Common use of Payment into Escrow Clause in Contracts

Payment into Escrow. (a) Notwithstanding anything to the contrary in this Agreement, in the event the Company determines in good faith that there exists a material risk that any amounts due to the Company under Section 8.5(c) would be treated upon the payment of such amounts to the Company as gross income for purposes of Section 856 of the Code (other than as described in Section 856(c)(3) of the Code) (“Nonqualifying Income”), the amount paid to the Company pursuant to Section 8.5(c) in the tax year during which such amount would otherwise be paid shall not exceed the maximum amount that can be paid to the Company in such tax year without causing the Company to fail to meet the requirements imposed on REITs pursuant to Sections 856 through and including 860 of the Code (the “REIT Requirements”) for any tax year, determined as if the payment of such amount were Nonqualifying Income as determined by the Company in good faith. (b) If the amount that Parent would otherwise be obligated to pay to the Company pursuant to Section 8.5(c) is greater than the amount payable for the tax year during which any such amount would otherwise be paid pursuant to Section 8.6(a) (the positive excess of such amount, the “Company Excess Amount”), then: (i) Parent shall place the Company Excess Amount into an escrow account (the “Company Escrow Account”) using an escrow agent and agreement reasonably acceptable to the Company and shall not release any portion thereof to the Company, and the Company shall not be entitled to any such amount, unless and until the Company delivers to Parent, at the sole option of the Company, (A) an opinion (a “Company Excess Amount Tax Opinion”) of the Company’s tax counsel to the effect that such amount, if and to the extent paid, would not constitute Nonqualifying Income or (B) a private letter ruling issued by the IRS to the Company indicating that the receipt of any Company Excess Amount hereunder will not cause the Company to fail to satisfy the REIT Requirements (a “Company REIT Qualification Ruling”). The escrow agreement shall also provide that (x) the amount in the Company Escrow Account shall be treated as the property of Parent, unless it is released from such Company Escrow Account to the Company, (y) all income earned upon the amount in the Company Escrow Account shall be treated as income of Parent and reported, as and to the extent required by applicable Law, by the escrow agent to the IRS, or any other taxing authority, as income earned by Parent whether or not said income has been distributed during such tax year, and (z) the amount in the Company Escrow Account shall be invested in Permitted Investments only, as determined by Parent in its sole discretion; (ii) any amount held in the Company Escrow Account pursuant to this Section 8.6 for five (5) years shall be released from such escrow to be used as determined by Parent in its sole and absolute discretion, and the Company shall have no rights in such amounts thereafter; and (iii) the Company shall bear all costs and expenses with respect to the Company Escrow Account. (c) Parent shall cooperate, at no unreimbursed cost or expense to Parent, in good faith with the Company (including amending this Section 8.6 at the reasonable request of the Company) in order to (i) maximize the portion of the payments that may be made to the Company hereunder without causing the Company to fail to meet the REIT Requirements, (ii) improve the Company’s chances of securing a favorable Company REIT Qualification Ruling, or (iii) assist the Company in obtaining a favorable Company Excess Amount Tax Opinion. Such cooperation shall include, for example, agreeing to make payments hereunder to a Taxable REIT Subsidiary of the Company or an affiliate or designee of the Company. (d) Notwithstanding anything to the contrary in this Agreement, in the event Parent determines in good faith that there exists a material risk that any amounts due to Parent under Section 8.5(b) would be treated upon the payment of such amounts to Parent as Nonqualifying Income, the amount paid to Parent pursuant to Section 8.5(b) in the tax year during which such amount would otherwise be paid shall not exceed the maximum amount that can be paid to Parent in such tax year without causing Parent (or any direct or indirect owner thereof) to fail to meet the REIT Requirements for any tax year, determined as if the payment of such amount were Nonqualifying Income as determined by Parent in good faith. (e) If the amount that Company would otherwise be obligated to pay to Parent pursuant to Section 8.5(b) is greater than the amount payable for the tax year during which any such amount would otherwise be paid pursuant to Section 8.6(d) (the positive excess of such amount, the “Parent Excess Amount”), then: (i) the Company shall place the Parent Excess Amount into an escrow account (the “Parent Escrow Account”) using an escrow agent and agreement reasonably acceptable to Parent and shall not release any portion thereof to Parent, and Parent shall not be entitled to any such amount, unless and until Parent delivers to the Company, at the sole option of Parent, (A) an opinion (an “Parent Excess Amount Tax Opinion”) of Parent’s tax counsel to the effect that such amount, if and to the extent paid, would not constitute Nonqualifying Income or (B) a private letter ruling issued by the IRS to Parent (or any direct or indirect owner thereof) indicating that the receipt of any Parent Excess Amount hereunder will not cause Parent (or any direct or indirect owner thereof) to fail to satisfy the REIT Requirements (a “Parent REIT Qualification Ruling”). The escrow agreement shall also provide that (x) the amount in the Parent Escrow Account shall be treated as the property of the Company, unless it is released from such Parent Escrow Account to Parent, (y) all income earned upon the amount in the Parent Escrow Account shall be treated as income of the Company and reported, as and to the extent required by applicable Law, by the escrow agent to the IRS, or any other taxing authority, as income earned by the Company whether or not said income has been distributed during such tax year, and (z) the amount in the Parent Escrow Account shall be invested in Permitted Investments only, as determined by the Company in its sole discretion; (ii) any amount held in the Parent Escrow Account pursuant to this Section 8.6 for five (5) years shall be released from such escrow to be used as determined by the Company in its sole and absolute discretion, and Parent shall have no rights in such amounts thereafter; and (iii) Parent shall bear all costs and expenses with respect to the Parent Escrow Account. (f) The Company shall cooperate, at no unreimbursed cost or expense to the Company, in good faith with Parent (including amending this Section 8.6 at the reasonable request of Parent) in order to (i) maximize the portion of the payments that may be made to Parent hereunder without causing Parent (or any direct or indirect owner thereof) to fail to meet the REIT Requirements, (ii) improve Parent’s (or any direct or indirect owner thereof) chances of securing a favorable Parent REIT Qualification Ruling, or (iii) assist Parent (or any direct or indirect owner thereof) in obtaining a favorable Parent Excess Amount Tax Opinion. Such cooperation shall include, for example, agreeing to make payments hereunder to a Taxable REIT Subsidiary of Parent (or any direct or indirect owner thereof) or an affiliate or designee of Parent.