The rights of the holders of Holdings’ Class A common stock and Holdings’ Class B common stock are identical, except with respect to voting and conversion applicable to the Class B common stock. Holders of Holdings’ Class A common stock are entitled to one vote per share and holders of Holdings’ Class B common stock are entitled to three votes per share. Holders of Class A common stock and Class B common stock will share ratably (based on the number of shares of common stock held) in any dividend declared by its board of directors, subject to any preferential rights of any outstanding preferred stock. The Class A common stock is not convertible into any other shares of Holdings’ capital stock. Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. In addition, each share of Class B common stock shall convert automatically into one share of Class A common stock upon any transfer, whether or not for value, except for certain transfers described in Holdings’ certificate of incorporation.

On September 24, 2020, the Company entered into an equity distribution agreement with Citigroup Global Markets Inc. and Goldman Sachs & Co. LLC, as sales agents to sell 15 million shares, and also on October 20, 2020 to sell an additional 15 million shares, of the Company’s Class A common stock, par value $0.01 per share, through an “at-the-market” offering program. On November 10, 2020 and December 11, 2020, the Company entered into an equity distribution agreement with Goldman Sachs & Co. LLC and B. Riley Securities, Inc., as sales agents to sell up to 20 million and 178.0 million shares, respectively, of Class A common stock, par value $0.01 per share, through an “at-the-market” offering program.

The Company raised gross proceeds of approximately $272.8 million for the year ended December 31, 2020, through its at-the-market offering of approximately 90,955,685 shares of its Class A common stock and paid fees to the sales agents and other fees of approximately $8.1 million. The Company has used and continues to use the net proceeds from the sale of the Class A common stock pursuant to the equity distribution agreement for general corporate purposes, which may include the repayment, refinancing, redemption or repurchase of existing indebtedness or working capital, capital expenditures and other investments. See Note 17—Subsequent Events for further information regarding additional at-the-market offerings of 50 million shares of Class A common stock and the sale of shares for net proceeds of approximately $582.0 million.

Certain backstop purchasers of the First Lien Notes due 2026 that participated in the Exchange Offer received five million Class A common shares. See Note 8—Corporate Borrowings and Finance Lease Obligations for further information.

On December 14, 2020, Mudrick received a total of 21,978,022 shares of the Company’s Class A common stock; of which 8,241,758 shares relates to consideration received for a commitment fee and 13,736,264 shares as consideration received for (i) the commitment provided with respect to the First Lien Toggle Notes due 2026 and (ii) the Second Lien Exchange. See Note 8—Corporate Borrowings and Finance Lease Obligations for further information.

Since April 24, 2020, the Company has been prohibited from making dividend payments in accordance with the covenant suspension conditions in its Senior Secured Credit Facility Agreement. The following is a summary of dividends and dividend equivalents declared to stockholders during the year ended December 31, 2020:

During the year ended December 31, 2020, the Company paid dividends and dividend equivalents of $6.5 million and accrued $0.4 million for the remaining unpaid dividends at December 31, 2020. The aggregate dividends paid for Class A common stock, Class B common stock, and dividend equivalents were approximately $1.6 million, $1.6 million, and $3.3 million, respectively.

The following is a summary of dividends and dividend equivalents declared to stockholders during the year ended December 31, 2019:

During the year ended December 31, 2019, the Company paid dividends and dividend equivalents of $84.1 million and accrued $2.3 million for the remaining unpaid dividends at December 31, 2019. The aggregate dividends paid for Class A common stock, Class B common stock, and dividend equivalents were approximately $41.7 million, $41.4 million, and $1.0 million, respectively.

The following is a summary of dividends and dividend equivalents declared to stockholders during the year ended December 31, 2018:

During the year ended December 31, 2018, the Company paid dividends and dividend equivalents of $258.1 million and accrued $4.0 million for the remaining unpaid dividends at December 31, 2018. The aggregate

dividends paid for Class A common stock, Class B common stock, and dividend equivalents were approximately $122.0 million, $136.1 million, and $0.1 million, respectively.

