`
`IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
`
`
`
`
`
`C.A. No.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Michael Simons, on behalf of himself and all other )
`similarly-situated holders of Series A Convertible
`)
`Participating Preferred Stock and AMC Preferred
`)
`Equity Units of AMC Entertainment Holdings, Inc. )
`
`
`
`
`
`
`
`)
`
`
`Plaintiff,
`
`
`
`)
`
`
`
`
`
`
`
`)
`
`v.
`
`
`
`
`
`)
`
`
`
`
`
`
`
`)
`AMC Entertainment Holdings, Inc.
`
`
`)
`
`
`
`
`
`
`
`)
`
`
`Defendant.
`
`
`
`)
`
`
`
`
`
`
`
`
`
`VERIFIED COMPLAINT
`
`Plaintiff Michael Simons, on behalf of himself and all other similarly situated holders of Series A
`
`Convertible Participating Preferred Stock (“Preferred Stock”) and AMC Preferred Equity Units
`
`(“APEs”) of E (“AMC” or the “Company” or “Defendant”) brings this Complaint for
`
`Declaratory and Injunctive Relief (the “Complaint”) against AMC. The allegations of the
`
`Complaint are based on the knowledge of Plaintiff as to himself and on information and belief,
`
`including based on the investigation of counsel and review of publicly available information, as
`
`to all other matters.
`
`NATURE OF THE ACTION
`
`1.
`
`This Action seeks: (a) a declaratory judgment that the Settlement (as defined
`
`below) breaches the Series A Convertible Participating Preferred Stock Certificate of
`
`Designations (COD); and (b) an injunction requiring AMC to (1) give effect to the anti-dilution
`
`provision in Section VI of the COD, which requires AMC to adjust the number of shares of
`
`
`
`EFiled: Aug 14 2023 08:59PM EDT
`Transaction ID 70632469
`Case No. 2023-0835-
`
`

`

`
`
`AMC Class A Common Stock (“Common Stock” or “Common Shares”) to be received by the
`
`holders of the Preferred Stock (“Preferred Stockholders’) upon the conversion of the Preferred
`
`Stock according to the formula set forth therein, and (2) give effect to Section III of the COD and
`
`distribute the Special Distribution (as defined herein) of the Settlement to the holders of
`
`Preferred Stock at the same time and on the same terms as it will be distributed to the holders of
`
`Common Stock the “Common Stockholders”).
`
`2.
`
`As set forth in greater detail in the Substantive Allegations section herein, AMC
`
`sought to raise additional capital by securing shareholder approval to amend the Company’s
`
`Certificate of Incorporation to authorize the issuance of additional shares of Common Stock and
`
`to issue those shares.
`
`3.
`
`AMC sought to increase the number of authorized Common Shares by first
`
`creating 10 million new shares of Preferred Stock, to be traded on the New York Stock Exchange
`
`(“NYSE”) as AMC Preferred Equity Units under the symbol “APE.” Each APE is a depositary
`
`share and represents an interest in one one-hundredth (1/100th) of a share of the Preferred Stock.
`
`4.
`
`The Certificate of Designations of the Preferred Stock (attached hereto as Exhibit
`
`A) calls for the number of shares of Common Stock to be received upon the conversion of the
`
`Preferred Stock to be adjusted for any dilution of the Common Stock. It also provides that any
`
`distribution made in respect of the shares of Common Stock shall also be made to the Preferred
`
`Stock in the same amount and at the same time.
`
`5.
`
`In January 2023, AMC set a special meeting for March 14, 2023 to vote on
`
`proposals to (i) increase the number of authorized shares of AMC Common Stock, (ii) convert all
`
`existing Preferred Stock into Common Stock on a 1-for-1 basis, and (iii) subsequently effect a 1-
`
`to-10 reverse stock split of the Common Stock.
`
`
`
`2
`
`

