Exhibit 10.7

 

--------------------------------------------------------------------------------

TAX RECEIVABLE AGREEMENT

among

NATIONAL CINEMEDIA, INC.,

NATIONAL CINEMEDIA, LLC,

REGAL CINEMEDIA HOLDINGS, LLC,

CINEMARK MEDIA, INC.,

REGAL CINEMAS, INC.,

AMERICAN MULTI-CINEMA, INC., and

CINEMARK USA, INC.

DATED AS OF FEBRUARY 13, 2007

 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

                Page

ARTICLE I DEFINITIONS

   2

SECTION 1.01. Definitions

         2

ARTICLE II DETERMINATION OF REALIZED TAX BENEFIT OR REALIZED TAX DETRIMENT

   12

SECTION 2.01. Tax Characterization of Transactions; Basis Adjustments

         12

(a)    Initial ESA Modification Payments

   12

(b)    Initial Deemed Exchange

   12

(c)    Positive Theatre Access Adjustments

   12

(d)    Negative Theatre Access Adjustments

   13

(e)    Subsequent Deemed Exchanges

   13

(f)    Payments Under Agreement.

   14

SECTION 2.02. Basis Schedules.

         15

(a)    Initial Deemed Exchange.

   15

(b)    Initial ESA Modification Payments.

   16

(c)    Positive Theatre Access Adjustments.

   17

(d)    Subsequent Deemed Exchanges.

   18

SECTION 2.03. Tax Benefit Schedules.

         19

(a)    NCM Inc. Tax Benefit Schedules

   19

(b)    Amended NCM Inc. Tax Benefit Schedules

   20

(c)    Applicable Principles

   20

ARTICLE III PAYMENTS

   22

SECTION 3.01. Exchange-Related Payments.

         22

(a)    Payments In Respect of NCM Inc. Tax Benefit Schedules

   22

(b)    Payments In Respect of Amended NCM Inc. Tax Benefit Schedules

   22

SECTION 3.02. ESA-Related Payments.

         23

(a)    Payments In Respect of NCM Inc. Tax Benefit Schedules

   23

(b)    Payments In Respect of Amended NCM Inc. Tax Benefit Schedules

   24

SECTION 3.03. Suspension of Tax Benefit Payments Following Change Notice.

         24

(a)    Receipt of Change Notice

   24

(b)    Suspension of Payments

   24

(c)    Release of Escrowed Funds

   25

SECTION 3.04. No Duplicative Payments; Other Matters

         25

ARTICLE IV TERMINATION

   25

SECTION 4.01. Early Termination of Agreement

         25

SECTION 4.02. Early Termination Notice

         26

SECTION 4.03. Payment Upon Early Termination.

         26

(a)    Payment

   26

(b)    Determination of Early Termination Payment

   26

SECTION 4.04. No Other Right of Early Termination

         26

SECTION 4.05. Term of Agreement

         26

 

i

--------------------------------------------------------------------------------

ARTICLE V SUBORDINATION AND LATE PAYMENTS

   27

SECTION 5.01. Subordination

   27

SECTION 5.02. Late Payments by NCM Inc. or NCM LLC

   27

SECTION 5.03. Rights of Offset

   27

SECTION 5.04. Late Payments by the Founding Members or ESA Parties

   27

ARTICLE VI NO DISPUTES; CONSISTENCY; COOPERATION

   28

SECTION 6.01. Participation In NCM Group Tax Matters

   28

SECTION 6.02. Consistency

   28

SECTION 6.03. Cooperation

   29

ARTICLE VII GENERAL PROVISIONS

   29

SECTION 7.01. Notices

   29

SECTION 7.02. Counterparts

   29

SECTION 7.03. Entire Agreement; No Third Party Beneficiaries

   29

SECTION 7.04. Governing Law; Submission to Jurisdiction.

   29

(a)    Governing Law

   29

(b)    Jurisdiction

   30

(c)    Costs and Expenses

   30

SECTION 7.05. Severability

   30

SECTION 7.06. Successors; Assignment

   31

SECTION 7.07. Titles and Subtitles

   31

SECTION 7.08. Withholding

   31

SECTION 7.09. Reconciliation Procedures

   31

SECTION 7.10. Indemnification

   31

 

ii

--------------------------------------------------------------------------------

TAX RECEIVABLE AGREEMENT

This TAX RECEIVABLE AGREEMENT (this “Agreement”), dated as of February 13, 2007,
by and among National CineMedia, Inc., a Delaware corporation (“NCM Inc.”),
National CineMedia, LLC, a Delaware limited liability company (“NCM LLC”), Regal
CineMedia Holdings, LLC, a Delaware limited liability company (“Regal Founding
Member”), Cinemark Media, Inc., a Delaware corporation (“Cinemark Founding
Member”), Regal Cinemas, Inc., a Tennessee corporation (“Regal ESA Party”),
American Multi-Cinema, Inc., a Missouri corporation (“AMCI”), and Cinemark USA,
Inc., a Texas corporation (“Cinemark ESA Party”).

RECITALS

WHEREAS, on December 29, 2006, National Cinema Network, Inc., a Delaware
corporation and previously a member of NCM LLC, merged with and into AMCI with
AMCI surviving, whereby AMCI, which had previously entered into an exhibitor
services arrangement with NCM LLC, became a member of NCM LLC (AMCI, in its
capacity as a member in NCM LLC, referred to as the “AMC Founding Member,” and
AMCI in its capacity as a party to an exhibitor services arrangement with NCM
LLC, referred to as the “AMC ESA Party”);

WHEREAS, each of the Regal Founding Member, the AMC Founding Member, and the
Cinemark Founding Member (each a “Founding Member” and, collectively, the
“Founding Members”) is an historic member of NCM LLC;

WHEREAS, as of the date hereof, NCM Inc. has become a member of NCM LLC pursuant
to the terms of that certain Common Unit Purchase Agreement and that certain NCM
LLC Operating Agreement;

WHEREAS, as of the date hereof, each of the Regal ESA Party, the AMC ESA Party,
and the Cinemark ESA Party (each an “ESA Party” and, collectively, the “ESA
Parties”) has entered into an Exhibitor Services Agreement with NCM LLC;

WHEREAS, as of the date hereof, NCM LLC has received the Net IPO Proceeds from
NCM Inc. and NCM LLC has incurred the NCM LLC Indebtedness;

WHEREAS, as of the date hereof, NCM LLC has made a payment (an “Initial ESA
Modification Payment”) to each ESA Party pursuant to Section 2.05(a)(i) of each
ESA Party’s Exhibitor Services Agreement with NCM LLC;

WHEREAS, as of the date hereof, NCM LLC has distributed the Redemption Proceeds
to the Founding Members in redemption of their Preferred Units pursuant to
Section 3.4(d) of the NCM LLC Operating Agreement;

WHEREAS, on and after the date hereof, the Founding Members have the right to
have their Common Units redeemed by NCM LLC pursuant to the terms of Sections
9.1 and 3.5(b) of the NCM LLC Operating Agreement;

 

1

--------------------------------------------------------------------------------

WHEREAS, on and after the date hereof, the Initial ESA Modification Payments are
subject to contingent positive or negative adjustments pursuant to the terms of
Section 2.05(a)(iii) of each ESA Party’s Exhibitor Services Agreement with NCM
LLC and the Common Unit Adjustment Agreement (a “Positive Theatre Access
Adjustment” or a “Negative Theatre Access Adjustment,” respectively); and

WHEREAS, the Parties desire to make certain arrangements with respect to the
Realized Tax Benefits and Realized Tax Detriments, if any, associated with the
foregoing relationships, agreements, and transactions.

NOW, THEREFORE, in consideration of the foregoing and the respective covenants
and agreements set forth herein, and intending to be legally bound hereby, the
Parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01. Definitions. As used in this Agreement, the terms set forth in
this Article I shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined).

“Adjusted Allocable Shares” means the ESA-Related Allocable Shares of the ESA
Parties and the Exchange-Related Allocable Shares of the Founding Members, in
each case, in effect as of the date of an Early Termination Notice and, in the
case of the Exchange-Related Allocable Shares of the Founding Members, as
adjusted as of the date of an Early Termination Notice to account for clause
(i) of the Valuation Assumptions.

“Administrative Agent” means Lehman Commercial Paper, Inc., as administrative
agent under the NCM LLC Credit Agreement and any successors and assignees in
accordance with the terms of the NCM LLC Credit Agreement.

“Advisory Firm” means an accounting or law firm that is nationally recognized as
being expert in Covered Tax matters, as determined by the Audit Committee. The
Audit Committee shall select the Advisory Firm, and the Audit Committee may
replace the Advisory Firm at its discretion (subject to the consistency
requirements of Section 6.02 of this Agreement).

“Advisory Firm Letter” shall mean a letter from the Advisory Firm stating that
any relevant schedule, notice or other information to be provided by NCM Inc. or
NCM LLC to the Founding Members or the ESA Parties pursuant to this Agreement
and all supporting schedules and work papers were prepared in a manner
consistent with the terms of this Agreement and, to the extent not expressly
provided in this Agreement, on a reasonable basis in light of the facts and law
in existence on the date such schedule, notice or other information is
delivered.

“Agreed Rate” means LIBOR plus 200 basis points.

“Agreement” is defined in the preamble.

 

2

--------------------------------------------------------------------------------

“AMC ESA Party” is defined in the preamble of this Agreement.

“AMC Founding Member” is defined in the preamble of this Agreement.

“AMCI” is defined in the preamble.

“Amended NCM Inc. Tax Benefit Schedule” is defined in Section 2.03(b) of this
Agreement.

“Applicable Treasury Rate” means a rate equal to (1) if an Early Termination
Notice is delivered prior to the third anniversary of the date hereof, 4.76% or
(2) the yield to maturity as of the date an Early Termination Notice is
delivered of U.S. Treasury securities with a constant maturity (the “Applicable
Maturity”) (as compiled and published in the most recent Federal Reserve
Statistical Release H 15 (519)) equal to (a) if such Early Termination Notice is
delivered on or after the third anniversary of the date hereof but prior to the
fifth anniversary of the date hereof, 10 years, (b) if such Early Termination
Notice is delivered on or after the fifth anniversary of the date hereof but
prior to the fifteenth anniversary of the date hereof, the number of years from
the date such Early Termination Notice is delivered through the fifteenth
anniversary of the date hereof, or (c) if such Early Termination Notice is
delivered on or after the fifteenth anniversary of the date hereof, 2 years. If
there are no U.S. Treasury securities with a constant maturity equal to the
Applicable Maturity, the yield to maturity shall be interpolated from the U.S.
Treasury securities with constant maturities that are most nearly longer than
and shorter than the Applicable Maturity.

“Audit Committee” means the independent audit committee of the board of
directors of NCM Inc.

“Bankruptcy Code” means Title 11 of the United States Code (11 U.S.C. § 101 et
seq.), as amended from time to time.

“Basis Adjustment” means the increase or decrease to NCM Inc.’s share of the tax
basis of NCM LLC’s Original Assets or Exchange Assets, as the case may be,
(i) under Sections 743(b) and 754 of the Code and the comparable sections of
U.S. state and local income and franchise Tax law as a result of the Initial
Deemed Exchange, (ii) under Section 743(b) and 754 of the Code and the
comparable sections of U.S. state and local income and franchise Tax law as a
result of any Subsequent Deemed Exchange, and (iii) under Sections 743(b) and
754 as a result of any Exchange-Related Payments made under this Agreement. For
the avoidance of doubt, any ESA-Related Payments or payments of Imputed Interest
under this Agreement shall not be treated as resulting in a Basis Adjustment.

“Business Day” means any calendar day that is not a Saturday, Sunday or other
calendar day on which banks are required or authorized to be closed in the City
of New York.

“Change Notice” is defined in Section 3.03(a) of this Agreement.

 

3

--------------------------------------------------------------------------------

“Cinemark ESA Party” is defined in the preamble of this Agreement.

“Cinemark Founding Member” is defined in the preamble of this Agreement.

“Code” means the Internal Revenue Code of 1986, as amended, and the Treasury
Regulations issued thereunder.

“Common Stock” means the common stock of NCM Inc., par value $0.01 per share.

“Common Units” is defined in Section 1.1 of the NCM LLC Operating Agreement.