As of December 31, 2020 and December 31, 2019, the Company recorded a receivable due from Wanda of $0.7 million and $0.8 million, respectively for reimbursement of general administrative and other expense incurred on behalf of Wanda. The Company recorded cost reductions for general and administrative services provided on behalf of Wanda of $0.3 million, $0.4 million and $0.0 million for the years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively. Wanda owns Legendary Entertainment, a motion picture production company. The Company will occasionally play Legendary’s films in its theatres as a result of transactions with independent film distributors.

On September 14, 2018, the Company entered into the Investment Agreement with Silver Lake, relating to the issuance to Silver Lake (or its designated affiliates) of $600.0 million principal amount of the Convertible Notes due 2024 and entered into an amended and restated investment agreement with Silver Lake, relating to the issuance of the Convertible Notes due 2026 on August 31, 2020. See Note 8—Corporate Borrowings and Finance Lease Obligations - Convertible Notes and Note 17—Subsequent Events for more information.

On September 14, 2018, the Company, Silver Lake and Wanda entered into a Right of First Refusal Agreement (the “ ROFR Agreement ”), which provides Silver Lake certain rights to purchase shares of the Company’s common stock that Wanda proposes to sell during a period of two years from the date of execution of the ROFR Agreement or, if earlier, until such time that Wanda and its affiliates cease to beneficially own at least 50.1% of the total voting power of the Company’s voting stock. The ROFR Agreement expired unexercised.

As of December 31, 2020, Wanda owns 23.08% of AMC through its 51,769,784 shares of Class B common stock. With the three-to-one voting ratio between the Company’s Class B and Class A common stock, Wanda had significant influence over of AMC with 47.37% of the voting power of the Company’s common stock. As discussed in Note 8—Corporate Borrowings and Finance Lease Obligations and Note 17—Subsequent Events, 5,666,000 shares of Class B common stock held by Wanda were forfeited and cancelled in connection with the Convertible Notes due 2026 conversion and Wanda converted all of its remaining and outstanding Class B common stock to Class A common stock on February 1, 2021.

On February 27, 2020, the Company announced that its Board of Directors authorized a share repurchase program for an aggregate purchase of up to $200.0 million shares of Class A common stock. As of April 24, 2020, the Company is prohibited from making purchases under its authorized stock repurchase program in accordance with the covenant suspension conditions in its Senior Secured Credit Facility Agreement. As of December 31, 2020, $200.0 million remained available for repurchase under this plan. A three-year time limit had been set for the completion of this program, expiring February 26, 2023.

The 2013 Equity Incentive Plan provides for grants of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSU’s”), performance stock units (“PSU’s), stock awards, and cash performance awards. The maximum number of shares of Holdings’ common stock available for delivery pursuant to awards granted under the second amendment to the 2013 Equity Incentive Plan is 15 million shares. At December 31, 2020, the aggregate number of shares of Holdings’ common stock available for grant was 8,520,193 shares.

The Company recorded stock-based compensation expense of $25.4 million, $4.4 million, and $14.9 million within general and administrative: other during the years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively. As of December 31, 2020, the remaining unrecognized compensation cost related to stock-based compensation arrangements was approximately $15.2 million. The weighted average period over which this remaining compensation expense will be recognized is approximately 1.5 years.

AMC’s Board of Directors approved awards of stock, RSU’s, and PSU’s to certain of the Company’s employees and directors under the 2013 Equity Incentive Plan. During years 2020, 2019, and 2018, the grant date fair value of these awards was based on the closing price of AMC’s stock on the date of grant, which ranged from $2.36 to $15.65 per share. A dividend equivalent for restricted stock units and performance stock units equal to the amount paid in respect of one share of Class A common stock underlying the unit began to accrue with respect to the unit on the date of grant. Such accrued dividend equivalents are paid to the holder upon vesting of the units. Each unit represents the right to receive one share of Class A common stock at a future date.

●

Restricted Stock Unit Award Agreement: The Company granted RSU awards of 1,511,297, 730,167, 656,576 to certain members of management during the years ended December 31, 2020, December 31, 2019, and December 31, 2018. Each RSU represents the right to receive one share of Class A common stock at a future date. The RSUs granted during 2020, 2019, and 2018 vest over three years with 1/3 vesting in each year. These RSUs will be settled within 30 days of vesting. The Company recorded approximately $8.7 million, $8.2 million and $6.2 million, respectively, in connection with these awards.