`

`
`
`6.
`
`Two class actions were filed on behalf of holders of Common Stock seeking,
`
`among other things, (i) a ruling that the creation of the Preferred Stock was not properly
`
`authorized, and (ii) a separate class vote for Class A Common Stockholders on the proposals at
`
`the March 14, 2023 shareholder meeting. At the March 14, 2023 special meeting, the 1-for-1
`
`conversion was approved, but the Certificate of Incorporation was not formally amended to
`
`authorize the issuance of additional shares of Common Stock to support the conversion because
`
`the Delaware Court of Chancery had previously issued an Order allowing the special meeting to
`
`occur but preventing AMC from formally amending its Certificate of Incorporation as a result of
`
`any vote of shares at that special meeting.
`
`7.
`
`The parties to the class action lawsuits, which were consolidated into a single
`
`action, reached a settlement which entailed distributing to the holders of Common Stock one
`
`share of Common Stock for every 7.5 shares held (the “Special Distribution”) prior to the
`
`conversion of the Preferred Shares into one share of Common Stock. This has the effect of
`
`diluting the Preferred Shareholders’ ownership interest in AMC and violates the anti-dilution
`
`provision of the COD, as well as the COD’s requirement that Preferred Stockholders receive the
`
`same distributions as Common Stockholders.
`
`8.
`
`On July 21, 2023, the Delaware Court of Chancery rejected the Settlement of the
`
`class action lawsuit because it contained a release that was excessively broad in that it included
`
`potential claims belonging to Preferred Shareholders.
`
`9.
`
`The parties to the class action lawsuit revised the release contained in the
`
`Settlement to exclude Preferred Shareholders and submitted the revision to the Court on July 22,
`
`2023.
`
`
`
`3
`
`

`

`
`
`10. The Settlement was granted final approval by the Court on August 11, 2023. As
`
`of the date of the filing of this Complaint, the March 14, 2023 shareholder approval of an
`
`increase in the number of authorized shares of Common Stock and subsequent filing of the
`
`amended Certificate of Incorporation that formalizes such increase, conversion of all existing
`
`Preferred Stock into Common Stock on a 1-for-1 basis, and a subsequent 1-to-10 reverse stock
`
`split of the Common Stock, has not yet been given effect, as it is currently subject to a Status
`
`Quo Order.
`
`11. When the Court lifts the Status Quo Order, AMC will file the amended Certificate
`
`of Incorporation that increases the number of authorized shares of Common Stock, and then
`
`converts all existing Preferred Stock into Common Stock on a 1-for-1 basis. AMC must, prior to
`
`the conversion, (i) give effect to the anti-dilution provision in Section VI of the COD, which
`
`requires AMC to adjust the number of shares of Common Stock to be received by the Preferred
`
`Stock upon conversion according to the formula set forth therein, and (ii) give effect to Section
`
`III of the COD and distribute the Special Distribution (as defined herein) of the Settlement to the
`
`holders of Preferred Stock at the same time and on the same terms as it will be distributed to the
`
`holders of Common Stock
`
`PARTIES
`
`12.
`
`Plaintiff Michael Simons (“Plaintiff”) has held AMC Preferred Equity (APE)
`
`units during all relevant times..
`
`13.
`
`Defendant AMC Entertainment Holdings, Inc. (previously defined as “AMC” or
`
`the “Company” or “Defendant”) is a Delaware corporation with its principal executive offices
`
`located at One AMC Way, 11500 Ash Street, Leawood, KS. AMC’s Common Stock trades on
`
`the New York Stock Exchange under the ticker symbol “AMC.” AMC is principally involved in
`
`
`
`4
`
`

