National CineMedia, Inc. (NASDAQ:NCMI) Files An 8-K Unregistered Sales of Equity Securities

34

National CineMedia, Inc. (NASDAQ:NCMI) Files An 8-K Unregistered Sales of Equity Securities

Item 3.02

Unregistered Sales of Equity Securities.

On March 16, 2017, National CineMedia, Inc. (NCM, Inc.), as sole
manager of National CineMedia, LLC (NCM LLC), provided written
notices setting forth the determination of common membership
units due to/from the members of NCM LLC as shown in the table
below, in accordance with the Common Unit Adjustment Agreement
dated as of February 13, 2007, by and among NCM, Inc., NCM LLC,
Regal CineMedia Holdings, LLC (Regal), American Multi-Cinema,
Inc. (AMC), Cinemark Media, Inc. (Cinemark), Regal Cinemas, Inc.
(RCI) and Cinemark USA, Inc.Regal, AMC and Cinemark are referred
to collectively as the Founding Members. The Founding Member
Group means, with respect to each Founding Member, the Founding
Member, its ESA Party, and their Affiliates.Any undefined
capitalized term has the meaning given it in the Common Unit
Adjustment Agreement.Under the Common Unit Adjustment Agreement,
the adjustment of membership units is conducted annually, except
that a Common Unit Adjustment will occur for a specific Founding
Member (or designee) if its acquisition or disposition of
theatres, in a single transaction or cumulatively since the most
recent Common Unit Adjustment, results in an extraordinary
attendance increase or decrease in excess of two percent of the
annual total attendance as determined on the prior adjustment
date.

On March 9, 2017, NCM, Inc. and NCM LLC entered into a binding
Memorandum of Understanding (MOU) with AMC to effectuate aspects
of a final judgment entered by the Department of Justice in
connection with AMCs acquisition of Carmike Cinemas, Inc.
(Carmike). to the MOU, promptly after the MOU effective date AMC
will receive NCM LLC common membership units in respect of the
annual attendance at such Carmike theatres in accordance with the
Common Unit Adjustment Agreement.AMCs acquisition of Carmike
meets the criteria for a Common Unit Adjustment for this
acquisition because it results in an extraordinary attendance
increase of approximately 9.5%.Further, the Final Judgment
requires AMC to transfer advertising rights to 17 theatres from
NCM LLC to another advertising provider (such theatres, the
Screen Transfer Theatres). to the MOU, promptly after the MOU
effective date, AMC will convey to NCM LLC approximately 4.7
million NCM LLC common membership units in respect of such
theatres.The 4.7 million surrendered NCM LLC common membership
units are comprised of (i) 2.9 million NCM LLC common membership
units to the adjustment for divested theatres in the Common Unit
Adjustment Agreement and (ii) an additional 1.8 million NCM LLC
common membership units valued at $25 million to compensate for
NCM LLCs lost operating income for these theaters during the
10-year term of the Final Judgment.These Common Unit Adjustments,
as well as, the annual Common Unit Adjustment for fiscal year
2016 attendance were included in the written notices provided on
March 16, 2017 and each of the common membership units to these
transactions are expected to be issued/surrendered on March 30,
2017, the settlement date.

Following is a summary of the NCM LLC ownership units that will
result from 1) the Annual Common Unit Adjustment related to 2016
attendance, 2) the extraordinary Common Unit Adjustment for AMCs
acquisition of Carmike and 3) the return of NCM LLC common
membership units related to the Screen Transfer Theatres to the
MOU.

Founding Member Group

Number of Units Owned Prior to Adjustments

Number of Units Issued per 2016 Adjustment

Number of Units Issued per Extraordinary Adjustment
(Carmike Theatres)

Number of Units Surrendered for Screen Transfer Theatre
Adjustment

Total Number of Units Owned Post Adjustments

AMC

23,862,988

361,892

18,425,423

(4,657,673

)

37,992,630

Cinemark

26,384,644

1,487,218

27,871,862

Regal

27,072,701

501,919

27,574,620

NCM, Inc. (1)

59,874,412

59,874,412

Total

137,194,745

2,351,029

18,425,423

(4,657,673

)

153,313,524

_________________

(1)

Excludes the issuance of NCM LLC units with respect to
restricted shares which have vested and stock options
which have been exercised subsequent to December 29, 2016
as these NCM LLC units are issued at each quarter end.