“Common Unit Adjustment Agreement” means that certain Common Unit Adjustment
Agreement by and among the Parties to this Agreement and dated as of the date
hereof.

“Common Unit Purchase Agreement” means that certain Common Unit Subscription
Agreement by and between NCM Inc. and NCM LLC and dated as of the date hereof.

“Covered Taxable Year” means with respect to each Founding Member or ESA Party,
each Taxable Year of NCM Inc. for which Covered Taxes are due and payable,
beginning with the Taxable Years that include the date of this Agreement, and
ending with NCM Inc.’s Taxable Years that include: (i) the 30th anniversary of
the date hereof; or, if earlier, (ii) the occurrence of a material and uncured
breach of this Agreement by such Founding Member or ESA Party or, in the case of
an ESA Party, the occurrence of a material and uncured breach of such ESA
Party’s ESA with NCM LLC.

“Covered Taxes” means U.S. Federal Income Taxes and U.S. state and local income
and franchise Taxes.

“Determination” shall have the meaning ascribed to such term in Section 1313(a)
of the Code or similar provision of state or local income or franchise Tax law,
as applicable.

“Distribution” is defined in Section 2.01(b) of this Agreement.

“Early Termination Notice” is defined in Section 4.02 of this Agreement.

“Early Termination Payment” is defined in Section 4.03(b) of this Agreement.

“Early Termination Rate” means the Applicable Treasury Rate plus 300 basis
points.

“ESA Party” is defined in the recitals to this Agreement.

“ESA Parties” is defined in the recitals to this Agreement.

 

4

--------------------------------------------------------------------------------

“ESA-Related Allocable Share” means with respect to each ESA Party, and in
connection with any ESA-Related Payment for any Covered Taxable Year, the
quotient (expressed as a percentage) obtained by dividing (x) the Realized Tax
Benefits or Realized Tax Detriments, if any, for such Covered Taxable Year that
result from the Initial ESA Modification Payment made to, or any Positive
Theatre Access Adjustments made in respect of, such ESA Party, by (y) the
aggregate Realized Tax Benefits or aggregate Realized Tax Detriments, if any,
for such Covered Taxable Year that result from the Initial ESA Modification
Payments made to, or any Positive Theatre Access Adjustments made in respect of,
all ESA Parties. For the avoidance of doubt, an ESA Party’s ESA-Related
Allocable Share shall be zero with respect to all future periods following the
last Covered Taxable Year with respect to such ESA Party, however, the Initial
ESA Modification Payment and any prior or subsequent Positive Theatre
Adjustments attributable to such ESA Party will continue to be taken into
consideration for purposes of the denominator (clause (y) in the preceding
sentence) used to determine the continuing ESA-Related Allocable Shares of other
ESA Parties with respect to any future Covered Taxable Years.

“ESA-Related Payment” means any payment made by NCM LLC or an ESA Party under
Section 3.02 of this Agreement.

“ESA-Related Tax Benefit Payment” means for any Covered Taxable Year the sum of
(x) 90% of the Realized Tax Benefit, if any, for such Covered Taxable Year that
is attributable to the Initial ESA Modification Payments and any Positive
Theatre Access Adjustments, plus (y) interest on such amount at the Agreed Rate
from the due date (without extensions) of NCM Inc.’s U.S. Federal Income Tax
Return for such Covered Taxable Year to the date of payment.

“ESA-Related Tax Detriment Payment” means for any Covered Taxable Year the sum
of (x) 100% of the Realized Tax Detriment, if any, for such Covered Taxable Year
that is attributable to the Initial ESA Modification Payments and any Positive
Theatre Access Adjustments, plus (y) interest on such amount at the Agreed Rate
from the due date (without extensions) of NCM Inc.’s U.S. Federal Income Tax
Return for such Covered Taxable Year to the date of payment.

“Escrow Agent” means any escrow agent engaged pursuant to Section 3.03(b) of
this Agreement.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
successor statute thereto.

“Exchange Assets” means the assets owned by NCM LLC as of an applicable
Subsequent Deemed Exchange Date (and any asset whose tax basis is determined, in
whole or in part, by reference to the adjusted basis of any such asset).

“Exchange-Related Allocable Share” means with respect to each Founding Member,
and in connection with any Exchange-Related Payment for any Covered Taxable
Year, the quotient (expressed as a percentage) obtained by dividing (x) the

 

5

--------------------------------------------------------------------------------

Realized Tax Benefits or Realized Tax Detriments, if any, for such Covered
Taxable Year that result from any Basis Adjustments attributable to such
Founding Member, by (y) the aggregate Realized Tax Benefits or aggregate
Realized Tax Detriments, if any, for such Covered Taxable Year that result from
any Basis Adjustments attributable to all Founding Members. For the avoidance of
doubt, a Founding Member’s Exchange-Related Allocable Share shall be zero with
respect to all future periods following the last Covered Taxable Year with
respect to such Founding Member, however, any remaining prior and subsequent
Basis Adjustments attributable to such Founding Member will continue to be taken
into consideration for purposes of the denominator (clause (y) in the preceding
sentence) used to determine the continuing Exchange-Related Allocable Shares of
other Founding Members with respect to any future Covered Taxable Years.

“Exchange-Related Payment” means any payment made by NCM Inc. or a Founding
Member under Section 3.01 of this Agreement.

“Exchange-Related Tax Benefit Payment” means for any Covered Taxable Year the
sum of (x) 90% of the Realized Tax Benefit, if any, for such Covered Taxable
Year that is attributable to any Basis Adjustments made in connection with the
Initial Deemed Exchange or any Subsequent Deemed Exchanges, plus (y) interest on
such amount at the Agreed Rate from the due date (without extensions) of NCM
Inc.’s U.S. Federal Income Tax Return for such Covered Taxable Year to the date
of payment.

“Exchange-Related Tax Detriment Payment” means for any Covered Taxable Year the
sum of (x) 100% of the Realized Tax Detriment, if any, for such Covered Taxable
Year that is attributable to any Basis Adjustments made in connection with the
Initial Deemed Exchange or any Subsequent Deemed Exchanges, plus (y) interest on
such amount at the Agreed Rate from the due date (without extensions) of NCM
Inc.’s U.S. Federal Income Tax Return for such Covered Taxable Year to the date
of payment.

“Exhibitor Services Agreement” means, in the case of each ESA Party, that
certain amended Exhibitor Services Agreement by and between such ESA Party and
NCM LLC and dated as of the date hereof.

“Federal Income Tax” means any tax imposed under Subtitle A of the Code or any
other provision of U.S. Federal income tax law (including, without limitation,
the taxes imposed by Sections 11, 55, 59A, 881, 882, 884 and 1201(a) of the
Code), and any interest, additions to tax or penalties applicable or related to
such tax.

“Founding Member” is defined in the recitals of this Agreement.

“Founding Members” is defined in the recitals of this Agreement.

“Governmental Entity” means any federal, state, local, provincial or foreign
government or any court of competent jurisdiction, administrative agency or
commission or other governmental authority or instrumentality, whether domestic
or foreign.

“Hypothetical Tax Allocations and Deductions” means, with respect to NCM Inc. at
any time, (i) the special tax allocations, if any, that would have been made to
NCM

 

6

--------------------------------------------------------------------------------

Inc. pursuant to the terms of Section 6.4(a) of the LLC Operating Agreement if
no capital contributions had been made by NCM Inc. to NCM LLC pursuant to the
terms of Section 5.1(b) of the LLC Operating Agreement and in respect of the
ESA-Related Payments to be made pursuant to Section 3.02 of this Agreement, and
(ii) the deductions that would be available to NCM Inc. if no Imputed Interest
had arisen in connection with NCM Inc.’s payment obligations under this
Agreement.

“Hypothetical Tax Basis” means, with respect to any asset at any time, the tax
basis that such asset would have at such time if (i) no Basis Adjustments had
been made as a result of the Initial Deemed Exchanges or any applicable
Subsequent Deemed Exchanges, as the case may be, or (ii) no Initial ESA
Modification Payments had been made, or (iii) no Positive Theatre Access
Adjustments or Negative Theatre Access Adjustments had been made, or (iv) no
Exchange-Related Payments or ESA-Related Payments had been made.

“Hypothetical Tax Liability” means, with respect to any Covered Taxable Year,
the hypothetical liability of NCM Inc. that would arise in respect of Covered
Taxes using the same methods, elections, conventions and similar practices used
on the actual Tax Returns of NCM Inc., but using the Hypothetical Tax Basis
instead of the actual tax basis of each relevant asset and using the
Hypothetical Tax Allocations and Deductions.

“Imputed Interest” shall mean any interest imputed under Section 1272, 1274, or
483 or other provision of the Code (or any successor U.S. Federal Income Tax
statute) and the similar section of the applicable U.S. state or local income or
franchise Tax law with respect to NCM Inc.’s payment obligations under this
Agreement.

“Initial Deemed Exchange” is defined in Section 2.01(b) of this Agreement.

“Initial Deemed Exchange Basis Schedule” is defined in Section 2.02(a)(1) of
this Agreement.

“Initial ESA Modification Payment” is defined in the recitals to this Agreement.

“Initial ESA Modification Payment Basis Schedule” is defined in
Section 2.02(b)(1) of this Agreement.

“Initial Exchange Proceeds” is defined in Section 2.01(b) of this Agreement.

“IRS” means the U.S. Internal Revenue Service.

“LIBOR” means, for each month (or portion thereof) during any period, an
interest rate per annum equal to the rate per annum reported, on the date two
days prior to the first day of such month, on the Telerate Page 3750 (or if such
screen shall cease to be publicly available, as reported on Reuters Screen page
“LIBO” or by any other publicly available source of such market rate) for London
interbank offered rates for U.S. dollar deposits for such month (or portion
thereof).

“NCM Inc.” is defined in the preamble of this Agreement.

 

7

--------------------------------------------------------------------------------

“NCM Inc. Certificate of Incorporation” means the Certificate of Incorporation
of NCM Inc.

“NCM Inc. Payment” is defined in Section 5.01 of this Agreement.

“NCM Inc. Tax Benefit Schedule” is defined in Section 2.03(a) of this Agreement.

“NCM LLC” is defined in the preamble of this Agreement.

“NCM LLC Credit Agreement” is defined within the term “NCM LLC Indebtedness” as
defined in Section 1.01 of this Agreement.

“NCM LLC Indebtedness” means the debt incurred by NCM LLC as of the date hereof
pursuant to that certain $805,000,000 Credit Agreement by and among NCM LLC, as
borrower, Lehman Brothers, Inc. and J.P. Morgan Securities, Inc., as arrangers,
J.P. Morgan Chase Bank, N.A., as syndication agent, Credit Suisse (USA) LLC and
Morgan Stanley Senior Funding, Inc., as co-documentation agents, and Lehman
Commercial Paper Inc., as administrative agent, and the several lenders from
time to time parties thereto, and dated as of the date hereof and as amended,
modified or supplemented from time to time and any extension, refunding,
refinancing or replacement (in whole or in part) thereof (the “NCM LLC Credit
Agreement”).

“NCM LLC Operating Agreement” means that certain Third Amended and Restated
Limited Liability Company Operating Agreement by and among NCM LLC, NCM, Inc.,
and the Founding Members and dated as of the date hereof.

“NCM LLC Payment” is defined in Section 5.01 of this Agreement.

“Negative Theatre Access Adjustment” is defined in the recitals to this
Agreement.

“Net IPO Proceeds” means the cash proceeds contributed by NCM Inc. to the
capital of NCM LLC in connection with NCM Inc.’s purchase of Common Units
pursuant to the Common Unit Purchase Agreement.

“Non-TRA Portion” is defined in Section 2.03(c) of this Agreement.

“Original Assets” means the assets of NCM LLC as of the date hereof (and any
asset whose tax basis is determined, in whole or in part, by reference to the
adjusted basis of any such asset).

“Parties” means the parties listed in the preamble to this Agreement.

“Percentage Interest” is defined in Section 1.1 of the NCM LLC Operating
Agreement.

