0001104659-17-046321.txt : 20170721 0001104659-17-046321.hdr.sgml : 20170721 20170721164939 ACCESSION NUMBER: 0001104659-17-046321 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 25 CONFORMED PERIOD OF REPORT: 20170717 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Changes in Control of Registrant ITEM INFORMATION: Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers ITEM INFORMATION: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year ITEM INFORMATION: Amendments to the Registrant's Code of Ethics, or Waiver of a Provision of the Code of Ethics ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20170721 DATE AS OF CHANGE: 20170721 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JBG SMITH Properties CENTRAL INDEX KEY: 0001689796 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 814307010 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-37994 FILM NUMBER: 17977040 BUSINESS ADDRESS: STREET 1: 210 ROUTE 4 EAST STREET 2: 5TH FLOOR CITY: PARAMUS STATE: NJ ZIP: 07652 BUSINESS PHONE: 2015871000 MAIL ADDRESS: STREET 1: 210 ROUTE 4 EAST STREET 2: 5TH FLOOR CITY: PARAMUS STATE: NJ ZIP: 07652 FORMER COMPANY: FORMER CONFORMED NAME: Vornado DC Spinco DATE OF NAME CHANGE: 20161109 8-K 1 a17-17912_18k.htm 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported):

July 17, 2017

 

JBG SMITH PROPERTIES

(Exact Name of Registrant as Specified in Charter)

 

Maryland

 

No. 001-37994

 

No. 81-4307010

(State or Other

 

(Commission

 

(IRS Employer

Jurisdiction of

 

File Number)

 

Identification No.)

Incorporation)

 

 

 

 

 

4445 Willard Avenue, Suite 400
Chevy Chase, Maryland

 

20815

(Address of Principal Executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (240) 333-3600

 

Former name or former address, if changed since last report:

2345 Crystal Drive, Suite 1100
Arlington, Virginia

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2.):

 

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

 

 



 

Introductory Note

 

This Current Report on Form 8-K is being filed in connection with the consummation on July 18, 2017 (the “Closing Date”) of the transactions contemplated by that certain Master Transaction Agreement, as amended, (the “Master Transaction Agreement”), dated as of October 31, 2016, by and among Vornado Realty Trust (“Vornado”), Vornado Realty L.P. (“VRLP”), JBG Properties, Inc., JBG/Operating Partners, L.P., certain affiliates of JBG Properties, Inc. and JBG/Operating Partners, L.P., JBG SMITH Properties (the “Company”) and JBG SMITH Properties LP (“JBG SMITH LP”).  Pursuant to the Master Transaction Agreement, Vornado spun-off (the “Spin-Off”) the Company, which contains Vornado’s Washington, DC business, at 11:59 p.m. Eastern on July 17, 2017 and at 12:01 a.m. Eastern on July 18, 2017, certain assets owned by affiliates of The JBG Companies (“JBG”) were contributed to the Company (the “Combination” and together with the Spin-Off, the “Transactions”).  The events described below took place in connection with the consummation of the Transactions.

 

The Company filed a Registration Statement on Form 10 with the Securities and Exchange Commission (the “SEC”) describing the Transactions that was declared effective on June 26, 2017.  The Company’s Information Statement, dated June 27, 2017 (the “Information Statement”), which was filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on June 27, 2017, described for shareholders the details of the Transactions and provided information as to the business and management of the Company.  Such information was provided in the sections entitled “The Separation and the Combination,” “Business and Properties” and “Management” in the Information Statement, which sections are incorporated herein by reference.

 

Item 1.01                                           Entry into a Material Definitive Agreement.

 

The information provided in the Introductory Note and Item 2.01 of this Current Report on Form 8-K is incorporated herein by reference.

 

Master Transaction Agreement Amendment

 

On July 17, 2017, the parties to the Master Transaction Agreement entered into Amendment No. 1 to Master Transaction Agreement (the “Amendment”).  The Amendment provided for, among other things, certain valuation adjustments to the relative equity values, a change in the closing date, the assumption by the Company of certain severance costs related to the termination of Vornado employees in connection with the Transactions and a change so that expenses incurred in connection with obtaining required consents (other than those incurred by a lender or other third party) will be borne by the Company.

 

The foregoing description of the Amendment is subject to, and qualified in its entirety by, reference to the full text of the Amendment, which is filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by reference.

 

Separation Documentation

 

In connection with the Spin-Off, the Company (or one of its subsidiaries) entered into several agreements with Vornado (or one of its subsidiaries) that govern the relationship of the parties following the Spin-Off, including the following:

 

·                                          Separation and Distribution Agreement, dated as of July 17, 2017, by and among Vornado, VRLP, the Company and JBG SMITH LP;

 

·                                          Tax Matters Agreement, dated as of July 17, 2017, by and between Vornado and the Company;

 

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·                                          Employee Matters Agreement, dated as of July 17, 2017, by and among Vornado, VRLP, the Company and JBG SMITH LP; and

 

·                                          Transition Services Agreement, dated as of July 17, 2017, by and between Vornado and the Company.

 

A summary of the material terms of these agreements can be found in the section titled “Certain Relationships and Related Person Transactions” of the Information Statement.  The summary is subject to, and qualified in its entirety by, reference to the Separation and Distribution Agreement, the Tax Matters Agreement, the Employee Matters Agreement and the Transition Services Agreement, filed as Exhibits 2.2, 10.1, 10.2 and 10.3, respectively, to this Current Report on Form 8-K, each of which is incorporated herein by reference.

 

Contribution and Merger Agreements

 

To effect the Combination, the Company (or one of its subsidiaries) entered into the following merger and contribution agreements:

 

·                                          Agreement and Plan of Merger, dated as of July 17, 2017, by and between JBG/Fund VI Transferred, L.L.C. and JBGS/Fund VI OP Mergerco, L.L.C.;

 

·                                          Agreement and Plan of Merger, dated as of July 17, 2017, by and between JBG/Fund VII Transferred, L.L.C. and JBGS/Fund VII OP Mergerco, L.L.C.;

 

·                                          Agreement and Plan of Merger, dated as of July 17, 2017, by and between JBG/Fund IX Transferred, L.L.C. and JBGS/Fund IX OP Mergerco, L.L.C.;

 

·                                          Contribution and Assignment Agreement, dated as of July 18, 2017, by and between JBG SMITH LP and JBG/Fund VIII Legacy, L.L.C.;

 

·                                          Contribution and Assignment Agreement, dated as of July 18, 2017, by and between JBG SMITH LP and JBG/UDM Legacy, L.L.C.;

 

·                                          Agreement and Plan of Merger, dated as of July 17, 2017, by and between JBG/Operating Partners, L.P. and JBGS/OP Mergerco, L.L.C.; and

 

·                                          Contribution and Assignment Agreement, dated as of July 18, 2017, by and between JBG Properties, Inc. and JBG SMITH LP.

 

A summary of the material terms of these agreements can be found in the section titled “The Separation and the Combination” of the Information Statement.  The summary is subject to, and qualified in its entirety by, reference to the full text of each agreement, which are filed as Exhibits 2.3, 2.4, 2.5, 2.6, 2.7, 2.8 and 2.9, respectively, to this Current Report on Form 8-K, each of which is incorporated herein by reference.

 

Credit Facility

 

In connection with the Transactions, JBG SMITH LP entered into a senior unsecured credit facility pursuant to a Credit Agreement, dated as of July 18, 2017 (the “Credit Agreement”), by and among JBG SMITH LP, Wells Fargo Bank, National Association, as administrative agent, and certain other financial institutions party thereto as lenders.

 

A summary of the material terms of the Credit Agreement can be found in the section titled “Description of Material Indebtedness,” sub-heading “Senior Unsecured Credit Facility,” of the Information Statement.  The

 

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summary is subject to, and qualified in its entirety by, reference to the Credit Agreement filed as Exhibit 10.4 to this Current Report on Form 8-K, which is incorporated herein by reference.

 

Registration Rights Agreements

 

On July 18, 2017, the Company entered into separate registration rights agreements with the initial holders of Company common shares received in the Combination (the “Shares Registration Rights Agreement”) and the initial holders of JBG SMITH LP common limited partnership units received in the Combination (the “Units Registration Rights Agreement”).

 

A summary of the material terms of the Shares Registration Rights Agreement and the Units Registration Rights Agreement can be found in the section titled “Certain Relationships and Related Person Transactions,” sub-heading “Registration Rights Agreements,” of the Information Statement.  The summary is subject to, and qualified in its entirety by, reference to the Shares Registration Rights Agreement and the Units Registration Rights Agreement filed as Exhibits 10.5 and 10.6, respectively, to this Current Report on Form 8-K, each of which is incorporated herein by reference.

 

Unit Issuance Agreements

 

On July 18, 2017, the Company entered into unit issuance agreements with certain of its trustees and executive officers in connection with the consideration they received in the Combination.

 

A summary of the material terms of these agreements can be found in the section titled “The Separation and the Combination—The Combination—The MTA—Consideration” of the Information Statement.  The summary is subject to, and qualified in its entirety by, reference to the Unit Issuance Agreements filed as Exhibits 10.7 and 10.8, to this Current Report on Form 8-K, each of which is incorporated herein by reference.

 

Item 2.01                                           Completion of Acquisition or Disposition of Assets.

 

The information provided in the Introductory Note and Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.

 

Separation

 

On July 17, 2017, Vornado completed the Spin-Off. The Company is now an independent public company trading under the symbol “JBGS” on the New York Stock Exchange. In the Spin-Off, Vornado distributed one common share of the Company for every two common shares of Vornado, and VRLP distributed one common limited partnership unit of JBG SMITH LP for every two common limited partnership units of VRLP.  A total of 94,735,489 common shares of the Company and 5,835,635 common limited partnership units of JBG SMITH LP were distributed in the Spin-Off.

 

Combination

 

Immediately following the Spin-Off, the Company consummated the Combination. In connection with the Combination, the Company issued 23,465,362 common shares and JBG SMITH LP issued 13,698,534 common limited partnership units to parties other than the Company. After completion of the Spin-Off and Combination, there are 118,200,851 Company common shares outstanding and 19,534,169 JBG SMITH LP common limited partnership units outstanding that are owned by parties other than the Company.

 

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Item 2.03                                           Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant.

 

The information provided in the Introductory Note and Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.

 

Item 3.02                                           Unregistered Sales of Equity Securities.

 

In connection with the Spin-Off, on July 17, 2017, JBG SMITH LP issued 100,571,402 JBG SMITH LP common limited partnership units to VRLP in exchange for the contribution by VRLP of Vornado’s Washington, DC business (including interest in entities holding properties).  In addition, the Company issued 94,734,489 common shares to Vornado in exchange for the contribution by Vornado of interests in certain of the 94,735,489 JBG SMITH LP common limited partnership units that Vornado received in the distribution by VRLP.  The JBG SMITH LP common limited partnership units and Company common shares issued to VRLP and Vornado, respectively, were issued in reliance upon an exemption from registration pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended, which exempts transactions by an issuer not involving any public offering.  Neither of these offerings was a “public offering” because only one person was involved in each transaction, neither the Company nor JBG SMITH LP has engaged in general solicitation or advertising with regard to the issuance and sale of the common limited partnership units and common shares to VRLP and Vornado, and neither the Company nor JBG SMITH LP has offered securities to the public in connection with such issuances and sales to VRLP and Vornado.

 

In connection with the Combination, on July 18, 2017, the Company issued 23,465,362 common shares and JBG SMITH LP issued 13,698,534 common limited partnership units as consideration for the contribution of certain assets of JBG, which were issued in reliance upon an exemption from registration pursuant to Regulation D under the Securities Act of 1933, as amended, which exempts transactions by an issuer not involving any public offering.  Among other things, the Company and JBG SMITH LP relied on the fact that there was no general solicitation or advertising with regard to the issuance and sale of these securities. The JBG SMITH LP common limited partnership units are redeemable for cash or, at the Company’s election, Company common shares, beginning August 1, 2018, subject to certain limitations.

 

Item 5.01                                           Change in Control of Registrant.

 

The information provided in the Introductory Note and Item 2.01 of this Current Report on Form 8-K is incorporated herein by reference.  The Spin-Off was completed on July 17, 2017.

 

Item 5.02                                           Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

The information provided in the Introductory Note, Item 1.01 and Item 2.01 of this Current Report on Form 8-K is incorporated herein by reference.

 

Election of Trustees and Appointment of Officers

 

Prior to the completion of the Combination, the Board of Trustees (the “Board”) of the Company consisted of Stephen Theriot and Scott Estes. In connection with the Spin-Off, Stephen Theriot resigned as trustee on July 17, 2017.

 

At the Company’s annual shareholder meeting held on July 10, 2017, Scott Estes, Alan Forman, Michael Glosserman, Charles E. Haldeman, Jr., W. Matthew Kelly, Carol A. Melton, William J. Mulrow, Steven Roth, Mitchell Schear, Robert Stewart, Ellen Shuman, and John F. Wood were elected as trustees of the Company,

 

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effective upon the Closing Date, bringing the total Board size to twelve trustees.  The Board has determined that Scott Estes, Alan Forman, Charles E. Haldeman, Jr., Carol A. Melton, William J. Mulrow, Ellen Shuman, and John F. Wood are independent trustees.

 

Set forth below are the trustees who are members of each committee of the Board, effective upon the Closing Date:

 

·                  Audit Committee: Scott Estes (Chair), Charles E. Haldeman, Jr., William J. Mulrow;

·                  Compensation Committee: Carol A. Melton (Chair), Scott Estes, Alan Forman, and William J. Mulrow; and

·                  Corporate Governance and Nominating Committee: Alan Forman (Chair), Charles E. Haldeman, Jr., Ellen Shuman, and John F. Wood.

 

Please see the section entitled “Management” in the Information Statement for biographical information about the newly elected trustees. Such information is incorporated herein by reference.

 

The following executive officers were appointed to the positions indicated below, effective as of the Closing Date:

 

W. Matthew Kelly — Chief Executive Officer
David Paul — President and Chief Operating Officer
Steven Museles — Chief Legal Officer and Secretary
James Iker — Chief Investment Officer
Brian Coulter — Co-Chief Development Officer
Kevin Reynolds — Co-Chief Development Officer
Robert Stewart — Executive Vice Chairman
Patrick J. Tyrell — Chief Administrative Officer.

 

Stephen Theriot continues to hold the office of Chief Financial Officer and Treasurer. David Paul replaced Steven Roth as President.

 

JBG SMITH 2017 Employee Share Purchase Plan

 

On June 23, 2017, the Board adopted the JBG SMITH 2017 Employee Share Purchase Plan (the “ESPP”), effective as of July 17, 2017, and authorized the issuance of up to 2,066,000 Company common shares thereunder.  On July 10, 2017, the Company’s sole shareholder approved the Plan. The ESPP provides eligible employees an option to purchase, through payroll deductions, common shares of the Company at a discount no greater than 15% of the closing price of a share of Company common stock on relevant determination dates, provided that the fair market value of Company common shares purchased by any eligible employee may not exceed $25,000 in any calendar year. The maximum aggregate number of Company common shares reserved for issuance under the ESPP will automatically increase on January 1 of each year, unless the compensation committee of the Board determines to limit any such increase, by the lesser of (i) 0.1% of the total number of outstanding common shares in the Company on December 31 of the preceding calendar year and (ii) 206,600.

 

All employees of the Company and its majority-owned subsidiaries who are customarily employed for more than 20 hours per week on a regular basis and are employees of the Company or a majority-owned subsidiary on the first day of the applicable offering period are eligible to participate in the ESPP, except that no employee may be granted an option under the ESPP if such employee owns 5% or more of the total combined voting power or value of all classes of shares in the Company or any of its subsidiaries. The Company has not yet established an offering period. The description of the ESPP is qualified in its entirety by reference to the ESPP, which is attached hereto as Exhibit 10.9, and is incorporated herein by reference.

 

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JBG SMITH 2017 Omnibus Share Plan

 

On June 23, 2017, the Board adopted the JBG SMITH 2017 Omnibus Share Plan (the “Plan”), effective as of July 17, 2017, and authorized the reservation of 10,330,200 Company common shares pursuant to the Plan.  On July 10, 2017, the Company’s sole shareholder approved the Plan.  Please see the section entitled “Compensation Discussion and Analysis,” sub-heading “JBG SMITH Compensation Programs Following the Separation,” in the Information Statement for a description of the material provisions of the Plan, which description is incorporated herein by reference.  The description of the Plan is qualified in its entirety by reference to the Plan, which is attached hereto as Exhibit 10.10, and is incorporated herein by reference.

 

Employment Agreement with Stephen Theriot

 

On July 17, 2017, the Company entered into an employment agreement with Stephen Theriot to serve as Chief Financial Officer and Treasurer for an initial term of three years, with automatic renewal provided for successive one-year periods, unless either party provides 180 days’ written notice of nonrenewal.  The employment agreement provides for Mr. Theriot to receive an annual base salary of $550,000.  The terms of Mr. Theriot’s employment agreement are substantially identical to the employment agreements entered into with the other executive officers of the Company.

 

A summary of the material terms of this agreement can be found in the section titled “Compensation Discussion and Analysis” of the Information Statement.  The summary is subject to, and qualified in its entirety by, reference to the Employment Agreement filed as Exhibit 10.11, to this Current Report on Form 8-K, which is incorporated herein by reference.

 

Indemnification Agreements

 

On July 18, 2017, the Company entered into indemnification agreements with each of its trustees and executive officers.

 

A summary of the material terms of these agreements can be found in the section titled “Certain Relationships and Related Person Transactions” of the Information Statement.  The summary is subject to, and qualified in its entirety by, reference to the Form of Indemnification Agreement filed as Exhibit 10.12, to this Current Report on Form 8-K, which is incorporated herein by reference.

 

Item 5.03                                           Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

 

On July 17, 2017, the Company amended and restated its declaration of trust and bylaws.  Please see the section entitled “Certain Provisions of Maryland Law and of Our Declaration of Trust and Bylaws” in the Information Statement for a description of the provisions of the Amended and Restated Declaration of Trust and Amended and Restated Bylaws, which description is incorporated herein by reference.  The Amended and Restated Declaration of Trust and the Amended and Restated Bylaws are filed as Exhibits 3.1 and 3.2, respectively, to this Form 8-K, and incorporated herein by reference.

 

On July 17, 2017, the first amended and restated limited partnership agreement of JBG SMITH LP was executed (the “Partnership Agreement”).  Please see the section entitled “Partnership Agreement” in the Information Statement for a description of the provisions of the Partnership Agreement, which description is incorporated herein by reference.  The Partnership Agreement is attached hereto as Exhibit 10.13, and is incorporated herein by reference.

 

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Item 5.05                                           Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics.

 

In connection with the Separation and the Distribution, the Board adopted a Code of Business Conduct and Ethics.  A copy of the Company’s Code of Business Conduct and Ethics is available under the Investor Relations section of the Company’s website at www.jbgsmith.com.

 

Item 8.01                                           Other Events.

 

In connection with the Spin-Off, the Board adopted Corporate Governance Guidelines.  A copy of the Company’s Corporate Governance Guidelines is available under the Investor Relations section of the Company’s website at www.jbgsmith.com.

 

Item 9.01.                                        Financial Statements and Exhibits.

 

(a)                                 Financial statements of businesses acquired.

 

The financial statements of the Company required to be filed pursuant to this item will be filed by amendment to this Current Report on Form 8-K no later than 71 calendar days after the date this Current Report on Form 8-K is required to be filed.

 

(d)                                 Exhibits.

 

2.1                               Amendment to Master Transaction Agreement, dated as of July 17, 2017, by and among Vornado Realty Trust, Vornado Realty L.P., JBG Properties, Inc., JBG/Operating Partners, L.P., certain affiliates of JBG Properties Inc. and JBG/Operating Partners set forth on Schedule A thereto, JBG SMITH Properties and JBG SMITH Properties LP

 

2.2                               Separation and Distribution Agreement, dated as of July 17, 2017, by and among Vornado Realty Trust, Vornado Realty L.P., JBG SMITH Properties and JBG SMITH Properties LP

 

2.3                               Agreement and Plan of Merger, dated as of July 17, 2017, by and between JBG/Fund VI Transferred, L.L.C. and JBGS/Fund VI OP Mergerco, L.L.C.

 

2.4                               Agreement and Plan of Merger, dated as of July 17, 2017, by and between JBG/Fund VII Transferred, L.L.C. and JBGS/Fund VII OP Mergerco, L.L.C.

 

2.5                               Agreement and Plan of Merger, dated as of July 17, 2017, by and between JBG/Fund IX Transferred, L.L.C. and JBGS/Fund IX OP Mergerco, L.L.C.

 

2.6                               Contribution and Assignment Agreement, dated as of July 18, 2017, by and between JBG SMITH Properties LP and JBG/Fund VIII Legacy, L.L.C.

 

2.7                               Contribution and Assignment Agreement, dated as of July 18, 2017, by and between JBG SMITH Properties LP and JBG/UDM Legacy, L.L.C.

 

2.8                               Agreement and Plan of Merger, dated as of July 17, 2017, by and between JBG/Operating Partners, L.P. and JBGS/OP Mergerco, L.L.C.

 

2.9                               Contribution and Assignment Agreement, dated as of July 18, 2017, by and between JBG Properties, Inc. and JBG SMITH Properties LP

 

3.1                               Declaration of Trust of JBG SMITH Properties, as amended and restated

 

3.2                               Amended and Restated Bylaws of JBG SMITH Properties

 

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10.1                        Tax Matters Agreement, dated as of July 17, 2017, by and between Vornado Realty Trust and JBG SMITH Properties

 

10.2                        Employee Matters Agreement, dated as of July 17, 2017, by and between Vornado Realty Trust, Vornado Realty L.P., JBG SMITH Properties and JBG SMITH Properties LP

 

10.3                        Transition Services Agreement, dated as of July 17, 2017, by and between Vornado Realty Trust and JBG SMITH Properties

 

10.4                        Credit Agreement, dated as of July 18, 2017, by and among JBG SMITH Properties LP, as Borrower, the financial institutions party thereto as lenders, and Wells Fargo Bank, National Association, as Administrative Agent

 

10.5                        Registration Rights Agreement, dated as of July 18, 2017, by and among JBG SMITH Properties and the holders listed on Schedule I thereto (for holders of common shares of JBG SMITH Properties received in the Combination)

 

10.6                        Registration Rights Agreement, dated as of July 18, 2017, by and among JBG SMITH Properties and the holders listed on Schedule I thereto (for holders of common limited partnership units of JBG SMITH LP received in the Combination)

 

10.7                        Form of JBG SMITH Properties Unit Issuance Agreement

 

10.8                        JBG SMITH Properties Non-Employee Trustee Unit Issuance Agreement, dated July 18, 2017, by and among, JBG SMITH Properties, JBG SMITH Properties LP, Michael J. Glosserman and Glosserman Family JBG Operating, L.L.C.

 

10.9                        JBG SMITH Properties 2017 Employee Share Purchase Plan

 

10.10                 JBG SMITH Properties 2017 Omnibus Share Plan

 

10.11                 Employment Agreement, dated as of July 17, 2017, by and between JBG SMITH Properties and Stephen W. Theriot

 

10.12                 Form of Indemnification Agreement between JBG SMITH Properties and each of its trustees and executive officers

 

10.13                 First Amended and Restated Limited Partnership Agreement of JBG SMITH Properties LP, dated as of July 17, 2017

 

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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

JBG SMITH PROPERTIES

 

(Registrant)

 

 

 

By:

/s/ Steven Museles

 

Name:

Steven A. Museles

 

Title:

Chief Legal Officer and Secretary

 

 

Date:  July 21, 2017

 

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Exhibit Index

 

2.1                               Amendment to Master Transaction Agreement, dated as of July 17, 2017, by and among Vornado Realty Trust, Vornado Realty L.P., JBG Properties, Inc., JBG/Operating Partners, L.P., certain affiliates of JBG Properties Inc. and JBG/Operating Partners set forth on Schedule A thereto, JBG SMITH Properties and JBG SMITH Properties LP

 

2.2                               Separation and Distribution Agreement, dated as of July 17, 2017, by and among Vornado Realty Trust, Vornado Realty L.P., JBG SMITH Properties and JBG SMITH Properties LP

 

2.3                               Agreement and Plan of Merger, dated as of July 17, 2017, by and between JBG/Fund VI Transferred, L.L.C. and JBGS/Fund VI OP Mergerco, L.L.C.

 

2.4                               Agreement and Plan of Merger, dated as of July 17, 2017, by and between JBG/Fund VII Transferred, L.L.C. and JBGS/Fund VII OP Mergerco, L.L.C.

 

2.5                               Agreement and Plan of Merger, dated as of July 17, 2017, by and between JBG/Fund IX Transferred, L.L.C. and JBGS/Fund IX OP Mergerco, L.L.C.

 

2.6                               Contribution and Assignment Agreement, dated as of July 18, 2017, by and between JBG SMITH Properties LP and JBG/Fund VIII Legacy, L.L.C.

 

2.7                               Contribution and Assignment Agreement, dated as of July 18, 2017, by and between JBG SMITH Properties LP and JBG/UDM Legacy, L.L.C.

 

2.8                               Agreement and Plan of Merger, dated as of July 17, 2017, by and between JBG/Operating Partners, L.P. and JBGS/OP Mergerco, L.L.C.

 

2.9                               Contribution and Assignment Agreement, dated as of July 18, 2017, by and between JBG Properties, Inc. and JBG SMITH Properties LP

 

3.1                               Declaration of Trust of JBG SMITH Properties, as amended and restated

 

3.2                               Amended and Restated Bylaws of JBG SMITH Properties

 

10.1                        Tax Matters Agreement, dated as of July 17, 2017, by and between Vornado Realty Trust and JBG SMITH Properties

 

10.2                        Employee Matters Agreement, dated as of July 17, 2017, by and between Vornado Realty Trust, Vornado Realty L.P., JBG SMITH Properties and JBG SMITH Properties LP

 

10.3                        Transition Services Agreement, dated as of July 17, 2017, by and between Vornado Realty Trust and JBG SMITH Properties

 

10.4                        Credit Agreement, dated as of July 18, 2017, by and among JBG SMITH Properties LP, as Borrower, the financial institutions party thereto as lenders, and Wells Fargo Bank, National Association, as Administrative Agent

 

10.5                        Registration Rights Agreement, dated as of July 18, 2017, by and among JBG SMITH Properties and the holders listed on Schedule I thereto (for holders of common shares of JBG SMITH Properties received in the Combination)

 

10



 

10.6                        Registration Rights Agreement, dated as of July 18, 2017, by and among JBG SMITH Properties and the holders listed on Schedule I thereto (for holders of common limited partnership units of JBG SMITH LP received in the Combination)

 

10.7                        Form of JBG SMITH Properties Unit Issuance Agreement

 

10.8                        JBG SMITH Properties Non-Employee Trustee Unit Issuance Agreement, dated July 18, 2017, by and among, JBG SMITH Properties, JBG SMITH Properties LP, Michael J. Glosserman and Glosserman Family JBG Operating, L.L.C.

 

10.9                        JBG SMITH Properties 2017 Employee Share Purchase Plan

 

10.10                 JBG SMITH Properties 2017 Omnibus Share Plan

 

10.11                 Employment Agreement, dated as of July 17, 2017, by and between JBG SMITH Properties and Stephen W. Theriot

 

10.12                 Form of Indemnification Agreement between JBG SMITH Properties and each of its trustees and executive officers

 

10.13                 First Amended and Restated Limited Partnership Agreement of JBG SMITH Properties LP, dated as of July 17, 2017

 

11


EX-2.1 2 a17-17912_1ex2d1.htm EX-2.1

Exhibit 2.1

 

EXECUTION VERSION

 

AMENDMENT NO. 1 TO

 

MASTER TRANSACTION AGREEMENT

 

This AMENDMENT NO. 1 TO MASTER TRANSACTION AGREEMENT (hereinafter referred to as this “Amendment”), dated as of July 17, 2017, is made by and among Vornado Realty Trust, a Maryland real estate investment trust (“Vornado”), Vornado Realty L.P., a Delaware limited partnership (“Vornado OP”, and together with Vornado, the “Vornado Parties”), JBG Properties, Inc., a Maryland corporation (“JBG Properties”), JBG/Operating Partners, L.P., a Delaware limited partnership (“JBG Operating Partners” and together with JBG Properties, the “JBG Management Entities”) and the JBG Properties affiliates listed on Schedule A of the Agreement (as defined below) (the “JBG Funds” and together with the JBG Management Entities, the “JBG Parties”), JBG SMITH Properties (f/k/a Vornado DC Spinco), a Maryland real estate investment trust (“Newco”) and JBG SMITH Properties LP (f/k/a Vornado DC Spinco OP LP), a Delaware limited partnership (“Newco OP”, and together with the Vornado Parties, the JBG Parties and Newco, collectively, the “Parties”).  Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Agreement (as defined below).

 

RECITALS

 

WHEREAS, the Parties entered into that certain Master Transaction Agreement, dated as of October 31, 2016 (as amended hereby, the “Agreement”);

 

WHEREAS, pursuant to Section 9.1 of the Agreement, the Parties may amend the Agreement by an instrument in writing signed by each of the Parties to the Agreement; and

 

WHEREAS, the Parties desire to enter into this Amendment to modify certain terms and provisions of the Agreement as provided below.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Amendment and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows:

 

AMENDMENTS

 

1.             Adjustments to Valuations.

 

a)            Section 1.5(b)(i) of the Agreement is hereby amended by adding “any prepayment of the principal amount of any Indebtedness described on Section 9.6(d) of the Vornado Disclosure Letter” between “but excluding, however,” and “any Interest Payments, exit fees”.

 

b)            The following new subsection (viii) shall be added immediately after Section 1.5(b)(vii) of the Agreement:

 

(viii)        Notwithstanding the foregoing, with respect to the Included Properties listed on Section 1.5(b)(viii) of the JBG Disclosure Letter, any adjustments to the Asset Values of

 



 

such Included Properties made pursuant to this Section 1.5(b) shall be subject to the terms set forth on Section 1.5(b)(viii) of the JBG Disclosure Letter.

 

c)             Section 1.5(d) of the Agreement is hereby amended by adding “repayment, prepayment or paydown” between “debt amortization,” and “Acquisition and Development Costs that such Group anticipates to be paid”.

 

d)            Section 1.5(d) of the Agreement is hereby amended by adding “for any Distribution paid by a Vornado REIT or” between “Equity Interests of any of its Included Entities, except” and “as may be expressly contemplated by the Pre-Combination Transactions, the Restructuring Transactions or the Combination Transactions”.

 

2.             OP Unit Issuance Agreements.  The second sentence of Section 1.7(c) of the Agreement is hereby deleted and replaced with the following:

 

With respect to the transactions described in Section 1.2(f), the individuals listed in Section 1.7(c)(i) of the JBG Disclosure Letter must execute an agreement with Newco OP in the form set forth in Section 1.7(c)(iv) of the JBG Disclosure Letter, the individuals listed in Section 1.7(c)(ii) of the JBG Disclosure Letter must execute an agreement with Newco OP in the form set forth in Section 1.7(c)(v) of the JBG Disclosure Letter and the individuals listed in Section 1.7(c)(iii) of the JBG Disclosure Letter must execute an agreement with Newco OP in the form set forth in Section 1.7(c)(vi) of the JBG Disclosure Letter, in each case prior to or at the Closing in order to receive Issued OP Units pursuant to this Section 1.7(c).

 

3.             Closing.  The first sentence of Section 2.1 of the Agreement is hereby deleted and replaced with the following:

 

The closing of the Combination Transactions (the “Closing”) shall take place at 12:01 a.m. Eastern time on the fifteenth (15th) day of the calendar month immediately following the month in which the Revaluation Time occurs, provided, that if either the fourteenth (14th) day of such calendar month or the fifteenth (15th) day of such calendar month is not a Business Day, the Vornado Distribution (as defined in Section 1.1 of the Vornado Disclosure Letter) shall occur at 11:59 p.m. (Eastern time) on the first Business Day following the fifteenth (15th) day of such calendar month (and each of the other Pre-Combination Transactions shall occur at or before such time) and the Closing Date shall occur on the second Business Day following the fifteenth (15th) day of such calendar month.

 

4.             Certain Pre-Closing Actions.  The second sentence of Section 5.8(a) of the Agreement is hereby deleted and replaced with the following:

 

The JBG Parties shall cause the actions set forth on Section 5.8(a) of the JBG Disclosure Letter that are contemplated to be taken prior to the Closing (collectively, the “Restructuring Transactions”) to be implemented as set forth therein immediately following the occurrence of the Pre-Combination Transactions, but prior to the Closing (other than obtaining certain consents, forming certain entities, contributing certain JBG

 

2



 

Included Interests to the applicable Transferred LLC and certain related transactions, which may occur prior to the Pre-Combination Transactions).

 

5.             Certain CompensationSection 6.4(e) of the Agreement is hereby amended by adding the following sentence to the end of such section:

 

Newco or Newco OP shall be responsible for the amounts set forth on Section 6.4(e) of the JBG Disclosure Letter.

 

6.             Transition Services AgreementSection 6.6(a) of the Agreement is hereby amended by replacing “March 15, 2017” with “the Closing Date.”

 

7.             Cleaning Services AgreementsSection 6.6(c) of the Agreement is hereby amended by replacing “March 15, 2017” with “the Closing Date.”

 

8.             ExpensesSection 9.4 of the Agreement is hereby deleted and replaced with the following:

 

Except as may be otherwise expressly contemplated herein, all Expenses incurred in connection with this Agreement and the Transactions (including Financial Advisor Expenses) shall be paid by the Party incurring such Expenses in the event the Closing does not occur unless the Closing does not occur by reason of the other Party’s Willful Breach, breach of representation or warranty or breach or default of covenant which results in a condition in Section 7.1, Section 7.2 or Section 7.3 not to be satisfied (it being agreed, for clarity, that a failure of the condition in Section 7.2(g) to be satisfied on account of the death, disability or incapacity of one or more of the individuals listed on Section 7.2(g) of the Vornado Disclosure Letter shall not be deemed a breach or default of covenant by the JBG Parties for purposes of this sentence). In the event that the Closing occurs, Newco and Newco OP shall pay all bona fide third party Expenses (which, for the avoidance of doubt, shall not include any expenses incurred by the JBG Parties or their Affiliates solely in connection with the proposed initial public offering of the JBG Parties or the proposed transaction between the JBG Parties and New York REIT, Inc.), JBG Severance Costs or Vornado Severance Costs incurred by the Parties in connection with this Agreement, the Restructuring Transactions and the other Transactions (and shall reimburse the JBG Parties and the Vornado Parties for any such Expenses previously paid by them), other than Consent Expenses, Financial Advisor Expenses and the expenses set forth in Section 6.1(f) of the JBG Disclosure Letter and the Vornado Disclosure Letter below the cap described therein; provided, that if the JBG Management Entities incur Indebtedness in amounts permitted by Section 5.5(b)(xiv), then the JBG Parties agree to apply any reimbursement for Expenses from Newco and Newco OP to the repayment of such Indebtedness until the same is fully repaid; provided, further, that if the amount of any such bona fide third party Expense, JBG Severance Cost or Vornado Severance Cost cannot be conclusively determined as of the Closing Date, the parties shall estimate the same in good faith and Newco and Newco OP shall bear responsibility for such estimated amount at Closing.  From time to time after Closing, as the amount of each such bona fide third party Expense, JBG Severance Cost or Vornado Severance Cost is conclusively determined (whether or not the amount of the same was

 

3



 

estimated at Closing), the parties shall take such action as is necessary to correct any resulting overpayment or underpayment in accordance with the provisions of this Section 9.4.  Without limitation of the foregoing, Vornado Severance Costs with respect to Vornado’s 2015 Outperformance Plan and 2016 Outperformance Plan will not be estimated at Closing and will be conclusively determined and paid at the end of the applicable performance periods, in accordance with the determination of earned awards pursuant to the applicable plans and awards.  On or before the Closing, the JBG Parties and the Vornado Parties shall pay their respective Consent Expenses, Financial Advisor Expenses and the expenses set forth in Section 6.1(f) of the JBG Disclosure Letter and the Vornado Disclosure Letter below the cap described therein. Notwithstanding anything in this Agreement to the contrary but without limiting the obligations of the Parties following the Closing with respect to Expenses, JBG Severance Costs and Vornado Severance Costs which are not conclusively determined at Closing, (i) in lieu of receiving any reimbursement owed to the Vornado Parties pursuant to this Section 9.4, the amount of the Vornado Parties’ cash contribution to Newco pursuant to Section 2.2(o) shall be reduced by the Parties’ good faith estimate as of the Closing of the amount of such reimbursement owed to the Vornado Parties, (ii) in lieu of Newco and Newco OP paying any Expenses incurred by the Vornado Parties and not previously paid by the Vornado Parties under this Section 9.4, the amount of the Vornado Parties’ cash contribution to Newco pursuant to Section 2.2(o) shall be reduced by the Parties’ good faith estimate as of the Closing of the amount of such Expenses, (iii) at the JBG Parties’ option, in lieu of receiving all or a portion of any reimbursement owed to the JBG Parties pursuant to this Section 9.4, the amount of the JBG Parties’ cash contribution to Newco pursuant to Section 2.3(k) shall be reduced by a like amount and (iv)  at the JBG Parties’ option, in lieu of Newco and Newco OP paying all or a portion of the Expenses incurred by the JBG Parties and not previously paid by the JBG Parties under this Section 9.4, the amount of the JBG Parties’ cash contribution to Newco pursuant to Section 2.3(k) shall be reduced by a like amount.  The Parties agree to treat any payments made after the Closing pursuant to this Section 9.4 as adjustments to the cash contributed by the Parties at the Closing for tax purposes.

 

9.             Certain Definitions.

 

a)            The defined term “Cash Contributed at Closing by JBG” set forth in Section 9.6 of the Agreement is hereby amended by replacing “$200,000,000” with “$275,000,000.”

 

b)            The defined term “Cash Contributed at Closing by Vornado” set forth in Section 9.6 of the Agreement is hereby amended by replacing “$200,000,000” with “$275,000,000.”

 

c)             The defined term “Consent Expenses” set forth in Section 9.6 of the Agreement is hereby deleted and replaced with the following:

 

Consent Expenses” means (i) any assumption, consent or transfer fees owed or otherwise charged by the applicable counterparty (or its servicer or representative) in connection with obtaining any Required Consents, (ii) all refinancing costs and expenses

 

4



 

(including, without limitation, brokerage fees, origination fees, title insurance premiums and other costs incurred or reimbursed to a lender) relating to any refinanced Indebtedness in respect of any Included Properties as a result of a Debt Refinancing, a Failed Loan Assumption or otherwise, (iii) all prepayment premiums and penalties and “make-wholes” that result from the refinancing of any Indebtedness in respect of any Included Property as a result of a Debt Refinancing, a Failed Loan Assumption or otherwise, (iv) all costs to provide replacement collateral required to defease any Indebtedness in respect of any Included Property as a result of a Debt Refinancing, a Failed Loan Assumption or otherwise, (v) all processing fees charged by a lender or a servicer in order to submit application packages relating to the assumption of any Indebtedness in respect of any Included Property, (vi) all applicable mortgage taxes, intangible taxes, documentary stamp taxes and recordation charges relating to any assumption of any Indebtedness in respect of any Included Property or a refinancing thereof, (vii) any third party, out-of-pocket costs and expenses, including attorneys’ fees and expenses charged by a lender in connection with the assumption of any Indebtedness relating to any Included Property or the refinancing thereof, and (viii) any third party, out-of-pocket costs and expenses, including attorneys’ fees and expenses charged by a lender, landlord or Joint Venture Partner in connection with the consideration of, and/or the documentation of, any Required Debt Consent, Required Ground Lease Consent or Required JV Consent, as applicable, excluding, with respect to (i) — (viii) above, Reimbursable Consent Expenses. Notwithstanding the foregoing, the costs and expenses set forth on Section 9.6(d) of the Vornado Disclosure Letter shall not be deemed “Consent Expenses” and shall be deemed “Expenses” incurred by the Vornado Parties for purposes of Section 9.4 of the Agreement.

 

d)            The defined term “Expenses” set forth in Section 9.6 of the Agreement is hereby amended by inserting “Reimbursable Consent Expenses, JBG Severance Costs, Vornado Severance Costs, the costs and expenses set forth on Section 9.6(d) of the Vornado Disclosure Letter, the amount set forth on Section 9.6(e) of the JBG Disclosure Letter” between “(except to the extent constituting Consent Expenses),” and “mortgage recording fees.”

 

e)             The defined term “JBG Severance Costs” is hereby added to Section 9.6 of the Agreement as follows:

 

JBG Severance Costs” means all severance-related costs (including, without limitation, severance or termination pay and post-termination benefits, including any post-termination health care continuation, and in each case the employer portion of any associated employment taxes withholding or similar costs) incurred by the JBG Parties or their Affiliates in connection with any employees whose employment with the JBG Parties or their Affiliates was terminated prior to, at or after the Closing in connection with the transactions contemplated by this Agreement, provided, that as of the date hereof, such employees had been identified by the Parties as likely to be terminated in connection with the transactions contemplated by this Agreement.  Notwithstanding the foregoing, JBG Severance Costs will not include payments or distributions on account of any promoted interest or similar interest in any investment vehicle or investment management vehicle or the vesting of any such interest.

 

5



 

f)             The defined term “Financial Advisor Expenses” is hereby amended by adding the following sentence to the end of such definition:

 

Notwithstanding the foregoing, the amount set forth on Section 9.6(e) of the JBG Disclosure Letter shall not be deemed “Financial Advisor Expenses” and shall be deemed “Expenses” incurred by the Parties (payable directly by Newco or Newco OP, and not reimbursable to any Party) for purposes of Section 9.4 of the Agreement.

 

g)             The defined term “Reimbursable Consent Expenses” is hereby added to Section 9.6 of the Agreement as follows:

 

Reimbursable Consent Expenses” means all reasonable out-of-pocket attorneys’ fees and expenses incurred by counsel to a Party (but not, for clarity, counsel to a lender or other third party) in connection with or related to (i) the assumption of any Indebtedness in respect of any Included Property, (ii) any Debt Refinancing, (iii) any Failed Loan Assumption or (iv) obtaining or pursuing any Required Consents.

 

h)            The defined term “Vornado Severance Costs” is hereby added to Section 9.6 of the Agreement as follows:

 

Vornado Severance Costs” means all severance-related costs (including, without limitation, the value of any unvested Vornado equity awards that vest in connection with a termination of employment (based on the closing price of a share of Vornado common stock on the date of vesting), severance or termination pay and post-termination benefits, including any post-termination health care continuation, and in each case the employer portion of any associated employment taxes withholding or similar costs) incurred by the Vornado Parties or their Affiliates in connection with any employees whose employment with the Vornado Parties or their Affiliates was terminated prior to, at or after the Closing in connection with the transactions contemplated by this Agreement, provided, that as of the date hereof, such employees had been identified by the Parties as likely to be terminated in connection with the transactions contemplated by this Agreement.

 

10.          Effect.  From and after the date of this Amendment, each reference in the Agreement to “this Agreement” shall mean the Agreement, as amended pursuant to this Amendment.  In the event of any inconsistencies between this Amendment and the Agreement, the terms of this Amendment shall govern.

 

11.          Counterparts.  This Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by facsimile, portable document format (.pdf) or other electronic means shall be effective as delivery of a mutually executed counterpart to this Amendment.

 

12.          Entire Agreement.  Except as specifically amended by this Amendment, the Agreement remains in full force and effect and is hereby ratified and confirmed by the Parties.  The Agreement (including all exhibits and schedules thereto), as amended by this Amendment, constitutes the entire agreement among the Parties with respect to the subject matter hereof and

 

6



 

thereof and supersede all other prior agreements and understandings, both written and oral, among the Parties or any of them with respect to the subject matter hereof and thereof.

 

13.          Governing Law. This Amendment, and all claims or causes of actions (whether at Law, in contract or in tort) that may be based upon, arise out of or related to this Amendment or the negotiation, execution or performance of this Amendment, shall be governed by, and construed in accordance with, the Laws of the State of New York without giving effect to conflicts of laws principles (whether of the State of New York or any other jurisdiction that would cause the application of the Laws of any jurisdiction other than the State of New York).

 

[The remainder of this page is intentionally left blank.]

 

7



 

IN WITNESS WHEREOF, the Parties have caused this Amendment to be signed by their respective officers thereunto duly authorized as of the date first written above.

 

 

 

VORNADO:

 

 

 

VORNADO REALTY TRUST

 

 

 

 

 

 

 

By:

/s/ Alan J. Rice

 

Name:

Alan J. Rice

 

Title:

Senior Vice President

 

 

 

 

 

VORNADO OP:

 

 

 

VORNADO REALTY L.P.

 

 

 

 

 

 

By:

Vornado Realty Trust, its General Partner

 

 

 

 

 

 

By:

/s/ Alan J. Rice

 

 

Name:

Alan J. Rice

 

 

Title:

Senior Vice President

 

[Signature page to Amendment No. 1 to Master Transaction Agreement]

 



 

 

NEWCO:

 

 

 

JBG SMITH PROPERTIES, a Maryland real estate investment trust

 

 

 

 

 

 

 

By:

/s/ Stephen Theriot

 

Name:

Stephen Theriot

 

Title:

Chief Financial Officer and Treasurer

 

 

 

 

 

NEWCO OP:

 

 

 

JBG SMITH PROPERTIES LP, a Delaware limited partnership

 

 

 

 

 

 

By:

Vornado DC Spinco GP LLC, a Delaware limited liability company, its general partner

 

 

 

 

 

 

By:

Vornado Realty L.P., a Delaware limited partnership, its manager

 

 

 

 

 

 

By:

Vornado Realty Trust, a Maryland real estate investment trust, its general partner

 

 

 

 

 

 

By:

/s/ Alan J. Rice

 

 

Name:

Alan J. Rice

 

 

Title:

Senior Vice President

 

[Signature page to Amendment No. 1 to Master Transaction Agreement]

 



 

 

JBG PARTIES:

 

 

 

JBG PROPERTIES, INC.

 

 

 

 

 

 

By:

/s/ Michael J. Glosserman

 

Name:

Michael J. Glosserman

 

Title:

President

 

 

 

 

 

 

 

JBG/OPERATING PARTNERS, L.P.

 

 

 

 

By:

JBG Properties, Inc., its General Partner

 

 

 

 

 

By:

/s/ Michael J. Glosserman

 

 

Name:

Michael J. Glosserman

 

 

Title:

President

 

 

 

 

 

JBG INVESTMENT FUND VI, L.L.C.

 

 

 

 

By:

JBG/Fund VI Manager, L.L.C.,

 

 

its Managing Member

 

 

 

 

 

By:

/s/ Michael J. Glosserman

 

 

Name:

Michael J. Glosserman

 

 

Title:

Managing Member

 

 

 

 

 

 

 

JBG INVESTMENT FUND VII, L.L.C.

 

 

 

 

By:

JBG/Fund VII Manager, L.L.C.,

 

 

its Managing Member

 

 

 

 

 

By:

/s/ Michael J. Glosserman

 

 

Name:

Michael J. Glosserman

 

 

Title:

Managing Member

 

[Signature page to Amendment No. 1 to Master Transaction Agreement]

 



 

 

JBG INVESTMENT FUND VIII, L.L.C.

 

 

 

 

By:

JBG/Fund VIII Manager, L.L.C.,

 

 

its Managing Member

 

 

 

 

By:

/s/ Michael J. Glosserman

 

 

Name:

Michael J. Glosserman

 

 

Title:

Managing Member

 

 

 

 

JBG INVESTMENT FUND IX, L.L.C.

 

 

 

 

By:

JBG/Fund IX Manager, L.L.C.,

 

 

its Managing Member

 

 

 

 

By:

/s/ Michael J. Glosserman

 

 

Name:

Michael J. Glosserman

 

 

Title:

Managing Member

 

 

 

 

JBG/URBAN DIRECT MEMBER, L.L.C.

 

 

 

 

By:

JBG/Company Manager IV, L.L.C.,

 

 

its Managing Member

 

 

 

 

By:

/s/ Michael J. Glosserman

 

 

Name:

Michael J. Glosserman

 

 

Title:

Managing Member

 

[Signature page to Amendment No. 1 to Master Transaction Agreement]

 


EX-2.2 3 a17-17912_1ex2d2.htm EX-2.2

Exhibit 2.2

 

EXECUTION VERSION

 

SEPARATION AND DISTRIBUTION AGREEMENT

 

BY AND AMONG

 

VORNADO REALTY TRUST,

 

VORNADO REALTY L.P.,

 

JBG SMITH PROPERTIES

 

AND

 

JBG SMITH PROPERTIES LP

 

DATED AS OF JULY 17, 2017

 



 

TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

 

ARTICLE I DEFINITIONS

2

 

 

 

ARTICLE II THE SEPARATION

13

 

 

 

2.1

Transfer of Assets and Assumption of Liabilities

13

2.2

Newco Assets

16

2.3

Newco Liabilities; Vornado Liabilities

18

2.4

Approvals and Notifications

19

2.5

Novation of Liabilities

19

2.6

Release of Guarantees

20

2.7

Termination of Agreements

21

2.8

Treatment of Shared Contracts

22

2.9

Bank Accounts; Cash Balances

23

2.10

Ancillary Agreements

24

2.11

Disclaimer of Representations and Warranties

24

2.12

Cooperation

25

2.13

Newco Assumption of Indebtedness

25

2.14

Partnership Agreement

26

2.15

Financial Information Certifications

26

2.16

Vornado OP Distribution of OP Units

26

2.17

Certain Resignations

26

2.18

Plan of Reorganization

26

 

 

 

ARTICLE III THE DISTRIBUTION

27

 

 

 

3.1

Sole and Absolute Discretion; Cooperation

27

3.2

Actions Prior to the Distribution

27

3.3

Conditions to the Distribution

28

3.4

The Vornado Distribution

29

3.5

The Vornado OP Distribution of OP Units

30

 

 

 

ARTICLE IV MUTUAL RELEASES; INDEMNIFICATION

32

 

 

 

4.1

Release of Pre-Distribution Claims

32

4.2

Indemnification by Newco

34

4.3

Indemnification by Vornado

34

4.4

Indemnification Obligations Net of Insurance Proceeds and Other Amounts

35

4.5

Procedures for Indemnification of Third-Party Claims

36

4.6

Additional Matters

38

4.7

Right of Contribution

39

4.8

Covenant Not to Sue

40

4.9

Remedies Cumulative

40

 

i



 

4.10

Survival of Indemnities

40

4.11

Certain Tax Procedures

40

 

 

 

ARTICLE V CERTAIN OTHER MATTERS

46

 

 

 

5.1

Insurance Matters

46

5.2

Late Payments

48

5.3

Treatment of Payments for Tax Purposes

48

5.4

Post-Effective Time Conduct

48

5.5

Non-Solicitation Covenant

49

 

 

 

ARTICLE VI EXCHANGE OF INFORMATION; CONFIDENTIALITY

49

 

 

 

6.1

Agreement for Exchange of Information

49

6.2

Ownership of Information

49

6.3

Compensation for Providing Information

49

6.4

Record Retention

50

6.5

Limitations of Liability

50

6.6

Other Agreements Providing for Exchange of Information

50

6.7

Production of Witnesses; Records; Cooperation

50

6.8

Privileged Matters

51

6.9

Confidentiality

54

6.10

Protective Arrangements

55

 

 

 

ARTICLE VII DISPUTE RESOLUTION

55

 

 

 

7.1

Good-Faith Negotiation

55

7.2

Mediation

56

7.3

Arbitration

56

7.4

Litigation and Unilateral Commencement of Arbitration

57

7.5

Conduct During Dispute Resolution Process

58

 

 

 

ARTICLE VIII FURTHER ASSURANCES AND ADDITIONAL COVENANTS

58

 

 

 

8.1

Further Assurances

58

 

 

 

ARTICLE IX TERMINATION

59

 

 

 

9.1

Termination

59

9.2

Effect of Termination

59

 

 

 

ARTICLE X MISCELLANEOUS

59

 

 

 

10.1

Counterparts; Entire Agreement; Corporate Power

59

10.2

Governing Law

60

10.3

Waiver of Jury Trial

61

10.4

Assignability

61

10.5

Subsidiaries

62

 

ii



 

10.6

Third-Party Beneficiaries

62

10.7

Notices

62

10.8

Severability

64

10.9

Force Majeure

64

10.10

No Set-Off

64

10.11

Publicity

64

10.12

Expenses

64

10.13

Headings

65

10.14

Survival of Covenants

65

10.15

Waivers of Default

65

10.16

Specific Performance

65

10.17

Amendments

65

10.18

Interpretation

65

10.19

Limitations of Liability

66

10.20

Performance

66

10.21

Mutual Drafting

66

10.22

No Admission of Liability

67

 

SCHEDULES

 

1.1

 

Employment-Related Agreements

1.2

 

Newco Contracts

1.3

 

Newco Intellectual Property

1.4

 

Newco Properties

1.5

 

Transferred Entities

2.2(a)(x)

 

Newco Assets

2.2(b)(v)

 

Vornado Assets

2.3(a)(vi)

 

Newco Liabilities

2.3(b)

 

Vornado Liabilities

2.7(b)(ii)

 

Agreements, Arrangements, Commitments or Understandings Which Shall Not Terminate

2.13

 

Newco Assumption of Indebtedness and Other Financing Arrangements

 

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SEPARATION AND DISTRIBUTION AGREEMENT

 

This SEPARATION AND DISTRIBUTION AGREEMENT, dated as of July 17, 2017 (this “Agreement”), is by and among Vornado Realty Trust, a Maryland real estate investment trust (“Vornado”), Vornado Realty L.P., a Delaware limited partnership (“Vornado OP”), JBG Smith Properties, a Maryland real estate investment trust (“Newco”), and JBG Smith Properties LP, a Delaware limited partnership (“Newco OP”). Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in Article I.

 

R E C I T A L S

 

WHEREAS, the board of trustees of Vornado (the “Vornado Board”) has determined that it is in the best interests of Vornado and its shareholders to create a new publicly traded company that shall operate the Newco Business (as defined below);

 

WHEREAS, in furtherance of the foregoing, the Vornado Board has determined that it is appropriate and desirable to separate the DC Business (as defined below) from the Vornado Business (as defined below) (the “Separation”);

 

WHEREAS, Vornado, Vornado OP, Newco, Newco OP, JBG Properties Inc. (“JBG Properties”), JBG/Operating Partners, L.P. (“JBG Operating Partners”) and, together with JBG Properties, the “JBG Management Entities”) and certain real estate investment funds sponsored by JBG Properties (each, a “JBG Fund” and, collectively, the “JBG Funds”) are parties to that certain Master Transaction Agreement, dated as of October 31, 2016 (the “Master Agreement”), pursuant to which, among other things, certain Assets and a portion of the business conducted by the JBG Management Entities and the JBG Funds will be combined with the business of Newco (the “Business Combination”);

 

WHEREAS, in furtherance of the Separation and pursuant to the Plan of Reorganization (as defined below), the Pre-Combination Transactions (as defined below), among others, are contemplated to occur;

 

WHEREAS, in furtherance of the Business Combination and pursuant to the Master Agreement, immediately following the Vornado Distribution (as defined below), the JBG Funds will contribute, directly or indirectly, by means of contribution, merger or otherwise, certain metropolitan DC real estate Assets to Newco OP or its Subsidiaries and the JBG Management Entities will contribute, directly or indirectly, by means of contribution, merger or otherwise, the JBG Management Business (as defined below) to Newco OP or its Subsidiaries;

 

WHEREAS, Newco and Newco OP have been organized solely for these purposes, and have not engaged in activities except in preparation for the Separation, the Distribution (as defined below) and the Business Combination;

 

WHEREAS, for U.S. federal income tax purposes, the Vornado OP Contribution to Newco OP (as defined below) and the Vornado OP Distribution of OP Units (as defined below) together are intended to qualify as a partnership division taking the “assets-over form” (as described in U.S. Treasury Regulations Section 1.708-1(d)) in which no gain or loss is recognized by Vornado OP, Newco OP and Vornado under Sections 721(a), 731(a) and 731(b)

 



 

of the Internal Revenue Code of 1986, as amended (the “Code”), and the Vornado Contribution of OP Units (as defined below) and the Vornado Distribution (as defined below) together are intended to qualify as a transaction described in Section 368(a)(1)(D) and Section 355 of the Code;

 

WHEREAS, Newco and Vornado have prepared or are preparing, and Newco has filed or will file with the SEC (as defined below), the Form 10 (as defined below), which includes the Information Statement (as defined below), which sets forth disclosure concerning Newco, the Separation, the Distribution and the Business Combination; and

 

WHEREAS, each of Vornado and Newco has determined that it is appropriate and desirable to set forth the principal corporate transactions required to effect the Separation and the Distribution and certain other agreements that will govern certain matters relating to the Separation, the Distribution and the Business Combination and the relationship of Vornado, Newco and the members of their respective Groups following the Separation, the Distribution and the Business Combination.

 

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

For the purpose of this Agreement, the following terms shall have the following meanings:

 

Action” shall mean any demand, action, claim, dispute, suit, countersuit, arbitration, inquiry, subpoena, proceeding or investigation of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any federal, state, local, foreign or international Governmental Authority or any arbitration or mediation tribunal.

 

Affiliate” shall mean, when used with respect to a specified Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For the purpose of this definition, “control” (including with correlative meanings, “controlled by” and “under common control with”), when used with respect to any specified Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise. It is expressly agreed that, prior to, at and after the Effective Time, for purposes of this Agreement and the Ancillary Agreements, (a) no member of the Newco Group shall be deemed to be an Affiliate of any member of the Vornado Group and (b) no member of the Vornado Group shall be deemed to be an Affiliate of any member of the Newco Group.

 

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Agent” shall mean the trust company or bank duly appointed by Vornado and Vornado OP to act as distribution agent, transfer agent and registrar for the Newco Shares in connection with the Distribution.

 

Agreement” shall have the meaning set forth in the Preamble.

 

Ancillary Agreement” shall mean all agreements (other than this Agreement) entered into by the Parties and/or members of their respective Groups (but as to which no Third Party is a party) in connection with the Separation, the Distribution, or the other transactions contemplated by this Agreement, including the Transition Services Agreement, the Tax Matters Agreement, the Employee Matters Agreement and the Transfer Documents.

 

Approvals or Notifications” shall mean any consents, waivers, approvals, Permits or authorizations to be obtained from, notices, registrations or reports to be submitted to, or other filings to be made with, any Third Party, including any Governmental Authority.

 

Arbitration Request” shall have the meaning set forth in Section 7.3(a).

 

Assets” shall mean, with respect to any Person, the assets, properties, claims and rights (including goodwill) of such Person, wherever located (including in the possession of vendors or other Third Parties or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of such Person, including rights and benefits pursuant to any contract, license, permit, indenture, note, bond, mortgage, agreement, concession, franchise, instrument, undertaking, commitment, understanding or other arrangement.

 

Business Combination” shall have the meaning set forth in the Recitals.

 

Code” shall have the meaning set forth in the Recitals.

 

Chosen Court” shall have the meaning set forth in Section 10.2(b).

 

DC Business” shall mean the business, operations and activities of the Vornado Group relating primarily to the Newco Properties as conducted at any time prior to the Effective Time by either Vornado or Newco or any of their current or former Subsidiaries.

 

Dispute” shall have the meaning set forth in Section 7.1.

 

Distribution” means the Vornado OP Distribution of OP Units and the Vornado Distribution.

 

Distribution Date” shall mean the date of the consummation of the Distribution.

 

Effective Time” shall mean 11:59 p.m., Eastern time, on the Distribution Date.

 

Employee Matters Agreement” shall mean the employee matters agreement to be entered into by and between Vornado and Newco (or certain members of their respective

 

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Groups) in connection with the Separation, the Distribution, the Business Combination or the other transactions contemplated by this Agreement, in the form attached as Exhibit G to the Master Agreement, as it may be amended from time to time.

 

Environmental Law” shall mean any Law relating to pollution, protection or restoration of or prevention of harm to the environment or natural resources, including the use, handling, transportation, treatment, storage, disposal, Release or discharge of Hazardous Materials or the protection of or prevention of harm to human health and safety.

 

Environmental Liabilities” shall mean all Liabilities relating to, arising out of or resulting from any Hazardous Materials, Environmental Law or contract or agreement relating to environmental, health or safety matters (including all removal, remediation or cleanup costs, investigatory costs, response costs, natural resources damages, property damages, personal injury damages, costs of compliance with any product take-back requirements or with any settlement, judgment or other determination of Liability and indemnity, contribution or similar obligations) and all costs and expenses, interest, fines, penalties or other monetary sanctions in connection therewith.

 

Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

 

Force Majeure” shall mean, with respect to a Party or any member of its Group, an event beyond the control of such Party or member of its Group (or any Person acting on its or their behalf), which event (a) does not arise or result from the fault or negligence of such Party or member of its Group (or any Person acting on its or their behalf) and (b) by its nature would not reasonably have been foreseen by such Party or member of its Group (or such Person), or, if it would reasonably have been foreseen, was unavoidable, and includes acts of God, acts of civil or military authority, embargoes, epidemics, war, riots, insurrections, fires, explosions, earthquakes, floods, unusually severe weather conditions, labor problems or, in the case of computer systems, any failure in electrical or air conditioning equipment. Notwithstanding the foregoing, the receipt by a Party or any member of its Group of an unsolicited takeover offer or other acquisition proposal, even if unforeseen or unavoidable, and such Party’s or member of its Group’s response thereto, shall not be deemed an event of Force Majeure.

 

Form 10” shall mean the registration statement on Form 10, or such other form as required by the SEC, filed by Newco with the SEC to effect the registration of Newco Shares pursuant to the Exchange Act in connection with the Distribution, as such registration statement may be amended or supplemented from time to time prior to the Distribution.

 

Governmental Approvals” shall mean any Approvals or Notifications to be made to, or obtained from, any Governmental Authority.

 

Governmental Authority” shall mean any nation or government, any state, municipality or other political subdivision thereof, and any entity, body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, local, domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory,

 

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administrative or other similar functions of, or pertaining to, government and any executive official thereof.

 

Group” shall mean either the Newco Group or the Vornado Group, as the context requires.

 

Hazardous Materials” shall mean any chemical, material, substance, waste, pollutant, emission, discharge, Release or contaminant that could result in Liability under, or that is prohibited, limited or regulated by or pursuant to, any Environmental Law, and any natural or artificial substance (whether solid, liquid or gas, noise, ion, vapor or electromagnetic) that could cause harm to human health or the environment, including petroleum, petroleum products and byproducts, asbestos and asbestos-containing materials, urea formaldehyde foam insulation, electronic, medical or infectious wastes, polychlorinated biphenyls, radon gas, radioactive substances, chlorofluorocarbons and all other ozone-depleting substances.

 

Indemnifying Party” shall have the meaning set forth in Section 4.4(a).

 

Indemnitee” shall have the meaning set forth in Section 4.4(a).

 

Indemnity Payment” shall have the meaning set forth in Section 4.4(a).

 

Information” shall mean information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other Software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data; provided that “Information” shall not include Registrable IP.

 

Information Statement” shall mean the information statement to be sent to the holders of Vornado Shares and the holders of Vornado OP Units in connection with the Distribution, as such information statement may be amended or supplemented from time to time prior to the Distribution.

 

Initial Notice” shall have the meaning set forth in Section 7.1.

 

Insurance Proceeds” shall mean those monies:

 

(a)                                 received by an insured from an insurance carrier; or

 

(b)                                 paid by an insurance carrier on behalf of the insured;

 

in any such case net of any applicable premium adjustments (including reserves and retrospectively rated premium adjustments) and net of any costs or expenses incurred in the collection thereof.

 

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Intellectual Property” shall mean all of the following whether arising under the Laws of the United States or of any other foreign or multinational jurisdiction: (a) patents, patent applications (including patents issued thereon) and statutory invention registrations, including reissues, divisions, continuations, continuations in part, substitutions, renewals, extensions and reexaminations of any of the foregoing, and all rights in any of the foregoing provided by international treaties or conventions, (b) trademarks, service marks, trade names, service names, trade dress, logos and other source or business identifiers, including all goodwill associated with any of the foregoing, and any and all common law rights in and to any of the foregoing, registrations and applications for registration of any of the foregoing, all rights in and to any of the foregoing provided by international treaties or conventions, and all reissues, extensions and renewals of any of the foregoing, (c) Internet domain names, registrations and related rights, (d) copyrightable works, copyrights, moral rights, mask work rights, database rights and design rights, in each case, other than Software, whether or not registered, and all registrations and applications for registration of any of the foregoing, and all rights in and to any of the foregoing provided by international treaties or conventions, (e) confidential and proprietary information, including trade secrets, invention disclosures, processes and know-how, in each case, other than Software, and (f) intellectual property rights arising from or in respect of any Technology.

 

IRS” shall mean the U.S. Internal Revenue Service.

 

JBG Fund” shall have the meaning set forth in the Recitals.

 

JBG Management Business” shall mean the management business conducted by the JBG Management Entities, which manage various real estate investment funds and other Assets.

 

JBG Management Entities” shall have the meaning set forth in the Recitals.

 

JBG Operating Partners” shall have the meaning set forth in the Recitals.

 

JBG Properties” shall have the meaning set forth in the Recitals.

 

Law” shall mean any national, supranational, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty, license, permit, authorization, approval, consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case, enacted, promulgated, issued or entered by a Governmental Authority.

 

Liabilities” shall mean all debts, guarantees, assurances, commitments, liabilities, responsibilities, Losses, remediation, deficiencies, damages, fines, penalties, settlements, sanctions, costs, expenses, interest and obligations of any nature or kind, whether accrued or fixed, absolute or contingent, matured or unmatured, accrued or not accrued, asserted or unasserted, liquidated or unliquidated, foreseen or unforeseen, known or unknown, reserved or unreserved, or determined or determinable, including those arising under any Law, claim (including any Third-Party Claim), demand, Action, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority or arbitration tribunal, and those arising under any contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment or undertaking, or any fines,

 

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damages or equitable relief that is imposed, in each case, including all costs and expenses relating thereto.

 

Linked” shall have the meaning set forth in Section 2.9(a).

 

Losses” shall mean actual losses (including any diminution in value), costs, damages, penalties and expenses (including legal and accounting fees, and expenses and costs of investigation and litigation), whether or not involving a Third-Party Claim.

 

Master Agreement” shall have the meaning set forth in the Recitals.

 

Mediation Request” shall have the meaning set forth in Section 7.2.

 

Newco” shall have the meaning set forth in the Preamble.

 

Newco Accounts” shall have the meaning set forth in Section 2.9(a).

 

Newco Assets” shall have the meaning set forth in Section 2.2(a).

 

Newco Balance Sheet” shall mean the unaudited pro forma combined balance sheet of the Newco Business (including any new Assets, activities, expansions, additions, or other modifications resulting from the Business Combination), including any notes and subledgers thereto, as of March 31, 2017, as presented in the Information Statement mailed to the Record Holders.

 

Newco Business” shall mean the DC Business and also, with respect to events that take place after the Effective Time, the DC Business as it is operated by the Newco Group after the Effective Time, including any new Assets, activities, expansions, additions, or other modifications resulting from the Business Combination.

 

Newco Bylaws” shall mean the Amended and Restated Bylaws of Newco, substantially in the form of Exhibit M to the Master Agreement.

 

Newco Contracts” shall mean the following contracts and agreements to which either Vornado or Newco or any member their respective Groups is a party or by which it or any member of its Group or any of their respective Assets is bound, whether or not in writing; provided that Newco Contracts shall not include (x) any contract or agreement that is contemplated to be retained by Vornado or any member of the Vornado Group from and after the Effective Time pursuant to any provision of this Agreement or any Ancillary Agreement or (y) any contract or agreement that would constitute Newco Software or Newco Technology:

 

(a)                                 any leases relating primarily to any Newco Property pursuant to which a Third Party leases all or any portion of such Newco Property;

 

(b)                                 any joint venture, shareholder, equityholder, partnership or similar agreements with any Third Party relating primarily to any Newco Property;

 

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(c)                                  any customer, distribution, supply, marketing, vendor or other contract, agreement or license, in each case with a Third Party and in effect as of the Effective Time, pursuant to which such Third Party provides or receives products or services to or from either Vornado or Newco or any member of their respective Groups, primarily in connection with the DC Business, excluding any such contracts or agreements for services that are addressed in the Transition Services Agreement or any other Ancillary Agreement;

 

(d)                                 any contract or part thereof providing for any guarantee, indemnity, representation, covenant, warranty or other Liability of, by or in favor of, Vornado or Newco or any member of their respective Groups to the extent in respect of any Newco Liability or the DC Business;

 

(e)                                  except as otherwise provided in the Master Agreement, any employment, change of control, retention, consulting, indemnification, termination, severance or other similar agreement with any Newco Group Employee or consultants of the Newco Group that is in effect as of the Effective Time and set forth on Schedule 1.1;

 

(f)                                   any contract or agreement that is otherwise expressly contemplated pursuant to this Agreement or any of the Ancillary Agreements to be assigned to Newco or any member of the Newco Group;

 

(g)                                  any interest rate, currency, commodity or other swap, collar, cap or other hedging or similar agreements or arrangements related exclusively to the DC Business or entered into by or on behalf of any division, business unit or member of the Newco Group;

 

(h)                                 any contract, guarantee, note, mortgage, bond, debenture or other agreement providing for indebtedness, whether secured or unsecured, which relates exclusively to the DC Business; and

 

(i)                                     any contracts, agreements or settlements listed on Schedule 1.2, including the right to recover any amounts under such contracts, agreements or settlements.

 

Newco Declaration of Trust” shall mean the Amended and Restated Declaration of Trust of Newco, substantially in the form of Exhibit L to the Master Agreement.

 

Newco Financing Arrangements” shall have the meaning set forth in Section 2.13(a).

 

Newco Group” shall mean (a) prior to the Effective Time, Newco and each Person that will be a Subsidiary of Newco as of immediately after the Effective Time, including the Transferred Entities, even if, prior to the Effective Time, such Person is not a Subsidiary of Newco; and (b) on and after the Effective Time, Newco and each Person that is a Subsidiary of Newco (including as a result of the Business Combination).

 

Newco Group Employee” shall have the meaning set forth in the Employee Matters Agreement.

 

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Newco Indemnitees” shall have the meaning set forth in Section 4.3.

 

Newco Indemnity Payment” shall have the meaning set forth in Section 4.11(a)(i).

 

Newco Intellectual Property” shall mean (a) the Registrable IP set forth on Schedule 1.3 and (b) all Other IP owned by, licensed by or to, or sublicensed by or to either Vornado or Newco or any member of their respective Groups as of the Effective Time exclusively used or exclusively held for use in the DC Business, including any Other IP set forth on Schedule 1.3.

 

Newco Liabilities” shall have the meaning set forth in Section 2.3(a).

 

Newco OP” shall have the meaning set forth in the Preamble.

 

Newco OP Interests” means common limited partnership interests in Newco OP.

 

Newco Permits” shall mean all Permits owned or licensed by either Vornado or Newco or any member of their respective Groups primarily used or primarily held for use in the DC Business as of the Effective Time.

 

Newco Portion” shall have the meaning set forth in Section 2.8(a).

 

Newco Properties” means the real properties listed on Schedule 1.4.

 

Newco Shares” means common shares, par value of $0.01 per share, of Newco.

 

Newco Software” shall mean all Software owned or licensed by either Vornado or Newco or any member of their respective Groups exclusively used or exclusively held for use in the DC Business as of the Effective Time.

 

Newco Technology” shall mean all Technology owned or licensed by either Vornado or Newco or any member of their respective Groups exclusively used or exclusively held for use in the DC Business as of the Effective Time.

 

NYSE” shall mean the New York Stock Exchange.

 

Other IP” shall mean all Intellectual Property, other than Registrable IP, that is owned by either Vornado or Newco or any member of their respective Groups as of the Effective Time.

 

Parties” shall mean Newco and Vornado.

 

Party” shall mean either Newco or Vornado, as applicable.

 

Permits” means permits, approvals, authorizations, consents, licenses or certificates issued by any Governmental Authority.

 

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Person” shall mean an individual, a general or limited partnership, a corporation, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity and any Governmental Authority.

 

Plan of Reorganization” means the Pre-Combination Transactions set forth in Section 5.8(a) of the Vornado Disclosure Letter (as defined in the Master Agreement).

 

Pre-Combination Transactions” shall have the meaning set forth in the Master Agreement.

 

Prime Rate” means the rate that Bloomberg displays as “Prime Rate by Country United States” at www.bloomberg.com/markets/rates-bonds/key-rates/ or on a Bloomberg terminal at PRIMBB Index.

 

Privileged Information” means any Information, in written, oral, electronic, or other tangible or intangible forms, including any communications by or to attorneys (including attorney-client privileged communications), memoranda and other materials prepared by attorneys or under their direction (including attorney work product), as to which a Party or any member of its Group would be entitled to assert or have asserted a privilege, including the attorney-client and attorney work product privileges.

 

Qualifying Income” means income described in Sections 856(c)(2)(A) through (I) and 856(c)(3)(A) through (I) of the Code.

 

Record Date” shall mean the close of business on the date to be determined by the Vornado Board, acting both on behalf of Vornado in its capacity as the general partner of Vornado OP and on its own behalf, as the record date for determining holders of Vornado OP Units entitled to receive Newco OP Interests pursuant to the Vornado OP Distribution of OP Units and for determining holders of Vornado Shares entitled to receive Newco Shares pursuant to the Vornado Distribution.

 

Record Holders” shall mean the holders of record of Vornado Shares and the holders of record of the Vornado OP Units, in each case, as of the Record Date.

 

Registrable IP” shall mean all patents, patent applications, statutory invention registrations, registered trademarks, registered service marks, registered Internet domain names and copyright registrations.

 

REIT” shall mean “a real estate investment trust” within the meaning of Section 856 of the Code.

 

REIT Guidance” shall mean either a ruling from the IRS or an opinion of Tax counsel selected by the Party who has given the relevant REIT Savings Notice, which opinion shall be reasonably satisfactory to such Party.

 

REIT Savings Notice” shall mean the written notice delivered by Newco or Vornado, as the case may be, pursuant to Section 4.11(a) or Section 4.11(b), respectively.

 

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Release” shall mean any release, spill, emission, discharge, leaking, pumping, pouring, dumping, injection, deposit, disposal, dispersal, leaching or migration of Hazardous Materials into the environment (including ambient air, surface water, groundwater and surface or subsurface strata).

 

Representatives” shall mean, with respect to any Person, any of such Person’s directors, trustees, officers, employees, agents, consultants, advisors, accountants, attorneys or other representatives.

 

SEC” shall mean the U.S. Securities and Exchange Commission.

 

Security Interest” shall mean any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever.

 

Separation” shall have the meaning set forth in the Recitals.

 

Shared Contract” shall have the meaning set forth in Section 2.8(a).

 

Software” shall mean any and all (a) computer programs, including any and all software implementation of algorithms, models and methodologies, whether in source code, object code, human readable form or other form, (b) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (c) descriptions, flow charts and other work products used to design, plan, organize and develop any of the foregoing, (d) screens, user interfaces, report formats, firmware, development tools, templates, menus, buttons and icons and (e) documentation, including user manuals and other training documentation, relating to any of the foregoing.

 

Specified REIT Requirements” means the requirements of Sections 856(c)(2) and (3) of the Code.

 

Subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, joint venture or partnership of which such Person (a) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (i) the total combined voting power of all classes of voting securities, (ii) the total combined equity interests or (iii) the capital or profit interests, in the case of a partnership, or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

 

Tangible Information” means Information that is contained in written, electronic or other tangible forms.

 

Tax” shall have the meaning set forth in the Tax Matters Agreement.

 

Tax Matters Agreement” shall mean the tax matters agreement to be entered into by and between Vornado and Newco (or any members of their respective Groups) in connection with the Separation, the Distribution, the Business Combination or the other transactions

 

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contemplated by this Agreement, in the form attached as Exhibit H to the Master Agreement, as it may be amended from time to time.

 

Tax Return” shall have the meaning set forth in the Tax Matters Agreement.

 

Technology” shall mean all technology, designs, formulae, algorithms, procedures, methods, discoveries, processes, techniques, ideas, know-how, research and development, technical data, tools, materials, specifications, processes, inventions (whether patentable or unpatentable and whether or not reduced to practice), apparatus, creations, improvements, works of authorship in any media, confidential, proprietary or non-public information, and other similar materials, and all recordings, graphs, drawings, reports, analyses and other writings, and other tangible embodiments of the foregoing in any form, whether or not listed herein, in each case, other than Software.

 

Third Party” means any Person other than the Parties or any members of their respective Groups.

 

Third-Party Claim” shall have the meaning set forth in Section 4.5(a).

 

Transfer Documents” shall have the meaning set forth in Section 2.1(b).

 

Transferred Entities” shall mean the entities set forth on Schedule 1.5.

 

Transition Services Agreement” shall mean the Transition Services Agreement as defined in the Master Agreement, as it may be amended from time to time.

 

Unreleased Newco Liability” shall have the meaning set forth in Section 2.5(b).

 

Unreleased Vornado Liability” shall have the meaning set forth in Section 2.5(c).

 

Vornado” shall have the meaning set forth in the Preamble.

 

Vornado Accounts” shall have the meaning set forth in Section 2.9(a).

 

Vornado Assets” shall have the meaning set forth in Section 2.2(b).

 

Vornado Board” shall have the meaning set forth in the Recitals.

 

Vornado Business” shall mean all businesses, operations and activities (whether or not such businesses, operations or activities are or have been terminated, divested or discontinued) conducted at any time prior to the Effective Time by either Vornado or Newco or any member of their respective Groups, other than the DC Business.

 

Vornado Contribution of OP Units” shall have the meaning set forth  on Section 1.1 of the Vornado Disclosure Letter.

 

Vornado Disclosure Letter” shall have the meaning set forth in the Master Agreement.

 

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Vornado Distribution” shall have the meaning set forth on Section 1.1 of the Vornado Disclosure Letter.

 

Vornado Group” shall mean Vornado and each Person that is a Subsidiary of Vornado (other than Newco and any other member of the Newco Group).

 

Vornado Indemnitees” shall have the meaning set forth in Section 4.2.

 

Vornado Indemnity Payment” shall have the meaning set forth in Section 4.11(b)(i).

 

Vornado Liabilities” shall have the meaning set forth in Section 2.3(b).

 

Vornado Name and Vornado Marks” shall mean the names, marks, trade dress, logos, monograms, domain names and other source or business identifiers of either Vornado or Newco or any member of their respective Groups using or containing “Vornado Realty” or “Vornado,” either alone or in combination with other words or elements, and all names, marks, trade dress, logos, monograms, domain names and other source or business identifiers confusingly similar to or embodying any of the foregoing either alone or in combination with other words or elements, together with the goodwill associated with any of the foregoing.

 

Vornado Shares” means common shares of Vornado, par value $0.04 per share.

 

Vornado OP” shall have the meaning set forth in the Preamble.

 

Vornado OP Contribution to Newco OP” shall have the meaning set forth on Section 1.1 of the Vornado Disclosure Letter.

 

Vornado OP Distribution of OP Units” shall have the meaning set forth on Section 1.1 of the Vornado Disclosure Letter.

 

Vornado OP Units” means common limited partnership interests in Vornado OP.

 

Vornado Portion” shall have the meaning set forth in Section 2.8(a).

 

ARTICLE II
THE SEPARATION

 

2.1                               Transfer of Assets and Assumption of Liabilities.

 

(a)                                 On or prior to the Distribution Date, but in any case, prior to the Vornado OP Distribution of OP Units, in accordance with the Plan of Reorganization:

 

(i)                                     Transfer and Assignment of Newco Assets. Vornado shall, and shall cause the applicable members of the Vornado Group to, contribute, assign, transfer, convey and deliver to the applicable members of the Newco Group, and the applicable members of the Newco Group shall accept from Vornado and the applicable members of

 

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the Vornado Group, all of Vornado’s and such Vornado Group members’ respective direct or indirect right, title and interest in and to all of the Newco Assets (it being understood that if any Newco Asset shall be held by a Transferred Entity or a wholly owned Subsidiary of a Transferred Entity, such Newco Asset may be assigned, transferred, conveyed and delivered to Newco as a result of the transfer of all of the equity interests in such Transferred Entity from Vornado or the applicable members of the Vornado Group to the applicable member of the Newco Group);

 

(ii)                                  Acceptance and Assumption of Newco Liabilities. The applicable members of the Newco Group shall accept, assume and agree faithfully to perform, discharge and fulfill all of the Newco Liabilities in accordance with their respective terms. The applicable members of the Newco Group shall be responsible for all Newco Liabilities, regardless of when or where such Newco Liabilities arose or arise (provided, however, that nothing contained herein shall preclude or inhibit Newco from asserting against Third Parties any defenses available to the legal entity that incurred or holds such Newco Liability), or whether the facts on which they are based occurred prior to or subsequent to the Effective Time, regardless of where or against whom such Newco Liabilities are asserted or determined (including any Newco Liabilities arising out of claims made by Vornado’s or Newco’s respective trustees, officers, employees, agents, Subsidiaries or Affiliates against any member of the Vornado Group or the Newco Group) or whether asserted or determined prior to the date hereof;

 

(iii)                               Transfer and Assignment of Vornado Assets. Newco shall, and shall cause the applicable members of the Newco Group to, contribute, assign, transfer, convey and deliver to the applicable members of the Vornado Group, and the applicable members of the Vornado Group shall accept from Newco and the applicable members of the Newco Group, all of Newco’s and such Newco Group members’ respective direct or indirect right, title and interest in and to any of the Vornado Assets, if any, held by Newco or any such members of the Newco Group (it being understood that any such Vornado Asset may be assigned, transferred, conveyed and delivered to Vornado as a result of the transfer of all of the equity interests in the entity or entities that own such Vornado Asset from Newco or the applicable members of the Newco Group to the applicable member of the Vornado Group); and

 

(iv)                              Acceptance and Assumption of Vornado Liabilities. The applicable members of the Vornado Group shall accept, assume and agree faithfully to perform, discharge and fulfill all of the Liabilities of any Transferred Entity that are Vornado Liabilities in accordance with their respective terms, regardless of when or where such Vornado Liabilities arose or arise (provided, however, that nothing contained herein shall preclude or inhibit Vornado from asserting against Third Parties any defenses available to the legal entity that incurred or holds such Vornado Liability), or whether the facts on which they are based occurred prior to or subsequent to the Effective Time, regardless of where or against whom such Vornado Liabilities are asserted or determined (including any Vornado Liabilities arising out of claims made by Vornado’s or Newco’s respective trustees, officers, employees, agents, Subsidiaries or Affiliates against any member of the Vornado Group or the Newco Group) or whether asserted or determined prior to the date hereof.

 

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(b)                                 Transfer Documents. In furtherance of the contribution, assignment, transfer, conveyance and delivery of the Assets and the assumption of the Liabilities in accordance with Section 2.1(a), (i) each Party shall execute and deliver, and shall cause the applicable members of its Group to execute and deliver, such bills of sale, quitclaim deeds, stock powers, certificates of title, assignments of contracts and other instruments of transfer, conveyance and assignment as and to the extent necessary to evidence the transfer, conveyance and assignment of all of such Party’s and the applicable members of its Group’s right, title and interest in and to such Assets to the other Party and the applicable members of its Group in accordance with Section 2.1(a), and (ii) each Party shall execute and deliver, and shall cause the applicable members of its Group to execute and deliver, to the other Party such assumptions of contracts and other instruments of assumption as and to the extent necessary to evidence the valid and effective assumption of the Liabilities by such Party and the applicable members of its Group in accordance with Section 2.1(a). All of the foregoing documents contemplated by this Section 2.1(b) shall be referred to collectively herein as the “Transfer Documents.”

 

(c)                                  Misallocations. In the event that at any time or from time to time (whether prior to, at or after the Effective Time), one Party (or any member of such Party’s respective Group) shall receive or otherwise possess any Asset that is allocated to the other Party (or any member of such Party’s Group) pursuant to this Agreement or any Ancillary Agreement (including, for the avoidance of doubt, any cash amount required to be contributed by one Party (or any member of such Party’s Group) to the other in accordance with the Plan of Reorganization), such Party shall promptly transfer, or cause to be transferred, such Asset to the Party so entitled thereto (or to any member of such Party’s Group), and such Party (or member of such Party’s Group) shall accept such Asset. Prior to any such transfer, the Person receiving or possessing such Asset shall hold such Asset in trust for any such other Person. In the event that at any time or from time to time (whether prior to, at or after the Effective Time), one Party hereto (or any member of such Party’s Group) shall receive or otherwise assume any Liability that is allocated to the other Party (or any member of such Party’s Group) pursuant to this Agreement or any Ancillary Agreement, such Party shall promptly transfer, or cause to be transferred, such Liability to the Party responsible therefor (or to any member of such Party’s Group), and such Party (or member of such Party’s Group) shall accept, assume and agree to faithfully perform such Liability.  For the avoidance of doubt, in the event that at any time or from time to time (whether prior to, at or after the Effective Time), one Party (or any member of such Party’s respective Group) shall make a payment in respect of any Liability that the Parties agree is allocated to the other Party (or any member of such other Party’s Group) pursuant to this Agreement or otherwise, such other Party shall reimburse the first Party for the amount so paid as promptly as is reasonably practicable.

 

(d)                                 Waiver of Bulk-Sale and Bulk-Transfer Laws. Newco, Newco OP and each member of the Newco Group hereby waives compliance by each and every member of the Vornado Group with the requirements and provisions of any “bulk-sale” or “bulk-transfer” Laws of any jurisdiction that may be applicable with respect to the transfer or sale of any or all of the Newco Assets or Newco Properties to any member of the Newco Group.

 

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2.2                               Newco Assets.

 

(a)                                 Newco Assets. For purposes of this Agreement, “Newco Assets” shall mean:

 

(i)                                     all issued and outstanding capital stock or other equity interests of the Transferred Entities that are owned by either Vornado or Newco or any member of their respective Groups as of the Effective Time;

 

(ii)                                  all interests in the Newco Properties of whatever nature, including easements, whether as owner, mortgagee or holder of a Security Interest in the Newco Properties, lessor, sublessor, lessee, sublessee or otherwise, and including all buildings or barges located thereon, and all associated parking areas, fixtures and all other improvements located thereon, and including all rights, benefits, privileges, tenements, hereditaments, covenants, conditions, restrictions, easements and other appurtenances on any Newco Property or otherwise appertaining to or benefitting any Newco Property and/or the improvements situated thereon, including all mineral rights, development rights, air and water rights, subsurface rights, vested rights entitling, or prospective rights which may entitle, the owner of any Newco Property to related easements, land use rights, air rights, viewshed rights, density credits, water, sewer, electrical and other utility service, credits and/or rebates, strips and gores and any land lying in the bed of any street, road, alley, open or proposed, adjoining any Newco Property, and all easements, rights of way and other appurtenances used or connected with the beneficial use or enjoyment of any Newco Property;

 

(iii)                               all Assets of either Vornado or Newco or any member of their respective Groups included or reflected as Assets of the Newco Group on the Newco Balance Sheet and any Assets acquired by or for the Newco Business or the Newco Group subsequent to the date of the Newco Balance Sheet which, had they been so acquired on or before such date and owned as of such date would have been reflected on the Newco Balance Sheet if prepared on a consistent basis, subject to any dispositions of such Assets subsequent to the date of the Newco Balance Sheet as may be permitted under the Master Agreement; provided that the amounts set forth on the Newco Balance Sheet with respect to any Assets shall not be treated as minimum amounts or limitations on the amount of such Assets that are included in the definition of Newco Assets pursuant to this subclause (iii);

 

(iv)                              all Assets of either Vornado or Newco or any member of their respective Groups as of the Effective Time that are expressly provided by this Agreement or any Ancillary Agreement as Assets to be transferred to Newco OP or any other member of the Newco Group;

 

(v)                                 all Newco Contracts as of the Effective Time and all rights, interests or claims of either Vornado or Newco or any member of their respective Groups thereunder as of the Effective Time;

 

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(vi)                              all Newco Intellectual Property, Newco Software and Newco Technology as of the Effective Time and all rights, interests or claims of either Vornado or Newco or any member of their respective Groups thereunder as of the Effective Time;

 

(vii)                           all Newco Permits as of the Effective Time and all rights, interests or claims of either Vornado or Newco or any member of their respective Groups thereunder as of the Effective Time;

 

(viii)                        all rights, interests and claims of either Vornado or Newco or any member of their respective Groups as of the Effective Time with respect to Information that is exclusively related to the Newco Assets, the Newco Liabilities, the DC Business the Transferred Entities and, subject to the provisions of the applicable Ancillary Agreements, a non-exclusive right to all Information that is related to, but not exclusively related to, the Newco Assets, the Newco Liabilities, the DC Business or the Transferred Entities; and

 

(ix)                              all other Assets owned or held by Vornado or Newco or any member of their respective Groups immediately prior to the Effective Time that exclusively relate to or are exclusively used in the DC Business; and

 

(x)                                 any and all Assets set forth on Schedule 2.2(a)(x).

 

Notwithstanding the foregoing, the Newco Assets shall not in any event include any Asset referred to in subclauses (i) through (v) of Section 2.2(b).

 

(b)                                 Vornado Assets. For the purposes of this Agreement, “Vornado Assets” shall mean all Assets of either Vornado or Newco or any member of their respective Groups as of the Effective Time, other than the Newco Assets, it being understood that the Vornado Assets shall include:

 

(i)                                     all Assets that are expressly contemplated by this Agreement, the Master Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Assets to be retained by Vornado, Vornado OP or any other member of the Vornado Group (including any Vornado Included Interests (as defined in the Master Agreement) that become “Kickout Interests” in accordance with the terms of the Master Agreement);

 

(ii)                                  all contracts of either Vornado or Newco or any member of their respective Groups as of the Effective Time (other than the Newco Contracts);

 

(iii)                               all Intellectual Property of either Vornado or Newco or any member of their respective Groups as of the Effective Time (other than the Newco Intellectual Property), including the Vornado Name and Vornado Marks;

 

(iv)                              all Permits of either Vornado or Newco or any member of their respective Groups as of the Effective Time (other than the Newco Permits); and

 

(v)                                 any and all Assets set forth on Schedule 2.2(b)(v).

 

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2.3                               Newco Liabilities; Vornado Liabilities.

 

(a)                                 Newco Liabilities. For the purposes of this Agreement, “Newco Liabilities” shall mean the following Liabilities of either Vornado or Newco or any member of their respective Groups:

 

(i)                                     all Liabilities included or reflected as liabilities or obligations of Newco or the members of the Newco Group on the Newco Balance Sheet and all Liabilities arising or assumed after the date of the Newco Balance Sheet which, had they arisen or been assumed on or before such date and been retained as of such date, would have been reflected on the Newco Balance Sheet if prepared on a consistent basis, subject to any discharge of such Liabilities subsequent to the date of the Newco Balance Sheet; provided that the amounts set forth on the Newco Balance Sheet with respect to any Liabilities shall not be treated as minimum amounts or limitations on the amount of such Liabilities that are included in the definition of Newco Liabilities pursuant to this subclause (i);

 

(ii)                                  all Liabilities, including any Environmental Liabilities, relating to, arising out of or resulting from the actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent that such Liabilities relate to, arise out of or result from the DC Business or any Newco Asset;

 

(iii)                               all Liabilities to the extent relating to, arising out of or resulting from (A) the activities or operations of the Newco Business or the ownership or use of the Newco Assets after the Effective Time by any member of the Newco Group or (B) the activities or operations of any other business conducted by any member of the Newco Group at any time after the Effective Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or Representative of any member of the Newco Group (whether or not such act or failure to act is or was within such Person’s authority));

 

(iv)                              any and all Liabilities that are expressly provided by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be assumed by Newco or any other member of the Newco Group, and all agreements, obligations and Liabilities of any member of the Newco Group under this Agreement or any of the Ancillary Agreements;

 

(v)                                 all Liabilities to the extent relating to, arising out of or resulting from the Newco Contracts, the Newco Intellectual Property, the Newco Software, the Newco Technology or the Newco Permits;

 

(vi)                              any and all Liabilities set forth on Schedule 2.3(a)(vi); and

 

(vii)                           all Liabilities arising out of claims made by any Third Party (including Vornado’s or Newco’s respective trustees, officers, shareholders, employees and agents) against any member of the Vornado Group or the Newco Group to the extent

 

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relating to, arising out of or resulting from the DC Business or any Newco Asset or the other business, operations, activities or Liabilities referred to in clauses (i) through (vi) above;

 

provided that, notwithstanding the foregoing, the Parties agree that the Liabilities set forth on Schedule 2.3(b), and any Liabilities of any member of the Vornado Group pursuant to the Ancillary Agreements, shall not be Newco Liabilities but instead shall be Vornado Liabilities.

 

(b)                                 Vornado Liabilities. For the purposes of this Agreement, “Vornado Liabilities” shall mean (i) all Liabilities relating to, arising out of or resulting from actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time) of any member of the Vornado Group and, prior to the Effective Time, any member of the Newco Group, in each case that are not Newco Liabilities, including any and all Liabilities set forth on Schedule 2.3(b); (ii) Liabilities of either Vornado or Newco or any member of their respective Groups to the extent relating to, arising out of or resulting from the Vornado Business or the Vornado Assets; and (iii) all Liabilities arising out of claims made by any Third Party (including Vornado’s or Newco’s respective trustees, officers, shareholders, employees and agents) against any member of the Vornado Group or the Newco Group to the extent relating to, arising out of or resulting from the Vornado Business or the Vornado Assets.

 

2.4                               Approvals and NotificationsApprovals and Notifications for Newco Assets. To the extent that the transfer or assignment of any Newco Asset, the assumption of any Newco Liability, the Separation, or the Distribution requires any Approvals or Notifications, the Parties shall use their commercially reasonable efforts to obtain or make such Approvals or Notifications as soon as reasonably practicable; provided, however, that, except to the extent expressly provided in this Agreement, any of the Ancillary Agreements or the Master Agreement, as otherwise agreed between Vornado and Newco, or to the extent otherwise required to be made by the applicable Party or any of its Subsidiaries pursuant to the terms of any then-existing contract, neither Vornado nor Newco shall be obligated to contribute capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any Person in order to obtain or make such Approvals or Notifications.

 

2.5                               Novation of Liabilities.

 

(a)                                 Each of Vornado and Newco, at the request of the other, shall use its commercially reasonable efforts to obtain, or to cause to be obtained, as soon as reasonably practicable, any consent, substitution, approval or amendment required to novate or assign (i) all Newco Liabilities or obtain in writing the unconditional release of each member of the Vornado Group that is a party to any such arrangements, or the substitution of a member of the Newco Group if no member of the Newco Group is then a party thereto, so that, in any such case, the members of the Newco Group shall be solely responsible for such Newco Liabilities or (ii) all Vornado Liabilities or obtain in writing the unconditional release of each member of the Newco Group that is a party to any such arrangements, or the substitution of a member of the Vornado Group if no member of the Vornado Group is then a party thereto, so that, in any such case, the

 

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members of the Vornado Group shall be solely responsible for such Vornado Liabilities; provided, however, that, except as otherwise expressly provided in this Agreement, the Master Agreement or any of the Ancillary Agreements, neither Vornado nor Newco shall be obligated to contribute any capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any Third Party from whom any such consent, substitution, approval, amendment or release is requested.

 

(b)                                 If Vornado or Newco is unable to obtain, or to cause to be obtained, any such required consent, substitution, approval, amendment or release and the applicable member of the Vornado Group continues to be bound by such Newco Liability (or any agreement, lease, license or other obligation, in each case, pursuant to which any Newco Liability arises) (each, an “Unreleased Newco Liability”), Newco shall, to the extent not prohibited by Law, as indemnitor, guarantor, agent or subcontractor for such member of the Vornado Group, as the case may be, (i) pay, perform and discharge fully all of the obligations or other Liabilities of such member of the Vornado Group that constitute Unreleased Newco Liabilities from and after the Effective Time and (ii) use its commercially reasonable efforts to effect such payment, performance or discharge prior to the time any demand for such payment, performance or discharge is permitted to be made by the obligee thereunder on any member of the Vornado Group. If and when any such consent, substitution, approval, amendment or release shall be obtained or the Unreleased Newco Liabilities shall otherwise become assignable or able to be novated, Vornado shall promptly assign, or cause to be assigned, and Newco or the applicable Newco Group member shall assume, such Unreleased Newco Liabilities without exchange of further consideration.

 

(c)                                  If Newco or Vornado is unable to obtain, or to cause to be obtained, any such required consent, substitution, approval, amendment or release and the applicable member of the Newco Group continues to be bound by such Vornado Liability (or any agreement, lease, license or other obligation, in each case, pursuant to which any Vornado Liability arises) (each, an “Unreleased Vornado Liability”), Vornado shall, to the extent not prohibited by Law, as indemnitor, guarantor, agent or subcontractor for such member of the Newco Group, as the case may be, (i) pay, perform and discharge fully all of the obligations or other Liabilities of such member of the Newco Group that constitute Unreleased Vornado Liabilities from and after the Effective Time and (ii) use its commercially reasonable efforts to effect such payment, performance or discharge prior to the time any demand for such payment, performance or discharge is permitted to be made by the obligee thereunder on any member of the Newco Group. If and when any such consent, substitution, approval, amendment or release shall be obtained or the Unreleased Vornado Liabilities shall otherwise become assignable or able to be novated, Newco shall promptly assign, or cause to be assigned, and Vornado or the applicable Vornado Group member shall assume, such Unreleased Vornado Liabilities without exchange of further consideration.

 

2.6                               Release of Guarantees. In furtherance of, and not in limitation of, the obligations set forth in Section 2.5:

 

(a)                                 On or prior to the Distribution Date or as soon as practicable thereafter, Vornado shall, at the request of Newco and with the reasonable cooperation of Newco and the applicable member(s) of the Newco Group, use commercially reasonable efforts to have any member(s) of the Newco Group removed as guarantor of, indemnitor of or obligor for any

 

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Vornado Liability to the extent that they relate to Vornado Liabilities, including the removal of any Security Interest on or in any Newco Asset that may serve as collateral or security for any such Vornado Liability.

 

(b)                                 To the extent required to obtain a release from a guarantee or indemnity of any member of the Newco Group, Vornado or one or more members of the Vornado Group shall execute a guarantee or indemnity agreement in the form of the existing guarantee or indemnity or such other form as is agreed to by the relevant parties to such guarantee or indemnity agreement, which agreement shall include the removal of any Security Interest on or in any Newco Asset that may serve as collateral or security for any such Vornado Liability, except to the extent that such existing guarantee contains representations, covenants or other terms or provisions either (i) with which Vornado would be reasonably unable to comply or (ii) which Vornado would not reasonably be able to avoid breaching.

 

(c)                                  Until such time as Vornado or an applicable member of the Vornado Group has obtained, or has caused to be obtained, any removal or release as set forth in clauses (a) and (b) of this Section 2.6, (i) Vornado or the relevant member of the Vornado Group that has assumed the Liability related to such guarantee shall indemnify, defend and hold harmless the guarantor or obligor against or from any Liability arising from or relating thereto in accordance with the provisions of Article IV and shall, as agent or subcontractor for such guarantor, indemnitor or obligor, pay, perform and discharge fully all the obligations or other Liabilities of such guarantor, indemnitor or obligor thereunder; and (ii) Vornado, on behalf of itself and the other members of its Group, agrees not to renew or extend the term of, increase any obligations under, or transfer to a Third Party, any loan, guarantee, lease, contract or other obligation for which Newco or a member of its Group is or may be liable unless all obligations of Newco and the members of its Group with respect thereto are thereupon terminated by documentation satisfactory in form and substance to Newco.

 

(d)                                 Until such time as Vornado has obtained, or has caused to be obtained, any removal or release as set forth in clauses (a) and (b) of this Section 2.6, Vornado shall coordinate with Newco with respect to contact with the beneficiary of such guarantee, afford Newco a reasonable opportunity to participate in discussions with such beneficiaries prior to engaging therein, and keep Newco reasonably informed of any discussions with such beneficiaries in which Newco does not participate.

 

2.7                               Termination of Agreements.

 

(a)                                 Except as set forth in Section 2.7(b), in furtherance of the releases and other provisions of Section 4.1, Newco and each member of the Newco Group, on the one hand, and Vornado and each member of the Vornado Group, on the other hand, hereby terminate any and all agreements, arrangements, commitments or understandings, whether or not in writing, between or among Newco and/or any member of the Newco Group, on the one hand, and Vornado and/or any member of the Vornado Group, on the other hand, effective or outstanding as of the Effective Time. No such terminated agreement, arrangement, commitment or understanding (including any provision thereof which purports to survive termination) shall be of any further force or effect after the Effective Time. Each Party shall, at the reasonable request of

 

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the other Party, take, or cause to be taken, such other actions as may be necessary to effect the foregoing.

 

(b)                                 The provisions of Section 2.7(a) shall not apply to any of the following agreements, arrangements, commitments or understandings (or to any of the provisions thereof): (i) this Agreement, the Master Agreement and the Ancillary Agreements (and each other agreement or instrument expressly contemplated by this Agreement, the Master Agreement or any Ancillary Agreement to be entered into by any of the Parties or any of the members of their respective Groups or to be continued from and after the Effective Time); (ii) any agreements, arrangements, commitments or understandings listed or described on Schedule 2.7(b)(ii); (iii) any agreements, arrangements, commitments or understandings to which any Third Party is a party; (iv) any intercompany accounts payable or accounts receivable accrued as of the Effective Time that are reflected in the books and records of the parties or otherwise documented in writing in accordance with past practices, which shall be settled in the manner contemplated by Section 2.7(c); (v) any agreements, arrangements, commitments or understandings to which any non-wholly owned Subsidiary of Vornado or Newco, as the case may be, is a party (it being understood that directors’ qualifying shares or similar interests will be disregarded for purposes of determining whether a Subsidiary is wholly owned); and (vi) any Shared Contracts.

 

(c)                                  All of the intercompany accounts receivable and accounts payable between any member of the Vornado Group, on the one hand, and any member of the Newco Group, on the other hand, outstanding as of the Effective Time shall, as promptly as is practicable after the Effective Time, be repaid, settled or otherwise eliminated by the member owing such amount, by means of cash payments, a dividend, capital contribution or a combination of the foregoing.

 

2.8                               Treatment of Shared Contracts.

 

(a)                                 Subject to applicable Law and without limiting the generality of the obligations set forth in Section 2.1, unless the parties otherwise agree or the benefits of any contract, agreement, arrangement, commitment or understanding described in this Section 2.8 are expressly conveyed to the applicable party pursuant to this Agreement or an Ancillary Agreement, any contract or agreement entered into by a member of the Vornado Group with a Third Party that is not a Newco Contract, but pursuant to which the DC Business, as of the Effective Time, has been provided certain revenues or other benefits in respect of the Newco Properties (any such contract or agreement, a “Shared Contract”) shall not be assigned in relevant part to the applicable member(s) of the Newco Group or amended to give the relevant member(s) of the Newco Group any entitlement to such rights and benefits thereunder; provided, however, that the Parties shall, and shall cause each of the members of their respective Groups to, take such other reasonable and permissible actions to cause (i) the relevant member of the Newco Group to receive the rights and benefits previously provided in the ordinary course of business, consistent with past practice, to the DC Business pursuant to such Shared Contract and (ii) the relevant member of the Newco Group to bear the burden of the corresponding Liabilities under such Shared Contract. Notwithstanding the foregoing, no member of the Vornado Group shall be required by this Section 2.8 to maintain in effect any Shared Contract, and no member of the Newco Group shall have any approval or other rights with respect to any amendment, termination or other modification of any Shared Contract; provided, however, that for any

 

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Shared Contract that the Newco Group in consultation with JBG Properties identifies as material to the operation of the DC Business, the Parties shall cause the members of their respective Groups to use their respective commercially reasonable efforts to work together (and, if necessary and desirable, to work with the Third Party to any Shared Contract) in an effort to divide, partially assign, modify and/or replicate (in whole or in part) the respective rights and obligations under and in respect of any such identified Shared Contract such that (i) a member of the Newco Group is the beneficiary of the rights and is responsible for the obligations related to that portion of such Shared Contract relating to the DC Business (the “Newco Portion”), which rights shall be a Newco Asset and which obligations shall be a Newco Liability and (ii) a member of the Vornado Group is the beneficiary of the rights and is responsible for the obligations related to such Shared Contract relating to the Vornado  Business (the “Vornado Portion”), which rights shall be a Vornado Asset and which obligations shall be a Vornado Liability.  If the Parties, or a member of their respective Groups, as applicable, do not or are not able to enter into an arrangement to formally divide, partially assign, modify and/or replicate such Shared Contract as contemplated by the previous sentence, then the Parties shall, and shall cause the members of their Groups to, cooperate in any lawful arrangement to provide that a member of the Newco Group shall receive the interest in the benefits and obligations of the Newco Portion under such Shared Contract and that a member of the Vornado Group shall receive the interest in the benefits and obligations of the Vornado Portion under such Shared Contract. The obligations set forth in this Section 2.8(a) shall terminate on the date that is twelve (12) months after the Effective Time.

 

(b)                                 Each of Vornado and Newco shall, and shall cause the members of its Group to, (i) treat for all Tax purposes the portion of each Shared Contract inuring to its respective businesses as Assets owned by, and/or Liabilities of, as applicable, such Party, or the members of its Group, as applicable, not later than the Effective Time, and (ii) neither report nor take any Tax position (on a Tax Return or otherwise) inconsistent with such treatment (unless required by applicable Law).

 

2.9                               Bank Accounts; Cash Balances.

 

Except as otherwise provided in the Transition Services Agreement:

 

(a)                                 Each Party agrees to take, or cause the members of its Group to take, at the Effective Time (or such earlier time as the Parties may agree), all actions necessary to amend all contracts or agreements governing each bank and brokerage account owned by Newco or any other member of the Newco Group (collectively, the “Newco Accounts”) and all contracts or agreements governing each bank or brokerage account owned by Vornado or any other member of the Vornado Group (collectively, the “Vornado Accounts”) so that each such Newco Account and Vornado Account, if currently Linked (whether by automatic withdrawal, automatic deposit or any other authorization to transfer funds from or to, hereinafter “Linked”) to any Vornado Account or Newco Account, respectively, is de-Linked from such Vornado Account or Newco Account, respectively.

 

(b)                                 It is intended that, following consummation of the actions contemplated by Section 2.9(a), there will be in place a cash management process pursuant to which the

 

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Newco Accounts will be managed and funds collected will be transferred into one (1) or more accounts maintained by Newco or a member of the Newco Group.

 

(c)                                  It is intended that, following consummation of the actions contemplated by Section 2.9(a), there will continue to be in place a cash management process pursuant to which the Vornado Accounts will be managed and funds collected will be transferred into one (1) or more accounts maintained by Vornado or a member of the Vornado Group.

 

(d)                                 With respect to any outstanding checks issued or payments initiated by Vornado, Newco, or any of the members of their respective Groups prior to the Effective Time, such outstanding checks and payments shall be honored following the Effective Time by the Person or Group owning the account on which the check is drawn or from which the payment was initiated, respectively, without limiting the ultimate allocation of Liability for such amounts under this Agreement, the Master Agreement or any of the Ancillary Agreements.

 

(e)                                  As between Vornado and Newco (and the members of their respective Groups), except to the extent prohibited by applicable Law, all payments made and reimbursements received after the Effective Time by either Vornado or Newco (or any member of their respective Groups) that relate to a business, Asset or Liability of the other Party (or member of its Group), shall be held by such Party in trust for the use and benefit of the Party entitled thereto and, promptly following receipt by such Party of any such payment or reimbursement, such Party shall pay over, or shall cause the applicable member of its Group to pay over, to the other Party (or a member of such other Party’s Group) the amount of such payment or reimbursement without right of set-off.

 

2.10                        Ancillary Agreements. Effective on or prior to the Effective Time, each of Vornado and Newco will, or will cause the applicable members of their Groups to, execute and deliver all Ancillary Agreements to which it (or any member of its Group) is a party.

 

2.11                        Disclaimer of Representations and Warranties. EACH OF VORNADO (ON BEHALF OF ITSELF AND EACH MEMBER OF THE VORNADO GROUP) AND NEWCO (ON BEHALF OF ITSELF AND EACH MEMBER OF THE NEWCO GROUP) UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, IN THE MASTER AGREEMENT, OR IN ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT CONTEMPLATED HEREBY OR THEREBY, NO PARTY TO THIS AGREEMENT, THE MASTER AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, THE MASTER AGREEMENT, ANY ANCILLARY AGREEMENT OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES OR LIABILITIES TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS, APPROVALS OR NOTIFICATIONS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SET-OFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY CLAIM OR OTHER ASSET, INCLUDING ANY ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY ASSIGNMENT, DOCUMENT OR

 

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INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN, IN THE MASTER AGREEMENT OR IN ANY ANCILLARY AGREEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS, WHERE IS” BASIS (AND, IN THE CASE OF ANY REAL PROPERTY, BY MEANS OF A QUITCLAIM OR SIMILAR FORM OF DEED OR CONVEYANCE) AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE WILL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY APPROVALS OR NOTIFICATIONS ARE NOT OBTAINED OR MADE OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

 

2.12                        Cooperation. Notwithstanding any provision of this Agreement or the Master Agreement to the contrary, (a) Vornado shall keep JBG Properties reasonably informed and furnish JBG Properties with information relating to the determination of the Assets that are proposed to be transferred to, and Liabilities that are proposed to be assumed by, the Newco Group under this Agreement or any of the Ancillary Agreements on a reasonably current basis and (b) to the extent any of the Ancillary Agreements or exhibits or schedules hereto or thereto are to be completed following the date hereof, Vornado and Newco shall consult with JBG Properties in good faith regarding the terms and conditions to be included in such documents, give JBG Properties a reasonable opportunity to comment on any additions or modifications to such documents, take such comments into account in finalizing such documents and shall not finalize such documents without the prior written consent of JBG Properties (such consent not to be unreasonably withheld, conditioned or delayed).

 

2.13                        Newco Assumption of Indebtedness.

 

(a)                                 Prior to and/or immediately after the Effective Time, pursuant to the Plan of Reorganization, but subject to the terms of the Master Agreement, Newco and/or other member(s) of the Newco Group shall continue to be borrowers under and, to the extent the borrowers thereunder are any members of the Vornado Group, shall assume all existing indebtedness which relates exclusively to one or more Newco Properties, as set forth in further detail on Schedule 2.13, as such Schedule may be modified by the parties hereto (with the prior written consent of JBG Properties) to reflect changes in accordance with the terms of the Master Agreement (the “Newco Financing Arrangements”). Consistent with the terms set forth in the Master Agreement, Vornado and Newco agree to use commercially reasonable efforts to cause the full release and discharge of Vornado and the other members of the Vornado Group from all obligations pursuant to the Newco Financing Arrangements as of no later than the Effective Time. The parties hereto agree that, subject to the terms of the Master Agreement, Newco or another member of the Newco Group, as the case may be, and not Vornado or any member of the Vornado Group, are and shall be responsible for all costs and expenses incurred in connection with the Newco Financing Arrangements.

 

(b)                                 Prior to the Effective Time, Vornado and Newco shall cooperate in the preparation of all materials as may be necessary or advisable to execute the Newco Financing Arrangements in accordance herewith.

 

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2.14                        Partnership Agreement.  Newco shall, in its capacity as the general partner of and a limited partner in Newco OP, and on behalf of and as attorney in fact for the other limited partners, enter into the limited partnership agreement of Newco OP, effective as of the Effective Time, in the form attached as Exhibit F to the Master Agreement;

 

2.15                        Financial Information Certifications. Vornado’s disclosure controls and procedures and internal control over financial reporting (as each is contemplated by the Exchange Act) are currently applicable to the Newco Group insofar as the members of the Newco Group are Subsidiaries of Vornado. In order to enable the principal executive officer and principal financial officer of Newco to make the certifications required of them under Section 302 of the Sarbanes-Oxley Act of 2002, Vornado, as soon as reasonably practicable following the Distribution Date and in any event prior to such time as Newco is required to file its first quarterly report on Form 10-Q (or annual report on Form 10-K, if earlier), shall provide Newco with one or more certifications with respect to such disclosure controls and procedures, its internal control over financial reporting and the effectiveness thereof. Such certification(s) shall be provided by Vornado (and not by any officer or employee in their individual capacity). Subject to the provisions of the Transition Services Agreement, with respect to any periods following the Distribution Date, the Parties shall cooperate and discuss in good faith any certifications or other supporting documentation required by Newco.

 

2.16                        Vornado OP Distribution of OP Units. Prior to the Vornado Distribution, in accordance with the Plan of Reorganization, Vornado OP shall cause the following to occur:

 

(a)                                 Vornado acting in its capacity as the general partner of Vornado OP shall cause Vornado OP to, and Vornado OP shall, declare and effectuate the Vornado OP Distribution of OP Units;

 

(b)                                 Vornado shall thereafter effectuate the Vornado Contribution of OP Units; and

 

(c)                                  Newco, acting in its capacity as the general partner of Newco OP, shall consent to, and use commercially reasonable efforts to cause, each of the holders of Vornado OP Units who receive Newco OP Interests in the Vornado OP Distribution of OP Units to be admitted as partners in Newco OP, effective as of immediately following the Vornado Contribution of OP Units.

 

2.17                        Certain Resignations. At or prior to the Distribution Date, Vornado shall cause each director or employee of Vornado and its Subsidiaries who will not be employed by Newco or a Newco Subsidiary after the Distribution Date to resign, effective upon the consummation of the Pre-Combination Transactions, from all boards of directors or similar governing bodies of Newco or any Newco Subsidiary, and from all positions as officers of Newco or any Newco Subsidiary in which they serve.

 

2.18                        Plan of Reorganization. For the avoidance of doubt, the Parties shall modify the Pre-Combination Transactions only in accordance with the principles set forth in Section 5.8(a) of the Master Agreement, and, to the extent necessary, such modifications shall be reflected in the Plan of Reorganization consistent with Section 5.8(a) of the Master Agreement.

 

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ARTICLE III
THE DISTRIBUTION

 

3.1                               Sole and Absolute Discretion; Cooperation.

 

(a)                                 Subject to compliance with the terms of the Master Agreement, Vornado shall, in its sole and absolute discretion, determine the terms of the Distribution, including the form, structure and terms of any transaction(s) and/or offering(s) to effect the Distribution and the timing and conditions to the consummation of the Distribution. In addition, subject to compliance with the terms of the Master Agreement, Vornado may, at any time and from time to time until the consummation of the Distribution, modify or change the terms of the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution. Nothing shall in any way limit Vornado’s right to terminate this Agreement or the Distribution as set forth in Article IX or alter the consequences of any such termination from those specified in Article IX.

 

(b)                                 Newco shall cooperate with Vornado to accomplish the Distribution and shall, at Vornado’s direction, promptly take any and all actions necessary or desirable to effect the Distribution, including in respect of the registration under the Exchange Act of Newco Shares on the Form 10. Vornado shall select any investment bank or manager in connection with the Distribution, as well as any financial printer, solicitation and/or exchange agent and financial, legal, accounting and other advisors for Vornado. Newco and Vornado, as the case may be, will provide to the Agent any information required in order to complete the Distribution.

 

3.2                               Actions Prior to the Distribution. Prior to the Effective Time and subject to the terms and conditions set forth herein, the Parties shall take, or cause to be taken, the following actions in connection with the Distribution:

 

(a)                                 Notice to NYSE. Vornado shall, to the extent possible, give the NYSE not less than ten (10) days’ advance notice of the Record Date in compliance with Rule 10b-17 under the Exchange Act.

 

(b)                                 Newco Declaration of Trust and Newco Bylaws. On or prior to the Distribution Date, Vornado and Newco shall take or cause to be taken all necessary actions so that, as of the Effective Time, the Newco Declaration of Trust and the Newco Bylaws shall become the declaration of trust and bylaws of Newco, respectively.

 

(c)                                  Newco Trustees and Officers. On or prior to the Distribution Date, Vornado and Newco shall take or cause to be taken all necessary actions so that as of the Effective Time the trustees and executive officers of Newco shall be those set forth in, or determined in accordance with, the Master Agreement, unless otherwise agreed by the Parties and JBG Properties.

 

(d)                                 NYSE Listing. Newco shall prepare and file, and shall use its reasonable best efforts to have approved, an application for the listing of the Newco Shares to be distributed in the Distribution on the NYSE, subject to official notice of distribution.

 

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(e)                                  Securities Law Matters. Newco shall file any amendments or supplements to the Form 10 as may be necessary or advisable in order to cause the Form 10 to become and remain effective as required by the SEC or federal, state or other applicable securities Laws. Vornado and Newco shall cooperate in preparing, filing with the SEC and causing to become effective registration statements or amendments thereof which are required to reflect the establishment of, or amendments to, any employee benefit and other plans necessary or advisable in connection with the transactions contemplated by this Agreement, the Master Agreement and the Ancillary Agreements. Vornado and Newco will prepare, and Newco will, to the extent required under applicable Law, file with the SEC any such documentation and any requisite no-action letters which Vornado determines are necessary or desirable to effectuate the Distribution, and Vornado and Newco shall each use its reasonable best efforts to obtain all necessary approvals from the SEC with respect thereto as soon as practicable. Vornado and Newco shall take all such action as may be necessary or appropriate under the securities or blue sky laws of the United States and shall use commercially reasonable efforts to comply with all applicable foreign securities Laws in connection with the transactions contemplated by this Agreement, the Master Agreement and the other Ancillary Agreements.

 

(f)                                   Mailing of Information Statement. Vornado shall, as soon as is reasonably practicable after the Form 10 is declared effective under the Exchange Act and the Vornado Board has approved the Distribution, cause the Information Statement to be mailed to the Record Holders.

 

(g)                                  The Distribution Agent. Vornado shall enter into a distribution agent agreement with the Agent or otherwise provide instructions to the Agent regarding the Distribution.

 

(h)                                 Share-Based Employee Benefit Plans. Vornado and Newco shall take all actions as may be necessary to approve the grants of adjusted equity awards by Vornado (in respect of Vornado shares) and Newco (in respect of Newco Shares) in connection with the Distribution in order to satisfy the requirements of Rule 16b-3 under the Exchange Act.

 

3.3                               Conditions to the Distribution.

 

(a)                                 The obligation of Vornado to consummate the Distribution will be subject to the satisfaction or waiver (subject to Section 10.15) at or prior to the Distribution Date of the following conditions (provided, however, that unless the Master Agreement shall have been terminated in accordance with its terms, any such waiver shall be subject to the written consent of JBG Properties):

 

(i)                                     the reorganization shall have been completed substantially in accordance with the Plan of Reorganization (other than those steps that are expressly contemplated to occur at or after the Distribution);

 

(ii)                                  each of the Transfer Documents shall have been duly executed and delivered by the applicable parties thereto; and

 

(iii)                               the satisfaction or waiver of each of the conditions set forth in Article VII of the Master Agreement, including (i) the satisfaction, or waiver by Vornado

 

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and JBG Properties, of the conditions set forth in Section 7.1 of the Master Agreement; (ii) the satisfaction, or waiver by Vornado of the conditions set forth in Section 7.2 of the Master Agreement; and (iii) the satisfaction, or waiver by JBG Properties, of the conditions set forth in Section 7.3 of the Master Agreement, in each case other than those conditions that, by their nature, are to be satisfied contemporaneously with the Distribution or at the Closing (as defined in the Master Agreement).

 

(b)                                 The foregoing conditions are for the sole benefit of Vornado and shall not give rise to or create any duty on the part of Vornado or the Vornado Board to waive or not waive any such condition or in any way limit Vornado’s right to terminate this Agreement as set forth in Article IX or alter the consequences of any such termination from those specified in Article IX, provided that the foregoing shall not limit the right of the parties hereto under the Master Agreement. Any determination made by the Vornado Board prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in Section 3.3(a) shall be conclusive and binding on the parties hereto. If Vornado waives any material condition, it shall promptly issue a press release disclosing such fact and file a Current Report on Form 8-K with the SEC describing such waiver.

 

3.4                               The Vornado Distribution.

 

(a)                                 Subject to Section 3.3, on or prior to the Distribution Date, Newco will deliver to the Agent, for the benefit of the holders of record of Vornado Shares as of the Record Date, book-entry transfer authorizations for such number of the outstanding Newco Shares as is necessary to effect the Vornado Distribution, and shall cause the transfer agent for the Vornado Shares to instruct the Agent to distribute at the Effective Time the appropriate number of Newco Shares to each such Record Holder or designated transferee or transferees of such Record Holder by way of direct registration in book-entry form. Newco will not issue paper share certificates in respect of the Newco Shares. The Vornado Distribution shall be effective at the Effective Time.

 

(b)                                 Subject to Section 3.3, each Record Holder will be entitled to receive in the Vornado Distribution one Newco Share for every Vornado Share (or, as determined by Vornado in its sole discretion, one Newco Share for every two Vornado Shares), held in each case by such Record Holder on the Record Date, rounded down to the nearest whole number.

 

(c)                                  No fractional shares will be distributed or credited to book-entry accounts in connection with the Vornado Distribution, and any such fractional share interests to which a Record Holder would otherwise be entitled shall not entitle such Record Holder to vote or to any other rights as a shareholder of Newco. In lieu of any such fractional shares, each Record Holder who, but for the provisions of this Section 3.4(c), would be entitled to receive a fractional share interest of a Newco Share pursuant to the Vornado Distribution, as applicable, shall be paid cash, without any interest thereon, as hereinafter provided. As soon as practicable after the Effective Time, Vornado shall direct the Agent to determine the number of whole and fractional Newco Shares allocable to each Record Holder, to aggregate all such fractional shares into whole shares, and to sell the whole shares obtained thereby in the open market at the then-prevailing prices on behalf of each Record Holder who otherwise would be entitled to receive fractional share interests (with the Agent, in its sole and absolute discretion, determining when, how and through which broker-dealer and at what price to make such sales), and to cause to be distributed to each

 

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such Record Holder, in lieu of any fractional share, such Record Holder’s or owner’s ratable share of the total proceeds of such sale, after deducting any Taxes required to be withheld and applicable transfer Taxes, and after deducting the costs and expenses of such sale and distribution, including brokers fees and commissions. None of Vornado, Vornado OP, Newco or the Agent will be required to guarantee any minimum sale price for the fractional Newco Shares sold in accordance with this Section 3.4(c). None of Vornado, Vornado OP or Newco will be required to pay any interest on the proceeds from the sale of fractional shares. Neither the Agent nor the broker-dealers through which the aggregated fractional shares are sold shall be Affiliates of Vornado or Newco. Solely for purposes of computing fractional share interests pursuant to this Section 3.4(c) and Section 3.4(d), the beneficial owner of Vornado Shares or Vornado OP Units, as the case may be, held of record in the name of a nominee in any nominee account shall be treated as the Record Holder with respect to such shares or units.

 

(d)                                 Any Newco Shares or cash in lieu of fractional shares with respect to Newco Shares that remain unclaimed by any Record Holder one hundred and eighty (180) days after the Distribution Date shall be delivered to Newco, and Newco shall hold such Newco Shares for the account of such Record Holder, and the parties hereto agree that all obligations to provide such Newco Shares and cash, if any, in lieu of fractional share interests shall be obligations of Newco, subject in each case to applicable escheat or other abandoned property Laws, and Vornado shall have no Liability with respect thereto.

 

(e)                                  Until the Newco Shares are duly transferred in accordance with this Section 3.4 and applicable Law, from and after the Effective Time, Newco will regard the Persons entitled to receive such Newco Shares as record holders of Newco Shares in accordance with the terms of the Distribution without requiring any action on the part of such Persons. Newco agrees that, subject to any transfers of such shares, from and after the Effective Time (i) each such holder will be entitled to receive all dividends payable on, and exercise voting rights and all other rights and privileges with respect to, the Newco Shares then held by such holder, and (ii) each such holder will be entitled, without any action on the part of such holder, to receive evidence of ownership of the Newco Shares then held by such holder.

 

3.5                               The Vornado OP Distribution of OP Units.

 

(a)                                 Subject to Section 3.3, on or prior to the Distribution Date, Newco will deliver to the Agent, for the benefit of the holders of record of Vornado OP Units as of the Record Date, book-entry transfer authorizations for such number of Newco OP Units as is necessary to effect the Vornado OP Distribution of OP Units, and Vornado OP shall instruct the Agent to distribute at the Effective Time (but immediately prior to the Vornado Distribution) the appropriate number of Newco OP Units to each such Record Holder or designated transferee or transferees of such Record Holder by way of direct registration in book-entry form. Newco OP will not issue paper share certificates in respect of the Newco OP Units. The Vornado OP Distribution of OP Units shall be effective at the Effective Time (but immediately prior to the Vornado Distribution).

 

(b)                                 Subject to Section 3.3, each Record Holder will be entitled to receive in the Vornado OP Distribution of OP Units one Newco OP Unit for every two Vornado OP Units,

 

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held in each case by such Record Holder on the Record Date, rounded down to the nearest whole number.

 

(c)                                  No fractional common limited partnership interest will be distributed or credited to book-entry accounts in connection with the Vornado OP Distribution of OP Units, and any such fractional common limited partnership interests to which a Record Holder would otherwise be entitled shall not entitle such Record Holder to vote or to any other rights as a limited partner of Newco OP. In lieu of any such fractional common limited partnership interest, each Record Holder who, but for the provisions of this Section 3.5(c), would be entitled to receive a fractional Newco OP Interest pursuant to the Vornado OP Distribution of OP Units, as applicable, shall be paid cash, without any interest thereon, as hereinafter provided. As soon as practicable after the Effective Time, Vornado OP shall direct the Agent to cause to be distributed to each such Record Holder, in lieu of each fractional common limited partnership interest to which such Record Holder would otherwise be entitled, an amount equal to the amount of cash that would have been received by such Record Holder pursuant to Section 3.4(c) if such Record Holder were entitled to an equal fractional share interest of a Newco Share, after deducting any Taxes required to be withheld and applicable transfer Taxes, and shall deposit with the Agent an amount in cash sufficient to provide for such payments to such Record Holders. Solely for purposes of computing fractional common limited partnership interests pursuant to this Section 3.5(c), the beneficial owner of Vornado OP Units held of record in the name of a nominee in any nominee account shall be treated as the Record Holder with respect to such shares or units.

 

(d)                                 Any Newco OP Units or cash in lieu of fractional common limited partnership interests with respect to Newco OP Units that remain unclaimed by any Record Holder one hundred and eighty (180) days after the Distribution Date shall be delivered to Newco OP, and Newco OP shall hold such Newco OP Units for the account of such Record Holder, and the parties hereto agree that all obligations to provide such Newco OP Units and cash, if any, in lieu of fractional share interests shall be obligations of Newco OP, subject in each case to applicable escheat or other abandoned property Laws, and Vornado and Vornado OP shall have no Liability with respect thereto.

 

(e)                                  Until the Newco OP Units are duly transferred in accordance with this Section 3.5 and applicable Law, from and after the Effective Time, Newco OP will regard the Persons entitled to receive such Newco OP Units as record holders of Newco OP Units in accordance with the terms of the Distribution without requiring any action on the part of such Persons (other than such action as may be required on the part of such persons pursuant to the Limited Partnership Agreement of Newco OP). Newco OP agrees that, subject to any transfers of such common limited partnership interests, from and after the Effective Time (i) each such holder will be entitled to receive all dividends payable on, and exercise voting rights and all other rights and privileges with respect to, the Newco OP Units then held by such holder, and (ii) each such holder will be entitled, without any action on the part of such holder (other than such action as may be required on the part of such persons pursuant to the Limited Partnership Agreement of Newco OP), to receive evidence of ownership of the Newco OP Units then held by such holder.

 

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ARTICLE IV
MUTUAL RELEASES; INDEMNIFICATION

 

4.1                               Release of Pre-Distribution Claims.

 

(a)                                 Newco Release of Vornado. Except (i) as provided in Sections 4.1(c) and 4.1(d), (ii) as may be otherwise expressly provided in this Agreement or any other Ancillary Agreement, and (iii) for any matter for which any member of the Newco Group is entitled to indemnification or contribution pursuant to this Article IV, effective as of the Effective Time, Newco does hereby, for itself and each other member of the Newco Group, and their respective successors and assigns, and, to the extent permitted by Law, all Persons who at any time prior to the Effective Time have been shareholders, directors, trustees, officers, agents or employees of any member of the Newco Group (in each case, in their respective capacities as such), remise, release and forever discharge (i) Vornado and the members of the Vornado Group, and their respective successors and assigns, (ii) all Persons who at any time prior to the Effective Time have been shareholders, directors, trustees, officers, agents or employees of any member of the Vornado Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, and (iii) all Persons who at any time prior to the Effective Time are or have been shareholders, directors, trustees, officers, agents or employees of a Transferred Entity and who are not, as of immediately following the Effective Time, directors, trustees, officers or employees of Newco or a member of the Newco Group, in each case from: (A) all Newco Liabilities, (B) all Liabilities arising from or in connection with the transactions and all other activities to implement the Separation, the Distribution and the Business Combination, and (C) all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent relating to, arising out of or resulting from the Newco Business, the Newco Assets or the Newco Liabilities.

 

(b)                                 Vornado Release of Newco. Except (i) as provided in Sections 4.1(c) and 4.1(d), (ii) as may be otherwise expressly provided in this Agreement or any other Ancillary Agreement and (iii) for any matter for which any member of the Vornado Group is entitled to indemnification or contribution pursuant to this Article IV, effective as of the Effective Time, Vornado does hereby, for itself and each other member of the Vornado Group and their respective successors and assigns, and, to the extent permitted by Law, all Persons who at any time prior to the Effective Time have been shareholders, directors, trustees, officers, agents or employees of any member of the Vornado Group (in each case, in their respective capacities as such), remise, release and forever discharge Newco and the members of the Newco Group and their respective successors and assigns, from (A) all Vornado Liabilities, (B) all Liabilities arising from or in connection with the transactions and all other activities to implement the Separation, the Distribution and the Business Combination, and (C) all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Effective Time), in each case to the extent relating to, arising out of or resulting from the Vornado Business, the Vornado Assets or the Vornado Liabilities.

 

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(c)                                  Obligations Not Affected. Nothing contained in Section 4.1(a) or 4.1(b) shall impair any right of any Person to enforce this Agreement, any Ancillary Agreement, the Master Agreement or any agreements, arrangements, commitments or understandings that are specified in Section 2.7(b) or the applicable Schedules thereto as not to terminate as of the Effective Time, in each case in accordance with its terms. Nothing contained in Section 4.1(a) or 4.1(b) shall release any Person from:

 

(i)                                     any Liability provided in or resulting from any agreement among any members of the Vornado Group or the Newco Group that is specified in Section 2.7(b) or the applicable Schedules thereto as not to terminate as of the Effective Time, or any other Liability specified in Section 2.7(b) as not to terminate as of the Effective Time;

 

(ii)                                  any Liability, contingent or otherwise, assumed, transferred, assigned or allocated to the Group of which such Person is a member in accordance with, or any other Liability of any member of any Group under, this Agreement or any Ancillary Agreement;

 

(iii)                               any Liability for the sale, lease, construction or receipt of goods, property or services purchased, obtained or used in the ordinary course of business by a member of one Group from a member of the other Group prior to the Effective Time;

 

(iv)                              any Liability that the parties may have with respect to indemnification or contribution or other obligation pursuant to this Agreement, the Master Agreement, any Ancillary Agreement or otherwise for claims brought against the parties by Third Parties, which Liability shall be governed by the provisions of this Article IV and Article V and, if applicable, the appropriate provisions of the Master Agreement or the Ancillary Agreements; or

 

(v)                                 any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 4.1.

 

In addition, nothing contained in Section 4.1(a) shall release any member of the Vornado Group from honoring its existing obligations to indemnify any director, trustee, officer or employee of Newco who was a director, trustee, officer or employee of any member of the Vornado Group on or prior to the Effective Time, to the extent such director, trustee, officer or employee becomes a named defendant in any Action with respect to which such director, trustee, officer or employee was entitled to such indemnification pursuant to such existing obligations; it being understood that, if the underlying obligation giving rise to such Action is a Newco Liability, Newco shall indemnify Vornado for such Liability (including Vornado’s costs to indemnify the director, trustee, officer or employee) in accordance with the provisions set forth in this Article IV.

 

(d)                                 No Claims. Newco shall not make, and shall not permit any member of the Newco Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Vornado or any other member of the Vornado Group, or any other Person released pursuant to Section 4.1(a), with respect to any Liabilities released pursuant to Section 4.1(a). Vornado shall not make, and

 

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shall not permit any other member of the Vornado Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification against Newco or any other member of the Newco Group, or any other Person released pursuant to Section 4.1(b), with respect to any Liabilities released pursuant to Section 4.1(b).

 

(e)                                  Execution of Further Releases. At any time at or after the Effective Time, at the request of either Newco or Vornado, the other Party shall cause each member of its respective Group to execute and deliver releases reflecting the provisions of this Section 4.1.

 

4.2                               Indemnification by Newco. Except as otherwise specifically set forth in this Agreement or in any Ancillary Agreement, to the fullest extent permitted by Law, Newco OP shall, and shall cause its Subsidiaries to, indemnify, defend and hold harmless Vornado, Vornado OP, each other member of the Vornado Group and each of their respective past, present and future directors, trustees, officers, employees and agents, in each case in their respective capacities as such, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “Vornado Indemnitees”), from and against any and all Liabilities of the Vornado Indemnitees relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication):

 

(a)                                 any Newco Liability;

 

(b)                                 any failure of Newco, any other member of the Newco Group or any other Person to pay, perform or otherwise promptly discharge any Newco Liabilities in accordance with their terms, whether prior to, on or after the Effective Time;

 

(c)                                  any breach by Newco or any other member of the Newco Group of this Agreement or any of the Ancillary Agreements; and

 

(d)                                 except to the extent it relates to a Vornado Liability, any guarantee, indemnification or contribution obligation, surety bond or other credit support agreement, arrangement, commitment or understanding for the benefit of any member of the Newco Group by any member of the Vornado Group that is required to be novated pursuant to Section 2.5 of this Agreement and that survives following the Distribution (other than as a result of a breach thereof by any member of the Vornado Group after the Effective Time).

 

In order to induce Vornado and Vornado OP to enter into this Agreement and for other good and valuable consideration, Newco hereby irrevocably guarantees the due and punctual performance and observance by Newco OP of its obligations contained in this Section 4.2, subject, in each case, to all of the terms, provisions and conditions herein, and Vornado, Vornado OP and the other Vornado Indemnitees shall not be required to seek recovery pursuant to any set-off of any amounts payable under this Agreement or otherwise prior to seeking recovery from Newco; provided that Newco shall in no event be liable for any percentage of indemnification obligations that exceeds its then current ownership percentage in Newco OP.

 

4.3                               Indemnification by Vornado. Except as otherwise specifically set forth in this Agreement or in any Ancillary Agreement, to the fullest extent permitted by Law, Vornado OP shall, and shall cause its Subsidiaries to, indemnify, defend and hold harmless Newco,

 

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Newco OP, each other member of the Newco Group and each of their respective past, present and future directors, trustees, officers, employees or agents, in each case in their respective capacities as such, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “Newco Indemnitees”), from and against any and all Liabilities of the Newco Indemnitees relating to, arising out of or resulting from, directly or indirectly, any of the following items (without duplication):

 

(a)                                 any Vornado Liability;

 

(b)                                 any failure of Vornado, any other member of the Vornado Group or any other Person to pay, perform or otherwise promptly discharge any Vornado Liabilities in accordance with their terms, whether prior to, on or after the Effective Time;

 

(c)                                  any breach by Vornado or any other member of the Vornado Group of this Agreement or any of the Ancillary Agreements; and

 

(d)                                 except to the extent it relates to a Newco Liability, any guarantee, indemnification or contribution obligation, surety bond or other credit support agreement, arrangement, commitment or understanding for the benefit of any member of the Vornado Group by any member of the Newco Group that is required to be novated pursuant to Section 2.5 of this Agreement and that survives following the Distribution (other than as a result of a breach thereof by any member of the Newco Group after the Effective Time).

