
DI Class A Stock and DI Class B Stock will be entitled to
one vote on each matter properly submitted for vote to DI
shareholders at the DI Special Meeting.

PURPOSE OF SPECIAL MEETINGS..... At the Special Meetings, stockholders of AMCE and DI will
be asked to approve the Merger Agreement between AMCE and
its controlling stockholder, DI.

THE MERGER...................... If the Merger Agreement is approved, DI will be merged
into AMCE, and AMCE will be the surviving corporation in
the Merger. In the Merger, shares of DI stock will be
exchanged for shares of AMCE stock. There will be no
increase in the aggregate number of outstanding shares of
AMCE as a result of the Merger, although the number of
outstanding shares of AMCE Common Stock will increase and
the number of outstanding shares of AMCE Class B Stock
will decrease. The percentage of shares of outstanding

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AMCE Common Stock held by unaffiliated stockholders will
decrease from 61.2% before the Merger to 32.3% after the
Merger, based on shares outstanding as of May 19, 1997,
but the voting interest in AMCE of unaffiliated
stockholders will increase from 3.5% before the Merger to
6.6% after the Merger. SHARES OF AMCE STOCK HELD BY
STOCKHOLDERS OTHER THAN DI WILL REMAIN ISSUED AND
OUTSTANDING AND WILL NOT BE EXCHANGED IN THE MERGER. See
"--The Merger--General."

The Merger has been approved by a Special Committee of the
AMCE Board consisting of Messrs. Charles J. Egan, Jr. and
Paul E. Vardeman (the "Special Committee"), by the New
Independent Directors of AMCE (as defined herein under
"--The Derivative Action Settlement Agreement") and by the
full AMCE Board. The Merger has also been approved by Mr.
Stanley H. Durwood, as sole director of DI.

AMCE REASONS FOR THE MERGER..... The Special Committee of the AMCE Board has concluded that
the Merger is fair to, and in the best interests of, AMCE
and its unaffiliated stockholders because (i) it will
increase the voting interest in AMCE of unaffiliated
stockholders, (ii) it will simplify the corporate
structure of AMCE, (iii) it will be accounted for as a
corporate reorganization, will not affect AMCE's total
capitalization and will have no tax effect on unaffiliated
stockholders, and (iv) the Durwood Family Stockholders
have agreed to sell a portion of the shares they receive
in the Merger in a registered secondary offering, which
will increase the public "float" and liquidity of AMCE
Common Stock, as a result of which the volatility of daily
stock price changes may be reduced, the bid/ asked spread
for AMCE Common Stock may narrow and the interest of
institutional investors in the AMCE Common Stock may
increase. These effects, over time, may enhance
shareholder value. Because AMCE will be reimbursed by Mr.
Stanley H. Durwood and certain related trusts and entities
for 50% and, in certain instances, 100% of its expenses in
connection with the Merger and subsequent secondary
offering by the Durwood Family Stockholders, the Special
Committee concluded that all of these benefits are
possible without substantial cost to AMCE or its
unaffiliated stockholders. The AMCE Board has adopted the
reasons of the Special Committee for approving the Merger.
See "--AMCE Reasons for the Merger" and "The
Merger--Certain Federal Income Tax Consequences."

DI REASONS FOR THE MERGER....... The Merger will permit the Durwood Family Stockholders to
hold their interests in AMCE directly instead of
indirectly through DI and AAE, thereby enhancing their
liquidity through ownership of a marketable security.

VOTE REQUIRED................... Under the Delaware General Corporation Law (the "DGCL")
and AMCE's Certificate of Incorporation, the Merger
Agreement requires the approval of the holders of a
majority of the votes of

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shares of AMCE Common Stock and AMCE Class B Stock
outstanding on the AMCE Record Date, with such shares
voting together as a single class and with each share of
AMCE Common Stock being entitled to one vote and each
share of AMCE Class B Stock being entitled to ten votes.
DI owned all outstanding shares of AMCE Class B Stock and
2,641,951, or 38.8%, of the outstanding shares of AMCE
Common Stock as of the AMCE Record Date. As of the AMCE
Record Date, other directors and executive officers of
AMCE were entitled to vote 19,418 shares of AMCE Common
Stock. DI has indicated its intention to vote the shares
of AMCE Stock which it owns in favor of the Merger
Agreement.

The Merger Agreement also requires the approval of the
holders of two-thirds of the outstanding shares of DI
Class A Stock and DI Class B Stock, voting together as a
single class, and of the holders of a majority of the
shares of DI Class A Stock and DI Class B Stock,
respectively, each voting as a separate class. Mr. Stanley
H. Durwood and the Durwood children (provided the Merger
occurs before September 30, 1997) have indicated their
intention to cause the shares of DI stock which they
beneficially own to be voted in favor of the Merger
Agreement.

Upon the recommendation of the Special Committee, a
condition to the Merger is that the Merger Agreement also
receive approval of the holders of a majority of shares of
AMCE Common Stock present or represented by proxy and
voting at the AMCE Special Meeting, other than those
shares held by DI, the Durwood Family Stockholders, their
spouses, their children living in the same household and
directors and officers of AMCE.

THE MERGER

GENERAL

The Merger has been sought by the Durwood Family Stockholders so that they
may hold their interests in AMCE directly instead of indirectly through DI and
AAE. AMCE was asked to consider engaging in the Merger and related transactions,
and the Special Committee was appointed to consider and review the Merger. If
the Special Committee considered the Merger to be in the best interests of AMCE
and its unaffiliated stockholders, it was to negotiate the terms of the Merger
and related transactions and make recommendations to the full AMCE Board in this
connection. The Special Committee was given the full power and authority of the
AMCE Board to reject the Merger. After its investigation and analysis and
negotiations, the Special Committee has recommended the approval of the Merger
Agreement and related transactions. Each of the New Independent Directors and
the full AMCE Board have also voted to approve the Merger Agreement and related
transactions. See "The Merger--Background of the Merger." Consummation of the
Merger also has been made a condition of settlement of the Derivative Action (as
defined herein) to which the Company and certain of its current and former
directors are parties. See "--The Derivative Action" and "Information About the
Company--Business of the Company--Legal Proceedings."

Immediately prior to the Merger, AAE will be liquidated and DI will convert
6,141,343 shares of AMCE Class B Stock into shares of AMCE Common Stock, so that
at the Effective Time of the Merger, DI will own 5,015,657 shares of AMCE Class
B Stock and 8,783,294 shares of AMCE Common Stock. Pursuant

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to the terms and subject to the conditions of the Merger Agreement, upon
consummation of the Merger (i) each share of AMCE Common Stock and AMCE Class B
Stock held by DI will be canceled, (ii) each share of DI Class A Stock presently
held by Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust will be
converted into and exchanged for 32.142857 shares of AMCE Class B Stock, so that
the 119,500 shares of DI Class A Stock presently held by Mr. Stanley H. Durwood,
the 1989 Trust or the 1992 Trust will be convertible into and exchangeable for
an aggregate of 3,841,071 shares of AMCE Class B Stock, (iii) each share of DI
Class A Stock presently held by persons other than Mr. Stanley H. Durwood, the
1989 Trust or the 1992 Trust will be converted into and exchanged for 32.142857
shares of AMCE Common Stock, so that the 500 shares of DI Class A Stock
presently held by persons other than Mr. Stanley H. Durwood, the 1989 Trust or
the 1992 Trust will be convertible into and exchangeable for an aggregate of
16,071 shares of AMCE Common Stock, (iv) each share of DI Class B Stock to be
held by Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust will be
converted into and exchanged for 243.767528 shares of AMCE Class B Stock, so
that the 4,818.4664 shares of DI Class B Stock to be held by Mr. Stanley H.
Durwood, the 1989 Trust or the 1992 Trust will be convertible into and
exchangeable for an aggregate of 1,174,586 shares of AMCE Class B Stock, and (v)
each share of DI Class B Stock to be held by the Durwood Children will be
converted into and exchanged for 243.767341 shares of AMCE Common Stock, so that
the 35,965.5336 shares of DI Class B Stock to be held by the Durwood Children
will be convertible into and exchangeable for an aggregate of 8,767,223 shares
of AMCE Common Stock.

SHARES OF AMCE STOCK HELD BY STOCKHOLDERS OTHER THAN DI WILL REMAIN ISSUED
AND OUTSTANDING AND WILL NOT BE EXCHANGED IN THE MERGER. HOLDERS OF AMCE STOCK
OTHER THAN DI SHOULD NOT SURRENDER THEIR SHARES IN CONNECTION WITH THE MERGER.

After giving effect to the liquidation of AAE and the Merger, there will be
issued and outstanding 5,015,657 shares of AMCE Class B Stock, all of which will
be beneficially owned by Mr. Stanley H. Durwood, and (based on the number of
such shares outstanding as of May 19, 1997) 12,945,639 shares of AMCE Common
Stock, of which 8,767,223 will be beneficially owned by the Durwood Children.

The following table shows the percentage of the ownership and voting
interests of AMCE held by the Durwood Family Stockholders and unaffiliated
stockholders of AMCE before the Merger and after the Merger, based on shares
outstanding as of May 19, 1997, assuming first no conversion of Convertible
Preferred Stock outstanding on that date and then assuming full conversion into
AMCE Common Stock of Convertible Preferred Stock outstanding on that date.

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PRE-MERGER
------------------------------------------------------
DURWOOD FAMILY
STOCKHOLDERS UNAFFILIATED STOCKHOLDERS
-------------------------- --------------------------
FULLY FULLY
UNCONVERTED CONVERTED UNCONVERTED CONVERTED
------------- ----------- ------------- -----------

PERCENTAGE HELD
Class B Stock.............................................. 100.0% 100.0% -- --
Common Stock............................................... 38.8% 21.5% 61.2% 78.5%
Voting Interest............................................ 96.5% 92.2% 3.5% 7.8%

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POST-MERGER
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STANLEY H. DURWOOD DURWOOD CHILDREN UNAFFILIATED STOCKHOLDERS
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FULLY FULLY FULLY
UNCONVERTED CONVERTED UNCONVERTED CONVERTED UNCONVERTED CONVERTED
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PERCENTAGE HELD
Class B Stock.................. 100.0% 100.0% -- -- -- --
Common Stock................... -- -- 67.7% 47.6% 32.3% 52.4%
Voting Interest................ 79.5% 73.1% 13.9% 12.8% 6.6% 14.1%

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Prior to the Effective Time of the Merger (as defined herein under "The
Merger--Material Terms of the Merger--The Merger Agreement"), all of DI's assets
(other than its equity interest in AMCE), consisting primarily of life insurance
policies, cash and notes of the Durwood Children and a former officer of the
Company, will be contributed to Delta. In addition, DI's other subsidiaries,
other than AMCE and its subsidiaries, have been merged into Delta and Delta has
agreed to assume DI's liabilities. Delta's stock will be distributed to DI's
shareholders, so that at the Effective Time DI's sole assets will consist of
stock of AMCE and its beneficial interest in certain tax credits and operating
loss carryforwards. (As a result of certain provisions of the Merger Agreement
and related agreements described below, AMCE will not benefit from such tax
credits and operating loss carryforwards.)

If the Merger occurs, Mr. Stanley H. Durwood will indemnify AMCE for all
losses resulting from any breach by DI of the Merger Agreement or resulting from
any liability of DI and for all taxes attributable to DI prior to the Effective
Time and all losses in connection therewith. If the Merger does not occur,
subject to certain limitations, Mr. Stanley H. Durwood and Delta will indemnify
AMCE against losses resulting from any breach by DI of the Merger Agreement. See
"--The Indemnification Agreement" and "The Merger--Material Terms of the
Merger--The Merger Agreement--Expenses."

Under the Merger Agreement, AMCE will be responsible for paying 50% of its
costs in connection with the Merger; the aggregate merger costs for both the
Company and DI are estimated to be approximately $2 million. If the Merger
occurs, Mr. Stanley H. Durwood and Delta have agreed, subject to certain
limitations, to indemnify AMCE for all of DI's Merger expenses which are not
paid prior to the Effective Time and for 50% of AMCE's expenses in connection
with the Merger. This obligation of Mr. Stanley H. Durwood may be offset by
certain Credit Amounts (as defined below under "--Indemnification Agreement")
resulting from the realization by AMCE of tax benefits from the utilization of
certain tax credits and operating loss carryforwards of DI. See "--The
Indemnification Agreement." If the Merger is not consummated for any reason
(other than as a result of certain terminations by the AMCE Board), DI will be
responsible for all of its expenses and AMCE's expenses in the Merger. If the
Merger is not consummated as a result of certain terminations by the AMCE Board,
DI will be responsible for all of its expenses and 50% of AMCE's expenses in the
Merger. Mr. Stanley H. Durwood and Delta have agreed to indemnify AMCE for any
breach by DI of such obligation described in the preceding two sentences.

As promptly as practicable after March 31, 2000, AMCE will pay Mr. Stanley
H. Durwood an amount equal to any Credit Amounts which have not been used to
offset various of his obligations to AMCE under the Stock Agreement, the
Indemnification Agreement and the Registration Agreement. If such benefits are
realized after such date, the related Credit Amounts will be paid to Mr. Stanley
H. Durwood when they are realized. See "--The Indemnification Agreement; --The
Stock Agreement; --The Registration Agreement."

For a period of three years after the Merger, the Durwood Children have
agreed to give an irrevocable proxy to the Secretary and each Assistant
Secretary of AMCE to vote their shares of AMCE Common Stock in the election of
directors for each candidate in the same proportionate manner as the aggregate
votes cast in such elections by other holders of AMCE Common Stock not
affiliated with AMCE, its directors and officers. See "--The Stock Agreement."

If the Merger Agreement is not approved by the holders of a majority of
shares of AMCE Common Stock present or represented by proxy and voting at the
AMCE Special Meeting, other than those shares held by DI, the Durwood Family
Stockholders, their spouses, their children living in the same household and
directors and officers of AMCE, the Merger Agreement will be terminated and the
Merger abandoned.

THE REGISTRATION AGREEMENT; SECONDARY OFFERING

As a condition to the Merger, AMCE and the Durwood Family Stockholders will
enter into a registration agreement (the "Registration Agreement") pursuant to
which the Durwood Family Stockholders will agree to sell at least 3,000,000
shares of AMCE Common Stock in a registered secondary

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offering (the "Secondary Offering") and AMCE will agree to file a registration
statement with respect to such shares so that the registration statement becomes
effective not more than twelve months and not less than six months after the
Merger. Consummation of the Secondary Offering is subject to certain conditions
and other rights of the parties. Subject to certain conditions, the expenses of
the Secondary Offering will be borne by Mr. Stanley H. Durwood and Delta. See
"The Merger--Material Terms of the Merger--The Registration Agreement." This
obligation may be offset by certain Credit Amounts resulting from the
realization by AMCE of tax benefits from the utilization of certain tax credits
and operating loss carryforwards of DI. See "--Indemnification Agreement."

Of the 3,000,000 shares to be sold in the Secondary Offering, 500,000 will
be sold by Mr. Stanley H. Durwood or his charitable donees who may agree to
participate in the Secondary Offering. Based on shares outstanding as of May 19,
1997, after giving effect to the Secondary Offering (assuming such shares are
sold to unaffiliated stockholders and disregarding shares which may be acquired
by Mr. Stanley H. Durwood upon the exercise of employee stock options and shares
which he may transfer to the Durwood Children under the Share Adjustment (as
defined herein under "The Merger--Background of the Merger--Subsequent Meetings
of the Special Committee" )), (i) unaffiliated stockholders will own
approximately 7.2 million shares of AMCE Common Stock, (ii) Mr. Stanley H.
Durwood will own approximately 4.5 million, or 100% of the outstanding, shares
of AMCE Class B Stock, and will be entitled to elect 75% of the AMCE Board, and
(iii) the Durwood Children will own in the aggregate approximately 6.3 million
shares of AMCE Common Stock. Holders of AMCE Common Stock are entitled to elect
25% of the AMCE Board.

As noted in the preceding paragraph, the number of shares owned by Mr.
Stanley H. Durwood could be further reduced and the shares owned by the Durwood
Children increased as a result of other agreements among the Durwood Family
Stockholders. See "Risk Factors-- Controlling Stockholders" and "The
Merger--Background of the Merger--Subsequent Meetings of the Special Committee."

The following table shows the percentage of the ownership and voting
interests of AMCE held by Mr. Stanley H. Durwood, the Durwood Children and
unaffiliated stockholders of AMCE, first after the Merger and then after the
Secondary Offering, based on shares outstanding as of May 19, 1997, assuming
first no conversion of Convertible Preferred Stock outstanding on such date and
then assuming full conversion into AMCE Common Stock of Convertible Preferred
Stock outstanding on such date. The percentages in the table presenting
Post-Secondary Offering results assume that shares sold in the Secondary
Offering are purchased by unaffiliated stockholders.

· Enlarge/Download Table

POST-SECONDARY OFFERING
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STANLEY H. DURWOOD DURWOOD CHILDREN UNAFFILIATED STOCKHOLDERS
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PERCENTAGE HELD
Class B Stock.................. 100.0% 100.0% -- -- -- --
Common Stock................... -- -- 46.6% 33.1% 53.4% 66.9%
Voting Interest................ 77.0% 70.4% 10.7% 9.8% 12.3% 19.8%

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THE INDEMNIFICATION AGREEMENT

In connection with the Merger, Mr. Stanley H. Durwood, Delta and the Durwood
Children have entered into an agreement (the "Indemnification Agreement")
agreeing to indemnify AMCE from certain losses and expenses. If the Merger
occurs, (i) Mr. Stanley H. Durwood will indemnify AMCE from losses resulting
from any breach by DI of its representations, warranties and covenants in the
Merger Agreement or based upon any liability of DI and for any taxes (or losses
incurred by AMCE in connection therewith) attributable to DI or its subsidiaries
for taxable periods prior to the Effective Time, (ii) each of the Durwood Family
Stockholders will (severally and not jointly) indemnify AMCE for any losses
which it might incur as a result of the breach by such party of certain tax
related representations, warranties and covenants made by such party in the
Stock Agreement and (iii) subject to certain conditions, Mr. Stanley H. Durwood
and Delta will indemnify AMCE from and against all of DI's Merger expenses that
have not been paid prior to the Effective Time and 50% of AMCE's Merger
expenses. If the Merger does not occur, subject to certain conditions, Mr.
Stanley H. Durwood and Delta will indemnify AMCE from losses resulting from any
breach by DI of its representations, warranties and covenants in the Merger
Agreement. If the Merger is not consummated for any reason (other than as a
result of certain terminations by the AMCE Board), DI will be responsible for
all of its expenses and AMCE's expenses in the Merger. If the Merger is not
consummated as a result of certain terminations by the AMCE Board, DI will be
responsible for all of its expenses and 50% of AMCE's expenses in the Merger.
Mr. Stanley H. Durwood and Delta have agreed to indemnify AMCE for any breach by
DI of such obligation described in the preceding two sentences.

Mr. Stanley H. Durwood's obligations (i) to pay DI's unpaid expenses and 50%
of AMCE's Merger expenses if the Merger occurs, as required by the
Indemnification Agreement, (ii) to pay AMCE's expenses in the Secondary
Offering, as required by the Registration Agreement, and (iii) to pay a $2
million penalty and 100% of AMCE's Merger expenses if the Secondary Offering
does not occur, as required by the Stock Agreement, may be offset by certain
credit amounts resulting from net tax benefits realized by AMCE from the
utilization by AMCE of DI's alternative minimum tax credit carryforwards and
Missouri operating loss carryforwards ("Credit Amounts"). Any Credit Amount not
so applied will be paid to Mr. Stanley H. Durwood promptly after March 31, 2000.
Any Credit Amount that arises after March 31, 2000 also will be paid promptly to
Mr. Stanley H. Durwood. The maximum amount of Credit Amounts that could be paid
to Mr. Durwood or used to offset his responsibilities to AMCE is approximately
$1,100,000, reduced by any amounts utilized on separate DI income tax returns
for 1996 and the portion of 1997 prior to the Effective Time.

In connection with the Merger, AMCE has agreed to indemnify the Durwood
Children from losses resulting from any breach by AMCE of any representation,
warranty, covenant or agreement made by it in the Merger Agreement.

The foregoing indemnification obligations generally will lapse on March 31,
2000.

See "The Merger--Material Terms of the Merger--The Indemnification
Agreement."

THE STOCK AGREEMENT

As a condition precedent to the Merger, the Durwood Family Stockholders will
enter into an agreement (the "Stock Agreement") which, for three years, limits
the ability of the Durwood Children to deposit shares in a voting trust, solicit
proxies, participate in election contests or make a proposal concerning an
extraordinary transaction involving AMCE. Under the Stock Agreement, the Durwood
Children will also agree, among other matters, for a period of three years, (i)
to grant an irrevocable proxy to the Secretary and each Assistant Secretary of
AMCE to vote their shares of AMCE Common Stock for each candidate to the AMCE
Board in the same proportion as the aggregate votes cast by all other
stockholders not affiliated with AMCE, its directors or officers and (ii) that
AMCE will have a right of first refusal with respect to any such shares the
Durwood Children wish to sell in a transaction exempt from

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registration, except for such shares sold in brokers' transactions. See "The
Merger--Material Terms of the Merger--The Stock Agreement." The Stock Agreement
obligates Mr. Stanley H. Durwood and Delta, whose shares will be distributed by
DI to the Durwood Family Stockholders before the Merger, to pay AMCE $2 million
and to reimburse AMCE for all of its Merger expenses if the Secondary Offering
is not consummated within 12 months after the Merger. This obligation may be
offset by certain Credit Amounts resulting from the realization by AMCE of tax
benefits from the utilization of certain tax credits and operating loss
carryforwards of DI. See "--Indemnification Agreement."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The Company has been advised by Chadbourne & Park LLP, special tax counsel
to the Company, that the Merger will qualify for federal income tax purposes as
a reorganization under the Internal Revenue Code of 1986, as amended (the
"Code"). Accordingly, no taxable income, gain or loss will be recognized by
AMCE, DI, the AMCE stockholders or the DI shareholders as a result of the Merger
(other than incident to the receipt by DI shareholders of cash for fractional
shares or by Mr. Stanley H. Durwood of Credit Amounts). See "--The
Indemnification Agreement." Because the tax consequences of the Merger to DI
shareholders under federal, state, local and foreign tax laws may vary depending
upon a taxpayer's particular situation, it is recommended that each DI
shareholder consult with his or her own tax advisor regarding the specific tax
consequences of the Merger to that particular person. For a more complete
description of the federal income tax consequences of the Merger, see "The
Merger--Certain Federal Income Tax Consequences."

ACCOUNTING TREATMENT

Management expects that the Merger will be accounted for as a corporate
reorganization and that, accordingly, the recorded balances for consolidated
assets, liabilities, total stockholders' equity and results of operations of the
Company will not be affected.

AMCE REASONS FOR THE MERGER

The Special Committee and the full AMCE Board concluded that the Merger is
fair to, and in the best interests of, AMCE and its unaffiliated stockholders
for the reasons set forth below.

- Based on shares outstanding when the Special Committee and AMCE Board
approved the Merger, the Merger would increase the voting interest of the
unaffiliated stockholders from 3.3% to 6.2% (assuming no conversions of
AMCE's Convertible Preferred Stock) and from 7.8% to 14.1% (assuming full
conversion into AMCE Common Stock of AMCE's Convertible Preferred Stock).
This increase would result from the conversion by DI of shares of AMCE
Class B Stock (which have ten votes per share) into shares of AMCE Common
Stock (which have one vote per share) in connection with the Merger.

- The Merger will simplify the corporate structure of AMCE and related
companies.

- The Merger will be accounted for as a corporate reorganization, will not
affect AMCE's total capitalization and will have no tax effect on AMCE or
its unaffiliated stockholders.

- As a result of the Merger, shares of AMCE stock will be distributed to the
Durwood Family Stockholders who have agreed, subject to certain
conditions, to sell a portion of those shares in the Secondary Offering.
This Secondary Offering will benefit AMCE and its unaffiliated
stockholders because:

- The Secondary Offering will increase the public "float" of the AMCE
Common Stock by nearly 75% if the minimum of 3,000,000 shares is sold.
Based on shares outstanding when the Special Committee and the AMCE
Board approved the Merger, the voting interest of the unaffiliated
stockholders would increase from 6.2% after the Merger to 11.9% after
the

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Secondary Offering (assuming no conversion into AMCE Common Stock of
then outstanding Convertible Preferred Stock and that shares sold in
the Secondary Offering are purchased by unaffiliated stockholders) and
from 14.1% after the Merger to 19.7% after the Secondary Offering
(assuming full conversion of then outstanding Convertible Preferred
Stock and that shares sold in the Secondary Offering are purchased by
unaffiliated stockholders).

- By increasing the public float and liquidity, the Secondary Offering
may make it easier for stockholders to sell or buy shares and may
reduce the volatility of daily stock price changes, narrow the
bid/asked spread and increase the interest of institutional investors
in AMCE Common Stock. These effects, over time, may enhance shareholder
value.

Because AMCE will be reimbursed by Mr. Stanley H. Durwood and certain
related trusts and entities for 50% and, in certain instances, 100% of its
expenses in connection with the Merger and the Secondary Offering, all of these
benefits are possible without substantial cost to AMCE or its stockholders. See
"The Merger--Background of the Merger--Reasons for Recommendations."

OPINION OF FINANCIAL ADVISOR

Furman Selz LLC ("Furman Selz") has delivered to the Special Committee and
the AMCE Board its opinion to the effect that the consideration to be paid by
AMCE in the Merger is fair, from a financial point of view, to AMCE. See "The
Merger--Background of Merger--Reports of Advisors." The full text of the written
opinion, which sets forth the assumptions made, procedures followed and the
matters considered in and scope of the review by Furman Selz in rendering its
opinion, is attached as Annex 2 and should be read in its entirety. See "The
Merger--Background of the Merger--Reasons for Recommendation--Report of Furman
Selz" for information regarding, among other things, the selection of Furman
Selz and its compensation in connection with the Merger.

RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE AMCE BOARD

Upon the recommendation of the Special Committee, the AMCE Board (including
the New Independent Directors) has unanimously approved the Merger pursuant to
the terms of the Merger Agreement, believes that the Merger is in the best
interests of AMCE and its stockholders and recommends that the stockholders vote
FOR the proposal to approve the Merger Agreement. See "The Merger--Background of
the Merger--Reasons for Recommendations."