`

`
`
`the theatrical exhibition business and owns, operates or has interests in theatres primarily located
`
`in the United States and Europe.
`
`JURISDICTION AND VENUE
`
`14.
`
`This Court has subject matter jurisdiction over this matter pursuant to 8 Del. C. §
`
`111, which provides jurisdiction over “[a]ny civil action to interpret, apply, enforce or determine
`
`the validity of the provisions of . . . Any written restrictions on the transfer, registration or
`
`transfer or ownership of securities,” and pursuant to 10 Del. C. § 6501, et seq,. the Declaratory
`
`Judgment Act, which permits the Court to “declare rights, status and other legal relations
`
`whether or not further relief is or could be claimed.” This Court also has subject matter
`
`jurisdiction under 10 Del. C. §341 because Plaintiff seeks declaratory and injunctive relief.
`
`15.
`
`The Court has jurisdiction over Defendant AMC, which is a Delaware
`
`corporation. 8 Del. C. §321(a).
`
`SUBSTANTIVE ALLEGATIONS
`
`16.
`
`In 2020, the COVID-19 pandemic prevented the American public from gathering
`
`in public spaces, including in movie theaters, which negatively impacted the revenues and
`
`operations of AMC. By late 2020, numerous hedge funds took widely reported short positions in
`
`AMC’s stock. In response, retail investors rallied around the Company and took positions in its
`
`stock in an effort to defeat the short sellers. By June 2021, more than 80% of AMC’s shares were
`
`held by approximately 4.1 million retail investors.
`
`17.
`
`To capitalize on the higher stock price driven by retail investment, AMC sold
`
`nearly all of the Company’s remaining authorized shares of Common Stock to raise new funding.
`
`Thereafter, AMC proposed on multiple occasions to amend the Company’s Certificate of
`
`Incorporation to authorize the issuance of additional shares of Common Stock, but AMC twice
`
`
`
`5
`
`

`

`
`
`abandoned seeking shareholder approval for this increase – first by postponing the May 24, 2021
`
`Annual Meeting and then on July 6, 2021 by withdrawing the proposal from consideration at the
`
`rescheduled Annual Meeting.
`
`18.
`
`On August 4, 2022, AMC announced the Board’s creation of 10 million new
`
`shares of Preferred Stock, which carried super voting rights—100 votes per share, as compared
`
`to the 1 vote per share enjoyed by the holders of AMC’s Common Stock—and a corresponding
`
`economic interest in the Company.
`
`19.
`
`The shares of Preferred Stock were deposited with a depositary institution,
`
`ComputerShare Inc. (“ComputerShare”), pursuant to a Deposit Agreement dated August 4, 2022.
`
`At AMC’s direction, ComputerShare then issued AMC Preferred Equity Units—widely referred
`
`to as “APEs”—which were listed for trade on the New York Stock Exchange (“NYSE”) under
`
`the symbol “APE.”
`
`20.
`
`Each APE is a depositary share and represents an interest in one one-hundredth
`
`(1/100th) of a share of the Preferred Stock. AMC touted that each APE was designed to be
`
`equivalent to one share of the Company’s Common Stock, both in economic and voting rights,
`
`and to be convertible into one share of Common Stock upon the occurrence of certain events,
`
`including upon the occurrence of a shareholder vote.
`
`21.
`
`Section II of the Certificate of Designations of the Series A Convertible
`
`Participating Preferred Stock (previously defined as “COD”) provides, inter alia, that:
`
`on the Conversion Date, each share of Preferred Stock will automatically convert
`into an amount of fully-paid and non-assessable shares of Common Stock,
`without any action on the part of Holders or the Corporation, determined in
`accordance with the Applicable Conversion Rate. The shares of Preferred Stock
`so converted will be cancelled as described in paragraph (b) below. The
`Corporation may seek Stockholder Approval at such time or times as the Board in
`its sole discretion shall determine.
`
`
`
`
`6
`
`

