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NOTE 13—RELATED PARTY TRANSACTIONS
Amended and Restated Fee Agreement
In connection with the merger with LCE Holdings Inc., Parent, AMCE and the Sponsors entered into an Amended and Restated Fee Agreement, which provides for an annual management fee of $5,000,000, payable quarterly and in advance to each Sponsor, on a pro rata basis, until the earlier of (i) the twelfth anniversary from December 23, 2004, and (ii) such time as the sponsors own less than 20% in the aggregate of Parent. In addition, the fee agreement provided for reimbursements by AMCE to the Sponsors for their out-of-pocket expenses and to Parent of up to $3,500,000 for fees payable by Parent in any single fiscal year in order to maintain its corporate existence, corporate overhead expenses and salaries or other compensation of certain employees. The Amended and Restated Fee Agreement terminated on June 11, 2007, the date of the holdco merger, and was superseded by a substantially identical agreement entered into by AMC Entertainment Holdings, Inc., AMCE, the Sponsors and Parents' other stockholders.
Upon the consummation of a change in control transaction or an initial public offering, each of the Sponsors will be entitled to receive, in lieu of quarterly payments of the annual management fee, a fee equal to the net present value of the aggregate annual management fee that would have been payable to the Sponsors during the remainder of the term of the fee agreement (assuming a twelve year term from the date of the original fee agreement), calculated using the treasury rate having a final maturity date that is closest to the twelfth anniversary of the date of the original fee agreement date. As of June 28, 2012, the Company estimates that this amount would be $20,924,000.
The fee agreement also provides that the Company will indemnify the Sponsors against all losses, claims, damages and liabilities arising in connection with the management services provided by the Sponsors under the fee agreement.
Tax Sharing Arrangement with Parent
Pursuant to its tax sharing arrangement, the Company has recorded $32,500,000 due from Parent related to AMCE tax benefits utilized as part of the consolidated tax return. |