 

In order to induce Newco and Newco OP to enter into this Agreement and for other good and valuable consideration, Vornado hereby irrevocably guarantees the due and punctual performance and observance by Vornado OP of its obligations contained in this Section 4.3, subject, in each case, to all of the terms, provisions and conditions herein, and Newco, Newco OP and the other Newco Indemnitees shall not be required to seek recovery pursuant to any set-off of any amounts payable under this Agreement or otherwise prior to seeking recovery from Vornado; provided that Vornado shall in no event be liable for any percentage of indemnification obligations that exceeds its then current ownership percentage in Vornado OP.

 

4.4                               Indemnification Obligations Net of Insurance Proceeds and Other Amounts.

 

(a)                                 The Parties intend that any Liability subject to indemnification, contribution or reimbursement pursuant to this Article IV or Article V will be net of Insurance Proceeds or other amounts actually recovered (net of any out-of-pocket costs or expenses incurred in the collection thereof) from any Person by or on behalf of the Indemnitee in respect of any indemnifiable Liability. Accordingly, the amount which either Newco or Vornado (an “Indemnifying Party”) is required to pay to any Person entitled to indemnification or contribution hereunder (an “Indemnitee”) will be reduced by any Insurance Proceeds or other amounts actually recovered (net of any out-of-pocket costs or expenses incurred in the collection thereof) from any Person by or on behalf of the Indemnitee in respect of the related Liability. If an Indemnitee receives a payment (an “Indemnity Payment”) required by this Agreement from an Indemnifying Party in respect of any Liability and subsequently receives Insurance Proceeds or any other amounts in respect of the related Liability, then the Indemnitee will pay to the

 

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Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance Proceeds or such other amounts (net of any out-of-pocket costs or expenses incurred in the collection thereof) had been received, realized or recovered before the Indemnity Payment was made.

 

(b)                                 The Parties agree that an insurer that would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of any provision contained in this Agreement or any Ancillary Agreement have any subrogation rights with respect thereto, it being understood that no insurer or any other Third Party shall be entitled to a “windfall” (i.e., a benefit they would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification and contribution provisions hereof. Each Party shall, and shall cause the members of its Group to, use commercially reasonable efforts (taking into account the probability of success on the merits and the cost of expending such efforts, including attorneys’ fees and expenses) to collect or recover any Insurance Proceeds that may be collectible or recoverable respecting the Liabilities for which indemnification or contribution may be available under this Article IV; provided that the Indemnitee’s ability or inability to collect or recover any such Insurance Proceeds shall not limit the Indemnifying Party’s obligations under this Agreement. Notwithstanding the foregoing, an Indemnifying Party may not delay making any indemnification payment required under the terms of this Agreement, or otherwise satisfying any indemnification obligation, pending the outcome of any Action to collect or recover Insurance Proceeds, and an Indemnitee need not attempt to collect any Insurance Proceeds prior to making a claim for indemnification or contribution or receiving any Indemnity Payment otherwise owed to it under this Agreement or any Ancillary Agreement.

 

(c)                                  Any indemnification payment under this Article IV shall be adjusted in accordance with Section 4.4 of the Tax Matters Agreement.

 

4.5                               Procedures for Indemnification of Third-Party Claims.

 

(a)                                 Notice of Claims. If, at or following the date of this Agreement, an Indemnitee shall receive notice or otherwise learn of the assertion by a Person (including any Governmental Authority) who is not a member of the Vornado Group or the Newco Group of any claim or of the commencement by any such Person of any Action (collectively, a “Third-Party Claim”) with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnitee pursuant to Section 4.2 or 4.3, or any other Section of this Agreement or any Ancillary Agreement, such Indemnitee shall give such Indemnifying Party written notice thereof as promptly as is reasonably practicable, but in any event within twenty (20) days (or sooner if the nature of the Third-Party Claim so requires) after becoming aware of such Third-Party Claim. Any such notice shall describe the Third-Party Claim in reasonable detail, including the facts and circumstances giving rise to such claim for indemnification, and include copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third-Party Claim. Notwithstanding the foregoing, the failure of an Indemnitee to provide notice in accordance with this Section 4.5(a) shall not relieve an Indemnifying Party of its indemnification obligations under this Agreement, except to the extent to which the Indemnifying Party is actually prejudiced by the Indemnitee’s failure to provide notice in accordance with this Section 4.5(a).

 

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(b)                                 Control of Defense. An Indemnifying Party may elect to defend (and seek to settle or compromise), at its own expense and with its own counsel, any Third-Party Claim, provided that, prior to the Indemnifying Party assuming and controlling defense of such Third-Party Claim, it shall first confirm to the Indemnitee in writing that, assuming the facts presented to the Indemnifying Party by the Indemnitee being true, the Indemnifying Party shall indemnify the Indemnitee for any damages to the extent resulting from, or arising out of, such Third-Party Claim; provided, however, that if the Indemnifying Party (i) becomes aware that the facts presented at the time the Indemnifying Party delivered such acknowledgement are not true and/or (ii) becomes aware of new or additional facts that provide a reasonable basis for asserting that the Indemnifying Party does not have an indemnification obligation in respect of such Third-Party Claim, then the Indemnifying Party may withdraw such acknowledgment.  Within thirty (30) days after the receipt of a notice from an Indemnitee in accordance with Section 4.5(a) (or sooner, if the nature of the Third-Party Claim so requires), the Indemnifying Party shall provide written notice to the Indemnitee indicating whether the Indemnifying Party shall assume responsibility for defending the Third-Party Claim. If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim or fails to notify an Indemnitee of its election within thirty (30) days after receipt of the notice from an Indemnitee as provided in Section 4.5(a), then the Indemnitee that is the subject of such Third-Party Claim shall be entitled to continue to conduct and control the defense of such Third-Party Claim.

 

(c)                                  Allocation of Defense Costs. If an Indemnifying Party has elected to assume the defense of a Third-Party Claim, then such Indemnifying Party shall be solely liable for all fees and expenses incurred by it in connection with the defense of such Third-Party Claim and shall not be entitled to seek any indemnification or reimbursement from the Indemnitee for any such fees or expenses incurred by the Indemnifying Party during the course of the defense of such Third-Party Claim by such Indemnifying Party, regardless of any subsequent decision by the Indemnifying Party to reject or otherwise abandon its assumption of such defense. If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim or fails to notify an Indemnitee of its election within thirty (30) days after receipt of a notice from an Indemnitee as provided in Section 4.5(a), and the Indemnitee conducts and controls the defense of such Third-Party Claim and the Indemnifying Party has an indemnification obligation with respect to such Third-Party Claim, then the Indemnifying Party shall be liable for all reasonable fees and expenses incurred by the Indemnitee in connection with the defense of such Third-Party Claim.

 

(d)                                 Right to Monitor and Participate. An Indemnitee that does not conduct and control the defense of any Third-Party Claim, or an Indemnifying Party that has failed to elect to defend any Third-Party Claim as contemplated hereby, nevertheless shall have the right to employ separate counsel (including local counsel as necessary) of its own choosing to monitor and participate in (but not control) the defense of any Third-Party Claim for which it is a potential Indemnitee or Indemnifying Party, but the fees and expenses of such counsel shall be at the expense of such Indemnitee or Indemnifying Party, as the case may be, and the provisions of Section 4.5(c) shall not apply to such fees and expenses. Notwithstanding the foregoing, but subject to Sections 6.7 and 6.8, such Party shall cooperate with the Party entitled to conduct and control the defense of such Third-Party Claim in such defense and make available to the controlling Party, at the non-controlling Party’s expense, all witnesses, information and materials in such Party’s possession or under such Party’s control relating thereto as are reasonably

 

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required by the controlling Party. In addition to the foregoing, if any Indemnitee shall in good faith determine that such Indemnitee and the Indemnifying Party have actual or potential differing defenses or conflicts of interest between them that make joint representation inappropriate, then the Indemnitee shall have the right to employ separate counsel (including local counsel as necessary) and to participate in (but not control) the defense, compromise, or settlement thereof, and the Indemnifying Party shall bear the reasonable fees and expenses of such counsel for all Indemnitees.

 

(e)                                  No Settlement. Neither Party may settle or compromise any Third-Party Claim for which either Party (or a member of its Group) is seeking to be indemnified hereunder without the prior written consent of the other Party, which consent may not be unreasonably withheld, unless such settlement or compromise is solely for monetary damages, does not involve any finding or determination of wrongdoing or violation of Law by the other Party (or any member of its Group that are parties thereto) and provides for a full, unconditional and irrevocable release of the other Party (and all members of its Group that are parties thereto) from all Liability in connection with the Third-Party Claim. The Parties hereby agree that if a Party presents the other Party with a written notice containing a proposal to settle or compromise a Third-Party Claim for which either Party or a member of its Group is seeking to be indemnified hereunder and the Party receiving such proposal does not respond in any manner to the Party presenting such proposal within thirty (30) days (or within any such shorter time period that may be required by applicable Law or court order) of receipt of such proposal, then the Party receiving such proposal shall be deemed to have consented to the terms of such proposal.

 

4.6                               Additional Matters.

 

(a)                                 Timing of Payments. Indemnification or contribution payments in respect of any Liabilities for which an Indemnitee is entitled to indemnification or contribution under this Article IV shall be paid reasonably promptly (but in any event within thirty (30) days of the final determination of the amount that the Indemnitee is entitled to as indemnification or contribution under this Article IV) by the Indemnifying Party to the Indemnitee as such Liabilities are incurred upon demand by the Indemnitee, including reasonably satisfactory documentation setting forth the basis for the amount of such indemnification or contribution payment, including documentation with respect to calculations made and consideration of any Insurance Proceeds that actually reduce the amount of such Liabilities. The indemnity and contribution provisions contained in this Article IV shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Indemnitee, and (ii) the knowledge by the Indemnitee of Liabilities for which it might be entitled to indemnification hereunder.

 

(b)                                 Notice of Direct Claims. Any claim for indemnification or contribution under this Agreement or any Ancillary Agreement that does not result from a Third-Party Claim shall be asserted by written notice given by the Indemnitee to the applicable Indemnifying Party as promptly as is reasonably practicable, but in any event within twenty (20) days (or sooner if the nature of the claim so requires) after becoming aware of such claim; provided that the failure by an Indemnitee to so assert any such claim shall not relieve the Indemnifying Party of its obligations hereunder except to the extent (if any) that the Indemnifying Party is prejudiced thereby. Such Indemnifying Party shall have a period of thirty (30) days after the receipt of such

 

38



 

notice within which to respond thereto. If such Indemnifying Party does not respond within such thirty (30)-day period, the Indemnifying Party shall be deemed to have refused to accept responsibility for such claim. If such Indemnifying Party does not respond within such thirty (30)-day period or rejects such claim in whole or in part, such Indemnitee shall, subject to the provisions of Article VII, be free to pursue such remedies as may be available to such Party as contemplated by this Agreement and the Ancillary Agreements, as applicable, without prejudice to its continuing rights to pursue indemnification or contribution hereunder.

 

(c)                                  Pursuit of Claims Against Third Parties. If (i) a Party or any member of its Group incurs any Liability arising out of this Agreement, the Master Agreement or any Ancillary Agreement; (ii) an adequate legal or equitable remedy is not available for any reason against the other Party or any member of its Group to satisfy the Liability incurred by the incurring Party or any member of its Group; and (iii) a legal or equitable remedy may be available to the other Party or any member of its Group against a Third Party for such Liability, then the other Party or any member of its Group shall use its commercially reasonable efforts to cooperate with the incurring Party or member of its Group, at the incurring Party’s expense, to permit the incurring Party or member of its Group to obtain the benefits of such legal or equitable remedy against the Third Party.

 

(d)                                 Subrogation. In the event of payment by or on behalf of any Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim or against any other Person. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.

 

(e)                                  Substitution. In the event of an Action in which the Indemnifying Party is not a named defendant, if either the Indemnitee or Indemnifying Party shall so request, the Parties shall endeavor to substitute the Indemnifying Party for the named defendant. If such substitution or addition cannot be achieved for any reason or is not requested, the named defendant shall allow the Indemnifying Party to manage the Action as set forth in Section 4.5 and this Section 4.6, and the Indemnifying Party shall fully indemnify the named defendant against all costs of defending the Action (including court costs, sanctions imposed by a court, attorneys’ fees, experts fees and all other external expenses), the costs of any judgment or settlement and the cost of any interest or penalties relating to any judgment or settlement.

 

4.7                               Right of Contribution.

 

(a)                                 Contribution. If any right of indemnification contained in Section 4.2 or Section 4.3 is held unenforceable or is unavailable for any reason, or is insufficient to hold harmless an Indemnitee in respect of any Liability for which such Indemnitee is entitled to indemnification hereunder, then the Indemnifying Party shall contribute to the amounts paid or payable by the Indemnitees as a result of such Liability (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and the

 

39



 

members of its Group, on the one hand, and the Indemnitees entitled to contribution, on the other hand, as well as any other relevant equitable considerations.

 

(b)                                 Allocation of Relative Fault. Solely for purposes of determining relative fault pursuant to this Section 4.7: (i) any fault associated with the business conducted with the Delayed Newco Assets or Delayed Newco Liabilities (except for the gross negligence or willful misconduct of a member of the Vornado Group) or with the ownership, operation or activities of the DC Business prior to the Effective Time shall be deemed to be the fault of Newco and the other members of the Newco Group, and no such fault shall be deemed to be the fault of Vornado or any other member of the Vornado Group; and (ii) any fault associated with the ownership, operation or activities of the Vornado Business prior to the Effective Time shall be deemed to be the fault of Vornado and the other members of the Vornado Group, and no such fault shall be deemed to be the fault of Newco or any other member of the Newco Group.

 

4.8                               Covenant Not to Sue. Each Party hereby covenants and agrees that none of it, the members of such Party’s Group or any Person claiming through it shall bring suit or otherwise assert any claim against any Indemnitee, or assert a defense against any claim asserted by any Indemnitee, before any court, arbitrator, mediator or administrative agency anywhere in the world, alleging that: (a) the assumption of any Newco Liabilities by Newco or a member of the Newco Group on the terms and conditions set forth in this Agreement and the Transfer Documents is void or unenforceable for any reason; (b) the retention of any Vornado Liabilities by Vornado or a member of the Vornado Group on the terms and conditions set forth in this Agreement and the Transfer Documents is void or unenforceable for any reason; or (c) the provisions of this Article IV are void or unenforceable for any reason.

 

4.9                               Remedies Cumulative. The remedies provided in this Article IV shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party.

 

4.10                        Survival of Indemnities. The rights and obligations of each of Vornado and Newco and their respective Indemnitees under this Article IV shall survive (a) the sale or other transfer by either Party or any member of its Group of any Assets or businesses or the assignment by it of any Liabilities; or (b) any merger, consolidation, business combination, sale of all or substantially all of its Assets, restructuring, recapitalization, reorganization or similar transaction involving either Party or any of the members of its Group.

 

4.11                        Certain Tax Procedures.

 

(a)                                 Indemnification Payments to Newco.

 

(i)                                     With respect to any period in which Newco has made or will make an election to be taxed as a REIT, notwithstanding any other provisions in this Agreement or any Ancillary Agreement, any indemnification payments to be made to any member of the Newco Group pursuant to Section 4.3 or 4.4 or any indemnification payments to be made to any member of the Newco Group pursuant to any Ancillary Agreement (a “Newco Indemnity Payment”) for any calendar year shall not exceed the sum of

 

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(A)                               the amount that is determined (x) will not be gross income of Newco or (y) will be Qualifying Income of Newco, in each case for purposes of the Specified REIT Requirements and for any period in which Newco has made any election to be taxed as a REIT, with such determination to be set forth in REIT Guidance,

 

plus

 

(B)                               such additional amount that is estimated can be paid to Newco in such taxable year without causing Newco to fail to meet the requirements of Sections 856(c)(2) and (3) of the Code, determined (x) as if the payment of such amount did not constitute Qualifying Income and (y) by taking into account any other payments to Newco (and any other relevant member of the Newco Group) during such taxable year that do not constitute Qualifying Income, which determination shall be (xx) made by independent tax accountants to Newco, and (yy) submitted to and approved by Newco’s outside tax counsel.

 

Newco shall use commercially reasonable efforts to provide Vornado with a REIT Savings Notice at least fifteen (15) business days before the date on which such Newco Indemnity Payment is due, but any failure to deliver such REIT Savings Notice, whether or not timely, shall not be deemed a waiver of, or otherwise vitiate, this Section 4.11(a)(i).

 

(ii)                                  Vornado shall place (or cause to be placed) the full amount of any Newco Indemnity Payments otherwise required to be made in a mutually agreed escrow account upon mutually acceptable terms, which shall provide that

 

(A)                               the amount in the escrow account shall be treated as the property of Vornado or the applicable member of the Vornado Group, unless it is released from such escrow account to any Indemnitee,

 

(B)                               all income earned upon the amount in the escrow account shall be treated as the property of Vornado or the applicable member of the Vornado Group and reported, as and to the extent required by applicable Law, by the escrow agent to the IRS, or any other taxing authority, on IRS Form 1099 or 1042S (or other appropriate form) as income earned by Vornado or the applicable member of the Vornado

 

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Group whether or not said income has been distributed during such taxable year,

 

(C)                               the amount in the escrow account shall be invested only as determined by Vornado in its sole discretion, provided that such investments shall be limited to (i) AAA-rated money market funds that comply with Rule 2a-7 of the Investment Company Act of 1940, (ii) interest-bearing securities of, or guaranteed as to all principal and interest by, the United States Government with maturities of 90 days or less, or (iii) bank deposit accounts of commercial banks with Tier 1 capital exceeding $1 billion or with an average rating above investment grade by S&P (LT Local Issuer Credit Rating), Moody’s (Long Term Rating) and Fitch Ratings, Inc. (LT Issuer Default Rating) (each as reported by Bloomberg Finance L.P.), and

 

(D)                               any portion thereof shall not be released to any Newco Indemnitee unless and until Vornado receives any of the following: (x) a letter from Newco’s independent tax accountants indicating the amount that it is estimated can be paid at that time to the Newco Indemnitees without causing Newco to fail to meet the Specified REIT Requirements for the taxable year in which the payment would be made, which determination shall be made by such independent tax accountants or (y) an opinion of outside tax counsel selected by Newco, such opinion to be reasonably satisfactory to Newco, to the effect that, based upon a change in applicable Law after the date on which payment was first deferred hereunder, receipt of the additional amount of Newco Indemnity Payments otherwise required to be paid either would be excluded from gross income of Newco for purposes of the Specified REIT Requirements or would constitute Qualifying Income, in either of which events amounts shall be released from the escrow account to the applicable Newco Indemnitees in an amount equal to the lesser of the unpaid Newco Indemnity Payments due and owing (determined without regard to this Section 4.11(a)) or the maximum amount stated in the letter referred to in clause (D)(x) above.

 

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(iii)                               Any amount held in escrow pursuant to Section 4.11(a)(ii) for ten (10) years shall be released from such escrow to be used as determined by Vornado in its sole and absolute discretion.

 

(iv)                              Newco shall bear all costs and expenses with respect to the escrow.

 

(v)                                 Vornado shall cooperate in good faith with Newco (including amending this Section 4.11(a) at the reasonable request of Newco) in order to (1) maximize the portion of the payments that may be made to the Newco Indemnitees hereunder without causing Newco to fail to meet the Specified REIT Requirements, (2) improve Newco’s chances of securing a favorable ruling from the IRS if Newco should seek to obtain such a ruling as to the matters described in Section 4.11(a)(i)(A), or (3) assist Newco in obtaining a favorable opinion from its outside tax counsel or determination from its tax accountants as described in this Section 4.11(a). Such cooperation shall include, for example, agreeing, at the request of Newco, to make payments hereunder to a taxable REIT subsidiary of Newco or an Affiliate or designee of Newco. Newco shall reimburse Vornado for all reasonable costs and expenses of such cooperation.

 

(b)                                 Indemnification Payments to Vornado.

 

(i)                                     With respect to any period in which Vornado has made or will make an election to be taxed as a REIT, notwithstanding any other provisions in this Agreement or any Ancillary Agreement, any indemnification payments to be made to any member of the Vornado Group pursuant to Section 4.2 or 4.4 or any indemnification payments to be made to any member of the Vornado Group pursuant to any Ancillary Agreement (a “Vornado Indemnity Payment”) for any calendar year shall not exceed the sum of

 

(A)                               the amount that is determined (x) will not be gross income of Vornado or (y) will be Qualifying Income of Vornado, in each case for purposes of the Specified REIT Requirements and for any period in which Vornado has made any election to be taxed as a REIT, with such determination to be set forth in REIT Guidance,

 

plus

 

(B)                               such additional amount that is estimated can be paid to Vornado in such taxable year without causing Vornado to fail to meet the requirements of Sections 856(c)(2) and (3) of the Code, determined (x) as if the payment of such amount did not constitute Qualifying Income and (y) by taking into account any other payments to Vornado (and any other relevant member of the Vornado Group) during

 

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such taxable year that do not constitute Qualifying Income, which determination shall be (xx) made by independent tax accountants to Vornado, and (yy) submitted to and approved by Vornado’s outside tax counsel.

 

Vornado shall use commercially reasonable efforts to provide Newco with a REIT Savings Notice at least fifteen (15) business days before the date on which such Vornado Indemnity Payment is due, but any failure to deliver such REIT Savings Notice, whether or not timely, shall not be deemed a waiver of, or otherwise vitiate, this Section 4.11(b)(i).

 

(ii)                                  Newco shall place (or cause to be placed) the full amount of any Vornado Indemnity Payments otherwise required to be made in a mutually agreed escrow account upon mutually acceptable terms, which shall provide that

 

(A)                               the amount in the escrow account shall be treated as the property of Newco or the applicable member of the Newco Group, unless it is released from such escrow account to any Vornado Indemnitee,

 

(B)                               all income earned upon the amount in the escrow account shall be treated as the property of Newco or the applicable member of the Newco Group and reported, as and to the extent required by applicable Law, by the escrow agent to the IRS, or any other taxing authority, on IRS Form 1099 or 1042S (or other appropriate form) as income earned by Newco or the applicable member of the Newco Group whether or not said income has been distributed during such taxable year,

 

(C)                               the amount in the escrow account shall be invested only as determined by Newco in its sole discretion, provided that such investments shall be limited to (i) AAA-rated money market funds that comply with Rule 2a-7 of the Investment Company Act of 1940, (ii) interest-bearing securities of, or guaranteed as to all principal and interest by, the United States Government with maturities of 90 days or less, or (iii) bank deposit accounts of commercial banks with Tier 1 capital exceeding $1 billion or with an average rating above investment grade by S&P (LT Local Issuer Credit Rating), Moody’s (Long Term Rating) and Fitch Ratings, Inc. (LT Issuer Default Rating) (each as reported by Bloomberg Finance L.P.), and

 

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(D)                               any portion thereof shall not be released to any Vornado Indemnitee unless and until Newco receives any of the following: (x) a letter from Vornado’s independent tax accountants indicating the amount that it is estimated can be paid at that time to the Vornado Indemnitees without causing Vornado to fail to meet the Specified REIT Requirements for the taxable year in which the payment would be made, which determination shall be made by such independent tax accountants or (y) an opinion of outside tax counsel selected by Vornado, such opinion to be reasonably satisfactory to Vornado, to the effect that, based upon a change in applicable Law after the date on which payment was first deferred hereunder, receipt of the additional amount of Vornado Indemnity Payments otherwise required to be paid either would be excluded from gross income of Vornado for purposes of the Specified REIT Requirements or would constitute Qualifying Income, in either of which events amounts shall be released from the escrow account to the applicable Vornado Indemnitees in an amount equal to the lesser of the unpaid Vornado Indemnity Payments due and owing (determined without regard to this Section 4.11(b)) or the maximum amount stated in the letter referred to in clause (D)(x) above.

 

(iii)                               Any amount held in escrow pursuant to Section 4.11(b)(ii) for ten (10) years shall be released from such escrow to be used as determined by Newco in its sole and absolute discretion.

 

(iv)                              Vornado shall bear all costs and expenses with respect to the escrow.

 

(v)                                 Newco shall cooperate in good faith with Vornado (including amending this Section 4.11(b) at the reasonable request of Vornado) in order to (1) maximize the portion of the payments that may be made to the Vornado Indemnitees hereunder without causing Vornado to fail to meet the Specified REIT Requirements, (2) improve Vornado’s chances of securing a favorable ruling from the IRS if Vornado should seek to obtain such a ruling as to the matters described in Section 4.11(b)(i)(A), or (3) assist Vornado in obtaining a favorable opinion from its outside tax counsel or determination from its tax accountants as described in this Section 4.11(b). Such cooperation shall include, for example, agreeing, at the request of Vornado to make payments hereunder to a taxable REIT subsidiary of Vornado or an Affiliate or designee of Vornado. Vornado shall reimburse Newco for all reasonable costs and expenses of such cooperation.

 

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ARTICLE V
CERTAIN OTHER MATTERS

 

5.1                               Insurance Matters.

 

(a)                                 From and after the Effective Time, with respect to any Losses, damages and Liability incurred by any member of the Newco Group prior to the Effective Time, Vornado will provide Newco with access to, and Newco may, upon ten (10) days’ prior written notice to Vornado, make claims under, Vornado’s Third Party insurance policies in place prior to the Effective Time and Vornado’s historical policies of insurance, but solely to the extent that such policies provided coverage for members of the Newco Group prior to the Effective Time; provided that such access to, and the right to make claims under, such insurance policies, shall be subject to the terms and conditions of such insurance policies, including any limits on coverage or scope, any deductibles and other fees and expenses, and shall be subject to the following additional conditions:

 

(i)                                     Newco shall report any claim to Vornado, as promptly as is reasonably practicable, and in any event in sufficient time so that such claim may be made and managed by Vornado pursuant to the Transition Services Agreement in accordance with Vornado’s claim reporting procedures in effect immediately prior to the Effective Time (or in accordance with any modifications to such procedures after the Effective Time communicated by Vornado to Newco in writing);

 

(ii)                                  Newco and the members of the Newco Group shall exclusively bear and be liable for (and neither Vornado nor any members of the Vornado Group shall have any obligation to repay or reimburse Newco or any member of the Newco Group for), and shall indemnify, hold harmless and reimburse Vornado and the members of the Vornado Group for, any deductibles, self-insured retention, fees and expenses to the extent resulting from any access to, or any claims made by Newco or any other members of the Newco Group or otherwise made in respect of Losses of the DC Business under, any insurance provided pursuant to this Section 5.1(a), including any Indemnity Payments, settlements, judgments, legal fees and allocated claims expenses and claim handling fees, whether such claims are made by members of the Newco Group, its employees or Third Parties; and

 

(iii)                               Newco shall exclusively bear and be liable for (and neither Vornado nor any members of the Vornado Group shall have any obligation to repay or reimburse Newco or any member of the Newco Group for) all uninsured, uncovered, unavailable or uncollectible amounts of all such claims made by Newco or any member of the Newco Group under the policies as provided for in this Section 5.1(a). In the event an insurance policy aggregate is exhausted, or believed likely to be exhausted, due to noticed claims, the Newco Group, on the one hand, and the Vornado Group, on the other hand, shall be responsible for their pro rata portion of the reinstatement premium, if any, based upon the Losses of such Group submitted to Vornado’s insurance carrier(s) (including any submissions prior to the Effective Time). To the extent that the Vornado Group or the Newco Group is allocated more than its pro rata portion of such premium due to the timing of Losses submitted to Vornado’s insurance carrier(s), the other Party

 

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shall promptly pay the first Party an amount so that each Group has been properly allocated its pro rata portion of the reinstatement premium. Subject to the following sentence, Vornado may elect not to reinstate the policy aggregate. In the event that, at any time prior to the Effective Time, Vornado elects not to reinstate the policy aggregate, it shall provide prompt written notice to Newco, and Newco may direct Vornado in writing to, and Vornado shall, in such case, reinstate the policy aggregate; provided that Newco shall be responsible for all reinstatement premiums and other costs associated with such reinstatement.

 

(b)                                 Except as provided in Section 5.1(a), from and after the Effective Time, neither Newco nor any member of the Newco Group shall have any rights to or under any of the insurance policies of Vornado or any other member of the Vornado Group. At the Effective Time, Newco shall, unless it has obtained the prior written consent of Vornado or Vornado OP, have in effect all insurance programs required to comply with Newco’s contractual obligations and such other insurance policies required by Law or as reasonably necessary or appropriate for companies operating a business similar to Newco’s. Such insurance programs may include but are not limited to general liability, commercial auto liability, worker’s compensation, employer’s liability, product/completed operations liability, pollution legal liability, surety bonds, professional services liability, property, cargo, employment practices liability, employee dishonesty/crime, directors’ and officers’ liability and fiduciary liability.

 

(c)                                  Neither Newco nor any member of the Newco Group, in connection with making a claim under any insurance policy of Vornado or any member of the Vornado Group pursuant to this Section 5.1, shall take any action that would be reasonably likely to (i) have an adverse impact on the then-current relationship between Vornado or any member of the Vornado Group, on the one hand, and the applicable insurance company, on the other hand; (ii) result in the applicable insurance company terminating or reducing coverage, or increasing the amount of any premium owed by Vornado or any member of the Vornado Group under the applicable insurance policy; or (iii) otherwise compromise, jeopardize or interfere with the rights of Vornado or any member of the Vornado Group under the applicable insurance policy.

 

(d)                                 All payments and reimbursements by Newco pursuant to this Section 5.1 will be made within fifteen (15) days after Newco’s receipt of an invoice therefor from Vornado. If Vornado incurs costs to enforce Newco’s obligations herein, Newco agrees to indemnify and hold harmless Vornado for such enforcement costs, including reasonable attorneys’ fees pursuant to Section 4.6(b). Vornado shall retain the exclusive right to control its insurance policies and programs, including the right to exhaust, settle, release, commute, buy-back or otherwise resolve disputes with respect to any of its insurance policies and programs and to amend, modify or waive any rights under any such insurance policies and programs, notwithstanding whether any such policies or programs apply to any Newco Liabilities and/or claims Newco has made or could make in the future, and no member of the Newco Group shall erode, exhaust, settle, release, commute, buyback or otherwise resolve disputes with Vornado’s insurers with respect to any of Vornado’s insurance policies and programs, or amend, modify or waive any rights under any such insurance policies and programs. Newco shall cooperate with Vornado and share such information as is reasonably necessary in order to permit Vornado to manage and conduct its insurance matters as it deems appropriate, including but not limited to with respect to (i) any claims made pursuant to Section 5.1(a) and the management thereof, (ii) any policy premium

 

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adjustments with respect to (A) Vornado’s Third Party insurance policies in place prior to the Effective Time and (B) Vornado’s historical policies of insurance, in each case to the extent that such policies provided coverage for members of the Newco Group prior to the Effective Time, and (iii) the release of any and all Vornado surety bonding obligations to the extent related to any such insurance policies described in clause (ii). Neither Vornado nor any of the members of the Vornado Group shall have any obligation to secure extended reporting for any claims under any Liability policies of Vornado or any member of the Vornado Group for any acts or omissions by any member of the Newco Group incurred prior to Effective Time.

 

(e)                                  This Agreement shall not be considered as an attempted assignment of any policy of insurance or as a contract of insurance and shall not be construed to waive any right or remedy of any member of the Vornado Group in respect of any insurance policy or any other contract or policy of insurance.

 

(f)                                   Newco does hereby, for itself and each other member of the Newco Group, agree that no member of the Vornado Group shall have any Liability whatsoever as a result of the insurance policies and practices of Vornado and the members of the Vornado Group as in effect at any time, including as a result of the level or scope of any such insurance, the creditworthiness of any insurance carrier, the terms and conditions of any policy, the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim or otherwise.

 

5.2                               Late Payments. Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount not paid when due pursuant to this Agreement or any Ancillary Agreement (and any amounts billed or otherwise invoiced or demanded and properly payable that are not paid within thirty (30) days of such bill, invoice or other demand) shall accrue interest at a rate per annum equal to Prime Rate plus two (2%) percent.

 

5.3                               Treatment of Payments for Tax Purposes. For all Tax purposes, the Parties and the members of their respective Groups shall treat (i) any payment made pursuant to this Agreement (other than payments representing interest) as either a contribution by the relevant entity or a distribution by the relevant entity (or as adjustments to such contribution or distribution) occurring immediately prior to the applicable contribution or Distribution, as the case may be, or as a payment of an assumed or retained Liability; and (ii) any payment of interest as taxable or deductible, as the case may be, to the party entitled under this Agreement to retain such payment or required under this Agreement to make such payment, in either case except as otherwise required by applicable Law.

 

5.4                               Post-Effective Time Conduct. The parties hereto acknowledge that, after the Effective Time, each Party and its Group shall be independent of the other Party and its Group, with responsibility for its and their own actions and inactions and its and their own Liabilities relating to, arising out of or resulting from the conduct of its and their business, operations and activities following the Effective Time, except as may otherwise be provided in any Ancillary Agreement, and each Party shall (except as otherwise provided in Article IV) use commercially reasonable efforts to prevent such Liabilities from being inappropriately borne by the other Party or the members of its Group.

 

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5.5                               Non-Solicitation Covenant.  For the period of two (2) years from and after the Effective Time, Newco shall not, and shall procure that the other members of the Newco Group shall not, directly or indirectly, solicit or hire any employees of the Vornado Group who have been engaged in providing services to the Newco Group pursuant to the Transition Services Agreement without the prior written consent of Vornado; provided, however, that (i) an individual shall not be deemed to have been solicited for employment or hired in violation of this Section 5.5 if such employee has ceased to be employed by any member of the Vornado Group for at least six (6) months prior to the date when any solicitation activity occurs, and (ii) this Section 5.5 shall not prohibit any general offers of employment to the public, including through a bona fide search firm, so long as it is not specifically targeted toward employees of the Vornado Group.

 

ARTICLE VI
EXCHANGE OF INFORMATION; CONFIDENTIALITY

 

6.1                               Agreement for Exchange of Information.

 

(a)                                 Subject to Section 6.9 and any other applicable confidentiality obligations, each of Vornado and Newco, on behalf of itself and each member of its Group, agrees to use commercially reasonable efforts to provide or make available, or cause to be provided or made available, to the other Party and the members of such other Party’s Group, at any time before, on or after the Effective Time, as soon as reasonably practicable after written request therefor, any information (or a copy thereof) in the possession or under the control of such Party or its Group to the extent that (i) such information relates to the DC Business, or any Newco Asset or Newco Liability, if Newco is the requesting Party, or to the Vornado Business, or any Vornado Asset or Vornado Liability, if Vornado is the requesting Party; (ii) such information is required by the requesting Party to comply with its obligations under this Agreement, the Master Agreement, any Ancillary Agreement or any Transfer Document; or (iii) such information is required by the requesting Party to comply with any obligation imposed by any Governmental Authority; provided, however, that, in the event that the Party to whom the request has been made determines that any such provision of information could be detrimental to the Party providing the information, violate any Law or agreement, or waive any privilege available under applicable Law, including any attorney-client privilege, then the Parties shall use commercially reasonable efforts to permit compliance with such obligations to the extent and in a manner that avoids any such harm or consequence. The Party providing information pursuant to this Section 6.1 shall only be obligated to provide such information in the form, condition and format in which it then exists, and in no event shall such Party be required to perform any improvement, modification, conversion, updating or reformatting of any such information, and nothing in this Section 6.1 shall expand the obligations of a Party under Section 6.4.

 

6.2                               Ownership of Information. The provision of any information pursuant to Section 6.1 or Section 6.7 shall not affect the ownership of such information (which shall be determined solely in accordance with the terms of this Agreement and the Ancillary Agreements), or constitute a grant of rights in or to any such information.

 

6.3                               Compensation for Providing Information. The Party requesting information agrees to reimburse the other Party for the reasonable costs, if any, of creating,

 

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gathering, copying, transporting and otherwise complying with the request with respect to such information (including any reasonable costs and expenses incurred in any review of information for purposes of protecting the Privileged Information of the providing Party or in connection with the restoration of backup media for purposes of providing the requested information) to the extent that such costs are incurred in connection with such other Party’s provision of information in response to the requesting Party. Except as may be otherwise specifically provided elsewhere in this Agreement, any Ancillary Agreement or any other agreement between the Parties, such costs shall be computed in accordance with the providing Party’s standard methodology and procedures.

 

6.4                               Record Retention. To facilitate the possible exchange of information pursuant to this Article VI and other provisions of this Agreement after the Effective Time, the parties hereto agree to use their commercially reasonable efforts, which shall be no less rigorous than those used for retention of Vornado’s or JBG Properties’ own information, to retain all information in their respective possession or control on the Effective Time in accordance with the policies of such Persons as in effect on the Effective Time or such other policies as may be reasonably adopted by such Persons after the Effective Time; provided, however, that such policies at least provide for the retention of documents until the expiration of the applicable statute of limitations (giving effect to any extensions thereof). Notwithstanding the foregoing in this Section 6.4, the Tax Matters Agreement will govern the retention of Tax-related records.

 

6.5                               Limitations of Liability. No party hereto shall have any Liability to any other party hereto in the event that any information exchanged or provided pursuant to this Agreement is found to be inaccurate in the absence of gross negligence or willful misconduct by the party providing such information. No party hereto shall have any Liability to any other party if any information is destroyed after commercially reasonable efforts by such party to comply with the provisions of Section 6.4.

 

6.6                               Other Agreements Providing for Exchange of Information.

 

(a)                                 The rights and obligations granted under this Article VI are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange, retention or confidential treatment of information set forth in the Master Agreement or any Ancillary Agreement.

 

(b)                                 Any party hereto that receives, pursuant to a request for information in accordance with this Article VI, Tangible Information that is not relevant to its request shall, at the request of the providing Party, (i) return it to the providing Party or, at the providing Party’s request, destroy such Tangible Information; and (ii) deliver to the providing Party written confirmation that such Tangible Information was returned or destroyed, as the case may be, which confirmation shall be signed by an authorized representative of the requesting Party.

 

6.7                               Production of Witnesses; Records; Cooperation.

 

(a)                                 After the Effective Time, except in the case of an adversarial Action or Dispute between Vornado and Newco, or any members of their respective Groups, each Party shall use its commercially reasonable efforts to make available to the other Party, upon written

 

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request, the former, current and future directors, trustees, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available without undue burden, to the extent that any such Person (giving consideration to business demands of such directors, trustees, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with any Action in which the requesting Party (or member of its Group) may from time to time be involved, regardless of whether such Action is a matter with respect to which indemnification may be sought hereunder. The requesting Party shall bear all costs and expenses in connection therewith.

 

(b)                                 If an Indemnifying Party chooses to defend or to seek to compromise or settle any Third-Party Claim, the other Party shall make available to such Indemnifying Party, upon written request, the former, current and future directors, trustees, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available without undue burden, to the extent that any such Person (giving consideration to business demands of such directors, trustees, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with such defense, settlement or compromise, or such prosecution, evaluation or pursuit, as the case may be, and shall otherwise cooperate in such defense, settlement or compromise, or such prosecution, evaluation or pursuit, as the case may be.

 

(c)                                  Without limiting the foregoing, the Parties shall cooperate and consult to the extent reasonably necessary with respect to any Actions.

 

(d)                                 Without limiting any provision of this Section 6.7, each of the Parties agrees to cooperate, and to cause each member of its respective Group to cooperate, with each other in the defense of any infringement or similar claim with respect any Intellectual Property and shall not claim to acknowledge, or permit any member of its respective Group to claim to acknowledge, the validity or infringing use of any Intellectual Property of a Third Party in a manner that would hamper or undermine the defense of such infringement or similar claim.

 

(e)                                  The obligation of the Parties to provide witnesses pursuant to this Section 6.7 is intended to be interpreted in a manner so as to facilitate cooperation and shall include the obligation to provide as witnesses, inventors and other officers without regard to whether the witness or the employer of the witness could assert a possible business conflict (subject to the exception set forth in the first sentence of Section 6.7(a)).

 

6.8                               Privileged Matters.

 

(a)                                 The Parties recognize that legal and other professional services that have been and will be provided prior to the Effective Time have been and will be rendered for the collective benefit of each of the members of the Vornado Group and the Newco Group, and that each of the members of the Vornado Group and the Newco Group should be deemed to be the client with respect to such services for the purposes of asserting all privileges which may be asserted under applicable Law in connection therewith. The Parties recognize that legal and other

 

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professional services will be provided following the Effective Time, which services will be rendered solely for the benefit of the Vornado Group or the Newco Group, as the case may be.

 

(b)                                 The Parties agree as follows:

 

(i)                                     Vornado shall be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to the Vornado Business and not to the DC Business, whether or not the Privileged Information is in the possession or under the control of any member of the Vornado Group or any member of the Newco Group. Vornado shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to any Vornado Liabilities resulting from any Actions that are now pending or may be asserted in the future, whether or not the Privileged Information is in the possession or under the control of any member of the Vornado Group or any member of the Newco Group;

 

(ii)                                  Newco shall be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to the DC Business and not to the Vornado Business, whether or not the Privileged Information is in the possession or under the control of any member of the Newco Group or any member of the Vornado Group. Newco shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to any Newco Liabilities resulting from any Actions that are now pending or may be asserted in the future, whether or not the Privileged Information is in the possession or under the control of any member of the Newco Group or any member of the Vornado Group; and

 

(iii)                               if the Parties do not agree as to whether certain information is Privileged Information, then such information shall be treated as Privileged Information, and the Party that believes that such information is Privileged Information shall be entitled to control the assertion or waiver of all privileges and immunities in connection with any such information unless the Parties otherwise agree. The Parties shall use the procedures set forth in Article VII to attempt to resolve any disputes as to whether any information relates solely to the Vornado Business, solely to the DC Business, or to both the Vornado Business and the DC Business.

 

(c)                                  Subject to the remaining provisions of this Section 6.8, the Parties agree that they shall have a shared privilege or immunity with respect to all privileges and immunities not allocated pursuant to Section 6.8(b) and all privileges and immunities relating to any Actions or other matters that involve both Parties (or one or more members of their respective Groups) and in respect of which both Parties (or one or more members of their respective Groups) have Liabilities under this Agreement, and that no such shared privilege or immunity may be waived by either Party without the consent of the other Party.

 

(d)                                 If any Dispute arises between the Parties or any members of their respective Groups regarding whether a privilege or immunity should be waived to protect or advance the interests of either Party and/or any member of their respective Groups, each Party

 

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agrees that it shall (i) negotiate with the other Party in good faith; (ii) endeavor to minimize any prejudice to the rights of the other Party; and (iii) not unreasonably withhold consent to any request for waiver by the other Party. Further, each Party specifically agrees that it shall not withhold its consent to the waiver of a privilege or immunity for any purpose except in good faith to protect its own legitimate interests.

 

(e)                                  In the event of any adversarial Action or Dispute between Vornado and Newco, or any members of their respective Groups, either Party may waive a privilege in which the other Party or member of such other Party’s Group has a shared privilege, without obtaining consent pursuant to Section 6.8(c); provided that such waiver of a shared privilege shall be effective only as to the use of information with respect to the Action between the Parties and/or the applicable members of their respective Groups, and shall not operate as a waiver of the shared privilege with respect to any Third Party.

 

(f)                                   Upon receipt by either Party, or by any member of its respective Group, of any subpoena, discovery or other request that may reasonably be expected to result in the production or disclosure of Privileged Information subject to a shared privilege or immunity or as to which the other Party has the sole right hereunder to assert a privilege or immunity, or if either Party obtains knowledge that any of its, or any member of its respective Group’s, current or former directors, trustees, officers, agents or employees have received any subpoena, discovery or other requests that may reasonably be expected to result in the production or disclosure of such Privileged Information, such Party shall promptly notify the other Party of the existence of the request (which notice shall be delivered to such other Party no later than five (5) business days following the receipt of any such subpoena, discovery or other request) and shall provide the other Party a reasonable opportunity to review the Privileged Information and to assert any rights it or they may have under this Section 6.8 or otherwise, to prevent the production or disclosure of such Privileged Information.

 

(g)                                  Any furnishing of, or access or transfer of, any information pursuant to this Agreement is made in reliance on the agreement of Vornado and Newco set forth in this Section 6.8 and in Section 6.9 to maintain the confidentiality of Privileged Information and to assert and maintain all applicable privileges and immunities. The Parties agree that their respective rights to any access to information, witnesses and other Persons, the furnishing of notices and documents and other cooperative efforts between the Parties contemplated by this Agreement, and the transfer of Privileged Information between the Parties and members of their respective Groups pursuant to this Agreement, shall not be deemed a waiver of any privilege that has been or may be asserted under this Agreement or otherwise.

 

(h)                                 In connection with any matter contemplated by Section 6.7 or this Section 6.8, the Parties agree to, and to cause the applicable members of their Group to, use commercially reasonable efforts to maintain their respective separate and joint privileges and immunities, including by executing joint defense and/or common interest agreements where necessary or useful for this purpose.

 

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6.9                               Confidentiality.

 

(a)                                 Confidentiality. Subject to Section 6.10, from and after the Effective Time until the five (5)-year anniversary of the Effective Time, each of Vornado and Newco, on behalf of itself and each member of its respective Group, agrees to hold, and to cause its respective Representatives to hold, in strict confidence, with at least the same degree of care that applies to Vornado’s or JBG Properties’ respective confidential and proprietary information pursuant to policies in effect as of the Effective Time, all confidential and proprietary information concerning the other Party or any member of the other Party’s Group or their respective businesses that is either in its possession (including confidential and proprietary information in its possession prior to the date hereof) or furnished by any such other Party or any member of such Party’s Group or their respective Representatives at any time pursuant to this Agreement, any Ancillary Agreement or otherwise, and shall not use any such confidential and proprietary information other than for such purposes as shall be expressly permitted hereunder or thereunder, except, in each case, to the extent that such confidential and proprietary information has been (i) in the public domain or generally available to the public, other than as a result of a disclosure by such Party or any member of such Party’s Group or any of their respective Representatives in violation of this Agreement, (ii) later lawfully acquired from other sources by such Party (or any member of such Party’s Group) which sources are not themselves bound by a confidentiality obligation or other contractual, legal or fiduciary obligation of confidentiality with respect to such confidential and proprietary information, or (iii) independently developed or generated without reference to or use of any proprietary or confidential information of the other Party or any member of such Party’s Group. If any confidential and proprietary information of one Party or any member of its Group is disclosed to the other Party or any member of such other Party’s Group in connection with providing services to such first Party or any member of such first Party’s Group under this Agreement, the Master Agreement or any Ancillary Agreement, then such disclosed confidential and proprietary information shall be used only as required to perform such services.

 

(b)                                 No Release; Return or Destruction. Each Party agrees not to release or disclose, or permit to be released or disclosed, any information addressed in Section 6.9(a) to any other Person, except its Representatives who need to know such information in their capacities as such (who shall be advised of their obligations hereunder with respect to such information), and except in compliance with Section 6.10. Without limiting the foregoing, when any such information is no longer needed for the purposes contemplated by this Agreement or any Ancillary Agreement, each Party will promptly after request of the other Party either return to the other Party all such information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or notify the other Party in writing that it has destroyed such information (and such copies thereof and such notes, extracts or summaries based thereon).

 

(c)                                  Third-Party Information; Privacy or Data Protection Laws. Each Party acknowledges that it and members of its Group may presently have and, following the Effective Time, may gain access to or possession of confidential or proprietary information of, or personal information relating to, Third Parties (i) that was received under confidentiality or non-disclosure agreements entered into between such Third Parties, on the one hand, and the other Party or members of such Party’s Group, on the other hand, prior to the Effective Time; or (ii) that, as between the two Parties, was originally collected by the other Party or members of such Party’s Group and that may be subject to and protected by privacy, data protection or other applicable Laws. Each Party agrees that it shall hold, protect and use, and shall cause the members of its

 

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Group and its and their respective Representatives to hold, protect and use, in strict confidence the confidential and proprietary information of, or personal information relating to, Third Parties in accordance with privacy, data protection or other applicable Laws and the terms of any agreements that were either entered into before the Effective Time or affirmative commitments or representations that were made before the Effective Time by, between or among the other Party or members of the other Party’s Group, on the one hand, and such Third Parties, on the other hand.

 

(d)                                 Assignment of Non-Disclosure and Confidentiality Agreements. At or prior to the Effective Time, Vornado shall assign, or cause to be assigned, to a member of the Newco Group any rights under non-disclosure and confidentiality agreements to which any member of the Vornado Group (which is not a member of the Newco Group) is a party to the extent restricting the use or disclosure of information of the DC Business (including any such agreement entered into in connection with the possible sale of the DC Business with any potential purchaser thereof); provided that in the event that such assignment cannot be completed or such agreement also restricts the use or disclosure of information of the Vornado Business, Vornado shall not be required to assign or cause such assignment, but shall enforce, or shall cause to be enforced, such agreements for the benefit of the DC Business as reasonably requested by Newco at Newco’s sole cost and expense.

 

6.10                        Protective Arrangements. In the event that a Party or any member of its Group either determines on the advice of its counsel that it is required to disclose any information pursuant to applicable Law or receives any request or demand under lawful process or from any Governmental Authority to disclose or provide information of the other Party (or any member of the other Party’s Group) that is subject to the confidentiality provisions hereof, such Party shall notify the other Party (to the extent legally permitted) as promptly as is reasonably practicable under the circumstances prior to disclosing or providing such information, shall consult with the other Party on the advisability of taking steps to resist or narrow such disclosure, and shall cooperate, following the other Party’s written request and at the other Party’s expense, in seeking any appropriate protective order requested by the other Party or in any attempt to resist such disclosure. In the event that such other Party fails to receive such appropriate protective order in a timely manner and the Party receiving the request or demand reasonably determines that its failure to disclose or provide such information shall actually prejudice the Party receiving the request or demand, then the Party that received such request or demand may thereafter disclose or provide information to the extent required by such Law (as so advised by its counsel) or by lawful process or such Governmental Authority, and the disclosing Party shall promptly provide the other Party with a copy of the information so disclosed, in the same form and format so disclosed, together with a list of all Persons to whom such information was disclosed, in each case to the extent legally permitted.

 

ARTICLE VII
DISPUTE RESOLUTION

 

7.1                               Good-Faith Negotiation. Either Party seeking resolution of any dispute, controversy or claim arising out of or relating to this Agreement or any Ancillary Agreement (including regarding whether any Assets are Newco Assets, any Liabilities are Newco Liabilities or the validity, interpretation, breach or termination of this Agreement or any Ancillary

 

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Agreement) (a “Dispute”), shall provide written notice thereof to the other Party (the “Initial Notice”), and within fifteen (15) days of the delivery of the Initial Notice, the Parties shall attempt in good faith to negotiate a resolution of the Dispute. The negotiations shall be conducted by executives who hold, at a minimum, the title of vice president. All such negotiations shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence. Any resolution reached by the applicable executives through negotiation shall be subject to final approval by the Chief Administrative Officer of Vornado and the Chief Executive Officer of Newco. If the Parties are unable for any reason to resolve a Dispute within fifteen (15) days after the delivery of such notice or if a Party reasonably concludes that the other Party is not willing to negotiate as contemplated by this Section 7.1, either Party may pursue any and all rights and remedies at Law or in equity available to it with respect to the Dispute.  Nothing herein shall limit or otherwise affect the rights of the Parties under Section 10.16.

 

7.2                               Mediation. Any Dispute not resolved pursuant to Section 7.1 shall, at the written request of a Party (a “Mediation Request”), be submitted to nonbinding mediation in accordance with the then-current JAMS procedures, except as modified herein. The mediation shall be held in such place as the Parties may mutually agree in writing. The Parties shall have twenty (20) days from receipt by a Party of a Mediation Request to agree on a mediator from the JAMS panel. If no mediator has been agreed upon by the Parties within twenty (20) days of receipt by a party of a Mediation Request, then a Party may request (on written notice to the other Party), that JAMS appoint a mediator in accordance with the then current JAMS procedures from mediators on the JAMS panel. All mediation pursuant to this clause shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence, and no oral or documentary representations made by the Parties during such mediation shall be admissible for any purpose in any subsequent proceedings. No Party shall disclose or permit the disclosure of any information about the evidence adduced or the documents produced by the other Party in the mediation proceedings or about the existence, contents or results of the mediation without the prior written consent of such other Party, except in the course of a judicial or regulatory proceeding or as may be required by Law or requested by a Governmental Authority or securities exchange. Before making any disclosure permitted by the preceding sentence, the Party intending to make such disclosure shall, to the extent reasonably practicable, give the other Party reasonable written notice of the intended disclosure and afford the other party a reasonable opportunity to protect its interests. If the Dispute has not been resolved within sixty (60) days of the appointment of a mediator, or within ninety (90) days after receipt by a Party of a Mediation Request (whichever occurs sooner), or within such longer period as the Parties may agree to in writing, then the Dispute shall be submitted to binding arbitration in accordance with Section 7.3.

 

7.3                               Arbitration.

 

(a)                                 In the event that a Dispute has not been resolved within sixty (60) days of the appointment of a mediator in accordance with Section 7.2, or within ninety (90) days after receipt by a Party of a Mediation Request (whichever occurs sooner), or within such longer period as the Parties may agree to in writing, then such Dispute shall, upon the written request of a Party (the “Arbitration Request”) be submitted to be finally resolved by binding arbitration pursuant to the JAMS Comprehensive Arbitration Rules and Procedures. The arbitration shall be

 

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held in the same location as the mediation pursuant to Section 7.2. Unless otherwise agreed by the Parties in writing, any Dispute to be decided pursuant to this Section 7.3 will be decided (i) before a sole arbitrator if the amount in dispute, inclusive of all claims and counterclaims, totals less than $5 million; or (ii) by a panel of three (3) arbitrators if the amount in dispute, inclusive of all claims and counterclaims, totals $5 million or more.  Arbitrators shall be named from the JAMS panel.

 

(b)                                 The panel of three (3) arbitrators will be chosen as follows: (i) within fifteen (15) days from the date of the receipt of the Arbitration Request, each Party will name an arbitrator; and (ii) the two (2) Party-appointed arbitrators will thereafter, within thirty (30) days from the date on which the second of the two (2) arbitrators was named, name a third, independent arbitrator who will act as chairperson of the arbitral tribunal. In the event that either Party fails to name an arbitrator within fifteen (15) days from the date of receipt of the Arbitration Request, then upon written application by either Party, that arbitrator shall be appointed pursuant to the JAMS Comprehensive Arbitration Rules and Procedures from the JAMS panel. In the event that the two (2) Party-appointed arbitrators fail to appoint the third, then the third, independent arbitrator will be appointed pursuant to the JAMS Comprehensive Arbitration Rules and Procedures. If the arbitration will be before a sole independent arbitrator, then the sole independent arbitrator will be appointed by agreement of the Parties within fifteen (15) days of the date of receipt of the Arbitration Request. If the Parties cannot agree to a sole independent arbitrator, then upon written application by either party, the sole independent arbitrator will be appointed pursuant to the JAMS Comprehensive Arbitration Rules and Procedures from the JAMS panel.

 

(c)                                  The arbitrator(s) will have the right to award, on an interim basis, or include in the final award, any relief which it deems proper in the circumstances, including money damages (with interest on unpaid amounts from the due date), injunctive relief (including specific performance) and reasonable attorneys’ fees and costs which will be reviewed by the arbitrator(s) for reasonableness; provided that the arbitrator(s) will not award any relief not specifically requested by the Parties and, in any event, will not award any indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages of the other arising in connection with the transactions contemplated hereby (other than any such Liability to a Third Party with respect to a Third-Party Claim). Upon selection of the arbitrator(s) following any grant of interim relief by a special arbitrator or court pursuant to Section 7.4, the arbitrator(s) may affirm or disaffirm that relief, and the Parties will seek modification or rescission of the order entered by the court as necessary to accord with the decision of the arbitrator(s). The award of the arbitrator(s) shall be final and binding on the Parties and the members of their respective Groups, and may be enforced in any court of competent jurisdiction. The initiation of mediation or arbitration pursuant to this Article VII will toll the applicable statute of limitations for the duration of any such proceedings.

 

7.4                               Litigation and Unilateral Commencement of Arbitration. Notwithstanding the foregoing provisions of this Article VII, (a) a Party may seek preliminary provisional or injunctive judicial relief with respect to a Dispute without first complying with the procedures set forth in Section 7.1, Section 7.2 and Section 7.3 if such action is reasonably necessary to avoid irreparable damage and (b) either Party may initiate arbitration before the expiration of the periods specified in Section 7.2 and Section 7.3 if (i) such Party has submitted a Mediation

 

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Request or Arbitration Request, as applicable, and the other party has failed, within the applicable periods set forth in Section 7.3, to agree upon a date for the first mediation session to take place within thirty (30) days after the appointment of such mediator or such longer period as the Parties may agree to in writing or (ii) such Party has failed to comply with Section 7.3 in good faith with respect to commencement and engagement in arbitration. In such event, the other Party may commence and prosecute such arbitration unilaterally in accordance with the JAMS Comprehensive Arbitration Rules and Procedures.

 

7.5                               Conduct During Dispute Resolution Process. Unless otherwise agreed to in writing, the Parties shall, and shall cause their respective members of their Group to, continue to honor all commitments under this Agreement and each Ancillary Agreement to the extent required by such agreements during the course of dispute resolution pursuant to the provisions of this Article VII, unless such commitments are the specific subject of the Dispute at issue.

 

ARTICLE VIII
FURTHER ASSURANCES AND ADDITIONAL COVENANTS

 

8.1                               Further Assurances.

 

(a)                                 In addition to the actions specifically provided for elsewhere in this Agreement, each of the parties hereto shall use commercially reasonable best efforts, prior to, on and after the Effective Time, to take, or cause to be taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable Laws, regulations and agreements to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.

 

(b)                                 Without limiting the foregoing, prior to, on and after the Effective Time, each party hereto shall cooperate with the other parties hereto, and without any further consideration, but, from and after the Effective Time, at the expense of the requesting party, execute and deliver, or use commercially reasonable best efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all Approvals or Notifications of, any Governmental Authority or any other Person under any Permit, license, agreement, indenture or other instrument (including any consents or Governmental Approvals), and to take or cause to be taken all such other actions as such party may reasonably be requested to take or cause to be taken by the other parties hereto from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and the transfers of the Newco Assets and the Vornado Assets and the assignment and assumption of the Newco Liabilities and the Vornado Liabilities and the other transactions contemplated hereby and thereby. Without limiting the foregoing, each party hereto will, at the reasonable request, cost and expense of another party hereto, take such other actions as may be reasonably necessary to vest in such other Party good and marketable title to the Assets allocated to such party under this Agreement or any of the Ancillary Agreements, free and clear of any Security Interest, if and to the extent it is practicable to do so.

 

(c)                                  On or prior to the Effective Time, Vornado and Newco in their respective capacities as direct and indirect shareholders of the members of their Groups, shall each ratify

 

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any actions which are reasonably necessary or desirable to be taken by Vornado, Newco or any of the members of their respective Groups, as the case may be, to effectuate the transactions contemplated by this Agreement and the Ancillary Agreements.

 

(d)                                 Vornado and Newco, and each of the members of their respective Groups, waive (and agree not to assert against any of the others) any claim or demand that any of them may have against any of the others for any Liabilities or other claims relating to or arising out of: (i) the failure of Newco or any other member of the Newco Group, on the one hand, or of Vornado or any other member of the Vornado Group, on the other hand, to provide any notification or disclosure required under any state Environmental Law in connection with the Separation or the other transactions contemplated by this Agreement, including the transfer by any member of any Group to any member of the other Group of ownership or operational control of any Assets not previously owned or operated by such transferee; or (ii) any inadequate, incorrect or incomplete notification or disclosure under any such state Environmental Law by the applicable transferor. To the extent any Liability to any Governmental Authority or any Third Party arises out of any action or inaction described in clause (i) or (ii) above, the transferee of the applicable Asset hereby assumes and agrees to pay any such Liability (except in the case of willful misconduct).

 

ARTICLE IX
TERMINATION

 

9.1                               Termination. This Agreement shall terminate simultaneously with the valid termination of the Master Agreement prior to the Closing Date (as defined in the Master Agreement). Except for a termination described in the immediately preceding sentence, prior to the Closing Date (as defined in the Master Agreement), Newco shall not agree to terminate this Agreement without the prior written consent of JBG Properties, which consent shall not be unreasonably withheld, conditioned or delayed.  After the Closing Date (as defined in the Master Agreement), this Agreement may not be terminated except by an agreement in writing signed by a duly authorized officer of each of the parties hereto.

 

9.2                               Effect of Termination. In the event of any termination of this Agreement prior to the Effective Time, no party hereto (nor any of its directors, trustees, officers or employees) shall have any Liability or further obligation to any other party hereto by reason of this Agreement.

 

ARTICLE X
MISCELLANEOUS

 

10.1                        Counterparts; Entire Agreement; Corporate Power.

 

(a)                                 This Agreement and each Ancillary 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 hereto and delivered to the other parties hereto.

 

(b)                                 This Agreement, the Master Agreement, the Ancillary Agreements and the Exhibits, Schedules and Appendices hereto and thereto contain the entire agreement between the

 

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parties hereto with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the parties hereto other than those set forth or referred to herein or therein.

 

(c)                                  Vornado represents on behalf of itself and each other member of the Vornado Group, and Newco represents on behalf of itself and each other member of the Newco Group, as follows:

 

(i)                                     each such Person has the requisite power and authority and has taken all action necessary in order to execute, deliver and perform this Agreement and each Ancillary Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby; and

 

(ii)                                  this Agreement and each Ancillary Agreement to which it is a party has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.

 

(d)                                 Each party to this Agreement acknowledges that it and each other party is executing certain of the Ancillary Agreements by facsimile, stamp or mechanical signature, and that delivery of an executed counterpart of a signature page to this Agreement or any Ancillary Agreement (whether executed by manual, stamp or mechanical signature) by facsimile or by email in portable document format (PDF) shall be effective as delivery of such executed counterpart of this Agreement or any Ancillary Agreement. Each party expressly adopts and confirms each such facsimile, stamp or mechanical signature (regardless of whether delivered in person, by mail, by courier, by facsimile or by email in portable document format (PDF)) made in its respective name as if it were a manual signature delivered in person, agrees that it will not assert that any such signature or delivery is not adequate to bind such party to the same extent as if it were signed manually and delivered in person and agrees that, at the reasonable request of the other parties hereto at any time, it will as promptly as is reasonably practicable cause each such Ancillary Agreement to be manually executed (any such execution to be as of the date of the initial date thereof) and delivered in person, by mail or by courier.

 

10.2                        Governing Law.

 

(a)                                 This Agreement, and all claims or causes of actions (whether at Law, in contract or in tort) that may be based upon, arise out of or related to this Agreement or the negotiation, execution or performance of this Agreement, shall be governed by, and construed in accordance with, the Laws of the State of New York without giving effect to conflicts of laws principles (whether of the State of New York or any other jurisdiction that would cause the application of the Laws of any jurisdiction other than the State of New York).

 

(b)                                 All Actions arising out of or relating to this Agreement shall be heard and determined exclusively in the state courts sitting in the City, County and State of New York, or if jurisdiction over the matter is vested exclusively in federal courts, the United States District Court for the Southern District of New York, and the appellate courts to which orders and judgments thereof may be appealed (the “Chosen Courts”).  Each of the parties hereto hereby

 

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irrevocably and unconditionally (a) submits to the exclusive jurisdiction of the Chosen Courts for the purpose of any Action arising out of or relating to this Agreement brought by any party hereto, whether sounding in tort, contract or otherwise, (b) agrees not to commence any such action or proceeding except in such courts, (c) agrees that any claim in respect of any such action or proceeding may be heard and determined in any Chosen Court, (d) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding, and (e) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such action or proceeding.  Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.  Each party hereto irrevocably consents to service of process in the manner provided for notices in Section 10.7.  Nothing in this Agreement will affect the right of any party hereto to serve process in any other manner permitted by Law.

 

10.3                        Waiver of Jury Trial.  EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.3.

 

10.4                        Assignability. Except as set forth in any Ancillary Agreement, this Agreement and each Ancillary Agreement shall be binding upon and inure to the benefit of the parties hereto and the parties thereto, respectively, and their respective successors and permitted assigns; provided, however, that no party hereto nor any such party thereto may assign its rights or delegate its obligations under this Agreement or any Ancillary Agreement without the express prior written consent of the other parties hereto or other parties thereto, as applicable, and any attempt to do so shall be null and void (provided that prior to the Effective Time, Newco shall not assign this Agreement or consent to an assignment of this Agreement without the prior written consent of JBG Properties, which consent shall not be unreasonably withheld, conditioned or delayed). Notwithstanding the foregoing, no such consent shall be required for the assignment of a party’s rights and obligations under this Agreement and the Ancillary Agreements (except as may be otherwise provided in any such Ancillary Agreement) in whole (i.e., the assignment of a party’s rights and obligations under this Agreement and all Ancillary Agreements all at the same time) in connection with a change of control of a party so long as the resulting, surviving or transferee Person assumes all the obligations of the relevant party thereto by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other parties hereto.

 

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10.5                        Subsidiaries. Each of the Parties shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such Party or by any Person that becomes a Subsidiary of such Party at or after the Effective Time, in each case to the extent such Subsidiary remains a Subsidiary of the applicable Party.

 

10.6                        Third-Party Beneficiaries. Except for the indemnification rights under this Agreement of any Vornado Indemnitee or Newco Indemnitee in their respective capacities as such, and except for JBG Operating Partners, who shall be a Third Party beneficiary of the rights of Newco under this Agreement, (a) the provisions of this Agreement and each Ancillary Agreement are solely for the benefit of the parties hereto and are not intended to confer upon any Person except the parties hereto any rights or remedies hereunder, and (b) there are no Third Party beneficiaries of this Agreement or any Ancillary Agreement and neither this Agreement nor any Ancillary Agreement shall provide any Third Party with any remedy, claim, Liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement or any Ancillary Agreement; provided, however, that JBG Properties shall be a Third Party beneficiary of the rights of JBG Properties as provided in this Agreement and the other Ancillary Agreements.

 

10.7                        Notices.

 

All notices, requests, demands, claims and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given (i) when received if delivered personally; (ii) when transmitted if transmitted by e-mail of a pdf attachment and the hard copy is sent by the next business day by reliable overnight delivery service (with proof of service) or hand delivery); and (iii) the business day after it is sent, if sent for next day delivery by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 10.7).

 

If to Vornado or, on or prior to the Effective Time, to Newco, then to:

 

Vornado Realty Trust
888 Seventh Avenue
New York, New York 10019
Attention:
                                         Corporation Counsel
Facsimile:                                         (212) 894-7996

 

Vornado Realty Trust
888 Seventh Avenue
New York, New York 10019
Attention:
                                         Joseph Macnow
Facsimile:                                         (212) 894-7996

 

with a copy to (which shall not constitute notice):

 

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Sullivan & Cromwell LLP
125 Broad Street
New York, New York 10004
Attention:
                                         William G. Farrar
Facsimile:                                         (212) 558-3588

 

and, in the case of Newco, with a copy to (which shall not constitute notice):

 

The JBG Companies
4445 Willard Avenue Suite 400
Chevy Chase, Maryland 20815
Attention: Chief Legal Officer

Email: smuseles@jbg.com

 

and

 

Hogan Lovells US LLP
Columbia Square
555 Thirteenth Street, NW
Washington, District of Columbia 20004
Phone:
                                                          (202) 637-5868
Facsimile:                                         (202) 637-5910
Attention:                                         David W. Bonser, Esq.
E-mail:                                                        david.bonser@hoganlovells.com

 

If to Newco after the Effective Time, then to:

 

JBG Smith Properties
4445 Willard Avenue Suite 400
Chevy Chase, Maryland 20815
Attention:
                                         Chief Legal Officer
E-mail:                                                        smuseles@jbg.com

 

with a copy to (which shall not constitute notice):

 

Hogan Lovells US LLP
Columbia Square
555 Thirteenth Street, NW
Washington, District of Columbia 20004
Phone:
                                                          (202) 637-5868
Facsimile:                                         (202) 637-5910
Attention:                                         David W. Bonser, Esq.
E-mail:                                                        david.bonser@hoganlovells.com

 

A Party may, by notice to the other Party, change the address to which such notices are to be given.

 

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10.8                        Severability. If any provision of this Agreement or any Ancillary Agreement or the application thereof to any Person or circumstance is determined by an arbitration tribunal or a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or thereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the parties hereto shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the parties hereto.

 

10.9                        Force Majeure. No party hereto shall be deemed in default of this Agreement or, unless otherwise expressly provided therein, any Ancillary Agreement for any delay or failure to fulfill any obligation (other than a payment obligation) hereunder or thereunder so long as and to the extent to which any delay or failure in the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. In the event of any such excused delay, the time for performance of such obligations (other than a payment obligation) shall be extended for a period equal to the time lost by reason of the delay. A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (a) provide written notice to the other Party of the nature and extent of any such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement and the Ancillary Agreements, as applicable, as soon as reasonably practicable.

 

10.10                 No Set-Off. Except as set forth in any Ancillary Agreement or as otherwise mutually agreed to in writing by the Parties, neither any Party nor any member of such Party’s Group shall have any right of set-off or other similar rights with respect to (a) any amounts received pursuant to this Agreement or any Ancillary Agreement; or (b) any other amounts claimed to be owed to such Party or any member of its Group arising out of this Agreement or any Ancillary Agreement.

 

10.11                 Publicity. Prior to the Effective Time, Vornado and Newco shall consult with JBG Properties before issuing any press release or other public announcement that relates to the transactions contemplated hereby.  Any such press release or public announcement shall comply with the requirements in Section 5.3 of the Master Agreement. From and after the Effective Time, the Chief Executive Officer of Newco and the Chief Administrative Officer of Vornado shall consult with each other prior to either Party or any member of their respective Groups issuing any press releases or otherwise making public statements with respect to the Separation, the Distribution or any of the other transactions contemplated hereby or under any Ancillary Agreement and prior to making any filings with any Governmental Authority with respect thereto.

 

10.12                 Expenses. Except as otherwise expressly set forth in this Agreement, the Master Agreement or any Ancillary Agreement, or as otherwise agreed to in writing by the Parties, (a) Newco shall be responsible for all reasonable out-of-pocket Third Party fees, costs and expenses incurred on or prior to the Effective Time in connection with the preparation, execution, delivery and implementation of this Agreement and any Ancillary Agreement, the Separation, the Form 10, the Plan of Reorganization and the Distribution and the consummation

 

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of the transactions contemplated hereby and thereby; and (b) all fees, costs and expenses incurred after the Effective Time shall be borne by the Party or its applicable Subsidiary incurring such fees, costs or expenses.

 

10.13                 Headings. The article, section and paragraph headings contained in this Agreement and in the Ancillary Agreements are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement or any Ancillary Agreement.

 

10.14                 Survival of Covenants. Except as expressly set forth in this Agreement or any Ancillary Agreement, the covenants, representations and warranties contained in this Agreement and each Ancillary Agreement, and Liability for the breach of any obligations contained herein, shall survive the Separation and the Distribution and shall remain in full force and effect.

 

10.15                 Waivers of Default. Waiver by a party hereto of any default by another party hereto of any provision of this Agreement or any Ancillary Agreement shall not be deemed a waiver by the waiving party of any subsequent or other default, nor shall it prejudice the rights of any other party. No failure or delay by a party hereto in exercising any right, power or privilege under this Agreement or any Ancillary Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.

 

10.16                 Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement or any Ancillary Agreement, the party or parties hereto who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief in respect of its or their rights under this Agreement or such Ancillary Agreement, in addition to any and all other rights and remedies at Law or in equity, and all such rights and remedies shall be cumulative. The parties hereto agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any Loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by each of the parties hereto. For the avoidance of doubt, JBG Properties shall, during the term of this Agreement, have the right to enforce specifically the obligations of Vornado and Newco set forth herein.

 

10.17                 Amendments. No provisions of this Agreement, including any Exhibit, Schedule or Appendices hereto, or any Ancillary Agreement shall be deemed waived, amended, supplemented or modified by a party hereto, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the party hereto against whom it is sought to enforce such waiver, amendment, supplement or modification.  In addition, unless the Master Agreement shall have been terminated in accordance with its terms, any such amendment, waiver, supplement or modification shall be subject to the prior written consent of JBG Operating Partners.

 

10.18                 Interpretation. In this Agreement and any Ancillary Agreement, (a) words in the singular shall be deemed to include the plural and vice versa and words of one gender shall be deemed to include the other genders as the context requires; (b) the terms “hereof,” “herein,”

 

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and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement (or the applicable Ancillary Agreement) as a whole (including all of the Schedules, Exhibits and Appendices hereto and thereto) and not to any particular provision of this Agreement (or such Ancillary Agreement); (c) Article, Section, Schedule, Exhibit and Appendix references are to the Articles, Sections, Schedules, Exhibits and Appendices to this Agreement (or the applicable Ancillary Agreement) unless otherwise specified; (d) unless otherwise stated, all references to any agreement shall be deemed to include the exhibits, schedules and annexes to such agreement; (e) the word “including” and words of similar import when used in this Agreement (or the applicable Ancillary Agreement) shall mean “including, without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) unless otherwise specified in a particular case, the word “days” refers to calendar days; (h) references to “business day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions are generally authorized or required by Law to close in the United States or New York, New York; (i) references herein to this Agreement or any other agreement contemplated herein shall be deemed to refer to this Agreement or such other agreement as of the date on which it is executed and as it may be amended, modified or supplemented thereafter, unless otherwise specified; and (j) unless expressly stated to the contrary in this Agreement or in any Ancillary Agreement, all references to “the date hereof,” “the date of this Agreement,” “hereby” and “hereupon” and words of similar import shall all be references to July 17, 2017. In the case of any conflict between this Agreement and any of the Transition Services Agreement, the Tax Matters Agreement and the Employee Matters Agreement in relation to any matters addressed by such Ancillary Agreement, the applicable Ancillary Agreement shall prevail unless such Ancillary Agreement explicitly states that this Agreement shall control. In the case of any conflict between this Agreement and the Master Agreement, the Master Agreement shall control.

 

10.19                 Limitations of Liability. Notwithstanding anything in this Agreement to the contrary, but without limiting any recovery expressly provided by Section 7.3, neither Newco or any member of the Newco Group, on the one hand, nor Vornado or any member of the Vornado Group, on the other hand, shall be liable under this Agreement to the other for any indirect, punitive, exemplary, remote, speculative or similar damages in excess of compensatory damages of the other arising in connection with the transactions contemplated hereby (other than any such Liability with respect to a Third-Party Claim).

 

10.20                 Performance. Vornado will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Ancillary Agreement to be performed by any member of the Vornado Group. Newco will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Ancillary Agreement to be performed by any member of the Newco Group. Each Party (including its permitted successors and assigns) further agrees that it will (a) give timely notice of the terms, conditions and continuing obligations contained in this Agreement and any applicable Ancillary Agreement to all of the other members of its Group and (b) cause all of the other members of its Group not to take any action or fail to take any such action inconsistent with such Party’s obligations under this Agreement, any Ancillary Agreement or the transactions contemplated hereby or thereby.

 

10.21                 Mutual Drafting. This Agreement and the Ancillary Agreements shall be deemed to be the joint work product of the parties hereto and any rule of construction that a

 

66



 

document shall be interpreted or construed against a drafter of such document shall not be applicable.

 

10.22                 No Admission of Liability. The allocation of Assets and Liabilities herein (including on the Schedules hereto) is solely for the purpose of allocation such Assets and Liabilities between Vornado and Newco and is not intended as an admission of liability or responsibility for any alleged Liabilities vis-à-vis any Third Party, including with respect to the Liabilities of any non-wholly owned Subsidiary of Vornado or Newco.

 

[Remainder of page intentionally left blank]

 

67



 

IN WITNESS WHEREOF, the parties have caused this Separation and Distribution Agreement to be executed by their duly authorized representatives.

 

 

VORNADO REALTY TRUST

 

 

 

 

 

 

 

By:

/s/ Alan J. Rice

 

 

Name: Alan J. Rice

 

 

Title: Senior Vice President

 

 

 

 

 

 

 

VORNADO REALTY L.P.

 

 

 

 

By. Vornado Realty Trust, its general partner

 

 

 

 

 

 

 

By:

/s/ Alan J. Rice

 

 

Name: Alan J. Rice

 

 

Title: Senior Vice President

 

[Signature Page to Separation and Distribution Agreement]

 



 

 

JBG SMITH PROPERTIES

 

 

 

 

 

 

 

By:

/s/ Stephen W. Theriot

 

 

Name: Stephen W. Theriot

 

 

Title: Chief Financial Officer

 

 

 

 

 

 

 

JBG SMITH PROPERTIES LP

 

 

 

 

By: JBG SMITH Properties GP LLC, its general partner

 

 

 

 

 

 

 

By:

/s/ Stephen W. Theriot

 

 

Name: Stephen W. Theriot

 

 

Title: Chief Financial Officer

 

[Signature Page to Separation and Distribution Agreement]

 


EX-2.3 4 a17-17912_1ex2d3.htm EX-2.3

Exhibit 2.3

 

AGREEMENT AND PLAN OF MERGER

 

Between

 

JBG/FUND VI TRANSFERRED, L.L.C.

 

and

 

JBGS/FUND VI OP MERGERCO, L.L.C.

 

Dated as of July 17, 2017

 



 

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER, dated as of July 17, 2017 (this “Agreement”), is made and entered into by and between JBGS/Fund VI OP Mergerco, L.L.C., a Delaware limited liability company (“Mergerco”), and JBG/Fund VI Transferred, L.L.C., a Delaware limited liability company (“Transferred LLC” and together with Mergerco, the “Parties”).

 

WHEREAS, this Agreement is being entered into and carried out by Transferred LLC and Mergerco in connection with, and as contemplated by that  certain Master Transaction Agreement, dated as of October 31, 2016 (the “Transaction Agreement”), by and among Vornado Realty Trust, a Maryland real estate investment trust (“Vornado”), Vornado Realty L.P., a Delaware limited partnership (“Vornado OP”), Vornado DC Spinco, a Maryland real estate investment trust, which entity has been renamed “JBG SMITH Properties” as of November 16, 2016 (“Newco”), Vornado DC Spinco OP LP, a Delaware limited partnership, which entity has been renamed JBG SMITH Properties LP (“Newco OP”), JBG Properties Inc., a Maryland corporation, JBG/Operating Partners, L.P., a Delaware limited partnership and certain affiliates of JBG Properties Inc. and JBG/Operating Partners, L.P.;

 

WHEREAS, Mergerco is a subsidiary of Newco OP and JBGS/TRS, L.L.C. (“TRS”);

 

WHEREAS, the Parties hereto wish to effect a business combination through a merger of Mergerco with and into Transferred LLC, with Transferred LLC surviving as a limited liability company owned by Newco OP and TRS (the “Merger”), on the terms and subject to the conditions set forth in this Agreement and in accordance with Section 18-209 of the Delaware Code, as amended (the “Code”);

 

WHEREAS, Transferred LLC has acquired ownership of certain JBG Included Interests as set forth on Schedule A (the “Equity Interests”) on or prior to the date hereof pursuant to the Restructuring Transactions outlined in 5.8(a) of the Transaction Agreement (the “Restructuring”);

 

WHEREAS, JBG/Fund VI Manager, L.L.C., the managing member (the “Managing Member”) of Transferred LLC and the members holding a majority of the membership interests in Transferred LLC (the “Investors”, and together with the Managing Member, the “Members”) have approved this Agreement and the Merger on behalf of Transferred LLC and declared that this Agreement and the Merger of Mergerco with and into Transferred LLC, with Transferred LLC surviving, are advisable, on the terms and subject to the conditions set forth herein;

 

WHEREAS, Newco OP, the sole managing member of Mergerco, has approved this Agreement and the Merger on behalf of Mergerco and declared that this Agreement and the Merger are advisable, on the terms and subject to the conditions set forth herein;

 

WHEREAS, for U.S. federal income tax purposes, the Parties intend that the Merger be treated as follows:  (i) with respect to each Member of Transferred LLC that receives Issued OP Units pursuant to the transactions contemplated by this Agreement, the Merger shall be treated as a contribution of the portion of such Member’s interests in Transferred LLC to Newco OP for which such form of consideration is received pursuant to Section 721(a) of the Internal Revenue Code of 1986, as amended (the “IRS Code”), and (ii) with respect to each member of Transferred LLC that receives cash or Issued Newco Shares pursuant to the transactions contemplated by this Agreement, the Merger shall be treated as the sale to Newco OP and TRS of the portion of such member’s interests in Transferred LLC for which such form of consideration is received, and Newco OP and TRS, pursuant to Section 1.09 below, agree to report the Merger pursuant to this intent; and

 

1



 

WHEREAS, capitalized terms not otherwise defined herein shall have the respective meaning set forth in the Transaction Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereto hereby agree as follows:

 

ARTICLE I
THE MERGER

 

SECTION 1.01.                             The Merger.

 

Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with Section 18-209 of the Code, at the Merger Effective Time (as defined below), Transferred LLC and Mergerco shall consummate the Merger, pursuant to which (i) Mergerco shall be merged with and into Transferred LLC and the separate existence of Mergerco shall thereupon cease, and (ii) Transferred LLC shall be the surviving limited liability company in the Merger.

 

SECTION 1.02.                             Effective Time of the Merger.

 

At or prior to the Closing (as defined below), Transferred LLC shall file the certificate of merger with respect to the Merger, in such form as is required by, and executed in accordance with, the relevant provisions of the Code (the “Certificate of Merger”), with the Secretary of State of the State of Delaware (the “DSOS”).  The Merger shall become effective at 12:01 a.m. Eastern Time on July 18, 2017 (such time, the “Merger Effective Time”).

 

SECTION 1.03.                       Closing.

 

The closing of the Merger (the “Closing”) shall occur at the Merger Effective Time, which is after the consummation of the Pre-Combination Transactions and simultaneously with the closing of the Combination Transactions pursuant to the Transaction Agreement.

 

SECTION 1.04.                       Effects of the Merger.

 

The Merger shall have the effects specified in Section 18-209 of the Code, and in addition, at the Merger Effective Time, by virtue of the Merger and without any action on the part of a holder of an interest in Transferred LLC or in Mergerco:

 

(a)                                 Pursuant to Section 1.2(a) of the Transaction Agreement, the Members of Transferred LLC will receive cash, Issued Newco Shares and Issued OP Units (the “Consideration”) as set forth on Schedule B attached hereto and incorporated herein as consideration for the Merger, and  by virtue of the Merger and without any action on the part of Transferred LLC or Mergerco or the Members of Transferred LLC, each interest held in Transferred LLC outstanding immediately prior to the Effective Time shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each Member of Transferred LLC shall thereafter cease to have any rights, except the right to receive the Consideration as set forth on Schedule B; and

 

(b)                              Each interest in Mergerco issued and outstanding immediately prior to the Merger Effective Time shall, by virtue of the Merger and without any action on the part of Transferred

 

2



 

LLC or Mergerco or the Members of Transferred LLC or the members of Mergerco, be converted automatically into an interest in Transferred LLC.

 

SECTION 1.05.                       Transferred LLC Limited Liability Company Agreement.

 

Immediately following the Merger Effective Time, the limited liability company agreement of Transferred LLC shall be amended and restated to be the limited liability company agreement of Mergerco as in effect immediately prior to the Merger Effective Time (the “New Transferred LLC Agreement”).

 

SECTION 1.06.                       Managing Member of Transferred LLC.

 

Immediately following the Merger Effective Time, Newco OP shall be the managing member of Transferred LLC, until its resignation or removal in accordance with the New Transferred LLC Agreement.

 

SECTION 1.07.                       Dissenters’ Rights.

 

No dissenters’ rights or appraisal rights shall be available with respect to the Merger or the other transactions contemplated hereby.

 

SECTION 1.08.                       Release.

 

Persons who at any time prior to the Merger Effective Time have been members, partners, shareholders, directors, trustees, officers, agents or employees of Transferred LLC or of any of its affiliates prior to the Merger Effective Time (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, who are not, as of immediately following the Merger Effective Time, directors, trustees, officers or employees of Newco or any of its Subsidiaries are hereby released of and from any further liabilities or obligations whether accruing before or after the Closing with respect to the Equity Interests, including, without limitation, all Liabilities arising from or in connection with the Transactions and all other activities to implement the Transactions, and all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Merger Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Merger Effective Time), in each case to the extent relating to, arising out of or resulting from the Newco Business, the Newco Assets or the Newco Liabilities (each as defined in the Separation and Distribution Agreement to be entered into by and among Vornado, Vornado OP, Newco and Newco OP, in the form attached to the Transaction Agreement as Exhibit D), but subject to the terms and conditions of the Transaction Agreement.

 

SECTION 1.09.                       Intended Tax Treatment of the Merger.

 

The Parties intend for the transactions contemplated by this Agreement to be treated in accordance with, and agree to report in a manner consistent with, the following for U.S. federal income tax purposes:

 

(a)                                 With respect to each Member of Transferred LLC that receives Issued OP Units pursuant to the transactions contemplated by this Agreement, the Merger shall be treated as a contribution of the portion of such Member’s interests in Transferred LLC to Newco OP for which such form of

 

3



 

consideration is received in exchange for Issued OP Units received pursuant to Section 721(a) of the IRS Code in a transaction in which no gain or loss is required to be recognized;

 

(b)                                 With respect to each Member of Transferred LLC that receives cash or Issued Newco Shares pursuant to the transactions contemplated by this Agreement, the Merger shall be treated as the sale to Newco OP and TRS of the portion of such Member’s interests in Transferred  LLC for which such form of consideration is received, as described in Schedule B attached hereto and incorporated herein; and

 

(c)                                  Transferred LLC will be treated as continuing as a partnership for federal income tax purposes following the Merger, with Newco OP and TRS as its partners.

 

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TRANSFERRED LLC

 

Transferred LLC hereby represents and warrants to Mergerco as follows:

 

SECTION 2.01.                             Organization, Power and Authority.

 

Transferred LLC is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware.  Transferred LLC has all requisite limited liability company power and authority to own and operate its assets.

 

SECTION 2.02.                             Authorization.

 

Transferred LLC has all requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Merger as contemplated by this Agreement.  The execution, delivery and performance by Transferred LLC of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly and validly authorized by all necessary limited liability company action on behalf of Transferred LLC, and no further limited liability company action on the part of Transferred LLC is required to consummate the transactions contemplated by this Agreement, other than the filing and recordation of the Certificate of Merger and other appropriate merger documents as required by the Code.  This Agreement has been duly and validly executed and delivered by Transferred LLC, and assuming the due authorization, execution and delivery by Mergerco, constitutes a valid, binding and enforceable obligation of Transferred LLC, enforceable against Transferred LLC in accordance with its terms.

 

SECTION 2.03.                             No Prior Business.

 

Since the date of its formation, Transferred LLC has not conducted any business, nor has it incurred any liabilities or obligations (direct or indirect, present or contingent), in each case, except in connection with the Transactions and the assets and liabilities of JBG Investment Fund VI, L.L.C. (“Fund VI”) and its subsidiaries related to the Equity Interests.

 

SECTION 2.04.                             Assumption of Liabilities.

 

Pursuant to the Restructuring, Transferred LLC assumed all obligations of certain JBG Included Entities, whether arising before or after the date hereof, to the extent such obligations relate to the Equity Interests. Transferred LLC is subject to and in compliance with the representations and

 

4



 

warranties in Article IV of the Transaction Agreement as such representations and warranties were applicable to certain JBG Included Entities’ holding of the Equity Interests and the assets and properties that were held by certain JBG Included Entities on the date thereof and are now held by Transferred LLC and its subsidiaries after giving effect to the Restructuring Transactions.

 

SECTION 2.05.                             Disclaimer of Representations and Warranties.

 

THE PARTIES UNDERSTAND AND AGREE THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, IN THE TRANSACTION AGREEMENT, OR IN ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT CONTEMPLATED HEREBY OR THEREBY, NO PARTY TO THIS AGREEMENT, THE TRANSACTION AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, THE TRANSACTION AGREEMENT, ANY ANCILLARY AGREEMENT OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES OR LIABILITIES TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS, APPROVALS OR NOTIFICATIONS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SET-OFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY CLAIM OR OTHER ASSET, INCLUDING ANY ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY ASSIGNMENT, DOCUMENT OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN, IN THE TRANSACTION AGREEMENT OR IN ANY ANCILLARY AGREEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS, WHERE IS” BASIS AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE WILL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY APPROVALS OR NOTIFICATIONS ARE NOT OBTAINED OR MADE OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

 

ARTICLE III

GENERAL PROVISIONS

 

SECTION 3.01.                                                     Amendment.

 

Subject to compliance with applicable Law, this Agreement may be amended by mutual agreement of the Parties hereto by action taken or authorized by their respective board of directors, managing member or other similar governing body, if necessary; provided, however, that there shall not be any amendment or change not permitted under applicable Law.  This Agreement may not be amended except by an instrument in writing signed by each of the Parties hereto.

 

SECTION 3.02.                                                     Non-Survival.

 

None of the representations, warranties, or agreements in this Agreement or in any schedule, instrument or other document delivered pursuant to this Agreement shall survive the Closing; provided, however, that this Section 3.02 shall not limit any covenant or agreement of the each of the

 

5



 

Parties hereto to the extent such covenant or agreement by its terms contemplates performance after the Closing, which shall survive the Closing.

 

SECTION 3.03.                                                     Interpretation.

 

When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The headings set forth in this Agreement are for convenience of reference purposes only and shall not affect or be deemed to affect in any way the meaning or interpretation of this Agreement or any term or provision hereof. When reference is made herein to a Person, such reference shall be deemed to include all direct and indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires.  All references herein to the Subsidiaries of a Person shall be deemed to include all direct and indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires.   The Parties agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any Law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.  In the case of any conflict between this Agreement and the Transaction Agreement, the Transaction Agreement shall control.

 

SECTION 3.04.                                                     Counterparts.

 

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

SECTION 3.05.                                                     Electronic Signatures and Transmission.

 

A facsimile, telecopy, portable document format (.pdf) or any other reproduction of this Agreement may be executed by the Parties, including by means of an electronic signature or other format, and an executed copy of this Agreement may be delivered by the Parties by facsimile, portable document format (.pdf)  or other electronic transmission means pursuant to which the signature of or on behalf of the Parties can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes.

 

SECTION 3.06.                                                     Entire Agreement.

 

This Agreement, the Transaction Agreement and the other Ancillary Documents constitute the entire agreement among the Parties with respect to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and oral, among the Parties or any of them with respect to the subject matter hereof and thereof. This Agreement is not intended to confer upon any Person, other than the Parties and their successors and permitted assigns, any rights or remedies hereunder.

 

SECTION 3.07.                                                     Severability.

 

If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by rule of Law or public policy, all other conditions 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 adverse to any Party.  Upon such determination that

 

6



 

any term or other provision is invalid, illegal or incapable of being enforced, the Parties 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 to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

SECTION 3.08.                                                     Governing Law; Jurisdiction.

 

This Agreement and all claims or causes of actions (whether at Law, in contract or in tort) that may be based upon, arise out of or related to this Agreement or the negotiation, execution or performance of this Agreement, shall be governed by, and construed in accordance with, the Laws of the State of Delaware without giving effect to conflicts of laws principles (whether of the State of Delaware or any other jurisdiction that would cause the application of the Laws of any jurisdiction other than the State of Delaware).

 

SECTION 3.09.                                                     Waiver of Jury Trial.

 

EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 3.09.

 

SECTION 3.10.                                                     Assignment.

 

This Agreement shall not be assigned by any of the Parties (whether by operation of Law or otherwise) without the prior written consent of the other Parties. Any assignment referred to in the immediately preceding sentence shall not relieve any Party of any obligation hereunder, and following such assignment this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and assigns.

 

[SIGNATURE PAGE FOLLOWS]

 

7



 

IN WITNESS WHEREOF, Transferred LLC and Mergerco have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

 

 

JBG/FUND VI TRANSFERRED, L.L.C., a Delaware limited

 

liability company

 

 

 

By: JBG/Fund VI Manager, L.L.C., its managing member

 

 

 

By:

/s/ Brian Coulter

 

Name:

Brian Coulter

 

Title:

Managing Member

 

 

 

 

 

JBGS/FUND VI OP MERGERCO, L.L.C., a Delaware limited

 

liability company

 

 

 

By: JBG SMITH Properties LP, its managing member

 

 

 

By: JBG SMITH Properties GP LLC, its general partner

 

 

 

By:

/s/ Stephen Theriot

 

Name:

Stephen Theriot

 

Title:

Chief Financial Officer

 

[Signature Page to Agreement and Plan of Merger by and between Fund VI Transferred LLC and

Fund VI Mergerco]

 


EX-2.4 5 a17-17912_1ex2d4.htm EX-2.4

Exhibit 2.4

 

AGREEMENT AND PLAN OF MERGER

 

Between

 

JBG/FUND VII TRANSFERRED, L.L.C.

 

and

 

JBGS/FUND VII OP MERGERCO, L.L.C.

 

Dated as of July 17, 2017

 



 

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER, dated as of July 17, 2017 (this “Agreement”), is made and entered into by and between JBGS/Fund VII OP Mergerco, L.L.C., a Delaware limited liability company (“Mergerco”), and JBG/Fund VII Transferred, L.L.C., a Delaware limited liability company (“Transferred LLC” and together with Mergerco, the “Parties”).

 

WHEREAS, this Agreement is being entered into and carried out by Transferred LLC and Mergerco in connection with, and as contemplated by that  certain Master Transaction Agreement, dated as of October 31, 2016 (the “Transaction Agreement”), by and among Vornado Realty Trust, a Maryland real estate investment trust (“Vornado”), Vornado Realty L.P., a Delaware limited partnership (“Vornado OP”), Vornado DC Spinco, a Maryland real estate investment trust, which entity has been renamed “JBG SMITH Properties” as of November 16, 2016 (“Newco”), Vornado DC Spinco OP LP, a Delaware limited partnership, which entity has been renamed JBG SMITH Properties LP (“Newco OP”), JBG Properties Inc., a Maryland corporation, JBG/Operating Partners, L.P., a Delaware limited partnership and certain affiliates of JBG Properties Inc. and JBG/Operating Partners, L.P.;

 

WHEREAS, Mergerco is a subsidiary of Newco OP and JBGS/TRS, L.L.C. (“TRS”);

 

WHEREAS, the Parties hereto wish to effect a business combination through a merger of Mergerco with and into Transferred LLC, with Transferred LLC surviving as a limited liability company owned by Newco OP and TRS (the “Merger”), on the terms and subject to the conditions set forth in this Agreement and in accordance with Section 18-209 of the Delaware Code, as amended (the “Code”);

 

WHEREAS, Transferred LLC has acquired ownership of certain JBG Included Interests as set forth on Schedule A (the “Equity Interests”) on or prior to the date hereof pursuant to the Restructuring Transactions outlined in 5.8(a) of the Transaction Agreement (the “Restructuring”);

 

WHEREAS, JBG/Fund VII Manager, L.L.C., the managing member (the “Managing Member”) of Transferred LLC and the members holding a majority of the membership interests in Transferred LLC (the “Investors”, and together with the Managing Member, the “Members”) have approved this Agreement and the Merger on behalf of Transferred LLC and declared that this Agreement and the Merger of Mergerco with and into Transferred LLC, with Transferred LLC surviving, are advisable, on the terms and subject to the conditions set forth herein;

 

WHEREAS, Newco OP, the sole managing member of Mergerco, has approved this Agreement and the Merger on behalf of Mergerco and declared that this Agreement and the Merger are advisable, on the terms and subject to the conditions set forth herein;

 

WHEREAS, for U.S. federal income tax purposes, the Parties intend that the Merger be treated as follows:  (i) with respect to each Member of Transferred LLC that receives Issued OP Units pursuant to the transactions contemplated by this Agreement, the Merger shall be treated as a contribution of the portion of such Member’s interests in Transferred LLC to Newco OP for which such form of consideration is received pursuant to Section 721(a) of the Internal Revenue Code of 1986, as amended (the “IRS Code”), and (ii) with respect to each member of Transferred LLC that receives cash or Issued Newco Shares pursuant to the transactions contemplated by this Agreement, the Merger shall be treated as the sale to Newco OP and TRS of the portion of such member’s interests in Transferred LLC for which such form of consideration is received, and Newco OP and TRS, pursuant to Section 1.09 below, agree to report the Merger pursuant to this intent; and

 

1



 

WHEREAS, capitalized terms not otherwise defined herein shall have the respective meaning set forth in the Transaction Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereto hereby agree as follows:

 

ARTICLE I
THE MERGER

 

SECTION 1.01.                             The Merger.

 

Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with Section 18-209 of the Code, at the Merger Effective Time (as defined below), Transferred LLC and Mergerco shall consummate the Merger, pursuant to which (i) Mergerco shall be merged with and into Transferred LLC and the separate existence of Mergerco shall thereupon cease, and (ii) Transferred LLC shall be the surviving limited liability company in the Merger.

 

SECTION 1.02.                             Effective Time of the Merger.

 

At or prior to the Closing (as defined below), Transferred LLC shall file the certificate of merger with respect to the Merger, in such form as is required by, and executed in accordance with, the relevant provisions of the Code (the “Certificate of Merger”), with the Secretary of State of the State of Delaware (the “DSOS”).  The Merger shall become effective at 12:01 a.m. Eastern Time on July 18, 2017 (such time, the “Merger Effective Time”).

 

SECTION 1.03.                       Closing.

 

The closing of the Merger (the “Closing”) shall occur at the Merger Effective Time, which is after the consummation of the Pre-Combination Transactions and simultaneously with the closing of the Combination Transactions pursuant to the Transaction Agreement.

 

SECTION 1.04.                       Effects of the Merger.

 

The Merger shall have the effects specified in Section 18-209 of the Code, and in addition, at the Merger Effective Time, by virtue of the Merger and without any action on the part of a holder of an interest in Transferred LLC or in Mergerco:

 

(a)                                 Pursuant to Section 1.2(a) of the Transaction Agreement, the Members of Transferred LLC will receive cash, Issued Newco Shares and Issued OP Units (the “Consideration”) as set forth on Schedule B attached hereto and incorporated herein as consideration for the Merger, and  by virtue of the Merger and without any action on the part of Transferred LLC or Mergerco or the Members of Transferred LLC, each interest held in Transferred LLC outstanding immediately prior to the Effective Time shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each Member of Transferred LLC shall thereafter cease to have any rights, except the right to receive the Consideration as set forth on Schedule B; and

 

(b)                              Each interest in Mergerco issued and outstanding immediately prior to the Merger Effective Time shall, by virtue of the Merger and without any action on the part of Transferred

 

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LLC or Mergerco or the Members of Transferred LLC or the members of Mergerco, be converted automatically into an interest in Transferred LLC.

 

SECTION 1.05.                       Transferred LLC Limited Liability Company Agreement.

 

Immediately following the Merger Effective Time, the limited liability company agreement of Transferred LLC shall be amended and restated to be the limited liability company agreement of Mergerco as in effect immediately prior to the Merger Effective Time (the “New Transferred LLC Agreement”).

 

SECTION 1.06.                       Managing Member of Transferred LLC.

 

Immediately following the Merger Effective Time, Newco OP shall be the managing member of Transferred LLC, until its resignation or removal in accordance with the New Transferred LLC Agreement.

 

SECTION 1.07.                       Dissenters’ Rights.

 

No dissenters’ rights or appraisal rights shall be available with respect to the Merger or the other transactions contemplated hereby.

 

SECTION 1.08.                       Release.

 

Persons who at any time prior to the Merger Effective Time have been members, partners, shareholders, directors, trustees, officers, agents or employees of Transferred LLC or of any of its affiliates prior to the Merger Effective Time (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, who are not, as of immediately following the Merger Effective Time, directors, trustees, officers or employees of Newco or any of its Subsidiaries are hereby released of and from any further liabilities or obligations whether accruing before or after the Closing with respect to the Equity Interests, including, without limitation, all Liabilities arising from or in connection with the Transactions and all other activities to implement the Transactions, and all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Merger Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Merger Effective Time), in each case to the extent relating to, arising out of or resulting from the Newco Business, the Newco Assets or the Newco Liabilities (each as defined in the Separation and Distribution Agreement to be entered into by and among Vornado, Vornado OP, Newco and Newco OP, in the form attached to the Transaction Agreement as Exhibit D), but subject to the terms and conditions of the Transaction Agreement.

 

SECTION 1.09.                       Intended Tax Treatment of the Merger.

 

The Parties intend for the transactions contemplated by this Agreement to be treated in accordance with, and agree to report in a manner consistent with, the following for U.S. federal income tax purposes:

 

(a)                                 With respect to each Member of Transferred LLC that receives Issued OP Units pursuant to the transactions contemplated by this Agreement, the Merger shall be treated as a contribution of the portion of such Member’s interests in Transferred LLC to Newco OP for which such form of

 

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consideration is received in exchange for Issued OP Units received pursuant to Section 721(a) of the IRS Code in a transaction in which no gain or loss is required to be recognized;

 

(b)                                 With respect to each Member of Transferred LLC that receives cash or Issued Newco Shares pursuant to the transactions contemplated by this Agreement, the Merger shall be treated as the sale to Newco OP and TRS of the portion of such Member’s interests in Transferred  LLC for which such form of consideration is received, as described in Schedule B attached hereto and incorporated herein; and

 

(c)                                  Transferred LLC will be treated as continuing as a partnership for federal income tax purposes following the Merger, with Newco OP and TRS as its partners.

 

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TRANSFERRED LLC

 

Transferred LLC hereby represents and warrants to Mergerco as follows:

 

SECTION 2.01.                             Organization, Power and Authority.

 

Transferred LLC is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware.  Transferred LLC has all requisite limited liability company power and authority to own and operate its assets.

 

SECTION 2.02.                             Authorization.

 

Transferred LLC has all requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Merger as contemplated by this Agreement.  The execution, delivery and performance by Transferred LLC of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly and validly authorized by all necessary limited liability company action on behalf of Transferred LLC, and no further limited liability company action on the part of Transferred LLC is required to consummate the transactions contemplated by this Agreement, other than the filing and recordation of the Certificate of Merger and other appropriate merger documents as required by the Code.  This Agreement has been duly and validly executed and delivered by Transferred LLC, and assuming the due authorization, execution and delivery by Mergerco, constitutes a valid, binding and enforceable obligation of Transferred LLC, enforceable against Transferred LLC in accordance with its terms.

 

SECTION 2.03.                             No Prior Business.

 

Since the date of its formation, Transferred LLC has not conducted any business, nor has it incurred any liabilities or obligations (direct or indirect, present or contingent), in each case, except in connection with the Transactions and the assets and liabilities of JBG Investment Fund VII, L.L.C. (“Fund VII”) and its subsidiaries related to the Equity Interests.

 

SECTION 2.04.                             Assumption of Liabilities.

 

Pursuant to the Restructuring, Transferred LLC assumed all obligations of certain JBG Included Entities, whether arising before or after the date hereof, to the extent such obligations relate to the Equity Interests. Transferred LLC is subject to and in compliance with the representations and

 

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warranties in Article IV of the Transaction Agreement as such representations and warranties were applicable to certain JBG Included Entities’ holding of the Equity Interests and the assets and properties that were held by certain JBG Included Entities on the date thereof and are now held by Transferred LLC and its subsidiaries after giving effect to the Restructuring Transactions.

 

SECTION 2.05.                             Disclaimer of Representations and Warranties.

 

THE PARTIES UNDERSTAND AND AGREE THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, IN THE TRANSACTION AGREEMENT, OR IN ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT CONTEMPLATED HEREBY OR THEREBY, NO PARTY TO THIS AGREEMENT, THE TRANSACTION AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, THE TRANSACTION AGREEMENT, ANY ANCILLARY AGREEMENT OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES OR LIABILITIES TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS, APPROVALS OR NOTIFICATIONS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SET-OFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY CLAIM OR OTHER ASSET, INCLUDING ANY ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY ASSIGNMENT, DOCUMENT OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN, IN THE TRANSACTION AGREEMENT OR IN ANY ANCILLARY AGREEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS, WHERE IS” BASIS AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE WILL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY APPROVALS OR NOTIFICATIONS ARE NOT OBTAINED OR MADE OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

 

ARTICLE III

GENERAL PROVISIONS

 

SECTION 3.01.                                                     Amendment.

 

Subject to compliance with applicable Law, this Agreement may be amended by mutual agreement of the Parties hereto by action taken or authorized by their respective board of directors, managing member or other similar governing body, if necessary; provided, however, that there shall not be any amendment or change not permitted under applicable Law.  This Agreement may not be amended except by an instrument in writing signed by each of the Parties hereto.

 

SECTION 3.02.                                                     Non-Survival.

 

None of the representations, warranties, or agreements in this Agreement or in any schedule, instrument or other document delivered pursuant to this Agreement shall survive the Closing; provided, however, that this Section 3.02 shall not limit any covenant or agreement of the each of the

 

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Parties hereto to the extent such covenant or agreement by its terms contemplates performance after the Closing, which shall survive the Closing.

 

SECTION 3.03.                                                     Interpretation.

 

When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The headings set forth in this Agreement are for convenience of reference purposes only and shall not affect or be deemed to affect in any way the meaning or interpretation of this Agreement or any term or provision hereof. When reference is made herein to a Person, such reference shall be deemed to include all direct and indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires.  All references herein to the Subsidiaries of a Person shall be deemed to include all direct and indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires.   The Parties agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any Law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.  In the case of any conflict between this Agreement and the Transaction Agreement, the Transaction Agreement shall control.

 

SECTION 3.04.                                                     Counterparts.

 

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

SECTION 3.05.                                                     Electronic Signatures and Transmissions.

 

A facsimile, telecopy, portable document format (.pdf) or any other reproduction of this Agreement may be executed by the Parties, including by means of an electronic signature or other format, and an executed copy of this Agreement may be delivered by the Parties by facsimile, portable document format (.pdf)  or other electronic transmission means pursuant to which the signature of or on behalf of the Parties can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes.

 

SECTION 3.06.                                                     Entire Agreement.

 

This Agreement, the Transaction Agreement and the other Ancillary Documents constitute the entire agreement among the Parties with respect to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and oral, among the Parties or any of them with respect to the subject matter hereof and thereof. This Agreement is not intended to confer upon any Person, other than the Parties and their successors and permitted assigns, any rights or remedies hereunder.

 

SECTION 3.07.                                                     Severability.

 

If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by rule of Law or public policy, all other conditions 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 adverse to any Party.  Upon such determination that

 

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any term or other provision is invalid, illegal or incapable of being enforced, the Parties 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 to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

SECTION 3.08.                                                     Governing Law; Jurisdiction.

 

This Agreement and all claims or causes of actions (whether at Law, in contract or in tort) that may be based upon, arise out of or related to this Agreement or the negotiation, execution or performance of this Agreement, shall be governed by, and construed in accordance with, the Laws of the State of Delaware without giving effect to conflicts of laws principles (whether of the State of Delaware or any other jurisdiction that would cause the application of the Laws of any jurisdiction other than the State of Delaware).

 

SECTION 3.09.                                                     Waiver of Jury Trial.

 

EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 3.09.

 

SECTION 3.10.                                                     Assignment.

 

This Agreement shall not be assigned by any of the Parties (whether by operation of Law or otherwise) without the prior written consent of the other Parties. Any assignment referred to in the immediately preceding sentence shall not relieve any Party of any obligation hereunder, and following such assignment this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and assigns.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, Transferred LLC and Mergerco have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

 

 

JBG/FUND VII TRANSFERRED, L.L.C., a Delaware limited

 

liability company

 

 

 

By: JBG/Fund VII Manager, L.L.C., its managing member

 

 

 

By:

/s/ James Iker

 

Name:

James Iker

 

Title:

Managing Member

 

 

 

 

 

JBGS/FUND VII OP MERGERCO, L.L.C., a Delaware limited

 

liability company

 

 

 

By: JBG SMITH Properties LP, its managing member

 

 

 

By: JBG SMITH Properties GP LLC, its general partner

 

 

 

By:

/s/ Stephen Theriot

 

Name:

Stephen Theriot

 

Title:

Chief Financial Officer

 

[Signature Page to Agreement and Plan of Merger by and between Fund VII Transferred LLC and

Fund VII Mergerco]

 


EX-2.5 6 a17-17912_1ex2d5.htm EX-2.5

Exhibit 2.5

 

AGREEMENT AND PLAN OF MERGER

 

Between

 

JBG/FUND IX TRANSFERRED, L.L.C.

 

and

 

JBGS/FUND IX OP MERGERCO, L.L.C.

 

Dated as of July 17, 2017

 



 

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER, dated as of July 17, 2017 (this “Agreement”), is made and entered into by and between JBGS/Fund IX OP Mergerco, L.L.C., a Delaware limited liability company (“Mergerco”), and JBG/Fund IX Transferred, L.L.C., a Delaware limited liability company (“Transferred LLC” and together with Mergerco, the “Parties”).

 

WHEREAS, this Agreement is being entered into and carried out by Transferred LLC and Mergerco in connection with, and as contemplated by that  certain Master Transaction Agreement, dated as of October 31, 2016 (the “Transaction Agreement”), by and among Vornado Realty Trust, a Maryland real estate investment trust (“Vornado”), Vornado Realty L.P., a Delaware limited partnership (“Vornado OP”), Vornado DC Spinco, a Maryland real estate investment trust, which entity has been renamed “JBG SMITH Properties” as of November 16, 2016 (“Newco”), Vornado DC Spinco OP LP, a Delaware limited partnership, which entity has been renamed JBG SMITH Properties LP (“Newco OP”), JBG Properties Inc., a Maryland corporation, JBG/Operating Partners, L.P., a Delaware limited partnership and certain affiliates of JBG Properties Inc. and JBG/Operating Partners, L.P.;

 

WHEREAS, Mergerco is a subsidiary of Newco OP and JBGS/TRS, L.L.C. (“TRS”);

 

WHEREAS, the Parties hereto wish to effect a business combination through a merger of Mergerco with and into Transferred LLC, with Transferred LLC surviving as a limited liability company owned by Newco OP and TRS (the “Merger”), on the terms and subject to the conditions set forth in this Agreement and in accordance with Section 18-209 of the Delaware Code, as amended (the “Code”);

 

WHEREAS, Transferred LLC has acquired ownership of certain JBG Included Interests as set forth on Schedule A (the “Equity Interests”) on or prior to the date hereof pursuant to the Restructuring Transactions outlined in 5.8(a) of the Transaction Agreement (the “Restructuring”);

 

WHEREAS, JBG/Fund IX Manager, L.L.C., the managing member (the “Managing Member”) of Transferred LLC and the members holding a majority of the membership interests in Transferred LLC (the “Investors”, and together with the Managing Member, the “Members”) have approved this Agreement and the Merger on behalf of Transferred LLC and declared that this Agreement and the Merger of Mergerco with and into Transferred LLC, with Transferred LLC surviving, are advisable, on the terms and subject to the conditions set forth herein;

 

WHEREAS, Newco OP, the sole managing member of Mergerco, has approved this Agreement and the Merger on behalf of Mergerco and declared that this Agreement and the Merger are advisable, on the terms and subject to the conditions set forth herein;

 

WHEREAS, for U.S. federal income tax purposes, the Parties intend that the Merger be treated as follows:  (i) with respect to each Member of Transferred LLC that receives Issued OP Units pursuant to the transactions contemplated by this Agreement, the Merger shall be treated as a contribution of the portion of such Member’s interests in Transferred LLC to Newco OP for which such form of consideration is received pursuant to Section 721(a) of the Internal Revenue Code of 1986, as amended (the “IRS Code”), and (ii) with respect to each member of Transferred LLC that receives cash or Issued Newco Shares pursuant to the transactions contemplated by this Agreement, the Merger shall be treated as the sale to Newco OP and TRS of the portion of such member’s interests in Transferred LLC for which such form of consideration is received, and Newco OP and TRS, pursuant to Section 1.09 below, agree to report the Merger pursuant to this intent; and

 

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WHEREAS, capitalized terms not otherwise defined herein shall have the respective meaning set forth in the Transaction Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereto hereby agree as follows:

 

ARTICLE I
THE MERGER

 

SECTION 1.01.                             The Merger.

 

Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with Section 18-209 of the Code, at the Merger Effective Time (as defined below), Transferred LLC and Mergerco shall consummate the Merger, pursuant to which (i) Mergerco shall be merged with and into Transferred LLC and the separate existence of Mergerco shall thereupon cease, and (ii) Transferred LLC shall be the surviving limited liability company in the Merger.

 

SECTION 1.02.                             Effective Time of the Merger.

 

At or prior to the Closing (as defined below), Transferred LLC shall file the certificate of merger with respect to the Merger, in such form as is required by, and executed in accordance with, the relevant provisions of the Code (the “Certificate of Merger”), with the Secretary of State of the State of Delaware (the “DSOS”).  The Merger shall become effective at 12:01 a.m. Eastern Time on July 18, 2017 (such time, the “Merger Effective Time”).

 

SECTION 1.03.                             Closing.

 

The closing of the Merger (the “Closing”) shall occur at the Merger Effective Time, which is after the consummation of the Pre-Combination Transactions and simultaneously with the closing of the Combination Transactions pursuant to the Transaction Agreement.

 

SECTION 1.04.                             Effects of the Merger.

 

The Merger shall have the effects specified in Section 18-209 of the Code, and in addition, at the Merger Effective Time, by virtue of the Merger and without any action on the part of a holder of an interest in Transferred LLC or in Mergerco:

 

(a)                                 Pursuant to Section 1.2(a) of the Transaction Agreement, the Members of Transferred LLC will receive cash, Issued Newco Shares and Issued OP Units (the “Consideration”) as set forth on Schedule B attached hereto and incorporated herein as consideration for the Merger, and  by virtue of the Merger and without any action on the part of Transferred LLC or Mergerco or the Members of Transferred LLC, each interest held in Transferred LLC outstanding immediately prior to the Effective Time shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each Member of Transferred LLC shall thereafter cease to have any rights, except the right to receive the Consideration as set forth on Schedule B; and

 

(b)                              Each interest in Mergerco issued and outstanding immediately prior to the Merger Effective Time shall, by virtue of the Merger and without any action on the part of Transferred

 

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LLC or Mergerco or the Members of Transferred LLC or the members of Mergerco, be converted automatically into an interest in Transferred LLC.

 

SECTION 1.05.                       Transferred LLC Limited Liability Company Agreement.

 

Immediately following the Merger Effective Time, the limited liability company agreement of Transferred LLC shall be amended and restated to be the limited liability company agreement of Mergerco as in effect immediately prior to the Merger Effective Time (the “New Transferred LLC Agreement”).

 

SECTION 1.06.                       Managing Member of Transferred LLC.

 

Immediately following the Merger Effective Time, Newco OP shall be the managing member of Transferred LLC, until its resignation or removal in accordance with the New Transferred LLC Agreement.

 

SECTION 1.07.                       Dissenters’ Rights.

 

No dissenters’ rights or appraisal rights shall be available with respect to the Merger or the other transactions contemplated hereby.

 

SECTION 1.08.                       Release.

 

Persons who at any time prior to the Merger Effective Time have been members, partners, shareholders, directors, trustees, officers, agents or employees of Transferred LLC or of any of its affiliates prior to the Merger Effective Time (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, who are not, as of immediately following the Merger Effective Time, directors, trustees, officers or employees of Newco or any of its Subsidiaries are hereby released of and from any further liabilities or obligations whether accruing before or after the Closing with respect to the Equity Interests, including, without limitation, all Liabilities arising from or in connection with the Transactions and all other activities to implement the Transactions, and all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Merger Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Merger Effective Time), in each case to the extent relating to, arising out of or resulting from the Newco Business, the Newco Assets or the Newco Liabilities (each as defined in the Separation and Distribution Agreement to be entered into by and among Vornado, Vornado OP, Newco and Newco OP, in the form attached to the Transaction Agreement as Exhibit D), but subject to the terms and conditions of the Transaction Agreement.

 

SECTION 1.09.                       Intended Tax Treatment of the Merger.

 

The Parties intend for the transactions contemplated by this Agreement to be treated in accordance with, and agree to report in a manner consistent with, the following for U.S. federal income tax purposes:

 

(a)                                 With respect to each Member of Transferred LLC that receives Issued OP Units pursuant to the transactions contemplated by this Agreement, the Merger shall be treated as a contribution of the portion of such Member’s interests in Transferred LLC to Newco OP for which such form of

 

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consideration is received in exchange for Issued OP Units received pursuant to Section 721(a) of the IRS Code in a transaction in which no gain or loss is required to be recognized;

 

(b)                                 With respect to each Member of Transferred LLC that receives cash or Issued Newco Shares pursuant to the transactions contemplated by this Agreement, the Merger shall be treated as the sale to Newco OP and TRS of the portion of such Member’s interests in Transferred  LLC for which such form of consideration is received, as described in Schedule B attached hereto and incorporated herein; and

 

(c)                                  Transferred LLC will be treated as continuing as a partnership for federal income tax purposes following the Merger, with Newco OP and TRS as its partners.

 

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TRANSFERRED LLC

 

Transferred LLC hereby represents and warrants to Mergerco as follows:

 

SECTION 2.01.                             Organization, Power and Authority.

 

Transferred LLC is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware.  Transferred LLC has all requisite limited liability company power and authority to own and operate its assets.

 

SECTION 2.02.                             Authorization.

 

Transferred LLC has all requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Merger as contemplated by this Agreement.  The execution, delivery and performance by Transferred LLC of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly and validly authorized by all necessary limited liability company action on behalf of Transferred LLC, and no further limited liability company action on the part of Transferred LLC is required to consummate the transactions contemplated by this Agreement, other than the filing and recordation of the Certificate of Merger and other appropriate merger documents as required by the Code.  This Agreement has been duly and validly executed and delivered by Transferred LLC, and assuming the due authorization, execution and delivery by Mergerco, constitutes a valid, binding and enforceable obligation of Transferred LLC, enforceable against Transferred LLC in accordance with its terms.

 

SECTION 2.03.                             No Prior Business.

 

Since the date of its formation, Transferred LLC has not conducted any business, nor has it incurred any liabilities or obligations (direct or indirect, present or contingent), in each case, except in connection with the Transactions and the assets and liabilities of JBG Investment Fund IX, L.L.C. (“Fund IX”) and its subsidiaries related to the Equity Interests.

 

SECTION 2.04.                             Assumption of Liabilities.

 

Pursuant to the Restructuring, Transferred LLC assumed all obligations of certain JBG Included Entities, whether arising before or after the date hereof, to the extent such obligations relate to the Equity Interests. Transferred LLC is subject to and in compliance with the representations and

 

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warranties in Article IV of the Transaction Agreement as such representations and warranties were applicable to certain JBG Included Entities’ holding of the Equity Interests and the assets and properties that were held by certain JBG Included Entities on the date thereof and are now held by Transferred LLC and its subsidiaries after giving effect to the Restructuring Transactions.

 

SECTION 2.05.                             Disclaimer of Representations and Warranties.

 

THE PARTIES UNDERSTAND AND AGREE THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, IN THE TRANSACTION AGREEMENT, OR IN ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT CONTEMPLATED HEREBY OR THEREBY, NO PARTY TO THIS AGREEMENT, THE TRANSACTION AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, THE TRANSACTION AGREEMENT, ANY ANCILLARY AGREEMENT OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES OR LIABILITIES TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS, APPROVALS OR NOTIFICATIONS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SET-OFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY CLAIM OR OTHER ASSET, INCLUDING ANY ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY ASSIGNMENT, DOCUMENT OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN, IN THE TRANSACTION AGREEMENT OR IN ANY ANCILLARY AGREEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS, WHERE IS” BASIS AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE WILL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY APPROVALS OR NOTIFICATIONS ARE NOT OBTAINED OR MADE OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

 

ARTICLE III

GENERAL PROVISIONS

 

SECTION 3.01.                                                     Amendment.

 

Subject to compliance with applicable Law, this Agreement may be amended by mutual agreement of the Parties hereto by action taken or authorized by their respective board of directors, managing member or other similar governing body, if necessary; provided, however, that there shall not be any amendment or change not permitted under applicable Law.  This Agreement may not be amended except by an instrument in writing signed by each of the Parties hereto.

 

SECTION 3.02.                                                     Non-Survival.

 

None of the representations, warranties, or agreements in this Agreement or in any schedule, instrument or other document delivered pursuant to this Agreement shall survive the Closing; provided, however, that this Section 3.02 shall not limit any covenant or agreement of the each of the

 

5



 

Parties hereto to the extent such covenant or agreement by its terms contemplates performance after the Closing, which shall survive the Closing.

 

SECTION 3.03.                                                     Interpretation.

 

When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The headings set forth in this Agreement are for convenience of reference purposes only and shall not affect or be deemed to affect in any way the meaning or interpretation of this Agreement or any term or provision hereof. When reference is made herein to a Person, such reference shall be deemed to include all direct and indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires.  All references herein to the Subsidiaries of a Person shall be deemed to include all direct and indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires.   The Parties agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any Law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.  In the case of any conflict between this Agreement and the Transaction Agreement, the Transaction Agreement shall control.

 

SECTION 3.04.                                                     Counterparts.

 

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

SECTION 3.05.                                                     Electronic Signatures and Transmission.

 

A facsimile, telecopy, portable document format (.pdf) or any other reproduction of this Agreement may be executed by the Parties, including by means of an electronic signature or other format, and an executed copy of this Agreement may be delivered by the Parties by facsimile, portable document format (.pdf)  or other electronic transmission means pursuant to which the signature of or on behalf of the Parties can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes.

 

SECTION 3.06.                                                     Entire Agreement.

 

This Agreement, the Transaction Agreement and the other Ancillary Documents constitute the entire agreement among the Parties with respect to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and oral, among the Parties or any of them with respect to the subject matter hereof and thereof. This Agreement is not intended to confer upon any Person, other than the Parties and their successors and permitted assigns, any rights or remedies hereunder.

 

SECTION 3.07.                                                     Severability.

 

If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by rule of Law or public policy, all other conditions 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 adverse to any Party.  Upon such determination that

 

6



 

any term or other provision is invalid, illegal or incapable of being enforced, the Parties 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 to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

SECTION 3.08.                                                     Governing Law; Jurisdiction.

 

This Agreement and all claims or causes of actions (whether at Law, in contract or in tort) that may be based upon, arise out of or related to this Agreement or the negotiation, execution or performance of this Agreement, shall be governed by, and construed in accordance with, the Laws of the State of Delaware without giving effect to conflicts of laws principles (whether of the State of Delaware or any other jurisdiction that would cause the application of the Laws of any jurisdiction other than the State of Delaware).

 

SECTION 3.09.                                                     Waiver of Jury Trial.

 

EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 3.09.

 

SECTION 3.10.                                                     Assignment.

 

This Agreement shall not be assigned by any of the Parties (whether by operation of Law or otherwise) without the prior written consent of the other Parties. Any assignment referred to in the immediately preceding sentence shall not relieve any Party of any obligation hereunder, and following such assignment this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and assigns.

 

[SIGNATURE PAGE FOLLOWS]

 

7



 

IN WITNESS WHEREOF, Transferred LLC and Mergerco have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

 

 

JBG/Fund IX Transferred, L.L.C., a Delaware limited liability

 

company

 

 

 

By: JBG/Fund IX Manager, L.L.C., its managing member

 

 

 

 

 

By:

/s/ James Iker

 

Name:

James Iker

 

Title:

Managing Member

 

 

 

 

 

Fund IX OP Mergerco, L.L.C., a Delaware limited liability

 

company

 

 

 

By: JBG SMITH Properties LP, its managing member

 

 

 

By: JBG SMITH Properties GP LLC, its general partner

 

 

 

By:

/s/ Stephen Theriot

 

Name:

Stephen Theriot

 

Title:

Chief Financial Officer

 

[Signature Page to Agreement and Plan of Merger by and between Transferred LLC and Mergerco]

 


EX-2.6 7 a17-17912_1ex2d6.htm EX-2.6

Exhibit 2.6

 

CONTRIBUTION AND ASSIGNMENT AGREEMENT

 

Between

 

JBG SMITH PROPERTIES LP

 

and

 

JBG/FUND VIII LEGACY, L.L.C.

 

Dated as of July 18, 2017

 



 

CONTRIBUTION AND ASSIGNMENT AGREEMENT

 

This CONTRIBUTION AND ASSIGNMENT AGREEMENT, dated as of July 18, 2017 (this “Agreement”), is made and entered into by and between JBG Smith Properties LP, a Delaware limited partnership (the “Operating Partnership”), and JBG/Fund VIII Legacy, L.L.C., a Delaware limited liability company (“Legacy LLC” and together with the Operating Partnership, the “Parties”).

 

WHEREAS, this Agreement is being entered into and carried out by the Operating Partnership and Legacy LLC in connection with, and as contemplated by that certain Master Transaction Agreement, dated as of October 31, 2016 (as it may be amended, the “Transaction Agreement”), by and among Vornado Realty Trust, a Maryland real estate investment trust (“Vornado”), Vornado Realty L.P., a Delaware limited partnership (“Vornado OP”), Vornado DC Spinco, a Maryland real estate investment trust (“Newco”), the Operating Partnership, JBG Properties Inc., a Maryland corporation, JBG/Operating Partners, L.P., a Delaware limited partnership and certain affiliates of JBG Properties Inc. and JBG Operating Partners, L.P.;

 

WHEREAS, Legacy LLC owns 100% of the outstanding membership interests (the “LLC Interest”) in JBG/Fund VIII Transferred, L.L.C. (“Transferred LLC”), which is disregarded as an entity separate from Legacy LLC for U.S. federal income tax purposes;

 

WHEREAS, Legacy LLC has acquired the LLC Interest from JBG Investment Fund VIII, L.L.C. (“JBG Fund VIII”) via a merger of Transferred LLC with a subsidiary of Legacy LLC on the date hereof pursuant to the Restructuring Transactions outlined in Section 5.8(a) of the Transaction Agreement (the “Restructuring”);

 

WHEREAS, pursuant to Section 1.2(c) of the Transaction Agreement, the Operating Partnership desires to acquire from Legacy LLC, and Legacy LLC desires to contribute and transfer to the Operating Partnership, subject to the terms and conditions set forth herein, the LLC Interest;

 

WHEREAS, pursuant to Section 1.4 of the Transaction Agreement, Legacy LLC will receive cash, Issued Newco Shares and Issued OP Units (collectively, the “Consideration”), as consideration for the contribution of the LLC Interest;

 

WHEREAS, immediately following the contribution of the LLC Interest to the Operating Partnershp in exchange for the Consideration, Legacy LLC will distribute the Consideration to its members and liquidate;

 

WHEREAS, for U.S. federal income tax purposes, (i) the Parties intend that the contribution of the LLC Interest to the Operating Partnership in exchange for the Consideration, followed by the immediate liquidation of Legacy LLC and the distribution of the Consideration to its members, be treated as a merger of Legacy LLC with the Operating Partnership within the meaning of Section 708(b)(2)(A) of the Internal Revenue Code of 1986, as amended (the “Code”) and Treasury Regulations §1.708-1(c), with such merger treated as an “assets-over” form of merger as provided for in Treasuary Regulations §1.708-1(c)(3)(i), and (ii) each member of Legacy LLC has agreed and consented to treat the receipt of any cash or Issued Newco Shares pursuant to the transactions contemplated by this Agreement as the sale to the Operating Partnership of the portion of such member’s interests in Legacy LLC for which such form of consideration is received, and the Operating Partnership, pursuant to Article IV below, agrees to report the payment of any cash and the issuance of any Issued Newco Shares as the purchase from such Legacy LLC member of those interests in Legacy LLC immediately prior to the merger described in clause (i) of this paragraph, all pursuant to Treasury Regulations Section 1.708-1(c)(4);

 

1



 

WHEREAS, Schedule A attached hereto and incorporated herein, specifies the portion and nature of the Consideration to be transferred to each member of Legacy LLC pursuant to the transactions contemplated herein, and the portion of the interests held by such member in Legacy LLC, if any, that is purchased by the Operating Partnership in exchange for such Consideration;

 

WHEREAS, the closing (the “Closing”) of the transactions contemplated by this Agreement shall be on the date hereof, after the consummation of the Pre-Combination Transactions and simultaneously with the closing of the Combination Transactions pursuant to the Transaction Agreement; and

 

WHEREAS, capitalized terms not otherwise defined herein shall have the respective meaning set forth in the Transaction Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

 

ARTICLE I
CONTRIBUTION

 

SECTION 1.01.                                                     Contribution and Assignment.

 

Upon the terms and subject to the conditions set forth in this Agreement, Legacy LLC hereby contributes, grants, assigns, transfers and conveys and delivers forever to the Operating Partnership, all of Legacy LLC’s rights, title and interest under, in and to the LLC Interest in exchange for the Consideration.  The Operating Partnership hereby accepts the foregoing contribution, grant, assignment, transfer and conveyance of the LLC Interest as a contribution by Legacy LLC to the Operating Partnership and hereby pays the Consideration to Legacy LLC, subject to Article IV hereof.

 

SECTION 1.02.                                                     Assumption.

 

Upon the terms and subject to the conditions set forth in this Agreement, Newco OP hereby expressly assumes and agrees to perform, satisfy and discharge, in each case in due course, all of the liabilities and obligations of Legacy LLC relating to the LLC Interest whether arising or accruing before or after the date hereof. Legacy LLC, any of its affiliates, their respective successors and assigns, all persons who at any time prior to the Closing have been shareholders, directors, trustees, officers, agents or employees of Legacy LLC or any of its affiliates (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns and all persons who at any time prior to the Closing are or have been shareholders, directors, trustees, officers, agents or employees of Transferred LLC and who are not, as of immediately following the Closing, directors, trustees, officers or employees of Newco or any of its Subsidiaries are hereby released of and from any further liabilities or obligations whether accruing before or after the date hereof with respect to the LLC Interest, including, without limitation, all Liabilities arising from or in connection with the Transactions and all other activities to implement the Transactions, and all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Closing (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Closing), in each case to the extent relating to, arising out of or resulting from the Newco Business, the Newco Assets or the Newco Liabilities (each as defined in the Separation and Distribution Agreement to be entered into by and among Vornado, Vornado OP, Newco and Newco OP, in the form attached to the Transaction Agreement as Exhibit D), but subject to the terms and conditions of the Transaction Agreement.

 

2



 

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF LEGACY LLC

 

Legacy LLC hereby represents and warrants to the Operating Partnership as follows:

 

SECTION 2.01.                                                     Organization, Power and Authority.

 

Legacy LLC is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware.  Legacy LLC has all requisite limited liability company power and authority to own and operate its assets.

 

SECTION 2.02.                                                     Authorization.

 

Legacy LLC has full right, authority, power and capacity (a) to enter into this Agreement and each agreement, document and instrument to be executed and delivered by or on behalf of Legacy LLC pursuant to this Agreement; (b) to carry out the transactions contemplated hereby and thereby; and (c) to contribute, transfer and deliver all of the LLC Interest to the Operating Partnership (or its designee) in accordance with this Agreement.  This Agreement and each agreement, document and instrument executed and delivered by or on behalf of Legacy LLC pursuant to this Agreement constitutes, or when executed and delivered will constitute, the legal, valid and binding obligation of Legacy LLC, each enforceable in accordance with its respective terms.

 

SECTION 2.03.                                                     No Prior Business.

 

Since the date of its formation, Legacy LLC has not conducted any business, nor has it incurred any liabilities or obligations (direct or indirect, present or contingent), in each case, except in connection with the Transactions and the assets and liabilities of Transferred LLC and its subsidiaries related to the LLC Interest.

 

SECTION 2.04.                                                     Assumption of Liabilities.

 

Pursuant to the Restructuring, Legacy LLC assumed all obligations of JBG Fund VIII, to the extent such obligations relate to the LLC Interest. Legacy LLC is subject to and in compliance with the representations and warranties in Article IV of the Transaction Agreement as such representations and warranties were applicable to JBG Fund VIII’s holding of the LLC Interest and the assets and properties that were held by JBG Fund VIII on the date thereof and are now held by Transferred LLC and its subsidiaries after giving effect to the Restructuring Transactions.

 

SECTION 2.05.                                                     Disclaimer of Representations and Warranties.

 

THE PARTIES UNDERSTAND AND AGREE THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, IN THE TRANSACTION AGREEMENT, OR IN ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT CONTEMPLATED HEREBY OR THEREBY, NO PARTY TO THIS AGREEMENT, THE TRANSACTION AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, THE TRANSACTION AGREEMENT, ANY ANCILLARY AGREEMENT OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES OR LIABILITIES TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS, APPROVALS OR NOTIFICATIONS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY

 

3



 

SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SET-OFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY CLAIM OR OTHER ASSET, INCLUDING ANY ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY ASSIGNMENT, DOCUMENT OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN, IN THE TRANSACTION AGREEMENT OR IN ANY ANCILLARY AGREEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS, WHERE IS” BASIS AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE WILL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY APPROVALS OR NOTIFICATIONS ARE NOT OBTAINED OR MADE OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

 

ARTICLE III

COVENANTS

 

SECTION 3.01.                                                     Subsequent Actions.

 

(a)                                 Immediately following the contribution of the LLC Interest to the Operating Partnership in exchange for the Consideration pursuant to this Agreement, Legacy LLC will liquidate and distribute the Consideration to its members in accordance with Schedule A.

 

(b)                                 The Operating Partnership hereby agrees that JBG/Fund VIII Trust, an affiliate of JBG Fund VIII, shall continue to exist (and shall not be liquidated or otherwise terminated) for no less than two years following the Closing.

 

ARTICLE IV

TAX MATTERS

 

The Parties intend for the transactions contemplated by this Agreement to be treated in accordance with, and agree to report in a manner consistent with, the following for U.S. federal income tax purposes:

 

(a)                                 The contribution and assignment of the LLC Interest by Legacy LLC to the Operating Partnership in exchange for the Consideration and the distribution, immediately thereafter, of the Consideration by Legacy LLC to its members in liquidation of Legacy LLC shall be treated as a merger, undertaken by Legacy LLC in the “assets-over” form, of Legacy LLC and the Operating Partnership pursuant to Treasury Regulations Section 1.708-1(c)(3)(i); and

 

(b)                                 The issuance of the cash and the Issued Newco Shares to Legacy LLC for distribution in the liquidation of Legacy LLC to the members thereof electing such consideration shall be treated as the direct purchase by the Operating Partnership, immediately prior to the merger described in clause (a) of this Article IV, of the membership interests in Legacy LLC from the electing members of Legacy LLC, and for the Consideration, described in Schedule A attached hereto and incorporated herein, as contemplated by Treasury Regulations Section 1.708-1(c)(4).

 

4



 

ARTICLE V
GENERAL PROVISIONS

 

SECTION 5.01.                                                     Amendment.

 

Subject to compliance with applicable Law, this Agreement may be amended by mutual agreement of the Parties hereto by action taken or authorized by their respective boards of directors, general partners or other similar governing body or entity, if necessary; provided, however, that there shall not be any amendment or change not permitted under applicable Law.  This Agreement may not be amended except by an instrument in writing signed by each of the Parties hereto.