 

8

--------------------------------------------------------------------------------

“Permitted Transfer” means (a) with respect to the rights and obligations of NCM
LLC under this Agreement, (i) the grant of a security interest by NCM LLC in
this Agreement and all rights and obligations of NCM LLC hereunder to the
Administrative Agent, on behalf of the Secured Parties, pursuant to the Security
Documents, (ii) the assignment or other transfer of such rights and obligations
to the Administrative Agent (on behalf of the Secured Parties) or other third
party upon the exercise of remedies in accordance with the NCM LLC Credit
Agreement and the Security Documents and (iii) in the event that the
Administrative Agent is the initial assignee or transferee under the preceding
clause (ii), the subsequent assignment or other transfer of such rights and
obligations by the Administrative Agent on behalf of the Secured Parties to a
third party, or (b) in the event that NCM LLC becomes a debtor in a case under
the Bankruptcy Code, the assumption and/or assignment by NCM LLC of this
Agreement under section 365 of the Bankruptcy Code, notwithstanding the
provisions of section 365(c) thereof.

“Person” means and includes any individual, firm, corporation, partnership
(including, without limitation, any limited, general or limited liability
partnership), company, limited liability company, trust, joint venture,
association, joint stock company, unincorporated organization or similar entity
or Governmental Entity, or other entity or organization of any nature whatsoever
or any “group” (as used in Section 13(d) and 14(d) of the Exchange Act) of two
or more of the foregoing.

“Positive Theatre Access Adjustment” is defined in the recitals to this
Agreement.

“Positive Theatre Access Adjustment Basis Schedule” is defined in
Section 2.01(c)(1) of this Agreement.

“Preferred Units” is defined in Section 1.1 of the NCM LLC Operating Agreement.

“Realized Tax Benefit” means, for a Covered Taxable Year, the excess, if any, of
the Hypothetical Tax Liability over the actual liability for Covered Taxes of
NCM Inc. for such Covered Taxable Year, less the fees, charges, and expenses
related to the administration of this Agreement, including any fees, charges,
and expenses of the Advisory Firm and, if applicable, the expert described in
Section 7.09, in each case paid by NCM LLC or NCM Inc. in the relevant Covered
Taxable Year. If all or a portion of the actual tax liability for Covered Taxes
for the Covered Taxable Year arises as a result of an audit by a Taxing
Authority of any Covered Taxable Year, such liability shall not be included in
determining the Realized Tax Benefit unless and until there has been a
Determination.

“Realized Tax Detriment” means, for a Covered Taxable Year, the excess, if any,
of the actual liability for Covered Taxes of NCM Inc. over the Hypothetical Tax
Liability for such Covered Taxable Year, plus the fees, charges, and expenses
related to the administration of this Agreement, including the fees, charges,
and expenses of the Advisory Firm and, if applicable, the expert described in
Section 7.09, in each case paid by NCM LLC or NCM Inc. in the relevant Covered
Taxable Year. If all or a portion of the actual tax liability for Covered Taxes
for the Covered Taxable Year arises as a result

 

9

--------------------------------------------------------------------------------

of an audit by a Taxing Authority of any Covered Taxable Year, such liability
shall not be included in determining the Realized Tax Detriment unless and until
there has been a Determination.

“Reconciliation Procedures” shall mean those procedures set forth in
Section 7.09 of this Agreement.

“Redemption Proceeds” means the cash used by NCM LLC to redeem the Preferred
Units pursuant to the terms of Section 3.4(d) of the NCM LLC Operating
Agreement.

“Regal ESA Party” is defined in the preamble of this Agreement.

“Regal Founding Member” is defined in the preamble of this Agreement.

“Relevant NCM Taxpayer” means (i) NCM Inc. (or its successors or assigns) or
(ii) NCM LLC (or its successors or assigns) and (iii) any consolidated, combined
or unitary group containing either NCM Inc. or NCM LLC, as the case may be, or
any of their respective successors or assigns.

“Scheduled Termination Date” shall mean the date specified in Section 4.05 of
this Agreement.

“Secured Parties” means the “Secured Parties” (or any analogous concept) as
defined in the NCM LLC Credit Agreement.

“Security Documents” means the “Security Documents” as defined in the NCM LLC
Credit Agreement and any amendment, modification, supplement or replacement of
such Security Documents.

“Subsequent Deemed Exchange” is defined in Section 2.01(e) of this Agreement.

“Subsequent Deemed Exchange Basis Schedule” is defined in Section 2.02(d)(1) of
this Agreement.

“Subsequent Deemed Exchange Date” is defined in Section 2.01(e) of this
Agreement.

“Subsequent Exchange Proceeds” is defined in Section 2.01(e) of this Agreement.

“Supplemental Theatre Access Fee” is defined in Section 1.01 of each of the
Exhibitor Services Agreements.

“Taxable Year” means a Taxable Year as defined in Section 441(b) of the Code or
comparable section of U.S. state or local income or franchise Tax law, as
applicable, (and, therefore, for the avoidance of doubt, may include a period of
less than 12 months for which a Tax Return is made).

 

10

--------------------------------------------------------------------------------

“Taxes” means (i) all forms of taxation or duties imposed, or required to be
collected or withheld, including, without limitation, charges, together with any
related interest, penalties or other additional amounts, (ii) liability for the
payment of any amount of the type described in the preceding clause (i) as a
result of being a member of an affiliated, consolidated, combined or unitary
group, and (iii) liability for the payment of any amounts as a result of being
party to any tax sharing agreement (other than this Agreement) or as a result of
any express or implied obligation to indemnify any other person with respect to
the payment of any amount described in the immediately preceding clauses (i) or
(ii) (other than an obligation to indemnify under this Agreement).

“Tax Return” means any return, filing, report, questionnaire, information
statement or other document required to be filed, including amended returns that
may be filed, for any taxable period with any Taxing Authority (whether or not a
payment is required to be made with respect to such filing).

“Taxing Authority” means the IRS and any other state, local, foreign or other
Governmental Entity responsible for the administration of Taxes.

“Theatre Access Fee” is defined in Section 1.01 of each of the Exhibitor
Services Agreements.

“TRA Portion” is defined in Section 2.03(c) of this Agreement.

“Treasury Regulations” means the final, temporary and proposed regulations under
the Code promulgated from time to time (including corresponding provisions of
succeeding provisions) as in effect for the relevant taxable period.

“Valuation Assumptions” mean the following assumptions to be made in connection
with determining the amount of any Early Termination Payment: (i) for purposes
of determining the individual and aggregate cumulative Basis Adjustments
attributable to the Founding Members, all Common Units outstanding as of the
date of the Early Termination Notice will be assumed to be exchanged in taxable
Subsequent Deemed Exchanges as of the date on which the Early Termination Notice
is delivered, and at a price equal to the 30-day volume-weighted average price
per share of Common Stock (determined over the 30 trading days prior to the
delivery of the Early Termination Notice); (ii) NCM Inc. will be assumed to have
sufficient taxable income in each of the relevant Covered Taxable Years ending
after the date of the Early Termination Notice and continuing through the
Scheduled Termination Date to fully utilize the applicable amortization
deductions attributable to the Initial ESA Modification Payment, any Positive
Theatre Access Adjustments made prior to the Early Termination Notice, and any
Basis Adjustments made prior to the Early Termination Notice (or deemed made
pursuant to clause (i)), and any Imputed Interest; (iii) U.S. Federal Income Tax
rates and applicable state and local income and franchise tax rates for each of
the relevant Covered Taxable Years ending after the date of the Early
Termination Notice and continuing through the Scheduled Termination Date shall
be assumed to equal such rates in effect for the Covered Taxable Year in which
the Early Termination Notice is delivered; and (iv) any loss carryforwards of
NCM Inc. available as of the date of the Early Termination

 

11

--------------------------------------------------------------------------------

Notice will be utilized by NCM Inc. on a pro rata basis in each of the relevant
Covered Taxable Years ending after the date of the Early Termination Notice and
continuing through the Scheduled Termination Date.

ARTICLE II

DETERMINATION OF REALIZED TAX BENEFIT

OR REALIZED TAX DETRIMENT

SECTION 2.01. Tax Characterization of Transactions; Basis Adjustments. For
purposes of determining the liability of each of the relevant Parties for
Covered Taxes, and for purposes of determining the amount of any Realized Tax
Benefits or Realized Tax Detriments under this Agreement, the Parties agree as
follows:

(a) Initial ESA Modification Payments. Each ESA Party will treat its receipt of
an Initial ESA Modification Payment as being immediately taxable in full and NCM
LLC will treat such Initial ESA Modification Payments as giving rise to, in the
aggregate, a $686,334,398 intangible asset within NCM LLC that will be amortized
on a straight-line basis over the thirty (30) year term of the Exhibitor
Services Agreements.

(b) Initial Deemed Exchange. Each Founding Member will treat its receipt of a
proportionate share of the Redemption Proceeds, in part, as a distribution from
NCM LLC under Section 731 of the Code (each a “Distribution”) and, in part, as
sale proceeds received directly from NCM Inc. in connection with a taxable sale
of Units to NCM Inc. under Section 707(a)(2)(B) of the Code (each such taxable
sale an “Initial Deemed Exchange”). The total amount of sales proceeds that will
be treated as received by the Founding Members in respect of the Initial Deemed
Exchanges (the “Initial Exchange Proceeds”) will equal the sum of (i) the
portion of the Redemption Proceeds, if any, attributable to the Net IPO
Proceeds, plus (ii) the portion of the Redemption Proceeds attributable to the
NCM LLC Indebtedness and treated as consideration in excess of the Founding
Members’ allocable share of the NCM LLC Indebtedness, as determined under
Proposed Treasury Regulation Section 1.707-7. The total amount of the
Distributions will equal (x) the Redemption Proceeds, minus (y) the Initial
Exchange Proceeds. NCM LLC and NCM Inc. will each treat the distribution of the
Redemption Proceeds in a manner consistent with the Founding Members, and NCM
LLC will have in effect an election under Section 754 of the Code (and under any
similar provisions of applicable state and local law) for the Taxable Year in
which the Initial Deemed Exchanges occur, and NCM LLC intends to maintain such
elections throughout the term of this Agreement. NCM Inc. will be treated as
receiving a Basis Adjustment in connection with each Initial Deemed Exchange.
The Founding Members and NCM Inc. shall treat the gain recognized by the
Founding Members in respect of the Initial Deemed Exchanges and NCM Inc.’s
related Basis Adjustments as occurring entirely as of the date hereof, unless
there is a Determination to the contrary. For purposes of this Agreement, the
Founding Members and NCM Inc. shall not take into account the fair market value
of any Exchange-Related Tax Benefit Payments to be made under this Agreement in
determining the gain recognized by the Founding Members in respect of the
Initial Deemed Exchanges or in determining NCM Inc.’s related Basis Adjustments.

(c) Positive Theatre Access Adjustments. Each ESA Party will treat any issuance
of Common Units in connection with a Positive Theatre Access Adjustment as being

 

12

--------------------------------------------------------------------------------

immediately taxable in full and NCM LLC will treat any such issuance as giving
rise to an intangible asset within NCM LLC that (i) will equal the fair market
value of the Common Units issued (as determined by multiplying the number of
such Common Units issued by the NCM Inc. Share Price as defined in the Common
Unit Adjustment Agreement), and (ii) will be amortized on a straight-line basis
over the then remaining term of the relevant ESA Party’s Exhibitor Services
Agreement. The ESA Parties and NCM LLC recognize and agree that the amount of
any Positive Theatre Access Adjustment is intended to account for NCM LLC’s
future utilization of additional theatre assets over the then remaining term of
the Exhibitor Services Agreements (and the Positive Theatre Access Adjustment is
not intended to account in any way for the past utilization of any theatre
assets), such that no portion of the Positive Theatre Access Adjustment will be
treated as Imputed Interest.

