12. Commitments and Contingencies

Leases

The Company holds certain property and equipment under rental agreements and operating leases that have varying expiration dates. A majority of its operating facilities are leased from unrelated parties throughout the United States. Future minimum annual fixed rentals under operating leases having an original term of more than one year as of December 31, 2017, were as follows (in thousands):


	Third Party		Related Party		Total
2018	$	99,145	$	2,126	$	101,271
2019		96,248		2,126		98,374
2020		89,334		2,126		91,460
2021		85,644		2,127		87,771
2022		81,820		2,024		83,844
Thereafter		691,385		20,770		712,155
Total	$	1,143,576	$	31,299	$	1,174,875

For the years ended December 31, 2017, 2016, and 2015, $86.5 million, $74.5 million, and $61.5 million, of rent expense, respectively, was charged to costs and expenses.

A subsidiary of FreedomRoads has letters of credit of $0.4 million, which were required by certain leases. The letters of credit expire in August 2018. These letters of credit are issued under the Floor Plan Facility.

On December 5, 2001, GSE sold 11 real estate properties to 11 separate wholly owned subsidiaries of AGRP Holding Corp., a wholly owned subsidiary of the Company’s ultimate parent, AGI Holding Corp., for $52.3 million in cash and a note receivable. The properties were leased back to the Company on a triple‑net basis. Both the sales price and lease rates were based on market rates determined by third‑party independent appraisers engaged by the mortgage lender and approved by the Previous Senior Secured Credit Facilities agent bank. These leases had an initial term of 25 to 27 years with two 5‑year renewal options at the then‑current market rent. The leases were classified as operating leases in accordance with accounting guidance for accounting for leases. Land and buildings with a net book value totaling $45.8 million were removed from the balance sheet. The transaction resulted in a net gain of $6.1 million consisting of a $12.1 million gain on certain properties and a $6.0 million loss on other properties. In accordance with accounting principles generally accepted in the United States, the $6.0 million loss was recognized upon the date of sale in 2001 and the $12.1 million gain was deferred and will be credited to income as rent expense adjustments over the lease terms. The average net annual lease payments over the lives of the leases were $3.4 million.

On December 29, 2011, AGRP Holding Corp. sold 6 of the 11 real estate properties to a third party. In 2012, AGRP Holding Corp. sold two real estate properties to a third party (one on January 9, 2012, and one on December 28, 2012). The leases on the real estate properties sold in 2012 were terminated. In June 2013, AGRP Holding Corp. sold an additional real estate property to a third party. In February 2014, AGRP Holding Corp. sold the remaining two real estate properties to a third party. As of December 31, 2017 and 2016, $4.6 million and $5.1 million, respectively, of deferred gain remains and will be recognized over the remaining lease terms.

In 2006, a subsidiary of FreedomRoads entered into sale‑leaseback arrangements. Under these arrangements, FreedomRoads sold real property and leased it back for a period of 20 years. The leasebacks have been accounted for as operating leases. The gain of $6.4 million is being recognized ratably over the term of the leases. The income recognition (offset to rent expense) of the deferred credits totaled $0.3 million for each of the years ended December 31, 2017, 2016, and 2015.

In 2017, 2016 and 2015, a subsidiary of FreedomRoads entered into sale leaseback arrangements resulting in a loss of less than $0.1 million in 2017 and gains of $0.1 million and $0.4 million in 2016 and 2015, respectively. The real properties were originally purchased by FreedomRoads from third parties. In 2017, the Company sold real property of $6.0 million that were originally purchased in 2017 for $6.0 million. In 2016, the Company sold real property of $13.2 million that was originally purchased in 2016 for $11.9 million, in 2015 for $1.2 million and in 2014 for $0.1 million. In 2015, the Company sold real properties of $19.0 million that were originally purchased in 2015 for $18.1 million, and in 2014 for $0.9 million. Under the sale‑leaseback arrangements, the real properties were leased back under operating leases for a period of 20 years. The properties are being used as part of the Company’s ongoing operations.

Sponsorship and Other Agreements

The Company enters into sponsorship agreements from time to time. Current sponsorship agreements run through 2024. The agreements consist of annual fees payable in aggregate of $9.8 million in 2018, $10.2 million in 2019, $9.2 million in 2020, $9.5 million in 2021, $9.9 million in 2022, $1.5 million in 2023, and $1.5 million in 2024.

The Company entered into a subscription agreement in 2014. The subscription agreement consisted of total fees of $9.4 million payable as follows: $1.7 million in 2014, $1.6 million in 2015, $1.8 million in 2016, $2.1 million in 2017, and $2.2 million in 2018. The agreement was amended on October 28, 2016. The amended subscription agreement consists of annual fees payable as follows: $4.0 million in 2017, $4.3 million in 2018, $4.5 million in 2019, $4.8 million in 2020, and $5.0 million in 2021.

Litigation

From time to time, the Company is involved in litigation arising in the normal course of business operations. The Company does not believe it is involved in any litigation that will have a material adverse effect on its results of operations or financial position.

Employment Agreements

The Company has employment agreements with certain officers. The agreements include, among other things, an annual bonus based on earnings before interest, taxes, depreciation and amortization, and up to one year’s severance pay beyond termination date.