Following the issuance (surrender) of these common membership
units to the Common Unit Adjustment Agreement and MOU, each
Founding Member Groups ownership interest in NCM LLC will change
as follows.

Founding Member Group

Ownership Interest Prior to Adjustments

Ownership Interest Post Adjustments

Change

AMC

17.4%

24.8%

7.4

Cinemark

19.2%

18.2%

– 1.0

Regal

19.7%

18.0%

– 1.7

NCM, Inc. (1)

43.7%

39.0%

– 4.7

_________________

(1)

Excludes the issuance of NCM LLC units with respect to
restricted shares which have vested and stock options
which have been exercised subsequent to December 29, 2016
as these NCM LLC units are issued at each quarter end.

to NCM, Inc.s Amended and Restated Certificate of Incorporation
and NCM LLCs Third Amended and Restated Limited Liability Company
Operating Agreement, as amended, members of NCM LLC, other than
NCM, Inc., may choose to have common membership units redeemed,
and NCM, Inc. may elect to issue cash or shares of its common
stock on a one-for-one basis.Therefore, the NCM LLC units issued
to the Founding Members may be redeemable for an equal number of
shares of NCM, Inc.s common stock.

Neither NCM, Inc. nor NCM LLC received any cash consideration in
exchange for the issuance of the units.In addition to the
issuance of the units, cash will be paid in lieu of partial units
in the amounts of $14.03, $10.94 and $11.02 to AMC, Cinemark USA,
Inc. and RCI, respectively.

The units will be issued in reliance upon the exemption from the
registration requirements of the Securities Act provided for by
Section 4(2) thereof for transactions not involving a public
offering. Appropriate legends will be affixed to the securities
issued in this transaction. The Founding Members had adequate
access, through business or other relationships, to information
about NCM, Inc.

In accordance with the ESA by and between NCM, Inc. and AMC, all
of the common units issued to AMC for the Carmike theatres are
currently under contract with a third-party advertising service
provider.As required by the ESA, AMC will pay NCM LLC amounts
reflecting the net amount of cash that approximates what NCM LLC
would have generated if it were able to sell on-screen
advertising in these theatres on an exclusive basis. These
integration payments will be made on a quarterly basis in arrears
in accordance with certain run-out provisions and are projected
to be approximately $20 million for a full year and will continue
until the earlier of (i) the date such theatres are transferred
to the NCM LLC network or (ii) the expiration of AMCs Exhibitor
Services Agreement (ESA) with NCM LLC.The payments will be
recorded directly to intangible assets in NCM LLCs balance sheet
but are added to available cash distributions to NCM, Inc. and
the founding members and will reduce NCM LLCs leverage as
calculated for debt covenant compliance purposes.

Discussion of Common Unit Adjustment Calculations

Methodology

The Common Unit Adjustment Agreement provides a mechanism for
adjusting membership units held by the Founding Members, based on
increases or decreases in attendance associated with new theatre
construction or acquisitions and dispositions or closures by each
Founding Member as discussed below.The adjustment of membership
units to this agreement are conducted annually, except that an
earlier adjustment will occur for a Founding Member if its
acquisition or disposition of theatres, in a single transaction
or cumulatively since the most recent adjustment, will cause a
change of two percent or more in the total annual attendance.

Increases in attendance associated with theatre additions are
included in the unit adjustment if arising from acquisition of a
theatre or opening of a newly constructed theatre, except that
lease renewals and extensions are not included and acquired
theatres, subject to an agreement with an alternative cinema
advertising provider, will not be included until certain run out
payments are made to NCM LLC by the Founding Member acquiring the
theatre to its ESA or until such third party cinema advertising
agreement expires.