(d) Negative Theatre Access Adjustments. Each ESA Party will treat any surrender
of Common Units to NCM LLC or any payment of cash to NCM LLC in connection with
a Negative Theatre Access Adjustment as a subsequent adjustment to its Initial
ESA Modification Payment that results in an immediate deduction. NCM LLC will
treat any such surrender of Common Units to NCM LLC or any such payment of cash
to NCM LLC in connection with a Negative Theatre Access Adjustment (i) as an
immediate reduction to the accumulated adjusted basis of (x) the $686,334,398
intangible asset within NCM LLC that was originally created in connection with
the Initial ESA Modification Payments, and then to (y) the amount of any
Positive Theatre Access Adjustments, and then to (z) the amount of any
ESA-Related Payments made by NCM LLC to the ESA Parties under this Agreement,
and (ii) to the extent the accumulated adjusted bases of such intangible assets
are insufficient to fully absorb such an immediate reduction, as income. The
amount of the foregoing adjustments by each ESA Party and the adjustments (and
possibly income) by NCM LLC will equal either the fair market value of the
Common Units surrendered (as determined by multiplying the number of such Common
Units surrendered by the NCM Inc. Share Price as defined in the Common Unit
Adjustment Agreement), or the amount of cash paid. The ESA Parties and NCM LLC
recognize and agree that the amount of any Negative Theatre Access Adjustment is
intended to account for NCM Inc.’s inability to continue to utilize certain
theatre assets over the then remaining term of the Exhibitor Services Agreements
(and the Negative Theatre Access Adjustment is not intended to account in any
way for the past utilization of any theatre assets), such that no portion of the
Negative Theatre Access Adjustment will be treated as Imputed Interest.

(e) Subsequent Deemed Exchanges. Each Founding Member will treat any redemption
of Common Units pursuant to Sections 9.1 and 3.5(b) of the NCM LLC Operating
Agreement as a taxable sale of Common Units to NCM Inc. under
Section 707(a)(2)(B) of the Code, and each Founding Member will also treat any
actual sale of Common Units to NCM Inc. in connection with the underwriters’
exercise of their over-allotment option as a taxable sale of Common Units to NCM
Inc. (each such taxable sale a “Subsequent Deemed Exchange”), except to the
extent that any such redemption is part of a transaction that qualifies as a
non-taxable transaction under the Code (for example, as part of a transaction
that qualifies as a non-taxable exchange under Section 351 of the Code). NCM
Inc. will be treated as receiving a Basis Adjustment in connection with each
Subsequent Deemed Exchange. The sales proceeds that will be treated as received
by a Founding Member in connection with a Subsequent Deemed Exchange (the
“Subsequent Exchange Proceeds”) will equal the fair market value of the Common
Stock or the amount of cash, or both, received by such Founding Member. For this

 

13

--------------------------------------------------------------------------------

purpose, the fair market value of any Common Stock received by a Founding Member
will equal the number of shares of such Common Stock multiplied by the NCM Inc.
Redemption Price, as defined in the NCM LLC Operating Agreement. In the case of
a redemption of Common Units under Sections 9.1 and 3.5(b) of the NCM LLC
Operating Agreement, each Founding Member and NCM Inc. shall treat the gain
recognized by a Founding Member in respect of a Subsequent Deemed Exchange and
NCM Inc.’s related Basis Adjustment as occurring entirely on the relevant
Redemption Date as defined in Section 9.1(a) of the NCM LLC Operating Agreement,
and in the case of any actual sale of Common Units to NCM Inc. in connection
with the underwriters’ exercise of their over-allotment option each Founding
Member and NCM Inc. shall treat the gain recognized by a Founding Member in
respect of a Subsequent Deemed Exchange and NCM Inc.’s related Basis Adjustment
as occurring entirely on the date of such actual sale (each such date a
“Subsequent Deemed Exchange Date”), unless there is a Determination to the
contrary. For purposes of this Agreement, and unless a Founding Member elects
out of installment sale treatment pursuant to Section 2.01(f) of this Agreement,
each Founding Member and NCM Inc. shall not take into account the fair market
value of any Exchange-Related Payments to be made under this Agreement in
determining the gain recognized by such Founding Member in respect of a
Subsequent Deemed Exchange or in determining NCM Inc.’s related Basis
Adjustment.

(f) Payments Under Agreement.

(1) Exchange-Related Payments. Any Exchange-Related Tax Benefit Payments made by
NCM Inc. under Section 3.01(a) of this Agreement in respect of an NCM Inc. Tax
Benefit Schedule, as well as any payments made by NCM Inc. under Section 3.01(b)
of this Agreement with respect to an Amended NCM Inc. Tax Benefit Schedule, will
be treated as subsequent upward purchase price adjustments that give rise to
further Basis Adjustments for NCM Inc. The Parties recognize and agree that the
treatment described in the preceding sentence will have the effect of creating
additional Basis Adjustments for NCM Inc. in the year of payment and, as a
result, such additional Basis Adjustments will be incorporated into the current
year calculation and into future year calculations, as appropriate, with any
circularity created in the current year continuing until any incremental current
year benefits equal an immaterial amount. Any such Exchange-Related Payments
will be reported by the Founding Members using the installment method under
Section 453 of the Code (to the extent applicable, and taking into account the
rules under Section 453A of the Code), unless in connection with a Subsequent
Deemed Exchange a Founding Member affirmatively elects out of the installment
method and treats the fair market value of its rights to receive such
Exchange-Related Payments under this Agreement as received on the relevant
Subsequent Deemed Exchange Date. To affirmatively elect out of the installment
method, the relevant Founding Member shall deliver a written notice to NCM Inc.
as of the relevant Subsequent Deemed Exchange Date. The principles of Sections
1272, 1274, or 483 of the Code, as applicable, and the principles of any similar
provisions of state and local law, will apply to cause a portion of each
Exchange-Related Payment made by NCM Inc. to the Founding Members under this
Agreement to be treated as imputed interest (the “Imputed Interest”). Any
Exchange-Related Tax Detriment Payments made by a Founding Member under
Section 3.01(a) of this Agreement in respect of an NCM Inc. Tax Basis Schedule,
as well as any payments made by a Founding Member under Section 3.01(b) of this
Agreement with respect to an Amended NCM Inc. Tax Basis Schedule, will be
treated as downward purchase price adjustments that reduce both the amount
previously realized by such Founding Member and the amount of any prior Basis
Adjustments for NCM Inc.

 

14

--------------------------------------------------------------------------------

(2) ESA-Related Payments. Any ESA-Related Tax Benefit Payments made by NCM LLC
under Section 3.02(a) of this Agreement with respect to an NCM Inc. Tax Benefit
Schedule, as well as any payments made by NCM LLC under Section 3.02(b) of this
Agreement with respect to an Amended NCM Inc. Tax Benefit Schedule, will be
treated as additional Initial ESA Modification Payments, to the extent
attributable to an Initial ESA Modification Payment, or as additional Positive
Theatre Access Adjustments, to the extent attributable to a Positive Theatre
Access Adjustment. The Parties recognize and agree that the treatment described
in the preceding sentence will have the effect of creating additional
amortization deductions within NCM LLC in the year of payment and, as a result,
such additional amortization deductions will be incorporated into the current
year calculation and into future year calculations, as appropriate, with any
circularity created in the current year continuing until any incremental current
year benefits equal an immaterial amount. Any ESA-Related Tax Detriment Payments
made by an ESA Party under Section 3.02(a) of this Agreement with respect to an
NCM Inc. Tax Benefit Schedule, as well as any payments made by an ESA Party
under Section 3.02(b) of this Agreement with respect to an Amended NCM Inc. Tax
Benefit Schedule, will be treated as downward adjustments that reduce both the
amount previously realized by such ESA Party and the amount of (x) any
ESA-Related Payments previously made by NCM LLC to the ESA Parties under this
Agreement, and then (y) any Positive Theatre Access Adjustments or Initial ESA
Modification Payments, as appropriate.

SECTION 2.02. Basis Schedules.

(a) Initial Deemed Exchange.

(1) Initial Deemed Exchange Basis Schedule. Within 180 calendar days after the
date hereof, NCM LLC shall deliver to each of the Founding Members a schedule
(the “Initial Deemed Exchange Basis Schedule”) approved by the Audit Committee
that shows, in reasonable detail, for purposes of Covered Taxes, (i) the actual
tax basis as of the date hereof of the Original Assets, (ii) the Basis
Adjustment with respect to the Original Assets as a result of the Initial Deemed
Exchanges and (iii) the period or periods, if any, over which the Original
Assets are amortizable or depreciable for purposes of Covered Taxes. At the time
NCM LLC delivers the Initial Deemed Exchange Basis Schedule to the Founding
Members, NCM LLC shall (x) deliver to the Founding Members schedules and work
papers providing reasonable detail regarding the preparation of the Initial
Deemed Exchange Basis Schedule and an Advisory Firm Letter supporting such
Initial Deemed Exchange Basis Schedule and (y) allow the Founding Members
reasonable access to the appropriate representatives at NCM Inc., NCM LLC, and
the Advisory Firm in connection with their review of such schedule. The Initial
Deemed Exchange Basis Schedule shall become final and binding on the Parties
unless the Founding Members, within 30 calendar days after receiving such
Initial Deemed Exchange Basis Schedule, provide NCM LLC with a written notice of
a material objection to such Initial Deemed Exchange Basis Schedule made in good
faith and specifying the reasons for such material objection. If the Founding
Members and NCM LLC, negotiating in good faith, are unable to successfully
resolve the issues raised in such written notice within 60 calendar days after
such Initial Deemed Exchange Basis Schedule was delivered to the Founding
Members, the Founding Members and NCM LLC shall employ the Reconciliation
Procedures.

 

15

--------------------------------------------------------------------------------

(2) Amended Initial Deemed Exchange Basis Schedule. The Initial Deemed Exchange
Basis Schedule may be amended from time to time by NCM LLC with the consent of
the Audit Committee (i) in connection with a Determination, (ii) to correct
inaccuracies to the original Initial Deemed Exchange Basis Schedule identified
after the date hereof as a result of the receipt of additional information
relating to facts or circumstances on or prior to the date hereof, or (iii) to
comply with the expert’s determination under the Reconciliation Procedures. At
the time NCM LLC delivers such amended Initial Deemed Exchange Basis Schedule
(an “Amended Initial Deemed Exchange Basis Schedule”) to the Founding Members,
NCM LLC shall (x) deliver to the Founding Members schedules and work papers
providing reasonable detail regarding the preparation of the Amended Initial
Deemed Exchange Basis Schedule and an Advisory Firm Letter supporting such
Amended Initial Deemed Exchange Basis Schedule and (y) allow the Founding
Members reasonable access to the appropriate representatives at NCM Inc., NCM
LLC, and the Advisory Firm in connection with their review of such schedule. The
Amended Initial Deemed Exchange Basis Schedule shall become final and binding on
the Parties unless the Founding Members, within 30 calendar days after receiving
such Amended Initial Deemed Exchange Basis Schedule, provide NCM LLC with a
written notice of a material objection to such Amended Initial Deemed Exchange
Basis Schedule made in good faith and specifying the reasons for such material
objection. If the Founding Members and NCM LLC, negotiating in good faith, are
unable to successfully resolve the issues raised in such written notice within
60 calendar days after such Amended Initial Deemed Exchange Basis Schedule was
delivered to the Founding Members, the Founding Members and NCM LLC shall employ
the Reconciliation Procedures.

(b) Initial ESA Modification Payments.

(1) Initial ESA Modification Payment Basis Schedule. Within 180 calendar days
after the date hereof, NCM LLC shall deliver to each of the ESA Parties a
schedule (the “Initial ESA Modification Payment Basis Schedule”) approved by the
Audit Committee that confirms, in reasonable detail, for purposes of Covered
Taxes, (i) the tax basis as of the date hereof of the expected $686,334,398
million intangible asset created by the Initial ESA Modification Payments, and
(ii) the thirty-year period over which such asset is expected to be amortizable
or depreciable for purposes of Covered Taxes. At the time NCM LLC delivers the
Initial ESA Modification Payment Basis Schedule to the ESA Parties, NCM LLC
shall (x) deliver to the ESA Parties any schedules and work papers providing
reasonable detail regarding the preparation of the Initial ESA Modification
Payment Basis Schedule and an Advisory Firm Letter supporting such Initial ESA
Modification Payment Basis Schedule and (y) allow the ESA Parties reasonable
access to the appropriate representatives at NCM Inc., NCM LLC, and the Advisory
Firm in connection with their review of such schedule. The Initial ESA
Modification Payment Basis Schedule shall become final and binding on the
Parties unless the ESA Parties, within 30 calendar days after receiving such
Initial ESA Modification Payment Basis Schedule, provide NCM LLC with a written
notice of a material objection to such Initial ESA Modification Payment Basis
Schedule made in good faith and specifying the reasons for such material
objection. If the ESA Parties and NCM LLC, negotiating in good faith, are unable
to successfully resolve the issues raised in such written notice within 60
calendar days after such Initial ESA Modification Payment Basis Schedule was
delivered to the ESA Parties, the ESA Parties and NCM LLC shall employ the
Reconciliation Procedures.