 

SECTION 5.02.                                                     Non-Survival.

 

None of the representations, warranties, or agreements in this Agreement or in any schedule, instrument or other document delivered pursuant to this Agreement shall survive the Closing; provided, however, that this Section 5.02 shall not limit any covenant or agreement of the Parties hereto to the extent such covenant or agreement by its terms contemplates performance after the Closing, which shall survive the Closing.

 

SECTION 5.03.                                                     Interpretation.

 

When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The headings set forth in this Agreement are for convenience of reference purposes only and shall not affect or be deemed to affect in any way the meaning or interpretation of this Agreement or any term or provision hereof. When reference is made herein to a Person, such reference shall be deemed to include all direct and indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires.  All references herein to the Subsidiaries of a Person shall be deemed to include all direct and indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires.   The Parties agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any Law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.  In the case of any conflict between this Agreement and the Transaction Agreement, the Transaction Agreement shall control.

 

SECTION 5.04.                                                     Counterparts.

 

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. A facsimile, telecopy, portable document format (.pdf) or any other reproduction of this Agreement may be executed by the Parties, including by means of an electronic signature or other format, and an executed copy of this Agreement by the Parties may be delivered by the Parties by facsimile, portable document format (.pdf)  or other electronic transmission means pursuant to which the signature of or on behalf of the Parties can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes.

 

SECTION 5.05.                                                     Entire Agreement.

 

This Agreement the Transaction Agreement and the other Ancillary Documents constitute the entire agreement among the Parties with respect to the subject matter hereof and thereof and

 

5



 

supersedes all other prior agreements and understandings, both written and oral, among the Parties or any of them with respect to the subject matter hereof and thereof. This Agreement is not intended to confer upon any Person, other than the Parties and their successors and permitted assigns, any rights or remedies hereunder.

 

SECTION 5.06.                                                     Severability.

 

If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by rule of Law or public policy, all other conditions 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 adverse to any Party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties 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 to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

SECTION 5.07.                                                     Governing Law; Jurisdiction.

 

(a)                                                         This Agreement, and all claims or causes of actions (whether at Law, in contract or in tort) that may be based upon, arise out of or related to this Agreement or the negotiation, execution or performance of this Agreement, shall be governed by, and construed in accordance with, the Laws of the State of New York without giving effect to conflicts of laws principles (whether of the State of New York or any other jurisdiction that would cause the application of the Laws of any jurisdiction other than the State of New York).

 

(b)                                                         All Actions arising out of or relating to this Agreement shall be heard and determined exclusively in the state courts sitting in the City, County and State of New York, or if jurisdiction over the matter is vested exclusively in federal courts, the United States District Court for the Southern District of New York, , and the appellate courts to which orders and judgments thereof may be appealed (the “Chosen Courts”).  Each of the Parties hereby irrevocably and unconditionally (a) submits to the exclusive jurisdiction of the Chosen Courts for the purpose of any Action arising out of or relating to this Agreement brought by any Party, whether sounding in tort, contract or otherwise, (b) agrees not to commence any such action or proceeding except in such courts, (c) agrees that any claim in respect of any such action or proceeding may be heard and determined in any Chosen Court, (d) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding, and (e) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such action or proceeding.  Each of the Parties agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Nothing in this Agreement will affect the right of any Party to serve process in any manner permitted by Law.

 

SECTION 5.08.                                                     Waiver of Jury Trial.

 

EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER

 

6



 

PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 5.08.

 

SECTION 5.09.                                                     Assignment.

 

This Agreement shall not be assigned by any of the Parties (whether by operation of Law or otherwise) without the prior written consent of the other Parties. Any assignment referred to in the immediately preceding sentence shall not relieve any Party of any obligation hereunder, and following such assignment this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and assigns.

 

[SIGNATURE PAGE FOLLOWS]

 

7



 

IN WITNESS WHEREOF, the Operating Partnership and Legacy LLC have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

 

 

JBG SMITH PROPERTIES LP, a Delaware limited partnership

 

 

 

By:       JBG SMITH PROPERTIES, its General Partner

 

 

 

 

 

By:

/s/ Steven Museles

 

Name:

Steven Museles

 

Title:

Chief Legal Officer and Secretary

 

 

 

 

 

JBG/FUND VIII LEGACY, L.L.C., a Delaware limited liability

 

company

 

 

 

By:

JBG/FUND VIII MANAGER L.L.C., as Managing

 

 

Member

 

 

 

 

By:

/s/ James Iker

 

Name:

James Iker

 

Title:

Managing Member

 

[SIGNATURE PAGE TO CONTRIBUTION AND ASSIGNMENT AGREEMENT BY AND BETWEEN JBG SMITH PROPERTIES LP AND JBG/FUND VIII LEGACY, L.L.C.]

 


EX-2.7 8 a17-17912_1ex2d7.htm EX-2.7

Exhibit 2.7

 

CONTRIBUTION AND ASSIGNMENT AGREEMENT

 

Between

 

JBG SMITH PROPERTIES LP

 

and

 

JBG/UDM LEGACY, L.L.C.

 

Dated as of July 18, 2017

 



 

CONTRIBUTION AND ASSIGNMENT AGREEMENT

 

This CONTRIBUTION AND ASSIGNMENT AGREEMENT, dated as of July 18, 2017 (this “Agreement”), is made and entered into by and between JBG SMITH Properties LP, a Delaware limited partnership (the “Operating Partnership”), and JBG/UDM Legacy L.L.C., a Delaware limited liability company (“Legacy LLC” and together with the Operating Partnership, the “Parties”).

 

WHEREAS, this Agreement is being entered into and carried out by the Operating Partnership and Legacy LLC in connection with, and as contemplated by that certain Master Transaction Agreement, dated as of October 31, 2016 (as it may be amended, the “Transaction Agreement”), by and among Vornado Realty Trust, a Maryland real estate investment trust (“Vornado”), Vornado Realty L.P., a Delaware limited partnership (“Vornado OP”), Vornado DC Spinco, a Maryland real estate investment trust (“Newco”), the Operating Partnership, JBG Properties Inc., a Maryland corporation, JBG/Operating Partners, L.P., a Delaware limited partnership and certain affiliates of JBG Properties Inc. and JBG Operating Partners, L.P.;

 

WHEREAS, Legacy LLC owns 100% of the outstanding membership interests (the “LLC Interest”) in JBG/UDM Transferred L.L.C. (“Transferred LLC”), which is disregarded as an entity separate from Legacy LLC for U.S. federal income tax purposes;

 

WHEREAS, Legacy LLC has acquired the LLC Interest from JBG/Urban Direct Member, L.L.C. (“UDM”) via a merger of Transferred LLC with a subsidiary of Legacy LLC on the date hereof pursuant to the Restructuring Transactions outlined in Section 5.8(a) of the Transaction Agreement (the “Restructuring”);

 

WHEREAS, pursuant to Section 1.2(c) of the Transaction Agreement, the Operating Partnership desires to acquire from Legacy LLC, and Legacy LLC desires to contribute and transfer to the Operating Partnership, subject to the terms and conditions set forth herein, the LLC Interest;

 

WHEREAS, pursuant to Section 1.4 of the Transaction Agreement, Legacy LLC will receive cash, Issued Newco Shares and Issued OP Units (collectively, the “Consideration”), as consideration for the contribution of the LLC Interest;

 

WHEREAS, immediately following the contribution of the LLC Interest to the Operating Partnershp in exchange for the Consideration, Legacy LLC will distribute the Consideration to its members and liquidate;

 

WHEREAS, for U.S. federal income tax purposes, (i) the Parties intend that the contribution of the LLC Interest to the Operating Partnership in exchange for the Consideration, followed by the immediate liquidation of Legacy LLC and the distribution of the Consideration to its members, be treated as a merger of Legacy LLC with the Operating Partnership within the meaning of Section 708(b)(2)(A) of the Internal Revenue Code of 1986, as amended (the “Code”) and Treasury Regulations §1.708-1(c), with such merger treated as an “assets-over” form of merger as provided for in Treasuary Regulations §1.708-1(c)(3)(i), and (ii) each member of Legacy LLC has agreed and consented to treat the receipt of any cash or Issued Newco Shares pursuant to the transactions contemplated by this Agreement as the sale to the Operating Partnership of the portion of such member’s interests in Legacy LLC for which such form of consideration is received, and the Operating Partnership, pursuant to Article IV below, agrees to report the payment of any cash and the issuance of any Issued Newco Shares as the purchase from such Legacy LLC member of those interests in Legacy LLC immediately prior to the merger described in clause (i) of this paragraph, all pursuant to Treasury Regulations Section 1.708-1(c)(4);

 

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WHEREAS, Schedule A attached hereto and incorporated herein, specifies the portion and nature of the Consideration to be transferred to each member of Legacy LLC pursuant to the transactions contemplated herein, and the portion of the interests held by such member in Legacy LLC, if any, that is purchased by the Operating Partnership in exchange for such Consideration;

 

WHEREAS, the closing (the “Closing”) of the transactions contemplated by this Agreement shall be on the date hereof, after the consummation of the Pre-Combination Transactions and simultaneously with the closing of the Combination Transactions pursuant to the Transaction Agreement; and

 

WHEREAS, capitalized terms not otherwise defined herein shall have the respective meaning set forth in the Transaction Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

 

ARTICLE I
CONTRIBUTION

 

SECTION 1.01.                                                     Contribution and Assignment.

 

Upon the terms and subject to the conditions set forth in this Agreement, Legacy LLC hereby contributes, grants, assigns, transfers and conveys and delivers forever to the Operating Partnership, all of Legacy LLC’s rights, title and interest under, in and to the LLC Interest in exchange for the Consideration.  The Operating Partnership hereby accepts the foregoing contribution, grant, assignment, transfer and conveyance of the LLC Interest as a contribution by Legacy LLC to the Operating Partnership and hereby pays the Consideration to Legacy LLC, subject to Article IV hereof.

 

SECTION 1.02.                                                     Assumption.

 

Upon the terms and subject to the conditions set forth in this Agreement, Newco OP hereby expressly assumes and agrees to perform, satisfy and discharge, in each case in due course, all of the liabilities and obligations of Legacy LLC relating to the LLC Interest whether arising or accruing before or after the date hereof. Legacy LLC, any of its affiliates, their respective successors and assigns, all persons who at any time prior to the Closing have been shareholders, directors, trustees, officers, agents or employees of Legacy LLC or any of its affiliates (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns and all persons who at any time prior to the Closing are or have been shareholders, directors, trustees, officers, agents or employees of Transferred LLC and who are not, as of immediately following the Closing, directors, trustees, officers or employees of Newco or any of its Subsidiaries are hereby released of and from any further liabilities or obligations whether accruing before or after the date hereof with respect to the LLC Interest, including, without limitation, all Liabilities arising from or in connection with the Transactions and all other activities to implement the Transactions, and all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Closing (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Closing), in each case to the extent relating to, arising out of or resulting from the Newco Business, the Newco Assets or the Newco Liabilities (each as defined in the Separation and Distribution Agreement to be entered into by and among Vornado, Vornado OP, Newco and Newco OP, in the form attached to the Transaction Agreement as Exhibit D), but subject to the terms and conditions of the Transaction Agreement.

 

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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF LEGACY LLC

 

Legacy LLC hereby represents and warrants to the Operating Partnership as follows:

 

SECTION 2.01.                                                     Organization, Power and Authority.

 

Legacy LLC is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware.  Legacy LLC has all requisite limited liability company power and authority to own and operate its assets.

 

SECTION 2.02.                                                     Authorization.

 

Legacy LLC has full right, authority, power and capacity (a) to enter into this Agreement and each agreement, document and instrument to be executed and delivered by or on behalf of Legacy LLC pursuant to this Agreement; (b) to carry out the transactions contemplated hereby and thereby; and (c) to contribute, transfer and deliver all of the LLC Interest to the Operating Partnership (or its designee) in accordance with this Agreement.  This Agreement and each agreement, document and instrument executed and delivered by or on behalf of Legacy LLC pursuant to this Agreement constitutes, or when executed and delivered will constitute, the legal, valid and binding obligation of Legacy LLC, each enforceable in accordance with its respective terms.

 

SECTION 2.03.                                                     No Prior Business.

 

Since the date of its formation, Legacy LLC has not conducted any business, nor has it incurred any liabilities or obligations (direct or indirect, present or contingent), in each case, except in connection with the Transactions and the assets and liabilities of Transferred LLC and its subsidiaries related to the LLC Interest.

 

SECTION 2.04.                                                     Assumption of Liabilities.

 

Pursuant to the Restructuring, Legacy LLC assumed all obligations of JBG UDM, to the extent such obligations relate to the LLC Interest. Legacy LLC is subject to and in compliance with the representations and warranties in Article IV of the Transaction Agreement as such representations and warranties were applicable to UDM’s holding of the LLC Interest and the assets and properties that were held by UDM on the date thereof and are now held by Transferred LLC and its subsidiaries after giving effect to the Restructuring Transactions.

 

SECTION 2.05.                                                     Disclaimer of Representations and Warranties.

 

THE PARTIES UNDERSTAND AND AGREE THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, IN THE TRANSACTION AGREEMENT, OR IN ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT CONTEMPLATED HEREBY OR THEREBY, NO PARTY TO THIS AGREEMENT, THE TRANSACTION AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, THE TRANSACTION AGREEMENT, ANY ANCILLARY AGREEMENT OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES OR LIABILITIES TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS, APPROVALS OR NOTIFICATIONS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY

 

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SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SET-OFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY CLAIM OR OTHER ASSET, INCLUDING ANY ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY ASSIGNMENT, DOCUMENT OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN, IN THE TRANSACTION AGREEMENT OR IN ANY ANCILLARY AGREEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS, WHERE IS” BASIS AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE WILL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY APPROVALS OR NOTIFICATIONS ARE NOT OBTAINED OR MADE OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

 

ARTICLE III

COVENANTS

 

SECTION 3.01.                                                     Subsequent Actions.

 

Immediately following the contribution of the LLC Interest to the Operating Partnership in exchange for the Consideration pursuant to this Agreement, Legacy LLC will liquidate and distribute the Consideration to its members in accordance with Schedule A.

 

ARTICLE IV

TAX MATTERS

 

The Parties intend for the transactions contemplated by this Agreement to be treated in accordance with, and agree to report in a manner consistent with, the following for U.S. federal income tax purposes:

 

(a)                                 The contribution and assignment of the LLC Interest by Legacy LLC to the Operating Partnership in exchange for the Consideration and the distribution, immediately thereafter, of the Consideration by Legacy LLC to its members in liquidation of Legacy LLC shall be treated as a merger, undertaken by Legacy LLC in the “assets-over” form, of Legacy LLC and the Operating Partnership pursuant to Treasury Regulations Section 1.708-1(c)(3)(i); and

 

(b)                                 The issuance of the cash and the Issued Newco Shares to Legacy LLC for distribution in the liquidation of Legacy LLC to the members thereof electing such consideration shall be treated as the direct purchase by the Operating Partnership, immediately prior to the merger described in clause (a) of this Article IV, of the membership interests in Legacy LLC from the electing members of Legacy LLC, and for the Consideration, described in Schedule A attached hereto and incorporated herein, as contemplated by Treasury Regulations Section 1.708-1(c)(4).

 

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ARTICLE V
GENERAL PROVISIONS

 

SECTION 5.01.                                                     Amendment.

 

Subject to compliance with applicable Law, this Agreement may be amended by mutual agreement of the Parties hereto by action taken or authorized by their respective boards of directors, general partners or other similar governing body or entity, if necessary; provided, however, that there shall not be any amendment or change not permitted under applicable Law.  This Agreement may not be amended except by an instrument in writing signed by each of the Parties hereto.

 

SECTION 5.02.                                                     Non-Survival.

 

None of the representations, warranties, or agreements in this Agreement or in any schedule, instrument or other document delivered pursuant to this Agreement shall survive the Closing; provided, however, that this Section 5.02 shall not limit any covenant or agreement of the Parties hereto to the extent such covenant or agreement by its terms contemplates performance after the Closing, which shall survive the Closing.

 

SECTION 5.03.                                                     Interpretation.

 

When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The headings set forth in this Agreement are for convenience of reference purposes only and shall not affect or be deemed to affect in any way the meaning or interpretation of this Agreement or any term or provision hereof. When reference is made herein to a Person, such reference shall be deemed to include all direct and indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires.  All references herein to the Subsidiaries of a Person shall be deemed to include all direct and indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires.   The Parties agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any Law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.  In the case of any conflict between this Agreement and the Transaction Agreement, the Transaction Agreement shall control.

 

SECTION 5.04.                                                     Counterparts.

 

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. A facsimile, telecopy, portable document format (.pdf) or any other reproduction of this Agreement may be executed by the Parties, including by means of an electronic signature or other format, and an executed copy of this Agreement by the Parties may be delivered by the Parties by facsimile, portable document format (.pdf)  or other electronic transmission means pursuant to which the signature of or on behalf of the Parties can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes.

 

SECTION 5.05.                                                     Entire Agreement.

 

This Agreement the Transaction Agreement and the other Ancillary Documents constitute the entire agreement among the Parties with respect to the subject matter hereof and thereof and

 

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supersedes all other prior agreements and understandings, both written and oral, among the Parties or any of them with respect to the subject matter hereof and thereof. This Agreement is not intended to confer upon any Person, other than the Parties and their successors and permitted assigns, any rights or remedies hereunder.

 

SECTION 5.06.                                                     Severability.

 

If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by rule of Law or public policy, all other conditions 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 adverse to any Party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties 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 to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

SECTION 5.07.                                                     Governing Law; Jurisdiction.

 

(a)                                                         This Agreement, and all claims or causes of actions (whether at Law, in contract or in tort) that may be based upon, arise out of or related to this Agreement or the negotiation, execution or performance of this Agreement, shall be governed by, and construed in accordance with, the Laws of the State of New York without giving effect to conflicts of laws principles (whether of the State of New York or any other jurisdiction that would cause the application of the Laws of any jurisdiction other than the State of New York).

 

(b)                                                         All Actions arising out of or relating to this Agreement shall be heard and determined exclusively in the state courts sitting in the City, County and State of New York, or if jurisdiction over the matter is vested exclusively in federal courts, the United States District Court for the Southern District of New York, , and the appellate courts to which orders and judgments thereof may be appealed (the “Chosen Courts”).  Each of the Parties hereby irrevocably and unconditionally (a) submits to the exclusive jurisdiction of the Chosen Courts for the purpose of any Action arising out of or relating to this Agreement brought by any Party, whether sounding in tort, contract or otherwise, (b) agrees not to commence any such action or proceeding except in such courts, (c) agrees that any claim in respect of any such action or proceeding may be heard and determined in any Chosen Court, (d) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding, and (e) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such action or proceeding.  Each of the Parties agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Nothing in this Agreement will affect the right of any Party to serve process in any manner permitted by Law.

 

SECTION 5.08.                                                     Waiver of Jury Trial.

 

EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER

 

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PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 5.08.

 

SECTION 5.09.                                                     Assignment.

 

This Agreement shall not be assigned by any of the Parties (whether by operation of Law or otherwise) without the prior written consent of the other Parties. Any assignment referred to in the immediately preceding sentence shall not relieve any Party of any obligation hereunder, and following such assignment this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and assigns.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Operating Partnership and Legacy LLC have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

 

 

JBG SMITH PROPERTIES LP, a Delaware limited partnership

 

 

 

By:

JBG SMITH Properties, its General Partner

 

 

 

 

 

 

 

 

By:

/s/ Steven Museles

 

 

Name:

Steven Museles

 

 

Title:

Chief Legal Officer and Secretary

 

 

 

 

 

JBG/UDM LEGACY, L.L.C., a Delaware limited liability

 

company

 

 

 

By:

JBG/Company Manager IV, L.L.C., as Managing

 

 

Member

 

 

 

 

 

By:

/s/ James Iker

 

 

Name:

James Iker

 

 

Title:

Managing Member

 

[SIGNATURE PAGE TO CONTRIBUTION AND ASSIGNMENT AGREEMENT BY AND BETWEEN JBG SMITH PROPERTIES LP AND JBG/UDM LEGACY, L.L.C.]

 


EX-2.8 9 a17-17912_1ex2d8.htm EX-2.8

Exhibit 2.8

 

AGREEMENT AND PLAN OF MERGER

 

Between

 

JBG/OPERATING PARTNERS, L.P.

 

and

 

JBGS/OP MERGERCO, L.L.C.

 

Dated as of July 17, 2017

 



 

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER, dated as of July 17, 2017 (this “Agreement”), is made and entered into by and between JBG/Operating Partners, L.P., a Delaware limited partnership (the “Merging Entity”), and JBGS/OP Mergerco, L.L.C., a Delaware limited liability company (the “Surviving Entity” and together with the Merging Entity, the “Parties”).

 

WHEREAS, this Agreement is being entered into and carried out by the Merging Entity and the Surviving Entity in connection with, and as contemplated by that certain Master Transaction Agreement, dated as of October 31, 2016 (as it may be amended, the “Transaction Agreement”), by and among Vornado Realty Trust, a Maryland real estate investment trust (“Vornado”), Vornado Realty L.P., a Delaware limited partnership (“Vornado OP”), Vornado DC Spinco, a Maryland real estate investment trust (“Newco”), Vornado DC Spinco OP LP, a Delaware limited partnership (“Newco OP”), JBG Properties Inc., a Maryland corporation (“JBG Properties”), the Merging Entity and certain affiliates of JBG Properties and the Merging Entity;

 

WHEREAS, the Parties hereto wish to effect a business combination through a merger of the Merging Entity with and into the Surving Entity, with the Surviving Entity surviving (the “Merger”), on the terms and subject to the conditions set forth in this Agreement and in accordance with Section 17-211 and Section 18-209 of the Delaware Code, as amended (the “Code”).

 

WHEREAS, the Merging Entity currently holds equity interests (the “Equity Interests”) in certain entities that are listed on Schedule A hereto.

 

WHEREAS, JBG Properties, the general partner of the Merging Entity, has approved this Agreement and the Merger on behalf of the Merging Entity and declared that this Agreement and the Merger of the Merging Entity with and into the Surviving Entity, with the Surviving Entity surviving, are advisable, on the terms and subject to the conditions set forth herein;

 

WHEREAS, Newco OP, the sole member and managing member of the Surviving Entity, has approved this Agreement and the Merger on behalf of the Surviving Entity and declared that this Agreement and the Merger are advisable, on the terms and subject to the conditions set forth herein; and

 

WHEREAS, capitalized terms not otherwise defined herein shall have the respective meaning set forth in the Transaction Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereto hereby agree as follows:

 

ARTICLE I
THE MERGER

 

SECTION 1.01.                             The Merger.

 

Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with Section 17-211 and Section 18-209 of the Code, at the Merger Effective Time (as defined below), the Surviving Entity and the Merging Entity shall consummate the Merger, pursuant to which (i) the Merging Entity shall be merged with and into the Surviving Entity and the separate existence of the Merging Entity shall thereupon cease, and (ii) the Surviving Entity shall be the surviving limited liability company in the Merger.

 

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SECTION 1.02.                             Effective Time of the Merger.

 

At or prior to the Closing (as defined below), the Surviving Entity shall file a certificate of merger with respect to the Merger, in such form as is required by, and executed in accordance with, the relevant provisions of the Code (the “Certificate of Merger”), with the Secretary of State of the State of Delaware (the “DSOS”).  The Merger shall become effective at 12:01 a.m. Eastern Time on July 18, 2017 (such time, the “Merger Effective Time”).

 

SECTION 1.03.                       Closing.

 

The closing of the Merger (the “Closing”) shall occur at the Merger Effective Time, which is after the consummation of the Pre-Combination Transactions and simultaneously with the closing of the Combination Transactions pursuant to the Transaction Agreement.

 

SECTION 1.04.                       Effects of the Merger.

 

The Merger shall have the effects specified in Section 17-211 and Section 18-209 of the Code, and in addition, at the Merger Effective Time, by virtue of the Merger and without any action on the part of a holder of an interest in the Surviving Entity or in the Merging Entity:

 

(a)                                 Pursuant to Section 1.2(f)(i) of the Transaction Agreement, the partners of Merging Entity will receive OP Units (the “Consideration”) as set forth on Schedule B attached hereto and incorporated herein as consideration for the Merger, and  by virtue of the Merger and without any action on the part of the Merging Entity or the Surviving Entity or any partner in the Merging Entity, from and after the Merger Effective Time, each partnership interest in the Merging Entity shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of such partnership interests shall thereafter cease to have any rights, except the right to receive the Consideration applicable thereto;

 

(b)                              Each interest in the Surviving Entity issued and outstanding immediately prior to the Merger Effective Time shall remain outstanding and unchanged as an interest in the Surviving Entity.

 

SECTION 1.05.                       Surviving Entity Limited Liability Company Agreement.

 

Immediately following the Merger Effective Time, the limited liability company agreement of the Surviving Entity as in effect immediately prior to the Merger Effective Time, shall be the limited liability company agreement of the Surviving Entity (the “Surviving LLC Agreement”).

 

SECTION 1.06.                       Managing Member of the Surviving Entity.

 

Immediately following the Merger Effective Time, Newco OP shall continue to be the sole member and managing member of the Surviving Entity, until its resignation or removal in accordance with the Surviving LLC Agreement.

 

SECTION 1.07.                       Dissenters’ Rights.

 

No dissenters’ rights or appraisal rights shall be available with respect to the Merger or the other transactions contemplated hereby.

 

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SECTION 1.08.                       Release.

 

Persons who at any time prior to the Merger Effective Time have been members, partners, shareholders, directors, trustees, officers, agents or employees of the Merging Entity or of any of its affiliates prior to the Merger Effective Time (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, who are not, as of immediately following the Merger Effective Time, directors, trustees, officers or employees of Newco or any of its Subsidiaries are hereby released of and from any further liabilities or obligations whether accruing before or after the Closing with respect to the Equity Interests, including, without limitation, all Liabilities arising from or in connection with the Transactions and all other activities to implement the Transactions, and all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Merger Effective Time (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Merger Effective Time), in each case to the extent relating to, arising out of or resulting from the Newco Business, the Newco Assets or the Newco Liabilities (each as defined in the Separation and Distribution Agreement to be entered into by and among Vornado, Vornado OP, Newco and Newco OP, in the form attached to the Transaction Agreement as Exhibit D), but subject to the terms and conditions of the Transaction Agreement.

 

SECTION 1.09.                       Intended Tax Treatment of the Merger.

 

The Parties intend for the Merger to be treated for U.S. federal income tax purposes, and agree to report it in a manner consistent with such treatment, as a merger, undertaken by the Merging Entity, in the “assets-over form” pursuant to Treasury Regulations Section 1.708-1(c)(3)(i), whereby the Merging Entity (i) contributes all of its assets and liabilities to Newco OP, the sole member of the Surviving Entity, which is treated as an entity disregarded from Newco OP for federal income tax purposes, in exchange for OP Units and (ii) immediately thereafter distributes the OP Units  to the Merging Entity partners in liquidation of the Merging Entity.

 

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF MERGING ENTITY

 

The Merging Entity hereby represents and warrants to the Surviving Entity as follows:

 

SECTION 2.01.                             Organization, Power and Authority.

 

The Merging Entity is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware.  The Merging Entity has all requisite limited partnership power and authority to own and operate its assets.

 

SECTION 2.02.                             Authorization.

 

The Merging Entity has all requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Merger as contemplated by this Agreement.  The execution, delivery and performance by the Merging Entity of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly and validly authorized by all necessary limited partnership action on behalf of the Merging Entity, and no further limited partnership action on the part of the Merging Entity is required to consummate the transactions contemplated by this Agreement, other than the filing and recordation of the Certificate of Merger and other appropriate merger documents as required by the Code.  This Agreement has been duly and validly executed and delivered by the Merging Entity, and assuming the due authorization, execution and

 

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delivery by the Surviving Entity, constitutes a valid, binding and enforceable obligation of the Merging Entity, enforceable against the Merging Entity in accordance with its terms.

 

SECTION 2.03.                             Disclaimer of Representations and Warranties.

 

THE PARTIES UNDERSTAND AND AGREE THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, IN THE TRANSACTION AGREEMENT, OR IN ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT CONTEMPLATED HEREBY OR THEREBY, NO PARTY TO THIS AGREEMENT, THE TRANSACTION AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, THE TRANSACTION AGREEMENT, ANY ANCILLARY AGREEMENT OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES OR LIABILITIES TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS, APPROVALS OR NOTIFICATIONS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SET-OFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY CLAIM OR OTHER ASSET, INCLUDING ANY ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY ASSIGNMENT, DOCUMENT OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN, IN THE TRANSACTION AGREEMENT OR IN ANY ANCILLARY AGREEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS, WHERE IS” BASIS AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE WILL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY APPROVALS OR NOTIFICATIONS ARE NOT OBTAINED OR MADE OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

 

ARTICLE III

GENERAL PROVISIONS

 

SECTION 3.01.                                                     Amendment.

 

Subject to compliance with applicable Law, this Agreement may be amended by mutual agreement of the Parties hereto by action taken or authorized by their respective general partner or managing members, if necessary; provided, however, that there shall not be any amendment or change not permitted under applicable Law.  This Agreement may not be amended except by an instrument in writing signed by each of the Parties hereto.

 

SECTION 3.02.                                                     Non-Survival.

 

None of the representations, warranties, or agreements in this Agreement or in any schedule, instrument or other document delivered pursuant to this Agreement shall survive the Closing; provided, however, that this Section 3.02 shall not limit any covenant or agreement of the each of the Parties hereto to the extent such covenant or agreement by its terms contemplates performance after the Closing, which shall survive the Closing.

 

4



 

SECTION 3.03.                                                     Interpretation.

 

When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The headings set forth in this Agreement are for convenience of reference purposes only and shall not affect or be deemed to affect in any way the meaning or interpretation of this Agreement or any term or provision hereof. When reference is made herein to a Person, such reference shall be deemed to include all direct and indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires.  All references herein to the Subsidiaries of a Person shall be deemed to include all direct and indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires.   The Parties agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any Law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.  In the case of any conflict between this Agreement and the Transaction Agreement, the Transaction Agreement shall control.

 

SECTION 3.04.                                                     Counterparts.

 

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. A facsimile, telecopy, portable document format (.pdf) or any other reproduction of this Agreement may be executed by the Parties, including by means of an electronic signature or other format, and an executed copy of this Agreement may be delivered by the Parties by facsimile, portable document format (.pdf)  or other electronic transmission means pursuant to which the signature of or on behalf of the Parties can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes.

 

SECTION 3.05.                                                     Entire Agreement.

 

This Agreement, the Transaction Agreement and the other Ancillary Documents constitute the entire agreement among the Parties with respect to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and oral, among the Parties or any of them with respect to the subject matter hereof and thereof. This Agreement is not intended to confer upon any Person, other than the Parties and their successors and permitted assigns, any rights or remedies hereunder.

 

SECTION 3.06.                                                     Severability.

 

If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by rule of Law or public policy, all other conditions 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 adverse to any Party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties 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 to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

SECTION 3.07.                                                     Governing Law; Jurisdiction.

 

This Agreement and all claims or causes of actions (whether at Law, in contract or in tort) that may be based upon, arise out of or related to this Agreement or the negotiation, execution or

 

5



 

performance of this Agreement, shall be governed by, and construed in accordance with, the Laws of the State of Delaware without giving effect to conflicts of laws principles (whether of the State of Delaware or any other jurisdiction that would cause the application of the Laws of any jurisdiction other than the State of Delaware).

 

SECTION 3.08.                                                     Waiver of Jury Trial.

 

EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 3.08.

 

SECTION 3.09.                                                     Assignment.

 

This Agreement shall not be assigned by any of the Parties (whether by operation of Law or otherwise) without the prior written consent of the other Parties. Any assignment referred to in the immediately preceding sentence shall not relieve any Party of any obligation hereunder, and following such assignment this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and assigns.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Merging Entity and the Surviving Entity have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

 

 

JBG/OPERATING PARTNERS, L.P. a Delaware limited partnership

 

 

 

By:

JBG Properties, Inc., its general partner

 

 

 

 

 

By:

/s/ James Iker

 

 

Name:

James Iker

 

 

Title:

Authorized Signatory

 

 

 

 

 

JBGS/OP MERGERCO, L.L.C., a Delaware limited liability

 

company

 

 

 

By: JBG SMITH Properties LP, its managing member

 

 

 

By: JBG SMITH Properties GP LLC, its general partner

 

 

 

 

By:

/s/ Stephen Theriot

 

 

Name:

Stephen Theriot

 

 

Title:

Chief Financial Officer

 

[Signature Page to Agreement and Plan of Merger by and between JBGS/OP MERGERCO, L.L.C. and JBG/OPERATING PARTNERS, L.P.]

 


EX-2.9 10 a17-17912_1ex2d9.htm EX-2.9

Exhibit 2.9

 

CONTRIBUTION AND ASSIGNMENT AGREEMENT

 

Between

 

JBG PROPERTIES, INC.

 

and

 

JBG SMITH PROPERTIES LP

 

Dated as of July 18, 2017

 



 

CONTRIBUTION AND ASSIGNMENT AGREEMENT

 

THIS CONTRIBUTION AND ASSIGNMENT AGREEMENT, dated as of July 18, 2017 (this “Agreement”), is made and entered into by and between JBG Properties, Inc., a Maryland corporation (“JBG Properties”), and JBG Smith Properties LP, a Delaware limited partnership (“Newco OP”, and together with JBG Properties, the “Parties”).

 

WHEREAS, this Agreement is being entered into and carried out by JBG Properties and Newco OP in connection with, and as contemplated by that certain Master Transaction Agreement, dated as of October 31, 2016 (as it may be amended, the “Transaction Agreement”), by and among Vornado Realty Trust, a Maryland real estate investment trust (“Vornado”), Vornado Realty L.P., a Delaware limited partnership (“Vornado OP”), Vornado DC Spinco, a Maryland real estate investment trust (“Newco”), Newco OP, JBG Properties, JBG/Operating Partners, L.P., a Delaware limited partnership, and certain affiliates of JBG Properties and JBG/Operating Partners, L.P.;

 

WHEREAS, JBG Properties currently owns interests in certain entities (the “Contributed Interests”), which Contributed Interests are set forth on Schedule A hereto;

 

WHEREAS, pursuant to Section 1.2(f)(ii) of the Transaction Agreement, Newco OP desires to acquire from JBG Properties, and JBG Properties desires to contribute and transfer to Newco OP, subject to the terms and conditions set forth herein, the Contributed Interests;

 

WHEREAS, pursuant to Section 1.4 of the Transaction Agreement, JBG Properties will receive Issued OP Units (the “Consideration”), as set forth on Schedule B hereto, as consideration for the contribution of the Contributed Interest;

 

WHEREAS, the closing (the “Closing”) of the transactions contemplated by this Agreement shall be on the date hereof, after the consummation of the Pre-Combination Transactions and simultaneously with the closing of the Combination Transactions pursuant to the Transaction Agreement; and

 

WHEREAS, capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Transaction Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereto hereby agree as follows:

 

ARTICLE I
CONTRIBUTION

 

SECTION 1.01.                             Contribution and Assignment.

 

Upon the terms and subject to the conditions set forth in this Agreement, JBG Properties hereby contributes, grants, assigns, transfers and conveys and delivers forever to Newco OP, all of JBG Properties’ rights, title and interest under, in and to the Contributed Interests.  Newco OP hereby accepts the foregoing contribution, grant, assignment, transfer and conveyance of the Contributed Interests by JBG Properties to Newco OP.

 

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SECTION 1.02.                             Assumption.

 

Upon the terms and subject to the conditions set forth in this Agreement, Newco OP hereby expressly assumes and agrees to perform, satisfy and discharge, in each case, in due course, all of the liabilities and obligations of JBG Properties relating to the Contributed Interests whether arising or accruing before or after the date hereof.  JBG Properties, any of its affiliates, their respective successors and assigns, all persons who at any time prior to the Closing have been stockholders, directors, trustees, officers, agents or employees of JBG Properties or any of its affiliates (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, and all persons who at any time prior to the Closing are or have been shareholders, directors, trustees, officers, agents or employees of the entities described on Schedule A and who are not, as of immediately following the Closing, directors, trustees, officers or employees of Newco, Newco OP or any Subsidiary of Newco, are hereby released of and from any further liabilities or obligations whether accruing before or after the date hereof with respect to the Contributed Interests, including, without limitation, all Liabilities arising from or in connection with the Transactions and all other activities to implement the Transactions, and all Liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the Closing (whether or not such Liabilities cease being contingent, mature, become known, are asserted or foreseen, or accrue, in each case before, at or after the Closing), in each case, to the extent relating to, arising out of or resulting from the Newco Business, the Newco Assets or the Newco Liabilities (each as defined in the Separation and Distribution Agreement to be entered into by and among Vornado, Vornado OP, Newco and Newco OP, in the form attached to the Transaction Agreement as Exhibit D), but subject to the terms and conditions of the Transaction Agreement.

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF JBG PROPERTIES

 

JBG Properties hereby represents and warrants to Newco OP as follows:

 

SECTION 2.01.                             Organization, Power and Authority.

 

JBG Properties is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland.  JBG Properties has all requisite corporate power and authority to own and operate its assets.

 

SECTION 2.02.                             Authorization.

 

JBG Properties has full right, authority, power and capacity (a) to enter into this Agreement and each agreement, document and instrument to be executed and delivered by or on behalf of JBG Properties pursuant to this Agreement; (b) to carry out the transactions contemplated hereby and thereby; and (c) to contribute, transfer and deliver all of the Contributed Interests to Newco OP (or its designee) in accordance with this Agreement.  This Agreement and each agreement, document and instrument executed and delivered by or on behalf of JBG Properties pursuant to this Agreement constitutes, or when executed and delivered will constitute, the legal, valid and binding obligation of JBG Properties, each enforceable in accordance with its respective terms.

 

SECTION 2.03.                             Disclaimer of Representations and Warranties.

 

THE PARTIES UNDERSTAND AND AGREE THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, IN THE TRANSACTION AGREEMENT, OR IN ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT CONTEMPLATED HEREBY OR THEREBY, NO PARTY TO THIS AGREEMENT, THE TRANSACTION AGREEMENT, ANY

 

2



 

ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, THE TRANSACTION AGREEMENT, ANY ANCILLARY AGREEMENT OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES OR LIABILITIES TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS, APPROVALS OR NOTIFICATIONS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SET-OFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY CLAIM OR OTHER ASSET, INCLUDING ANY ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY ASSIGNMENT, DOCUMENT OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN, IN THE TRANSACTION AGREEMENT OR IN ANY ANCILLARY AGREEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS, WHERE IS” BASIS AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE WILL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY APPROVALS OR NOTIFICATIONS ARE NOT OBTAINED OR MADE OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

 

ARTICLE III

TAX MATTERS

 

The Parties intend for the transactions contemplated by this Agreement to be treated in accordance with, and agree to report in a manner consistent with, the following for U.S. federal income tax purposes:  The contribution of the Contributed Interests in exchange for the Consideration as a transaction in which no gain or loss is recognized by JBG Properties or Newco OP under Section 721(a) of the Internal Revenue Code of 1986.

 

ARTICLE IV

GENERAL PROVISIONS

 

SECTION 4.01.                                                     Amendment.

 

Subject to compliance with applicable Law, this Agreement may be amended by mutual agreement of the Parties hereto by action taken or authorized by their respective board of directors, general partner or other similar governing body or entity, if necessary; provided, however, that there shall not be any amendment or change not permitted under applicable Law.  This Agreement may not be amended except by an instrument in writing signed by each of the Parties hereto.

 

SECTION 4.02.                                                     Non-Survival.

 

None of the representations, warranties, or agreements in this Agreement or in any schedule, instrument or other document delivered pursuant to this Agreement shall survive the Closing; provided, however, that this Section 4.02 shall not limit any covenant or agreement of the Parties hereto to the extent such covenant or agreement by its terms contemplates performance after the Closing, which shall survive the Closing.

 

3



 

SECTION 4.03.                                                     Interpretation.

 

When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The headings set forth in this Agreement are for convenience of reference purposes only and shall not affect or be deemed to affect in any way the meaning or interpretation of this Agreement or any term or provision hereof. When reference is made herein to a Person, such reference shall be deemed to include all direct and indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires.  All references herein to the Subsidiaries of a Person shall be deemed to include all direct and indirect Subsidiaries of such Person unless otherwise indicated or the context otherwise requires.   The Parties agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any Law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.  In the case of any conflict between this Agreement and the Transaction Agreement, the Transaction Agreement shall control.

 

SECTION 4.04.                                                     Counterparts.

 

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. A facsimile, telecopy, portable document format (.pdf) or any other reproduction of this Agreement may be executed by the Parties, including by means of an electronic signature or other format, and an executed copy of this Agreement may be delivered by the Parties by facsimile, portable document format (.pdf)  or other electronic transmission means pursuant to which the signature of or on behalf of the Parties can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes.

 

SECTION 4.05.                                                     Entire Agreement.

 

This Agreement, the Transaction Agreement and the other Ancillary Documents constitute the entire agreement among the Parties with respect to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and oral, among the Parties or any of them with respect to the subject matter hereof and thereof. This Agreement is not intended to confer upon any Person, other than the Parties and their successors and permitted assigns, any rights or remedies hereunder.

 

SECTION 4.06.                                                     Severability.

 

If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by rule of Law or public policy, all other conditions 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 adverse to any Party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties 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 to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

SECTION 4.07.                                                     Governing Law; Jurisdiction.

 

(a)                                                         This Agreement, and all claims or causes of actions (whether at Law, in contract or in tort) that may be based upon, arise out of or related to this Agreement or the negotiation, execution or performance of this Agreement, shall be governed by, and construed in accordance with,

 

4



 

the Laws of the State of New York without giving effect to conflicts of laws principles (whether of the State of New York or any other jurisdiction that would cause the application of the Laws of any jurisdiction other than the State of New York).

 

(b)                                                         All Actions arising out of or relating to this Agreement shall be heard and determined exclusively in the state courts sitting in the City, County and State of New York, or if jurisdiction over the matter is vested exclusively in federal courts, the United States District Court for the Southern District of New York, and the appellate courts to which orders and judgments thereof may be appealed (the “Chosen Courts”).  Each of the Parties hereby irrevocably and unconditionally (a) submits to the exclusive jurisdiction of the Chosen Courts for the purpose of any Action arising out of or relating to this Agreement brought by any Party, whether sounding in tort, contract or otherwise, (b) agrees not to commence any such action or proceeding except in such courts, (c) agrees that any claim in respect of any such action or proceeding may be heard and determined in any Chosen Court, (d) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding, and (e) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such action or proceeding.  Each of the Parties agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Nothing in this Agreement will affect the right of any Party to serve process in any manner permitted by Law.

 

SECTION 4.08.                                                     Waiver of Jury Trial.

 

EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 4.08.

 

SECTION 4.09.                                                     Assignment.

 

This Agreement shall not be assigned by any of the Parties (whether by operation of Law or otherwise) without the prior written consent of the other Parties. Any assignment referred to in the immediately preceding sentence shall not relieve any Party of any obligation hereunder, and following such assignment this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and assigns.

 

[SIGNATURE PAGE FOLLOWS]

 

5



 

IN WITNESS WHEREOF, JBG Properties and Newco OP have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

 

 

JBG PROPERTIES, INC., a Maryland corporation

 

 

 

By:

/s/ James Iker

 

Name:

James Iker

 

Title:

Executive Vice President

 

 

 

 

 

JBG SMITH PROPERTIES LP, a Delaware limited partnership

 

 

 

By: JBG SMITH Properties, its General Partner

 

 

 

By:

/s/ Steven Museles

 

Name:

Steven Museles

 

Title:

Chief Legal Officer and Secretary

 

[Signature Page to Contribution and Assignment Agreement by and between JBG Smith Properties LP and JBG Properties, Inc.]

 


EX-3.1 11 a17-17912_1ex3d1.htm EX-3.1

Exhibit 3.1

 

JBG SMITH PROPERTIES

 

ARTICLES OF AMENDMENT AND RESTATEMENT

 

FIRST:  JBG SMITH Properties, a Maryland real estate investment trust (the “Trust”) formed under Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland (“Title 8”), desires to amend and restate its Declaration of Trust as currently in effect and as hereinafter amended.

 

SECOND:  The following provisions are all the provisions of the Declaration of Trust currently in effect and as hereinafter amended and restated:

 

ARTICLE I

 

FORMATION

 

The Trust is a real estate investment trust within the meaning of Title 8.  The Trust shall not be deemed to be a general partnership, limited partnership, joint venture, joint stock company or a corporation but nothing herein shall preclude the Trust from being treated for tax purposes as an association under the Internal Revenue Code of 1986, as amended (the “Code”).

 

ARTICLE II

 

NAME

 

The name of the Trust is:

 

JBG SMITH Properties

 

ARTICLE III

 

PURPOSES AND POWERS

 

Section 3.1  Purposes.  The purposes for which the Trust is formed are to invest in and to acquire, hold, manage, administer, control and dispose of property, including, without limitation or obligation, engaging in business as a real estate investment trust within the meaning of Section 856 of the Code (a “REIT”).

 



 

Section 3.2  Powers. The Trust shall have all of the powers granted to real estate investment trusts by Title 8 or any successor statute and all other powers set forth in the Declaration of Trust of the Trust (the “Declaration of Trust”) which are not inconsistent with law and are appropriate to promote and attain the purposes set forth in the Declaration of Trust.

 

ARTICLE IV

 

RESIDENT AGENT

 

The name of the resident agent of the Trust in the State of Maryland is The Corporation Trust Incorporated, whose post office address is 2405 York Rd, Suite 201, Lutherville-Timonium, MD 21093-2264.  The resident agent is a Maryland corporation.  The Trust may have such offices or places of business within or outside the State of Maryland as the Board of Trustees of the Trust (the “Board of Trustees” or “Board”) may from time to time determine.

 

ARTICLE V

 

BOARD OF TRUSTEES

 

Section 5.1  Powers.  Subject to any express limitations contained in the Declaration of Trust or in the Bylaws, (a) the business and affairs of the Trust shall be managed under the direction of the Board of Trustees and (b) the Board shall have full, exclusive and absolute power, control and authority over any and all property and business of the Trust.  The Board may take any action as in its sole judgment and discretion is necessary or appropriate to conduct the business and affairs of the Trust.  The Declaration of Trust shall be construed with the presumption in favor of the grant of power and authority to the Board.  Any construction of the Declaration of Trust or determination made by the Board concerning its powers and authority hereunder shall be conclusive.  The enumeration and definition of particular powers of the Board of Trustees included in the Declaration of Trust or in the Bylaws of the Trust (the “Bylaws”) shall in no way be construed or deemed by inference or otherwise in any manner to exclude or limit the powers conferred upon the Board or the Trustees under the general laws of the State of Maryland or any other applicable laws.

 

2



 

The Board, without any action by the shareholders of the Trust, shall have and may exercise, on behalf of the Trust, without limitation, the power to terminate the status under the Code of the Trust as a REIT; to determine that compliance with any restriction or limitations on ownership and transfers of shares of the Trust’s beneficial interest set forth in Article VII of the Declaration of Trust is no longer required in order for the Trust to qualify as a REIT; to adopt, amend and repeal Bylaws; to elect officers in the manner prescribed in the Bylaws; to solicit proxies from holders of shares of beneficial interest of the Trust; and to do any other acts and deliver any other documents necessary or appropriate to the foregoing powers.

 

Section 5.2  Number and Classification.  The number of Trustees (hereinafter the “Trustees”) initially shall be two, which number may be increased or decreased pursuant to the Bylaws or this Section 5.2.  No reduction in the number of Trustees shall cause the removal of any Trustee from office prior to the expiration of his or her term.  The names of the current Trustees who shall serve until their successors are duly elected and qualify are:

 

Stephen W. Theriot

 

Scott Estes

 

Effective upon Closing (as defined in the Master Transaction Agreement, dated as of October 31, 2016, by and among Vornado Realty Trust (“Vornado”), Vornado Realty L.P., JBG Properties Inc., JBG Operating/Partners L.P., certain affiliates of JBG Properties Inc. and JBG Operating/Partners L.P., the Trust and Vornado DC Spinco OP LP (the “Master Agreement”)), the number of Trustees shall be increased to twelve and the Trustees (other than any Trustee elected solely by holders of one or more classes or series of Preferred Shares) shall be classified, with respect to the terms for which they severally hold office, into three classes, one class (“Class I”) to hold office initially for a term expiring at the annual meeting of shareholders in 2018, another class (“Class II”) to hold office initially for a term expiring at the annual meeting of shareholders in 2019 and another class (“Class III”) to hold office initially for a term expiring at

 

3



 

the annual meeting of shareholders in 2020, with the members of each class to hold office until their successors are duly elected and qualify.  At the annual meeting of shareholders held in 2018, the successors to the Trustees whose terms expire at such meeting shall be elected to hold office for a term expiring at the annual meeting of shareholders held in 2020 and until their successors are duly elected and qualify. At the annual meeting of  shareholders held in 2019 and each annual meeting of shareholders held thereafter, the successors to the Trustees whose terms expire at each annual meeting shall be elected to hold office for a term expiring at the next annual meeting of shareholders and until their successors are duly elected and qualify. Upon Closing (as defined in the Master Agreement), the names and class of the Trustees who shall serve until their successors are duly elected and qualify shall be:

 

Class I

 

W. Matthew Kelly

Mitchell Schear

Ellen Shuman

John F. Wood

 

Class II

 

Michael Glosserman

Charles E. Haldeman, Jr.

Carol A. Melton

Alan Forman

 

Class III

 

William J. Mulrow

Steven Roth

Robert Stewart

Scott Estes

 

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The Trustees shall be elected in the manner provided in the Bylaws and (subject to the following paragraph) any vacancy on the Board of Trustees may be filled in the manner provided in the Bylaws.  It shall not be necessary to list in the Declaration of Trust the names and addresses of any Trustees hereinafter elected.

 

The Trust elects, pursuant to Section 3-804(c) of the Maryland General Corporation Law (the “MGCL”), that, except as may be provided by the Board of Trustees in setting the terms of any class or series of Shares, any and all vacancies on the Board of Trustees may be filled only by the affirmative vote of a majority of the remaining Trustees in office, even if the remaining Trustees do not constitute a quorum, and any Trustee elected to fill a vacancy shall serve for the remainder of the full term of the trusteeship in which such vacancy occurred and until a successor is duly elected and qualifies.

 

Section 5.3  Removal.   Subject to the rights of holders of one or more classes or series of Preferred Shares to elect or remove one or more Trustees, a Trustee may be removed at any time, but only for cause and then only by the affirmative vote of the holders of a majority of the Shares then outstanding and entitled to vote generally in the election of Trustees. For the purpose of this paragraph, “cause” shall mean, with respect to any particular Trustee, conviction of a felony or a final judgment of a court of competent jurisdiction holding that such Trustee caused demonstrable, material harm to the Trust through willful misconduct, bad faith or active and deliberate dishonesty. Any amendment to this Section 5.3 that amends or removes the requirement of cause for the removal of Trustees shall not apply to or affect in any respect the applicability of the preceding sentence with respect to any Trustee in office at the time of such amendment.

 

Section 5.4  Determinations by Board.  The determination as to any of the following matters, made by or pursuant to the direction of the Board of Trustees shall be final and conclusive and shall be binding upon the Trust and every holder of Shares:  the amount of the net income of the Trust for any period and the amount of assets at any time legally available for the payment of dividends, acquisition of Shares or the payment of other distributions on

 

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Shares; the amount of paid-in surplus, net assets, other surplus, cash flow, funds from operations, adjusted funds from operations, net profit, net assets in excess of capital, undivided profits or excess of profits over losses on sales of assets; the amount, purpose, time of creation, increase or decrease, alteration or cancellation of any reserves or charges and the propriety thereof (whether or not any obligation or liability for which such reserves or charges shall have been created shall have  been paid or discharged); any interpretation or resolution of any ambiguity with respect to any provision of the Declaration of Trust (including any of the terms, preferences, conversion or other rights, voting powers or rights, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of any shares of any class or series of Shares) or of the Bylaws; the number of Shares of any class or series of the Trust; the fair value, or any sale, bid or asked price to be applied in determining the fair value, of any asset owned or held by the Trust or of any Shares of the Trust; any matter relating to the acquisition, holding and disposition of any assets by the Trust; any interpretation of the terms and conditions of one or more agreements with any person, corporation, association, company, trust, partnership (limited or general) or other organization; the compensation of Trustees, officers, employees or agents of the Trust; or any other matter relating to the business and affairs of the Trust or required or permitted by applicable law, the Declaration of Trust or Bylaws or otherwise to be determined by the Board of Trustees.

 

Section 5.5  Business Opportunities.

 

(a)                                 The Trust shall have the power to renounce, by resolution of the Board of Trustees, any interest or expectancy of the Trust in, or in being offered an opportunity to participate in, business opportunities or classes or categories of business opportunities that are (i) presented to the Trust or (ii) developed by or presented to one or more Trustees or officers of the Trust.

 

(b)                                 A Trustee of the Trust who is also a trustee, officer, employee or agent of Vornado or any of Vornado’s affiliates (each such Trustee, a “Covered Person”) shall not have a duty to communicate or present any business opportunity to the Trust, and the Trust renounces, on its

 

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behalf and on behalf of its subsidiaries, any potential interest or expectation in, or right to be offered or to participate in such business opportunity and waives to the maximum extent permitted by Maryland law any claim against a Covered Person arising from the fact that he or she does not present, communicate or offer such business opportunity to the Trust or any of its subsidiaries or pursues such business opportunity or facilitates the pursuit of such business opportunity by others; provided, however, that the foregoing shall not apply in a case in which a Covered Person is presented with a business opportunity in writing expressly in his or her capacity as a Trustee of the Trust. The taking by a Covered Person for himself or herself, or the offering or other transfer to another person or entity, of any potential business opportunity, in accordance with the provisions of this Section 5.5(b), shall not constitute or be construed or interpreted as (i) an act or omission of the Trustee committed in bad faith or as the result of active or deliberate dishonesty or (ii) receipt by the Covered Person of an improper benefit or profit in money, property, services or otherwise. No amendment or repeal of the foregoing provision of this Declaration of Trust shall affect the treatment of, or obligations with respect to, any business opportunity of which a Covered Person learned prior to such amendment or repeal.

 

ARTICLE VI

 

SHARES OF BENEFICIAL INTEREST

 

Section 6.1  Authorized Shares.  The beneficial interest of the Trust shall be divided into shares of beneficial interest (the “Shares”).   The Trust has authority to issue 500,000,000 common shares of beneficial interest, par value $0.01 per share (“Common Shares”), and 200,000,000 preferred shares of beneficial interest, par value $0.01 per share (“Preferred Shares”).  The Board of Trustees shall have the power, without approval of the holders of shares of beneficial interest, to classify any unissued Common Shares and the Preferred Shares into one or more class or series of capital stock by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of such shares.  If shares of one class are classified or reclassified into shares of another class of shares pursuant to this Article VI, the number of

 

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authorized shares of the former class shall be automatically decreased and the number of shares of the latter class shall be automatically increased, in each case by the number of shares so classified or reclassified, so that the aggregate number of shares of beneficial interest of all classes that the Trust has authority to issue shall not be more than the total number of shares of beneficial interest set forth in the second sentence of this paragraph.  The Board of Trustees, with the approval of a majority of the entire Board and without any action by the shareholders of the Trust, may amend the Declaration of Trust from time to time to increase or decrease the aggregate number of Shares or the number of Shares of any class or series that the Trust has authority to issue.

 

Section 6.2  Common Shares.  Subject to the provisions of Article VII and except as may otherwise be specified in the Declaration of Trust, each Common Share shall entitle the holder thereof to one vote on each matter upon which holders of Common Shares are entitled to vote.

 

Section 6.3  Classified or Reclassified Shares.  Prior to issuance of classified or reclassified Shares of any class or series, the Board of Trustees by resolution shall (a) designate that class or series to distinguish it from all other classes and series of Shares; (b) specify the number of Shares to be included in the class or series; (c) set, subject to the provisions of Article VII and subject to the express terms of any class or series of Shares outstanding at the time, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each class or series; and (d) cause the Trust to file articles supplementary with the State Department of Assessments and Taxation of Maryland (the “SDAT”).  Any of the terms of any class or series of Shares set pursuant to clause (c) of this Section 6.3 may be made dependent upon facts ascertainable outside the Declaration of Trust (including the occurrence of any event, including a determination or action by the Trust or any other person or body) and may vary among holders thereof, provided that the manner in which such facts or variations shall operate upon the terms of such class or

 

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series of Shares is clearly and expressly set forth in the articles supplementary filed with the SDAT.

 

Section 6.4  Authorization by Board of Share Issuance.  The Board of Trustees may authorize the issuance from time to time of Shares of any class or series, whether now or hereafter authorized, or securities or rights convertible into Shares of any class or series, whether now or hereafter authorized, for such consideration (whether in cash, property, past or future services, obligation for future payment or otherwise) as the Board of Trustees may deem advisable (or without consideration in the case of a Share split or Share dividend), subject to such restrictions or limitations, if any, as may be set forth in the Declaration of Trust or the Bylaws.

 

Section 6.5  Dividends and Other Distributions.  The Board of Trustees may from time to time authorize, and cause the Trust to declare to shareholders, such dividends or other distributions, in cash or other assets of the Trust or in securities of the Trust or from any other source as the Board of Trustees in its discretion shall determine.  The Board of Trustees shall endeavor to cause the Trust to declare and pay such dividends and other distributions as shall be necessary for the Trust to qualify under the Code as a REIT; however, shareholders shall have no right to any dividend or distribution unless and until authorized by the Board and declared by the Trust.  The exercise of the powers and rights of the Board of Trustees pursuant to this Section 6.5 shall be subject to the provisions of any class or series of Shares at the time outstanding.  Notwithstanding any other provision in the Declaration of Trust, no determination shall be made by the Board of Trustees nor shall any transaction be entered into by the Trust which would cause any Shares or other beneficial interest in the Trust not to constitute “transferable shares” or “transferable certificates of beneficial interest” under Section 856(a)(2) of the Code or which would cause any distribution to constitute a preferential dividend as described in Section 562(c) of the Code.

 

Section 6.6  General Nature of Shares.  All Shares shall be personal property entitling the shareholders only to those rights provided in the Declaration of Trust.  The shareholders shall have no interest in the property of the Trust and shall have no right to compel

 

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any partition, division, dividend or distribution of the Trust or of the property of the Trust.  The death of a shareholder shall not terminate the Trust or give his or her legal representatives any rights against other shareholders, the Trustees or the property of the Trust.  The Trust is entitled to treat as shareholders only those persons in whose names Shares are registered as holders of Shares on the beneficial interest ledger of the Trust.

 

Section 6.7  Fractional Shares.  The Trust may, without the consent or approval of any shareholder, issue fractional Shares, eliminate a fraction of a Share by rounding up or down to a full Share, arrange for the disposition of a fraction of a Share by the person entitled to it, or pay cash for the fair value of a fraction of a Share.

 

Section 6.8  Declaration and Bylaws.  The rights of all shareholders and the terms of all Shares are subject to the provisions of the Declaration of Trust and the Bylaws.

 

Section 6.9  Divisions and Combinations of Shares.  Subject to an express provision to the contrary in the terms of any class or series of beneficial interest hereafter authorized, the Board of Trustees shall have the power to divide or combine the outstanding shares of any class or series of beneficial interest, without a vote of shareholders, so long as the number of shares combined into one share in any such combination or series of combinations within any period of twelve months is not greater than ten.

 

ARTICLE VII

 

RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES

 

Section 7.1  Definitions.  For the purposes of this Article VII, the following terms shall have the following meanings:

 

“Adoption Time” shall mean the date and time upon which the Articles of Amendment and Restatement containing this Article VII are accepted for record by the SDAT.

 

“Beneficial Ownership” shall mean ownership of Equity Shares either directly or constructively through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code.  The terms “Beneficial Owner,” “Beneficially Owns” and “Beneficially Owned” shall have the correlative meanings.

 

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“Beneficiary” shall mean one or more beneficiaries of the Special Trust as determined pursuant to Section 7.3.6.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

 

“Constructive Ownership” shall mean ownership of Equity Shares either directly or constructively through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code.  The terms “Constructive Owner,” “Constructively Owns” and “Constructively Owned” shall have the correlative meanings.

 

“Constructive Ownership Limit” shall mean 7.5% (in value or in number of shares, whichever is more restrictive), or such other percentage determined by the Board in accordance with Section 7.2.8, of the outstanding Equity Shares of any class or series.

 

“Equity Shares” shall mean Shares of any class or series, including, without limitation, Common Shares and Preferred Shares.

 

“Market Price” shall mean the last reported sales price of Equity Shares of the relevant class or series reported on the New York Stock Exchange on the trading day immediately preceding the relevant date, or if the Equity Shares of the relevant class or series are not then traded on the New York Stock Exchange, the last reported sales price of Equity Shares of the relevant class or series on the trading day immediately preceding the relevant date, as reported on any other exchange or quotation system over which the Equity Shares of the relevant class or series may be traded, or if the Equity Shares of the relevant class or series are not then traded over any exchange or quotation system, then the market price of the Equity Shares of the relevant class or series on the relevant date as determined by the Board.

 

“Ownership Limit” shall mean 7.5% (in value or in number of shares, whichever is more restrictive), or such other percentage determined by the Board in accordance with Section 7.2.8, of the outstanding Equity Shares of any class or series.

 

“Ownership Limitation Termination Date” shall mean, with respect to any or all of the restrictions and limitations on Beneficial Ownership, Constructive Ownership and Transfer

 

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of Equity Shares set forth herein, the first day after the Adoption Time on which the Board of Trustees determines that it is no longer in the best interests of the Trust to attempt to, or continue to, qualify as a REIT or that compliance with such restriction or limitation on Beneficial Ownership, Constructive Ownership or Transfer of Equity Shares is no longer required in order for the Trust to qualify as a REIT.

 

“Person” shall mean an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity or any government or agency or political subdivision thereof and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, but does not include an underwriter which participates in a public offering of Equity Shares for a period of 25 days following the purchase by such underwriter of those Equity Shares, but only with respect to such Equity Shares.

 

“Prohibited Owner” shall mean with respect to any purported Transfer or other event, any Person that, but for the provisions of Section 7.2.2, would have Beneficially Owned or Constructively Owned the Equity Shares that were transferred to a Special Trust and, if appropriate in the context, shall also mean any Person who would have been the record owner of the Equity Shares that the Prohibited Owner would have so owned.

 

“Special Trust” shall mean any trust provided for in Section 7.3.

 

“Special Trustee” shall mean the Person unaffiliated with the Trust and the Prohibited Owner that is appointed by the Trust to serve as trustee of the Special Trust.

 

“Transfer” shall mean any sale, transfer, gift, assignment, devise or other disposition of Equity Shares (including (i) the granting of any option or entering into any agreement for the sale, transfer or other disposition of Equity Shares or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for

 

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Equity Shares), whether voluntary or involuntary, whether of record or beneficially and whether by operation of law or otherwise.

 

Section 7.2  Equity Shares.

 

Section 7.2.1  Restrictions on Ownership and Transfer.

 

(a)                                 Except as provided in Section 7.2.8(a)(ii), from the Adoption Time and prior to the Ownership Limitation Termination Date, no Person shall Beneficially Own Equity Shares of any class or series in excess of the Ownership Limit with respect to Equity Shares of such class or series and no Person shall Constructively Own Equity Shares of any class or series in excess of the Constructive Ownership Limit with respect to Equity Shares of such class or series.

 

(b)                                 Except as provided in Section 7.2.8(a)(ii), from the Adoption Time and prior to the Ownership Limitation Termination Date, any Transfer that, if effective, would result in any Person Beneficially Owning Equity Shares of any class or series in excess of the Ownership Limit with respect to Equity Shares of such class or series shall be void ab initio as to the Transfer of such Equity Shares that would be otherwise Beneficially Owned by such Person in excess of such Ownership Limit; and the intended transferee shall acquire no rights to such Equity Shares.

 

(c)                                  Except as provided in Section 7.2.8(a)(ii), from the Adoption Time and prior to the Ownership Limitation Termination Date, any Transfer that, if effective, would result in any Person Constructively Owning Equity Shares of any class or series in excess of the Constructive Ownership Limit with respect to Equity Shares of such class or series shall be void ab initio as to the Transfer of such Equity Shares that would be otherwise Constructively Owned by such Person in excess of such Constructive Ownership Limit; and the intended transferee shall acquire no rights in such Equity Shares.

 

(d)                                 From the Adoption Time and prior to the Ownership Limitation Termination Date, any Transfer that, if effective, would result in Equity Shares being beneficially owned by fewer than 100 Persons (within the meaning of Section 856(a)(5) of the

 

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Code and the Treasury Regulations promulgated thereunder) shall be void ab initio as to the Transfer of such Equity Shares that would be otherwise Beneficially Owned by the transferee; and the intended transferee shall acquire no rights in such Equity Shares.

 

(e)                                  From the Adoption Time and prior to the Ownership Limitation Termination Date, any Transfer that, if effective, would result in the Trust being “closely held” (within the meaning of Section 856(h) of the Code) or otherwise failing to qualify as a REIT, shall be void ab initio as to the Transfer of the Equity Shares that would cause the Trust to be “closely held” (within the meaning of Section 856(h) of the Code) or otherwise fail to qualify as a REIT (including, but not limited to, Beneficial Ownership or Constructive Ownership that would result in the Trust owning (actually or Constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Trust from such tenant would cause the Trust to fail to satisfy any of the gross income requirements of Section 856(c) of the Code), and the intended transferee shall acquire no rights in such Equity Shares.

 

(f)                                   From the Adoption Time and prior to the Ownership Limitation Termination Date, no Person shall Beneficially Own or Constructively Own Equity Shares of any class or series that would cause the Trust to be “closely held” (within the meaning of Section 856(h) of the Code) or otherwise fail to qualify as a REIT (including, but not limited to, Beneficial Ownership or Constructive Ownership that would result in the Trust owning (actually or Constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Trust from such tenant would cause the Trust to fail to satisfy any of the gross income requirements of Section 856(c) of the Code).

 

(g)                                  Notwithstanding anything to the contrary herein, from the Adoption Time until the consummation of the Pre-Combination Transactions (as defined in the Master Agreement), the provisions of this Article VII, including without limitation the Ownership Limit and the Constructive Ownership Limit, shall not apply to the ownership of

 

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Equity Shares of any class or series by, or the Transfer of Equity Shares of any class or series to, Vornado or any of its subsidiaries.

 

Section 7.2.2  Transfer of Equity Shares to Special Trust.

 

(a)                                 If, notwithstanding the other provisions contained in this Article VII, at any time from the Adoption Time and prior to the Ownership Limitation Termination Date, there is a purported or attempted Transfer that, if effective, would cause any Person to Beneficially Own Equity Shares of any class or series in excess of the Ownership Limit with respect to Equity Shares of such class or series, then, except as otherwise provided in Section 7.2.8(a)(ii), the Equity Shares that would have been Beneficially Owned in excess of such Ownership Limit (rounded up to the nearest whole Share) shall be transferred automatically to a Special Trust, effective as of the close of business on the business day prior to the date of the purported or attempted Transfer.

 

(b)                                 If, notwithstanding the other provisions contained in this Article VII, at any time from the Adoption Time and prior to the Ownership Limitation Termination Date, there is a purported or attempted Transfer that, if effective, would cause any Person to Constructively Own Equity Shares of any class or series in excess of the Constructive Ownership Limit with respect to Equity Shares of such class or series, then, except as otherwise provided in Section 7.2.8(a)(ii), the Equity Shares that would have been Constructively Owned in excess of such Constructive Ownership Limit (rounded up to the nearest whole Share) shall be transferred automatically to a Special Trust, effective as of the close of business on the business day prior to the date of the purported or attempted Transfer.

 

(c)                                  If, notwithstanding the other provisions contained in this Article VII, at any time from the Adoption Time and prior to the Ownership Limitation Termination Date, there is a purported or attempted Transfer that, if effective, would cause the Trust to become “closely held” (within the meaning of Section 856(h) of the Code) or otherwise fail to qualify as a REIT, then the Equity Shares being Transferred that would have caused the Trust to become “closely held” (within the meaning of Section 856(h) of the Code) or otherwise

 

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fail to qualify as a REIT (rounded up to the nearest whole share) shall be transferred automatically to a Special Trust, effective as of the close of business on the business day prior to the date of the purported or attempted Transfer.

 

(d)                                 If, notwithstanding the other provisions contained in this Article VII, at any time from the Adoption Time and prior to the Ownership Limitation Termination Date, any Person (the “Beneficial Purchaser”) purchases or otherwise acquires an interest in a Person that Beneficially Owns Equity Shares (the “Beneficial Purchase”) and, as a result, the Beneficial Purchaser would Beneficially Own Equity Shares of any class or series in excess of the Ownership Limit with respect to Equity Shares of such class or series, then, except as otherwise provided in Section 7.2.8(a)(ii), such number of Equity Shares, the acquisition of Beneficial Ownership of which would cause the Beneficial Purchaser to Beneficially Own Equity Shares in excess of such Ownership Limit (rounded up to the nearest whole Share), shall be transferred automatically to a Special Trust, effective as of the close of business on the business day prior to the date of the Beneficial Purchase.  In determining which Equity Shares are so transferred to a Special Trust, Equity Shares Beneficially Owned by the Beneficial Purchaser prior to the Beneficial Purchase shall be transferred to the Special Trust before any Equity Shares Beneficially Owned by the Person, an interest in which is being so purchased or acquired, are so transferred.

 

(e)                                  If, notwithstanding the other provisions contained in this Article VII, at any time from the Adoption Time and prior to the Ownership Limitation Termination Date, any Person (the “Constructive Purchaser”) purchases or otherwise acquires an interest in a Person that Constructively Owns Equity Shares (the “Constructive Purchase”) and, as a result, the Constructive Purchaser would Constructively Own Equity Shares of any class or series in excess of the Constructive Ownership Limit with respect to Equity Shares of such class or series, then, except as otherwise provided in Section 7.2.8(a)(ii), such number of Equity Shares, the acquisition of Constructive Ownership of which would cause the Constructive Purchaser to Constructively Own Equity Shares in excess of such Constructive Ownership Limit

 

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(rounded up to the nearest whole Share), shall be transferred automatically to a Special Trust, effective as of the close of business on the business day prior to the date of the Constructive Purchase.  In determining which Equity Shares are so transferred to a Special Trust, Equity Shares Constructively Owned by the Constructive Purchaser prior to the Constructive Purchase shall be transferred to the Special Trust before any Equity Shares Constructively Owned by the Person, an interest in which is being so purchased or acquired, are so transferred.

 

(f)                                   If, notwithstanding the other provisions contained in this Article VII, at any time from the Adoption Time and prior to the Ownership Limitation Termination Date, there is a redemption, repurchase, restructuring or similar transaction with respect to a Person that Beneficially Owns Equity Shares (the “Beneficial Entity”) and, as a result, any Person holding a direct or indirect interest in the Beneficial Entity would Beneficially Own Equity Shares of any class or series in excess of the Ownership Limit with respect to Equity Shares of such class or series, then, except as otherwise provided in Section 7.2.8(a)(ii), such number of Equity Shares, the Beneficial Ownership of which by the Beneficial Entity would cause such Person to Beneficially Own Equity Shares in excess of such Ownership Limit (rounded up to the nearest whole Share), shall be transferred automatically to a Special Trust, effective as of the close of business on the business day prior to the date of such redemption, repurchase, restructuring or similar transaction.  In determining which Equity Shares are so transferred to a Special Trust, Equity Shares of the relevant class or series Beneficially Owned by the Beneficial Entity shall be transferred to the Special Trust before any Equity Shares Beneficially Owned by the Person holding an interest in the Beneficial Entity (independently of such Person’s interest in the Entity) are so transferred.

 

(g)                                  If, notwithstanding the other provisions contained in this Article VII, at any time from the Adoption Time and prior to the Ownership Limitation Termination Date, there is a redemption, repurchase, restructuring or similar transaction with respect to a Person that Constructively Owns Equity Shares (the “Constructive Entity”) and, as a result, any Person holding a direct or indirect interest in the Constructive Entity would

 

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Constructively Own Equity Shares of any class or series in excess of the Constructive Ownership Limit with respect to Equity Shares of such class or series, then, except as otherwise provided in Section 7.2.8(a)(ii), such number of Equity Shares, the Constructive Ownership of which by the Constructive Entity would cause such Person to Constructively Own Equity Shares in excess of such Constructive Ownership Limit (rounded up to the nearest whole Share), shall be transferred automatically to a Special Trust, effective as of the close of business on the business day prior to the date of such redemption, repurchase, restructuring or similar transaction.  In determining which Equity Shares are so transferred to a Special Trust, Equity Shares of the relevant class or series Constructively Owned by the Constructive Entity shall be transferred to the Special Trust before any Equity Shares Constructively Owned by the Person holding an interest in the Constructive Entity (independently of such Person’s interest in the Entity) are so transferred.

 

(h)                                 If, notwithstanding the other provisions contained in this Article VII, at any time from the Adoption Time and prior to the Ownership Limitation Termination Date, an event, other than an event described in Sections 7.2.2(a) through (g), occurs that would, if effective, result in any Person Constructively Owning Equity Shares of any class or series in excess of the Constructive Ownership Limit with respect to Equity Shares of such class or series, then, except as otherwise provided in Section 7.2.8(a)(ii), the smallest whole number of Equity Shares of such class or series Constructively Owned by such Person which, if transferred to a Special Trust, would result in such Person’s Constructive Ownership of Equity Shares not being in excess of such Constructive Ownership Limit, shall be transferred automatically to a Special Trust, effective as of the close of business on the business day prior to the date of the relevant event.

 

(i)                                     If, notwithstanding the other provisions contained in this Article VII, at any time from the Adoption Time and prior to the Ownership Limitation Termination Date, an event, other than an event described in Sections 7.2.2(a) through (g), occurs that would, if effective, result in any Person Beneficially Owning Equity Shares of any class or series in excess of the Ownership Limit with respect to Equity Shares of such class or series,

 

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then, except as otherwise provided in Section 7.2.8(a)(ii), the smallest whole number of Equity Shares of such class or series Beneficially Owned by such Person which, if transferred to a Special Trust, would result in such Person’s Beneficial Ownership of Equity Shares not being in excess of such Ownership Limit, shall be transferred automatically to a Special Trust, effective as of the close of business on the business day prior to the date of the relevant event.

 

(j)                                    If, notwithstanding the other provisions contained in this Article VII, at any time from the Adoption Time and prior to the Ownership Limitation Termination Date, an event, other than an event described in Sections 7.2.2(a) through (g), occurs that, if effective, would cause the Trust to become “closely held” (within the meaning of Section 856(h) of the Code) or otherwise fail to qualify as a REIT, then the Equity Shares that would have caused the Trust to become “closely held” (within the meaning of Section 856(h) of the Code) or otherwise fail to qualify as a REIT (rounded up to the nearest whole share) shall be transferred automatically to a Special Trust, effective as of the close of business on the business day prior to the date of the event that would have caused such violation.

 

(k)                                 To the extent that, upon a transfer of Equity Shares pursuant to this Section 7.2.2, a violation of any provision of this Article VII would nonetheless be continuing (for example, where the ownership of Equity Shares by a single Special Trust would violate the restrictions in Section 7.2.1(d)), then Equity Shares may be transferred to that number of Special Trusts, each having a distinct Special Trustee and Beneficiary or Beneficiaries that are distinct from those of each other Special Trust, such that no violation of this Article VII results.

 

(l)                                     In determining which Equity Shares are to be transferred to a Special Trust in accordance with this Section 7.2.2, Equity Shares shall be so transferred to the Special Trust in such a manner as minimizes the aggregate value of the Equity Shares that are transferred to the Special Trust and, to the extent not inconsistent herewith, on a pro rata basis.

 

Section 7.2.3  Remedies For Breach.  If the Board of Trustees or its designees shall at any time determine  that a Transfer has taken place in violation of Section 7.2.1

 

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or that a Person intends to acquire or has attempted to acquire beneficial ownership (determined under the principles of Section 856(a)(5) of the Code), Beneficial Ownership or Constructive Ownership of any Equity Shares in violation of Section 7.2.1, the Board of Trustees or its designees may take such action as it deems advisable to refuse to give effect or to prevent such Transfer (or any Transfer related to such intent), including, but not limited to, refusing to give effect to such Transfer on the books of the Trust or instituting proceedings to enjoin such Transfer; provided, however, that any Transfers or attempted Transfers in violation of Sections 7.2.1(a) through (c) or Section 7.2.1(e) shall automatically result in the transfer to a Special Trust as provided in Section 7.2.2, irrespective of any action (or non-action) by the Board of Trustees.

 

Section 7.2.4  Notice of Ownership or Attempted Ownership in Violation of Section 7.2.1.  Any Person who acquires or attempts to acquire Beneficial or Constructive Ownership of Equity Shares in violation of Section 7.2.1, shall immediately give written notice to the Trust of such event or, in the case of such a proposed or attempted acquisition, give at least 15 days’ prior written notice, and shall provide to the Trust such other information as the Trust may request in order to determine the effect, if any, of such acquisition or attempted acquisition on the Trust’s status as a REIT.

 

Section 7.2.5  Owners Required to Provide Information.  From the Adoption Time and prior to the Ownership Limitation Termination Date:

 

(a)                                 Every Beneficial Owner and Constructive Owner of more than 1.0% (or such lower percentage as required by the Code or the Treasury Regulations promulgated thereunder) of the outstanding Equity Shares of any class or series shall, within 30 days after January 1 of each year, give written notice to the Trust stating the name and address of such Beneficial Owner or Constructive Owner, the number of Equity Shares Beneficially Owned and/or Constructively Owned, and a description of how such Equity Shares are held.  Each such Beneficial Owner and Constructive Owner shall provide to the Trust such additional information as the Trust may request in order to determine the effect, if any, of such Beneficial Ownership

 

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and/or Constructive Ownership on the Trust’s status as a REIT and to ensure compliance with the Ownership Limit and the Constructive Ownership Limit.

 

(b)                                 Each Person who is a Beneficial Owner or Constructive Owner of Equity Shares and each Person (including the shareholder of record) who is holding Equity Shares for a Beneficial Owner or Constructive Owner shall provide to the Trust such information as the Trust may request in order to determine the Trust’s status as a REIT or to comply with regulations promulgated under the REIT provisions of the Code or the requirements of any other taxing authority or governmental authority, or to determine such compliance.

 

Section 7.2.6  Remedies Not Limited.  Subject to Section 5.1, nothing contained in this Article VII shall limit the power of the Board of Trustees to take such other action as it deems necessary or advisable to preserve the Trust’s status as a REIT.

 

Section 7.2.7  AmbiguityIn the case of an ambiguity in the application of any of the provisions of this Article VII, including any definition contained in Section 7.1 and any ambiguity with respect to which Equity Shares are transferred to a Special Trust in a given situation, the Board of Trustees shall have the power to determine the application of the provisions of this Article VII with respect to any situation based on the facts known to it. In the event Section 7.2 or 7.3 requires an action by the Board of Trustees and the Declaration of Trust fails to provide specific guidance with respect to such action, the Board of Trustees may determine the action to be taken so long as such action is not contrary to the provisions of Sections 7.1, 7.2 or 7.3.

 

Section 7.2.8  Modifications of Ownership Limit.

 

(a)                                 The Board of Trustees may from time to time, prospectively or retroactively, (i) increase or decrease the Ownership Limit and/or the Constructive Ownership Limit with respect to one or more classes or series of Equity Shares for one or more Persons and increase or decrease the Ownership Limit and the Constructive Ownership Limit with respect to one or more classes or series of Equity Shares for all other Persons and (ii) exempt one or more Persons from the Ownership Limit and Constructive

 

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Ownership Limit, as the case may be, with respect to a class or series of Equity Shares, if in each case the Board of Trustees obtains such representations, covenants and undertakings as the Board of Trustees may deem appropriate in order to conclude that increasing or decreasing the Ownership Limit or the Constructive Ownership Limit or granting the exemption, as the case may be, will not cause the Trust to lose its status as a REIT under the Code.

 

(b)                              Prior to modifications or exemptions of any Ownership Limit or Constructive Ownership Limit pursuant to this Section 7.2.8, the Board of Trustees may require such opinions of counsel, affidavits, undertakings or agreements or a ruling from the Internal Revenue Service as it may deem necessary or advisable in order to determine or ensure the Trust’s status as a REIT, and any such modification or exemption may be subject to such conditions or restrictions as the Board may impose.

 

(c)                                  No decreased Ownership Limit or Constructive Ownership Limit will be effective for any Person whose percentage of ownership of Equity Shares is in excess of such decreased Ownership Limit or Constructive Ownership Limit, as applicable, until such time as such Person’s percentage of ownership of Equity Shares equals or falls below the decreased Ownership Limit or Constructive Ownership Limit (the “Reduced Limit Trigger”); provided, however, until the Reduced Limit Trigger occurs, such Person (other than a Person for whom an exemption has been granted pursuant to Section 7.2.8(a)(ii)) shall not be entitled to make any further acquisition of Equity Shares to the extent such acquisition would result in such Person Beneficially Owning or Constructively Owning in excess of the lesser of  (i) the number of Equity Shares owned by such Person on the date the adoption of the decreased Ownership Limit or Constructive Ownership Limit or (ii) if, after the adoption of such decreased Ownership Limit or Constructive Ownership Limit, such Person Transfers Equity Shares, the number of Equity Shares owned by such Person after such Transfer or Transfers, and such acquisition in excess of the lesser of (i) or (ii) above shall be a violation of the Ownership Limit or Constructive Ownership Limit.

 

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Section 7.2.9  Legend.  (a) Each certificate for Equity Shares, if certificated, or the notice in lieu of a certificate, if any, shall bear substantially the following legend:

 

The Equity Shares evidenced by this certificate are subject to restrictions on transfer and ownership for the purpose, among others, of the Trust’s maintenance of its status as a real estate investment trust (a “REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”).  Subject to certain further restrictions and except as expressly provided in the Trust’s Declaration of Trust, (i) no Person may Beneficially Own Equity Shares in excess of the Ownership Limit; (ii) no Person may Constructively Own Equity Shares in excess of the Constructive Ownership Limit; (iii) no Person may Transfer Equity Shares if such Transfer would result in the Equity Shares of the Trust being owned by fewer than 100 Persons; and (iv) no Person may Transfer Equity Shares if such Transfer would result in the Trust being “closely held” under Section 856(h) of the Code or otherwise cause the Trust to fail to qualify as a REIT.  Any Person who Beneficially or Constructively Owns or attempts to Beneficially or Constructively Own Equity Shares which causes or will cause a Person to Beneficially or Constructively Own Equity Shares in excess or in violation of the above limitations must immediately notify the Trust.  Attempted Transfers in violation of the restrictions described above will be void ab initio, and if the Beneficial Ownership, Constructive Ownership or Transfer of the Equity Shares represented hereby violates the restrictions on transfer or ownership set forth in clauses (i), (ii) or (iv), the Equity Shares represented hereby will be automatically transferred to a Special Trust for the benefit of one or more Beneficiaries.  In addition, the Trust may redeem Equity Shares upon the terms and conditions specified by the Board of Trustees in its sole and absolute discretion if the Board of Trustees determines that ownership or a Transfer or other event may violate the restrictions described above.  All capitalized terms in this legend have the meanings set forth in the Declaration of Trust, a copy of which, including the restrictions on transfer and ownership, will be furnished to each holder of Equity Shares of the Trust on request and without charge.  Requests for such a copy may be directed to the Secretary of the Trust at its principal office.

 

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Instead of the foregoing legend, a certificate or notice in lieu of a certificate may state that the Trust will furnish a full statement about certain restrictions on transfer and ownership of the Equity Shares to a shareholder on request and without charge.

 

Section  7.3  Transfer of Equity Shares in Special Trust.

 

Section 7.3.1  Ownership in Trust.  The Equity Shares transferred to the Special Trust pursuant to Section 7.2.2 shall be held in trust by a Special Trustee for the exclusive benefit of one or more Beneficiaries.  The Special Trustee shall be appointed by the Trust and shall be a Person unaffiliated with the Trust and any Prohibited Owner.  Each Beneficiary shall be designated by the Trust as provided in Section 7.3.6.  Equity Shares so held in a Special Trust shall be issued and outstanding shares of beneficial interest in the Trust.  The Prohibited Owner shall have no rights in such Equity Shares.  The Prohibited Owner shall not benefit economically from ownership of any Equity Shares held in a Special Trust by the Special Trustee, shall have no rights to dividends or other distributions and shall not possess any rights to vote or other rights attributable to the Equity Shares held in the Special Trust.

 

Section 7.3.2  Dividend Rights.  The Special Trustee shall have all rights to dividends or other distributions with respect to Equity Shares held in a Special Trust, which rights shall be exercised for the exclusive benefit of the Beneficiary.  Any dividend or other distribution paid prior to the discovery by the Trust that the Equity Shares have been transferred to the Special Trustee shall be paid by the recipient of such dividend or other distribution to the Special Trustee upon demand and any dividend or other distribution authorized but unpaid shall be paid when due to the Special Trustee.  Any dividend or other distribution so paid to the Special Trustee shall be held in trust for the Beneficiary.

 

Section 7.3.3  Voting Rights.  The Special Trustee shall have all voting rights with respect to the Equity Shares held in a Special Trust, which rights shall be exercised for the exclusive benefit of the Beneficiary. The Prohibited Owner shall have no voting rights with respect to Equity Shares held in a Special Trust and, subject to Maryland law, effective as of the date that the Equity Shares have been transferred to the Special Trustee, the Special Trustee

 

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shall have the authority (at the Special Trustee’s sole and absolute discretion) (a) to rescind as void any vote cast by Prohibited Owner prior to the discovery by the Trust that the Equity Shares have been transferred to the Special Trustee and (b) to recast such vote; provided, however, that if the Trust has already taken irreversible trust action, then the Special Trustee shall not have the authority to rescind and recast such vote.  Notwithstanding the provisions of this Article VII, until the Trust has received notification that Equity Shares have been transferred into a Special Trust, the Trust shall be entitled to rely on its share transfer and other stockholder records for purposes of preparing lists of stockholders entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes and determining the other rights of stockholders.

 

Section 7.3.4  Sale of Equity Shares by Special Trustee.  Within 20 days of receiving notice from the Special Trust that Equity Shares have been transferred to a Special Trust, the Special Trustee shall sell such Equity Shares to a Person or Persons designated by the Special Trustee, whose ownership of the Equity Shares will not violate the ownership limitations set forth in Section 7.2.1. Upon such sale, the interest of the Beneficiary in the Equity Shares sold shall terminate and the Special Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and to the Beneficiary as provided in this Section 7.3.4.  The Prohibited Owner shall receive the lesser of (i) the price such Prohibited Owner paid (or proposed to pay) for the Equity Shares, or if the transaction or event that caused the Equity Shares to be transferred to the Special Trust did not involve a purchase of such shares at Market Price, a price per share equal to the Market Price of such Equity Shares on the date of the event that resulted in the transfer to the Special Trust and (ii) the price per share received by the Special Trustee (net of any commissions and other expenses of sale) from the sale or other disposition of the Equity Shares. The Special Trustee may reduce the amount payable to the Prohibited Owner by the amount of dividends and distributions which have been paid to the Prohibited Owner and are owed by the Prohibited Owner to the Special Trustee pursuant to Section 7.3.2 of this Article VII.  Any net sales proceeds in excess of the amount payable to the Prohibited Owner and any other amounts held in

 

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the Special Trust with respect to such Equity Shares shall be immediately paid to the Beneficiary.  If, prior to the discovery by the Trust that Equity Shares have been transferred to the Special Trustee, such shares are sold by a Prohibited Owner, then (i) such shares shall be deemed to have been sold on behalf of the Special Trust and (ii) to the extent that the Prohibited Owner received an amount for such shares that exceeds the amount that such Prohibited Owner was entitled to receive pursuant to this Section 7.3.4, such excess shall be paid to the Special Trustee upon demand.

 

Section 7.3.5  Purchase Right in Equity Shares.  Equity Shares transferred to a Special Trust shall be deemed to have been offered for sale to the Trust, or its designee, at a price per share equal to the lesser of (i) the price such Prohibited Owner paid (or proposed to pay) for the Equity Shares, or if the transaction or event that caused the Equity Shares to be transferred to the Special Trust did not involve a purchase of such shares at Market Price, a price per share equal to the Market Price of such Equity Shares on the date of the event that resulted in the transfer to the Special Trust and (ii) the Market Price on the date the Trust, or its designee, accepts such offer.  The Trust may reduce the amount so payable by the amount of dividends and other distributions which has been paid to the Prohibited Owner and is owed by the Prohibited Owner to the Special Trustee pursuant to Section 7.3.2 of this Article VII and pay the amount of such reduction to the Special Trustee for the benefit of the Beneficiary.  The Trust shall have the right to accept such offer until the Special Trustee has sold the shares held in the Special Trust pursuant to Section 7.3.4.  Upon such a sale to the Trust, the interest of the Beneficiary in the Equity Shares sold shall terminate and the Special Trustee shall distribute the net proceeds of the sale to the Prohibited Owner, and distribute any dividends or other distributions held by the Special Trustee with respect to such Equity Shares to the Beneficiary.

 

Section 7.3.6  Designation of Beneficiaries.  By written notice to the Special Trustee, the Trust shall designate one or more nonprofit organizations to be the Beneficiary of the interest in a Special Trust such that (i) the Equity Shares held in the Special Trust would not violate the restrictions set forth in Section 7.2.1(a) in the hands of such

 

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Beneficiary and (ii) each such organization must be described in Section 501(c)(3) of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.  Neither the failure of the Trust to make such designation nor the failure of the Trust to appoint the Special Trustee before the automatic transfer provided in Section 7.2.2 shall make such transfer ineffective, provided that the Trust thereafter makes such designation and appointment.

 

Section 7.4  Severability.  If any provision of this Article VII or any application of any such provision is determined to be invalid by any Federal or state court having jurisdiction over the issues, the validity of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court.

 

Section 7.5  New York Stock Exchange Transactions.  Nothing in this Article VII, shall preclude the settlement of any transaction entered into through the facilities of the New York Stock Exchange.  The fact that the settlement of any transaction occurs shall not negate the effect of any other provision of this Article VII and any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Article VII.

 

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ARTICLE VIII

 

SHAREHOLDERS

 

Section 8.1  Meetings.  There shall be an annual meeting of the shareholders, to be held on proper notice at such time (after the delivery of the annual report) and location as shall be determined by or in the manner prescribed in the Bylaws, for the election of the Trustees, if required, and for the transaction of any other business within the powers of the Trust. Except as otherwise provided in the Declaration of Trust, special meetings of shareholders may be called in the manner provided in the Bylaws.  If there are no Trustees, the officers of the Trust shall promptly call a special meeting of the shareholders entitled to vote for the election of successor Trustees.  Any meeting may be adjourned and reconvened as the Trustees determine or as provided in the Bylaws.

 

Section 8.2  Voting Rights.  Subject to the provisions of any class or series of Shares then outstanding, the shareholders shall be entitled to vote only on the following matters: (a) election of Trustees as provided in Section 5.2 and the removal of Trustees as provided in Section 5.3; (b) amendment of the Declaration of Trust as provided in Article X; (c) termination of the Trust as provided in Section 12.2; (d) merger or consolidation of the Trust, to the extent a vote of the shareholders is required by Title 8; (e) the sale or disposition of substantially all of the property of the Trust, to the same extent as a stockholder of a Maryland corporation would be entitled to vote on such sale or disposition under the MGCL; and (e) such other matters with respect to which the Board of Trustees has adopted a resolution declaring that a proposed action is advisable and directing that the matter be submitted to the shareholders for approval or ratification.  Except with respect to the foregoing matters, no action taken by the shareholders at any meeting, or by written consent, shall in any way bind the Board of Trustees.

 

Section 8.3  Preemptive and Appraisal Rights.  Except as may be provided by the Board of Trustees in setting the terms of classified or reclassified Shares pursuant to Section 6.1, or as may otherwise be provided by contract approved by the Board of Trustees, no holder of Shares shall, as such holder, have any preemptive right to purchase or subscribe for any

 

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additional Shares of the Trust or any other security of the Trust which it may issue or sell. Holders of shares of beneficial interest shall not be entitled to exercise any rights of an objecting shareholder provided for under Title 8 and Title 3, Subtitle 2 of the MGCL or any successor statute unless the Board of Trustees, upon the affirmative vote of a majority of the Board of Trustees and upon such terms and conditions as may be specified by the Board of Trustees, shall determine that such rights apply, with respect to all or any classes or series of shares of beneficial interest, to one or more transactions occurring after the date of such determination in connection with which holders of such shares would otherwise be entitled to exercise such rights.  Notwithstanding the foregoing, in the event the Trust is subject to the Maryland Control Share Acquisition Act, holders of shares of beneficial interest shall be entitled to exercise rights of an objecting shareholder under Section 3-708(a) of the MGCL.

 

Section 8.4  Extraordinary Actions.  Notwithstanding any provision of law permitting or requiring any action to be taken or authorized by the affirmative vote of the holders of a greater number of votes, any such action shall be effective and valid if declared advisable by the Board of Trustees and taken or approved by the affirmative vote of holders of Shares entitled to cast a majority of all the votes entitled to be cast on the matter.

 

Section 8.5  Board Approval.  The submission of any action of the Trust to the shareholders for their consideration shall first be approved by the Board of Trustees.

 

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Section 8.6  Action By Shareholders without a Meeting.  The Bylaws may provide that any action required or permitted to be taken by the shareholders may be taken without a meeting by the written consent of the shareholders entitled to cast the minimum number of votes that would be necessary to approve the matter at a meeting at which all Shares entitled to vote thereon were present and voted, as required by statute, the Declaration of Trust or the Bylaws, as the case may be.

 

ARTICLE IX

 

LIABILITY LIMITATION, INDEMNIFICATION

 

AND TRANSACTIONS WITH THE TRUST

 

Section 9.1  Limitation of Shareholder Liability.  No shareholder shall be liable for any debt, claim, demand, judgment or obligation of any kind of, against or with respect to the Trust by reason of his being a shareholder, nor shall any shareholder be subject to any personal liability whatsoever, in tort, contract or otherwise, to any person in connection with the property or the affairs of the Trust by reason of his being a shareholder.

 

Section 9.2  Limitation of Trustee and Officer Liability.  To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of trustees and officers of a real estate investment trust, no present or former Trustee or officer of the Trust shall be liable to the Trust or to any shareholder for money damages.  Neither the amendment nor repeal of this Section 9.2, nor the adoption or amendment of any other provision of the Declaration of Trust inconsistent with this Section 9.2, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.  No Trustee or officer of the Trust shall be liable to the Trust or to any shareholder for money damages except to the extent that (a) the Trustee or officer actually received an improper benefit or profit in money, property or services, for the amount of the benefit or profit in money, property or services actually received; or (b) a judgment or other final adjudication adverse to the Trustee or officer is entered in a proceeding based on a finding in the proceeding that the Trustee’s or officer’s action or failure to act was the result of

 

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active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding.

 

Section 9.3 Express Exculpatory Clauses in Instruments.  Neither the shareholders nor the Trustees, officers, employees or agents of the Trust shall be liable under any written instrument creating an obligation of the Trust, and all persons shall look solely to the property of the Trust for the payment of any claim under or for the performance of that instrument. The omission of the foregoing exculpatory language from any instrument shall not affect the validity of enforceability of such instrument and shall not render any shareholder, Trustee, officer, employee or agent liable thereunder to any third party, nor shall the Trustees or any officer, employee or agent of the Trust be liable to anyone for such omission.

 

Section 9.4  Indemnification.  To the maximum extent permitted by Maryland law in effect from time to time, the Trust shall indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, shall pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or former Trustee or officer of the Trust and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity or (b) any individual who, while a Trustee or officer of the Trust and at the request of the Trust, serves or has served as a director, trustee, officer, partner, member or manager of another corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity.  The rights to indemnification and advance of expenses provided by this Declaration of Trust shall vest immediately upon election of a Trustee or officer. The Trust may, with the approval of its Board of Trustees, provide such indemnification and advance for expenses to an individual who served a predecessor of the Trust in any of the capacities described in (a) or (b) above and to any employee or agent of the Trust or a predecessor of the Trust.  The indemnification and payment or reimbursement of expenses provided in this Declaration of Trust shall not be deemed exclusive of or limit in any way other rights to which any person seeking

 

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indemnification or payment or reimbursement of expenses may be or may become entitled under any bylaw, resolution, insurance, agreement or otherwise.

 

Neither the amendment nor repeal of this Section 9.4, nor the adoption or amendment of any other provision of this Declaration of Trust inconsistent with this Section 9.4, shall apply to or affect in any respect the applicability of the preceding paragraph of this Section 9.4 with respect to any act or failure to act that occurred prior to such amendment, repeal or adoption.

 

Section 9.5  Transactions Between the Trust and its Trustees, Officers, Employees and Agents.  Subject to any express restrictions in the Declaration of Trust or adopted by the Trustees in the Bylaws or by resolution, the Trust may enter into any contract or transaction of any kind with any person, including any Trustee, officer, employee or agent of the Trust or any person affiliated with a Trustee, officer, employee or agent of the Trust, whether or not any of them has a financial interest in such transaction.

 

Section 9.6  Insurance.  The Trust may, to the fullest extent permitted by law, purchase and maintain insurance on behalf of any person described in the preceding paragraph against any liability which may be asserted against such person.

 

Section 9.7  No Limitation.  The indemnification provided herein shall not be deemed to limit the right of the Trust to indemnify any other person for any such expenses to the fullest extent permitted by law, nor shall it be deemed exclusive of any other rights to which any person seeking indemnification from the Trust may be entitled under any agreement, vote of shareholders or disinterested trustees, or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office.

 

ARTICLE X

 

AMENDMENTS

 

Section 10.1  General.  The Trust reserves the right from time to time to make any amendment to the Declaration of Trust, now or hereafter authorized by law, including any amendment altering the terms or contract rights, as expressly set forth in the Declaration of Trust,

 

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of any Shares.  All rights and powers conferred by the Declaration of Trust on shareholders, Trustees and officers are granted subject to this reservation.  An amendment to the Declaration of Trust (a) shall be filed for record as provided in Section 13.5 and (b) shall become effective as of the later of the time the SDAT accepts the amendment for record or the time established in the amendment, not to exceed 30 days after the amendment is accepted for record.  All references to the Declaration of Trust shall include all amendments thereto.

 

Section 10.2  By Trustees.  The Trustees may amend the Declaration of Trust from time to time, in the manner provided by Title 8, without any action by the shareholders, (i) to qualify under the Code as a REIT or as a real estate investment trust under Title 8, (ii) in any respect in which the charter of a corporation may be amended in accordance with Section 2-605 of the Corporations and Associations Article of the Annotated Code of Maryland and (iii) as otherwise provided in the Declaration of Trust.

 

Section 10.3  By Shareholders.  Except as otherwise provided in the Declaration of Trust, any amendment to the Declaration of Trust shall be valid only if declared advisable by the Board of Trustees and approved by the affirmative vote of majority of all the votes entitled to be cast on the matter.

 

ARTICLE XI

 

MERGER, CONSOLIDATION OR SALE OF TRUST PROPERTY

 

Subject to the provisions of any class or series of Shares at the time outstanding, the Trust may (a) merge the Trust into another entity, (b) consolidate the Trust with one or more other entities into a new entity or (c) sell, lease, exchange or otherwise transfer all or substantially all of the property of the Trust. Any such action must be approved (a) by the Board of Trustees and (b) if a vote of shareholders is required by Title 8, after notice to all shareholders entitled to vote on the matter, by the affirmative vote of a majority of votes entitled to be cast on the matter.

 

ARTICLE XII

 

DURATION AND TERMINATION OF TRUST

 

Section 12.1  Duration.  The Trust shall continue perpetually unless terminated

 

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pursuant to Section 12.2 or pursuant to any applicable provision of Title 8.

 

Section 12.2  Termination.

 

(a)                                 Subject to the provisions of any class or series of Shares at the time outstanding, after approval by a majority of the entire Board of Trustees, the Trust may be terminated at any meeting of shareholders, by the affirmative vote of a majority of all the votes entitled to be cast on the matter.  Upon the termination of the Trust:

 

(i)                                     The Trust shall carry on no business except for the purpose of winding up its affairs.

 

(ii)                                  The Trustees shall proceed to wind up the affairs of the Trust and all of the powers of the Trustees under the Declaration of Trust shall continue, including the powers to fulfill or discharge the Trust’s contracts, collect its assets, sell, convey, assign, exchange, transfer or otherwise dispose of all or any part of the remaining property of the Trust to one or more persons at public or private sale for consideration which may consist in whole or in part of cash, securities or other property of any kind, discharge or pay its liabilities and do all other acts appropriate to liquidate its business.  The Trustees may appoint any officer of the Trust or any other person to supervise the winding up of the affairs of the Trust and delegate to such officer or such person any or all powers of the Trustees in this regard.

 

(iii) After paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and agreements as they deem necessary for their protection, the Trust may distribute the remaining property of the Trust, in cash or in kind or partly each, among the shareholders so that after payment in full or the setting apart for payment of such preferential amounts, if any, to which the holders of any Shares at the time outstanding shall be entitled, the remaining property of the Trust shall, subject to any participating or similar rights of Shares  at the time outstanding, be distributed ratably among the holders of Common Shares at the time outstanding.

 

(b)                                 After termination of the Trust, the liquidation of its business and the distribution to the shareholders as herein provided, a majority of the Trustees shall execute

 

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and file with the Trust’s records a document certifying that the Trust has been duly terminated, and the Trustees shall be discharged from all liabilities and duties hereunder, and the rights and interests of all shareholders shall cease.

 

ARTICLE XIII

 

MISCELLANEOUS

 

Section 13.1  Governing Law.  The Declaration of Trust is executed by the undersigned Trustees and delivered in the State of Maryland with reference to the laws thereof, and the rights of all parties and the validity, construction and effect of every provision hereof shall be subject to and construed according to the laws of the State of Maryland without regard to conflicts of laws provisions thereof.

 

Section 13.2  Reliance by Third Parties.  Any certificate shall be final and conclusive as to any person dealing with the Trust if executed by the Secretary or an Assistant Secretary of the Trust or a Trustee, and if certifying to: (a) the number or identity of Trustees, officers of the Trust or shareholders; (b) the due authorization of the execution of any document; (c) the action or vote taken, and the existence of a quorum, at a meeting of the Board of Trustees or shareholders; (d) a copy of the Declaration of Trust or of the Bylaws as a true and complete copy as then in force; (e) an amendment to the Declaration of Trust; (f) the termination of the Trust; or (g) the existence of any fact  relating to the affairs of the Trust.  No purchaser, lender, transfer agent or other person shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trust on its behalf or by any officer, employee or agent of the Trust.

 

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Section 13.3  Severability.

 

(a)                                 The provisions of the Declaration of Trust are severable, and if the Board of Trustees shall determine, with the advice of counsel, that any one or more of such provisions (the “Conflicting Provisions”) are in conflict with the Code, Title 8 or other applicable federal or state laws, the Conflicting Provisions, to the extent of the conflict, shall be deemed never to have constituted a part of the Declaration of Trust, even without any amendment of the Declaration of Trust pursuant to Article X and without affecting or impairing any of the remaining provisions of the Declaration of Trust or rendering invalid or improper any action taken or omitted prior to such determination.  No Trustee shall be liable for making or failing to make such a determination.  In the event of any such determination by the Board of Trustees, the Board shall amend the Declaration of Trust in the manner provided in Section 10.2.

 

(b)                                 If any provision of the Declaration of Trust shall be held invalid or unenforceable in any jurisdiction, such holding shall apply only to the extent of any such invalidity or unenforceability and shall not in any manner affect, impair or render invalid or unenforceable such provision in any other jurisdiction or any other provision of the Declaration of Trust in any jurisdiction.

 

Section 13.4  Construction.  In the Declaration of Trust, unless the context otherwise requires, words used in the singular or in the plural include both the plural and singular and words denoting any gender include all genders.  The title and headings of different parts are inserted for convenience and shall not affect the meaning, construction or effect of the Declaration of Trust.  In defining or interpreting the powers and duties of the Trust and its Trustees and officers, reference may be made by the Trustees or officers, to the extent appropriate and not inconsistent with the Code or Title 8, to Titles 1 through 3 of the Corporations and Associations Article of the Annotated Code of Maryland.

 

Section 13.5  Recordation.  The Declaration of Trust and any amendment hereto shall be filed for record with the SDAT and may also be filed or recorded in such other places as the Trustees deem appropriate, but failure to file for record the Declaration of Trust or any

 

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amendment hereto in any office other than in the State of Maryland shall not affect or impair the validity or effectiveness of the Declaration of Trust or any amendment hereto.  A restated Declaration of Trust shall, upon filing, be conclusive evidence of all amendments contained therein and may thereafter be referred to in lieu of the original Declaration of Trust and the various amendments  thereto.

 

THIRD:  The amendment to and restatement of the Declaration of Trust of the Trust as hereinabove set forth have been duly advised by the Board of Trustees and approved by the shareholders of the Trust as required by law.

 

FOURTH:  The total number of shares of beneficial interest which the Trust had authority to issue immediately prior to this amendment and restatement was 1,000, consisting of 1,000 Common Shares, $0.01 par value per share.  The aggregate par value of all shares of beneficial interest having par value was $10.00.

 

FIFTH:  The total number of shares of beneficial interest which the Trust has authority to issue pursuant to the foregoing amendment and restatement of the Declaration of Trust is 700,000,000, consisting of 500,000,000 Common Shares, $0.01 par value per share, and 200,000,000 Preferred Shares, $0.01 par value per share.  The aggregate par value of all authorized shares of beneficial interest having par value is $7,000,000.

 

The undersigned acknowledges these Articles of Amendment and Restatement to be the trust act of the Trust and as to all matters or facts required to be verified under oath, the undersigned acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

 

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IN WITNESS WHEREOF, the Trust has caused these Articles of Amendment and Restatement to be signed in its name and on its behalf by its Chief Financial Officer and attested to by its Secretary on this 17th day of July, 2017.

 

ATTEST:

 

JBG SMITH Properties

 

 

 

 

 

 

 

 

 

/s/ Mitchell Schear

 

/s/ Stephen W. Theriot

(SEAL)

Mitchell Schear

 

Stephen W. Theriot

 

Secretary

 

Chief Financial Officer

 

 

[Signature Page to Articles of Amendment and Restatement]

 


EX-3.2 12 a17-17912_1ex3d2.htm EX-3.2

Exhibit 3.2

 

JBG SMITH PROPERTIES

 

BYLAWS

 

ARTICLE I

 

OFFICES

 

Section 1.                                           PRINCIPAL OFFICE.  The principal office of the Trust in the State of Maryland shall be located at such place as the Board of Trustees may designate.

 

Section 2.                                           ADDITIONAL OFFICES.  The Trust may have additional offices, including a principal executive office, at such places as the Board of Trustees may from time to time determine or the business of the Trust may require.

 

ARTICLE II

 

MEETINGS OF SHAREHOLDERS

 

Section 1.                                           PLACE.  All meetings of shareholders shall be held at the principal executive office of the Trust or at such other place as shall be set in accordance with these Bylaws and stated in the notice of the meeting.

 

Section 2.                                           ANNUAL MEETING.  An annual meeting of shareholders for the election of trustees and the transaction of any business within the powers of the Trust shall be held on the date and at the time and place set by the Board of Trustees.

 

Section 3.                                           SPECIAL MEETINGS.   Each of the chairman of the board, chief executive officer, president and a majority of the Board of Trustees then in office shall have the exclusive power to call a special meeting of shareholders. A special meeting of shareholders shall be held on the date and at the time and place set by the chairman of the board, chief executive officer, president or Board of Trustees, whoever has called the meeting.

 

Section 4.                                           NOTICE.  Not less than ten nor more than 90 days before each meeting of shareholders, the secretary shall give to each shareholder entitled to vote at such meeting and to each shareholder not entitled to vote who is entitled to notice of the meeting notice in writing or by electronic transmission stating the time and place of the meeting and, in the case of a special meeting or as otherwise may be required by any statute, the purpose for which the meeting is called, by mail, by presenting it to such shareholder personally, by leaving it at the shareholder’s residence or usual place of business or by any other means permitted by Maryland law.  If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the shareholder at the shareholder’s address as it appears on the records of the Trust, with postage thereon prepaid.  If transmitted electronically, such notice shall be deemed to be given when transmitted to the shareholder by an electronic transmission to any address or number of the shareholder at which the shareholder receives electronic transmissions.

 



 

The Trust may give a single notice to all shareholders who share an address, which single notice shall be effective as to any shareholder at such address, unless such shareholder objects to receiving such single notice or revokes a prior consent to receiving such single notice.  Failure to give notice of any meeting to one or more shareholders, or any irregularity in such notice, shall not affect the validity of any meeting fixed in accordance with this Article II or the validity of any proceedings at any such meeting.

 

Subject to Section 12(a) of this Article II, any business of the Trust may be transacted at an annual meeting of shareholders without being specifically designated in the notice, except such business as is required by any statute to be stated in such notice.  No business shall be transacted at a special meeting of shareholders except as specifically designated in the notice.  The Trust may postpone or cancel a meeting of shareholders by making a “public announcement” (as defined in Section 12(c)(3) of this Article II) of such postponement or cancellation prior to the meeting.  Notice of the date, time and place to which the meeting is postponed shall be given not less than ten days prior to such date and otherwise in the manner set forth in this section.

 

Section 5.                                           ORGANIZATION AND CONDUCT.  Every meeting of shareholders shall be conducted by an individual appointed by the Board of Trustees to be chairman of the meeting or, in the absence of such appointment or appointed individual, by the chairman of the board or, in the case of a vacancy in the office or absence of the chairman of the board, by one of the following officers present at the meeting in the following order:  the vice chairman of the board, if there is one, the chief executive officer, the president, the vice presidents in their order of rank and seniority, the secretary or, in the absence of such officers, a chairman chosen by the shareholders by the vote of a majority of the votes cast by shareholders present in person or by proxy.  The secretary or, in the secretary’s absence, an assistant secretary, or, in the absence of both the secretary and assistant secretaries, an individual appointed by the Board of Trustees or, in the absence of such appointment, an individual appointed by the chairman of the meeting shall act as secretary.  In the event that the secretary presides at a meeting of shareholders, an assistant secretary or, in the absence of all assistant secretaries, an individual appointed by the Board of Trustees or the chairman of the meeting, shall record the minutes of the meeting.  The order of business and all other matters of procedure at any meeting of shareholders shall be determined by the chairman of the meeting.  The chairman of the meeting may prescribe such rules, regulations and procedures and take such action as, in the discretion of the chairman and without any action by the shareholders, are appropriate for the proper conduct of the meeting, including, without limitation, (a) restricting admission to the time set for the commencement of the meeting; (b) limiting attendance at the meeting to shareholders of record of the Trust, their duly authorized proxies and such other individuals as the chairman of the meeting may determine; (c) limiting participation at the meeting on any matter to shareholders of record of the Trust entitled to vote on such matter, their duly authorized proxies and other such individuals as the chairman of the meeting may determine; (d) limiting the time allotted to questions or comments; (e) determining when and for how long the polls should be opened and when the polls should be closed; (f) maintaining order and security at the meeting; (g) removing any shareholder or any other individual who refuses to comply with meeting procedures, rules or guidelines as set forth by the chairman of the meeting; (h) concluding a meeting or recessing or adjourning the meeting, whether or not a quorum is present, to a later

 

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date and time and at a place announced at the meeting; and (i) complying with any state and local laws and regulations concerning safety and security.  Unless otherwise determined by the chairman of the meeting, meetings of shareholders shall not be required to be held in accordance with the rules of parliamentary procedure.

 

Section 6.                                           QUORUM.  At any meeting of shareholders, the presence in person or by proxy of shareholders entitled to cast a majority of all the votes entitled to be cast at such meeting on any matter shall constitute a quorum; but this section shall not affect any requirement under any statute or the Declaration of Trust of the Trust (the “Declaration of Trust”) for the vote necessary for the approval of any matter.  If such quorum is not established at any meeting of the shareholders, the chairman of the meeting may adjourn the meeting sine die or from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting.  At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.

 

The shareholders present either in person or by proxy, at a meeting which has been duly called and at which a quorum has been established, may continue to transact business until adjournment, notwithstanding the withdrawal from the meeting of enough shareholders to leave fewer than would be required to establish a quorum.

 

Section 7.                                           VOTING.  A plurality of all the votes cast at a meeting of shareholders duly called and at which a quorum is present shall be sufficient to elect a trustee. Each share may be voted for as many individuals as there are trustees to be elected and for whose election the share is entitled to be voted.  A majority of the votes cast at a meeting of shareholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute or by the Declaration of Trust.  Unless otherwise provided by statute or by the Declaration of Trust, each outstanding share of beneficial interest, regardless of class, entitles the holder thereof to cast one vote on each matter submitted to a vote at a meeting of shareholders.  Voting on any question or in any election may be viva voce unless the chairman of the meeting shall order that voting be by ballot or otherwise.

 

Section 8.                                           PROXIES.  A holder of record of shares of beneficial interest of the Trust may cast votes in person or by proxy executed by the shareholder or by the shareholder’s duly authorized agent in any manner permitted by law.  Such proxy or evidence of authorization of such proxy shall be filed with the secretary of the Trust before or at the meeting.  No proxy shall be valid more than eleven months after its date unless otherwise provided in the proxy.

 

Section 9.                                           VOTING OF SHARES BY CERTAIN HOLDERS.  Shares of beneficial interest of the Trust registered in the name of a corporation, limited liability company, partnership, joint venture, trust or other entity, if entitled to be voted, may be voted by the president or a vice president, managing member, manager, general partner or trustee thereof, as

 

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the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such shares pursuant to a bylaw or a resolution of the governing body of such corporation or other entity or agreement of the partners of a partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such shares.  Any trustee or fiduciary, in such capacity, may vote shares of beneficial interest registered in such trustee’s or fiduciary’s name, either in person or by proxy.

 

Shares of beneficial interest of the Trust directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time.

 

The Board of Trustees may adopt by resolution a procedure by which a shareholder may certify in writing to the Trust that any shares of beneficial interest registered in the name of the shareholder are held for the account of a specified person other than the shareholder.  The resolution shall set forth the class of shareholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date, the time after the record date within which the certification must be received by the Trust; and any other provisions with respect to the procedure which the Board of Trustees considers necessary or desirable.  On receipt by the Trust of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the holder of record of the specified shares of beneficial interest in place of the shareholder who makes the certification.

 

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Section 10.                                    INSPECTORS.  The Board of Trustees or the chairman of the meeting may appoint, before or at the meeting, one or more inspectors for the meeting and any successor to the inspector.  Except as otherwise provided by the chairman of the meeting, the inspectors, if any, shall (i) determine the number of shares of beneficial interest represented at the meeting in person or by proxy and the validity and effect of proxies, (ii) receive and tabulate all votes, ballots or consents, (iii) report such tabulation to the chairman of the meeting, (iv) hear and determine all challenges and questions arising in connection with the right to vote, and (v) do such acts as are proper to fairly conduct the election or vote.  Each such report shall be in writing and signed by the inspector or by a majority of them if there is more than one inspector acting at such meeting.  If there is more than one inspector, the report of a majority shall be the report of the inspectors.  The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.

 

Section 11.                                    REPORTS TO SHAREHOLDERS.  The president or some other executive officer designated by the Board of Trustees shall prepare annually a full and correct statement of the affairs of the Trust, which shall include a balance sheet and a financial statement of operations for the preceding fiscal year.  The statement of affairs shall be submitted at the annual meeting of the shareholders and, within 20 days after the annual meeting of shareholders, placed on file at the principal office of the Trust.

 

Section 12.                                    ADVANCE NOTICE OF SHAREHOLDER NOMINEES FOR TRUSTEE AND OTHER SHAREHOLDER PROPOSALS.

 

(a)  Annual Meetings of Shareholders.  (1) Nominations of individuals for election to the Board of Trustees and the proposal of other business to be considered by the shareholders may be made at an annual meeting of shareholders (i) pursuant to the Trust’s notice of meeting, (ii) by or at the direction of the Board of Trustees (in accordance with Article III, Section 11 and Article III, Section 18 hereof to the extent applicable), (iii) by any shareholder of the Trust who was a shareholder of record both at the time of giving of notice by the shareholder as provided for in this Section 12 and at the time of the annual meeting, who is entitled to vote at the meeting in the election of each individual so nominated or on any such other business and who has complied with the procedures set forth in this Section 12 or (iv) pursuant to Section 13 of this Article II.

 

(2)                                 For any nomination or other business to be properly brought before an annual meeting by a shareholder pursuant to clause (iii) of paragraph (a)(1) of this Section 12, the shareholder must have given timely notice thereof in writing to the secretary of the Trust and any such other business must otherwise be a proper matter for action by the shareholders.  To be timely, such shareholder’s notice shall set forth all information required under this Section 12 and shall be delivered to the secretary at the principal executive office of the Trust not earlier than the 150th day nor later than 5:00 p.m., Eastern Time, on the 120th day prior to the first anniversary of the date of the proxy statement (as defined in Section 12(c)(3) of this Article II) for the preceding year’s annual meeting; provided, however, that, in connection with the Trust’s first annual meeting or in the event that the date of the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the preceding year’s annual meeting,

 

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in order for notice by the shareholder to be timely, such notice must be so delivered not earlier than the 150th day prior to the date of such annual meeting and not later than 5:00 p.m., Eastern Time, on the later of the 120th day prior to the date of such annual meeting, as originally convened, or the tenth day following the day on which public announcement of the date of such meeting is first made.  The public announcement of a postponement or adjournment of an annual meeting shall not commence a new time period for the giving of a shareholder’s notice as described above.  To be timely for nominations made pursuant to Section 13 of this Article II, a Nomination Notice (as defined below) shall be delivered in accordance with the requirements of Section 13.

 

(3)                                 Any shareholder’s notice given pursuant to paragraph (a)(2) of this Section 12 shall set forth:

 

(i) as to each individual whom the shareholder proposes to nominate for election or reelection as a trustee (each, a “Proposed Nominee”), all information relating to the Proposed Nominee that would be required to be disclosed in connection with the solicitation of proxies for the election of the Proposed Nominee as a trustee in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such solicitation, in each case pursuant to Regulation 14A (or any successor provision) under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”);

 

(ii) as to any other business that the shareholder proposes to bring before the meeting, a description of such business, the shareholder’s reasons for proposing such business at the meeting and any material interest in such business of such shareholder or any Shareholder Associated Person (as defined below), individually or in the aggregate, including any anticipated benefit to the shareholder or the Shareholder Associated Person therefrom;

 

(iii) as to the shareholder giving the notice, any Proposed Nominee and any Shareholder Associated Person,

 

(A) the class, series and number of all shares of beneficial interest or other securities of the Trust or any affiliate thereof (collectively, the “Company Securities”), if any, which are owned (beneficially or of record) by such shareholder, Proposed Nominee or Shareholder Associated Person, the date on which each such Company Security was acquired and the investment intent of such acquisition, and any short interest (including any opportunity to profit or share in any benefit from any decrease in the price of such shares or other security) in any Company Securities of any such person,

 

(B) the nominee holder for, and number of, any Company Securities owned beneficially but not of record by such shareholder, Proposed Nominee or Shareholder Associated Person,

 

(C) whether and the extent to which such shareholder, Proposed Nominee or Shareholder Associated Person, directly or indirectly (through brokers, nominees or

 

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otherwise), is subject to or during the last six months has engaged in any hedging, derivative or other transaction or series of transactions or entered into any other agreement, arrangement or understanding (including any short interest, any borrowing or lending of securities or any proxy or voting agreement), the effect or intent of which is to (I) manage risk or benefit of changes in the price of (x) Company Securities or (y) any security of any entity that was listed in the Peer Group in the Share Performance Graph in the most recent annual report to security holders of the Trust (a “Peer Group Company”) for such shareholder, Proposed Nominee or Shareholder Associated Person or (II) increase or decrease the voting power of such shareholder, Proposed Nominee or Shareholder Associated Person in the Trust or any affiliate thereof (or, as applicable, in any Peer Group Company) disproportionately to such person’s economic interest in the Company Securities (or, as applicable, in any Peer Group Company) and

 

(D) any substantial interest, direct or indirect (including, without limitation, any existing or prospective commercial, business or contractual relationship with the Trust), by security holdings or otherwise, of such shareholder, Proposed Nominee or Shareholder Associated Person, in the Trust or any affiliate thereof, other than an interest arising from the ownership of Company Securities where such shareholder, Proposed Nominee or Shareholder Associated Person receives no extra or special benefit not shared on a pro rata basis by all other holders of the same class or series;

 

(iv) as to the shareholder giving the notice, any Shareholder Associated Person with an interest or ownership referred to in clauses (ii) or (iii) of this paragraph (3) of this Section 12(a) and any Proposed Nominee,

 

(A) the name and address of such shareholder, as they appear on the Trust’s share ledger, and the current name and business address, if different, of each such Shareholder Associated Person and any Proposed Nominee,

 

(B) the investment strategy or objective, if any, of such shareholder and each such Shareholder Associated Person who is not an individual and a copy of the prospectus, offering memorandum or similar document, if any, provided to investors or potential investors in such shareholder and each such Shareholder Associated Person; and

 

(C) whether any such shareholder or any Shareholder Associated Person has received any financial assistance, funding or other consideration from any other person in respect of the nomination or such other business;

 

(v) the name and address of any person who contacted or was contacted by the shareholder giving the notice or any Shareholder Associated Person about the Proposed Nominee or other business proposal prior to the date of such shareholder’s notice; and

 

(vi) to the extent known by the shareholder giving the notice, the name and address of any other shareholder supporting the Proposed Nominee or the proposal of other business on the date of such shareholder’s notice.

 

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(4)                                 Any shareholder’s notice given pursuant to paragraph (a)(2) of this Section 12 shall, with respect to any Proposed Nominee, be accompanied by a certificate executed by the Proposed Nominee (i) certifying that such Proposed Nominee (a) is not, and will not become, a party to any agreement, arrangement or understanding with any person or entity other than the Trust in connection with service or action as a trustee that has not been disclosed to the Trust and (b) will serve as a trustee of the Trust if elected; and (ii) attaching a completed Proposed Nominee questionnaire (which questionnaire shall be provided by the Trust, upon request, to the shareholder providing the notice and shall include all information relating to the Proposed Nominee that would be required to be disclosed in connection with the solicitation of proxies for the election of the Proposed Nominee as a trustee in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such solicitation in each case pursuant to Regulation 14A (or any successor provision) under the Exchange Act and the rules thereunder, or would be required pursuant to the rules of any national securities exchange on which any securities of the Trust are listed or over-the-counter market on which any securities of the Trust are traded).

 

(5)                                 Notwithstanding anything in this subsection (a) of this Section 12 to the contrary, in the event that the number of trustees to be elected to the Board of Trustees is increased, and there is no public announcement of such action at least 130 days prior to the first anniversary of the date of the proxy statement (as defined in Section 12(c)(3) of this Article II) for the preceding year’s annual meeting, a shareholder’s notice required by paragraph (a)(2) of this Section 12(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal executive office of the Trust not later than 5:00 p.m., Eastern Time, on the tenth day following the day on which such public announcement is first made by the Trust.

 

(6)                                 For purposes of this Section 12, “Shareholder Associated Person” of any shareholder shall mean (i) any person acting in concert with, such shareholder, (ii) any beneficial owner of shares of beneficial interest of the Trust owned of record or beneficially by such shareholder (other than a shareholder that is a depositary) and (iii) any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such shareholder or Shareholder Associated Person.

 

(b)                                 Special Meetings of Shareholders.  Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Trust’s notice of meeting.  Nominations of individuals for election to the Board of Trustees may be made at a special meeting of shareholders at which trustees are to be elected only (i) by or at the direction of the Board of Trustees or (ii) provided that the special meeting has been called in accordance with Section 3 of this Article II for the purpose of electing trustees, by any shareholder of the Trust who is a shareholder of record both at the time of giving of notice provided for in this Section 12 and at the time of the special meeting, who is entitled to vote at the meeting in the election of each individual so nominated and who has complied with the notice procedures set forth in this Section 12.  In the event the Trust calls a special meeting of shareholders for the purpose of electing one or more individuals to the Board of Trustees, any shareholder may nominate an individual or individuals (as the case may be) for election as a

 

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trustee as specified in the Trust’s notice of meeting, if the shareholder’s notice, containing the information required by paragraphs (a)(3) and (4) of this Section 12 is delivered to the secretary at the principal executive office of the Trust not earlier than the 120th day prior to such special meeting and not later than 5:00 p.m., Eastern Time, on the later of the 90th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Trustees to be elected at such meeting.  The public announcement of a postponement or adjournment of a special meeting shall not commence a new time period for the giving of a shareholder’s notice as described above.

 

(c)                                  General.  (1)  If information submitted pursuant to this Section 12 or Section 13 of this Article II, as the case may be, by any shareholder proposing a nominee for election as a trustee or any proposal for other business at a meeting of shareholders shall be inaccurate in any material respect, such information may be deemed not to have been provided in accordance with this Section 12 or Section 13 of this Article II, as the case may be.  Any such shareholder shall notify the Trust of any inaccuracy or change (within two Business Days of becoming aware of such inaccuracy or change) in any such information.  Upon written request by the secretary or the Board of Trustees, any such shareholder shall provide, within five Business Days of delivery of such request (or such other period as may be specified in such request), (A) written verification, satisfactory, in the discretion of the Board of Trustees or any authorized officer of the Trust, to demonstrate the accuracy of any information submitted by the shareholder pursuant to this Section 12 or Section 13 of this Article II, as the case may be, and (B) a written update of any information (including, if requested by the Trust, written confirmation by such shareholder that it continues to intend to bring such nomination or other business proposal before the meeting) submitted by the shareholder pursuant to this Section 12 or Section 13 of this Article II, as the case may be, as of an earlier date.  If a shareholder fails to provide such written verification or written update within such period, the information as to which written verification or a written update was requested may be deemed not to have been provided in accordance with this Section 12 or Section 13 of this Article II, as the case may be.

 

(2)                                 Only such individuals who are nominated in accordance with this Section 12 or Section 13 of this Article II, shall be eligible for election by shareholders as trustees, and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with this Section 12 or Section 13 of this Article II, as the case may be.  The chairman of the meeting shall have the power to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with this Section 12 or Section 13 of this Article II.

 

(3)                                  For purposes of this Section 12, “the date of the proxy statement” shall have the same meaning as “the date of the company’s proxy statement released to shareholders” as used in Rule 14a-8(e) promulgated under the Exchange Act, as interpreted by the Securities and Exchange Commission from time to time.  “Public announcement” shall mean disclosure (A) in a press release reported by the Dow Jones News Service, Associated Press, Business Wire, PR Newswire or other widely circulated news or wire service or (B) in a document publicly filed by

 

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the Trust with the Securities and Exchange Commission pursuant to the Exchange Act or the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

(4)                                 Notwithstanding the foregoing provisions of this Section 12, a shareholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 12.  Nothing in this Section 12 shall be deemed to affect any right of a shareholder to request inclusion of a proposal in, or the right of the Trust to omit a proposal from, the Trust’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act.  Nothing in this Section 12 shall require disclosure of revocable proxies received by the shareholder or Shareholder Associated Person pursuant to a solicitation of proxies after the filing of an effective Schedule 14A by such shareholder or Shareholder Associated Person under Section 14(a) of the Exchange Act.

 

(5)                                 For purposes of these Bylaws, “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

 

Section 13.                                    SHAREHOLDER NOMINATIONS INCLUDED IN THE TRUST’S PROXY MATERIAL.

 

(a)  Inclusion of Proxy Access Nominees in Proxy Statement. Subject to the provisions of this Section 13, if expressly requested in the relevant Nomination Notice (as defined below), the Trust shall include in its proxy statement for any annual meeting of shareholders: (i) the names of any person or persons nominated for election (each, a “Proxy Access Nominee”), which shall also be included on the Trust’s form of proxy and ballot, by any Eligible Holder (as defined below) or group of up to 20 Eligible Holders that has (individually and collectively, in the case of a group) satisfied, as determined by the Board of Trustees, all applicable conditions and complied with all applicable procedures set forth in this Section 13 (such Eligible Holder or group of Eligible Holders being a “Nominating Shareholder”); (ii) disclosure about each Proxy Access Nominee and the Nominating Shareholder required under the rules of the Securities and Exchange Commission or other applicable law to be included in the proxy statement; (iii) any statement included by the Nominating Shareholder in the Nomination Notice for inclusion in the proxy statement in support of each Proxy Access Nominee’s election to the Board of Trustees (subject, without limitation, to Section 13(e)(ii)), if such statement does not exceed 500 words and fully complies with Section 14 of the Exchange Act and the rules and regulations thereunder, including Rule 14a-9 (the “Supporting Statement”); and (iv) any other information that the Trust or the Board of Trustees determines, in their discretion, to include in the proxy statement relating to the nomination of each Proxy Access Nominee, including, without limitation, any statement in opposition to the nomination, any of the information provided pursuant to this Section 13 and any solicitation materials or related information with respect to a Proxy Access Nominee.

 

For purposes of this Section 13, any determination to be made by the Board of Trustees may be made by the Board of Trustees, a committee of the Board of Trustees or any

 

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officer of the Trust designated by the Board of Trustees or a committee of the Board of Trustees, and any such determination shall be final and binding on the Trust, any Eligible Holder, any Nominating Shareholder, any Proxy Access Nominee and any other person so long as made in good faith (without any further requirements). The chairman of any annual meeting of shareholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall have the power and duty to determine whether a Proxy Access Nominee has been nominated in accordance with the requirements of this Section 13 and, if not so nominated, shall direct and declare at the meeting that such Proxy Access Nominee shall not be considered.

 

(b)  Maximum Number of Proxy Access Nominees.  (1) The Trust shall not be required to include in the proxy statement for an annual meeting of shareholders more Proxy Access Nominees than that number of Trustees constituting the greater of (i) two or (ii) 20% of the total number of Trustees of the Trust on the last day on which a Nomination Notice may be submitted pursuant to this Section 13 (rounded down to the nearest whole number) (the “Maximum Number”). The Maximum Number for a particular annual meeting shall be reduced by: (i) Proxy Access Nominees who the Board of Trustees itself decides to nominate for election at such annual meeting; (ii) the number of individuals who will be included in the Trust’s proxy materials as nominees recommended by the Board of Trustees pursuant to an agreement, arrangement or other understanding with a shareholder or group of shareholders (other than any such agreement, arrangement or understanding entered into in connection with an acquisition of shares from the Trust by such shareholder or group of shareholders); (iii) Proxy Access Nominees who cease to satisfy, or Proxy Access Nominees of Nominating Shareholders that cease to satisfy, the eligibility requirements in this Section 13, as determined by the Board of Trustees; (iv) Proxy Access Nominees whose nomination is withdrawn by the Nominating Shareholder or who become unwilling to serve on the Board of Trustees; and (v) the number of incumbent Trustees who had been Proxy Access Nominees with respect to any of the preceding two annual meetings of shareholders and whose reelection at the upcoming annual meeting is being recommended by the Board of Trustees. In the event that one or more vacancies for any reason occurs on the Board of Trustees after the deadline for submitting a Nomination Notice as set forth in Section 13(d) below but before the date of the annual meeting, and the Board of Trustees resolves to reduce the size of the board in connection therewith, the Maximum Number shall be calculated based on the number of Trustees in office as so reduced.

 

(2)                                 If the number of Proxy Access Nominees pursuant to this Section 13 for any annual meeting of shareholders exceeds the Maximum Number then, promptly upon notice from the Trust, each Nominating Shareholder will select one Proxy Access Nominee for inclusion in the proxy statement until the Maximum Number is reached, going in order of the amount (largest to smallest) of the ownership position as disclosed in each Nominating Shareholder’s Nomination Notice, with the process repeated if the Maximum Number is not reached after each Nominating Shareholder has selected one Proxy Access Nominee. If, after the deadline for submitting a Nomination Notice as set forth in Section 13(d), a Nominating Shareholder or a Proxy Access Nominee ceases to satisfy the eligibility requirements in this Section 13, as determined by the Board of Trustees, a Nominating Shareholder withdraws its nomination or a Proxy Access Nominee becomes unwilling to serve on the Board of Trustees,

 

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whether before or after the mailing or other distribution of the definitive proxy statement, then the nomination shall be disregarded, and the Trust: (1) shall not be required to include in its proxy statement or on any ballot or form of proxy the disregarded Proxy Access Nominee or any successor or replacement nominee proposed by the Nominating Shareholder or by any other Nominating Shareholder and (2) may otherwise communicate to its shareholders, including without limitation by amending or supplementing its proxy statement or ballot or form of proxy, that a Proxy Access Nominee will not be included as a nominee in the proxy statement or on any ballot or form of proxy and will not be voted on at the annual meeting.

 

(c)  Eligibility of Nominating Shareholder. (1) An “Eligible Holder” is a person who has either (i) been a record holder of the common shares used to satisfy the eligibility requirements in this Section 13(c) continuously for the three-year period specified in Subsection (2) below or (ii) provides to the Secretary of the Trust, within the time period referred to in Section 13(d), evidence of continuous ownership of such shares for such three-year period from one or more securities intermediaries in a form that the Board of Trustees determines would be deemed acceptable for purposes of a shareholder proposal under Rule 14a-8(b)(2) under the Exchange Act (or any successor rule).

 

(2) An Eligible Holder or group of up to 20 Eligible Holders may submit a nomination in accordance with this Section 13 only if the person or group (in the aggregate) has continuously owned at least the Minimum Number (as defined below) of common shares of the Trust (excluding any common shares of any predecessor of the Trust) throughout the three-year period preceding and including the date of submission of the Nomination Notice, and continues to own at least the Minimum Number through the date of the annual meeting. Two or more funds that are (x) under common management and investment control, (y) under common management and funded primarily by a single employer or (z) a “group of investment companies,” as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended, shall be treated as one Eligible Holder if such Eligible Holder shall provide together with the Nomination Notice documentation reasonably satisfactory to the Trust that demonstrates that the funds meet the criteria set forth in (x), (y) or (z) hereof. For the avoidance of doubt, in the event of a nomination by a group of Eligible Holders, any and all requirements and obligations for an individual Eligible Holder that are set forth in this Section 13, including the minimum holding period, shall apply to each member of such group; provided, however, that the Minimum Number shall apply to the ownership of the group in the aggregate. Should any shareholder cease to satisfy the eligibility requirements in this Section 13, as determined by the Board of Trustees, or withdraw from a group of Eligible Holders at any time prior to the annual meeting of shareholders, the group of Eligible Holders shall only be deemed to own the shares held by the remaining members of the group.

 

(3) The “Minimum Number” of the Trust’s common shares means 3% of the number of outstanding common shares as of the most recent date for which such amount is given in any filing by the Trust with the Securities and Exchange Commission prior to the submission of the Nomination Notice.