●

Restricted Stock Unit Award Executive Agreement: During the year ended December 31, 2019, the Company granted RSU awards of 200,000 to an executive officer (“2019 RSU executive”) of the Company with one-half vesting on the first anniversary of employment on December 2, 2020 and the remaining one-half vesting ratably over a three year period ending on December 2, 2022. All unvested RSUs shall be forfeited upon termination of services. These RSUs will be settled within 30 days of vesting. The Company recorded approximately $1.0 million and $0.1 million of expense in general and administrative: other expense during the years ended December 31, 2020 and December 31, 2019, respectively.

●

Restricted Stock Unit Named Executive Officer Award Agreement: During the years ended December 31, 2017 and December 31, 2016, RSU awards of 129,214 and 135,981 units, respectively, were granted to certain executive officers covered by Section 162(m) of the Internal Revenue Code. The RSUs vest over three years with 1/3 vesting each year if the cash flow from operating activities target was met. The vested RSUs will be settled within 30 days of vesting. The RSUs will be forfeited if AMC does not achieve a specified cash flow from operating activities target. The Company recorded expense for these awards of $1.4 million and $2.4 million in general and administrative: other expense, during the years ended December 31, 2019 and December 31, 2018, respectively, based on achievement of the performance condition for 2019, and 2018.

●

Performance Stock Unit Award Agreement: During the year ended December 31, 2020, PSU awards of 1,436,297 were granted to certain members of management and executive officers, with three-year cumulative Adjusted EBITDA and free cash flow target conditions and service conditions, covering a performance period beginning January 1, 2020 and ending on December 31, 2022. The PSUs will vest based on achieving 80% to 120% of the performance targets with the corresponding vested unit amount ranging from 50% to 200% (or 30% to 200% for PSU awards granted prior to year 2020). If the performance target is met at 100%, the PSU awards granted during the year ended December 31, 2020 will vest at 1,436,297 units in the aggregate. No PSUs will vest if Holdings does not achieve 80% of the three-year cumulative Adjusted EBITDA and free cash flow target. Additionally, unvested PSU’s shall be ratably forfeited upon termination of service prior to December 31, 2022. The vested PSUs will be settled within 30 days of vesting which will occur upon certification of performance results by the Compensation Committee of the Board of Directors.

During the year ended December 31, 2019, PSU awards of 730,167 were granted to certain members of

management and executive officers, with three-year cumulative Adjusted EBITDA, diluted earnings per share, and net profit performance target conditions and service conditions, covering a performance period beginning January 1, 2019 and ending on December 31, 2021.

During the year ended December 31, 2018, PSU awards of 653,669 were granted to certain members of management and executive officers with three-year cumulative net profit, Adjusted EBITDA, and diluted earnings per share performance target conditions and service conditions, covering a performance period beginning January 1, 2018 and ending on December 31, 2020.

During the year ended December 31, 2017, PSU awards were granted to certain members of management and executive officers with three-year cumulative net profit, Adjusted EBITDA, and diluted earnings per share performance target conditions and service conditions, covering a performance period beginning January 1, 2017 and ending on December 31, 2019. The performance conditions were not met as of December 31, 2019 and 100% of the awards were forfeited.

On October 30, 2020, based upon the recommendation of the Compensation Committee, the Board of Directors of the Company approved a modification to the PSUs for the awards granted in 2018, 2019, and 2020. The modification included separating the three-year cumulative performance targets into three separate year performance targets applicable to each tranche year. Due to the dramatic impact of the COVID-19 pandemic on the Company’s business, the Board of Directors waived attainment of the 2020 tranche year performance targets and established a vesting level for such PSUs at 90%. In addition, the service conditions were modified, and vesting is now subject to the participant’s continued employment through the end of the three-year cumulative period. The Company accounted for the modification in accordance with ASC 718-20, Compensation-Stock Compensation, as an exchange of the original award, that was not expected to vest, for a new award. The Company measured the fair value of the new award on the modification date, October 30, 2020, because the Company determined that achieving performance thresholds were probable for certain tranche awards.

The Company recorded approximately $1.2 million, $(5.8) million, and $5.8 million of expense (credit) related to PSUs in general and administrative: other expense during the years ended December 31, 2020, December 31, 2019 and December 31, 2018, respectively. At December 31, 2019, the Company determined that achieving the PSU performance thresholds was improbable and reversed previously recorded expense of $5.8 million on these units during the year ended December 31, 2019.