DI REASONS FOR THE MERGER

The Merger is being sought by the Durwood Family Stockholders pursuant to
their efforts to dissolve AAE, a family partnership, and their desire to own
AMCE shares directly instead of indirectly through DI, thereby enhancing the
liquidity of their investment in AMCE through ownership of a marketable security
instead of one that is not publicly traded.

RECOMMENDATION OF THE DI BOARD

Mr. Stanley H. Durwood, DI's sole board member, has approved the Merger
pursuant to the terms of the Merger Agreement, believes that the Merger is in
the best interests of DI and its shareholders and recommends that the DI
shareholders vote FOR the proposal to approve the Merger Agreement.

DISSENTERS' RIGHTS

Holders of AMCE Common Stock do not have appraisal rights under the DGCL in
connection with the Merger. Holders of AMCE Class B Stock have appraisal rights
under the DGCL in connection with the Merger; however, DI is the sole
stockholder of AMCE Class B Stock and is a party to the Merger

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Agreement. Shareholders of DI are entitled to dissenters' appraisal rights under
The General and Business Corporation Law of Missouri (the "GBCLM"), but a
condition to the Merger is that no DI shareholder shall have exercised his or
her dissenters' rights under the GBCLM. See "The Merger-- Dissenters' Rights."

REGULATORY MATTERS

The Merger is not subject to any federal or state regulatory requirements or
approvals.

THE DERIVATIVE ACTION SETTLEMENT AGREEMENT

The dissolution of AAE, the Merger and the sale of at least 3,000,000 shares
of AMCE Common Stock by the Durwood Family Stockholders are provided for in the
settlement of a derivative action (the "Derivative Action") that was filed by
certain stockholders in 1993 against Messrs. Stanley H. Durwood, Edward D.
Durwood, Charles J. Egan, Jr., Paul E. Vardeman and a former AMCE director. The
Derivative Action originally was brought as separate actions by Mr. Scott C.
Wallace and Mr. James M. Bird. In December 1994, the court, pursuant to a
stipulation by the parties, approved Mr. Wallace's withdrawal and granted the
motion for intervention filed by Mr. Philip J. Bogosian, Auginco, Mr. Norman M.
Werther and Ms. Ellen K. Werther. The separate actions were consolidated in
1995.

In the Derivative Action, plaintiffs allege breach of fiduciary duties of
care, loyalty and candor, mismanagement, constructive fraud and waste of assets
in connection with, among other allegations, the provision of film licensing,
accounting and financial services to the Company by AAE, certain other
transactions with affiliates of the Company, termination payments to a former
officer, certain transactions between the Company and National Cinema Supply
Corporation, and a fee paid by a subsidiary to a former director in connection
with a transaction between the Company and TPI Entertainment, Inc. Plaintiffs
in the Derivative Action seek unspecified money damages and equitable relief and
costs, including reasonable attorneys' fees. See "Information about the
Company--Business of the Company--Legal Proceedings."

In June of 1996, counsel for the parties to the Derivative Action entered
into a non-binding memorandum of understanding concerning a possible settlement
of the Derivative Action, subject to completion of certain discovery by
plaintiffs. The memorandum of understanding reflected, in substance, the
elements of the settlement eventually embodied in the Derivative Action
Settlement Agreement discussed below.

On October 10, 1996, counsel for the parties in the Derivative Action
entered into a Stipulation and Agreement of Compromise and Settlement (the
"Derivative Action Settlement Agreement") providing for the discharge and
release of all claims against the defendants, the Durwood Family Stockholders
and the Company relating to such transactions, the proposed settlement, the
Merger, the Secondary Offering and indemnification of defendants for their
expenses, except claims for fraud, misrepresentation or omissions in connection
with the Secondary Offering and claims relating to the implementation of the
settlement. The Derivative Action Settlement Agreement provides, among other
matters, (i) for the dissolution of AAE, the merger of DI into AMCE and the
sale, within 12 months thereafter, of 3,000,000 shares of AMCE Common Stock by
the Durwood Family Stockholders in a public underwritten secondary offering
(which will only be made by means of a prospectus), (ii) for the payment by
defendants of an aggregate of approximately $1.3 million to persons who were
holders of AMCE Common Stock on January 2, 1996 (other than the defendants, DI
or the Durwood Family Stockholders), (iii) the nomination, for three annual
meetings, of two additional outside directors (initially, Messrs. William T.
Grant, II and John P. Mascotte (collectively, with their replacements, if any,
the "New Independent Directors")) to serve on the AMCE Board whose biographical
information has been furnished to plaintiffs' counsel and which persons, to be
nominated, must be serving on the board of another public company or be a member
of senior management of a publicly held company or a privately held company with
$50 million

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in annual revenues, (iv) that Messrs. Stanley H. Durwood and Edward D. Durwood
will cause the other Durwood Family Stockholders to vote their shares with
respect to the election and reelection of the New Independent Directors in the
same proportion as votes cast by all stockholders not affiliated with AMCE, its
directors and officers, (v) that the New Independent Directors are to have the
ability to approve or disapprove (a) any proposed transaction between AMCE and
any of the Durwood Family Stockholders, except with respect to compensation
issues relating to Mr. Stanley H. Durwood or any other Durwood Family
Stockholder who is an officer of AMCE, which are to be governed by existing AMCE
Board procedures, and (b) the hiring and compensation of any person related to
Mr. Stanley H. Durwood who is not an officer of AMCE, and (vi) that the New
Independent Directors, together with either Messrs. Charles J. Egan, Jr. or Paul
E. Vardeman, are to have the ability to approve or disapprove all other
related-party transactions with all officers, directors and ten percent
stockholders of AMCE.

The Derivative Action Settlement Agreement provides that AMCE will pay the
cost of providing notice of the settlement to its stockholders and for the fees
of the settlement administrator who will be responsible for distributing the
settlement amount to eligible stockholders.

The Derivative Action Settlement Agreement requires court approval and is
conditioned upon, among other things, the consummation of the Merger. It is not
anticipated that a hearing to approve the Derivative Action Settlement Agreement
will occur until after the Merger is consummated because the Merger is a
condition to the Derivative Action Settlement Agreement. In the hearing, the
court will determine whether the settlement is fair to present and former
stockholders who are members of the plaintiff class but will not make a separate
determination as to the fairness of the Merger.

Although consummation of certain of the transactions contemplated by the
Durwood Family Settlement Agreement are conditions to the Derivative Action
Settlement Agreement, the agreements and the parties thereto are different. Even
if the Merger and other transactions contemplated by the Durwood Family
Settlement Agreement occur, the court may not approve the Derivative Action
Settlement Agreement.

Consistent with the Derivative Action Settlement Agreement, at AMCE's Annual
Meeting of Stockholders held on November 14, 1996, two additional outside
directors, Messrs. John P. Mascotte and William T. Grant, II, were nominated by
the company and elected to the AMCE Board by the holders of AMCE Common Stock.

The members of the Special Committee are parties to the Derivative Action.
Although they will not make any monetary payment out of personal funds as a
result of, or be subject to any sanctions under, the Derivative Action
Settlement Agreement, because they have an interest in such agreement, they may
also be deemed to have an interest in the outcome of the vote on the proposed
Merger Agreement. As described above, the Merger has also been approved by the
New Independent Directors of AMCE and by the full AMCE Board. Upon the
recommendation of the Special Committee, a condition to the Merger is that the
Merger Agreement also receive approval by the holders of a majority of the
outstanding shares of AMCE Common Stock (other than DI, the Durwood Family
Stockholders, their spouses, children sharing the same household and directors
and officers of AMCE) present or represented by proxy and voting at the AMCE
Special Meeting.

THE COMPANY

The Company is one of the leading theatrical exhibition companies in North
America. In the fiscal year ended April 3, 1997, the Company's revenues were
$749,597,000. As of April 3, 1997, the Company operated 228 theatres with an
aggregate of 1,957 screens located in 23 states, the District of Columbia,
Portugal and Japan. Approximately 61% of the screens operated by the Company are
located in Florida, California, Texas, Missouri and Michigan and approximately
73% of the Company's domestic screens are located in areas among the 20 largest
"Areas of Dominant Influence" (television market areas as defined by Arbitron
Company).

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The Company is an industry leader in the development and operation of
"megaplex" and multiplex theatres, primarily in large metropolitan markets.
Megaplex theatres are theatres having at least 14 screens with predominantly
stadium-style seating (seating with an elevation between rows to provide
unobstructed viewing). Multiplex theatres are theatres generally without
stadium-style seating and having less than 14 screens. The Company believes that
its strategy of developing megaplex theatres has prompted the current theatrical
exhibition industry trend in the United States and Canada toward the development
of larger theatre complexes. This trend has accelerated the obsolescence of many
existing movie theatres by setting new standards for moviegoers, who have
demonstrated their preference for the more attractive surroundings, wider
variety of films, better customer services and more comfortable seating typical
of megaplexes.

In addition to providing a superior entertainment experience, megaplex
theatres realize economies of scale by serving more patrons from common support
facilities, thereby spreading costs over a higher revenue base. The Company's
megaplex theatres have consistently ranked among its top grossing facilities on
a per screen basis. During the fiscal year ended April 3, 1997, attendance per
screen at the Company's megaplex theatres was 88,200 compared to 63,800 for the
Company's multiplex theatres. (During 1995, the last period for which data is
available, the theatrical exhibition industry in the United States averaged
approximately 47,000 patrons per screen.) In addition, during the fiscal year
ended April 3, 1997, average revenue per patron at the Company's megaplex
theatres was $6.54 compared to $5.95 for its multiplex theatres, and operating
cash flow before rent of the Company's megaplex theatres was 37% of the total
revenues of such theatres, whereas operating cash flow before rent of the
Company's multiplex theatres was 33% of total revenues of such theatres. As of
April 3, 1997, 591 screens, or 30.2% of the Company's screens, were in megaplex
and multiplex theatres with 14 or more screens and of these, 366 screens, or
18.7% of the Company's screens, were in megaplex theatres. The average number of
screens per theatre operated by the Company is 8.6, compared to an average of
5.9 for the ten largest North American theatrical exhibition companies (based on
number of screens) and 5.2 for all North American theatrical exhibition
companies.

The Company continually upgrades its theatre circuit by opening new theatres
(primarily megaplex theatres), adding new screens to existing theatres and
selectively closing unprofitable theatres. Since April 1995, the Company has
opened 24 new theatres with 422 screens, representing 21.6% of its current
number of screens, and has added 42 screens to existing theatres. Of these 422
screens, 366 screens were in 18 megaplex locations. Among these new theatres are
the Company's first theatre in Japan, the Canal City 13, in Fukuoka, and its
first theatre in Portugal, the Arrabida 20, in Porto. As of April 3, 1997, the
Company had 21 new theatres under construction having an aggregate of 514
screens and was adding 44 screens to existing theatres; all of these theatres
and screens will be located in the United States.

Revenues for the Company are generated primarily from box office admissions
and theatre concessions sales, which accounted for 66% and 30%, respectively, of
fiscal 1997 revenues. The balance of the Company's revenues are generated
primarily by the Company's on-screen advertising business, video games located
in theatre lobbies and the rental of theatre auditoriums.

AMCE has three direct wholly-owned subsidiaries, AMC, AMC Entertainment
International, Inc. and National Cinema Network, Inc. All of the Company's
domestic theatrical exhibition business is conducted through AMC and its
subsidiaries. The Company is developing theatres in international markets
through AMC Entertainment International, Inc. and its subsidiaries. The Company
engages in the on-screen advertising business through National Cinema Network,
Inc.

AMCE is a Delaware corporation with its principal executive offices located
at 106 West 14th Street, Kansas City, Missouri 64105-1977. Its telephone number
at such address is (816) 221-4000.

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BUSINESS STRATEGY

The Company intends to expand its theatre circuit primarily by developing
new theatres in major markets in the United States and select international
markets. New theatres will primarily be megaplex theatres which will also be
equipped with SONY Dynamic Digital Sound-TM- (SDDS-TM-) and AMC LoveSeat-TM-
style seating (plush, high-backed seats with retractable armrests). Other
amenities may include auditoriums with TORUS-TM- Compound Curved Screens and
High Impact Theatre Systems-TM- (HITS-TM-), which enhance picture and sound
quality, respectively.

The Company's strategy of establishing megaplex theatres enhances attendance
and concessions sales by enabling it to exhibit concurrently a variety of motion
pictures attractive to different segments of the movie-going public. Megaplexes
also allow the Company to match a particular motion picture's attendance
patterns to the appropriate auditorium size (ranging from approximately 90 to
450 seats), thereby extending the run of a motion picture and providing superior
theatre economics. The Company believes that megaplex theatres enhance its
ability to license commercially popular motion pictures and to access
economically prime real estate sites due to its desirability as an anchor
tenant.

The Company believes that the megaplex format will create a new replacement
cycle for the industry. The new format raises moviegoers' expectations by
providing superior viewing lines, comfort, picture and sound quality as well as
increased choices of films and start times. The Company believes that consumers
will increasingly choose theatres based on the quality of the movie-going
experience rather than the location of the theatre. As a result, the Company
believes that older, smaller theatres will become obsolete as the megaplex
concept matures.

The Company believes that significant market opportunities exist for
development of modern megaplex and multiplex theatres in select international
markets. The theatrical exhibition business has become increasingly global and
box office receipts from international markets approximate those of the U.S.
market and are rising at a faster rate. In addition, the production and
distribution of feature films and demand for American motion pictures are
increasing in many countries. The Company believes that its experience in
developing and operating megaplex and multiplex theatres provides it with a
significant advantage in developing megaplex and multiplex facilities in
international markets and the Company intends to utilize this experience, as
well as its existing relationships with domestic motion picture studios, to
enter certain international markets. The Company's strategy in these markets is
to operate leased theatres and consider partnerships or joint ventures, where
appropriate, to share risk and leverage resources. Presently the Company's
activities in international markets are directed toward Japan, Portugal, Spain,
Hong Kong and Canada, which markets the Company believes are under screened.

THEATRICAL EXHIBITION INDUSTRY OVERVIEW

Motion picture theatres are the primary initial distribution channel for new
motion picture releases, and the Company believes that the theatrical success of
a motion picture is often the most important factor in establishing its value in
the cable television, videocassette and other ancillary markets. The Company
further believes that the emergence of new motion picture distribution channels
has not adversely affected attendance at theatres and that these distribution
channels do not provide an experience comparable to that of viewing a movie in a
theatre. The Company believes that the public will continue to recognize the
advantages of viewing a movie on a large screen with superior audio and visual
quality, while enjoying a variety of concessions and sharing the experience with
a larger audience.

Annual domestic theatre attendance has averaged approximately one billion
persons since the early 1960s. In 1996, estimated domestic attendance was 1.35
billion. Fluctuations and variances in year-to-year attendance are primarily
related to the overall popularity and supply of motion pictures.

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The theatrical exhibition industry in North America is comprised of over 400
exhibitors, approximately 250 of which operate four or more screens. Based on
the listing of exhibitors in the National Association of Theatre Owners (NATO)
1996-97 Encyclopedia of Exhibitions, as of May 1, 1996, the ten largest
exhibitors (in terms of number of screens) operated approximately 56% of the
total screens, with no one exhibitor operating more than ten percent of the
total screens.

RECENT NOTE OFFERING AND AMENDMENT TO CREDIT FACILITY

NOTE OFFERING. On March 19, 1997, AMCE sold $200 million aggregate
principal amount of 9 1/2% Senior Subordinated Notes due 2009 (the "Notes") in a
private transaction conforming with Rule 144A and Regulation S (the "Note
Offering"). The Notes were issued under an Indenture dated March 19, 1997 (the
"Note Indenture") between AMCE and The Bank of New York, as Trustee. Net
proceeds from the issuance of the Notes (approximately $193.8 million) were used
to reduce borrowings under AMCE's $425 million credit facility (the "Credit
Facility"). Amounts repaid under the Credit Facility will again be available for
borrowing thereunder, and AMCE intends to utilize this increased availability to
continue with its current expansion program.

Interest on the Notes is payable on March 15 and September 15 of each year,
commencing September 15, 1997. The Notes are redeemable at the option of AMCE,
in whole or in part, at any time on or after March 15, 2002 at 104.75% of the
principal amount thereof, declining ratably to 100% of the principal amount
thereof on or after March 15, 2006, plus in each case interest accrued to the
redemption date. Upon a change of control (as defined in the Note Indenture),
each holder of the Notes will have the right to require AMCE to repurchase such
holder's Notes at a price equal to 101% of the principal amount thereof plus
accrued and unpaid interest to the date of repurchase. The Notes are
subordinated to all existing and future senior indebtedness (as defined in the
Note Indenture) of AMCE.

AMCE has agreed to use its best efforts to (i) file and cause to become
effective by August 16, 1997, a registration statement relating to a registered
offer to exchange the Notes (the "Exchange Offer") for notes of AMCE with terms
identical in all material respects to the Notes and (ii) cause the Exchange
Offer to be consummated by September 15, 1997. If the Exchange Offer
registration statement is not declared effective by August 16, 1997, AMCE has
agreed that in lieu thereof it will use its best efforts to cause to become
effective by September 15, 1997 a shelf registration statement with respect to
the Notes. In the event that either (a) the Exchange Offer registration
statement is not filed on or prior to June 17, 1997, (b) the Exchange Offer
registration statement is not declared effective on or prior to August 16, 1997
or (c) the Exchange Offer is not consummated or a shelf registration statement,
with respect to the Notes, is not declared effective on or prior to September
15, 1997, the interest rate borne by the Notes will increase by 0.50% per annum
following June 17, 1997 in the case of clause (a) above, following August 16,
1997 in the case of clause (b) above and following September 15, 1997 in the
case of clause (c) above. The aggregate amount of such increase will in no event
exceed 1.00% per annum. Upon (x) the filing of the Exchange Offer registration
statement after June 17, 1997, (y) the effectiveness of the Exchange Offer
registration statement after August 16, 1997 or (z) the consummation of the
Exchange Offer or the effectiveness of a shelf registration statement, as the
case may be, after September 15, 1997, the interest rate borne by the Notes from
the date of filing, effectiveness or consummation, as the case may be, will be
reduced to 9 1/2%. The Exchange Offer registration statement was filed on June
13, 1997.

The Note Indenture contains certain covenants that, among other things,
restrict the ability of AMCE and its subsidiaries to: incur additional
indebtedness; pay dividends or make distributions in respect of their capital
stock; purchase or redeem capital stock; enter into transactions with
stockholders or certain affiliates; or consolidate, merge or sell all or
substantially all of AMCE's assets, other than in certain transactions between
AMCE and one or more of its wholly-owned subsidiaries and other than the Merger.
All of these limitations are subject to a number of important qualifications.
The Note Indenture does not impose any limitation on the incurrence by AMCE and
its subsidiaries of liabilities that are not considered "Indebtedness" under the
Note Indenture, such as those that would be incurred under

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certain sale/leaseback transactions; nor does the Note Indenture impose any
limitation on the amount of liabilities incurred by subsidiaries, if any, that
might be designated as Unrestricted Subsidiaries (as defined therein).
Furthermore, there are no restrictions on the ability of AMCE and its
subsidiaries to make advances to, or invest in, other entities (including
unaffiliated entities) and no restrictions on the ability of AMCE's subsidiaries
to enter into agreements restricting their ability to pay dividends or otherwise
transfer funds to AMCE. If the Notes attain "investment grade status" ( as
defined in the Note Indenture), the covenants in the Note Indenture limiting
AMCE's ability to incur indebtedness, pay dividends, acquire stock or engage in
transactions with affiliates will cease to apply.

The Notes have not been registered under the Securities Act and may not be
offered or sold in the United States or to or for the benefit of United States
persons absent registration or an applicable exemption from the registration
requirements of the Securities Act.

AMENDMENT TO CREDIT FACILITY. On April 10, 1997, the Company and its
lenders entered into an amendment and restatement of the Credit Facility, which
among other matters, extended the termination date of the Credit Facility to
2004, eliminated a covenant which had restricted the amount of capital
expenditures that the Company could incur during any fiscal year and modified
and added certain other financial covenants. See "Information About the
Company--Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."

DURWOOD, INC.

DI is a holding company whose principal shareholders are Mr. Stanley H.
Durwood and AAE. Mr. Stanley H. Durwood owns 119,500, or 99%, of the 120,000
outstanding shares of DI Class A Stock, representing approximately 75% of the
voting power of DI, and AAE owns 40,784, or 100%, of the DI Class B Stock,
representing approximately 25% of the voting power of DI. AAE's partners are Mr.
Stanley H. Durwood and the Durwood Children. Mr. Stanley H. Durwood is the sole
director of DI and his son, Mr. Edward D. Durwood, is the managing general
partner of AAE. DI's principal asset consists of stock of AMCE and at present it
has no significant business activity other than the ownership of such stock of
AMCE. DI's principal executive offices are located at 106 West 14th Street,
Kansas City, Missouri 64105. Its telephone number at such address is (816)
221-4000.

MARKET VALUES AND DIVIDENDS

AMCE Common Stock is publicly traded and listed on the American Stock
Exchange ("AMEX") and the Pacific Stock Exchange.

None of the AMCE Class B Stock nor DI Class A Stock or DI Class B Stock has
an established public trading market. On May 3, 1996, the last trading date
preceding public announcement of the Durwood Family Settlement Agreement, the
reported last sale price of AMCE Common Stock on the AMEX was $25.75. On April
16, 1997, the day preceding announcement that the Merger Agreement had been
entered into, the reported last sale price of the AMCE Common Stock on the AMEX
was $20.00. On , the date preceding the date of this Proxy-- Information
Statement/Prospectus, the reported last sale price of AMCE Common Stock on the
AMEX was $ per share.

Except for a $1.14 per share special dividend paid in August 1992, AMCE has
not declared a dividend on its stock since fiscal 1989. DI has not declared a
dividend on its stock since fiscal 1988.

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SUMMARY FINANCIAL DATA

The following tables set forth certain historical and pro forma financial
data for the Company and DI. The summary financial data with respect to the
Company for the five fiscal years ended April 3, 1997 has been derived from the
Company's consolidated financial statements for such periods.

The summary financial data with respect to DI for the five fiscal years
ended April 3, 1997 has been derived from the audited financial statements of
DI.

The unaudited pro forma financial information of the Company as of and for
the fiscal year ended April 3, 1997 has been adjusted to give effect to the
Merger and Note Offering as set forth in the Notes to the Company's Condensed
Pro Forma Financial Statements included elsewhere herein. Such pro forma
information does not purport to represent what the Company's results of
operations would have been had the Merger and Note Offering occurred on the
dates presented or to project the Company's financial position or results of
operations for any future period.

The summary financial data presented herein should be read in conjunction
with the audited financial statements and other historical and pro forma
financial information of each of the Company and DI included elsewhere in this
Proxy--Information Statement/Prospectus and Management's Discussion and Analysis
of Financial Condition and Results of Operations for each of the Company and DI
included elsewhere herein.

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AMC ENTERTAINMENT INC.

· Enlarge/Download Table

YEAR ENDED
----------------------------------------------------------------------
APRIL 3, MARCH 28, MARCH 30, MARCH 31, APRIL 1,
1997(1)(2) 1996(1)(2) 1995(1)(2) 1994(1)(2) 1993(2)
----------- -------------- ----------- ------------ --------------
(IN THOUSANDS, EXCEPT STATISTICAL DATA)

STATEMENT OF
OPERATIONS DATA
Total revenues.................................. $ 749,597 $ 655,972 $ 563,344 $ 586,300 $ 403,775
Depreciation and amortization................... 59,803 43,886 37,913 38,048 28,175
Operating income................................ 53,145 68,669 51,029 60,736 26,670
Gain (loss) on disposition of assets............ (84) (222) (156) 296 9,638
Earnings before extraordinary item.............. 18,995 27,371 33,978 15,312 7,746
Net earnings.................................... 18,995 8,021(4) 33,978 15,312 1,263(3)
Preferred dividends............................. 5,907 7,000 7,000 538 256
BALANCE SHEET DATA
Cash, equivalents and investments............... $ 24,715 $ 10,795 $ 140,377 $ 151,469 $ 50,106
Total assets.................................... 718,213 483,458 522,154 501,276 374,102
Total debt (including capital lease
obligations).................................. 373,724 188,172 267,504 268,188 255,302
Stockholders' equity............................ 170,012 158,918 157,388 130,404 18,171
OTHER FINANCIAL DATA
EBITDA(5)....................................... $ 112,948 $ 112,555 $ 88,942 $ 98,784 $ 57,345
Cash flows provided by operating activities..... 134,074 96,847 44,366 63,680 29,062
Cash flows provided by (used in) investing
activities.................................... (283,917) (66,848) 3,664 (111,505) 4,594
Cash flows provided by (used in) financing
activities.................................... 163,982 (90,437) (9,116) 56,147 (21,022)
Capital expenditures............................ 253,380 120,796 56,403 10,651 8,786
STATISTICAL DATA (AT PERIOD END)
Number of theatres operated..................... 228 226 232 236 243
Number of screens operated...................... 1,957 1,719 1,630 1,603 1,617
Screens per theatre............................. 8.6 7.6 7.0 6.8 6.7

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DURWOOD, INC.*

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YEAR ENDED
----------------------------------------------------------------
APRIL 3, MARCH 28, MARCH 30, MARCH 31, APRIL 1,
1997(1)(2) 1996(1)(2) 1995(1)(2) 1994(1)(2) 1993(2)
----------- ----------- ----------- ------------ -----------
(IN THOUSANDS)

STATEMENT OF OPERATIONS DATA
Total revenues........................................ $ 749,597 $ 655,972 $ 563,347 $ 586,305 $ 403,785
Depreciation and amortization......................... 59,447 43,537 37,569 37,701 27,834
Operating income...................................... 53,515 68,494 51,313 60,256 25,244
Gain (loss) on disposition of assets.................. (84) (220) (142) 296 9,627
Earnings before extraordinary item and minority
interest............................................ 19,514 26,541 35,355 20,847 7,723
Net earnings (loss)................................... 10,430 23 23,796 20,074 (526)
BALANCE SHEET DATA
Cash, equivalents and investments..................... $ 26,042 $ 12,888 $ 142,754 $ 152,979 $ 50,596
Total assets.......................................... 717,972 481,827 521,735 500,060 370,229
Total debt (including capital lease obligations)...... 373,724 188,172 267,548 268,233 255,346
Minority interest..................................... 102,015 109,721 109,285 104,859 2,758
Stockholders' equity.................................. 66,170 47,476 46,891 23,095 6,719
OTHER FINANCIAL DATA
EBITDA (5)............................................ $ 112,962 $ 112,031 $ 88,882 $ 97,957 $ 55,578
Cash flows provided by operating activities........... 126,218 89,998 38,453 65,132 27,144
Cash flows provided by (used in) investing
activities.......................................... (282,749) (66,998) 3,350 (111,047) 5,350
Cash flows provided by (used in) financing
activities.......................................... 169,904 (83,722) (2,022) 55,257 (19,412)
Capital expenditures.................................. 253,380 120,796 56,701 10,672 8,773

--------------

* Because AMCE is a majority owned subsidiary of DI, the information shown
includes the financial results of AMCE.