 

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(4) For purposes of this Section 13, an Eligible Holder “owns” only those outstanding shares of the Trust as to which the Eligible Holder possesses both: (A) the full voting and investment rights pertaining to the shares; and (B) the full economic interest in (including the opportunity for profit and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (A) and (B) shall not include any shares: (i) purchased or sold by such Eligible Holder or any of its affiliates in any transaction that has not been settled or closed, (ii) sold short by such Eligible Holder, (iii) borrowed by such Eligible Holder or any of its affiliates for any purpose or purchased by such Eligible Holder or any of its affiliates pursuant to an agreement to resell or subject to any other obligation to resell to another person, or (iv) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such Eligible Holder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of outstanding shares of the Trust, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of: (x) reducing in any manner, to any extent or at any time in the future, such Eligible Holder’s or any of its affiliates’ full right to vote or direct the voting of any such shares, and/or (y) hedging, offsetting, or altering to any degree, gain or loss arising from the full economic ownership of such shares by such Eligible Holder or any of its affiliates. An Eligible Holder “owns” shares held in the name of a nominee or other intermediary so long as the Eligible Holder retains the right to instruct how the shares are voted with respect to the election of Trustees and possesses the full economic interest in the shares. An Eligible Holder’s ownership of shares shall be deemed to continue during any period in which the Eligible Holder has delegated any voting power by means of a proxy, power of attorney, or other similar instrument or arrangement that is revocable at any time by the Eligible Holder. An Eligible Holder’s ownership of shares shall be deemed to continue during any period in which the Eligible Holder has loaned such shares provided that the Eligible Holder has the power to recall such loaned shares on five business days’ notice. The terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings. Whether outstanding shares of the Trust are “owned” for these purposes shall be determined by the Board of Trustees.

 

(5) No Eligible Holder shall be permitted to be in more than one group constituting a Nominating Shareholder, and if any Eligible Holder appears as a member of more than one group, it shall be deemed to be a member of the group that has the largest ownership position as reflected in the Nomination Notice.

 

(6) Any Eligible Holder (including each Eligible Holder whose stock ownership is counted for the purposes of qualifying as a group) whose Proxy Access Nominee withdraws, becomes ineligible or does not receive at least 10% of the votes cast for such Proxy Access Nominee at an annual meeting of shareholders will not be eligible to nominate or participate in the nomination of a Proxy Access Nominee pursuant to this Section 13 for the following two annual meetings of shareholders.

 

(d)  Nomination Notice.

 

To nominate a Proxy Access Nominee, the Nominating Shareholder must, no earlier than 150 days and no later than 120 days before the anniversary of the date that the Trust

 

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mailed its proxy statement for the prior year’s annual meeting of shareholders, submit to the Secretary of the Trust at the principal executive office of the Trust all of the following information and documents (collectively, the “Nomination Notice”); provided, however, that if (and only if) the annual meeting is not scheduled to be held within a period that commences 30 days before such anniversary date and ends 30 days after such anniversary date (an annual meeting date outside such period being referred to herein as an “Other Meeting Date”), the Nomination Notice shall be given in the manner provided herein by the later of the close of business on the date that is 180 days prior to such Other Meeting Date or the tenth day following the day on which public announcement of the date of such Other Meeting Date is first made: (i) a Schedule 14N (or any successor form) relating to each Proxy Access Nominee, completed and filed with the Securities and Exchange Commission by the Nominating Shareholder as applicable, in accordance with Securities and Exchange Commission rules; (ii) a written notice, in a form deemed satisfactory by the Board of Trustees, of the nomination of each Proxy Access Nominee that includes the following additional information, agreements, representations and warranties by the Nominating Shareholder (including each group member): (A) the information required with respect to the nomination of Trustees pursuant to Section 12 of this Article II; (B) the details of any relationship that existed within the past three years and that would have been described pursuant to Item 6(e) of Schedule 14N (or any successor item) if it existed on the date of submission of the Schedule 14N; (C) a representation and warranty that the Nominating Shareholder acquired the securities of the Trust in the ordinary course of business and did not acquire, and is not holding, securities of the Trust for the purpose or with the effect of influencing or changing control of the Trust; (D) a representation and warranty that each Proxy Access Nominee’s candidacy or, if elected, Board of Trustees membership would not violate applicable state or federal law or the rules of any stock exchange on which the Trust’s securities are traded; (E) a representation and warranty that each Proxy Access Nominee: (1) does not have any direct or indirect relationship with the Trust that would cause the Proxy Access Nominee to be considered not independent pursuant to the Trust’s Governance Guidelines as most recently published on its website and otherwise qualifies as independent under the rules of the primary stock exchange on which the common shares of beneficial interest of the Trust are traded; (2) meets the audit committee and compensation committee independence requirements under the rules of the primary stock exchange on which the common shares of beneficial interest of the Trust are traded; (3) is a “non-employee trustee” for the purposes of Rule 16b-3 under the Exchange Act (or any successor rule); (4) is an “outside trustee” for the purposes of Section 162(m) of the Internal Revenue Code (or any successor provision); (5) meets the Trustee qualifications set forth in Article III of these Bylaws; and (6) is not and has not been subject to any event specified in Rule 506(d)(1) of Regulation D (or any successor rule) under the Securities Act of 1933 or Item 401(f) of Regulation S-K (or any successor rule) under the Exchange Act, without reference to whether the event is material to an evaluation of the ability or integrity of such Proxy Access Nominee; (F) a representation and warranty that the Nominating Shareholder satisfies the eligibility requirements set forth in Section 13(c) and has provided evidence of ownership to the extent required by Section 13(c)(1); (G) a representation and warranty that the Nominating Shareholder intends to continue to satisfy the eligibility requirements described in Section 13(c) through the date of the annual meeting; (H) details of any position of a Proxy Access Nominee as an officer, director or trustee of any competitor (that is, any entity that provides services or engages in business activities that compete with or are

 

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alternatives to the services provided or business activities engaged in by the Trust or its affiliates) of the Trust, within the three years preceding the submission of the Nomination Notice; (I) a representation and warranty that the Nominating Shareholder will not engage in a “solicitation” within the meaning of Rule 14a-1(l) (without reference to the exception in Section 14a-1(l)(2)(iv)) (or any successor rules) with respect to the annual meeting, other than with respect to a Proxy Access Nominee or any nominee of the Board of Trustees; (J) a representation and warranty that the Nominating Shareholder will not use any proxy card other than the Trust’s proxy card in soliciting shareholders in connection with the election of a Proxy Access Nominee at the annual meeting; (K) if desired, a Supporting Statement; and (L) in the case of a nomination by a group, the designation by all group members of one group member that is authorized to act on behalf of all group members with respect to matters relating to the nomination, including withdrawal of the nomination; (iii) an executed agreement, in a form deemed satisfactory by the Board of Trustees, pursuant to which the Nominating Shareholder (including each group member) agrees: (A) to comply with all applicable laws, rules and regulations in connection with the nomination, solicitation and election; (B) to file any written solicitation or other communication with the Trust’s shareholders relating to one or more of the Trust’s Trustees or Trustee nominees or any Proxy Access Nominee with the Securities and Exchange Commission, to the extent that such filing would be required if such communication were made by or on behalf of the Trust; (C) to assume all liability stemming from an action, suit or proceeding concerning any actual or alleged legal or regulatory violation arising out of any communication by the Nominating Shareholder or any of its Proxy Access Nominees with the Trust, its shareholders or any other person in connection with the nomination or election of Trustees, including, without limitation, the Nomination Notice; (D) to indemnify and hold harmless (jointly with all other group members, in the case of a group member) the Trust and each of its Trustees, officers and employees individually against any liability, loss, damages, expenses or other costs (including attorneys’ fees) incurred in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Trust or any of its Trustees, officers or employees arising out of or relating to any nomination, solicitation or other activity by the Nominating Shareholder in connection with its efforts to elect its Proxy Access Nominees pursuant to this Section 13; (E) in the event that any information included in the Nomination Notice, or any other communication by the Nominating Shareholder (including with respect to any group member), with the Trust, its shareholders or any other person in connection with the nomination or election ceases to be true and accurate in all material respects (or omits a material fact necessary to make the statements made not misleading), or that the Nominating Shareholder (including any group member) has failed to continue to satisfy the eligibility requirements described in Section 13(c), to promptly (and in any event within 48 hours of discovering such misstatement, omission or failure) notify the Trust and any other recipient of such communication of (A) the misstatement or omission in such previously provided information and of the information that is required to correct the misstatement or omission or (B) such failure; and (iv) an executed agreement, in a form deemed satisfactory by the Board of Trustees, by each Proxy Access Nominee: (A) to provide to the Trust such other information and certifications, including completion of the Trust’s Trustee questionnaire, as it may reasonably request; (B) at the reasonable request of the Trust’s Corporate Governance and Nominating Committee, to meet with the Corporate Governance and Nominating Committee to discuss matters relating to the nomination of such Proxy Access Nominee to the Board of Trustees, including the information

 

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provided by such Proxy Access Nominee to the Trust in connection with his or her nomination and such Proxy Access Nominee’s eligibility to serve as a member of the Board of Trustees; (C) that such Proxy Access Nominee has read and agrees, if elected, to serve as a member of the Board of Trustees, to adhere to the Trust’s Governance Guidelines, Code of Business Conduct and Ethics, and any other Trust policies and guidelines applicable to Trustees; and (D) that such Proxy Access Nominee is not and will not become a party to (i) any compensatory, payment or other financial agreement, arrangement or understanding with any person or entity in connection with his or her nomination, service or action as a Trustee of the Trust that has not been disclosed to the Trust, (ii) any agreement, arrangement or understanding with any person or entity as to how such Proxy Access Nominee would vote or act on any issue or question as a Trustee (a “Voting Commitment”) that has not been disclosed to the Trust or (iii) any Voting Commitment that could limit or interfere with such Proxy Access Nominee’s ability to comply, if elected as a Trustee of the Trust, with its fiduciary duties under applicable law.

 

The information and documents required by this Section 13(d) to be provided by the Nominating Shareholder shall be: (i) provided with respect to and executed by each group member, in the case of information applicable to group members; and (ii) provided with respect to the persons specified in Instruction 1 to Items 6(c) and (d) of Schedule 14N (or any successor item) in the case of a Nominating Shareholder or group member that is an entity. The Nomination Notice shall be deemed submitted on the date on which all the information and documents referred to in this Section 13(d) (other than such information and documents contemplated to be provided after the date the Nomination Notice is provided) have been delivered to or, if sent by mail, received by the Secretary of the Trust.

 

(e)  Exceptions. (1) Notwithstanding anything to the contrary contained in this Section 13, the Trust may omit from its proxy statement any Proxy Access Nominee and any information concerning such Proxy Access Nominee (including a Nominating Shareholder’s Supporting Statement) and no vote on such Proxy Access Nominee will occur (notwithstanding that proxies in respect of such vote may have been received by the Trust), and the Nominating Shareholder may not, after the last day on which a Nomination Notice would be timely, cure in any way any defect preventing the nomination of such Proxy Access Nominee, if: (i) the Trust receives a notice pursuant to Section 12 of this Article II that a shareholder intends to nominate a candidate for Trustee at the annual meeting, whether or not such notice is subsequently withdrawn or made the subject of a settlement with the Trust; (ii) the Nominating Shareholder or the designated lead group member, as applicable, or any qualified representative thereof, does not appear at the meeting of shareholders to present the nomination submitted pursuant to this Section 13, the Nominating Shareholder withdraws its nomination or the chairman of the annual meeting declares that such nomination was not made in accordance with the procedures prescribed by this Section 13 and shall therefore be disregarded; (iii) the Board of Trustees determines that such Proxy Access Nominee’s nomination or election to the Board of Trustees would result in the Trust violating or failing to be in compliance with the Declaration of Trust, these Bylaws or any applicable law, rule or regulation to which the Trust is subject, including any rules or regulations of the primary stock exchange on which the common shares of beneficial interest of the Trust are traded; (iv) such Proxy Access Nominee was nominated for election to the Board of Trustees pursuant to this Section 13 at one of the Trust’s two preceding annual

 

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meetings of shareholders and either withdrew or became ineligible or received a vote of less than 25% of the votes cast in favor of such Proxy Access Nominee; (v) such Proxy Access Nominee has been, within the past three years, an officer or director of a competitor, as defined for purposes of Section 8 of the Clayton Antitrust Act of 1914, as amended; (vi) the Trust is notified, or the Board of Trustees determines, that the Nominating Shareholder or the Proxy Access Nominee has failed to continue to satisfy the eligibility requirements described in Section 13(c), any of the representations and warranties made in the Nomination Notice ceases to be true and accurate in all material respects (or omits a material fact necessary to make the statements made not misleading), such Proxy Access Nominee becomes unwilling or unable to serve on the Board of Trustees or any material violation or breach occurs of the obligations, agreements, representations or warranties of the Nominating Shareholder or such Proxy Access Nominee under this Section 13;

 

(2) Notwithstanding anything to the contrary contained in this Section 13, the Trust may omit from its proxy statement, or may supplement or correct, any information, including all or any portion of the Supporting Statement or any other statement in support of a Proxy Access Nominee included in the Nomination Notice, if the Board of Trustees determines that: (i) such information is not true in all material respects or omits a material statement necessary to make the statements made not misleading; (ii) such information directly or indirectly impugns the character, integrity or personal reputation of, or directly or indirectly makes charges concerning improper, illegal or immoral conduct or associations, without factual foundation, with respect to, any person; or (iii) the inclusion of such information in the proxy statement would otherwise violate the Securities and Exchange Commission proxy rules or any other applicable law, rule or regulation.

 

The Trust may solicit against, and include in the proxy statement its own statement relating to, any Proxy Access Nominee.

 

Section 14.                                    CONTROL SHARE ACQUISITION ACT.  Notwithstanding any other provision of the Declaration of Trust or these Bylaws, Title 3, Subtitle 7 of the Maryland General Corporation Law, or any successor statute (the “MGCL”), shall not apply to any acquisition by any person of shares of beneficial interest of the Trust.  This section may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition.

 

Section 15.                                    SHAREHOLDERS’ CONSENT IN LIEU OF MEETING.  Any action required or permitted to be taken at any meeting of shareholders may be taken without a meeting (a) if a unanimous consent setting forth the action is given in writing or by electronic transmission by each shareholder entitled to vote on the matter and filed with the minutes of proceedings of the shareholders or (b) if the action is advised, and submitted to the shareholders for approval, by the Board of Trustees and a consent in writing or by electronic transmission of shareholders entitled to cast not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting of shareholders is delivered to the Trust in accordance with the Maryland REIT Law or the other applicable provisions of the Corporations and

 

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Associations Article of the Annotated Code of Maryland (collectively, the “MRL”).  The Trust shall give notice of any action taken by less than unanimous consent to each shareholder not later than ten days after the effective time of such action.

 

ARTICLE III

 

TRUSTEES

 

Section 1.                                           GENERAL POWERS.  The business and affairs of the Trust shall be managed under the direction of its Board of Trustees.

 

Section 2.                                           NUMBER, TENURE, QUALIFICATIONS AND RESIGNATION.  At any regular meeting or at any special meeting called for that purpose, a majority of the entire Board of Trustees may establish, increase or decrease the number of trustees, provided that the number thereof shall never be less than the minimum number required by the MRL, nor more than 15, and further provided that the tenure of office of a trustee shall not be affected by any decrease in the number of trustees.  In case of failure to elect trustees at the designated time, the trustees holding over shall continue to serve as trustees until their successors are elected and qualify.  Any trustee of the Trust may resign at any time by delivering his or her resignation to the Board of Trustees, the chairman of the board or the secretary.  Any resignation shall take effect immediately upon its receipt or at such later time specified in the resignation.  The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation.

 

Section 3.                                           ANNUAL AND REGULAR MEETINGS.  An annual meeting of the Board of Trustees shall be held immediately after and at the same place as the annual meeting of shareholders, no notice other than this Bylaw being necessary.  In the event such meeting is not so held, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Trustees.  The Board of Trustees may provide, by resolution, the time and place of regular meetings of the Board of Trustees without other notice than such resolution.

 

Section 4.                                           SPECIAL MEETINGS.  Special meetings of the Board of Trustees may be called by or at the request of the chairman of the board, the chief executive officer, the president or a majority of the trustees then in office.  The person or persons authorized to call special meetings of the Board of Trustees may fix the time and place of any special meeting of the Board of Trustees called by them.  The Board of Trustees may provide, by resolution, the time and place for special meetings of the Board of Trustees without other notice than such resolution.

 

Section 5.                                           NOTICE.  Notice of any special meeting of the Board of Trustees shall be delivered personally or by telephone, electronic mail, facsimile transmission, courier or United States mail to each trustee at his or her business or residence address.  Notice by personal delivery, telephone, electronic mail or facsimile transmission shall be given at least 24 hours prior to the meeting.  Notice by United States mail shall be given at least three days prior to the

 

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meeting.  Notice by courier shall be given at least two days prior to the meeting.  Telephone notice shall be deemed to be given when the trustee or his or her agent is personally given such notice in a telephone call to which the trustee or his or her agent is a party.  Electronic mail notice shall be deemed to be given upon transmission of the message to the electronic mail address given to the Trust by the trustee.  Facsimile transmission notice shall be deemed to be given upon completion of the transmission of the message to the number given to the Trust by the trustee and receipt of a completed answer-back indicating receipt.  Notice by United States mail shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid.  Notice by courier shall be deemed to be given when deposited with or delivered to a courier properly addressed.  Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Trustees need be stated in the notice, unless specifically required by statute or these Bylaws.

 

Section 6.                                           QUORUM.  A majority of the trustees shall constitute a quorum for transaction of business at any meeting of the Board of Trustees, provided that, if less than a majority of such trustees is present at such meeting, a majority of the trustees present may adjourn the meeting from time to time without further notice, and provided further that if, pursuant to applicable law, the Declaration of Trust or these Bylaws, the vote of a majority or other percentage of a particular group of trustees is required for action, a quorum must also include a majority or such other percentage of such group.

 

The trustees present at a meeting which has been duly called and at which a quorum has been established may continue to transact business until adjournment, notwithstanding the withdrawal from the meeting of enough trustees to leave fewer than required to establish a quorum.

 

Section 7.                                           VOTING.  The action of a majority of the trustees present at a meeting at which a quorum is present shall be the action of the Board of Trustees, unless the concurrence of a greater proportion is required for such action by applicable law, the Declaration of Trust or these Bylaws.  If enough trustees have withdrawn from a meeting to leave fewer than required to establish a quorum, but the meeting is not adjourned, the action of the majority of that number of trustees necessary to constitute a quorum at such meeting shall be the action of the Board of Trustees, unless the concurrence of a greater proportion is required for such action by applicable law, the Declaration of Trust or these Bylaws.

 

Section 8.                                       ORGANIZATION.  At each meeting of the Board of Trustees, the chairman of the board or, in the absence of the chairman, the vice chairman of the board, if any, shall act as chairman of the meeting.  In the absence of both the chairman and vice chairman of the board, the chief executive officer or, in the absence of the chief executive officer, the president or, in the absence of the president, a trustee chosen by a majority of the trustees present, shall act as chairman of the meeting.  The secretary or, in his or her absence, an assistant secretary of the Trust or, in the absence of the secretary and all assistant secretaries, an individual appointed by the chairman of the meeting, shall act as secretary of the meeting.

 

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Section 9.              TELEPHONE MEETINGS.  Trustees may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time.  Participation in a meeting by these means shall constitute presence in person at the meeting.

 

Section 10.            CONSENT BY TRUSTEES WITHOUT A MEETING.  Any action required or permitted to be taken at any meeting of the Board of Trustees may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each trustee and is filed with the minutes of proceedings of the Board of Trustees.

 

Section 11.       VACANCIESIf for any reason any or all the trustees cease to be trustees, such event shall not terminate the Trust or affect these Bylaws or the powers of the remaining trustees hereunder.  Except as may be provided by the Board of Trustees in setting the terms of any class or series of preferred shares of beneficial interest, any vacancy on the Board of Trustees may be filled only by a majority of the remaining trustees, even if the remaining trustees do not constitute a quorum.  For a period of two years following [·], 2017 (the “Closing Date”), any vacancy on the Board of Trustees shall be filled with a Replacement Designee (as defined below).   Any trustee elected to fill a vacancy shall serve for the remainder of the full term of the trusteeship in which the vacancy occurred and until a successor is elected and qualifies.

 

Section 12.      COMPENSATION.  Trustees shall not receive any stated salary for their services as trustees but, by resolution of the trustees, may receive compensation per year and/or per meeting and/or per visit to real property or other facilities owned or leased by the Trust and for any service or activity they performed or engaged in as trustees.  Trustees may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the trustees or of any committee thereof and for their expenses, if any, in connection with each property visit and any other service or activity they perform or engage in as trustees; but nothing herein contained shall be construed to preclude any trustees from serving the Trust in any other capacity and receiving compensation therefor.

 

Section 13.            RELIANCE.  Each trustee and officer of the Trust shall, in the performance of his or her duties with respect to the Trust, be entitled to rely on any information, opinion, report or statement, including any financial statement or other financial data, prepared or presented by an officer or employee of the Trust whom the trustee or officer reasonably believes to be reliable and competent in the matters presented, by a lawyer, certified public accountant or other person, as to a matter which the trustee or officer reasonably believes to be within the person’s professional or expert competence, or, with respect to a trustee, by a committee of the Board of Trustees on which the trustee does not serve, as to a matter within its designated authority, if the trustee reasonably believes the committee to merit confidence.

 

Section 14.             RATIFICATION.  The Board of Trustees or the shareholders may ratify and make binding on the Trust any action or inaction by the Trust or its officers to the extent that the Board of Trustees or the shareholders could have originally authorized the matter.  Moreover, any action or inaction questioned in any shareholders’ derivative proceeding or any other proceeding on the ground of lack of authority, defective or irregular execution, adverse

 

20



 

interest of a trustee, officer or shareholder, non-disclosure, miscomputation, the application of improper principles or practices of accounting or otherwise, may be ratified, before or after judgment, by the Board of Trustees or by the shareholders, and if so ratified, shall have the same force and effect as if the questioned action or inaction had been originally duly authorized, and such ratification shall be binding upon the Trust and its shareholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned action or inaction.

 

Section 15.             INTERESTED TRUSTEE TRANSACTIONS.  Section 2-419 of the MGCL shall be available for and apply to any contract or other transaction between the Trust and any of its trustees or between the Trust and any other trust, corporation, firm or other entity in which any of its trustees is a trustee or director or has a material financial interest.

 

Section 16.           CERTAIN RIGHTS OF TRUSTEES AND OFFICERS.   Any trustee or officer, in his or her personal capacity or in a capacity as an affiliate, employee or agent of any other person, or otherwise, may have business interests and engage in business activities similar to, in addition to or in competition with those of or relating to the Trust.

 

Section 17.            EMERGENCY PROVISIONS.  Notwithstanding any other provision in the Declaration of Trust or these Bylaws, this Section 17 shall apply during the existence of any catastrophe, or other similar emergency condition, as a result of which a quorum of the Board of Trustees under Article III of these Bylaws cannot readily be obtained (an “Emergency”).  During any Emergency, unless otherwise provided by the Board of Trustees, (i) a meeting of the Board of Trustees or a committee thereof may be called by any trustee or officer by any means feasible under the circumstances; (ii) notice of any meeting of the Board of Trustees during such an Emergency may be given less than 24 hours prior to the meeting to as many trustees and by such means as may be feasible at the time, including publication, television or radio; and (iii) the number of trustees necessary to constitute a quorum shall be one-third of the entire Board of Trustees.

 

Section 18.            COMPOSITION OF THE BOARD OF TRUSTEES.  In connection with the first annual meeting of shareholders following the Closing Date, the Board of Trustees shall, subject to the reasonable exercise of its duties, take all such actions as may be necessary to nominate the Vornado Board Designees and the JBG Board Designees (each as defined below) (as they may have changed as the result of the appointment of any Replacement Designees) for election by the Trust’s shareholders and shall use no less rigorous efforts to cause the election of each such Vornado Board Designee and JBG Board Designee than the manner in which the Trust supports all other nominees of the Board of Trustees.

 

“JBG Board Designees” means Scott Estes, Alan Forman, Michael Glosserman, W. Matthew Kelly, Ellen Shuman and Robert Stewart.

 

“Vornado Board Designees” means Charles E. Haldeman, Jr., Carol Melton, William Mulrow, Steven Roth, Mitchell Schear and John F. Wood.

 

21



 

“Replacement Designee” means, in the event that any Vornado Board Designee or JBG Board Designee is unable or unwilling to serve or is otherwise no longer serving as a member of the Board of Trustees, a replacement individual designated by the then remaining Vornado Board Designees or JBG Board Designees, respectively, that is reasonably satisfactory to the Corporate Governance and Nominating Committee of the Board of Trustees.

 

ARTICLE IV

 

COMMITTEES

 

Section 1.              NUMBER, TENURE AND QUALIFICATIONS.  The Board of Trustees may appoint from among its members an Executive Committee, an Audit Committee, a Compensation Committee, a Corporate Governance and Nominating Committee and other committees, composed of one or more trustees, to serve at the pleasure of the Board of Trustees. For a period of two years following the Closing Date , to the extent reasonably practicable, the membership of each of the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee shall consist of an equal number of JBG Board Designees and Vornado Board Designees (or if applicable, their respective Replacement Designees).

 

Section 2.              POWERS.  The Board of Trustees may delegate to committees appointed under Section 1 of this Article IV any of the powers of the Board of Trustees.  Except as may be otherwise provided by the Board of Trustees, any committee may delegate some or all of its power and authority to one or more subcommittees, composed of one or more trustees, as the committee deems appropriate in its sole and absolute discretion.

 

Section 3.              MEETINGS.  Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Trustees.  A majority of the members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee.  The act of a majority of the committee members present at a meeting shall be the act of such committee.  The Board of Trustees may designate a chairman of any committee, and such chairman or, in the absence of a chairman, any two members of any committee (if there are at least two members of the committee) may fix the time and place of its meeting unless the Board shall otherwise provide.  In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another trustee to act in the place of such absent member, provided such appointed trustee meets the membership requirements of such committee.

 

Section 4.              TELEPHONE MEETINGS.  Members of a committee of the Board of Trustees may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time.  Participation in a meeting by these means shall constitute presence in person at the meeting.

 

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Section 5.              CONSENT BY COMMITTEES WITHOUT A MEETING.  Any action required or permitted to be taken at any meeting of a committee of the Board of Trustees may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each member of the committee and is filed with the minutes of proceedings of such committee.

 

Section 6.              VACANCIES.  Subject to the provisions hereof, the Board of Trustees shall have the power at any time to change the membership of any committee, to fill any vacancy, to designate an alternate member to replace any absent or disqualified member or to dissolve any such committee.

 

ARTICLE V

 

OFFICERS

 

Section 1.              GENERAL PROVISIONS.  The officers of the Trust shall include a president, a secretary and a treasurer and may include a chairman of the board, a vice chairman of the board, a chief executive officer, one or more vice presidents, a chief operating officer, a chief financial officer, one or more assistant secretaries and one or more assistant treasurers.  In addition, the Board of Trustees may from time to time elect such other officers with such powers and duties as it shall deem necessary or desirable.  The officers of the Trust shall be elected annually by the Board of Trustees, except that the chief executive officer or president may from time to time appoint one or more vice presidents, assistant secretaries and assistant treasurers or other officers.  Each officer shall serve until his or her successor is elected and qualifies or until his or her death, or his or her resignation or removal in the manner hereinafter provided.  Any two or more offices except president and vice president may be held by the same person.  Election of an officer or agent shall not of itself create contract rights between the Trust and such officer or agent.

 

Section 2.              REMOVAL AND RESIGNATION.  Any officer or agent of the Trust may be removed, with or without cause, by the Board of Trustees if in its judgment the best interests of the Trust would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.  Any officer of the Trust may resign at any time by delivering his or her resignation to the Board of Trustees, the chairman of the board, the chief executive officer, the president or the secretary.  Any resignation shall take effect immediately upon its receipt or at such later time specified in the resignation.  The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation.  Such resignation shall be without prejudice to the contract rights, if any, of the Trust.

 

Section 3.              VACANCIES.  A vacancy in any office may be filled by the Board of Trustees for the balance of the term.

 

Section 4.              CHIEF EXECUTIVE OFFICER.  The Board of Trustees may designate a chief executive officer.  The chief executive officer shall have general responsibility for implementation of the policies of the Trust, as determined by the Board of Trustees, and for

 

23



 

the management of the business and affairs of the Trust.  He or she may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Trustees or by these Bylaws to some other officer or agent of the Trust or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of chief executive officer and such other duties as may be prescribed by the Board of Trustees from time to time.

 

Section 5.              CHIEF OPERATING OFFICER.  The Board of Trustees may designate a chief operating officer.  The chief operating officer shall have the responsibilities and duties as determined by the Board of Trustees or the chief executive officer.

 

Section 6.              CHIEF FINANCIAL OFFICER.  The Board of Trustees may designate a chief financial officer.  The chief financial officer shall have the responsibilities and duties as determined by the Board of Trustees or the chief executive officer.

 

Section 7.              CHAIRMAN OF THE BOARD.  The Board of Trustees may designate from among its members a chairman of the board, who shall not, solely by reason of these Bylaws, be an officer of the Trust.  The Board of Trustees may designate the chairman of the board as an executive or non-executive chairman.  The chairman of the board shall preside over the meetings of the Board of Trustees.  The chairman of the board shall perform such other duties as may be assigned to him or her by these Bylaws or the Board of Trustees.

 

Section 8.              PRESIDENT.   In the absence of a chief executive officer, the president shall in general supervise and control all of the business and affairs of the Trust.  In the absence of a designation of a chief operating officer by the Board of Trustees, the president shall be the chief operating officer.  He or she may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Trustees or by these Bylaws to some other officer or agent of the Trust or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Trustees from time to time.

 

Section 9.              VICE PRESIDENTS.  In the absence of the president or in the event of a vacancy in such office, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon the president; and shall perform such other duties as from time to time may be assigned to such vice president by the chief executive officer, the president or the Board of Trustees.  The Board of Trustees may designate one or more vice presidents as executive vice president, senior vice president, or vice president for particular areas of responsibility.

 

Section 10.            SECRETARY.  The secretary shall (a) keep the minutes of the proceedings of the shareholders, the Board of Trustees and committees of the Board of Trustees in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the

 

24



 

trust records and of the seal of the Trust; (d) keep a register of the post office address of each shareholder which shall be furnished to the secretary by such shareholder; (e) have general charge of the share transfer books of the Trust; and (f) in general perform such other duties as from time to time may be assigned to him or her by the chief executive officer, the president or the Board of Trustees.

 

Section 11.            TREASURER.  The treasurer shall have the custody of the funds and securities of the Trust, shall keep full and accurate accounts of receipts and disbursements in books belonging to the Trust, shall deposit all moneys and other valuable effects in the name and to the credit of the Trust in such depositories as may be designated by the Board of Trustees and in general perform such other duties as from time to time may be assigned to him or her by the chief executive officer, the president or the Board of Trustees.  In the absence of a designation of a chief financial officer by the Board of Trustees, the treasurer shall be the chief financial officer of the Trust.

 

The treasurer shall disburse the funds of the Trust as may be ordered by the Board of Trustees, taking proper vouchers for such disbursements, and shall render to the president and Board of Trustees, at the regular meetings of the Board of Trustees or whenever it may so require, an account of all his or her transactions as treasurer and of the financial condition of the Trust.

 

Section 12.            ASSISTANT SECRETARIES AND ASSISTANT TREASURERS.  The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or treasurer, respectively, or by the chief executive officer, the president or the Board of Trustees.

 

Section 13.            COMPENSATION.  The compensation of the officers shall be fixed from time to time by or under the authority of the Board of Trustees and no officer shall be prevented from receiving such compensation by reason of the fact that he or she is also a trustee.

 

ARTICLE VI

 

CONTRACTS, CHECKS AND DEPOSITS

 

Section 1.              CONTRACTS.  The Board of Trustees may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Trust and such authority may be general or confined to specific instances.  Any agreement, deed, mortgage, lease or other document shall be valid and binding upon the Trust when duly authorized or ratified by action of the Board of Trustees and executed by an authorized person.

 

Section 2.              CHECKS AND DRAFTS.  All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Trust shall be signed by such officer or agent of the Trust in such manner as shall from time to time be determined by the Board of Trustees.

 

25



 

Section 3.              DEPOSITS.  All funds of the Trust not otherwise employed shall be deposited or invested from time to time to the credit of the Trust as the Board of Trustees, the chief executive officer, the president, the chief financial officer, or any other officer designated by the Board of Trustees may determine.

 

ARTICLE VII

 

SHARES

 

Section 1.              CERTIFICATES.  Except as may be otherwise provided by the Board of Trustees, shareholders of the Trust are not entitled to certificates evidencing the shares of beneficial interest held by them.  In the event that the Trust issues shares of beneficial interest evidenced by certificates, such certificates shall be in such form as prescribed by the Board of Trustees or a duly authorized officer, shall contain the statements and information required by the MRL and shall be signed by the officers of the Trust in any manner permitted by the MRL.  In the event that the Trust issues shares of beneficial interest without certificates, to the extent then required by the MRL, the Trust shall provide to the record holders of such shares a written statement of the information required by the MRL to be included on share certificates.  There shall be no differences in the rights and obligations of shareholders based on whether or not their shares are evidenced by certificates.

 

Section 2.             TRANSFERS.  All transfers of shares shall be made on the books of the Trust, by the holder of the shares, in person or by his or her attorney, in such manner as the Board of Trustees or any officer of the Trust may prescribe and, if such shares are certificated, upon surrender of certificates duly endorsed.  The issuance of a new certificate upon the transfer of certificated shares is subject to the determination of the Board of Trustees that such shares shall no longer be evidenced by certificates.  Upon the transfer of any uncertificated shares the Trust shall provide to the record holders of such shares, to the extent then required by the MRL, a written statement of the information required by the MRL to be included on share certificates.

 

The Trust shall be entitled to treat the holder of record of any share of beneficial interest as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by the laws of the State of Maryland.

 

Notwithstanding the foregoing, transfers of shares of any class or series of beneficial interest will be subject in all respects to the Declaration of Trust and all of the terms and conditions contained therein.

 

Section 3.              REPLACEMENT CERTIFICATE.  Any officer of the Trust may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Trust alleged to have been lost, destroyed, stolen or mutilated, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, destroyed,

 

26



 

stolen or mutilated; provided, however, if such shares have ceased to be certificated, no new certificate shall be issued unless requested in writing by such shareholder and the Board of Trustees has determined that such certificates may be issued.  Unless otherwise determined by an officer of the Trust, the owner of such lost, destroyed, stolen or mutilated certificate or certificates, or his or her legal representative, shall be required, as a condition precedent to the issuance of a new certificate or certificates, to give the Trust a bond in such sums as it may direct as indemnity against any claim that may be made against the Trust.

 

Section 4.              FIXING OF RECORD DATE.  The Board of Trustees may set, in advance, a record date for the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or determining shareholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of shareholders for any other proper purpose.  Such date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than 90 days and, in the case of a meeting of shareholders, not less than ten days, before the date on which the meeting or particular action requiring such determination of shareholders of record is to be held or taken.

 

When a record date for the determination of shareholders entitled to notice of and to vote at any meeting of shareholders has been set as provided in this section, such record date shall continue to apply to the meeting if adjourned or postponed, except if the meeting is adjourned or postponed to a date more than 120 days after the record date originally fixed for the meeting, in which case a new record date for such meeting shall be determined as set forth herein.

 

Section 5.              SHARE LEDGER.  The Trust shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, an original or duplicate share ledger containing the name and address of each shareholder and the number of shares of each class held by such shareholder.

 

Section 6.              FRACTIONAL SHARES; ISSUANCE OF UNITS.  The Board of Trustees may authorize the Trust to issue fractional shares or authorize the issuance of scrip, all on such terms and under such conditions as it may determine.  Notwithstanding any other provision of the Declaration of Trust or these Bylaws, the Board of Trustees may  authorize the issuance of units consisting of different securities of the Trust.  Any security issued in a unit shall have the same characteristics as any identical securities issued by the Trust, except that the Board of Trustees may provide that for a specified period securities of the Trust issued in such unit may be transferred on the books of the Trust only in such unit.

 

ARTICLE VIII

 

ACCOUNTING YEAR

 

The Board of Trustees shall have the power, from time to time, to fix the fiscal year of the Trust by a duly adopted resolution.

 

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ARTICLE IX

 

DISTRIBUTIONS

 

Section 1.              AUTHORIZATION.  Dividends and other distributions upon the shares of beneficial interest of the Trust may be authorized by the Board of Trustees, subject to the provisions of law and the Declaration of Trust.  Dividends and other distributions may be paid in cash, property or shares of beneficial interest of the Trust, subject to the provisions of law and the Declaration of Trust.

 

Section 2.              CONTINGENCIES.  Before payment of any dividends or other distributions, there may be set aside out of any assets of the Trust available for dividends or other distributions such sum or sums as the Board of Trustees may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends, for repairing or maintaining any property of the Trust or for such other purpose as the Board of Trustees shall determine, and the Board of Trustees may modify or abolish any such reserve.

 

ARTICLE X

 

INVESTMENT POLICY

 

Subject to the provisions of the Declaration of Trust, the Board of Trustees may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Trust as it shall deem appropriate in its sole discretion.

 

ARTICLE XI

 

SEAL

 

Section 1.              SEAL.  The Board of Trustees may authorize the adoption of a seal by the Trust.  The seal shall contain the name of the Trust and the year of its formation and the words “Formed Maryland.”  The Board of Trustees may authorize one or more duplicate seals and provide for the custody thereof.

 

Section 2.              AFFIXING SEAL.  Whenever the Trust is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word “(SEAL)” adjacent to the signature of the person authorized to execute the document on behalf of the Trust.

 

ARTICLE XII

 

INDEMNIFICATION AND ADVANCE OF EXPENSES

 

To the maximum extent permitted by Maryland law in effect from time to time, the Trust shall indemnify and, without requiring a preliminary determination of the ultimate

 

28



 

entitlement to indemnification, shall pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or former trustee or officer of the Trust and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity or (b) any individual who, while a trustee or officer of the Trust and at the request of the Trust, serves or has served as a director, trustee, officer, partner, member or manager of another corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity.  The rights to indemnification and advance of expenses provided by the Declaration of Trust and these Bylaws shall vest immediately upon election of a trustee or officer.  The Trust may, with the approval of its Board of Trustees, provide such indemnification and advance for expenses to an individual who served a predecessor of the Trust in any of the capacities described in (a) or (b) above and to any employee or agent of the Trust or a predecessor of the Trust.  The indemnification and payment or reimbursement of expenses provided in these Bylaws shall not be deemed exclusive of or limit in any way other rights to which any person seeking indemnification or payment or reimbursement of expenses may be or may become entitled under any bylaw, resolution, insurance, agreement or otherwise.

 

Neither the amendment nor repeal of this Article XII, nor the adoption or amendment of any other provision of the Declaration of Trust or these Bylaws inconsistent with this Article, shall apply to or affect in any respect the applicability of the preceding paragraph of this Article XII with respect to any act or failure to act that occurred prior to such amendment, repeal or adoption.

 

ARTICLE XIII

 

WAIVER OF NOTICE

 

Whenever any notice of a meeting is required to be given pursuant to the Declaration of Trust or these Bylaws or pursuant to applicable law, a waiver thereof in writing or by electronic transmission, given by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.  Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice of such meeting, unless specifically required by statute.  The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting has not been lawfully called or convened.

 

ARTICLE XIV

 

EXCLUSIVE FORUM FOR CERTAIN LITIGATION

 

Unless the Trust consents in writing to the selection of an alternative forum, and to the fullest extent permitted by law, the Circuit Court for Baltimore City, Maryland, or, if that Court does not have jurisdiction, the United States District Court for the District of Maryland,

 

29



 

Baltimore Division, shall be the sole and exclusive forum for (a) any derivative action or proceeding brought in the right or on behalf of the Trust, (b) any action asserting a claim of breach of any duty owed by any trustee, officer, other employee, or agent of the Trust to the Trust or to the shareholders of the Trust, (c) any action asserting a claim against the Trust or any trustee, officer, other employee, or agent of the Trust arising pursuant to any provision of the MRL, the Declaration of Trust or these Bylaws, or (d) any action asserting a claim against the Trust or any trustee or officer or other employee of the Trust that is governed by the internal affairs doctrine.  In the event that any action or proceeding described in the this Article XIV is pending in the Circuit Court for Baltimore City, Maryland, any shareholder that is a party to such action, proceeding or claim shall cooperate in seeking to have the action or proceeding assigned to the Business & Technology Case Management Program.

 

ARTICLE XV

 

AMENDMENT OF BYLAWS

 

The Board of Trustees shall have the exclusive power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws.  For a period of two years following the Closing Date, any amendment to (i) Article II, Section 12(a)(1), (ii) Article III, Section 11, (iii) Article III, Section 18, (iv) Article IV, Section 1 or (v) this sentence of the Bylaws shall be valid only if approved by a majority of the entire Board of Trustees, including a majority of each of the JBG Board Designees and Vornado Board Designees.

 

ARTICLE XVI

 

MISCELLANEOUS

 

All references to the Declaration of Trust shall include all amendments and supplements thereto and any other documents filed with and accepted for record by the State Department of Assessments and Taxation related thereto.

 

ARTICLE XVII

 

SEVERABILITY

 

If any provision of these Bylaws shall be held invalid or unenforceable in any respect, such holding shall apply only to the extent of any such invalidity or unenforceability and shall not in any manner affect, impair or render invalid or unenforceable any other provision of these Bylaws in any jurisdiction.

 

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EX-10.1 13 a17-17912_1ex10d1.htm EX-10.1

Exhibit 10.1

 

EXECUTION VERSION

 

TAX MATTERS AGREEMENT

 

between

 

VORNADO REALTY TRUST

 

and

 

JBG SMITH PROPERTIES

 

dated as of

 

July 17, 2017

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

SECTION 1. Definition of Terms

2

 

 

SECTION 2. Allocation of Taxes and Tax-Related Losses

11

 

 

 

2.1

Allocation of Taxes

11

2.2

Allocation of Distribution Taxes

12

2.3

Tax Payments

12

2.4

Closing of Tax Year

13

2.5

Allocation of Tax Attributes

13

 

 

SECTION 3. Preparation and Filing of Tax Returns

13

 

 

 

3.1

Returns

13

3.2

Provision of Information

15

3.3

Special Rules Relating to the Preparation of Tax Returns

15

3.4

Refunds, Credits or Offsets

15

3.5

Carrybacks

16

3.6

Amended Returns

16

 

 

SECTION 4. Tax Payments

16

 

 

 

4.1

Payment of Taxes to Tax Authority

16

4.2

Indemnification Payments

16

4.3

Interest on Late Payments

17

4.4

Tax Consequences of Payments and Adjustments

17

4.5

Section 336(e) Election

18

 

 

SECTION 5. Cooperation and Tax Contests

18

 

 

 

5.1

Cooperation

18

5.2

Notices of Tax Contests

18

5.3

Control of Tax Contests

19

5.4

Cooperation Regarding Tax Contests

19

 

 

SECTION 6. Tax Records

20

 

 

 

6.1

Retention of Tax Records

20

6.2

Access to Tax Records

20

6.3

Confidentiality

20

 

 

SECTION 7. Representations and Covenants

20

 

 

 

7.1

Covenants of Vornado and Newco

20

7.2

Covenants of Newco

21

 

i



 

7.3

Covenants of Vornado

21

7.4

Newco Further Assurances

22

7.5

Vornado Further Assurances

22

7.6

Notices and Exceptions

22

7.7

Relief

23

7.8

Operating Rules

23

7.9

REIT Certificates

24

 

 

SECTION 8. General Provisions

24

 

 

 

8.1

Predecessors or Successors

24

8.2

Construction

25

8.3

Counterparts

25

8.4

Notices

25

8.5

Amendments

26

8.6

Assignment

26

8.7

Successors and Assigns

26

8.8

Change in Law

26

8.9

Authorization, Etc.

26

8.10

Termination

26

8.11

Subsidiaries

26

8.12

Third-Party Beneficiaries

26

8.13

Governing Law

27

8.14

Waiver of Jury Trial

27

8.15

Severability

27

8.16

Waiver

27

8.17

No Double Recovery

27

8.18

No Strict Construction; Interpretation

27

 

ii



 

TAX MATTERS AGREEMENT

 

THIS TAX MATTERS AGREEMENT (the “Agreement”) is dated as of July 17, 2017 by and between Vornado Realty Trust, a Maryland real estate investment trust (“Vornado”) and JBG SMITH Properties, a Maryland real estate investment trust and a Subsidiary of Vornado immediately prior to the Vornado Distribution (as defined below) (“Newco” and, together with Vornado, the “Parties,” and each, a “Party”).  Unless otherwise indicated, all “Section” references in this Agreement are to Sections of the Agreement.

 

RECITALS

 

WHEREAS, the board of directors of Vornado determined that it is in the best interest of Vornado and its stockholders to separate the businesses of Newco from Vornado’s other businesses on the terms and conditions set forth in the Separation and Distribution Agreement by and among Vornado, Vornado Realty L.P., a Delaware limited partnership (“Vornado OP”), Newco, and JBG SMITH Properties LP, a Delaware limited partnership (“Newco OP”), dated on or about the date hereof (the “Separation and Distribution Agreement”);

 

WHEREAS, the board of directors of Vornado has authorized the distribution of all of the issued and outstanding common shares, par value $0.01 per share, of Newco (the “Newco Shares”) to the holders of record, as of the record date, of common shares of Vornado, par value $0.04 per share (the “Vornado Shares”), entitled to participate in such distributions, with such distribution to be made on a pro rata basis (such distribution, the “Vornado Distribution”);

 

WHEREAS, Vornado and Newco intend for the Transactions (as defined below) to be treated in accordance with the Agreed Treatment (as defined below), including for the Vornado Contribution of OP Units (as defined below) and the Vornado Distribution together to qualify for the Tax-Free Status (as defined below);

 

WHEREAS, the boards of directors of Vornado and Newco have each determined that the Vornado Distribution and the other transactions contemplated by the Separation and Distribution Agreement are in the best interests of their respective companies and stockholders and have approved the Separation and Distribution Agreement;

 

WHEREAS, the Parties contemplate that, pursuant to the Master Transaction Agreement (as defined below), immediately after the Vornado Distribution and the Effective Time (as defined below), the transactions described in such agreement will occur (pursuant to which, inter alia, Newco and Newco OP will issue Equity Interests (as defined below) to certain Persons);

 

WHEREAS, the Parties set forth in the Separation and Distribution Agreement and the Master Transaction Agreement (as defined below) the principal arrangements between them regarding the separation of the Newco Group (as defined below) from the Vornado Group (as defined below); and

 

WHEREAS, the Parties desire to provide for and agree upon the allocation between the Parties of liabilities for Taxes (as defined below) arising prior to, as a result of, and subsequent to the Vornado Distribution, and to provide for and agree upon other matters relating to Taxes (as defined below).

 



 

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, the Parties hereby agree as follows:

 

SECTION 1.  Definition of Terms.  For purposes of this Agreement, the following terms have the following meanings:

 

“Acquisition Transaction Requiring Notice” means a transaction or series of transactions (or any agreement, understanding or arrangement, within the meaning of Section 355(e) of the Code and Treasury Regulations Section 1.355-7, or any other regulations promulgated thereunder, to enter into a transaction or series of transactions), whether such transaction is supported, permitted or solicited by management or shareholders of Newco or any of its Subsidiaries, is a hostile acquisition, or otherwise, as a result of which Newco or such Subsidiary would merge or consolidate with or enter into any other reorganization transaction with any other Person or as a result of which one or more Persons would (directly or indirectly) acquire, or have the right to acquire, from Newco or such Subsidiary and/or one or more holders of outstanding shares of Equity Interests of Newco or such Subsidiary, as the case may be, a number of shares of Equity Interests of Newco or such Subsidiary that would, when combined with any other changes in ownership of the Equity Interests of Newco or such Subsidiary pertinent for purposes of Section 355(e) of the Code (but not taking into account Excepted Transactions), comprise an Applicable Percentage Interest in Newco or such Subsidiary (A) by value, as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series, or (B) by vote, as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series.  Notwithstanding the foregoing, a Acquisition Transaction Requiring Notice shall not include (A) the adoption by Newco of, or issuance of stock pursuant to, a shareholder rights plan or (B) issuances of Equity Interests by Newco or any of its Subsidiaries that satisfy Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulations Section 1.355-7(d).  For purposes of determining whether a transaction constitutes an indirect acquisition, any recapitalization resulting in a shift of voting power shall be treated as an indirect acquisition of Equity Interests by the shareholders whose voting power is increased thereby and any redemption of shares of Equity Interests shall be treated as an indirect acquisition of Equity Interests by the non-exchanging shareholders.  This definition and the application thereof are intended to monitor compliance with Section 355(e) of the Code and shall be interpreted accordingly.  Any clarification of, or change in, the statute or regulations promulgated under Section 355(e) of the Code or published IRS guidance with respect thereto shall be incorporated in this definition and its interpretation.

 

“Agreed Treatment” means the treatment of:

 

(i)                                     the Vornado OP Contribution to Newco OP and the Vornado OP Distribution of OP Units together as a partnership division taking the “assets-over form” (as described in Treasury Regulations Section 1.708-1(d)) in which no gain or loss is recognized by Vornado OP, Newco OP, and Vornado pursuant to Sections 721(a), 731(a), and 731(b) of the Code and

 

(ii)                                  the Vornado Contribution of OP Units and the Vornado Distribution in accordance with the Tax-Free Status.

 

2



 

“Agreement” has the meaning set forth in the preamble hereof.

 

“Applicable Percentage Interest” means a five percent (5%) or greater interest, except that (i) if ten percent (10%) or more of the Vornado Included Interests are Kickout Interests, “Applicable Percentage Interest” means a two percent (2%) or greater interest and (ii) if twenty percent (20%) or more of the Vornado Included Interests are Kickout Interests, “Applicable Percentage Interest” means a one percent (1%) or greater interest.

 

“Applicable Year” has the meaning assigned to such term in the Partnership Agreement.

 

“Business Day” means any day other than a Saturday, a Sunday or a statutory holiday on which banks in the State of New York are closed.

 

“Closing” has the meaning assigned to such term in the Master Transaction Agreement.

 

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

 

“Companies” means Vornado and Newco.

 

“Company” means Vornado or Newco, as the context requires.

 

“Control” means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through ownership of securities or partnership, membership, limited liability company, or other ownership interests, by contract or otherwise.

 

“Controlling Party” means, with respect to a Tax Contest, the Person that has responsibility, control and discretion in handling, defending, settling or contesting such Tax Contest.

 

“Disclosing Party” has the meaning set forth in Section 6.3.

 

“Distribution Comparison Analysis” means, for a Party whose required amount of distributions under Section 857(a) of the Code is reduced, the actual reduction in distributions undertaken by such Party, as determined by a Tax Arbitrator, taking into account the distribution history (or where such history is not available, the projected distributions) of such Party, in each case as appropriate in the discretion of such Tax Arbitrator.

 

“Distribution Date” means the Date on which Vornado distributes the Newco Shares to the holders of the Vornado Shares.

 

“Distribution Tax Counsel” means Sullivan & Cromwell LLP.

 

“Distribution Taxes” means (x) any Taxes arising from a Relevant Final Determination (including, for the avoidance of doubt, (i) Taxes imposed because “Section 1374 treatment” (as that phrase is defined in Treasury Regulations Section 1.337(d)-7(b)) applies or Taxes imposed because of the application of Temporary Treasury Regulations Section 1.337(d)-7T(b)(4) to Vornado, Newco, or any of their respective Subsidiaries and (ii) Spin-Failure Related REIT

 

3



 

Compliance Taxes) and all reasonable costs and expenses associated with such Taxes and (y) all costs, expenses and damages associated with shareholders litigation or controversies and any amount paid by a Party in respect of the liability of its shareholders, whether paid to its shareholders or to any Tax Authority, resulting from the failure or alleged failure of the Vornado Contribution of OP Units and the Vornado Distribution together to qualify for the Tax-Free Status and all reasonable costs and expenses associated with such payments.

 

“Effective Time” has the meaning assigned to such term in the Separation and Distribution Agreement.

 

“Employee Matters Agreement” has the meaning assigned to such term in the Master Transaction Agreement.

 

“Equity Incentive Plan” has the meaning assigned to such term in the Master Transaction Agreement.

 

“Equity Interest” means any instrument treated as equity for United States federal income tax purposes.

 

“Excepted Disposals” means (i) expenditure of cash paid to acquire assets in an arm’s length transaction, (ii) transfers of property to a disregarded entity of the transferor, (iii) payment of indebtedness, (iv) any disposal of any property whose proceeds are reinvested in the business of the Company within six month of such disposal (it being understood that reinvestment in the business does not include increases in working capital, cash or marketable securities or similar assets).

 

“Excepted Transactions” means (i) the transactions described in the Master Transaction Agreement or any conversion of OP Units issued pursuant to the Master Transaction Agreement into Newco Shares, (ii) the issuance of Newco Shares and OP Units pursuant to the Employee Matters Agreement or the Equity Incentive Plan or any conversion of OP Units issued pursuant to the Employee Matters Agreement or the Equity Incentive Plan into Newco Shares, (iii) any sale or other disposition of Newco Shares by the persons receiving such Newco Shares pursuant to the previous clauses of this definition, if such sales or other dispositions satisfy the requirements of Treasury Regulations Section 1.355-7(d)(7), and (iv) any prior Acquisition Transaction Requiring Notice with respect to which Newco has notified Vornado pursuant to Section 7.6(e).

 

“Expert Law Firm” means a law firm nationally recognized for its expertise in the matter for which its opinion is sought that is reasonably satisfactory to the Party seeking such opinion.

 

“Fifty-Percent Equity Interest” means, in respect of any corporation (within the meaning of the Code), stock or other equity interests of such corporation possessing (i) at least fifty percent (50%) of the total combined voting power of all classes of stock or equity interests entitled to vote or (ii) at least fifty percent (50%) of the total value of shares of all classes of stock or of the total value of all equity interests.

 

“Final Determination” means a determination within the meaning of Section 1313 of the Code or any similar provision of Local Tax Law.

 

4



 

“Group” means the Vornado Group or the Newco Group, as the context requires.

 

“Indemnification-Receipt Related Corporate Taxes” means Taxes imposed on a Vornado Indemnified Party at the entity level if, as the result of a accruing or receiving an amount required to be paid pursuant to Sections 2.2(a)(i) or 2.2(a)(ii), such party is unable to comply with the requirements of operating as a REIT (including as a result of Newco failing to qualify as a REIT for any period).

 

“Indemnified Party” means each Newco Indemnified Party and each Vornado Indemnified Party, as the context requires.

 

“Indemnifying Party” has the meaning set forth in Section 4.4.

 

“IRS” means the Internal Revenue Service.

 

“JBG Tax Group” has the meaning assigned to such term in the Master Transaction Agreement.

 

“Kickout Interests” has the meaning assigned to such term in the Master Transaction Agreement.

 

“Law” means any law, statute, ordinance, rule, regulation, code, order, judgment, injunction or decree enacted, issued, promulgated, enforced or entered by any federal, state, local or foreign court, administrative body or other governmental or quasi-governmental entity with competent jurisdiction.

 

“Local” means pertaining to a jurisdiction (whether within or outside the United States of America), other than the Federal Government of the United States of America.

 

“Master Transaction Agreement” means the Master Transaction Agreement by and among Vornado, Vornado OP, JBG Properties Inc., JBG/Operating Partners, L.P., the JBG Parties Set Forth on Schedule A, Newco and Newco OP, dated as of October 31, 2016.

 

“Newco” has the meaning set forth in the preamble hereof.

 

“Newco Business” means the “Washington, D.C. Segment Active Business,” as set forth and to the extent described in the Tax Opinion Representation Letter, that constitutes an active trade or business, within the meaning of Section 355(b) of the Code, of the separate affiliated group of Newco, as represented in the Tax Opinion Representation Letter.

 

“Newco Group” means (i) with respect to any Tax Year (or portion thereof) ending at or before the Effective Time, Newco and each of its Subsidiaries at the Effective Time and (ii) with respect to any Tax Year (or portion thereof) beginning after the Effective Time, Newco and each Subsidiary of Newco (but only while such Subsidiary is a Subsidiary of Newco).

 

“Newco Indemnified Party” includes each member of the Newco Group, each of their Representatives, each of their respective heirs, executors, trustees, administrators, successors, and assigns.

 

5



 

“Newco OP” has the meaning set forth in the recitals to this Agreement.

 

“Newco Shares” has the meaning set forth in the recitals to this Agreement.

 

“Newco Taint” means any violation of a covenant or any inaccuracy or falsity of a representation made by Newco in Section 7.1, 7.2, or 7.4 of this Agreement, the taking of a Restricted Action by Newco, any inaccuracy or falsity of the representation made in Section 4.13(p) of the Master Transaction Agreement, any violation of the covenant in Section 6.3(f) of the Master Transaction Agreement, or any acquisition of stock of Newco (after applying Section 7.8 hereof and other than pursuant to the Master Transaction Agreement) by any member of the JBG Tax Group.

 

“Non-Controlling Party” has the meaning set forth in Section 5.3(a).

 

“Non-Preparer” means any Company that is not responsible for the preparation and filing of the applicable Tax Return pursuant to Section 3.1.

 

“Parties” has the meaning set forth in the preamble hereof.

 

“Partnership Agreement” has the meaning assigned to such term in the Master Transaction Agreement.

 

“Payment Date” means (x) with respect to any U.S. federal income tax return, the date on which any required installment of estimated taxes determined under Section 6655 of the Code is due, the date on which (determined without regard to extensions) filing the return determined under Section 6072 of the Code is required, and the date the return is filed and (y) with respect to any other Tax Return, the corresponding dates determined under the applicable Tax Law.

 

“Permitted Acquisition” means any acquisition (as a result of the Vornado Distribution) of Newco Shares solely by reason of holding Vornado Shares, but does not include such an acquisition if such Vornado Shares, before such acquisition, were itself acquired in a manner to which the flush language of Section 355(e)(3)(A) of the Code applies (thus causing, for the avoidance of doubt, Section 355(e)(3)(A)(i), (ii), (iii) or (iv) of the Code not to apply).

 

“Person” means any individual, corporation, company, partnership, trust, incorporated or unincorporated association, joint venture, or other entity of any kind.

 

“Post-Distribution Period” means any Tax Year or other taxable period beginning after the Distribution Date and, in the case of any Straddle Period, that part of the Tax Year or other taxable period that begins at the beginning of the day after the Distribution Date.

 

“Pre-Distribution Period” means any Tax Year or other taxable period that ends on or before the Distribution Date and, in the case of any Straddle Period, that part of the Tax Year or other taxable period through the end of the day on the Distribution Date.

 

“Preparer” means the Company that is responsible for the preparation and filing of the applicable Tax Return pursuant to Section 3.1.

 

6



 

“Protective Section 336(e) Election” has the meaning set forth in Section 4.5.

 

“Real Estate Taxes” means ad valorem and other property Taxes measured by reference to the value of realty and not measured by reference to income or gross receipts.

 

“Reasonable Cause Exceptions” has the meaning assigned to such term in the Master Transaction Agreement.

 

“Receiving Party” has the meaning set forth in Section 6.3.

 

“REIT” means a real estate investment trust within the meaning of Section 856 of the Code.

 

“Relevant Final Determination” means a Final Determination that the Vornado Contribution of OP Units and the Vornado Distribution failed to qualify for the Tax-Free Status (including, for the avoidance of doubt, as a result of the application of Section 355(d) or Section 355(e) of the Code) or that amounts are required to be taken into account under Treasury Regulations Section 1.337(d)-7(b) or Temporary Treasury Regulations Section 1.337(d)-7T(b).

 

“Relevant Gain” means, in respect of a Party to be indemnified, gain or income that arises to such Party as a result of a Relevant Final Determination.

 

“Representative” means, with respect to any Person, any of such Person’s directors, officers, employees, agents, consultants, advisors, accountants, attorneys and representatives.

 

“Restricted Action” means any action by Newco or any of its Subsidiaries inconsistent with the covenants set forth in Section 7.2; and, for the avoidance of doubt, an action shall be and remain a Restricted Action even if Newco or any of its Subsidiaries is permitted to take such an action pursuant to Section 7.8.

 

“Restriction Period” means the period beginning on the Distribution Date and ending twenty-four (24) months after the Distribution Date.

 

“Satisfactory Guidance” means either a ruling from the IRS or an Unqualified Opinion, in either case reasonably satisfactory to Vornado in both form and substance.

 

“Separation and Distribution Agreement” has the meaning set forth in the recitals hereof.

 

“Spin-Failure Related REIT Compliance Taxes” means, in case of a Relevant Final Determination, and in respect of a Party that otherwise qualifies as a REIT (or would have so qualified in the absence of such Relevant Final Determination), Taxes imposed on such Party as a result of (i) such Party’s being treated as having failed to distribute, in the taxable year that includes the Distribution Date, any amount of Relevant Gain, (ii) the application of any of the provisions of Subchapter M of Chapter 1 of Subtitle A of the Code and any related provisions (including, for the avoidance of doubt, Section 856(c)(7), 856(g)(5), 857(b)(3), 857(b)(5) or 4981 of the Code) to such Party as a result of such Party’s having Relevant Gain, (iii) such Party being unable to comply with the requirements of operating as a REIT as a result of recognizing any amount of Relevant Gain or as a result of the application of Section 856(c)(8) of the Code to

 

7



 

such Party due to the failure of the Vornado Distribution to satisfy the exception to Section 355(h) of the Code described in Section 355(h)(2)(A) of the Code, and (iv) all costs, expenses and damages associated with shareholders litigation or controversies and any amount paid by a Party in respect of the liability of its shareholders, whether paid to its shareholders or to any Tax Authority, in connection with clauses (i), (ii), (iii) hereof, and all reasonable costs and expenses associated with such payments.

 

“Straddle Period” means any taxable period beginning on or prior to, and ending after, the Distribution Date.

 

“Subsidiary” when used with respect to any Person, means (i) (A) a corporation a majority in voting power of whose share capital or capital stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, (B) a partnership or limited liability company in which such Person or a Subsidiary of such Person is, at the date of determination, (1) in the case of a partnership, a general partner of such partnership with the power affirmatively to direct the policies and management of such partnership or (2) in the case of a limited liability company, the managing member or, in the absence of a managing member, a member with the power affirmatively to direct the policies and management of such limited liability company, or (C) any other Person (other than a corporation) in which such Person, one or more Subsidiaries of such Person or such Person and one or more Subsidiaries of such Person, directly or indirectly, at the date of determination thereof, has or have (1) the power to elect or direct the election of a majority of the members of the governing body of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, or (2) in the absence of such a governing body, at least a majority ownership interest or (ii) any other Person of which an aggregate of 50% or more of the equity interests are, at the time, directly or indirectly, owned by such Person and/or one or more Subsidiaries of such Person.

 

“Tax” or “Taxes” means any income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers’ compensation, employment, unemployment, disability, property, ad valorem, stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, value added, alternative minimum, estimated or other similar tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax) imposed by any Tax Authority, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing, together with any reasonable expenses, including attorneys’ fees, incurred in defending against any such Tax.

 

“Tax Arbitrator” means an arbitrator selected pursuant to the Tax Arbitrator Designation Process.

 

Tax Arbitrator Designation Process” means (i) the good faith attempt of the Parties to agree upon an arbitrator who is expert as to the relevant matter to resolve it and (ii) if such attempt fails within three (3) days, the determination, on the next day, by lot from a pool of arbitrators whose names have been put forth by the Parties in confidence in equal numbers and who are experts to resolve the matters put before them.

 

8



 

“Tax Authority” means, with respect to any Tax, the governmental entity or political subdivision, agency, commission or authority thereof (including, for the avoidance of doubt, any Local governmental authority) that imposes such Tax, and the agency, commission or authority (if any) charged with the assessment, determination or collection of such Tax for such entity or subdivision.

 

“Tax Benefit” means a reduction in the Tax liability of a taxpayer (or of the affiliated group of which it is a member) for any taxable period.  Except as otherwise provided in this Agreement, a Tax Benefit shall be deemed to have been realized or received from a Tax Item in a taxable period only if and to the extent that the Tax liability of the taxpayer (or of the affiliated group of which it is a member) for such period, after taking into account the effect of the Tax Item on the Tax liability of such taxpayer in the current period and all prior periods, is less than it would have been if such Tax liability were determined without regard to such Tax Item.

 

“Tax Contest” means an audit, review, examination, or any other administrative or judicial proceeding with the purpose, potential or effect of redetermining Taxes of any member of either Group (including any administrative or judicial review of any claim for refund).

 

“Tax-Free Status” means the qualification of the Vornado Contribution of OP Units and the Vornado Distribution together (a) as a transaction described in Section 368(a)(1)(D) and Section 355 of the Code, (b) as a transaction in which the stock distributed by Vornado is “qualified property” for purposes of Section 355(d) and Section 355(e) of the Code, and (c) as a transaction in which shareholders of Vornado will not recognize gain or loss upon the Vornado Distribution under Section 355(a) of the Code.

 

“Tax Item” means, with respect to any Tax, any item of income, gain, loss, deduction, credit or other attribute that may have the effect of increasing or decreasing any Tax.

 

“Tax Law” means the law of any governmental entity or political subdivision thereof, and any controlling judicial or administrative interpretations of such law, relating to any Tax.

 

“Tax Opinion” means the opinion to be delivered by Distribution Tax Counsel to Vornado in connection with the Transactions.

 

“Tax Opinion Representation Letter” means the Officer’s Certificate of Vornado, dated July 17, 2017, as amended or supplemented, including any appendices and exhibits attached thereto or included therewith, submitted to Distribution Tax Counsel.

 

“Tax Records” means Tax Returns, Tax Return work papers, documentation relating to any Tax Contests, and any other books of account or records required to be maintained under applicable Tax Laws (including but not limited to Section 6001 of the Code) or under any record retention agreement with any Tax Authority.

 

“Tax Return” means any report of Taxes due, any claims for refund of Taxes paid, any information return with respect to Taxes, or any other similar report, statement, declaration, or document filed or required to be filed (by paper, electronically or otherwise) under any applicable Tax Law, including any attachments, exhibits, or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing.

 

9



 

“Tax Year” means, with respect to any Tax, the year, or shorter period, if applicable, for which the Tax is reported as provided under applicable Tax Law.

 

“Transactions” means the Pre-Combination Transactions as that term is defined in the Master Transaction Agreement.

 

“Transfer Taxes” has the meaning assigned to such term in the Master Transaction Agreement.

 

“Treasury Regulations” means the regulations promulgated from time to time under the Code as in effect for the relevant Tax Year.

 

“Unqualified Opinion” means an unqualified “will” opinion of an Expert Law Firm that permits reliance by Vornado.  For the avoidance of doubt, an Unqualified Opinion may be based on factual representations and assumptions that are reasonably satisfactory to Vornado.  Vornado and its affiliates shall use commercially reasonable efforts to provide to the Expert Law Firm any representations reasonably requested by Expert Law Firm in order to issue its Unqualified Opinion.

 

“Vornado” has the meaning set forth in the preamble hereof.

 

“Vornado Business” means the “New York Segment Active Business,” as set forth in the Tax Opinion Representation Letter that constitutes an active trade or business, within the meaning of Section 355(b) of the Code, of the separate affiliated group of Vornado, as represented in the Tax Opinion Representation Letter.

 

“Vornado Contribution of OP Units” has the meaning assigned to such term in Section 1.1 of the Vornado Disclosure Letter.

 

“Vornado Disclosure Letter” has the meaning assigned to such term in the Master Transaction Agreement.

 

“Vornado Distribution” has the meaning set forth in the recitals hereof.

 

“Vornado Group” means Vornado and each Subsidiary of Vornado (but only while such Subsidiary is a Subsidiary of Vornado) other than any Person that is a member of the Newco Group (but only during the period such Person is treated as a member of the Newco Group).

 

“Vornado Included Interests” has the meaning assigned to such term in the Master Transaction Agreement.

 

“Vornado Indemnified Party” includes each member of the Vornado Group, each of their Representatives, each of their respective heirs, executors, trustees, administrators, successors and assigns.

 

“Vornado Newco REIT Taxes” means:

 

10



 

(i)                                     Taxes in respect of a Pre-Distribution Period that are imposed on Newco or a Vornado REIT that, in each case:

 

(x)                                 are not Distribution Taxes and

 

(y)                                 would not be imposed but for an action taken by Vornado after the Vornado Distribution (such as the filing of an amended Tax Return), and

 

(ii)                                  Taxes in respect of any period that are imposed on Newco or a Vornado REIT that, in each case:

 

(x)                                 are not Distribution Taxes and

 

(y)                                 would not be imposed but for the failure of Vornado to qualify as a REIT for the taxable year of Vornado that includes the Vornado Distribution.

 

“Vornado OP” has the meaning set forth in the recitals to this Agreement.

 

“Vornado OP Contribution to Newco OP” has the meaning assigned to such term in Section 1.1 of the Vornado Disclosure Letter.

 

“Vornado OP Distribution of OP Units” has the meaning assigned to such term in Section 1.1 of the Vornado Disclosure Letter.

 

“Vornado Shares” has the meaning set forth in the recitals to this Agreement.

 

“Vornado Taint” means any violation of a covenant or any inaccuracy or falsity of a representation made by Vornado in Section 7.1, 7.3 or 7.5 of this Agreement.

 

“Vornado REIT” has the meaning assigned to such term in the Master Transaction Agreement.

 

SECTION 2.  Allocation of Taxes and Tax-Related Losses.

 

2.1                               Allocation of Taxes.  Except as provided in Section 2.2 (Allocation of Distribution Taxes) and subject to the allocation of Transfer Taxes pursuant to the Master Transaction Agreement, Taxes shall be allocated as follows:

 

(a)                                 Vornado shall be liable for and shall be allocated any Vornado Newco REIT Taxes.

 

(b)                                 Newco shall be liable for and shall be allocated any Taxes attributable to members of the Newco Group for any period other than Vornado Newco REIT Taxes.

 

(c)                                  Real Estate Taxes, whenever due, shall be borne and paid by the Party liable therefor under applicable Law and shall not be allocated pursuant to the other provisions of this Section 2. As a result, Vornado shall not be required to indemnify Newco on account of any Real Estate Taxes and Newco shall not be required to indemnify Vornado on account of any Real Estate Taxes.

 

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(d)                                 To the extent Vornado is liable for Taxes under this Section 2.1, it shall indemnify Newco for such Taxes.  To the extent Newco is liable for Taxes under this Section 2.1, it shall indemnify Vornado for such Taxes.

 

2.2                               Allocation of Distribution Taxes.  Notwithstanding any other provision of this Agreement:

 

(a)                                 Newco shall indemnify and hold harmless each Vornado Indemnified Party from and against any liability of such party for:

 

(i)                                     Distribution Taxes to the extent such Distribution Taxes result from a Newco Taint, provided, however, that Newco shall have no obligation to indemnify any Vornado Indemnified Party hereunder if there has occurred, prior to such Newco Taint, a Vornado Taint from which such Distribution Taxes result; provided further, in the case Newco’s obligation to indemnify arises pursuant to the provision of this Section 2.2(a)(i) immediately before this further proviso, Vornado shall determine its REIT compliance requirements in its reasonable discretion and shall use commercially reasonable efforts to minimize Spin-Failure Related REIT Compliance Taxes,

 

(ii)                                  Any Taxes imposed on such party under Section 856(c)(7), 856(g)(5), 857(b)(3), 857(b)(5) or 4981 of the Code, as the result of accruing or receiving an amount required to be paid pursuant to Section 2.2(a)(i) or this Section 2.2(a)(ii) (including as a result of Newco failing to qualify as a REIT for any Post-Distribution Period), and

 

(iii)                               Any Indemnification-Receipt Related Corporate Taxes.

 

It is understood and agreed that, in determining the amounts payable under Sections 2.2(a)(ii) and 2.2(a)(iii) above, there shall be included all costs, expenses and damages associated with shareholders litigation or controversies and any amount paid by Vornado in respect of the liability of its shareholders, whether paid to its shareholders or to any Tax Authority, in connection with liability that may arise to shareholders as a result of receiving or accruing an amount payable under this Section 2.2(a), and all reasonable costs and expenses associated with such payments.

 

(b)                                 Vornado shall indemnify and hold harmless each Newco Indemnified Party from and against any liability of such party for Distribution Taxes to the extent such Distribution Taxes result from a Vornado Taint, provided, however, that Vornado shall have no obligation to indemnify any Newco Indemnified Party hereunder if there has occurred, prior to such Vornado Taint, a Newco Taint from which such Distribution Taxes result.

 

2.3                               Tax PaymentsEach Company shall be liable for and shall pay the Taxes allocated to it by this Section 2 either to the applicable Tax Authority or to the other Company in accordance with Section 4 and the other applicable provisions of this Agreement.

 

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2.4                               Closing of Tax YearEach member of the Newco Group shall, unless prohibited by applicable Tax Law, close its Tax Year on the Distribution Date for each applicable Tax.  If applicable Tax Law does not permit a member of the Newco Group to close its Tax Year on the Distribution Date or in any case in which a Tax is assessed with respect to a Straddle Period, the Taxes, if any, attributable to a Straddle Period shall be allocated (i) to the period up to and including the Distribution Date, on the one hand, and (ii) to the period subsequent to the Distribution Date, on the other hand, by means of a closing of the books and records of such member of the Newco Group as of the close of the Distribution Date, provided that Taxes, exemptions, allowances or deductions that are calculated on a periodic basis shall be allocated between the period ending on the Distribution Date and the period after the Distribution Date in proportion to the number of days in each such period.

 

2.5                               Allocation of Tax AttributesVornado shall consult with Newco in good faith and consider in good faith any comments provided by Newco with respect to the portion, if any, of any earnings and profits and other Tax attributes to be allocated to the Newco Group, and Vornado shall in good faith advise Newco in writing of the such portion, if any, which Vornado shall have determined shall be allocated or apportioned to the Newco Group under applicable Tax Law.  Newco and all members of the Newco Group shall prepare all Tax Returns in accordance with such written notice.  In the event that, as a result of a Final Determination, the allocation provided by Vornado is required to be adjusted in accordance with such Final Determination, Vornado shall promptly notify Newco in writing of such adjustment and Newco and all members of the Newco Group shall prepare all Tax Returns, from the date of such notification, in accordance with the adjusted amounts set forth in such notification.  For the avoidance of doubt, Vornado shall not be liable to Newco or any member of the Newco Group for any failure of any determination under this Section 2.5 to be accurate under applicable Tax Law.

 

SECTION 3.  Preparation and Filing of Tax Returns.

 

3.1                               Returns.

 

(a)                                 Tax Returns to be Prepared by Vornado.  Vornado shall be responsible for preparing and filing (or causing to be prepared and filed):

 

(i)                                     all Tax Returns which relate to one or more members of the Vornado Group for any Tax Year and

 

(ii)                                  all Tax Returns which relate to one or more members of the Newco Group for any Pre-Distribution Period or Straddle Period if such return includes a Tax for which Vornado is liable under Section 2.1(a), provided, however, that Newco shall furnish any relevant information, including pro-forma returns, disclosures, apportionment data and supporting schedules, relating to any member of the Newco Group necessary for completing any Tax Return for any Pre-Distribution Period or Straddle Period in a format suitable for inclusion in such return, and provided further, that Newco shall have the right to review and reasonably comment with respect to items on (x) such returns if and to the extent such items directly relate to a Tax for which Newco would be liable under

 

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Section 2.1(b) or (y) such items could reasonably be expected to affect the qualification of Newco as a REIT for any Post-Distribution Period, such comments not to be unreasonably rejected.

 

(b)                                 Tax Returns to be Prepared by Newco.  Subject to Section 3.1(d), Newco shall be responsible for preparing and filing (or causing to be prepared and filed) all Tax Returns which relate to one or more members of the Newco Group and for which Vornado is not responsible under Section 3.1(a).

 

(c)                                  Agent.  Subject to the other applicable provisions of this Agreement (including, without limitation, Section 5), Newco irrevocably designates, and agrees to cause each member of the Newco Group to designate, Vornado as its sole and exclusive agent and attorney-in-fact to take such action (including execution of documents) as Vornado may deem reasonably appropriate in matters relating to the preparation or filing of any Tax Return described in Section 3.1(a)(ii) (subject to Vornado complying with the “provided further” clause in such Section).

 

(d)                                 Tax Returns Relating to Distribution Taxes.  No member of the Newco Group shall file or caused to be filed any Tax Return which relates to matters involving Distribution Taxes without the consent of Vornado (which consent shall not be unreasonably withheld or delayed).  Notwithstanding anything in this Agreement to the contrary, Vornado shall not be liable for any Distribution Taxes under Section 2.2(b) to the extent such Distribution Taxes arise from a breach of this Section 3.1(d) by any member of the Newco Group.

 

(e)                                  Manner of Tax Return Preparation.  The Parties shall prepare and file all Tax Returns, and take all other actions, in a manner consistent with this Agreement, and, to the extent not inconsistent with this Agreement, the Tax Opinion Representation Letter and the Tax Opinion; except that if a Party asserts that such consistency is contrary to the requirements of applicable Law, the Parties shall cooperate in good faith to resolve such objection and, if the Parties shall be unable to resolve such objection, the dispute shall be resolved by a Tax Arbitrator, who shall be required to resolve the matter with reasonable promptness in light of the need for the timely filing of Tax Returns, with the costs and fees of hiring such Tax Arbitrator shared by the Parties in an equitable manner based on the resolution of the objection.  All Tax Returns shall be filed on a timely basis (taking into account applicable extensions) by the Party responsible for filing such Tax Returns under this Agreement.  Subject to the preceding sentences of this Section 3.1(e), Vornado shall have the exclusive right, in its reasonable discretion, with respect to any Tax Return described in Section 3.1(a) to determine (i) the manner in which such Tax Return shall be prepared and filed, including the elections, methods of accounting, positions, conventions and principles of taxation to be used and the manner in which any Tax Item shall be reported, (ii) whether any extensions may be requested, (iii) the elections that will be made on such Tax Return, (iv) whether any amended Tax Return(s) shall be filed, (v) whether any claim(s) for refund shall be made, (vi) whether any refund shall be paid by way of refund or credited against any liability for the related Tax, and (vii) whether to retain outside firms to prepare or review such Tax Returns (subject to Vornado

 

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complying with the “provided further” clause in Section 3.1(a)(ii) in respect of the Tax Returns described in Section 3.1(a)(ii)).

 

3.2                               Provision of Information.

 

(a)                                 Vornado shall provide to Newco, and Newco shall provide to Vornado, any information about members of the Vornado Group or the Newco Group, respectively, that the Preparer reasonably requires to determine the amount of Taxes due on any Payment Date with respect to a Tax Return for which the Preparer is responsible pursuant to Section 3.1 and to properly and timely file all such Tax Returns.

 

(b)                                 If a member of the Newco Group supplies information to a member of the Vornado Group, or a member of the Vornado Group supplies information to a member of the Newco Group, and an officer of the requesting member intends to sign a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then a duly authorized officer of the member supplying such information shall certify, to the best of such officer’s knowledge, the accuracy of the information so supplied.

 

3.3                               Special Rules Relating to the Preparation of Tax Returns.  All Tax Returns that include any members of the Newco Group or Vornado Group shall be prepared in a manner that is consistent with the Tax Opinion Representation Letter and the Tax Opinion.  Except as otherwise set forth in this Agreement, all Tax Returns for which Vornado is responsible under Section 3.1(a) shall be prepared (x) in accordance with elections, Tax accounting methods and other practices used with respect to such Tax Returns filed prior to the Distribution Date (unless such past practices are not permissible under applicable law), or (y) to the extent any items are not covered by past practices (or in the event such past practices are not permissible under applicable Tax Law), in accordance with reasonable practices selected by Vornado, provided such practices would not adversely affect the qualification of Newco as a REIT for any Post-Distribution Period.

 

3.4                               Refunds, Credits or Offsets.

 

(a)                                 Any refunds, credits or offsets with respect to Taxes allocated to, and actually paid by, Vornado (or actually paid, at whatever time, by any entity that was a Subsidiary of Vornado during any period up to and including the Distribution Date) pursuant to this Agreement shall be for the account of Vornado.  Any refunds, credits or offsets with respect to Taxes not allocated to Vornado pursuant to the preceding sentence shall be for the account of Newco.  For the avoidance of doubt, consistent with Section 2.1(d), any refunds, credits, or offsets with respect to Real Estate Taxes shall belong to the Party entitled thereto under applicable Law and shall not otherwise be allocated pursuant to this Section 3.4.

 

(b)                                 Vornado shall forward to Newco, or reimburse Newco for, any such refunds, credits or offsets, plus any interest received thereon, net of any Taxes incurred with respect to the receipt or accrual thereof and any reasonable expenses incurred in connection therewith, that are for the account of Newco within fifteen (15) Business Days

 

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from receipt thereof by Vornado.  Newco shall forward to Vornado, or reimburse Vornado for, any refunds, credits or offsets, plus any interest received thereon, net of any Taxes incurred with respect to the receipt or accrual thereof and any reasonable expenses incurred in connection therewith, that are for the account of Vornado within fifteen (15) Business Days from receipt thereof by Newco.  If, subsequent to a Tax Authority’s allowance of a refund, credit or offset, such Tax Authority reduces or eliminates such allowance, any refund, credit or offset, plus any interest received thereon, forwarded or reimbursed under this Section 3.4 shall be returned to the party who had forwarded or reimbursed such refund, credit or offset and interest upon the request of such forwarding party in an amount equal to the applicable reduction, including any interest received thereon.

 

3.5                               CarrybacksTo the extent permitted under applicable Tax Laws, the Newco Group shall make the appropriate elections in respect of any Tax Returns to waive any option to carry back any net operating loss, any credits or any similar item from a Post-Distribution Period to any Pre-Distribution Period or to any Straddle Period.  Any refund of or credit for Taxes resulting from any such carryback by a member of the Newco Group that cannot be waived shall be payable to Newco net of any Taxes incurred with respect to the receipt or accrual thereof and any reasonable expenses incurred in connection therewith.

 

3.6                               Amended ReturnsAny amended Tax Return or claim for Tax refund, credit or offset with respect to any member of the Newco Group may be made (or be caused to be made) only by the Company responsible for preparing the original Tax Return with respect to such member pursuant to Section 3.1(a) (and, for the avoidance of doubt, subject to the same review and comment rights set forth in Section 3.1(a), to the extent applicable).  Such Company shall not, without the prior written consent of the other Company (which consent shall not be unreasonably withheld or delayed), file, or cause to be filed, any such amended Tax Return or claim for Tax refund, credit or offset to the extent that such filing, if accepted, is likely to increase the Taxes allocated to, or the Tax indemnity obligations under this Agreement of, such other Company for any Tax Year (or portion thereof).

 

SECTION 4.  Tax Payments.

 

4.1                               Payment of Taxes to Tax Authority.  Vornado shall be responsible for remitting to the proper Tax Authority the Tax shown on any Tax Return for which it is responsible for the preparation and filing pursuant to Section 3.1(a), and Newco shall be responsible for remitting to the proper Tax Authority the Tax shown on any Tax Return for which it is responsible for the preparation and filing pursuant to Section 3.1(b).

 

4.2                               Indemnification Payments.

 

(a)                                 Tax Payments Made by the Vornado Group.  If any Vornado Indemnified Party is required to make a payment to a Tax Authority for Taxes allocated to Newco under this Agreement, Newco will pay the amount of Taxes allocated to it to Vornado not later than the later of (i) ten (10) Business Days after receiving notification requesting such amount, and (ii) one (1) Business Day prior to the date such payment is required to be made to such Tax Authority.

 

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(b)                                 Tax Payments Made by the Newco Group.  If any Newco Indemnified Party is required to make a payment to a Tax Authority for Taxes allocated to Vornado under this Agreement, Vornado will pay the amount of Taxes allocated to it to Newco not later than the later of (i) ten (10) Business Days after receiving notification requesting such amount, and (ii) one (1) Business Day prior to the date such payment is required to be made to such Tax Authority.

 

4.3                               Interest on Late PaymentsAny amount not paid when due pursuant to this Agreement (and any amounts billed or otherwise invoiced or demanded and properly payable that are not paid within thirty (30) days of such bill, invoice or other demand) shall accrue interest at a rate per annum equal to the rate specified for late payments in the Separation and Distribution Agreement or, if higher and if with respect to a payment to indemnify for a Tax to which the “large corporate underpayment” provision within the meaning of Section 6621(c) of the Code applies, such interest rate that would be applicable at such time to such “large corporate underpayment.”

 

4.4                               Tax Consequences of Payments and Adjustments.  For all Tax purposes, the Parties hereto shall treat (i) any payment made pursuant to this Agreement (other than payments representing interest) as either a contribution by the relevant entity or a distribution by the relevant entity (or as adjustments to such contribution or distribution) occurring immediately prior to the Vornado OP Contribution to Newco OP, the Vornado OP Distribution of OP Units, the Vornado Contribution of OP Units or the Vornado Distribution, as the case may be, or as a payment of an assumed or retained liability; and (ii) any payment of interest as taxable or deductible, as the case may be, to the Party entitled under this Agreement to retain such payment or required under this Agreement to make such payment, in either case except as otherwise required by applicable Law.  If the receipt or accrual of any indemnity payment under this Agreement causes, directly or indirectly, an increase in the taxable income of the recipient under one or more applicable Tax Laws, such payment shall be increased so that, after the payment of any Taxes with respect to the payment, the recipient thereof shall have realized the same net amount it would have realized had the payment not resulted in taxable income.  For the avoidance of doubt, any liability for Taxes due to an increase in taxable income described in the immediately preceding sentence shall be governed by this Section 4.4 and not by Section 2.1.  To the extent that Taxes for which any Party hereto (the “Indemnifying Party”) is required to pay an Indemnified Party pursuant to this Agreement (i) may be deducted or credited in determining the amount of any other Taxes required to be paid by the Indemnified Party (for example, state Taxes which are permitted to be deducted in determining federal Taxes) or (ii) reduces the amount required to be distributed by the Indemnified Party under Section 857(a), the amount of any payment made to the Indemnified Party by the Indemnifying Party shall be decreased by taking into account, in the case of (i), any resulting reduction in other Taxes actually realized by the Indemnified Party and, in the case of (ii), the reduction of the amount actually distributed by the Indemnified Party (determined pursuant to the Distribution Comparison Analysis).  If such a reduction in Taxes or reduction of such amount required to be so distributed of the Indemnified Party occurs following the payment made to the Indemnified Party with respect to the relevant indemnified Taxes, the Indemnified Party shall promptly repay the Indemnifying Party the amount of such reduction when actually realized.  If the Tax Benefit arising from the foregoing reduction of Taxes or the reduction of such amount so required to be distributed described in this Section 4.4 is subsequently decreased or eliminated, then the Indemnifying Party shall promptly

 

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pay the Indemnified Party the amount of the decrease in such Tax Benefit or such reduction, as applicable.  If an adjustment to the liability for Taxes for which one Party or any of its Subsidiaries is responsible hereunder (i) gives rise to a Tax Benefit to the other Party or any of its Subsidiaries or (ii) reduces the amount required to be distributed by such other Party under Section 857(a), including, in each case, as a result of an election set forth in Section 4.5, such latter Party shall, on an annual basis, pay such former Party, in the case of (i), any resulting reduction in Taxes actually realized by such latter Party as a result of such Tax Benefit and, in the case of (ii), the reduction of the amount actually distributed by the Indemnified Party (determined pursuant to the Distribution Comparison Analysis).

 

4.5                               Section 336(e) Election.   The Parties agree that (i) Vornado and Newco shall enter into a written, binding agreement and (ii) Vornado shall timely make a protective election under Section 336(e) of the Code (and any similar provision of any Local Tax Law) and Treasury Regulation Section 1.336-2(j) (a “Protective Section 336(e) Election”) with respect to the Vornado Distribution, in each case, in accordance with Treasury Regulation Section 1.336-2(h).  Vornado shall timely file such forms as may be contemplated by applicable Tax Law or administrative practice to effect such Protective Section 336(e) Election.  To the extent, pursuant to a Final Determination, the Vornado Distribution constitutes a “qualified stock disposition,” as defined in Treasury Regulation Section 1.336-1(b)(6), the Parties shall not, and shall not permit any of their respective Subsidiaries to, take any position for Tax purposes inconsistent with the relevant Protective Section 336(e) Election, except as may be required pursuant to a Final Determination.

 

SECTION 5.  Cooperation and Tax Contests.

 

5.1                               CooperationIn addition to the obligations enumerated in Sections 3.2 and 5.4, subject to Schedule A hereto, Vornado and Newco will cooperate (and cause their respective Subsidiaries and Representatives to cooperate) with each other and with each other’s agents, including accounting firms and legal counsel, in connection with Tax matters, including provision of relevant documents and information in their possession and making available to each other, as reasonably requested and available, personnel (including officers, directors, employees and agents of the Parties or their respective Subsidiaries or Representatives) responsible for preparing, maintaining, and interpreting information and documents relevant to Taxes, and personnel reasonably required as witnesses or for purposes of providing information or documents in connection with any administrative or judicial proceedings relating to Taxes.

 

5.2                               Notices of Tax ContestsEach Company shall provide prompt notice to the other Company of any pending or threatened Tax audit, assessment or proceeding or other Tax Contest of which it becomes aware relating to (i) Taxes for which it is or may reasonably be expected to be indemnified by such other Company hereunder or (ii) Tax Items that may reasonably be expected to affect the amount or treatment of Tax Items of such other Company.  Such notice shall contain factual information (to the extent known) describing any asserted Tax liability in reasonable detail and shall be accompanied by copies of any notice and other documents received from any Tax Authority in respect of any such matters; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except, and only to the extent that, the indemnifying Company shall have been actually prejudiced as a result of such failure.  Thereafter, the indemnified Company shall deliver to the indemnifying Company

 

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such additional information with respect to such Tax Contest in its possession that the indemnifying Company may reasonably request.

 

5.3                               Control of Tax Contests.

 

(a)                                 Controlling Party.  Subject to the limitations set forth in Sections 5.3(b) and 5.3(c), each Preparer (or the appropriate member of its Group) shall be the Controlling Party with respect to any Tax Contest involving a Tax reported (or that, it is asserted, should have been reported) on a Tax Return for which such Company is responsible for preparing and filing (or causing to be prepared and filed) pursuant to Section 3 of this Agreement, in which case any Non-Preparer that could have liability under this Agreement for a Tax to which such Tax Contest relates shall be treated as the “Non-Controlling Party.”  Notwithstanding the immediately preceding sentence, if a Non-Preparer (x) acknowledges to the Preparer in writing its full liability under this Agreement to indemnify for any Tax, and (y) provides to the Preparer evidence (that is satisfactory to the Preparer as determined in the Preparer’s reasonable discretion) of the Non-Preparer’s financial readiness and capacity to make such indemnity payment, then thereafter with respect to the Tax Contest relating solely to such Tax the Non-Preparer shall be the Controlling Party (subject to Section 5.3(b)) and the Preparer shall be treated as the Non-Controlling Party.

 

(b)                                 Non-Controlling Party Participation Rights.  With respect to a Tax Contest of any Tax Return that could result in a Tax liability that is allocated under this Agreement, (i) the Non-Controlling Party shall, at its own cost and expense, be entitled to participate in such Tax Contest, (ii) the Controlling Party shall keep the Non-Controlling Party updated and informed, and shall consult with the Non-Controlling Party, (iii) the Controlling Party shall act in good faith with a view to the merits in connection with the Tax Contest, and (iv) the Controlling Party shall not settle or compromise such Tax Contest (x) that relates to the REIT qualification of the Non-Controlling Party or a Subsidiary thereof that has elected to be treated as a REIT or (y) that relates to Distribution Taxes,  without (in each case) the prior written consent of the Non-Controlling Party (which consent shall not be unreasonably withheld, delayed, or conditioned).

 

(c)                                  Vornado Control in Tax Contests Relating to Distribution Taxes and the Tax-Free Status.  Notwithstanding paragraphs (a) and (b) of this Section 5.3, Vornado shall be the Controlling Party with respect to (i) any Tax Contest involving Distribution Taxes, and (ii) any Tax Contest involving the qualification of the Vornado Contribution of OP Units and the Vornado Distribution for the Tax-Free Status.

 

5.4                               Cooperation Regarding Tax ContestsThe Parties shall provide each other with all information relating to a Tax Contest which is needed by the other Party to handle, participate in, defend, settle or contest the Tax Contest.  At the request of any Party, the other Party shall take any action (e.g., executing a power of attorney) that is reasonably necessary in order for the requesting Party to exercise its rights under this Agreement in respect of a Tax Contest.  Newco shall assist Vornado, and Vornado shall assist Newco, in taking any remedial actions that are necessary or desirable to minimize the effects of any adjustment made by a Tax Authority.  The

 

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Indemnifying Party shall reimburse the Indemnified Party for any reasonable out-of-pocket costs and expenses incurred in complying with this Section 5.4.

 

SECTION 6.  Tax Records.

 

6.1                               Retention of Tax RecordsEach of Vornado and Newco shall preserve, and shall cause their respective Subsidiaries to preserve, all Tax Records that are in their possession, and that could affect the liability of any member of the other Group for Taxes, for as long as the contents thereof may become material in the administration of any matter under applicable Tax Law, but in any event until the later of (x) the expiration of any applicable statute of limitations, as extended, and (y) seven years after the Distribution Date.

 

6.2                               Access to Tax RecordsNewco shall make available, and cause its Subsidiaries to make available, to members of the Vornado Group for inspection and copying (x) all Tax Records in their possession that relate to a Pre-Distribution Period, and (y) the portion of any Tax Record in their possession that relates to a Post-Distribution Period and which is reasonably necessary for the preparation of a Tax Return by a member of the Vornado Group or with respect to any Tax Contest with respect to such return.  Vornado shall make available, and cause its Subsidiaries to make available, to members of the Newco Group for inspection and copying the portion of any Tax Record in their possession that relates to (i) a Vornado Included Interest and (ii) is reasonably necessary for the preparation of a Tax Return by a member of the Newco Group or with respect to any Tax Contest with respect to such return; provided, however, that, for the avoidance of doubt, this provision shall not require Vornado to furnish any information pertaining to the status or qualification of Vornado as a REIT or the compliance of any activities or assets of Vornado that are not Vornado Included Interests with applicable REIT requirements.

 

6.3                               ConfidentialityEach party hereby agrees that it will hold, and shall use its reasonable best efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence all records and information prepared and shared by and among the Parties in carrying out the intent of this Agreement, except as may otherwise be necessary in connection with the filing of Tax Returns or any administrative or judicial proceedings relating to Taxes or unless disclosure is compelled by a governmental authority.  Information and documents of one Party (the “Disclosing Party”) shall not be deemed to be confidential for purposes of this Section 6.3 to the extent that such information or document (i) is previously known to or in the possession of the other Party (the “Receiving Party”) and is not otherwise subject to a requirement to be kept confidential, (ii) becomes publicly available by means other than unauthorized disclosure under this Agreement by the Receiving Party or (iii) is received from a third party without, to the knowledge of the Receiving Party after reasonable diligence, a duty of confidentiality owed to the Disclosing Party.

 

SECTION 7.  Representations and Covenants.

 

7.1                               Covenants of Vornado and Newco.

 

(a)                                 Vornado hereby covenants that, to the fullest extent permissible under United States federal income and state Tax Laws, it will, and will cause the members of the Vornado Group to, treat the applicable Transactions in accordance with the Agreed

 

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Treatment.  Newco hereby covenants that, to the fullest extent permissible under United States federal income and state Tax Laws, it will, and will cause each Subsidiary of Newco to, treat the applicable Transactions in accordance with the Agreed Treatment.

 

(b)                                 Vornado further covenants that, as of and following the date hereof, Vornado shall not and shall cause the members of the Vornado Group not to take any action that (or fail to take any action the omission of which) would be inconsistent with the applicable Transactions qualifying for the Agreed Treatment or Newco qualifying as a REIT at the time of the Vornado Distribution or for any Pre-Distribution Period.  Newco further covenants that, as of and following the date hereof, Newco shall not and shall cause the members of the Newco Group not to take any action that (or fail to take any action the omission of which) would be inconsistent with the applicable Transactions qualifying for the Agreed Treatment or Newco qualifying as a REIT at the time of the Vornado Distribution or for any Post-Distribution Period.

 

7.2                               Covenants of Newco.  Without limiting the generality of the provisions of Section 7.1, Newco, on behalf of itself and each member of the Newco Group, agrees and covenants that Newco and each member of the Newco Group will not, directly or indirectly, during the Restriction Period, (i) take any action that would result in Newco’s ceasing to be engaged in the active conduct of the Newco Business within the meaning of Section 355(b)(2)(A) of the Code, (ii) redeem or otherwise repurchase (directly or indirectly) any of Newco’s outstanding stock other than pursuant to open market stock repurchase programs meeting the requirements of Section 4.05(1)(b) of Revenue Procedure 96-30, 1996-1 C.B. 696, (iii) vary the relative voting rights of separate classes of Newco’s stock or convert one class of Newco’s stock into another class of its stock, (iv) liquidate or partially liquidate Newco, (v) merge or consolidate Newco with any other corporation, (vi) sell or otherwise dispose of the assets of Newco and its Subsidiaries, or take any other action or actions if such sale, other disposition or other action or actions in the aggregate would have the effect that one or more Persons acquire (or have the right to acquire), directly or indirectly, as part of a plan or series of related transactions, assets representing thirty percent (30%) or more of the fair market value of the assets of the Newco Group, not taking into account any Excepted Disposals, or (vii) take any other action or actions that in the aggregate would have the effect that one or more Persons acquire (or have the right to acquire), directly or indirectly, as part of a plan or series of related transactions, stock or equity securities of Newco representing a Fifty-Percent Equity Interest in Newco, other than a Permitted Acquisition.   Newco covenants that so long as it qualifies as a REIT at the time of the Vornado Distribution (determined as if the taxable year of Newco ended at such time), it will qualify as a REIT for the taxable year in which the Vornado Distribution occurs so long as Section 856(c)(8) of the Code does not apply.

 

7.3                               Covenants of Vornado.  Without limiting the generality of the provisions of Section 7.1, Vornado, on behalf of itself and each member of the Vornado Group, agrees and covenants that Vornado and each member of the Vornado Group will not, directly or indirectly, during the Restriction Period, (i) take any action that would result in Vornado’s ceasing to be engaged in the active conduct of the Vornado Business within the meaning of Section 355(b)(2)(A) of the Code, (ii) redeem or otherwise repurchase (directly or indirectly) any of Vornado’s outstanding stock other than pursuant to open market stock repurchase programs meeting the requirements of Section 4.05(1)(b) of Revenue Procedure 96-30, 1996-1 C.B. 696,

 

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(iii) vary the relative voting rights of separate classes of Vornado’s stock or convert one class of Vornado’s stock into another class of its stock, (iv) liquidate or partially liquidate Vornado, (v) merge or consolidate Vornado with any other corporation, (vi) sell or otherwise dispose of (other than in the ordinary course of business) the assets of Vornado and its Subsidiaries, or take any other action or actions if such sale, other disposition or other action or actions in the aggregate would have the effect that one or more Persons acquire (or have the right to acquire), directly or indirectly, as part of a plan or series of related transactions, assets representing fifty percent (50%) or more of the fair market value of the assets of the Vornado Group, or (vii) take any other action or actions that in the aggregate would have the effect that one or more Persons acquire (or have the right to acquire), directly or indirectly, as part of a plan or series of related transactions, stock or equity securities of Vornado representing a Fifty-Percent Equity Interest in Vornado.  Vornado further covenants that (i) it qualifies and will qualify as a REIT for its taxable year that includes the date of the Vornado Distribution and at all times during the two years thereafter and (ii) from the time of the effective date of its REIT election, Newco has qualified as a REIT and will continue to qualify as a REIT to the time of the Vornado Distribution (determined as if the taxable year of Newco ended at such time).

 

7.4                               Newco Further Assurances.  Newco represents that it knows of no facts that are not known to Vornado and would be inconsistent with the applicable Transactions qualifying for the Agreed Treatment. Newco further represents that, in reliance on the covenant set forth in Section 7.3, from the time of the effective date of its REIT election to the date of this Agreement, it has qualified as a REIT and that it has no intention, and knows no facts which would cause it, not to so qualify hereafter.  Newco further covenants that, based on and subject to the covenant of Vornado set forth in Section 7.3, it qualifies and will qualify as a REIT for its entire taxable year that includes the date of the Vornado Distribution and through the end of the Applicable Year.

 

7.5                               Vornado Further Assurances.  Vornado represents that it knows of no facts that would be inconsistent with the Transactions qualifying for the Agreed Treatment.  Vornado further represents that, from the time of its formation to the date of this Agreement, it has qualified as a REIT and that it has no intention, and knows no facts which would cause it, not to so qualify hereafter.  Vornado further covenants that it qualifies and will qualify as a REIT for its entire taxable year that includes the date of the Vornado Distribution and through the end of the Applicable Year.

 

7.6                               Notices and Exceptions.

 

(a)                                 If Newco or any of its Subsidiaries determines that it desires to take a Restricted Action, Newco shall notify Vornado of this fact in writing.  Nonetheless, Newco or any of its Subsidiaries may take a Restricted Action if Vornado consents in writing to such Restricted Action, or if Newco provides Vornado with Satisfactory Guidance concluding that such Restricted Action will not alter the Tax-Free Status of the Vornado Contribution of OP Units and the Vornado Distribution in respect of Vornado or Vornado’s shareholders.

 

(b)                                 Newco and each of its Subsidiaries agree that Vornado and each Vornado Indemnified Party are to have no liability for any Tax resulting from any Restricted

 

22



 

Actions permitted pursuant to this Section 7.8 and, subject to Section 2.2, agree to indemnify and hold harmless each Vornado Indemnified Party against any such Tax.  Newco shall bear all costs incurred by it, and all reasonable costs incurred by Vornado, in connection with requesting and/or obtaining any Satisfactory Guidance.

 

(c)                                  Newco shall promptly notify Vornado in the event that Newco has knowledge that any of the representations made in Section 7.4 is false.

 

(d)                                 Vornado shall promptly notify Newco in the event that Vornado has knowledge that any of the representations made in Section 7.5 is false.

 

(e)                                  If Newco or any of its Subsidiaries proposes to enter into any Acquisition Transaction Requiring Notice or, to the extent Newco has the right to prohibit any Acquisition Transaction Requiring Notice, proposes to permit any Acquisition Transaction Requiring Notice to occur, in each case, during the Restriction Period, Newco shall provide Vornado no later than ten (10) days before the signing of any written agreement with respect to any Acquisition Transaction Requiring Notice, with a written description of such transaction (including the type and amount of Equity Interests in Newco or any Subsidiary of Newco that are the subject of such transaction).

 

7.7                               Relief.

 

(a)                                 For the avoidance of doubt, Vornado shall have the right to seek injunctive relief to prevent Newco or any of its Subsidiaries from taking any action that is not consistent with the covenants of Newco or any of its Subsidiaries under Section 7.1 or 7.2.

 

(b)                                 Nothing in this Agreement shall be construed to give any Newco Indemnified Party any right to remedies other than indemnification for any increase in the actual Tax liability (and/or decrease in Tax Benefit) of such Newco Indemnified Party that results from Vornado Group’s failure to comply with the covenants in made in Section 7.1 or 7.3.

 

7.8                               Operating Rules.  For the avoidance of doubt, for purposes of Sections 7.2 and 7.3, (i) any arrangement whereby a Person that is a corporation has the right to satisfy an obligation to purchase property by delivering either cash or its own stock shall be treated as an arrangement to which Treasury Regulations Section 1.355-7(e) applies, (ii) the acquisitions of Newco Shares and units of Newco OP pursuant to the Combination Transactions (as that term is defined in the Master Transaction Agreement) are taken into account in determining whether one or more Persons acquire (or have the right to acquire), directly or indirectly, as part of a plan or series of related transactions, stock or equity securities of Newco representing a Fifty-Percent Equity Interest in Newco, (iii) the issuance of any compensatory stock or compensatory stock options, the issuance of any stock pursuant to any equity award, compensatory option, or restricted stock unit, or the repurchase of any restricted stock, if such issuance or repurchase satisfies the conditions of Treasury Regulation Section 1.355-7(d)(8)(i), shall not be taken into account, and (iv) the issuance of stock to a retirement plan qualified under Section 401(a) or 403(a) of the Code in a transaction that satisfies the requirements of Treasury Regulation

 

23



 

Section 1.355-7(d)(9) shall not be taken into account; provided, however, that, for the avoidance of doubt, in the case of clauses (i) and (ii) of this Section 7.8, the issuance by Newco of Newco Shares in exchange for OP Units which OP Units have been taken into account for purposes of determining whether one or more Persons acquire (or have the right to acquire), directly or indirectly, as part of a plan or series of related transactions, stock or equity securities of Newco representing a Fifty-Percent Equity Interest in Newco shall not be taken into account duplicatively for such purposes.

 

7.9                               REIT Certificates.  On each of the first three anniversaries of the Vornado Distribution,

 

(a)                                 Newco will deliver to Vornado a written opinion of an Expert Law Firm, dated as of such date and in form and substance reasonably satisfactory to Vornado and in reliance on the tax opinions described in Sections 7.3(e)(i) and 7.3(e)(iii) of the Master Transaction Agreement (relating to the REIT qualification of the Vornado REITs and Vornado, respectively), to the effect that, commencing with Newco’s taxable year in which the Vornado Distribution occurs, Newco has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and its actual method of operation has enabled Newco to meet, through the date of such opinion, and its proposed method of operation will enable Newco to continue to meet, the requirements for qualification and taxation as a REIT under the Code, which opinion will (i) be subject to customary exceptions, assumptions and qualifications (including Reasonable Cause Exceptions) and (ii) be based on customary representations contained in an officer’s certificate from Newco (including Reasonable Cause Exceptions); and

 

(b)                                 Vornado will deliver to Newco a written opinion of an Expert Law Firm, dated as of such date and in form and substance reasonably satisfactory to Newco and upon which Newco and its REIT counsel shall be entitled to rely for future opinions, to the effect that, commencing with Vornado’s first taxable year with respect to which Vornado made an election pursuant to Section 856(c)(1) of the Code to be taxed as a REIT, Vornado has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and its actual method of operation has enabled Vornado to meet, through the date of such opinion, and its proposed method of operation will enable Vornado to continue to meet, the requirements for qualification and taxation as a REIT under the Code, which opinion will (i) be subject to customary exceptions, assumptions and qualifications (including Reasonable Cause Exceptions)  and (ii) be based on customary representations contained in an officer’s certificate from Vornado (including Reasonable Cause Exceptions), executed by an officer with the knowledge necessary to make the representations contained therein.

 

SECTION 8.  General Provisions.

 

8.1                               Predecessors or Successors.  Any reference to Vornado, Newco, a Person, or a Subsidiary in this Agreement shall include any predecessors or successors (e.g., by merger or other reorganization, liquidation, conversion, or election under Treasury Regulations Section 301.7701-3) of Vornado, Newco, such Person, or such Subsidiary, respectively, including within the meaning of Section 355(e)(4)(D) of the Code and the Treasury Regulations

 

24



 

promulgated thereunder.  For the avoidance of doubt, no member of the Vornado Group shall be deemed to be a predecessor or successor of Newco and no member of the Newco Group shall be deemed to be a predecessor or successor of Vornado.

 

8.2                               Construction.  This Agreement and so much of the Separation and Distribution Agreement as relates to the subject matter hereof shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter.

 

8.3                               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 such counterparts have been signed by each of the Parties and delivered to the other Party.

 

8.4                               Notices.  All notices and other communications hereunder shall be in writing, shall reference this Agreement and shall be hand delivered or mailed by registered or certified mail (return receipt requested) to the Parties at the following addresses (or at such other addresses for a Party as shall be specified by like notice) and will be deemed given on the date on which such notice is received:

 

 

If to Vornado, to:

 

 

 

Vornado Realty Trust

 

888 Seventh Avenue

 

New York, New York 10019

 

Attention:

Secretary and General Counsel

 

E-mail:

arice@vno.com

 

 

 

with a copy (until 12:01 a.m., Eastern time, on the Distribution Date) to:

 

 

 

 

Sullivan & Cromwell LLP

 

125 Broad Street

 

New York, New York 10004

 

Attention:

William G. Farrar

 

Facsimile:

(212) 558-3588

 

 

 

If to Newco, to:

 

 

 

Vornado Realty Trust

 

888 Seventh Avenue

 

New York, New York 10019

 

Attention:

Secretary and General Counsel

 

E-mail:

arice@vno.com

 

 

 

with a copy (until 12:01 a.m., Eastern time, on the Distribution Date) to:

 

 

 

 

JBG Properties Inc.

 

25



 

 

4445 Willard Avenue, Suite 400

 

Chevy Chase, Maryland 20815

 

Attention:

W. Matthew Kelly

 

E-mail:

mkelly@jbg.com

 

8.5                               Amendments.  This Agreement may not be modified or amended except by an agreement in writing signed by each of the Parties.

 

8.6                               Assignment.  This Agreement shall not be assignable, in whole or in part, directly or indirectly, by any Party without the prior written consent of the other Party, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void; provided that, subject to compliance with Section 7, if applicable, either Party may assign this Agreement to a purchaser of all or substantially all of the properties and assets of such Party so long as such purchaser expressly assumes, in a written instrument in form reasonably satisfactory to the non-assigning Party, the due and punctual performance or observance of every agreement and covenant of this Agreement on the part of the assigning Party to be performed or observed.

 

8.7                               Successors and Assigns.  The provisions to this Agreement shall be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assigns.

 

8.8                               Change in LawAny reference to a provision of the Code, the Treasury Regulations or any other Tax Law shall include a reference to any applicable successor provision or law.

 

8.9                               Authorization, Etc.  Each of the Parties hereto hereby represents and warrants that it has the power and authority to execute, deliver and perform this Agreement, that this Agreement has been duly authorized by all necessary corporate action on the part of such Party, that this Agreement constitutes a legal, valid and binding obligation of such Party and that the execution, delivery and performance of this Agreement by such Party does not contravene or conflict with any provision of law or the Party’s charter or bylaws or any agreement, instrument or order binding such Party.

 

8.10                        Termination.  Notwithstanding any provision to the contrary, in the event that the Master Transaction Agreement is terminated prior to the Closing, this Agreement shall terminate and be of no further force and effect.  In the event of such termination, no Party shall have any liability of any kind to any other Party or any other Person.  After the Vornado Distribution, this Agreement may not be terminated except by an agreement in writing signed by the Parties.

 

8.11                        Subsidiaries.  Each of the Parties shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any entity that is contemplated to be a Subsidiary of such Party after the Distribution Date.

 

8.12                        Third-Party Beneficiaries.  Except with respect to Vornado Indemnified Parties and Newco Indemnified Parties, and in each case, only where and as indicated herein, this Agreement is solely for the benefit of the Parties and their respective Subsidiaries and shall not be deemed to confer upon any other Person any remedy, claim, liability, reimbursement, cause of

 

26



 

action or other right in excess of those existing without reference to this Agreement.  Notwithstanding anything in this Agreement to the contrary, this Agreement is not intended to confer upon any Newco Indemnified Parties any rights or remedies against Newco hereunder, and this Agreement is not intended to confer upon any Vornado Indemnified Parties any rights or remedies against Vornado hereunder.

 

8.13                        Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York.

 

8.14                        Waiver of Jury Trial.  The Parties hereby irrevocably waive any and all right to trial by jury in any legal proceeding arising out of or related to this Agreement or the transactions contemplated hereby.

 

8.15                        Severability.  In the event any one or more of the provisions contained in this Agreement were to be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby.  The Parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

8.16                        Waiver.  The Parties may waive a provision of this Agreement only by a writing signed by the party intended to be bound by the waiver.  A party is not prevented from enforcing any right, remedy or condition in the Party’s favor because of any failure or delay in exercising any right or remedy or in requiring satisfaction of any condition, except to the extent that the Party specifically waives the same in writing.  A written waiver given for one matter or occasion is effective only in that instance and only for the purpose stated.  A waiver once given is not to be construed as a waiver for any other matter or occasion.  Any enumeration of a Party’s rights and remedies in this Agreement is not intended to be exclusive, and a Party’s rights and remedies are intended to be cumulative to the extent permitted by law and include any rights and remedies authorized in law or in equity.

 

8.17                        No Double Recovery.  No provision of this Agreement shall be construed to provide an indemnity or other recovery for any costs, damages, or other amounts for which the damaged Party has been fully compensated under any other provision of this Agreement or under any other agreement or action at law or equity.  Unless expressly required in this Agreement, a Party shall not be required to exhaust all remedies available under other agreements or at law or equity before recovering under the remedies provided in this Agreement.

 

8.18                        No Strict Construction; Interpretation.

 

(a)                                 Each of Vornado and Newco acknowledges that this Agreement has been prepared jointly by the Parties hereto and shall not be strictly construed against any Party hereto.

 

(b)                                 The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include,” “includes” or “including” are used in

 

27



 

this Agreement, they shall be deemed to be followed by the words “without limitation”.  The words “hereof,” “herein,” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.  The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term.  Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein.  References to a Person are also to its permitted successors and assigns.

 

[Remainder of page intentionally left blank]

 

28



 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by the respective officers as of the date set forth above.

 

 

VORNADO REALTY TRUST

 

 

 

By:

/s/ Alan J. Rice

 

Name:

Alan J. Rice

 

Title:

Senior Vice President

 

[Signature Page to Tax Matters Agreement]

 



 

 

JBG SMITH PROPERTIES

 

 

 

By:

/s/ Stephen W. Theriot

 

Name:

Stephen W. Theriot

 

Title:

Chief Financial Officer

 

[Signature Page to Tax Matters Agreement]

 


EX-10.2 14 a17-17912_1ex10d2.htm EX-10.2

Exhibit 10.2

 

EXECUTION VERSION

 

EMPLOYEE MATTERS AGREEMENT
BY AND BETWEEN
VORNADO REALTY TRUST,
VORNADO REALTY L.P.,
JBG SMITH PROPERTIES

AND
JBG SMITH PROPERTIES
LP

 

DATED AS OF JULY 17, 2017

 

EMPLOYEE MATTERS AGREEMENT

 

This EMPLOYEE MATTERS AGREEMENT (the “Agreement”), dated as of July 17, 2017, is by and among Vornado Realty Trust, a Maryland real estate investment trust (“Vornado”), Vornado Realty L.P., a Delaware limited partnership (“VRLP”), JBG SMITH Properties, a Maryland real estate investment trust (“Newco”), and JBG SMITH Properties LP, a Delaware limited partnership (“Newco LP”) and together with Vornado, VRLP and Newco, each a “Party” and collectively, the “Parties”).

 

WHEREAS, the board of trustees of Vornado (the “Vornado Board”) has determined that it is in the best interests of Vornado and its shareholders to create a new publicly traded company that will operate the DC Business (as defined below);

 

WHEREAS, in furtherance of the foregoing, the Vornado Board has determined that it is appropriate and desirable to separate the DC Business from the Vornado Business (the “Separation”);

 

WHEREAS, Vornado and VRLP (the “Vornado Parties”), and JBG Properties Inc., a Maryland corporation and JBG/Operating Partners, L.P., a Delaware limited partnership, together with certain JBG entities (the “JBG Parties”), and Newco and Newco LP, are parties to that certain Master Transaction Agreement dated as of October 31, 2016 (the “Transaction Agreement”), pursuant to which the Vornado Parties and the JBG Parties will effectuate a series of transactions resulting in the acquisition, transfer and contribution of assets and interests, including the DC Business, to Newco and Newco LP, a Delaware limited partnership;

 

WHEREAS, in furtherance of the foregoing, the Parties have entered into a Separation and Distribution Agreement, dated as of July 17, 2017 (the “Separation Agreement”), and have entered or will enter into other Transaction Documents that will govern certain matters relating to the Distribution (as defined below) and the relationship of Vornado, Newco and their respective Affiliates prior to and following the Distribution Date (as defined below); and

 

WHEREAS, pursuant to the Separation Agreement, the Parties have agreed to enter into this Agreement for the purpose of allocating assets, liabilities and responsibilities with

 



 

respect to certain human resources, employee compensation and benefits matters between them to the extent not provided in, or that vary from, the Separation Agreement.

 

NOW, THEREFORE, in consideration of the premises and of the respective agreements and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound hereby, agree as follows:

 

2



 

ARTICLE I

DEFINITIONS

 

1.1          Definitions.  The following terms shall have the following meanings:

 

Affiliate” shall mean, when used with respect to a specified Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person.  For the purpose of this definition, “control” (including with correlative meanings, “controlled by” and “under common control with”), when used with respect to any specified Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise.  It is expressly agreed that, prior to, at and after the Effective Time, for purposes of the Transaction Documents (a) no member of the Newco Group shall be deemed to be an Affiliate of any member of the Vornado Group and (b) no member of the Vornado Group shall be deemed to be an Affiliate of any member of the Newco Group.

 

Agreement” has the meaning ascribed thereto in the preamble to this Agreement.

 

Benefit Plan” means, with respect to an entity, any “employee benefit plan” (as defined in Section 3(3) of ERISA), and each plan, program, arrangement, agreement or commitment that is an employment, consulting, non-competition or deferred compensation agreement, or an executive compensation, incentive bonus or other bonus, employee pension, profit-sharing, savings, retirement, supplemental retirement, stock option, stock purchase, stock appreciation rights, restricted stock, operating partnership unit, other equity-based compensation, severance pay, salary continuation, life, health, hospitalization, sick leave, vacation pay, paid time-off, disability or accident insurance plan, program, arrangement, agreement or commitment, corporate-owned or key-man life insurance or other employee benefit plan, program, arrangement, agreement or commitment, sponsored or maintained by such entity (or to which such entity contributes or is required to contribute or with respect to which such entity has any Liability).

 

Closing” has the meaning given such term in the Transaction Agreement.

 

COBRA” means the continuation coverage requirements for “group health plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as codified in Code Section 4980B and Sections 601 through 608 of ERISA, and any similar state group health plan continuation Law, together with all regulations and proposed regulations promulgated thereunder, including any amendments or other modifications of such Laws and regulations that may be made from time to time.

 

Code” means the U.S. Internal Revenue Code of 1986, as amended.

 

3



 

DC Business” shall mean the business, operations and activities of the Vornado Group relating to the Newco Properties as defined in the Separation Agreement as conducted at any time prior to the Effective Time by either Party or any of their current or former Subsidiaries.

 

DCP” has the meaning ascribed thereto in Section 6.1 of this Agreement.

 

DCP II” has the meaning ascribed thereto in Section 6.1 of this Agreement.

 

Designated Vornado Welfare Plan” means a Welfare Plan sponsored or maintained by Vornado or its Affiliates which is identified on Schedule 1.0 hereto.

 

Distribution” shall have the meaning set forth in the recitals to the Separation Agreement.

 

Distribution Date” shall mean the date of the consummation of the Distribution, which shall be determined by the Vornado Board in its sole and absolute discretion.

 

Effective Time” shall mean 12:01 a.m., Eastern time, on the Distribution Date.

 

Employee” means any individual set forth in Schedule 1.1 who is a full-time or part-time employee of the applicable entity and provides substantially all of such individual’s services for the benefit of the DC Business and who is intended to become a Newco Group Employee if such individual remains employed (or is on an approved leave) at the Effective Time.

 

ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

 

Force Majeure” has the meaning ascribed thereto in the Separation Agreement.

 

Former Employee” means any former Employee of Vornado or an Affiliate of Vornado or of Newco or an Affiliate of Newco, as of immediately prior to the Effective Time, whether having last been employed by a member of the Vornado Group or a member of the Newco Group, including retired Employees.

 

Governmental Authority” means any nation or government, any state, municipality or other political subdivision thereof, and any entity, body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, local, domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory, administrative or other similar functions of, or pertaining to, government and any executive official thereof.

 

4



 

Group” shall mean either the Newco Group or the Vornado Group, as the context requires.

 

HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended.

 

Law” means any national, supranational, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any income tax treaty), license, permit, authorization, approval, consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case, enacted, promulgated, issued or entered by a Governmental Authority.

 

Liabilities” shall have the meaning ascribed thereto in the Separation Agreement.

 

Newco” has the meaning ascribed thereto in the preamble to this Agreement.

 

Newco 401(k) Plan” has the meaning ascribed thereto in Section 3.1(a) of this Agreement.

 

Newco Benefit Plan” means any Benefit Plan sponsored, maintained or contributed to by a member of the Newco Group after the Effective Time, but excluding any Vornado Benefit Plan.

 

Newco Common Share” shall mean a share of common stock, par value $0.01 per share, of Newco.

 

Newco Equity Plan” has the meaning ascribed thereto in Section 5.1 of this Agreement.

 

Newco Group” shall mean (a) prior to the Effective Time, Newco and each Person that will be a Subsidiary of Newco as of immediately after the Effective Time, including the Transferred Entities (as defined in the Separation Agreement), even if, prior to the Effective Time, such Person is not a Subsidiary of Newco; and (b) on and after the Effective Time, Newco and each Person that is a Subsidiary of Newco.

 

Newco Group Employee” means any person who, immediately following the Effective Time, is an Employee of any member of the Newco Group, including any such Employee who is on an approved leave at such time (other than long-term disability leave, in which case such Employee will become a Newco Group Employee upon return to active employment as set forth in Section 2.1 below).

 

Newco Participant” shall mean any Newco Group Employee who was, prior to the Effective Time, a participant in the applicable Vornado Benefit Plan or is, after the Effective Time, a participant in the applicable Newco Benefit Plan, or is a beneficiary, dependent or alternate payee of such a participant.

 

Parties” has the meaning ascribed thereto in the preamble to this Agreement.

 

5



 

Person” shall mean an individual, a general or limited partnership, a corporation, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity and any Governmental Authority.

 

Separation” has the meaning ascribed thereto in the recitals to this Agreement.

 

Separation Agreement” has the meaning ascribed thereto in the recitals to this Agreement.

 

Subsidiary” or “subsidiary” means, with respect to any Person, any corporation, limited liability company, joint venture or partnership of which such Person (i) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (A) the total combined voting power of all classes of voting securities of such Person, (B) the total combined equity interests, or (C) the capital or profit interests, in the case of a partnership, or (ii) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

 

Terminating Employee” means an Employee of Vornado or any of its Affiliates whose employment is not intended to be continued by Vornado or any of its Affiliates following the Effective Time and is not assigned to a member of the Newco Group, and whose employment is involuntarily terminated by Vornado as of or following the Effective Time.

 

Transaction Documents” means all agreements entered into by the Parties or the members of their respective Groups (but as to which no third party is a party) in connection with the Separation, the Distribution, or the other transactions contemplated by this Agreement, including this Agreement, the Separation Agreement, the Transition Services Agreement, the Tax Matters Agreement and the Transfer Documents, as such terms are defined in the Separation Agreement (if not defined in this Agreement).

 

Transition Services Agreement” means the Transition Services Agreement to be entered into by and between Vornado and Newco or any members of their respective Groups in connection with the Separation, the Distribution or the other transactions contemplated by the Separation Agreement.

 

U.S.” means the United States of America.

 

Vornado 401(k) Plan” shall mean the Vornado Realty Trust 401(k) Plan.

 

Vornado Benefit Plan” shall mean any Benefit Plan sponsored, maintained or contributed to by Vornado or any of its Affiliates.

 

Vornado Board” has the meaning ascribed thereto in the recitals to this Agreement.

 

Vornado Business” shall mean all businesses, operations and activities (whether or not such businesses, operations or activities are or have been terminated, divested or

 

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discontinued) conducted at any time prior to the Effective Time by either Party or any member of its Group, other than the DC Business.

 

Vornado Common Share” shall mean a common share, par value of $0.04 per share, of Vornado.

 

Vornado Equity Plan” shall mean the Vornado Realty Trust 2010 Omnibus Share Plan.

 

Vornado Group” shall mean Vornado and each Person that is a Subsidiary of Vornado (other than any member of the Newco Group).

 

Vornado Group Employee” shall mean any person who, immediately following the Effective Time, is an Employee of any member of the Vornado Group, including any such Employee who is on an approved leave at such time.

 

Vornado Nonqualified Deferred Compensation Plans” has the meaning ascribed thereto in Section 6.1 of this Agreement.

 

Vornado Participant” shall mean any Vornado Group Employee or Vornado Former Employee and who is, at any time prior to, on, or after the Effective Time, a participant in the applicable Vornado Benefit Plan or is a beneficiary, dependent or alternate payee of such a participant.

 

Welfare Plan” shall mean a plan that provides for health, welfare or other insurance benefits within the meaning of Section 3(1) of ERISA.

 

ARTICLE II
EMPLOYMENT GENERALLY

 

2.1          Continuation of Employment.  Except as otherwise provided on Schedule 2.1 of this Agreement or as required by applicable local Law, Vornado and its Affiliates shall take all actions necessary to ensure that, as of immediately prior to the Effective Time, the Employees, including any such Employees who are on short-term disability leave or other approved leave of absence, are employed by a member of the Newco Group; provided, that with respect to any such Employee who is on long-term disability leave as of the Effective Time, employment will not transfer at the Effective Time, but upon such Employee’s return to active employment, Newco shall offer the Employee employment with Newco on comparable terms for its similarly-situated Employees and, absent the Employee’s express rejection of such offer and subject to applicable law, such Employee will be deemed to have accepted such offer and will become a Newco Group Employee as soon as practicable after return to active employment.  In the case of any Employee who becomes a Newco Group Employee on a date following the Effective Time, all references in this Agreement to the Effective Time shall be deemed to be the references to the date on which such Employee becomes a Newco Group Employee.

 

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2.2          Employment and Benefit Plan Liabilities.  Except as specifically set forth on Schedule 2.2 or otherwise in this Agreement or the Separation Agreement, Vornado and its Affiliates will retain, and Newco shall have no obligations for, (i) any Liabilities relating to or with respect to employment, compensation, severance, employment practices, and similar claims (including any legal action, suit, investigation, inquiry, proceeding, arbitration, order or other claim) of Terminating Employees and Former Employees, regardless of when incurred, and (ii) any Liabilities relating to or with respect to employment, compensation, severance, employment practices, and similar claims (including any legal action, suit, investigation, inquiry, proceeding, arbitration, order or other claim) arising on or prior to the Effective Time in respect of a Newco Group Employee’s employment with the Vornado Group.  Newco shall be responsible for all employment-related Liabilities in respect of the Newco Group Employees’ employment with the Newco Group arising after the Effective Time.  Except as may otherwise be agreed to between the Parties, Vornado and its Affiliates will retain, and Newco shall have no obligations for, any Liabilities in respect of any Vornado Benefit Plan, regardless of when incurred.

 

2.3          Service Recognition.  Newco shall give, or shall cause its Affiliates to give, each Newco Group Employee full credit for purposes of eligibility to participate, vesting and accrual of pension, paid time off and vacation benefits under any Newco Benefit Plan (other than a defined benefit pension plan) for such Newco Group Employee’s service with Vornado or any of its Affiliates prior to the Effective Time to the same extent such service was recognized by the corresponding Vornado Benefit Plan immediately prior to the Effective Time and for purposes of any severance benefits; provided, however, that such service shall not be recognized to the extent that such recognition would result in the duplication of benefits or as otherwise provided by applicable local Law.

 

2.4          Employment Agreements.  With respect to any employment agreements with Newco Group Employees that are not with Newco or a member of the Newco Group or which do not transfer to a Newco Group member by operation of applicable Law, the Parties shall use reasonable best efforts to assign the applicable Contract to a member of the Newco Group and Newco shall, or shall cause a member of the Newco Group to, assume and perform such employment agreements.

 

2.5          No Separation From Service or Termination of Employment.  The Distribution and the assignment, transfer, or continuation of employment of any Employee of Vornado or any of its Affiliates in connection therewith (including in accordance with Section 2.1 hereof) shall not be deemed a separation from service or termination of employment entitling such Employee to be eligible to participate in, or to receive payment of, severance or other termination payments or benefits under any applicable Law, Vornado Benefit Plan or Newco Benefit Plan provided, however, that any Terminating Employee, shall be deemed to have incurred a separation from service and shall be eligible to receive severance and benefits in accordance with the applicable Vornado Benefit Plan.

 

2.6          Former EmployeesNewco shall have no Liability with respect to (1) Former Employees or (2) as provided in the Transaction Agreement, former employees of JBG or its Affiliates who had a termination event on or prior to the Closing, in each case, regardless of when such Liability arises. Vornado shall retain Liability, if any, with respect to Former

 

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Employees.  Notwithstanding the foregoing, if after the Effective Time Newco hires a Former Employee (not in violation of the nonsolicitation obligations in Section 5.6 of the Separation Agreement), then Newco shall be responsible for any prospective compensation and benefits provided to such person.

 

2.7          Collective Bargaining AgreementsOn and after the Effective Time, Newco or its Affiliates shall (a) recognize, as may be required by law, the International Union of Operating Engineers Local 99-99A, AFL-CIO (“Local 99”) and Service Employees International Union Local 32BJ (“Local 32BJ”) as the certified labor representative of the Newco Group Employees covered by the collective bargaining agreement (“Represented Employees”) between, respectively, Local 99 and Vornado /Charles E. Smith for Charles E. Smith Real Estate Services L.P. Buildings, dated January 1, 2015 — December 31, 2017, Local 32BJ and Charles E. Smith Realty, dated October 15, 2015 — October 15, 2019 and between Local 32BJ and H Street Management, LLC at Riverhouse Apartments Complex, dated October 1, 2016 — September 30, 2020 and all existing letters of understanding, letters of agreement, and memoranda of agreement (“CBAs”), and, (b) assume and be bound by, for their durations, the CBAs between such parties governing the terms and conditions of the Represented Employees and in effect immediately before the Effective Time.  The terms and conditions of the employment of the Represented Employees shall be governed by the applicable CBAs.  To the extent required by the National Labor Relations Act (“NLRA”) or any agreement with a labor union or similar employee organization representing any Newco Group Employees, Vornado and JBG shall each comply in all material respects with the NLRA and the terms of any agreement with any labor union or similar employee organization representing any Newco Group Employee, including any all notification and/or consultation requirements.  Neither Newco nor its Affiliates shall have any other obligations, or any Liabilities, other than as set forth in this Section 2.7, relating to or with respect to any Employees, Terminating Employees or Former Employees under the NLRA.

 

ARTICLE III
RETIREMENT PLANS

 

3.1          The Vornado 401(k) Plan and Newco 401(k) Plan.

 

(a)           Contributions Under the Vornado 401(k) Plan as of the Effective Time.  All employer contributions, including employee deferrals, matching contributions (including any true-up contributions, if applicable), profit-sharing contributions, and employer non-elective contributions, accrued by Newco Participants under the Vornado 401(k) Plan through the Effective Time, determined in accordance with the terms and provisions of the Vornado 401(k) Plan, ERISA and the Code, and based on all eligible service performed and eligible compensation accrued through the Effective Time, shall be deposited by Vornado in the Vornado 401(k) Plan and allocated to the Vornado 401(k) Plan accounts of the applicable Newco Participants as soon as administratively practicable following the Effective Time.

 

(b)           Continued Participation in the Vornado 401(k) Plan.  Prior to the Effective Time, Vornado and Newco shall take all actions as may be required to permit JBGS/Management OP, L.P. (“JBGS/Management”) to adopt the Vornado 401(k) Plan as a participating employer, effective as of the Effective Time, with respect to Newco Group

 

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Employees who are employed by JBGS/Management following the Effective Time.  Vornado shall permit JBGS/Management to remain a participating employer of the Vornado 401(k) Plan through December 31, 2017, or such later date as Vornado may in writing permit.  Such Newco Group Employees shall receive full credit for purposes of eligibility to participate and vesting under the Vornado 401(k) Plan for such Newco Group Employee’s service with Vornado or any of its Affiliates prior to the Effective Time.

 

(c)           Establishment of Plan and Trust.  Newco or one of its Affiliates shall adopt or otherwise make available a retirement plan and related trust that are qualified and tax-exempt pursuant to Code Sections 401(a) and 501(a), respectively, and that is intended to meet the requirements of Code Section 401(k) (the “Newco 401(k) Plan”), and any trust agreement or other plan documents reasonably necessary in connection therewith, and shall cause a trustee to be appointed for the Newco 401(k) Plan.  Vornado and Newco acknowledge and agree that the JBG Properties, Inc. Employee 401(k) Savings Plan may serve as the Newco 401(k) Plan.

 

(d)           Assumption of Liabilities; Transfer of Assets.  Effective January 1, 2018, Vornado shall cause the account balances of Newco Group Employees who are participants under the Vornado 401(k) Plan as of such date to become fully vested (to the extent not then vested), and as soon as practicable thereafter Vornado and the Newco Group shall cause said account balances under the Vornado 401(k) Plan to be transferred to the Newco 401(k) Plan in a plan-to-plan transfer that satisfies the requirements of applicable Law, including, without limitation, Section 414(l) of the Code.  Newco shall as a condition of such transfer provide Vornado with evidence reasonably satisfactory to Vornado that the Newco 401(k) Plan is tax-qualified under Section 401(a) of the Code and that such plan’s related trust is tax-exempt under Section 501(a) of the Code. Newco shall cause the Newco 401(k) Plan to accept the transfer of any outstanding loans (and promissory notes evidencing the transfer of outstanding loans) for such Newco Participants, provided that the Newco 401(k) Plan shall not be obligated to accept the transfer of any employer securities, and provided further that to the extent that any accounts of such Newco Participants are invested in nonpublic partnership interests, such accounts (to the extent of such nonpublic partnership interests) shall not be transferred and shall remain with the Vornado 401(k) Plan. The Parties will take such actions as are necessary or reasonably requested by the other to effectuate such plan-to-plan transfers in an orderly manner, including, without limitation, adoption of plan amendments.  Upon transfer of such account balances, the Newco 401(k) plan shall be solely responsible for such accounts and neither the Vornado Parties nor the Vornado 401(k) Plan shall have any liability or further obligation with respect thereto.

 

3.2          Reservation of Rights.  Except as provided in Section 3.1, the Parties hereby acknowledge that nothing in this Article III shall be construed to require (a) Vornado or any of its Affiliates to continue the Vornado 401(k) Plan before or after the Effective Time, and (b) Newco or any of its Affiliates to continue the Newco 401(k) Plan after the Effective Time following its establishment and receipt of the asset and Liability transfer described in Section 3.1.  The Parties agree that (i) Vornado reserves the right, in its sole discretion, to amend or terminate the Vornado 401(k) Plan at any time following the date of this Agreement in accordance with its terms and applicable Law, and (ii) Newco reserves the right, in its sole discretion, to amend or terminate the Newco 401(k) Plan at any time following the date of this

 

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Agreement in accordance with its terms and applicable Law; provided that no such amendment to either the Vornado 401(k) Plan or the Newco 401(k) Plan shall prevent the actions described in Section 3.1. The Parties further agree that neither Newco nor any of its Affiliates (including JBGS/Management) may amend the Vornado 401(k) Plan.

 

ARTICLE IV
HEALTH AND WELFARE PLANS

 

4.1          Vornado and Newco Health and Welfare Plans.

 

(a)           Participation in Vornado Welfare Plans.  Prior to the Effective Time, Vornado shall take all actions as may be required to permit Newco Group Employees who were eligible to participate in a Designated Vornado Welfare Plan as of immediately prior to the Effective Time to continue to be eligible to participate in such Designated Vornado Welfare Plan, subject to the terms thereof, during the period commencing at the Effective Time and ending on December 31, 2017.  Effective as of the Effective Time, Newco Group Employees shall cease to participate, and shall not be covered by, any and all Welfare Plans maintained by Vornado or its Affiliates other than Designated Vornado Welfare Plans.

 

(b)           Participation in Newco Welfare Plans. Effective as of January 1, 2018, Newco Group Employees shall cease to be eligible to participate in the Designated Vornado Welfare Plans and shall become eligible to participate in the Newco Welfare Plans, which shall have been established by Newco as of the Effective Time, in a form and on terms determined by Newco.