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Performance Stock Unit Executive Award Agreement: During the year ended December 31, 2019, a PSU market condition award of 300,000 was granted to an executive officer of the Company that would vest based upon achieving target prices for the Company’s Class A common stock. This award was subsequently cancelled and replaced with the PSU market condition award granted on February 26, 2020.

On February 26, 2020 and March 5, 2020, special performance stock unit awards (“SPSUs”), totaling 3,570,000 units were granted to certain executive officers that will vest based upon achieving target prices for the Company’s Class common stock. The SPSUs are eligible to vest in tranches contingent upon (i) the attainment of certain 20 trading day volume weighted average closing prices and (ii) fulfillment of the three-year service requirement from the date of grant. The vested SPSUs will be settled within 30 days of vesting. Any unvested SPSUs remaining after 10 years will be forfeited. If service is terminated prior to the three year anniversary from the date of grant, unvested SPSUs shall be forfeited. The target prices and vesting tranches are set forth in the table below:


Tranche	Target Stock Price	SPSUs Vesting
1	$12.00	595,003
2	$16.00	595,003
3	$20.00	595,003
4	$24.00	595,003
5	$28.00	594,994
6	$32.00	594,994

The Company used the Monte Carlo simulation model to estimate the fair value of the SPSUs. This model utilizes multiple input variables to estimate the probability that the market conditions will be achieved. The Company used the following assumptions in determining the fair value of the SPSUs:


		Assumptions
Expected stock price volatility		45.0%
Expected dividend yield		2.02% and 2.44%
Risk-free interest rate		1.33% and 0.92%
Grant-date stock price		$5.93 and $4.92

The expected stock price volatility was based on the historical volatility of the Company’s stock for a period equivalent to the derived service period. The expected dividend yield is based on annual expected dividend payments. The risk-free interest rate was based on the treasury yield rates as of the date of grant for a period equivalent to the performance measurement period. The fair value of each SPSU is amortized over the requisite or derived service period, which is up to 6.4 years. The SPSUs granted on February 26, 2020 and March 5, 2020 have a grant date fair value of approximately $12.2 million.

On October 30, 2020, based upon the recommendation of the Compensation Committee, the Board of Directors of the Company approved a modification to the SPSUs for the awards. Each SPSU award agreement was amended as follows:

●

The stock price thresholds (ranging from $12 to $24) and service requirement for tranches 1 through 4 of the SPSUs were eliminated and such SPSUs vested on October 30, 2020;

●

Participants shall be prohibited from selling the shares of common stock issued upon the foregoing vesting until October 30, 2021;

●

The stock price threshold for tranche 5 of the SPSUs was changed to $4 from $28 and the stock price threshold for tranche 6 of the SPSUs was changed to $8 from $32; and

●

The service requirement for tranches 5 and 6 was shortened to end on October 30, 2021.

As a result of the SPSU modification of market conditions, the incremental fair value amount assigned to the grant date fair value was approximately $7.3 million in accordance with ASC 718-20, Compensation-Stock Compensation. During the year ended December 31, 2020, the Company recorded a total of $14.0 million related to SPSUs in general and administrative: other expense.

The following table represents the nonvested RSU and PSU activity for the years ended December 31, 2020, December 31, 2019 and December 31, 2018:


		Weighted
		Average
	Shares of RSU	Grant Date
	PSU and SPSU	Fair Value
Beginning balance at January 1, 2018	1,083,841	$	28.61
Granted	1,313,152		15.65
Vested	(408,848)		21.68
Forfeited	(53,698)		20.69
Beginning balance at January 1, 2019	1,934,447	$	21.50
Granted	1,960,334		12.89
Vested	(303,201)		21.76
Forfeited	(220,632)		17.17
Cancelled (1)	(100,855)		21.46
Beginning balance at January 1, 2020	3,270,093	$	15.88
Granted	6,517,594		4.66
Vested	(2,472,375)		8.61
Forfeited	(1,020,122)		16.97
Cancelled (1)	(2,135,929)		7.22
Nonvested at December 31, 2020	4,159,261	$	6.80

(1)

Represents vested RSUs and PSUs surrendered in lieu of taxes and cancelled awards returned to the 2013 Equity Incentive Plan.