Decreases in attendance associated with theatre dispositions are
included in the unit adjustment if arising from the closure or
sale of a theatre, unless the purchaser or sublessee enters into
an agreement with NCM LLC similar to the ESA, the theatre is
closed at or after the end of its lease term in effect on
February 13, 2007 (the Common Unit Adjustment Agreement date),
the theatre is closed at the end of an initial term of a lease
entered into after February 13, 2007, or a non-digitized theatre
is closed within the last three years of the term of a lease in
effect on February 13, 2007 (the closing date of NCM, Inc.s
initial public offering).

The increases in attendance for acquired theatres that were open
for the full twelve months prior to the acquisition date are
calculated based on the attendance for the twelve months prior to
the acquisition date and decreases in attendance for theatres
that were disposed are based on the attendance for the twelve
months prior to the disposition date. However, if an acquired or
new build theatre was not operating during the entire twelve
months prior to the acquisition date (in the case of an acquired
theatre), the change in annual attendance is calculated based on
75% of the projected, year 1 annual attendance for such theatre,
as determined by the Founding Members board of directors (or
other investment committee designated by the board) in approving
development or acquisition.Additionally, in the calculations for
adjustment upon acquisition, new openings, closures or
disposition, only 50% of the attendance is included for theatres
that were not digitized.

In the case of acquired or new build theatres in which the 75% of
projected, year 1 annual attendance was used in prior Common Unit
Adjustments, an additional adjustment or true-up was made to the
net increases and decreases in attendance.This adjustment was
calculated as the variance between the attendees applied in the
prior Common Unit Adjustment and the actual, year 1 attendance
for such theatres.

Common Unit Adjustment Calculations

Following is the detail of the Common Unit Adjustment
calculations for 1) the Annual Common Unit Adjustment related to
2016 attendance, 2) the extraordinary Common Unit Adjustment for
AMCs acquisition of Carmike and 3) the return of NCM LLC common
membership units related to the Screen Transfer Theatres to the
MOU.

1)

Annual Common Unit Adjustment for 2016 Fiscal Year

Discussion of changes in screens and attendance:

The aggregate net attendance adjustment used in calculating the
Common Unit Adjustment for the 2016 fiscal year was an increase
of 8,189,813 attendees as described below.

The total attendance increase was 7,726,221 attendees, of
which

o

4,140,421 related to newly opened or acquired theatres that
were not open for 12 months at time of acquisition.

4,140,421 from digital screens or 5,520,562 weighted at
75%

o

3,585,800 attendees related to acquired theatres that were
open for the full 12 months prior to the acquisition date

3,382,083 from digital screens weighted at 50%

203,717 from non-digital screens or 407,434 weighted at
50%

A total of 281 screens were added resulting in an average
attendance per added screen of approximately 27,495.

The total attendance decrease due to dispositions was
1,415,030 attendees, of which

1,392,073 from digital screens weighted at 50%

22,957 from non-digital screens or 45,914 weighted at 50%

A total of 50 screens were disposed of resulting in an average
attendance per disposed screen of approximately 28,301.

The total attendance increase due to an adjustment
between the projected, year 1 attendance of 17 new build
and acquired theatres or 183 screens included in the
prior Common Unit Adjustment and the actual, year 1
attendance for these theatres was 1,878,622 attendees.

Excluded from the calculation was a 3,428,771 decrease in
attendance related to theatre closures associated with expired
leases in effect at February 13, 2007, of which all attendees
were from digital screens.A total of

155 screens were excluded, due to end of lease screen closures
resulting in an average attendance per excluded screen of
approximately 22,121.

Calculation of the Common Unit Adjustment (1): (as of and for the
fiscal year ended December 29, 2016, except as noted)

Outstanding NCM LLC Equity Equivalents (2)

137,981,049

Times – NCM, Inc. Share Price (3)

$

14.6237

NCM LLC Equity Value

$

2,017,793,466

NCM LLC Long-Term Funded Debt

$

935,000,000

Less: NCM LLC Cash and Cash Equivalents

$

(10,721,419

)

NCM LLC Enterprise Value

$

2,942,072,047

Divided by – Attendance Total (4)

697,006,763

NCM LLC Enterprise Value per Attendee

$

4.2210093

Times – aggregate Net Attendance Adjustment (for the
period

January 1, 2016 through December 29, 2016)

8,189,813

Common Unit Adjustment Equivalent (Value of aggregate Net

Attendance Adjustment)

$

34,569,277

Divided by – NCM, Inc. Share Price (3)

$

14.6237

Common Unit Adjustment (in whole units)

2,363,919

Units to be Adjusted from Prior Year

(12,890

)

Adjusted Common Unit Adjustment (in whole units)

2,351,029

Cash paid in lieu of partial units issued Founding
Members

$

34.77

_________________

(1)

Terms as defined in the Common Unit Adjustment Agreement.

