Initial Deemed Exchange Sample Clauses
The Initial Deemed Exchange clause establishes the point at which certain assets, rights, or obligations are considered to have been exchanged between parties, even if the actual physical or legal transfer has not yet occurred. In practice, this clause may specify a particular date or event upon which the exchange is deemed effective, such as the signing of an agreement or the satisfaction of specific conditions. Its core function is to provide legal certainty regarding the timing of the exchange, which can affect tax treatment, risk allocation, and the commencement of rights and obligations under the contract.
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.