 

16

--------------------------------------------------------------------------------

(2) Amended Initial ESA Modification Payment Basis Schedule. The Initial ESA
Modification Payment Basis Schedule may be amended from time to time by NCM LLC
with the consent of the Audit Committee (i) in connection with a Determination,
(ii) to correct inaccuracies to the original Initial ESA Modification Payment
Basis Schedule identified after the date hereof as a result of the receipt of
additional information relating to facts or circumstances on or prior to the
date hereof, (iii) to adjust for a Negative Theatre Access Adjustment, or
(iv) to comply with the expert’s determination under the Reconciliation
Procedures. At the time NCM LLC delivers such amended Initial ESA Modification
Payment Basis Schedule (an “Amended Initial ESA Modification Payment Basis
Schedule”) to the ESA Parties, NCM LLC shall (x) deliver to the ESA Parties any
schedules and work papers providing reasonable detail regarding the preparation
of the Amended Initial ESA Modification Payment Basis Schedule and an Advisory
Firm Letter supporting such Amended Initial ESA Modification Payment Basis
Schedule and (y) allow the ESA Parties reasonable access to the appropriate
representatives at NCM Inc., NCM LLC, and the Advisory Firm in connection with
their review of such schedule. The Amended Initial ESA Modification Payment
Basis Schedule shall become final and binding on the Parties unless the ESA
Parties, within 30 calendar days after receiving such Amended Initial ESA
Modification Payment Basis Schedule, provide NCM LLC with a written notice of a
material objection to such Amended Initial ESA Modification Payment Basis
Schedule made in good faith and specifying the reasons for such material
objection. If the ESA Parties and NCM LLC, negotiating in good faith, are unable
to successfully resolve the issues raised in such written notice within 60
calendar days after such Amended Initial ESA Modification Payment Basis Schedule
was delivered to the ESA Parties, the ESA Parties and NCM LLC shall employ the
Reconciliation Procedures.

(c) Positive Theatre Access Adjustments.

(1) Positive Theatre Access Adjustment Basis Schedules. Within 180 calendar days
after the date of a Positive Theatre Access Adjustment, NCM LLC shall deliver to
each of the ESA Parties a schedule (the “Positive Theatre Access Adjustment
Basis Schedule”) approved by the Audit Committee that shows, in reasonable
detail, for purposes of Covered Taxes, (i) the tax basis as of the date of the
Positive Theatre Access Adjustment the intangible asset created by the Positive
Theatre Access Adjustment, and (ii) the period over which such asset is
amortizable or depreciable for purposes of Covered Taxes. At the time NCM LLC
delivers the Positive Theatre Access Adjustment Basis Schedule to the ESA
Parties, NCM LLC shall (x) deliver to the ESA Parties any schedules and work
papers providing reasonable detail regarding the preparation of the Positive
Theatre Access Adjustment Basis Schedule and an Advisory Firm Letter supporting
such Positive Theatre Access Adjustment Basis Schedule and (y) allow the ESA
Parties reasonable access to the appropriate representatives at NCM Inc., NCM
LLC, and the Advisory Firm in connection with their review of such schedule. The
Positive Theatre Access Adjustment Basis Schedule shall become final and binding
on the Parties unless the ESA Parties, within 30 calendar days after receiving
such Positive Theatre Access Adjustment Basis Schedule, provide NCM LLC with a
written notice of a material objection to such Positive Theatre Access
Adjustment Payment Basis Schedule made in good faith and specifying the reasons
for such material objection. If the ESA Parties and NCM LLC,

 

17

--------------------------------------------------------------------------------

negotiating in good faith, are unable to successfully resolve the issues raised
in such written notice within 60 calendar days after such Positive Theatre
Access Adjustment Basis Schedule was delivered to the ESA Parties, the ESA
Parties and NCM LLC shall employ the Reconciliation Procedures.

(2) Amended Positive Theatre Access Adjustment Basis Schedules. Each Positive
Theatre Access Adjustment Basis Schedule may be amended from time to time by NCM
LLC with the consent of the Audit Committee (i) in connection with a
Determination, (ii) to correct inaccuracies to the original Positive Theatre
Access Adjustment Basis Schedule identified after the date hereof as a result of
the receipt of additional information relating to facts or circumstances on or
prior to the date of the relevant Positive Theatre Access Adjustment, (iii) to
adjust for a Negative Theatre Access Adjustment, or (iv) to comply with the
expert’s determination under the Reconciliation Procedures. At the time NCM LLC
delivers such amended Positive Theatre Access Adjustment Basis Schedule (an
“Amended Positive Theatre Access Adjustment Basis Schedule”) to the ESA Parties,
NCM LLC shall (x) deliver to the ESA Parties any schedules and work papers
providing reasonable detail regarding the preparation of the Amended Positive
Theatre Access Adjustment Basis Schedule and an Advisory Firm Letter supporting
such Amended Positive Theatre Access Adjustment Basis Schedule and (y) allow the
ESA Parties reasonable access to the appropriate representatives at NCM Inc.,
NCM LLC, and the Advisory Firm in connection with their review of such schedule.
Each Amended Positive Theatre Access Adjustment Basis Schedule shall become
final and binding on the Parties unless the ESA Parties, within 30 calendar days
after receiving such Amended Positive Theatre Access Adjustment Basis Schedule,
provide NCM LLC with a written notice of a material objection to such Amended
Positive Theatre Access Adjustment Basis Schedule made in good faith and
specifying the reasons for such material objection. If the ESA Parties and NCM
LLC, negotiating in good faith, are unable to successfully resolve the issues
raised in such written notice within 60 calendar days after such Amended
Positive Theatre Access Adjustment Basis Schedule was delivered to the ESA
Parties, the ESA Parties and NCM LLC shall employ the Reconciliation Procedures.

(d) Subsequent Deemed Exchanges.

(1) Subsequent Deemed Exchange Basis Schedules. Within 180 calendar days after
the end of a Covered Taxable Year in which any Subsequent Deemed Exchange has
been effected, NCM Inc. shall deliver to the Founding Members a schedule (the
“Subsequent Deemed Exchange Schedule”) approved by the Audit Committee that
shows, in reasonable detail, for purposes of Covered Taxes, (i) the actual tax
basis of the Exchange Assets as of each Subsequent Deemed Exchange Date in such
Covered Taxable Year, (ii) the Basis Adjustment with respect to the Exchange
Assets as a result of each Subsequent Deemed Exchange effected in such Covered
Taxable Year and (iii) the period or periods, if any, over which the Exchange
Assets are amortizable or depreciable as a result of each Subsequent Deemed
Exchange effected in such Covered Taxable Year. At the time NCM Inc. delivers
the Subsequent Deemed Exchange Basis Schedule to the Founding Members, NCM Inc.
shall (x) deliver to the Founding Members schedules and work papers providing
reasonable detail regarding the preparation of the Subsequent Deemed Exchange
Basis Schedule and an Advisory Firm Letter supporting such Subsequent Deemed
Exchange Basis Schedule and (y) allow the Founding Members reasonable access to
the appropriate representatives at NCM Inc., NCM

 

18

--------------------------------------------------------------------------------

LLC, and the Advisory Firm in connection with their review of such schedule. The
Subsequent Deemed Exchange Basis Schedule shall become final and binding on the
Parties unless the Founding Members, within 30 calendar days after receiving
such Subsequent Deemed Exchange Basis Schedule, provide NCM Inc. with notice of
a material objection to such Subsequent Deemed Exchange Basis Schedule made in
good faith and specifying the reasons for such material objection. If the
Founding Members and NCM Inc., negotiating in good faith, are unable to
successfully resolve the issues raised in such notice within 60 calendar days
after such Subsequent Deemed Exchange Basis Schedule was delivered to the
Founding Members, the Founding Members and NCM Inc. shall employ the
Reconciliation Procedures.

(2) Amended Subsequent Deemed Exchange Basis Schedules. Each Subsequent Deemed
Exchange Basis Schedule may be amended from time to time by NCM Inc. with the
consent of the Audit Committee (i) in connection with a Determination, (ii) to
correct inaccuracies to the original Subsequent Deemed Exchange Basis Schedule
identified after the date of the Subsequent Deemed Exchanges as a result of the
receipt of additional information relating to facts or circumstances on or prior
to the relevant Subsequent Deemed Exchange Dates, or (iii) to comply with the
expert’s determination under the Reconciliation Procedures. At the time NCM Inc.
delivers such amended Subsequent Deemed Exchange Basis Schedule (an “Amended
Subsequent Deemed Exchange Basis Schedule”) to the Founding Members, NCM Inc.
shall (x) deliver to the Founding Members schedules and work papers providing
reasonable detail regarding the preparation of the Amended Subsequent Deemed
Exchange Basis Schedule and an Advisory Firm Letter supporting such Amended
Subsequent Deemed Exchange Basis Schedule and (y) allow the Founding Members
reasonable access to the appropriate representatives at NCM Inc., NCM LLC, and
the Advisory Firm in connection with their review of such schedule. Each Amended
Subsequent Deemed Exchange Basis Schedule shall become final and binding on the
Parties unless the Founding Members, within 30 calendar days after receiving
such Amended Subsequent Deemed Exchange Basis Schedule, provide NCM Inc. with
written notice of a material objection to such Amended Subsequent Deemed
Exchange Basis Schedule made in good faith and specifying the reasons for such
material objection. If the Founding Members and NCM Inc., negotiating in good
faith, are unable to successfully resolve the issues raised in such written
notice within 60 calendar days after such Amended Subsequent Deemed Exchange
Basis Schedule was delivered to the Founding Members, the Founding Members and
NCM Inc. shall employ the Reconciliation Procedures.

SECTION 2.03. Tax Benefit Schedules.

(a) NCM Inc. Tax Benefit Schedules. Within 30 calendar days after filing the
U.S. Federal Income Tax Returns of NCM Inc. and NCM LLC for the relevant Covered
Taxable Year, NCM Inc. shall provide to the Founding Members and the ESA Parties
a schedule approved by the Audit Committee showing, in reasonable detail, the
calculation of NCM Inc.’s Realized Tax Benefit or Realized Tax Detriment for
such Covered Taxable Year (the “NCM Inc. Tax Benefit Schedule”). At the time NCM
Inc. delivers an NCM Inc. Tax Benefit Schedule to the Founding Members and the
ESA Parties, NCM Inc. shall (i) deliver to the Founding Members and the ESA
Parties schedules and work papers providing reasonable detail regarding the
preparation of such NCM Inc. Tax Benefit Schedule and an Advisory Firm Letter
supporting such NCM Inc. Tax Benefit Schedule and (ii) allow the Founding
Members and the ESA Parties reasonable access to the appropriate representatives
at NCM Inc., NCM LLC, and the Advisory

 

19

--------------------------------------------------------------------------------

Firm in connection with their review of such schedules. Each NCM Inc. Tax
Benefit Schedule shall become final and binding on the Parties unless the
Founding Members or the ESA Parties, within 30 calendar days after receiving
such Tax Benefit Schedule, provides NCM Inc. with a written notice of a material
objection to such Tax Benefit Schedule made in good faith and specifying the
reasons for such material objection. If the Founding Members or the ESA Parties,
or both, and NCM Inc., negotiating in good faith, are unable to successfully
resolve the issues raised in such written notice within 60 calendar days after
such NCM Inc. Tax Benefit Schedule was delivered to the Founding Members and the
ESA Parties, the Founding Members or the ESA Parties, or both, and NCM Inc.
shall employ the Reconciliation Procedures.