(2)

Includes 59,874,412 60-day weighted average shares of
NCMI outstanding common stock, 77,320,333 60-day weighted
average NCM LLC units held by the Founding Members and
786,304 restricted shares and outstanding options deemed
exercised under the treasury stock method.

(3)

Represents the 60-day weighted average share price of
NCM, Inc. up to, but not including, December 29, 2016.

(4)

Includes attendees from (i) Founding Members, (ii)
network affiliates and (ii) certain Rave theatres
previously acquired by AMC and Cinemark under contract
with another cinema advertising provider for which AMC
and Cinemark pay integration payments to NCM LLC.

2)

Extraordinary Common Unit Adjustment for AMC Acquisition
of Carmike

Discussion of changes in screens and attendance:

The aggregate net attendance adjustment used in calculating the
Common Unit Adjustment was an increase of 65,142,100 attendees.

The total attendance increase due to the 2,928 screens
acquired from Carmike was 65,142,100 attendees.Of this
increase, all related attendees are currently under
contract with another advertising provider.Additionally,
the total attendance increase due to seven newly opened
theatres was 1,562,667 (2,083,556 weighted at 75%). All
of the attendees were added on digital screens, resulting
in an average attendance per added screen of
approximately 22,248.

Calculation of the Common Unit Adjustment (1): (as of December
20, 2016, except as noted)

Outstanding NCM LLC Equity Equivalents (2)

137,979,609

Times – NCM, Inc. Share Price (3)

$

14.7378

NCM LLC Equity Value

$

2,033,515,882

NCM LLC Long-Term Funded Debt

$

935,000,000

Less: NCM LLC Cash and Cash Equivalents

$

(11,192,353

)

NCM LLC Enterprise Value

$

2,957,323,529

Divided by – Attendance Total (4)

709,431,495

NCM LLC Enterprise Value per Attendee

$

4.1685822

Times – aggregate Net Attendance Adjustment (for the
period

December 4, 2015 through December 1, 2016)

65,142,100

Common Unit Adjustment Equivalent (Value of aggregate Net

Attendance Adjustment)

$

271,550,201

Divided by – NCM, Inc. Share Price (3)

$

14.7378

Common Unit Adjustment (in whole units)

18,425,423

Cash paid in lieu of partial units issued Founding
Members

$

1.90

_________________

(1)

Terms as defined in the Common Unit Adjustment Agreement
dated as of February 13, 2007.

(2)

Includes 59,853,806 60-day weighted average shares of
NCM, Inc. outstanding common stock, 77,320,333 60-day
weighted average NCM LLC units held by the Founding
Members and 805,471 restricted shares and outstanding
options deemed exercised under the treasury stock method.

(3)

Represents the 60-day weighted average share price of
NCM, Inc.

(4)

Includes attendees from (i) network affiliates and (ii)
certain Rave theatres previously acquired by AMC under
contract with another cinema advertising provider for
which AMC pays integration payments to NCM LLC.

3)

Adjustment for Screen Transfer Theatres

Discussion of changes in screens and attendance:

The aggregate net attendance adjustment used in calculating the
Common Unit Adjustment was a decrease of 9,534,295 attendees.

The total attendance decrease due to the 17 theatres was
9,534,295 attendees.Of this decrease, 9,534,295 related
to attendees on our network.All of the attendees were on
digital screens.A total of 318 screens were transferred
resulting in an average attendance per decrease screen of
approximately 29,982.