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AMCE
PRO FORMA(6)
YEAR ENDED
APRIL 3, 1997
------------------------------
MERGER & NOTE
OFFERING COMBINED MERGER
------------------- ---------
(IN THOUSANDS)

STATEMENT OF OPERATIONS DATA

Total revenues............................................... $ 749,597 $ 749,597

Depreciation and amortization................................ 59,803 59,803

Operating income............................................. 53,145 53,145

Gain (loss) on disposition of assets......................... (84) (84)

Net earnings................................................. 13,275 18,995

Preferred dividends.......................................... 5,907 5,907

BALANCE SHEET DATA

Cash, equivalents and investments............................ $ 24,715 $ 24,715

Total assets................................................. 718,213 718,213

Total debt (including capital lease obligations)............. 373,724 373,724

Stockholders' equity......................................... 169,012 169,012

OTHER FINANCIAL DATA

EBITDA(5).................................................... $ 112,948 $ 112,948

Cash flows provided by operating activities.................. 134,074 134,074

Cash flows provided by (used in) investing activities........ (283,917) (283,917)

Cash flows provided by (used in) financing activities........ 163,982 163,982

Capital expenditures......................................... 253,380 253,380

--------------

(1) Fiscal 1997, 1996, 1995 and 1994 include the effects from the acquisition of
Exhibition Enterprises Partnership ("EEP") on May 28, 1993.

(2) Fiscal 1997 consists of 53 weeks. All other years have 52 weeks.

(3) Fiscal 1993 includes a $6,483,000 extraordinary loss equal to $.40 per
common share.

(4) Fiscal 1996 includes a $19,350,000 extraordinary loss equal to $1.15 per
common share.

(5) Represents operating income plus depreciation and amortization plus
estimated loss on future disposition of assets. EBITDA is a financial
measure commonly used in the Company's industry and should not be construed
as an alternative to operating income (as determined in accordance with
GAAP). EBITDA as determined by the Company may not be comparable to EBITDA
as reported by other companies. In addition, EBITDA is not intended to
represent cash flow and does not represent the measure of cash available for
discretionary uses. EBITDA is a non-GAAP measure, but has been used by
lenders and stockholders as additional information for estimating the
Company's value and evaluating its ability to service debt.

(6) The pro forma Statement of Operations Data for the fiscal year ended April
3, 1997 give effect to the Merger and Note Offering described elsewhere
herein, as though such transactions had occurred at the beginning of the
period. The pro forma Balance Sheet Data gives effect to the Merger as
though it had occurred on April 3, 1997. See the Company's Condensed Pro
Forma Financial Statements and the Notes thereto included elsewhere in this
Proxy--Information Statement/Prospectus.

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PRO FORMA PER SHARE DATA

The following table sets forth the income from continuing operations and
book value per common share of AMCE and DI for the period indicated. This
comparison should be read in conjunction with the pro forma selected financial
statements and the historical financial statements and the notes thereto
included elsewhere herein. Neither AMCE nor DI paid any cash dividends on their
common shares during the periods indicated. AMCE pays quarterly dividends of
$.4375 per share on its Convertible Preferred Stock.

· Enlarge/Download Table

YEAR ENDED
-------------
APRIL 3, 1997
-------------

INCOME PER SHARE FROM CONTINUING OPERATIONS
AMCE Historical:
Primary.................................................................... $ .74
Fully diluted.............................................................. .73
Pro Forma AMCE for Merger:
Primary.................................................................... $ .74
Fully diluted.............................................................. .73
Pro Forma AMCE for Merger & Note Offering:
Primary.................................................................... $ .42
Fully diluted.............................................................. .41

DI Historical:
Primary.................................................................... $ 63.96
Fully diluted.............................................................. 63.24
Equivalent Pro Forma DI (excluding Note Offering):
Primary.................................................................... $ .71(1)
Fully diluted.............................................................. .70(1)

BOOK VALUE PER COMMON SHARE
AMCE Historical.............................................................. $ 4.93
Pro Forma AMCE for Merger.................................................... 4.87
Pro Forma AMCE for Merger & Note Offering.................................... 4.87

DI Historical................................................................ $ 422.91
Equivalent Pro Forma DI (excluding Note Offering)............................ 4.87(1)

--------------

(1) Reflects the effect to DI of the pre-Merger activities provided for in the
Pre-Merger Action Plan (Exhibit A to the Merger Agreement). Does not
consider the Note Offering and its effect on DI.

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RISK FACTORS

In connection with the transactions contemplated by this Proxy--Information
Statement/Prospectus, the following should be considered.

CONTROLLING STOCKHOLDERS

Voting control of AMCE is vested in the holders of AMCE Class B Stock,
subject to the right of holders of AMCE Common Stock to elect 25% of the members
of the AMCE Board. As of May 19, 1997, Mr. Stanley H. Durwood and the Durwood
Children, through DI, beneficially owned all of the shares of outstanding AMCE
Class B Stock and 2,641,951 shares of outstanding AMCE Common Stock (38.8% of
the issued and outstanding shares of AMCE Common Stock as of such date), which
in the aggregate represented 96.5% of the voting interest in AMCE as of such
date. Therefore, Mr. Stanley H. Durwood has the ability to elect or remove a
majority of the AMCE Board. See "Information about the Company-- Management of
the Company" and "The Merger--General Effects of the Merger." Mr. Stanley H.
Durwood has recently undergone surgery for esophageal cancer.

The 1989 Trust and the 1992 Trust hold approximately 75% of the voting power
of the outstanding capital stock of DI. The 1992 Trust is the record owner of
such DI shares, and has issued voting trust certificates to the 1989 Trust. Mr.
Stanley H. Durwood is the sole acting trustee of these trusts; the named
successor trustees under Mr. Stanley H. Durwood's trusts are Messrs. Charles J.
Egan, Jr., a director of AMCE, and Raymond F. Beagle, Jr., general counsel to
the Company. Under the terms of the 1992 Trust, Mr. Durwood has all voting
powers with respect to shares held therein during his lifetime. Thereafter, all
voting rights with respect to such shares vest in his successor trustees and any
additional trustees whom they might appoint, who shall exercise such rights by
majority vote. Unless revoked by Mr. Stanley H. Durwood or otherwise terminated
or extended in accordance with its terms, the 1992 Trust will terminate in the
year 2030.

After giving effect to the Merger and Secondary Offering (and disregarding
shares which may be acquired by Mr. Stanley H. Durwood upon the exercise of
employee stock options and shares which the Durwood Children might acquire under
the Share Adjustment), (i) Mr. Stanley H. Durwood will own approximately 4.5
million shares of AMCE Class B Stock, and (ii) the Durwood Children will own an
aggregate of approximately 6.3 million shares of AMCE Common Stock. Based on the
number of shares outstanding as of May 19, 1997 (a) such shares of AMCE Class B
Stock to be owned by Mr. Stanley H. Durwood will be 100% of the outstanding
shares of such class, will entitle him to elect a majority of the AMCE Board and
will represent 77.0% of the voting interest in AMCE (70.4% assuming full
conversion of Convertible Preferred Stock), and (b) the AMCE Common Stock to be
owned by the Durwood Children will represent 46.6% of the shares of AMCE Common
Stock (33.1% assuming full conversion of Convertible Preferred Stock),
representing 10.7% of the voting interest in AMCE (9.8% assuming full conversion
of Convertible Preferred Stock).

As a result of their ownership of shares of AMCE Common Stock after the
Merger and because attendance at stockholders meetings generally is less than
100%, any corporate action requiring the approval of the holders of AMCE Common
Stock voting as a class may as a practical matter require the approval of the
Durwood Children instead of Mr. Stanley H. Durwood, as is presently the case.
Matters requiring approval of holders of the AMCE Common Stock voting as a class
include any proposed amendment to AMCE's Certificate of Incorporation changing
the authorized number or par value of shares of AMCE Common Stock or altering
the powers, preferences or special rights of the shares of such class so as to
affect them adversely. See "Comparison of Rights of Holders of AMCE Stock and DI
Stock--Voting Rights--Requisite Voting Percentage in General and in Certain
Extraordinary Matters."

Holders of AMCE Common Stock are entitled to elect 25% of the AMCE Board. As
stated above, the Durwood children will hold approximately 47% of the shares of
AMCE Common Stock after the Merger and Secondary Offering. For a period of three
years after the Effective Time of the Merger, the Durwood

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Children will grant an irrevocable proxy to vote their shares of AMCE Common
Stock for each candidate to the AMCE Board in the same proportion as the
aggregate votes cast by all other stockholders not affiliated with AMCE, its
directors and officers. Also, the Durwood Children will agree during such period
not to become a member of any group (other than a group of Durwood Family
Stockholders), solicit proxies or enter into any arrangement or agreement with
respect to voting shares. See "The Merger-- Material Terms of the Merger--The
Stock Agreement."

RESTRICTIONS ON TRANSFER

Under the Stock Agreement, whose execution by the Durwood Family
Stockholders is a condition to the Merger, AMCE will have a right of first
refusal for a period of three years with respect to any shares of AMCE Common
Stock that the Durwood Children wish to sell in a transaction exempt from
registration under the Securities Act, except for such shares sold in a broker's
transactions. During such period, the Durwood Family Stockholders may not
transfer stock by gift to any person or entity unless such person or entity
agrees to be bound by the Stock Agreement, provided that each Durwood Family
Stockholder may transfer up to 5% of the shares of AMCE stock he or she receives
in the Merger to certain charitable assignees (as defined in the Stock
Agreement). Under the Stock Agreement, each Durwood Family Stockholder generally
must agree that he or she will not sell more than 50% of his or her AMCE stock
(or, in the case of Mr. Stanley H. Durwood, an additional amount) for two years.
See "The Merger--Material Terms of the Merger--The Stock Agreement." Pursuant to
the Indemnification Agreement, a portion of the shares received by each Durwood
Family Stockholder must be deposited in escrow under an Escrow Agreement. See
"The Merger Agreement--Material Terms of the Merger--The Indemnification
Agreement--Other Agreements."

The Durwood Family Stockholders may be considered "affiliates" of DI and
AMCE as such term is defined under the Securities Act. Shares of AMCE received
in the Merger by those who are affiliates will be subject to applicable
restrictions under Rule 145 and Rule 144 promulgated under the Securities Act,
which are summarized below.

Prior to the expiration of one year after the Merger, Durwood Family
Stockholders who were affiliates of DI (whether or not they are also affiliates
of AMCE) may publicly sell securities of AMCE acquired in the Merger only in a
registered offering or in compliance with Rule 144. Generally, a sale will
comply with Rule 144 only if (i) AMCE has filed all reports required of it under
Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") for a period of twelve months preceding the date of any such sale, (ii)
the number of securities sold by a person does not exceed the volume limitations
imposed by Rule 144 (generally, the greater of the average weekly reported
trading volume in AMCE Common Stock during the four calendar weeks preceding the
filing of the notice discussed below or 1% of the outstanding shares of AMCE
Common Stock may be sold during any three month period by a person and those
with whom he or she may be acting in concert), (iii) the sale is made in a
"broker's transaction", as defined in Rule 144, or in a transaction directly
with a "market maker", as permitted by such Rule, and (iv) notice of the sale is
filed with the Commission and the AMEX concurrently with the placement of any
order with a broker or the execution of a transaction with a market maker.

Commencing one year after the date of the Merger, Durwood Family
Stockholders who were affiliates of DI but who are not then affiliates of AMCE
may publicly sell securities acquired in the Merger without restriction under
Rule 145 or Rule 144 provided that AMCE has filed all reports required of it
under Section 13 of the Exchange Act for a period of twelve months preceding the
date of any such sale.

Commencing two years after the date of the Merger, Durwood Family
Stockholders who were affiliates of DI but who are not then affiliates of AMCE
may publicly sell securities acquired in the Merger without restriction under
Rule 145 or Rule 144.

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SHARES ELIGIBLE FOR FUTURE SALE

Based on the number of shares outstanding on May 19, 1997, upon consummation
of the Merger (and disregarding any fractional shares which are paid for in cash
in the Merger), there will be 12,945,639 shares of AMCE Common Stock
outstanding, 5,015,657 shares of AMCE Class B Stock outstanding, which are
convertible into a like number of shares of AMCE Common Stock, and 3,175,800
shares of Convertible Preferred Stock outstanding, which are presently
convertible into 5,475,079 shares of AMCE Common Stock. Of the shares of AMCE
Common Stock outstanding or issuable upon conversion of the Convertible
Preferred Stock, approximately 9.6 million will be freely tradeable without
restriction or registration under the Securities Act. Additional shares of AMCE
Common Stock, including shares issuable upon exercise of options, will also
become eligible for sale in the public market from time to time. See
"Restrictions on Resale." Although the Special Committee and the AMCE Board
believe that the Merger and Secondary Offering will increase the public float
and liquidity, which may reduce the volatility of daily stock price changes,
narrow the bid/asked spread and increase institutional investor interest in AMCE
Common Stock (see "The Merger--Report of Advisors--Reasons for
Recommendations"), sales of substantial amounts of AMCE Common Stock in the
public market pursuant to Rule 144 or otherwise, or even the potential of such
sales, could adversely affect the prevailing market price of AMCE Common Stock
and impair AMCE's ability to raise additional capital through the sale of equity
securities.

THE AMCE SPECIAL MEETING

DATE, TIME AND PLACE OF MEETING; RECORD DATE; VOTING RIGHTS

This Proxy--Information Statement/Prospectus is furnished in connection with
the solicitation of the enclosed proxy by the AMCE Board for use at the AMCE
Special Meeting to be held at 2:00 p.m. local time on July 29, 1997, at the
offices of Lathrop & Gage L.C., 2345 Grand Avenue, 24th Floor, Kansas City,
Missouri. This Proxy--Information Statement/Prospectus and the accompanying
proxy are being mailed to all stockholders of AMCE (including holders of
Convertible Preferred Stock) on or about June 25, 1997.

The AMCE Board has established June 19, 1997, as the AMCE Record Date for
the AMCE Special Meeting. Only stockholders of record at the close of business
on the AMCE Record Date are entitled to notice of the AMCE Special Meeting, and
only holders of AMCE Common Stock and AMCE Class B Stock on the AMCE Record Date
are entitled to vote at the AMCE Special Meeting and any adjournments thereof.
At the close of business on the AMCE Record Date, there were outstanding
[6,804,296] shares of AMCE Common Stock and 11,157,000 shares of AMCE Class B
Stock. At the AMCE Special Meeting, the shares of AMCE Common Stock and AMCE
Class B Stock shall vote together as a single class, with each outstanding share
of AMCE Common Stock having one vote per share and each outstanding share of
AMCE Class B Stock having ten votes per share.

PURPOSE OF THE AMCE SPECIAL MEETING

At the AMCE Special Meeting, AMCE stockholders eligible to vote thereat will
be asked to consider and vote upon a proposal to approve and adopt the Merger
Agreement. A copy of the Merger Agreement is attached as Annex 1 to this
Proxy--Information Statement/Prospectus. If the Merger Agreement receives the
requisite approval of stockholders of AMCE and DI (including approval of the
holders of a majority of shares of AMCE Common Stock present or represented by
proxy and voting at the AMCE Special Meeting, other than those shares held by
DI, the Durwood Family Stockholders, their spouses, their children living in the
same household and directors and officers of AMCE), (i) shares of AMCE Common
Stock and Convertible Preferred Stock held by AMCE stockholders other than DI
will remain issued and outstanding and will not be exchanged, (ii) each share of
AMCE Common Stock and AMCE Class B Stock held by DI will be canceled, (iii) each
share of DI Class A Stock presently held by

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Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust will be converted into
and exchanged for 32.142857 shares of AMCE Class B Stock, so that the 119,500
shares of DI Class A Stock presently held by Mr. Stanley H. Durwood, the 1989
Trust or the 1992 Trust will be convertible into and exchangeable for an
aggregate of 3,841,071 shares of AMCE Class B Stock, (iv) each share of DI Class
A Stock presently held by persons other than Mr. Stanley H. Durwood, the 1989
Trust or the 1992 Trust will be converted into and exchanged for 32.142857
shares of AMCE Common Stock, so that the 500 shares of DI Class A Stock
presently held by persons other than Mr. Stanley H. Durwood, the 1989 Trust or
the 1992 Trust will be convertible into and exchangeable for an aggregate of
16,071 shares of AMCE Common Stock, (v) each share of DI Class B Stock to be
held by Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust will be
converted into and exchanged for 243.767528 shares of AMCE Class B Stock, so
that the 4,818.4664 shares of DI Class B Stock to be held by Mr. Stanley H.
Durwood, the 1989 Trust or the 1992 Trust will be convertible into and
exchangeable for an aggregate of 1,174,586 shares of AMCE Class B Stock, and
(vi) each share of DI Class B Stock to be held by the Durwood Children will be
converted into and exchanged for 243.767341 shares of AMCE Common Stock, so that
the 35,965.5336 shares of DI Class B Stock to be held by the Durwood Children
will be convertible into and exchangeable for an aggregate of 8,767,223 shares
of AMCE Common Stock.

VOTE REQUIRED FOR THE MERGER

Under AMCE's Certificate of Incorporation and the DGCL, the approval of the
holders of a majority of the votes of outstanding shares of AMCE Common Stock
and AMCE Class B Stock entitled to notice of and to vote at the AMCE Special
Meeting, voting as a single class, is required to approve the Merger Agreement,
with each share of AMCE Common Stock being entitled to one vote and each share
of AMCE Class B Stock being entitled to ten votes. In determining whether the
Merger has received the vote required under the DGCL, abstentions and broker
non-votes will have the effect of a negative vote. In addition, upon the
recommendation of the Special Committee, a condition to the Merger is that the
Merger Agreement also be approved by the holders of a majority of the shares of
AMCE Common Stock present or represented by proxy and voting at the AMCE Special
Meeting, other than those held by DI, the Durwood Family Stockholders, their
spouses, their children sharing the same house and directors and officers of
AMCE; if the Merger is not so approved, the Merger Agreement will be terminated
and the proposed Merger abandoned. Under Delaware case law, an abstention is
regarded as a voluntary decision not to vote, and, accordingly, in determining
whether the special approval requirement referred to in the preceding sentence
is satisfied, only yeas and nays will be counted and abstentions and broker
non-votes will not be counted.

THE SPECIAL COMMITTEE AND THE AMCE BOARD RECOMMEND THAT THE STOCKHOLDERS OF
AMCE VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT.

PROXIES

Properly executed and dated proxies which are received by AMCE prior to the
AMCE Special Meeting will be voted in accordance with the instructions thereon.
If a proxy is received with no instructions given with respect to the matters to
be acted upon, the shares represented by the proxy will be voted for the
proposal to approve and adopt the Merger Agreement. A proxy may be revoked at
any time before being voted by written notice to such effect received by the
Secretary of AMCE before the proxy is voted at the Special Meeting, by delivery
to AMCE of a subsequently dated proxy or by a vote cast in person at the AMCE
Special Meeting by written ballot.

A proxy confers discretionary authority with respect to the voting of the
shares represented thereby on any other business that may properly come before
the meeting and any adjournments thereof. The AMCE Board is not aware that any
such other business is to be presented for action at the meeting and does not
itself intend to present any such other business. However, if any such other
business does come before the meeting, shares represented by proxies given
pursuant to this solicitation will be voted

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by the persons named in the proxy in accordance with their best judgment. A
proxy also confers discretionary authority on the persons named therein to vote
on matters incident to the conduct of the meeting.

COSTS OF SOLICITATION

AMCE and DI will share all of the expenses in connection with printing this
Proxy--Information Statement/Prospectus. The costs of solicitation of proxies
also will be shared by AMCE and DI. Mr. Stanley H. Durwood and Delta have agreed
to indemnify AMCE against all of DI's expenses and for 50% of AMCE's expenses in
connection with the Merger (subject to offset for certain Credit Amounts). See
"The Merger--Material Terms of the Merger--Indemnification Agreement--Other
Indemnification" and "--Other Agreements." If the Merger is not consummated for
any reason other than as a result of a termination by the AMCE Board for a
Specified Reason or Without Cause (as such terms are defined in the Merger
Agreement), DI will be responsible for all of its expenses and all of AMCE's
expenses; if the Merger is terminated for a Specified Reason or Without Cause,
DI shall be responsible for all of its expenses and 50% of AMCE's expenses. See
"The Merger--Material Terms of the Merger--The Merger Agreement--Merger
Expenses." AMCE will reimburse brokers, fiduciaries, custodians and other
nominees for reasonable out-of-pocket expenses incurred in sending this
Proxy--Information Statement/ Prospectus and other proxy materials to, and
obtaining instructions relating to such materials from, beneficial owners of
AMCE Common Stock.

AMCE has retained D.F. King & Co., Inc. to provide proxy solicitation
services in connection with the AMCE Special Meeting. AMCE will reimburse D.F.
King & Co., Inc.'s expenses in connection with its services and pay it a fee
consisting of an $8,000 base fee and reimbursement of out of pocket expenses.
AMCE stockholder proxies also may be solicited by directors, executive officers
or employees of AMCE in person, by letter or by telephone or telegram. No
additional compensation will be paid to those persons for such service.

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THE MERGER

BACKGROUND OF THE MERGER

APPOINTMENT OF SPECIAL COMMITTEE. On October 5, 1994, the AMCE Board formed
the Special Committee, consisting of Messrs. Charles J. Egan, Jr. and Paul E.
Vardeman, the only two members of the AMCE Board at the time who were not
Durwood Family Stockholders or employees of AMCE, to review and consider the
possible merger of DI into AMCE and certain related transactions, which included
the Secondary Offering of shares of AMCE Common Stock to be received in the
Merger by the Durwood Family Stockholders. If the Special Committee considered
the Merger to be in the best interests of AMCE and its unaffiliated
stockholders, it was to negotiate the terms of the Merger and related
transactions and to make recommendations to the full AMCE Board in this
connection. The Special Committee was given the full power and authority of the
AMCE Board to reject the Merger.

As more fully described below, the Special Committee recommended that the
New Independent Directors approve and that the full AMCE Board approve and adopt
the Merger Agreement relating to the Merger and recommend that AMCE stockholders
approve and adopt the Merger Agreement. The Special Committee also recommended
that the New Independent Directors and the full AMCE Board approve certain
related agreements and take the necessary steps to register the sale in the
Secondary Offering of certain of the shares of AMCE Common Stock to be received
in the Merger by the Durwood Family Stockholders.

ORGANIZATION AND OWNERSHIP OF AMCE AND DI. AMCE was formed in 1983 as the
result of a reorganization involving DI and AMC. Prior to the reorganization, DI
owned approximately 99% of American Multi-Cinema, Inc.'s capital stock.
Following the reorganization and related transactions, including the offering to
the public of shares of AMCE Common Stock, DI owned 100% of AMCE's Class B Stock
and approximately 43% of AMCE's Common Stock. As of May 19, 1997, DI owned 38.8%
of the outstanding AMCE Common Stock and 100% of the outstanding AMCE Class B
Stock, representing in the aggregate 96.5% of the combined voting power of the
outstanding shares of AMCE Common Stock and AMCE Class B Stock as of such date.

DI was formed in 1947. In 1982, Mr. Stanley H. Durwood was DI's sole
shareholder. In that year, Mr. Stanley H. Durwood recapitalized DI and exchanged
all of his DI stock for 120,000 shares of DI Class A Stock and 40,784 shares of
DI Class B Stock. The shares of DI Class A Stock are entitled to preferences on
liquidation aggregating $450 per share, for a total of $54 million.

Following DI's recapitalization, Mr. Stanley H. Durwood gave 25% of his DI
Class B shares to the Durwood Children in equal amounts. Mr. Stanley H. Durwood
and each of his children then contributed all of their DI Class B shares to AAE.
In exchange for the contribution of their DI Class B shares to AAE, the Durwood
Children received equal 1/6 interests in AAE as general partners. In exchange
for his contribution, Mr. Stanley H. Durwood received a preferred limited
partnership interest in AAE having a fixed value on liquidation, plus a right to
an annual cumulative distribution equal to 14% of this value. Upon liquidation
of AAE, Mr. Stanley H. Durwood is entitled to receive partnership assets worth
the current value of his preferred limited partnership share.

Prior to December 26, 1991, the Company engaged AAE for the purposes of
executing film license contracts and providing related accounting and financial
management services. Effective December 26, 1991, the Company began to execute
film rental agreements directly with distributors and stopped using AAE for such
services. In 1992, AAE ceased all business activity and since then has been
unable to meet its annual distribution obligation to Mr. Stanley H. Durwood,
which continues to accumulate.

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Chart I below illustrates how Mr. Stanley H. Durwood and his children hold
their interests in AMCE indirectly through two entities. The Durwood Family
Stockholders own interests in AAE which, together with Harvard College and the
1989 Trust and 1992 Trust, owns DI, which in turn owns 38.8% of the outstanding
AMCE Common Stock and 100% of the outstanding AMCE Class B Stock as of May 19,
1997.

[GRAPH]

(THE GRAPHIC MATERIAL SET FORTH AT THIS POINT IS A CHART WHICH SHOWS THE CURRENT
OWNERSHIP STRUCTURE OF AMCE. DURWOOD, INC. IS SHOWN AS THE PRINCIPAL STOCKHOLDER
OF AMCE, OWNING 2,641,951 SHARES (OR 38.8% OF AMCE COMMON STOCK) AND 11,157,000
SHARES (OR 100%) OF AMCE CLASS B STOCK. THE OWNERS OF DURWOOD, INC. ARE SHOWN AS
AMERICAN ASSOCIATED ENTERPRISES, OWNING 40,784 SHARES OF DI CLASS B STOCK,
HARVARD COLLEGE, OWNING 500 SHARES OF DI CLASS A STOCK, AND THE 1989 AND 1992
TRUSTS, OWNING 119,500 SHARES OF DI CLASS A STOCK. THE OWNERS OF AMERICAN
ASSOCIATED ENTERPRISES ARE SHOWN AS THE 1989 AND 1992 TRUSTS, OWNING A PREFERRED
LIMITED PARTNERSHIP INTEREST, AND THE DURWOOD CHILDREN, OWNING GENERAL
PARTNERSHIP INTERESTS.)