`

`
`
`22.
`
`The Certificate of Designations defines Applicable Conversion Rate as “the Initial
`
`Conversion Rate, subject to adjustment” and defines Initial Conversion Rate as “one-hundred
`
`(100) shares of Common Stock for each share of Preferred Stock.” Because one APE represents
`
`one one-hundredth (1/100) of a Preferred share, the Initial Conversion Rate effectively calls for
`
`the conversion of one APE unit into one share of Common Stock.
`
`23.
`
`The Certificate of Designations defines Conversion Date as “the first business day
`
`following the receipt of Stockholder Approval and the filing, acceptance and effectiveness of the
`
`Amendment with the Office of the Secretary of State of the State of Delaware.”
`
`24.
`
`The Certificate of Designations defines the Amendment as:
`
`the Amendment to the Certificate of Incorporation increasing the number of
`shares of Common Stock that the Corporation is authorized to issue from
`524,173,073 to such higher number of authorized shares of Common Stock as the
`Board may at any time determine in its sole discretion, which amount shall be not
`less than an amount sufficient to effect the conversion of the then-outstanding
`shares of Preferred Stock into Common stock.
`
`25.
`
`Thus, the Certificate of Designations calls for the conversion of one APE (which
`
`represents an interest in one one-hundredth (1/100th) of a share of the Preferred Stock) to one
`
`share of Common Stock upon the approval of the Amendment by the requisite stockholders of
`
`the Corporation.
`
`26.
`
`The Certificate of Designations (Section VI. Anti-Dilution Adjustments) calls for
`
`the number of shares of Common Stock to be received upon the conversion of the Preferred
`
`Stock to be adjusted for any dilution of the Common Stock that occurs “[i]n the event the
`
`Corporation shall at any time prior to the Conversion Date issue Additional Shares of Common
`
`Stock.”
`
`27.
`
`Section III of the Certificate of Designations provides that any distribution made
`
`to holders of Common Stock will also be made to Preferred Stockholders:
`
`
`
`7
`
`

`

`
`
`the Holders of AMC Preferred Equity Units shall be entitled to receive, when, as
`and if declared by the Board or any duly authorized committee of the Board, but
`only out of assets legally available therefor, all cash dividends or distributions
`(including, but not limited to, regular quarterly dividends) declared and paid or
`made in respect of the shares of Common Stock, at the same time and on the same
`terms as holders of Common Stock, in an amount per share of Preferred Stock
`equal to the product of (x) the Applicable Conversion Rate then in effect and (y)
`any per share dividend or distribution, as applicable, declared and paid or made in
`respect of each share of Common Stock.
`
`28.
`
`On August 22, 2022, APE units were issued to the then-current holders of
`
`Common Stock as a special dividend. Each AMC Shareholder was issued one APE unit for each
`
`AMC Common Share held at the time, in effect resulting in a two-for-one stock split. A total of
`
`approximately 516 million APE units were issued on August 22, 2022. APE units began trading
`
`on the New York Stock Exchange on that same day.
`
`29.
`
`On September 26, 2022, the Company announced that it would issue additional
`
`APE units through an “at the market” issuance program to be led by Citigroup Global Markets.
`
`30.
`
`On December 22, 2022, AMC announced it had entered into a multi-step
`
`agreement allowing a single investor, Antara Capital L.P. (“Antara”), to obtain over 257 million
`
`APEs—representing almost 28% of all outstanding APEs—at an average cost of $0.66 per unit.
`
`The agreement with Antara also required AMC to propose an increase in the number of
`
`authorized shares of Common Stock and a conversion of all existing APEs into Common Stock
`
`on a 1-for-1 basis, and AMC itself sought a subsequent 1-to-10 reverse stock split of the
`
`Common Stock (the “Proposals”). Antara also signed a voting agreement to support the
`
`Proposals.1
`
`
`1 Following the September 2022 APE sales and the Antara deal, there were more than 929
`million units of the Company’s APEs outstanding, as compared to just 517 million shares of
`Class A common stock.
`
`
`
`8
`
`

`

`
`
`2023.
`
`31.
`
`In January 2023, AMC set a shareholder vote on the Proposals for March 14,
`
`32.
`
`On February 20, 2023, Allegheny County Employees’ Retirement System
`
`commenced an action in the Delaware Court of Chancery bearing the caption Allegheny County
`
`Employees’ Retirement System v. AMC Entertainment Holdings, Inc., et al., C.A. No. 2023-
`
`0215-MTZ (the “Allegheny Action”), on behalf of itself and all other similarly situated holders
`
`of Common Stock, against AMC and members of AMC’s board of directors (the “Board”),
`
`asserting claims for breach of fiduciary duty and violation of 8 Del. C. § 242(b)(2) in connection
`
`with the issuance of the APEs and the Proposals, and seeking injunctive relief and money
`
`damages. The Allegheny Action sought (i) a judgment that the AMC Board members breached
`
`their fiduciary duties to the Company’s Class A stockholders and that the creation of the
`
`Preferred Stock was not properly authorized pursuant to the DGCL; and (ii) relief including a
`
`separate class vote for Class A stockholders on the Proposals at the March 14, 2023 shareholder
`
`meeting.
`
`33.
`
`On February 20, 2023, Usbaldo Munoz and Anthony Franchi commenced an
`
`action in the Delaware Court of Chancery bearing the caption Munoz, et al. v. Aron, et al., C.A.
`
`No. 2023-0216-MTZ (the “Munoz Action”), on behalf of themselves and all other similarly
`
`situated holders of Common Stock, against AMC and Board members, asserting a claim for
`
`breach of fiduciary duty in connection with the Proposals, and seeking injunctive relief.
`
`34.
`
`On February 20, 2023, plaintiffs in the Munoz action filed their Motion for
`
`Expedited Proceedings and Entry of a Status Quo Order or, in the Alternative, a Temporary
`
`Restraining Order.
`
`
`
`9
`
`