Calculation of the Common Unit Adjustment (1): (as of March 3,
2017, except as noted)

Outstanding NCM LLC Equity Equivalents (2)

138,688,871

Times – NCM, Inc. Share Price (3)

$

13.8334

NCM LLC Equity Value

$

1,918,538,628

NCM LLC Long-Term Funded Debt

$

970,000,000

Less: NCM LLC Cash and Cash Equivalents

$

(11,522,408

)

NCM LLC Enterprise Value

$

2,877,016,220

Divided by – Attendance Total (4)

695,645,538

NCM LLC Enterprise Value per Attendee

$

4.1357503

Times – aggregate Net Attendance Adjustment (for the
period February 26, 2016 through February 23, 2017)

9,534,295

Common Unit Adjustment Equivalent (Value of aggregate

Net Attendance Adjustment)

$

39,431,463

Divided by – NCM, Inc. Share Price (3)

$

13.8334

Screen Transfer Theatre Adjustment Amount (in whole
units)

(2,850,453

)

Additional Unit Amount per MOU

25,000,000

Divided by – NCM, Inc. Share Price (3)

$

13.8334

Additional Unit Amount (in whole units)

(1,807,220

)

Common Unit Adjustment (in whole units)

(4,657,673

)

Cash received in lieu of partial units from Founding
Members

$

(0.68

)

_________________

(1)

Terms as defined in the Common Unit Adjustment Agreement
dated as of February 13, 2007.

(2)

Includes 59,874,412 60-day weighted average shares of
NCM, Inc. outstanding common stock, 77,320,333 60-day
weighted average NCM LLC units held by the Founding
Members and 1,494,126 restricted shares and outstanding
options deemed exercised under the treasury stock method.

(3)

Represents the 60-day weighted average share price of
NCM, Inc.

(4)

Includes attendees from (i) network affiliates and (ii)
certain Rave theatres previously acquired by AMC under
contract with another cinema advertising provider for
which AMC pays integration payments to NCM LLC.

Item 9.01Financial Statements and Exhibits

(d)Exhibits

Exhibit

Description

3.1

Amended and Restated Certificate of
Incorporation.(Incorporated by reference to Exhibit 3.1
from the Registrants Quarterly Report on Form 10-Q (File
No. 001-33296) filed on May 6, 2011.)

10.1

National CineMedia, LLC Third Amended and Restated
Limited Liability Company Operating Agreement dated as of
February 13, 2007, by and among American Multi-Cinema,
Inc., Cinemark Media, Inc., Regal CineMedia Holdings, LLC
and National CineMedia, Inc.(Incorporated by reference to
Exhibit 10.1 to NCM, Inc.s Current Report on Form 8-K
(File No. 001-33296) filed on February 16, 2007.)

10.1.1

First Amendment to Third Amended and Restated Limited
Liability Company Operating Agreement of National
CineMedia, LLC dated as of March 16, 2009, by and among
American Multi-Cinema, Inc., Cinemark Media, Inc., Regal
CineMedia Holdings, LLC and National CineMedia,
Inc.(Incorporated by reference to Exhibit 10.1.1 from the
Registrants Quarterly Report on Form 10-Q (File No.
001-33296) filed on August 7, 2009.)

10.1.2

Second Amendment to Third Amended and Restated Limited
Liability Company Operating Agreement of National
CineMedia, LLC dated as of August 6, 2010, by and among
American Multi-Cinema, Inc., Cinemark Media, Inc., Regal
CineMedia Holdings, LLC and National CineMedia,
Inc.(Incorporated by reference to Exhibit 10.1 from the
Registrants Current Report on Form 8-K (File No.
001-33296) filed on August 10, 2010.)

10.1.3

Third Amendment to the Third Amended and Restated Limited
Liability Company Operating Agreement of National
CineMedia, LLC dated September 3, 2013, by and among
American Multi-Cinema, Inc., AMC ShowPlace Theatres,
Inc., Cinemark Media, Inc., Regal CineMedia Holdings,
LLC, Regal Cinemas, Inc. and National CineMedia,
Inc.(Incorporated by reference to Exhibit 10.1.3 to NCM,
Inc.s Current Report on Form 8-K (File No. 001-33296)
filed on September 9, 2013.)