 

(c)           Allocation of Health and Welfare Plan Liabilities.  All outstanding Liabilities relating to, arising out of, or resulting from health and welfare claims incurred by or on behalf of Newco Employees or their covered dependents under the Designated Vornado Welfare Plans on or before the Effective Time, including claims incurred but not reported, shall be retained by Vornado or the applicable member of the Vornado Group.  Without limitation of any obligations of the JBG Parties under the Transition Services Agreement with respect to benefits or coverage made available to Newco Group Employees under the Designated Vornado Welfare Plans, the JBG Parties shall pay or reimburse, as applicable, the Vornado Parties for any amounts expended by the Vornado Parties on behalf of Newco Group Employees (or their dependents) arising out of their participation in and coverage under the Designated Vornado Welfare Plans from and after the Effective Time and ending on December 31, 2017 (including, without limitation, contributions or funding on behalf of Newco Group Employees for deductibles, health savings account contributions and health reimbursement contributions).  The Parties acknowledge and agree that all of the Designated Vornado Welfare Plans (except the Vornado Realty Trust Flexible Benefits and Health Reimbursement Plan) are fully insured plans.

 

(d)           Waiver of Conditions. To the extent permitted by applicable Law and the terms of the applicable Newco Welfare Plan, Newco (acting directly or through its Affiliates) shall cause the Newco Welfare Plans to (i) waive all limitations as to preexisting conditions, exclusions, and service conditions with respect to participation and coverage requirements applicable to any Newco Group Employee, other than limitations that were in effect with respect

 

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to the Newco Group Employee under the corresponding Vornado Welfare Plan immediately prior to January 1, 2018, and (ii) waive any waiting period limitation or evidence of insurability requirement applicable to a Newco Group Employee other than limitations or requirements that were in effect with respect to such Newco Group Employee under the corresponding Vornado Welfare Plan immediately prior to January 1, 2018 and requirements imposed by insurers.  Such waivers described in clauses (i) and (ii) of the foregoing sentence, with respect to the Newco Welfare Plans, shall apply to initial enrollment effective immediately following January 1, 2018.  Following the initial enrollment, pre-existing condition limitations, exclusions, and services conditions under the Newco Welfare Plans may apply only to the extent allowable under applicable Law.

 

4.2          COBRA and HIPAA Compliance.  Vornado shall continue to be responsible for compliance with the health care continuation requirements of COBRA (including the requirements under the American Recovery and Reinvestment Act), the certificate of creditable coverage requirements of HIPAA, and the corresponding provisions of the Designated Vornado Welfare Plans with respect to any Newco Group Employees or any of their covered dependents who incur a qualifying event or loss of coverage under COBRA on or before December 31, 2017.  Newco shall assume responsibility for compliance with the health care continuation requirements of COBRA, the certificate of creditable coverage requirements of HIPAA, and the corresponding provisions of the Newco Welfare Plans, with respect to any Newco Group Employees or any of their covered dependents who incur a qualifying event or loss of coverage under the Newco Welfare Plans on or after January 1, 2018.

 

4.3          Time-Off Benefits.  Newco shall credit each Newco Group Employee immediately following the Effective Time with the amount of accrued but unused paid time-off as such Newco Group Employee had under the applicable Vornado paid time-off policy immediately prior to the Effective Time.

 

4.4          Incurred Claim Definition.  For purposes of this Article IV, a claim or Liability is deemed to be incurred:  (a) with respect to medical, dental, vision and/or prescription drug benefits, at the time professional services, equipment or prescription drugs covered by the applicable plan are incurred; (b) with respect to life insurance, accidental death and dismemberment and business travel accident insurance, upon the occurrence of the event giving rise to such claim or Liability; (c) with respect to disability benefits, upon the date of an Employee’s disability, as determined by the disability benefit insurance carrier or claim administrator, giving rise to such claim or Liability; and (d) with respect to a period of continuous hospitalization, upon the date of admission to the hospital.

 

4.5          Workers Compensation.  The ownership and administration of workers compensation insurance shall be governed by Section 5.1 of the Separation Agreement regarding insurance matters.  For the avoidance of doubt, nothing in this Agreement shall be interpreted to allocate between the Parties the claims and Liabilities under any workers compensation insurance policies.

 

4.6          Reservation of Rights.  The Parties hereby acknowledge and agree that nothing in this Article IV shall be construed to require (a) Vornado or any of its Affiliates to continue any

 

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Vornado Benefit Plan before or after the Effective Time, or (b) Newco or any of its Affiliates to continue any Newco Benefit Plan before or after the Effective Time, in each case, except as set forth in Article VII.  Each of Vornado and Newco reserves the right, in its sole discretion, to amend or terminate any Vornado Benefit Plan and any Newco Benefit Plan, respectively, at any time after the date of this Agreement, to the extent permitted or required under the terms of the applicable Vornado Benefit Plan, Newco Benefit Plan or applicable Law; provided that no such amendment or termination shall prevent the actions described in Article IV.

 

ARTICLE V
EQUITY PLANS AND AWARDS

 

5.1          Establishment of Newco Equity Plan.  As of or prior to the Effective Time, Newco shall adopt an omnibus equity compensation plan (the “Newco Equity Plan”) pursuant to which equity awards may be granted to Newco Group Employees.  Vornado and Newco shall take all actions as may be necessary or advisable to adopt and obtain approval of the Newco Equity Plan (and the awards in respect of Newco Common Shares thereunder) in order to satisfy the requirement of Rule 16b-3 under the Exchange Act, and the applicable rules and regulations of any applicable exchange on which Newco Common Shares will be traded.  The Newco Equity Plan shall be approved prior to the Effective Time by Vornado as Newco’s sole shareholder.

 

5.2          Formation Unit Grants.  Promptly after the Effective Time, Newco will grant a number of Formation Units (as defined in the limited partnership agreement of Newco LP, dated as of July 17, 2017) under the Newco Equity Plan with an aggregate value up to $100,000,000 divided by the volume-weighted average price of the Newco stock on the NYSE on the first trading day following the Effective Time (the “Formation Unit Pool”).  Except as otherwise agreed by the parties, seventy-five percent (75%) of the Formation Unit Pool will be allocable by JBG and the remaining twenty-five percent (25%) of the Formation Unit Pool will be allocable by Vornado, in each case as mutually agreed by Vornado and JBG prior to the Effective Time (or as otherwise committed to the individuals and in the amounts set forth on Schedule 5.2).

 

5.3          Liabilities for Settlement of Vornado Awards.  For awards made under the Vornado Equity Plan to Newco Group Employees that remain unvested or unsettled as of the Effective Time Vornado will, in its discretion, (x) cause the awards to become vested at the Effective Time, (y) cause the awards to continue to vest after the Effective Time subject to the Newco Group Employee’s continued service to Newco, and/or (z) provide the Newco Group Employee a cash payment in respect of an award that may otherwise be forfeited in connection with the transactions contemplated by the Transaction Agreement.  Vornado shall be responsible for all Liabilities (including, for the avoidance of doubt, the employer portion of any payroll taxes) associated with awards made under the Vornado Equity Plan, including without limitation such awards made to Newco Group Employees at the time they were Vornado Group Employees.  Newco shall be responsible for all Liabilities associated with awards made under the Newco Equity Plan.

 

5.4          Reservation of Rights.  The Parties hereby acknowledge and agree that nothing in this Article V shall be construed to require (a) Vornado or any of its Affiliates to continue the Vornado Equity Plan before or after the Effective Time, or (b) Newco or any of its Affiliates to

 

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continue the Newco Equity Plan before or after the Effective Time.  Each of Vornado and Newco reserves the right, in its sole discretion, to amend or terminate the Vornado Equity Plan (and the awards thereunder) and the Newco Equity Plan (and the awards thereunder), respectively, at any time after the date of this Agreement, to the extent permitted or required under the terms of the Vornado Equity Plan, Newco Equity Plan or applicable Law; provided that no such amendment or termination shall prevent the actions described in Article V.

 

ARTICLE VI
NONQUALIFIED PLANS

 

6.1          Deferred Compensation Plans.  Effective no later than the Effective Time, Newco Group Employees shall cease to be eligible to actively participate in the Vornado Realty Trust Nonqualified Deferred Compensation Plan (the “DCP”) and/or the Vornado Realty Trust Nonqualified Deferred Compensation Plan II (the “DCP II”) and no further deferrals shall be made to the DCP or the DCP II on behalf of Newco Group Employees with respect to compensation or earnings for services on or for the year in which the Effective Time occurs.  Each Newco Group Employee who immediately prior to the Effective Time was a participant in, or entitled to future benefits under, the DCP, the DCP II and/or the Vornado Realty Trust Nonqualified Deferred Compensation Plan (together, the “Vornado Nonqualified Deferred Compensation Plans”) shall continue to have such rights, privileges and obligations under the Vornado Nonqualified Deferred Compensation Plans as are provided thereunder. A Newco Group Employee shall not be deemed to have separated from service or incurred a termination of employment for purposes of the Vornado Nonqualified Deferred Compensation Plans until such Newco Group Employee incurs a separation from service (within the meaning of Section 409A of the Code) from Newco and the Newco Affiliates (and provided such Newco Group Employee is not employed by or providing services to Vornado or any Vornado Affiliate).  Newco agrees to promptly notify Vornado if and when a Newco Group Employee who is a participant of the Vornado Nonqualified Deferred Compensation Plans separates from service with Newco and the Newco Affiliates.

 

6.2          Liabilities for Payment of Deferred Compensation Accounts.  Vornado shall remain responsible for all Liabilities associated with the accounts of each Newco Group Employee under the Vornado Nonqualified Deferred Compensation Plans.

 

6.3          Reservation of Rights.  The Parties hereby acknowledge and agree that nothing in this Article VI shall be construed to require Vornado or any of its Affiliates to continue the Vornado Nonqualified Deferred Compensation Plans before or after the Effective Time.  Vornado reserves the right, in its sole discretion, to amend or terminate the Vornado Nonqualified Deferred Compensation Plans at any time after the date of this Agreement, to the extent permitted or required under the terms of the Vornado Nonqualified Deferred Compensation Plans or applicable Law.

 

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ARTICLE VII
ADDITIONAL COMPENSATION MATTERS; SEVERANCE

 

7.1          Annual Cash Incentive Awards.  As of the Effective Time, Newco Group Employees shall cease participating in each Vornado annual bonus plan or policy (“Vornado Annual Bonus Plans”).  As of the Effective Time, (i) Newco shall establish annual bonus plans or policies (“Newco Annual Bonus Plans”) and (ii) Newco Group Employees who were eligible to participate in the Vornado Bonus Plans shall be eligible to participate in the Newco Bonus Plans.  Newco shall be solely responsible for funding, paying and discharging all obligations under the Newco Annual Bonus Plans and Vornado shall have no Liability with respect to annual bonuses to be paid to Newco group employees with respect to the calendar year in which the Effective Time occurs.  Vornado shall remain solely responsible for funding and discharging all obligations under the Vornado Annual Bonus Plans with respect to annual bonuses to be paid to Newco group employees with respect to performance periods ending on or prior to the Effective Time.

 

7.2          Assumption of Severance Liabilities.

 

(a)           Severance Liabilities.  Newco shall be responsible for the severance obligations, if any, to Newco Group Employees whose employment is terminated after the Effective Time and neither Vornado nor JBG shall have Liability with respect to such severance obligations, except as set forth in the Transaction Agreement.

 

(b)           Severance Agreements.  In the event any Newco Group Employee is eligible for severance benefits on account of a termination of employment on or after the Effective Time, Newco shall require such employee, as a condition of receiving severance benefits, to agree in writing to a release of existing claims and confidentiality and non-solicitation provisions in favor of Newco, Vornado, and JBG, in a form substantially the same as Schedule 7.2(b); provided that for a Newco Group Employee who is subject to an individual employment or severance agreement or arrangement, the release of claims shall be as set forth in such individual employment or severance agreement or arrangement.

 

7.3          Reservation of Rights.  The Parties hereby acknowledge that, except for the obligations described in this Article VII, nothing in this Article VII shall be construed to require either Vornado or Newco (and their respective Affiliates) to continue any cash incentive awards program, deferred compensation plan, or severance plan after the Effective Time.  The Parties agree that each of Vornado and Newco reserves the right, in its sole discretion, to amend or terminate any cash incentive awards program, deferred compensation plan, or severance plan maintained by the Vornado Group or the Newco Group, respectively, at any time after the Effective Time to the extent permitted under the terms of the applicable cash incentive awards program, deferred compensation plan, or severance plan and applicable Law; provided that no such amendment shall prevent the actions described in this Article VII.

 

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ARTICLE VIII
GENERAL AND ADMINISTRATIVE

 

8.1          Non-Termination of Employment; No Third-Party Beneficiaries.  Except as expressly provided for in this Agreement or the Separation Agreement, no provision of this Agreement or any of the other Transaction Documents shall be construed to create any right, or accelerate entitlement, to any compensation or benefit whatsoever on the part of any Vornado Group Employee, Newco Group Employee or any Former Employee, or future Employee of Vornado or any of its Affiliates or of Newco or any of its Affiliates under any Vornado Benefit Plan or Newco Benefit Plan or otherwise, nor shall any such provision be construed as an amendment to any employee benefit plan or other employee compensatory or benefit arrangement.  Furthermore, nothing in this Agreement is intended to confer upon any Employee or Former Employee any right to continued employment, any recall or similar rights to an Employee on layoff or any type of approved leave, or to change the employment status of any Employee from “at will.”

 

8.2          Beneficiary Designation/Release of Information/Right to Reimbursement.  Newco shall seek to obtain, before or as soon as reasonably practicable following the Effective Time, beneficiary designations, authorizations for the release of Information and rights to reimbursement from all Newco Participants under Newco Benefit Plans .

 

8.3          Not a Change in Control.  The Parties acknowledge and agree that the transactions contemplated by the Separation Agreement and this Agreement do not constitute a “change in control” for purposes of any Vornado Benefit Plan.

 

8.4          Code Section 409A.  Notwithstanding anything to the contrary herein, if any of the provisions of this Agreement would result in imposition of taxes and/or penalties under Section 409A of the Code, Vornado and Newco shall cooperate in good faith to modify the applicable provision so that such taxes and/or penalties do not apply in order to comply with the provisions of Section 409A of the Code, other applicable provisions of the Code and/or any rules, regulations or other regulatory guidance issued under such statutory provisions.

 

ARTICLE IX
MISCELLANEOUS

 

9.1          Relationship of Parties.  Nothing in this Agreement shall be deemed or construed by the Parties or any third party as creating the relationship of principal and agent, partnership or joint venture between the Parties, it being understood and agreed that no provision contained therein, and no act of the Parties, shall be deemed to create any relationship between the Parties other than the relationship set forth herein.

 

9.2          Affiliates.  Each of Vornado and Newco shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement to be performed by each of their respective Affiliates.

 

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9.3          Corporate Power.  Vornado represents on behalf of itself and on behalf of other members of the Vornado Group, and Newco represents on behalf of itself and on behalf of other members of the Newco Group, as follows:

 

(a)           each such Person has the requisite trust power and authority and has taken all corporate action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby and thereby; and

 

(b)           this Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.

 

9.4          Governing Law.  This Agreement (and any claims or disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of New York irrespective of the choice of laws principles of the State of New York including all matters of validity, construction, effect, enforceability, performance and remedies.

 

9.5          Survival of Covenants.  Except as expressly set forth in any other Transaction Document, the covenants and other agreements contained in this Agreement, and Liability for the breach of any obligations contained herein or therein, shall survive each of the transactions described in the Plan of Reorganization (as defined in the Separation Agreement) and the Distribution and shall remain in full force and effect.

 

9.6          Force Majeure.  No Party shall be deemed in default of this Agreement or, unless otherwise expressly provided therein, any other Transaction Document for any delay or failure to fulfill any obligation (other than a payment obligation) hereunder or thereunder so long as and to the extent to which any delay or failure in the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure.  In the event of any such excused delay, the time for performance of such obligations (other than a payment obligation) shall be extended for a period equal to the time lost by reason of the delay.  A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (a) provide written notice to the other Party of the nature and extent of any such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under the Transaction Documents, as applicable, as soon as reasonably practicable.

 

9.7          Notices.  All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile or electronic transmission with receipt confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 9.7):

 

17



 

If to Vornado, to:

 

Vornado Realty Trust

888 Seventh Avenue

New York, New York 10019

Attention: Corporation Counsel

Facsimile: (212) 894-7996

 

with a copy to:

 

Sullivan & Cromwell LLP
125 Broad Street
New York, New York 10004

Attention:

William G. Farrar

 

Matthew M. Friestedt

Facsimile:

(212) 558-3588

 

If to Newco, to:

 

JBG Properties Inc.

4445 Willard Avenue, Suite 400

Chevy Chase, Maryland 20815

Attention:

W. Matthew Kelly

E-mail:

mkelly@jbg.com

 

with a copy (until the Effective Time) to:

 

Sullivan & Cromwell LLP
125 Broad Street
New York, New York 10004

Attention:

William G. Farrar

 

Matthew M. Friestedt

Facsimile:

(212) 558-3588

 

with a copy (following the Effective Time ) to:

 

Hogan Lovells US LLP
Columbia Square
555 Thirteenth Street, NW
Washington, District of Columbia 20004

Attention:

David W. Bonser, Esq.

E-mail:

david.bonser@hoganlovells.com

 

9.8          Termination.  Notwithstanding any provision to the contrary, in the event that the Transaction Agreement is terminated prior to the Closing, this Agreement shall terminate

 

18



 

automatically and be of no further force and effect.  In the event of such termination, this Agreement shall become void and no Party, or any of its officers and directors, shall have any Liability to any Person by reason of this Agreement.

 

9.9          Severability.  If any provision of this Agreement or any Ancillary Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or thereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby.  Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.

 

9.10        Entire Agreement.  Except as otherwise expressly provided in this Agreement, this Agreement (including the Schedules hereto) and the applicable provisions of the Separation Agreement together constitute the entire agreement of the Parties with respect to the subject matter of this Agreement and supersedes all prior agreements and undertakings, both written and oral, between or on behalf of the Parties with respect to the subject matter of this Agreement.

 

9.11        Indemnification; Dispute Resolutions.  Article IV of the Separation Agreement governs the Parties’ indemnification rights and obligations and Article VII of the Separation Agreement governs the resolution of any dispute between the Parties.

 

9.12        Assignment; No Third-Party Beneficiaries.  This Agreement shall not be assigned by any Party without the prior written consent of the other Parties, except that Vornado may assign (i) any or all of its rights and obligations under this Agreement to any of its Affiliates and (ii) any or all of its rights and obligations under this Agreement in connection with a sale or disposition of any assets or entities or lines of business of Vornado; provided, however, that, in each case, no such assignment shall release Vornado from any Liability or obligation under this Agreement nor change any of the steps in the Plan of Reorganization (as defined in the Separation Agreement).  Except as provided in Article IV of the Separation Agreement with respect to Indemnified Parties (as defined in the Separation Agreement), this Agreement is for the sole benefit of the Parties and members of their respective Group and their permitted successors and assigns and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

9.13        Public Announcements.  From and after the Effective Time, Vornado and Newco shall consult with each other before issuing, and give each other the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement, and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system.

 

19



 

9.14        Specific Performance.  Subject to the provisions of Article VII of the Separation Agreement, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party or Parties who are or are to be thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief (on an interim or permanent basis) of its rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.  The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, may be inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived.  Any requirements for the securing or posting of any bond with such remedy are waived by each of the Parties.

 

9.15        Amendment.  No provision of this Agreement may be amended or modified except by a written instrument signed by all the Parties.  No waiver by any Party of any provision of this Agreement shall be effective unless explicitly set forth in writing and executed by the Party so waiving.  The waiver by any Party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other subsequent breach.

 

9.16        Rules of Construction.  Interpretation of this Agreement shall be governed by the following rules of construction (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) references to the terms Article, Section, paragraph, clause, Exhibit and Schedule are references to the Articles, Sections, paragraphs, clauses, Exhibits and Schedules of this Agreement unless otherwise specified, (iii) the terms “hereof,” “herein,” “hereby,” “hereto,” and derivative or similar words refer to this entire Agreement, including the Schedules and Exhibits hereto, (iv) references to “$” shall mean U.S. dollars, (v) the word “including” and words of similar import when used in this Agreement shall mean “including without limitation,” unless otherwise specified, (vi) the word “or” shall not be exclusive, (vii) references to “written” or “in writing” include in electronic form, (viii) unless the context requires otherwise, references to “Party” shall mean Vornado or Newco, as appropriate, and references to “Parties” shall mean Vornado and Newco, (ix) provisions shall apply, when appropriate, to successive events and transactions, (x) the table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement, (xi) Vornado and Newco have each participated in the negotiation and drafting of this Agreement and if an ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or burdening either Party by virtue of the authorship of any of the provisions in this Agreement or any interim drafts of this Agreement, and (xii) a reference to any Person includes such Person’s successors and permitted assigns.

 

9.17        Counterparts.  This Agreement may be executed in one or more counterparts, and by the different Parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page to this Agreement by

 

20



 

facsimile or portable document format (PDF) shall be as effective as delivery of a manually executed counterpart of any such Agreement.

 

[Remainder of this page intentionally left blank.]

 

21



 

EXECUTION VERSION

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written.

 

 

VORNADO REALTY TRUST

 

 

 

 

 

By:

/s/ Alan J. Rice

 

 

Name: Alan J. Rice

 

 

Title: Senior Vice President

 

 

 

 

 

 

 

VORNADO REALTY L.P.

 

 

 

By VORNADO REALTY TRUST, its general partner

 

 

 

 

 

 

 

By:

/s/ Alan J. Rice

 

 

Name: Alan J. Rice

 

 

Title: Senior Vice President

 



 

 

JBG SMITH PROPERTIES

 

 

 

 

 

 

 

By:

/s/ Stephen W. Theriot

 

 

Name: Stephen W. Theriot

 

 

Title: Chief Financial Officer

 

 

 

 

 

 

 

JBG SMITH PROPERTIES LP

 

 

 

By JBG SMITH PROPERTIES GP LLC, its general partner

 

 

 

 

 

 

 

By:

/s/ Stephen W. Theriot

 

 

Name: Stephen W. Theriot

 

 

Title: Chief Financial Officer

 


EX-10.3 15 a17-17912_1ex10d3.htm EX-10.3

Exhibit 10.3

 

EXECUTION VERSION

 

 

TRANSITION SERVICES AGREEMENT

 

DATED AS OF JULY 17, 2017

 

BETWEEN

 

VORNADO REALTY TRUST

 

AND

 

JBG SMITH PROPERTIES

 

 



 

TABLE OF CONTENTS

 

 

 

Page

 

ARTICLE I

 

 

SERVICES

 

 

 

 

Section 1.01.

General

1

Section 1.02.

Quality of Services

2

Section 1.03.

Level of Service

2

Section 1.04.

Duration of Services

2

Section 1.05.

Third-Person Services

2

Section 1.06.

Responsible Personnel

3

Section 1.07.

Consultation

3

Section 1.08.

Monitoring and Reports; Books and Records; Audit Right

3

Section 1.09.

Changes to Services

4

Section 1.10.

Service Increases

4

Section 1.11.

New Services

5

Section 1.12.

Amendments to Schedule A

5

 

 

 

 

ARTICLE II

 

 

COMPENSATION; BILLING

 

 

 

 

Section 2.01.

Service Fees

5

Section 2.02.

Expenses

5

Section 2.03.

Taxes

5

Section 2.04.

Invoices

6

Section 2.05.

Payment Delay; Finance Charges

6

Section 2.06.

No Right to Set-Off

6

 

 

 

 

ARTICLE III

 

 

COOPERATION AND CONSENTS

 

 

 

 

Section 3.01.

General

6

Section 3.02.

Transition

7

Section 3.03.

Consents

7

 

 

 

 

ARTICLE IV

 

 

CONFIDENTIALITY

 

 

 

 

Section 4.01.

Recipient Confidential Information

7

Section 4.02.

Provider Confidential Information

8

Section 4.03.

Limitations on Confidential Information

9

Section 4.04.

Required Disclosure

9

Section 4.05.

Third-Person Confidential Information

10

 

i



 

 

ARTICLE V

 

 

INTELLECTUAL PROPERTY

 

 

 

 

Section 5.01.

Recipient Intellectual Property

10

Section 5.02.

Provider Intellectual Property

10

 

 

 

 

ARTICLE VI

 

 

REMEDIES AND LIMITATION OF LIABILITY

 

 

 

 

Section 6.01.

Remedies

10

Section 6.02.

Limitation of Liability

11

 

 

 

 

ARTICLE VII

 

 

INDEMNIFICATION

 

 

 

 

Section 7.01.

General

12

Section 7.02.

Indemnification Procedures

12

 

 

 

 

ARTICLE VIII

 

 

INDEPENDENT CONTRACTOR

 

 

 

 

 

ARTICLE IX

 

 

COMPLIANCE WITH LAWS

 

 

 

 

 

ARTICLE X

 

 

TERM AND TERMINATION

 

 

 

 

Section 10.01.

Term

13

Section 10.02.

Termination of this Agreement

13

Section 10.03.

Effect

14

 

 

 

 

ARTICLE XI

 

 

NOTICES

 

 

 

 

 

ARTICLE XII

 

 

DISPUTE RESOLUTION

 

 

 

 

Section 12.01.

Dispute Resolution

15

 

 

 

 

ARTICLE XIII

 

 

MISCELLANEOUS

 

 

 

 

Section 13.01.

Amendment

16

Section 13.02.

Waiver

16

Section 13.03.

Governing Law; Jurisdiction

16

Section 13.04.

Assignability

16

Section 13.05.

Subcontracting

17

 

ii



 

Section 13.06.

No Third-Person Beneficiaries

17

Section 13.07.

Severability

17

Section 13.08.

Intentionally Left Blank

17

Section 13.09.

Counterparts

17

Section 13.10.

Disclaimer of Representations and Warranties

17

Section 13.11.

Remedies

18

Section 13.12.

Force Majeure

18

Section 13.13.

Specific Performance

18

Section 13.14.

Construction

19

Section 13.15.

Waiver of Jury Trial

19

Section 13.16.

Entire Agreement

20

 

 

 

SCHEDULE A TO TRANSITION SERVICES AGREEMENT

A-1

 

iii



 

TRANSITION SERVICES AGREEMENT

 

This Transition Services Agreement (this “Agreement”) is entered into and effective as of July 17, 2017 (the “Effective Date”), by and between Vornado Realty Trust, a Maryland real estate investment trust (“Provider”), and JBG SMITH Properties, a Maryland real estate investment trust (“Recipient”). Provider and Recipient may each be referred to herein as a “Party,” and are collectively referred to as the “Parties.”

 

RECITALS

 

WHEREAS, Provider, as general partner of its operating partnership, Vornado Realty L.P. (“VRLP”), has determined that it is in the best interests of VRLP to distribute to Provider and the other holders of common limited partnership units of VRLP all of the common limited partnership interests in JBG SMITH Properties LP (“JBG SMITH LP”), a newly formed company that will hold, directly or indirectly, certain assets and liabilities associated with Provider’s Washington D.C. real estate portfolio, and the board of trustees of Provider has determined that it is in the best interests of Provider to (i) contribute to Recipient all of the common limited partnership interests in JBG SMITH LP it receives in the distribution by VRLP in exchange for common shares of Recipient and (ii) distribute to holders of Provider common shares all of the common shares of Recipient to be received by Provider in exchange for such contribution (the “Separation”);

 

WHEREAS, Provider, VRLP, JBG SMITH LP and Recipient have entered into that certain Separation and Distribution Agreement, dated as of July 17, 2017 (the “Separation Agreement”), to carry out, effect, and consummate the Separation; and

 

WHEREAS, the Parties have agreed that Provider will, or will cause one or more of its Subsidiaries (as defined below) to, provide to Recipient or one or more of its Subsidiaries, and Recipient and/or its Subsidiaries will receive, the transition services described in Article I on a transitional basis following the Separation and in accordance with the terms of, and subject to, the conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and mutual promises, covenants, agreements, representations and warranties contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

 

ARTICLE I
SERVICES

 

Section 1.01.                                    General. In accordance with the provisions hereof, Provider shall provide, or cause to be provided, to Recipient and/or its Subsidiaries, and Recipient and/or its Subsidiaries shall receive, the services described in Schedule A attached hereto, (each such service, a “Service” and, collectively, the “Services”).  Schedule A may be amended from time to time by written agreement of the Parties. For purposes of this Agreement, a “Subsidiary” of any Party means a corporation or other entity of which at least a majority of the voting power or value of equity securities is owned, directly or indirectly, by such Party;  for the avoidance of

 



 

doubt, “Subsidiary” shall include VRLP, when used with respect to Provider, and JBG SMITH LP, when used with respect to Recipient.

 

Section 1.02.                                    Quality of Services. Provider shall perform the Services (i) in a workmanlike and professional manner, (ii) with the same degree of care as it exercises in performing its own functions of a like or similar nature and to a standard that is materially consistent to that provided by Provider with respect to Provider’s business during the twelve (12) months immediately prior to the Separation, (iii) utilizing persons of suitable experience, training and skill, and (iv) in a timely manner in accordance with the provisions of this Agreement.

 

Section 1.03.                                    Level of Service. The Service levels requested by Recipient (the “Service Levels”) shall be as set forth in Schedule A.  Subject to Section 1.10, Service Levels may not be increased, including the enhancement of any Services or addition of any new Services, without the written agreement of the Parties.

 

Section 1.04.                                    Duration of Services. Subject to the terms of this Agreement, Provider will provide (or cause to be provided) the Services to Recipient until the earlier of, with respect to each such Service, (i) the expiration of the period of the maximum duration for such Service set forth in Schedule A (as may be extended in accordance with the terms of this Agreement), or (ii) the date upon which such Service is terminated under Section 10.02; provided, however, that Recipient shall use its commercially reasonable efforts in good faith to transition from using the Services during the term of this Agreement; and provided, further, that to the extent that Provider’s ability to provide a Service is dependent on the continuation of a related Service (and such dependence is reflected on Schedule A (including any amendments to Schedule A in connection with a New Service pursuant to Section 1.11 or an amendment pursuant to Section 1.12)), as the case may be, Provider’s obligation to provide such dependent Service shall terminate automatically with the termination of such related Service.

 

Section 1.05.                                    Third-Person Services. Each Party acknowledges and agrees that certain of the Services to be provided under this Agreement may be provided to Recipient by third Persons (as defined below) designated by Provider (“Third-Party Service Providers”) provided that (i) such Third-Party Service Provider as of the Effective Time is providing the applicable services to Provider or to Recipient (whether directly or through Provider), (ii) Provider engages such Third-Party Service Provider to provide to Provider one or more of the same or similar services as are being provided to Recipient under this Agreement or (iii) Recipient consents in writing. A “Person” means any individual, corporation, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company, governmental authority or other entity. To the extent so provided, Provider shall use commercially reasonable efforts to cause such Third-Party Service Providers to continue to provide such Services to Recipient, consistent with the manner in which such Services had been provided historically to Recipient; provided, however, that if any such Third-Party Service Provider notifies Provider or its Subsidiaries that it is unable or unwilling to provide any such Services, Provider shall promptly notify Recipient in writing, and shall use its commercially reasonable efforts to determine the manner in which such Services can best be provided, and, if there is any change to the Services provided as a result, including the level or cost thereof, Provider and Recipient shall negotiate in good faith to amend Schedule A as appropriate.

 

2



 

Section 1.06.                                    Responsible Personnel. The Parties shall each designate a point of contact for each Service listed in Schedule A to whom any questions related to the Services provided may be directed. The personnel (including Third-Party Service Providers) who will provide the Services for and on behalf of Provider shall be (a) the Persons so designated by the Parties in writing on or prior to the date of this Agreement whether on Schedule A or otherwise and (b) the Persons agreed by the Parties in writing after the date of this Agreement (the Persons described in clauses (a) and (b) the “Transition Team”). From time to time after the date of this Agreement, so long as there is no resulting increase in costs, or decrease in the level of service for Recipient, Provider will have the right, in its reasonable discretion, to (i) designate which of its personnel will be involved in providing Services to Recipient, and (ii) remove and replace any such personnel, provided, that Provider may remove existing personnel from the Transition Team who are providing significant Services to Recipient or its Subsidiaries only with the prior written consent of Recipient or if such personnel are no longer employed by Provider or its affiliates (which, for the avoidance of doubt, does not include Provider terminating the engagement of a Third-Party Service Provider unless Provider also terminates the provision of services by such Third-Party Provider to Provider) or such personnel or such Third-Party Service Provider become unable to perform the applicable Services for reasons outside the control of Provider and its affiliates. To the extent that any Provider personnel who is performing Services hereunder leaves the employ of Provider, becomes disabled or otherwise becomes unavailable to perform the Services for reasons outside the control of Provider or its affiliates, the Parties shall cooperate in good faith to determine how to provide replacement Services to Recipient. Provider will use its commercially reasonable efforts to limit disruption of the provision of Services to Recipient in the transition of any Services to different personnel.  In the event that the provision of any Service by Provider requires the cooperation and services of applicable personnel of Recipient, Recipient will make available to Provider such personnel as may be necessary for Provider to provide such Service. Recipient will have the right, in its reasonable discretion, to (i) designate which of its personnel it will make available to Provider in connection with the receipt of such Service, and (ii) remove and replace any such personnel, so long as there is no resulting increase in costs to Provider in providing such Service or adverse effect on Provider’s ability to provide such Service; provided, however, that Recipient will use its commercially reasonable efforts to limit disruption of the provision of services by Provider in the transition of such personnel.

 

Section 1.07.                                    Consultation. The Parties agree to review Schedule A and the Services provided thereunder no less often than quarterly to discuss the Services and Service Levels provided during the preceding quarter and expected to be provided during the subsequent quarter.

 

Section 1.08.                                    Monitoring and Reports; Books and Records; Audit Right.

 

(a)                                 Provider shall maintain books and records in reasonable and customary detail pertaining to the provision of Services pursuant to this Agreement. Provider shall make such books and records available for inspection by Recipient, or its authorized representatives, during normal business hours and upon reasonable notice, and shall retain such books and records for periods consistent with the retention policies applicable to Provider’s business.

 

3



 

(b)                                 Upon thirty (30) days’ advance written notice to Provider, Recipient may audit (or cause an independent third Person auditor to audit), during regular business hours and in a manner that complies with the confidentiality, building and security requirements of Provider, the books, records and facilities of Provider pertaining to the provision of Services pursuant to this Agreement to the extent necessary to determine Provider’s compliance with this Agreement or as may otherwise be required to ensure compliance with applicable laws or regulations. Recipient shall have the right to audit such books, records and facilities of Provider until the end of the sixth (6th) month after the termination of this Agreement, provided Recipient may only audit once in any twelve (12)-month period (or on other occasions to the extent agreed to by the Parties). Any audit under this Section 1.08(b) shall not interfere unreasonably with the operations of Provider. Recipient shall reimburse Provider for any reasonable, documented, out-of-pocket costs incurred in connection with such audit unless the amount of the overcharge or overpayment disclosed by such audit exceeds $25,000 with respect to one or more of the following categories, each considered separately from the others: (i) the Services set forth on Schedule A under the heading “Information Technology” or (ii) all other Services set forth on Schedule A. The amount of any overcharge or overpayment disclosed in an audit shall be promptly refunded to Recipient, and the amount of any undercharge or underpayment disclosed in an audit shall be promptly paid by Recipient to Provider.

 

Section 1.09.                                    Changes to Services. It is understood and agreed that Provider may from time to time modify, change or enhance the manner, nature and/or quality of any Service provided to Recipient to the extent Provider is making a similar change in the performance of the same services provided by or on behalf of Provider to itself and its Subsidiaries; provided that any such modification, change or enhancement will not reasonably be expected to negatively affect such Service (including the timing, scope or nature thereof) in any material respect. Provider shall furnish to Recipient substantially the same notice (in content and timing), if any, as Provider furnishes to its own organization with respect to such modifications, changes or enhancements (but in no event less than thirty (30) days’ notice).

 

Section 1.10.                                    Service Increases. After the date of this Agreement, if (i) Recipient requests, or Provider reasonably determines that Recipient’s business requires, that Provider increase, relative to historical levels prior to the Separation, the volume, amount, level or frequency, as applicable, of any Service provided by Provider, and (ii) such increase is reasonably determined by Recipient as necessary for Recipient to operate its businesses (such increase, a “Service Increase”), then Provider shall provide such Service Increase in accordance with such request and subject to the Parties agreeing to an amendment to Schedule A to address such Service Increase; provided, however, that Provider shall not be obligated to provide any Service Increase if it does not, in its reasonable judgment, have adequate resources to provide such Service Increase or if the provision of such Service Increase would significantly disrupt the operation of its own business. In connection with any request for a Service Increase in accordance with this Section 1.10, the Parties shall in good faith negotiate the terms of an amendment to Schedule A, which amendment shall be consistent with the terms of, and the pricing methodology used for, the applicable Service.

 

4



 

Section 1.11.                                    New Services.

 

(a)                                 From time to time during the term of this Agreement, Recipient may request that Provider provide additional or different services which Provider is not expressly obligated to provide under this Agreement (“New Services”). Provider shall consider such requests in good faith and shall use commercially reasonable efforts to provide any such New Services; provided, however, that Provider shall not be obligated to provide any New Services if it does not, in its reasonable judgment, have adequate resources to provide such New Services or if the provision of such New Services would significantly disrupt the operation of its own business, or if, after negotiations between the Parties pursuant to Section 1.11(b), the Parties fail to reach an agreement with respect to the terms (including the Service Fees and Expenses (as defined below)) applicable to the provision of such New Services.

 

(b)                                 In connection with any request for New Services, except as otherwise provided in Section 1.11(a), the Parties shall in good faith (i) negotiate the applicable Service Fee and the terms of an amendment to Schedule A, which amendment shall describe in reasonable detail the nature, scope, service period(s), termination provisions, the applicable Service Fee and other terms applicable to such New Services, and (ii) determine any costs and expenses, including any start-up costs and expenses that would be incurred by Provider, in connection with the provision of such New Services, which costs and expenses shall be borne solely by Recipient to the extent reflected on the amended Schedule A.

 

Section 1.12.                                    Amendments to Schedule A. Each amendment to Schedule A, as agreed to in writing by the Parties, shall be deemed part of this Agreement and any changes to Services, Service Increases, unintentionally omitted services and/or New Services set forth therein shall be subject to the terms and conditions of this Agreement.

 

ARTICLE II
COMPENSATION; BILLING

 

Section 2.01.                                    Service Fees. In consideration for providing the Services, Provider will charge Recipient the fees indicated for each Service listed in Schedule A (each, a “Service Fee” and collectively, the “Service Fees”).

 

Section 2.02.                                    Expenses. Except to the extent provided otherwise in Schedule A, in addition to the Service Fee, Provider shall also be entitled to charge Recipient for any reasonable, documented, out-of-pocket costs and expenses incurred by Provider in providing the Services (“Expenses”); provided that Expenses (other than reasonable travel costs) greater than $25,000 in the aggregate that are not otherwise identified on Schedule A must be pre-approved in writing by Recipient.

 

Section 2.03.                                    Taxes. In addition to any amounts otherwise payable by Recipient pursuant to this Agreement, Recipient shall pay, be responsible, and promptly reimburse Provider, for any sales, use, value added, goods and services, excise, transfer, recording or similar taxes, including any interest, penalties or additional amounts imposed with respect thereto, imposed with respect to, or in connection with, the provision of Services or payment of any Service Fees hereunder.

 

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Section 2.04.                                    Invoices. Within thirty (30) days after the end of each calendar month, Provider shall send Recipient an invoice that includes in reasonable detail, with such supporting documentation as Recipient may reasonably request, the Service Fees and Expenses due for Services provided to Recipient for such month. Payments of invoices shall be made by check or wire transfer of immediately available funds to one or more accounts specified in writing by Provider. Payment shall be made within thirty (30) days after the date of receipt of Provider’s invoice. All amounts payable to Provider hereunder shall be paid without set-off, deduction, abatement or counterclaim. Recipient may dispute an invoice by providing written notice of such dispute and the basis therefor to Provider. Recipient shall pay any undisputed portion of an Invoice in accordance herewith.

 

Section 2.05.                                    Payment Delay; Finance Charges.

 

(a)                                 If Recipient fails to make any payment or payments that exceed $100,000 individually or in the aggregate within thirty (30) days of the date such payment was due to Provider with respect to one or more Services and has not disputed the applicable payment or payments, Provider shall have the right, at its sole option, upon ten (10) business days’ prior written notice (such notice, a “Suspension Notice”), to suspend performance of such Service or Services until payment has been received.

 

(b)                                 If Recipient fails to make any payment within thirty (30) days of the date such payment was due to Provider, a finance charge of five percent (5%) per annum, payable from the date of the invoice to the date such payment is received and levied upon the balance of any such payment, shall be due and payable to Provider. In addition, subject to Section 2.05(c), Recipient shall indemnify Provider for its costs, including reasonable attorneys’ fees and disbursements incurred to collect any unpaid amount.

 

(c)                                  Recipient shall not be liable for the payment of any finance charges or attorneys’ fees and disbursements pursuant to this Section 2.05, and Provider shall not be authorized to suspend performance pursuant to this Section 2.05, to the extent, but only to the extent, that Recipient is in good faith disputing Service Fees or Expenses incurred under Sections 2.01 and 2.02.

 

Section 2.06.                                    No Right to Set-Off. Recipient shall pay the full amount of all Service Fees and shall not set off, counterclaim or otherwise withhold any amount owed to Provider under this Agreement on account of any obligation owed by Provider to Recipient (other than agreed-upon credits, as contemplated herein).

 

ARTICLE III
COOPERATION AND CONSENTS

 

Section 3.01.                                    General. Each Party shall reasonably cooperate with and provide assistance to the other Party in carrying out the provisions of this Agreement. Such cooperation shall include, but not be limited to, exchanging information, providing access to electronic systems used in connection with the Services, making adjustments and obtaining all consents, licenses, sublicenses or approvals necessary to permit each Party to perform its obligations

 

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hereunder; provided, however, that neither Party shall be required to disclose confidential, proprietary, privileged or competitively sensitive information to the other Party.

 

Section 3.02.                                    Transition. At the request of Recipient in contemplation of the termination of any Services hereunder, in whole or in part, Provider shall cooperate with Recipient, at Recipient’s expense, in transitioning such Services to Recipient or to any Third-Party Service Provider designated by Recipient.

 

Section 3.03.                                    Consents. Provider will use commercially reasonable efforts to obtain, and to keep and maintain in effect, any third-Person licenses and consents necessary to provide the Services (the “Consents”). The costs relating to obtaining any such licenses or Consents obtained solely for the benefit of Recipient shall be borne by Recipient; provided that Provider shall not incur any such costs without the prior written consent of Recipient. If any such consent is not obtained or maintained, Provider shall promptly notify Recipient in writing, and the Parties will reasonably cooperate with one another to achieve a reasonable alternative arrangement with respect thereto.

 

ARTICLE IV
CONFIDENTIALITY

 

Section 4.01.                                    Recipient Confidential Information. From and after the Effective Date, subject to Section 4.04, and except as contemplated by or otherwise provided for under this Agreement or the Separation Agreement, Provider shall not, and shall cause its affiliates and its own and its affiliates’ officers, trustees, directors, employees, and other agents and representatives, including attorneys, agents, customers, suppliers, contractors, consultants and other representatives (collectively, “Representatives”), to not, directly or indirectly, disclose, reveal, divulge or communicate to any Person, other than to Recipient and its affiliates (collectively, the “Recipient Group”) and their respective Representatives, and to Provider and its affiliates (collectively, the “Provider Group”) and their respective Representatives who reasonably need to know such information in connection with the provision of Services under this Agreement, or use or otherwise exploit for its own benefit or for the benefit of any third Person (other than members of the Recipient Group), any Recipient Confidential Information (as defined below).  For the purposes of this Agreement, “Group” shall mean the Provider Group or the Recipient Group, as the context requires. If any disclosures are made by members of the Recipient Group to members of the Provider Group in connection with the provision of Services under this Agreement, then the Recipient Confidential Information so disclosed shall be used by the Provider Group only as required to perform the Services. Provider shall use the same degree of care to prevent and restrain the unauthorized use or disclosure of the Recipient Confidential Information by any member of the Provider Group or its Representatives as it uses for its own confidential information of a like nature, but in no event less than a reasonable standard of care. For purposes of this Agreement, any information, material or documents relating to the businesses currently or formerly conducted, or proposed to be conducted, by the Recipient Group that is furnished to, or in possession of, any member of the Provider Group, in each case in connection with the Services provided under this Agreement and irrespective of the form of communication, and all notes, analyses, compilations, forecasts, data, translations, studies, memoranda or other documents prepared by members of the Provider Group, that contain, or

 

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otherwise reflect, such information, material or documents is hereinafter referred to as “Recipient Confidential Information.” Recipient Confidential Information does not include, and there shall be no obligation hereunder, with respect to information that (i) is or becomes generally available to the public, other than as a result of a disclosure by a member of the Provider Group or its Representatives not otherwise permissible hereunder, (ii) Provider can demonstrate was or became available to the Provider Group from a source other than the Recipient Group or its Representatives, or (iii) is developed independently by the Provider Group without reference to the Recipient Confidential Information; provided, however, that, in the case of clause (ii), the source of such information was not known by Provider to be bound by a confidentiality or non-disclosure agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, any member of the Recipient Group with respect to such information.  The Parties acknowledge and agree that, from and after the Effective Time (as defined in the Separation Agreement), all information about the DC Business (as defined in the Separation Agreement) shall be Recipient Confidential Information for purposes of this Agreement.

 

Section 4.02.                                    Provider Confidential Information. From and after the Effective Date, subject to Section 4.04, and except as contemplated by or otherwise provided for under this Agreement or the Separation Agreement, Recipient shall not, and shall cause the members of the Recipient Group and their respective Representatives to not, directly or indirectly, disclose, reveal, divulge or communicate to any Person other than members of the Provider Group and its Representatives, or members of the Recipient Group and its Representatives, who reasonably need to know such information in connection with the provision of services under this Agreement, or use or otherwise exploit for its own benefit or for the benefit of any third Person (other than members of the Provider Group), any Provider Confidential Information (as defined below). If any disclosures are made by members of the Provider Group to members of the Recipient Group in connection with the provision of Services under this Agreement, then the Provider Confidential Information (as defined below) so disclosed shall be used by the Recipient Group only as required to receive the Services. Recipient shall use the same degree of care to prevent and restrain the unauthorized use or disclosure of the Provider Confidential Information by any member of the Recipient Group or its Representatives as it uses for its own confidential information of a like nature, but in no event less than a reasonable standard of care. For purposes of this Agreement, any information, material or documents relating to the businesses currently or formerly conducted (except as set forth in the last sentence of Section 4.01), or proposed to be conducted, by the Provider Group that is furnished to, or in possession of, any member of the Recipient Group, in each case in connection with the Services provided under this Agreement and irrespective of the form of communication, and all notes, analyses, compilations, forecasts, data, translations, studies, memoranda or other documents prepared by members of the Recipient Group, that contain, or otherwise reflect, such information, material or documents, is hereinafter referred to as “Provider Confidential Information,” and, together with the Recipient Confidential Information, “Confidential Information.” Provider Confidential Information does not include, and there shall be no obligation hereunder with respect to, information that (i) is or becomes generally available to the public, other than as a result of a disclosure by any member of the Recipient Group or its Representatives not otherwise permissible hereunder, (ii) Recipient can demonstrate was or became available to the Recipient Group from a source other than the Provider Group or its Representatives, or (iii) is developed independently by the Recipient Group without reference to the Provider Confidential Information; provided, however, that, in the case

 

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of clause (ii), the source of such information was not known by Recipient to be bound by a confidentiality or non-disclosure agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, any member of the Provider Group with respect to such information.

 

Section 4.03.                                    Limitations on Confidential Information. For the duration of this Agreement, Provider agrees that access to Recipient Confidential Information that is received from any member of the Recipient Group during the course of the performance of this Agreement shall be (i) limited to only those employees of the Provider Group that are providing Services under this Agreement and who have been informed of the obligations and restrictions under this Article IV; (ii) used only for the purpose of providing Services pursuant to this Agreement; and (iii) shall otherwise be kept strictly confidential by all members of the Provider Group, except that Provider may share, to the extent necessary to provide Services pursuant to this Agreement, such information to any member of the Provider Group or to any third Person who may have a need to know such information for purposes of providing the Services; provided, that any such member of the Provider Group or Third-Party Service Provider shall have agreed to be bound by this Article IV and Provider shall be liable for any breaches of this Article IV by any member of the Provider Group or Third-Party Service Provider. Notwithstanding anything in this Section 4.03 to the contrary, the obligations under this Section 4.03 shall not apply to (i) information that becomes generally available to the public other than as a result of a disclosure, directly or indirectly, by any member of the Provider Group or (ii) information that becomes available to any member of the Provider Group on a non-confidential basis from a source other than any member of the Recipient Group; provided, that such source is not known by any member of the Provider Group, after reasonable inquiry, to be subject to an obligation of confidentiality or other obligation of secrecy to Recipient.

 

Section 4.04.                                    Required Disclosure. Either Party may disclose Confidential Information to the extent reasonably necessary in connection with the enforcement of this Agreement or as required by law or legal, regulatory or self-regulatory process (including to the extent requested by any governmental authority, stock exchange or other self-regulatory organization in connection with any such law or legal, regulatory or self-regulatory process), including any tax audit or litigation. If either Group, or any third Person with whom Provider has shared Recipient Confidential Information received from any member of the Recipient Group during the course of the performance of this Agreement, is requested or required (by oral question, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process) by any governmental authority, stock exchange or other self-regulatory organization or pursuant to applicable law, to disclose or provide any Confidential Information, the Party or third Person receiving such request or demand shall use commercially reasonable efforts to provide the Party whose Confidential Information is subject to such request or demand with written notice of such request or demand as promptly as practicable, under the circumstances, so that such relevant Party shall have an opportunity to seek an appropriate protective order. The Party or third Person receiving such request or demand agrees to take, and to cause its Representatives to take, at the expense of the Party whose Confidential Information is subject to such request or demand, all other reasonable steps necessary to obtain confidential treatment of the Confidential Information in question. Subject to the foregoing, the Party or third Person that receives such a request or demand may thereafter disclose or provide Confidential Information, to the extent required by

 

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law (as so advised by counsel), or by lawful process of such governmental authority, stock exchange or other self-regulatory organization.

 

Section 4.05.                                    Third-Person Confidential Information. Each Party acknowledges that it and the other members of its Group may have in their possession confidential or proprietary information of third Persons (such information, “Third-Person Confidential Information”) that was received under confidentiality or non-disclosure agreements with such third Persons. Each Party agrees that it will hold, and will cause the other members of its Group and their respective Representatives to hold, in strict confidence, any Third-Person Confidential Information to which it or any other member of its respective Group has access, in accordance with the terms of any agreements entered into between or among one (1) or more members of the applicable Party’s Group and such third Persons; provided, that each Party has been provided with a copy of such confidentiality or non-disclosure agreement and informed by the other Party of the confidential and proprietary nature of the information.

 

ARTICLE V
INTELLECTUAL PROPERTY

 

Section 5.01.                                    Recipient Intellectual Property. Except as otherwise agreed by the Parties, all data, software, or other property or assets owned or created by Recipient, including, without limitation, derivative works thereof, and new data or software created by Recipient at Recipient’s expense, in connection with its receipt of Services and all intellectual property rights therein (the “Recipient Property”), shall remain the sole and exclusive property and responsibility of Recipient. Provider shall not acquire any rights in any Recipient Property pursuant to this Agreement.

 

Section 5.02.                                    Provider Intellectual Property. Except as otherwise agreed by the Parties, all data, software or other property or assets owned or created by Provider, including, without limitation, derivative works thereof, and new data or software created by Provider at Provider’s expense, in connection with the provision of Services and all intellectual property rights therein (the “Provider Property”), shall be the sole and exclusive property and responsibility of Provider. Recipient shall not acquire any rights in any Provider Property pursuant to this Agreement.

 

ARTICLE VI
REMEDIES AND LIMITATION OF LIABILITY

 

Section 6.01.                                    Remedies. In the event that any Service performed by Provider hereunder is not performed in accordance with the provisions of Article I, then, except in the event of (A) the gross negligence or willful misconduct of Provider or (B) any infringement by Recipient of third-Person intellectual property in connection with the receipt of any Service from Provider, the sole remedy of the Recipient shall be (i) to require Provider to re-perform such Service in accordance with Article I without obligation on the part of Recipient to make additional payments for such performance, (ii) to obtain from Provider a credit in an equivalent amount towards the future purchase of any Services that are contemplated by and under the terms of this Agreement, or (iii) to replace such Service with service provided by a Third-Party Service Provider. In the event that Recipient elects to replace any Services with a Third-Party

 

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Service Provider, Provider shall be forever released from any liability arising on account of such Service and shall not be entitled to any Service Fees in respect of services provided by such Third-Party Service Provider to Recipient.

 

Section 6.02.                                    Limitation of Liability.

 

(a)                                 No member of the Provider Group or their respective controlling persons, trustees, directors, officers, employees, agents and permitted assigns (each, a “Provider Party”) shall be liable to any member of the Recipient Group or their respective controlling persons, directors, officers, employees, agents and permitted assigns (each, a “Recipient Party”) for any liabilities, claims, demands, damages, judgments, losses, costs and expenses (including, but not limited to, court costs, reasonable attorneys’ fees and/or amounts paid in settlement) of any kind or nature, whether direct or indirect (collectively referred to as “Damages”), of any Recipient Party resulting from, relating to or arising in connection with, this Agreement or any of the Services provided hereunder, except for any liability of Provider to the extent that such Damages resulted from (i) any acts or omissions of any Provider Party, which acts or omissions are the result of gross negligence, willful misconduct or bad faith by such Provider Party, or (ii) Provider’s breach of its obligations under Article IV or Article VII of this Agreement; it being understood that nothing in this Section 6.02(a) shall impact the rights of the Parties under Section 13.13 of this Agreement.

 

(b)                                 No Recipient Party shall be liable to any Provider Party for any Damages to any Provider Party resulting from, relating to or arising in connection with this Agreement, or any of the Services provided hereunder, except for any liability of Recipient to the extent that such Damages resulted from (i) acts or omissions of any Recipient Party, which acts or omissions are the result of gross negligence, willful misconduct or bad faith by such Recipient Party, or (ii) Recipient’s breach of its obligations under Article IV or Article VII of this Agreement; it being understood that nothing in this Section 6.02(b) shall impact the rights of the Parties under Section 13.13 of this Agreement.

 

(c)                                  IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY) OR OTHERWISE, AT LAW OR EQUITY, FOR ANY SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE, EXEMPLARY, REMOTE, SPECULATIVE, CONSEQUENTIAL OR SIMILAR DAMAGES (INCLUDING LOST PROFITS OR DAMAGES CALCULATED ON MULTIPLES OF EARNINGS APPROACHES) IN EXCESS OF COMPENSATORY DAMAGE, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT.

 

(d)                                 Each Party agrees that it shall, in all circumstances, use commercially reasonable efforts to mitigate, and to otherwise minimize its Damages, and those of all members of its Group and their respective controlling persons, directors, officers, employees, agents and permitted assigns, whether direct or indirect, resulting from, or arising in connection with, any failure by the other Party to comply fully with its obligations under this Agreement.

 

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(e)                                  In no event, whether as a result of breach of contract, indemnity, warranty, tort (including negligence), strict liability, or otherwise, shall the liability of any Party to the other Party for any loss or damage arising out of, or resulting from, this Agreement or the furnishing of Services hereunder exceed (i) if twelve months have elapsed since the Effective Date, the aggregate Service Fees actually paid pursuant to this Agreement during the twelve (12)-month period immediately preceding the applicable claim for losses or damages or (ii) if twelve months have not elapsed since the Effective Date, the aggregate Service Fees actually paid pursuant to this Agreement, annualized.

 

ARTICLE VII
INDEMNIFICATION

 

Section 7.01.                                    General.

 

(a)                                 Provider shall indemnify and hold harmless any Recipient Party against and from all Damages payable to third Persons arising out of or relating to (i) a breach of Article IV of this Agreement by Provider, (ii) the gross negligence or willful misconduct of Provider, and (iii) any infringement by Provider of third-Person intellectual property in the performance of any Service, in each case, except to the extent that such Damages are a result of the breach of this Agreement, gross negligence, or willful misconduct on the part of any Recipient Party.

 

(b)                                 Recipient shall indemnify and hold harmless any Provider Party against and from all Damages payable to third Persons arising out of or relating to (i) a breach of Article IV of this Agreement by Recipient, (ii) the gross negligence or willful misconduct of Recipient, and (iii) any infringement by Recipient of third-Person intellectual property in connection with the receipt of any Service, in each case except to the extent that such Damages are a result of the breach of this Agreement, gross negligence, or willful misconduct on the part of any Provider Party.

 

Section 7.02.                                    Indemnification Procedures. The provisions of Article IV of the Separation Agreement shall govern, mutatis mutandis, claims for indemnification under this Article VII.

 

ARTICLE VIII
INDEPENDENT CONTRACTOR

 

In performing the Services hereunder, each Group shall operate as, and have the status of, an independent contractor. No Party’s employees shall be considered employees or agents of the other Party, nor shall the employees of either Party be eligible or entitled to any benefits, perquisites, or privileges given or extended to any of the other Party’s employees. Nothing contained in this Agreement shall be deemed or construed to create a joint venture or partnership between the Parties. No Party shall have any power or authority to bind or commit any other Party.

 

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ARTICLE IX
COMPLIANCE WITH LAWS

 

In the performance of its duties and obligations under this Agreement, each Party shall comply with all applicable laws in all material respects. The Parties shall cooperate fully in obtaining and maintaining in effect all permits and licenses that may be required for the performance of the Services.

 

ARTICLE X
TERM AND TERMINATION

 

Section 10.01.                             Term. The term of this Agreement shall commence on the Effective Date and end on the expiration or termination of the final Service on Schedule A, unless terminated earlier as provided in Section 10.02. Except as may be otherwise set forth in Schedule A, and subject to the last proviso of Section 1.04, Recipient may terminate the Information Technology Services prior to the scheduled expiration date thereof set forth on Schedule A by giving Provider not less than sixty (60) days’ prior written notice, or such less time as may be agreed upon by the Parties. For the avoidance of doubt, none of the other Services listed on Schedule A may be terminated prior to the scheduled expiration date thereof set forth on Schedule A. To the extent there are any break-up costs (including commitments made to, or in respect of, personnel or third Persons due to the requirement to provide the Services, prepaid expenses related to the Services or costs related to terminating such commitments) reasonably incurred by Provider as a result of any early termination of a Service by Recipient, Provider shall use its reasonable best efforts to mitigate such costs, and Recipient shall bear such costs and reimburse Provider in full for the same.

 

Section 10.02.                             Termination of this Agreement. This Agreement may be terminated:

 

(a)                                 by the written agreement of the Parties;

 

(b)                                 by Provider in the event that it delivers a Suspension Notice to Recipient and suspends delivery of one or more Services in accordance with Section 2.05(a), and such Suspension Notice is not the subject of a good faith dispute and is not satisfied within thirty (30) days of the date of delivery of such Suspension Notice, provided, that Provider may only terminate the Service or Services covered by such Suspension Notice;

 

(c)                                  by either Party upon a material breach (other than non-payment of Service Fees or Expenses) by the other Party that is not cured within thirty (30) days after delivery of written notice of such breach from the non-breaching Party;

 

(d)                                 immediately by either Party, if the other Party: (i) commences a voluntary case or other proceeding seeking bankruptcy protection, liquidation, reorganization or similar relief, or seeks the appointment of a trustee, receiver, liquidator or other similar official or the taking of possession by any such official in any involuntary case or other proceeding commenced against it, or makes a general assignment for the benefit of creditors or fails generally to pay its debts as they become due; or (ii) has an involuntary case or other proceeding commenced against it seeking bankruptcy protection, liquidation, reorganization, or other relief with respect to it or

 

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substantially all of its debts, or seeks the appointment of a trustee, receiver, liquidator, custodian or other similar official for such Party or any substantial part of such Party’s property, and such involuntary case or other proceeding remains undismissed for a period of sixty (60) days;

 

(e)                                  by either Party if all of the Services have been terminated early in accordance with Section 10.01; or

 

(f)                                   by either Party, upon a Change in Control (as defined below) of the other Party; it being agreed that notice of a Change of Control will be provided by the Party undergoing a Change in Control to the other Party not later than ten (10) days prior to signing a definitive agreement and, in any event, not later than sixty (60) days prior to consummation of such Change in Control.  For the purposes of this Agreement, “Change in Control” shall mean, with respect to a Party, the occurrence after the Effective Date of any of the following: (i) the sale, conveyance or disposition, in one or a series of related transactions, of all or substantially all of the assets of such Party and its Group (taken as a whole) to a third Person that is not a member of such Party’s Group prior to such transaction or the first of such related transactions; (ii) the consolidation, merger or other business combination of a Party with or into any other Person, immediately following which the then-current shareholders of the Party, as such, fail to own, in the aggregate, at least majority voting power of the surviving Party in such consolidation, merger or business combination, or of its ultimate publicly traded parent; (iii) a transaction or series of transactions in which any Person or “group” (as the term “group” is used in Sections 13(d) and 14(d) of the United States Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder) acquires majority voting power of such Party (other than a reincorporation or similar corporate transaction in which each of such Party’s shareholders owns, immediately thereafter, interests in the new parent company in substantially the same percentage as such shareholder owned in such Party immediately prior to such transaction); or (iv) a majority of the board of trustees of such Party ceases to consist of individuals who have become trustees as a result of being nominated or elected by a majority of such Party’s trustees.

 

Section 10.03.                             Effect. In the event of termination of this Agreement in its entirety pursuant to this Article X, or upon the expiration of the term of this Agreement, this Agreement shall cease to have further force or effect, and neither Party shall have any liability to the other Party with respect to this Agreement; provided that:

 

(a)                                 termination or expiration of this Agreement for any reason shall not release a Party from any liability or obligation that already has accrued as of the effective date of such termination or expiration, and shall not constitute a waiver or release of, or otherwise be deemed to adversely affect, any rights, remedies or claims which a Party may have hereunder at law, equity or otherwise or which may arise out of or in connection with such termination or expiration;

 

(b)                                 as promptly as practicable, following termination of this Agreement in its entirety or with respect to any Service to the extent applicable, and the payment by Recipient of all amounts owing hereunder, Provider shall return all reasonably available material, inventory and other property of Recipient held by Provider, and shall deliver copies of all of Recipient’s

 

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records maintained by Provider with regard to the Services in Provider’s standard format and media. Provider shall deliver such property and records to such location or locations, as reasonably requested by Recipient. Arrangements for shipping, including the cost of freight and insurance, and the reasonable cost of packing incurred by Provider shall be borne by Recipient; and

 

(c)                                  Section 1.08, Articles IV, V, VI, VIIIX, XI, XII and XIII, and this Section 10.03, shall survive any termination or expiration of this Agreement and remain in full force and effect.

 

ARTICLE XI
NOTICES

 

All notices, requests, demands, claims and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given (i) when received if delivered personally; (ii) when transmitted if transmitted by e-mail of a pdf attachment and the hard copy is sent by the next business day by reliable overnight delivery service (with proof of service) or hand delivery); and (iii) the business day after it is sent, if sent for next day delivery by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows (or at such other address for a Party as shall be specified in a notice given in accordance with this Article XI).

 

If to Provider, to:

 

Vornado Realty Trust
888 Seventh Avenue
New York, New York 10019
Attention: Corporation Counsel

Email: arice@vno.com

 

If to Recipient, to:

 

JBG SMITH Properties
4445 Willard Avenue Suite 400
Chevy Chase, Maryland 20815

Attention: Chief Legal Officer

Email: smuseles@jbg.com

 

ARTICLE XII
DISPUTE RESOLUTION

 

Section 12.01.                             Dispute Resolution. The provisions of Article VII of the Separation Agreement shall apply, mutatis mutandis, to all disputes, controversies or claims (whether

 

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arising in contract, tort or otherwise) that may arise out of or relate to, or arise under or in connection with this Agreement or the transactions contemplated hereby.

 

ARTICLE XIII
MISCELLANEOUS

 

Section 13.01.                             Amendment. No provision of this Agreement, including Schedule A, may be amended, supplemented or modified except by a written instrument signed by both of the Parties and making specific reference to this Agreement or to Schedule A, as applicable.

 

Section 13.02.                             Waiver.

 

(a)                                 Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the Party or the Parties entitled to the benefit thereof. Any such waiver shall be validly and sufficiently given for the purposes of this Agreement if, as to any Party, it is executed by a writing signed by an authorized representative of such Party.

 

(b)                                 Waiver by any Party of any default by the other Party of any provision of this Agreement shall not be construed to be a waiver by the waiving Party of any subsequent or other default, nor shall it in any way affect the validity of this Agreement or prejudice the rights of the other Party, thereafter, to enforce each and every such provision. No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof, or the exercise of any other right, power or privilege.

 

Section 13.03.                             Governing Law; Jurisdiction. This Agreement, and the legal relations between the Parties hereto, shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws rules thereof, to the extent such rules would require the application of the law of another jurisdiction. In addition, each of the Parties hereto (a) consents to submit itself to the exclusive personal jurisdiction and venue of the Supreme Court of the State of New York, New York County and the United States District Court for the Southern District of New York (the “Applicable Courts”) with respect to any suit (whether at law, in equity, in contract, in tort or otherwise) relating to or arising out of this Agreement (other than arbitrable Disputes (as defined in the Separation Agreement) governed by Article XII), (b) agrees that it will not, directly or indirectly, attempt to defeat or deny such personal jurisdiction or venue by motion or otherwise, (c) agrees that it will not, and it will cause its subsidiaries not to, bring or support any such suit in any court other than the Applicable Courts, (d) irrevocably agrees that any such suit (whether at law, in equity, in contract, in tort or otherwise) will be heard and determined exclusively in the Applicable Courts, and (e) agrees to service of process in any such action in any manner prescribed by the laws of the State of New York.

 

Section 13.04.                             Assignability. This Agreement shall be binding upon, and inure to the benefit of, the Parties, and their respective successors and permitted assigns; provided, however, that no Party may assign, delegate or transfer (by operation of law or otherwise) its respective rights, or delegate its respective obligations, under this Agreement without the express prior

 

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written consent of the other Party. Notwithstanding the foregoing, either Party may assign its rights and obligations under this Agreement to (i) any member of such Party’s Group; provided, however, that each Party shall at all times remain liable for the performance of its obligations under this Agreement by any such Group member, or (ii) any successor by merger, consolidation, reorganization, recapitalization, acquisition or person acquiring all or substantially all of the assets of such Party, subject to Section 10.02(f). Any attempted assignment or delegation in violation of this Section 13.04 shall be null and void.

 

Section 13.05.                             Subcontracting. To the extent expressly permitted under Section 1.05, Provider may hire or engage one or more subcontractors to perform any or all of its obligations under this Agreement; provided, that (i) Provider shall use the same degree of care in selecting any subcontractors as it would if such subcontractor was being retained to provide similar services to Provider, (ii) the use of such subcontractor will not increase the Service Fees or Expenses payable by Recipient or result in a decrease in the level of service for Recipient in connection with such Services, and (iii) Provider shall, in all cases, remain responsible for ensuring that obligations with respect to the standards of services set forth under this Service Agreement are satisfied with respect to any Service provided by a subcontractor hired or engaged by Provider.

 

Section 13.06.                             No Third-Person Beneficiaries. Except for the indemnification provisions in Article VII, this Agreement is for the sole benefit of the Parties and their successors and assigns, and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Agreement.

 

Section 13.07.                             Severability. If any provision of this Agreement, or the application thereof to any Person or circumstance, is determined by a court of competent jurisdiction to be invalid, null and void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid, null and void or unenforceable, shall remain in full force and effect, and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any Party. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.

 

Section 13.08.                             Intentionally Left Blank.

 

Section 13.09.                             Counterparts. This Agreement may be executed in one or more counterparts, each of which, when so executed and delivered or transmitted by facsimile, e-mail or other electronic means, shall be deemed to be an original, and all of which taken together shall constitute but one and the same instrument. A facsimile or electronic signature is deemed an original signature for all purposes under this Agreement.

 

Section 13.10.                             Disclaimer of Representations and Warranties. EXCEPT FOR THE REPRESENTATIONS, WARRANTIES AND COVENANTS EXPRESSLY MADE IN THIS AGREEMENT OR IN ANY OF THE “TRANSACTION DOCUMENTS” (AS DEFINED IN

 

17



 

THE MASTER TRANSACTION AGREEMENT, DATED AS OF OCTOBER 31, 2016, BY AND AMONG VORNADO REALTY TRUST, VORNADO REALTY L.P., JBG PROPERTIES INC., JBG/OPERATING PARTNERS, L.P., THE JBG PARTIES SET FORTH ON SCHEDULE A THEREOF, JBG SMITH PROPERTIES AND JBG SMITH PROPERTIES LP), NEITHER PARTY HAS MADE, NOR DOES EITHER PARTY HEREBY MAKE, ANY EXPRESS OR IMPLIED REPRESENTATIONS, WARRANTIES OR COVENANTS, STATUTORY OR OTHERWISE, OF ANY NATURE, INCLUDING WITH RESPECT TO THE WARRANTIES OF MERCHANTABILITY, QUALITY, QUANTITY, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. ALL OTHER REPRESENTATIONS, WARRANTIES, AND COVENANTS, EXPRESS OR IMPLIED, STATUTORY, COMMON LAW OR OTHERWISE, OF ANY NATURE, INCLUDING WITH RESPECT TO THE WARRANTIES OF MERCHANTABILITY, QUALITY, QUANTITY, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE ARE HEREBY DISCLAIMED BY EACH PARTY.

 

Section 13.11.                             Remedies. The rights and remedies provided herein shall be cumulative and not exclusive of any rights or remedies provided by law.

 

Section 13.12.                             Force Majeure.

 

(a)                                 Neither Party (nor any Person acting on its behalf) shall have any liability or responsibility for failure to fulfill any obligation (other than a payment obligation) under this Agreement so long as, and to the extent to which, the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure (as defined in the Separation Agreement); provided that (i) such Party (or such Person) shall have exercised commercially reasonable efforts to minimize the effect of Force Majeure on its obligations, and (ii) the nature, quality and standard of care that Provider shall provide in delivering a Service after a Force Majeure shall again comply with Section 1.03. In the event of an occurrence of a Force Majeure, the Party whose performance is affected thereby shall give notice of suspension as soon as reasonably practicable to the other stating the date and extent of such suspension and the cause thereof, and such Party shall resume the performance of such obligations as soon as reasonably practicable after the removal of such cause.

 

(b)                                 During the period of a Force Majeure, Recipient shall be entitled to seek an alternative service provider with respect to such Service(s) (and shall be relieved of the obligation to pay Service Fees for such Service(s) throughout the duration of such Force Majeure) and shall be entitled to permanently terminate such Service(s) if a Force Majeure shall continue to exist for more than thirty (30) consecutive days, it being understood that Recipient shall provide advance notice of such termination to Provider.

 

Section 13.13.                             Specific Performance. Subject to the provisions of Article XII, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party or Parties who are or are to be thereby aggrieved shall have the right to seek specific performance and injunctive or other equitable relief (on an interim or permanent basis), in addition to any and all other rights and remedies at law or in equity. The Parties agree that the remedies at law for any breach or threatened breach, including monetary

 

18



 

damages, may be inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by each of the Parties to this Agreement.

 

Section 13.14.                             Construction. Any uncertainty or ambiguity with respect to any provision of this Agreement shall not be construed for or against any party based on attribution of drafting by either Party. The headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. In this Agreement, unless the context requires or a clear contrary intention appears:

 

(a)                                 the singular number includes the plural number and vice versa;

 

(b)                                 reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

 

(c)                                  reference to any gender includes each other gender;

 

(d)                                 reference to any agreement, document or instrument means such agreement, document or instrument, as amended, modified, supplemented or restated, and in effect from time to time in accordance with the terms thereof, subject to compliance with the requirements set forth herein;

 

(e)                                  reference to any applicable law means such applicable law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any applicable law means that provision of such applicable law, from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

 

(f)                                   “herein,” “hereby,” “hereunder,” “hereof,” “hereto” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular article, section or other provision hereof;

 

(g)                                  “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term;

 

(h)                                 with respect to the determination of any period of time, “from” means “from and including” and “to” means “to but excluding;” and

 

(i)                                     references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

 

Section 13.15.                             Waiver of Jury Trial. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL

 

19



 

BY JURY IN RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER; AND (ii) ACKNOWLEDGES THAT IT AND THE OTHER PARTY TO THIS AGREEMENT HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER TRANSACTION AGREEMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 13.15.

 

Section 13.16.                             Entire Agreement. This Agreement and Schedule A hereto, as well as any other agreements and documents referred to herein (including the Separation Agreement, to the extent applicable), constitute the entire agreement between the Parties with respect to the subject matter hereof, and supersede all previous agreements, negotiations, discussions, understandings, writings, commitments and conversations between the Parties with respect to such subject matter. No agreements or understandings exist between the Parties other than those set forth or referred to herein.

 

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

 

20



 

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized officers or representatives as of the date first written above.

 

 

VORNADO REALTY TRUST

 

 

 

 

 

By:

/s/ Alan J. Rice

 

 

Name: Alan J. Rice

 

 

Title: Senior Vice President

 

[Signature Page to Transition Services Agreement]

 



 

 

JBG SMITH PROPERTIES

 

 

 

 

 

 

 

By:

/s/ Stephen W. Theriot

 

 

Name: Stephen W. Theriot

 

 

Title: Chief Financial Officer

 

[Signature Page to Transition Services Agreement]

 


EX-10.4 16 a17-17912_1ex10d4.htm EX-10.4

Exhibit 10.4

 

EXECUTION VERSION

 

 

CREDIT AGREEMENT

 

dated as of July 18, 2017,

 

among

 

JBG SMITH PROPERTIES LP,
as Borrower,

 

THE BANKS SIGNATORY HERETO,
each as a Bank,

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent,

 

BANK OF AMERICA, N.A. and JPMORGAN CHASE BANK, N.A.,
as Co-Syndication Agents for the Ratable Loans and the Term A-1 Loans,

 

CAPITAL ONE, NATIONAL ASSOCIATION, PNC BANK, NATIONAL ASSOCIATION and CITIZENS BANK, N.A.,
as Co-Syndication Agents for the Term A-2 Loans,

 

BMO HARRIS BANK, N.A., REGIONS BANK, TD BANK, N.A., and
THE BANK OF NEW YORK MELLON,
as Co-Documentation Agents

 

 

WELLS FARGO SECURITIES LLC, MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED and JPMORGAN CHASE BANK, N.A.,
as Joint Bookrunners for the Ratable Loans and the Term A-1 Loans,

 

WELLS FARGO SECURITIES LLC, CAPITAL ONE, NATIONAL ASSOCIATION,

PNC CAPITAL MARKETS LLC and CITIZENS BANK, N.A.,
as Joint Bookrunners for the Term A-2 Loans,

 

WELLS FARGO SECURITIES LLC, MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED, JPMORGAN CHASE BANK, N.A.,
CAPITAL ONE, NATIONAL ASSOCIATION,

PNC CAPITAL MARKETS LLC and CITIZENS BANK, N.A.,

as Joint Lead Arrangers for the Ratable Loans and the Term A-1 Loans,

 

WELLS FARGO SECURITIES LLC, CAPITAL ONE, NATIONAL ASSOCIATION,

PNC CAPITAL MARKETS LLC and CITIZENS BANK, N.A.,

as Joint Lead Arrangers for the Term A-2 Loans

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I

DEFINITIONS; ETC.

1

 

 

 

SECTION 1.01.

Definitions

1

SECTION 1.02.

Accounting Terms

35

SECTION 1.03.

Computation of Time Periods

35

SECTION 1.04.

Rules of Construction

35

SECTION 1.05.

Financial Covenant Calculations

36

 

 

 

ARTICLE II

THE LOANS

36

 

 

 

SECTION 2.01.

Ratable Loans; Bid Rate Loans; Term Loans

36

SECTION 2.02.

Bid Rate Loans

37

SECTION 2.03.

Swingline Loan Subfacility

41

SECTION 2.04.

Advances, Generally

43

SECTION 2.05.

Procedures for Advances

44

SECTION 2.06.

Interest Periods; Renewals

44

SECTION 2.07.

Interest

45

SECTION 2.08.

Fees

45

SECTION 2.09.

Notes; Due at Maturity

46

SECTION 2.10.

Prepayments

47

SECTION 2.11.

Method of Payment

49

SECTION 2.12.

Elections, Conversions or Continuation of Loans

49

SECTION 2.13.

Minimum Amounts

50

SECTION 2.14.

Certain Notices Regarding Elections, Conversions and Continuations of Loans

50

SECTION 2.15.

Payments Generally

50

SECTION 2.16.

Changes of Loan Commitments; Incremental Increases

50

SECTION 2.17.

Letters of Credit

52

SECTION 2.18.

Extension Option

59

SECTION 2.19.

Funds Transfer Disbursements

59

SECTION 2.20.

Permitted Extension Amendments

59

 

 

 

ARTICLE III

YIELD PROTECTION; ILLEGALITY; ETC.

62

 

 

 

SECTION 3.01.

Additional Costs

62

SECTION 3.02.

Alternate Rate of Interest

63

SECTION 3.03.

Illegality

64

SECTION 3.04.

Treatment of Affected Loans

64

SECTION 3.05.

Certain Compensation

64

SECTION 3.06.

Capital Adequacy

65

SECTION 3.07.

Substitution of Banks

66

SECTION 3.08.

Obligation of Banks to Mitigate

67

SECTION 3.09.

Usury

68

 

 

 

ARTICLE IV

CONDITIONS PRECEDENT

68

 

 

 

SECTION 4.01.

Conditions Precedent to the Loans

68

SECTION 4.02.

Conditions Precedent to Advances After the Initial Advance

71

 

i



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

SECTION 4.03.

Deemed Representations

71

 

 

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES

72

 

 

 

SECTION 5.01.

Existence

72

SECTION 5.02.

Corporate/Partnership Powers

72

SECTION 5.03.

Power of Officers

72

SECTION 5.04.

Power and Authority; No Conflicts; Compliance With Laws

72

SECTION 5.05.

Legally Enforceable Agreements

73

SECTION 5.06.

Litigation

73

SECTION 5.07.

Good Title to Properties

73

SECTION 5.08.

Taxes

73

SECTION 5.09.

ERISA

73

SECTION 5.10.

No Default on Outstanding Judgments or Orders

74

SECTION 5.11.

No Defaults on Other Agreements

74

SECTION 5.12.

Government Regulation

75

SECTION 5.13.

Environmental Protection

75

SECTION 5.14.

Solvency

75

SECTION 5.15.

Financial Statements

75

SECTION 5.16.

Valid Existence of Affiliates

75

SECTION 5.17.

Insurance

76

SECTION 5.18.

Accuracy of Information; Full Disclosure

76

SECTION 5.19.

Use of Proceeds

76

SECTION 5.20.

Governmental Approvals

76

SECTION 5.21.

Principal Offices

77

SECTION 5.22.

General Partner Status

77

SECTION 5.23.

Labor Matters

77

SECTION 5.24.

Organizational Documents

77

SECTION 5.25.

Anti-Corruption Laws and Sanctions

77

SECTION 5.26.

EEA Financial Institutions

78

 

 

 

ARTICLE VI

AFFIRMATIVE COVENANTS

78

 

 

 

SECTION 6.01.

Maintenance of Existence

78

SECTION 6.02.

Maintenance of Records

78

SECTION 6.03.

Maintenance of Insurance

78

SECTION 6.04.

Compliance with Laws; Payment of Taxes

78

SECTION 6.05.

Right of Inspection

79

SECTION 6.06.

Compliance With Environmental Laws

79

SECTION 6.07.

Intentionally Omitted

79

SECTION 6.08.

Maintenance of Properties

79

SECTION 6.09.

Reporting and Miscellaneous Document Requirements

79

SECTION 6.10.

Guarantors

82

 

 

 

ARTICLE VII

NEGATIVE COVENANTS

84

 

 

 

SECTION 7.01.

Mergers, Etc.

84

SECTION 7.02.

Distributions

85

SECTION 7.03.

Amendments to Organizational Documents

86

 

ii



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

SECTION 7.04.

Activities of General Partner

86

SECTION 7.05.

Use of Proceeds and Letters of Credit

88

SECTION 7.06.

Transactions with Affiliates

88

 

 

 

ARTICLE VIII

FINANCIAL COVENANTS

89

 

 

 

SECTION 8.01.

Ratio of Total Outstanding Indebtedness to Capitalization Value

89

SECTION 8.02.

Ratio of Combined EBITDA to Fixed Charges

89

SECTION 8.03.

Ratio of Unencumbered Combined EBITDA to Unsecured Interest Expense

90

SECTION 8.04.

Ratio of Unsecured Indebtedness to Capitalization Value of Unencumbered Assets

90

SECTION 8.05.

Ratio of Secured Indebtedness to Capitalization Value

90

SECTION 8.06.

Debt of General Partner

91

 

 

 

ARTICLE IX

EVENTS OF DEFAULT

91

 

 

 

SECTION 9.01.

Events of Default

91

SECTION 9.02.

Remedies

95

SECTION 9.03.

Allocation of Proceeds

95

SECTION 9.04.

Performance by Administrative Agent

97

SECTION 9.05.

Rights Cumulative

97

 

 

 

ARTICLE X

ADMINISTRATIVE AGENT; RELATIONS AMONG BANKS

98

 

 

 

SECTION 10.01.

Appointment, Powers and Immunities of Administrative Agent

98

SECTION 10.02.

Reliance by Administrative Agent

99

SECTION 10.03.

Defaults

99

SECTION 10.04.

Rights of Agent as a Bank

100

SECTION 10.05.

Indemnification of Agents

100

SECTION 10.06.

Non-Reliance on Agents and Other Banks

100

SECTION 10.07.

Failure of Administrative Agent to Act

101

SECTION 10.08.

Resignation or Removal of Administrative Agent

101

SECTION 10.09.

Amendments Concerning Agency Function

102

SECTION 10.10.

Liability of Administrative Agent

103

SECTION 10.11.

Transfer of Agency Function

103

SECTION 10.12.

Non-Receipt of Funds by Administrative Agent

103

SECTION 10.13.

Taxes

103

SECTION 10.14.

Pro Rata Treatment

107

SECTION 10.15.

Sharing of Payments Among Banks

108

SECTION 10.16.

Possession of Documents

109

SECTION 10.17.

Syndication Agents and Documentation Agents

109

 

 

 

ARTICLE XI

NATURE OF OBLIGATIONS

109

 

 

 

SECTION 11.01.

Absolute and Unconditional Obligations

109

SECTION 11.02.

Non-Recourse to Principals and General Partner

110

 

 

 

ARTICLE XII

MISCELLANEOUS

111

 

iii



 

TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

SECTION 12.01.

Binding Effect of Request for Advance

111

SECTION 12.02.

Amendments and Waivers

111

SECTION 12.03.

Survival; Termination

114

SECTION 12.04.

Expenses; Indemnification

115

SECTION 12.05.

Assignment; Participation

117

SECTION 12.06.

Documentation Satisfactory

122

SECTION 12.07.

Notices

122

SECTION 12.08.

Setoff

126

SECTION 12.09.

Table of Contents; Headings

127

SECTION 12.10.

Severability

127

SECTION 12.11.

Counterparts

127

SECTION 12.12.

Integration

127

SECTION 12.13.

Governing Law

128

SECTION 12.14.

Waivers

128

SECTION 12.15.

Jurisdiction; Immunities

128

SECTION 12.16.

Designated Lender

129

SECTION 12.17.

No Bankruptcy Proceedings

130

SECTION 12.18.

Intentionally Omitted

130

SECTION 12.19.

USA Patriot Act

130

SECTION 12.20.

Defaulting Lenders

130

SECTION 12.21.

Use for Mortgages

134

SECTION 12.22.

Bottom-Up Guaranties

134

SECTION 12.23.

Confidentiality

135

SECTION 12.24.

No Advisory or Fiduciary Responsibility

136

SECTION 12.25.

Acknowledgement and Consent to Bail-In of EEA Financial Institutions

136

 

iv



 

SCHEDULES AND EXHIBITS

 

SCHEDULE 1

-

Loan Commitments

SCHEDULE 2

-

Other Investments

SCHEDULE 2A

-

General Partner Investments

SCHEDULE 3

-

General Partner — Debt

SCHEDULE 5.16

-

Subsidiaries

SCHEDULE 5.23

-

Labor Matters

 

 

 

EXHIBIT A

-

Disbursement Instruction Agreement

EXHIBIT B-1

-

Ratable Loan Note

EXHIBIT B-2

-

Bid Rate Loan Note

EXHIBIT B-3

-

Term Loan Note

EXHIBIT C

-

Guaranty

EXHIBIT D

-

Solvency Certificate

EXHIBIT E

-

Assignment and Assumption Agreement

EXHIBIT G-1

-

Bid Rate Quote Request

EXHIBIT G-2

-

Invitation for Bid Rate Quotes

EXHIBIT G-3

-

Bid Rate Quote

EXHIBIT G-4

-

Acceptance of Bid Rate Quote

EXHIBIT H

-

Designation Agreement

EXHIBIT J

-

Tax Compliance Certificates

EXHIBIT K

 

Notice of Borrowing

 



 

CREDIT AGREEMENT (this “Agreement”) dated as of July 18, 2017 among JBG SMITH PROPERTIES LP, a limited partnership organized and existing under the laws of the State of Delaware (“Borrower”), WELLS FARGO BANK, NATIONAL ASSOCIATION, as agent for the Banks (in such capacity, together with its successors in such capacity, “Administrative Agent”), and the other lenders signatory hereto (said lenders signatory hereto and the lenders who from time to time become Banks pursuant to Section 3.07 or 12.05 and, if applicable, any of the foregoing lenders’ Designated Lenders, each a “Bank” and collectively, the “Banks”).

 

In consideration of the premises and the mutual agreements, covenants and conditions hereinafter set forth, Borrower, Administrative Agent and each of the Banks agree as follows:

 

ARTICLE I

 

DEFINITIONS; ETC.

 

SECTION 1.01.  Definitions.  As used in this Agreement the following terms have the following meanings (except as otherwise provided, terms defined in the singular have a correlative meaning when used in the plural, and vice versa):

 

1031 Property” means any Real Property Asset that is at any time held by a “qualified intermediary” (a “QI”), as defined in the Treasury Regulations promulgated pursuant to Section 1031 of the Code, or an “exchange accommodation titleholder” (an “EAT”), as defined in Internal Revenue Service Revenue Procedure 2000-37, as modified by Internal Revenue Procedure 2004-51, (or in either case, by one or more Wholly Owned Subsidiaries thereof, singly or as tenants in common) which is a single purpose entity and has entered into an “exchange agreement” or a “qualified exchange accommodation agreement” with General Partner, Borrower or a Wholly Owned Subsidiary in connection with the acquisition (or possible disposition) of such Real Property Asset by Borrower or a Wholly Owned Subsidiary pursuant to, and intended to qualify for tax treatment under, Section 1031 of the Code.

 

Accession Agreement” means an Accession Agreement substantially in the form of Annex I to the Guaranty.

 

Additional Costs” has the meaning specified in Section 3.01.

 

Additional Lender” has the meaning specified in Section 2.20(d).

 

Administrative Agent” has the meaning specified in the preamble.

 

Administrative Agent’s Office” means Administrative Agent’s office located at 600 South 4th Street, 9th Floor, Minneapolis, Minnesota 55415, or such other office in the United States as Administrative Agent may designate by written notice to Borrower and the Banks.

 

Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by Administrative Agent.

 

1



 

Affected Bank” has the meaning specified in Section 3.07.

 

Affected Loan” has the meaning specified in Section 3.04.

 

Affiliate” means, with respect to any Person (for purposes of this definition, the “first Person”), any other Person which directly or indirectly controls, or is controlled by, or is under common control with, the first Person. The term “control” means the possession, directly or indirectly, of the power, alone, to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.

 

Agent” means, individually and collectively, Administrative Agent, each Syndication Agent and each Documentation Agent.

 

Agreement” means this Credit Agreement.

 

Anti-Corruption Laws” means all Laws of any jurisdiction applicable to General Partner and its Subsidiaries from time to time concerning or relating to bribery or corruption or money laundering, including without limitation, the Foreign Corrupt Practices Act of 1977.

 

Applicable Lending Office” means, for each Bank and for its Loans, the lending office of such Bank (or of an Affiliate of such Bank) designated as such in its Administrative Questionnaire or in the applicable Assignment and Assumption Agreement, or such other office of such Bank (or of an Affiliate of such Bank) as such Bank may from time to time specify to Administrative Agent and Borrower as the office by which its Loans are to be made and maintained.

 

Applicable Margin” means

 

(a)                                 At any time other than during the Investment Grade Pricing Period, the percentage rate set forth below corresponding to the level (each, a “Level”) into which the ratio of Total Outstanding Indebtedness to Capitalization Value as determined in accordance with Section 8.01 then falls:

 

Level

 

Ratio of Total
Outstanding
Indebtedness to
Capitalization
Value

 

Applicable
Margin for
Term A-1
Loans that are
LIBOR Loans

 

Applicable
Margin for
Term A-1
Loans that are
Base Rate
Loans

 

Applicable
Margin for
Term A-2
Loans that are
LIBOR Loans

 

Applicable
Margin for
Term A-2
Loans that are
Base Rate
Loans

 

Applicable
Margin for
Ratable Loans
that are LIBOR
Loans

 

Applicable 
Margin for
Ratable Loans
that are Base
Rate Loans

 

1

 

<30%

 

1.200

%

0.200

%

1.550

%

0.550

%

1.100

%

0.100

%

2

 

>30 and <35%

 

1.200

%

0.200

%

1.650

%

0.650

%

1.100

%

0.100

%

3

 

>35% and <40%

 

1.300

%

0.300

%

1.700

%

0.700

%

1.150

%

0.150

%

4

 

>40% and <45%

 

1.350

%

0.350

%

1.750

%

0.750

%

1.200

%

0.200

%

5

 

>45% and <50%

 

1.400

%

0.400

%

1.900

%

0.900

%

1.250

%

0.250

%

6

 

>50% and <55%

 

1.500

%

0.500

%

2.050

%

1.050

%

1.300

%

0.300

%

7

 

>55%

 

1.700

%

0.700

%

2.350

%

1.350

%

1.500

%

0.500

%

 

2



 

The Applicable Margin shall be determined by Administrative Agent from time to time, based on the ratio of Total Outstanding Indebtedness to Capitalization Value as set forth in the certificate most recently delivered by Borrower pursuant to Section 6.09(3).  Any adjustment to the Applicable Margin under this clause (a) shall be effective as of the first day of the calendar month immediately following the month during which Borrower delivers to Administrative Agent the applicable certificate pursuant to Section 6.09(3).  At such time or times as the Applicable Margin is determined under this clause (a), if Borrower fails to deliver a certificate within the applicable time period required pursuant to such Section and such failure continues for three days following notice of such failure from Administrative Agent to Borrower, then the Applicable Margin shall equal the percentages corresponding to Level 7 from the date of such notice until the first day of the calendar month immediately following the month that the required certificate pursuant to Section 6.09(3) is delivered.  Notwithstanding the foregoing, for the period from the Closing Date through but excluding the date on which Administrative Agent first determines the Applicable Margin for Loans as set forth above, the Applicable Margin shall be determined based on Level 1.  Thereafter, such Applicable Margin shall be adjusted from time to time as set forth in this definition.

 

(b)                                 During the Investment Grade Pricing Period, the percentage rate set forth in the table below corresponding to the Level into which the Credit Rating then falls.  Any change in the Credit Rating which would cause the Applicable Margin to be determined at a different Level shall be effective as of the first day of the first calendar month immediately following receipt by Administrative Agent of written notice delivered by Borrower in accordance with Section 6.09(14) that the Credit Rating has changed (or, if earlier, the date on which Borrower shall receive written notice of such change from Administrative Agent); provided, however, if Borrower has not delivered the notice required by such Section but Administrative Agent becomes aware that the Credit Rating has changed, then Administrative Agent may, in its reasonable discretion, adjust the Level at which the Applicable Margin is determined effective as of the first day of the first calendar month following the date Administrative Agent becomes aware that the Credit Rating has changed.  The Applicable Margin for purposes of this clause (b) shall be determined based on the Level corresponding to the lower of the highest two Credit Ratings; provided that if the higher two Credit Ratings are from S&P and Moody’s, then the Applicable Margin for purposes of this clause (b) shall be determined based on the higher of such two Credit Ratings.  During any period for which Borrower has received a Credit Rating from only one Rating Agency, the Applicable Margin for purposes of this clause (b) shall be determined based on such Credit Rating so long as such Credit Rating is from either S&P or Moody’s.  During any period during the Investment Grade Pricing Period that Borrower has (a) no Credit Rating from any Rating Agency or (b) received a Credit Rating from only one Rating Agency that is neither S&P or Moody’s, the Applicable Margin for purposes of this clause (b) shall be determined based on Level 5.

 

3



 

Level

 

S&P/Moody’s
/Fitch Rating

 

Applicable
Margin for
Term A-1
Loans that are
LIBOR Loans

 

Applicable
Margin for
Term A-1
Loans that are
Base Rate
Loans

 

Applicable
Margin for
Term A-2
Loans that are
LIBOR Loans

 

Applicable
Margin for
Term A-2
Loans that are
Base Rate
Loans

 

Applicable
Margin for
Ratable Loans
that are LIBOR
Loans

 

Applicable
Margin for
Ratable Loans
that are Base
Rate Loans

 

1

 

A-/A3 or better

 

0.900

%

0.000

%

1.500

%

0.500

%

0.825

%

0.000

%

2

 

BBB+/Baa1

 

0.950

%

0.000

%

1.550

%

0.550

%

0.875

%

0.000

%

3

 

BBB/Baa2

 

1.100

%

0.100

%

1.650

%

0.650

%

1.000

%

0.000

%

4

 

BBB-/Baa3

 

1.350

%

0.350

%

1.900

%

0.900

%

1.200

%

0.200

%

5

 

<BBB-/Baa3/ Unrated

 

1.750

%

0.750

%

2.450

%

1.450

%

1.550

%

0.550

%

 

(c)                                  The provisions of clause (a) of this definition shall be subject to the last paragraph of Section 2.06.

 

Approved Fund” means any Fund that is administered or managed by (a) a Bank, (b) an Affiliate of a Bank, or (c) an entity or an Affiliate of any entity that administers or manages a Bank.

 

Assignment and Assumption Agreement” means an Assignment and Assumption Agreement, substantially in the form of EXHIBIT E, pursuant to which a Bank assigns and a Qualified Institution (with the consent of any party whose consent is required by Section 12.05), assumes rights and obligations in accordance with Section 12.05, and Administrative Agent accepts such assignment.

 

Available Ratable Commitmentat any time with respect to any Bank, the Ratable Loan Commitment of such Bank then in effect minus the Ratable Credit Exposure of such Bank at such time.

 

Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

 

Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

 

Bank” and “Banks” have the respective meanings specified in the preamble; provided, however, that the term “Bank” shall exclude each Designated Lender when used in reference to a Ratable Loan, the Ratable Loan Commitments or terms relating to the Ratable Loans and the Ratable Loan Commitments.

 

Bank Affiliate” means, (a) with respect to any Bank, (i) a Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Bank or (ii) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by such Bank or a Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Bank and (b) with respect to any Bank that is a fund which invests in bank loans and similar

 

4



 

extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Bank or by a Person directly or indirectly controlling or controlled by or under direct or indirect common control with such investment advisor.

 

Bank of America” means Bank of America, N.A.

 

Bank Party” means Administrative Agent, any Fronting Bank, any Swingline Lender or any other Bank.

 

Bank Reply Period” has the meaning specified in Section 12.02.

 

Banking Day” means (1) any day except a Saturday or Sunday on which commercial banks are not authorized or required to close in New York City and (2) whenever such day relates to a LIBOR Loan, a Bid Rate Loan, an Interest Period with respect to a LIBOR Loan or a Bid Rate Loan, or notice with respect to a LIBOR Loan or Bid Rate Loan, a day on which dealings in Dollar deposits are carried out in the London interbank market and banks are open for business in London and New York City, and (3) in the case of Letters of Credit transactions for a particular Fronting Bank, any day except a Saturday or Sunday on which commercial banks are not authorized or required to close in the place where its office for issuance or administration of the pertinent Letter of Credit is located and in New York City.

 

Bankruptcy Code” means Title 11 of the United States Code, entitled “Bankruptcy”, as amended from time to time, and any successor or statute or statutes.

 

Bankruptcy Event” means, with respect to any Person, such Person becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment, provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, provided that such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.

 

Banks’ L/C Fee Rate” has the meaning specified in Section 2.17(g).

 

Base Ratemeans, at any time, the highest of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus 0.50% and (c) the LIBOR Interest Rate plus 1.0%.  Each change in the Base Rate shall take effect simultaneously with the corresponding change or changes in the Prime Rate, the Federal Funds Effective Rate or the LIBOR Interest Rate (provided that clause (c) shall not be applicable during any period in which the LIBOR Base Rate is unavailable or unascertainable).

 

5



 

Base Rate Loan” means all or any portion (as the context requires) of a Bank’s Ratable Loans or Term Loans which shall accrue interest at a rate determined in relation to the Base Rate.

 

Bid Borrowing Limit” has the meaning specified in Section 2.01(c).

 

Bid Rate Loan” has the meaning specified in Section 2.01(c).

 

Bid Rate Loan Note” has the meaning specified in Section 2.09.

 

Bid Rate Quote” means an offer by a Bank to make a Bid Rate Loan in accordance with Section 2.02.

 

Bid Rate Quote Request” has the meaning specified in Section 2.02(a).

 

Bookrunners” means (x) with respect to the Ratable Loan and Term A-1 Loans, Wells Fargo Securities, Merrill Lynch and JPMorgan and (y) with respect to the Term A-2 Loans, Wells Fargo Securities, Capital One, PNC Capital and Citizens.

 

Borrower” has the meaning specified in the preamble.

 

Borrower’s Accountants” means Deloitte LLP, any other “Big 4” accounting firm selected by Borrower (or a successor thereof), or such other accounting firm(s) selected by Borrower and reasonably acceptable to the Required Banks.

 

Borrower’s Pro Rata Share” means an amount determined based on the pro rata ownership of the Equity Interests of a Person by Borrower and Borrower’s consolidated subsidiaries.

 

Capital Lease” means any lease which has been or should be capitalized on the books of the lessee in accordance with GAAP.

 

Capital One” means Capital One, National Association.

 

Capitalization Value” means, at any time, the sum (without duplication) of:

 

(1)                                 with respect to Real Property Businesses (other than UJVs and Real Property Businesses the value of which is to be included in Capitalization Value under clauses (2) and (3) below), individually determined, the greater of (x) Combined EBITDA from such Real Property Businesses (a) in the case of all Real Property Businesses other than hotels, for the most recently ended calendar quarter, annualized (i.e., multiplied by four), and (b) in the case of hotels, for the most recently ended four consecutive calendar quarters, in both cases, capitalized at a rate of 6.0% per annum, and (y) 75% of the Gross Book Value of such Real Property Businesses;

 

(2)                                 with respect to Real Property Businesses (other than UJVs and Real Property Businesses the value of which is to be included in Capitalization Value under clause (3) below) acquired during the four (4) fiscal quarters most recently ended, the

 

6



 

Gross Book Value of such Real Property Business (except for any such Real Property Business which Borrower has elected in a certificate of the type required by paragraph (3) of Section 6.09 delivered to Administrative Agent be included in determinations of Capitalization Value under the immediately preceding clause (1));

 

(3)                                 Capitalized Development Costs (except with respect to any Real Property Business which Borrower has elected in a certificate of the type required by paragraph (3) of Section 6.09 delivered to Administrative Agent prior to the relevant 18- or 24-month period, as applicable, be included in determinations of Capitalization Value under the preceding clause (1));

 

(4)                                 with respect to Other Investments, which do not have publicly traded shares, the Net Equity Value of such Other Investments;

 

(5)                                 with respect to Real Property UJVs, which do not have publicly traded shares, individually determined, the greater of (x) Combined EBITDA from such Real Property UJVs (a) in the case of all Real Property UJVs other than those owning hotels, for the most recently ended calendar quarter, annualized (i.e., multiplied by four), and (b) in the case of Real Property UJVs owning hotels, for the most recently ended four consecutive calendar quarters, in both cases, capitalized at the rate of 6.0%, less Borrower’s Pro Rata Share of any Indebtedness attributable to such Real Property UJVs, and (y) the Net Equity Value of such Real Property UJVs (subject to the last sentence of this definition); and

 

(6)                                 without duplication, Borrower’s Pro Rata Share of Unrestricted Cash and Cash Equivalents, the book value of notes and mortgage loans receivable, and the fair market value of publicly traded securities, at such time, all as determined in accordance with GAAP.

 

For clarity, the parties acknowledge and agree that the calculations pursuant to clause (1)(x) and (y), clause (2), clause (3) and clause (5)(x) and (y) above in this definition are intended to be made on a Real-Property-Asset-by-Real-Property-Asset basis.  For the purposes of this definition, (1) for any Disposition of Real Property Assets by a Real Property Business during any calendar quarter, Combined EBITDA will be reduced by actual Combined EBITDA generated from such asset or assets, (2) the aggregate contribution to Capitalization Value in excess of 35% of the total Capitalization Value from all Real Property Businesses and Other Investments owned by UJVs shall not be included in Capitalization Value, and (3) the aggregate contribution to Capitalization Value from leasing commissions and management and development fees in excess of 15% of Combined EBITDA shall not be included in Capitalization Value. To the extent that liabilities of a Real Property UJV are Recourse to Borrower or General Partner, then for purposes of clause (5)(y) above, the Net Equity Value of such Real Property UJV shall not be reduced by such Recourse liabilities.

 

Capitalization Value of Unencumbered Assets” means, at any time, the sum (without duplication) of:

 

7



 

(1)                                 with respect to Real Property Businesses (other than UJVs and Real Property Businesses the value of which is to be included in Capitalization Value under clauses (2) and (3) below), individually determined, the greater of (x) Unencumbered Combined EBITDA from such Real Property Businesses (a) in the case of all Real Property Businesses other than hotels, for the most recently ended calendar quarter, annualized (i.e., multiplied by four), and (b) in the case of hotels, the most recently ended four consecutive calendar quarters, in both cases, capitalized at a rate of 6.0% per annum, and (y) 75% of the Gross Book Value of such Real Property Businesses constituting Unencumbered Assets;

 

(2)                                 with respect to Real Property Businesses (other than UJVs and Real Property Businesses the value of which is to be included in Capitalization Value under clause (3) below) constituting Unencumbered Assets acquired during the four (4) fiscal quarters most recently ended, the Gross Book Value of such Real Property Business (except for any such Real Property Business which Borrower has elected in a certificate of the type required by paragraph (3) of Section 6.09 delivered to Administrative Agent be included in determinations of Capitalization Value under the immediately preceding clause (1));

 

(3)                                 Capitalized Development Costs (except with respect to any Real Property Business which Borrower has elected in a certificate of the type required by paragraph (3) of Section 6.09 delivered to Administrative Agent prior to the relevant 18- or 24-month period, as applicable, be included in determinations of Capitalization Value under the preceding clause (1));

 

(4)                                 with respect to Real Property UJVs, which do not have publicly traded shares, individually determined, the greater of (x) the Unencumbered Combined EBITDA from such Real Property UJVs (a) in the case of Real Property UJVs other than those owning hotels, for the most recently ended calendar quarter, annualized (i.e., multiplied by four), and (b) in the case of Real Property UJVs owning hotels, for the most recently ended four consecutive calendar quarters, in both cases, capitalized at a rate of 6.0% per annum, and (y) the Net Equity Value of such Real Property UJVs constituting Unencumbered Assets; and

 

(5)                                 without duplication, Borrower’s Pro Rata Share of Unrestricted Cash and Cash Equivalents, the book value of notes and mortgage loans receivable and the fair market value of publicly traded securities that are Unencumbered Assets, at such time, all as determined in accordance with GAAP.

 

For the purposes of this definition, (1) for any Disposition of Real Property Assets by a Real Property Business during any calendar quarter, Unencumbered Combined EBITDA will be reduced by actual Unencumbered Combined EBITDA generated from such asset or assets, (2) the aggregate contribution to Capitalization Value of Unencumbered Assets in excess of 35% of the total Capitalization Value of Unencumbered Assets from the aggregate of all Real Property Businesses owned by UJVs, Real Property Businesses subject to Permitted Transfer Restrictions of the type described in clause (c) of the definition thereof and notes and mortgage loans receivable that are Unencumbered Assets at such time, as determined, in accordance with GAAP,

 

8



 

shall not be included in Capitalization Value of Unencumbered Assets, and (3) the aggregate contribution to Capitalization Value of Unencumbered Assets from leasing commissions and management and development fees in excess of 15% of Unencumbered Combined EBITDA shall not be included in Capitalization Value of Unencumbered Assets.

 

Capitalized Development Costs” means development costs (including land and building being readied for development or redevelopment expected to commence within the next 12 months) capitalized in accordance with GAAP.  Development costs for a Real Property Business on which development has been completed for at least 24 months or redevelopment has been completed for at least 18 months shall be excluded from Capitalized Development Costs.

 

Cash or Cash Equivalentsmeans (a) cash; (b) marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by an agency thereof and backed by the full faith and credit of the United States, in each case maturing within one (1) year after the date of acquisition thereof; (c) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within ninety (90) days after the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from any two of S&P, Moody’s or Fitch (or, if at any time no two of the foregoing shall be rating such obligations, then from such other nationally recognized rating services as are reasonably acceptable to Administrative Agent); (d) domestic corporate bonds, other than domestic corporate bonds issued by Borrower or any of its Affiliates, maturing no more than two (2) years after the date of acquisition thereof and, at the time of acquisition, having a rating of at least A or the equivalent from any two (2) of S&P, Moody’s or Fitch (or, if at any time no two of the foregoing shall be rating such obligations, then from such other nationally recognized rating services as are reasonably acceptable to Administrative Agent); (e) variable-rate domestic corporate notes or medium term corporate notes, other than notes issued by Borrower or any of its Affiliates, maturing or resetting no more than one (1) year after the date of acquisition thereof and having a rating of at least A or the equivalent from two of S&P, Moody’s or Fitch (or, if at any time no two of the foregoing shall be rating such obligations, then from such other nationally recognized rating services as are reasonably acceptable to Administrative Agent); (f) commercial paper (foreign and domestic) or master notes, other than commercial paper or master notes issued by Borrower or any of its Affiliates, and, at the time of acquisition, having a long-term rating of at least A or the equivalent from S&P, Moody’s or Fitch and having a short-term rating of at least A-2 and P-2 from S&P and Moody’s, respectively (or, if at any time neither S&P nor Moody’s shall be rating such obligations, then the highest rating from such other nationally recognized rating services as are reasonably acceptable to Administrative Agent); (g) domestic and foreign certificates of deposit or domestic time deposits or foreign deposits or bankers’ acceptances (foreign or domestic) in Dollars, Hong Kong Dollars, Singapore Dollars, Pounds Sterling, Euros or Yen that are issued by a bank (I) which has, at the time of acquisition, a long-term rating of at least A or the equivalent from S&P, Moody’s or Fitch (or, if at any time no two of the foregoing shall be rating such obligations, then from such other nationally recognized rating services as are reasonably acceptable to Administrative Agent) and (II) if a domestic bank, which is a member of the Federal Deposit Insurance Corporation; (h) overnight securities repurchase agreements, or reverse repurchase agreements secured by any of the foregoing types of securities or debt instruments, provided that the collateral supporting such repurchase agreements shall have a value not less than 101% of the principal amount of the repurchase agreement plus accrued

 

9



 

interest; and (i) money market funds invested in investments at least 75% of which consist of the items described in clauses (a) through (h) above.

 

Cash Collateralhas the meaning specified in Section 2.17(i); and “Cash Collateralize” shall mean to pledge and deposit Cash Collateral with Administrative Agent.

 

Cash Management Agreement” means any agreement to provide cash management services, including treasury, depository, overdraft, credit or debit card (including non-card electronic payables), electronic funds transfer and other cash management arrangements.

 

Citizens” means Citizens Bank, N.A.

 

Closing Date” means the date on which all of the conditions precedent set forth in Section 4.01 shall be fulfilled or waived by the Banks in accordance with Section 12.02.

 

Code” means the Internal Revenue Code of 1986, as amended.

 

Combination Agreement” means that certain Master Transaction Agreement, dated October 31, 2016, by and among Vornado Realty Trust, Vornado Realty L.P., JBG Properties, Inc., and JBG/Operating Partners, L.P.

 

Combination Transaction” means, collectively, the following transactions as described and entered into pursuant to the Combination Agreement: (a) the contribution of all of the assets and liabilities of Vornado Realty Trust’s (“Vornado”) Washington, DC segment (which operates as Vornado / Charles E. Smith) to JBG SMITH Properties or its subsidiaries; (b) the distribution by Vornado to the holders of common shares of Vornado, of all of the outstanding common shares of General Partner; (c) the distribution by Vornado Realty L.P., the operating partnership of Vornado (“VRLP”), to the holders of VRLP common limited partnership units, of all of the common limited partnership units of Borrower; and (d) following the distributions, the combination with the management business and certain Washington, DC metropolitan area assets of The JBG Companies.

 

Combined EBITDAmeans, for any quarter, Borrower’s Pro Rata Share of net income or loss plus Interest Expense, income taxes, depreciation and amortization and excluding (x) the effect of extraordinary or non-recurring items (such as, without limitation, (i) gains or losses from asset sales, (ii) gains or losses from debt restructurings or write-ups or forgiveness of indebtedness (including prepayment premiums), and costs and expenses incurred during such period with respect to acquisitions (whether or not consummated) during such period, (iii) severance and non-cash stock based compensation expenses and other restructuring, impairment or one-time changes, and (iv) non-cash gains or losses from foreign currency fluctuations), (y) other non-cash charges (such as, without limitation, share-based compensation), and (z) transaction and restructuring costs and expenses incurred in connection with the Combination Transaction (other than severance costs and expenses) to the extent arising on or prior to the eighteen-month anniversary of the Closing Date (or such later date as determined by Administrative Agent in the exercise of its reasonable discretion), all as determined in accordance with GAAP, of Consolidated Businesses and UJVs (provided, however, that for purposes of determining the ratio of Combined EBITDA to Fixed Charges, Combined EBITDA of UJVs shall exclude UJVs that are not Real Property UJVs), as the case may be, multiplied by

 

10



 

four, provided however, that Combined EBITDA shall include only general and administrative expenses that are attributable to the management and operation of the assets in accordance with GAAP and shall not include any corporate general and administrative expenses of Borrower, General Partner, Consolidated Businesses or UJVs (e.g., salaries of corporate officers).

 

Consolidated Businesses” means, at any time, Borrower and Subsidiaries of Borrower that Borrower consolidates in its consolidated financial statements prepared in accordance with GAAP, provided, however, that UJVs which are consolidated in accordance with GAAP are not Consolidated Businesses.

 

Continue”, “Continuation” and “Continued” refer to the continuation pursuant to Section 2.12 of a LIBOR Loan as a LIBOR Loan from one Interest Period to the next Interest Period.

 

Convert”, “Conversion” and “Converted” refer to a conversion pursuant to Section 2.12 of a Base Rate Loan into a LIBOR Loan or a LIBOR Loan into a Base Rate Loan, each of which may be accompanied by the transfer by a Bank (at its sole discretion) of all or a portion of its applicable Loan from one Applicable Lending Office to another.

 

Credit Exposure” means, as to any Bank at any time, the sum of (a) such Bank’s Ratable Credit Exposure at such time, plus (b) an amount equal to the aggregate principal amount of its Term Loans outstanding at such time.

 

Credit Rating” means the rating assigned by a Rating Agency to Borrower’s senior, unsecured, non-credit enhanced long-term indebtedness.

 

Debt” means, at any time, without duplication, (i) all indebtedness and liabilities of a Person for borrowed money, secured or unsecured, including mortgage and other notes payable (but excluding any indebtedness to the extent secured by cash or cash equivalents or marketable securities, or defeased), as determined in accordance with GAAP, and (ii) without duplication, all liabilities of a Person consisting of indebtedness for borrowed money, determined in accordance with GAAP, that are or would be stated and quantified as contingent liabilities in the notes to the consolidated financial statements of such Person as of that date (excluding contingent liabilities constituting Debt that is Without Recourse). For purposes of determining “Total Outstanding Indebtedness” and “Debt”, the term “without duplication” shall mean (without limitation) that amounts loaned from one Person to a second Person that under GAAP would be consolidated with the first Person shall not be treated as Debt of the second Person.

 

Default” means any event which with the giving of notice or lapse of time, or both, would become an Event of Default.

 

Defaulting Lender” means any Bank that (a) has failed, within three Banking Days of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Letters of Credit or Swingline Loans or (iii) pay over to any Bank Party any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Bank notifies Administrative Agent in writing that such failure is the result of such Bank’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, or, in the case of clause (iii) above, such

 

11



 

Bank notifies Administrative Agent in writing that such failure is the result of a good faith dispute which has been specifically identified, (b) has notified Borrower or any Bank Party in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Bank’s good faith determination that a condition precedent (specifically identified and including the particular default, if any) to funding a loan under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three Banking Days after request by Administrative Agent, a Fronting Bank, a Swingline Lender or Borrower, acting in good faith, to provide a certification in writing from an authorized officer of such Bank that it will comply with its obligations to fund prospective Loans and participations in then outstanding Letters of Credit and Swingline Loans under this Agreement, provided that such Bank shall cease to be a Defaulting Lender pursuant to this clause (c) upon Administrative Agent’s, such Fronting Bank’s, such Swingline Lender’s or Borrower’s (as applicable) receipt of such certification in form and substance reasonably satisfactory to it or them (as applicable), or (d) has, or has a direct or indirect parent company that has, become the subject of a Bankruptcy Event or a Bail-In Action.

 

Default Rate” means a rate per annum equal to: (1) with respect to Base Rate Loans, a variable rate of two percent (2%) plus the rate of interest then in effect thereon (including the Applicable Margin); and (2) with respect to LIBOR Loans and Bid Rate Loans, a fixed rate of two percent (2%) plus the rate(s) of interest in effect thereon (including the Applicable Margin or the LIBOR Bid Margin, as the case may be) at the time of any Default or Event of Default until the end of the then current Interest Period therefor and, thereafter, a variable rate of two percent (2%) plus the rate of interest for a Base Rate Loan (including the Applicable Margin).

 

Derivatives Contract” means a “swap agreement” as defined in Section 101 of the Bankruptcy Code.

 

Designated Lender” means a special purpose corporation that (i) shall have become a party to this Agreement pursuant to Section 12.16 and (ii) is not otherwise a Bank.

 

Designating Lender” has the meaning specified in Section 12.16.

 

Designation Agreement” means an agreement in substantially the form of EXHIBIT H, entered into by a Bank and a Designated Lender and accepted by Administrative Agent.

 

Disbursement Instruction Agreement” means an agreement executed by Borrower in the form of EXHIBIT A.

 

Disposition” means a sale (whether by assignment, transfer or Capital Lease) of an asset.

 

Documentation Agents” means BMO Harris Bank, N.A., Regions Bank, TD Bank, N.A. and The Bank of New York Mellon.

 

Dollars” and the sign “$” mean lawful money of the United States of America.

 

12



 

EAT” has the meaning given that term in the definition of “1031 Property”.

 

EEA Financial Institution” means (a) any institution established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent;

 

EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

 

EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

 

Elect”, “Election” and “Elected” refer to elections, if any, by Borrower pursuant to Section 2.12 to have all or a portion of an advance of the applicable Loans be outstanding as LIBOR Loans.

 

Electronic Signature” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a person with the intent to sign, authenticate or accept such contract or record.

 

Electronic System” means any electronic system, including e-mail, e-fax, Intralinks®, ClearPar®, Debt Domain, Syndtrak and any other Internet or extranet-based site, whether such electronic system is owned, operated or hosted by Administrative Agent and any of its Affiliates or any other Person, providing for access to data protected by passcodes or other security system(s).

 

Environmental Discharge” means any discharge or release of any Hazardous Materials in violation of any applicable Environmental Law.

 

Environmental Law” means any applicable Law relating to pollution or the environment, including Laws relating to noise or to emissions, discharges, releases or threatened releases of Hazardous Materials into the work place, the community or the environment, or otherwise relating to the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials.

 

Environmental Notice” means any written complaint, order, citation, letter, inquiry, notice or other written communication from any Person (1) affecting or relating to Borrower’s compliance with any Environmental Law in connection with any activity or operations at any time conducted by Borrower, (2) relating to the occurrence or presence of or exposure to or possible or threatened or alleged occurrence or presence of or exposure to Environmental Discharges or Hazardous Materials at any of Borrower’s locations or facilities, including, without limitation: (a) the existence of any contamination or possible or threatened contamination at any such location or facility and (b) remediation of any Environmental

 

13



 

Discharge or Hazardous Materials at any such location or facility or any part thereof; and (3) any violation or alleged violation of any relevant Environmental Law.

 

Equity Interest” means, with respect to any Person, any share of capital stock of (or other ownership or profit interests in) such Person, any warrant, option or other right for the purchase or other acquisition from such Person of any share of capital stock of (or other ownership or profit interests in) such Person, whether or not certificated, any security convertible into or exchangeable for any share of capital stock of (or other ownership or profit interests in) such Person or warrant, right or option for the purchase or other acquisition from such Person of such shares (or such other interests), and any other ownership or profit interest in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such share, warrant, option, right or other interest is authorized or otherwise existing on any date of determination.

 

ERISA” means the Employee Retirement Income Security Act of 1974, including the rules and regulations promulgated thereunder.

 

ERISA Affiliate” means any corporation or trade or business which is a member of the same controlled group of organizations (within the meaning of Section 414(b) of the Code) as Borrower or General Partner or is under common control (within the meaning of Section 414(c) of the Code) with Borrower or General Partner or is required to be treated as a single employer with Borrower or General Partner under Section 414(m) or 414(o) of the Code.

 

Escrow Datemeans June 29, 2017.

 

EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

 

Event of Default” has the meaning specified in Section 9.01.

 

Excluded Swap Obligation” means, with respect to any Loan Party, any Swap Obligation if, and to the extent that, all or a portion of the liability of such Loan Party for or the guarantee of such Loan Party of, or the grant by such Loan Party of a Lien to secure, such Swap Obligation (or any liability or guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Loan Party’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the liability for or the guarantee of such Loan Party or the grant of such Lien becomes effective with respect to such Swap Obligation (such determination being made after giving effect to any applicable keepwell, support or other agreement for the benefit of the applicable Loan Party).  If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such guarantee or Lien is or becomes illegal for the reasons identified in the immediately preceding sentence of this definition.

 

Excluded Taxesmeans any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient: (a) Taxes

 

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imposed on or measured by net income (however denominated), profits or gains, franchise Taxes (imposed in lieu of income Taxes), and branch profits Taxes (or any similar Taxes), in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Bank, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Bank, U.S. Federal withholding Taxes imposed on amounts payable to or for the account of such Bank with respect to an applicable interest in a Loan, Letter of Credit or Loan Commitment pursuant to a law in effect on the date on which (i) such Bank acquires such interest in such Loan, Letter of Credit or Loan Commitment (other than pursuant to an assignment requested by Borrower under Section 3.07) or (ii) such Bank changes its lending office, except in each case to the extent that, pursuant to Section 10.13, amounts with respect to such Taxes were payable either to such Bank’s assignor immediately before such Bank acquired the applicable interest in a Loan, Letter of Credit or Loan Commitment or to such Bank immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 10.13 and (d) any U.S. Federal withholding Taxes imposed under FATCA.

 

Existing General Partner Debthas the meaning specified in Section 5.22.

 

Existing Maturity Date” has the meaning specified in Section 2.20(a).

 

Extending Lender” has the meaning specified in Section 2.20(b).

 

Extension Date” has the meaning specified in Section 2.18.

 

Extension Notice” has the meaning specified in Section 2.18.

 

Facility Fee” means:

 

(a)           At any time other than during the Investment Grade Pricing Period, the percentage per annum set forth in the table below corresponding to the Level at which the “Applicable Margin” is determined in accordance with clause (a) of the definition thereof:

 

Level

 

Facility Fee

 

1

 

0.150

%

2

 

0.150

%

3

 

0.200

%

4

 

0.200

%

5

 

0.200

%

6

 

0.300

%

7

 

0.300

%

 

(b)           During the Investment Grade Pricing Period, the percentage per annum set forth in the table below corresponding to the Level at which the “Applicable Margin” is determined in accordance with clause (b) of the definition thereof:

 

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Level

 

Facility Fee

 

1

 

0.125

%

2

 

0.150

%

3

 

0.200

%

4

 

0.250

%

5

 

0.300

%

 

(c)           Any change in the applicable Level at which the Applicable Margin is determined shall result in a corresponding and simultaneous change in the Facility Fee.  The provisions of this definition shall be subject to Section 2.06.

 

Fair Market Value” means, (a) with respect to a security listed on a national securities exchange or the NASDAQ National Market, the price of such security as reported on such exchange or market by any widely recognized reporting method customarily relied upon by financial institutions and (b) with respect to any other property, the price which could be negotiated in an arm’s-length free market transaction, for cash, between a willing seller and a willing buyer, neither of which is under pressure or compulsion to complete the transaction.

 

FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(1) of the Code or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code.

 

Federal Funds Effective Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System, as published for such day (or, if such day is not a Banking Day, for the immediately preceding Banking Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Banking Day, the average of the quotations for such day on such transactions received by Administrative Agent from three Federal Funds brokers of recognized standing selected by Administrative Agent.  If the Federal Funds Effective Rate determined as provided above would be less than zero, the Federal Funds Effective Rate shall be deemed to be zero.

 

Final Term A-1 Loan Availability Date” means July 18, 2019.

 

Final Term A-2 Loan Availability Date” means July 18, 2018.

 

Fiscal Year” means each period from January 1 to December 31.

 

Fitch” means Fitch, Inc.

 

Fixed Charges” means, without duplication, in respect of any quarter, the sum of (i) Borrower’s Pro Rata Share of Interest Expense for such period attributable to Debt in respect of Consolidated Businesses and Real Property UJVs, as well as to any other Debt that is Recourse to Borrower, multiplied by four (4); and (ii) distributions during such period on preferred units of

 

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Borrower, as determined on a consolidated basis, in accordance with GAAP, multiplied by four (4).

 

Foreign Bank” means a Bank that is not a U.S. Person.

 

Form 10” means the Form 10 filed in connection with the Combination Transaction by General Partner with the SEC initially on January 23, 2017, as amended by various amendments thereto on or prior to the Escrow Date.

 

Fronting Bank” means Wells Fargo, Bank of America, JPMorgan, Capital One, PNC Bank, Citizens or another Bank that shall have agreed to be designated by Borrower from among those Banks identified by Administrative Agent as being a permissible Fronting Bank pursuant to Section 2.17, each in its capacity as the issuer of Letters of Credit hereunder and its successors in such capacity.  A Fronting Bank may, in its discretion, arrange for Letters of Credit to be issued by its Affiliate, in which case “Fronting Bank” shall include such Affiliate.  When used herein, “Fronting Bank” shall mean the applicable Fronting Bank, each Fronting Bank, any Fronting Bank or all of the Fronting Banks, as the context may require.

 

Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with respect to a Fronting Bank, such Defaulting Lender’s Pro Rata Share of the outstanding Letter of Credit Liabilities other than Letter of Credit Liabilities as to which such Defaulting Lender’s participation obligation has been reallocated to other Banks or Cash Collateralized in accordance with the terms hereof, and (b) with respect to a Swingline Lender, such Defaulting Lender’s Pro Rata Share of outstanding Swingline Loans other than Swingline Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Banks.

 

GAAP” means accounting principles generally accepted in the United States of America as in effect from time to time, applied on a basis consistent with those used in the preparation of the pro forma financial statements delivered prior to the Escrow Date (captioned “Financial Statements”) (except for changes concurred to by Borrower’s Accountants); provided that, if Borrower notifies Administrative Agent that Borrower requests an amendment to any provision hereof or of any other Loan Document to eliminate the effect of any change occurring after the date hereof in GAAP or in the application of any such change on the operation of such provision, or if Administrative Agent notifies Borrower that the Required Banks request an amendment to any provision hereof for such purpose, in either case, regardless of whether any such notice is given before or after such change in GAAP or in the application of any such change, then such provision shall be interpreted on the basis of GAAP as in effect and applied for purposes of this Agreement immediately before such change shall have become effective.

 

General Partner” means JBG SMITH Properties, a real estate investment trust organized and existing under the laws of the State of Maryland and the sole general partner of Borrower.

 

General Partner’s Consolidated Financial Statements” means the consolidated balance sheet and related consolidated statements of operations, changes in equity and cash flows, and footnotes thereto, of General Partner, in each case prepared in accordance with GAAP and as filed with the SEC as SEC Reports.

 

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Good Faith Contest” means the contest of an item if: (1) the item is diligently contested in good faith, and, if appropriate, by proceedings timely instituted; (2) adequate reserves are established with respect to the contested item; (3) during the period of such contest, the enforcement of any contested item is effectively stayed; and (4) the failure to pay or comply with the contested item during the period of the contest could not reasonably be expected to result in a Material Adverse Change.

 

Governmental Authority” means any nation or government, any state or other political subdivision thereof, and any agency, authority, regulatory body, central bank or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any supra-national bodies such as the European Union or the European Central Bank.

 

Gross Book Value” means the undepreciated book value of assets comprising a business, determined in accordance with GAAP.

 

Guaranteed Obligations” means, collectively, (a) the Obligations and (b) all existing or future payment and other obligations owing by any Loan Party under any Specified Derivatives Contract (other than any Excluded Swap Obligation) and any Specified Cash Management Agreement.

 

Guarantor” means any Person that is party to the Guaranty as a “Guarantor”.

 

Guaranty” means the guaranty executed and delivered pursuant to Section 6.10 and substantially in the form of EXHIBIT C.

 

Hazardous Materials” means any pollutant, effluents, emissions, contaminants, toxic or hazardous wastes or substances, as any of those terms are defined from time to time in or for the purposes of any relevant Environmental Law, including asbestos fibers and friable asbestos, polychlorinated biphenyls, and any petroleum or hydrocarbon-based products or derivatives.

 

Incremental Increase” has the meaning specified in Section 2.16(c).

 

Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of Borrower or any other Loan Party under any Loan Document and (b) to the extent not otherwise described in (a) hereof, Other Taxes.

 

Initial Advance” means the first advance of proceeds of the Loans and/or issuance of Letters of Credit.

 

Interest Expense” means, for any quarter, the consolidated interest expense, whether paid, accrued or capitalized (without deduction of consolidated interest income) of Borrower that is attributable to Borrower’s Pro Rata Share in its Consolidated Businesses in respect of Real Property Businesses, including, without limitation or duplication (or, to the extent not so included, with the addition of), (1) the portion of any rental obligation in respect of any Capital Lease obligation allocable to interest expense in accordance with GAAP; (2) the amortization of Debt discounts and premiums; (3) any payments or fees (other than upfront fees) with respect to

 

18



 

interest rate swap or similar agreements; and (4) the interest expense and items listed in clauses (1) through (3) above applicable to each of the UJVs (to the extent not included above) multiplied by Borrower’s Pro Rata Share in the UJVs in respect of Real Property Businesses, in all cases as reflected in the most recent General Partner’s Consolidated Financial Statements, provided that there shall be excluded from Interest Expense capitalized interest covered by an interest reserve established under a loan facility (such as capitalized construction interest provided for in a construction loan). “Interest Expense” shall not include the non-cash portion of interest expense attributable to convertible Debt determined in accordance with ASC 470-20.

 

Interest Period” means, (1) with respect to any LIBOR Loan, the period commencing on the date the same is advanced, Converted from a Base Rate Loan or Continued, as the case may be, and ending, as Borrower may select pursuant to Section 2.06, on the numerically corresponding day one week thereafter or in the first, third or sixth calendar month thereafter, provided that each such Interest Period (other than an Interest Period of one week) which commences on the last Banking Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Banking Day of the appropriate calendar month; and (2) with respect to any Bid Rate Loan, the period commencing on the date the same is advanced and ending, as Borrower may select pursuant to Section 2.02, on the numerically corresponding day one week thereafter or in the first, third or sixth calendar month thereafter, provided that each such Interest Period (other than an Interest Period of one week) which commences on the last Banking Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Banking Day of the appropriate calendar month.

 

Investment Grade Pricing Periodmeans the period commencing on the date specified by Borrower in an irrevocable written notice to Administrative Agent and the Banks after Borrower obtains an Investment Grade Rating from Moody’s or S&P.

 

Investment Grade Rating” means a Credit Rating of BBB- (or equivalent) or higher from S&P or Baa3 (or equivalent) or higher from Moody’s.

 

Invitation for Bid Rate Quotes” has the meaning specified in Section 2.02(b).

 

JPMorgan.” means JPMorgan Chase Bank, N.A.

 

Law” means all international, foreign, federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes, executive orders, and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

 

LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all drawings under Letters of Credit that have not yet been reimbursed by or on behalf of Borrower (including, for

 

19



 

clarity, by means of advances of Loans pursuant to this Agreement) at such time.  The LC Exposure of any Bank at any time shall be its Pro Rata Share of the total LC Exposure at such time.

 

Lead Arrangers” means (x) with respect to the Ratable Loans, Wells Fargo Securities, Merrill Lynch, JPMorgan, Capital One, PNC Capital, and Citizens, (y) with respect to the Term A-1 Loans, Wells Fargo Securities, Merrill Lynch, JPMorgan, Capital One, PNC Capital and Citizens and (z) with respect to the Term A-2 Loans, Wells Fargo Securities, Capital One, PNC Capital and Citizens, including, in each case, their respective designated affiliates.

 

Lender Notice Date” has the meaning specified in Section 2.20(b).

 

Letter of Credit” has the meaning specified in Section 2.17(a).

 

Letter of Credit Commitment” means, with respect to each Fronting Bank, the commitment of each Fronting Bank to issue Letters of Credit hereunder.  The initial amount of each Fronting Bank’s Letter of Credit Commitment is $25,000,000.

 

Letter of Credit Liabilities” means, without duplication, at any time and in respect of any Letter of Credit (1) the stated undrawn amount of such Letter of Credit plus (2) the aggregate unpaid principal amount of all Reimbursement Obligations of Borrower at such time due and payable in respect of all drawings made under such Letter of Credit.  For purposes of this Agreement, with respect to a Letter of Credit, a Ratable Loan Bank (including the Ratable Loan Bank that is the Fronting Bank for such Letter of Credit) shall be deemed to hold a Letter of Credit Liability in an amount equal to such Bank’s Pro Rata Share of the stated undrawn amount of such Letter of Credit and any outstanding Reimbursement Obligations in respect of such Letter of Credit.

 

Leverage Pricing Periodmeans any period other than the Investment Grade Pricing Period.

 

LIBOR Base Ratemeans, with respect to any LIBOR Loan for any Interest Period, the rate of interest per annum determined on the basis of the rate as set by the ICE Benchmark Administration (“ICE”) (or the successor thereto if ICE is no longer making such rate available) for deposits in Dollars for a period equal to the applicable Interest Period which appears on Reuters Screen LIBOR01 Page (or any applicable successor page) at approximately 11:00 a.m. (London time) two Banking Days prior to the first day of the applicable Interest Period.  If, for any reason, the rate referred to in the preceding sentence does not appear on Reuters Screen LIBOR01 Page (or any applicable successor page), then the rate to be used for such sentence shall be determined by Administrative Agent to be the arithmetic average of the rate per annum at which deposits in Dollars would be offered by first class banks in the London interbank market to Administrative Agent at approximately 11:00 a.m. (London time) two Banking Days prior to the first day of the applicable Interest Period for a period equal to such Interest Period.  If the LIBOR Base Rate determined as provided above would be less than zero, the LIBOR Base Rate shall be deemed to be zero.

 

LIBOR Bid Margin” has the meaning specified in Section 2.02(c)(2)(iii).

 

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LIBOR Bid Rate” means a rate per annum equal to the sum of (1) the LIBOR Interest Rate for a Bid Rate Loan with the applicable Interest Period and (2) the LIBOR Bid Margin.

 

LIBOR Interest Rate” means, for any LIBOR Loan or Bid Rate Loan, a rate per annum determined by Administrative Agent to be equal to the quotient of (1) the LIBOR Base Rate for such LIBOR Loan or Bid Rate Loan, as the case may be, for the Interest Period therefor divided by (2) a percentage equal to one minus the LIBOR Reserve Requirement for such LIBOR Loan or Bid Rate Loan, as the case may be, for such Interest Period.  Any change in the LIBOR Reserve Requirement shall result in a change in the LIBOR Interest Rate on the date on which such change in the LIBOR Reserve Requirement becomes effective.

 

LIBOR Loan” means all or any portion (as the context requires) of any Bank’s Ratable Loans or Term Loans which shall accrue interest at rate(s) determined in relation to LIBOR Interest Rate(s).

 

LIBOR Reserve Requirement” means, for any day, the percentage which is in effect for such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any basic, supplemental or emergency reserves) in respect of eurocurrency liabilities or any similar category of liabilities for a member bank of the Federal Reserve System in New York City.

 

Lien” means any mortgage, deed of trust, pledge, security interest, hypothecation, assignment for collateral purposes, deposit arrangement, lien (statutory or other), or other security agreement or charge of any kind or nature whatsoever of any third party (excluding any right of setoff but including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction to evidence any of the foregoing).

 

Loan” means, with respect to each Bank, its Ratable Loans, Bid Rate Loans, Swingline Loans and Term Loans, individually or collectively, as the context may require.

 

Loan Commitment” means, with respect to each Bank, the sum of such Bank’s Ratable Loan Commitment, Term A-1 Loan Commitment and Term A-2 Loan Commitment.

 

Loan Documents” means this Agreement, the Notes, the Disbursement Instruction Agreement, the Solvency Certificate and any Guaranty.

 

Loan Party” means Borrower and each Guarantor (if any).

 

Mandatory Borrowing” has the meaning specified in Section 2.03(b)(3).

 

Material Adverse Change” means either (1) a material adverse change in the status of the business, results of operations, financial condition, or property of General Partner, Borrower and their Subsidiaries taken as a whole or (2) any event or occurrence of whatever nature which is likely to have a material adverse effect on the ability of Borrower and the other Loan Parties taken as a whole to perform their obligations under the Loan Documents.

 

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Maturity Date” means the Ratable Loan Maturity Date, the Term A-1 Loan Maturity Date or the Term A-2 Loan Maturity Date, individually or collectively, as the context may require.

 

Merrill Lynch” means Merrill Lynch, Pierce, Fenner & Smith Incorporated.

 

Moody’s” means Moody’s Investors Service, Inc.

 

Multiemployer Plan” means a Plan defined as such in Section 3(37) of ERISA to which contributions have been or are required to be made by Borrower or General Partner or any ERISA Affiliate and which is covered by Title IV of ERISA.