As can be seen in Chart I, the Durwood Family Stockholders do not hold AMCE
stock directly. Each holds an interest in AAE and (except for Mr. Stanley H.
Durwood, who has a direct interest through the 1989 Trust and the 1992 Trusts)
an indirect interest in DI, which holds AMCE Common Stock and AMCE Class B
Stock. There is no public market for interests in AAE or DI and these holdings
are essentially illiquid. In addition, an individual member of the Durwood
family has no real ability by his or her decision alone to sell the shares of
AMCE Common Stock or AMCE Class B Stock that he or she indirectly owns.

GENESIS OF PROPOSAL FOR THE MERGER AND SECONDARY OFFERING. In the spring of
1994, the Durwood Children began suggesting to Mr. Stanley H. Durwood that AAE
should be liquidated and the AMCE stock held by DI distributed in accordance
with the economic interests of DI's shareholders as then reflected in the value
of the AMCE shares which DI held. The reasons the Durwood Children sought these
steps were to terminate AAE's escalating obligations to Mr. Stanley H. Durwood,
which diminished the value of their interests in AMCE, and to eliminate AAE and
DI as separate legal entities, thereby enabling the Durwood Family Stockholders
to hold their interests in AMCE directly (in the form of a

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marketable security) rather than indirectly through ownership of stock of DI or
partnership interests in AAE. After lengthy and difficult negotiations between
Mr. Stanley H. Durwood and the Durwood Children involving resolution of
valuation issues and other matters involving the relationships among the
Company, Mr. Stanley H. Durwood and the Durwood Children, a proposal was
developed whereby AAE was to be liquidated (see Chart II below) and DI was to be
merged into AMCE (see Chart III below). The result of these transactions would
be that the Durwood Family Stockholders would hold their interests in AMCE stock
directly and would then be able to make a public sale of all or part of these
interests. AMCE was asked to consider engaging in the Merger and related
transactions.

Chart II shows the structure following the liquidation of AAE but prior to
the Merger. Besides the elimination of AAE, Chart II also reflects the
conversion of 6,141,343 shares of AMCE Class B Stock into AMCE Common Stock
pursuant to the terms of the AMCE Class B Stock.

[GRAPH]

(THE GRAPHIC MATERIAL SET FORTH AT THIS POINT IS A CHART WHICH SHOWS THE
OWNERSHIP STRUCTURE OF AMCE AFTER GIVING EFFECT TO THE LIQUIDATION OF AMERICAN
ASSOCIATED ENTERPRISES AND THE CONVERSION OF 6,141,343 SHARES OF AMCE CLASS B
STOCK INTO 6,141,343 SHARES OF AMCE COMMON STOCK. DURWOOD, INC. IS SHOWN AS THE
PRINCIPAL STOCKHOLDER OF AMCE, OWNING 8,783,294 SHARES OF AMCE COMMON STOCK AND
5,015,657 SHARES OF AMCE CLASS B STOCK. THE OWNERS OF DURWOOD, INC. ARE SHOWN AS
THE DURWOOD CHILDREN, OWNING 35,965.5331 SHARES OF DI CLASS B STOCK, THE 1989
AND 1992 TRUSTS, OWNING 119,500 SHARES OF DI CLASS A STOCK AND 4,818.4664 SHARES
OF DI CLASS B STOCK, AND HARVARD COLLEGE, OWNING 500 SHARES OF DI CLASS A
STOCK.)

Chart III shows the ownership structure after the Merger. By acquiring DI in
the Merger, AMCE will receive the same number of shares of AMCE Common Stock and
AMCE Class B Stock as AMCE will issue in the Merger to stockholders of DI
(except for fractional shares). Accordingly, the aggregate number of outstanding
shares of AMCE will not change as a result of the Merger, although the number of
shares of AMCE Common Stock will increase and the number of shares of AMCE Class
B Stock will decrease. However, as a result of the Merger (and the conversion of
AMCE Class B Stock into AMCE Common Stock immediately prior thereto and in
connection therewith), the percentage of shares of outstanding AMCE Common Stock
held by unaffiliated stockholders will decrease from 61.2% to 32.3%,

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based on shares outstanding as of May 19, 1997, and the voting interest in AMCE
of unaffiliated stockholders will increase from 3.5% as of such date to 6.6%
after the Merger.

(THE GRAPHIC MATERIAL SET FORTH AT THIS POINT IS A CHART WHICH SHOWS THE
OWNERSHIP STRUCTURE OF AMCE AFTER GIVING EFFECT TO THE MERGER. THE PRINCIPAL
STOCKHOLDERS OF AMCE ARE SHOWN AS THE DURWOOD CHILDREN, OWNING 8,767,223 SHARES
OF AMCE COMMON STOCK, HARVARD COLLEGE, OWNING 16,071 SHARES OF AMCE COMMON
STOCK, AND THE 1989 AND 1992 TRUSTS, OWNING 5,015,657 SHARES OF AMCE CLASS B
STOCK.)

Because Mr. Stanley H. Durwood, Chairman of the Board of AMCE and its
principal stockholder, Mr. Edward D. Durwood and other Durwood Family
Stockholders are partners in AAE and indirectly owners of DI and would also be
sellers in a secondary offering, the AMCE Board, by unanimous written consent on
October 5, 1994, established the Special Committee composed of the only two
members of the AMCE Board at that time who were not Durwood Family Stockholders
or employees of AMCE.

Preliminary drafts of a merger agreement and related documents were prepared
by counsel for the Company in consultation with management and provided to the
Special Committee and representatives of the Durwood Children. Generally, these
documents provided for (i) the termination of AAE, (ii) the merger of DI into
AMCE, (iii) a registration rights agreement providing for one demand
registration of shares received by the Durwood Family Stockholders in the
Merger, and (iv) a stock agreement imposing certain obligations and limitations
on the Durwood Children with respect to such matters as the solicitation of
proxies and the voting and sale of shares received by them in the Merger. These
drafts contemplated that AMCE would pay its expenses incurred in connection with
the Merger and its internal expenses incurred in connection with a secondary
offering by the Durwood Family Stockholders.

INITIAL ACTIONS BY THE SPECIAL COMMITTEE. The Special Committee held its
initial meeting on October 11, 1994. The Special Committee retained Hughes
Hubbard & Reed LLP as Special Counsel. It also retained Furman Selz as financial
advisor initially to assist in the valuation of DI and to advise the Special
Committee concerning the AMCE/DI exchange ratio in the Merger and the benefits
to AMCE and its unaffiliated stockholders of the Merger. Subsequently, Furman
Selz also advised the Special Committee on the terms of the Secondary Offering.
The Special Committee chose Furman Selz because the firm is regularly engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of securities
and valuations for other corporate purposes, has considerable expertise in the
entertainment industry and one of the members of the Special Committee had a
favorable prior experience with Furman Selz.

KPMG Peat Marwick LLP ("KPMG") was also retained to assist in connection
with the Special Committee's review of DI and its subsidiaries and certain
accounting aspects of the Merger.

In this initial consideration, the Special Committee saw important benefits
to AMCE and its unaffiliated stockholders from the simplification of the
ownership structure of the Company through the Merger. The Special Committee was
also of the view that by increasing the float and liquidity of the AMCE Common
Stock, a secondary offering might make it easier for stockholders to sell their
shares or buy additional ones (because there would be more potential buyers and
sellers and more shares available to buy and sell), might make the market price
of the stock less volatile and might narrow the bid/asked spread.

On this preliminary basis, the Special Committee believed it advisable to
proceed with its investigation of DI and begin the negotiation of the terms of
the Merger and the Secondary Offering.

SUBSEQUENT MEETINGS OF THE SPECIAL COMMITTEE. On November 10, 1994, the
Special Committee received a preliminary report from KPMG on the results to date
of their limited procedures performed with respect to DI and its subsidiaries,
excluding the Company. The procedures dealt principally with assets and
liabilities that it was later agreed were to be removed from DI and not be
acquired or assumed by AMCE in the Merger.

Negotiations concerning the Merger were then suspended while Mr. Stanley H.
Durwood and the Durwood Children conducted further lengthy discussions
concerning the value of their interests in DI and AAE and negotiated the number
of shares that should be allocated to the Durwood Children and Mr. Stanley H.
Durwood in a merger between DI and AMCE.

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On July 18, 1995, following resumption of negotiations concerning the
Merger, the Special Committee met and identified several aspects of the Merger
and the Secondary Offering that would be of major importance to it and that it
would seek in the negotiations:

- At the time of the Merger, DI should have as few assets (apart from AMCE
capital stock) as possible. This would make valuation of DI easier.

- AMCE should be indemnified by Mr. Stanley H. Durwood and/or members of his
family for any liability resulting from a detailed set of representations,
including representations concerning DI and actions taken prior to the
Merger by DI and AAE in their restructuring.

- AMCE should not indemnify Mr. Stanley H. Durwood for any breaches of
AMCE's representations.

- Parameters for the Secondary Offering acceptable to the Special Committee
should be finalized prior to signing the Merger Agreement.

- Mr. Stanley H. Durwood and/or the Durwood Children should bear part of
AMCE's expenses relating to the Merger and the Secondary Offering.

- Because of the importance of the Secondary Offering to AMCE and its
unaffiliated stockholders, Mr. Stanley H. Durwood and/or the Durwood
Children should make a cash payment to AMCE and bear all of AMCE's
expenses if the Merger was consummated but the Secondary Offering was not
for certain reasons.

- The Merger should be subject to approval by the holders of a majority of
the AMCE Common Stock held by persons not affiliated with the management
of AMCE or the Durwood Family Stockholders voting on the Merger.

At meetings on August 10, 16 and 21, 1995, the Special Committee met to
discuss the major tasks involved in the Merger and Secondary Offering and to
review the Merger Agreement and Indemnification Agreement. See "Material Terms
of the Merger" for a summary of the terms of these agreements.

On August 22, 1995, the Special Committee received comments from counsel for
AMCE on the draft agreements. In addition, the Special Committee was briefed on
the status of preliminary settlement negotiations relating to the Derivative
Action. The Committee was told that among the possible settlement provisions
being discussed was a requirement that DI merge into AMCE and that the Durwood
Family Stockholders sell shares of AMCE Common Stock to the public.

On August 24, 1995, the Special Committee met to discuss the nature of the
reimbursement of Company expenses and other payments it would seek from the
Durwood Family Stockholders if the Merger occurred but the Secondary Offering
did not occur. The Special Committee was also advised by counsel for the Durwood
Family Stockholders that the Durwood Family Stockholders needed to discuss
further certain issues associated with the Secondary Offering and the
restructuring of DI and the allocation of the costs of the transactions among
the Durwood Family Stockholders.

On January 22, 1996, Mr. Stanley H. Durwood tentatively agreed with the
Durwood Children, in the context of a comprehensive settlement of disputed
issues between them respecting the Merger, that he would pay any of AMCE's
expenses of the proposed merger and secondary offering that were allocated to DI
or, in certain instances, the Durwood Family Stockholders, in the Merger
Agreement to the extent that such expenses exceeded certain assets of Delta at
the Effective Time of the Merger.

Between January 22 and May 3, 1996, the Durwood Family Stockholders
circulated written drafts of an agreement (the "Durwood Family Settlement
Agreement"), which was executed on May 3, 1996 by the last of the parties to
sign. The Durwood Family Settlement Agreement provides, among other matters,
that, subject to satisfaction or waiver of all conditions precedent to the
Merger, (i) Mr. Stanley H. Durwood will receive 5,015,657 shares of AMCE Class B
Stock for his interests in DI and AAE and the Durwood Children will receive an
aggregate of 8,767,223 shares of AMCE Common Stock

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for their interests, (ii) within 12 months after the proposed Merger of DI and
AMCE, the Durwood Family Stockholders will offer an aggregate minimum of
3,000,000 shares of AMCE Common Stock in a secondary offering, of which 500,000
shares (after conversion of an equal number of shares of AMCE Class B Stock into
AMCE Common Stock) will be sold by Mr. Stanley H. Durwood or any of his
charitable donees who independently agrees to participate in the Secondary
Offering and the balance by the Durwood Children or any of their charitable
donees who independently agrees to participate in the Secondary Offering, (iii)
Mr. Stanley H. Durwood will pay the Durwood Children up to $20 million in shares
of AMCE Common Stock if and to the extent the price received by them in the sale
of 2,500,000 shares of AMCE Common Stock in the Secondary Offering is less than
$18 per share (net of applicable underwriting commissions) (the "Share
Adjustment") and (iv) for three years after the Merger, the Durwood Children
will give a proxy to the Secretary and each Assistant Secretary of AMCE to vote
their shares of AMCE Common Stock for each candidate for the AMCE Board in the
same proportionate manner as the aggregate votes cast in such elections by all
other holders of AMCE Common Stock not affiliated with AMCE, its directors and
officers. The Durwood Family Settlement Agreement also contains other provisions
relating to such matters as the termination of AAE, the conversion of shares of
AMCE Class B Stock prior to the proposed Merger and indemnification from any
unexpected gift tax and other matters.

The Special Committee met again on May 21, 1996 following advice that
agreement had been reached on these issues described above among the Durwood
Family Stockholders and following the distribution of revised drafts of the
Merger Agreement and the related agreements. The Special Committee reviewed the
representations to be given by DI, the reimbursement of AMCE's expenses, the
terms of the proposed Secondary Offering and the restrictions on transfer of
AMCE stock by Durwood Family Stockholders contained in the Stock Agreement.

On July 24, September 25 and November 5, 1996, the Special Committee met to
discuss issues raised in the negotiations, including the indemnification
provisions, the parameters of the Secondary Offering and the form of tax opinion
regarding the Merger. At the last of these meetings, the Special Committee was
advised that lawyers for the parties in the Derivative Action had executed the
Derivative Action Settlement Agreement providing for the settlement of that
litigation. The Special Committee discussed the inclusion of a provision
requiring the Merger as part of the settlement.

On November 25, 1996, January 20, 1997 and February 6, 1997, the Special
Committee met to receive status reports on the negotiations and consider issues
relating to the accounting treatment of the Merger and the allocation of
indemnification obligations for the benefit of AMCE among the Durwood Family
Stockholders.

On March 13, 1997, the AMCE Board and the Special Committee met to consider
the Merger and the Secondary Offering. The Special Committee convened first and
heard the reports of Furman Selz and KPMG, financial advisors to the Special
Committee. Furman Selz discussed its analysis of the Merger, presented the
Special Committee with its fairness opinion and discussed the benefits to AMCE
and its unaffiliated stockholders of the Merger and the Secondary Offering. See
"--Reports of Advisors."

KPMG reported to the Special Committee on the results of its limited
procedures performed with respect to DI. See "--Reports of Advisors." Coopers &
Lybrand L.L.P. ("Coopers & Lybrand"), auditors for the Company, then discussed
the accounting treatment of the Merger.

A joint meeting of the full AMCE Board and the Special Committee then
convened. Counsel to the Special Committee summarized the history of discussions
concerning the Merger and related transactions and of deliberations of the
Special Committee. Counsel to the Special Committee then summarized the
provisions of the Merger Agreement, Indemnification Agreement, Stock Agreement
and Registration Agreement. Furman Selz and KPMG then presented their reports to
the Special Committee, followed by a discussion by Coopers & Lybrand of the
accounting treatment of the Merger. Following these presentations, the meeting
of the full AMCE Board was recessed and the meeting of the Special

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Committee was reconvened. The Special Committee reviewed its conclusions
concerning the Merger and related transactions and voted unanimously to
recommend approval of the Merger and related transactions to the New Independent
Directors and the full AMCE Board. The meeting of the Special Committee was
adjourned, and the meeting of the full AMCE Board was reconvened. The Special
Committee then presented its reasons for recommending approval of the Merger and
related transactions and gave its recommendation to the full AMCE Board and the
New Independent Directors. After discussions and questions by the AMCE Board,
each of the New Independent Directors and each other member of the full AMCE
Board voted to approve the Merger and related transactions, subject to agreement
by the Durwood Children to amend their right to terminate the Durwood Family
Settlement Agreement if the Merger had not occurred by a certain date. By March
25, 1997, the Durwood Children had agreed to extend this date to September 30,
1997. On March 31, 1997, AMCE executed the Merger Agreement.

SUMMARY OF TERMS OF AGREEMENTS. The Merger Agreement, a Stock Agreement, a
Registration Agreement and an Indemnification Agreement were negotiated by the
Special Committee. See "The Merger--Material Terms of the Merger" for a summary
of the terms of these Agreements.

REPORTS OF ADVISORS

FAIRNESS OPINION OF FURMAN SELZ. Furman Selz advised the Special Committee
on March 13, 1997 that it was its opinion as investment bankers that the
consideration to be paid by AMCE in the Merger is fair, from a financial point
of view, to AMCE. Furman Selz expressed its view that because DI would at the
time of the Merger have no assets (other than shares of AMCE Common Stock and
AMCE Class B Stock) and AMCE would be indemnified against liabilities of DI, the
value of the shares of AMCE Common Stock and AMCE Class B Stock to be issued in
the Merger should be viewed as the total consideration to be paid by AMCE in the
Merger. Because this consideration will equal the aggregate amount of shares of
AMCE stock held by DI at the time of the Merger (subject to the payment of
fractional shares in cash), which shares will be acquired by AMCE by virtue of
the Merger, the Merger can be viewed as an exchange of like assets.

ADDITIONAL PRESENTATION OF FURMAN SELZ. In connection with a discussion of
the Merger, Furman Selz also noted the following:

Furman Selz noted that the Merger would increase the voting interest of
AMCE's unaffiliated stockholders. As a result of the Merger and without giving
effect to the Secondary Offering, based on shares outstanding as of March 13,
1997, the voting interest of unaffiliated stockholders would increase from 3.3%
to 6.2%. Assuming conversion of the Convertible Preferred Stock into AMCE Common
Stock and without giving effect to the Secondary Offering, the voting interest
of unaffiliated stockholders would increase from 7.8% to 14.1%; after
consummation of the Secondary Offering, such interest would increase from 11.9%
assuming no conversion of Convertible Preferred Stock to 19.7% assuming full
conversion of Convertible Preferred Stock. Furman Selz discussed the possibility
that such increase in the voting interest of public stockholders would enhance
the attractiveness of AMCE's stock, in particular to institutional holders.
Furman Selz noted that institutional ownership of AMCE Common Stock is low
relative to other companies in the theatrical exhibition industry.

Furman Selz expressed the view that the Merger would create an ownership
structure for AMCE that would be easier to understand. See "--Organization and
Ownership of AMCE and DI", Chart I.

Furman Selz further stated that by increasing the public float and
liquidity, the Secondary Offering may narrow the bid/asked spread of AMCE Common
Stock, perhaps reduce the volatility of daily stock price changes and may
increase the interest of institutional investors in AMCE Common Stock. Furman
Selz expressed the view that these effects, over time, may enhance shareholder
value.

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Furman Selz stated its conclusion that these potential benefits to AMCE and
its stockholders were significant in comparison to the transaction costs to be
borne by AMCE in the Merger.

REPORT OF KPMG. At the direction of the Special Committee, KPMG assisted
the Special Committee with its investigation and analysis of the Merger. The
primary scope of KPMG's engagement was to obtain, analyze and comment on the
financial data provided by the Company. In this connection, KPMG:

- Met with officers and management of DI;

- Read DI's historical and latest interim financial statements available and
discussed them with management;

- Reviewed DI's auditors' workpapers and management letter;

- Read an analysis of DI's revenues and expenses and inquired about the
components thereof;

- Read an analysis of DI's assets and an analysis of accounts payable,
accrued expenses and borrowings and deferred gains and inquired about any
unrecorded amounts;

- Inquired about significant commitments and contingent liabilities;

- Reviewed an analysis of accrued income taxes and inquired about the
adequacy of accruals, the existence of any significant tax exposure items
and the status of any examinations.

The procedures performed by KPMG were limited in nature. Such procedures did
not constitute an audit, examination or review in accordance with standards
established by the American Institute of Certified Public Accountants and,
therefore, KPMG did not express an opinion or any other form of assurance on the
information presented in this report.

REASONS FOR RECOMMENDATIONS

Based on its investigations and analysis and the reports of its advisors,
the Special Committee concluded that the Merger is fair to, and in the best
interests of, AMCE and its unaffiliated stockholders for the following reasons:

(1) Based on shares outstanding when the Special Committee approved the
Merger, the Merger would increase the voting interest of the unaffiliated
stockholders from 3.3% to 6.2%, assuming no conversion of Convertible
Preferred Stock, and from 7.8% to 14.1%, assuming full conversion of
Convertible Preferred Stock into AMCE Common Stock and before the Secondary
Offering. This increase will be a result of the conversion by DI of shares
of AMCE Class B Stock (which have ten votes per share) into shares of AMCE
Common Stock (which have one vote per share) in connection with the Merger.

(2) The Merger will simplify the corporate structure of AMCE and related
companies by removing the two levels of holding companies (AAE and DI).

(3) The Merger will be accounted for as a corporate reorganization and
will not affect AMCE's total capitalization because AMCE will issue shares
of AMCE stock in the exact number (except for the payment of fractional
shares in cash) of the shares of AMCE stock held by DI that AMCE will
acquire in the Merger. Also, because DI will have no other assets or
liabilities, except for certain contingent assets and liabilities against
which AMCE will be indemnified, the Merger may be viewed as an exchange of
like assets in which shares of AMCE stock will be exchanged in consideration
for a like amount of shares. The Special Committee received and relied upon
an opinion of Furman Selz as to the fairness from a financial point of view
to AMCE of the consideration to be paid by AMCE in the Merger. It also
relied upon the results of the limited procedures performed by KPMG and
discussions with Coopers & Lybrand and the advice of the Commission staff
concerning the Merger's treatment as a corporate reorganization.

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(4) The Merger will have no tax effect on unaffiliated stockholders
because it will be a tax-free reorganization in the opinion of special tax
counsel. See "--Certain Federal Income Tax Consequences."

(5) Finally, as a result of the Merger, shares of AMCE stock will be
distributed to stockholders of DI who have agreed to sell a portion of those
shares in the Secondary Offering. As noted below in greater detail, the
Secondary Offering will benefit AMCE and its unaffiliated stockholders.

In its consideration of the Merger, the Special Committee also reviewed the
Secondary Offering and concluded it was in the best interests of AMCE and its
stockholders for the following reasons:

(1) The Secondary Offering will increase the float and liquidity of the
AMCE Common Stock, making it easier for stockholders to sell their shares or
buy additional ones. Approximately 4.2 million shares of AMCE Common Stock
(not including shares issuable upon conversion of the AMCE Convertible
Preferred Stock) are owned by persons who are not Durwood Family
Stockholders. If the minimum of 3,000,000 shares of AMCE Common Stock is
sold in the Secondary Offering, the public float will increase by nearly
75%. In addition, the shares currently held by the Durwood Family
Stockholders through AAE and DI will, as a result of the Merger, be held
directly by those persons and may be sold at their individual discretion
(absent the Merger, action of AAE and/or DI would be needed), subject to
transfer restrictions in the Stock Agreement and elsewhere. Future sales by
these persons will further increase the public float. As a result of the
Secondary Offering, based on shares outstanding when the Special Committee
approved the Merger, the voting interest of persons who are not Durwood
Family Stockholders would increase from 6.2% after the Merger to 11.9% after
the Secondary Offering (assuming the Convertible Preferred Stock is not
converted) or from 14.1% after the Merger to 19.7% after the Secondary
Offering on a fully diluted basis.

(2) By increasing the public float and liquidity, the Secondary Offering
may reduce the volatility of daily stock price changes, narrow the bid/asked
spread and increase the interest of institutional investors in AMCE Common
Stock. These effects, over time, may enhance shareholder value.

The Special Committee noted that all of these benefits are possible without
substantial cost to AMCE or its stockholders. AMCE has incurred expenses in
negotiating the Merger Agreement and related agreements and will incur
additional expenses in carrying out the terms of these agreements, including
seeking the approval of its stockholders (total costs are estimated at $2
million). However, DI (if the merger is not consummated) and Mr. Stanley H.
Durwood, the 1989 Trust, the 1992 Trust and Delta (if the merger is consummated)
will pay 50% of AMCE's expenses (subject to offset for Credit Amounts), and, in
certain circumstances, 100% of AMCE's expenses. In addition, Mr. Stanley H.
Durwood, the 1989 Trust and the 1992 Trust will reimburse AMCE for its expenses
in connection with the Secondary Offering (subject to offset for Credit Amounts)
and, with certain exceptions, if the Secondary Offering is not consummated, will
pay AMCE $2 million (subject to offset for Credit Amounts) for diversion of its
employees in connection with the Secondary Offering.

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The Special Committee also based its recommendations on the fact that the
terms of the Merger Agreement and the related agreements (including the
Secondary Offering) were determined through arms' length negotiations between
representatives of the Durwood Family Stockholders and DI, on the one hand, and
the Special Committee, on the other hand.

In view of the wide variety of factors considered in connection with its
evaluation of the Merger, the Special Committee did not find it practicable to
assign relative weights to the factors considered in reaching its decision, and,
therefore, the Special Committee did not qualify or otherwise attach relative
weights to the specific factors it considered.

The Special Committee considered as an important element of its assessment,
among the other factors described above, the analyses of its financial advisor
as to the fairness of the Merger. The Special Committee relied upon the fairness
opinion of Furman Selz for its analysis and the Special Committee expressly
adopted the conclusions and analysis of Furman Selz as its own.

The Special Committee also considered as another important element of its
assessment of the Merger the results of the limited procedures performed with
respect to DI and its subsidiaries, other than the Company, conducted by KPMG.
As more fully described in "Report of KPMG" above, because these procedures
related to financial and accounting aspects of DI, the company to be merged into
AMCE (including analyses of its assets and liabilities), KPMG's report was
important to the Special Committee.