`

`
`
`35.
`
`On February 27, 2023, pursuant to a joint motion of the parties to the Action, the
`
`Delaware Court of Chancery entered an Order allowing AMC to hold its March 14, 2023 special
`
`meeting and to solicit and tabulate any votes in connection therewith, but not amend its
`
`certificate of incorporation as a result of any vote of shares at that special meeting.
`
`36.
`
`On March 2, 2023, the Delaware Court of Chancery entered an Order
`
`consolidating the Allegheny Action and the Munoz Action for all purposes (the “Action”).
`
`37.
`
`On March 14, 2023, AMC convened the Special Meeting and held a shareholder
`
`vote where the Proposals, including the one-for-one Conversion, were approved by a majority of
`
`Common Stock and Preferred Stock.2
`
`38.
`
`A total of 182,342,728 out of 517,580,416 eligible shares of the Common Stock
`
`were present in person or represented by proxy at the Special Meeting, and a total of
`
`182,342,728 shares of Common Stock were voted after excluding broker non-votes. Of those
`
`182,342,728 shares of Common Stock voted, 132,182,944, or 72.5%, voted in favor of the
`
`Proposals. See AMC’s Form 8-K dated March 14, 2023.
`
`39.
`
`On April 3, AMC filed a Form 8-K announcing that the parties to the consolidated
`
`Action reached a proposed settlement. That same day, the plaintiffs in the Action filed an
`
`Unopposed Motion to Lift the Status Quo Order Due to the Parties’ proposed settlement. As
`
`
`2 Though APEs and Class A shares are each entitled to one vote per share, the Deposit
`Agreement with ComputerShare included a “mirror voting” provision requiring ComputerShare,
`as depositary for the Preferred Stock, to “[i]n the absence of specific instructions from Holders of
`[APEs], . . . vote the Preferred Stock represented by the [APEs] . . . of such Holders
`proportionately with votes cast pursuant to the instructions received from other Holders.” Thus,
`for example, if the holders of just three APEs cast votes on a corporate proposal—say, two in
`favor and one against—ComputerShare will cast votes for all of the nearly 1 billion outstanding
`APEs 2/3 in favor and 1/3 against, regardless of the number of votes actually cast (the
`“Depositary Voting Requirement”). There is no similar arrangement for the Class A common
`stock. Thus, uninstructed shares of Class A stock, unlike uninstructed APEs, were not voted on
`the Proposals.
`
`
`
`10
`
`