 

Negative Pledge” means, with respect to a given asset, any provision of a document, instrument or agreement (other than any Loan Document) which prohibits or purports to prohibit the creation or assumption of any Lien on such asset as security for Debt of the Person owning such asset or any other Person (unless such prohibition does not apply to Liens securing the Obligations); provided, however, that (i) an agreement that conditions a Person’s ability to encumber its assets upon the maintenance of one or more specified ratios that limit such Person’s ability to encumber its assets but that do not generally prohibit the encumbrance of its assets, or the encumbrance of specific assets, (ii) an agreement relating to Unsecured Indebtedness containing restrictions substantially similar to, or taken as a whole, not more restrictive than, the restrictions contained in the Loan Documents (as determined by Borrower in good faith), (iii) Permitted Transfer Restrictions and (iv) Permitted Sale Restrictions, in each case, shall not constitute a Negative Pledge.

 

Net Equity Value” means, at any time, the total assets of the applicable business less the total liabilities of such business less the amounts attributable to the minority interest in such business, in each case as determined on a consolidated basis, in accordance with GAAP, subject to the last sentence of the definition of Capitalization Value.

 

Non-Consenting Bank” means any Bank that does not approve any consent, approval, amendment or waiver that (a) requires the consent of all Banks or all adversely affected Banks in accordance with the terms of Section 12.02 and (b) has been approved by the Required Banks.

 

Non-Extending Lender” has the meaning specified in Section 2.20(b).

 

Note” and “Notes” have the respective meanings specified in Section 2.09.

 

Notice of Borrowing” means a notice substantially in the form of EXHIBIT K (or such other form reasonably acceptable to Administrative Agent and containing the information required in the Exhibit) to be delivered to Administrative Agent pursuant to Section 2.04 evidencing Borrower’s request for the borrowing of any Loan.

 

Obligations” means each and every obligation, covenant and agreement of Borrower and each other Loan Party, now or hereafter existing, contained in this Agreement, and any of the other Loan Documents, whether for principal, reimbursement obligations, interest, fees, expenses, indemnities or otherwise, and any amendments or supplements thereto, extensions or renewals thereof or replacements therefor, including but not limited to all indebtedness,

 

22



 

obligations and liabilities of Borrower or another Loan Party to Administrative Agent and any Bank now existing or hereafter incurred under or arising out of or in connection with the Notes, this Agreement, the other Loan Documents, and any documents or instruments executed in connection therewith, in each case, whether direct or indirect, joint or several, absolute or contingent, liquidated or unliquidated, now or hereafter existing, renewed or restructured, whether or not from time to time decreased or extinguished and later increased, created or incurred, and including all indebtedness of Borrower under any instrument now or hereafter evidencing or securing any of the foregoing.

 

OFAC” means The Office of Foreign Assets Control of the United States Department of the Treasury.

 

Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan, Letter of Credit or Loan Document).

 

Other Investment” means a Consolidated Business or UJV that does not own primarily Real Property Assets or publicly traded securities, including, without limitation, those entities more particularly set forth on SCHEDULE 2 attached hereto.

 

Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 3.07).

 

Parent” means, with respect to any Bank, any Person controlling such Bank.

 

Parent Entity” has the meaning specified in Section 7.04.

 

Participant” has the meaning specified in Section 12.05(d).

 

Participant Register” has the meaning specified in Section 12.05(d).

 

Patriot Act” has the meaning specified in Section 12.19.

 

Payor” has the meaning specified in Section 10.12.

 

PBGC” means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA.

 

Permitted Sale Restrictions” means obligations, encumbrances or restrictions contained in any Real Property Business or Real Property Asset sale agreement restricting the creation of

 

23



 

Liens on, or the sale, transfer or other disposition of Equity Interests or property that is subject to, such Real Property Business or Real Property Asset pending such sale; provided that the encumbrances and restrictions apply only to the Subsidiary or assets that are subject to such Real Property Business or Real Property Asset.

 

Permitted Transfer Restrictions” means (a) reasonable and customary restrictions on transfer, mortgage liens, pledges and changes in beneficial ownership arising under management agreements and ground leases entered into in the ordinary course of business (including in connection with any acquisition or development of any applicable Real Property Asset, without regard to the transaction value), including rights of first offer or refusal arising under such agreements and leases, in each case, that limit, but do not prohibit, sale or mortgage transactions, (b) reasonable and customary obligations, encumbrances or restrictions contained in agreements not constituting Debt entered into with limited partners or members of Borrower or of any other Subsidiary of General Partner imposing obligations in respect of contingent obligations to make any tax “make whole” or similar payment arising out of the sale or other transfer of assets reasonably related to such limited partners’ or members’ interest in Borrower or such Subsidiary pursuant to “tax protection” or other similar agreements, and (c) customary major decision rights in favor of partners or co-investors requiring approvals of transfers, mortgage liens, pledges and changes in beneficial ownership in the ordinary course of business.

 

Person” means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, limited liability company, Governmental Authority or other entity of whatever nature.

 

Plan” means any employee benefit or other plan (other than a Multiemployer Plan) established or maintained, or to which contributions have been or are required to be made, by Borrower or General Partner or any ERISA Affiliate and which is covered by Title IV of ERISA or to which Section 412 of the Code applies.

 

PNC Bank” means PNC Bank, National Association.

 

PNC Capital” means PNC Capital Markets LLC.

 

Prepayment Premium” has the meaning specified in Section 2.10(b).

 

presence”, when used in connection with any Environmental Discharge or Hazardous Materials, means and includes presence, generation, manufacture, installation, treatment, use, storage, handling, repair, encapsulation, disposal, transportation, spill, discharge and release.

 

Prime Rate” means, at any time, the rate of interest per annum publicly announced from time to time by the Bank then acting as Administrative Agent as its prime rate.  Each change in the Prime Rate shall be effective as of the opening of business on the day such change in such prime rate occurs.  The parties hereto acknowledge that the rate announced publicly by the Bank acting as Administrative Agent as its prime rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks.

 

Principals” means the trustees, executive officers and directors of Borrower (other than General Partner) or of General Partner at any applicable time.

 

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Pro Rata Sharemeans, with respect to each Bank, (a) with respect to Ratable Loans, LC Exposure or Swingline Exposure, a fraction the numerator of which is such Ratable Loan Bank’s Ratable Loan Commitment and the denominator of which is the aggregate Ratable Loan Commitments of all Ratable Loan Banks (or, if the Ratable Loan Commitments have terminated or reduced to zero, the Pro Rata Share shall be determined based upon the Ratable Loan Commitments most recently in effect), (b) with respect to the Term A-1 Loans, a fraction the numerator of which is such Term A-1 Bank’s Term A-1 Loan Commitment and the denominator of which is the Total Term A-1 Loan Commitments (or, after advancing the Term A-1 Loans or if the Term A-1 Loan Commitments have terminated or reduced to zero, a fraction the numerator of which is the principal amount of such Term A-1 Bank’s outstanding Term A-1 Loans and the denominator of which is the aggregate outstanding principal amount of the Term A-1 Loans of all Term A-1 Banks); and (c) with respect to the Term A-2 Loans, a fraction the numerator of which is such Term A-2 Bank’s Term A-2 Loan Commitment and the denominator of which is the Total Term A-2 Loan Commitments (or, after advancing the Term A-2 Loans or if the Term A-2 Loan Commitments have terminated or reduced to zero, a fraction the numerator of which is the principal amount of such Term A-2 Bank’s outstanding Term A-2 Loans and the denominator of which is the aggregate outstanding principal amount of the Term A-2 Loans of all Term A-2 Banks); provided that, in each case, in the case of Section 12.20 when a Defaulting Lender shall exist, “Pro Rata Share” shall disregard any Defaulting Lender’s Loan Commitment and outstanding Loans.

 

Prohibited Transaction” means any transaction set forth in Section 406 of ERISA or Section 4975 of the Code.

 

QI” has the meaning given that term in the definition of “1031 Property”.

 

Qualified Institutionmeans a Bank, or one or more banks, finance companies, insurance or other financial institutions which (A) has (or, in the case of a banking institution which is a subsidiary, such banking institution’s parent has) a rating of its senior debt obligations of not less than BBB+ by S&P or Baal by Moody’s or a comparable rating by a rating agency reasonably acceptable to Administrative Agent and (B) has (or, in the case of a banking institution which is a subsidiary, such banking institution’s parent has) total assets in excess of Ten Billion Dollars ($10,000,000,000), but shall exclude any natural person (or a company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person or relative(s) thereof), any Defaulting Lender and Borrower or any of its Affiliates.

 

Ratable Credit Exposure” means, with respect to any Ratable Loan Bank at any time, the sum of the outstanding principal amount of such Ratable Loan Bank’s Ratable Loans, its LC Exposure and its Swingline Exposure at such time.

 

Ratable Loan” has the meaning specified in Section 2.01(b).

 

Ratable Loan Bank” means, as of any date of determination, each Bank that has a Ratable Loan Commitment or, if the Ratable Loan Commitments have terminated or expired, a Bank that holds Ratable Loans, Swingline Exposure or LC Exposure.

 

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Ratable Loan Commitment” means, with respect to each Bank, the obligation to make a Ratable Loan in the principal amount set forth on SCHEDULE 1 attached hereto and incorporated herein, as such amount may be reduced or increased from time to time in accordance with the provisions of Section 2.16 (upon the execution of Assignment and Assumption Agreements, the definition of Ratable Loan Commitment shall be deemed revised to reflect the assignment being effected pursuant to each such Assignment and Assumption Agreement).  The initial aggregate amount of the Ratable Banks’ Ratable Loan Commitments is $1,000,000,000.

 

Ratable Loan Maturity Date” means July 16, 2021, subject to extension pursuant to Section 2.18.

 

Ratable Loan Note” has the meaning specified in Section 2.09.

 

Rating Agency” means S&P, Moody’s, Fitch or any other nationally recognized securities rating agency selected by Borrower and approved by Administrative Agent in writing.

 

Real Property Asset” means an asset from which income is, or upon completion expected by Borrower to be, derived predominantly from contractual rent payments under leases with unaffiliated third party tenants, hotel operations, tradeshow operations or leasing commissions and management and development fees, and shall include those investments in mortgages and mortgage participations owned by Borrower as to which Borrower has demonstrated to Administrative Agent, in Administrative Agent’s reasonable discretion, that Borrower has control of the decision-making functions of management and leasing of such mortgaged properties, has control of the economic benefits of such mortgaged properties, and holds the right to acquire such mortgaged properties.

 

Real Property Business” means a Consolidated Business or UJV that is primarily engaged in the ownership, operation, leasing, management or development of or investment in a Real Property Asset.

 

Real Property UJV” means a UJV that is a Real Property Business.

 

Recipient” means Administrative Agent, any Bank and any Fronting Bank, as applicable.

 

Recourse” means, with reference to any obligation or liability, any liability or obligation that is not Without Recourse to the obligor thereunder, directly or indirectly. For purposes hereof, a Person shall not be deemed to be “indirectly” liable for the liabilities or obligations of an obligor solely by reason of the fact that such Person has an ownership interest in such obligor, provided that such Person is not otherwise legally liable, directly or indirectly, for such obligor’s liabilities or obligations (e.g. by reason of a guaranty or contribution obligation, by operation of law or by reason of such Person being a general partner of such obligor). A guaranty of Debt issued by Borrower or General Partner (as distinguished from a Subsidiary) shall be Recourse, but a guaranty for completion of improvements in connection with Debt shall be deemed Without Recourse, unless and except to the extent of a claim made under such guaranty that remains unpaid.

 

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Refinancing Mortgage” has the meaning specified in Section 12.21.

 

Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System, as the same may be amended or supplemented from time to time, or any similar Law from time to time in effect.

 

Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System, as the same may be amended or supplemented from time to time, or any similar Law from time to time in effect.

 

Regulatory Changemeans the occurrence after the date of this Agreement or, with respect to any Bank, such later date on which such Bank becomes a party to this Agreement, of (a) the adoption of or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the interpretation or application thereof by any Governmental Authority or (c) compliance by any Bank or any Fronting Bank (or, for purposes of Section 3.06, by any lending office of such Bank or by such Bank’s or such Fronting Bank’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided that, notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall be deemed to be a “Regulatory Change,” regardless of the date enacted, adopted or issued, provided, however, that if the applicable Bank shall have implemented changes prior to the Escrow Date in response to any such requests, rules, guidelines or directives, then the same shall not be deemed to be a Regulatory Change with respect to such Bank.

 

Reimbursement Obligation” means the absolute, unconditional and irrevocable obligation of Borrower to reimburse the applicable Fronting Bank for any drawing honored by such Fronting Bank under a Letter of Credit.

 

REIT” means a “real estate investment trust,” as such term is defined in Section 856 of the Code.

 

Related Party Transaction Policy” means that certain Related Party Transaction Policy adopted by the Board of Trustees of General Partner on or prior to the Closing Date, in the form provided to Administrative Agent and the Banks on or prior to the Escrow Date.

 

Relevant Documents” has the meaning specified in Section 11.02.

 

Replacement Bank” has the meaning specified in Section 3.07.

 

Replacement Notice” has the meaning specified in Section 3.07.

 

Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty (30) day notice period is waived by the PBGC.

 

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Requested Extension Date” has the meaning specified in Section 2.20(a).

 

Required Banks” means at any time Banks having Credit Exposures and unused Loan Commitments representing at least 51% of the sum of the Ratable Loan Commitments, the unused Term Loan Commitments and the aggregate unpaid principal amount of the Term Loans at such time (excluding, however, any Defaulting Lender); provided, however, that if the Loan Commitments shall have been terminated or reduced to zero, the “Required Banks” shall be the Banks holding at least 51% of the then aggregate unpaid principal amount of the Loans (excluding, however, any Defaulting Lender); and provided, further that in the case of Swingline Loans, the amount of each Ratable Loan Bank’s funded participation interest in such Swingline Loans shall be considered for purposes hereof as if it were a direct Ratable Loan and not a participation interest, and the aggregate amount of Swingline Loans owing to a Swingline Lender shall be considered for purposes hereof as reduced by the amount of such funded participation interests.

 

Required Payment” has the meaning set forth in Section 10.12.

 

Required Ratable Loan Banks” means, as of any date, Ratable Loan Banks having at least 51% of the aggregate amount of the Ratable Loan Commitments (excluding, however, any Defaulting Lender); provided, however, that if the Ratable Loan Commitments have been terminated or reduced to zero, the “Required Ratable Loan Banks” shall be the Ratable Loan Banks holding at least 51% of the Ratable Credit Exposure of all Ratable Loan Banks (excluding, however, any Defaulting Lender); provided, further, that in the case of Swingline Loans, the amount of each Ratable Loan Bank’s funded participation interest in such Swingline Loans shall be considered for purposes hereof as if it were a direct Ratable Loan and not a participation interest, and the aggregate amount of Swingline Loans owing to a Swingline Lender shall be considered for purposes hereof as reduced by the amount of such funded participation interests.

 

Required Term A-1 Loan Banks” means, as of any date, Term A-1 Banks having at least 51% of the sum of (a) the aggregate amount of the unused Total Term A-1 Loan Commitments plus (b) the aggregate outstanding principal amount of the Term A-1 Loans; provided, however, that if the Term A-1 Loan Commitments have been terminated or reduced to zero, the “Required Term A-1 Loan Banks” shall be the Term A-1 Banks holding at least 51% of the aggregate outstanding principal amount of the Term A-1 Loans (excluding, however, any Defaulting Lender).

 

Required Term A-2 Loan Banks” means, as of any date, Term A-2 Banks having at least 51% of the sum of (a) the aggregate amount of the unused Total Term A-2 Loan Commitments plus (b) the aggregate outstanding principal amount of the Term A-2 Loans; provided, however, that if the Term A-2 Loan Commitments have been terminated or reduced to zero, the “Required Term A-2 Loan Banks” shall be the Term A-2 Banks holding at least 51% of the aggregate outstanding principal amount of the Term A-2 Loans (excluding, however, any Defaulting Lender).

 

Responsible Officer” means the chief executive officer, chief financial officer or chief accounting officer of General Partner.

 

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Restricted Payment” means (1) any dividend or other distribution, direct or indirect, on account of any Equity Interest of Borrower or any of its Subsidiaries now or hereafter outstanding, except a dividend payable solely in shares of that class of Equity Interests to the holders of that class; (2) any redemption, conversion, exchange, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Equity Interests of Borrower or any of its Subsidiaries now or hereafter outstanding; and (3) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire any Equity Interests of Borrower or any of its Subsidiaries now or hereafter outstanding.

 

Sanctioned Countrymeans, at any time, a country, territory or region which is itself the subject or target of any Sanctions.

 

Sanctioned Personmeans, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by any Governmental Authority of the United States of America, including without limitation, OFAC or the U.S. Department of State, or by the United Nations Security Council, Her Majesty’s Treasury, the European Union or any other Governmental Authority, (b) any Person located, organized or resident in a Sanctioned Country, (c) an agency of the government of a Sanctioned Country or (d) any Person Controlled by any Person or agency described in any of the preceding clauses (a) through (c). For purposes of this definition, “Controlled” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.

 

Sanctions” means any sanctions or trade embargoes imposed, administered or enforced by any Governmental Authority of the United States of America, including without limitation, OFAC or the U.S. Department of State, or by the United Nations Security Council, Her Majesty’s Treasury, the European Union or any other Governmental Authority.

 

SEC” means the United States Securities and Exchange Commission.

 

SEC Reports” means the reports required to be delivered to the SEC pursuant to the Securities Exchange Act of 1934, as amended.

 

Secured Indebtedness” means, at any time, that portion of Total Outstanding Indebtedness that is not Unsecured Indebtedness.

 

Secured Indebtedness Adjustment” has the meaning set forth in Section 8.05.

 

Solvency Certificate” means a certificate in substantially the form of EXHIBIT D, to be delivered by Borrower pursuant to the terms of this Agreement.

 

Solvent” means, when used with respect to any Person, that (1) the fair value of the property of such Person, on a going concern basis, is greater than the total amount of liabilities (including, without limitation, contingent liabilities) of such Person; (2) the present fair saleable value of the assets of such Person, on a going concern basis, is not less than the amount that will be required to pay the probable liabilities of such Person on its debts as they become absolute and matured; (3) such Person does not intend to, and does not believe that it will, incur debts or

 

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liabilities beyond such Person’s ability to pay as such debts and liabilities mature; (4) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged; and (5) such Person has sufficient resources, provided that such resources are prudently utilized, to satisfy all of such Person’s obligations. Contingent liabilities will be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

Specified Cash Management Agreement” means any Cash Management Agreement that is made or entered into at any time, or in effect at any time now or hereafter, whether as a result of an assignment or transfer or otherwise, between or among any Loan Party and any Specified Cash Management Bank, and which was not prohibited by any of the Loan Documents when made or entered into.

 

Specified Cash Management Bank” means any Person that (a) at the time it enters into a Cash Management Agreement with a Loan Party, is a Bank or an Affiliate of a Bank or (b) at the time it (or its Affiliate) becomes a Bank (including on the Closing Date), is a party to a Cash Management Agreement with a Loan Party, in each case in its capacity as a party to such Cash Management Agreement.

 

Specified Derivatives Contract” means any Derivatives Contract that is made or entered into at any time, or in effect at any time now or hereafter, whether as a result of an assignment or transfer or otherwise, between or among any Loan Party and any Specified Derivatives Provider, and which was not prohibited by any of the Loan Documents when made or entered into.

 

Specified Derivatives Obligations” means all indebtedness, liabilities, obligations, covenants and duties of a Loan Party under or in respect of any Specified Derivatives Contract, whether direct or indirect, absolute or contingent, due or not due, liquidated or unliquidated, and whether or not evidenced by any written confirmation.

 

Specified Derivatives Provider” means any Person that (a) at the time it enters into a Specified Derivatives Contract with a Loan Party, is a Bank or an Affiliate of a Bank or (b) at the time it (or its Affiliate) becomes a Bank (including on the Closing Date), is a party to a Specified Derivatives Contract with a Loan Party, in each case in its capacity as a party to such Specified Derivatives Contract.

 

S&P” means Standard & Poor’s Ratings Services, a division of McGraw-Hill Financial, Inc.

 

Subsidiary” means, with respect to any Person, a corporation, partnership, joint venture, limited liability company or other entity, fifty percent (50%) or more of the outstanding voting stock, partnership interests or membership interests, as the case may be, of which are owned, directly or indirectly, by that Person or by one or more other Subsidiaries of that Person and over which that Person or one or more other Subsidiaries of that Person exercise sole control. For the purposes of this definition, “voting stock” means stock having voting power for the election of directors or trustees, as the case may be, whether at all times or only so long as no senior class of

 

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stock has voting power for the election of directors or trustees by reason of any contingency, and “control” means the power to direct the management and policies of a Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

 

Swap Obligation” means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.

 

Swingline Commitment” has the meaning specified in Section 2.03(a).

 

Swingline Exposure” means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time.  The Swingline Exposure of any Ratable Loan Bank at any time shall be the sum of (a) its Pro Rata Share of the total Swingline Exposure at such time other than with respect to any Swingline Loans made by such Ratable Loan Bank in its capacity as a Swingline Lender and (b) the aggregate principal amount of all Swingline Loans made by such Ratable Loan Bank as a Swingline Lender outstanding at such time (less the amount of participations funded by the other Ratable Loan Banks in such Swingline Loans).

 

Swingline Lenders” means Wells Fargo, Bank of America, JPMorgan, Capital One, PNC Bank and Citizens, each in their capacity as Swingline Lenders hereunder, and their permitted successors in such capacity in accordance with the terms of this Agreement.  When used herein, “Swingline Lender” shall mean the applicable Swingline Lender, each Swingline Lender, any Swingline Lender or all of the Swingline Lenders, as the context may require.

 

Swingline Loan” has the meaning set forth in Section 2.03(a).

 

Syndication Agents” means (x) with respect to the Ratable Loans and the Term A-1 Loans, Bank of America and JPMorgan and (y) with respect to the Term A-2 Loans, Capital One, PNC Bank and Citizens.

 

Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

Term A-1 Bank” means, as of any date of determination, each Bank having a Term A-1 Loan Commitment or that holds Term A-1 Loans.

 

Term A-1 Loan” has the meaning specified in Section 2.01(d).

 

Term A-1 Loan Availability Period” means the period commencing on the Closing Date to and including the Final Term A-1 Loan Availability Date.

 

Term A-1 Loan Commitment” means, with respect to each Bank, the obligation to make a Term A-1 Loan in the principal amount set forth in SCHEDULE 1 attached hereto and incorporated herein, as such amount may be reduced or increased from time to time in accordance with the provisions of Section 2.16 (upon the execution of Assignment and Assumption Agreements, the definition of Loan Commitment shall be deemed revised to reflect the assignment being effected pursuant to each such Assignment and Assumption Agreement).

 

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Term A-1 Loan Maturity Date” means January 18, 2023.

 

Term A-2 Bank” means, as of any date of determination, each bank having a Term A-2 Loan Commitment or that holds Term A-2 Loans.

 

Term A-2 Loan” has the meaning specified in Section 2.01(d).

 

Term A-2 Loan Availability Period” means the period commencing on the Closing Date to and including the Final Term A-2 Loan Availability Date.

 

Term A-2 Loan Commitment” means, with respect to each Bank, the obligation to make a Term A-2 Loan in the principal amount set forth in SCHEDULE 1 attached hereto and incorporated herein, as such amount may be reduced or increased from time to time in accordance with the provisions of Section 2.16 (upon the execution of Assignment and Assumption Agreements, the definition of Loan Commitment shall be deemed revised to reflect the assignment being effected pursuant to each such Assignment and Assumption Agreement).

 

Term A-2 Loan Maturity Date” means July 18, 2024.

 

Term Bank” means a Term A-1 Bank or a Term A-2 Bank or both, as the context requires.

 

Term Loan Commitment” means, with respect to each Bank, an amount equal to the aggregate amount of such Bank’s Term A-1 Loan Commitment and Term A-2 Loan Commitment.

 

Term Loan Note” has the meaning specified in Section 2.09.

 

Term Loans” means, with respect to each Bank, collectively, its Term A-1 Loans and Term A-2 Loans.

 

Total Ratable Credit Exposure” means the sum of the outstanding principal amount of all Ratable Loan Banks’ Ratable Loans, their LC Exposure and their Swingline Exposure at such time.

 

Total Term A-1 Loan Commitment” means an amount equal to the aggregate amount of all Term A-1 Loan Commitments.  The initial Total Term A-1 Loan Commitment is $200,000,000.

 

Total Term A-2 Loan Commitment” means an amount equal to the aggregate amount of all Term A-2 Loan Commitments. The initial Total Term A-1 Loan Commitment is $200,000,000.

 

Total Outstanding Indebtedness” means, at any time, without duplication, the sum of Debt of Borrower, Borrower’s Pro Rata Share of Debt in respect of Consolidated Businesses, and any Debt of UJVs to the extent Recourse to Borrower, as determined on a consolidated basis in accordance with GAAP.

 

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UJVs” means, at any time, (1) investments of Borrower that are accounted for under the equity method in the most recent General Partner’s Consolidated Financial Statements prepared in accordance with GAAP and (2) investments of Borrower in which Borrower owns less than 50% of the Equity Interests and that are consolidated in the most recent General Partner’s Consolidated Financial Statements prepared in accordance with GAAP.

 

Unencumbered Assets” means, collectively, assets, reflected in the most recent General Partner’s Consolidated Financial Statements, owned in whole or in part, directly or indirectly, by Borrower and not subject to any Lien to secure all or any portion of Secured Indebtedness or to any Negative Pledge, and assets of Consolidated Businesses and UJVs which are not subject to any Lien to secure all or any portion of Secured Indebtedness or to any Negative Pledge.  Notwithstanding the foregoing, a 1031 Property may constitute an Unencumbered Asset so long as: (I) such Real Property Asset is owned in fee simple by, or is subject to a ground lease to, the applicable EAT (or a combination of such fee simple ownership and being subject to a ground lease); (II) such Real Property Asset is located in the United States; (III) Borrower or a Wholly Owned Subsidiary thereof (a) leases such 1031 Property from the applicable EAT (or Wholly Owned Subsidiary thereof, as applicable) and (b) manages such 1031 Property or such Real Property Asset is subject to a third-party management agreement, as applicable; (IV) Borrower or a Wholly Owned Subsidiary or Subsidiaries thereof is obligated to purchase such 1031 Property (or Wholly Owned Subsidiary or Subsidiaries of the applicable EAT that owns such 1031 Property) from the applicable EAT (or such Wholly Owned Subsidiary or Subsidiaries of the EAT, as applicable) (other than in circumstances where the 1031 Property is disposed of by Borrower or any Subsidiary); (V) the applicable EAT is obligated to transfer such 1031 Property (or its Wholly Owned Subsidiary or Subsidiaries that owns such 1031 Property, as applicable) to Borrower or a Wholly Owned Subsidiary thereof, directly or indirectly (including through a QI); (VI) the applicable EAT (or Wholly Owned Subsidiary or Subsidiaries thereof that owns such 1031 Property, as applicable) acquired such 1031 Property with the proceeds of a loan made by Borrower or a Wholly Owned Subsidiary which loan is secured either by a mortgage on such 1031 Property and/or a pledge of all of the Equity Interests of the applicable Wholly Owned Subsidiary or Subsidiaries of an EAT that owns such 1031 Property, as applicable; and (VII) neither such 1031 Property nor, if such Real Property Asset is owned or leased by a Subsidiary, any of Borrower’s direct or indirect ownership interests in such Subsidiary, is subject to any liens, claims, or restrictions on transferability or assignability of any kind other than (A) pursuant to Permitted Transfer Restrictions or Permitted Sale Restrictions or as permitted pursuant to clause (V) above, (B) the Lien of any mortgage or pledge referred to in the preceding clause (VI), or (C) a Negative Pledge binding on the EAT in favor of Borrower or a Wholly Owned Subsidiary.  In no event shall a 1031 Property qualify as an Unencumbered Asset for a period in excess of 180 days after the date the applicable EAT (or Wholly Owned Subsidiary or Subsidiaries thereof, as applicable) acquired ownership of such Real Property Asset (or, if such 180 day period is subject to extension under the Code (including any Treasury Regulations), then such period as extended).

 

Unencumbered Combined EBITDA” means that portion of Combined EBITDA attributable to Unencumbered Assets; provided that Unencumbered Combined EBITDA shall include only general and administrative expenses that are attributable to the management and operation of the Unencumbered Assets in accordance with GAAP and shall not include any

 

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corporate general and administrative expenses of Borrower, General Partner, Consolidated Businesses or UJVs (e.g., salaries of corporate officers).

 

Unfunded Current Liability” of any Plan means the amount, if any, by which the actuarial present value of accumulated plan benefits as of the close of its most recent plan year, based upon the actuarial assumptions used by such Plan’s actuary in the most recent annual valuation of such Plan, exceeds the fair market value of the assets allocable thereto, determined in accordance with Section 412 of the Code.

 

Unrestricted Cash and Cash Equivalents” means Cash or Cash Equivalents owned by Borrower, and Borrower’s Pro Rata Share of any Cash or Cash Equivalents owned by any Consolidated Businesses or UJV, that are not subject to any pledge, lien or control agreement, less amounts placed with third parties as deposits or security for contractual obligations; provided, that Unrestricted Cash and Cash Equivalents shall (a) not exclude Cash and Cash Equivalents subject to customary rights of set-off and statutory or common law provisions relating to bankers’ liens, and (b) include Cash and Cash Equivalents representing the proceeds from the sale of an asset (the “Disposed Asset”; it being understood that no Disposed Asset shall constitute a Real Property Asset from and after the date of such sale), which proceeds have been escrowed for a period not in excess of 180 days in anticipation of the acquisition of a 1031 Property, net of related tax obligations for the cancellation of such acquisition and transaction costs and expenses related thereto; provided that to the extent the amount of Unrestricted Cash and Cash Equivalents attributable to this clause (b) shall exceed 50% of the aggregate Unrestricted Cash and Cash Equivalents, such excess shall be excluded.

 

Unsecured Indebtedness” means, at any time, Total Outstanding Indebtedness that is not secured by a lien (except any Refinancing Mortgage) on assets of Borrower, a Consolidated Business or a UJV, as the case may be.

 

Unsecured Indebtedness Adjustment” has the meaning set forth in Section 8.04.

 

Unsecured Indebtedness Subsidiary” means any Subsidiary of Borrower that is a borrower or a guarantor, or otherwise has a payment obligation in respect of, any Unsecured Indebtedness (other than (a) subordinated intercompany Indebtedness owing to General Partner, (b) intercompany Indebtedness between or among any of Borrower and its Subsidiaries, and (c) Indebtedness of any non-Wholly Owned Subsidiary the incurrence of which was not subject to the Control or affirmative consent of Borrower or any of its Subsidiaries; provided, however, that any non-Wholly Owned Subsidiary of Borrower that guarantees Unsecured Indebtedness of General Partner or any Wholly Owned Subsidiary as described in this definition shall be an Unsecured Indebtedness Subsidiary).

 

Unsecured Interest Expense” means, for any quarter, Borrower’s Pro Rata Share of Interest Expense attributable to Total Outstanding Indebtedness constituting Unsecured Indebtedness.

 

U.S. Person” means a “United States person” within the meaning of Section 7701(a)(30) of the Code.

 

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U.S. Tax Compliance Certificate” has the meaning assigned to such term in Section 10.13(f)(ii)(B)(3).

 

Wells Fargo” means Wells Fargo Bank, National Association.

 

Wells Fargo Securities” means Wells Fargo Securities LLC.

 

Wholly Owned Subsidiary” means any Subsidiary of a Person in respect of which all of the Equity Interests (other than (x) in the case of a corporation, directors’ qualifying shares and (y) solely for purposes of Section 9.01(16), in the case of a Subsidiary which is qualified as a real estate investment trust, Equity Interests issued to not more than 125 separate Persons solely in order to satisfy the requirements for such qualification) are at the time directly or indirectly owned or controlled by such Person or one or more other Subsidiaries of such Person or by such Person and one or more other Subsidiaries of such Person.

 

Withholding Agent” means any Loan Party and Administrative Agent.

 

Without Recourse” means, with reference to any obligation or liability, any obligation or liability for which the obligor thereunder is not liable or obligated other than as to its interest in a designated asset or assets only, subject to such exceptions to the non-recourse nature of such obligation or liability (such as, but not limited to, fraud, misappropriation, misapplication and environmental indemnities), as are usual and customary in like transactions involving institutional lenders at the time of the incurrence of such obligation or liability, and including any guaranty for completion of improvements in connection with Debt, unless and except to the extent of a claim made under such guaranty that remains unpaid.

 

Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

 

SECTION 1.02.  Accounting Terms.  All accounting terms not specifically defined herein shall be construed in accordance with GAAP, and, except as otherwise provided herein, all financial data required to be delivered hereunder shall be prepared in accordance with GAAP.

 

SECTION 1.03.  Computation of Time Periods.  Except as otherwise provided herein, in this Agreement, in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and words “to” and “until” each means “to but excluding”.

 

SECTION 1.04.  Rules of Construction.  When used in this Agreement: (1) “or” is not exclusive; (2) a reference to a Law includes any amendment or modification to such Law; (3) a reference to a Person includes its permitted successors and permitted assigns; (4) except as provided otherwise, all references to the singular shall include the plural and vice versa; (5) except as provided in this Agreement, a reference to an agreement, instrument or document shall include such agreement, instrument or document as the same may be amended, modified or supplemented from time to time in accordance with its terms and as permitted by the Loan Documents; (6) all references to Articles, Sections, Schedules and Exhibits shall be to Articles,

 

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Sections, Schedules and Exhibits of this Agreement unless otherwise indicated; (7) all Exhibits to this Agreement shall be incorporated into this Agreement; and (8) unless explicitly set forth to the contrary, a reference to “Subsidiary” means a Subsidiary of Borrower or a Subsidiary of such Subsidiary and a reference to an “Affiliate” means an Affiliate of Borrower.  Titles and captions of Articles, Sections, subsections and clauses in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement.  Unless otherwise indicated, (a) all references to time are references to New York City time and (b) when any date specified herein as the due date for a payment, notice or other deliverable is not a Banking Day, such due date shall be extended to the next following Banking Day.

 

SECTION 1.05.  Financial Covenant Calculations.  The calculation of liabilities shall not include any fair value adjustments to the carrying value of liabilities to record such liabilities at fair value pursuant to electing the fair value option election under FASB ASC 825-10-25 (formerly known as FAS 159, The Fair Value Option for Financial Assets and Financial Liabilities) or other FASB standards allowing entities to elect fair value option for financial liabilities. Therefore, the amount of liabilities shall be the historical cost basis, which generally is the contractual amount owed adjusted for amortization or accretion of any premium or discount.  Notwithstanding anything in this Agreement to the contrary, the financial covenants shall ignore the adoption of ASU 2016-02 such that Capital Leases shall specifically exclude any operating leases under GAAP as in effect on the Escrow Date and upon the adoption of ASU 2016-02.

 

ARTICLE II

 

THE LOANS

 

SECTION 2.01.  Ratable Loans; Bid Rate Loans; Term Loans.  (a) Subject to the terms and conditions of this Agreement, each Bank, severally and not jointly, agrees to make loans to Borrower as provided in this Article II.  Each Loan of each Bank shall be maintained at such Bank’s Applicable Lending Office.

 

(b)                                 Each of the Ratable Loan Banks severally agrees to make loans to Borrower in Dollars (each such loan by a Ratable Loan Bank, a “Ratable Loan”) from time to time in an aggregate principal amount that will not result in (i) the amount of such Ratable Loan Bank’s Ratable Credit Exposure exceeding such Ratable Loan Bank’s Ratable Loan Commitment or (ii) the Total Ratable Credit Exposure plus the aggregate outstanding principal amount of all Bid Rate Loans exceeding the aggregate amount of the Ratable Loan Commitments. Within the limits set forth herein, Borrower may borrow from time to time under this paragraph (b) and prepay from time to time pursuant to Section 2.10 (subject, however, to the restrictions on prepayment set forth in said Section), and thereafter reborrow pursuant to this paragraph (b). The Ratable Loans may be outstanding as: (1) Base Rate Loans; (2) LIBOR Loans; or (3) a combination of the foregoing, as Borrower shall elect and notify Administrative Agent in accordance with Section 2.14.

 

(c)                                  So long as Borrower has an Investment Grade Rating, one or more Ratable Loan Banks may, at Borrower’s request and in their sole discretion, make non-ratable loans in Dollars which shall bear interest at the LIBOR Bid Rate in accordance with Section 2.02 (such loans being referred to in this Agreement as “Bid Rate Loans”). Borrower may borrow Bid Rate Loans

 

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from time to time pursuant to this paragraph (c) in an amount up to fifty percent (50%) of the aggregate Ratable Loan Commitments at the time of the borrowing (taking into account any repayments of the Ratable Loans made simultaneously therewith) (the “Bid Borrowing Limit”), provided that at no time shall the sum of the Total Ratable Credit Exposure plus the aggregate outstanding principal amount of all Bid Rate Loans exceed the aggregate amount of the Ratable Loan Commitments, and shall repay such Bid Rate Loans as required by Section 2.09, and it may thereafter reborrow pursuant to this paragraph (c) or paragraph (b) above; provided, however, that the aggregate outstanding principal amount of Bid Rate Loans at any particular time shall not exceed the Bid Borrowing Limit.

 

(d)                                 Each of the Term A-1 Banks severally agrees to make loans to Borrower in Dollars (each such loan by a Term A-1 Bank, a “Term A-1 Loan”), during the Term A-1 Loan Availability Period, in an aggregate amount not to exceed its Term A-1 Loan Commitment; provided, that (x) to the extent that Term A-1 Loans in an aggregate principal amount equal to $50,000,000 (the “Term A-1 Incremental Amount”) shall not have been made on the Closing Date, the Total Term A-1 Term Loan Commitments shall be automatically terminated at 5:00 p.m. (New York Time) ratably among the Term A-1 Banks on the Closing Date in an amount equal to the excess of the Term A-1 Incremental Amount over the actual amount of Term A-1 Loans made on the Closing Date, (y) to the extent that Term A-1 Loans (exclusive of Term A-1 Loans subject to clause (x)) in an aggregate principal amount equal to the Term A-1 Incremental Amount shall not have been made during the period commencing on the Closing Date through and including January 18, 2018 (the “Second Term A-1 Commitment Termination Date”), the Total Term A-1 Term Loan Commitments shall be automatically terminated at 5:00 p.m. (New York Time) ratably among the Term A-1 Banks on the Second Term A-1 Commitment Termination Date in an amount equal to the excess of the Term A-1 Incremental Amount over the actual amount of Term A-1 Loans (exclusive of Term A-1 Loans subject to clause (x)) made during the period commencing on the Closing Date through and including the Second Term A-1 Commitment Termination Date and (z) the remaining unused Total Term A-1 Loan Commitments shall automatically terminate at 5:00 p.m. (New York time) on the Final Term A-1 Loan Availability Date.  Each of the Term A-2 Banks severally agrees to make loans to Borrower in Dollars (each such loan by a Term A-2 Bank, a “Term A-2 Loan”), during the Term A-2 Loan Availability Period, in an aggregate amount not to exceed its Term A-2 Loan Commitment.  Unused Total Term A-2 Loan Commitments shall terminate at 5:00 p.m. (New York time) on the Final Term A-2 Loan Availability Date. Amounts repaid or prepaid in respect of the Term Loans may not be reborrowed.

 

(e)                                  The obligations of the Banks under this Agreement are several, and no Bank shall be responsible for the failure of any other Bank to make any advance of a Loan to be made by such other Bank. However, the failure of any Bank to make any advance of each Loan to be made by it hereunder on the date specified therefor shall not relieve any other Bank of its obligation to make any advance of its Loans specified hereby to be made on such date.

 

SECTION 2.02.  Bid Rate Loans.  (a) So long as Borrower has an Investment Grade Rating and wishes to request offers from the Ratable Loan Banks to make Bid Rate Loans, it shall transmit to Administrative Agent by facsimile a request (a “Bid Rate Quote Request”) substantially in the form of EXHIBIT G-1 so as to be received not later than 10:30 a.m. (New

 

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York time) on the fourth Banking Day prior to the date for funding of the Bid Rate Loan(s) proposed therein, specifying:

 

(1)                                 the proposed date of funding of such Bid Rate Loan(s), which shall be a Banking Day;

 

(2)                                 the aggregate amount of the Bid Rate Loans requested, which shall be at least Five Million Dollars ($5,000,000) and an integral multiple of One Million Dollars ($1,000,000);

 

(3)                                 the prepayment terms of such Bid Rate Loan(s), which, if not specified, shall have the same prepayment terms as Ratable Loans; and

 

(4)                                 the duration of the Interest Period(s) applicable thereto, subject to the provisions of the definition of “Interest Period” in Section 1.01.

 

Borrower may request offers to make Bid Rate Loans for more than one (1) Interest Period in a single Bid Rate Quote Request. No Bid Rate Quote Request may be submitted by Borrower sooner than seven (7) calendar days after the submission of any other Bid Rate Quote Request.

 

(b)                                 Promptly upon receipt of a Bid Rate Quote Request, Administrative Agent shall send to the Ratable Loan Banks by facsimile an invitation (an “Invitation for Bid Rate Quotes”) substantially in the form of EXHIBIT G-2, which shall constitute an invitation by Borrower to the Ratable Loan Banks to submit Bid Rate Quotes offering to make Bid Rate Loans to which such Bid Rate Quote Request relates in accordance with this Section 2.02.

 

(c)                                  (1)                                 Each Ratable Loan Bank may submit a Bid Rate Quote containing an offer or offers to make Bid Rate Loans in response to any Invitation for Bid Rate Quotes. Each Bid Rate Quote must comply with the requirements of this paragraph (c) and must be submitted to Administrative Agent by facsimile not later than 10:00 a.m. (New York time) on the third Banking Day prior to the proposed date of the Bid Rate Loan(s); provided that Bid Rate Quotes submitted by the Ratable Loan Bank serving as Administrative Agent (or any Affiliate of the Bank serving as Administrative Agent) in its capacity as a Ratable Loan Bank may be submitted, and may only be submitted, if the Ratable Loan Bank serving as Administrative Agent or such Affiliate notifies Borrower of the terms of the offer or offers contained therein not later than fifteen (15) minutes prior to the deadline for the other Ratable Loan Banks. Any Bid Rate Quote so made shall (subject to Borrower’s satisfaction of the conditions precedent set forth in this Agreement to its entitlement to an advance) be irrevocable except with the written consent of Administrative Agent given on the instructions of Borrower. Bid Rate Loans to be funded pursuant to a Bid Rate Quote may, as provided in Section 12.16, be funded by a Ratable Loan Bank’s Designated Lender. A Ratable Loan Bank making a Bid Rate Quote shall specify in its Bid Rate Quote whether the related Bid Rate Loans are intended to be funded by such Ratable Loan Bank’s Designated Lender, as provided in Section 12.16.

 

(2)                                 Each Bid Rate Quote shall be in substantially the form of EXHIBIT G-3 and shall in any case specify:

 

(ii)                                  the proposed date of funding of the Bid Rate Loan(s);

 

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(iii)                               the principal amount of the Bid Rate Loan(s) for which each such offer is being made, which principal amount (w) may be greater than or less than the applicable Ratable Loan Commitment of the quoting Ratable Loan Bank, (x) must be in the aggregate at least Five Million Dollars ($5,000,000) and an integral multiple of One Hundred Thousand Dollars ($100,000), (y) may not exceed the principal amount of Bid Rate Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Bid Rate Loans for which offers being made by such quoting Ratable Loan Bank may be accepted;

 

(iv)                              the margin above or below the applicable LIBOR Interest Rate (the “LIBOR Bid Margin”) offered for each such Bid Rate Loan, expressed as a percentage per annum (specified to the nearest 1/1,000th of 1%) to be added to (or subtracted from) the applicable LIBOR Interest Rate;

 

(v)                                 the applicable Interest Period; and

 

(vi)                              the identity of the quoting Ratable Loan Bank.

 

A Bid Rate Quote may set forth up to five (5) separate offers by the quoting Ratable Loan Bank with respect to each Interest Period specified in the related Invitation for Bid Rate Quotes.

 

(3)                                 Any Bid Rate Quote shall be disregarded if it:

 

(vii)                           is not substantially in conformity with EXHIBIT G-3 or does not specify all of the information required by sub-paragraph (c)(2) above;

 

(viii)                        contains qualifying, conditional or similar language (except for an aggregate limitation as provided in subparagraph (c)(2)(ii)(z) above);

 

(ix)                              proposes terms other than or in addition to those set forth in the applicable Invitation for Bid Rate Quotes (except for an aggregate limitation as provided in subparagraph (c)(2)(ii)(z) above); or

 

(x)                                 arrives after the time set forth in sub-paragraph (c)(1) above.

 

(d)                                 Administrative Agent shall no later than 10:15 a.m. (New York City time) on the third Banking Day prior to the proposed date for the requested Bid Rate Loan notify Borrower in writing of the terms of any Bid Rate Quote submitted by a Ratable Loan Bank that is in accordance with paragraph (c). Any subsequent Bid Rate Quote shall be disregarded by Administrative Agent unless such subsequent Bid Rate Quote is submitted solely to correct a manifest error in such former Bid Rate Quote. Administrative Agent’s notice to Borrower shall specify (A) the aggregate principal amount of Bid Rate Loans for which offers have been received for each Interest Period specified in the related Bid Rate Quote Request, (B) the respective principal amounts and LIBOR Bid Margins so offered and (C) if applicable, limitations on the aggregate principal amount of Bid Rate Loans for which offers in any single Bid Rate Quote may be accepted.

 

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(e)                                  Not later than 11:00 a.m. (New York time) on the third Banking Day prior to the proposed date of funding of the Bid Rate Loan, Borrower shall notify Administrative Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to paragraph (d). A notice of acceptance shall be substantially in the form of EXHIBIT G-4 and shall specify the aggregate principal amount of offers for each Interest Period that are accepted. Borrower may accept any Bid Rate Quote in whole or in part; provided that:

 

(1)                                 the principal amount of each Bid Rate Loan may not exceed the applicable amount set forth in the related Bid Rate Quote Request or be less than Five Million Dollars ($5,000,000) and shall be an integral multiple of One Hundred Thousand Dollars ($100,000);

 

(2)                                 acceptance of offers with respect to a particular Interest Period may only be made on the basis of ascending LIBOR Bid Margins offered for such Interest Period from the lowest effective cost; and

 

(3)                                 Borrower may not accept any offer that is described in subparagraph (c)(3) or that otherwise fails to comply with the requirements of this Agreement.

 

(f)                                   If offers are made by two (2) or more Ratable Loan Banks with the same LIBOR Bid Margins, for a greater aggregate principal amount than the amount in respect of which such offers are permitted to be accepted for the related Interest Period, the principal amount of Bid Rate Loans in respect of which such offers are accepted shall be allocated by Administrative Agent among such Ratable Loan Banks as nearly as possible (in multiples of One Hundred Thousand Dollars ($100,000)) in proportion to the aggregate principal amounts of such offers. Administrative Agent shall promptly (and in any event within one (1) Banking Day after such offers are accepted) notify Borrower and each such Bank in writing of any such allocation of Bid Rate Loans. Determinations by Administrative Agent of the allocation of Bid Rate Loans shall be conclusive in the absence of manifest error.

 

(g)                                  In the event that Borrower accepts the offer(s) contained in one (1) or more Bid Rate Quotes in accordance with paragraph (e), the Ratable Loan Bank(s) making such offer(s) shall make a Bid Rate Loan in the accepted amount (as allocated, if necessary, pursuant to paragraph (f)) on the date specified therefor, in accordance with the procedures specified in Section 2.05.

 

(h)                                 Notwithstanding anything to the contrary contained herein, each Ratable Loan Bank shall be required to fund its Pro Rata Share of the Available Ratable Commitment in accordance with Section 2.01(b) despite the fact that any Ratable Loan Bank’s Ratable Loan Commitment may have been or may be exceeded as a result of such Ratable Loan Bank’s making Bid Rate Loans.

 

(i)                                     A Ratable Loan Bank who is notified that it has been selected to make a Bid Rate Loan as provided above may designate its Designated Lender (if any) to fund such Bid Rate Loan on its behalf, as described in Section 12.16. Any Designated Lender which funds a Bid Rate Loan shall on and after the time of such funding become the obligee under such Bid Rate Loan and be entitled to receive payment thereof when due. No Ratable Loan Bank shall be

 

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relieved of its obligation to fund a Bid Rate Loan, and no Designated Lender shall assume such obligation, prior to the time the applicable Bid Rate Loan is funded.

 

SECTION 2.03.  Swingline Loan Subfacility.

 

(a)                                 Swingline Commitment.  Subject to the terms and conditions of this Section 2.03, each Swingline Lender, in its individual capacity, agrees to make certain revolving credit loans in Dollars to Borrower (each a “Swingline Loan” and, collectively, the “Swingline Loans”) from time to time during the term hereof in an amount equal to its pro rata share of the Swingline Loans requested by Borrower in its notice of borrowing described in clause (b) below; provided, however, that the aggregate amount of Swingline Loans outstanding at any time shall not exceed Seventy-Five Million Dollars ($75,000,000) (the “Swingline Commitment”); provided, further, that (i) the aggregate amount of Swingline Loans outstanding to any Swingline Lender shall not exceed the lesser of (A) Twelve Million Five-Hundred Thousand Dollars ($12,500,000) and (B) such Swingline Lender’s Ratable Loan Commitment minus its Ratable Loan Credit Exposure and (ii) the Total Ratable Credit Exposure plus the aggregate outstanding principal amount of all Bid Rate Loans shall not exceed the aggregate amount of the Ratable Loan Commitments. Subject to the limitations set forth herein, any amounts repaid in respect of Swingline Loans may be reborrowed.

 

(b)                                 Swingline Borrowings.

 

(1)                                 Notice of Borrowing. With respect to any Swingline Loan, Borrower shall give Swingline Lenders and Administrative Agent notice in writing which is received by Swingline Lenders and Administrative Agent not later than 2:00 p.m. (New York City time) on the proposed date of such Swingline Loan (and confirmed by telephone by such time), specifying (A) that a Swingline Loan is being requested, (B) the amount of such Swingline Loan, (C) the proposed date of such Swingline Loan, which shall be a Banking Day and (D) stating that no Default or Event of Default has occurred and is continuing both before and after giving effect to such Swingline Loan. Such notice shall be irrevocable.

 

(2)                                 Minimum Amounts. Each Swingline Loan shall be at least Three Million Dollars ($3,000,000) and, or an integral multiple of One Million Dollars ($1,000,000).

 

(3)                                 Repayment of Swingline Loans. Each Swingline Loan shall be due and payable on the earliest of (A) five (5) Banking Days from and including the date of such Swingline Loan or (B) the Ratable Loan Maturity Date. If, and to the extent, any Swingline Loans shall be outstanding on the date any Ratable Loan is advanced, such Swingline Loans shall first be repaid from the proceeds of such Ratable Loan prior to the disbursement of the same to Borrower. If, and to the extent, a Ratable Loan is not requested prior to the earliest of the Ratable Loan Maturity Date, the last calendar day of the month in which such Swingline Loan is made, or the end of the five (5) Banking Day period after such Swingline Loan was made, or unless Borrower shall have notified Administrative Agent and the Swingline Lenders prior to 1:00 p.m. (New York City time) on the third (3rd) Banking Day after such Swingline Loan was made that Borrower intends to reimburse Swingline Lender for the amount of such Swingline Loan with funds

 

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other than proceeds of the Ratable Loans, Borrower shall be deemed to have requested a Ratable Loan comprised entirely of Base Rate Loans in the amount of the applicable Swingline Loan then outstanding, the proceeds of which shall be used to repay such Swingline Loan to Swingline Lenders. In addition, if (x) Borrower does not repay a Swingline Loan on or prior to the end of such five (5) Banking Day period, or (y) a Default or Event of Default shall have occurred during such five (5) Banking Day period, a Swingline Lender may, at any time, in its sole discretion, by written notice to Borrower and Administrative Agent, demand repayment of all Swingline Loans by way of a Ratable Loan, in which case Borrower shall be deemed to have requested a Ratable Loan comprised entirely of Base Rate Loans in the amount of such Swingline Loans then outstanding, the proceeds of which shall be used to repay such Swingline Loans to Swingline Lenders. Any Ratable Loan which is deemed requested by Borrower in accordance with this Section 2.03(b)(3) is hereinafter referred to as a “Mandatory Borrowing”. Each Bank hereby irrevocably agrees to make Ratable Loans promptly upon receipt of notice from a Swingline Lender or Administrative Agent of any such deemed request for a Mandatory Borrowing in the amount and in the manner specified in the preceding sentences and on the date such notice is received by such Bank (or the next Banking Day if such notice is received after 12:00 p.m. (New York City time)) notwithstanding (I) the amount of the Mandatory Borrowing may not comply with the minimum amount of Ratable Loans otherwise required hereunder, (II) whether any conditions specified in Section 4.02 are then satisfied, (III) whether a Default or an Event of Default then exists, (IV) failure of any such deemed request for a Ratable Loan to be made by the time otherwise required in Section 2.05, (V) the date of such Mandatory Borrowing (provided that such date must be a Banking Day), or (VI) any termination of the Loan Commitments immediately prior to such Mandatory Borrowing or contemporaneously therewith; provided, however, that no Bank shall be obligated to make Ratable Loans in respect of a Mandatory Borrowing if a Default or an Event of Default then exists and the applicable Swingline Loan was made by Swingline Lenders without receipt of a written notice of borrowing in the form specified in Section 2.03(b)(1) or after Administrative Agent has delivered a notice of Default or Event of Default which has not been rescinded.

 

(4)                                 Purchase of Participations. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to Borrower), then each Ratable Loan Bank hereby agrees that it shall forthwith purchase (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payment received from Borrower on or after such date and prior to such purchase) from Swingline Lenders such participations in the outstanding Swingline Loans as shall be necessary to cause each such Ratable Loan Bank to share in such Swingline Loans ratably based upon its Pro Rata Share (determined before giving effect to any termination of the Loan Commitments), provided that (A) all interest payable on the Swingline Loans with respect to any participation shall be for the account of Swingline Lenders until but excluding the day upon which the Mandatory Borrowing would otherwise have occurred, and (B) in the event of a delay between the day upon which the Mandatory Borrowing would otherwise have occurred and the time any purchase of a participation pursuant to this sentence is actually made, the purchasing

 

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Ratable Loan Bank shall be required to pay to Swingline Lenders interest on the principal amount of such participation for each day from and including the day upon which the Mandatory Borrowing would otherwise have occurred to but excluding the date of payment for such participation, at the rate equal to the Federal Funds Effective Rate, for the two (2) Banking Days after the date the Mandatory Borrowing would otherwise have occurred, and thereafter at a rate equal to the Base Rate. Notwithstanding the foregoing, no Ratable Loan Bank shall be obligated to purchase a participation in any Swingline Loan if a Default or an Event of Default then exists and such Swingline Loan was made by Swingline Lenders without receipt of a written notice of borrowing in the form specified in Section 2.03(b)(1) or after Administrative Agent has delivered a notice of Default or Event of Default which has not been rescinded.

 

(c)                                  Interest Rate. Each Swingline Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Swingline Loan is made until the date it is repaid, at a rate per annum equal to the Base Rate plus the Applicable Margin for Base Rate Loans.

 

(d)                                 Replacement and Resignation of Swingline Lender.  Any Swingline Lender may be replaced at any time by written agreement among Borrower, Administrative Agent, the replaced Swingline Lender and the successor Swingline Lender.  Administrative Agent shall notify the Ratable Loan Banks of any such replacement of a Swingline Lender.  At the time any such replacement shall become effective, Borrower shall pay all unpaid interest accrued for the account of the replaced Swingline Lender pursuant to Section 2.03(c).  From and after the effective date of any such replacement, (x) the successor Swingline Lender shall have all the rights and obligations of the replaced Swingline Lender under this Agreement with respect to Swingline Loans made thereafter and (y) references herein to the term “Swingline Lender” shall be deemed to refer to such successor or to any previous Swingline Lender, or to such successor and all previous Swingline Lenders and all other Swingline Lenders, as the context shall require.  After the replacement of a Swingline Lender hereunder, the replaced Swingline Lender shall remain a party hereto and shall continue to have all the rights and obligations of a Swingline Lender under this Agreement with respect to Swingline Loans made by it prior to its replacement, but shall not be required to make additional Swingline Loans.  Subject to the appointment and acceptance by Administrative Agent and Borrower of a successor Swingline Lender, any Swingline Lender may resign as a Swingline Lender at any time upon thirty days’ prior written notice to Administrative Agent, Borrower and the Ratable Loan Banks, in which case, such Swingline Lender shall be replaced as provided above.

 

SECTION 2.04.  Advances, Generally.  The amount of each advance hereunder shall, subject to Section 2.13, be at least One Million Dollars ($1,000,000) (unless less than One Million Dollars ($1,000,000) is available for disbursement pursuant to the terms hereof at the time of any advance, in which case the amount of such advance shall be equal to such remaining availability) and in an integral multiple of One Hundred Thousand Dollars ($100,000). Additional restrictions on the amounts and timing of, and conditions to the making of, advances of Bid Rate Loans and Swingline Loans are set forth in Sections 2.02 and 2.03, respectively.

 

Each advance shall be subject, in addition to the limitations and conditions applicable to advances of the Loans generally, to Administrative Agent’s receipt, in accordance with the

 

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timing requirements of Section 2.05 with respect to requests for advances, a Notice of Borrowing.

 

SECTION 2.05.  Procedures for Advances.  In the case of advances of Ratable Loans and Term Loans, Borrower shall submit to Administrative Agent a Notice of Borrowing for each advance, stating the date of the Loan, the amount of the Loan, the type of Loan and, in the case of LIBOR Loans, the initial Interest Period for such LIBOR Loans, no later than 11:00 a.m. (New York time) on the date, in the case of advances of Base Rate Loans, which is the proposed date of such Base Rate Loan, and, in the case of advances of LIBOR Loans, which is three (3) Banking Days prior to the date such advance is to be made. In the case of advances of Bid Rate Loans, Borrower shall submit a Bid Rate Quote Request at the time specified in Section 2.02.  In the case of advances of Swingline Loans, Borrower shall submit a notice of borrowing at the time specified in Section 2.03.  Administrative Agent, upon its receipt of the Notice of Borrowing, will so notify the Ratable Loan Banks by facsimile. Not later than 11:30 a.m. (New York time) on the date of each advance (or 1:00 p.m. (New York time) in the case of a Base Rate Loan for which Borrower has made a Loan request on such date), each applicable Bank shall, through its Applicable Lending Office and subject to the conditions of this Agreement, make the amount to be advanced by it on such day available to Administrative Agent, at Administrative Agent’s Office and in immediately available funds for the account of Borrower.  The amount so received by Administrative Agent shall, subject to the conditions of this Agreement, be made available to Borrower, in immediately available funds, by Administrative Agent’s to an account designated by Borrower.

 

SECTION 2.06.  Interest Periods; Renewals.  In the case of the LIBOR Loans, Borrower shall select an Interest Period in a Notice of Borrowing of any duration in accordance with the definition of Interest Period in Section 1.01, subject to the following limitations: (1) no Interest Period may extend beyond the applicable Maturity Date for that type of Loan; (2) if an Interest Period would end on a day which is not a Banking Day, such Interest Period shall be extended to the next Banking Day, unless such Banking Day would fall in the next calendar month, in which event such Interest Period shall end on the immediately preceding Banking Day; (3) only eight (8) discrete segments of a Ratable Loan Bank’s Ratable Loan bearing interest at a LIBOR Interest Rate for a designated Interest Period pursuant to a particular Election, Conversion or Continuation, may be outstanding at any one time (each such segment of each Ratable Loan Bank’s Ratable Loan corresponding to a proportionate segment of each of the other Ratable Loan Banks’ Ratable Loans) and (4) only five (5) discrete segments of a Term Loan Bank’s applicable Term Loans bearing interest at a LIBOR Interest Rate for a designated Interest Period pursuant to a particular Election, Conversion or Continuation, may be outstanding at any one time (each such segment of each Term Loan Bank’s applicable Term A-1 Loans and Term A-2 Loans corresponding to a proportionate segment of each of the other Term Loan Banks’ applicable Term A-1 Loans and Term A-2 Loans).

 

Upon notice to Administrative Agent as provided in Section 2.14, Borrower may Continue any LIBOR Loan on the last day of the Interest Period of the same or different duration in accordance with the limitations provided above.

 

The parties understand that during a Leverage Pricing Period the applicable interest rate for the Obligations and certain fees set forth herein may be determined and/or adjusted from time

 

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to time based upon certain financial ratios and/or other information to be provided or certified to the Banks by Borrower (the “Borrower Information”).  If it is subsequently determined that any such Borrower Information was incorrect (for whatever reason, including without limitation because of a subsequent restatement of earnings by Borrower) at the time it was delivered to Administrative Agent, and if the applicable interest rate or fees calculated for any period during a Leverage Pricing Period were lower than they should have been had the correct information been timely provided, then, such interest rate and such fees for such period shall be automatically recalculated using correct Borrower Information.  Administrative Agent shall promptly notify Borrower in writing of any additional interest and fees due because of such recalculation, and Borrower shall pay such additional interest or fees due to Administrative Agent, for the account of each Bank, within 5 Banking Days of receipt of such written notice.  Any recalculation of interest or fees required by this provision shall survive for a period of one year following the termination of this Agreement, and this provision shall not in any way limit any of Administrative Agent’s, a Fronting Bank’s, or any Bank’s other rights under this Agreement.

 

SECTION 2.07.  Interest.  Borrower shall pay interest to Administrative Agent for the account of the applicable Bank, on the outstanding and unpaid principal amount of the Loans, at a rate per annum as follows: (1) for Base Rate Loans at a rate equal to the Base Rate plus the Applicable Margin; (2) for LIBOR Loans at a rate equal to the applicable LIBOR Interest Rate plus the Applicable Margin; and (3) for Bid Rate Loans at a rate equal to the applicable LIBOR Bid Rate. Any principal amount not paid when due (when scheduled, at acceleration or otherwise) shall bear interest thereafter, payable on demand, at the Default Rate and, with respect to any other Obligation that is not paid when due (when scheduled, at acceleration or otherwise), shall bear interest thereafter, payable on demand, at the Default Rate applicable to Base Rate Loans.

 

The interest rate on Base Rate Loans shall change when the Base Rate changes. Interest on Base Rate Loans, LIBOR Loans and Bid Rate Loans shall not exceed the maximum amount permitted under applicable law. Interest shall be calculated for the actual number of days elapsed on the basis of a year consisting of three hundred sixty (360) days, except interest on Base Rate Loans shall be computed on the basis of a year of 365 or 366 days, as applicable.

 

Accrued interest shall be due and payable in arrears, (x) in the case of Base Rate Loans, on the first Banking Day of each calendar month and (y) in the case of both LIBOR Loans and Bid Rate Loans, at the expiration of the Interest Period applicable thereto, but no less frequently than once every three (3) months determined on the basis of the first (1st) day of the Interest Period applicable to the Loan in question; provided, however, that interest accruing at the Default Rate shall be due and payable on demand.

 

SECTION 2.08.  Fees.

 

(a)                                 Borrower shall, commencing as of the Closing Date, pay to Administrative Agent for the account of each Ratable Loan Bank a facility fee computed, on the daily Ratable Loan Commitment of such Bank, by multiplying the aggregate Ratable Loan Commitments on such day by an amount equal to the daily Facility Fee, calculated on the basis of a year of three hundred sixty (360) days for the actual number of days elapsed. The accrued facility fee shall be due and payable in arrears on the first Banking Day of January, April, July and October of each

 

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year, commencing on the first such date after the Closing Date, and upon the Ratable Loan Maturity Date (as may be accelerated) or earlier termination of the Ratable Loan Commitments.

 

(b)                                 Borrower shall, commencing on the 91st day following the Closing Date, pay to Administrative Agent for the account of each Term A-1 Bank an unused fee equal to the product, computed on a daily basis, of (x) the unused portion of the Total Term A-1 Loan Commitment then in effect and (y) the per annum rate of 0.150%, calculated on the basis of a year of three hundred sixty (360) days for the actual number of days elapsed. The accrued unused fee shall be due and payable in arrears on the first Banking Day of January, April, July and October of each year, commencing on the first such date after the 91st day following the Closing Date, and upon the Final Term A-1 Loan Availability Date (as may be accelerated) or earlier termination of the Term A-1 Loan Commitments.

 

(c)                                  Borrower shall, commencing on the 91st day following the Closing Date, pay to Administrative Agent for the account of each Term A-2 Bank an unused fee equal to the product, computed on a daily basis, of (x) the unused portion of the Total Term A-2 Loan Commitment then in effect and (y) the per annum rate of 0.150%, calculated on the basis of a year of three hundred sixty (360) days for the actual number of days elapsed. The accrued unused fee shall be due and payable in arrears on the first Banking Day of January, April, July and October of each year, commencing on the first such date after the 91st day following the Closing Date, and upon the Final Term A-2 Loan Availability Date (as may be accelerated) or earlier termination of the Term A-2 Loan Commitments.

 

SECTION 2.09.  Notes; Due at Maturity.  At the request of a Ratable Loan Bank, any Ratable Loans made by such Ratable Loan Bank under this Agreement shall be evidenced by a promissory note of Borrower in the form of EXHIBIT B-1 duly completed and executed by Borrower, in a principal amount equal to such Ratable Loan Bank’s Ratable Loan Commitment, payable to such Ratable Loan Bank for the account of its Applicable Lending Office (each such note, as the same may hereafter be amended, modified, extended, severed, assigned, substituted, renewed or restated from time to time, including any substitute note pursuant to Section 3.07 or 12.05, a “Ratable Loan Note”).  At the request of any Bank, any Bid Rate Loans made by such Bank under this Agreement shall be evidenced by a promissory note of Borrower substantially in the form of EXHIBIT B-2, duly completed and executed by Borrower, payable to such Bank for the account of its Applicable Lending Office (each such note, as the same may hereafter be amended, modified, extended, severed, assigned, substituted, renewed or restated from time to time, the “Bid Rate Loan Note”).  At the request of a Term Loan Bank, the tranche of Term Loans made by such Term Loan Bank under this Agreement shall be evidenced by a promissory note of Borrower in the form of EXHIBIT B-3 duly completed and executed by Borrower, in a principal amount equal to such Term Loan Bank’s Term A-1 Loan Commitment or Term A-2 Loan Commiment, as applicable, payable to such Term Loan Bank for the account of its Applicable Lending Office (each such note, as the same may hereafter be amended, modified, extended, severed, assigned, substituted, renewed or restated from time to time, including any substitute note pursuant to Section 3.07 or 12.05, a “Term Loan Note”).  A particular Bank’s Ratable Loan Note, Term Loan Note and Bid Rate Loan Note are referred to individually or collectively in this Agreement, as the context may require, as such Bank’s “Note”; all such Ratable Loan Notes, Term Loan Notes and Bid Rate Loan Notes are referred to collectively in this Agreement as the “Notes”.

 

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The Ratable Loans shall mature, and all outstanding principal and accrued interest and Obligations in respect thereof shall be paid in full, on the Ratable Loan Maturity Date, or, in the case of Swingline Loans, in accordance with Section 2.03, in either case as the same may be accelerated in accordance with this Agreement. The outstanding principal amount of each Bid Rate Loan evidenced by each Bid Rate Loan Note, and all accrued interest and other sums with respect thereto, shall become due and payable to the Bank making such Bid Rate Loan at the earlier of the expiration of the Interest Period applicable thereto or the Ratable Loan Maturity Date, as the same may be accelerated in accordance with this Agreement.  The Term A-1 Loans shall mature, and all outstanding principal and accrued interest and Obligations in respect thereof shall be paid in full, on the Term A-1 Loan Maturity Date, or as the same may be accelerated in accordance with this Agreement.  The Term A-2 Loans shall mature, and all outstanding principal and accrued interest and other Obligations in respect thereof shall be paid in full, on the Term A-2 Loan Maturity Date, as the same may be accelerated in accordance with this Agreement.

 

The date, amount, interest rate, type and duration of Interest Periods (if applicable) of each Loan made by each Bank to Borrower, and each payment made on account of the principal thereof, shall be evidenced by one or more accounts or records maintained by such Bank and by Administrative Agent in the ordinary course of business.  The accounts or records maintained by Administrative Agent and each Bank shall be conclusive absent manifest error.  Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of Borrower hereunder to pay any amount owing with respect to the Obligations.  In the event of any conflict between the accounts and records maintained by any Bank and the accounts and records of Administrative Agent in respect of such matters, the accounts and records of Administrative Agent shall control in the absence of manifest error.

 

In connection with a Refinancing Mortgage, Borrower shall deliver to Administrative Agent, a mortgage note, payable to Administrative Agent for the account of the applicable Banks receiving the benefit of, and which shall be secured by, the applicable Refinancing Mortgage. Such note shall be in such form as shall be requested by Borrower, subject to Administrative Agent’s reasonable approval. Each reference in this Agreement to the “Notes” shall be deemed to refer to and include any or all of such mortgage notes, as the context may require.

 

SECTION 2.10.  Prepayments.

 

(a)                                 Without prepayment premium or penalty (other than any applicable Prepayment Premium) but subject to Section 3.05, Borrower may, upon same Banking Day’s notice to Administrative Agent in the case of the Base Rate Loans, and at least three (3) Banking Days’ notice to Administrative Agent in the case of LIBOR Loans, which notice shall have been received not later than 11:00 a.m. (New York time) on such applicable date, prepay in whole or in part the Ratable Loans or any of the Term Loans; provided, that (1) any partial prepayment under the foregoing shall be in integral multiples of One Million Dollars ($1,000,000) and (2) each prepayment under the foregoing shall include, at Administrative Agent’s option, all interest accrued on the amount of principal prepaid to (but excluding) the date of prepayment.  Borrower shall have the right to prepay Bid Rate Loans only if so provided in the Bid Rate Loan Request, and otherwise with the consent of the Ratable Loan Bank or the Designated Lender that funded the Bid Rate Loan that Borrower desires to prepay. Borrower may, from time to time on any

 

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Banking Day so long as prior notice is given to Administrative Agent and Swingline Lender no later than 1:00 p.m. (New York City time) on the day on which Borrower intends to make such prepayment, prepay any Swingline Loans in whole or in part in amounts aggregating at least One Hundred Thousand Dollars ($100,000), and in an integral multiple of One Hundred Thousand Dollars ($100,000) (or, if less, the aggregate outstanding principal amount of all Swingline Loans then outstanding) by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment by initiating a wire transfer of the principal and interest on the Swingline Loans no later than 1:00 P.M. (New York City time) on such day and Borrower shall deliver a federal reference number evidencing such wire transfer to Administrative Agent as soon as available thereafter on such day.

 

(b)                                 Notwithstanding the foregoing, to the extent that Borrower makes a prepayment of principal of all or any portion of the Term A-2 Loans (whether voluntary or otherwise) prior to the second anniversary of the Closing Date, Borrower shall pay to Administrative Agent, for the ratable account of the Term A-2 Banks, a prepayment premium (the “Prepayment Premium”) equal to the percentage of the principal amount so prepaid set forth in the following table corresponding to the period during which such prepayment is made.  Such fee shall be due and payable on the date of any such prepayment:

 

Period

 

Prepayment
Premium

 

After Closing Date and prior to the 1-year anniversary of the Closing Date

 

2.0

%

On or after the 1-year anniversary of the Closing Date and prior to the 2-year anniversary of the Closing Date

 

1.0

%

 

The Loan Parties and the Term A-2 Banks expressly agree as follows:

 

(x)                                 (A)                               All amounts payable pursuant to this Section 2.10 are reasonable and are the product of an arm’s length transaction between sophisticated business people, ably represented by counsel; (B) all such amounts shall be payable notwithstanding the then prevailing market rates at the time payment is made; (C) there has been a course of conduct between the Banks and the Loan Parties giving specific consideration in this transaction for such agreement to pay all such amounts; (D) the Loan Parties, Administrative Agent and the Term A-2 Banks shall be estopped hereafter from claiming differently than as agreed to herein; (E) their agreement to pay all such amounts is a material inducement to the Banks to make the Loans, and (F) such amounts represents a good faith, reasonable estimate and calculation of the lost profits or damages of Administrative Agent and the Term A-2 Banks and it would be impractical and extremely difficult to ascertain the actual amount of damages to Administrative Agent and the Term A-2 Banks or profits lost by Administrative Agent and the Banks as a result of the occurrence of the events described in such Sections.

 

(y)                                 Any amounts payable in accordance with this Section 2.10 shall be presumed to be equal to the liquidated damages sustained by the Term A-2 Banks as the result of the occurrence of the events described in this Section and the Loan Parties agree that it is reasonable under the circumstances currently existing.  THE LOAN PARTIES EXPRESSLY WAIVE TO

 

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THE EXTENT PERMITTED BY APPLICABLE LAW THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR LAW THAT PROHIBITS OR MAY PROHIBIT THE COLLECTION OF ANY SUCH AMOUNTS IN CONNECTION WITH ANY ACCELERATION.

 

SECTION 2.11.  Method of Payment.

 

Borrower shall make each payment under this Agreement and under the Notes not later than 1:00 p.m. (New York time) on the date when due in Dollars to Administrative Agent at Administrative Agent’s Office in immediately available funds, without condition or deduction for any counterclaim, defense, recoupment or setoff. Borrower shall deliver federal reference number(s) evidencing the applicable wire transfer(s) to Administrative Agent as soon as available thereafter on such day. Administrative Agent will thereafter, on the day of its receipt of each such payment(s), cause to be distributed to each Bank (1) such Bank’s appropriate share (based upon the respective outstanding principal amounts and interest due under the Loans of the Banks) of the payments of principal and interest in like funds for the account of such Bank’s Applicable Lending Office; and (2) fees payable to such Bank by Borrower in accordance with the terms of this Agreement.  In the event Administrative Agent fails to pay such amounts to such Bank within one Business Day of receipt of such amounts, Administrative Agent shall pay interest on such amounts until paid at a rate per annum equal to the Federal Funds Effective Rate from time to time in effect.

 

Except to the extent provided in this Agreement, whenever any payment to be made under this Agreement or under the Notes is due on any day other than a Banking Day, such payment shall be made on the next succeeding Banking Day, and such extension of time shall in such case be included in the computation of the payment of interest and other fees, as the case may be.

 

SECTION 2.12.  Elections, Conversions or Continuation of Loans.

 

Subject to the provisions of Article III and Sections 2.06 and 2.13, Borrower shall have the right to Elect to have all or a portion of any advance of the Ratable Loans or Term Loans be LIBOR Loans, to Convert Base Rate Loans into LIBOR Loans, to Convert LIBOR Loans into Base Rate Loans, or to Continue LIBOR Loans as LIBOR Loans, at any time or from time to time, provided that: (1) Borrower shall give Administrative Agent notice of each such Election, Conversion or Continuation as provided in Section 2.14; and (2) a LIBOR Loan may be Continued or Converted only on the last day of the applicable Interest Period for such LIBOR Loan.  Except as otherwise provided in this Agreement, each Election, Continuation and Conversion shall be applicable to each Bank’s applicable Loans in accordance with its Pro Rata Share of such Loans.  Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing, Administrative Agent, at the request of the Required Banks, may require, by notice to Borrower, that (i) no outstanding Loan may be converted to or continued as a LIBOR Loan and (ii) unless repaid, each Loan shall be converted to a Base Rate Loan at the end of the Interest Period applicable thereto.

 

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SECTION 2.13.  Minimum Amounts.

 

With respect to the Ratable Loans and Term Loans as a whole, each Election and each Conversion thereof shall be in an amount at least equal to One Million Dollars ($1,000,000) and in integral multiples of One Hundred Thousand Dollars ($100,000) or such lesser amount as shall be available or outstanding, as the case may be.

 

SECTION 2.14.  Certain Notices Regarding Elections, Conversions and Continuations of Loans.

 

Notices by Borrower to Administrative Agent of Elections, Conversions and Continuations of LIBOR Loans shall be irrevocable and shall be effective only if received by Administrative Agent not later than 11:00 a.m. (New York time) on the number of Banking Days prior to the date of the relevant Election, Conversion or Continuation specified below:

 

Notice

 

Number of
Banking Days Prior

 

Conversions into or Continuances as Base Rate Loans

 

Same Banking Day

 

Elections of, Conversions into or Continuations as LIBOR Loans

 

Three (3)

 

 

Promptly following its receipt of any such notice, Administrative Agent shall so advise the applicable Banks by facsimile. Each such notice of Election shall specify the portion of the amount of the advance that is to be LIBOR Loans (subject to Section 2.13) and the duration of the Interest Period applicable thereto (subject to Section 2.06); each such notice of Conversion shall specify the LIBOR Loans or Base Rate Loans to be Converted; and each such notice of Conversion or Continuation shall specify the date of Conversion or Continuation (which shall be a Banking Day), the amount thereof (subject to Section 2.13) and the duration of the Interest Period applicable thereto (subject to Section 2.06). In the event that Borrower fails to Elect to have any portion of an advance of the Ratable Loans or Term Loans be LIBOR Loans, the portion of such advance for which a LIBOR Loan Election is not made shall constitute Base Rate Loans. Subject to the terms of the last sentence of Section 2.12, in the event that Borrower fails to Continue LIBOR Loans within the time period and as otherwise provided in this Section, such LIBOR Loans will be automatically Continued as LIBOR Loans with an Interest Period of one month on the last day of the then current applicable Interest Period for such LIBOR Loans.

 

SECTION 2.15.  Payments Generally.  If any Bank shall fail to make any payment required to be made by it pursuant to Section 2.03(b)(4), 2.17(h) or 10.05, then Administrative Agent may, in its discretion and notwithstanding any contrary provision hereof, (i) apply any amounts thereafter received by Administrative Agent for the account of such Bank for the benefit of Administrative Agent, the Swingline Lenders or the Fronting Banks to satisfy such Bank’s obligations to it under such Section until all such unsatisfied obligations are fully paid, and/or (ii) hold any such amounts in a segregated account as cash collateral for, and application to, any future funding obligations of such Bank under any such Section, in the case of each of clauses (i) and (ii) above, in any order as determined by Administrative Agent in its discretion.

 

SECTION 2.16.  Changes of Loan Commitments; Incremental Increases.

 

(a)                                 At any time, Borrower shall have the right, without premium or penalty, to terminate any unused Loan Commitments existing as of the date of such termination, in whole or

 

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in part, from time to time, provided that: (1) Borrower shall give notice of each such termination to Administrative Agent (which shall promptly notify each of the Banks holding such Loan Commitments) no later than 10:00 a.m. (New York time) on the date which is three (3) Banking Days prior to the effectiveness of such termination (it being understood that any notice of termination may be conditioned upon the consummation of any financing or acquisition or similar transaction and, to the extent such condition is not satisfied by the effective date specified therein, such notice of termination may be revoked or the effective date specified therein may be delayed); (2) (x) the Ratable Loan Commitments of each of the Ratable Loan Banks must be terminated (and, in the case of a partial termination, on a pro rata basis) (taking into account, however, Section 2.02(h)) simultaneously with those of the other Ratable Loan Banks, (y) the Term A-1 Loan Commitments of each of the Term A-1 Banks must be terminated (and, in the case of a partial termination, on a pro rata basis) (taking into account, however, Section 2.02(h)) simultaneously with those of the other Term A-1 Banks, and (z) the Term A-2 Loan Commitments of each of the Term A-2 Banks must be terminated (and, in the case of a partial termination, on a pro rata basis) (taking into account, however, Section 2.02(h)) simultaneously with those of the other Term A-2 Banks; and (3) each partial termination of the Loan Commitments in the aggregate shall be in an integral multiple of One Million Dollars ($1,000,000).  A reduction of the unused Ratable Loan Commitments pursuant to this Section 2.16(a) shall not effect a reduction in the Swingline Commitments (unless so elected by Borrower) until the aggregate unused Ratable Loan Commitments have been reduced to an amount equal to or less than the Swingline Commitments.

 

(b)           The Loan Commitments and the Swingline Commitment, to the extent terminated pursuant to Section 2.16(a), may not be reinstated.

 

(c)           Unless a Default or an Event of Default has occurred and is continuing, Borrower, by written notice to Administrative Agent, may request to increase the Ratable Loan Commitments, Term A-1 Loan Commitment or Term A-2 Loan Commitment or enter into one or more other tranches of revolving loans or term loans (each an “Incremental Increase”), in each case by/in an amount not less than Twenty Five Million Dollars ($25,000,000) per request and not more than Six Hundred Million Dollars ($600,000,000) in the aggregate (such that the aggregate amount of the Ratable Loan Commitments, the unused Term Loan Commitments and the aggregate outstanding principal amount of the Term Loans after any such Incremental Increase shall never exceed Two Billion Dollars ($2,000,000,000)); provided that (a) any such request shall be accompanied by a certificate from Borrower confirming that the representations and warranties of Borrower and each other Loan Party contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the date of the requested Incremental Increase (except in those cases where such representation or warranty expressly relates to an earlier date or is qualified as to “materiality”, “Material Adverse Change” or similar language (which shall be true and correct in all respects as qualified therein) and except for changes in factual circumstances permitted hereunder), (b) any Bank which is a party to this Agreement prior to such request for an Incremental Increase, at its sole discretion, may elect to provide a portion of such Incremental Increase but shall not have any obligation to provide any portion of such Incremental Increase (and it being agreed and understood that Borrower or the arrangers of such Incremental Increase shall not be required to offer to or solicit from any existing Bank the opportunity to provide a portion of such Incremental Increase), and (c) to the extent that a Bank does not elect, or is not offered, to provide any part of a requested

 

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Incremental Increase, the Lead Arrangers shall use commercially reasonable efforts to locate additional Qualified Institutions willing to hold commitments for the requested Incremental Increase, and Borrower may also identify additional Qualified Institutions willing to hold commitments for the requested Incremental Increase; provided however that Administrative Agent and, in the case of an Incremental Increase in the aggregate Ratable Loan Commitments, each Swingline Lender and each Fronting Bank, shall have the right to approve any such additional Qualified Institutions, which approval will not be unreasonably withheld or delayed.  In the event that the Banks or additional Qualified Institutions commit to any such Incremental Increase, the Loan Commitments of the Banks shall be increased (as applicable), the Pro Rata Shares of the Banks shall be adjusted, new Notes shall be issued, Borrower shall make such borrowings and repayments as shall be necessary to effect the reallocation of the Loans so that the Loans are held by the Banks in accordance with their Pro Rata Shares after giving effect to such Incremental Increase, and other changes shall be made to the Loan Documents as may be necessary to reflect the aggregate amount, if any, by which the Banks or additional Qualified Institutions have agreed to increase their respective Loan Commitments or make new Loan Commitments in response to Borrower’s request for an Incremental Increase pursuant to this Section 2.16(c), in each case without the consent of the Banks other than those Banks providing such Incremental Increase. The fees payable by Borrower upon any such Incremental Increase shall be agreed upon by the Lead Arrangers and Borrower at the time of such increase.  Any Incremental Increase (i) shall rank pari passu in right of payment with the applicable Loans hereunder, (ii) shall not mature earlier than, (A) with respect to an Incremental Increase of the Ratable Loan Commitments or in the form of a new tranche of revolving loans, the applicable Maturity Date for the Ratable Loan Commitments hereunder, (B) with respect to an Incremental Increase of the Term A-1 Loan Commitments or Term A-2 Loan Commitments, the applicable Maturity Date for such respective Term Loans, or (C) with respect to an Incremental Increase in the form of a new tranche of term loans, the applicable Maturity Date for the Term A-2 Loans and (iii) all other terms of such Incremental Increase (other than the maturity date and matters in relation to pricing and fees, including, without limitation, interest rate, facility fees, commitment fees, prepayment premiums, upfront fees, arranger fees, or other similar fees applicable to such Incremental Increase) that apply prior to the Maturity Date of the applicable Loans, if not consistent with the terms of the applicable Loans hereunder, shall be reasonably acceptable to Administrative Agent.  In connection with any Incremental Increase pursuant to this Section 2.16, any Bank becoming a party hereto shall (1) execute such documents and agreements as Administrative Agent may reasonably request and (2) in the case of any Bank that is organized under the laws of a jurisdiction outside of the United States of America, provide to Administrative Agent, its name, address, tax identification number and/or such other information as shall be necessary for Administrative Agent to comply with “know your customer” and anti-money laundering rules and regulations, including without limitation, the Patriot Act.

 

Notwithstanding the foregoing, nothing in this Section 2.16(c) shall constitute or be deemed to constitute an agreement by any Bank to increase its Loan Commitment hereunder.

 

SECTION 2.17.  Letters of Credit.

 

(a)           Borrower, by notice to Administrative Agent and the applicable Fronting Bank, may request, in lieu of advances of proceeds of the Ratable Loans, that such Fronting Bank issue unconditional, irrevocable standby letters of credit in Dollars (each, a “Letter of Credit”) for the

 

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account of Borrower or its designee (which shall be an Affiliate of Borrower) (it being understood that the issuance of a Letter of Credit for the account of a designee shall not in any way relieve Borrower of any of its obligations hereunder), payable by sight drafts, for such beneficiaries and with such other terms as Borrower shall specify. Unless the applicable Fronting Bank has received written notice from Administrative Agent, not less than one (1) Banking Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Section 4.02 shall not have been satisfied, then, subject to the terms and conditions hereof, such Fronting Bank, on the requested date, shall issue a Letter of Credit for the account of Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with such Fronting Bank’s usual and customary business practices. Promptly upon issuance of a Letter of Credit, the applicable Fronting Bank shall notify Administrative Agent and Administrative Agent shall notify each of the Banks by telephone or by facsimile.  Notwithstanding anything herein to the contrary, the Fronting Banks shall have no obligation hereunder to issue, and shall not issue, any Letter of Credit the proceeds of which would be made available to any Person (i) to fund any activity or business of or with any Sanctioned Person, or in any Sanctioned Country or (ii) in any manner that would result in a violation of any Sanctions by any party to this Agreement.

 

(b)           To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the applicable Fronting Bank) to the Fronting Bank or Fronting Banks which are being requested to issue (or has or have issued, in the case of an amendment, renewal or extension) such Letter of Credit and Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension, but in any event no less than three Banking Days or such shorter period as the applicable Fronting Bank shall agree to) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Banking Day), the identity of the Fronting Bank(s) selected to issue such Letter of Credit, the date on which such Letter of Credit is to expire (which shall comply with paragraph (e) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit.  If requested by the Fronting Bank, Borrower also shall submit a letter of credit application on the Fronting Bank’s standard form in connection with any request for a Letter of Credit; provided that the provisions of this Agreement shall prevail if there is an inconsistency between this Agreement and such letter of credit application.  Borrower and the Fronting Banks shall use reasonable efforts, to the extent practical, to cause any Letters of Credit to be issued by the Fronting Banks on a proportionate basis in accordance with their respective Letter of Credit Commitments, although, for the avoidance of doubt, no single Letter of Credit will be required to be issued by more than one Fronting Bank unless the amount of such Letter of Credit will exceed the available Letter of Credit Commitment of the applicable Fronting Bank.  A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) (x) the aggregate undrawn amount of all outstanding Letters of Credit issued by the applicable Fronting Bank at such time plus (y) the aggregate amount of all drawings under Letters of Credit issued by such Fronting Bank that have not yet been reimbursed by or on behalf of Borrower (including, for

 

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clarity, by means of advances of Loans pursuant to this Agreement) at such time shall not exceed its Letter of Credit Commitment (unless agreed to by such Fronting Bank), (ii) the aggregate LC Exposure at such time shall not exceed $150,000,000 (as such amount may be reduced by written notice from Borrower consistent with Section 2.16(a) so long as the outstanding Letters of Credit do not exceed such reduced amount), (iii) the Total Ratable Credit Exposure plus the aggregate outstanding principal amount of all Bid Rate Loans shall not exceed the aggregate amount of the Ratable Loan Commitments, and (iv) the amount of such Letter of Credit shall not exceed the excess of the Fronting Bank’s Loan Commitment minus the sum of the outstanding principal amount of such Fronting Bank’s Ratable Loans, Swingline Exposure and LC Exposure at such time. Borrower may, at any time and from time to time, reduce the Letter of Credit Commitment of any Fronting Bank with the consent of such Fronting Bank; provided that Borrower shall not reduce the Letter of Credit Commitment of any Fronting Bank if, after giving effect of such reduction, the conditions set forth in clauses (i) through (iv) of this paragraph (b) shall not be satisfied.  The amount of each Letter of Credit issued and outstanding shall effect a reduction, by an equal amount, of the Available Ratable Commitment as provided in Section 2.01(b) (such reduction to be allocated to each Ratable Loan Bank’s Ratable Loan Commitment ratably in accordance with the Banks’ respective Pro Rata Shares).

 

(c)           The amount of each Letter of Credit shall be further subject to the conditions and limitations applicable to amounts of advances set forth in Section 2.04 and except as otherwise provided in clause (b) above, the procedures for the issuance of each Letter of Credit shall be the same as the procedures applicable to the making of advances as set forth in the first sentence of Section 2.05.

 

(d)           The Fronting Bank’s issuance of each Letter of Credit shall be subject to Borrower’s satisfaction of all conditions precedent to its entitlement to an advance of proceeds of the Loans.

 

(e)           Each Letter of Credit shall, unless approved by Administrative Agent and the applicable Fronting Bank, (i) expire no later than one (1) year after the date of its issuance (without regard to any automatic renewal provisions thereof), and (ii) be in a minimum amount of One Hundred Thousand Dollars ($100,000), or such lesser amount approved by the Fronting Bank. In no event shall a Letter of Credit expire later than the first anniversary of the Ratable Loan Maturity Date. Notwithstanding the foregoing, in the event that, with the approval of Administrative Agent and each Fronting Bank with a Letter of Credit then outstanding, any Letters of Credit are issued and outstanding on the date that is fourteen (14) days prior to the Ratable Loan Maturity Date (any such Letter of Credit being referred to as an “Extended Letter of Credit”), Borrower shall deliver to Administrative Agent on such date by wire transfer of immediately available funds a cash deposit in the amount of such Letters of Credit in accordance with the provisions of Section 2.17(i). To the extent Borrower fails to provide such cash deposit with respect to any Extended Letter of Credit by the date that is fourteen (14) days prior to the Ratable Loan Maturity Date, such failure shall be treated as a drawing under such Extended Letter of Credit (in an amount equal to the maximum stated amount of such Letter of Credit), which shall be reimbursed (or participations therein funded) by the Banks in accordance with Section 2.17(h), with the proceeds being utilized to provide such cash deposit for such Extended Letter of Credit.  Such funds shall be held by Administrative Agent and applied to repay the amount of each drawing under such Letters of Credit on or after the Ratable Loan Maturity Date.

 

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Such funds, with any interest earned thereon, will be returned to Borrower (and may be returned from time to time with respect to any applicable Letter of Credit) on the earlier of (a) the date that the applicable Letter of Credit or Letters of Credit expire in accordance with their terms; and (b) the date that the applicable Letter of Credit or Letters of Credit are cancelled; provided that upon the expiration or cancellation of an Extended Letter of Credit for which the Ratable Loan Banks reimbursed (or funded participations in) a drawing deemed to have occurred as provided in this Section 2.17 but in respect of which the Ratable Loan Banks have not otherwise received payment for the amount so reimbursed or funded, Administrative Agent shall promptly remit to the Ratable Loan Banks the amount of such funds so reimbursed or funded for such Extended Letter of Credit, pro rata in accordance with the respective unpaid reimbursements or funded participations of the Ratable Loan Banks in respect of such Extended Letter of Credit.  Notwithstanding the foregoing, Administrative Agent shall not be required to, and shall not, return any such funds to the extent doing so would result in the amount of such funds being less than the stated amount of all Extended Letters of Credit then outstanding.

 

(f)            In connection with, and as a further condition to the issuance of, each Letter of Credit, Borrower shall execute and deliver to the Fronting Bank an application for the Letter of Credit in such form, and together with such other documents, opinions and assurances, as the Fronting Bank shall reasonably require.

 

(g)           In connection with each Letter of Credit, Borrower hereby covenants to pay (i) to Administrative Agent, quarterly in arrears (on the first Banking Day of each calendar quarter following the issuance of such Letter of Credit), a fee, payable to Administrative Agent for the account of the Ratable Loan Banks, computed daily (calculated on the basis of a year of three hundred and sixty (360) days for the actual number of days elapsed) on the face amount of such Letter of Credit issued and outstanding at a rate per annum equal to the “Banks’ L/C Fee Rate” (as hereinafter defined) and (ii) to the Fronting Bank, payable quarterly in arrears, a fee, payable to the Fronting Bank for its own account, computed daily (calculated on the basis of a year of three hundred and sixty (360) days for the actual number of days elapsed) as mutually agreed between Borrower and such Fronting Bank.  Administrative Agent shall have no responsibility for the collection of the fee for any Letter of Credit that is payable to the Fronting Bank. For purposes of this Agreement, the “Banks’ L/C Fee Rate” shall mean, provided no Event of Default has occurred and is continuing, a rate per annum (calculated on the basis of a year of three hundred and sixty (360) days for the actual number of days elapsed) equal to the Applicable Margin for Ratable Loans that are LIBOR Loans minus 0.125% and, in the event an Event of Default has occurred and is continuing, a rate per annum (calculated on the basis of a year of three hundred and sixty (360) days for the actual number of days elapsed) equal to 2%. It is understood and agreed that the last installment of the fees provided for in this paragraph (g) with respect to any particular Letter of Credit shall be due and payable on the first day of the calendar quarter following the surrender or cancellation, of such Letter of Credit.

 

(h)           The Fronting Bank shall promptly notify Administrative Agent of any drawing under a Letter of Credit issued by such Fronting Bank. The parties hereto acknowledge and agree that, immediately upon notice from Administrative Agent of any drawing under a Letter of Credit, each Ratable Loan Bank shall, notwithstanding the existence of a Default or Event of Default or the non-satisfaction of any conditions precedent to the making of an advance of the Loans, advance proceeds of its Ratable Loan, in an amount equal to its Pro Rata Share of such

 

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drawing, which advance shall be made to Administrative Agent for disbursement to the Fronting Bank issuing such Letter of Credit to reimburse the Fronting Bank, for its own account, for such drawing, all in satisfaction of Borrower’s obligation to reimburse such drawing. Each of the Ratable Loan Banks further acknowledges that its obligation to fund its Pro Rata Share of drawings under Letters of Credit as aforesaid shall survive the Ratable Loan Banks’ termination of this Agreement or enforcement of remedies hereunder or under the other Loan Documents. If any Ratable Loan cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under any applicable bankruptcy law with respect to Borrower), then Borrower shall immediately reimburse such drawing by paying to Administrative Agent the amount of such drawing and each of the Ratable Loan Banks shall purchase (on the date such Ratable Loan would otherwise have been made) from the Fronting Bank a participation interest in any unreimbursed drawing in an amount equal to its Pro Rata Share of such unreimbursed drawing.  Promptly following any change in Letters of Credit outstanding, the applicable Fronting Bank shall deliver to Administrative Agent, which shall promptly deliver the same to each Ratable Loan Bank and Borrower, a notice describing the aggregate amount of all Letters of Credit outstanding at such time.  Upon the request of any Ratable Loan Bank from time to time, such Fronting Bank shall deliver any other information reasonably requested by such Ratable Loan Bank with respect to each Letter of Credit then outstanding.  Other than as set forth in this subsection, no Fronting Bank shall have any duty to notify the Ratable Loan Banks regarding the issuance or other matters regarding Letters of Credit issued hereunder.  The failure of any Fronting Bank to perform its requirements under this subsection shall not relieve any Ratable Loan Bank from its obligations under this subsection (h).

 

(i)            Borrower agrees (a), upon and during the occurrence of an Event of Default and within one (1) Banking Day following the written request of Administrative Agent or the Required Ratable Loan Banks (or automatically upon an Event of Default under Section 9.01(5)) and (b) as required by Section 2.17(e) with respect to Extended Letters of Credit, (x) to deposit with Administrative Agent cash collateral in the amount of all the outstanding Letters of Credit (“Cash Collateral”), which Cash Collateral is hereby pledged and shall be held by Administrative Agent for the benefit of the Ratable Loan Banks and the Fronting Banks in an account as security for Borrower’s obligations in connection with the Letters of Credit and (y) to execute and deliver to Administrative Agent such documents as Administrative Agent requests to confirm and perfect the assignment of such Cash Collateral and such account to Administrative Agent for the benefit of the Ratable Loan Banks.  In addition, at any time that there shall exist a Defaulting Lender, within one (1) Banking Day upon the written request of Administrative Agent or any Fronting Bank that has issued a Letter of Credit, Borrower shall deliver to Administrative Agent Cash Collateral in an amount sufficient to cover all Fronting Exposure (after giving effect to Section 12.20(d) and any Cash Collateral provided by such Defaulting Lender). All Cash Collateral (other than credit support not constituting funds subject to deposit) shall be maintained in blocked, interest bearing deposit accounts at Administrative Agent.  Borrower, and to the extent provided by any Bank, such Bank, hereby grants to (and subjects to the control of) Administrative Agent, for the benefit of Administrative Agent, the Fronting Banking and the Banks, and agrees to maintain, a first priority security interest in all such cash, deposit accounts and all balances therein, and all other property so provided as collateral pursuant hereto, and in all proceeds of the foregoing, all as security for the obligations to which such Cash Collateral may be applied as set forth below. Notwithstanding anything to the contrary contained in this

 

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Agreement, Cash Collateral provided hereunder in respect of Letters of Credit shall be held and applied to the satisfaction of the specific L/C Obligations for which the Cash Collateral was so provided. Cash Collateral (or the appropriate portion thereof) provided to reduce Fronting Exposure or other obligations shall be released promptly following (i) the elimination of the applicable Fronting Exposure or other obligations giving rise thereto (including by the termination of Defaulting Lender status of the applicable Bank) or (ii) Administrative Agent’s good faith determination that there exists excess Cash Collateral; provided, however, that such Cash Collateral furnished by Borrower to reduce Fronting Exposure shall not be released if Borrower is required to deposit Cash Collateral in accordance with the first sentence of this Section 2.17(i).

 

(j)            Intentionally Omitted.

 

(k)           A Fronting Bank may be replaced at any time by written agreement in a form reasonably satisfactory to Administrative Agent among Borrower, Administrative Agent, the replaced Fronting Bank and the successor Fronting Bank.  In addition, Borrower, by written agreement in a form reasonably satisfactory to Administrative Agent among Borrower, Administrative Agent and a Ratable Loan Bank delivered to Administrative Agent, may designate such Ratable Loan Bank as an additional Fronting Bank with such Letter of Credit Commitment as may be agreed on between such Ratable Loan Bank and Borrower provided that the sum of (x) all Letter of Credit Commitments plus (y) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (z) the aggregate amount of all drawings under Letters of Credit that have not yet been reimbursed by or on behalf of Borrower (including, for clarity, by means of advances of Loans pursuant to this Agreement) shall not exceed $150,000,000 (and the Letter of Credit Commitment of each other Fronting Bank shall be reduced pro rata by the amount of the additional Fronting Bank’s Letter of Credit Commitment).  Administrative Agent shall notify the Ratable Loan Banks of any such replacement of the Fronting Bank and any additional Fronting Bank.  At the time any such replacement of a Fronting Bank shall become effective, Borrower shall pay all unpaid fees accrued for the account of the replaced Fronting Bank pursuant to Section 2.17(g).  From and after the effective date of any such replacement or addition of a Fronting Bank, (x) the successor or additional (as applicable) Fronting Bank shall have all the rights and obligations of a Fronting Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (y) references herein to the term “Fronting Bank” shall be deemed to refer to such successor or additional Fronting Bank, or to any previous Fronting Bank, or to such successor or additional, and all previous, Fronting Banks and all other Fronting Banks, as the context shall require.  After the replacement of a Fronting Bank hereunder, the replaced Fronting Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Fronting Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.  Subject to the appointment and acceptance by Administrative Agent and Borrower of a successor Fronting Bank, any Fronting Bank may resign as a Fronting Bank at any time upon thirty days’ prior written notice to Administrative Agent, Borrower and the Ratable Loan Banks, in which case, such Fronting Bank shall be replaced as provided above.

 

(l)            Borrower’s obligation to reimburse drawings under Letters of Credit as provided in paragraph (h) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all

 

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circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Fronting Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, Borrower’s obligations hereunder.  Neither Administrative Agent, the Ratable Loan Banks nor the Fronting Bank shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Fronting Bank; provided that the foregoing shall not be construed to excuse the Fronting Bank from liability to Borrower to the extent of any direct damages (as opposed to special, indirect, consequential or punitive damages, claims in respect of which are hereby waived by Borrower to the extent permitted by applicable law) suffered by Borrower that are caused by the Fronting Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof.  The parties hereto expressly agree that, in the absence of gross negligence or wilful misconduct on the part of the Fronting Bank (as finally determined by a court of competent jurisdiction), the Fronting Bank shall be deemed to have exercised care in each such determination.  In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Fronting Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

 

(m)          No Fronting Bank shall be under any obligation to issue any Letter of Credit if:  (a) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such Fronting Bank from issuing the Letter of Credit, or any law applicable to such Fronting Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such Fronting Bank shall prohibit, or request that such Fronting Bank refrain from, the issuance of letters of credit generally or the Letter of Credit in particular or shall impose upon such Fronting Bank with respect to the Letter of Credit any restriction, reserve or capital requirement (for which such Fronting Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon such Fronting Bank any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which such Fronting Bank in good faith deems material to it; or (b) the issuance of the Letter of Credit would violate one or more policies of such Fronting Bank applicable to letters of credit generally.

 

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SECTION 2.18.  Extension Option.  Borrower may extend the Ratable Loan Maturity Date two (2) times only for a period of six (6) months per extension upon satisfaction of the following terms and conditions for each extension: (i) delivery by Borrower of a written notice to Administrative Agent (an “Extension Notice”) on or before a date that is not more than one hundred twenty (120) days nor less than one (1) month prior to the then-scheduled Ratable Loan Maturity Date, which Extension Notice Administrative Agent shall promptly deliver to the Banks, which Extension Notice shall include a certification dated as of the date of such Extension Notice signed by a duly authorized signatory of Borrower, stating, to the best of the certifying party’s knowledge, (x) all representations and warranties of Borrower and the other Loan Parties contained in this Agreement and in each of the other Loan Documents are true and correct in all material respects (and in all respects to the extent qualified by Material Adverse Change or other materiality qualifier) on and as of the date of such Extension Notice (except in those cases where such representation or warranty expressly relates to an earlier date, in which case such representations and warranties were true and correct as of such date, and except for changes in factual circumstances not prohibited under the Loan Documents), and (y) no Event of Default has occurred and is continuing; (ii) no Event of Default shall have occurred and be continuing on the original Ratable Loan Maturity Date (an “Extension Date”), and (iii) Borrower shall pay to Administrative Agent on or before such Extension Date a fee equal to (x) 0.0625% of the aggregate Ratable Loan Commitments for the first extension and (y) 0.075% of the aggregate Ratable Loan Commitments for the second extension, which fee shall be distributed by Administrative Agent pro rata to each of the Ratable Loan Banks based on each Ratable Loan Bank’s Pro Rata Share.  Borrower’s delivery of an Extension Notice shall be irrevocable.

 

SECTION 2.19.  Funds Transfer Disbursements.  Borrower hereby authorizes Administrative Agent to disburse the proceeds of any Loan made by the Banks or any of their Affiliates pursuant to the Loan Documents as requested by an authorized representative of Borrower to any of the accounts designated in the Disbursement Instruction Agreement.

 

SECTION 2.20.  Permitted Extension Amendments.

 

(a)           Borrower may (i) with respect to any requested extension of any of the Term Loans, at any time or from time to time not more than one hundred twenty (120) days and not less than thirty (30) days prior to any anniversary of the Closing Date and (ii) in the case of any requested extension of the Ratable Loan Maturity Date, (A) not more than one hundred twenty (120) days and not less than thirty (30) days prior to the then-current Ratable Loan Maturity Date and (B) solely to the extent Borrower shall have executed each extension option pursuant to Section 2.18, in the case of each of clauses (i) and (ii), by notice to Administrative Agent (who shall promptly notify the Banks under the applicable tranche), request that each Term A-1 Bank, Term A-2 Bank, and/or each Ratable Loan Bank extend (each such date on which an extension occurs, a “Requested Extension Date”) such Bank’s Maturity Date applicable to such class of Loans and/or Loan Commitment to the date that is one year after the applicable Maturity Date (or, if such one year anniversary date is not a Business Day, the immediately preceding Business Day) for such class of Loans and/or Loan Commitment then in effect for such Bank (the “Existing Maturity Date”), subject to the terms and conditions contained in such request which may include (i) an increase in the interest rate or other fees applicable solely with respect to the Loans and/or Loan Commitments in respect of which such extension is made to apply on and after the Requested Extension Date and (ii) the inclusion of additional fees to be payable to the

 

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Extending Lenders (as defined below) in connection with such extension (including any upfront fees).

 

(b)           Each Bank under the applicable class of Loans and/or Loan Commitments, acting in its sole and individual discretion, shall, by notice to Administrative Agent given not later than the date that is fifteen (15) days after the date on which Administrative Agent received Borrower’s extension request (the “Lender Notice Date”), advise Administrative Agent whether or not such Bank agrees to such extension under such class of Loans and/or Loan Commitments (each Bank that determines to so extend its applicable Maturity Date under such class of Loans and/or Loan Commitments, an “Extending Lender”).  Each Bank that determines not to so extend its applicable Maturity Date under such class of Loans and/or Loan Commitments (a “Non-Extending Lender”) shall notify Administrative Agent of such fact promptly after such determination (but in any event no later than the Lender Notice Date), and any Bank under such class of Loans and/or Loan Commitments that does not so advise Administrative Agent on or before the Lender Notice Date shall be deemed to be a Non-Extending Lender.  The election of any Bank under such class of Loans and/or Loan Commitments to agree to such extension shall not obligate any other Bank under the same class of Loans and/or Loan Commitments to so agree, and it is understood and agreed that no Bank shall have any obligation whatsoever to agree to any request made by Borrower for extension of the applicable Maturity Date.

 

(c)           Administrative Agent shall promptly notify Borrower of each Bank’s determination under this Section.

 

(d)           Borrower shall have the right, but shall not be obligated, on or before the applicable Maturity Date for any Non-Extending Lender to replace such Non-Extending Lender with, and add as “Ratable Loan Banks”, “Term A-1 Banks”, and/or “Term A-2 Banks”, as the case may be, under this Agreement in place thereof, one or more financial institutions under the applicable class of Loans and/or Loan Commitments (each, an “Additional Lender”) approved by Administrative Agent and the Fronting Banks in accordance with the procedures provided in Section 3.07, each of which Additional Lenders shall have entered into an Assignment and Assumption Agreement (in accordance with and subject to the restrictions contained in Section 12.05, with Borrower obligated to pay any applicable processing or recordation fee) with such Non-Extending Lender, pursuant to which such Additional Lenders shall, effective on or before the applicable Maturity Date for such Non-Extending Lender, assume Ratable Loan Commitments, Term A-1 Loans and/or Term A-2 Loans, as the case may be (and, if any such Additional Lender is already a Bank, its Ratable Loan Commitment, Term A-1 Loans and/or Term A-2 Loans, as applicable, shall be in addition to such Bank’s Ratable Loan Commitment, Term A-1 Loans and/or Term A-2 Loans, as applicable, hereunder on such date).  Prior to any Non-Extending Lender being replaced by one or more Additional Lenders pursuant hereto, such Non-Extending Lender may elect, in its sole discretion, by giving irrevocable notice thereof to Administrative Agent and Borrower (which notice shall set forth such Bank’s new applicable Maturity Date), to become an Extending Lender.  Administrative Agent may effect such amendments to this Agreement as are reasonably necessary to provide for any such extensions with the consent of Borrower but without the consent of any other Banks.

 

(e)           If (and only if) (x) with respect to the Ratable Loan Commitments, the total of the Ratable Loan Commitments of the Ratable Loan Banks that have agreed to extend their Ratable

 

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Loan Maturity Date and the new or increased Ratable Loan Commitments of any Additional Lenders is more than 50% of the aggregate amount of the Ratable Loan Commitments in effect immediately prior to the applicable Requested Extension Date, (y) with respect to the Term A-1 Loans, the total of the outstanding Term A-1 Loans of the Term A-1 Banks that have agreed to extend their Term A-1 Loan Maturity Date and the assumed Term A-1 Loans of any Additional Lenders is more than 50% of the aggregate amount of the Term A-1 Loans outstanding immediately prior to the applicable Requested Extension Date, or (z) with respect to the Term A-2 Loans, the total of the outstanding Term A-2 Loans of the Term A-2 Banks that have agreed to extend their Term A-2 Loan Maturity Date and the assumed Term A-2 Loans of any Additional Lenders is more than 50% of the aggregate amount of the Term A-2 Loans outstanding immediately prior to the applicable Requested Extension Date then, in each case, effective as of the applicable Reqested Extension Date, the applicable Maturity Date of each Extending Lender under the applicable class of Loans and/or Loan Commitments and of each Additional Lender shall be extended to the date that is one year after the Existing Maturity Date for such class of Loans and/or Loan Commitments (except that, if such date is not a Banking Day, such Maturity Date as so extended shall be the next preceding Banking Day) and each Additional Lender shall thereupon become a “Ratable Loan Bank”, “Term A-1 Bank”, and/or “Term A-2 Bank”, as applicable, for all purposes of this Agreement and shall be bound by the provisions of this Agreement as a Bank under such class of Loans and/or Loan Commitments hereunder and shall have the obligations of a Bank under such class of Loans and/or Loan Commitments hereunder.  For purposes of clarity, it is acknowledged and agreed that (x) from and after the six-month anniversary of the Closing Date, the Term A-1 Loan Maturity Date on any date of determination shall not be a date more than five (5) years after such date of determination and (y) the Term A-2 Loan Maturity Date on any date of determination shall not be a date more than seven (7) years after such date of determination, whether such determination is made before or after giving effect to any extension request made hereunder.

 

(f)                                   Notwithstanding the foregoing, (x) with respect to any extension of the Ratable Loan Maturity Date pursuant to this Section 2.20, Borrower shall have first exercised each of its extension options pursuant to Section 2.18 and (y) any extension of any Maturity Date pursuant to this Section 2.20 shall not be effective with respect to any Extending Lender unless:

 

(i)                                     no Default or Event of Default shall have occurred and be continuing on the applicable Requested Extension Date and immediately after giving effect thereto;

 

(ii)                                  the representations and warranties of Borrower and each other Loan Party contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the applicable Requested Extension Date (except in those cases where such representation or warranty expressly relates to an earlier date or is qualified as to “materiality”, “Material Adverse Change” or similar language (which shall be true and correct in all respects as qualified therein) and except for changes in factual circumstances permitted hereunder); and

 

(iii)                               Administrative Agent shall have received a certificate dated as of the applicable Requested Extension Date from Borrower (A) certifying the

 

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accuracy of the foregoing clauses (i) and (ii) and (B) certifying and attaching the resolutions adopted by Borrower approving or consenting to such extension.

 

(g)                                  On the applicable Maturity Date of each Non-Extending Lender, (i) with respect to any extension of the Ratable Loan Maturity Date, any Ratable Loan Commitment of each Non-Extending Lender shall automatically terminate and (ii) Borrower shall repay such Non-Extending Lender in accordance with Section 2.09 (and shall pay to such Non-Extending Lender all of the other Obligations owing to it under this Agreement) and after giving effect thereto shall prepay any Ratable Loans and/or Term Loans outstanding on such date (and pay any additional amounts required pursuant to Section 3.05) to the extent necessary to keep outstanding Loans under the applicable class of Loans ratable with any revised applicable percentages of the respective Banks under such class of Loans effective as of such date, and, with respect to the Ratable Loan Commitments, Administrative Agent shall administer any necessary reallocation of the Ratable Credit Exposures (without regard to any minimum borrowing, pro rata borrowing and/or pro rata payment requirements contained elsewhere in this Agreement).

 

(h)                                 This Section shall supersede any provisions in Sections 2.09, 10.14, 10.15, or 12.02 to the contrary.

 

ARTICLE III

 

YIELD PROTECTION; ILLEGALITY; ETC.

 

SECTION 3.01.  Additional Costs.  Borrower shall pay directly to each Bank or other Recipient from time to time on demand such amounts as such Bank or other Recipient may reasonably determine to be necessary to compensate it for any increased costs which such Bank or other Recipient determines are attributable to its making or maintaining a Loan, or its obligation to make or maintain a Loan, or its obligation to Convert a Loan hereunder, or any reduction in any amount receivable by such Bank or other Recipient hereunder in respect of its Loan(s) or such obligations (such increases in costs and reductions in amounts receivable being herein called “Additional Costs”), in each case resulting from any Regulatory Change which:

 

(1)                                 subjects any Recipient to any Taxes (other than (A) Indemnified Taxes, and (B) Excluded Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

 

(2)                                 (other than to the extent the LIBOR Reserve Requirement is taken into account in determining the LIBOR Rate at the commencement of the applicable Interest Period) imposes or modifies any reserve, special deposit, liquidity, deposit insurance or assessment, minimum capital, capital ratio or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Bank (including any Loan or any deposits referred to in the definition of “LIBOR Interest Rate”), or any commitment of such Bank (including such Bank’s Loan Commitment hereunder); or

 

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(3)                                 imposes any other condition, cost or expense (other than Taxes) affecting this Agreement or the Notes (or any of such extensions of credit or liabilities).

 

Without limiting the effect of the provisions of the first paragraph of this Section, in the event that, by reason of any Regulatory Change, any Bank becomes subject to restrictions on the amount of such a category of liabilities or assets which it may hold, then, if such Bank so elects by notice to Borrower (with a copy to Administrative Agent), the obligation of such Bank to permit Elections of, to Continue, or to Convert Base Rate Loans into, LIBOR Loans shall be suspended (in which case the provisions of Section 3.04 shall be applicable) until such Regulatory Change ceases to be in effect.

 

The obligations of Borrower under this Section shall survive the repayment of all amounts due under or in connection with any of the Loan Documents and the termination of the Loan Commitments in respect of the period prior to such termination.

 

Determinations and allocations by a Bank for purposes of this Section of the effect of any Regulatory Change pursuant to the first or second paragraph of this Section, on its costs or rate of return of making or maintaining its Loan or portions thereof or on amounts receivable by it in respect of its Loan or portions thereof, and the amounts required to compensate such Bank under this Section, shall be included in a calculation of such amounts given to Borrower and shall be conclusive absent manifest error.

 

Notwithstanding anything contained in this Article III to the contrary, Borrower shall only be obligated to pay any amounts due under this Section 3.01 or under Section 3.06 if, and a Bank shall not exercise any right under this Section 3.01 or Sections 3.02, 3.03, 3.04 or 3.06 unless, the applicable Bank is generally imposing a similar charge on, or otherwise similarly enforcing its agreements with, its other similarly situated borrowers. In addition, Borrower shall not be obligated to compensate any Bank under any such provision for any amounts attributable to any period which is more than 180 days prior to such Bank’s delivery of notice thereof to Borrower (except that if a Regulatory Change is retroactive, then such period shall be extended to include the period of retroactive effect, provided that such Bank delivered notice thereof to Borrower no later than 180 days after the date on which the Regulatory Change with such retroactive effect was made).

 

For purposes of this Section 3.01, the term “Bank” includes any Fronting Bank.

 

SECTION 3.02.  Alternate Rate of Interest.  If prior to the commencement of any Interest Period for a LIBOR Loan:

 

(a)                                 Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the LIBOR Interest Rate or the LIBOR Base Rate, as applicable, for such Interest Period; or

 

(b)                                 Administrative Agent is advised by the Required Banks (or, in the case of a Bid Rate Loan, the Bank that is required to make such Loan), as applicable, that the LIBOR Interest Rate or the LIBOR Base Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Banks (or Bank) of making or maintaining their Ratable Loans or Term Loans (or its Loan), as applicable, included in such borrowing for such Interest Period;

 

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then Administrative Agent shall give notice thereof to Borrower and the Banks by telephone or telecopy as promptly as practicable thereafter and, until Administrative Agent notifies Borrower and the Banks that the circumstances giving rise to such notice no longer exist, (i) any notice by Borrower of Election, Conversion or Continuation that requests the Conversion of any Loan to, or Continuation of any Loan as, a LIBOR Loan shall be ineffective, (ii) if Borrower requests a Ratable Loan, such Loan shall be made or Continued as a Base Rate Loan and (iii) any request by Borrower for a Bid Rate Loan shall be ineffective; provided that if the circumstances giving rise to such notice do not affect all the Banks, then requests by Borrower for Bid Rate Loans may be made to Banks that are not affected thereby.

 

SECTION 3.03.  Illegality.  Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Bank or its Applicable Lending Office to honor its obligation to make or maintain a LIBOR Loan or Bid Rate Loan hereunder, to allow Elections or Continuations of a LIBOR Loan or to Convert a Base Rate Loan into a LIBOR Loan, then such Bank shall promptly notify Administrative Agent and Borrower thereof and such Bank’s obligation to make or maintain a LIBOR Loan or Bid Rate Loan, or to permit Elections of, to Continue, or to Convert its Base Rate Loan into, a LIBOR Loan shall be suspended (in which case the provisions of Section 3.04 shall be applicable) until such time as such Bank may again make and maintain a LIBOR Loan or Bid Rate Loan.

 

SECTION 3.04.  Treatment of Affected Loans.  If the obligations of any Bank to make or maintain a LIBOR Loan or a Bid Rate Loan, or to permit an Election of a LIBOR Loan, to Continue its LIBOR Loan, or to Convert its Base Rate Loan into a LIBOR Loan, are suspended pursuant to Section 3.01 or 3.03 (each LIBOR Loan or Bid Rate Loan so affected being herein called an “Affected Loan”), such Bank’s Affected Loan shall be automatically Converted into a Base Rate Loan (or, in the case of an Affected Loan that is a Bid Rate Loan, the interest rate thereon shall be converted to the rate applicable to Base Rate Loans) on the last day of the then current Interest Period for the Affected Loan (or, in the case of a Conversion or conversion resulting from Section 3.03, on such earlier date as such Bank may specify to Borrower).

 

To the extent that such Bank’s Affected Loan has been so Converted (or the interest rate thereon so converted), all payments and prepayments of principal which would otherwise be applied to such Bank’s Affected Loan shall be applied instead to its Base Rate Loan (or to its Bid Rate Loan bearing interest at the converted rate) and such Bank shall have no obligation to Convert its Base Rate Loan into a LIBOR Loan.

 

SECTION 3.05.  Certain Compensation.  Other than in connection with a Conversion of an Affected Loan, Borrower shall pay to Administrative Agent for the account of the applicable Bank, upon the request of such Bank through Administrative Agent which request includes a calculation of the amount(s) due, such amount or amounts as shall be sufficient (in the reasonable opinion of such Bank) to compensate it for any loss, cost or expense which such Bank reasonably determines is attributable to:

 

(1)                                 any payment or prepayment of a LIBOR Loan or Bid Rate Loan made by such Bank, or any Conversion of a LIBOR Loan (or conversion of the rate of interest on a Bid Rate Loan) made by such Bank, in any such case on a date other than the last day of an applicable Interest Period, whether by reason of acceleration or otherwise;

 

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(2)                                 any failure by Borrower for any reason to Convert a LIBOR Loan or a Base Rate Loan or to Continue a LIBOR Loan, as the case may be, to be Converted or Continued by such Bank on the date specified therefor in the relevant notice under Section 2.14;

 

(3)                                 any failure by Borrower to borrow (or to qualify for a borrowing of) a LIBOR Loan or Bid Rate Loan which would otherwise be made hereunder on the date specified in the relevant Election notice under Section 2.14 or Bid Rate Quote acceptance under Section 2.02(e) given or submitted by Borrower; or

 

(4)                                 any failure by Borrower to prepay a LIBOR Loan or Bid Rate Loan on the date specified in a notice of prepayment.

 

Without limiting the foregoing, such compensation shall include an amount equal to the present value (using as the discount rate an interest rate equal to the rate determined under (2) below) of the excess, if any, of (1) the amount of interest (less the Applicable Margin) which otherwise would have accrued on the principal amount so paid, prepaid, Converted or Continued (or not Converted, Continued or borrowed) for the period from the date of such payment, prepayment, Conversion or Continuation (or failure to Convert, Continue or borrow) to the last day of the then current applicable Interest Period (or, in the case of a failure to Convert, Continue or borrow, to the last day of the applicable Interest Period which would have commenced on the date specified therefor in the relevant notice) at the applicable rate of interest for the LIBOR Loan or Bid Rate Loan provided for herein, over (2) the amount of interest (as reasonably determined by such Bank) based upon the interest rate which such Bank would have bid in the London interbank market for Dollar deposits, for amounts comparable to such principal amount and maturities comparable to such period. A determination of any Bank as to the amounts payable pursuant to this Section shall be conclusive absent manifest error.

 

The obligations of Borrower under this Section shall survive the repayment of all amounts due under or in connection with any of the Loan Documents and the termination of the Loan Commitments in respect of the period prior to such termination.

 

SECTION 3.06.  Capital Adequacy.  If any Bank shall have determined that, after the date hereof, due to any Regulatory Change or the adoption of, or any change in, any applicable law, rule or regulation regarding capital adequacy or liquidity ratios or requirements, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy or liquidity requirements (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank’s obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy and liquidity) by an amount deemed by such Bank to be material, then from time to time, within fifteen (15) days after demand by such Bank (with a copy to Administrative Agent), Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. A certificate of any Bank claiming compensation under this Section, setting forth in reasonable detail the

 

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basis therefor, shall be conclusive absent manifest error.  The obligations of Borrower under this Section shall survive the repayment of all amounts due under or in connection with any of the Loan Documents and the termination of the Loan Commitments in respect of the period prior to such termination.

 

SECTION 3.07.  Substitution of Banks.  If any Bank (an “Affected Bank”) (i) makes demand upon Borrower for (or if Borrower is otherwise required to pay) Additional Costs pursuant to Section 3.01, (ii) is unable to make or maintain a LIBOR Loan or Bid Rate Loan as a result of a condition described in Section 3.03 or clause (b) of Section 3.02, (iii) has any increased costs as described in Section 3.06, (iv) requires Borrower to pay any Indemnified Taxes or other amounts to such Bank or any Governmental Authority pursuant to Section 10.13, or (v) becomes a Defaulting Lender or a Non-Consenting Bank, Borrower may, at Borrower’s sole expense and effort within ninety (90) days of receipt of such demand or notice of the occurrence of an event described above in this Section 3.07 (provided (A) such 90-day limit shall not be applicable for a Defaulting Lender and (B) such 90-day period shall be extended for an additional period of 60 days if Borrower shall have attempted during such 90-day period to secure a Replacement Bank (as defined below) and shall be diligently pursuing such attempt), give written notice (a “Replacement Notice”) to Administrative Agent and to each Bank of Borrower’s intention to replace the Affected Bank with another financial institution (the “Replacement Bank”) designated in such Replacement Notice; provided, that in the case of any assignment resulting from a Bank becoming a Non-Consenting Bank, the Replacement Bank shall have consented to the applicable consent, approval, amendment or waiver; provided, further, that in the case of an Affected Bank that is not a Defaulting Lender or Non-Consenting Bank, if Borrower has been unable to obtain a Replacement Bank after using its commercially reasonable efforts to do so for a period of sixty (60) days, Borrower shall be permitted to prepay in full such Affected Bank’s Loans and to terminate such Affected Bank’s entire Loan Commitment so long as (A) no Default or Event of Default shall have ocurrred and be continuing at the time of such prepayment or immediately after giving effect thereto, (B) within thirty (30) days after its receipt of Borrower’s request therefor, such Affected Bank shall not have agreed to waive the payment of the Additional Costs, Indemnified Taxes or other amounts in question pursuant to Section 10.13 or the effect of the circumstances described in Section 3.03, in clause (b) of Section 3.02 or in Section 3.06 and (C) to the extent two or more Affected Banks are so prepaid and their Loan Commitments terminated, such Affected Banks’ aggregate Loan Commitments so terminated shall not exceed 5% of the total Loan Commitments before giving effect to such terminations, and such prepayments shall be made ratably in accordance with such Affected Banks’ respective Pro Rata Shares.

 

In the event Borrower shall elect to make a prepayment of an Affected Bank to the extent permitted in the final proviso of the preceding paragraph, then, so long as no Event of Default shall exist, Borrower may (notwithstanding the provisions of clause (2) of Section 2.16(a)) terminate the Affected Bank’s entire Loan Commitments, provided that in connection therewith it pays to the Affected Bank all outstanding principal and accrued and unpaid interest under the Affected Bank’s Loans, together with all other amounts, if any, due from Borrower to the Affected Bank, including all amounts properly demanded and unreimbursed under Sections 3.01, 3.05 or 10.13. After any replacement or termination, an Affected Bank shall remain entitled to the benefits of Sections 3.01, 3.06, 10.13 and 12.04 in respect of the period prior to such termination.

 

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In the event Borrower opts to give a Replacement Notice, and if Administrative Agent and, in the case of the replacement of a Ratable Loan Bank, each Fronting Bank and each Swingline Lender, shall promptly (and in any event, within thirty (30) days of its receipt of the Replacement Notice), notify Borrower and each Bank in writing that the Replacement Bank is reasonably satisfactory to Administrative Agent, then the Affected Bank shall, so long as no Event of Default shall exist, assign its Loans and all of its rights and obligations under this Agreement to the Replacement Bank, and the Replacement Bank shall assume all of the Affected Bank’s rights and obligations, pursuant to an agreement, substantially in the form of an Assignment and Assumption Agreement, executed by the Affected Bank and the Replacement Bank. In connection with such assignment and assumption, the Replacement Bank shall pay to the Affected Bank an amount equal to the outstanding principal amount of the Affected Bank’s Loans plus all interest accrued thereon, plus all other amounts, if any (other than the Additional Costs in question), then due and payable to the Affected Bank; provided, however, that prior to or simultaneously with any such assignment and assumption, Borrower shall have paid to such Affected Bank all amounts properly demanded and unreimbursed under Sections 3.01, 3.05 and 10.13. Upon the effective date of such assignment and assumption, the Replacement Bank shall become a Bank party to this Agreement and shall have all the rights and obligations of a Bank as set forth in such Assignment and Assumption Agreement, and the Affected Bank shall be released from its obligations hereunder, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this Section, Notes shall be issued to the Replacement Bank by Borrower in accordance with Section 2.09.  If the Replacement Bank is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to Borrower and Administrative Agent a certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 10.13. Each Replacement Bank shall be deemed to have made the representations contained in, and shall be bound by the provisions of, Section 10.13. After any assignment as provided in this paragraph, an Affected Bank shall remain entitled to the benefits of Sections 3.01, 3.06, 10.13 and 12.04 in respect of the period prior to such assignment.  The Affected Bank shall not be required to make any assignment described in this Section if, prior thereto, as a result of a waiver by such Affected Bank or otherwise, the circumstances entitling Borrower to require such assignment cease to apply.

 

Borrower, Administrative Agent and the Banks shall execute such modifications to the Loan Documents as shall be reasonably required in connection with and to effectuate the foregoing.

 

SECTION 3.08.  Obligation of Banks to Mitigate.  Each Bank agrees that, as promptly as practicable after such Bank has actual knowledge of the occurrence of an event or the existence of a condition that would cause such Bank to become an Affected Bank or that would entitle such Bank to receive payments under Sections 3.01, 3.02, 3.03, 3.06 or 10.13, it will, to the extent not inconsistent with any applicable legal or regulatory restrictions, use reasonable efforts at the cost and expense of Borrower (i) to make, issue, fund, or maintain the Loan Commitment of such Bank or the affected Loans of such Bank through another lending office of such Bank, or (ii) to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if as a result thereof the circumstances that would cause such Bank to be an Affected Bank would cease to exist or the additional amounts that would otherwise be required to be paid to

 

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such Bank pursuant to Sections 3.01, 3.02, 3.03, 3.06 or 10.13 would be reduced and if, as reasonably determined by such Bank in its sole discretion, the making, issuing, funding, or maintaining of such Loan Commitment or Loans through such other lending office or in accordance with such other measures, as the case may be, would not otherwise adversely affect such Loan Commitment or Loans or would not be otherwise disadvantageous to the interests of such Bank.

 

SECTION 3.09.  Usury.  In no event shall the amount of interest due or payable on the Loans or other Obligations exceed the maximum rate of interest allowed by applicable Law and, if any such payment is paid by Borrower or any other Loan Party or received by any Bank, then such excess sum shall be credited as a payment of principal, unless Borrower shall notify the respective Bank in writing that Borrower elects to have such excess sum returned to it forthwith.  It is the express intent of the parties hereto that Borrower not pay and the Banks not receive, directly or indirectly, in any manner whatsoever, interest in excess of that which may be lawfully paid by Borrower under applicable Law.  The parties hereto hereby agree and stipulate that the only charge imposed upon Borrower for the use of money in connection with this Agreement is and shall be the interest specifically described in Section 2.07 and, with respect to Swingline Loans, in Section 2.03(c).  Notwithstanding the foregoing, the parties hereto further agree and stipulate that all agency fees, syndication fees, facility fees, closing fees, letter of credit fees, underwriting fees, default charges, late charges, funding or “breakage” charges, increased cost charges, attorneys’ fees and reimbursement for costs and expenses paid by Administrative Agent or any Bank to third parties or for damages incurred by Administrative Agent or any Bank, in each case in connection with the transactions contemplated by this Agreement and the other Loan Documents, are charges made to compensate Administrative Agent or any such Bank for underwriting or administrative services and costs or losses performed or incurred, and to be performed or incurred, by Administrative Agent and the Banks in connection with this Agreement and shall under no circumstances be deemed to be charges for the use of money.  All charges other than charges for the use of money shall be fully earned and nonrefundable when due.

 

ARTICLE IV

 

CONDITIONS PRECEDENT

 

SECTION 4.01.  Conditions Precedent to the Loans.  The obligations of the Banks hereunder and the obligation of each Bank to make the Initial Advance hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 12.02):

 

(1)                                 Fees and Expenses. The payment of all fees owed to the Banks incurred in connection with the origination of the Loans and required to be paid as of the Closing Date and all expenses (including, without limitation, the reasonable and documented out-of-pocket fees and expenses of legal counsel of Administrative Agent) for which invoices have been presented to Borrower on or prior to the Closing Date;

 

(2)                                 Loan Agreement and Notes. This Agreement (including all schedules hereto, which shall be accurate as of the Closing Date), duly executed by Borrower, and

 

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the Notes for each of the Banks signatory hereto which has requested such Note, each duly executed by Borrower;

 

(3)                                 Pro Forma Compliance Certificate and Financial Projections. Receipt and review of pro forma compliance certificate of the type required by paragraph (3) of Section 6.09 and financial projections for General Partner’s consolidated operations calculated as of the most recent quarter ending at least 50 days prior to the Closing Date (or fiscal year ending at least 95 days prior to the Closing Date, whichever is later) and giving pro forma effect to the Combination Transactions;

 

(4)                                 Certificates of Limited Partnership/Trust, etc. A copy of the Certificate of Limited Partnership for Borrower, a copy of the articles of trust of General Partner and a copy of the certificate or articles of incorporation or formation, articles of organization, certificate of limited partnership, declaration of trust or other comparable organizational instrument (if any) of each other Loan Party, each certified by the appropriate Secretary of State or equivalent state official;

 

(5)                                 Agreements of Limited Partnership/Bylaws, etc. A copy of the Agreement of Limited Partnership for Borrower, a copy of the bylaws of General Partner and a copy of the by-laws, the operating agreement, the partnership agreement, or other comparable document in the case of ecah other Loan Party, including all amendments thereto, each certified by the Secretary or an Assistant Secretary (or other individual performing similar functions) of each Loan Party as being in full force and effect on the Closing Date;

 

(6)                                 Good Standing Certificates. A certified copy of a certificate from the Secretary of State or equivalent state official of the states where Borrower, General Partner and each other Loan Party are organized, dated as of the most recent practicable date, showing the good standing or partnership qualification of Borrower, General Partner and each other Loan Party;

 

(7)                                 Foreign Qualification Certificates. A certified copy of a certificate from the Secretary of State or equivalent state official of the state where Borrower, General Partner and each other Loan Party maintain their principal places of business, dated as of the most recent practicable date, showing the qualification to transact business in such state as a foreign limited partnership or foreign trust, as the case may be, for Borrower, General Partner and each other Loan Party, except where the failure to be so qualified would likely cause a Material Adverse Change to occur;

 

(8)                                 Resolutions. A copy of a resolution or resolutions adopted by the Board of Trustees of General Partner and all other corporate, partnership, member or other necessary action taken by each other Loan Party, certified by the Secretary or an Assistant Secretary of General Partner or such other Loan Party (or other individual performing similar functions) as being in full force and effect on the Closing Date, authorizing the Loans provided for herein and the execution, delivery and performance of the Loan Documents to be executed and delivered by General Partner, including on behalf of Borrower, and each other Loan Party hereunder;

 

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(9)                                 Incumbency Certificate. A certificate, signed by the Secretary or an Assistant Secretary of General Partner and each other Loan Party (or other individual performing similar functions) and dated the Closing Date, as to the incumbency, and containing the specimen signature or signatures, of the Persons authorized to execute and deliver the Loan Documents to be executed and delivered by it, Borrower and each other Loan Party hereunder;

 

(10)                          Solvency Certificate. A Solvency Certificate, duly executed, from Borrower;

 

(11)                          Opinion of Counsel for Borrower. Favorable opinions, dated as of the Closing Date, from counsels for Borrower, General Partner and the other Loan Parties, as to such customary matters as Administrative Agent may reasonably request;

 

(12)                          Disbursement Instruction Agreement. The Disbursement Instruction Agreement, duly executed by Borrower;

 

(13)                          Combination Transaction. The Combination Transaction shall have been consummated pursuant to and on the terms set forth in the Combination Agreement;

 

(14)                          Notice of Borrowing. To the extent an advance is to be made on the Closing Date, a Notice of Borrowing in accordance with Section 2.05;

 

(15)                          Certificate. The following statements shall be true and Administrative Agent shall have received a certificate dated as of the Closing Date signed by a Responsible Officer of Borrower stating, to the best of the certifying party’s knowledge, the following:

 

(A)                               All representations and warranties of Borrower and the other Loan Parties contained in this Agreement and in each of the other Loan Documents are true and correct on and as of the Closing Date as though made on and as of such date,

 

(B)                               No Default or Event of Default has occurred and is continuing; and

 

(C)                               On or prior to the Closing Date, the Combination Transaction shall have been consummated pursuant to and on the terms set forth in the Combination Agreement (as provided to Administrative Agent and the Banks on or prior to the Escrow Date, without giving effect to any amendment, waiver or other modification thereto after the Escrow Date that is adverse to the interests of the Banks in any material respect or could otherwise reasonably be expected to have a Material Adverse Effect);

 

(16)                          KYC Information.  Administrative Agent and each Bank shall have received all documentation and other information about Borrower, General Partner and the other Loan Parties as shall have been reasonably requested by Administrative Agent or such Bank that it shall have reasonably determined is required by regulatory

 

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authorities under applicable “know your customer” and anti-money laundering rules and regulations; provided, that the Banks shall have requested any such know-your-customer documentation at least ten (10) Banking Days prior to the Closing Date, and Borrower shall have delivered any such know-your-customer documentation at least seven (7) Banking Days prior to the Closing Date; provided, further, that to the extent that any such documentation shall not be available in executed and certified form prior to the Escrow Date, Borrower shall have delivered final and complete drafts of such documentation at least seven (7) Banking Days prior to the Escrow Date (with any non-material changes to such drafts after the Escrow Date and prior to the Closing Date to be approved by Administrative Agent in its reasonable discretion); and

 

(17)                          General Partner Status.  The Form 10, in substantially the form in effect as of the Escrow Date (as such Form 10, together with all schedules and exhibits thereto, may be further amended or supplemented in a manner that is not adverse to the interests of the Banks in any material respect or could not otherwise reasonably be expected to have a Material Adverse Effect), filed with respect to General Partner’s common stock shall have become effective and General Partner’s common stock shall have been approved for listing on the New York Stock Exchange.