The Special Committee (whose members are parties to the Derivative Action)
also took note of the following. As discussed above, a proposal relating to the
Merger and Secondary Offering became part of preliminary settlement discussions
in the Derivative Action. These settlement negotiations were not finalized until
October 10, 1996, by which time the Special Committee had substantially
concluded its analysis of the benefits of the Merger and the Secondary Offering.
On that date, the Derivative Action Settlement Agreement was signed and provided
for the Merger and Secondary Offering as part of the settlement. In this
connection, Mr. Stanley H. Durwood and Mr. Edward D. Durwood had entered into
the Durwood Family Settlement Agreement in which all parties agreed to work to
effect the Merger. The provisions relating to the Merger and the Secondary
Offering are only a part of the Derivative Action Settlement Agreement and the
undertakings of the parties.

The Special Committee noted that in addition to approval of the Merger
Agreement by the Special Committee, the Merger Agreement is subject to approval
by the holders of a majority of the shares of AMCE Common Stock (other than
those owned by DI, the Durwood Family Stockholders, their spouses, their
children sharing the same household and directors and officers of AMCE) voting
on the Merger.

Based on the preceding, the Special Committee recommended that the New
Independent Directors approve and that the full AMCE Board approve and adopt the
Merger Agreement and the related agreements (including the Secondary Offering)
described above and recommend that AMCE stockholders approve and adopt the
Merger Agreement. In accordance with the Derivative Action Settlement Agreement,
two New Independent Directors have been elected to the AMCE Board. The
Derivative Action Settlement Agreement requires that the New Independent
Directors shall have the ability to approve or disapprove any proposed
transaction between AMCE and members of the Durwood Family. Accordingly, the New
Independent Directors voted separately and as part of the full AMCE Board on the
Merger and the Secondary Offering.

The full AMCE Board and the two New Independent Directors voted unanimously
to approve and adopt the Merger Agreement and the related agreements (including
the Secondary Offering) and to recommend that AMCE stockholders approve and
adopt the Merger Agreement.

FAIRNESS OPINION OF FURMAN SELZ. Furman Selz has delivered its written
opinion to the Special Committee that, as of March 13, 1997, the consideration
to be paid by AMCE in the Merger is fair, from a financial point of view, to
AMCE. In rendering the opinion, Furman Selz assumed that at the time of the
Merger, DI will have no liabilities except for a contingent liability which,
they were informed, is remote.

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They also took note of the fact that certain shareholders of DI will indemnify
AMCE against the existence of such liabilities for a period of two years after
the March 31 occurring immediately after the Effective Date. They have also
relied upon the accuracy and completeness of the financial and other information
supplied to or otherwise used by them in arriving at their opinion and have not
attempted independently to verify such information. They have further relied
upon the assurances of the management of DI and AMCE that they were not aware of
any facts that would make such information inaccurate or misleading. In view of
the opinion that Chadbourne & Parke LLP, special tax counsel, will render,
Furman Selz assumed that the Merger will qualify as a reorganization in which no
taxable income, gain or loss will be recognized by AMCE or DI. They also assumed
that the Merger would be accounted for as a corporate reorganization. The
opinion is based on economic, market and financial conditions existing as of its
date. No limitations were imposed by the AMCE Board or the Special Committee
upon Furman Selz with regard to the investigations made or procedures followed
by Furman Selz in rendering its opinion.

The full text of Furman Selz's opinion, which sets forth assumptions made,
matters considered and limits of the review undertaken in arriving at the
opinions set forth therein, is attached as Annex 2 and is incorporated herein by
reference in its entirety. AMCE's stockholders are urged to read this opinion in
its entirety for assumptions made, matters considered and limits of the review
by Furman Selz. The summary of the opinion set forth herein is qualified in its
entirety by reference to the full text of the opinion. Furman Selz's opinion is
directed only to the fairness, from a financial point of view, of the
consideration to be paid by AMCE in the Merger and does not constitute a
recommendation to any stockholder of AMCE to vote to approve the Merger. In
rendering its opinion, Furman Selz, among other things, reviewed the forms of
Merger Agreement, Indemnification Agreement, Stock Agreement and Registration
Agreement, together with certain historical financial information of DI and
AMCE. Furman Selz also met with members of management of DI and AMCE,
respectively, and considered the trading history of AMCE Common Stock from
January 2, 1992 through March 7, 1997 and a comparison of that trading history
with those of other companies in the theatrical exhibition industry. Furman Selz
also undertook such other studies, analysis and investigations as it deemed
appropriate. In connection with its presentation concerning the benefits of the
Secondary Offering, Furman Selz compared historical and projected financial
results and financial condition of AMCE with those of other companies engaged in
the theatrical exhibition industry. Furman Selz is a nationally recognized
investment banking firm regularly engaged in the evaluation of businesses and
their securities in connection with mergers and acquisitions. Furman Selz was
chosen by the Special Committee because of the Special Committee's assessment of
Furman Selz's expertise in financial matters and business combination
transactions in the entertainment industry and a favorable prior experience that
one of the members of the Special Committee had with Furman Selz.

Pursuant to a letter agreement dated May 22, 1995 between Furman Selz and
AMCE (the "Engagement Letter"), Furman Selz was engaged to provide financial
advisory and investment banking services to the Special Committee in connection
with its consideration of the Merger, including the rendering of a written
opinion relating to the fairness to AMCE, from a financial point of view, of the
Merger consideration. The Special Committee on behalf of AMCE has agreed to pay
Furman Selz an aggregate fee pursuant to the Engagement Letter of $350,000. Of
this fee, $175,000 has been paid and the remaining $175,000 will be payable upon
the consummation of the Merger. AMCE has also agreed to reimburse Furman Selz
for its reasonable out-of-pocket expenses, and to hold harmless Furman Selz from
and against certain losses, claims, damages, liabilities and expenses related to
or arising out of Furman Selz's engagement under or its role in connection with
the Engagement Letter. Furman Selz may in the future, from time to time, perform
certain other financial advisory and securities underwriting services for AMCE
for which it may receive a fee. In the ordinary course of its business, Furman
Selz may trade in the equity securities of AMCE for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or short
position in such securities.

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During the course of its engagement, Furman Selz provided the Special
Committee with presentations and other information and assisted in negotiations
and met on numerous occasions in person and by telephone with the Special
Committee. On March 13, 1997, Furman Selz delivered to the Special Committee its
written opinion that, as of such date, the consideration to be paid by AMCE in
the Merger was fair, from a financial point of view, to AMCE.

In its presentation to the Special Committee on March 13, 1997, Furman Selz
expressed its view that because DI would at the time of the Merger have no
assets (other than shares of AMCE Common Stock and AMCE Class B Stock) and AMCE
would be indemnified against liabilities of DI, the value of the shares of AMCE
Common Stock and AMCE Class B Stock to be issued in the Merger should be viewed
as the total consideration to be paid by AMCE in the Merger. Because this
consideration will equal the aggregate amount of shares of AMCE stock held by DI
at the time of the Merger (subject to the payment of fractional shares in cash),
which shares will be acquired by AMCE by virtue of the Merger, the Merger can be
viewed as an exchange of like assets.

Furman Selz believes that its analysis must be considered as a whole and
that selecting portions of its analysis and the factors considered by Furman
Selz, without considering all the factors and analysis, could create an
incomplete view of the processes underlying Furman Selz's opinion and its
presentation to the Special Committee. The preparation of a fairness opinion is
a complex process not susceptible to partial analysis or summary description. In
rendering its opinion, Furman Selz made numerous assumptions, many of which are
beyond the control of AMCE or DI.

MATERIAL TERMS OF THE MERGER

The following is a summary of the material terms of the Merger Agreement and
the Stock Agreement, Registration Agreement and Indemnity Agreement referred to
therein. Copies of such agreements are exhibits to the Merger Agreement and
included in Annex 1 to this Proxy--Information Statement/ Prospectus, and such
summary is qualified in its entirety by reference to the full texts of such
agreements.

THE MERGER AGREEMENT

EFFECTIVE TIME. The closing date of the Merger shall occur as promptly as
practicable after satisfaction or waiver of all the conditions in the Merger
Agreement. The Merger shall be effective (the "Effective Time") immediately upon
the filing of the Merger Agreement or a Certificate of Merger with the Secretary
of State of Delaware in accordance with applicable law.

MERGER CONSIDERATION. In the Merger, shares of DI stock will be converted
as follows (subject to the payment of fractional shares in cash):

Each share of DI Class A Stock which immediately prior to the Effective Time
is owned of record by persons other than Mr. Stanley H. Durwood, the 1989 Trust
and the 1992 Trust shall be converted into 32.142857 shares of AMCE Common
Stock.

Each share of DI Class A Stock issued and outstanding immediately prior to
the Effective Time owned by Mr. Stanley H. Durwood, the 1989 Trust or the 1992
Trust shall be converted into 32.142857 shares of AMCE Class B Stock.

Each share of DI Class B Stock which immediately prior to the Effective Time
is owned of record by Mr. Stanley H. Durwood, the 1989 Trust or the 1992 Trust
will be converted into 243.767528 shares of AMCE Class B Stock.

Each share of DI Class B Stock which immediately prior to the Effective Time
is owned of record by any person other than Mr. Stanley H. Durwood, the 1989
Trust or the 1992 Trust will be converted into 243.767341 shares of AMCE Common
Stock.

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SHARES OF AMCE COMMON STOCK HELD BY PERSONS OTHER THAN DI AND SHARES OF
CONVERTIBLE PREFERRED STOCK WILL NOT BE EXCHANGED IN THE MERGER. Each share of
AMCE Common Stock and Class B Stock held by DI at the Effective Time will be
canceled.

CONVERSION AND EXCHANGE OF SHARES. After the Effective Time of the Merger,
each holder of an outstanding certificate or certificates formerly representing
shares of DI Class A Stock or DI Class B Stock will be entitled to receive, upon
surrender of his or her DI stock certificates, a certificate or certificates
representing the number of full shares of AMCE Common Stock or AMCE Class B
Stock into which such shares of DI stock shall have been converted pursuant to
the Merger, together with cash in lieu of any fractional shares. Promptly after
the Effective Time of the Merger, AMCE or its representative will mail or
otherwise deliver to each holder of certificates formerly representing DI Class
A Stock or DI Class B Stock instructions for surrendering his or her DI stock
certificates for certificates representing shares of AMCE Common Stock or AMCE
Class B Stock, as the case may be, and cash in lieu of any fractional shares.

From and after the Effective Time of the Merger, certificates formerly
representing shares of DI Class A Stock or DI Class B Stock will be deemed for
all corporate purposes to evidence ownership of the number of full shares of
AMCE Common Stock or AMCE Class B Stock into which such shares were converted
pursuant to the Merger, provided, that until such DI stock certificates have
been so surrendered, no dividends payable to the holders of record of DI stock
as of any date subsequent to the Merger shall be paid to the holders of such
outstanding DI stock certificates. Any dividends payable on AMCE Common Stock or
AMCE Class B Stock to holders of record as of any date after the Effective Time
of the Merger and prior to the exchange of certificates by any DI shareholder
will be paid to such shareholder, without interest, at the time such shareholder
surrenders his or her DI stock certificates for exchange.

SHARES OF AMCE STOCK HELD BY PERSONS AND ENTITIES OTHER THAN DI WILL NOT BE
EXCHANGED IN THE MERGER. HOLDERS OF AMCE STOCK SHOULD NOT SURRENDER THEIR SHARES
IN CONNECTION WITH THE MERGER.

DI PRE-MERGER ACTION PLAN. Pursuant to the DI Pre-Merger Action Plan set
forth as Exhibit A to the Merger Agreement (the "DI Pre-Merger Action Plan"),
prior to the Effective Time, all of DI's assets (other than its equity interest
in AMCE), consisting primarily of life insurance policies, cash and notes of the
Durwood Children and a former officer of the Company, will be transferred to
Delta and Delta will agree to assume DI's liabilities, and DI's other
subsidiaries, other than AMCE and its subsidiaries, have been merged into Delta.
Delta's stock will be distributed to DI's shareholders so that, at the Effective
Time, DI's sole assets will consist of stock of AMCE and its beneficial interest
in certain tax credits and operating loss carryforwards. In addition, AAE will
be liquidated.

REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties relating to, among other things: (i)
each of AMCE's and DI's organization and similar corporate matters, (ii) each of
AMCE's and DI's capital structure, (iii) authorization, execution, delivery and
enforceability of the Merger Agreement and related matters, (iv) the
subsidiaries of DI (other than AMCE) and investments by DI in other persons and
entities, (v) the financial statements of DI as of and for the fiscal year ended
March 26, 1996 and as of and for the thirty-nine week period ended December 26,
1996, (vi) absence of material changes with respect to DI since December 26,
1996, except as contemplated by the DI Pre-Merger Action Plan (vii) absence of
material liabilities of DI as of the Effective Time, (viii) the filing by DI of
its tax returns and payment of its taxes, (ix) the absence of ownership by DI
and its subsidiaries (other than AMCE) of real property or tangible assets, and
the absence of ownership of any assets of DI other than AMCE Common Stock and
AMCE Class B Stock at the Effective Time, (x) leases of DI, (xi) the accuracy of
the books and records of DI, (xii) the ownership by DI of certain life insurance
policies, (xiii) compliance by DI with applicable law, (xiv) the absence of
litigation and other proceedings involving DI or any of its subsidiaries (other
than AMCE), (xv) the absence of misstatements by DI in written materials
furnished in connection with the transaction, (xvi) the lack of liabilities of
DI and its subsidiaries (other than AMCE) for a brokerage or similar fee in
connection

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with the transaction, (xvii) DI's employees and benefit plans, (xviii) contracts
of DI and the absence of such contracts binding upon DI at the Effective Time,
(xix) the adequacy of reserves on DI's December 26, 1996 balance sheet and (xx)
that any contract of DI benefiting any insider or affiliate of DI is set forth
on a schedule to the Merger Agreement.

CERTAIN COVENANTS. DI has agreed that until the Effective Time, except as
otherwise contemplated in the Pre-Merger Action Plan, it will conduct its
business only in the ordinary course as previously conducted, will not amend its
certificate of incorporation, declare or pay any dividend or other distribution
in respect of its capital stock, incur any indebtedness, enter into any material
agreement or take other actions prohibited by the Merger Agreement. DI has also
agreed to afford representatives of AMCE access to its books and records in
connection with the transactions contemplated by the Merger Agreement.

AMCE has agreed to prepare and file the Registration Statement with respect
to the issuance of shares of AMCE in the Merger. AMCE has also agreed to use its
reasonable efforts to have listed for trading on the AMEX and, if AMCE Common
Stock is still listed on the Pacific Stock Exchange, on the Pacific Stock
Exchange, the AMCE Common Stock to be issued pursuant to the Merger.

DI has agreed that at the time the Registration Statement or any
post-effective amendment thereto becomes effective, and at all times subsequent
to any such effectiveness up to and including the Effective Time, any
information regarding DI or any insider or affiliate of DI set forth in the
Registration Statement, any amendments or supplements thereto, the proxy
statement and in any other proxy soliciting material to be used by AMCE and DI
in connection with the transactions contemplated by the Merger Agreement, will
comply as to form in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission thereunder, and will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made therein not misleading. DI further agrees to cause all actions contemplated
by the Pre-Merger Action Plan to occur at the times contemplated by the
Pre-Merger Action Plan.

CONDITIONS TO CLOSING. The respective obligations of AMCE and DI to effect
the Merger are subject to the following conditions, among others: (i) the Merger
Agreement shall have been approved by the requisite votes of the holders of AMCE
Common Stock, AMCE Class B Stock, DI Class A Stock and DI Class B Stock required
under the DGCL and the GBCLM, as applicable, and, in addition, shall have been
approved by the holders of a majority of the outstanding shares of AMCE Common
Stock (excluding DI, the Durwood Family Stockholders, their spouses, children
living in the same household and officers and directors of AMCE) present or
represented by proxy and voting at the meeting of stockholders called to
consider the Merger, (ii) all required approvals of state securities
administrators shall have been obtained and at the Effective Time no stop order
or similar restraining order shall have been threatened or entered by the
Commission or any state securities administrators, (iii) the shares of AMCE
Common Stock to be issued pursuant to the Merger shall have been approved for
listing by the AMEX and, if AMCE Common Stock is still listed on the Pacific
Stock Exchange, on such exchange, (iv) all relevant governmental filings shall
have been made or obtained, (v) all requisite consents, approvals and agreements
of third parties in connection with the Merger and the actions contemplated by
the Pre-Merger Action Plan shall have been received and (vi) Harvard College
shall have given its written consent to the Merger.

The obligations of AMCE to effect the Merger are subject to the following
conditions, among others: (i) DI shall have taken all requisite corporate action
in connection with the Merger and Pre-Merger Action Plan, (ii) there shall be no
litigation, proceedings or actions concerning the Merger that in the judgment of
the AMCE Board renders consummation of the Merger inadvisable, (iii) no
dissenters' rights shall have been exercised by the holders of any shares of DI
Stock, (iv) the Indemnification Agreement, Stock Agreement and Registration
Agreement shall have been executed by the other parties thereto and remain in
full force and effect, (v) AMCE shall have received a satisfactory fairness
opinion from Furman

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Selz, (vi) AMCE shall have received from Coopers & Lybrand satisfactory "comfort
letters", (vii) the representations and warranties of DI in the Merger Agreement
shall continue to be true and correct in all material respects, (viii) DI shall
have performed in all material respects its obligations in the Merger Agreement
to be performed prior to the Effective Time, (ix) AMCE shall have received an
opinion of Chadbourne & Parke, LLP to the effect that the Merger will constitute
a reorganization within the meaning of Section368(a)(1)(A) of the Code and no
income, gain or loss will be recognized by AMCE or DI as a result of the Merger,
(x) AMCE shall have received a satisfactory opinion from special counsel to DI
and (xi) DI shall have converted 6,141,343 shares of AMCE Class B Stock into a
like number of shares of AMCE Common Stock.

The obligations of DI to effect the Merger are subject to the following
conditions, among others: (i) AMCE shall have taken all requisite corporate
action in connection with the transactions contemplated by the Merger Agreement,
(ii) the Indemnification Agreement, Stock Agreement and Registration Agreement
shall have been executed by AMCE and remain in full force and effect, (iii)
there shall be no litigation, proceedings or actions concerning the Merger that
in the judgment of the Board of Directors of DI renders consummation of the
Merger inadvisable, (iv) the representations and warranties of AMCE in the
Merger Agreement shall continue to be true and correct in all material respects,
(v) AMCE shall have performed in all material respects its obligations under the
Merger Agreement to be performed prior to the Effective Time and (vi) DI and its
shareholders shall have received the opinion of Chadbourne & Parke, LLP to the
effect that the Merger will constitute a reorganization within the meaning of
Section368(a)(1)(A) of the Code and except for cash received in lieu of
fractional shares or in payment of Credit Amounts (see--"Indemnification
Agreement--Other Agreements" ), no income, gain or loss will be recognized by DI
or its shareholders as a result of the Merger.

EXPENSES. If the Merger is not consummated for any reason (other than as a
result of the Board of Directors of AMCE terminating the Merger Agreement for a
Specified Reason (as defined below) or Without Cause (as defined below)), DI
shall be responsible for all of the expenses of DI and AMCE in connection with
the Merger. If the Merger Agreement is terminated by the AMCE Board for a
Specified Reason or Without Cause, DI shall be responsible for 50% of AMCE's
expenses (but shall continue to be responsible for 100% of DI's expenses).

A "Specified Reason" shall mean any of the following bases for a
determination by the AMCE Board to terminate the Merger Agreement: (i) that it
is in the best interest of AMCE to pursue an unrelated transaction and the
transactions contemplated by the Merger Agreement would adversely impact such
unrelated transaction, (ii) that certain conditions in the Merger Agreement have
failed due to circumstances beyond the control of the parties or the Durwood
Family Stockholders or (iii) AMCE's condition relating to litigation is not
satisfied (unless DI or any Durwood Family Stockholder is involved in a role
adverse to AMCE). "Without Cause" shall mean a determination by the AMCE Board
to terminate the Merger Agreement without having a reasonable basis for such
action.

AMENDMENT AND TERMINATION. DI and AMCE, by mutual consent of the Board of
Directors of DI and the AMCE Board acting with the recommendation of the Special
Committee, may amend the Merger Agreement at any time, provided that no such
amendment shall (i) if agreed to after approval by the stockholders of AMCE,
change the amount or nature of the consideration received by shareholders of DI
or, in the judgment of the AMCE Board acting with the recommendation of the
Special Committee, otherwise have a material adverse effect on the rights of
AMCE stockholders, or (ii) be effective unless approved by a majority of the
Durwood Family Stockholders.

The Merger may be deferred or abandoned at any time prior to the Effective
Time by the Board of Directors of DI or the AMCE Board acting with the
recommendation of the Special Committee.

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THE STOCK AGREEMENT

One of the conditions to the Merger is that the Durwood Family Stockholders
enter into the Stock Agreement with AMCE.

RESTRICTIONS ON CERTAIN ACTIONS. Pursuant to the Stock Agreement, each of
the Durwood Children agrees that for a period of three years commencing on the
date of the Merger (the "Restricted Period"), he or she will not become a member
of a group (other than a group composed solely of Durwood Family Stockholders)
or make any public or private proposal with respect to an extraordinary
transaction involving AMCE or any of its subsidiaries, participate in any proxy
or election contest, or subject shares of AMCE Common Stock owned by him or her
to a voting agreement or other arrangement with respect to the voting of such
shares.

Each of the Durwood Children also grants a proxy to the Secretary and each
Assistant Secretary of AMCE to vote shares of AMCE Common Stock owned by him or
her for each candidate for the AMCE Board in the same proportion as the
aggregate votes cast in such elections by all other holders of AMCE Common Stock
not affiliated with AMCE, its directors and officers. This proxy will remain in
effect during the Restricted Period.

Each Durwood Family Stockholder agrees not to transfer any of its AMCE
stock, except in compliance with the Securities Act. Each Durwood Family
Stockholder also agrees that during the Restricted Period he or she will not
transfer AMCE stock by gift to any person or entity unless such person or entity
agrees to be bound by the Stock Agreement, provided that each Durwood Family
Stockholder may transfer up to 5% of the shares of AMCE stock he or she receives
in the Merger to certain charitable assignees (as defined in the Stock
Agreement) free of the provisions of the Stock Agreement.

Each of the Durwood Children also agrees that in the event any of them
desires during the Restricted Period to sell any of his or her shares of AMCE
stock in a transaction exempt from the Securities Act (other than in a brokers'
transaction), he or she shall first afford AMCE the opportunity to purchase such
shares on the same terms and conditions as the proposed sale.

SECONDARY OFFERING. Each Durwood Family Stockholder agrees to use his or
her best efforts to cause the Secondary Offering to be consummated during the
period beginning on the date that is six months and one day from the Effective
Date and ending on the date that is six months from such beginning date,
provided that such six-month period may be extended under certain circumstances.

In the event that the Merger is consummated but the Secondary Offering is
not consummated, other than as a result of the breach by AMCE of the
Registration Agreement, Mr. Stanley H. Durwood, the 1992 Trust, the 1989 Trust
and Delta agree jointly and severally to pay AMCE a fee of $2 million (subject
to offset for Credit Amounts ( See "--The Indemnification Agreement -- Other
Agreements")) and to reimburse AMCE for all of its expenses in connection with
the Merger not theretofore reimbursed.

TAX MATTERS. Except as provided below, each Durwood Family Stockholder
represents that it has no intention of disposing of a number of shares of AMCE
stock received in the Merger in excess of 50% of the number of such shares
received by such Durwood Family Stockholder in the Merger. In addition, to
enable Harvard College to sell all of the shares of AMCE Common Stock it
receives in the Merger if it so elects, and to take account of the payment of
Credit Amounts, if any, Mr. Stanley H. Durwood, the 1989 Trust and the 1992
Trust, collectively, represent that they have no intention of disposing of an
additional number of shares of AMCE Class B Stock equal to 65% of the number of
shares of AMCE Common Stock received by Harvard College in the Merger, plus a
number of shares of AMCE Class B Stock equal to the Specified Percentage (as
defined below) of the number of shares of AMCE Class B Stock and AMCE Common
Stock issued in the Merger. "Specified Percentage" means a percentage equal to
the product of (A) a fraction having a numerator of $1,125,000 and a denominator
equal to the sum of the value of all shares of AMCE Common Stock and AMCE Class
B Stock issued in the Merger, plus $1,125,000, multiplied by (B) 1.25.

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Each Durwood Family Stockholder also covenants not to dispose of a like
number of shares of AMCE stock received in the Merger by such Durwood Family
Stockholder during the two-year period commencing with the Effective Time of the
Merger.

THE REGISTRATION AGREEMENT

A condition to the Merger Agreement is that the Durwood Family Stockholders
enter into the Registration Agreement.

REGISTRATION. In the Registration Agreement, the Durwood Family
Stockholders agree to sell at least 3,000,000 shares of AMCE Common Stock in a
registered underwritten Secondary Offering during a six-month period beginning
the day that is six months and one day from the date of the Merger (provided
that such period can be extended under certain circumstances). They also agree
that the underwriters for such registration will use their reasonable efforts in
light of market conditions to sell at least 70% of such shares to institutional
(as opposed to retail) investors. The Durwood Family Stockholders have the right
to increase the number of shares included in the Secondary Offering to up to
5,000,000 shares.

The managing underwriters for the Secondary Offering shall be selected
jointly by AMCE and the Durwood Family Stockholders.

AMCE shall be entitled to postpone the filing of the registration statement
for the Secondary Offering for up to 180 days if, as a result of the
registration, AMCE would be required to prepare any financial statements other
than those it customarily prepares or AMCE determines in its reasonable business
judgment that such registration would interfere with any material financing,
acquisition, corporate reorganization or other material corporate transaction or
development.

REGISTRATION PROCEDURES. AMCE agrees to prepare and file a registration
statement covering the Secondary Offering, and use its reasonable efforts to
cause such registration statement to become effective. In connection with the
Secondary Offering, AMCE agrees to enter into one or more underwriting or
similar agreements, as appropriate, with customary provisions.

AMCE agrees to supplement or amend the prospectus included in the
registration statement as may be necessary to effect and maintain the
effectiveness of the registration statement for the period of the Secondary
Offering.