`

`
`
`described in the Motion, the parties agreed that if the Court approved lifting the status quo order,
`
`AMC would (1) “increase the authorized number of shares of Common Stock,” (2) “convert the
`
`Company’s outstanding AMC Preferred Equity Units (‘APES’) into shares of Common Stock,”
`
`(3) and “effect a 1-to-10 reverse split of AMC equity.”
`
`40.
`
`On April 5, 2023, the Delaware Court of Chancery denied the Unopposed Motion
`
`to Lift the Status Quo Order and found “the parties offer no good cause to lift the status quo
`
`order.”
`
`41.
`
`The parties to the Action entered into a Stipulation and Agreement Of
`
`Compromise, Settlement, And Release Parties dated April 27, 2023 (“Settlement”), whereby the
`
`holders of Common Stock are to receive one share of Common Stock for every 7.5 shares held
`
`(“Special Distribution”), followed by a planned 1-for-10 reverse common stock split.
`
`42.
`
`As the Delaware Chancery Court stated in the Action:
`
`The Proposed Settlement has the practical effect of reallocating the ownership of
`AMC's equity between its common stockholders and the APE unitholders. If the
`settlement is approved, the existing common stockholders would own a slightly
`bigger slice of the AMC pie at the expense of the APE unitholders. . . Without the
`Proposed Settlement, the existing common stockholders would own 34.28% of
`AMC's equity after the Conversion and the former APEs unitholders would own
`65.72%. With the Proposed Settlement, the existing common stockholders would
`own 37.15% of AMC's equity after the Conversion and the former APEs
`unitholders would own 62.85%.
`
`In re AMC Ent. Holdings, Inc. S'holder Litig., No. 2023-0215-MTZ, 2023 WL 4677722, at *12
`
`(Del. Ch. July 21, 2023)
`
`43.
`
`On July 21, 2023, the Delaware Court of Chancery rejected the Settlement after
`
`determining the release contained in the Stipulation of Settlement was too broad because holders
`
`of Common Stock are not able to release AMC from potential claims that belong solely to
`
`holders of AMC Preferred Stock. As the Court held:
`
`
`
`11
`
`

`

`
`
`Because Plaintiffs are empowered to speak in this putative class action only as
`and for common stockholders, they cannot represent or release APE direct claims
`adhered to APE units in this action. Direct APE claims require APE unitholders to
`be part of the class. APE units are not represented in the complaints or in the
`common stockholder class.
`
`In re AMC Ent. Holdings, Inc. S'holder Litig., No. 2023-0215-MTZ, 2023 WL 4677722, at *21
`
`(Del. Ch. July 21, 2023)
`
`44.
`
`The parties to the Action revised the release contained in the Stipulation of
`
`Settlement to exclude holders of AMC preferred shares and submitted the revision to the Court
`
`on July 22, 2023. See Exhibit B (Revised Settlement).
`
`45.
`
`The Revised Settlement was approved by the Court on August 11, 2023. In re
`
`AMC Ent. Holdings, Inc. S’holder Litig., No. 2023-0215-MTZ, D. E. 92340791 (August 11,
`
`2023) (attached hereto as Exhibit C.) Once the Status Quo Order is lifted, the Company will
`
`increase the number of Common Shares outstanding, distribute the Special Distribution to the
`
`Common Stockholders and convert the Preferred Stock. The Special Distribution gives one share
`
`of Common Stock for every 7.5 shares held. In the conversion, outstanding Preferred Stock will
`
`be converted into shares of Common Stock on a basis of one-hundred (100) shares of Common
`
`Stock for each share of Preferred Stock, and thus converts the APEs - which are each one one-
`
`hundredth (1/100) of a Preferred Share - into common stock on a 1:1 basis.
`
`46.
`
`The Revised Settlement violates the Certificate of Designations (Section VI. Anti-
`
`Dilution Adjustments), which calls for the number of shares of Common Stock to be received
`
`upon the conversion of the Preferred Stock to be adjusted for any dilution of the Common Stock
`
`that occurs “[i]n the event the Corporation shall at any time prior to the Conversion Date issue
`
`Additional Shares of Common Stock.”
`
`
`
`12
`
`