 

SECTION 4.02.  Conditions Precedent to Advances After the Initial Advance.  The obligation of each Bank to make any advance of the Loans or issue, renew or increase the amount of any Letter of Credit subsequent to the Initial Advance shall be subject to satisfaction of the following conditions precedent:

 

(1)                                 No Default or Event of Default shall have occurred and be continuing;

 

(2)                                 Each of the representations and warranties of Borrower and the other Loan Parties contained in this Agreement and in each of the other Loan Documents shall be true and correct in all material respects as of the date of the advance, issuance, renewal or increase (except in those cases where such representation or warranty expressly relates to an earlier date or is qualified as to “materiality”, “Material Adverse Change” or similar language (which shall be true and correct in all respects) and except for changes in factual circumstances not prohibited hereunder); and

 

(3)                                 Administrative Agent shall have received a Notice of Borrowing in accordance with Section 2.05.

 

SECTION 4.03.  Deemed Representations.  Each request by Borrower for, and acceptance by Borrower of, an advance of proceeds of the Loans or the issuance, renewal or increase of any Letter of Credit, shall constitute a representation and warranty by Borrower that, as of both the date of such request and the date of such advance, issuance, renewal or increase (1) no Default or Event of Default has occurred and is continuing as of the date of such advance, issuance, renewal or increase, and (2) each of the representations and warranties by Borrower and the other Loan Parties contained in this Agreement and in each of the other Loan Documents is true and correct in all material respects (except in those cases where such representation or warranty expressly relates to an earlier date or is qualified as to “materiality”, “Material Adverse Change” or similar language (which shall be true and correct in all respects)) on and as of such

 

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date with the same effect as if made on and as of such date, except where such representation or warranty expressly relates to an earlier date and except for changes in factual circumstances not prohibited hereunder. In addition, the request by Borrower for, and acceptance by Borrower of, the Initial Advance shall constitute a representation and warranty by Borrower that, as of the Closing Date, each certificate delivered pursuant to Section 4.01 is true and correct in all material respects.

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants to Administrative Agent and each Bank as follows:

 

SECTION 5.01.  Existence.  Borrower is a limited partnership duly organized, existing and in good standing under the laws of the jurisdiction of its formation, with its principal executive office, as of the Closing Date, in the State of Maryland, and is duly qualified as a foreign limited partnership, properly licensed, in good standing and has all requisite authority to conduct its business in each jurisdiction in which it owns properties or conducts business except where the failure to be so qualified or to obtain such authority would not constitute a Material Adverse Change.  General Partner is a REIT duly organized, existing and in good standing under the laws of the jurisdiction of its incorporation, with its principal executive office, as of the Closing Date, in the State of Maryland, is duly qualified as a foreign corporation or trust and properly licensed and in good standing in each jurisdiction where the failure to qualify or be licensed would constitute a Material Adverse Change. The common shares of General Partner are listed on the New York Stock Exchange.

 

SECTION 5.02.  Corporate/Partnership Powers.  The execution, delivery and performance of this Agreement and the other Loan Documents required to be delivered by Borrower and the other Loan Parties are within the partnership or other authority of Borrower or such Loan Party, as applicable, have been duly authorized by all requisite action, and are not in conflict with the terms of any organizational documents of such entity, or any instrument or agreement to which Borrower, any other Loan Party or General Partner is a party or by which Borrower, any other Loan Party or General Partner or any of their respective assets may be bound or affected (which conflict with any such instrument or agreement would likely cause a Material Adverse Change).

 

SECTION 5.03.  Power of Officers.  The officers of General Partner executing the Loan Documents required to be delivered by it on behalf of Borrower hereunder and the officers or other representatives of the other Loan Parties executing the Loan Documents required to be delivered by such Loan Parties hereunder have been duly elected or appointed and were fully authorized to execute the same at the time each such Loan Document was executed.

 

SECTION 5.04.  Power and Authority; No Conflicts; Compliance With Laws.  The execution and delivery of, and the performance of the obligations required to be performed by Borrower and the other Loan Parties under, the Loan Documents do not and will not (a) violate any provision of, or, except for those which have been made or obtained, require any filing (other than SEC disclosure filings), registration, consent or approval under, any Law (including,

 

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without limitation, Regulation U), order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to it, (b) result in a breach of or constitute a default under or require any consent under any material indenture or material loan or credit agreement or any other material agreement, lease or instrument to which it may be a party or by which it or its properties may be bound or affected except for consents which have been obtained, or (c) result in, or require, the creation or imposition of any Lien, upon or with respect to any of its properties now owned or hereafter acquired.  Borrower and its Subsidiaries are in compliance with all Laws applicable to it and its respective properties where the failure to be in compliance could reasonably be expected to cause a Material Adverse Change to occur.

 

SECTION 5.05.  Legally Enforceable Agreements.  Each Loan Document to which Borrower or another Loan Party is party is a legal, valid and binding obligation of Borrower or such other Loan Party, enforceable in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors’ rights generally, as well as general principles of equity.

 

SECTION 5.06.  Litigation.  There are no investigations, actions, suits or proceedings pending or, to its knowledge, threatened against Borrower, General Partner or any of their Affiliates before any court or arbitrator or any Governmental Authority reasonably likely to (i) have a material effect on Borrower’s ability to repay the Loans, (ii) except with respect to matters existing as of the Escrow Date as disclosed and specifically identified in General Partner’s SEC Reports prior to the Escrow Date, result in a Material Adverse Change, or (iii) affect the validity or enforceability of any Loan Document.

 

SECTION 5.07.  Good Title to Properties.  Borrower and each Subsidiary have good, marketable and legal title to all of the properties and assets each of them purports to own (including, without limitation, those reflected in the financial statements referred to in Sections 4.01(3) and 5.15 and only with exceptions which do not materially detract from the value of such property or assets or the use thereof in the Loan Parties’ and each Affiliate’s businesses, and except to the extent that any such properties and assets have been encumbered or disposed of since the date of such financial statements without violating any of the covenants contained in Article VII or elsewhere in this Agreement) and except where failure to comply with the foregoing would likely result in a Material Adverse Change. Borrower and its Subsidiaries enjoy peaceful and undisturbed possession of all leased property under leases which are valid and subsisting and are in full force and effect, except to the extent that the failure to be so would not likely result in a Material Adverse Change.

 

SECTION 5.08.  Taxes.  Borrower, the Loan Parties and General Partner have filed all tax returns (federal, state and local) required to be filed and have paid all taxes, assessments and governmental charges and levies due and payable without the imposition of a penalty, including interest and penalties, except to the extent they are the subject of a Good Faith Contest or where the failure to comply with the foregoing would not likely result in a Material Adverse Change.

 

SECTION 5.09.  ERISA.  To the knowledge of Borrower, each Plan is in compliance in all material respects with its terms and all applicable provisions of ERISA. No Prohibited Transaction has occurred with respect to any Plan that could subject Borrower, any of its Subsidiaries, General Partner or any ERISA Affiliate to a tax or penalty imposed under Section

 

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4975 of the Code or Section 502(i) of ERISA in an amount that is in excess of $250,000; except as would not likely result in a Material Adverse Change, no Reportable Event has occurred with respect to any Plan within the last six (6) years; except as would not likely result in a Material Adverse Change, no notice of intent to terminate a Plan has been filed nor has any Plan been terminated within the past five (5) years; except as would not likely result in a Material Adverse Change, no Multiemployer Plan has been determined to be in “endangered status” or “critical status”; except as would not likely result in a Material Adverse Change, none of Borrower, its Subsidiaries, General Partner or ERISA Affiliate has partially or completely withdrawn from a Multiemployer Plan or incurred any liablity with respect to a Multiemployer Plan under Section 4201 of ERISA (or received notice under Section 4219 of ERISA of withdrawal liability with respect to Multiemployer Plan); except as would not likely result in a Material Adverse Change, there has been no filing of a notice of reorganization, insolvency or termination, or treatment of a plan amendment as termination, under 4041A of ERISA; to the knowledge of Borrower, there are no circumstances which constitute grounds under Section 4042 of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a trustee to administer, a Plan, nor has the PBGC instituted any such proceedings; except as would not likely result in a Material Adverse Change, Borrower, its Subsidiaries, General Partner and the ERISA Affiliates have met the minimum funding requirements of Section 412 of the Code and Section 302 of ERISA of each with respect to the Plans of each and except as disclosed in the most recent General Partner’s Consolidated Financial Statements there was no Unfunded Current Liability with respect to any Plan established or maintained by each as of the last day of the most recent plan year of each Plan; and except as would not likely result in a Material Adverse Change, Borrower, its Subsidiaries, General Partner and the ERISA Affiliates have not incurred any liability to the PBGC under ERISA (other than for the payment of premiums under Section 4007 of ERISA) which is due and payable for more than 45 days and has not been reserved against. None of the assets of Borrower its Subsidiaries or General Partner under this Agreement constitute “plan assets” of any “employee benefit plan” within the meaning of ERISA or of any “plan” within the meaning of Section 4975(e)(1) of the Code, as interpreted by the Internal Revenue Service and the U.S. Department of Labor in rules, regulations, releases or bulletins or as interpreted under applicable case law.

 

SECTION 5.10.  No Default on Outstanding Judgments or Orders.  Borrower and its Subsidiaries have satisfied all judgments which are not being appealed and are not in default with respect to any rule or regulation or any judgment, order, writ, injunction or decree applicable to Borrower or any of its Subsidiaries, of any court, arbitrator or federal, state, municipal or other Governmental Authority, commission, board, bureau, agency or instrumentality, domestic or foreign, in each case which failure to satisfy or which being in default is likely to result in a Material Adverse Change.

 

SECTION 5.11.  No Defaults on Other Agreements.  Except as disclosed to the Bank Parties in writing prior to the Escrow Date or with respect to matters existing as of the Escrow Date as disclosed and specifically identified in General Partner’s SEC Reports prior to the Escrow Date, none of Borrower or any of its Subsidiaries, to the best of Borrower’s knowledge, is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any partnership, trust or other restriction which is likely to result in a Material Adverse Change. To the best of Borrower’s knowledge, none of Borrower or any of its Subsidiaries is in default in any respect in the performance, observance or fulfillment of any of

 

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the obligations, covenants or conditions contained in any agreement or instrument which is likely to result in a Material Adverse Change.

 

SECTION 5.12.  Government Regulation.  None of Borrower, General Partner or any Loan Party is subject to regulation under the Investment Company Act of 1940.

 

SECTION 5.13.  Environmental Protection.  To Borrower’s knowledge, except with respect to matters existing as of the Escrow Date as disclosed and specifically identified in General Partner’s SEC Reports prior to the Escrow Date, none of the properties of Borrower, General Partner or any Subsidiary contains any Hazardous Materials that, under any Environmental Law currently in effect, (1) would impose liability on Borrower, General Partner or any Subsidiary that is likely to result in a Material Adverse Change, or (2) is likely to result in the imposition of a Lien on any assets of Borrower, General Partner or any Subsidiary that is likely to result in a Material Adverse Change. To Borrower’s knowledge, neither it nor any Subsidiaries are in violation of, or subject to any existing, pending or threatened investigation or proceeding by any Governmental Authority under any Environmental Law that is likely to result in a Material Adverse Change.

 

SECTION 5.14.  Solvency.  Borrower and the other Loan Parties, taken as a whole, are, and upon consummation of the transactions contemplated by this Agreement, the other Loan Documents and any other documents, instruments or agreements relating thereto, will be, Solvent.

 

SECTION 5.15.  Financial Statements.  General Partner’s Consolidated Financial Statements most recently delivered to the Banks prior to the Closing Date are in all material respects complete and fairly present in all material respects the financial condition and results of operations of the subjects thereof as of the dates of and for the periods covered by such statements, all in accordance with GAAP(subject, in the case of the unaudited statements, to changes resulting from normal year-end audit adjustments and the inclusion in the final audited statements of footnotes that were not contained in the unaudited statements).  There has been no Material Adverse Change since the Escrow Date, or if any of General Partner’s Consolidated Financial Statements have been delivered pursuant to Section 6.09(1) subsequent to the Escrow Date, there has been no Material Adverse Change since the date of such recently delivered General Partner’s Consolidated Financial Statements.

 

SECTION 5.16.  Valid Existence of Subsidiaries.  Each Subsidiary is (i) an entity duly organized and validly existing under the laws of the jurisdiction of its formation and (ii) in good standing under the laws of the jurisdiction of its formation except in the case of this clause (ii),where the failure to be so qualified would not likely cause a Material Adverse Change. As to each Subsidiary and as of the Closing Date, its correct name, the jurisdiction of its formation, and Borrower’s direct or indirect percentage of beneficial interest therein, are set forth on SCHEDULE 5.16. Borrower and each of its Subsidiaries have the power to own their respective properties and to carry on their respective businesses now being conducted, except, in the case of a Subsidiary that does not own, directly or indirectly, any Unencumbered Asset, where the failure to have such power would not likely result in a Material Adverse Change. Each Subsidiary is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the respective businesses conducted by it or its

 

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respective properties, owned or held under lease, make such qualification necessary and where the failure to be so qualified would likely cause a Material Adverse Change.

 

SECTION 5.17.  Insurance.  Borrower (with respect to itself and its Subsidiaries) and General Partner have in force paid insurance with financially sound and reputable insurance companies or associations in such amounts and covering such risks as are usually carried by companies engaged in the same or a similar business and similarly situated.

 

SECTION 5.18.  Accuracy of Information; Full Disclosure.  Neither this Agreement nor any documents, financial statements, reports, notices, schedules, certificates, statements or other writings furnished by or on behalf of Borrower to Administrative Agent or any Bank in connection with the negotiation of this Agreement or the consummation of the transactions contemplated hereby, required herein to be furnished by or on behalf of Borrower (other than projections which are made by Borrower in good faith) or certified as being true and correct by or on behalf of Borrower to Administrative Agent or any Bank in connection with the negotiation of this Agreement or delivered hereunder, taken as a whole, contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein, in the light of the circumstances under which they were made, not misleading in any material respect; provided that, with respect to projected financial information, Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time prepared. There is no fact which Borrower has not disclosed to Administrative Agent and the Banks in writing or that is not included in General Partner’s SEC Reports that materially affects adversely or, so far as Borrower can foresee as of the Closing Date, will materially affect adversely the business or financial condition of Borrower or the ability of Borrower to perform this Agreement and the other Loan Documents.

 

SECTION 5.19.  Use of Proceeds.  All proceeds of the Loans and Letters of Credit will be used by Borrower (x) to pay fees and expenses in connection with the Combination Transaction and (y) for any purpose permitted by law, including, without limitation, working capital and other general corporate purposes.  Neither the making of any Loan nor the use of the proceeds thereof nor any other extension of credit hereunder will violate the provisions of Regulations T, U, or X of the Federal Reserve Board.  No Swingline Loan shall be used more than once for the purpose of refinancing another Swingline Loan, in whole or part.  Borrower is not engaged principally or as one of its important activities in the business of extending credit for the purposes of “purchasing” or “carrying” any “margin stock” within the respective meanings of such terms under Regulations T, U and X of the Federal Reserve Board.

 

SECTION 5.20.  Governmental Approvals.  No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with the execution, delivery and performance of any Loan Document or the consummation of any of the transactions contemplated thereby other than those that have already been duly made or obtained and remain in full force and effect or those which, if not made or obtained, would not likely result in a Material Adverse Change and those which will be made in due course as SEC disclosure filings.

 

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SECTION 5.21.  Principal Offices.  As of the Closing Date, the principal office, chief executive office and principal place of business of Borrower is 4445 Willard Avenue, Suite 400, Chevy Chase, Maryland 20815.

 

SECTION 5.22.  General Partner Status.

 

(1)                                 General Partner (i) at all times operates its business in a manner not to prevent it from qualifying for status as a REIT under the Code and (ii) from and after the date that General Partner’s election to qualify as a REIT under the Code is effective, General Partner is qualified and intends to continue to qualify as a REIT (provided that, General Partner shall elect to be taxed as a REIT under the Code commencing with its 2018 taxable year (or, at the election of General Partner, commencing with its 2017 taxable year)).

 

(2)                                 As of the Closing Date, General Partner owns no assets other than ownership interests in Borrower or as disclosed on SCHEDULE 2A attached hereto.

 

(3)                                 General Partner is neither the borrower nor guarantor of any Debt except as disclosed on SCHEDULE 3 attached hereto (the “Existing General Partner Debt”) and except for Debt of General Partner permitted by Section 7.04(b).

 

SECTION 5.23.  Labor Matters.  Except for collective bargaining agreements disclosed on SCHEDULE 5.23 and Multiemployer Plans disclosed in SCHEDULE 5.23, (i) as of the Closing Date, there are no collective bargaining agreements or Multiemployer Plans covering the employees of Borrower, General Partner, or any ERISA Affiliate and (ii) neither Borrower, General Partner, nor any ERISA Affiliate has suffered any strikes, walkouts, work stoppages or other material labor difficulty within the last five years which could reasonably be expected to result in a Material Adverse Change.

 

SECTION 5.24.  Organizational Documents.  The documents delivered pursuant to Section 4.01(4) and (5) constitute, as of the Closing Date, all of the organizational documents of Borrower, the other Loan Parties and General Partner. Borrower represents that it has delivered to Administrative Agent true, correct and complete copies of each such document. General Partner (or a wholly-owned Subsidiary of General Partner) is General Partner of Borrower. General Partner holds (directly or indirectly) not less than seventy-five percent (75%) of the ownership interests in Borrower as of the Closing Date.

 

SECTION 5.25.  Anti-Corruption Laws and Sanctions.  None of General Partner, Borrower, any Subsidiary, any of their respective directors, officers, employees, Affiliates or, to the knowledge of General Partner, any agent or representative of General Partner, Borrower or any Subsidiary that will act in any capacity in connection with or benefit from this Agreement, (i) is a Sanctioned Person or currently the subject or target of any Sanctions, (ii) has its assets located in a Sanctioned Country, (iii) except to the extent permitted for a Person required to comply with Sanctions, directly or indirectly derives revenues from investments in, or transactions with, Sanctioned Persons or (iv) has violated any anti-money laundering rule or regulation in any material respect.  Each of General Partner, Borrower and its Subsidiaries, and to the knowledge of Borrower, each director, officer, employee, agent and Affiliate of General

 

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Partner, Borrower and each such Subsidiary, is in compliance with the Anti-Corruption Laws in all material respects.  Each of General Partner and Borrower has implemented and maintains in effect policies and procedures reasonably designed to ensure compliance with the Anti-Corruption Laws and applicable Sanctions by General Partner, Borrower, its Subsidiaries, their respective directors, officers, employees, Affiliates and agents and representatives of General Partner, Borrower or any Subsidiary that will act in any capacity in connection with or benefit from this Agreement.

 

SECTION 5.26.  EEA Financial Institutions.  None of General Partner, Borrower or any of its or their Subsidiaries is an EEA Financial Institution.

 

ARTICLE VI

 

AFFIRMATIVE COVENANTS

 

So long as this Agreement is in effect, Borrower shall:

 

SECTION 6.01.  Maintenance of Existence.  Preserve and maintain, and, except as permitted by Section 7.01, cause General Partner and each Subsidiary to preserve and maintain, its legal existence and, if applicable, good standing in its jurisdiction of organization (except, in the case of a Subsidiary, where the failure to maintain such good standing would not likely cause a Material Adverse Change) and, if applicable, qualify and remain qualified as a foreign entity in each jurisdiction in which such qualification is required, except to the extent that failure to so qualify would not likely result in a Material Adverse Change.

 

SECTION 6.02.  Maintenance of Records.  Keep adequate records and books of account, in which entries will be made in accordance with GAAP in all material respects, except as disclosed in General Partner’s financial statements, reflecting all of its financial transactions.

 

SECTION 6.03.  Maintenance of Insurance.  At all times, maintain and keep in force with respect to General Partner, Borrower, and their respective Subsidiaries, insurance with financially sound and reputable insurance companies or associations in such amounts and covering such risks as are usually carried by companies engaged in the same or a similar business and similarly situated, which insurance may provide for reasonable deductibles from coverage thereof.

 

SECTION 6.04.  Compliance with Laws; Payment of Taxes.

 

(a)                                 Comply, and cause General Partner and each Subsidiary to comply, in all material respects with all Laws applicable to it or to any of its properties or any part thereof, such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments and governmental charges imposed upon it or upon any of its property, except to the extent they are the subject of a Good Faith Contest or the failure to so comply would not cause a Material Adverse Change.

 

(b)                                 Borrower shall, and shall cause General Partner to, maintain in effect and enforce policies and procedures reasonably designed to ensure compliance with the Anti-Corruption Laws and applicable Sanctions by General Partner, Borrower, its or their Subsidiaries, its or their

 

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respective directors, officers, employees, Affiliates, and agents and representatives of General Partner, Borrower or its or their Subsidiaries that will act in any capacity in connection with or benefit from this Agreement.

 

SECTION 6.05.  Right of Inspection.  At any reasonable time and from time to time upon reasonable notice, but not more frequently than twice in any 12-month period provided that no Event of Default shall have occurred and be continuing, permit, and cause each Subsidiary to permit, Administrative Agent or any Bank or any agent or representative thereof (provided that, at Borrower’s request, Administrative Agent or such Bank, or such representative, must be accompanied by a representative of Borrower), to examine and make copies and abstracts from the records and books of account of, and visit the properties of, Borrower and its Subsidiaries and to discuss the affairs, finances and accounts of Borrower and its Subsidiaries with the independent accountants of Borrower (subject to limitations, if any, imposed under regulatory or confidentiality requirements and agreements to which General Partner, Borrower or one of its Subsidiaries is subject (and not entered into with the intent to prohibit the inspection rights set forth herein) or could otherwise reasonably be expected to contravene attorney—client privilege or constitute attorney work product). The request by any Bank or agent or representative thereof for such an inspection shall be made to Administrative Agent and Administrative Agent promptly shall notify all the Banks of such request (or if Administrative Agent shall have requested the same on its behalf, Administrative Agent shall notify all the Banks thereof) and any Bank that shall so desire may accompany Administrative Agent or such Bank, or such representative on such examination.

 

SECTION 6.06.  Compliance With Environmental Laws.  Comply, and cause General Partner and each Subsidiary to comply, in all material respects with all applicable Environmental Laws and immediately pay or cause to be paid all costs and expenses incurred in connection with such compliance, except to the extent there is a Good Faith Contest or the failure to so comply would not likely cause a Material Adverse Change.

 

SECTION 6.07.  Intentionally Omitted.

 

SECTION 6.08.  Maintenance of Properties.  Do all things reasonably necessary to maintain, preserve, protect and keep its and its Subsidiaries’ properties in good repair, working order and condition except where the failure to do so would not result in a Material Adverse Change.

 

SECTION 6.09.  Reporting and Miscellaneous Document Requirements.  Furnish to Administrative Agent (which shall promptly distribute to each of the Banks):

 

(1)                                 Annual Financial Statements. Not later than five (5) days following the filing of General Partner’s Form 10-K with the SEC and in any event within ninety-five (95) days after the end of each Fiscal Year, General Partner’s Consolidated Financial Statements as of the end of and for such Fiscal Year, audited by Borrower’s Accountants;

 

(2)                                 Quarterly Financial Statements. Not later than five (5) days following the filing of General Partner’s Form 10-Q with the SEC and in any event within fifty (50) days after the end of each of the first three quarters of each Fiscal Year, the unaudited

 

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General Partner’s Consolidated Financial Statements as of the end of and for such quarter;

 

(3)                                 Certificate of No Default and Financial Compliance. Within fifty (50) days after the end of each of the first three quarters of each Fiscal Year and within ninety-five (95) days after the end of each Fiscal Year, a certificate of the chief financial officer or other appropriate financial officer of General Partner (a) stating that, to the best of his or her knowledge, no Default or Event of Default has occurred and is continuing, or if a Default or Event of Default has occurred and is continuing, specifying the nature thereof and the action which is being taken with respect thereto; (b) stating that the covenants contained in Article VIII have been complied with as of the date that such covenants are required to be tested (or specifying those that have not been complied with) and including computations demonstrating such compliance (or non-compliance); (c) setting forth all items comprising Total Outstanding Indebtedness, Capitalization Value, Secured Indebtedness, Combined EBITDA, Unencumbered Combined EBITDA, Interest Expense, Unsecured Interest Expense and Unsecured Indebtedness; (d) only at the end of each Fiscal Year an estimate of Borrower’s taxable income and (e) describing any item appearing on the balance sheet delivered pursuant to clauses (1) or (2) above, as applicable, that would not appear on the consolidated balance sheet of Borrower;

 

(4)                                 Certificate of Borrower’s Accountants. Within ninety-five (95) days after the end of each Fiscal Year, a report with respect thereto of Borrower’s Accountants, which report shall not be subject to (i) any “going concern” qualification or exception (other than any such qualification or exception with respect to the Obligations being treated as short-term indebtedness resulting solely from a maturity date under the Facilities occurring within one year from the time such opinion is delivered) or (ii) any qualification or exception as to the scope of such audit, and shall state that such financial statements fairly present the consolidated financial position of each of General Partner and its Subsidiaries as at the dates indicated and the consolidated results of their operations and cash flows for the periods indicated, in conformity with GAAP applied on a basis consistent with prior years (except for changes which shall have been disclosed in the notes to the financial statements).

 

(5)                                 Notice of Litigation. Promptly after the commencement and knowledge thereof, notice of all actions, suits, and proceedings before any court or arbitrator, in respect of the Loan Documents or affecting General Partner or Borrower or any of its Subsidiaries which, if determined adversely to General Partner or Borrower or such Subsidiary is likely to result in a Material Adverse Change and which would be required to be reported in Borrower’s SEC Reports;

 

(6)                                 Notice of ERISA Events. Promptly after the occurrence thereof, (a) notice of any action or event described in Section 9.01(7), (b) the establishment of (or agreement to establish) a Plan or (c) the making of contributions (or the undertaking of any obligation or agreement to make contributions) to a Multiemployer Plan not listed on SCHEDULE 5.23 or other incurrence of any liability with respect to a Multiemployer Plan;

 

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(7)                                 Notices of Defaults and Events of Default. As soon as possible and in any event within ten (10) days after Borrower becomes aware of the occurrence of (a) a material Default, (b) any Event of Default, or (c) an event of the type described in Section 9.01(8), in each case, a written notice setting forth the details of such Default, Event of Default or such event and the action which is proposed to be taken with respect thereto;

 

(8)                                 Sales or Acquisitions of Assets. Promptly after the occurrence thereof, written notice of any Disposition or acquisition of an individual asset (other than acquisitions or Dispositions of investments such as certificates of deposit, Treasury securities and money market deposits in the ordinary course of Borrower’s cash management) in excess of Five Hundred Million Dollars ($500,000,000);

 

(9)                                 Material Adverse Change. As soon as is practicable and in any event within five (5) days after knowledge of the occurrence of any event or circumstance which is likely to result in or has resulted in a Material Adverse Change and which would be required to be reported in Borrower’s SEC Reports;

 

(10)                          Environmental and Other Notices. As soon as practicable and in any event within thirty (30) days after receipt, copies of all Environmental Notices received by Borrower or any Subsidiary which are not received in the ordinary course of business and which relate to a previously undisclosed situation which could reasonably be expected to result in a Material Adverse Change;

 

(11)                          Insurance Coverage. Promptly, such information concerning Borrower’s insurance coverage as Administrative Agent may reasonably request;

 

(12)                          Proxy Statements, Etc. Promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports which Borrower or General Partner sends to its respective shareholders, and copies of all regular, periodic and special reports, and all registration statements, which Borrower or General Partner files with the SEC or any Governmental Authority which may be substituted therefor, or with any national securities exchange;

 

(13)                          Capital Expenditures. If reasonably requested by Administrative Agent, a schedule of such Fiscal Year’s capital expenditures and a budget for the next Fiscal Year’s planned capital expenditures for Borrower and each Consolidated Business that is a Real Property Business;

 

(14)                          Change in Borrower’s Credit Rating. During the Investment Grade Pricing Period, within two (2) Banking Days after Borrower’s receipt of notice of any change in Borrower’s Credit Rating, written notice of such change; and

 

(15)                          General Information. Promptly, rent rolls, capital expenditure summaries and such other information respecting the condition or operations, financial or otherwise, of General Partner, Borrower or any properties of Borrower as Administrative Agent or any Bank may from time to time reasonably request (in the case of non-financial information, subject to (i) limitations, if any, imposed under regulatory or confidentiality requirements and agreements to which General Partner, Borrower, or one of its

 

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Subsidiaries is subject (and not entered into with the intent to prohibit any request for information hereunder) or (ii) the right of Borrower to exclude any information that could reasonably be expected to contravene attorney—client privilege or constitute attorney work product).

 

Documents and notices required to be delivered pursuant to the Loan Documents may be delivered by electronic communication and delivery, including the Internet, e-mail or intranet websites to which Administrative Agent and each Bank have access (including a commercial, third-party website such as www.Edgar.com <http://www.Edgar.com> or a website sponsored or hosted by Administrative Agent, General Partner or Borrower); provided that (A) the foregoing shall not apply to notices to any Bank (or any Fronting Bank) pursuant to Article II, (B) any Bank has not notified Administrative Agent and Borrower that it cannot or does not want to receive electronic communications and (C) documents required to be delivered pursuant to Sections 6.09(1), 6.09(2), 6.09(4) and 6.09(12) shall, if not otherwise delivered to Administrative Agent, be deemed to have been delivered on the date on which such documents are filed for public availability on the SEC’s Electronic Data Gathering and Retrieval System (it being understood that Borrower shall not be required to provide notice to Administrative Agent or any Bank of such electronic filing of information (other than with respect to financial statements pursuant to 6.09(1) or 6.09(2)) to satisfy its reporting obligations).  Documents or notices delivered electronically shall be deemed to have been delivered on the date on which Administrative Agent, General Partner or Borrower posts such documents or the documents become available on a commercial website and Borrower notifies (except in such instances where notification is not required pursuant to this paragraph) Administrative Agent of said posting and provides a link thereto; provided that if such notice or other communication is not sent or posted during normal business hours, said posting date and time shall be deemed to have commenced as of 9:00 a.m. New York City time on the opening of business on the next Banking Day.  Administrative Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents delivered electronically, and in any event shall have no responsibility to monitor compliance by Borrower with any such request for delivery.  Each Bank shall be solely responsible for requesting delivery to it of paper copies and maintaining its paper or electronic documents.

 

SECTION 6.10.  Guarantors.  If (a) any Subsidiary becomes an Unsecured Indebtedness Subsidiary in respect of Indebtedness in an aggregate principal amount in excess of $1,000,000 or (b) General Partner becomes a borrower or guarantor of, or otherwise has a payment obligation in respect of, any Unsecured Indebtedness (other than intercompany Indebtedness owing to Borrower or any of its Subsidiaries) in an aggregate principal amount in excess of $1,000,000, then, within five (5) Banking Days thereof (or such longer period as (i) Administrative Agent may agree in its sole discretion or (ii) may be reasonably agreed to be extended by Administrative Agent to permit such Loan Party to comply with the requirements of Section 6.10(9)), Borrower shall cause such Person to deliver to Administrative Agent each of the following in form and substance satisfactory to Administrative Agent:

 

(1)                                 An Accession Agreement (or if the Guaranty is not then in effect, a Guaranty);

 

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(2)                                 The certificate or articles of incorporation or formation, articles of organization, certificate of limited partnership, declaration of trust or other comparable organizational document (if any) for such Loan Party, certified as of a recent date by the appropriate Secretary of State or equivalent state official;

 

(3)                                 A copy of such Loan Party’s by-laws, if a corporation, operating agreement, if a limited liability company, partnership agreement, if a limited or general partnership, or other comparable document in the case of any other form of legal entity or other comparable organizational instrument (if any), including all amendments thereto, certified by the Secretary or an Assistant Secretary (or other individual performing similar functions) of such Loan Party, as being in full force and effect;

 

(4)                                 A certificate from the Secretary of State or equivalent state official of the state where such Loan Party is organized, dated as of a recent date, evidencing the good standing of such Loan Party;

 

(5)                                 A certified copy of a certificate, in each case dated as of a recent date, from the Secretary of State or equivalent state official of the state (x) where such Loan Party is organized, showing the good standing or partnership qualification of such Loan Party and (y) where such Loan Party maintains its principal place of business, showing the qualification to transact business in such state as a foreign limited partnership, foreign trust or other foreign entity, as the case may be, except where the failure to be so qualified under this clause (y) would likely cause a Material Adverse Change to occur;

 

(6)                                 A copy of a resolution or resolutions adopted by the partners, members or directors, as required, for such Loan Party, certified by the Secretary or an Assistant Secretary (or other individual performing similar functions) of such Loan Party as being in full force and effect, authorizing the execution, delivery and performance of the Loan Documents to be executed and delivered by such Loan Party;

 

(7)                                 A certificate, signed by the Secretary or an Assistant Secretary (or other individual performing similar functions) of such Loan Party, as to the incumbency, and containing the specimen signature or signatures, of the Persons authorized to execute and deliver the Loan Documents to be executed and delivered by such Loan Party;

 

(8)                                 If requested by Administrative Agent, favorable opinions from counsel for such Loan Party, as to such customary matters as Administrative Agent may reasonably request;

 

(9)                                 All documentation and other information about such Loan Party as shall have been reasonably requested by Administrative Agent or any Bank that it shall have reasonably determined is required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations; and

 

(10)                          Such other usual and customary documents, agreements and instruments as Administrative Agent, or any Bank through Administrative Agent, may reasonably request.

 

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Borrower may request in writing that Administrative Agent release, and, at Borrower’s expense, upon receipt of such request Administrative Agent shall release (pursuant to customary release documentation or as may be reasonably requested by Borrower), a Guarantor from the Guaranty so long as: (i) such Guarantor is not otherwise required to be a party to the Guaranty under the immediately preceding sentence; (ii) no Default under Section 9.01(1) or Event of Default shall then be in existence or would occur as a result of such release; (iii) the representations and warranties of Borrower and each other Loan Party contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the date of such release (except in those cases where such representation or warranty expressly relates to an earlier date or is qualified as to “materiality”, “Material Adverse Change” or similar language (which shall be true and correct in all respects as qualified therein) and except for changes in factual circumstances permitted hereunder); and (iv) Administrative Agent shall have received such written request at least 10 Banking Days (or such shorter period as may be acceptable to Administrative Agent) prior to the requested date of release.  Delivery by Borrower to Administrative Agent of any such request shall constitute a representation by Borrower that the matters set forth in the preceding sentence (both as of the date of the giving of such request and as of the date of the effectiveness of such request) are true and correct with respect to such request.

 

ARTICLE VII

 

NEGATIVE COVENANTS

 

So long as this Agreement is in effect, Borrower shall not do any or all of the following:

 

SECTION 7.01.  Mergers, Etc.

 

(a)                                 Merge or consolidate or permit any other Loan Party to merge or consolidate, with, or permit General Partner to merge or consolidate with any other Person, except (i) where Borrower or General Partner, or in the case of any other Loan Party, another Loan Party, is the surviving entity, (ii) in a transaction the purpose of which is to redomesticate such entity in another United States jurisdiction, and no Default or Event of Default has occurred and is continuing or (iii) that a Guarantor may merge or consolidate with or into any other Loan Party or any other Person; provided, however, that, in the case of this clause (iii):

 

(1)                                 (A) immediately prior to entering into such transaction, no Default or Event of Default shall exist and (B) at the time of, and immediately thereafter and after giving effect to such transaction, no Event of Default arising under Section 9.01(1) or 9.01(5) shall have occurred and be continuing, nor, as the result of the occurrence of any other Event of Default, have the Obligations been accelerated pursuant to Section 9.02;

 

(2)                                 if the surviving entity is required to be a Guarantor pursuant to Section 6.10, such surviving entity shall be a Guarantor or shall become a Guarantor in accordance with the applicable requirements of Section 6.10; and

 

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(3)                                 in the case of the entry into any transaction of merger or consolidation with a Person other than a Loan Party or a Subsidiary which transaction or series of related transactions shall have a fair market value in excess of $50,000,000, not later than the date on which such transaction is entered into:  (A) Borrower shall have given Administrative Agent and the Banks written notice of the entry into such transaction; and (B) Borrower shall have delivered to Administrative Agent a pro forma compliance certificate of the type required by paragraph (3) of Section 6.09, evidencing the continued compliance by the Loan Parties with the financial covenants contained in Article VIII, after giving effect to such transaction or series of transactions; provided, however, that in the event that the obligation of any Guarantor to consummate such transaction is subject to a financing condition or the obtaining of the requisite approval of the Banks under this Agreement, the certificate required by this clause (B) shall not be required to be delivered until the date on which such transaction is consummated;

 

(b)                                 sell, assign, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of Borrower’s or General Partner’s or any other Loan Party’s assets, except (i) in the case of a sale, assignment or disposition of all or a substantial part of the assets of a Loan Party (other than Borrower) where Borrower or any other Loan Party is the transferee of such assets, and no Default or Event of Default has occurred and is continuing or (ii) in the case of any such transaction or series of related transactions involving assets, capital stock or other Equity Interests of a Guarantor being conveyed, sold, leased, subleased or otherwise transferred or disposed of to any other Person that is not a Loan Party, with such assets, capital stock or other Equity Interests having a fair market value of not more than $50,000,000, or, if more than such amount:

 

(1)                                 Borrower shall have, not later than the date of such transaction or series of related transactions, (A) given Administrative Agent and the Banks written notice of such transaction or series of related transactions and (B) delivered to Administrative Agent a pro forma compliance certificate of the type required by paragraph (3) of Section 6.09, evidencing the continued compliance by the Loan Parties with the financial covenants contained in Article VIII, after giving effect to such transaction or series of transactions, and

 

(2)                                 immediately prior to any such transaction or series of related transactions, and immediately thereafter and after giving effect to such transaction or series of related transactions, no Event of Default arising under Section 9.01(1) or 9.01(5) shall have occurred and be continuing, nor, as the result of the occurrence of any other Event of Default, have the Obligations been accelerated pursuant to Section 9.02; and

 

(c)                                  with respect to Borrower or General Partner or any other Loan Party, liquidate, wind up or dissolve (or suffer any liquidation or dissolution) or discontinue its business, except that a Guarantor (other than General Partner) may liquidate, wind up or dissolve or discontinue a business so long as the continued entity is a Loan Party if required pursuant to Section 6.10.

 

SECTION 7.02.  DistributionsMake any Restricted Payment to General Partner except that Borrower may declare and make Restricted Payments to General Partner; provided, that:

 

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(a)                                 if a Default or Event of Default resulting from noncompliance with any of the provisions of Article VIII exists, Borrower shall not, and shall not permit any Subsidiary to, declare or make any Restricted Payments to General Partner other than:

 

(i)                                     the declaration and making of cash distributions to General Partner and other holders of partnership interests in Borrower with respect to any fiscal year to the extent necessary for General Partner to distribute an aggregate amount not to exceed the minimum amount necessary for General Partner to avoid (x) an Event of Default under Section 9.01(8)(ii) and (y) income or excise tax under the Code; and

 

(ii)                                  Borrower may make repurchases, retirement or other acquisition of Equity Interests in General Partner, Borrower or any Subsidiary pursuant to any employee or director equity or stock option plan entered into in the ordinary course of business;

 

(b)                                 if a Default or Event of Default, in each case, specified in Section 9.01(1) or Section 9.01(5) shall exist, or if as a result of the occurrence of any other Event of Default any of the Obligations have been accelerated pursuant to Section 9.02, Borrower shall not, and shall not permit any Subsidiary to, make any Restricted Payments to any Person other than to Borrower or any Subsidiary (except that, in the case of a Subsidiary that is not a Wholly Owned Subsidiary, distributions are made only to holders of Equity Interests in such Subsidiary ratably according to the holders’ respective holdings of the type of Equity Interest in respect of which such distributions are being made); and

 

(c)                                  notwithstanding the foregoing in paragraphs (a) and (b) above, Borrower may make Restricted Payments in an amount sufficient to pay customary and reasonable administrative and legal costs and expenses, including, without limitation, audit expenses, of the Parent Entities in connection with the maintenance of its respective legal existence as a publicly traded company.

 

SECTION 7.03.  Amendments to Organizational Documents.

 

(a)                                 Amend Borrower’s agreement of limited partnership or other organizational documents in any manner that would result in a Material Adverse Change without the Required Banks’ consent, which consent shall not be unreasonably withheld. Without limitation of the foregoing, no Person shall be admitted as a general partner of Borrower other than General Partner.

 

(b)                                 Make any “in-kind” transfer of any of Borrower’s property or assets to any of Borrower’s constituent partners if such transfer would result in an Event of Default, without, in each case, the Required Banks’ consent, which consent shall not be unreasonably withheld.

 

SECTION 7.04. Activities of General Partner.

 

(a)                                 General Partner Assets.  For so long as General Partner is not a Guarantor, Borrower shall not permit General Partner or any Subsidiary of General Partner that owns,

 

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directly or indirectly, any Equity Interests of Borrower (each, a “Parent Entity”) to own any assets other than:

 

(i)                                     Equity Interests in any other Parent Entity that is a Wholly Owned Subsidiary of General Partner or Borrower;

 

(ii)                                  cash and other assets of nominal value incidental to its status as a public company or its ownership of the Equity Interests described in clause (i) of this Section 7.04(a);

 

(iii)                               assets maintained on a temporary or pass-through basis that are held (x) for subsequent payment of dividends, repurchase or redemption of Equity Interests in General Partner, or repayment of Debt of General Partner or other satisfaction of obligations of General Partner not prohibited by this Agreement or any other Loan Document or (y) for contribution to Borrower or any of its Subsidiaries, in each case, for a period not in excess of ten (10) Banking Days for any such asset;

 

(iv)                              customary contract rights related to General Partner’s status as a public company and the general partner of Borrower; or

 

(v)                                 other assets with an aggregate book value not to exceed $50,000,000.

 

(b)                                 General Partner Liabilities.  For so long as General Partner is not a Guarantor, Borrower shall not permit any Parent Entity to incur, assume or permit to exist any liabilities other than:

 

(i)                                     liabilities incidental to its status as a publicly traded REIT under the Code and not constituting liabilities in respect of Debt for borrowed money (including liabilities associated with employment contracts, executive officer and director indemnification agreements and employee benefit matters), indemnification obligations pursuant to purchase and sale agreements, tax liabilities and legacy liabilities arising pursuant to contracts entered into in the ordinary course of business prior to (and not in contemplation of) the Combination Transaction, this Agreement or any other Loan Document;

 

(ii)                                  nonconsensual obligations imposed by operation of applicable Law; and

 

(iii)                               other immaterial obligations, immaterial intercompany obligations or other intercompany obligations owing by any Parent Entity to Borrower or any Subsidiary of Borrower.

 

(c)                                  Parent Entity Business Activities.  For so long as General Partner is not a Guarantor, Borrower shall not permit any Parent Entity to engage in any business or activity other than the ownership of outstanding Equity Interests of any other Parent Entity or Borrower and Borrower’s Subsidiaries, the issuance and sale of its Equity Interests and, in each case,

 

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activities incidental thereto or incidental to the ownership of assets and liabilities permitted under clauses (a) and (b) above.

 

(d)                                 Contribution of Indebtedness or Equity Proceeds.  The Parent Entities shall cause 100% of the net cash proceeds received (including into escrow) from the incurrence of Debt (including hybrid securities and debt securities convertible to equity) or the issuance of Equity Interests by any Parent Entity to be contributed to Borrower within ten (10) Banking Days of receipt thereof.

 

(e)                                  Cure Period and Parent Entity Guaranty Trigger Event.  If at any time any of the requirements set forth in the preceding Section 7.04(a)-(d) are not satisfied, each Parent Entity shall promptly and in any event within five (5) Banking Days of the earlier of (A) the first date a Responsible Officer of a Parent Entity or Borrower obtains knowledge that such requirements were not satisfied or (B) the date upon which Borrower has received written notice that such requirements were not satisfied by Administrative Agent, either (i) satisfy such requirements or (ii) deliver to Administrative Agent each of the following in form and substance satisfactory to Administrative Agent: (x) an Accession Agreement (or if the Guaranty is not then in effect, the Guaranty) executed by such Parent Entity and (y) the items that would have been delivered under Section 4.01(3) through (9) if such Parent Entity had been a Loan Party on the Closing Date.

 

SECTION 7.05.  Use of Proceeds and Letters of Credit.

 

(a)                                 Intentionally Omitted.

 

(b)                                 Neither General Partner nor Borrower shall use, and shall procure that none of its or their Subsidiaries shall use, any proceeds of the Loans or any Letter of Credit (a) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (b) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country or (c) in any manner that would result in the violation of any Sanctions applicable to any party hereto.

 

SECTION 7.06.  Transactions with Affiliates.  Permit to exist or enter into, or permit any Subsidiary to permit to exist or enter into, any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate (other than any Parent Entity, Borrower, any other Loan Party or any Subsidiary), except:

 

(a)                                 transactions upon fair and reasonable terms which are no less favorable to Borrower or such other Subsidiary than would be obtained in a comparable arm’s length transaction with a Person that is not an Affiliate;

 

(b)                                 Restricted Payments permitted under Section 7.02;

 

(c)                                  transactions permitted by Section 7.04;

 

(d)                                 the Combination Transaction;

 

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(e)                                  transactions constituting investments by Borrower or any Subsidiary in any UJV that are not otherwise prohibited under the Loan Documents; and

 

(f)                                   transactions permitted or approved in accordance with the Related Party Transaction Policy.

 

ARTICLE VIII

 

FINANCIAL COVENANTS

 

So long as this Agreement is in effect, Borrower shall not permit or suffer:

 

SECTION 8.01.  Ratio of Total Outstanding Indebtedness to Capitalization Value.  Total Outstanding Indebtedness to exceed sixty percent (60%) of Capitalization Value, each measured as of the most recently ended calendar quarter; provided, however, with respect to any fiscal quarter in which Borrower or any of its Consolidated Businesses or UJVs have acquired Real Property Assets, the ratio of Total Outstanding Indebtedness to Capitalization Value as of the end of such fiscal quarter and the next three (3) succeeding fiscal quarters may increase to 65%, provided that such ratio does not exceed 60% as of the end of the fiscal quarter immediately thereafter. For purposes of this Section 8.01 only:

 

(i)                               Total Outstanding Indebtedness shall be adjusted by deducting therefrom an amount equal to the lesser of (x) Total Outstanding Indebtedness that by its terms is either (1) scheduled to mature (including by reason of the election of the borrower of such debt to call such debt prior to its maturity) on or before the date that is 24 months from the date of calculation, or (2) convertible Debt with the right to put all or a portion thereof on or before the date that is 24 months from the date of calculation, and (y) Unrestricted Cash and Cash Equivalents;

 

(ii)                            Capitalization Value shall be adjusted by deducting therefrom the amount by which Total Outstanding Indebtedness is reduced under the immediately preceding clause (i);

 

(iii)                         for purposes of determining Capitalization Value costs and expenses incurred during the applicable period with respect to acquisitions that failed to close and were abandoned during such period shall not be deducted in determining EBITDA; and

 

(iv)                        for purposes of clause (i)(y) above, Unrestricted Cash and Cash Equivalents shall be (x) adjusted to deduct therefrom $35,000,000 and (y) calculated without inclusion of Borrower’s Pro Rata Share of any Cash or Cash Equivalents owned by any UJV.

 

SECTION 8.02.  Ratio of Combined EBITDA to Fixed Charges.  The ratio of Combined EBITDA to Fixed Charges, each measured as of the most recently ended calendar quarter, to be less than 1.50 to 1.00.

 

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SECTION 8.03.  Ratio of Unencumbered Combined EBITDA to Unsecured Interest Expense.  The ratio of Unencumbered Combined EBITDA to Unsecured Interest Expense, each measured as of the most recently ended calendar quarter, to be less than 1.50 to 1.00.

 

SECTION 8.04.  Ratio of Unsecured Indebtedness to Capitalization Value of Unencumbered Assets.  Unsecured Indebtedness to exceed sixty percent (60%) of Capitalization Value of Unencumbered Assets, each measured as of the most recently ended calendar quarter; provided, however, with respect to any fiscal quarter in which Borrower or any of its Consolidated Businesses or UJVs has acquired Real Property Assets, the ratio of Unsecured Indebtedness to Capitalization Value of Unencumbered Assets as of the end of such fiscal quarter and the next three (3) succeeding fiscal quarters may increase to 65%, provided that such ratio does not exceed 60% as of the end of the fiscal quarter immediately thereafter. For purposes of this Section 8.04 only:

 

(i)                               Unsecured Indebtedness shall be adjusted by deducting therefrom an amount equal to the lesser of (x) Unsecured Indebtedness that by its terms is either (1) scheduled to mature (including by reason of the election of the borrower of such debt to call such debt prior to its maturity) on or before the date that is 24 months from the date of calculation, or (2) convertible Debt with the right to put all or a portion thereof on or before the date that is 24 months from the date of calculation, and (y) Unrestricted Cash and Cash Equivalents or such lesser amount of Unrestricted Cash and Cash Equivalents as Borrower shall specify solely for this purpose (the “Unsecured Indebtedness Adjustment”);

 

(ii)                            Capitalization Value of Unencumbered Assets shall be adjusted by deducting therefrom the Unsecured Indebtedness Adjustment;

 

(iii)                         for purposes of determining Capitalization Value of Unencumbered Assets, costs and expenses incurred during the applicable period with respect to acquisitions that failed to close and were abandoned during such period shall not be deducted in determining EBITDA; and

 

(iv)                        for purposes of clause (i)(y) above, Unrestricted Cash and Cash Equivalents shall be (x) adjusted to deduct therefrom the sum of $35,000,000 plus the amount of any Unrestricted Cash and Cash Equivalents used to determine the Secured Indebtedness Adjustment in Section 8.05, and (y) calculated without inclusion of Borrower’s Pro Rata Share of any Cash or Cash Equivalents owned by any UJV.

 

SECTION 8.05.  Ratio of Secured Indebtedness to Capitalization Value.  The ratio of Secured Indebtedness to Capitalization Value, each measured as of the most recently ended calendar quarter, to exceed 50%. For purposes of this Section 8.05 only:

 

(i)                               Secured Indebtedness shall be adjusted by deducting therefrom an amount equal to the lesser of (x) Secured Indebtedness that by its terms is either (1) scheduled to mature on (including by reason of the election of the borrower of such debt to call such debt prior to its maturity) or before the date that is 24 months from the date of calculation, or (2) convertible Debt with the right to put all or a portion thereof on or

 

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before the date that is 24 months from the date of calculation, and (y) Unrestricted Cash and Cash Equivalents or such lesser amount of Unrestricted Cash and Cash Equivalents as Borrower shall specify solely for this purpose (the “Secured Indebtedness Adjustment”);

 

(ii)         Capitalization Value shall be adjusted by deducting therefrom the Secured Indebtedness Adjustment;

 

(iii)        for purposes of determining Capitalization Value, costs and expenses incurred during the applicable period with respect to acquisitions that failed to close and were abandoned during such period shall not be deducted in determining EBITDA; and

 

(iv)        for purposes of clause (i)(y) above, Unrestricted Cash and Cash Equivalents shall be (x) adjusted to deduct therefrom the sum of $35,000,000 plus the amount of any Unrestricted Cash and Cash Equivalents used to determine the Unsecured Indebtedness Adjustment in Section 8.04, and (y) calculated without inclusion of Borrower’s Pro Rata Share of any Cash or Cash Equivalents owned by any UJV.

 

SECTION 8.06.  Debt of General Partner.  Notwithstanding anything contained herein to the contrary, any Debt of General Partner shall be deemed to be Debt of Borrower (provided that the same shall be without duplication), for purposes of calculating the financial covenants set forth in this Article VIII.

 

ARTICLE IX

 

EVENTS OF DEFAULT

 

SECTION 9.01.  Events of Default.  Any of the following events shall be an “Event of Default”:

 

(1)           If Borrower shall fail to pay the principal of any Loans or reimburse any drawing on a Letter of Credit as and when due; or fail to pay interest accruing on any Loans as and when due and such failure to pay shall continue unremedied for five (5) days after the due date of such amount; or fail to pay any fee, Prepayment Premium or any other amount due under this Agreement or any other Loan Document as and when due and such failure to pay shall continue unremedied for five (5) days after notice by Administrative Agent of such failure to pay;

 

(2)           If any representation or warranty made or deemed made by Borrower or any other Loan Party in this Agreement or in any other Loan Document or which is contained in any certificate, document, opinion, financial or other statement furnished at any time under or in connection with a Loan Document shall prove to have been incorrect in any material respect (or in any respect to the extent qualified by Material Adverse Change or other materiality qualifier) on or as of the date made or deemed made;

 

(3)           If Borrower shall fail (a) to perform or observe any term, covenant or agreement contained in Section 6.01, 6.09(7), Article VII or Article VIII; or (b) to perform or observe any term, covenant or agreement contained in this Agreement or any

 

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other Loan Document (other than obligations specifically referred to elsewhere in this Section 9.01) and such failure shall remain unremedied for thirty (30) consecutive calendar days after the date upon which Borrower has received written notice of such failure from Administrative Agent; provided, however, that if any such default under clause (b) above cannot by its nature be cured within such thirty (30) day grace period and so long as Borrower shall have commenced cure within such thirty (30) day grace period and shall, at all times thereafter, diligently prosecute the same to completion, Borrower shall have an additional period to cure such default; provided, however, that, in no event is the foregoing intended to effect an extension of any Maturity Date;

 

(4)           If Borrower or any Subsidiary that owns, directly or indirectly, any Unencumbered Asset, shall fail (a) to pay any Debt (other than the payment obligations described in paragraph (1) of this Section 9.01 or obligations that are Without Recourse to Borrower) the Recourse portion of which to Borrower is an amount equal to or greater than Fifty Million Dollars ($50,000,000) when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) after the expiration of any applicable grace period, or (b) to perform or observe any material term, covenant, or condition under any agreement or instrument relating to any such Debt, when required to be performed or observed, if the effect of such failure to perform or observe is to accelerate, or to permit the acceleration of, after the giving of notice or the lapse of time, or both (other than in cases where, in the judgment of the Required Banks, meaningful discussions likely to result in (i) a waiver or cure of the failure to perform or observe, or (ii) otherwise averting such acceleration are in progress between Borrower and the obligee of such Debt), the maturity of such Debt, or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled or otherwise required prepayment, repurchase or defeasance not triggered by such failure, or customary non-default events, such as mandatory prepayments triggered by asset sales or casualty events), prior to the stated maturity thereof;

 

(5)           If Borrower, General Partner, any Guarantor or any other Subsidiary (other than a Subsidiary that does not own, in whole or in part, directly or indirectly, any Unencumbered Assets) shall (a) generally not, or be unable to, or shall admit in writing its inability to, pay its debts as such debts become due; (b) make an assignment for the benefit of creditors, petition or apply to any tribunal for the appointment of a custodian, receiver or trustee for it or a substantial part of its assets; (c) commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; (d) have had any such petition or application filed or any such proceeding shall have been commenced, against it, in which an adjudication or appointment is made or order for relief is entered, or which petition, application or proceeding remains undismissed or unstayed for a period of sixty (60) days or more; (e) be the subject of any proceeding under which all or a substantial part of its assets may be subject to seizure, forfeiture or divestiture by any governmental entity; (f) by any act or omission indicate its consent to, approval of or acquiescence in any such petition, application or proceeding or order for relief or the appointment of a custodian, receiver or trustee for all or any substantial part of its property; or (g) suffer any such custodianship, receivership or trusteeship for all or

 

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any substantial part of its property, to continue undischarged for a period of sixty (60) days or more;

 

(6)           If one or more judgments, decrees or orders for the payment of money in excess of Fifty Million Dollars ($50,000,000) in the aggregate shall be rendered against Borrower, General Partner, any Guarantor or any other Subsidiary that owns, directly or indirectly, any Unencumbered Asset, and any such judgments, decrees or orders shall continue unsatisfied and in effect for a period of sixty (60) consecutive days without being vacated, discharged, satisfied or stayed or bonded pending appeal (excluding (x) amounts for which insurance coverage has not been denied by the applicable carrier and (y) judgments, decrees or orders in respect of Debt that is Without Recourse to Borrower or General Partner), or such earlier date as any Person shall commence enforcement of such judgment, decree or order;

 

(7)           If any of the following events shall occur or exist with respect to any Plan or Multiemployer Plan (as applicable): (a) any Prohibited Transaction; (b) any Reportable Event; (c) the filing under Section 4041 or 4041A of ERISA of a notice of intent to terminate any Plan or Multiemployer Plan or the termination of any Plan or Multiemployer Plan; (d) the complete or partial withdrawal from a Multiemployer Plan (or receipt of a notice under Section 4219 of ERISA of withdrawal liability with respect to a Multiemployer Plan) by Borrower, its Subsidiaries, General Partner or any ERISA Affiliate from a Multiemployer Plan; (e) the determination that a Multiemployer Plan is in “endangered status” or “critical status”; (f) the receipt of a notice from a Multiemployer Plan that it is in “reorganization” or “insolvency”; (g) receipt of notice of an application by the PBGC to institute proceedings under Section 4042 of ERISA for the termination of, or for the appointment of a trustee to administer, any Plan or Multiemployer Plan, or the institution by the PBGC of any such proceedings; (h) Borrower, its Subsidiaries, General Partner or any ERISA Affiliate fails to meet the minimum funding standards under Section 412 of the Code or a condition exists which gives rise to imposition of a lien under Section 430(k) of the Code or Section 303(k) of ERISA, and in each case above, if either (1) such event or conditions, if any, result in Borrower, its Subsidiaries, General Partner or any ERISA Affiliate being subject to any tax, penalty or other liability to a Plan, a Multiemployer Plan, the PBGC or otherwise (or any combination thereof), which in the aggregate exceeds or is reasonably likely to exceed Twenty Million Dollars ($20,000,000), and the same continues unremedied or unpaid for a period of forty-five (45) consecutive days or (2) such event or conditions, if any, is reasonably likely to result in Borrower, its Subsidiaries, General Partner or any ERISA Affiliate being subject to any tax, penalty or other liability to a Plan, a Multiemployer Plan, the PBGC or otherwise (or any combination thereof), which in the aggregate exceeds or may exceed Twenty Million Dollars ($20,000,000) and such event or condition is unremedied, or such tax, penalty or other liability is not reserved against or the payment thereof otherwise secured to the reasonable satisfaction of Administrative Agent, for a period of forty-five (45) consecutive days after notice from Administrative Agent;

 

(8)           If General Partner shall fail at any time to (i) maintain at least one class of its common shares which has trading privileges on the New York Stock Exchange or the

 

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American Stock Exchange or is the subject of price quotations in the over-the-counter market as reported by the National Association of Securities Dealers Automated Quotation System, or (ii) from and after the date that General Partner’s election to qualify as a REIT under the Code is effective, maintain its status as a self-directed and self-administered REIT (provided that, General Partner shall elect to be taxed as a REIT under the Code commencing with its 2018 taxable year (or, at the election of General Partner, commencing with its 2017 taxable year)), and in either case such failure shall remain unremedied for thirty (30) consecutive calendar days after notice thereto;

 

(9)           Intentionally Omitted;

 

(10)         If at any time assets of Borrower or General Partner constitute Plan assets for ERISA purposes (within the meaning of C.F.R. § 2510.3-101, as modified by Section 3(32) of ERISA);

 

(11)         Intentionally Omitted;

 

(12)         If Borrower or any other Loan Party shall disavow, revoke or terminate any Loan Document to which it is a party or shall otherwise challenge or contest in any action, suit or proceeding in any court or before any Governmental Authority the validity or enforceability of any Loan Document or any Loan Document shall cease to be in full force and effect (except, in each case, as a result of the express terms thereof or as Administrative Agent may approve in writing);

 

(13)         If any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person will be deemed to have “beneficial ownership” of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 40.0% of the total voting power of the then outstanding voting stock of General Partner;

 

(14)         If, during any period of 12 consecutive months ending after the Closing Date, individuals who at the beginning of any such 12-month period constituted the Board of Trustees of General Partner (together with any new trustees whose election by such Board or whose nomination for election by the shareholders of General Partner was approved by a vote of a majority of the trustees then still in office who were either trustees at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Trustees of General Partner then in office;

 

(15)         If General Partner shall cease to own or control, directly or indirectly, more than 50% of the outstanding Equity Interests of Borrower; or

 

(16)         If General Partner, or a Wholly Owned Subsidiary of General Partner, shall cease to be the sole general partner of Borrower or shall cease to have the sole and exclusive power to exercise all management and control over Borrower substantively in

 

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the same manner as provided for in Borrower’s partnership agreement as contained in the Form 10 most recently filed with the SEC prior to the Escrow Date.

 

Notwithstanding the foregoing, in the event of a Default or Event of Default arising as a result of the determination of any asset, Consolidated Business or UJV as an Unencumbered Asset at any particular time of reference, if such Default or Event of Default is capable of being cured solely by the exclusion of such asset, Consolidated Business or UJV as an Unencumbered Asset, Borrower shall be permitted a period not to exceed fifteen (15) days from the earlier of (x) the date upon which a Responsible Officer of Borrower obtains knowledge of such Default or Event of Default (as applicable) or (y) the date upon which Borrower has received written notice of such Default or Event of Default from Administrative Agent to remove such asset, Consolidated Business or UJV as an Unencumbered Asset upon delivery by Borrower to Administrative Agent of each of the following:  (i) written notice thereof and (ii) a compliance certificate excluding such asset, Consolidated Business or UJV as an Unencumbered Asset and evidencing compliance with the financial covenants for the periods such asset, Consolidated Business or UJV was determined to be an Unencumbered Asset.

 

SECTION 9.02.  Remedies.  If any Event of Default shall occur and be continuing, Administrative Agent shall, (a) upon request of the Required Banks, by notice to Borrower, (1) terminate the applicable Loan Commitments of such Banks, whereupon such Loan Commitments shall terminate and such Banks (including the Swingline Lenders and the Fronting Banks, as applicable) shall have no further obligation to extend credit hereunder; and/or (2) declare the unpaid balance of the applicable Loans, all interest thereon, any Prepayment Premium and all other Guaranteed Obligations related to such Loans payable under this Agreement to be forthwith due and payable, whereupon such balance, all such interest, any Prepayment Premium and all such Guaranteed Obligations due under this Agreement shall become and be forthwith due and payable, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by Borrower; and/or (3) exercise any remedies provided in any of the Loan Documents or by law; and/or (b) upon request of the Required Ratable Loan Banks, require the deposit of Cash Collateral for the Letters of Credit pursuant to Section 2.17(i); provided, however, that upon the occurrence of any Event of Default specified in Section 9.01(5), the Loan Commitments shall automatically terminate (and the Banks, the Swingline Lenders and the Fronting Banks shall have no further obligation to extend credit hereunder) and the unpaid balance of the Loans, all interest thereon, any Prepayment Premium and all other Guaranteed Obligations payable under this Agreement shall automatically be and become forthwith due and payable, and the obligations to deliver Cash Collateral for the Letters of Credit pursuant to Section 2.17(i) shall automatically become effective without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by Borrower.

 

SECTION 9.03.  Allocation of Proceeds.

 

(a)           If an Event of Default exists, all payments received by Administrative Agent (or any Bank as a result of its exercise of remedies permitted under Section 12.08) under any of the Loan Documents in respect of any Guaranteed Obligations shall be applied in the following order and priority:

 

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(i)            to payment of that portion of the Guaranteed Obligations constituting fees, indemnities, expenses and other amounts, including attorney fees then due and payable in accordance with the Loan Documents, payable to Administrative Agent in its capacity as such, each Fronting Bank in its capacity as such and each Swingline Lender in its capacity as such, ratably among Administrative Agent, the Fronting Banks and the Swingline Lenders in proportion to the respective amounts described in this clause (i) payable to them;

 

(ii)           to payment of that portion of the Guaranteed Obligations constituting fees, indemnities and other amounts (other than principal, interest and Prepayment Premium) then due and payable to the Banks in accordance with the Loan Documents, including reasonable attorney fees, ratably among the Banks in proportion to the respective amounts described in this clause (ii) payable to them;

 

(iii)          to payment of that portion of the Guaranteed Obligations constituting accrued and unpaid interest on the Swingline Loans;

 

(iv)          to payment of that portion of the Guaranteed Obligations constituting accrued and unpaid interest and Prepayment Premiums on the Loans and Reimbursement Obligations, ratably among the Banks and the Fronting Banks in proportion to the respective amounts described in this clause (iv) payable to them;

 

(v)           to payment of that portion of the Guaranteed Obligations constituting unpaid principal of the Swingline Loans;

 

(vi)          to payment of that portion of the Guaranteed Obligations constituting unpaid principal of the Loans, Reimbursement Obligations and other Letter of Credit Liabilities and payment obligations then owing under Specified Derivatives Contracts and Specified Cash Management Agreements, ratably among the Banks, the Fronting Banks, the Specified Derivatives Providers and the Specified Cash Management Banks in proportion to the respective amounts described in this clause (vi) payable to them; provided, however, to the extent that any amounts available for distribution pursuant to this clause are attributable to the issued but undrawn amount of an outstanding Letter of Credit, such amounts shall be paid to Administrative Agent to be held as provided in Section 2.17(i); and

 

(vii)         the balance, if any, after all of the Guaranteed Obligations have been indefeasibly paid in full, to Borrower or as otherwise required by applicable Law.

 

Notwithstanding the foregoing, Guaranteed Obligations arising under Specified Derivatives Contracts and Specified Cash Management Agreements shall be excluded from the application described above if Administrative Agent has not received written notice thereof, together with such supporting documentation as Administrative Agent may request, from the applicable Specified Derivatives Provider or Specified Cash Management Bank, as the case may be.  Each

 

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Specified Derivatives Provider or Specified Cash Management Bank not a party to this Agreement that has given the notice contemplated by the preceding sentence shall, by such notice, be deemed to have acknowledged and accepted the appointment of Administrative Agent pursuant to the terms of Article X for itself and its Affiliates as if a “Bank” party hereto.

 

SECTION 9.04.  Performance by Administrative Agent.  If Borrower or any other Loan Party shall fail to perform any covenant, duty or agreement contained in any of the Loan Documents, Administrative Agent may, after notice to Borrower, perform or attempt to perform such covenant, duty or agreement on behalf of Borrower or such other Loan Party after the expiration of any cure or grace periods set forth herein.  In such event, Borrower shall, at the request of Administrative Agent, promptly pay any amount reasonably expended by Administrative Agent in such performance or attempted performance to Administrative Agent, together with interest thereon at the applicable Default Rate from the date of such expenditure until paid.  Notwithstanding the foregoing, neither Administrative Agent nor any Bank shall have any liability or responsibility whatsoever for the performance of any obligation of Borrower under this Agreement or any other Loan Document.

 

SECTION 9.05.  Rights Cumulative.

 

(a)           The rights and remedies of Administrative Agent, the Fronting Banks and the Banks under this Agreement and each of the other Loan Documents, of the Specified Derivatives Providers under the Specified Derivatives Contracts, and of the Specified Cash Management Banks under the Specified Cash Management Agreements, shall be cumulative and not exclusive of any rights or remedies which any of them may otherwise have under applicable law.  In exercising their respective rights and remedies Administrative Agent, the Fronting Banks, the Banks, the Specified Derivatives Providers and the Specified Cash Management Banks may be selective and no failure or delay by any such Person in exercising any right shall operate as a waiver of it, nor shall any single or partial exercise of any power or right preclude its other or further exercise or the exercise of any other power or right.

 

(b)           Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against Borrower and the other Loan Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, Administrative Agent in accordance with Article X for the benefit of all of the Banks and the Fronting Banks; provided that the foregoing shall not prohibit (i) Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (ii) a Fronting Bank or Swingline Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as a Fronting Bank or Swingline Lender, as the case may be) hereunder or under the other Loan Documents, (iii) any Specified Derivatives Provider or Specified Cash Management Bank from exercising the rights and remedies that inure to its benefit under any Specified Deriviatives Contract or Specified Cash Management Agreement, as applicable, (iv) any Bank from exercising setoff rights in accordance with Section 12.08 (subject to the terms of Section 10.15), or (v) any Bank from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party under any Debtor Relief Law; and provided, further, that if at any time

 

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there is no Person acting as Administrative Agent hereunder and under the other Loan Documents, then (x) the Required Banks shall have the rights otherwise ascribed to Administrative Agent pursuant to Article X and (y) in addition to the matters set forth in clauses (ii), (iii) and (iv) of the preceding proviso and subject to Section 10.15, any Bank may, with the consent of the Required Banks, enforce any rights and remedies available to it and as authorized by the Required Banks.

 

ARTICLE X

 

ADMINISTRATIVE AGENT; RELATIONS AMONG BANKS

 

SECTION 10.01.  Appointment, Powers and Immunities of Administrative Agent.  Each Bank hereby irrevocably appoints and authorizes Administrative Agent to act as its agent hereunder and under any other Loan Document with such powers as are specifically delegated to Administrative Agent by the terms of this Agreement and any other Loan Document, together with such other powers as are reasonably incidental thereto. Administrative Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and any other Loan Document or required by law, and shall not by reason of this Agreement be a fiduciary or trustee for any Bank except to the extent that Administrative Agent acts as an agent with respect to the receipt or payment of funds (nor shall Administrative Agent have any fiduciary duty to Borrower nor shall any Bank have any fiduciary duty to Borrower or to any other Bank). Administrative Agent shall not be responsible to the Banks for any recitals, statements, representations or warranties made by Borrower or any officer, partner or official of Borrower or any other Person contained in this Agreement or any other Loan Document, or in any certificate or other document or instrument referred to or provided for in, or received by any of them under, this Agreement or any other Loan Document, or for the value, legality, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or any other document or instrument referred to or provided for herein or therein, for the perfection or priority of any Lien securing the Guaranteed Obligations or for any failure by Borrower to perform any of its obligations hereunder or thereunder.  None of Administrative Agent, its Affiliates or its or its Affiliates’ officers, directors, employees, agents, trustees, administrators, managers, advisors or representatives (collectively, the “Related Parties”): (a) makes any warranty or representation to any Bank, any Fronting Bank or any other Person, or shall be responsible to any Bank, any Fronting Bank or any other Person for any statement, warranty or representation made or deemed made by Borrower, any other Loan Party or any other Person in or in connection with this Agreement or any other Loan Document; (b) shall have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any other Loan Document or the satisfaction of any conditions precedent under this Agreement or any Loan Document on the part of Borrower or other Persons, or to inspect the property, books or records of Borrower or any other Person; and (c) shall incur any liability under or in respect of this Agreement or any other Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telephone, telecopy or electronic mail) believed by it to be genuine and signed, sent or given by the proper party or parties.  Administrative Agent may employ agents and attorneys-in-fact and shall not be responsible, except as to money or securities received by it or its authorized agents, for the negligence or misconduct (as finally determined by a court of competent jurisdiction) of any such agents or attorneys-in-fact selected by it with reasonable care. Neither Administrative Agent nor any of its

 

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directors, officers, employees or agents shall be liable or responsible for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith, except for its or their own gross negligence or willful misconduct (as finally determined by a court of competent jurisdiction). Borrower shall pay any fee agreed to by Borrower and Administrative Agent with respect to Administrative Agent’s services hereunder. Notwithstanding anything to the contrary contained in this Agreement, Administrative Agent agrees with the Banks that Administrative Agent shall perform its obligations under this Agreement in good faith according to the same standard of care as that customarily exercised by it in administering its own revolving credit loans.

 

SECTION 10.02.  Reliance by Administrative Agent.  Administrative Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telefax or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Administrative Agent. Administrative Agent may deem and treat each Bank as the holder of the Loan made by it for all purposes hereof and shall not be required to deal with any Person who has acquired a participation in any Loan or participation from a Bank. As to any matters not expressly provided for by this Agreement or any other Loan Document, Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder in accordance with instructions signed by the Required Banks, and such instructions of the Required Banks and any action taken or failure to act pursuant thereto shall be binding on all of the Banks and any other holder of any of the Guaranteed Obligations; provided, however, that, notwithstanding anything in this Agreement to the contrary, Administrative Agent shall not be required to take any action which exposes Administrative Agent to personal liability or which is contrary to this Agreement or any other Loan Document or applicable law.  Without limiting the foregoing, no Bank shall have any right of action whatsoever against Administrative Agent as a result of Administrative Agent acting or refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of the Required Banks, or where applicable, all of the Banks.

 

SECTION 10.03.  Defaults.  Administrative Agent shall not be deemed to have knowledge of the occurrence of a Default or Event of Default (other than an Event of Default pursuant to Section 9.01(1)) unless Administrative Agent has received notice from a Bank or Borrower specifying such Default or Event of Default and stating that such notice is a “Notice of Default.” In the event that Administrative Agent receives a Notice of Default, Administrative Agent shall give prompt notice thereof to the Banks. Administrative Agent, following consultation with the Banks, shall (subject to Section 9.02, Section 10.07 and Section 12.02) take such action with respect to such Default or Event of Default which is continuing as shall be directed by the Required Banks; provided that, unless and until Administrative Agent shall have received such directions, Administrative Agent may take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interest of the Banks; and provided further that Administrative Agent shall not (subject to Section 9.02) send a notice of Default, Event of Default or acceleration to Borrower without the approval of the Required Banks. In no event shall Administrative Agent be required to take any such action which it determines to be contrary to law.  If any Bank (excluding the Bank which is also serving as Administrative Agent) becomes aware of any Default or Event of Default, it shall promptly send to Administrative Agent such a “Notice of Default”; provided, a Bank’s failure to

 

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provide such a “Notice of Default” to Administrative Agent shall not result in any liability of such Bank to any other party to any of the Loan Documents.

 

SECTION 10.04.  Rights of Agent as a Bank.  With respect to its Loan Commitment and the Loan provided by it, each Person serving as an Agent in its capacity as a Bank hereunder shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not acting as such Agent, and the term any “Bank” or “Banks” shall include each Person serving as an Agent in its capacity as a Bank. Each Person serving as an Agent and its Affiliates may (without having to account therefor to any Bank) accept deposits from, lend money to (on a secured or unsecured basis), and generally engage in any kind of banking, trust or other business with, Borrower (and any Affiliates of Borrower) as if it were not acting as such Agent.  The Fronting Banks and the Banks acknowledge that, pursuant to such business activities, an Agent or its Affiliates may receive information regarding Borrower and its Affiliates (including information that may be subject to confidentiality obligations in favor of such Person) and acknowledge that no Agent shall be under any obligation to provide such information to the Fronting Banks or the Banks.

 

SECTION 10.05.  Indemnification of Agents.  Each Bank agrees to indemnify each Agent (to the extent not reimbursed under Section 12.04 or under the applicable provisions of any other Loan Document, but without limiting the obligations of Borrower under Section 12.04 or such provisions), for its Pro Rata Share of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of this Agreement, any other Loan Document or any other documents contemplated by or referred to herein or the transactions contemplated hereby or thereby (including, without limitation, the costs and expenses which Borrower is obligated to pay under Section 12.04) or under the applicable provisions of any other Loan Document or the enforcement of any of the terms hereof or thereof or of any such other documents or instruments; provided that no Bank shall be liable for (1) any of the foregoing to the extent they arise from the gross negligence or willful misconduct (as finally determined by a court of competent jurisdiction) of the party to be indemnified, (2) any loss of principal or interest with respect to the Loan of any Bank serving as an Agent or (3) any loss suffered by such Agent in connection with a swap or other interest rate hedging arrangement entered into with Borrower, and that no action taken in accordance with the written directions of the Required Banks (or all of the Banks, if expressly required hereunder) shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder or under the other Loan Documents and the termination of this Agreement.

 

SECTION 10.06.  Non-Reliance on Agents and Other BanksEach of the Banks and the Fronting Banks expressly acknowledges and agrees that no Agent nor any of its respective Related Parties has made any representations or warranties to such Fronting Bank or such Bank and that no act by any Agent hereafter taken, including any review of the affairs of General Partner, Borrower, any other Loan Party or any other Subsidiary or Affiliate, shall be deemed to constitute any such representation or warranty by any Agent to a Fronting Bank or any Bank.  Each of the Banks and the Fronting Banks acknowledges that it has made its own credit and legal analysis and decision to enter into this Agreement and the transactions contemplated hereby,

 

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independently and without reliance upon any Agent, any other Bank or counsel to Administrative Agent, or any of their respective Related Parties, and based on the financial statements of General Partner, Borrower, the other Loan Parties, the other Subsidiaries and other Affiliates, and inquiries of such Persons, its independent due diligence of the business and affairs of General Partner, Borrower, the other Loan Parties, the other Subsidiaries and other Persons, its review of the Loan Documents, the legal opinions required to be delivered to it hereunder, the advice of its own counsel and such other documents and information as it has deemed appropriate.  Each of the Banks and the Fronting Banks also acknowledges that it will, independently and without reliance upon any Agent, any other Bank or counsel to Administrative Agent or any of their respective Related Parties, and based on such review, advice, documents and information as it shall deem appropriate at the time, continue to make its own decisions in taking or not taking action under the Loan Documents.  No Agent shall be required to keep itself informed as to the performance or observance by Borrower or any other Loan Party of the Loan Documents or any other document referred to or provided for therein or to inspect the properties or books of, or make any other investigation of, Borrower, any other Loan Party or any other Subsidiary.  Except for notices, reports and other documents and information expressly required to be furnished to the Banks and the Fronting Banks by Administrative Agent under this Agreement or any of the other Loan Documents, Administrative Agent shall have no duty or responsibility to provide any Bank or Fronting Bank with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of General Partner, Borrower, any other Loan Party or any other Affiliate thereof which may come into possession of Administrative Agent or any of its Related Parties.  Each of the Banks and the Fronting Banks acknowledges that Administrative Agent’s legal counsel in connection with the transactions contemplated by this Agreement is only acting as counsel to Administrative Agent and is not acting as counsel to any Bank or Fronting Bank.

 

SECTION 10.07.  Failure of Administrative Agent to Act.  Except for action expressly required of Administrative Agent hereunder, Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall have received further assurances (which may include Cash Collateral) of the indemnification obligations of the Banks under Section 10.05 in respect of any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.  If any indemnity furnished by the Banks to Administrative Agent for any purpose shall, in the reasonable opinion of Administrative Agent, be insufficient or become impaired, Administrative Agent may call for additional indemnity and cease, or not commence, to do the action indemnified against until such additional indemnity is furnished.

 

SECTION 10.08.  Resignation or Removal of Administrative AgentIf the Person serving as Administrative Agent is a Defaulting Lender pursuant to clause (d) of the definition thereof, the Required Banks may, to the extent permitted by applicable law, by notice in writing to Borrower and such Person remove such Person as Administrative Agent and appoint a successor; provided, however, that so long as no Default under Section 9.01(1) or Section 9.01(5) or Event of Default exists, such appointment shall be subject to Borrower’s approval (such approval not to be unreasonably withheld or delayed) (except that Borrower shall, in all events, be deemed to have approved each Bank and any of its Affiliates as a successor Administrative Agent). If no such successor shall have been so appointed by the Required Banks and shall have accepted such appointment within 30 days (or such earlier day as shall be agreed

 

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by the Required Banks) (the “Removal Closing Date”), then such removal shall nonetheless become effective in accordance with such notice on the Removal Closing Date.  Administrative Agent may resign at any time as Administrative Agent under the Loan Documents by giving written notice thereof to the Banks and Borrower.  Upon any such resignation, the Required Banks shall have the right to appoint a successor Administrative Agent which appointment shall, provided no Default under Section 9.01(1) or Section 9.01(5) or Event of Default exists, be subject to Borrower’s approval, which approval shall not be unreasonably withheld or delayed (except that Borrower shall, in all events, be deemed to have approved each Bank and any of its Affiliates as a successor Administrative Agent).  If no successor Administrative Agent shall have been so appointed in accordance with the immediately preceding sentence, and shall have accepted such appointment, within 30 days after the current Administrative Agent’s giving of notice of resignation, then the current Administrative Agent may, on behalf of the Banks and the Fronting Banks, appoint a successor Administrative Agent, which shall be a Bank, if any Bank shall be willing to serve, and otherwise shall be a Qualified Institution; provided that if Administrative Agent shall notify Borrower and the Banks that no Bank has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice.  As of the Removal Closing Date or the effectiveness of such resignation, as applicable, (1) Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents and (2) all payments, communications and determinations provided to be made by, to or through Administrative Agent shall instead be made to each Bank and the Fronting Banks directly, until such time as a successor Administrative Agent has been appointed as provided for above in this Section; provided, further that such the Banks and the Fronting Banks so acting directly shall be and be deemed to be protected by all indemnities and other provisions herein for the benefit and protection of Administrative Agent as if each such Bank or Fronting Bank were itself Administrative Agent.  Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the current Administrative Agent, and the current Administrative Agent shall be discharged from its duties and obligations under the Loan Documents.  Any resignation by or removal of an Administrative Agent shall also constitute the resignation or removal as a Fronting Bank and as the Swingline Bank by the Bank then acting as Administrative Agent (the “Resigning Bank”).  Upon the acceptance of a successor’s appointment as Administrative Agent hereunder (i) the Resigning Bank shall be discharged from all duties and obligations of a Fronting Bank and the Swingline Lenders hereunder and under the other Loan Documents and (ii) the successor Fronting Bank shall issue letters of credit in substitution for all Letters of Credit issued by the Resigning Bank as Fronting Bank outstanding at the time of such succession (which letters of credit issued in substitutions shall be deemed to be Letters of Credit issued hereunder) or make other arrangements satisfactory to the Resigning Bank to effectively assume the obligations of the Resigning Bank with respect to such Letters of Credit.  After any Administrative Agent’s resignation or removal hereunder as Administrative Agent, the provisions of this Article X shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under the Loan Documents.

 

SECTION 10.09.  Amendments Concerning Agency Function.  Notwithstanding anything to the contrary contained in this Agreement, no Agent shall be bound by any waiver, amendment, supplement or modification of this Agreement or any other Loan Document which

 

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affects its duties, rights, and/or function hereunder or thereunder unless it shall have given its prior written consent thereto.

 

SECTION 10.10.  Liability of Administrative Agent.  Administrative Agent shall not have any liabilities or responsibilities to Borrower on account of the failure of any Bank to perform its obligations hereunder or to any Bank on account of the failure of Borrower to perform its obligations hereunder or under any other Loan Document.

 

SECTION 10.11.  Transfer of Agency Function.  Without the consent of Borrower or any Bank, Administrative Agent may at any time or from time to time transfer its functions as Administrative Agent hereunder to any of its offices wherever located in the United States, provided that Administrative Agent shall promptly notify in writing Borrower and the Banks thereof.

 

SECTION 10.12.  Non-Receipt of Funds by Administrative Agent.  Unless Administrative Agent shall have received notice from a Bank or Borrower (either one as appropriate being the “Payor”) prior to the date on which such Bank is to make payment hereunder to Administrative Agent of the proceeds of a Loan or Borrower is to make payment to Administrative Agent, as the case may be (either such payment being a “Required Payment”), which notice shall be effective upon receipt, that the Payor will not make the Required Payment in full to Administrative Agent, Administrative Agent may assume that the Required Payment has been made in full to Administrative Agent on such date, and Administrative Agent in its sole discretion may, but shall not be obligated to, in reliance upon such assumption, make the amount thereof available to the intended recipient on such date. If and to the extent the Payor shall not have in fact so made the Required Payment in full to Administrative Agent, the recipient of such payment shall repay to Administrative Agent forthwith on demand such amount made available to it together with interest thereon, for each day from the date such amount was so made available by Administrative Agent until the date Administrative Agent recovers such amount, at the customary rate set by Administrative Agent for the correction of errors among the Banks for three (3) Banking Days and thereafter at the Base Rate.

 

SECTION 10.13.  Taxes.

 

(a)                                 Payments Free of Taxes.  Any and all payments by or on account of any obligation of Borrower under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable law.  If any applicable law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by Borrower shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 10.13) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

 

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(b)                                 Payment of Other Taxes by Borrower.  Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of Administrative Agent timely reimburse it for, Other Taxes.

 

(c)                                  Evidence of Payments.  As soon as practicable after any payment of Taxes by Borrower to a Governmental Authority pursuant to this Section 10.13, Borrower shall deliver to Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to Administrative Agent.

 

(d)                                 Indemnification by Borrower.  Borrower shall indemnify each Recipient, within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable out-of-pocket expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to Borrower by a Recipient (with a copy to Administrative Agent), or by Administrative Agent on its own behalf or on behalf of a Recipient, shall be conclusive absent manifest error.

 

(e)                                  Indemnification by Banks.  Each Bank shall severally indemnify Administrative Agent, within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Bank (but only to the extent that Borrower has not already indemnified Administrative Agent for such Indemnified Taxes and without limiting the obligation of Borrower to do so), (ii) any Taxes attributable to such Bank’s failure to comply with the provisions of Section 12.05(b) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Bank, in each case, that are payable or paid by Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to any Bank by Administrative Agent shall be conclusive absent manifest error.  Each Bank hereby authorizes Administrative Agent to set off and apply any and all amounts at any time owing to such Bank under any Loan Document or otherwise payable by Administrative Agent to such Bank from any other source against any amount due to Administrative Agent under this paragraph (e).

 

(f)                                   Status of Banks.  (i) Any Bank that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to Borrower and Administrative Agent, at the time or times reasonably requested by Borrower or Administrative Agent, such properly completed and executed documentation reasonably requested by Borrower or Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding.  In addition, any Bank, if reasonably requested by Borrower or Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by Borrower or Administrative Agent as will enable Borrower or Administrative Agent to determine whether or not such Bank is subject to backup withholding or information reporting requirements.  Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such

 

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documentation (other than such documentation set forth in Section 10.13(f)(ii)(A),(B) and (D) below) shall not be required if in the applicable Bank’s reasonable judgment such completion, execution or submission would subject such Bank to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Bank.

 

(ii)                                              Without limiting the generality of the foregoing, in the event that Borrower is a U.S. Person,

 

(A)                               any Bank that is a U.S. Person shall deliver to Borrower and Administrative Agent on or prior to the date on which such Bank becomes a Bank under this Agreement (and from time to time thereafter upon the reasonable request of Borrower or Administrative Agent), an executed IRS Form W-9 certifying that such Bank is exempt from U.S. Federal backup withholding tax;

 

(B)                               any Foreign Bank shall, to the extent it is legally entitled to do so, deliver to Borrower and Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Bank becomes a Bank under this Agreement (and from time to time thereafter upon the reasonable request of Borrower or Administrative Agent), whichever of the following is applicable:

 

(1)                                 in the case of a Foreign Bank claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, an executed IRS Form W-8BEN or Form W-8BEN-E establishing an exemption from, or reduction of, U.S. Federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN or W-8BEN-E establishing an exemption from, or reduction of, U.S. Federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

 

(2)                                 in the case of a Foreign Bank claiming that its extension of credit will generate U.S. effectively connected income, an executed IRS Form W-8ECI;

 

(3)                                 in the case of a Foreign Bank claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of EXHIBIT J-1 to the effect that such Foreign Bank is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” within the meaning of Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) an executed IRS Form W-8BEN or W-8BEN-E; or

 

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(4)                                 to the extent a Foreign Bank is not the beneficial owner, an executed IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, or IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate substantially in the form of EXHIBIT J-2 or EXHIBIT J-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Bank is a partnership and one or more direct or indirect partners of such Foreign Bank are claiming the portfolio interest exemption, such Foreign Bank may provide a U.S. Tax Compliance Certificate substantially in the form of EXHIBIT J-4 on behalf of each such direct and indirect partner;

 

(C)                               any Foreign Bank shall, to the extent it is legally entitled to do so, deliver to Borrower and Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Bank becomes a Bank under this Agreement (and from time to time thereafter upon the reasonable request of Borrower or Administrative Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. Federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit Borrower or Administrative Agent to determine the withholding or deduction required to be made; and

 

(D)                               if a payment made to a Bank under any Loan Document would be subject to U.S. Federal withholding Tax imposed by FATCA if such Bank were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Bank shall deliver to Borrower and Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by Borrower or Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Borrower or Administrative Agent as may be necessary for Borrower and Administrative Agent to comply with their obligations under FATCA and to determine that such Bank has complied with such Bank’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

Each Bank agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify Borrower and Administrative Agent in writing of its legal inability to do so.

 

(g)                                  Treatment of Certain Refunds.  If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 10.13 (including by the payment of additional amounts pursuant to this Section 10.13), it shall pay to the indemnifying party an amount equal to such

 

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refund (but only to the extent of indemnity payments made under this Section 10.13 with respect to the Taxes giving rise to such refund), net of all reasonable out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund).  Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (g) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority.  Notwithstanding anything to the contrary in this paragraph (g), in no event will any indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (g) the payment of which would place such indemnified party in a less favorable net after-Tax position than such indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid.  This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to, or to apply for or seek a refund of any Taxes on behalf of, any indemnifying party or any other Person.

 

(h)                                 Survival.  Each party’s obligations under this Section 10.13 shall survive the resignation or replacement of Administrative Agent or any assignment of rights by, or the replacement of, a Bank, the termination of the Loan Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.

 

(i)                                     Defined Terms.  For purposes of this Section 10.13, the term “Bank” includes any Fronting Bank or Designated Bank and the term “applicable law” includes FATCA.

 

SECTION 10.14.  Pro Rata Treatment.  Except to the extent otherwise provided:

 

(a)                                 each borrowing of Ratable Loans from the Ratable Loan Banks under Sections 2.01(b), 2.03(b)(3) and 2.17(h) shall be made from the Ratable Loan Banks, each payment of the fees under Sections 2.08, 2.17(g)(i) and 2.18 shall be made for the account of the Ratable Loan Banks, and each termination or reduction of the amount of the Ratable Loan Commitments under Section 2.16(a) shall be applied to the respective Ratable Loan Commitments of the Ratable Loan Banks, according to the amounts of their respective Pro Rata Shares;

 

(b)                                 each payment or prepayment of principal of Ratable Loans shall be made for the account of the Ratable Loan Banks according to the amounts of their respective Pro Rata Shares; provided that, subject to Section 12.20, if immediately prior to giving effect to any such payment in respect of any Ratable Loans the outstanding principal amount of the Ratable Loans shall not be held by the Ratable Loan Banks in accordance with their respective Pro Rata Shares in effect at the time such Ratable Loans were made, then such payment shall be applied to the Ratable Loans in such manner as shall result, as nearly as is practicable, in the outstanding principal amount of the Ratable Loans being held by the Ratable Loan Banks according to the amounts of their respective Pro Rata Shares;

 

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(c)                                  each payment of interest on Ratable Loans shall be made for the account of the Ratable Loan Banks pro rata in accordance with the amounts of interest on such Ratable Loans then due and payable to the respective Ratable Loan Bank;

 

(d)                                 each borrowing of a tranche of Term Loans from the applicable tranche of Term Loan Banks under Sections 2.01(d) shall be made from the applicable Term Loan Banks, each payment of the fees under Sections 2.08 shall be made for the account of the the applicable tranche of Term Loan Banks, and each termination or reduction of the amount of a tranche of Term Loans Commitments under Section 2.16(a) shall be applied to the respective tranche of Term Loan Commitments of the applicable Term Loan Banks, according to the amounts of their respective Pro Rata Shares of such tranche;

 

(e)                                  each payment or prepayment of principal of any tranche of Term Loans shall be made for the account of the applicable Term Loan Banks according to the amounts of their respective Pro Rata Shares of such tranche; provided that, subject to Section 12.20, if immediately prior to giving effect to any such payment in respect of any tranche of Term Loans the outstanding principal amount of the Term Loans of such tranche shall not be held by the Term Loan Banks in accordance with their respective Pro Rata Shares in effect at the time such Term Loan Loans of such tranche were made, then such payment shall be applied to such tranche of the Term Loans in such manner as shall result, as nearly as is practicable, in the outstanding principal amount of the Terms Loans of such tranche being held by the Term Loan Banks of such tranche in accordance with such respective Pro Rata Shares;

 

(f)                                   each payment of interest on a tranche of Term Loans shall be made for the account of the applicable tranche of Term Loan Banks according to the amounts of their respective Pro Rata Shares of such tranche, as applicable, then due and payable to the respective Term Loan Banks;

 

(g)                                  the Conversion and Continuation of Ratable Loans or a tranche of Term Loans (other than Conversions provided for by Sections 3.01, 3.02, 3.03 and 3.04) shall be made pro rata among the Ratable Loan Banks or tranche of Term Loan Banks, as applicable, according to the amounts of their respective Pro Rata Shares;

 

(h)                                 the Ratable Loan Banks’ participation in, and payment obligations in respect of, Swingline Loans under Section 2.03(b)(4) shall be in accordance with their respective Pro Rata Shares; and

 

(i)                                     the Ratable Loan Banks’ participation in, and payment obligations in respect of, Letters of Credit under Section 2.17(h) shall be in accordance with their respective Pro Rata Shares.

 

SECTION 10.15.  Sharing of Payments Among Banks.  If a Bank shall obtain payment of any principal of or interest on any Loan made by it through the exercise of any right of setoff, banker’s lien or counterclaim, or by any other means (including direct payment), and such payment results in such Bank receiving a greater payment than it would have been entitled to had such payment been paid directly to Administrative Agent for disbursement to the Banks, then such Bank shall promptly purchase for cash from the other Banks participations in the Loans

 

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made by the other Banks in such amounts, and make such other adjustments from time to time as shall be equitable to the end that all of the Banks shall share ratably the benefit of such payment; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Bank as consideration for the assignment of or sale of a participation in any of its Loans or participations in Letters of Credit to any assignee or participant, other than to Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). To such end the Banks shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. Borrower agrees that any Bank so purchasing a participation in the Loans made by other Banks may exercise all rights of setoff, banker’s lien, counterclaim or similar rights with respect to such participation. Nothing contained herein shall require any Bank to exercise any such right or shall affect the right of any Bank to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness of Borrower.

 

SECTION 10.16.  Possession of Documents.  Each Bank shall keep possession of its own Notes. Administrative Agent shall hold all the other Loan Documents and related documents in its possession and maintain separate records and accounts with respect thereto, and shall permit the Banks and their representatives access at all reasonable times to inspect such Loan Documents, related documents, records and accounts.

 

SECTION 10.17.  Syndication Agents and Documentation Agents.  The Banks serving as Syndication Agents or Documentation Agents shall have no duties or obligations in such capacities.  In addition, in acting as an Agent, no Bank will have any responsibility except as set forth herein and shall in no event be subject to any fiduciary or other implied duties.

 

ARTICLE XI

 

NATURE OF OBLIGATIONS

 

SECTION 11.01.  Absolute and Unconditional Obligations.  Borrower acknowledges and agrees that its obligations and liabilities under this Agreement and under the other Loan Documents shall be absolute and unconditional irrespective of (1) any lack of validity or enforceability of any of the Guaranteed Obligations, any Specified Derivative Contract, any Specified Cash Management Agreement, any Loan Documents, or any agreement or instrument relating thereto; (2) any change in the time, manner or place of payment of, or in any other term in respect of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or consent to any departure from any Loan Documents or any other documents or instruments executed in connection with or related to the Guaranteed Obligations; (3) any exchange or release of any collateral, if any, or of any other Person from all or any of the Guaranteed Obligations; or (4) any other circumstances which might otherwise constitute a defense available to, or a discharge of, Borrower or any other Person in respect of the Guaranteed Obligations.

 

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The obligations and liabilities of Borrower under this Agreement and the other Loan Documents shall not be conditioned or contingent upon the pursuit by any Bank or any other Person at any time of any right or remedy against Borrower, any other Loan Party or any other Person which may be or become liable in respect of all or any part of the Guaranteed Obligations or against any collateral or security or guarantee therefor or right of setoff with respect thereto.

 

SECTION 11.02.  Non-Recourse to Principals and General Partner.  This Agreement and the obligations hereunder and under the other Loan Documents are fully recourse to Borrower and the Guarantors. Unless General Partner becomes a Guarantor pursuant to Section 6.10 and subject to the limitations described below in this Section 11.02, notwithstanding anything to the contrary contained in this Agreement, in any of the other Loan Documents, or in any other instruments, certificates, documents or agreements executed in connection with the Loans (all of the foregoing, for purposes of this Section, hereinafter referred to, individually and collectively, as the “Relevant Documents”), and notwithstanding any applicable law that would make General Partner liable for the debts or obligations of Borrower, including as a general partner, no recourse under or upon any Obligation, representation, warranty, promise or other matter whatsoever shall be had against any of the Principals or General Partner, and each Bank expressly waives and releases, on behalf of itself and its successors and assigns, all right to assert any liability whatsoever under or with respect to the Relevant Documents against, or to satisfy any claim or obligation arising thereunder against, any of the Principals or General Partner or out of any assets of the Principals or General Partner, provided, however, that nothing in this Section shall be deemed to (1) release Borrower from any liability pursuant to, or from any of its obligations under, the Relevant Documents, or from liability for its fraudulent actions or fraudulent omissions; (2) release General Partner from personal liability arising outside of the terms of this Agreement for its, his or her own fraudulent actions, fraudulent omissions, misappropriation of funds, rents or insurance proceeds, gross negligence or willful misconduct; (3) constitute a waiver of any obligation evidenced or secured by, or contained in, the Relevant Documents or affect in any way the validity or enforceability of the Relevant Documents; or (4) limit the right of Administrative Agent and/or the Banks to proceed against or realize upon any collateral hereafter given for the Loans and Letters of Credit or any and all of the assets of Borrower (notwithstanding the fact that General Partner has an ownership interest in Borrower and, thereby, an interest in the assets of Borrower) or to name Borrower (or, to the extent that the same are required by applicable law or are determined by a court to be necessary parties in connection with an action or suit against Borrower or any collateral hereafter given for the Loans, General Partner) as a party defendant in, and to enforce against any collateral hereafter given for the Loans and/or assets of Borrower any judgment obtained by Administrative Agent and/or the Banks with respect to, any action or suit under the Relevant Documents so long as no judgment shall be taken (except to the extent taking a judgment is required by applicable law or determined by a court to be necessary to preserve Administrative Agent’s and/or the Banks’ rights against any collateral hereafter given for the Loans or Borrower, but not otherwise) or shall be enforced against General Partner or its assets.

 

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ARTICLE XII

 

MISCELLANEOUS

 

SECTION 12.01.  Binding Effect of Request for Advance.  Borrower agrees that, by its acceptance of any advance of proceeds of the Loans under this Agreement or the issuance of any Letter of Credit, it shall be bound in all respects by the request for advance or Letter of Credit submitted on its behalf in connection therewith with the same force and effect as if Borrower had itself executed and submitted the request for advance or Letter of Credit and whether or not the request for advance is executed and/or submitted by an authorized person.

 

SECTION 12.02.  Amendments and Waivers.

 

(a)                                 Generally.  No amendment or material waiver of any provision of this Agreement or any other Loan Document nor consent to any material departure by Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Banks and, solely for purposes of its acknowledgment thereof, Administrative Agent (and, in the case of an amendment to any Loan Document, the written consent of each Loan Party a party thereto), and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, that subject to the immediately following subsection (b):

 

(i)                                                 any term of this Agreement or of any other Loan Document relating to the rights or obligations of the Ratable Loan Banks, and not any other Banks, may be amended, and the performance or observance by Borrower or any other Loan Party or any Subsidiary of any such terms may be waived (either generally or in a particular instance and either retroactively or prospectively) with, and only with, the written consent of the Required Ratable Loan Banks (and, in the case of an amendment to any Loan Document, the written consent of each Loan Party a party thereto);

 

(ii)                                              any term of this Agreement or of any other Loan Document relating to the rights or obligations of the Term A-1 Banks, and not any other Banks, may be amended, and the performance or observance by Borrower or any other Loan Party or any Subsidiary of any such terms may be waived (either generally or in a particular instance and either retroactively or prospectively) with, and only with, the written consent of the Required Term A-1 Loan Banks (and, in the case of an amendment to any Loan Document, the written consent of each Loan Party a party thereto); and

 

(iii)                                           any term of this Agreement or of any other Loan Document relating to the rights or obligations of the Term A-2 Banks, and not any other Banks, may be amended, and the performance or observance by Borrower or any other Loan Party of any such terms may be waived (either generally or in a particular instance and either retroactively or prospectively) with, and only with, the written consent of the Required Term A-2 Loan Banks (and, in the case of an amendment to any Loan Document, the written consent of each Loan Party a party thereto).

 

(b)                                 Additional Bank Consents.  Notwithstanding the foregoing, no amendment, waiver or consent shall do any of the following:

 

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(i)                                                 forgive or reduce the principal of, or interest on, the Loans or any fees or Prepayment Premium due hereunder or any other amount due hereunder or under any other Loan Document (other than a waiver of default interest and changes in calculation of the ratio of Total Outstanding Indebtedness to Capitalization Value that may indirectly affect pricing), in each case, without the written consent of each Bank directly and adversely affected thereby;

 

(ii)                                              change the definition of “Ratable Loan Maturity Date”, or otherwise postpone any date on which a, or forgive any, scheduled payment of principal of any Ratable Loans, fees payable to the Ratable Loan Banks or any other Obligations owing to the Ratable Loan Banks, or permit the expiration date of any Letter of Credit to be later than the first anniversary of the Ratable Loan Maturity Date, in each case, without the written consent of each Ratable Loan Bank directly and adversely affected thereby;

 

(iii)                                           change the definition of “Term A-1 Loan Maturity Date” or otherwise postpone any date on which a, or forgive any, scheduled payment of principal of the Term A-1 Loans, fees payable to any Term A-1 Banks or any other Obligations owing to the Term A-1 Banks (excluding mandatory prepayments, if any), in each case, without the written consent of each Term A-1 Bank directly and adversely affected thereby;

 

(iv)                                          change the definition of “Term A-2 Loan Maturity Date” or otherwise postpone any date on which a, or forgive any, scheduled payment of principal of the Term A-2 Loans, fees or Prepayment Premium payable to any Term A-2 Banks or any other Obligations owing to the Term A-2 Banks (excluding mandatory prepayments, if any), in each case, without the written consent of each Term A-2 Bank directly and adversely affected thereby;

 

(v)                                             change the definition of Pro Rata Share or change Section 10.14 or 10.15 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Bank directly and adversely affected thereby;

 

(vi)                                          amend this Section 12.02 without the written consent of each Bank directly and adversely affected thereby;

 

(vii)                                       increase or decrease the Ratable Loan Commitment, Term A-1 Loan Commitment or Term A-2 Loan Commitment of any Bank or subject any of the Banks to any additional obligations without the written consent of such Bank (other than pursuant to Section 2.16(c) or Section 3.07 and except for a ratable decrease in the Ratable Loan Commitments of all Ratable Lenders, the Term A-1 Loan Commitments of all Term A-1 Banks or the Term A-2 Loan Commitments of all Term A-2 Banks, as applicable);

 

(viii)                                    waive any default in payment under paragraph (1) of Section 9.01 or any default under paragraph (5) of Section 9.01 with respect to Borrower, any

 

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other Loan Party or General Partner, in each case, without the written consent of all of the Banks;

 

(ix)                                          release all or substantially all of the Guarantors (other than as provided in Section 6.10) without the written consent of all of the Banks;

 

(x)                                             change the definition of Required Banks or except as otherwise provided in the following clause (xi), make any other modification that reduces the number or percentage of the Banks required to make any determinations or waive any rights hereunder or to modify any provision hereof without the written consent of all of the Banks;

 

(xi)                                          change (i) the definition of the term “Required Ratable Loan Banks” or modify the Loan Documents in any other manner that reduces the number or percentage of the Ratable Loan Banks required to make any determinations or waive any rights hereunder or to modify any provision hereof solely with respect to the Ratable Loan Banks without the written consent of each Ratable Loan Bank, (ii) the definition of the term “Required Term A-1 Loan Banks” or modify in any other manner the number or percentage of the Term A-1 Banks required to make any determinations or waive any rights hereunder or to modify any provision hereof without the written consent of each Term A-1 Bank or (iii) the definition of the term “Required Term A-2 Loan Banks” or modify in any other manner the number or percentage of the Term A-1 Banks required to make any determinations or waive any rights hereunder or to modify any provision hereof without the written consent of each Term A-1 Bank; or

 

(xii)                                       permit the assignment or transfer by Borrower of any of its rights or obligations hereunder or under any other Loan Document except in a transaction permitted (with or without the Required Banks’ consent) pursuant to Section 7.01 without the written consent of all of the Banks; and

 

provided further, that (A) an amendment, waiver or consent relating to the time specified for payment of principal, interest and fees with respect to Bid Rate Loans shall only be binding if in writing and signed by the affected Bank or Designated Lender and (B) an amendment, waiver or consent relating to the Swingline Loans or the Letters of Credit (including any letter of credit application; provided that the provisions of this Agreement shall prevail if there is an inconsistency between this Agreement and such amendment, waiver or consent to a letter of credit application) shall only be binding if in writing and signed by the Swingline Lenders or the Fronting Banks affected thereby, as applicable. Any advance of proceeds of the Loans made prior to or without the fulfillment by Borrower of all of the conditions precedent thereto, whether or not known to Administrative Agent and the Banks, shall not constitute a waiver of the requirement that all conditions, including the non-performed conditions, shall be required with respect to all future advances. No failure on the part of Administrative Agent or any Bank to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof or preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by

 

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law. All communications from Administrative Agent to the Banks requesting the Banks’ determination, consent, approval or disapproval (i) shall be given in the form of a written notice to each Bank and (ii) shall be accompanied by a description of the matter or thing as to which such determination, approval, consent or disapproval is requested. Each Bank shall reply promptly, but in any event within fifteen (15) Banking Days (or five (5) Banking Days with respect to any decision to accelerate or stop acceleration of the Loan) after receipt of the request therefor by Administrative Agent (the “Bank Reply Period”). Unless a Bank shall give written notice to Administrative Agent that it objects to the requested determination, approval, consent or disapproval within the Bank Reply Period, such Bank shall be deemed to have approved or consented to such requested determination, approval, consent or disapproval; provided that this sentence shall not apply to any determination, consent, approval or disapproval regarding any matter requiring the consent of all Banks or all affected Banks under the first proviso of this Section.

 

(c)                                  Notwithstanding anything to the contrary in this Section, if Administrative Agent and Borrower have jointly identified an ambiguity, omission, mistake or defect in any provision of this Agreement or an inconsistency between provisions of this Agreement, Administrative Agent and Borrower shall be permitted to amend such provision or provisions to cure such ambiguity, omission, mistake, defect or inconsistency so long as to do so would not adversely affect the interests of the Banks and the Fronting Banks.  Any such amendment shall become effective without any further action or consent of any of other party to this Agreement.  Administrative Agent shall notify the Banks and the Fronting Banks of any such amendment.

 

(d)                                 Notwithstanding the foregoing, this Agreement may be amended (or amended and restated) with only the written consent of Administrative Agent and Borrower (a) to provide for the making of any Incremental Increase as contemplated by Section 2.16 and to permit the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the Loans and the accrued interest and fees in respect thereof and (b) to include appropriately the Banks in respect of such Incremental Increase in any determination of the Required Banks.

 

SECTION 12.03.  Survival; Termination.  All covenants, agreements, representations and warranties made by Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that Administrative Agent or any Bank may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as any Guaranteed Obligations hereunder are outstanding and unpaid.  At such time as (a) all of the Loan Commitments have been terminated, (b) all Letters of Credit have terminated or expired (other than Letters of Credit the expiration dates of which extend beyond the Ratable Loan Maturity Date as permitted under Section 2.17(e) and in respect of which Borrower has satisfied the requirements of such Section and Section 2.17(i)), (c) none of the Banks is obligated any longer under this Agreement to make any Loans and (d) all Obligations (other than obligations which survive as hereafter provided in this Section 12.03 and contingent indemnification obligations

 

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that have not been asserted) have been paid and satisfied in full, this Agreement shall terminate.  Promptly following such termination, each Bank shall promptly return to Borrower any Note issued to such Bank.  The provisions of Sections 3.01, 3.05, 3.06, 10.13, 12.14 and 12.15, the indemnities to which Administrative Agent, the Fronting Banks and the Banks are entitled under Sections 10.05 and 12.04, and any other provision of this Agreement and the other Loan Documents, and (for as long as any Letters of Credit remain outstanding) the provisions of Sections 2.17(e) and 2.17(i), shall continue in full force and effect and shall protect Administrative Agent, the Fronting Banks and the Banks (i) notwithstanding any termination of this Agreement, or of the other Loan Documents, against events arising after such termination as well as before and (ii) at all times after any such party ceases to be a party to this Agreement with respect to all matters and events existing on or prior to the date such party ceased to be a party to this Agreement.  Upon Borrower’s request, Administrative Agent agrees to deliver to Borrower, at Borrower’s sole cost and expense, written confirmation of the foregoing termination.

 

SECTION 12.04.  Expenses; Indemnification.

 

(a)                                 Borrower agrees (a) to pay or reimburse Administrative Agent and, solely in connection with the initial closing and syndication of the facilities hereunder, the Bookrunners, for all of its and their reasonable and documented out-of-pocket costs and expenses incurred in connection with the preparation, negotiation and execution of, and any amendment, supplement or modification to, any of the Loan Documents (including, without limitation, in respect of any notice given by Borrower under Section 2.16(c), whether or not the requested increase is actually effected), and the consummation of the transactions contemplated thereby, including the reasonable and documented out-of-pocket fees, disbursements and other charges of counsel to Administrative Agent and all reasonable and documented out-of-pocket costs and expenses of Administrative Agent in connection with the use of IntraLinks, SyndTrak or other similar information transmission systems in connection with the Loan Documents, (b) without duplication of the provisions of Section 2.17(g), to pay to each Fronting Bank all reasonable and documented out-of-pocket costs and expenses incurred by such Fronting Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (c) to pay or reimburse Administrative Agent, the Fronting Banks and the Banks for all their costs and expenses incurred in connection with the enforcement or preservation of any rights under the Loan Documents, including the reasonable and documented out-of-pocket fees, disbursements and other charges of their respective counsel and (d) to the extent not already covered by any of the preceding subsections, to pay or reimburse the fees and disbursements of counsel to Administrative Agent, any Lead Arranger, any Bookrunner, any Fronting Bank and any Bank incurred in connection with the representation of Administrative Agent, such Lead Arranger, any Bookrunner, such Fronting Bank or such Bank in any matter relating to or arising out of any bankruptcy or other proceeding of the type described in Sections 9.01(5), including, without limitation, (i) any motion for relief from any stay or similar order, (ii) the negotiation, preparation, execution and delivery of any document relating to the Obligations and (iii) the negotiation and preparation of any debtor in possession financing or any plan of reorganization of Borrower or any other Loan Party, whether proposed by Borrower, such Loan Party, the Banks or any other Person, and whether such fees and expenses are incurred prior to, during or after the commencement of such proceeding or the confirmation or conclusion of any such proceeding.  Notwithstanding the foregoing, (i) the obligation to reimburse

 

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Administrative Agent, the Lead Arrangers, the Bookrunners, the Banks and the Fronting Banks for fees and expenses of counsel in connection with the matters described in clauses (a), (c) and (d) above shall be limited to the reasonable and documented out-of-pocket fees, disbursements and other charges of one counsel to Administrative Agent, the Lead Arrangers, the Bookrunners, the Fronting Banks and the Banks and, if reasonably necessary, a single local counsel for Administrative Agent, the Fronting Banks and the Banks in each relevant jurisdiction and with respect to each relevant specialty, and in the case of an actual or perceived conflict of interest, one additional counsel in each relevant jurisdiction to the affected Bank similarly situated and (ii) except to the extent otherwise agreed among Borrower, the Lead Arrangers and Administrative Agent, Borrower is not responsible for costs, expenses and charges incurred by the Bank Parties in connection with the administration or syndication of the Loans (other than any administration fee payable to Administrative Agent).  Other than to the extent constituting a condition to the Closing Date set forth in Section 4.01, all reimbursement obligations pursuant to this Section 12.04(a) shall be due and payable not later than fifteen (15) Banking Days following receipt of a reasonably detailed invoice therefor.

 

(b)                                 Borrower agrees to indemnify Administrative Agent, each Bank, Affiliates of the foregoing, and their respective directors, officers, employees, agents and advisors (each such Person being called an “Indemnified Party”) from, and hold each of them harmless against, any and all losses, liabilities, claims, damages or expenses incurred by any of them arising out of or by reason of (w) the execution, delivery or performance of the Loan Documents by Borrower or the use of the proceeds of the Loans or Letters of Credit, directly or indirectly, by Borrower, (x) any claims by brokers due to acts or omissions by Borrower, (y) any investigation or litigation or other proceedings (including any threatened investigation or litigation or other proceedings) (an “Indemnity Proceeding”) relating to any actual or proposed use by Borrower of the proceeds of the Loans, including without limitation, the reasonable fees and disbursements of third-party counsel incurred in connection with any such investigation or litigation or other proceedings or (z) third party claims or actions against any Bank or Administrative Agent relating to or arising from this Agreement and the transactions contemplated pursuant to this Agreement; provided, however, that Borrower shall not be obligated to indemnify any Indemnified Party for any acts or omissions of such Indemnified Party in connection with matters described in this Section 12.04 to the extent arising from (A) the gross negligence, bad faith or willful misconduct of such Indemnified Party, as determined by a court of competent jurisdiction in a final, non-appealable judgment, (B) a material breach by such Indemnified Party of its obligations under the Loan Documents, as determined by a court of competent jurisdiction in a final, non-appealable judgment, (C) any dispute solely among Indemnified Parties (except in connection with claims or disputes (1) against Administrative Agent and/or any Bookrunner or any Arranger in their respective capacities relating to whether the conditions to any advance have been satisfied, (2) against Administrative Agent, any Bookrunner and/or any Arranger in their respective capacities with respect to a Defaulting Lender or the determination of whether a Bank is a Defaulting Lender, (3) against Administrative Agent, any Bookrunner and/or any Arranger in their respective capacities as such and (4) directly resulting from any act or omission on the part of General Partner, Borrower, any other Loan Parties or any other Subsidiary), and (D) tax and yield maintenance matters otherwise addressed in Sections 3.01, 3.05, 3.06 and 10.13.

 

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(c)                                  If and to the extent that the obligations of Borrower under this Section are unenforceable for any reason, Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law.

 

(d)                                 The obligations of Borrower under this Section shall survive the repayment of all amounts due under or in connection with any of the Loan Documents and the termination of the Loan Commitments.

 

(e)                                  An Indemnified Party may conduct its own investigation and defense of, and may formulate its own strategy with respect to, any Indemnity Proceeding covered by this Section and, as provided above, all costs and expenses incurred by such Indemnified Party shall be reimbursed by Borrower.  No action taken by legal counsel chosen by an Indemnified Party in investigating or defending against any such Indemnity Proceeding shall vitiate or in any way impair the obligations and duties of Borrower hereunder to indemnify and hold harmless each such Indemnified Party; provided, however, that (i) if Borrower is required to indemnify an Indemnified Party pursuant hereto and (ii) Borrower has provided evidence reasonably satisfactory to such Indemnified Party that Borrower has the financial wherewithal to reimburse such Indemnified Party for any amount paid by such Indemnified Party with respect to such Indemnity Proceeding, such Indemnified Party shall not settle or compromise any such Indemnity Proceeding without the prior written consent of Borrower (which consent shall not be unreasonably withheld or delayed).

 

SECTION 12.05.  Assignment; Participation.

 

(a)                                 Successors and Assigns Generally.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, provided that neither Borrower, General Partner nor any other Loan Party may, except as otherwise provided in Section 7.01, assign or otherwise transfer any of its rights or obligations hereunder or under any other Loan Document without the prior written consent of Administrative Agent and each Bank, and no Bank may assign or otherwise transfer any of its rights or obligations hereunder except (i) to a Qualified Institution in accordance with the provisions of the immediately following subsection (b), (ii) by way of participation in accordance with the provisions of the following subsection (d) or (iii) by way of pledge or assignment of a security interest subject to the restrictions of the following subsection (e) (and, subject to the last sentence of the immediately following subsection (b), any other attempted assignment or transfer by any party hereto shall be null and void).  Except as otherwise provided under Section 12.04, nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of a Fronting Bank that issues any Letter of Credit), Participants to the extent provided in the following subsection (d) and, to the extent expressly contemplated hereby, the Affiliates and their respective directors, officers, employees, agents and advisors of each of Administrative Agent, the Fronting Banks and the Banks) any legal or equitable right, remedy or claim under or by reason of this Agreement.  The parties hereby agree that Merrill Lynch may, without notice to Borrower, General Partner or any Loan Party, assign its rights and obligations under this Agreement to any other registered broker-dealer wholly-owned by Bank of America Corporation to which all or substantially all of Bank of

 

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America Corporation’s or any of its subsidiaries’ investment banking, commercial lending services or related businesses may be transferred following the date of this Agreement.

 

(b)                                 Assignments by Banks.  Any Bank may at any time assign to one or more Qualified Institutions all or a portion of its rights and obligations under this Agreement (including all or a portion of its Loan Commitment and the Loans at the time owing to it); provided that any such assignment shall be subject to the following conditions:

 

(i)                                                 Minimum Amounts.

 

(1)                                 in the case of an assignment of the entire remaining amount of an assigning Bank’s Loan Commitment and the Loans at the time owing to it, or contemporaneous assignments to related Approved Funds that equal at least the amount specified in the immediately following clause (2) in the aggregate, or in the case of an assignment to a Bank, an Affiliate of a Bank or an Approved Fund, no minimum amount need be assigned; and

 

(2)                                 in any case not described in the immediately preceding subsection (1), the aggregate amount of the Loan Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable Loan Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Bank subject to each such assignment (in each case, determined as of the date the Assignment and Assumption Agreement with respect to such assignment is delivered to Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption Agreement, as of the Trade Date) shall not be less than $5,000,000, unless each of Administrative Agent and, so long as no Event of Default shall exist, Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); provided, however, that if, after giving effect to such assignment, the amount of the Loan Commitment held by such assigning Bank or the outstanding principal balance of the Loans of such assigning Bank, as applicable, and in each case, without Participants, would be less than $10,000,000 (which minimum amount shall be reduced pro rata as a result of a cancellation or reduction of the aggregate Loan Commitments), then such assigning Bank shall assign the entire amount of its Loan Commitment and the Loans at the time owing to it.

 

(ii)                                              Proportionate Amounts.  Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Bank’s rights and obligations under this Agreement with respect to the Loan or the Loan Commitment assigned, except that this clause (ii) shall not apply to rights in respect of a Bid Rate Loan.

 

(iii)                                           Required Consents.  No consent shall be required for any assignment except to the extent required by clause (i)(2) of this subsection (b) and, in addition:

 

(1)                                 the consent of Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless an Event of Default shall exist at the time of such assignment; provided that (I) Borrower shall be deemed to have consented to any such

 

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assignment unless it shall object thereto by written notice to Administrative Agent within five (5) Banking Days after having received notice thereof and (II) Borrower can withhold such consent if such assignment shall subject Borrower to any greater obligations under Sections 3.01 or 3.06; provided further that no such consent shall be required if such assignment is to a Person that is already a Bank with a Loan Commitment, an Affiliate of such a Bank or an Approved Fund with respect to such a Bank;

 

(2)                                 the consent of Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of a Loan Commitment if such assignment is to a Person that is not already a Bank with a Loan Commitment, an Affiliate of such a Bank or an Approved Fund with respect to such a Bank; and

 

(3)                                 the consent of each Fronting Bank and each Swingline Lender (such consent not to be unreasonably withheld or delayed) shall be required for any assignment in respect of a Ratable Loan Commitment if such assignment is to a Person that is not already a Bank with a Loan Commitment, an Affiliate of such a Bank or an Approved Fund with respect to such a Bank.

 

(iv)                                          Assignment and Acceptance; Notes.  The parties to each assignment shall execute and deliver to Administrative Agent an Assignment and Assumption Agreement, together with a processing and recordation fee of $4,500 for each assignment (which fee Administrative Agent may, in its sole discretion, elect to waive), and the assignee, if it is not a Bank, shall deliver to Administrative Agent an Administrative Questionnaire.  If requested by the transferor Bank or the assignee, upon the consummation of any assignment, the transferor Bank, Administrative Agent and Borrower shall make appropriate arrangements so that new Notes are issued to the assignee and such transferor Bank, as appropriate.

 

(v)                                             No Assignment to Certain Persons.  No such assignment shall be made to (A) Borrower or any of Borrower’s Affiliates or Subsidiaries or (B) to any Defaulting Lender or any of its Subsidiaries, or to any Person who, upon becoming a Bank hereunder, would constitute any of the foregoing Persons described in this clause (B).

 

(vi)                                          No Assignment to Natural Persons.  No such assignment shall be made to a natural person (or a company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person or relative(s) thereof).

 

(vii)                                       Certain Additional Payments.  In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of Borrower and Administrative Agent, the applicable pro

 

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rata share of Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to Administrative Agent, the Fronting Banks, the Swingline Banks and each other Bank hereunder (and interest accrued thereon), and (y) acquire (and fund as appropriate) its full pro rata share of all Loans and participations in Letters of Credit and Swingline Loans in accordance with its Pro Rata Share.  Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.

 

Subject to acceptance and recording thereof by Administrative Agent pursuant to the immediately following subsection (c), from and after the effective date specified in each Assignment and Assumption Agreement, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption Agreement, have the rights and obligations of a Bank under this Agreement, and the assigning Bank thereunder shall, to the extent of the interest assigned by such Assignment and Assumption Agreement, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption Agreement covering all of the assigning Bank’s rights and obligations under this Agreement, such Bank shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.05 and 12.04 and the other provisions of this Agreement and the other Loan Documents with respect to facts and circumstances occurring prior to the effective date of such assignment; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Bank having been a Defaulting Lender.  Any assignment or transfer by a Bank of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Bank of a participation in such rights and obligations in accordance with the following subsection (d).

 

(c)                                  Register.  Administrative Agent, acting solely for this purpose as a non-fiduciary agent of Borrower, shall maintain at Administrative Agent’s Office a copy of each Assignment and Assumption Agreement delivered to it and a register for the recordation of the names and addresses of the Banks, and the Loan Commitments of, and principal amounts (and stated interest) of the Loans owing to, each Bank pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive absent manifest error, and Borrower, Administrative Agent and the Banks shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Bank hereunder for all purposes of this Agreement.  The Register shall be available for inspection by Borrower and any Bank, at any reasonable time and from time to time upon reasonable prior notice.

 

(d)                                 Participations.  Any Bank may at any time, without the consent of, or notice to, Borrower or Administrative Agent, sell participations to any Person (other than a natural Person or Borrower or any of Borrower’s Affiliates or Subsidiaries or any Defaulting Lender) (each, a “Participant”) in all or a portion of such Bank’s rights and/or obligations under this Agreement

 

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(including all or a portion of its Loan Commitment and/or the Loans owing to it) in minimum amounts of not less than $5,000,000 prior to an Event of Default, and upon the occurrence and during the continunance of an Event of Default, in any amount; provided that (i) such Bank’s obligations under this Agreement shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) Borrower, Administrative Agent, the Fronting Banks and the Banks shall continue to deal solely and directly with such Bank in connection with such Bank’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which a Bank sells such a participation shall provide that such Bank shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Bank will not, without the consent of the Participant, agree to (w) increase such Bank’s Loan Commitment, (x) extend the date fixed for the payment of principal on the Loans or portions thereof owing to such Bank, (y) reduce the rate at which interest is payable thereon or (z) release any Guarantor from its Obligations under the Guaranty except as contemplated by Section 6.10, in each case, as applicable to that portion of such Bank’s rights and/or obligations that are subject to the participation.  Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01 and 3.06 (subject to the requirements and limitations therein) to the same extent as if it were a Bank and had acquired its interest by assignment pursuant to subsection (b) of this Section; provided that such Participant (A) agrees to be subject to the provisions of Section 3.07 as if it were an assignee under subsection (b) of this Section; and (B) shall not be entitled to receive any greater payment under Sections 3.01 or 3.06, with respect to any participation, than its participating Bank would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Regulatory Change that occurs after the Participant acquired the applicable participation.  Each Bank that sells a participation agrees, at Borrower’s request and expense, to use reasonable efforts to cooperate with Borrower to effectuate the provisions of Section 3.07 with respect to any Participant.  To the extent permitted by Law, each Participant also shall be entitled to the benefits of Section 12.08 as though it were a Bank; provided that such Participant agrees to be subject to Section 10.15 as though it were a Bank.  Each Bank that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Bank shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations.  The entries in the Participant Register shall be conclusive absent manifest error, and such Bank shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.  For the avoidance of doubt, Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

 

(e)                                  Certain Pledges.  Any Bank may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Bank, including any pledge or assignment to secure obligations to a Federal Reserve Bank or other central bank

 

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having jurisdiction over such Bank; provided that no such pledge or assignment shall release such Bank from any of its obligations hereunder or substitute any such pledgee or assignee for such Bank as a party hereto.

 

(f)                                   No Registration.  Each Bank agrees that, without the prior written consent of Borrower and Administrative Agent, it will not make any assignment hereunder in any manner or under any circumstances that would require registration or qualification of, or filings in respect of, any Loan or Note under the Securities Act of 1933 or any other securities laws of the United States of America or of any other jurisdiction.

 

(g)                                  USA Patriot Act Notice; Compliance.  In order for Administrative Agent to comply with “know your customer” and anti-money laundering laws, rules and regulations, including without limitation, the Patriot Act, prior to any Bank that is organized under the laws of a jurisdiction outside of the United States of America becoming a party hereto, Administrative Agent may request, and such Bank shall provide to Administrative Agent, its name, address, tax identification number and/or such other identification information as shall be necessary for Administrative Agent to comply with such laws, rules and regulations.

 

SECTION 12.06.  Documentation Satisfactory.  All documentation required from or to be submitted on behalf of Borrower in connection with this Agreement and the documents relating hereto shall be subject to the prior approval of, and be satisfactory in form and substance to, Administrative Agent, its counsel and, where specifically provided herein, the Banks. In addition, the persons or parties responsible for the execution and delivery of, and signatories to, all of such documentation, shall be acceptable to, and subject to the approval of, Administrative Agent and its counsel and the Banks.

 

SECTION 12.07.  Notices.  (a)  Unless otherwise provided herein, communications provided for hereunder shall be in writing and shall be mailed, telecopied, or delivered as follows:

 

If to Borrower:

 

JBG SMITH Properties LP

4445 Willard Avenue

Suite 400

Chevy Chase, Maryland 20815

Attention: Stephen Theriot, Chief Financial Officer

Telecopier: 240-333-3630

Telephone: 240-333-3704

 

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Email: stheriot@jbg.com

 

With a copy to:

 

JBG SMITH Properties LP

4445 Willard Avenue

Suite 400

Chevy Chase, Maryland 20815

Attention: Steven Museles, Chief Legal Officer

Telecopier: 240-333-3630

Telephone: 240-333-3654

Email: smuseles@jbg.com

 

If to Administrative Agent:

 

Wells Fargo Bank, National Association

550 South Tryon Street, 6th Floor

Charlotte, NC  28202

Attention:  Bryan Gregory

Telephone:  704-410-1776

Email: Bryan.Gregory@wellsfargo.com

 

If to Administrative Agent under Article II:

 

Wells Fargo Bank, National Association

CRE Agency Services

600 South 4th Street, 9th Floor

Minneapolis, MN 55415

Attention:  Anthony Gangelhoff

Telecopier: 877-410-5023

Telephone: 612-316-0109

Email: Anthony.Gangelhoff@wellsfargo.com

 

If to Wells Fargo as Fronting Bank:

 

Wells Fargo Bank, National Association

550 South Tryon Street, 6th Floor

Charlotte, NC  28202

Attention:  Bryan Gregory

Telephone 704-410-1776

Email: Bryan.Gregory@wellsfargo.com

 

With a copy to:

 

Wells Fargo Bank, National Association

 

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1512 Eureka Road, Suite 350

Roseville, CA  95661

Attention:  Patty Cabrera

Telephone:  916-788-4672

Email: pcabrera@wellsfargo.com

 

If to a Fronting Bank (as applicable):

 

Bank of America, N.A.

One Fleet Way, 2nd Floor

Mail Code PA6-580-02-30

Scranton, PA 18507

Attention: Global Trade Operations

Phone: 1.800.370.7519 and choose Trade product

opt. #1

Fax: 1. 800.755.8743

Email: scranton_standby_lc@bankofamerica.com

 

With a copy to:

 

Bank of America, N.A.

900 West Trade Street

NC1-026-06-01

Charlotte, NC 28255

Attention: Linda J. Frixen, Assistant Vice President

Telephone: 980-386-6994

Email: linda.j.frixen@baml.com

 

Capital One, National Association

6200 Chevy Chase Drive

Laurel, MD 20707

Attention: Jason Hall, Principal Operations Coordinator

Telecopier: 469-522-3588

Telephone: 301-939-5910

Email: 14694225388@tls.ldsprod.com

 

Citizens Bank, N.A.

20 Cabot Road

Medford, MA 02155

Attention: Laura Ferraz, Operations Team Lead

Telecopier: 855-457-1554

Telephone: 781-655-4107

Email: CLOoperations@citizensbank.com

 

JPMorgan Chase Bank, N.A.
Standby Letter of Credit Department

10420 Highland Manor Drive, Floor 4

 

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Tampa, FL 33610

Attention: Letter of Credit Department

Fax: (856) 294-5267

 

PNC Bank, National Association

6750 Miller Road

Brecksville, OH 44141

Attention: Myra Ollison

Telecopier: 877-733-1172

Telephone: 440-546-7434

Email: myra.ollison@pnc.com

 

If to any other Bank:

 

To such Bank’s address or telecopy number as set forth in the applicable Administrative Questionnaire

 

All such notices and other communications shall be effective (i) if mailed, upon the first to occur of receipt or the expiration of 3 days after the deposit in the United States Postal Service mail, postage prepaid and addressed to the address of Borrower or Administrative Agent, the Fronting Banks and the Banks at the addresses specified; (ii) if telecopied, when transmitted; or (iii) if hand delivered or sent by overnight courier, when delivered; provided, however, that, non-receipt of any communication as of the result of any change of address of which the sending party was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such communication.  Notwithstanding the immediately preceding sentence, all notices or communications to Administrative Agent, a Fronting Bank or any Bank under Article II shall be effective only when actually received.  Notices delivered through Electronic Systems, to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph.  Failure of a Person designated to get a copy of a notice to receive such copy shall not affect the validity of notice properly given to another Person.

 

(b)                                 Notices and other communications to the Banks and the Fronting Banks hereunder may be delivered or furnished by using Electronic Systems pursuant to procedures approved by Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by Administrative Agent and the applicable Bank.  Administrative Agent or Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

 

Unless Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing

 

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clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.

 

(c)                                  Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto in accordance with this Section 12.07, except that each Bank must only give such notice to Administrative Agent, Borrower, the Fronting Banks and the Swingline Lenders.

 

(d)                                 Electronic Systems.

 

(i)                                                 Borrower agrees that Administrative Agent may, but shall not be obligated to, make Communications (as defined below) available to the Fronting Banks and the other Banks by posting the Communications on Debt Domain, Intralinks, Syndtrak, ClearPar or a substantially similar Electronic System.

 

(ii)                                              Any Electronic System used by Administrative Agent is provided “as is” and “as available.”  None of Administrative Agent or Borrower or any of their respective Affiliates and such Affiliates’ respective directors, officers, employees, agents or advisors (the “Communications Parties”) warrant the adequacy of such Electronic Systems and each expressly disclaims liability for errors or omissions in the Communications.  No warranty of any kind, express, implied or statutory, including any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Communications Party in connection with the Communications or any Electronic System.  In no event shall any Communications Party have any liability to the other parties hereto or any other Person or entity for damages of any kind, including direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of Borrower’s or Administrative Agent’s transmission of communications through an Electronic System.  “Communications” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of Borrower pursuant to any Loan Document or the transactions contemplated therein which is distributed by Administrative Agent, any Bank or any Fronting Bank by means of electronic communications pursuant to this Section, including through an Electronic System.

 

SECTION 12.08.  Setoff.  Upon the occurrence of an Event of Default, to the extent permitted or not expressly prohibited by applicable law, Borrower agrees that, in addition to (and without limitation of) any right of setoff, bankers’ lien or counterclaim a Bank may otherwise have, each Bank shall be entitled, subject to receipt of the prior written consent of the Required Banks exercised in their sole discretion, to offset balances (general or special, time or demand, provisional or final) held by it for the account of Borrower at any of such Bank’s offices, in Dollars or in any other currency, against any amount payable by Borrower to such Bank under this Agreement or such Bank’s Notes, or any other Loan Document, which is not paid when due

 

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(regardless of whether such balances are then due to Borrower or General Partner), in which case it shall promptly notify Borrower and Administrative Agent thereof; provided that such Bank’s failure to give such notice shall not affect the validity thereof. Payments by Borrower hereunder or under the other Loan Documents shall be made without setoff or counterclaim.  Notwithstanding anything to the contrary in this Section, if any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to Administrative Agent for further application in accordance with the provisions of Section 12.20 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of Administrative Agent, the Fronting Banks and the Banks and (y) the Defaulting Lender shall provide promptly to Administrative Agent a statement describing in reasonable detail the Guaranteed Obligations owing to such Defaulting Lender as to which it exercised such right of setoff.

 

SECTION 12.09.  Table of Contents; Headings.  Any table of contents and the headings and captions hereunder are for convenience only and shall not affect the interpretation or construction of this Agreement.

 

SECTION 12.10.  Severability.  The provisions of this Agreement are intended to be severable. If for any reason any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction.

 

SECTION 12.11.  Counterparts.  This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing any such counterpart.  Delivery of an executed counterpart of a signature page of this Agreement by telecopy, emailed pdf. or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement.  The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to any document to be signed in connection with this Agreement and the transactions contemplated hereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that nothing herein shall require Administrative Agent to accept electronic signatures in any form or format without its prior written consent.

 

SECTION 12.12.  Integration.  The Loan Documents set forth the entire agreement among the parties hereto relating to the transactions contemplated thereby (except with respect to agreements relating solely to compensation, consideration and the coordinated syndication of the Loan) and supersede any prior oral or written statements or agreements with respect to such transactions.

 

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SECTION 12.13.  Governing Law.  This Agreement shall be governed by, and interpreted and construed in accordance with, the laws of the State of New York.

 

SECTION 12.14.  Waivers.  To the extent permitted or not expressly prohibited by applicable law, in connection with the obligations and liabilities as aforesaid, Borrower hereby waives (1) notice of any actions taken by any Bank Party under this Agreement, any other Loan Document or any other agreement or instrument relating hereto or thereto except to the extent otherwise provided herein; (2) all other notices, demands and protests, and all other formalities of every kind in connection with the enforcement of the Obligations, the omission of or delay in which, but for the provisions of this Section 12.14, might constitute grounds for relieving Borrower of its obligations hereunder; (3) any requirement that any Bank Party protect, secure, perfect or insure any Lien on any collateral or exhaust any right or take any action against Borrower or any other Person or any collateral; (4) any right or claim of right to cause a marshalling of the assets of Borrower; and (5) all rights of subrogation or contribution, whether arising by contract or operation of law (including, without limitation, any such right arising under the Bankruptcy Code) or otherwise by reason of payment by Borrower, pursuant to this Agreement or any other Loan Document.