REGISTRATION EXPENSES. Mr. Stanley H. Durwood, the 1989 Trust, the 1992
Trust and Delta shall pay all expenses in connection with the Secondary Offering
(subject to offset for Credit Amounts (see "--The Indemnification
Agreement--Other Agreements")), except that each seller of securities in the
Secondary Offering shall pay its pro rata portion of all underwriting discounts
and commissions and the fees and expenses of its own counsel, and AMCE shall pay
all of its internal expenses.

INDEMNIFICATION. AMCE agrees to indemnify each seller of securities in the
Secondary Offering (other than Mr. Stanley H. Durwood, the 1992 Trust and the
1989 Trust) from all damages that may arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in the
registration statement, or any preliminary, final or summary prospectus
contained therein or furnished by AMCE to any such seller, or any amendment or
supplement thereto, or that may arise out of or are based upon any omission or
alleged omission to state therein a material fact necessary to make the
statements therein not misleading, provided that AMCE shall not be obligated to
indemnify any such person (i) to the extent the damages are caused by an untrue
statement or alleged untrue statement or omission or alleged omission based upon
written information furnished to AMCE by any seller of securities, (ii) with
respect to any preliminary prospectus to the extent the damage results from the
fact that such person sold securities to a person to whom a prospectus was not
given at or prior to the confirmation of such sale if AMCE has previously
furnished copies of the prospectus to such seller or

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underwriter and the damage results from an untrue statement or omission
contained in the preliminary prospectus which was corrected in the prospectus
and (iii) with respect to sales occurring after AMCE has given notice to the
seller that the prospectus needs to be amended or supplemented and prior to the
delivery by AMCE of an amended or supplemented prospectus.

Each Durwood Family Stockholder agrees to indemnify AMCE and all other
sellers of securities against damages to the same extent as the indemnity by
AMCE, but only with reference to information relating to such Durwood Family
Stockholder furnished to AMCE by such Durwood Family Stockholder for use in the
registration statement, or any preliminary, final or summary prospectus.

Each party agrees that in the event the indemnities described above are
unavailable or insufficient it will contribute to the amount paid or payable to
the indemnified party in an equitable manner.

The indemnification and contribution obligations described above will
terminate (except as to claims already made) on the March 31 that is two years
after the March 31 occurring immediately after the date on which the Effective
Time occurs.

THE INDEMNIFICATION AGREEMENT

A condition to the Merger Agreement is that the Durwood Family Stockholders
enter into the Indemnification Agreement.

INDEMNITIES REGARDING REGISTRATION STATEMENT AND PROXY STATEMENT. Each of
the Durwood Family Stockholders has agreed to indemnify AMCE and its affiliates,
officers, directors, employees, agents, successors and assigns for damages
incurred as a result of any untrue statement or alleged untrue statement of a
material fact contained in the Proxy--Information Statement/Prospectus and
related Registration Statement, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, if the statement or omission was made in reliance upon and in
conformity with the information supplied by such Durwood Family Stockholders.
Such indemnification obligations are several, except that the obligations of Mr.
Stanley H. Durwood, the 1992 Trust and the 1989 Trust are joint and several.

Mr. Stanley H. Durwood, the 1992 Trust and the 1989 Trust (the "SHD
Indemnitors") have agreed to indemnify AMCE and its affiliates, officers,
directors, employees, agents, successors and assigns for damages incurred as a
result of any untrue statement or alleged untrue statement of a material fact
contained in the Proxy--Information Statement/Prospectus and related
Registration Statement, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, if the statement or omission was made in reliance upon and in
conformity with information provided by the SHD Indemnitors regarding DI,
subsidiaries of DI (other than AMCE) and AAE.

AMCE has agreed to indemnify each Durwood Family Stockholder, other than the
SHD Indemnitors, for any damages incurred by them as a result of any untrue
statement or alleged untrue statement of a material fact contained in the
Proxy--Information Statement/Prospectus and related Registration Statement, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in each case except to
the extent that the statement or omission was made in reliance upon and in
conformity with information supplied by the Durwood Family Stockholders.

OTHER INDEMNIFICATION. If the Effective Time occurs, AMCE shall indemnify
the Durwood Family Stockholders (other than Mr. Stanley H. Durwood, the 1989
Trust and the 1992 Trust), and certain of their assigns, against damages
resulting from a breach of any representation, warranty, covenant or agreement
of AMCE contained in the Merger Agreement.

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If the Effective Time occurs, the SHD Indemnitors shall indemnify AMCE for
any damages resulting from a breach of any representation, warranty, covenant or
agreement of DI contained in the Merger Agreement or resulting from any
liability or obligation of DI or its subsidiaries (other than AMCE).

If the Effective Time occurs, the SHD Indemnitors and Delta shall indemnify
AMCE for all of DI's expenses in connection with the Merger which have not been
paid prior to the Effective Time and for 50% of AMCE's expenses in connection
with the Merger (subject to offset for Credit Amounts (see "--The
Indemnification Agreement--Other Agreements")).

If the Effective Time occurs, the SHD Indemnitors shall indemnify AMCE for
all taxes attributable to DI or any of its subsidiaries (other than AMCE) for
periods ending on or prior to the Effective Time.

If the Effective Time does not occur, the SHD Indemnitors and Delta shall
indemnify AMCE for all damages resulting from the breach by DI of any
representation, warranty, covenant or agreement in the Merger Agreement.

If the Effective Time occurs, each Durwood Family Stockholder shall
indemnify AMCE for all damages resulting from a breach by such Durwood Family
Stockholder of any provision of Article VI of the Stock Agreement, which Article
provides in general that the Durwood Family Stockholders may not dispose of more
than 50% of the shares of AMCE stock received in the Merger during the two-year
period following the date on which the Effective Time occurs. See "--The Stock
Agreement--Tax Matters."

The indemnification obligations of the parties will terminate (except as to
claims already made) on the March 31 that is two years after the March 31
occurring immediately after the date on which the Effective Time occurs.

OTHER AGREEMENTS. The Durwood Family Stockholders have agreed that the
Durwood Family Settlement Agreement will not be amended without the prior
consent of AMCE, such consent not to be unreasonably withheld.

Each Durwood Family Stockholder has agreed to deposit certain of the shares
of AMCE stock received by him or her in the Merger in escrow for a period of two
years following the date of the Merger.

AMCE has agreed that to the extent it realizes net tax benefits from the
utilization of DI's alternative minimum tax credits and Missouri net operating
loss carryforwards, it will credit such amounts against certain obligations of
the SHD Indemnitors to pay AMCE's merger expenses if the Merger occurs, as
required by the Indemnification Agreement, to pay AMCE's expenses in the
Secondary Offering, as required by the Registration Agreement, and to pay a $2
million penalty amount and 100% of AMCE's Merger Expenses if the Secondary
Offering does not occur, as required by the Stock Agreement, and after March 31,
2000 will pay the SHD Indemnitors other Credit Amounts so realized but not so
credited. Any Credit Amount that arises after March 31, 2000 also will be paid
to Mr. Stanley H. Durwood. DI's alternate minimum tax credits were approximately
$559,000 and its Missouri operating loss carryforwards were approximately
$13,761,000 as of March 28, 1996. Such tax benefits, if fully utilized, would
create Credit Amounts aggregating approximately $1,100,000, which would be
reduced by any subsequent utilization of such benefits on separate tax returns
of DI for 1996 and the portion of 1997 prior to the Effective Time.

The SHD Indemnitors agree that they will not transfer shares of AMCE Stock
(other than in the Secondary Offering, to a charitable assignee (as defined in
the Indemnification Agreement) or otherwise in an arms'-length sale for fair
consideration) unless the transferee agrees to be bound by the provisions of the
Indemnification Agreement as an SHD Indemnitor and to guarantee the performance
by the SHD Indemnitors of their obligations under the Indemnification Agreement
and certain of their obligations under the Registration Agreement and Stock
Agreement, provided that an SHD Indemnitor may not

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transfer more than 5% of the shares of AMCE stock received by it in the Merger
to a charitable assignee unless such charitable assignee receiving shares in
excess of such threshold agrees to be so bound.

GENERAL EFFECTS OF THE MERGER

Pursuant to the Merger Agreement, DI will be merged into AMCE, with AMCE
remaining as the surviving corporation. Prior to the Merger, AAE will be
liquidated. SHARES OF AMCE COMMON STOCK HELD BY STOCKHOLDERS OTHER THAN DI AND
CONVERTIBLE PREFERRED STOCK WILL NOT BE EXCHANGED IN THE MERGER AND WILL REMAIN
OUTSTANDING. After consummation of the Merger, the separate existence of DI will
cease, the Certificate of Incorporation and Bylaws of AMCE will remain unchanged
and the directors and officers of AMCE will continue to serve as such until
their successors are duly elected or appointed or until their earlier
resignation or removal.

The table and notes set forth below illustrates, based on stockholdings as
of May 19, 1997, the beneficial ownership (before and after giving effect to the
Merger) of the Durwood Family Stockholders and other persons known to AMCE to
own beneficially in excess of 5% of its Common Stock, directors and Named
Executive Officers (as defined below in "Management of the Company--Compensation
of Management") and all directors and executive officers of the Company as a
group.

· Enlarge/Download Table

POST-MERGER(4)
---------------------------
PRE-MERGER
-----------------------------------------------------------------
AMCE CLASS B AMCE COMMON STOCK
AMCE COMMON STOCK
NAMES OF BENEFICIAL STOCK ------------------------------- ---------------------------
OWNERS AND ADDRESSES OF -------------------------------- % OF % OF
CERTAIN 5% OWNERS NUMBER NUMBER CLASS NUMBER CLASS
------------------- ------------------ ----------- -------------- -----------
% OF
CLASS
-----------

Durwood, Inc. 2,641,951(1)(2)(4) 38.8 11,157,000(1)(4) 100 -- --

Stanley H. Durwood 2,697,101(1)(2)(3)(4) 39.3 11,157,000(1)(2)(4) 100 55,150(3)(4) *

Carol D. Journagan 2,641,951(2) 38.8 11,157,000(2)(4) 100 1,461,203(5) 11.3

Edward D. Durwood 2,641,951(2) 38.8 11,157,000(2)(4) 100 1,461,203(5) 11.3

Thomas A. Durwood 2,641,951(2) 38.8 11,157,000(2)(4) 100 1,461,203(5) 11.3

Elissa D. Grodin 2,641,951(2) 38.8 11,157,000(2)(4) 100 1,461,203(5) 11.3

Brian H. Durwood 2,641,951(2) 38.8 11,157,000(2)(4) 100 1,461,203(5) 11.3

Peter J. Durwood 2,641,951(2) 38.8 11,157,000(2)(4) 100 1,461,203(5) 11.3

Vanguard Explorer Fund,
Inc. c/o The Vanguard
Group of Investment
Companies P.O. Box 2600
Valley Forge, PA 19482 482,720(6) 6.6 0 -- 482,720(6) 3.7

Wellington Management
Company, LLP 75 State
Street Boston, MA 02109 658,260(7) 8.8 0 -- 658,260(7) 5.1

Peter C. Brown 156,750(8) 2.3 0 -- 156,750(8) 1.2

Philip M. Singleton 172,750(8) 2.5 0 -- 172,750(8) 1.3

Richard T. Walsh 33,425(8) * 0 -- 33,425(8) *

John P. Mascotte 1,000 * 0 -- 1,000 *

Paul E. Vardeman 300 * 0 -- 300 *

All directors and
executive officers as a
group 3,116,119 42.9 11,157,000 100 472,100 3.5

AMCE CLASS B
STOCK
NAMES OF BENEFICIAL ---------------------------
OWNERS AND ADDRESSES OF % OF
CERTAIN 5% OWNERS NUMBER CLASS
-------------- -----------

Durwood, Inc. -- --
Stanley H. Durwood 5,015,657(4)(5) 100
Carol D. Journagan 0 --
Edward D. Durwood 0 --
Thomas A. Durwood 0 --
Elissa D. Grodin 0 --
Brian H. Durwood 0 --
Peter J. Durwood 0 --
Vanguard Explorer Fund,
Inc. c/o The Vanguard
Group of Investment
Companies P.O. Box 2600
Valley Forge, PA 19482 0 --
Wellington Management
Company, LLP 75 State
Street Boston, MA 02109 0 --
Peter C. Brown 0 --
Philip M. Singleton 0 --
Richard T. Walsh 0 --
John P. Mascotte 0 --
Paul E. Vardeman 0 --
All directors and
executive officers as a
group 5,015,657 100

--------------

* less than 1%

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(1) The 1989 Trust and the 1992 Trust hold approximately 75% of the voting
power of the outstanding capital stock of DI. Record ownership of the DI shares
is in the name of the 1992 Trust, which has issued its voting trust certificates
to the 1989 Trust. AAE holds approximately 25% of the voting power of DI. Mr.
Stanley H. Durwood is the sole director of DI and is Chairman of the Board,
Chief Executive Officer and a Director of AMCE and AMC.

Mr. Stanley H. Durwood is the sole acting trustee of the 1989 Trust and the
1992 Trust and as such has sole voting power over the shares of AMCE stock held
by DI; the named successor trustees under Mr. Stanley H. Durwood's trusts are
Messrs. Charles J. Egan, Jr., a director of AMCE, and Raymond F. Beagle, Jr.,
general counsel to the Company. Under the terms of his revocable voting trust
(the 1992 Trust), Mr. Stanley H. Durwood has all voting powers with respect to
shares held therein during his lifetime. Thereafter, all voting rights with
respect to such shares vest in his successor trustees and any additional
trustees whom they might appoint, who shall exercise such rights by majority
vote. Unless revoked by Mr. Stanley H. Durwood or otherwise terminated or
extended in accordance with its terms, the 1992 Trust will terminate in 2030.

Mr. Stanley H. Durwood may be deemed to share investment power with the
Durwood Children with respect to such shares held of record by DI. As reported
in the Schedule 13Ds filed by Mr. Stanley H. Durwood and DI and by the Durwood
Children and AAE, Mr. Stanley H. Durwood and the Durwood Children have entered
into the Durwood Family Settlement Agreement expressing their intention to
pursue certain transactions to dissolve AAE and to cause shares of AMCE held by
DI to be distributed to members of the Durwood family through the Merger of DI
into AMCE. Thereafter, the Durwood Family Stockholders intend to sell 3,000,000
shares of AMCE Common Stock in the Secondary Offering, which will be made only
by means of a prospectus. If the proposed transactions are consummated, Mr.
Stanley H. Durwood will retain approximately 4.5 million shares (or 100%) of
AMCE Class B Stock and the Durwood Children will retain in the aggregate
approximately 6.3 million shares of AMCE Common Stock, or 46.6% of the shares of
that class (33.1% assuming full conversion of Convertible Preferred Stock).
Based on voting shares outstanding as of May 19, 1997, the shares of AMCE Class
B Stock to be retained by Mr. Stanley H. Durwood will represent 77.0% of the
combined voting power of AMCE's voting stock (70.4% assuming full conversion of
Convertible Preferred Stock). However, provisions of the Durwood Family
Settlement Agreement could result in an adjustment pursuant to which Mr. Stanley
H. Durwood would deliver additional shares of AMCE stock to the Durwood
Children. Mr. Stanley H. Durwood has agreed with the Durwood Children that if
the price per share to the public of the 2.5 million shares of AMCE Common Stock
proposed to be sold by the Durwood Children in the Secondary Offering following
the Merger is less than $18, Mr. Stanley H. Durwood will pay the Durwood
Children the difference between such sale price and $18 (net of applicable
underwriting commissions), up to $20 million in aggregate amount, in shares of
AMCE Common Stock, as an adjustment to the original allocation of shares to be
received by the Durwood Children in the Merger. Mr. Stanley H. Durwood's
holdings will diminish and the Durwood Children's holdings will increase if the
Durwood Children acquire additional shares under such Share Adjustment. However,
based on the number of shares of AMCE Common Stock and AMCE Class B Stock
outstanding as of May 19, 1997, the Share Adjustment should not result in Mr.
Stanley H. Durwood owning shares with less than 50% of the combined voting power
of the outstanding AMCE stock unless the Durwood Family Stockholders determine
to proceed with a Secondary Offering of the family's shares at a price to the
public of less than approximately $6.95 per share. Mr. Stanley H. Durwood's
voting control also will be diluted if he is obligated to dispose of shares to
honor tax and other indemnity obligations made to the Durwood Children and AMCE
in connection with the Merger and other related transactions, or if additional
shares of AMCE Common Stock are issued under AMCE's existing employee benefit
plans.

(2) As stated in note (1), as a result of the Durwood Family Settlement
Agreement, the Durwood Children may share investment power with respect to the
shares owned of record by DI and have filed ownership reports with the
Commission to such effect.

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(3) Includes 150 shares owned directly by Mr. Stanley H. Durwood and 55,000
shares subject to presently exercisable stock options.

(4) The shares of AMCE Class B Stock are convertible into AMCE Common Stock
on a share-for-share basis. The number and percentage of shares of AMCE Common
Stock shown as beneficially owned do not give effect to the conversion option.

(5) Does not give effect to the proposed sale of shares by certain of the
Durwood Family Stockholders in the Secondary Offering. See "--Material Terms of
the Merger--The Registration Agreement."

(6) This is the number of shares of AMCE Common Stock that would be obtained
upon conversion of Convertible Preferred Stock reported as owned by Vanguard
Explorer Fund, Inc. in its Schedule 13G dated February 10, 1997. Vanguard
Explorer Fund, Inc. reported that it has sole power to vote such shares and
shared power to dispose of them.

(7) This is the number of shares of AMCE Common Stock reported as owned by
Wellington Management Company, LLP in its Schedule 13G dated February 12, 1997,
which number, AMCE has been supplementally advised, represents the number of
shares that would be obtained upon conversion of Convertible Preferred Stock
beneficially owned by Wellington Management Company, LLP. Of these shares
(which, based on the report, are believed to include the shares owned by
Vanguard Explorer Fund, Inc. referred to in note (6)), Wellington Management
Company, LLP reports that it has shared voting power with respect to 37,584
shares and shared dispositive power with respect to 658,260 shares.

(8) Includes shares subject to presently exercisable options to purchase AMCE
Common Stock under AMCE's 1984 and 1994 Stock Option and Incentive Plans, as
follows: Mr. Peter C. Brown-- 156,750 shares; Mr. Philip M. Singleton--156,750
shares; Mr. Richard T. Walsh--33,375 shares; and all officers as a group--
454,750 shares. No adjustments will be made to outstanding options held by
employees as a result of the Merger.

MANAGEMENT AND OPERATIONS OF AMCE AFTER THE MERGER

There will be no changes in the operations of AMCE resulting from the
Merger. However, pursuant to the Derivative Action Settlement Agreement, two New
Independent Directors have been nominated by the Company and elected to serve on
the AMCE Board and will be empowered for three years to approve or disapprove
all transactions between the Company and the Durwood Family Stockholders and all
employment and compensation matters involving the Durwood Family Stockholders,
other than Mr. Stanley H. Durwood and any other Durwood Family Stockholder who
is an officer of AMCE. The current directors and officers of AMCE will continue
to serve as such following the Merger until their successors are duly elected or
appointed or their earlier resignation or removal.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the material United States federal income tax
consequences of the Merger to AMCE, DI and their shareholders. The summary is
based upon the Code, administrative pronouncements, judicial decisions and
Department of Treasury regulations, subsequent changes to any of which may
affect the tax consequences described herein. The summary does not purport to be
a comprehensive description of all of the tax consequences applicable to a
particular taxpayer. In particular, the summary does not address the tax
treatment to holders subject to special tax rules, such as banks, insurance
companies, dealers in securities or stockholders who acquired their stock
pursuant to the exercise of employee stock options or otherwise as compensation.
In addition, the summary only applies to a holder who is a U.S. citizen or
resident, a U.S. corporation, partnership or other entity created or organized
under the laws of the United States, or an estate or trust the income of which
is subject to

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U.S. federal income taxation regardless of its source and who holds shares as
capital assets. Shareholders are urged to consult their tax advisor as to the
particular United States federal income tax consequences to them of the Merger
and as to the foreign, state, local and other tax consequences thereof.

Chadbourne & Parke LLP has provided an opinion to the effect that, under
current law, the Merger will qualify as a tax-free reorganization under Section
368 of the Code, and accordingly, that the Merger will have the tax consequences
set forth below. Such opinion is subject to the conditions, qualifications and
assumptions set forth therein and has been filed as an exhibit to the
Registration Statement of which this Proxy--Information Statement/Prospectus is
a part. As stated above, it is a condition to the consummation of the Merger
that no dissenters' rights shall have been exercised by any of the Durwood
Family Stockholders, and the opinion of Chadbourne & Parke LLP is based upon the
assumption that this condition will be satisfied. Opinions of counsel are not
binding on the Internal Revenue Service ("IRS") or the courts, and the parties
do not intend to request a ruling from the IRS with respect to the Merger.
Accordingly, there can be no assurance that the IRS will not challenge such
conclusion or that a court will not sustain such challenge.

TAX CONSEQUENCES TO AMCE AND DI. The Merger will qualify as a
"reorganization" within the meaning of Section 368(a) of the Code. As a result,
no taxable income, gain or loss will be recognized by either AMCE or DI in the
Merger.

TAX CONSEQUENCES TO AMCE STOCKHOLDERS. The Merger will not be treated as a
sale or exchange by the stockholders of AMCE. As a consequence thereof, such
stockholders will recognize no taxable income, gain or loss as a result of the
Merger.

TAX CONSEQUENCES TO NON-DISSENTING DI SHAREHOLDERS. Subject to the
discussion below concerning fractional shares, no taxable income, gain or loss
will be recognized to the shareholders of DI as a result of the Merger, except
to the extent of any cash received by Mr. Stanley Durwood, the 1989 Trust and/or
the 1992 Trust pursuant to the Indemnification Agreement in respect of the
utilization of certain tax attributes realized by AMCE.

The aggregate tax basis of the shares of AMCE stock received by the DI
shareholders, including the fractional shares deemed to be received, will be the
same as the aggregate tax basis of the shares of DI stock exchanged thereof. The
holding period of the shares of AMCE stock received in the Merger will include
the holding period of the shares of DI stock surrendered therefor.

DI shareholders who receive cash with respect to fractional shares will be
treated as having received such fractional shares pursuant to the Merger and
then as having sold those fractional shares for cash. Such shareholders will
recognize gain or loss with respect to such fractional shares in an amount equal
to the difference between the tax basis allocated to such fractional shares and
the cash received in respect thereof. Any such gain or loss will be a capital
gain or loss and will constitute long-term capital gain or loss if the holding
period of such fractional shares (as determined above) exceeds one year.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

The members of the Special Committee are parties to the Derivative Action.
Although they will not make any monetary payment out of personal funds as a
result of, or be subject to sanctions under, the Derivative Action Settlement
Agreement, because they have an interest in such agreement, they may also be
deemed to have an interest in the outcome of the vote on the proposed Merger
Agreement. As described above, the Merger has also been approved by the New
Independent Directors of AMCE and by the full AMCE Board. Upon the
recommendation of the Special Committee, a condition to the Merger is that the
Merger Agreement also receive approval by the holders of a majority of the
outstanding shares of AMCE Common Stock (other than DI, the Durwood Family
Stockholders, their spouses, children sharing the same household and directors
and officers of AMCE) present and voting at the AMCE Special Meeting.

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Mr. Stanley H. Durwood also is a party to the Derivative Action. Because he
also has an interest in the Derivative Action Settlement Agreement, he also may
also be deemed to have an interest in the outcome of the vote of the proposed
Merger Agreement.

DISSENTERS' RIGHTS

Under the DGCL, holders of AMCE Common Stock have no dissenters' rights with
respect to the Merger. Holders of AMCE Class B Stock have appraisal rights under
the DGCL in connection with the Merger; however, DI is the sole stockholder of
AMCE Class B Stock and is a party to the Merger Agreement.

Under Section 351.455 of the General and Business Corporation Law of
Missouri (the "GBCLM"), shareholders of DI who do not vote for approval of the
Merger Agreement and who follow certain other procedures summarized below will
have the right to dissent from and obtain payment in cash of the fair value of
their shares in the event of the consummation of the Merger. However, AMCE may
elect to terminate the Merger Agreement if any of the DI shareholders exercises
dissenters' rights. The following is a summary of the procedures which must be
followed by any DI shareholder who wishes to dissent and demand payment for his
or her shares in the event of consummation of the Merger. Holders receiving cash
upon exercise of dissenters' rights will recognize a gain or loss for federal
income tax purposes. See "The Merger--Certain Federal Income Tax Consequences."

A shareholder may assert dissenters' rights only if such shareholder:

(i) Delivers to DI prior to or at the DI Special Meeting a written
objection to the Merger Agreement. Such objection should be delivered or
mailed in time to arrive before the vote at such DI Special Meeting to
Durwood, Inc., 106 West 14th Street, Kansas City, Missouri, 64105, Attn:
Secretary. Such a written objection must be made in addition to, and
separate from, any proxy or other vote against adoption and approval of the
Merger. Neither a vote against, a failure to vote for, nor an abstention
from voting will satisfy the requirement that a written objection be
delivered to DI before the vote is taken. Unless a shareholder files the
written objection as provided above, he or she will not have any rights as a
dissenting shareholder; and

(ii) Does NOT vote for approval of the Merger Agreement. A shareholder
who abstains from voting or who does not vote will not be foreclosed from
exercising dissenters' rights; and

(iii) Delivers to AMCE within twenty days after the Effective Date of
the Merger a written demand for payment of the fair value of his or her
shares of DI stock as of the day prior to the date on which the vote for
approval was taken and which includes a statement of the number and class of
shares owned. Such demand must be mailed or delivered to AMCE at AMC
Entertainment Inc., 106 West 14th Street, Kansas City, Missouri, 64105,
Attn: Secretary. Any shareholder who fails to make a written demand for
payment within the twenty-day period after the Effective Date of the Merger
shall be conclusively presumed to have consented to the Merger Agreement and
shall be bound by the terms thereof. Neither a vote against the Merger nor
the written objection referred to in paragraph (i) satisfies the written
demand requirement referred to in this paragraph (iii).

A beneficial owner of shares who is not the record owner may not assert
dissenters' rights. If the stock is owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, or by a nominee, the written demand
asserting dissenters' rights must be executed by the fiduciary or nominee. If
the stock is owned of record by more than one person, as in a joint tenancy or
tenancy in common, the demand must be executed by all joint owners. An
authorized agent, including an agent for two or more joint owners, may execute
the demand for a shareholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in executing the demand, he
is acting as agent for the record owner.