(b) Amended NCM Inc. Tax Benefit Schedules. Each NCM Inc. Tax Benefit Schedule
for any Covered Taxable Year may be amended from time to time by NCM Inc. with
the consent of the Audit Committee (i) in connection with a Determination
affecting such NCM Inc. Tax Benefit Schedule, (ii) to correct inaccuracies in
the original NCM Inc. Tax Benefit Schedule identified as a result of the receipt
of additional factual information relating to a Covered Taxable Year after the
date the NCM Inc. Tax Benefit Schedule was provided to the Founding Members and
the ESA Parties, (iii) to reflect a change in the Realized Tax Benefit or
Realized Tax Detriment for such Covered Taxable Year attributable to a carryback
or carryforward of a loss or other tax item to such Covered Taxable Year,
(iv) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment
for such Covered Taxable Year attributable to an amended Tax Return filed for
such Covered Taxable Year (provided, however, that such a change attributable to
an audit of a Tax Return by an applicable Taxing Authority shall not be taken
into account on an amended NCM Inc. Tax Benefit Schedule unless and until there
has been a Determination with respect to such change), or (v) to comply with the
expert’s determination under the Reconciliation Procedures. At the time NCM Inc.
delivers such an amended NCM Inc. Tax Benefit Schedule (an “Amended NCM Inc. Tax
Benefit Schedule”) to the Founding Members and the ESA Parties it shall
(x) deliver to the Founding Members and the ESA Parties schedules and work
papers providing reasonable detail regarding the preparation of the Amended NCM
Inc. Tax Benefit Schedule and an Advisory Firm Letter supporting such Amended
NCM Inc. Tax Benefit Schedule and (y) allow the Founding Members and the ESA
Parties reasonable access to the appropriate representatives at NCM Inc., NCM
LLC, and the Advisory Firm in connection with their review of such schedule.
Each Amended NCM Inc. Tax Benefit Schedule shall become final and binding on the
Parties unless the Founding Members or the ESA Parties, within 30 calendar days
after receiving such Amended NCM Inc. Tax Benefit Schedule, provides NCM Inc.
with a written notice of a material objection to such Amended NCM Inc. Tax
Benefit Schedule made in good faith and specifying the reasons for such material
objection. If the Founding Members or the ESA Parties, or both, and NCM Inc.,
negotiating in good faith, are unable to successfully resolve the issues raised
in such written notice within 60 calendar days after such Amended NCM Inc. Tax
Benefit Schedule was delivered to the Founding Members and the ESA Parties, the
Founding Members or the ESA Parties, or both, and NCM Inc. shall employ the
Reconciliation Procedures.

(c) Applicable Principles.

(1) The Realized Tax Benefit or Realized Tax Detriment for each Covered Taxable
Year is intended to measure the decrease or increase in the actual Covered Tax
liability of NCM Inc. for such Covered Taxable Year attributable to any

 

20

--------------------------------------------------------------------------------

Basis Adjustments, the Initial ESA Modification Payments, any Positive Theatre
Access Adjustments, any Negative Theatre Access Adjustments, and Imputed
Interest, determined using a “with and without” methodology and based on the
Parties’ interpretation of applicable law as of the date hereof. Any subsequent
change in an individual Party’s interpretation of applicable law (or potentially
differing interpretation by the Advisory Firm), or actual change in applicable
law, may result in a change in the procedures and methodologies utilized for
purposes of this Agreement, provided that any such change in procedures and
methodologies is agreed to by each Party to this Agreement and approved by the
Advisory Firm for purposes of issuing the Advisory Firm Letter (subject to the
Reconciliation Procedures if the Parties are unable to reach unanimous agreement
with respect to such change within 60 calendar days of such change being first
proposed by a Party).

(2) For purposes of this Agreement, any Tax items that may potentially reduce
gross taxable income (“Tax Reduction Items”) shall be divided as between
(i) those Tax Reduction Items that are attributable to any Basis Adjustments,
any Initial ESA Modification Payments, any Positive Theatre Access Adjustments,
any Negative Theatre Access Adjustments, or Imputed Interest (the “TRA
Portion”), and (ii) all other Tax Reduction Items (the “Non-TRA Portion”). With
respect to any Covered Taxable Year, the use of any current Tax Reduction Items,
and the use of any Tax Reduction Items attributable to any carryovers or
carrybacks, will be deemed utilized in a manner that first applies the amount of
any Non-TRA Portion, and then applies the amount of any TRA Portion (with the
TRA Portion being applied on a proportionate basis determined by the relative
amount of each Tax Reduction Item that comprises such TRA Portion); provided,
however, that in the case of any carryback of a Non-TRA Portion to a prior
Covered Taxable Year, such carryback shall not affect the original “with and
without” calculation in such prior Covered Taxable Year to the extent that the
original “with” calculation is not affected under applicable law. Carryovers or
carrybacks of any TRA Portion or Non-TRA Portion shall be considered to be
subject to the rules of the Code (or any successor U.S. Federal Income Tax
statute) and the Treasury Regulations or the appropriate provisions of U.S.
state and local income and franchise Tax law, as applicable, governing the use,
limitation and expiration of carryovers or carrybacks of the relevant type.

(3) As an example of the intended operation of the principles in the preceding
paragraph, assume that: (i) in the first Covered Taxable Year, $250 of gross
taxable income arose and was reduced by a $100 TRA Portion (which resulted in a
Hypothetical Tax Liability of $100 under the “without” calculation and an actual
tax liability of $60 under the “with” calculation); (ii) in the second Covered
Taxable Year, $0 of gross taxable income arose along with both a TRA Portion of
$100 ($50 attributable to Basis Adjustments and $50 attributable to Initial ESA
Modification Payments) and a Non-TRA Portion of $200 (attributable to general
operating expenses); (iii) in the third Covered Taxable Year, $100 of gross
taxable income arose along with a $100 TRA Portion; (iv) in the fourth Covered
Taxable Year, $250 of gross taxable income arose along with a $100 TRA Portion;
(v) any unutilized TRA Portions and Non-TRA Portions are both able to be carried
back and carried over under applicable law; and (vi) there are no other items of
income, gain, loss, or deduction in such Covered Taxable Years and

 

21

--------------------------------------------------------------------------------

NCM Inc.’s effective tax rate is 40% for such Covered Taxable Years. Using the
intended operating principles set forth in the preceding paragraph, the
following results would be deemed to occur: (a) in the second Covered Taxable
Year, the $100 TRA Portion and the $200 Non-TRA Portion arising in the second
Covered Taxable Year would be carried back to the first Covered Taxable Year and
$150 of the $200 Non-TRA Portion would be deemed utilized for purposes of
modifying the original “with” and “without” calculations in such first Covered
Taxable Year (resulting in a Hypothetical Tax Liability of $40 under the
modified “without” calculation and an actual tax liability of $0 under the
modified “with” calculation, with no net change in Realized Tax Benefits arising
with respect to such first Covered Taxable Year for purposes of this Agreement);
(b) also in the second Covered Taxable Year, the remaining $50 Non-TRA Portion
and $100 TRA Portion unutilized after being carried back as against the first
Covered Taxable Year would remain unutilized in the second Covered Taxable Year
as against $0 of gross taxable income; (c) in the third Covered Taxable Year,
the remaining $50 Non-TRA Portion and $100 TRA Portion carried over from the
second Covered Taxable Year would be utilized in the third Covered Taxable Year
by deeming the $50 Non-TRA Portion to be used first, followed by $50 of the TRA
Portion with $25 attributable to Basis Adjustments and $25 attributable to
Initial ESA Modification Payments (resulting in a Hypothetical Tax Liability of
$20 under the “without” calculation and an actual tax liability of $0 under the
“with” calculation, with Realized Tax Benefits of $20 arising in such third
Covered Taxable Year for purposes of this Agreement); and (d) in the fourth
Covered Taxable Year, the remaining unutilized $50 TRA Portion carried over from
the second Covered Taxable Year, along with the unutilized $100 TRA Portion
generated in the third Covered Taxable Year, would both be carried over into the
fourth Covered Taxable Year and utilized along with the $100 TRA Portion
generated in the fourth Covered Taxable Year (resulting in a Hypothetical Tax
Liability of $100 under the “without” calculation and an actual tax liability of
$0 under the “with” calculation, with Realized Tax Benefits of $100 arising in
such fourth Covered Taxable Year for purposes of this Agreement).

ARTICLE III

PAYMENTS

SECTION 3.01. Exchange-Related Payments.

(a) Payments In Respect of NCM Inc. Tax Benefit Schedules. Except as provided in
Section 3.03 below, within 45 calendar days of the delivery of a final NCM Inc.
Tax Benefit Schedule to the Founding Members for any Covered Taxable Year:
(i) NCM Inc. will pay to each Founding Member an amount equal to (x) such
Founding Member’s Exchange-Related Allocable Share for such Covered Taxable
Year, multiplied by (y) the Exchange-Related Tax Benefit Payment for such
Covered Taxable Year; or, alternatively, as applicable, (ii) each Founding
Member will pay to NCM Inc. an amount equal to (x) such Founding Member’s
Exchange-Related Allocable Share for such Covered Taxable Year, multiplied by
(y) the Exchange-Related Tax Detriment Payment for such Covered Taxable Year.

(b) Payments In Respect of Amended NCM Inc. Tax Benefit Schedules. Except as
provided in Section 3.03 below, within 45 calendar days of the delivery of a
final

 

22

--------------------------------------------------------------------------------

Amended NCM Inc. Tax Benefit Schedule to the Founding Members for any Covered
Taxable Year: (i) NCM Inc. will pay to each Founding Member an amount equal to
(x) such Founding Member’s Exchange-Related Allocable Share for such Covered
Taxable Year, multiplied by (y) the sum of (1) any increase in the amount of any
Exchange-Related Tax Benefit Payment for such Covered Taxable Year (as
determined by comparing the Exchange-Related Tax Benefit Payments previously
made pursuant to Section 3.01 of this Agreement to the Exchange-Related Tax
Benefit Payments shown on the Amended NCM Inc. Tax Benefit Schedule), plus
(2) any decrease in the amount of any Exchange-Related Tax Detriment Payment for
such Covered Taxable Year (as determined by comparing the Exchange-Related Tax
Detriment Payments previously made pursuant to Section 3.01 of this Agreement to
the Exchange-Related Tax Detriment Payments shown on the Amended NCM Inc. Tax
Benefit Schedule); or, alternatively, as applicable, (ii) each Founding Member
will pay to NCM Inc. an amount equal to (x) such Founding Member’s
Exchange-Related Allocable Share for such Covered Taxable Year, multiplied by
(y) the sum of (1) any increase in the amount of any Exchange-Related Tax
Detriment Payment for such Covered Taxable Year (as determined by comparing the
Exchange-Related Tax Detriment Payments previously made pursuant to Section 3.01
of this Agreement to the Exchange-Related Tax Detriment Payments shown on the
Amended NCM Inc. Tax Benefit Schedule), plus (2) any decrease in the amount of
any Exchange-Related Tax Benefit Payment for such Covered Taxable Year (as
determined by comparing the Exchange-Related Tax Benefit Payments previously
made pursuant to Section 3.01 of this Agreement to the Exchange-Related Tax
Benefit Payments shown on the Amended NCM Inc. Tax Benefit Schedule). As an
example of the intended operation of clause (i) of the preceding sentence, if
the original Exchange-Related Tax Benefit Payment paid in connection with an
original NCM Inc. Tax Benefit Schedule was $100, and a subsequent change
resulted in an Amended NCM Inc. Tax Benefit Schedule that gave rise to a $200
Exchange-Related Tax Benefit Payment, then NCM Inc. would pay the net increase
in the Exchange-Related Tax Benefit Payment of $100 to the Founding Members
based on each Founding Member’s Exchange-Related Allocable Share for the Covered
Taxable Year to which the Amended NCM Inc. Tax Benefit Schedule relates. As an
example of the intended operation of clause (ii) of the first sentence of this
paragraph, if the original Exchange-Related Tax Benefit Payment paid in
connection with an original NCM Inc. Tax Benefit Schedule was $100, and a
subsequent change resulted in an Amended NCM Inc. Tax Benefit Schedule that gave
rise, instead, to a $10 Exchange-Related Tax Detriment Payment (due to, for
example, the imposition of interest charges in connection with a Determination),
then the Founding Members would pay the total net difference of $110 (the sum of
the $10 increase in the Exchange-Related Tax Detriment Payment plus the $100
decrease in the Exchange-Related Tax Benefit Payment) to NCM Inc. based on each
Founding Member’s Exchange-Related Allocable Share for the Covered Taxable Year
to which the Amended NCM Inc. Tax Benefit Schedule relates.

SECTION 3.02. ESA-Related Payments.