`

`
`
`47.
`
`As the Court stated in the Action, “[u]nder its terms, AMC agreed to distribute
`
`6,922,565 shares of common stock to existing common stockholders, at a ratio of one share of
`
`common for every seven and a half shares of common stock held, after the Reverse Split but
`
`before the Conversion.” In re AMC Ent. Holdings, Inc. S’holder Litig., No. 2023-0215-MTZ,
`
`2023 WL 4677722, at *12 (Del. Ch. July 21, 2023) (emphasis added).3
`
`48.
`
`Thus, the Special Distribution will be issued before the Conversion Date and will
`
`dilute the ownership stake of the Preferred Shareholders – unless the Anti-Dilution provision in
`
`Section VI of the Certificate of Designations is given effect prior to the Conversion.
`
`49.
`
`Even if the Conversion technically were to occur in time before the Special
`
`Distribution, these actions are part of the same AMC plan to raise capital by increasing the
`
`number of Common Shares outstanding and issuing those shares through the conversion of
`
`Preferred Stock. Thus, the Anti-Dilution provision in the Certificate of Designations must be
`
`implemented ex post facto, lest the Company be permitted an end-run around Section VI of the
`
`Certificate of Designations.
`
`50.
`
`The Settlement also breaches the contractual right of the Preferred Shareholders
`
`(and thus APE unitholders) under Section III of the COD to receive distributions (i.e., the Special
`
`
`3 See In re AMC Ent. Holdings, Inc. S'holder Litig., No. 2023-0215-MTZ, 2023 WL 4677722, at
`*12, FN 83. (Del. Ch. July 21, 2023) (“POB at 31; Stip. ¶ A.1(aa) (“ ‘Settlement Payment’
`means one share of Common Stock for every 7.5 shares of Common Stock owned by record
`holders of Common Stock as of the Settlement Class Time (after giving effect to the Reverse
`Stock Split).”); Notice ¶ 44 (“If the proposed Settlement is approved, AMC will promptly effect
`the Conversion and issue to the record holders of Common Stock as of the Settlement Class
`Time one share of Common Stock for every 7.5 shares of Common Stock owned by such holders
`(after giving effect to the Reverse Stock Split and taking into account cash payments in lieu of
`fractional shares).”); id. ¶ 30 (“Only record holders of Common Stock as of the ‘Settlement Class
`Time’ will be entitled to a Settlement Payment.”); id. ¶ 47 (“As noted above, the Settlement
`Payment will be issued to record holders of Common Stock as of the Settlement Class Time; that
`is, the time after the Reverse Stock Split has effected but immediately before the APEs are
`converted into Common Stock.”).
`
`
`
`
`13
`
`

`

`
`
`Distribution) declared and paid or made in respect of the shares of Common Stock, at the same
`
`time and on the same terms as holders of Common Stock.
`
`51.
`
` According to the Court in the Action:
`
`The Proposed Settlement compensates common stockholders to the exclusion—
`and dilution—of APE unitholders. The settlement consideration offers common
`stockholders more AMC equity, which necessarily comes at the expense of the
`APE position. The parties propose to pay that consideration after the Reverse
`Split, but before the Conversion. In that scenario, when the APEs convert to
`shares of common stock, former APE unitholders will represent a smaller
`percentage of the total common than they would have if not for the Proposed
`Settlement consideration received by the class.
`
`In re AMC Ent. Holdings, Inc. S’holder Litig., No. 2023-0215-MTZ, 2023 WL 4677722, at *24
`
`(Del. Ch. July 21, 2023) The Anti-Dilution provision in the Certificate of Designations exists to
`
`protect the Preferred shareholders (and thus APE unitholders) from exactly this scenario.
`
`52.
`
`The contractual rights of the APE unitholders are clearly breached by the
`
`Settlement. As the Court stated:
`
`I will not speculate or hazard to guess what APE claims a class member who also
`owns APE, in their capacity as an APE unitholder, might bring, or what risk such
`claims might present to the Company. The parties bear the burden of
`demonstrating that the Proposed Settlement is fair, reasonable, and in accordance
`with due process. It is up to the parties to decide if the risk of unreleased APE
`claims is worth rejection of a settlement that might pave the way for the
`Conversion, which the parties have intimated is necessary to save the Company
`from financial ruin.
`
`In re AMC Ent. Holdings, Inc. S’holder Litig., No. 2023-0215-MTZ, 2023 WL 4677722, at *26
`
`(Del. Ch. July 21, 2023).
`
`53.
`
`By not giving effect to the Preferred Stock’s anti-dilution protection provision, the
`
`Company will be performing an end run around the terms of the Preferred Stock Certificate of
`
`Designations and, indeed, breaching those Designations, including Sections III and VI, which are
`
`
`
`14
`
`