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If within thirty days of the Effective Date the value of a dissenting
shareholder's shares is agreed upon between the shareholder and AMCE, AMCE will
make payment to the shareholder within ninety days of the Effective Date, upon
the shareholder's surrender of his or her share certificates. Upon payment of
the agreed value, the dissenting shareholder will cease to have any interest in
such shares or in AMCE.

If the dissenting shareholder and AMCE do not agree on the fair value of the
shares within thirty days of the Effective Date, the dissenting shareholder may,
within sixty days thereafter, file a petition in any court of competent
jurisdiction within Jackson County, Missouri asking for a finding and a
determination of the fair value of the shares. The dissenting shareholder is
entitled to judgment against AMCE for the amount of such fair value as of the
day prior to the date on which such vote was taken approving the Merger
Agreement, together with interest thereon to the date of judgment. The judgment
is payable only upon and simultaneously with the surrender to AMCE of the
certificates representing said shares. Upon payment of the judgment, the
dissenting shareholder shall cease to have any interest in such shares or in
AMCE. Unless the dissenting shareholder shall file such petition within the time
herein limited, such shareholder and all persons claiming under the shareholder
shall be conclusively presumed to have approved and ratified the Merger
Agreement and shall be bound by the terms thereof.

The right of a dissenting shareholder to be paid the fair value for his or
her shares will cease if the shareholder fails to comply with the procedures of
the GBCLM or if the Merger Agreement is terminated for any reason.

IT IS A CONDITION TO AMCE'S OBLIGATION TO CONSUMMATE THE MERGER THAT NO DI
SHAREHOLDER SHALL HAVE EXERCISED HIS OR HER DISSENTER'S RIGHTS.

ACCOUNTING TREATMENT

Management expects that the Merger will be accounted for as a corporate
reorganization and, accordingly, the recorded balances for consolidated assets,
liabilities, total stockholders' equity and results of operations of the Company
will not be affected.

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CAPITALIZATION OF THE COMPANY

The following table sets forth the total capitalization of the Company
(including short-term debt) as of April 3, 1997 and as adjusted to give pro
forma effect to the Merger. This table should be read in conjunction with the
Company's Consolidated Financial Statements and the Notes thereto included
elsewhere herein.*

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AS OF APRIL 3, 1997
-------------------------
AS ADJUSTED
FOR MERGER ACTUAL
------------ -----------
(IN THOUSANDS, EXCEPT
SHARE AND PER SHARE
AMOUNTS)

Short-term debt (including current portion of long-term debt).......................... $ 3,441 $ 3,441
Long-term debt:........................................................................
Credit Facility(1)................................................................... 110,000 110,000
9 1/2% Senior Subordinated Notes due 2009.......................................... 198,940 198,940
Capital lease obligations and other long-term debt................................... 61,343 61,343
Stockholders' equity
$1.75 Cumulative Convertible Preferred Stock, par value 66 2/3 CENTS per share,
10,000,000 shares authorized; 3,303,600 shares issued and outstanding (aggregate
liquidation value of 82,590,000)................................................... 2,202 2,202
Common Stock, par value 66 2/3 CENTS per share, 45,000,000 shares authorized;
6,604,469 shares issued; 12,745,812 as adjusted for Merger(2)...................... 8,497 4,403
Class B Stock, par value 66 2/3 CENTS per share, 30,000,000 shares authorized;
11,157,000 shares issued and outstanding; 5,015,657 as adjusted for Merger......... 3,344 7,438
Additional paid-in capital........................................................... 107,781 107,781
Foreign currency translation adjustment.............................................. (2,048) (2,048)
Retained earnings.................................................................... 49,605 50,605
------------ -----------
169,381 170,381
Less Common Stock in treasury, at cost, 20,500 shares................................ 369 369
------------ -----------
Total stockholders' equity......................................................... 169,012 170,012
------------ -----------
Total capitalization................................................................... $ 542,736 $ 543,736
------------ -----------
------------ -----------

--------------

(1) As of April 3, 1997, the total availability under the Credit Facility was
$425 million of which the Company had borrowed $110 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations Liquidity and Capital Resources."

(2) Does not include 5,695,406 shares of AMCE Common Stock issuable upon the
conversion of Convertible Preferred Stock, 11,157,000 shares reserved for
issuance upon conversion of AMCE Class B Stock (5,015,657 as adjusted for
the Merger) or 774,500 shares reserved for issuance upon the exercise of
outstanding employee stock options and vesting of outstanding performance
share awards, at the maximum level of performance attainment.

* For information concerning the Company's commitments and contingencies, see
Notes 8 and 10 to AMCE's Consolidated Financial Statements included
elsewhere herein.

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INFORMATION ABOUT THE COMPANY

DIVIDENDS AND PRICE RANGE OF AMCE COMMON STOCK

AMCE Common Stock is listed on the American and Pacific Stock Exchanges
under the symbol AEN. There is no established trading market for AMCE Class B
Stock. The table below sets forth, for the periods indicated, the high and low
closing prices of the AMCE Common Stock as reported on the AMEX composite tape.

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PRICE RANGE OF AMCE
COMMON STOCK
HIGH LOW
--------- ---------

YEAR ENDED MARCH 30, 1995:
1st Quarter................................................................ $ 12.75 $ 9.75
2nd Quarter................................................................ 13.25 11.12
3rd Quarter................................................................ 12.37 10.37
4th Quarter................................................................ 12.62 9.87
YEAR ENDING MARCH 28, 1996:
1st Quarter................................................................ $ 14.50 $ 11.00
2nd Quarter................................................................ 18.12 13.50
3rd Quarter................................................................ 23.50 17.62
4th Quarter................................................................ 24.12 19.25
YEAR ENDING APRIL 3, 1997
1st Quarter................................................................ $ 33.87 $ 23.12
2nd Quarter................................................................ 27.87 15.87
3rd Quarter................................................................ 19.50 13.75
4th Quarter................................................................ 20.25 13.87

On May 3, 1996, the last trading day preceding the announcement of the
Durwood Family Settlement Agreement, the reported last sale price of AMCE Common
Stock on the AMEX was $25.75. On April 16, 1997, the day preceding announcement
that the Merger Agreement had been entered into, the reported last sale price of
AMCE Common Stock on the AMEX was $20.00. On , the date preceding
the date of the Proxy-Information Statement/Prospectus, the reported last sale
price of AMCE Common Stock on the AMEX was $ . As of May 19, 1997, there
were 470 holders of record of AMCE Common Stock. See "The Merger--General
Effects of the Merger" for the effect of the Merger on the percentage of present
holdings of AMCE Common Stock and AMCE Class B Stock by directors, officers and
persons beneficially owning in excess of 5% of either class of such stock.

AMCE's Certificate of Incorporation provides that holders of AMCE Common
Stock and AMCE Class B Stock shall receive, pro rata per share, such cash
dividends as may be declared from time to time by the AMCE Board. Certain
provisions of the Note Indenture and the Credit Facility govern the payment of
dividends on and purchase by AMCE of its capital stock. Presently, it is not
anticipated that the most restrictive of these provisions, as set forth in the
Credit Facility, will affect the ability of AMCE to pay dividends in the
foreseeable future. See "--Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources." Except
for a $1.14 per share dividend declared in connection with a recapitalization
that occurred in August 1992, AMCE has not declared a dividend on shares of AMCE
Common Stock or AMCE Class B Stock since fiscal 1989. Any payment of cash
dividends on AMCE Common Stock in the future will be at the discretion of the
AMCE Board and will depend upon such factors as earnings levels, capital
requirements, AMCE's financial condition and other factors deemed relevant by
the AMCE Board. Currently, AMCE does not contemplate declaring or paying any
dividends on its Common Stock or Class B Stock.

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SELECTED FINANCIAL DATA

The following table sets forth selected data regarding the Company's five
most recent fiscal years ended April 3, 1997. The historical financial
information for each of the fiscal years specified below has been derived from
the Company's consolidated financial statements for such periods. The unaudited
pro forma financial information of the Company as of and for the fiscal year
ended April 3, 1997 has been adjusted to give effect to the Merger and Note
Offering, as set forth in the Notes to the Company's Condensed Pro Forma
Financial Statements included elsewhere herein. Such pro forma information does
not purport to represent what the Company's results of operations would have
been had the Merger and Note Offering occurred on the dates presented or to
project the Company's financial position or results of operations for any future
period. The historical financial data set forth below is qualified in its
entirety by reference to the Company's Consolidated Financial Statements and the
Notes thereto included elsewhere in this Proxy--Information
Statement/Prospectus. The historical and pro forma financial data set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations", the Company's Consolidated
Financial Statements and the Notes thereto and Durwood, Inc.'s Consolidated
Financial Statements and the Notes thereto included elsewhere in this
Proxy--Information Statement/Prospectus.

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YEARS ENDED
---------------------------------------------------------------------------------------------
APRIL 3, 1997
PRO FORMA(1)(2)(6)
-----------------------
MERGER AND
NOTE APRIL 3, MARCH 28, MARCH 30, MARCH 31, APRIL 1,
OFFERING 1997 1996 1995 1994 1993
COMBINED MERGER ACTUAL(1)(2) ACTUAL(1)(2) ACTUAL(1)(2) ACTUAL(1)(2) ACTUAL(2)
------------ --------- ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, RATIOS AND STATISTICAL DATA)

STATEMENT OF OPERATIONS DATA
Total revenues................. $ 749,597 $ 749,597 $ 749,597 $ 655,972 $ 563,344 $ 586,300 $ 403,775
Total cost of operations....... 580,002 580,002 580,002 491,358 432,763 446,957 308,848
General and administrative..... 56,647 56,647 56,647 52,059 41,639 40,559 37,582
Depreciation and
amortization................. 59,803 59,803 59,803 43,886 37,913 38,048 28,175
Estimated loss on future
disposition of assets........ -- -- -- -- -- -- 2,500
------------ --------- ------------ ------------ ------------ ------------ ------------
Operating income............... 53,145 53,145 53,145 68,669 51,029 60,736 26,670
Interest expense............... 30,822 22,022 22,022 28,828 35,908 36,375 31,401
Investment income.............. 856 856 856 7,052 10,013 1,156 8,239
Minority interest.............. -- -- -- -- -- 1,599 --
Gain (loss) on disposition of
assets....................... (84) (84) (84) (222) (156) 296 9,638
------------ --------- ------------ ------------ ------------ ------------ ------------
Earnings before income taxes
and extraordinary item....... 23,095 31,895 31,895 46,671 24,978 27,412 13,146
Income tax provision........... 9,820 12,900 12,900 19,300 (9,000) 12,100 5,400
------------ --------- ------------ ------------ ------------ ------------ ------------
Earnings before extraordinary
item......................... 13,275 18,995 18,995 27,371 33,978 15,312 7,746
Extraordinary item............. -- -- -- (19,350) -- -- (6,483)
------------ --------- ------------ ------------ ------------ ------------ ------------
Net earnings................... $ 13,275 $ 18,995 $ 18,995 $ 8,021 $ 33,978 $ 15,312 $ 1,263
------------ --------- ------------ ------------ ------------ ------------ ------------
------------ --------- ------------ ------------ ------------ ------------ ------------
Preferred dividends............ 5,907 5,907 5,907 7,000 7,000 538 256
------------ --------- ------------ ------------ ------------ ------------ ------------
Net earnings for common
shares....................... $ 7,368 $ 13,088 $ 13,088 $ 1,021 $ 26,978 $ 14,774 $ 1,007
------------ --------- ------------ ------------ ------------ ------------ ------------
------------ --------- ------------ ------------ ------------ ------------ ------------
Earnings per share before
extraordinary item:
Primary........................ $ .42 $ .74 $ .74 $ 1.21 $ 1.63 $ .89 $ .46
Fully diluted.................. $ .41 $ .73 $ .73 $ 1.20 $ 1.45 $ .89 $ .46
Earnings per share:
Primary........................ $ .42 $ .74 $ .74 $ .06(4) $ 1.63 $ .89 $ .06(3)
Fully diluted.................. $ .41 $ .73 $ .73 $ .06(4) $ 1.45 $ .89 $ .06(3)
Common dividends per share....... $ -- $ -- $ -- $ -- $ -- $ -- $ 1.14

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Weighted average number of shares
outstanding:
Primary........................ 17,726 17,726 17,726 16,795 16,593 16,521 16,217
Fully diluted.................. 17,940 17,940 17,940 17,031 23,509 16,550 16,217
BALANCE SHEET DATA
Cash, equivalents and
investments.................. $ 24,715 $ 24,715 $ 24,715 $ 10,795 $ 140,377 $ 151,469 $ 50,106
Total assets................... 718,213 718,213 718,213 483,458 522,154 501,276 374,102
Total debt (including capital
lease obligations)........... 373,724 373,724 373,724 188,172 267,504 268,188 255,302
Stockholders' equity........... 169,012 169,012 170,012 158,918 157,388 130,404 18,171
OTHER FINANCIAL DATA
EBITDA(5)...................... $ 112,948 $ 112,948 $ 112,948 $ 112,555 $ 88,942 $ 98,784 $ 57,345
Cash flows provided by
operating activities......... 134,074 134,074 134,074 96,847 44,366 63,680 29,062
Cash flows provided by (used
in) investing activities..... (283,917) (283,917) (283,917) (66,848) 3,664 (111,505) 4,594
Cash flows provided by (used
in) financing activities..... 163,982 163,982 163,982 (90,437) (9,116) 56,147 (21,022)
Capital expenditures........... 253,380 253,380 253,380 120,796 56,403 10,651 8,786
STATISTICAL DATA (AT PERIOD END)
Number of theatres operated.... 228 228 228 226 232 236 243
Number of screens operated..... 1,957 1,957 1,957 1,719 1,630 1,603 1,617
Screens per theatre............ 8.6 8.6 8.6 7.6 7.0 6.8 6.7

--------------

(1) Fiscal 1997, 1996, 1995 and 1994 include the effects from the acquisition of
EEP on May 28, 1993.

(2) Fiscal 1997 consists of 53 weeks. All other years have 52 weeks.

(3) Fiscal 1993 includes a $6,483,000 extraordinary loss equal to $.40 per
common share.

(4) Fiscal 1996 includes a $19,350,000 extraordinary loss equal to $1.15 per
common share.

(6) See the Company's Condensed Pro Forma Financial Statements and the Notes
thereto included elsewhere herein.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OPERATING RESULTS

As a result of the commencement of international operations during fiscal
1997, the Company is disaggregating its domestic and international exhibition
operations and the Company's on-screen advertising and other business in order
to provide more information as to the Company's revenues, cost of operations,
depreciation and amortization, and general and administrative expenses as set
forth in the table below for the fifty-three and fifty-two week periods ended
April 3, 1997 and March 28, 1996.

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YEARS (53/52 WEEKS) ENDED
-------------------------------------
APRIL 3, MARCH 28,
1997 1996 % CHANGE
--------- ----------- -------------
(IN THOUSANDS)

REVENUES
Domestic
Admissions........................................... $ 479,629 $ 431,361 11.2%
Concessions.......................................... 222,945 196,645 13.4
Other................................................ 15,763 15,096 4.4
--------- ----------- ---
718,337 643,102 11.7
International
Admissions........................................... 13,322 -- --
Concessions.......................................... 2,222 -- --
Other................................................ 49 -- --
--------- ----------- ---
15,593 -- --
On-screen advertising and other........................ 15,667 12,870 21.7
--------- ----------- ---
Total revenues....................................... $ 749,597 $ 655,972 14.3%
--------- ----------- ---
--------- ----------- ---
COST OF OPERATIONS
Domestic
Film rentals......................................... $ 239,480 $ 215,099 11.3%
Concession costs..................................... 36,045 30,417 18.5
Rent................................................. 75,116 64,813 15.9
Other................................................ 198,555 172,087 15.4
--------- ----------- ---
549,196 482,416 13.8
International
Film rentals......................................... 7,719 -- --
Concession costs..................................... 703 -- --
Rent................................................. 4,945 -- --
Other................................................ 5,377 -- --
--------- ----------- ---
18,744 -- --
On-screen advertising and other........................ 12,062 8,942 34.9
--------- ----------- ---
Total cost of operations............................. $ 580,002 $ 491,358 18.0%
--------- ----------- ---
--------- ----------- ---
GENERAL AND ADMINISTRATIVE
Domestic and corporate............................... $ 45,558 $ 44,200 3.1%
International........................................ 6,864 4,550 50.9
On-screen advertising and other...................... 4,225 3,309 27.7
--------- ----------- ---
Total general and administrative................... $ 56,647 $ 52,059 8.8%
--------- ----------- ---
--------- ----------- ---
DEPRECIATION AND AMORTIZATION
Domestic and corporate............................... $ 56,623 $ 42,550 33.1%
International........................................ 1,436 -- --
On-screen advertising and other...................... 1,744 1,336 30.5
--------- ----------- ---
Total depreciation and amortization................ $ 59,803 $ 43,886 36.3%
--------- ----------- ---
--------- ----------- ---

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YEARS (53/52 WEEKS) ENDED APRIL 3, 1997 AND MARCH 28, 1996

REVENUES. Total revenues increased 14.3%, or $93,625,000, during the year
(53 weeks) ended April 3, 1997 compared to the year (52 weeks) ended March 28,
1996.

Total domestic revenues increased 11.7%, or $75,235,000, from the prior
year. Admissions revenues increased 11.2%, or $48,268,000, due to a 6.4%
increase in attendance, which contributed $27,658,000 of the increase, and a
4.7% increase in average ticket prices, which contributed $20,610,000 of the
increase. The increase in attendance was due primarily to the Company's megaplex
theatres (theatres having at least 14 screens with predominately stadium-style
seating). Attendance at megaplex theatres increased during the year as a result
of the addition of 12 new megaplex theatres with 248 screens and from the
operation for a full fiscal year of the Company's remaining five domestic
megaplex theatres with 98 screens that were opened in fiscal 1996. The increase
in attendance from megaplex theatres was partially offset by a decrease in
attendance at multiplex theatres (theatres generally without stadium-style
seating and having less than 14 screens) and the closure or sale of 15 theatres
with 76 screens. Attendance at multiplex theatres decreased as a result of
competitive factors. Also, during the first nine months of the fiscal year,
attendance at all theatres was impacted by film product from the Company's key
suppliers which did not deliver the results achieved in the prior fiscal year.
The increase in average ticket prices is due to price increases and the growing
number of megaplexes in the Company's circuit, which yield higher average ticket
prices than multiplexes. Concessions revenues at domestic theatres increased by
13.4%, or $26,300,000, due to a 6.9% increase in average concessions per patron,
which contributed $13,692,000 of the increase, and the increase in total
attendance, which contributed $12,608,000 of the increase. The increase in
average concessions per patron is attributable to the introduction of new
concessions products and the increasing number of megaplexes in the Company's
circuit, where concession spending per patron is higher than multiplex theatres.

Total international revenues were the result of admissions and concessions
revenues from the Company's two international theatres, the Canal City 13
located in Fukuoka, Japan and the Arrabida 20 located in Porto, Portugal, which
opened during the first and third quarters of fiscal 1997, respectively.
Admissions and concessions revenues accounted for 85% and 14% of total
international revenues, respectively. The Company's initial attendance at the
Canal City 13 was negatively impacted by film distributors in Japan who
restricted the Company's ability to obtain film product until approximately two
weeks after its competitors had received it. This delay in releasing films to
the Company has generally been eliminated.

On-screen advertising and other revenues increased 21.7%, or $2,797,000, due
primarily to an increase in the number of screens served by the Company's
on-screen advertising business, a result of its expansion program.

COST OF OPERATIONS. Total cost of operations increased 18.0%, or
$88,644,000, during the year (53 weeks) ended April 3, 1997 compared to the year
(52 weeks) ended March 28, 1996.

Total domestic cost of operations increased 13.8%, or $66,780,000, from the
prior year. Film rentals expense increased 11.3%, or $24,381,000, due to higher
admissions revenues. As a percentage of admissions revenues, film rentals
expense was 49.9% in each year. The 18.5%, or $5,628,000, increase in concession
costs is attributable to the increase in concessions revenues. As a percentage
of concessions revenues, concession costs increased from 15.5% to 16.2% due
primarily to increases in raw popcorn costs and the lower margins on new
concessions products. Rent expense increased 15.9%, or $10,303,000, due to the
higher number of screens in operation. Other cost of operations increased 15.4%,
or $26,468,000, from the prior year due to the higher number of screens in
operation, $1,825,000 of advertising expenses associated with the opening of new
theatres and higher expenses associated with the Company's theatre management
development program.

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Total international cost of operations were the result of expenses
associated with the Company's new theatres in Japan and Portugal. As a
percentage of admissions revenues, film rentals expense was 57.9% primarily
because film rentals in Japan are generally higher than those domestically.
Concession costs were 31.6% of concessions revenues due to the high procurement
costs of concessions products sourced from the United States. As a percentage of
total revenues, rent expense was 31.7% as a result of low attendance and
admissions revenues and the higher real estate costs in Japan.

On-screen advertising and other cost of operations increased 34.9%, or
$3,120,000, as a result of the higher number of screens served and related
start-up expenses.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
8.8%, or $4,588,000, during the year (53 weeks) ended April 3, 1997.

Domestic and corporate general and administrative expenses increased 3.1%,
or $1,358,000, primarily due to increases in costs associated with the Company's
development of theatres and increased pension and retirement expenses of
$1,992,000. These increases were partially offset by a decrease of $3,500,000 in
the current year's bonus expense and severance payments of $967,000 for two
former executive officers made during the prior year.

International general and administrative expenses increased 50.9%, or
$2,314,000, due primarily to increases in costs associated with the Company's
development of new theatres and other expenses to support the Company's
international operations and expansion plan.

General and administrative expenses associated with on-screen advertising
and other increased 27.7%, or $916,000, due primarily to an increase in payroll
and related costs to support the expansion program at the Company's on-screen
advertising business.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
36.3%, or $15,917,000, during the year (53 weeks) ended April 3, 1997. This
increase was caused by an increase in employed theatre assets resulting from the
Company's expansion plan and an impairment loss of $7,231,000 due to expected
declines in future cash flows of certain theatres.

OPERATING INCOME. Operating income decreased 22.6%, or $15,524,000, during
the year (53 weeks) ended April 3, 1997. The decrease in operating income is
attributable to the attendance and revenue decline at multiplex theatres and an
increase in domestic and corporate general and administrative expenses of
$1,358,000, the effects of which were partially offset by an increase in
attendance and revenues at megaplex theatres. Additionally, operating income was
reduced by operating losses of $4,587,000 from the Company's international
theatres in Japan and Portugal, an increase in international general and
administrative expenses of $2,314,000 and an increase in operating losses of
$1,647,000 from the Company's on-screen advertising business.

INTEREST EXPENSE. Interest expense decreased 23.6%, or $6,806,000, during
the year (53 weeks) ended April 3, 1997 compared to the prior year. The decrease
in interest expense resulted from lower rates under the Company's $425 million
credit facility (the "Credit Facility"), which was partially offset by an
increase in average outstanding borrowings related to the Company's expansion
plan.

INVESTMENT INCOME. Investment income decreased 87.9%, or $6,196,000, during
the year (53 weeks) ended April 3, 1997 due to a decrease in outstanding cash
and investments compared to the prior year. Cash and investments decreased as a
result of the Company's redemption of substantially all of its 11 7/8% Senior
Notes due 2000 ("Senior Notes") and 12 5/8% Senior Subordinated Notes due 2002
("12 5/8% Senior Subordinated Notes") on December 28, 1995.

EARNINGS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. Earnings before income
taxes and extraordinary item decreased by 31.7%, or $14,776,000, during the year
(53 weeks) ended April 3, 1997 due primarily to the $15,524,000 decrease in
operating income.

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NET EARNINGS. Net earnings before extraordinary item decreased $8,376,000
during the year (53 weeks) ended April 3, 1997 to $18,995,000 from $27,371,000
in the prior year. Net earnings for the period were $18,995,000 compared to
$8,021,000 in the prior year, which included an extraordinary item (a loss of
$19,350,000 in connection with the early extinguishment of debt). Net earnings
before extraordinary item per common share, after deducting preferred dividends,
was $.74 compared to $1.21 for the prior year. Net earnings per common share,
after deducting preferred dividends, was $.74 compared to $.06 for the prior
year.

· Enlarge/Download Table

YEARS (52 WEEKS) ENDED
----------------------------------------------------------
MARCH 28, % OF TOTAL MARCH 30, % OF TOTAL
1996 REVENUES 1995 REVENUES
----------- --------------- ----------- ---------------
(IN THOUSANDS)

REVENUES
Admissions................................ $ 431,361 66% $ 371,145 66%
Concessions............................... 196,645 30 169,120 30
Other..................................... 27,966 4 23,079 4
----------- --- ----------- ---
Total................................... $ 655,972 100% $ 563,344 100%
----------- --- ----------- ---
----------- --- ----------- ---
COST OF OPERATIONS
Film rentals.............................. $ 215,099 33% $ 182,669 33%
Concession costs.......................... 30,417 5 24,383 4
Rent...................................... 64,813 10 60,076 11
Other..................................... 181,029 27 165,635 29
----------- --- ----------- ---
Total................................... $ 491,358 75% $ 432,763 77%
----------- --- ----------- ---
----------- --- ----------- ---

YEARS (52 WEEKS) ENDED MARCH 28, 1996 AND MARCH 30, 1995

REVENUES. Total revenues for the year (52 weeks) ended March 28, 1996
increased 16.4%, or $92,628,000, to $655,972,000 compared to $563,344,000 for
the year (52 weeks) ended March 30, 1995. Admissions revenues increased 16.2%,
or $60,216,000, due to a 11.1% increase in attendance, which contributed
$41,151,000 of the increase, and a 4.4% increase in average ticket prices, which
contributed $19,065,000 of the increase. The increase in attendance resulted
from the popularity of films licensed during fiscal 1996 and the net addition of
89 screens since fiscal 1995 at new and higher performing locations. Attendance
during the prior year was impacted by a dispute with a major distributor over
film licensing terms, which resulted in the Company's licensing that
distributor's films for a smaller number of its theatres than it otherwise would
have. In fiscal 1996, the Company licensed that distributor's films for what it
considers to be a more acceptable number of the Company's theatres. Concessions
revenues increased by 16.3%, or $27,525,000, due to the increase in total
attendance, which caused an increase of $18,752,000, and a 6.9% increase in
average concessions per patron, which contributed $8,773,000 of the increase.