(a) Payments In Respect of NCM Inc. Tax Benefit Schedules. Except as provided in
Section 3.03 below, and pursuant to the terms of Section 2.05(a)(ii) of the
Exhibitor Services Agreements and Sections 5.1(b) and 6.4(b) of the NCM LLC
Operating Agreement, within 45 calendar days of the delivery of a final NCM Inc.
Tax Benefit Schedule to the ESA Parties for any Covered Taxable Year: (i) NCM
LLC will pay to each ESA Party an amount equal to (x) such ESA Party’s
ESA-Related Allocable Share for such Covered Taxable Year,

 

23

--------------------------------------------------------------------------------

multiplied by (y) the ESA-Related Tax Benefit Payment for such Covered Taxable
Year; or, alternatively, as applicable, (ii) each ESA Party will pay to NCM LLC
(for distribution to NCM Inc.) an amount equal to (x) such ESA Party’s
ESA-Related Allocable Share for such Covered Taxable Year, multiplied by (y) the
ESA-Related Tax Detriment Payment for such Covered Taxable Year.

(b) Payments In Respect of Amended NCM Inc. Tax Benefit Schedules. Except as
provided in Section 3.03 below, within 45 calendar days of the delivery of a
final Amended NCM Inc. Tax Benefit Schedule to the ESA Parties for any Covered
Taxable Year: (i) NCM LLC will pay to each ESA Party an amount equal to (x) such
ESA Party’s ESA-Related Allocable Share for such Covered Taxable Year,
multiplied by (y) the sum of (1) any increase in the amount of any ESA-Related
Tax Benefit Payment for such Covered Taxable Year (as determined by comparing
the ESA-Related Tax Benefit Payments previously made pursuant to Section 3.02 of
this Agreement to the ESA-Related Tax Benefit Payments shown on the Amended NCM
Inc. Tax Benefit Schedule), plus (2) any decrease in the amount of any
ESA-Related Tax Detriment Payment for such Covered Taxable Year (as determined
by comparing the ESA-Related Tax Detriment Payments previously made pursuant to
Section 3.02 of this Agreement to the ESA-Related Tax Detriment Payments shown
on the Amended NCM Inc. Tax Benefit Schedule); or, alternatively, as applicable,
(ii) each ESA Party will pay to NCM LLC (for distribution to NCM Inc.) an amount
equal to (x) such ESA Party’s ESA-Related Allocable Share for such Covered
Taxable Year, multiplied by (y) the sum of (1) any increase in the amount of any
ESA-Related Tax Detriment Payment for such Covered Taxable Year (as determined
by comparing the ESA-Related Tax Detriment Payments previously made pursuant to
Section 3.02 of this Agreement to the ESA-Related Tax Detriment Payments shown
on the Amended NCM Inc. Tax Benefit Schedule), plus (2) any decrease in the
amount of any ESA-Related Tax Benefit Payment for such Covered Taxable Year (as
determined by comparing the ESA-Related Tax Benefit Payments previously made
pursuant to Section 3.02 of this Agreement to the ESA-Related Tax Benefit
Payments shown on the Amended NCM Inc. Tax Benefit Schedule). For the avoidance
of doubt, the general principles set forth in this paragraph are intended to
operate in the same manner as the general principles illustrated through the two
examples set forth at the end of Section 3.01(b) of this Agreement with respect
to Exchange-Related Payments.

SECTION 3.03. Suspension of Tax Benefit Payments Following Change Notice.

(a) Receipt of Change Notice. If any Party, or an affiliate of any Party,
receives a 30-day letter, a final audit report, a statutory notice of
deficiency, or similar written notice from any Taxing Authority relating to the
Tax treatment of either the Initial Deemed Exchange, the Initial ESA
Modification Payments, any Positive Theatre Access Adjustments, any Negative
Theatre Access Adjustment, or any Subsequent Deemed Exchanges, or any other Tax
matter relating to this Agreement (a “Change Notice”), prompt written
notification (and a copy of the Change Notice) shall be delivered by the Party,
or its affiliate, receiving such Change Notice to each other Party to this
Agreement.

(b) Suspension of Payments. From and after the date such Change Notice is
received, any Exchange-Related Payments required to be made by NCM Inc. or any
ESA-Related Payments required to be made by NCM LLC under this Agreement, or
both, as

 

24

--------------------------------------------------------------------------------

appropriate based on the adjustments proposed in the Change Notice, will instead
be paid by NCM Inc. or NCM LLC, or both, as appropriate, to a national bank
mutually agreeable to the affected Parties to act as escrow agent to hold such
funds in escrow pursuant to an escrow agreement until a Determination is
received with respect to the Change Notice.

(c) Release of Escrowed Funds. If a Determination results in no adjustment in
any Exchange-Related Payments or ESA-Related Payments under this Agreement, then
the escrowed funds (along with any net interest earned on such funds, and less
the out-of-pocket expenses incurred by NCM Inc. or NCM LLC in administering the
escrow and in contesting the Determination) shall be distributed to the affected
Founding Members or ESA Parties in accordance with their respective
Exchange-Related Allocable Shares or ESA-Related Allocable Shares, respectively.
If a Determination results in an adjustment in any Exchange-Related Payments or
ESA-Related Payments under this Agreement, then the escrowed funds (along with
any net interest earned on such funds) shall be distributed as follows:
(i) first, to NCM Inc. or NCM LLC, as appropriate, in an amount equal to the
out-of-pocket expenses incurred by NCM Inc. or NCM LLC in administering the
escrow and in contesting the Determination and (ii) second, to the relevant
Parties (which, for the avoidance of doubt and depending on the nature of the
adjustments, may include NCM Inc. or NCM LLC, or both) in accordance with the
recalculated Exchange-Related Payments or ESA-Related Payments determined under
Sections 3.01(b) and 3.02(b) of this Agreement and set forth on one or more
Amended NCM Inc. Tax Benefit Schedules.

SECTION 3.04. No Duplicative Payments; Other Matters. No duplicative payment of
any amount (including interest) will be required under this Agreement. Any
Exchange-Related Payment or ESA-Related Payment to be made by any Party under
this Agreement shall be made by wire transfer of immediately available funds to
the bank accounts specified in writing by the relevant recipient (subject to, in
the case of the Founding Members and the ESA Parties, the rights of offset
described in Section 5.03). For the avoidance of doubt, no Exchange-Related
Payments or ESA-Related Payments shall be made in respect of estimated tax
payments, including, without limitation, estimated Federal Income Tax payments.

ARTICLE IV

TERMINATION

SECTION 4.01. Early Termination of Agreement. At any time after the date of this
Agreement, NCM Inc. may terminate its obligations under this Agreement, or NCM
LLC may terminate its obligations under this Agreement, or both NCM Inc. and NCM
LLC may terminate their obligations under this Agreement, in whole or in part,
with the consent of the Audit Committee by paying to the Founding Members or the
ESA Parties, or both, as applicable, the Early Termination Payment determined as
of the date of the Early Termination Notice. Upon payment of the Early
Termination Payment, NCM Inc. or NCM LLC, or both, as applicable, shall have no
further payment obligations under this Agreement with respect to the portion of
the obligations to which the Early Termination Payment relates (which in the
case of a complete termination of this Agreement by both NCM Inc. and NCM LLC,
would mean that both NCM Inc. and NCM LLC would have no further obligations
under this Agreement).

 

25

--------------------------------------------------------------------------------

SECTION 4.02. Early Termination Notice. If NCM Inc. or NCM LLC, or both, choose
to exercise the right of early termination under Section 4.01 above, NCM Inc.
shall deliver to the Founding Members or the ESA Parties, or both, as
applicable, advance written notice (the “Early Termination Notice”) specifying
the intention to exercise such right. At the time NCM Inc. delivers the Early
Termination Notice, NCM Inc. shall also (i) deliver schedules and work papers
providing reasonable detail regarding the calculation of the Early Termination
Payment in a manner consistent with the guidelines set forth in Section 4.03 of
this Agreement (such schedules and work papers comprising the “Early Termination
Payment Schedule”) and an Advisory Firm Letter supporting such Early Termination
Payment Schedule and (ii) allow the Founding Members or the ESA Parties, or
both, as applicable, reasonable access to the appropriate representatives at NCM
Inc., NCM LLC, and the Advisory Firm in connection with the review of such Early
Termination Payment Schedule. The Early Termination Payment Schedule shall
become final and binding on the relevant Parties unless a Founding Member or ESA
Party, within 30 calendar days after receiving such Early Termination Schedule,
provides NCM Inc. with written notice of a material objection to such Early
Termination Schedule made in good faith and specifying the reasons for such
material objection. If the relevant Parties, negotiating in good faith, are
unable to successfully resolve the issues raised in such Early Termination
Schedule within 60 calendar days after such Early Termination Schedule was
delivered, the relevant Parties shall employ the Reconciliation Procedures.

SECTION 4.03. Payment Upon Early Termination.

(a) Payment. Within 5 Business Days after the Early Termination Payment Schedule
becomes final, NCM Inc. or NCM LLC, or both, as applicable, shall pay to the
Founding Members or the ESA Parties, or both, as applicable, an amount equal to
the Early Termination Payment multiplied by their respective Adjusted Allocable
Shares. Such payment shall be made by wire transfer of immediately available
funds to a bank account designated in writing by each relevant Founding Member
or ESA Party entitled to receive a payment.

(b) Determination of Early Termination Payment. The payment to be made upon the
early termination of this Agreement in accordance with the provisions of this
Article IV (the “Early Termination Payment”) will be determined as of the date
of delivery of the Early Termination Notice and will be shown on the Early
Termination Payment Schedule and shall equal the present value, discounted at
the Early Termination Rate, of all Exchange-Related Tax Benefit Payments or
ESA-Related Tax Benefit Payments, or both, that would be required to be paid by
NCM Inc. or NCM LLC, or both, to the Founding Members or the ESA Parties, or
both, as applicable, during the period from the date of the Early Termination
Notice through the Scheduled Termination Date using the Valuation Assumptions.

SECTION 4.04. No Other Right of Early Termination. For the avoidance of doubt, a
Founding Member or an ESA Party shall not be entitled to cause an early
termination of this Agreement.

SECTION 4.05. Term of Agreement. Unless terminated at any earlier time in
accordance with the provisions of this Article IV, the term of this Agreement
begins as of the date hereof and will continue until 90 days following the
expiration of all applicable statutes of limitations (including any waivers or
extensions) with respect to any Covered Taxable Years for which Exchange-Related
Payments or ESA-Related Payments are made.

 

26

--------------------------------------------------------------------------------

ARTICLE V

SUBORDINATION AND LATE PAYMENTS

SECTION 5.01. Subordination. Notwithstanding any other provision of this
Agreement to the contrary, any Exchange-Related Payment or all or any portion of
any Early Termination Payment to be made by NCM Inc. to the Founding Members
under this Agreement (an “NCM Inc. Payment”) shall rank (i) subordinate and
junior in right of payment to any principal, interest or other amounts due and
payable in respect of any current or future secured obligations of NCM Inc. and
(ii) pari passu with any current or future unsecured obligations of NCM Inc.
Notwithstanding any other provision of this Agreement to the contrary, any
ESA-Related Payment or all or any portion of any Early Termination Payment to be
made by NCM LLC to the ESA Parties under this Agreement (an “NCM LLC Payment”)
shall rank (i) subordinate and junior in right of payment to any principal,
interest or other amounts due and payable in respect of any current or future
secured obligations of NCM LLC and (ii) pari passu with any current or future
unsecured obligations of NCM LLC.

SECTION 5.02. Late Payments by NCM Inc. or NCM LLC. The amount of all or any
portion of an NCM Inc. Payment or NCM LLC Payment not made to the Founding
Members or the ESA Parties, respectively, when due under the terms of this
Agreement shall be payable together with any interest thereon, computed at the
Agreed Rate and commencing from the date on which such NCM Inc. Payment or NCM
LLC Payment was due and payable.