`

`
`
`a contract between the Company on the one hand, and the Preferred Stockholders (and thus also
`
`the APE unitholders) on the other.
`
`CLASS ACTION ALLEGATIONS
`
`54.
`
`Plaintiff brings this Action pursuant to Chancery Court Rule 23, on behalf of all
`
`other holders of Preferred Stock and holders of AMC Preferred Equity Units (APEs) of AMC
`
`Entertainment Holdings, Inc. (except Defendants herein and any person, firm, trust, corporation
`
`or other entity related to or affiliated with them and their successors-in-interest) who are or will
`
`be threatened with injury arising from Defendant’s wrongful actions, as more fully described
`
`herein (the “Class”).
`
`55.
`
`56.
`
`This Action is properly maintainable as a class action.
`
`The Class is so numerous that joinder of all members is impracticable. The
`
`number of shares of AMC Preferred Stock as of August 1, 2023 is 9,954,064 and the number of
`
`AMC Preferred Equity Units as of August 1, 2023 is 995,406,413. Plaintiff believes there are
`
`millions of beneficial holders of AMC Preferred Equity Units dispersed across the country and
`
`internationally.
`
`57.
`
`There are questions of law and fact which are common to the Class and which
`
`predominate over questions affecting any individual Class member. The common questions
`
`include, inter alia, the following:
`
`Whether the Defendant’s actions and intended actions have breached or will
`breach the Certificate Of Designations Of Series A Convertible Participating
`Preferred Stock Of AMC Entertainment Holdings, Inc.;
`
`Whether Plaintiff and the other members of the Class would be irreparably
`damaged by the conduct of the Defendant.
`
`58.
`
`Plaintiff anticipates that there will be no difficulty in the management of this
`
`litigation as a class action.
`
`
`
`15
`
`

`

`
`
`59.
`
`Defendant has acted on grounds generally applicable to the Class with respect to
`
`the matters complained of herein, thereby making appropriate the relief sought herein with
`
`respect to the Class as a whole. To the extent the Defendant’s continue their unlawful conduct
`
`complained of herein, preliminary and final declaratory, injunctive and equitable relief on behalf
`
`of the Class as a whole will be entirely appropriate.
`
`60.
`
`Plaintiff is committed to prosecuting this Action and has retained competent
`
`counsel experienced in litigation of this nature. Plaintiff’s claims are typical of the claims of the
`
`other members of the Class and Plaintiff has the same interests as the other members of the
`
`Class. Accordingly, Plaintiff is an adequate representative of the Class and will fairly and
`
`adequately protect the interests of the Class.
`
`61.
`
`The prosecution of separate actions by individual members of the Class would
`
`create the risk of inconsistent or varying adjudications with respect to individual members of the
`
`Class, which would establish incompatible standards of conduct for Defendant, or adjudications
`
`with respect to individual members of the Class which would, as a practical matter, be
`
`dispositive of the interests of the other members not parties to the adjudications or substantially
`
`impair or impede their ability to protect their interests.
`
`COUNT I
`Declaratory Judgment
`
`62.
`
`Plaintiff incorporates by reference the foregoing allegations, as though fully set
`
`forth herein.
`
`63.
`
`Plaintiff brings this claim for declaratory judgment pursuant to 8 Del. C. § 111,
`
`which provides jurisdiction over “[a]ny civil action to interpret, apply, enforce or determine the
`
`validity of the provisions of . . . Any written restrictions on the transfer, registration of transfer
`
`or ownership of securities,” and pursuant to 10 Del. C. § 6501, the Declaratory Judgment Act,
`
`
`
`16
`
`

`

`
`
`which permits the Court to “declare rights, status and other legal relations whether or not further
`
`relief is or could be claimed.”
`
`64.
`
`A justiciable controversy ripe for adjudication exists between Plaintiff and
`
`Defendant as to their rights and other legal relations, including remedies, pertaining to the
`
`Certificate of Designations of the Series A Convertible Participating Preferred Stock.
`
`65.
`
`Prompt resolution of the issues set forth herein will provide clarity to the parties
`
`and will aid in resolution of the dispute between them.
`
`66.
`
`Pursuant to applicable law, including the Delaware Declaratory Judgment Act, 10
`
`Del. C. §