COST OF OPERATIONS. Total cost of operations increased 13.5%, or
$58,595,000, in fiscal 1996 to $491,358,000 from $432,763,000 in fiscal 1995. As
a percentage of total revenues, cost of operations was 75% and 77% in fiscal
1996 and 1995, respectively. Film rentals expense increased 17.8%, or
$32,430,000, in fiscal 1996 due to higher attendance levels, which contributed
$29,637,000 of the increase, and an increase in the percentage of admissions
paid to film distributors, which caused an increase of $2,793,000. Concessions
costs, rent and other costs of operations increased 10.5%, or $26,165,000, from
the prior year due to increases in payroll of $6,641,000, concession costs of
$6,034,000, rent of $4,737,000 and other theatre operating expenses associated
with the increase in admissions and concessions revenues and from the higher
number of screens in operation.

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GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
25.0%, or $10,420,000, to $52,059,000 in fiscal 1996 from $41,639,000 in fiscal
1995. The increase in general and administrative expenses is primarily
attributable to payroll and other costs associated with the Company's
development of theatres in the United States and certain international markets,
additional bonus expense of $3,074,000 related to improved profitability of the
Company and severance payments of $967,000 for two former executive officers. As
a percentage of total revenues, general and administrative expenses increased to
7.9% in fiscal 1996 from 7.4% in fiscal 1995.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
15.8%, or $5,973,000, to $43,886,000 in fiscal 1996 from $37,913,000 in fiscal
1995. This increase resulted primarily from the reduction, effective December
30, 1994, in the estimated lives of lease rights and location premiums on
certain smaller theatres to correspond to the base terms of the theatre leases,
an increase in employed theatre assets and the recognition of an impairment loss
of $1,799,000 in connection with the adoption of Statement of Financial
Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF.

INTEREST EXPENSE. Interest expense decreased 19.7%, or $7,080,000, to
$28,828,000 in fiscal 1996 from $35,908,000 in fiscal 1995. The decrease in
interest expense resulted from lower interest rates under the Company's Credit
Facility as compared to the rates under the Senior Notes and 12 5/8% Senior
Subordinated Notes.

INVESTMENT INCOME. Investment income decreased 29.6%, or $2,961,000, to
$7,052,000 in fiscal 1996 from $10,013,000 in fiscal 1995 due primarily to a net
gain of $1,407,000 recorded in fiscal 1995 from the sales of stock of TPI
Enterprises, Inc. and AmeriHealth, Inc. and a decrease of $1,513,000 in interest
income in fiscal 1996.

EARNINGS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. Earnings before income
taxes and extraordinary item increased 86.8%, or $21,693,000, to $46,671,000 in
fiscal 1996 from $24,978,000 in fiscal 1995. The Company recorded a $19,350,000
extraordinary loss, net of income tax benefit of $13,400,000, related to
extinguishment of debt in fiscal 1996.

NET EARNINGS. For the year (52 weeks) ended March 28, 1996, the Company
recorded net earnings of $8,021,000, a $25,957,000 decrease from net earnings of
$33,978,000 for the year (52 weeks) ended March 30, 1995. Net earnings per
common share, after deducting $7,000,000 of preferred dividends, was $.06 in
fiscal 1996 compared to $1.63 in fiscal 1995. The decrease in net earnings was
impacted by an extraordinary loss of $19,350,000 incurred as a result of the
Company's repurchase of Senior Notes and 12 5/8% Senior Subordinated Notes in
fiscal 1996. Also, in fiscal 1996 the Company had a tax expense of $19,300,000,
as opposed to a tax benefit of $9,000,000 in fiscal 1995. The fiscal 1995 tax
benefit resulted from a $19,792,000 reduction in the deferred tax valuation
allowance established under Statement of Financial Accounting Standards No. 109,
ACCOUNTING FOR INCOME TAXES. Earnings per share before extraordinary item, after
deduction of preferred dividends, was $1.21 in fiscal 1996 compared to $1.63 in
fiscal 1995.

LIQUIDITY AND CAPITAL RESOURCES

The forward-looking statements included in this section, which reflect
management's best judgment based on factors currently known, involve risks and
uncertainties. Actual results could differ materially from those anticipated in
the forward-looking statements included herein as a result of a number of
factors, including but not limited to the Company's ability to enter into
various financing programs, competition from other companies, changes in
economic climate, increase in demand for real estate, demographic changes,
changes in real estate, zoning and tax laws, the performance of films licensed
by the Company and other risks and uncertainties.

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The Company's revenues are collected in cash, principally through box office
admissions and theatre concessions sales. The Company has an operating "float"
which partially finances its operations and which generally permits the Company
to maintain a smaller amount of working capital capacity. This float exists
because admissions revenues are received in cash, while exhibition costs
(primarily film rentals) are ordinarily paid to distributors from 30 to 45 days
following receipt of box office admission revenues. The Company is only
occasionally required to make advance payments or non-refundable guarantees of
film rentals. Film distributors generally release films which they anticipate
will be the most successful during the summer and holiday seasons. Consequently,
the Company typically generates higher revenues during such periods. Cash flows
from operating activities, as reflected in the Consolidated Statements of Cash
Flows, was $134,074,000, $96,847,000 and $44,366,000 in fiscal years 1997, 1996
and 1995, respectively.

During fiscal 1997, the Company had capital expenditures of $253,380,000,
primarily for the development of new theatres and the addition of screens at
existing locations. The Company has continued its expansion plan by opening 14
leased theatres with 244 screens, two owned theatres with 46 screens and one
theatre with 24 screens leased pursuant to a ground lease. Included in these
openings is the Company's first theatre in Japan, the Canal City 13 in Fukuoka,
which opened in April 1996, and the Company's first theatre in Portugal, the
Arrabida 20 in Porto, which opened in late December 1996. In addition, the
Company closed or sold 14 leased theatres with 72 screens and one owned theatre
with four screens, resulting in a circuit total of 1,957 screens in 228 theatres
as of April 3, 1997.

The Company has plans to open approximately 700 screens during fiscal 1998.
If these planned screens are opened as scheduled, the Company estimates that
total capital expenditures for fiscal 1998 will aggregate approximately $425
million. Included in these amounts are assets which the Company may place into
sale/leaseback or other comparable financing programs which will have the effect
of reducing the Company's net cash outlays. As of April 3, 1997, the Company had
under construction 15 new leased theatre locations totaling 362 screens, four
new owned theatres with 104 screens, two theatres with 48 screens leased
pursuant to a ground lease and additions to four existing theatres for 44 new
screens. All of these theatres and screens will be located in the United States.

On December 28, 1995, the Company completed the redemption of substantially
all of its Senior Notes and 12 5/8% Senior Subordinated Notes. The Company
redeemed $99,383,000 of the Senior Notes at a total price of $1,117.90 per
$1,000 principal amount and $95,096,000 of the 12 5/8% Senior Subordinated Notes
at a total price of $1,144.95 per $1,000 principal amount. The Company utilized
cash and investments along with borrowings of $130,000,000 on a credit facility
to redeem the Senior Notes and the 12 5/8% Senior Subordinated Notes.

As a part of the refinancing plan, the Company entered into the Credit
Facility, which was subsequently amended and restated as of April 10, 1997. The
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 in 2004. The commitment thereunder will
reduce 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 April
3, 1997, the Company had outstanding borrowings of $110,000,000 under the Credit
Facility at an average interest rate of 6.4% per annum.

Covenants of the Credit Facility, as amended and restated, impose
limitations on the incurrence of additional indebtedness, creation of liens,
change of control, transactions with affiliates, mergers, investments,
guaranties, asset sales, business activities and pledges. The Company is
required to maintain (i) a maximum net indebtedness to consolidated EBITDA
ratio, as defined in the Credit Facility (generally, the ratio of the principal
amount of outstanding indebtedness (less cash and equivalents) to earnings
before interest, taxes, depreciation, amortization and other noncash charges),
of 5.25 to 1 during the first four years of the Credit Facility, a ratio of 4.75
to 1 during the fifth year, a ratio of 4.25 to 1 in

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the sixth year and a ratio of 4.0 to 1 thereafter, and a (ii) minimum cash flow
coverage ratio, as defined in the Credit Facility (generally, the ratio of
consolidated EBITDA for the most recent four quarters to the sum of (A)
consolidated interest expense for such period, (B) amounts paid as dividends,
for the optional repurchase or redemption of subordinated debt or capital stock,
or with respect to the principal amount of capital lease obligations during such
period, plus (C) the current portion of debt with an original maturity exceeding
one year), of 1.40 to 1. If the Company prepays, defeases or repurchases more
than $10 million of the Notes (as defined below) or any other subordinated debt
incurred after April 10, 1997, it is required to maintain a maximum net senior
indebtedness to EBITDA ratio, as defined in the Credit Facility, of 4.5 to 1
during the first four years of the Credit Facility and 4.0 to 1 thereafter. As
of April 3, 1997, the Company was in compliance with all financial covenants
relating to the Credit Facility.

Prior to its April 10, 1997 amendment and restatement, the Credit Facility
contained a covenant that generally limited the Company's capital expenditures.
This covenant has been eliminated.

On March 19, 1997, the Company sold $200 million aggregate principal amount
of its Notes in the Note Offering. Net proceeds from the issuance of the Notes
(approximately $193.8 million) were used to reduce borrowings under the Credit
Facility. Amounts repaid under the Credit Facility will again be available for
borrowing thereunder, and the Company intends to utilize this increased
availability to continue with its current expansion program.

The Notes bear interest at the rate of 9 1/2% per annum, payable in March
and September. The Notes are redeemable at the option of the Company, in whole
or in part, at any time on or after March 15, 2002 at 104.75% of the principal
amount thereof, declining ratably to 100% of the principal amount thereof on or
after March 15, 2006, plus in each case interest accrued to the redemption date.
Upon a change of control (as defined in the Note Indenture), each holder of the
Notes will have the right to require the Company to repurchase such holder's
Notes at a price equal to 101% of the principal amount thereof plus accrued and
unpaid interest to the date of repurchase. The Notes are subordinated to all
existing and future senior indebtedness (as defined in the Note Indenture) of
the Company.

The Company has agreed to use its best efforts to (i) file and cause to
become effective by August 16, 1997, a registration statement relating to a
registered offer to exchange the Notes (the "Exchange Offer") for notes of AMCE
with terms identical in all material respects to the Notes and (ii) cause the
Exchange Offer to be consummated by September 15, 1997. If the Exchange Offer
registration statement is not declared effective by August 16, 1997, the Company
has agreed that in lieu thereof it will use its best efforts to cause to become
effective by September 15, 1997 a shelf registration statement with respect to
the Notes. In the event that either (a) the Exchange Offer registration
statement is not filed on or prior to June 17, 1997, (b) the Exchange Offer
registration statement is not declared effective on or prior to August 16, 1997
or (c) the Exchange Offer is not consummated or a shelf registration statement,
with respect to the Notes, is not declared effective on or prior to September
15, 1997, the interest rate borne by the Notes will increase by 0.50% per annum
following June 17, 1997 in the case of clause (a) above, following August 16,
1997 in the case of clause (b) above and following September 15, 1997 in the
case of clause (c) above. The aggregate amount of such increase will in no event
exceed 1.00% per annum. Upon (x) the filing of the Exchange Offer registration
statement after June 17, 1997, (y) the effectiveness of the Exchange Offer
registration statement after August 16, 1997 or (z) the consummation of the
Exchange Offer or the effectiveness of a shelf registration statement, as the
case may be, after September 15, 1997, the interest rate borne by the Notes from
the date of filing, effectiveness or consummation, as the case may be, will be
reduced to 9 1/2%. The Exchange Offer registration statement was filed on June
13, 1997.

The Note Indenture contains certain covenants that, among other things,
restrict the ability of the Company and its subsidiaries to: incur additional
indebtedness; pay dividends or make distributions in respect of their capital
stock; purchase or redeem capital stock; enter into transactions with
stockholders or certain affiliates; or consolidate, merge or sell all or
substantially all of the Company's assets, other

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than in certain transactions between the Company and one or more of its
wholly-owned subsidiaries and other than the Merger. All of these limitations
are subject to a number of important qualifications. The Note Indenture does not
impose any limitation on the incurrence by the Company and its subsidiaries of
liabilities that are not considered "Indebtedness" under the Note Indenture,
such as those that would be incurred under certain sale/leaseback transactions;
nor does the Note Indenture impose any limitation on the amount of liabilities
incurred by subsidiaries, if any, that might be designated as Unrestricted
Subsidiaries (as defined therein). Furthermore, there are no restrictions on the
ability of the Company and its subsidiaries to make advances to, or invest in,
other entities (including unaffiliated entities) and no restrictions on the
ability of the Company's subsidiaries to enter into agreements restricting their
ability to pay dividends or otherwise transfer funds to the Company. If the
Notes attain "investment grade status" (as defined in the Note Indenture), the
covenants in the Note Indenture limiting the Company's ability to incur
indebtedness, pay dividends, acquire stock or engage in transactions with
affiliates will cease to apply.

The Company believes that cash generated from operations, existing cash and
equivalents, amounts received from sale/leaseback or other comparable financing
programs which the Company is currently pursuing and the unused commitment
amount under its Credit Facility will be sufficient to fund operations and
planned capital expenditures through the end of fiscal 1998.

During the year (53 weeks) ended April 3, 1997, various holders of the
Company's $1.75 Cumulative Convertible Preferred Stock (the "Convertible
Preferred Stock") converted 696,400 shares into 1,200,589 shares of Common Stock
at a conversion rate of 1.724 shares of Common Stock for each share of
Convertible Preferred Stock. Convertible Preferred Stock dividend payments
decreased 14.4%, or $1,007,000, to $5,993,000 for the year (53 weeks) ended
April 3, 1997 from $7,000,000 in the prior year as a result of the conversions.
Future conversions will continue to reduce the amount of dividends paid by the
Company and increase the number of shares of Common Stock outstanding.

The Convertible Preferred Stock is redeemable in whole or in part, at the
option of the Company, at a current redemption price of $26 per share, declining
by $.25 per share on March 15 of each year until March 15, 2001, when such price
will become fixed at $25. Shares called for redemption may be converted by the
holders thereof prior to the redemption date.

On January 10, 1997, the Company purchased the 20% minority interest in the
common stock of AMC Philadelphia, Inc., an 80% owned subsidiary, for $7,400,000
in cash. The Company utilized borrowings on its Credit Facility to finance the
purchase. Management does not believe that the acquisition will have a
significant effect on the Company's results of operations.

OTHER

The Board of Directors has approved the Merger Agreement providing for the
Merger of the Company and DI, with the Company remaining as the surviving
entity. The Merger has been sought by members of the Durwood family so that they
may hold their interests in the Company directly instead of indirectly through
DI and AAE. In the Merger, stockholders of DI would exchange their shares of DI
stock for shares of the Company's stock. Although the outstanding shares of the
Company's Common Stock will increase and the outstanding shares of its Class B
Stock will decrease if the Merger is effected, no aggregate increase in total
outstanding shares will occur because the shares of the Company owned by DI will
be canceled and the shares of the Company held by other stockholders would not
be exchanged in the Merger. A condition to the Merger is that the Merger
Agreement receive approval of the holders of a majority of the shares of Common
Stock other than DI, the Durwood Family Stockholders, their spouses and children
and officers and directors of the Company.

DI is primarily a holding company with no significant operations or assets
other than its equity interest in the Company. Management expects that the
Merger will be accounted for as a corporate reorganization and that,
accordingly, the recorded balances for consolidated assets, liabilities, total

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stockholders equity and results of operations of the Company would not be
affected. If the Merger occurs, the Company will be responsible for paying 50%
of its costs in connection with the Merger; the aggregate merger costs for both
the Company and DI are estimated to be approximately $2 million. Management does
not believe that the transaction will have a significant effect on the Company's
financial condition, liquidity or capital resources.

The Company is in the process of modifying its computer applications to
ensure their continuing functionality for the "Year 2000" and beyond. At the
present time the Company estimates that expenses related to this project will
total approximately $1.5 million to $2.0 million. These total estimated expenses
are expected to be incurred during fiscal years 1998 and 1999.

Congress passed legislation to increase the federal minimum hourly wage paid
to hourly wage employees over a two-year period. This legislation will increase
the aggregate average hourly wage paid by the Company. The Company intends to
relieve the cost pressure from the minimum wage increase by pursuing better
labor and operating efficiencies as well as some price adjustments for theatres
in certain markets. Such legislation is not expected to have a material adverse
effect on the Company's results of operations, liquidity or financial condition.

IMPACT OF INFLATION

Historically, the principal impact of inflation and changing prices upon the
Company has been to increase the costs of the construction of new theatres, the
purchase of theatre equipment and the utility and labor costs incurred in
connection with continuing theatre operations. Film rentals expense, the largest
cost of operations of the Company, is customarily paid as a percentage of
admissions revenues and hence, while the film rentals expense may increase on an
absolute basis, the percentage of admissions revenues represented by such
expense is not directly affected by inflation. Except as set forth above,
inflation and changing prices have not had a significant impact on the Company's
total revenues and results of operations.

RECENTLY ISSUED FINANCIAL ACCOUNTING PRONOUNCEMENTS

During fiscal 1996, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION. The Statement allows companies to measure compensation cost in
connection with employee stock compensation plans using a fair value based
method or to continue to use an intrinsic value based method to account for
stock options and awards. The Company has chosen to continue using the intrinsic
value based method while adopting the disclosure-only provisions of the
pronouncement.

During fiscal 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), EARNINGS PER
SHARE. SFAS 128 eliminates the presentation of primary and fully diluted
earnings per share ("EPS") and requires presentation of basic and diluted EPS.
The principal difference between primary and basic EPS is that common stock
equivalents are not included with the weighted average number of shares
outstanding used in the computation of basic EPS. Diluted EPS is computed
similarly to fully diluted EPS. SFAS 128 is effective for periods ending after
December 15, 1997, including interim periods, and requires restatement of all
prior-period EPS data. Early adoption is not permitted. Management has not yet
determined the impact that this statement will have on the Company.

BUSINESS OF THE COMPANY

GENERAL

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California, Texas, Missouri and Michigan and approximately 73% of the Company's
domestic screens are located in areas among the 20 largest "Areas of Dominant
Influence" (television market areas as defined by Arbitron Company).

The Company is an industry leader in the development and operation of
"megaplex" and "multiplex" theatres, primarily in large metropolitan markets.
Megaplex theatres are theatres having at least 14 screens with predominantly
stadium-style seating (seating with an elevation between rows to provide
unobstructed viewing). Multiplex theatres are theatres generally without
stadium-style seating and having less than 14 screens. The Company believes that
its strategy of developing megaplex theatres has prompted the current theatrical
exhibition industry trend in the United States and Canada toward the development
of larger theatre complexes. This trend has accelerated the obsolescence of many
existing movie theatres by setting new standards for moviegoers, who have
demonstrated their preference for the more attractive surroundings, wider
variety of films, better customer services and more comfortable seating typical
of megaplexes.

In addition to providing a superior entertainment experience, megaplex
theatres realize economies of scale by serving more patrons from common support
facilities, thereby spreading costs over a higher revenue base. The Company's
megaplex theatres have consistently ranked among its top grossing facilities on
a per screen basis. During the fiscal year ended April 3, 1997, attendance per
screen at the Company's megaplex theatres was 88,200 compared to 63,800 for the
Company's multiplex theatres. (During 1995, the last period for which data is
available, the theatrical exhibition industry in the United States averaged
approximately 47,000 patrons per screen.) In addition, during the fiscal year
ended April 3, 1997, average revenue per patron at the Company's megaplex
theatres was $6.54 compared to $5.95 for its multiplex theatres, and operating
cash flow before rent of the Company's megaplex theatres was 37% of the total
revenue of such theatres, whereas operating cash flow before rent of the
Company's multiplex theatres was 33% of total revenues of such theatres. As of
April 3, 1997, 591 screens, or 30.2% of the Company's screens, were in megaplex
and multiplex theatres with 14 or more screens and of these, 366 screens, or
18.7% of the Company's screens, were in megaplex theatres. The average number of
screens per theatre operated by the Company is 8.6, compared to an average of
5.9 for the ten largest North American theatrical exhibition companies (based on
number of screens) and 5.2 for all North American theatrical exhibition
companies.

The Company continually upgrades its theatre circuit by opening new theatres
(primarily megaplex theatres), adding new screens to existing theatres and
selectively closing unprofitable theatres. Since April 1995, the Company has
opened 24 new theatres with 422 screens, representing 21.6% of its current
number of screens, and has added 42 screens to existing theatres. Of these 422
screens, 366 screens were in 18 megaplex locations. Among these new theatres are
the Company's first theatre in Japan, the Canal City 13, in Fukuoka, and its
first theatre in Portugal, the Arrabida 20, in Porto. As of April 3, 1997, the
Company had 21 new theatres under construction having an aggregate of 514
screens and was adding 44 screens to existing theatres. All of these theatres
and screens will be located in the United States.

The Company's predecessor was founded in Kansas City, Missouri in 1920 by
the father of Mr. Stanley H. Durwood, the current Chairman of the Board and
Chief Executive Officer of the Company. DI, substantially all of whose stock is
beneficially owned by Mr. Stanley H. Durwood and the Durwood Children, owned
100% of the outstanding shares of AMCE Class B Stock and 40% of the outstanding
shares of AMCE Common Stock as of April 3, 1997, representing in the aggregate
approximately 97% of the voting power of outstanding securities in matters other
than the election of directors. Holders of AMCE Class B Stock are entitled to
ten votes per share and as a class are presently entitled to elect 75%

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of the AMCE Board. See "--Security Ownership of Beneficial Owners" and
"--Management of the Company."

BUSINESS STRATEGY

The Company's strategy of establishing megaplex theatres enhances attendance
and concessions sales by enabling it to exhibit concurrently a variety of motion
pictures attractive to different segments of the movie-going public. Megaplexes
also allow the Company to match a particular motion picture's attendance
patterns to the appropriate auditorium size (ranging from approximate 90 to 450
seats), thereby extending the run of a motion picture and providing superior
theatre economies. The Company believes that megaplex theatres enhance its
ability to license commercially popular motion pictures and to access
economically prime real estate sites due to its desirability as an anchor
tenant.

The Company believes that significant market opportunities exist for
development of modern megaplex and multiplex theatres in select international
markets. The theatrical exhibition business has become increasingly global and
box office receipts from international markets approximate those of the U.S.
market and are rising at a faster rate. In addition, the production and
distribution of feature films and demand for American motion pictures is
increasing in many countries. The Company believes that its experience in
developing and operating megaplex and multiplex theatres provides it with a
significant advantage in developing megaplex and multiplex facilities in
international markets and the Company intends to utilize this experience, as
well as its existing relationships with domestic motion picture studios, to
enter certain international markets. The Company's strategy in these markets is
to operate leased theatres and consider partnerships or joint ventures, where
appropriate, to share risk and leverage resources. Presently the Company's
activities in international markets are directed toward Japan, Portugal, Spain,
Hong Kong and Canada, which markets the Company believes are under screened.

The Company continually monitors its theatres to determine their performance
and has improved the profitability of certain of its older theatres by
converting them to "dollar houses," which display second-run movies and charge
lower admission prices (ranging from $1.00 to $1.75). It operated 12 such
theatres with 68 screens as of April 3, 1997 (3.5% of the Company's total
screens). Other strategies for under performing theatres include selling them to
discount operators and closing them. Divestiture strategies for theatres with
longer leases include selling them to other exhibitors, closing them or
converting such theatres to other uses and subleasing them.

THEATRE CIRCUIT

The following table sets forth information concerning additions and
dispositions of theatres and screens during, and the number of theatres and
screens operated as of the end of, the last five fiscal years. The Company adds
and disposes of theatres based on industry conditions and its business strategy.

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CHANGES IN THEATRES OPERATED

· Enlarge/Download Table

NUMBER OF NUMBER OF NUMBER OF NUMBER OF NUMBER OF NUMBER OF
FISCAL YEAR ENDED THEATRES SCREENS THEATRES SCREENS THEATRES SCREENS
------------------------- --------------- --------------- --------------- --------------- --------------- -------------
ADDITIONS DISPOSITIONS TOTAL THEATRES OPERATED
-------------------------------- -------------------------------- ------------------------------

April 1, 1993............ 6 72 16 72 243 1,617
March 31, 1994........... 2 15 9 29 236 1,603
March 30, 1995........... 3 53 7 26 232 1,630
March 28, 1996........... 7 150 13 61 226 1,719
April 3, 1997............ 17 314 15 76 228 1,957
-- --
--- ---
Total.................. 35 604 60 264
-- --
-- --
--- ---
--- ---

The following table provides greater detail with respect to the Company's
theatre circuit as of April 3, 1997.

· Enlarge/Download Table

SCREENS PER
THEATRE
TOTAL TOTAL ------------
DOMESTIC SCREENS THEATRES 1-13 14+
---------------------------------------------------------- ----------- ------------- ----------- -----------

Florida................................................... 390 43 35 8
California................................................ 333 35 28 7
Texas..................................................... 221 24 21 3
Missouri.................................................. 127 13 10 3
Michigan.................................................. 115 19 19 --
Arizona................................................... 114 13 11 2
Pennsylvania.............................................. 105 15 15 --
Georgia................................................... 86 7 3 4
Colorado.................................................. 65 9 9 --
Ohio...................................................... 62 5 3 2
Virginia.................................................. 62 8 7 1
New Jersey................................................ 50 8 8 --
Maryland.................................................. 48 6 6 --
Oklahoma.................................................. 22 3 3 --
North Carolina............................................ 22 1 -- 1
Louisiana................................................. 20 3 3 --
Washington................................................ 20 3 3 --
New York.................................................. 16 2 2 --
Massachusetts............................................. 10 2 2 --
District of Columbia...................................... 9 1 1 --
Nebraska.................................................. 8 2 2 --
Illinois.................................................. 8 1 1 --
Kansas.................................................... 6 1 1 --
Delaware.................................................. 5 2 2 --
--
----- --- ---
Total Domestic.......................................... 1,924 226 195 31
--
--
----- --- ---
----- --- ---
INTERNATIONAL
----------------------------------------------------------
Japan..................................................... 13 1 1 --
Portugal.................................................. 20 1 -- 1

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Amc Entertainment Inc · S-4/A · On 6/17/97

Filed On 6/17/97 · SEC File 333-25755 · Accession Number 912057-97-20592

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