10.2

Common Unit Adjustment Agreement dated as of February 13,
2007, by and among National CineMedia, Inc., National
CineMedia, LLC, Regal CineMedia Holdings, LLC, American
Multi-Cinema, Inc., Cinemark Media, Inc, Regal Cinemas,
Inc. and Cinemark USA, Inc. (Confidential treatment
granted as to certain portions, which portions were
omitted and filed separately with the
Commission.)(Incorporated by reference to Exhibit 10.6 to
NCM, Inc.s Current Report on Form 8-K (File No.
001-33296) filed on February 16, 2007.)

10.3

Registration Rights Agreement dated as of February 13,
2007, by and among National CineMedia, Inc., American
Multi-Cinema, Inc., Regal CineMedia Holdings, LLC and
Cinemark Media, Inc.(Incorporated by reference to Exhibit
10.11 to NCM, Inc.s Current Report on Form 8-K (File No.
001-33296) filed on February 16, 2007.)

10.4

Amended and Restated Exhibitor Services Agreement dated
as of December 26, 2013, by and between National
CineMedia, LLC and American Multi-Cinema, Inc.
(Confidential treatment requested as to certain portions,
which portions were omitted and filed separately with the
Commission.)(Incorporated by reference to Exhibit 10.2.4
to NCM, Inc.s Annual Report on Form 10-K (File No.
001-33296) filed on February 21, 2014).

Exhibit

Description

10.5

Amended and Restated Exhibitor Services Agreement dated
as of December 26, 2013, by and between National
CineMedia, LLC and Cinemark USA, Inc. (Confidential
treatment requested as to certain portions, which
portions were omitted and filed separately with the
Commission.)(Incorporated by reference to Exhibit 10.3.4
to NCM, Inc.s Annual Report on Form 10-K (File No.
001-33296) filed on February 21, 2014).

10.6

Amended and Restated Exhibitor Services Agreement dated
as of December 26, 2013, by and between National
CineMedia, LLC and Regal Cinemas, Inc. (Confidential
treatment requested as to certain portions, which
portions were omitted and filed separately with the
Commission.)(Incorporated by reference to Exhibit 10.4.4
to NCM, Inc.s Annual Report on Form 10-K (File No.
001-33296) filed on February 21, 2014).

10.7

Amendment to Exhibitor Services Agreement dated as of
March 9, 2017, by and between National CineMedia, LLC and
American Multi-Cinema, Inc.(Incorporated by reference to
Exhibit 10.1 to NCM, Inc.s Current Report on Form 8-K
(File No. 001-33296) filed on March 15, 2017).

10.9

Amendment to Exhibitor Services Agreement dated as of
March 9, 2017, by and between National CineMedia, LLC and
Regal Cinemas, Inc. (Incorporated by reference to Exhibit
10.2 to NCM, Inc.s Current Report on Form 8-K (File No.
001-33296) filed on March 15, 2017).

10.10

Waiver of Section 12.06 of the ESA, dated as of March 14,
2017, by and between National CineMedia, LLC and Cinemark
USA, Inc.(Incorporated by reference to Exhibit 10.3 to
NCM, Inc.s Current Report on Form 8-K (File No.
001-33296) filed on March 15, 2017).


About National CineMedia, Inc. (NASDAQ:NCMI)

National CineMedia, Inc. (NCM, Inc.) is a holding company that manages its consolidated subsidiary National CineMedia, LLC (NCM LLC). NCM LLC operates the digital in-theatre media network in North America, through which it sells in-theatre and online advertising and promotions. The Company is engaged in advertising business. It operates through advertising segment. The Company’s advertising and entertainment pre-show, FirstLook, lobby entertainment network (LEN) and programming are distributed across its digital content network (DCN) utilizing its digital content software (DCS). NCM, Inc. has no business operations or material assets. Its on-screen digital FirstLook pre-feature show consists of national and local advertising, as well as behind the scenes making-of and other entertainment content provided by its content partners and other clients. The Company’s Lobby Entertainment Network (LEN) has approximately 3,104 screens in over 1,519 theatres connected to its DCN.

National CineMedia, Inc. (NASDAQ:NCMI) Recent Trading Information

National CineMedia, Inc. (NASDAQ:NCMI) closed its last trading session down -0.16 at 12.56 with 692,994 shares trading hands.

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