SECTION 5.03. Rights of Offset. To the extent that all or any portion of a
payment payable by a Founding Member under the terms of this Agreement is not
paid to NCM Inc. when due, any such unpaid amount will be offset against
(i) such Founding Member’s distributions that would otherwise be received by
such Founding Member from NCM LLC (and such offset amounts will instead be
distributed by NCM LLC to NCM Inc.) and (ii) against any payments owed to such
Founding Member by NCM Inc. under this Agreement, in each case, until such
unpaid amount is fully satisfied (including any interest that may be owed under
Section 5.04 of this Agreement). To the extent that all or any portion of a
payment payable by an ESA Party under the terms of this Agreement is not paid to
NCM LLC when due, any such unpaid amount will be offset against such ESA Party’s
Theatre Access Fee payments (and any Supplemental Theatre Access Fee payments)
that would otherwise be made under the terms of such ESA Party’s Exhibitor
Services Agreement (and such offset amounts will instead be distributed by NCM
LLC to NCM Inc.) until such unpaid amount is fully satisfied (including any
interest that may be owed under Section 5.04 of this Agreement). Any such
amounts distributed by NCM LLC to NCM Inc. under this Section 5.03 will be
treated as if they were first distributed to such Founding Member or paid to
such ESA Party, as the case may be, and immediately thereafter effectively paid
to NCM Inc. pursuant to Sections 3.01 and 3.02 of this Agreement, as
appropriate.

SECTION 5.04. Late Payments by the Founding Members or ESA Parties. After
applying the rights of offset described in Section 5.03 of this Agreement and
after receiving any payments from a Founding Member or an ESA Party under this
Agreement, in each case at the

 

27

--------------------------------------------------------------------------------

time a payment by a Founding Member or an ESA Party is first due and payable
under this Agreement, the amount of any remaining unsatisfied payment obligation
by such Founding Member or ESA Party shall be immediately due and payable in
accordance with the provisions of Article III, and, to the extent not timely
paid, subject to further offset under Section 5.03 of this Agreement together
with interest thereon, computed at the Agreed Rate and commencing from the date
on which such payment was due and payable.

ARTICLE VI

NO DISPUTES; CONSISTENCY; COOPERATION

SECTION 6.01. Participation In NCM Group Tax Matters. Except as otherwise
provided herein, and except as otherwise provided in Section 5.2(l) of the NCM
Inc. Certificate of Incorporation and Sections 4.3(a) and 4.3(b)(vii) of the NCM
LLC Operating Agreement, NCM Inc. shall have full responsibility for, and sole
discretion over, all Tax matters concerning any Relevant NCM Taxpayer,
including, without limitation, the preparation, filing or amending of any Tax
Return and defending, contesting or settling any issue pertaining to Taxes.
Notwithstanding the foregoing, NCM Inc. shall notify the Founding Members and
the ESA Parties of, and keep them reasonably informed with respect to, and the
Founding Members and the ESA Parties shall have the right to participate in and
monitor at their own expense (but, for the avoidance of doubt, not to control),
the portion of any audit of the Relevant NCM Taxpayers by a Taxing Authority the
outcome of which is reasonably expected to affect the Founding Members’ or the
ESA Parties’ rights under this Agreement. NCM Inc. shall provide to the Founding
Members and the ESA Parties reasonable opportunity to provide information and
other input to NCM Inc. and its advisors concerning the conduct of any such
portion of such audits. No Relevant NCM Taxpayer shall settle or otherwise
resolve any audit or other challenge by a Taxing Authority relating to Realized
Tax Benefits or Realized Tax Detriments that are subject of this Agreement
without the consent of the Audit Committee and the Founding Members and the ESA
Parties, which consent the Founding Members and the ESA Parties shall not
unreasonably withhold, condition or delay.

SECTION 6.02. Consistency. Unless there is a Determination to the contrary, the
Relevant NCM Taxpayers, the Founding Members and the ESA Parties, on their own
behalf and on behalf of each of their affiliates, agree to report and cause to
be reported for all Tax purposes, including U.S. Federal Income, state and local
income and franchise Tax purposes, all Tax-related items relating to this
Agreement (including, without limitation, the Initial ESA Modification Payments,
the Initial Deemed Exchange, any Positive Theatre Access Adjustments, any
Negative Theatre Access Adjustments, any Subsequent Deemed Exchanges, any Basis
Adjustments, any Imputed Interest, any Exchange-Related Payments, and any
ESA-Related Payments) in a manner consistent with that specified in any
schedule, letter or certificate required to be provided by or on behalf of the
Relevant NCM Taxpayers under this Agreement. In the event that an Advisory Firm
is replaced with another firm acceptable to the Audit Committee, such
replacement Advisory Firm shall be required to perform its services under this
Agreement using procedures and methodologies consistent with the previous
Advisory Firm, unless otherwise required by law or unless NCM Inc., the Audit
Committee, the Founding Members, and the ESA Parties agree to the use of other
procedures and methodologies.

 

28

--------------------------------------------------------------------------------

SECTION 6.03. Cooperation. The Founding Members and the ESA Parties shall (and
shall cause their affiliates to) (a) furnish to the Relevant NCM Taxpayers in a
timely manner such information, documents and other materials as the Relevant
NCM Taxpayers may reasonably request which are relevant for purposes of making
any determination or computation necessary or appropriate under this Agreement,
preparing any Tax Return or contesting or defending any audit, examination or
controversy with any Taxing Authority, (b) make its employees available during
normal business hours to the Relevant NCM Taxpayers and their representatives to
provide explanations of documents and materials and such other information as
the Relevant NCM Taxpayers or their representatives may reasonably request in
connection with any of the matters described in clause (a) above, and
(c) otherwise reasonably cooperate in connection with the Relevant NCM
Taxpayers’ efforts to administer this Agreement.

ARTICLE VII

GENERAL PROVISIONS

SECTION 7.01. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed duly given and
received (a) on the date of delivery if delivered personally, or by facsimile
upon confirmation of transmission by the sender’s fax machine if sent on a
Business Day (or otherwise on the next Business Day) or (b) on the first
Business Day following the date of dispatch if delivered by a recognized
next-day courier service. All notices hereunder shall be delivered as set forth
in Exhibit A to the NCM LLC Operating Agreement (in the case of NCM Inc. and the
Founding Members), and as set forth in Section 15.01 of each of the Exhibitor
Services Agreements (in the case of NCM LLC and the ESA Parties), or pursuant to
such other instructions as may be designated in writing by the Party to receive
such notice. Any Party may change its address or fax number by giving the other
Parties written notice of its new address or fax number in the manner set forth
above.

SECTION 7.02. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the Parties and delivered to the other Parties, it being understood that all
Parties need not sign the same counterpart.

SECTION 7.03. Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the Parties with respect to the
subject matter hereof. This Agreement shall be binding upon and inure solely to
the benefit of each Party hereto and their respective successors and permitted
assigns, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.

SECTION 7.04. Governing Law; Submission to Jurisdiction.

(a) Governing Law. This Agreement is to be construed in accordance with and
governed by the internal laws of the State of Delaware without giving effect to
any choice of law rule that would cause the application of the laws of any
jurisdiction other than the internal laws of the State of Delaware to the rights
and duties of the Parties.

 

29

--------------------------------------------------------------------------------

(b) Jurisdiction. Each Party hereto agrees that any legal action or other legal
proceeding relating to this Agreement or the enforcement of any provision of
this Agreement shall be brought or otherwise commenced exclusively in any state
or federal court located in Delaware or in New York, New York. Subject to the
preceding sentence, each Party hereto:

(1) expressly and irrevocably consents and submits to the jurisdiction of each
state and federal court located in New York, New York (and each appellate court
located in the State of New York) in connection with any such legal proceeding,
including to enforce any settlement, order or award;

(2) consents to service of process in any such proceeding in any manner
permitted by the laws of the State of New York, and agrees that service of
process by registered or certified mail, return receipt requested, at its
address specified pursuant to Section 7.01 is reasonably calculated to give
actual notice;

(3) agrees that each state and federal court located in New York, New York shall
be deemed to be a convenient forum;

(4) waives and agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state or federal court
located in New York, New York, any claim that such Party is not subject
personally to the jurisdiction of such court, that such legal proceeding has
been brought in an inconvenient forum, that the venue of such proceeding is
improper or that this Agreement or the subject matter hereof or thereof may not
be enforced in or by such court; and

(5) agrees to the entry of an order to enforce any resolution, settlement, order
or award made pursuant to this Section by the state and federal courts located
in New York, New York and in connection therewith hereby waives, and agrees not
to assert by way of motion, as a defense, or otherwise, any claim that such
resolution, settlement, order or award is inconsistent with or violative of the
laws or public policy of the laws of the State of New York or any other
jurisdiction.

(c) Costs and Expenses. In the event of any action or other proceeding relating
to this Agreement or the enforcement of any provision of this Agreement, the
prevailing Party (as determined by the court) shall be entitled to payment by
the non-prevailing Party of all costs and expenses (including reasonable
attorneys’ fees) incurred by the prevailing Party, including any costs and
expenses incurred in connection with any challenge to the jurisdiction or the
convenience or propriety of venue of proceedings before any state or federal
court located in New York, New York.

SECTION 7.05. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.

 

30

--------------------------------------------------------------------------------

SECTION 7.06. Successors; Assignment. Each Founding Member and each ESA Party
may not assign this Agreement to any Person without the prior written consent of
NCM Inc., NCM LLC, and the Audit Committee. Except in the case of a Permitted
Transfer by NCM LLC, NCM Inc. and NCM LLC may not assign this Agreement to any
Person without the prior written consent of the Audit Committee, the Founding
Members, and the ESA Parties.

SECTION 7.07. Titles and Subtitles. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

SECTION 7.08. Withholding. NCM Inc. and NCM LLC and the Escrow Agent shall be
entitled to deduct and withhold from any payment payable pursuant to this
Agreement such amounts as NCM Inc. and NCM LLC and the Escrow Agent are required
to deduct and withhold with respect to the making of such payment under the
Code, or any provision of state, local or other Tax law. To the extent that
amounts are so withheld and paid over to the appropriate Taxing Authority by NCM
Inc. or NCM LLC or the Escrow Agent, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the relevant Founding
Member or ESA Party.

SECTION 7.09. Reconciliation Procedures. In the event that one or more Parties
are unable to resolve a disagreement within the relevant period designated in
this Agreement, the matter shall be submitted for determination to a nationally
recognized expert in the particular area of disagreement employed by a
nationally recognized accounting firm or a law firm (other than the Advisory
Firm), which expert is mutually acceptable to all affected Parties and the Audit
Committee. After a matter has been submitted to an expert for resolution, the
expert will use its reasonable best efforts to resolve the matter within 30
calendar days. If the matter is not resolved before any Tax Return reflecting
the subject of a disagreement is due, such Tax Return may be filed as prepared
by NCM Inc. or other Relevant NCM Taxpayer, subject to potential adjustment or
amendment upon resolution. The costs and expenses relating to the engagement of
the expert shall be borne by the Party that did not have the prevailing
position, or if a compromise is reached by the expert or by the affected Parties
prior to a resolution by the expert, the costs and expenses will be borne
equally by the affected Parties. The determinations of the expert pursuant to
this Section 7.09 shall be binding on the affected Parties absent manifest
error.

SECTION 7.10. Indemnification. The liabilities and obligations of the Founding
Members and the ESA Parties under this Agreement shall be several and not joint.

[Signature Page Follows]

 

31

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, NCM Inc., NCM LLC, the Founding Members, and the ESA Parties
have duly executed this Agreement as of the date first written above.

 

NATIONAL CINEMEDIA, INC.     NATIONAL CINEMEDIA, LLC       By:   NATIONAL
CINEMEDIA, INC.,        

its Manager

By:  

/s/ Gary W. Ferrera

    By:  

/s/ Gary W. Ferrera

Name:   Gary W. Ferrera     Name:   Gary W. Ferrera Title:  

Executive Vice President and

Chief Financial Officer

    Title:  

Executive Vice President and Chief

Financial Officer

REGAL CINEMEDIA HOLDINGS, LLC     REGAL CINEMAS, INC. By:  

/s/ Michael L. Campbell

    By:  

/s/ Michael L. Campbell

Name:   Michael L. Campbell     Name:   Michael L. Campbell Title:   Chief
Executive Officer     Title:   Chief Executive Officer CINEMARK MEDIA, INC.    
CINEMARK USA, INC. By:  

/s/ Michael Cavalier

    By:  

/s/ Michael Cavalier

Name:   Michael Cavalier     Name:   Michael Cavalier Title:  

Senior Vice President–General

Counsel

    Title:  

Senior Vice President–General

Counsel

AMERICAN MULTI-CINEMA, INC       By:  

/s/ Craig R. Ramsey

      Name:   Craig R. Ramsey       Title:  

Executive Vice President and

Chief Financial Officer

     

[Signature Page to Tax Receivable Agreement]

 

32