 

SECTION 12.15.  Jurisdiction; Immunities.  Borrower, Administrative Agent and each Bank hereby irrevocably submit to the exclusive jurisdiction of any New York State or United States Federal court sitting in New York City, Borough of Manhattan, over any action or proceeding arising out of or relating to this Agreement, the Notes or any other Loan Document. Borrower, Administrative Agent, and each Bank irrevocably agree that all claims in respect of such action or proceeding may be heard and determined in such New York State or United States Federal court. Borrower, Administrative Agent, and each Bank irrevocably consent to the service of any and all process in any such action or proceeding by the mailing of copies of such process to Borrower, Administrative Agent or each Bank, as the case may be, at the addresses specified herein. Borrower, Administrative Agent and each Bank agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Borrower, Administrative Agent and each Bank further waive any objection to venue in the State of New York and any objection to an action or proceeding in the State of New York on the basis of forum non conveniens. Borrower, Administrative Agent and each Bank agree that any action or proceeding brought against Borrower, Administrative Agent or any Bank, as the case may be, shall be brought only in a New York State court sitting in New York City, Borough of Manhattan, or a United States Federal court sitting in New York City, Borough of Manhattan, to the extent permitted or not expressly prohibited by applicable law.

 

Nothing in this Section shall affect the right of Borrower, Administrative Agent or any Bank to serve legal process in any other manner permitted by law.

 

To the extent that Borrower, Administrative Agent or any Bank have or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether from service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, Borrower, Administrative Agent and each Bank hereby irrevocably waive such immunity in respect of its obligations under this Agreement, the Notes and any other Loan Document.

 

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BORROWER, ADMINISTRATIVE AGENT AND EACH BANK WAIVE ANY RIGHT EACH SUCH PARTY MAY HAVE TO JURY TRIAL IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING BROUGHT WITH RESPECT TO THIS AGREEMENT, THE NOTES OR THE LOAN. IN ADDITION, BORROWER HEREBY WAIVES, IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING BROUGHT BY ADMINISTRATIVE AGENT OR THE BANKS WITH RESPECT TO THE NOTES, ANY RIGHT BORROWER MAY HAVE (1) TO THE EXTENT PERMITTED OR NOT EXPRESSLY PROHIBITED BY APPLICABLE LAW, TO INTERPOSE ANY COUNTERCLAIM THEREIN (OTHER THAN A COUNTERCLAIM THAT IF NOT BROUGHT IN THE SUIT, ACTION OR PROCEEDING BROUGHT BY ADMINISTRATIVE AGENT OR THE BANKS COULD NOT BE BROUGHT IN A SEPARATE SUIT, ACTION OR PROCEEDING OR WOULD BE SUBJECT TO DISMISSAL OR SIMILAR DISPOSITION FOR FAILURE TO HAVE BEEN ASSERTED IN SUCH SUIT, ACTION OR PROCEEDING BROUGHT BY ADMINISTRATIVE AGENT OR THE BANKS) OR (2) TO THE EXTENT PERMITTED OR NOT EXPRESSLY PROHIBITED BY APPLICABLE LAW, TO HAVE THE SAME CONSOLIDATED WITH ANY OTHER OR SEPARATE SUIT, ACTION OR PROCEEDING. NOTHING HEREIN CONTAINED SHALL PREVENT OR PROHIBIT BORROWER FROM INSTITUTING OR MAINTAINING A SEPARATE ACTION AGAINST ADMINISTRATIVE AGENT OR THE BANKS WITH RESPECT TO ANY ASSERTED CLAIM.

 

To the extent not prohibited by applicable law, Borrower shall not assert, and Borrower hereby waives, any claim against any Bank or any Agent, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, any Loan or other extension of credit hereunder or the use of the proceeds thereof.

 

SECTION 12.16.  Designated Lender.  Any Bank (other than an Affected Bank or a Bank which is such solely because it is a Designated Lender) (each, a “Designating Lender”) may at any time designate one (1) Designated Lender to fund Bid Rate Loans on behalf of such Designating Lender subject to the terms of this Section and the provisions in Section 12.05 shall not apply to such designation. No Bank may designate more than one (1) Designated Lender. The parties to each such designation shall execute and deliver to Administrative Agent for its acceptance a Designation Agreement. Upon such receipt of an appropriately completed Designation Agreement executed by a Designating Lender and a designee representing that it is a Designated Lender, Administrative Agent will accept such Designation Agreement and give prompt notice thereof to Borrower, whereupon, (i) from and after the “Effective Date” specified in the Designation Agreement, the Designated Lender shall become a party to this Agreement with a right to make Bid Rate Loans on behalf of its Designating Lender pursuant to Section 2.02 after Borrower has accepted the Bid Rate Quote of the Designating Lender and (ii) the Designated Lender shall not be required to make payments with respect to any obligations in this Agreement except to the extent of excess cash flow of such Designated Lender which is not otherwise required to repay obligations of such Designated Lender which are then due and payable; provided, however, that regardless of such designation and assumption by the Designated Lender, the Designating Lender shall be and remain obligated to Borrower, Administrative Agent and the Banks for each and every of the obligations of the Designating

 

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Lender and its related Designated Lender with respect to this Agreement, including, without limitation, any indemnification obligations under Section 10.05. Each Designating Lender shall serve as the administrative agent of its Designated Lender and shall on behalf of, and to the exclusion of, the Designated Lender (i) receive any and all payments made for the benefit of the Designated Lender and (ii) give and receive all communications and notices and take all actions hereunder, including, without limitation, votes, approvals, waivers and consents under or relating to this Agreement and the other Loan Documents. Any such notice, communication, vote, approval, waiver or consent shall be signed by the Designating Lender as administrative agent for the Designated Lender and shall not be signed by the Designated Lender on its own behalf, but shall be binding on the Designated Lender to the same extent as if actually signed by the Designated Lender. Borrower, Administrative Agent and the Banks may rely thereon without any requirement that the Designated Lender sign or acknowledge the same. No Designated Lender may assign or transfer all or any portion of its interest hereunder or under any other Loan Document, other than assignments to the Designating Lender which originally designated such Designated Lender.

 

SECTION 12.17.  No Bankruptcy Proceedings.  Each of Borrower, the Banks and Administrative Agent hereby agrees that it will not institute against any Designated Lender or join any other Person in instituting against any Designated Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any federal or state bankruptcy or similar law, for 366 days after the payment in full of the latest maturing commercial paper note issued by such Designated Lender.

 

SECTION 12.18.  Intentionally Omitted.

 

SECTION 12.19.  USA Patriot Act.  Each Bank hereby notifies Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies Borrower, General Partner and each other Loan Party, which information includes the name, address, tax identification and/or such other identification information of Borrower, General Partner and each other Loan Party that will allow such Bank to identify Borrower, General Partner and each other Loan Party in accordance with the Patriot Act. Borrower shall provide such information and take such actions as are reasonably requested by Administrative Agent or any Bank in order to assist Administrative Agent and the Banks in maintaining compliance with applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the Patriot Act.

 

SECTION 12.20.  Defaulting Lenders.  Notwithstanding anything to the contrary contained in this Agreement, if any Bank becomes a Defaulting Lender, then, until such time as such Bank is no longer a Defaulting Lender, to the extent permitted by applicable Law:

 

(a)                                 Waivers and Amendments.  Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of “Required Banks”, “Required Ratable Loan Banks”, “Required Term A-1 Loan Banks”, “Required Term A-2 Loan Banks” and in Section 12.02.

 

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(b)                                 Defaulting Lender Waterfall.  Any payment of principal, interest, fees or other amounts received by Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity or otherwise) or received by Administrative Agent from a Defaulting Lender pursuant to Section 12.08 shall be applied at such time or times as may be determined by Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the Fronting Banks or the Swingline Lenders hereunder; third, to Cash Collateralize the Fronting Banks’ Fronting Exposure with respect to such Defaulting Lender in accordance with subsection (e) below; fourth, as Borrower may request (so long as no Default or Event of Default exists other than a Default or Event of Default that will be cured by the application of such funds in accordance with this paragraph), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by Administrative Agent; fifth, if so determined by Administrative Agent and Borrower, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement and (y) Cash Collateralize the Fronting Banks’ future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in accordance with subsection (e) below; sixth, to the payment of any amounts owing to the Banks, the Fronting Banks or the Swingline Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Bank, a Fronting Bank or the Swingline Lenders against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to Borrower as a result of any judgment of a court of competent jurisdiction obtained by Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that such payment is a payment of the principal amount of any Loans or amounts owing by such Defaulting Lender under Section 2.17 in respect of Letters of Credit (such amounts “L/C Disbursements”), in respect of which such Defaulting Lender has not fully funded its appropriate share, such payment shall be applied solely to pay the Loans of, and L/C Disbursements owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or L/C Disbursements owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in Letter of Credit Liabilities and Swingline Loans are held by the Ratable Loan Banks in accordance with their respective Pro Rata Shares (determined without giving effect to the immediately following subsection (d)) and all Term Loans are held by the Term Loan Banks in accordance with their respective Pro Rata Shares as if there had been no Term Loan Banks that are Defaulting Lenders.  Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this subsection shall be deemed paid to and redirected by such Defaulting Lender, and each Bank irrevocably consents hereto.

 

(c)                                  Certain Fees.

 

(1)                                 No Defaulting Lender shall be entitled to receive any fee payable under Section 2.08 for any period during which that Bank is a Defaulting Lender (and Borrower

 

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shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).

 

(2)                                 Each Defaulting Lender shall be entitled to receive the fee payable under Section 2.17(g)(i) for any period during which that Bank is a Defaulting Lender only to the extent allocable to its Pro Rata Share of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to the immediately following subsection (e).

 

(3)                                 With respect to any fee not required to be paid to any Defaulting Lender pursuant to the immediately preceding clause (2), Borrower shall (x) pay to each Non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in Letter of Credit Liabilities that has been reallocated to such Non-Defaulting Lender pursuant to the immediately following subsection (d), (y) pay to the applicable Fronting Bank the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to such Fronting Bank’s Fronting Exposure to such Defaulting Lender, and (z) not be required to pay the remaining amount of any such fee.

 

(d)                                 Reallocation of Pro Rata Shares to Reduce Fronting Exposure.

 

(i)                                     During any period in which there is a Defaulting Lender, for purposes of computing the amount of the obligation of each non-Defaulting Lender to acquire, refinance or fund participations in Letters of Credit or Swing Loans, the “Pro Rata Share” of each non- Defaulting Lender shall be computed without giving effect to the Ratable Loan Commitment of that Defaulting Lender; provided, that, (i) each such reallocation shall be given effect only if, at the date the applicable Bank becomes a Defaulting Lender, the conditions set forth in Section 4.02 are satisfied at the time of such reallocation (and, unless Borrower shall have otherwise notified Administrative Agent at such time, Borrower shall be deemed to have represented and warranted that such conditions are satisfied at such time); and (ii) the aggregate obligation of each non-Defaulting Lender to acquire, refinance or fund participations in Letters of Credit and Swing Loans shall not exceed the positive difference, if any, of (1) the Ratable Loan Commitment of that non-Defaulting Lender minus (2) the aggregate outstanding Ratable Credit Exposure of that Bank.

 

(ii)                                  If such reallocation cannot, or can only partially, be effected, Borrower shall (x) within two Banking Days following notice by Administrative Agent, prepay such Fronting Exposure of the Swing Lender with respect to Swing Loans and (y) within five (5) Banking Days following notice by Administrative Agent, Cash Collateralize for the benefit of the Fronting Banks only Borrower’s obligations corresponding to the Fronting Exposure of the Fronting Banks with respect to Letters of Credit (after giving effect to any partial reallocation described above) in accordance with the procedures set forth in Section 2.17(i) for so long as such Fronting Exposure is outstanding.

 

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(iii)                               So long as such Ratable Loan Bank is a Defaulting Lender, the Swing Lender shall not be required to fund any Swing Loan and the Fronting Banks shall not be required to issue, amend or increase any Letter of Credit, unless it is satisfied that the related Fronting Exposure will be 100% covered by the Ratable Loan Commitments of the non-Defaulting Lenders and/or Cash Collateral will be provided by Borrower in accordance with Section 2.17(i) and/or Section 12.20(d), and participating interests in any newly made Swing Loan or any newly issued or increased Letter of Credit shall be allocated among non-Defaulting Lenders in a manner consistent with the above provisions (and such Defaulting Lender shall not participate therein.

 

(e)                                  Defaulting Lender Cure.  If Borrower, Administrative Agent, the Swingline Lenders and the Fronting Banks agree in writing that a Bank is no longer a Defaulting Lender, Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), that Bank will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Banks or take such other actions as Administrative Agent may determine to be necessary to cause, as applicable (i) the Ratable Loans and funded and unfunded participations in Letters of Credit and Swingline Loans to be held by the Banks in accordance with their respective Pro Rata Shares (determined without giving effect to the immediately preceding subsection (d)) and (ii) the Term Loans to be held by the Term Loan Lenders in accordance with their respective Pro Rata Shares as if there had been no Term Loan Lenders that were Defaulting Lenders, whereupon such Bank will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of Borrower while that Bank was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Non-Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Bank’s having been a Defaulting Lender.

 

(f)                                   New Swingline Loans/Letters of Credit.  So long as any Ratable Loan Bank is a Defaulting Lender, (i) the Swingline Lenders shall not be required to fund any Swingline Loans unless it is satisfied that it will have no Fronting Exposure after giving effect to such Swingline Loan and (ii) a Fronting Bank shall not be required to issue, extend, renew or increase any Letter of Credit unless it is satisfied that it will have no Fronting Exposure after giving effect thereto.

 

(g)                                  Purchase of Defaulting Lender’s Commitment.  During any period that a Bank is a Defaulting Lender, Borrower may, by Borrower giving written notice thereof to Administrative Agent, such Defaulting Lender and the other Banks, demand that such Defaulting Lender assign its Loan Commitment and Loans to a Qualified Institution subject to and in accordance with the provisions of Section 12.05.  No party hereto shall have any obligation whatsoever to initiate any such replacement or to assist in finding a Qualified Institution.  In addition, any Bank which is not a Defaulting Lender may, but shall not be obligated to, in its sole discretion, acquire the face amount of all or a portion of such Defaulting Lender’s Loan Commitment and Loans via an assignment subject to and in accordance with the provisions of Section 12.04.  In connection with any such assignment, such Defaulting Lender shall promptly execute all documents reasonably requested to effect such assignment, including an appropriate Assignment and

 

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Assumption Agreement and, notwithstanding Section 12.05, shall pay to Administrative Agent an assignment fee in the amount of $4,500.  The exercise by Borrower of its rights under this Section shall be at Borrower’s sole cost and expense and at no cost or expense to Administrative Agent, the Fronting Banks or the Banks provided that the foregoing shall not constitute a waiver or release of any claim of Borrower, Administrative Agent, any Fronting Bank or any Bank against any Defaulting Lender.

 

SECTION 12.21.  Use for Mortgages.  From time to time, on not less than ten (10) Banking Days’ notice, Borrower may request proceeds of the Ratable Loans or Term Loans be used to refinance or acquire properties secured by certain secured mortgage Debt of Borrower and/or its Subsidiaries, in which event, a portion of such Ratable Loans or Term Loans equal to the amount of the advances made hereunder in connection with such refinancing or acquisition, at Borrower’s election, may be secured by an amended and restated mortgage on the property securing the mortgage Debt to be so refinanced or acquired (a “Refinancing Mortgage”) and evidenced by a separate mortgage note executed by Borrower and/or one or more Subsidiaries (provided that (i) if Borrower shall not execute such mortgage note, Borrower shall execute a guaranty of such mortgage note and (ii) it being agreed and understood the execution of, and being obligated under, such a mortgage note and Refinancing Mortgage, shall not cause any Subsidiary to be deemed an Unsecured Indebtedness Subsidiary for purposes of Section 6.10), as more particularly set forth in Section 2.09, provided that no Refinancing Mortgage may encumber a property located in a Special Flood Hazard Area as designated by the Federal Emergency Management Agency.  At least seven (7) Banking Days prior to the recordation of any Refinancing Mortgage, Administrative Agent shall provide all of the applicable Banks requested to make such refinancing or acquisition Loans with a legal description and special flood hazard determination form for all property proposed to be encumbered thereby.  Any such Refinancing Mortgage and any other agreement, certifications, opinions and other documents will be (i) in form and substance reasonably acceptable to Administrative Agent and its counsel, (ii) consistent in all respects with the terms of this Agreement, and (iii) subject to being, and shall be, released or assigned by Administrative Agent at the request of Borrower (it being understood and agreed that Administrative Agent and the Banks shall not be required to give any representations or warranties with respect to any such release or assignment, including with respect to any aspects of the Debt secured thereby, except that it is the holder thereof and authorized to execute and deliver the same), and Administrative Agent shall, and is authorized by the Banks to, execute and deliver any release or assignment documents reasonably requested by, and at the expense of, Borrower. In addition, in connection with each Refinancing Mortgage, Administrative Agent, at the request and expense of Borrower, will provide subordination, non-disturbance and attornment agreements and intercreditor and/or subordination agreements with respect to any other Debt secured by the related mortgaged property, in each case in form and substance reasonably satisfactory to Administrative Agent.  Unless otherwise directed by Borrower, any prepayments made by Borrower shall be applied first to any and all Loans outstanding that are not secured by a Refinancing Mortgage, and only to Loans secured by Refinancing Mortgages if there shall be no other Loans outstanding at the time.

 

SECTION 12.22.  Bottom-Up Guaranties.  At Borrower’s request from time to time, Administrative Agent shall accept “bottom-up” guaranties of the Loans from limited partners in Borrower in such amounts and on such terms as Borrower shall request, provided that Administrative Agent shall have reasonably satisfied itself and the Banks with respect to

 

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applicable “know your customer” and anti-money laundering rules and regulations, including without limitation, the Patriot Act and other similar restrictions in respect of any such proposed guarantor.  A Person shall not be considered to be a “Guarantor” or a “Loan Party” as a result of providing such a “bottom-up” guaranty.

 

SECTION 12.23.  Confidentiality.  Each of Administrative Agent, the Fronting Banks and the Banks agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees, and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any Governmental Authority (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to Borrower and its obligations, (g) with the consent of Borrower, (h) a confidential basis to any rating agency in connection with rating Borrower or the Loans or (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to Administrative Agent, any Fronting Bank or any Bank on a non-confidential basis from a source other than Borrower.  For the purposes of this Section, “Information” means all information received from Borrower relating to Borrower or its business, other than any such information that was available to Administrative Agent, any Fronting Bank or any Bank on a non-confidential basis prior to disclosure by Borrower.  In addition, Administrative Agent and the Banks may disclose the existence of this Agreement and information about this Agreement to market data collectors, similar service providers to the lending industry and service providers to Administrative Agent and the Banks in connection with the administration of this Agreement, the other Loan Documents, and the Loan Commitments.

 

EACH BANK ACKNOWLEDGES THAT INFORMATION AS DEFINED IN THE IMMEDIATELY PRECEDING PARAGRAPH FURNISHED TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL NON-PUBLIC INFORMATION CONCERNING BORROWER, ITS AFFILIATES AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ADVISORS AND REPRESENTATIVES OR THEIR RESPECTIVE SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES REGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCH MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.

 

ALL INFORMATION, INCLUDING REQUESTS FOR WAIVERS AND AMENDMENTS, FURNISHED BY BORROWER OR ADMINISTRATIVE AGENT PURSUANT TO, OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE SYNDICATE-LEVEL

 

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INFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT BORROWER, THE OTHER LOAN PARTIES, THEIR AFFILIATES AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ADVISORS AND REPRESENTATIVES OR THEIR RESPECTIVE SECURITIES.  ACCORDINGLY, EACH BANK REPRESENTS TO BORROWER AND ADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE INFORMATION THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW.

 

SECTION 12.24.  No Advisory or Fiduciary Responsibility.  In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), Borrower acknowledges and agrees, and acknowledges its Affiliates’ understanding, that: (i) (A) the arranging and other services regarding this Agreement provided by Administrative Agent, the Lead Arrangers, the Bookrunners and the Banks are arm’s-length commercial transactions between Borrower and its Affiliates, on the one hand, and Administrative Agent, the Lead Arrangers, the Bookrunners and the Banks, on the other hand, (B) Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (ii) (A) Administrative Agent, each Lead Arranger, each Bookrunner and each Bank is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for Borrower or any of its Affiliates, or any other Person and (B) neither Administrative Agent, any Lead Arranger, any Bookrunner nor any Bank has any obligation to Borrower or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (iii) Administrative Agent, the Lead Arrangers, the Bookrunners and the Banks and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of Borrower and its Affiliates, and neither Administrative Agent, any Lead Arranger, any Bookrunner nor any Bank has any obligation to disclose any of such interests to Borrower or its Affiliates.  To the fullest extent permitted by law, Borrower hereby waives and releases any claims that it may have against Administrative Agent, any Lead Arranger, any Bookrunner or any Bank with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

 

SECTION 12.25.  Acknowledgement and Consent to Bail-In of EEA Financial Institutions.  Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

 

(a)                                 the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and

 

136



 

(b)                                 the effects of any Bail-In Action on any such liability, including, if applicable:

 

(i)                                                 a reduction in full or in part or cancellation of any such liability;

 

(ii)                                              a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

 

(iii)                                           the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK]

 

137



 

IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be duly executed as of the day and year first above written.

 

 

JBG SMITH PROPERTIES LP

 

 

 

By:

JBG SMITH Properties,

 

 

a Maryland real estate investment trust, its General Partner

 

 

 

 

By:

/s/ Stephen Theriot

 

 

 

Name: Stephen Theriot

 

 

 

Title: Chief Financial Officer and Treasurer

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

 

as Administrative Agent, a Bank, a Fronting Bank and a Swingline Lender

 

 

 

By:

/s/ Matthew Ricketts

 

 

Name: Matthew Ricketts

 

 

Title: Managing Director

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

JPMORGAN CHASE BANK, N.A.,

 

as a Bank, Fronting Bank and Swingline Lender

 

 

 

By:

/s/ Jaime Gitler

 

 

Name: Jaime Gitler

 

 

Title: Vice President

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

BANK OF AMERICA, N.A.,

 

as a Bank, a Fronting Bank and a Swingline Lender

 

 

 

By:

/s/ Robert T. Wratten

 

 

Name: Robert T. Wratten

 

 

Title: Sr. Vice President

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

CAPITAL ONE, NATIONAL ASSOCIATION,

 

as a Bank, a Fronting Bank and a Swingline Lender

 

 

 

By:

/s/ Barbara Heubner

 

 

Name: Barbara Heubner

 

 

Title: Vice President

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

PNC BANK, NATIONAL ASSOCIATION,

 

as a Bank, a Fronting Bank and a Swingline Lender

 

 

 

By:

/s/ Kinnery Clinebell

 

 

Name: Kinnery Clinebell

 

 

Title: Vice President

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

CITIZENS BANK, N.A.

 

as a Bank, a Fronting Bank and a Swingline Lender

 

 

 

By:

/s/ Brad E. Bindas

 

 

Name: Brad E. Bindas

 

 

Title: Senior Vice President

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

BMO HARRIS BANK N.A.,

 

as a Bank

 

 

 

By:

/s/ Michael Kauffman

 

 

Name: Michael Kauffman

 

 

Title: Managing Director

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

REGIONS BANK,

 

as a Bank

 

 

 

By:

/s/ Lori Chambers

 

 

Name: Lori Chambers

 

 

Title: Senior Vice President

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

TD BANK, N.A.,

 

as a Bank

 

 

 

By:

/s/ Jay P Arvai

 

 

Name: Jay P Arvai

 

 

Title: Senior Vice President

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

THE BANK OF NEW YORK MELLON,

 

as a Bank

 

 

 

By:

/s/ Carol Murray

 

 

Name: Carol Murray

 

 

Title: Managing Director

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

THE BANK OF NOVA SCOTIA,

 

as a Bank

 

 

 

By:

/s/ Chad Hale

 

 

Name: Chad Hale

 

 

Title: Director & Execution Head, REGAL

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

SUNTRUST BANK,

 

as a Bank

 

 

 

 

By:

/s/ Craig Lockard

 

 

Name: Craig Lockard

 

 

Title: Senior Vice President

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

FIFTH THIRD BANK, an Ohio Banking

Corporation, as a Bank

 

 

 

By:

/s/ Casey Gehrig

 

 

Name: Casey Gehrig

 

 

Title: Vice President

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

SANTANDER BANK, N.A.,

 

as a Bank

 

 

 

 

By:

/s/ Michael J. Corbett

 

 

Name: Michael J. Corbett

 

 

Title: SVP

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

GOLDMAN SACHS BANK USA,

 

as a Bank

 

 

 

 

By:

/s/ Annie Carr

 

 

Name: Annie Carr

 

 

Title: Authorized Signatory

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

MORGAN STANLEY BANK, N.A.,

 

as a Bank

 

 

 

By:

/s/ Michael King

 

 

Name: Michael King

 

 

Title: Authorized Signatory

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

SOCIÉTÉ GÉNÉRALE,

 

as a Bank

 

 

 

 

By:

/s/ Nigel Elvey

 

 

Name: Nigel Elvey

 

 

Title: Director

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

LANDESBANK BADEN-WÜRTTEMBERG,

 

NEW YORK BRANCH, as a Bank

 

 

 

 

By:

/s/ Chase Cassidy

 

 

Name: Chase Cassidy

 

 

Title: Assistant Vice President, Real Estate Finance Group

 

 

 

By:

/s/ David McGannon

 

 

Name: David McGannon

 

 

Title: Senior Relationship Manager, Vice President

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

ING CAPITAL LLC,

 

as a Bank

 

 

 

 

By:

/s/ Sofya Shuster

 

 

Name: Sofya Shuster

 

 

Title: Vice President

 

 

 

By:

/s/ Craig R. Bender

 

 

Name: Craig R. Bender

 

 

Title: Managing Director

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK,

 

as a Bank

 

 

 

 

By:

/s/ Dominque Fournier

 

 

Name: Dominique Fournier

 

 

Title: Managing Director

 

 

 

 

By:

/s/ Adam Jenner

 

 

Name: Adam Jenner

 

 

Title: Director

 

Signature Page to JBG SMITH Credit Agreement

 



 

 

ASSOCIATED BANK, NATIONAL ASSOCIATION

 

as a Bank

 

 

 

 

By:

/s/ Gregory A. Conner

 

 

Name: Gregory A. Conner

 

 

Title: Senior Vice President

 

Signature Page to JBG SMITH Credit Agreement

 



 

Schedule 1

 

LOAN COMMITMENTS

 

 

 

Ratable Loan

 

 

 

 

 

Commitment

 

Term A-1 Loan

 

Lender

 

Amount

 

Commitment Amount

 

Wells Fargo Bank, National Association

 

$

77,750,000

 

$

16,250,000

 

Bank of America, N.A.

 

$

99,000,000

 

$

21,000,000

 

JPMorgan Chase Bank, N.A.

 

$

99,000,000

 

$

21,000,000

 

Capital One, National Association

 

$

65,500,000

 

$

13,500,000

 

Citizens Bank, N.A.

 

$

65,500,000

 

$

13,500,000

 

PNC Bank, National Association

 

$

65,500,000

 

$

13,500,000

 

BMO Harris Bank N.A.

 

$

51,000,000

 

$

11,000,000

 

Regions Bank

 

$

51,000,000

 

$

11,000,000

 

TD Bank, N.A.

 

$

51,000,000

 

$

11,000,000

 

The Bank of New York Mellon

 

$

51,000,000

 

$

11,000,000

 

The Bank of Nova Scotia

 

$

45,000,000

 

$

10,000,000

 

SunTrust Bank

 

$

41,250,000

 

$

8,750,000

 

Fifth Third Bank

 

$

34,750,000

 

$

7,250,000

 

Santander Bank, N.A.

 

$

29,000,000

 

$

6,000,000

 

Goldman Sachs Bank USA

 

$

29,000,000

 

$

6,000,000

 

Morgan Stanley Bank, N.A.

 

$

35,000,000

 

$

0

 

Société Générale

 

$

29,000,000

 

$

6,000,000

 

Landesbank Baden-Württemberg, New York Branch

 

$

25,000,000

 

$

5,000,000

 

ING Capital LLC

 

$

20,750,000

 

$

4,250,000

 

Crédit Agricole Corporate and Investment Bank

 

$

17,000,000

 

$

4,000,000

 

Associated Bank, National Association

 

$

18,000,000

 

$

0

 

 

 

 

 

 

 

TOTAL

 

$

1,000,000,000

 

$

200,000,000

 

 



 

Lender

 

Term A-2 Loan 
Commitment Amount

 

Wells Fargo Bank, National Association

 

$

26,000,000

 

Capital One, National Association

 

$

26,000,000

 

Citizens Bank, N.A.

 

$

26,000,000

 

PNC Bank, National Association

 

$

26,000,000

 

BMO Harris Bank N.A.

 

$

18,000,000

 

Regions Bank

 

$

18,000,000

 

TD Bank, N.A.

 

$

18,000,000

 

The Bank of New York Mellon

 

$

18,000,000

 

Associated Bank, National Association

 

$

12,000,000

 

Fifth Third Bank

 

$

8,000,000

 

Crédit Agricole Corporate and Investment Bank

 

$

4,000,000

 

 

 

 

 

TOTAL

 

$

200,000,000

 

 



 

Schedule 2

 

OTHER INVESTMENTS

 

1.              SineWave Ventures Fund I, L.P.

2.              1776 Global, Inc. PBC.

3.              1776 Seed Investors, LP

4.              Crystal Tech Fund LP

5.              Local Motors, Inc.

 



 

Schedule 2A

 

GENERAL PARTNER INVESTMENTS

 

None.

 



 

Schedule 3

 

GENERAL PARTNER — DEBT

 

None.

 



 

Schedule 5.16

 

SUBSIDIARIES

 

Name of Entity

 

State of
Formation

 

Percent Ownership

1101 Fern Street, L.L.C.

 

Delaware

 

99.9852%

1200 Eads Street LLC

 

Delaware

 

99.9852%

1200 Eads Street Sub LLC

 

Delaware

 

99.9843%

1244 South Capitol Residential, L.L.C.

 

Delaware

 

100%

1250 First Street Office, L.L.C.

 

Delaware

 

30%

1400 Eads Street LLC

 

Delaware

 

99.9852%

1400 Eads Street Sub LLC

 

Delaware

 

99.9852%

151 Q Street Co-Investment, L.P.

 

Delaware

 

0% General Partner

151 Q Street REIT, L.L.C.

 

Delaware

 

5% Common(1)

151 Q Street Residential, L.L.C.

 

Delaware

 

5%

1776 Seed Investors, LP

 

Delaware

 

40.4042%

1800 Rockville Residential, L.L.C.

 

Delaware

 

1.8000%

35 New York Avenue, L.L.C.

 

Delaware

 

59.0000%

50 Patterson Office, L.L.C.

 

Delaware

 

30%

51 N 50 Patterson Corporate Member, L.L.C.

 

Delaware

 

30%

51 N 50 Patterson Holdings, L.L.C.

 

Delaware

 

30%

51 N Residential, L.L.C.

 

Delaware

 

30%

7900 Wisconsin Residential, L.L.C.

 

Delaware

 

25%(2)

Arna-Eads, L.L.C.

 

Delaware

 

99.9852%

Arna-Fern, L.L.C.

 

Delaware

 

99.9852%

Atlantic AB Holdings, L.L.C.

 

Delaware

 

64%

Atlantic AB Services, L.L.C.

 

Delaware

 

64%

Atlantic Residential A, L.L.C.

 

Delaware

 

64%

Atlantic Residential C, L.L.C.

 

Delaware

 

100%

Atlantic Retail B, L.L.C.

 

Delaware

 

64%

Blue Lion, L.L.C.

 

District of Columbia

 

100%

Bowen Building, L.P.

 

Delaware

 

100%

Central Place Office, L.L.C.

 

Delaware

 

100%

CESC 1101 17th Street L.L.C.

 

Delaware

 

54.8326%

CESC 1101 17th Street Limited Partnership

 

Maryland

 

54.8326%

 


(1)  Does not reflect ownership of preferred stockholders.

 

(2)  Ownership percentage will increase to 50% at or within 30 days of the Closing Date.

 



 

CESC 1101 17th Street Manager L.L.C.

 

Delaware

 

100%

CESC 1150 17th Street L.L.C.

 

Delaware

 

100%

CESC 1150 17th Street Manager L.L.C.

 

Delaware

 

100%

CESC 1730 M Street L.L.C.

 

Delaware

 

100%

CESC 2101 L Street L.L.C.

 

Delaware

 

100%

CESC Commerce Executive Park L.L.C.

 

Delaware

 

100%

CESC Crystal Square Four L.L.C.

 

Delaware

 

100%

CESC Crystal/Rosslyn L.L.C.

 

Delaware

 

99.9852%

CESC District Holdings L.L.C.

 

Delaware

 

100%

CESC Downtown Member L.L.C.

 

Delaware

 

100%

CESC Engineering TRS Inc.

 

Delaware

 

100%

CESC Gateway One L.L.C.

 

Delaware

 

99.9852%

CESC Gateway Two Limited Partnership

 

Virginia

 

100%

CESC Gateway Two Manager L.L.C.

 

Virginia

 

100%

CESC Gateway/Square L.L.C.

 

Delaware

 

100%

CESC Gateway/Square Member L.L.C.

 

Delaware

 

100%

CESC H Street L.L.C.

 

Delaware

 

100%

CESC Mall L.L.C.

 

Virginia

 

100%

CESC Mall Land L.L.C.

 

Delaware

 

100%

CESC One Courthouse Plaza Holdings L.L.C.

 

Delaware

 

100%

CESC One Courthouse Plaza L.L.C.

 

Delaware

 

100%

CESC One Democracy Plaza L.P.

 

Maryland

 

100%

CESC One Democracy Plaza Manager L.L.C.

 

Delaware

 

100%

CESC Park Five Land L.L.C.

 

Delaware

 

100%

CESC Park Five Manager L.L.C.

 

Virginia

 

100%

CESC Park Four Land L.L.C.

 

Delaware

 

100%

CESC Park Four Manager L.L.C.

 

Virginia

 

100%

CESC Park One Land L.L.C.

 

Delaware

 

100%

CESC Park One Manager L.L.C.

 

Delaware

 

100%

CESC Park Three Land L.L.C.

 

Delaware

 

100%

CESC Park Three Manager L.L.C.

 

Virginia

 

100%

CESC Park Two L.L.C.

 

Delaware

 

100%

CESC Park Two Land L.L.C.

 

Delaware

 

100%

CESC Plaza Five Limited Partnership

 

Virginia

 

100%

CESC Plaza Limited Partnership

 

Virginia

 

100%

CESC Plaza Manager L.L.C.

 

Virginia

 

100%

CESC Potomac Yard LLC

 

Delaware

 

100%

CESC Square L.L.C.

 

Virginia

 

100%

 



 

CESC TRS, Inc.

 

Delaware

 

100%

CESC Two Courthouse Plaza Limited Partnership

 

Virginia

 

100%

CESC Two Courthouse Plaza Manager L.L.C.

 

Delaware

 

100%

CESC Water Park L.L.C.

 

Virginia

 

100%

Charles E. Smith Commercial Realty L.P.

 

Delaware

 

100%

Crystal Tech Fund LP

 

Delaware

 

100%

Fairways I Residential, L.L.C.

 

Delaware

 

10%

Fairways II Residential, L.L.C.

 

Delaware

 

10%

Fairways Residential REIT, L.L.C.

 

Delaware

 

10% Common(3)

Falkland Chase Residential I, L.L.C.

 

Delaware

 

100%

Falkland Chase Residential II, L.L.C.

 

Delaware

 

100%

Falkland Road Residential, L.L.C.

 

Delaware

 

100%

Fifth Crystal Park Associates Limited Partnership

 

Virginia

 

100%

First Crystal Park Associates Limited Partnership

 

Virginia

 

100%

Florida Avenue Residential, L.L.C.

 

Delaware

 

100%

Fort Totten North, L.L.C.

 

Delaware

 

99.25%(4)

Fourth Crystal Park Associates Limited Partnership

 

Virginia

 

100%

H Street Building Corporation

 

Delaware

 

99.9852%

H Street Management LLC

 

Delaware

 

99.9852%

IB Associates Limited Partnership

 

Delaware

 

5%

JBG Associates, L.L.C.

 

Delaware

 

100%

JBG Core Venture I, L.P.

 

Delaware

 

10%

JBG Urban, L.L.C.

 

Delaware

 

18%

JBG/151 Q Street Services, L.L.C.

 

Delaware

 

5%

JBG/1233 20th Street, L.L.C.

 

Delaware

 

100%

JBG/1247 20th St. Lessee, L.L.C.

 

Delaware

 

100%

JBG/1250 First Member, L.L.C.

 

Delaware

 

100%

JBG/12511 Parklawn, L.L.C.

 

Delaware

 

18%

JBG/1253 20th Street, L.L.C.

 

Delaware

 

100%

JBG/1300 First Street, L.L.C.

 

Delaware

 

59%

JBG/1600 K Member, L.L.C.

 

Delaware

 

100%

JBG/1600 K, L.L.C.

 

District of Columbia

 

100%

JBG/1831 Wiehle, L.L.C.

 

Delaware

 

100%

JBG/1861 Wiehle Lessee, L.L.C.

 

Delaware

 

100%

JBG/1920 N, L.L.C.

 

Delaware

 

100%

JBG/19th & N Holdings, L.L.C.

 

Delaware

 

100%

 


(3)  Does not reflect ownership of preferred stockholders.

 

(4)  Ownership percentage will increase to 100% at or within 30 days of the Closing Date.

 



 

JBG/19th Street, L.L.C.

 

Delaware

 

100%

JBG/55 New York Avenue, L.L.C.

 

Delaware

 

59%

JBG/6th Street Associates, L.L.C.

 

Delaware

 

100%

JBG/7200 Wisconsin Mezz, L.L.C.

 

Delaware

 

100%

JBG/7200 Wisconsin, L.L.C.

 

Maryland

 

100%

JBG/75 New York Option, L.L.C.

 

Delaware

 

59%

JBG/7900 Wisconsin Member, L.L.C.

 

Delaware

 

100%

JBG/Asset Management, L.L.C.

 

Delaware

 

100%

JBG/Atlantic Fund, L.P.

 

Delaware

 

0% General Partner

JBG/Atlantic GP, L.L.C.

 

Delaware

 

100%

JBG/Atlantic Investor, L.L.C.

 

Delaware

 

100%

JBG/Atlantic REIT, L.L.C.

 

Delaware

 

0% General Partner

JBG/Bethesda Avenue, L.L.C.

 

Delaware

 

100%

JBG/Commercial Management, L.L.C.

 

Delaware

 

100%

JBG/Core I GP, L.L.C.

 

Delaware

 

100%

JBG/Core I LP, L.L.C.

 

Delaware

 

100%

JBG/Courthouse Metro, L.L.C.

 

Delaware

 

100%

JBG/Development Group, L.L.C.

 

Delaware

 

100%

JBG/Development Services, L.L.C.

 

Delaware

 

100%

JBG/Fort Totten Member, L.L.C.

 

Delaware

 

99.25%(5)

JBG/Foundry Office REIT, L.L.C.

 

Delaware

 

10% Common(6)

JBG/Foundry Office Services, L.L.C.

 

Delaware

 

10%

JBG/Foundry Office, L.L.C.

 

Delaware

 

10%

JBG/Fund IX Transferred, L.L.C.

 

Delaware

 

100%

JBG/Fund VI Transferred, L.L.C.

 

Delaware

 

100%

JBG/Fund VII Transferred, L.L.C.

 

Delaware

 

100%

JBG/Fund VIII Services, L.L.C.

 

Delaware

 

100%

JBG/Fund VIII Transferred, L.L.C.

 

Delaware

 

100%

JBG/Fund VIII Trust

 

Maryland

 

100%

JBG/Hatton Retail, L.L.C.

 

Delaware

 

100%

JBG/HQ Member, L.L.C.

 

Delaware

 

100%

JBG/Landbay G Member, L.L.C.

 

Delaware

 

100%

JBG/Landbay G, L.L.C.

 

Delaware

 

98%(7)

JBG/L’Enfant Plaza Member, L.L.C.

 

Delaware

 

48.9952%

JBG/L’Enfant Plaza Mezzanine, L.L.C.

 

Delaware

 

48.9952%

JBG/LEP Southeast, L.L.C.

 

Delaware

 

48.9952%

 


(5)  Ownership percentage will increase to 100% at or within 30 days of the Closing Date.

 

(6)  Does not reflect ownership of preferred stockholders.

 

(7)  Ownership percentage will increase to 100% at or within 30 days of the Closing Date.

 



 

JBG/Lionhead, L.L.C.

 

Delaware

 

100%

JBG/N & Patterson Member, L.L.C.

 

Delaware

 

100%

JBG/New York Avenue, L.L.C.

 

Delaware

 

59%

JBG/Nicholson Lane East II, L.L.C.

 

Delaware

 

18%

JBG/Nicholson Lane East, L.L.C.

 

Delaware

 

18%

JBG/Nicholson Lane West, L.L.C.

 

Delaware

 

18%

JBG/Nicholson Member, L.L.C.

 

Delaware

 

18%

JBG/Pickett Office REIT, L.L.C.

 

Delaware

 

10% Common(8)

JBG/Pickett Office, L.L.C.

 

Delaware

 

10%

JBG/Residential Management, L.L.C.

 

Delaware

 

100%

JBG/Reston Executive Center, L.L.C.

 

Delaware

 

100%

JBG/Retail Management, L.L.C.

 

Maryland

 

100%

JBG/Rosslyn Gateway North, L.L.C.

 

Delaware

 

18%

JBG/Rosslyn Gateway South, L.L.C.

 

Delaware

 

18%

JBG/Shay Retail, L.L.C.

 

Delaware

 

100%

JBG/Sherman Member, L.L.C.

 

Delaware

 

100%

JBG/Summit Member, L.L.C.

 

Delaware

 

100%

JBG/Summit, L.L.C.

 

Delaware

 

100%

JBG/Tenant Services, L.L.C.

 

Delaware

 

100%

JBG/Twinbrook Metro, L.L.C.

 

Maryland

 

18%

JBG/UDM Transferred, L.L.C.

 

Delaware

 

100%

JBG/Urban TRS, L.L.C.

 

Delaware

 

18%

JBG/VNO Holdings, L.L.C.

 

Delaware

 

100%

JBG/West Half Residential Member L.L.C.

 

Delaware

 

100%

JBG/Woodbridge REIT, L.L.C.

 

Delaware

 

10% Common(9)

JBG/Woodbridge Retail, L.L.C.

 

Delaware

 

10%

JBG/Woodbridge Services, L.L.C.

 

Delaware

 

10%

JBG/Woodbridge, L.L.C.

 

Delaware

 

10%

JBG/Woodmont II, L.L.C.

 

Delaware

 

100%

JBGS Employee Company, L.L.C.

 

Delaware

 

100%(10)

JBGS/Company Manager L.L.C.

 

Delaware

 

100%

JBGS/Fund IX OP Mergerco, L.L.C.

 

Delaware

 

100%

JBGS/Fund VI OP Mergerco, L.L.C.

 

Delaware

 

100%

JBGS/Fund VII OP Mergerco, L.L.C.

 

Delaware

 

100%

JBGS/Fund VIII REIT Management Services, L.L.C.

 

Delaware

 

100%

JBGS/OP Management Services, L.L.C.

 

Delaware

 

100%

 


(8)  Does not reflect ownership of preferred stockholders.

 

(9)  Does not reflect ownership of preferred stockholders.

 

(10)  Does not reflect ownership of preferred members.

 



 

JBGS/Recap GP, L.L.C.

 

Delaware

 

100%

JBGS/Recap, L.L.C.

 

Delaware

 

100%

JBGS/TRS, L.L.C.

 

Delaware

 

100%(11)

Kaempfer Management Services, LLC

 

Delaware

 

100%

Landbay G Corporate Member, L.L.C.

 

Delaware

 

98%(12)

Landbay G Declarant, L.L.C.

 

Virginia

 

98%(13)

LBG Parcel A, L.L.C.

 

Delaware

 

98%(14)

LBG Parcel B, L.L.C.

 

Delaware

 

98%(15)

LBG Parcel C, L.L.C.

 

Delaware

 

98%(16)

LBG Parcel D, L.L.C.

 

Delaware

 

98%(17)

LBG Parcel E, L.L.C.

 

Delaware

 

98%(18)

LBG Parcel F, L.L.C.

 

Delaware

 

98%(19)

LBG Parcel G, L.L.C.

 

Delaware

 

98%(20)

Market Square Fairfax MM LLC

 

Virginia

 

100%

New Kaempfer 1501 LLC

 

Delaware

 

99.9825%

New Kaempfer IB LLC

 

Delaware

 

99.9852%

New Kaempfer Waterfront LLC

 

Delaware

 

50%

New York Avenue Lessee, L.L.C.

 

Delaware

 

59%

North Glebe Office, L.L.C.

 

Delaware

 

100%

Palisades 1399 New York Avenue TIC Owner LLC

 

Delaware

 

100%

Park One Member L.L.C.

 

Delaware

 

100%

Potomac Creek Associates, L.L.C.

 

Delaware

 

48.9952%

Sherman Avenue, L.L.C.

 

Maryland

 

70%

Sinewave Ventures Fund I, L.P.

 

Delaware

 

9.9600%

South Capitol L.L.C.

 

Delaware

 

100%

The Commerce Metro Center Association of Co-Owners

 

Virginia

 

Member

Third Crystal Park Associates Limited Partnership

 

Virginia

 

100%

Twinbrook Commons Office, L.L.C.

 

Delaware

 

1.80%

Twinbrook Commons Residential 1B, L.L.C.

 

Delaware

 

1.80%

Twinbrook Commons Residential North, L.L.C.

 

Delaware

 

18%

Twinbrook Commons Residential South, L.L.C.

 

Delaware

 

18%

 


(11)  Does not reflect ownership of preferred members.

 

(12)  Ownership percentage will increase to 100% at or within 30 days of the Closing Date.

 

(13)  Ownership percentage will increase to 100% at or within 30 days of the Closing Date.

 

(14)  Ownership percentage will increase to 100% at or within 30 days of the Closing Date.

 

(15)  Ownership percentage will increase to 100% at or within 30 days of the Closing Date.

 

(16)  Ownership percentage will increase to 100% at or within 30 days of the Closing Date.

 

(17)  Ownership percentage will increase to 100% at or within 30 days of the Closing Date.

 

(18)  Ownership percentage will increase to 100% at or within 30 days of the Closing Date.

 

(19)  Ownership percentage will increase to 100% at or within 30 days of the Closing Date.

 

(20)  Ownership percentage will increase to 100% at or within 30 days of the Closing Date.

 



 

Twinbrook Commons Residential West, L.L.C.

 

Delaware

 

18%

Twinbrook Commons, L.L.C.

 

Delaware

 

18%

UBI Management LLC

 

Delaware

 

98.8776%

Universal Bldg., North, Inc.

 

District of Columbia

 

99.8776%

Universal Building, Inc.

 

District of Columbia

 

99.8776% Common(21)

VNO 1229-1231 25th Street LLC

 

Delaware

 

99.9852%

VNO 1399 Holding LLC

 

Delaware

 

100%

VNO 1399 New York Avenue TIC Owner LLC

 

Delaware

 

100%

VNO 220 S 20th Street LLC

 

Delaware

 

100%

VNO 220 S. 20th Street Member LLC

 

Delaware

 

100%

VNO Ashley House LLC

 

Delaware

 

99.9852%

VNO Ashley House Member LLC

 

Delaware

 

99.9852%

VNO Courthouse I LLC

 

Delaware

 

100%

VNO Courthouse II LLC

 

Delaware

 

100%

VNO Crystal City TRS, Inc.

 

Delaware

 

100%

VNO Hotel L.L.C.

 

Delaware

 

100%

VNO James House LLC

 

Delaware

 

99.9852%

VNO James House Member LLC

 

Delaware

 

99.9852%

VNO Pentagon Plaza LLC

 

Virginia

 

99.9852%

VNO Potomac House LLC

 

Delaware

 

99.9852%

VNO Potomac House Member LLC

 

Delaware

 

99.9852%

VNO South Capitol LLC

 

Delaware

 

100%

VNO/HQ Member LLC

 

Delaware

 

100%

Vornado 17th Street Holdings, L.P.

 

Delaware

 

52.5989%

Vornado 17th Street LLC

 

Delaware

 

52.5989%

Vornado Bowen GP LLC

 

Delaware

 

100%

Vornado Bowen II LLC

 

Delaware

 

100%

Vornado Bowen LLC

 

Delaware

 

100%

Vornado CESCR Gen-Par, LLC

 

Delaware

 

100%

Vornado Crystal City L.L.C.

 

Delaware

 

100%

Vornado IB Holdings LLC

 

Delaware

 

100%

Vornado KMS Holdings LLC

 

Delaware

 

100%

Vornado Warner Acquisition LLC

 

Delaware

 

54.9746%

Vornado Warner GP LLC

 

Delaware

 

54.9746%

Vornado Warner Holdings, L.P.

 

Delaware

 

55%

 


(21)  Does not reflect ownership of preferred stockholders.

 



 

Vornado Warner LLC

 

Delaware

 

54.9746%

Vornado Waterfront Holdings LLC

 

Delaware

 

100%

Vornado/Charles E. Smith L.P.

 

Virginia

 

100%

Vornado/Charles E. Smith Management L.L.C.

 

Virginia

 

100%

Warner Investments, L.P.

 

Delaware

 

54.9746%

Washington CESC TRS, Inc.

 

Delaware

 

100%

Washington CT Fund GP LLC

 

Delaware

 

100%

Washington Mart TRS Inc.

 

Delaware

 

100%

Waterfront 375 M Street, LLC

 

Delaware

 

2.5%

Waterfront 425 M Street, LLC

 

Delaware

 

2.5%

West Half Residential II, L.L.C.

 

Delaware

 

94.2497%

West Half Residential III, L.L.C.

 

Delaware

 

94.2497%

 



 

Schedule 5.23

 

LABOR MATTERS

 

1.              Collective Bargaining Agreement between Local 99-99A, International Union of Operating Engineers and JBG Properties, Inc., July 1, 2016 – June 30, 2019; obligates contributions to the Central Pension Fund of the International Union of Operating Engineers and Participating Employers

 

2.              CBA between Local 99 and Vornado /Charles E. Smith for Charles E. Smith Real Estate Services L.P. Buildings, dated January 1, 2015 – December 31, 2017; obligates contributions to (1) Central Pension Fund of the International Union of Operating Engineers and Participating Employers and (2) Local 99 Health and Welfare Plan

 



 

EXHIBIT A

 

FORM OF DISBURSEMENT INSTRUCTION AGREEMENT

 

Borrower:  JBG SMITH PROPERTIES LP

 

Administrative Agent:  Wells Fargo Bank, National Association

 

Loan:  Loan number 1017111 made pursuant to that certain “Credit Agreement” dated as of July 18, 2017 among Borrower, Administrative Agent, Banks, and the other parties thereto, as amended from time to time

 

Effective Date:            , 20

 

Check applicable box:

 

o            New — This is the first Disbursement Instruction Agreement submitted in connection with the Loan.

o            Replace Previous Agreement — This is a replacement Disbursement Instruction Agreement.  All prior instructions submitted in connection with this Loan are cancelled as of the Effective Date set forth above.

 

This Agreement must be signed by the Borrower and is used for the following purposes:

 

(1)         to designate an individual or individuals with authority to request disbursements of Loan proceeds, whether at the time of Loan closing/origination or thereafter;

 

(2)         to designate an individual or individuals with authority to request disbursements of funds from Restricted Accounts (as defined in the Terms and Conditions attached to this Agreement), if applicable; and

 

(3)         to provide Administrative Agent with specific instructions for wiring or transferring funds on Borrower’s behalf.

 

Any of the disbursements, wires or transfers described above are referred to herein as a “Disbursement.”

 

Specific dollar amounts for Disbursements must be provided to Administrative Agent at the time of the applicable Disbursement in the form of a signed closing statement, an email instruction or other written communication (each, a “Disbursement Request”) from an applicable Authorized Representative (as defined in the Terms and Conditions attached to this Agreement).

 

A new Disbursement Instruction Agreement must be completed and signed by the Borrower if (i) all or any portion of a Disbursement is to be transferred to an account or an entity not described in this Agreement or (ii) Borrower wishes to add or remove any Authorized Representatives.

 

See the Additional Terms and Conditions attached hereto for additional information and for definitions of certain capitalized terms used in this Agreement.

 

A-1



 

Disbursement of Loan Proceeds at Origination/Closing

 

Closing Disbursement Authorizers:  Administrative Agent is authorized to accept one or more Disbursement Requests from any of the individuals named below (each, a “Closing Disbursement Authorizer”) to disburse Loan proceeds on or about the date of the Loan origination/closing and to initiate Disbursements in connection therewith (each, a “Closing Disbursement”):

 

 

Individual’s Name

 

Title

1.

 

 

 

2.

 

 

 

3.

 

 

 

 

Describe Restrictions, if any, on the authority of the Closing Disbursement Authorizers (dollar amount limits, wire/deposit destinations, etc.):

 

DESCRIBE APPLICABLE RESTRICTIONS OR INDICATE “N/A”

 

If there are no restrictions described here, any Closing Disbursement Authorizer may submit a Disbursement Request for all available Loan proceeds.

 

Permitted Wire Transfers:  Disbursement Requests for the Closing Disbursement(s) to be made by wire transfer must specify the amount and applicable Receiving Party.  Each Receiving Party included in any such Disbursement Request must be listed below.  Administrative Agent is authorized to use the wire instructions that have been provided directly to Administrative Agent by the Receiving Party or Borrower and attached as the Closing Exhibit.  All wire instructions must be in the format specified on the Closing Exhibit.

 

 

Names of Receiving Parties for the Closing Disbursement(s) (may include as many parties as needed; wire
instructions for each Receiving Party must be attached as the Closing Exhibit)

1.

 

2.

 

3.

 

 

DELETE FOLLOWING SECTION IF NO DEPOSITS INTO WFB ACCOUNTS AT ORIGINATION/CLOSING

 

Direct Deposit:  Disbursement Requests for the Closing Disbursement(s) to be deposited into an account at Wells Fargo Bank, N.A. must specify the amount and applicable account.  Each account included in any such Disbursement Request must be listed below.

 

Name on Deposit Account:

Wells Fargo Bank, N.A. Deposit Account Number:

Further Credit Information/Instructions:

 

A-2



 

Disbursements of Loan Proceeds Subsequent to Loan Closing/Origination

 

Subsequent Disbursement Authorizers:  Administrative Agent is authorized to accept one or more Disbursement Requests from any of the individuals named below (each, a “Subsequent Disbursement Authorizer”) to disburse Loan proceeds after the date of the Loan origination/closing and to initiate Disbursements in connection therewith (each, a “Subsequent Disbursement”):

 

 

Individual’s Name

 

Title

1.

 

 

 

2.

 

 

 

3.

 

 

 

 

Describe Restrictions, if any, on the authority of the Subsequent Disbursement Authorizers (dollar amount limits, wire/deposit destinations, etc.):

 

DESCRIBE APPLICABLE RESTRICTIONS OR INDICATE “N/A”

 

If there are no restrictions described here, any Subsequent Disbursement Authorizer may submit a Disbursement Request for all available Loan proceeds.

 

Permitted Wire Transfers:  Disbursement Requests for Subsequent Disbursements to be made by wire transfer must specify the amount and applicable Receiving Party.  Each Receiving Party included in any such Disbursement Request must be listed below.  Administrative Agent is authorized to use the wire instructions that have been provided directly to Administrative Agent by the Receiving Party or Borrower and attached as the Subsequent Disbursement Exhibit. All wire instructions must be in the format specified on the Subsequent Disbursement Exhibit.

 

 

Names of Receiving Parties for Subsequent Disbursements (may include as many parties as needed; wire
instructions for each Receiving Party must be attached as the Subsequent Disbursement Exhibit)

1.

 

2.

 

3.

 

 

DELETE FOLLOWING SECTION IF NO SUBSEQUENT DEPOSITS INTO WFB ACCOUNTS ANTICIPATED

 

Direct Deposit:  Disbursement Requests for Subsequent Disbursements to be deposited into an account at Wells Fargo Bank, N.A. must specify the amount and applicable account.  Each account included in any such Disbursement Request must be listed below.

 

Name on Deposit Account:

Wells Fargo Bank, N.A. Deposit Account Number:

Further Credit Information/Instructions:

 

A-3



 

DELETE THIS PAGE IF NO THERE ARE NO RESTRICTED ACCOUNTS.

 

WIRE INSTRUCTIONS RECEIVED FROM THIRD PARTIES MUST BE ATTACHED.

 

Restricted Account Disbursements

 

Restricted Account Disbursement Authorizers:  Administrative Agent is authorized to accept one or more Disbursement Requests from any of the individuals named below (each, a “Restricted Account Disbursement Authorizer”) to disburse funds from a Restricted Account and to initiate Disbursements in connection therewith (each, a “Restricted Account Disbursement”):

 

 

Individual’s Name

 

Title

1.

 

 

 

2.

 

 

 

3.

 

 

 

 

Describe Restrictions, if any, on the authority of the Restricted Account Disbursement Authorizers (dollar amount limits, wire/deposit destinations, etc.):

 

DESCRIBE APPLICABLE RESTRICTIONS OR INDICATE “N/A”

 

If there are no restrictions described here, any Restricted Account Disbursement Authorizer may submit a Disbursement Request for all available funds.

 

DELETE FOLLOWING SECTION IF NO WIRE TRANSFERS FROM RESTRICTED ACCOUNT ANTICIPATED

 

Permitted Wire Transfers:  Disbursement Requests for Restricted Account Disbursements to be made by wire transfer must specify the amount and applicable Receiving Party.  Each Receiving Party included in any such Disbursement Request must be listed below.  Administrative Agent is authorized to use the wire instructions that have been provided directly to Administrative Agent by the Receiving Party or Borrower and attached as the Restricted Account Disbursement Exhibit. All wire instructions must be in the format specified on the Restricted Account Disbursement Exhibit.

 

 

Names of Receiving Parties for Restricted Account Disbursements (may include as many parties as needed;
wire instructions for each Receiving Party must be attached as the Restricted Account Disbursement Exhibit)

1.

 

2.

 

3.

 

 

DELETE FOLLOWING SECTION IF NO DEPOSITS INTO WFB ACCOUNTS FROM RESTRICTED ACCOUNTS ANTICIPATED

 

Direct Deposit:  Disbursement Requests for Restricted Account Disbursements to be deposited into an account at Wells Fargo Bank, N.A. must specify the amount and applicable account.  Each account included in any such Disbursement Request must be listed below.

 

Name on Deposit Account:

Wells Fargo Bank, N.A. Deposit Account Number:

Further Credit Information/Instructions:

 

A-4



 

Borrower acknowledges that all of the information in this Agreement is correct and agrees to the terms and conditions set forth herein and in the Additional Terms and Conditions on the following page.

 

 

JBG SMITH PROPERTIES LP

 

 

 

By: JBG SMITH Properties,

 

General Partner

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

A-5



 

Additional Terms and Conditions to the Disbursement Instruction Agreement

 

Definitions.  The following capitalized terms shall have the meanings set forth below:

 

“Authorized Representative” means any or all of the Closing Disbursement Authorizers, Subsequent Disbursement Authorizers and Restricted Account Disbursement Authorizers, as applicable.

 

“Receiving Bank” means the financial institution where a Receiving Party maintains its account.

 

“Receiving Party” means the ultimate recipient of funds pursuant to a Disbursement Request.

 

“Restricted Account” means an account at Wells Fargo Bank, N.A. associated with the Loan to which Borrower’s access is restricted.

 

Capitalized terms used in these Additional Terms and Conditions to Disbursement Instruction Agreement and not otherwise defined herein shall have the meanings given to such terms in the body of the Agreement.

 

Disbursement Requests. Except as expressly provided in the Credit Agreement, Administrative Agent must receive Disbursement Requests in writing.  Disbursement Requests will only be accepted from the applicable Authorized Representatives designated in the Disbursement Instruction Agreement. Disbursement Requests will be processed subject to satisfactory completion of Administrative Agent’s customer verification procedures. Administrative Agent is only responsible for making a good faith effort to execute each Disbursement Request and may use agents of its choice to execute Disbursement Requests.  Funds disbursed pursuant to a Disbursement Request may be transmitted directly to the Receiving Bank, or indirectly to the Receiving Bank through another bank, government agency, or other third party that Administrative Agent considers to be reasonable.  Administrative Agent will, in its sole discretion, determine the funds transfer system and the means by which each Disbursement will be made.  Administrative Agent may delay or refuse to accept a Disbursement Request if the Disbursement would: (i) violate the terms of this Agreement; (ii) require use of a bank unacceptable to Administrative Agent or Banks or prohibited by government authority; (iii) cause Administrative Agent or Banks to violate any Federal Reserve or other regulatory risk control program or guideline; or (iv) otherwise cause Administrative Agent or Banks to violate any applicable law or regulation.

 

Limitation of Liability. Administrative Agent, Fronting Banks, Swingline Lenders and Banks shall not be liable to Borrower or any other parties for: (i) errors, acts or failures to act of others, including other entities, banks, communications carriers or clearinghouses, through which Borrower’s requested Disbursements may be made or information received or transmitted, and no such entity shall be deemed an agent of the Administrative Agent, any Fronting Bank, any Swingline Lender or any Bank; (ii) any loss, liability or delay caused by fires, earthquakes, wars, civil disturbances, power surges or failures, acts of government, labor disputes, failures in communications networks, legal constraints or other events beyond Administrative Agent’s, any Fronting Bank’s, any Swingline Lender’s or any Bank’s control; or (iii) any special, consequential, indirect or punitive damages, whether or not (A) any claim for these damages is based on tort or contract or (B) Administrative Agent, any Fronting Bank, any Swingline Lender, any Bank or Borrower knew or should have known the likelihood of these damages in any situation.  Neither Administrative Agent, any Fronting Bank, any Swingline Lender nor any Bank makes any representations or warranties other than those expressly made in this Agreement.  IN NO EVENT WILL ADMINISTRATIVE AGENT, FRONTING BANK, SWINGLINE LENDER OR ANY BANK BE LIABLE FOR DAMAGES ARISING DIRECTLY OR INDIRECTLY IF A DISBURSEMENT REQUEST IS EXECUTED BY ADMINISTRATIVE AGENT IN GOOD FAITH AN IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT.

 

Reliance on Information Provided. Administrative Agent is authorized to rely on the information provided by Borrower or any Authorized Representative in or in accordance with this Agreement when executing a Disbursement Request until Administrative Agent has received a new Agreement signed by Borrower.  Borrower agrees to be bound by any Disbursement Request: (i) authorized or transmitted by Borrower; or (ii) made in Borrower’s name and accepted by Administrative Agent in good faith and in compliance with this Agreement, even if not properly authorized by Borrower.  Administrative Agent may rely solely (i) on the account number of the Receiving Party, rather than the Receiving Party’s name, and (ii) on the bank routing number of the Receiving Bank, rather than the Receiving Bank’s name, in executing a Disbursement Request.  Administrative Agent is not obligated or required in any way to take any actions to detect errors in information provided by Borrower or an Authorized Representative.  If Administrative Agent takes any actions in an attempt to detect errors in the transmission or content of transfers or requests or takes any actions in an attempt to detect unauthorized Disbursement Requests, Borrower agrees that, no matter how many times Administrative Agent takes these actions, Administrative Agent will not in any situation be liable for failing to take or correctly perform these actions in the future, and such actions shall not become any part of the Disbursement procedures authorized herein, in the Loan Documents, or in any agreement between Administrative Agent and Borrower.

 

International Disbursements. A Disbursement Request expressed in US Dollars will be sent in US Dollars, even if the Receiving Party or Receiving Bank is located outside the United States. Administrative Agent will not execute Disbursement Requests expressed in foreign currency unless permitted by the Credit Agreement.

 

Errors. Borrower agrees to notify Administrative Agent of any errors in the Disbursement of any funds or of any unauthorized or improperly authorized Disbursement Requests within fourteen (14) days after Administrative Agent’s confirmation to Borrower of such Disbursement.

 

Finality of Disbursement Requests. Disbursement Requests will be final and will not be subject to stop payment or recall; provided that Administrative Agent may, at Borrower’s request, make an effort to effect a stop payment or recall but will incur no liability whatsoever for its failure or inability to do so.

 

A-6



 

CLOSING EXHIBIT

 

WIRE INSTRUCTIONS

 

ADMINISTRATIVE AGENT TO ATTACH WIRE INSTRUCTIONS FROM RECEIVING PARTIES

 

All wire instructions must contain the following information:

 

Transfer/Deposit Funds to (Receiving Party Account Name)

 

Receiving Party Deposit Account Number

 

Receiving Bank Name, City and State

 

Receiving Bank Routing (ABA) Number

 

Further identifying information, if applicable (title escrow number, borrower name, loan number, etc.)

 

A-7



 

SUBSEQUENT DISBURSEMENT EXHIBIT

 

WIRE INSTRUCTIONS

 

ADMINISTRATIVE AGENT TO ATTACH WIRE INSTRUCTIONS FROM RECEIVING PARTIES

 

All wire instructions must contain the following information:

 

Transfer/Deposit Funds to (Receiving Party Account Name)

 

Receiving Party Deposit Account Number

 

Receiving Bank Name, City and State

 

Receiving Bank Routing (ABA) Number

 

Further identifying information, if applicable (title escrow number, borrower name, loan number, etc.)

 

A-8



 

RESTRICTED ACCOUNT DISBURSEMENT EXHIBIT

 

WIRE INSTRUCTIONS

 

ADMINISTRATIVE AGENT TO ATTACH WIRE INSTRUCTIONS FROM RECEIVING PARTIES

 

All wire instructions must contain the following information:

 

Transfer/Deposit Funds to (Receiving Party Account Name)

 

Receiving Party Deposit Account Number

 

Receiving Bank Name, City and State

 

Receiving Bank Routing (ABA) Number

 

Further identifying information, if applicable (title escrow number, borrower name, loan number, etc.)

 

A-22



 

EXHIBIT B-1

 

FORM OF RATABLE LOAN NOTE

 

$[     ]

[     ], 2017

 

For value received, the undersigned, JBG SMITH PROPERTIES LP, a Delaware limited partnership (“Borrower”), hereby unconditionally promises to pay to the order of [BANK] or its registered successors or assigns (collectively, the “Bank”), in the care of Wells Fargo Bank, National Association, as administrative agent (“Administrative Agent”), to its address located at 600 South 4th Street, 9th Floor, Minneapolis, Minnesota 55415, or at such other address as may be specified by Administrative Agent to Borrower, for the account of the Applicable Lending Office of the Bank, the principal sum of [       ] AND [  ]/100 Dollars ($[    ]) or, if less, the amount loaned by the Bank as Ratable Loans and Swingline Loans to Borrower pursuant to the Loan Agreement (as defined below) and actually outstanding, in lawful money of the United States and in immediately available funds, on the dates specified and otherwise in accordance with the terms set forth in the Loan Agreement. Borrower also promises to pay interest on the unpaid principal balance hereof, for the period such balance is outstanding, in like money, at said office for the account of said Applicable Lending Office, at the times and at the rates per annum as provided in the Loan Agreement. Any amount of principal hereof which is not paid when due, whether at stated maturity, by acceleration, or otherwise, shall bear interest from the date when due until said principal amount is paid in full, payable on demand, at the rates set forth in the Loan Agreement.

 

The date and amount of each advance of a Ratable Loan or a Swingline Loan made by the Bank to Borrower under the Loan Agreement, and each payment of said Ratable Loan or Swingline Loan, shall be recorded by the Bank on its books and, prior to any transfer of this Note (or, at the discretion of the Bank, at any other earlier time), may be endorsed by the Bank on the schedule attached hereto and any continuation thereof.

 

This Note is one of the “Ratable Loan Notes” referred to in the Credit Agreement dated as of July 18, 2017 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”) by and among Borrower, the banks named therein (including the Bank) and their assignees under Section 12.05 thereof, the other parties thereto and Administrative Agent, as administrative agent for the banks, and is subject to, and entitled to, all provisions and benefits thereof. All of the terms, conditions and provisions of the Loan Agreement are hereby incorporated by reference. All capitalized terms used herein and not defined herein shall have the meanings given to them in the Loan Agreement.

 

The Loan Agreement contains, among other things, provisions for the prepayment of and acceleration of the maturity of this Note upon the happening of certain stated events upon the terms and conditions specified therein.

 

No recourse shall be had under this Note against the General Partner except as and to the extent set forth in Section 11.02 of the Loan Agreement.

 

All parties to this Note, whether principal, surety, guarantor or endorser, hereby waive presentment for payment, demand, protest, notice of protest, notice of dishonor and

 

B-1-1



 

notice of any kind.  No failure to exercise, and no delay in exercising any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights.

 

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

 

[Signatures on Following Page]

 

B-1-2



 

IN WITNESS WHEREOF, Borrower has executed and delivered this Note on the day and year first above written.

 

 

JBG SMITH PROPERTIES LP

 

 

 

By:

JBG SMITH Properties,

 

 

General Partner

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

B-1-3



 

Date

 

Type of
Advance

 

Amount
of Advance

 

Amount
of Payment

 

Balance
Outstanding

 

Notation By

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B-1-4



 

EXHIBIT B-2

 

FORM OF BID RATE LOAN NOTE

 

[     ], 2017

 

For value received, the undersigned, JBG SMITH PROPERTIES LP, a Delaware limited partnership (“Borrower”), hereby unconditionally promises to pay to the order of [BANK] or its registered successors or assigns (collectively, the “Bank”), in the care of Wells Fargo Bank, National Association, as administrative agent (“Administrative Agent”), to its address located at 600 South 4th Street, 9th Floor, Minneapolis, Minnesota 55415, or at such other address as may be specified by Administrative Agent to Borrower, for the account of the Applicable Lending Office of the Bank, the aggregate unpaid principal amount of Bid Rate Loans made by the Bank to Borrower pursuant to the Loan Agreement (as defined below), in lawful money of the United States and in immediately available funds, on the dates specified and otherwise in accordance with the terms set forth in the Loan Agreement. Borrower also promises to pay interest on the unpaid principal balance hereof, for the period such balance is outstanding, in like money, at said office for the account of said Applicable Lending Office, at the times and at the rates per annum as provided in the Loan Agreement. Any amount of principal hereof which is not paid when due, whether at stated maturity, by acceleration, or otherwise, shall bear interest from the date when due until said principal amount is paid in full, payable on demand, at the rates set forth in the Loan Agreement.

 

The date and amount of each advance of a Bid Rate Loan made by the Bank to Borrower under the Loan Agreement, and each payment of said Bid Rate Loan, shall be recorded by the Bank on its books and, prior to any transfer of this Note (or, at the discretion of the Bank, at any other earlier time), may be endorsed by the Bank on the schedule attached hereto and any continuation thereof.

 

This Note is one of the “Bid Rate Loan Notes” referred to in the Credit Agreement dated as of July 18, 2017 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”) by and among Borrower, the banks named therein (including the Bank) and their assignees under Section 12.05 thereof, the other parties thereto and Administrative Agent, as administrative agent for the banks, and is subject to, and entitled to, all provisions and benefits thereof. All of the terms, conditions and provisions of the Loan Agreement are hereby incorporated by reference. All capitalized terms used herein and not defined herein shall have the meanings given to them in the Loan Agreement.

 

The Loan Agreement contains, among other things, provisions for the prepayment of and acceleration of the maturity of this Note upon the happening of certain stated events upon the terms and conditions specified therein.

 

No recourse shall be had under this Note against the General Partner except as and to the extent set forth in Section 11.02 of the Loan Agreement.

 

All parties to this Note, whether principal, surety, guarantor or endorser, hereby waive presentment for payment, demand, protest, notice of protest, notice of dishonor and notice of any kind.  No failure to exercise, and no delay in exercising any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights.

 

B-2-1



 

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

 

[Signatures on Following Page]

 

B-2-2



 

IN WITNESS WHEREOF, Borrower has executed and delivered this Note on the day and year first above written.

 

 

JBG SMITH PROPERTIES LP

 

 

 

By:

JBG SMITH Properties,

 

 

General Partner

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

B-2-3



 

Date

 

Type of
Advance

 

Amount
of Advance

 

Amount
of Payment

 

Balance
Outstanding

 

Notation By

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B-2-4



 

EXHIBIT B-3

 

FORM OF TERM [A-1][A-2] LOAN NOTE

 

$[     ]

[     ], 2017

 

For value received, the undersigned, JBG SMITH PROPERTIES LP, a Delaware limited partnership (“Borrower”), hereby unconditionally promises to pay to the order of [BANK] or its registered successors or assigns (collectively, the “Bank”), in the care of Wells Fargo Bank, National Association, as administrative agent (“Administrative Agent”), to its address located at 600 South 4th Street, 9th Floor, Minneapolis, Minnesota 55415, or at such other address as may be specified by Administrative Agent to Borrower, for the account of the Applicable Lending Office of the Bank, the principal sum of [       ] AND [  ]/100 Dollars ($[    ]) or, if less, the amount loaned by the Bank as Term [A-1][A-2] Loans to Borrower pursuant to the Loan Agreement (as defined below) and actually outstanding, in lawful money of the United States and in immediately available funds, on the dates specified and otherwise in accordance with the terms set forth in the Loan Agreement. Borrower also promises to pay interest on the unpaid principal balance hereof, for the period such balance is outstanding, in like money, at said office for the account of said Applicable Lending Office, at the times and at the rates per annum as provided in the Loan Agreement. Any amount of principal hereof which is not paid when due, whether at stated maturity, by acceleration, or otherwise, shall bear interest from the date when due until said principal amount is paid in full, payable on demand, at the rates set forth in the Loan Agreement.

 

The date and amount of each advance of a Term [A-1][A-2] Loan made by the Bank to Borrower under the Loan Agreement, and each payment of said Term [A-1][A-2] Loan, shall be recorded by the Bank on its books and, prior to any transfer of this Note (or, at the discretion of the Bank, at any other earlier time), may be endorsed by the Bank on the schedule attached hereto and any continuation thereof.

 

This Note is one of the “Term Loan Notes” referred to in the Credit Agreement dated as of July 18, 2017 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”) by and among Borrower, the banks named therein (including the Bank) and their assignees under Section 12.05 thereof, the other parties thereto and Administrative Agent, as administrative agent for the banks, and is subject to, and entitled to, all provisions and benefits thereof. All of the terms, conditions and provisions of the Loan Agreement are hereby incorporated by reference. All capitalized terms used herein and not defined herein shall have the meanings given to them in the Loan Agreement.

 

The Loan Agreement contains, among other things, provisions for the prepayment of and acceleration of the maturity of this Note upon the happening of certain stated events upon the terms and conditions specified therein.

 

No recourse shall be had under this Note against the General Partner except as and to the extent set forth in Section 11.02 of the Loan Agreement.

 

All parties to this Note, whether principal, surety, guarantor or endorser, hereby waive presentment for payment, demand, protest, notice of protest, notice of dishonor and notice of any kind.  No failure to exercise, and no delay in exercising any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights.

 

B-3-1



 

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

 

[Signatures on Following Page]

 

B-3-2



 

IN WITNESS WHEREOF, Borrower has executed and delivered this Note on the day and year first above written.

 

 

JBG SMITH PROPERTIES LP

 

 

 

By:

JBG SMITH Properties,

 

 

General Partner

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

B-3-3



 

Date

 

Type of
Advance

 

Amount
of Advance

 

Amount
of Payment

 

Balance
Outstanding

 

Notation By

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B-3-4



 

EXHIBIT C

 

FORM OF GUARANTY

 

THIS GUARANTY dated as of               , 20   (this “Guaranty”) is executed and delivered by each of the undersigned and the other Persons from time to time party hereto pursuant to the execution and delivery of an Accession Agreement in the form of Annex I hereto (all of the undersigned, together with such other Persons each a “Guarantor” and collectively, the “Guarantors”) in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION, in its capacity as Administrative Agent (the “Administrative Agent”) for the Banks under that certain Credit Agreement dated as of July 18, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among JBG SMITH PROPERTIES LP (the “Borrower”), the financial institutions party thereto and their assignees under Section 12.05 thereof (the “Banks”), the Administrative Agent, and the other parties thereto, for its benefit and the benefit of the Banks, the Swingline Lenders, the Fronting Banks, the Specified Derivatives Providers and the Specified Cash Management Banks (the Administrative Agent, the Banks, the Swingline Lenders, the Fronting Banks, the Specified Derivatives Providers and the Specified Cash Management Banks, each individually a “Guarantied Party” and collectively, the “Guarantied Parties”).

 

WHEREAS, pursuant to the Credit Agreement, the Administrative Agent, the Fronting Banks, the Swingline Lenders and the other Banks have agreed to make available to the Borrower certain financial accommodations on the terms and conditions set forth in the Credit Agreement;

 

WHEREAS, the Specified Derivatives Providers and Specified Cash Management Banks may from time to time enter into Specified Derivatives Contracts and Specified Cash Management Agreements, as applicable, with the Borrower and/or its Subsidiaries;

 

WHEREAS, each Guarantor is owned or controlled by the Borrower, or is otherwise an Affiliate of the Borrower;

 

WHEREAS, the Borrower and the Guarantors, though separate legal entities, are mutually dependent on one another in the conduct of their respective businesses as an integrated operation and have determined it to be in their mutual best interests to obtain financial accommodations from the Guarantied Parties through their collective efforts;

 

WHEREAS, each Guarantor acknowledges that it will receive direct and indirect benefits from the Guarantied Parties making such financial accommodations and, accordingly, each Guarantor is willing to guarantee the obligations of the Borrower and the other Loan Parties to the Guarantied Parties on the terms and conditions contained herein; and

 

WHEREAS, each Guarantor’s execution and delivery of this Guaranty is a condition to the Guarantied Parties’ making, and continuing to make, such financial accommodations.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Guarantor, each Guarantor hereby agrees as follows:

 

Section 1.  Guaranty.  Each Guarantor hereby absolutely, irrevocably and unconditionally guaranties the due and punctual payment and performance when due, whether at stated maturity, by acceleration or otherwise, of all of the following (collectively referred to as the “Guaranteed Obligations”): (a) all indebtedness, liabilities, obligations, covenants and duties owing by the Borrower or

 

C-1



 

any other Loan Party to the Administrative Agent or any other Guarantied Party under or in connection with the Credit Agreement or any other Loan Document, including without limitation, the repayment of all principal of the Ratable Loans, Bid Rate Loans, Swingline Loans and Term Loans, and the Letter of Credit Liabilities, and the payment of all interest, fees, charges, attorneys’ fees and other amounts payable to the Administrative Agent or any other Guarantied Party thereunder or in connection therewith; (b) all existing or future payment and other obligations owing by and all indebtedness, liabilities, covenants and duties of any Loan Party under or in respect of any Specified Derivatives Contract (other than any Excluded Swap Obligation) and any Specified Cash Management Agreement, whether direct or indirect, absolute or contingent, due or not due, liquidated or unliquidated, and whether or not evidenced by any written confirmation; (c) any and all extensions, renewals, modifications, amendments or substitutions of the foregoing; (d) all expenses, including, without limitation, attorneys’ fees and disbursements, that are incurred by the Administrative Agent or any other Guarantied Party in the enforcement of any of the foregoing or any obligation of such Guarantor hereunder; and (e) all other “Guaranteed Obligations” (as defined in the Credit Agreement).

 

Section 2.  Guaranty of Payment and Not of Collection.  This Guaranty is a guaranty of payment, and not of collection, and a debt of each Guarantor for its own account.  Accordingly, the Guarantied Parties shall not be obligated or required before enforcing this Guaranty against any Guarantor: (a) to pursue any right or remedy the Guarantied Parties may have against the Borrower, any other Loan Party or any other Person or commence any suit or other proceeding against the Borrower, any other Loan Party or any other Person in any court or other tribunal; (b) to make any claim in a liquidation or bankruptcy of the Borrower, any other Loan Party or any other Person; or (c) to make demand of the Borrower, any other Loan Party or any other Person or to enforce or seek to enforce or realize upon any collateral security held by the Guarantied Parties which may secure any of the Guaranteed Obligations.

 

Section 3.  Guaranty Absolute.  Each Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the documents evidencing the same, regardless of any applicable Law now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Guarantied Parties with respect thereto.  The liability of each Guarantor under this Guaranty shall be absolute, irrevocable and unconditional in accordance with its terms and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, subject to the termination provisions in Section 20, including without limitation, the following (whether or not such Guarantor consents thereto or has notice thereof):

 

(a)           (i) any change in the amount, interest rate or due date or other term of any of the Guaranteed Obligations, (ii) any change in the time, place or manner of payment of all or any portion of the Guaranteed Obligations, (iii) any amendment or waiver of, or consent to the departure from or other indulgence with respect to, the Credit Agreement, any other Loan Document, any Specified Derivatives Contract, any Specified Cash Management Agreement or any other document, instrument or agreement evidencing or relating to any Guaranteed Obligations (each, a “Guarantied Document”, and collectively, the “Guarantied Documents”), or (iv) any waiver, renewal, extension, addition, or supplement to, or deletion from, or any other action or inaction under or in respect of, any Guarantied Document or any assignment or transfer of any Guarantied Document;

 

(b)           any lack of validity or enforceability of any Guarantied Document or any assignment or transfer of any Guarantied Document;

 

(c)           any furnishing to any of the Guarantied Parties of any security for any of the Guaranteed Obligations, or any sale, exchange, release or surrender of, or realization on, any collateral securing any of the Guaranteed Obligations;

 

C-2



 

(d)           any settlement or compromise of any of the Guaranteed Obligations, any security therefor, or any liability of any other party with respect to any of the Guaranteed Obligations, or any subordination of the payment of any of the Guaranteed Obligations to the payment of any other liability of the Borrower or any other Loan Party;

 

(e)           any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to such Guarantor, any other Loan Party or any other Person, or any action taken with respect to this Guaranty by any trustee or receiver, or by any court, in any such proceeding;

 

(f)            any act or failure to act by any Loan Party or any other Person which may adversely affect such Guarantor’s subrogation rights, if any, against any other Loan Party or any other Person to recover payments made under this Guaranty;

 

(g)           any nonperfection or impairment of any security interest or other Lien on any collateral, if any, securing in any way any of the Guaranteed Obligations;

 

(h)           any application of sums paid by any Loan Party or any other Person with respect to the liabilities of any Loan Party to any of the Guarantied Parties, regardless of what liabilities of the Borrower remain unpaid;

 

(i)            any defect, limitation or insufficiency in the borrowing powers of the Borrower or in the exercise thereof;

 

(j)            any defense, set-off, claim or counterclaim (other than indefeasible payment and performance in full) which may at any time be available to or be asserted by any Loan Party or any other Person against any Guarantied Party;

 

(k)           any change in the corporate existence, structure or ownership of any Loan Party;

 

(l)            any statement, representation or warranty made or deemed made by or on behalf of any Loan Party under any Guarantied Document, or any amendment hereto or thereto, proves to have been incorrect or misleading in any respect; or

 

(m)          any other circumstance which might otherwise constitute a defense available to, or a discharge of, a Guarantor hereunder (other than indefeasible payment and performance in full).

 

Section 4.  Action with Respect to Guaranteed Obligations.  The Guarantied Parties may, at any time and from time to time, without the consent of, or notice to, any Guarantor, and without discharging any Guarantor from its obligations hereunder, take any and all actions described in Section 3. and may otherwise: (a) amend, modify, alter or supplement the terms of any of the Guaranteed Obligations, including, but not limited to, extending or shortening the time of payment of any of the Guaranteed Obligations or changing the interest rate that may accrue on any of the Guaranteed Obligations; (b) amend, modify, alter or supplement any Guarantied Document in accordance with the terms thereof; (c) sell, exchange, release or otherwise deal with all, or any part, of any collateral securing any of the Guaranteed Obligations; (d) release any Loan Party or other Person liable in any manner for the payment or collection of any of the Guaranteed Obligations; (e) exercise, or refrain from exercising, any rights against any Loan Party or any other Person; and (f) apply any sum, by whomsoever paid or however realized, to the Guaranteed Obligations in such order as the Guarantied Parties shall elect.

 

Section 5.  Representations and Warranties.  Each Guarantor hereby makes to the Administrative Agent and the other Guarantied Parties all of the representations and warranties made by the Borrower

 

C-3



 

with respect to or in any way relating to such Guarantor in the Credit Agreement and the other Guarantied Documents, as if the same were set forth herein in full mutatis mutandis.

 

Section 6.  Covenants.  Each Guarantor will comply with all covenants with which the Borrower or any other Loan Party is to cause such Guarantor to comply under the terms of the Credit Agreement or any of the other Guarantied Documents.

 

Section 7.  Waiver.  Each Guarantor, to the fullest extent permitted by applicable Law, hereby waives notice of acceptance hereof or any presentment, demand, protest or notice of any kind, and any other act or thing, or omission or delay to do any other act or thing, which in any manner or to any extent might vary the risk of such Guarantor or which otherwise might operate to discharge such Guarantor from its obligations hereunder.

 

Section 8.  Inability to Accelerate.  If the Guarantied Parties or any of them are prevented under applicable Law or otherwise from demanding or accelerating payment of any of the Guaranteed Obligations by reason of any automatic stay or otherwise, the Administrative Agent and/or the other Guarantied Parties shall be entitled to receive from each Guarantor, upon demand therefor, the sums which otherwise would have been due had such demand or acceleration occurred.

 

Section 9.  Reinstatement of Guaranteed Obligations.  If claim is ever made on the Administrative Agent or any other Guarantied Party for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations, and the Administrative Agent or such other Guarantied Party repays all or part of said amount by reason of (a) any judgment, decree or order of any court or administrative body of competent jurisdiction, or (b) any settlement or compromise of any such claim effected by the Administrative Agent or such other Guarantied Party with any such claimant (including the Borrower or a trustee in bankruptcy for the Borrower), then and in such event each Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding on it, notwithstanding any revocation hereof or the cancellation of any of the Guarantied Documents and such Guarantor shall be and remain liable to the Administrative Agent or such other Guarantied Party for the amounts so repaid or recovered to the same extent as if such amount had never originally been paid to the Administrative Agent or such other Guarantied Party.

 

Section 10.  Subrogation.  Upon the making by any Guarantor of any payment hereunder for the account of another Loan Party, such Guarantor shall be subrogated to the rights of the payee against such Loan Party; provided, however, that such Guarantor shall not enforce any right or receive any payment by way of subrogation or otherwise take any action in respect of any other claim or cause of action such Guarantor may have against such Loan Party arising by reason of any payment or performance by such Guarantor pursuant to this Guaranty, unless and until all of the Guaranteed Obligations have been indefeasibly paid and performed in full.  If any amount shall be paid to such Guarantor on account of or in respect of such subrogation rights or other claims or causes of action, such Guarantor shall hold such amount in trust for the benefit of the Guarantied Parties and shall forthwith pay such amount to the Administrative Agent to be credited and applied against the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of the Credit Agreement or to be held by the Administrative Agent as collateral security for any Guaranteed Obligations existing.

 

Section 11. Payments Free and Clear.  Section 10.13 of the Credit Agreement shall be applicable, mutatis mutandis, to all payments required to be made by any Guarantor under this Guaranty.

 

Section 12.  Set-off.  In addition to any rights now or hereafter granted under any of the other Guarantied Documents or applicable Law and not by way of limitation of any such rights, subject to Section 12.08 of the Credit Agreement, each Guarantor hereby authorizes each Guarantied Party, each Affiliate of a Guarantied Party, and each Participant, at any time while an Event of Default exists, without

 

C-4



 

any prior notice to such Guarantor or to any other Person, any such notice being hereby expressly waived, but in the case of a Guarantied Party (other than the Administrative Agent), an Affiliate of a Guarantied Party (other than the Administrative Agent), or a Participant, subject to receipt of the prior written consent of the Administrative Agent and the Required Banks exercised in their sole discretion, to set off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured) and any other indebtedness at any time held or owing by a Guarantied Party, an Affiliate of a Guarantied Party or such Participant to or for the credit or the account of such Guarantor against and on account of any of the Guaranteed Obligations, irrespective of whether or not any or all of the Loans and all other Obligations have been declared to be, or have otherwise become, due and payable as permitted by Section 9.02 of the Credit Agreement, and although such Obligations shall be contingent or unmatured.  Each Guarantor agrees, to the fullest extent permitted by applicable Law, that any Participant may exercise rights of setoff or counterclaim and other rights with respect to its participation as fully as if such Participant were a direct creditor of such Guarantor in the amount of such participation.

 

Section 13.  Subordination.  Each Guarantor hereby expressly covenants and agrees for the benefit of the Guarantied Parties that all obligations and liabilities of any other Loan Party to such Guarantor of whatever description, including without limitation, all intercompany Indebtedness or receivables of such Guarantor from any other Loan Party (collectively, the “Junior Claims”) shall be subordinate and junior in right of payment to all Guaranteed Obligations.  If an Event of Default shall exist, unless otherwise permitted under the Credit Agreement, no Guarantor shall accept any direct or indirect payment (in cash, property or securities, by setoff or otherwise) from any other Loan Party on account of or in any manner in respect of any Junior Claim until all of the Guaranteed Obligations have been indefeasibly paid in full.

 

Section 14.  Avoidance Provisions.  It is the intent of each Guarantor and the Guarantied Parties that in any Proceeding, such Guarantor’s maximum obligation hereunder shall equal, but not exceed, the maximum amount which would not otherwise cause the obligations of such Guarantor hereunder (or any other obligations of such Guarantor to the Guarantied Parties) to be avoidable or unenforceable against such Guarantor in such Proceeding as a result of applicable Law, including without limitation, (a) Section 548 of the Bankruptcy Code and (b) any state fraudulent transfer or fraudulent conveyance act or statute applied in such Proceeding, whether by virtue of Section 544 of the Bankruptcy Code or otherwise.  The applicable Laws under which the possible avoidance or unenforceability of the obligations of such Guarantor hereunder (or any other obligations of such Guarantor to the Guarantied Parties) shall be determined in any such Proceeding are referred to as the “Avoidance Provisions”.  Accordingly, to the extent that the obligations of any Guarantor hereunder would otherwise be subject to avoidance under the Avoidance Provisions, the maximum Guaranteed Obligations for which such Guarantor shall be liable hereunder shall be reduced to that amount which, as of the time any of the Guaranteed Obligations are deemed to have been incurred under the Avoidance Provisions, would not cause the obligations of any Guarantor hereunder (or any other obligations of such Guarantor to the Guarantied Parties), to be subject to avoidance under the Avoidance Provisions.  This Section is intended solely to preserve the rights of the Administrative Agent and the other Guarantied Parties hereunder to the maximum extent that would not cause the obligations of any Guarantor hereunder to be subject to avoidance under the Avoidance Provisions, and no Guarantor or any other Person shall have any right or claim under this Section as against the Guarantied Parties that would not otherwise be available to such Person under the Avoidance Provisions.

 

Section 15.  Information.  Each Guarantor assumes all responsibility for being and keeping itself informed of the financial condition of the Loan Parties, and of all other circumstances bearing upon the risk of nonpayment of any of the Guaranteed Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that neither the Administrative Agent nor any other Guarantied Party shall have any duty whatsoever to advise any Guarantor of information regarding such circumstances or risks.

 

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Section 16.  Governing Law.  THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

 

SECTION 17.  WAIVER OF JURY TRIAL.

 

(a)           EACH GUARANTOR, AND EACH OF THE GUARANTIED PARTIES BY ACCEPTING THE BENEFITS HEREOF, ACKNOWLEDGES THAT ANY DISPUTE OR CONTROVERSY BETWEEN OR AMONG SUCH GUARANTOR AND ANY OF THE GUARANTIED PARTIES WOULD BE BASED ON DIFFICULT AND COMPLEX ISSUES OF LAW AND FACT AND WOULD RESULT IN DELAY AND EXPENSE TO THE PARTIES.  ACCORDINGLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE GUARANTORS, AND THE GUARANTIED PARTIES BY ACCEPTING THE BENEFITS HEREOF, HEREBY WAIVES ITS RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT OR TRIBUNAL IN WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST ANY PARTY HERETO ARISING OUT OF THIS GUARANTY.

 

(b)           EACH GUARANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT IT WILL NOT COMMENCE ANY ACTION, LITIGATION OR PROCEEDING OF ANY KIND OR DESCRIPTION, WHETHER IN LAW OR EQUITY, WHETHER IN CONTRACT OR IN TORT OR OTHERWISE, AGAINST THE ADMINISTRATIVE AGENT, ANY OTHER GUARANTIED PARTY, OR ANY RELATED PARTY OF THE FOREGOING IN ANY WAY RELATING TO THIS GUARANTY OR ANY OTHER GUARANTIED DOCUMENT OR THE TRANSACTIONS RELATING HERETO OR THERETO, IN ANY FORUM OTHER THAN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY, AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS AND AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION, LITIGATION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION, LITIGATION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS GUARANTY OR IN ANY OTHER GUARANTIED DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT OR ANY OTHER GUARANTIED PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS GUARANTY OR ANY OTHER GUARANTIED DOCUMENT AGAINST ANY GUARANTOR OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.  EACH PARTY FURTHER WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT FORUM, AND EACH AGREES NOT TO PLEAD OR CLAIM THE SAME.  THE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE BRINGING OF ANY ACTION BY ANY GUARANTIED PARTY OR THE ENFORCEMENT BY ANY GUARANTIED PARTY OF ANY JUDGMENT OBTAINED IN SUCH FORUM IN ANY OTHER APPROPRIATE JURISDICTION.

 

(c)           THE PROVISIONS OF THIS SECTION HAVE BEEN CONSIDERED BY EACH PARTY WITH THE ADVICE OF COUNSEL AND WITH A FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF, AND SHALL SURVIVE THE PAYMENT OF THE LOANS

 

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AND ALL OTHER AMOUNTS PAYABLE HEREUNDER OR UNDER THE OTHER GUARANTIED DOCUMENTS, THE TERMINATION OR EXPIRATION OF ALL LETTERS OF CREDIT AND THE TERMINATION OF THIS GUARANTY.

 

Section 18.  Loan Accounts.  The Administrative Agent and each other Guarantied Party may maintain books and accounts setting forth the amounts of principal, interest and other sums paid and payable with respect to the Guaranteed Obligations arising under or in connection with the Loan Documents, and in the case of any dispute relating to any of the outstanding amount, payment or receipt of any of such Guaranteed Obligations or otherwise, the entries in such books and accounts shall be binding on the Guarantors absent manifest error.  The failure of the Administrative Agent or any other Guarantied Party to maintain such books and accounts shall not in any way relieve or discharge any Guarantor of any of its obligations hereunder.

 

Section 19.  Waiver of Remedies.  No delay or failure on the part of the Administrative Agent or any other Guarantied Party in the exercise of any right or remedy it may have against any Guarantor hereunder or otherwise shall operate as a waiver thereof, and no single or partial exercise by the Administrative Agent or any other Guarantied Party of any such right or remedy shall preclude any other or further exercise thereof or the exercise of any other such right or remedy.

 

Section 20.  Termination.  This Guaranty shall remain in full force and effect with respect to each Guarantor until the earlier of the (x) date on which all of the Guaranteed Obligations have been indefeasibly paid and performed in full (other than (1) contingent indemnification obligations that have not been asserted, (2) Letters of Credit the expiration dates of which extend beyond the Ratable Loan Maturity Date as permitted under Section 2.17(e) of the Credit Agreement and in respect of which the applicable Borrower has satisfied the requirements of such Section and Section 2.17(i) of the Credit Agreement, (3) to the extent arrangements reasonably satisfactory to a Specified Derivatives Provider under a Specified Derivatives Contract have been entered into, Specified Derivatives Obligations under such Specified Derivatives Contract and (4) to the extent arrangements reasonably satisfactory to a Specified Cash Management Bank under a Specified Cash Management Agreement have been entered into, Guaranteed Obligations under such Specified Cash Management Agreement) and (y) solely with respect to such Guarantor (but not any other Guarantor), release or termination of the obligations of such Guarantor hereunder in accordance with the terms of the Credit Agreement, at which point this Guaranty shall (solely with respect to such Guarantor, in the case of clause (y)), automatically terminate and have no further force and effect (other than any provisions of this Guaranty that expressly survive the termination hereof).  The Administrative Agent agrees to execute and deliver such documents as are reasonably requested in accordance with the terms of the Credit Agreement by Borrower or any such Guarantor to evidence such termination or release, at Borrower’s or such Guarantor’s sole cost and expense.

 

Section 21.  Successors and Assigns.  Each reference herein to the Administrative Agent or any other Guarantied Party shall be deemed to include such Person’s respective successors and assigns (including, but not limited to, any holder of the Guaranteed Obligations) in whose favor the provisions of this Guaranty also shall inure, and each reference herein to each Guarantor shall be deemed to include such Guarantor’s successors and assigns, upon whom this Guaranty also shall be binding.  The Guarantied Parties may, in accordance with the applicable provisions of the Guarantied Documents, assign, transfer or sell any Guaranteed Obligation, or grant or sell participations in any Guaranteed Obligations, to any Person without the consent of, or notice to, any Guarantor and without releasing, discharging or modifying any Guarantor’s obligations hereunder.  Subject to Section 12.23 of the Credit Agreement, each Guarantor hereby consents to the delivery by the Administrative Agent and any other Guarantied Party to any Qualified Institution or Participant (or any prospective Qualified Institution or Participant) of any financial or other information regarding the Borrower or any Guarantor.  No Guarantor may assign or transfer its rights or obligations hereunder to any Person without the prior written consent of the Administrative

 

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Agent and all other Guarantied Parties and any such assignment or other transfer to which the Administrative Agent and all other Guarantied Parties have not so consented shall be null and void.

 

Section 22.  JOINT AND SEVERAL OBLIGATIONS.  THE OBLIGATIONS OF THE GUARANTORS HEREUNDER SHALL BE JOINT AND SEVERAL, AND ACCORDINGLY, EACH GUARANTOR CONFIRMS THAT IT IS LIABLE FOR THE FULL AMOUNT OF THE “GUARANTEED OBLIGATIONS” AND ALL OF THE OBLIGATIONS AND LIABILITIES OF EACH OF THE OTHER GUARANTORS HEREUNDER.

 

Section 23.  Amendments.  This Guaranty may not be amended except in writing signed by the Required Banks (or the Administrative Agent at the written direction of the Required Banks) (or all of the Banks if required under the terms of the Credit Agreement), each Guarantor, and, solely for purposes of its acknowledgment thereof, the Administrative Agent, subject to Section 12.02 of the Credit Agreement; provided, however, that any Subsidiary Guarantor may be released hereunder in accordance with the terms of Section 6.10 of the Credit Agreement, and any Subsidiary may become a Guarantor hereunder by executing and delivering an Accession Agreement and any other applicable documents in accordance with Section 6.10 of the Credit Agreement.

 

Section 24.  Payments.  All payments to be made by any Guarantor pursuant to this Guaranty shall be made in Dollars, in immediately available funds to the Administrative Agent at the Administrative Agent’s Office, not later than 1:00 p.m. New York time, on the date one Business Day after demand therefor.

 

Section 25.  Notices.  All notices, requests and other communications hereunder shall be in writing (including facsimile or electronic transmission or similar writing) and shall be given (a) to each Guarantor at its address set forth below its signature hereto, (b) to the Administrative Agent or any other Guarantied Party at its respective address for notices provided for in the Guarantied Documents, as applicable, or (c) as to each such party at such other address as such party shall designate in a written notice to the other parties.  Each such notice, request or other communication shall be effective (i) if mailed, upon the first to occur of receipt or the expiration of 3 days after the deposit in the United States Postal Service mail, postage prepaid and addressed to the address of a Guarantor or Guarantied Party at the addresses specified; (ii) if telecopied, when transmitted; (iii) if hand delivered or sent by overnight courier, when delivered or (iv) if delivered by electronic mail, in accordance with Section 12.07(b) of the Credit Agreement, to the extent applicable; provided, however, that in the case of the immediately preceding clauses (i) through (iii), non-receipt of any communication as the result of any change of address of which the sending party was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such communication.

 

Section 26.  Severability.  In case any provision of this Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

Section 27.  Headings.  Section headings used in this Guaranty are for convenience only and shall not affect the construction of this Guaranty.

 

Section 28.  Limitation of Liability.  None of the Administrative Agent, any other Guarantied Party or any of their respective Related Parties shall have any liability with respect to, and each Guarantor hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by a Guarantor in connection with, arising out of, or in any way related to, this Guaranty, any of the other Guarantied Documents, or any of the transactions contemplated by this Guaranty or any of the other Guarantied Documents.  Each Guarantor hereby waives, releases, and agrees not to sue the Administrative Agent, any other Guarantied Party or

 

C-8



 

any of their respective Related Parties for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Guaranty, any of the other Guarantied Documents, or any of the transactions contemplated by thereby.

 

Section 29. Electronic Delivery of Certain Information.  Each Guarantor acknowledges and agrees that information regarding the Guarantor may be delivered electronically pursuant to Section 12.07(b) of the Credit Agreement.

 

Section 30.  Right of Contribution.  The Guarantors hereby agree as among themselves that, if any Guarantor shall make an Excess Payment, such Guarantor shall have a right of contribution from each other Guarantor in an amount equal to such other Guarantor’s Contribution Share of such Excess Payment.  The payment obligations of any Guarantor under this Section shall be subordinate and subject in right of payment to the Guaranteed Obligations until such time as the Guaranteed Obligations have been indefeasibly paid and performed in full and the Commitments have expired or terminated, and none of the Guarantors shall exercise any right or remedy under this Section against any other Guarantor until such Guaranteed Obligations have been indefeasibly paid and performed in full and the Commitments have expired or terminated.  Subject to Section 10 of this Guaranty, this Section shall not be deemed to affect any right of subrogation, indemnity, reimbursement or contribution that any Guarantor may have under applicable Law against any other Loan Party in respect of any payment of Guaranteed Obligations.  Notwithstanding the foregoing, all rights of contribution against any Guarantor shall terminate from and after such time, if ever, that such Guarantor shall cease to be a Guarantor in accordance with the applicable provisions of the Loan Documents.

 

Section 31.  Keepwell.  Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Loan Party to honor all of its obligations under this Guaranty in respect of Swap Obligations (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section, or otherwise under this Guaranty, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount).  The obligations of each Qualified ECP Guarantor under this Section shall remain in full force and effect until termination of this Guaranty in accordance with Section 20 hereof.  Each Qualified ECP Guarantor intends that this Section constitute, and this Section shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Loan Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

Section 32.  Definitions.  (a) For the purposes of this Guaranty:

 

Contribution Share” means, for any Guarantor in respect of any Excess Payment made by any other Guarantor, the ratio (expressed as a percentage) as of the date of such Excess Payment of (i) the amount by which the aggregate present fair salable value of all of its assets and properties exceeds the amount of all debts and liabilities of such Guarantor (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of such Guarantor hereunder) to (ii) the amount by which the aggregate present fair salable value of all assets and other properties of the Loan Parties other than the maker of such Excess Payment exceeds the amount of all of the debts and liabilities (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of the Loan Parties) of the Loan Parties other than the maker of such Excess Payment; provided, however, that, for purposes of calculating the Contribution Shares of the Guarantors in respect of any Excess Payment, any Guarantor that became a Guarantor subsequent to the date of any such Excess Payment shall be deemed to have been a Guarantor on the date of such Excess Payment and the financial information for such Guarantor as of the date such Guarantor became a Guarantor shall be utilized for such Guarantor in connection with such Excess Payment.

 

C-9



 

Excess Payment” means the amount paid by any Guarantor in excess of its Ratable Share of any Guaranteed Obligations.

 

Proceeding” means any of the following:  (i) a voluntary or involuntary case concerning any Guarantor shall be commenced under the Bankruptcy Code; (ii) a custodian (as defined in the Bankruptcy Code or any other applicable bankruptcy laws) is appointed for, or takes charge of, all or any substantial part of the property of any Guarantor; (iii) any other proceeding under any applicable Law, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding-up or composition for adjustment of debts, whether now or hereafter in effect, is commenced relating to any Guarantor; (iv) any Guarantor is adjudicated insolvent or bankrupt; (v) any order of relief or other order approving any such case or proceeding is entered by a court of competent jurisdiction; (vi) any Guarantor makes a general assignment for the benefit of creditors; (vii) any Guarantor shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; (viii) any Guarantor shall call a meeting of its creditors with a view to arranging a composition or adjustment of its debts; (ix) any Guarantor shall by any act or failure to act indicate its consent to, approval of or acquiescence in any of the foregoing; or (x) any corporate action shall be taken by any Guarantor for the purpose of effecting any of the foregoing.

 

Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Loan Party (including the Borrower) that has total assets exceeding $10,000,000 at the time the relevant Guarantee or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

Ratable Share” means, for any Guarantor in respect of any payment of Guaranteed Obligations, the ratio (expressed as a percentage) as of the date of such payment of Guaranteed Obligations of (i) the amount by which the aggregate present fair salable value of all of its assets and properties exceeds the amount of all debts and liabilities of such Guarantor (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of such Guarantor hereunder) to (ii) the amount by which the aggregate present fair salable value of all assets and other properties of all of the Loan Parties exceeds the amount of all of the debts and liabilities (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of the Loan Parties hereunder) of the Loan Parties; provided, however, that, for purposes of calculating the Ratable Shares of the Guarantors in respect of any payment of Guaranteed Obligations, any Guarantor that became a Guarantor subsequent to the date of any such payment shall be deemed to have been a Guarantor on the date of such payment and the financial information for such Guarantor as of the date such Guarantor became a Guarantor shall be utilized for such Guarantor in connection with such payment.

 

(b)           As used herein, “Guarantors” shall mean, as the context requires, collectively, (a) each Subsidiary identified as a “Guarantor” on the signature pages hereto, (b) each Person that joins this Guaranty as a Guarantor pursuant to Section 6.10 of the Credit Agreement, (c) with respect to (i) any Specified Derivatives Obligations between any Loan Party (other than the Borrower) and any Specified Derivatives Provider, the Borrower and (ii) the payment and performance by each other Loan Party of its obligations under the Guaranty with respect to all Swap Obligations, the Borrower, and (d) the successors and permitted assigns of the foregoing.

 

(c)           Terms not otherwise defined herein are used herein with the respective meanings given them in the Credit Agreement.

 

[Signatures on Following Pages]

 

C-10



 

IN WITNESS WHEREOF, each Guarantor has duly executed and delivered this Guaranty as of the date and year first written above.

 

 

GUARANTORS:

 

 

 

[NAME OF GUARANTOR]

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

 

Address for Notices for all Guarantors:

 

 

 

c/o JBG SMITH PROPERTIES LP

 

 

 

 

 

 

 

Attention:

 

 

Telecopier:

(     )

 

Telephone:

(     )

 

 

 

 

BORROWER:

 

 

 

JBG SMITH PROPERTIES LP

 

 

 

By:

JBG SMITH Properties,

 

 

General Partner

 

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

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ANNEX I

 

FORM OF ACCESSION AGREEMENT

 

THIS ACCESSION AGREEMENT dated as of             ,     , executed and delivered by                       , a               (the “New Guarantor”) in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION, in its capacity as Administrative Agent (the “Administrative Agent”) under that certain Credit Agreement dated as of                , 20   (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among JBG SMITH PROPERTIES LP (the “Borrower”), the financial institutions party thereto and their assignees under Section 12.05 thereof (the “Banks”), the Administrative Agent, and the other parties thereto, for its benefit and the benefit of the other Guarantied Parties.

 

WHEREAS, pursuant to the Credit Agreement, the Administrative Agent, the Swingline Lenders, the Fronting Banks and the other Banks have agreed to make available to the Borrower certain financial accommodations on the terms and conditions set forth in the Credit Agreement;

 

WHEREAS, the Specified Derivatives Providers and Specified Cash Management Banks, may from time to time enter into Specified Derivatives Contracts and Specified Cash Management Agreements, as applicable, with the Borrower and/or its Subsidiaries;

 

WHEREAS, the New Guarantor is owned or controlled by the Borrower, or is otherwise an Affiliate of the Borrower;

 

WHEREAS, the Borrower, the New Guarantor and the other existing Guarantors, though separate legal entities, are mutually dependent on each other in the conduct of their respective businesses as an integrated operation and have determined it to be in their mutual best interests to obtain financial accommodations from the Guarantied Parties through their collective efforts;

 

WHEREAS, the New Guarantor acknowledges that it will receive direct and indirect benefits from the Guarantied Parties making such financial accommodations available, and, accordingly, the New Guarantor is willing to guarantee the obligations of the Borrower and the other Loan Parties to the Guarantied Parties on the terms and conditions contained herein; and

 

WHEREAS, the New Guarantor’s execution and delivery of this Agreement is a condition to the Guarantied Parties’ continuing to make such financial accommodations.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the New Guarantor, the New Guarantor hereby agrees as follows:

 

Section 1.  Accession to Guaranty.  The New Guarantor hereby agrees that it is a “Guarantor” under that certain Guaranty dated as of            , 20   (as amended, restated, supplemented or otherwise modified from time to time, the “Guaranty”), made by the Guarantors party thereto in favor of the Administrative Agent, for its benefit and the benefit of the other Guarantied Parties, and assumes all obligations of a “Guarantor” thereunder and agrees to be bound thereby, all as if the New Guarantor had been an original signatory to the Guaranty.  Without limiting the generality of the foregoing, the New Guarantor hereby:

 

(a)           irrevocably and unconditionally guarantees the due and punctual payment and performance when due, whether at stated maturity, by acceleration or otherwise, of all Guaranteed Obligations;

 

C-12



 

(b)           makes to the Administrative Agent and the other Guarantied Parties as of the date hereof each of the representations and warranties contained in Section 5 of the Guaranty and agrees to be bound by each of the covenants contained in Section 6 of the Guaranty; and

 

(c)           consents and agrees to each provision set forth in the Guaranty.

 

SECTION 2.  GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

 

Section 3.  Definitions.  Capitalized terms used herein and not otherwise defined herein shall have their respective defined meanings given them in the Guaranty or, to the extent not defined therein, the Credit Agreement.

 

[Signatures on Following Page]

 

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IN WITNESS WHEREOF, the New Guarantor has caused this Accession Agreement to be duly executed and delivered by its duly authorized officers as of the date first written above.

 

 

[NEW GUARANTOR]

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

 

Address for Notices:

 

 

 

c/o JBG SMITH PROPERTIES LP

 

 

 

 

 

Attention:

 

Telecopier: (     )

 

Telephone: (     )

 

Accepted:

 

 

 

WELLS FARGO BANK, NATIONAL

 

ASSOCIATION, as Administrative Agent

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

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EXHIBIT D

 

FORM OF SOLVENCY CERTIFICATE

 

                                , 20    

 

The officer executing this Certificate is the              of JBG SMITH Properties, a Maryland real estate investment trust (“General Partner”), the sole general partner of JBG SMITH Properties LP, a Delaware limited partnership (“Borrower”), and is familiar with its properties, assets and businesses, and is duly authorized to execute this Certificate on behalf of Borrower pursuant to the Credit Agreement dated as of the date hereof (the “Credit Agreement”) among Borrower, the banks party thereto (each, a “Bank” and collectively, the “Banks”) and Wells Fargo Bank, National Association, as agent for the Banks (in such capacity, together with its successors in such capacity, the “Agent”). In executing this Certificate, such individual is acting solely in [his] [her] capacity as the           of General Partner, and not in [his] [her] individual capacity. Unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined.

 

The undersigned further certifies that [he] [she] has carefully reviewed the Credit Agreement and the other Loan Documents and the contents of this Certificate and, in connection herewith, has made such investigation and inquiries as [he] [she] deems necessary and prudent therefor. The undersigned further certifies that the financial information and assumptions which underlie and form the basis for the representations made in this Certificate were reasonable when made and were made in good faith and continue to be reasonable as of the date hereof.

 

The undersigned understands that the Agent is relying on the truth and accuracy of this Certificate in connection with the transactions contemplated by the Credit Agreement.

 

The undersigned certifies that Borrower is Solvent.

 

D-1



 

IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the date first set forth above.

 

 

By:

 

 

Name:

 

 

Title:

 

 

D-2



 

EXHIBIT E

 

FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

 

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Loan Agreement identified below (as amended, restated, extended, supplemented or otherwise modified from time to time, the “Loan Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

 

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Loan Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Bank under the Loan Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including without limitation any letters of credit, guarantees and swingline loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Bank) against any Person, whether known or unknown, arising under or in connection with the Loan Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Each such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

 

1. Assignor:

 

 

 

 

 

2. Assignee:

 

 

 

 

[and is [a Bank] [a Bank Affiliate of [identify Bank]]]

 

 

 

3. Borrower:

 

JBG SMITH Properties LP

 

 

 

4. Administrative Agent:

 

Wells Fargo Bank, National Association, as the administrative agent under the Loan Agreement

 

 

 

5. Loan Agreement:

 

The Credit Agreement dated as of July 18, 2017 among JBG SMITH Properties LP, the Banks from time to time party thereto, and Wells Fargo Bank, National Association, as Administrative Agent for the

 

E-1



 

 

 

Banks and the other parties thereto (as amended, restated, supplemented or otherwise modified from time to time)

 

6. Assigned Interest:

 

Facility Assigned(22)

 

Aggregate Amount of
Loan
Commitment/Loans
for all Banks

 

Amount of Loan
Commitment/Loans
Assigned

 

Percentage Assigned
of Loan
Commitment/Loans(23)

 

 

 

$

 

 

$

 

 

 

%

 

 

$

 

 

$

 

 

 

%

 

 

$

 

 

$

 

 

 

%

 

Effective Date:                                 , 20   [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

 

[Signature pages follow]

 


(22)  Fill in the appropriate terminology for the types of facilities under the Loan Agreement that are being assigned under this Assignment (e.g., “Ratable Loan Commitment,” “Term A-1 Loan Commitment” or “Term A-2 Loan Commitment”).

 

(23)  Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.

 

E-2



 

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

 

ASSIGNOR(24)

 

 

 

[NAME OF ASSIGNOR]

 

 

 

By:

 

 

 

Title:

 

 

 

ASSIGNEE

 

 

 

[NAME OF ASSIGNEE]

 

 

 

 

 

By:

 

 

 

Title:

 

[Consented to and](25) Accepted:

 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent

 

 

 

 

 

 

By

 

 

Name:

 

 

Title:

 

 

 

 

 

[Consented to:](26)

 

 

 

JBG SMITH PROPERTIES LP, as the Borrower

 

 

 

By: JBG SMITH Properties, General Partner

 

 

 

 

By

 

 

Name:

 

Title:

 

 


(24)  Add additional signature blocks as needed. Include both Fund/Pension Plan and manager making the trade (if applicable).

 

(25)  To be added only if the consent of the Administrative Agent is required by the terms of Section 12.05(b)(iii) of the Credit Agreement.

 

(26)  To be added only if the consent of the Borrower is required by the terms of Section 12.05(b)(iii) of the Credit Agreement.

 

E-3



 

[FRONTING BANKS/SWINGLINE LENDERS](27)

 

 

 

 

 

 

By

 

 

 

Name:

 

 

Title:

 

 


(27)  To be added only if the consent of the Fronting Banks and/or the Swingline Lenders is required by the terms of Section 12.05(b)(iii) of the Credit Agreement.

 

E-4



 

STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION

 

1.         Representations and Warranties.

 

1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim, (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and (iv) it is not a Defaulting Lender; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Loan Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

 

1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Bank under the Loan Agreement, (ii) it meets all the requirements to be an assignee under Section 12.05 of the Loan Agreement (subject to such consents, if any, as may be required thereunder), (iii) from and after the Effective Date, it shall be bound by the provisions of the Loan Agreement as a Bank thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Bank thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire the Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Loan Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 6.09(1) and Section 6.09(2) thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest, (vi) it has, independently and without reliance upon the Administrative Agent or any other Bank and based on such documents and information as it has deemed appropriate made its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest, and (vii) if it is a Foreign Bank, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Loan Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Bank.

 

2.    Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective

 

E-5



 

Date and to the Assignee for amounts which have accrued from and after the Effective Date. Notwithstanding the foregoing, the Administrative Agent shall make all payments of interest, fees or other amounts paid or payable in kind from and after the Effective Date to the Assignee.

 

3.                            General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument.  Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

 

E-6



 

EXHIBIT F

 

RESERVED

 

F-1



 

EXHIBIT G-1

 

BID RATE QUOTE REQUEST

 

[Date]

 

To:

Wells Fargo Bank, National Association, as Administrative Agent (the “Administrative Agent”) 

 

 

From:

JBG SMITH Properties LP (the “Borrower”)

 

 

Re:

Credit Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”) dated as of July 18, 2017 by and among the Borrower, the financial institutions party thereto and their assignees under Section 12.05 thereof and the Administrative Agent

 

We hereby give notice pursuant to Section 2.02 of the Loan Agreement that we request Bid Rate Quotes for the following proposed Bid Rate Loans:

 

Proposed Date of Borrowing (which shall be a Banking Day):

 

Principal Amount(28): $

 

Interest Period(29):

 

 

Such Bid Rate Quotes should offer a LIBOR Bid Margin. [Such Bid Rate Quotes should offer the following prepayment terms:          .](30)

 

Terms used herein have the meanings assigned to them in the Loan Agreement.

 

 

JBG SMITH Properties LP, a Delaware limited partnership

 

 

 

By:

JBG SMITH Properties, a Maryland real estate investment trust, general partner

 

 

 

 

 

By

 

 

 

 

Name:

 

 

 

Title:

 


(28)  Minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess thereof.

 

(29)  Subject to the provisions of the definition of “Interest Period” in the Loan Agreement.

 

(30)  To be included if Borrower requests prepayment terms different than those applicable to Ratable Loans.

 

G-1-1



 

EXHIBIT G-2

 

INVITATION FOR BID RATE QUOTES

 

To:

[Bank]

 

 

Re:

Invitation for Bid Rate Quotes to JBG SMITH Properties LP (“Borrower”)

 

Pursuant to Section 2.02 of the Credit Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”) dated as of July 18, 2017 by and among the Borrower, the financial institutions party thereto and their assignees under Section 12.05 thereof and the undersigned, as Administrative Agent, we are pleased on behalf of Borrower to invite you to submit Bid Rate Quotes to Borrower for the following proposed Bid Rate Loans:

 

Proposed Date of Borrowing (which shall be a Banking Day):

 

Principal Amount: $

 

Interest Period:

 

Such Bid Rate Quotes should offer a LIBOR Bid Margin. [Such Bid Rate Quotes should offer the following prepayment terms:          .](31)

 

Please respond to this invitation by no later than 10:00 a.m. (New York time) on [date] (the third Banking Day prior to the Proposed Date of Borrowing).

 

Terms used herein have the meanings assigned to them in the Loan Agreement.

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent

 

 

 

By

 

 

 

Name:

 

 

Title:

 


(31)  To be included if Borrower requests prepayment terms different than those applicable to Ratable Loans.

 

G-2-1



 

EXHIBIT G-3

 

BID RATE QUOTE

 

To:

Wells Fargo Bank, National Association, as Administrative Agent (the “Administrative Agent”)

 

 

Re:

Bid Rate Quote to JBG SMITH Properties LP (“Borrower”) pursuant to the Credit Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”) dated as of July 18, 2017 by and among Borrower, the financial institutions party thereto and their assignees under Section 12.05 thereof and the Administrative Agent

 

In response to your invitation on behalf of Borrower dated       , 20  , we hereby make the following Bid Rate Quote on the following terms:

 

1.                            Quoting Bank:

 

2.                            Person to contact at Quoting Bank:

 

3.                            Date of Borrowing:

 

4.                            We hereby offer to make Bid Rate Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates:

 

Principal Amount(32): $

 

Interest Period(33):

 

LIBOR Bid Margin(34):

 

5.                            LIBOR Reserve Requirement, if any:

 

6.                            Prepayment terms if different from Ratable Loans:

 

Terms used herein have the meanings assigned to them in the Loan Agreement.

 

We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Loan Agreement, irrevocably obligates us to make the Bid Rate Loan(s) for which any offer(s) are accepted, in whole or in part[; provided, that the aggregate principal amount of Bid Rate Loans for which the above offers may be accepted shall not exceed $       ].

 

 

Very truly yours,

 

[NAME OF BANK]

 

 

 

By:

 

 

Authorized Officer

 

Date:

 

 


(32)  Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Amounts of bids are subject to the requirements of Section 2.02(c) of the Loan Agreement.

 

(33)  No more than five (5) bids are permitted for each Interest Period.

 

(34)  Margin over or under the LIBOR Interest Rate determined for the applicable Interest Period. Specify percentage (to the nearest 1/1,000 of 1 %) and specify whether “PLUS” or “MINUS”.

 

G-3-1



 

EXHIBIT G-4

 

ACCEPTANCE OF BID RATE QUOTE

 

To:

Wells Fargo Bank, National Association, as Administrative Agent (the “Administrative Agent”)

 

 

From:

JBG SMITH Properties LP (the “Borrower”)

 

 

Re:

Credit Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”) dated as of July 18, 2017 by and among the Borrower, the financial institutions party thereto and their assignees under Section 12.05 thereof and the Administrative Agent

 

We hereby accept the offers to make Bid Rate Loan(s) set forth in the Bid Rate Quote(s) identified below:

 

Bank:

 

Date of Bid Rate Quote:

 

Principal Amount: $

 

Interest Period:

 

LIBOR Bid Margin:

 

Terms used herein have the meanings assigned to them in the Loan Agreement.

 

 

JBG SMITH Properties LP, a Delaware limited partnership

 

 

 

By:

JBG SMITH Properties, a Maryland real estate investment trust, general partner

 

 

 

 

 

By

 

 

 

 

Name:

 

 

 

Title:

 

G-4-1



 

EXHIBIT H

 

FORM OF DESIGNATION AGREEMENT

 

THIS DESIGNATION AGREEMENT dated as of            ,       (the “Agreement”) by and among                           (the “Designating Lender”),                           (the “Designated Lender”) and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent (the “Administrative Agent”).

 

WHEREAS, the Designating Lender is a Lender under that certain Credit Agreement dated as of July 18, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among JBG SMITH Properties LP (the “Borrower”), the financial institutions party thereto and their assignees under Section 12.05 thereof (the “Banks”), Wells Fargo Bank, National Association, as Administrative Agent (the “Administrative Agent”), and the other parties thereto;

 

WHEREAS, pursuant to Section 12.16 of the Credit Agreement, the Designating Lender desires to designate the Designated Lender as its “Designated Lender” under and as defined in the Credit Agreement; and

 

WHEREAS, the Administrative Agent consents to such designation on the terms and conditions set forth herein.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged by the parties hereto, the parties hereto hereby agree as follows:

 

Section 1.  Designation.  Subject to the terms and conditions of this Agreement, the Designating Lender hereby designates the Designated Lender, and the Designated Lender hereby accepts such designation, to have a right to make Bid Rate Loans on behalf of the Designating Lender pursuant to Section 2.02 of the Credit Agreement.  Any assignment by the Designating Lender to the Designated Lender of rights to make a Bid Rate Loan shall only be effective at the time such Bid Rate Loan is funded by the Designated Lender.  The Designated Lender, subject to the terms and conditions hereof, hereby agrees to make such accepted Bid Rate Loans and to perform such other obligations as may be required of it as a Designated Lender under the Credit Agreement.

 

Section 2.  Designating Lender Not Discharged.  Notwithstanding the designation of the Designated Lender hereunder, the Designating Lender shall be and remain obligated to the Borrower, the Administrative Agent and the Banks for each and every obligation of the Designating Lender and its related Designated Lender with respect to the Credit Agreement and the other Loan Documents, including, without limitation, any indemnification obligations under Section 10.05 of the Credit Agreement and any sums otherwise payable to the Borrower by the Designated Lender.

 

Section 3.  No Representations by Designating Lender.  The Designating Lender makes no representation or warranty and, except as set forth in Section 8 below, assumes no responsibility pursuant to this Agreement with respect to (a) any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability,

 

H-1



 

genuineness, sufficiency or value of any Loan Document or any other instrument and document furnished pursuant thereto and (b) the financial condition of the Borrower, any other Loan Party or any other Subsidiary of the Borrower or the performance or observance by the Borrower or any other Loan Party of any of its obligations under any Loan Document to which it is a party or any other instrument or document furnished pursuant thereto.

 

Section 4.  Representations and Covenants of Designated Lender.  The Designated Lender makes and confirms to the Administrative Agent, the Designating Lender, and the other Banks all of the representations, warranties and covenants of a Lender under Article X of the Credit Agreement.  Not in limitation of the foregoing, the Designated Lender (a) represents and warrants that it (i) is legally authorized to enter into this Agreement; (ii) is an “accredited investor” (as such term is used in Regulation D of the Securities Act) and (iii) meets the requirements of a “Designated Lender” contained in the definition of such term contained in the Credit Agreement; (b) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant thereto and such other documents and information (including without limitation the Loan Documents) as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement; (c)  confirms that it has, independently and without reliance upon the Administrative Agent, any other Lender or counsel to the Administrative Agent, or any of their respective officers, directors, employees, agents or counsel, and based on such financial statements and such other documents and information, made its own credit analysis and decision to become a Designated Lender under the Credit Agreement; (d) appoints and authorizes the Administrative Agent to take such action as contractual representative on its behalf and to exercise such powers under the Loan Documents as are delegated to the Administrative Agent by the terms thereof together with such powers as are reasonably incidental thereto; and (e) agrees that it will become a party to and shall be bound by the Credit Agreement, the other Loan Documents to which the other Banks are a party on the Effective Date (as defined below) and will perform in accordance therewith all of the obligations which are required to be performed by it as a Designated Lender.  The Designated Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent, any other Lender or counsel to the Administrative Agent or any of their respective officers, directors, employees and agents, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement or any Note or pursuant to any other obligation.  The Designated Lender acknowledges and agrees that except as expressly required under the Credit Agreement, the Administrative Agent shall have no duty or responsibility whatsoever, either initially or on a continuing basis, to provide the Designated Lender with any credit or other information with respect to the Borrower, any other Loan Party or any other Subsidiary or to notify the Designated Lender of any Default or Event of Default.

 

Section 5.  Appointment of Designating Lender as Attorney-In-Fact.  The Designated Lender hereby appoints the Designating Lender as the Designated Lender’s agent and attorney-in-fact, and grants to the Designating Lender an irrevocable power of attorney, to receive any and all payments to be made for the benefit of the Designated Lender under the Credit Agreement, to deliver and receive all notices and other communications under the Credit Agreement and other Loan Documents and to exercise on the Designated Lender’s behalf all actions under the Credit Agreement, including, without limitation, rights to vote and to grant and make approvals, waivers, consents and amendments to or under the Credit Agreement or the other

 

H-2



 

Loan Documents.  Any document executed by the Designating Lender on the Designated Lender’s behalf in connection with the Credit Agreement or other Loan Documents shall be binding on the Designated Lender to the same extent as if signed by the Designated Lender on its own behalf.  The Borrower, each Administrative Agent and each of the Banks may rely on and are beneficiaries of the preceding provisions.

 

Section 6.  Acceptance by the Administrative Agent.  Following the execution of this Agreement by the Designating Lender and the Designated Lender, the Designating Lender will (i) deliver to the Administrative Agent a duly executed original of this Agreement for acceptance by the Administrative Agent and (ii) pay to the Administrative Agent the fee, if any, payable under the applicable provisions of the Credit Agreement whereupon this Agreement shall become effective as of the later of (x) the date of such acceptance or (y) such other date as may be specified on the signature page hereof (the “Effective Date”).

 

Section 7.  Effect of Designation.  Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, the Designated Lender shall be a party to the Credit Agreement with a right to make Bid Rate Loans as a Bank pursuant to Section 2.02 of the Credit Agreement and the rights and obligations of a Bank related thereto; provided, however, that the Designated Lender shall not be required to make payments with respect to such obligations except to the extent of excess cash flow of the Designated Lender which is not otherwise required to repay obligations of the Designated Lender which are then due and payable.  Notwithstanding the foregoing, the Designating Lender, as agent for the Designated Lender, shall be and remain obligated to the Borrower, the Administrative Agent and the Banks for each and every of the obligations of the Designated Lender and the Designating Lender with respect to the Credit Agreement.

 

Section 8.  Indemnification of Designated Lender.  The Designating Lender unconditionally agrees to pay or reimburse the Designated Lender and save the Designated Lender harmless against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed or asserted by any of the parties to the Loan Documents against the Designated Lender, in its capacity as such, in any way relating to or arising out of this Agreement or any other Loan Documents or any action taken or omitted by the Designated Lender hereunder or thereunder, provided that the Designating Lender shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements if the same results from the Designated Lender’s gross negligence or willful misconduct.

 

Section 9.  Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

 

Section 10.  Counterparts.  This Agreement may be executed in any number of counterparts each of which, when taken together, shall constitute one and the same agreement.

 

Section 11.  Headings.  Section headings have been inserted herein for convenience only and shall not be construed to be a part hereof.

 

H-3



 

Section 12.  Amendments; Waivers.  This Agreement may not be amended, changed, waived or modified except by a writing executed by all parties hereto.

 

Section 13.  Binding Effect.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

 

Section 14.  Definitions.  Terms not otherwise defined herein are used herein with the respective meanings given them in the Credit Agreement.

 

[Signatures on Following Page]

 

H-4



 

IN WITNESS WHEREOF, the parties hereto have duly executed this Designation Agreement as of the date and year first written above.

 

 

EFFECTIVE DATE:

 

 

 

 

 

 

DESIGNATING LENDER:

 

 

 

[NAME OF DESIGNATING LENDER]

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

DESIGNATED LENDER:

 

 

 

[NAME OF DESIGNATED LENDER]

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

Accepted as of the date first written above.

 

ADMINISTRATIVE AGENT:

 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

H-5



 

EXHIBIT I

 

RESERVED

 

I-1



 

EXHIBIT J-1

 

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Banks That Are Not Partnerships For U.S. Federal Income Tax Purposes)

 

Reference is hereby made to the Credit Agreement dated as of July 18, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), among JBG SMITH Properties LP, as Borrower, Wells Fargo Bank, National Association, as Administrative Agent, and each Bank from time to time party thereto.

 

Pursuant to the provisions of Section 10.13(f)(ii)(B)(3) of the Loan Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN or Form W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate or in such Form W-8BEN or Form W-8BEN-E changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

 

Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.

 

[NAME OF BANK]

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:                     , 20     

 

J-1-1



 

EXHIBIT J-2

 

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Banks That Are Partnerships For U.S. Federal Income Tax Purposes)

 

Reference is hereby made to the Credit Agreement dated as of July 18, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), among JBG SMITH Properties LP, as Borrower, Wells Fargo Bank, National Association, as Administrative Agent, and each Bank from time to time party thereto.

 

Pursuant to the provisions of Section 10.13(f)(ii)(B)(4) of the Loan Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Loan Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished the Administrative Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or Form W-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or W-8BEN-E from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate or in such Form W-8IMY, such Form W-8BEN or Form W-8BEN-E, as applicable, changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

 

Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.

 

[NAME OF BANK]

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

Date:                    , 20

 

 

J-2-1



 

EXHIBIT J-3

 

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

 

Reference is hereby made to the Credit Agreement dated as of July 18, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), among JBG SMITH Properties LP, as Borrower, Wells Fargo Bank, National Association, as Administrative Agent, and each Bank from time to time party thereto.

 

Pursuant to the provisions of Section 10.13(f)(ii)(B)(4) of the Loan Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(c)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished its participating Bank with a certificate of its non-U.S. Person status on IRS Form W-8BEN or Form W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate or in such Form W-8BEN or Form W-8BEN-E changes, the undersigned shall promptly so inform such Bank in writing, and (2) the undersigned shall have at all times furnished such Bank with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

 

Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.

 

[NAME OF PARTICIPANT]

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

Date:                     , 20    

 

J-3-1



 

EXHIBIT J-4

 

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

 

Reference is hereby made to the Credit Agreement dated as of July 18, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), among JBG SMITH Properties LP, as Borrower, Wells Fargo Bank, National Association, as Administrative Agent, and each Bank from time to time party thereto.

 

Pursuant to the provisions of Section 10.13(f)(ii)(B)(4) of the Loan Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect to such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished its participating Bank with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or Form W-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or Form W-8BEN-E from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate or in such Form W-8IMY, such Form W-8BEN or Form W-8BEN-E changes, the undersigned shall promptly so inform such Bank and (2) the undersigned shall have at all times furnished such Bank with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

 

Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.

 

[NAME OF PARTICIPANT]

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

Date:                , 20

 

 

J-4-1



 

EXHIBIT K

 

FORM OF NOTICE OF BORROWING

 

                        , 20    

 

Wells Fargo Bank, National Association

600 South 4th Street, 9th Floor

Minneapolis, MN 55415

 

Ladies and Gentlemen:

 

Reference is hereby made to the Credit Agreement dated as of July 18, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among JBG SMITH Properties LP, as Borrower, Wells Fargo Bank, National Association, as Administrative Agent, and each Bank from time to time party thereto.  Capitalized terms used herein, and not otherwise defined herein, have their respective meanings given them in the Credit Agreement.

 

1.                                      Pursuant to Section 2.05. of the Credit Agreement, the Borrower hereby requests that the [Ratable Loan][Term A-1][Term A-2] Banks make the [Ratable Loans][Term A-1 Loans][Term A-2 Loans] to Borrower in an aggregate amount equal to $                   .

 

2.                                      The Borrower requests that such [Ratable Loans][Term A-1 Loans][Term A-2 Loans] be made available to the Borrower on             , 20  .

 

3.                                      The Borrower hereby requests that such [Ratable Loans][Term A-1 Loans][Term A-2 Loans] be of the following type:

 

[Check one box only]

o                       Base Rate Loan

o                       LIBOR Loan with an initial Interest Period for a duration of:

 

[Check one box only]

o                       seven days

o                       one month

o                       three months

o                       six months

 

The Borrower hereby certifies to the Administrative Agent and the Lenders that as of the date hereof and on and as of the date of the making of the requested Loans, (a) no Default or Event of Default exists or would exist as of the date of the making of such Loans or would exist after immediately giving effect thereto; and (b) each of the representations and warranties of Borrower and the other Loan Parties contained in the Credit Agreement and in each of the other

 

K-1



 

Loan Documents is true and correct in all material respects (except in those cases where such representation or warranty expressly relates to an earlier date or is qualified as to “materiality”, “Material Adverse Change” or similar language (which shall be true and correct in all respects) and except for changes in factual circumstances not prohibited under the Credit Agreement).

 

[Signatures on Following Page]

 

K-2



 

IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Notice of Borrowing as of the date first written above.

 

 

JBG SMITH Properties LP, a Delaware limited partnership

 

 

 

By:

JBG SMITH Properties, a Maryland real estate investment trust, general partner

 

 

 

 

 

By

 

 

 

 

Name:

 

 

 

Title:

 

K-3


EX-10.5 17 a17-17912_1ex10d5.htm EX-10.5

Exhibit 10.5

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT is entered into as of July 18, 2017 by and among JBG Smith Properties, a Maryland real estate investment trust (the “Company”), and the holders listed on Schedule I hereto (each an “Initial Holder” and, collectively, the “Initial Holders”).

 

RECITALS

 

WHEREAS, the Company and JBG SMITH Properties LP, a Delaware limited partnership (the “Operating Partnership”), have concurrently engaged in certain combination transactions as more fully set forth in that certain Master Transaction Agreement dated as of October 31, 2016 by and among Vornado Realty Trust, Vornado Realty L.P., JBG Properties Inc., JBG/Operating Partners, L.P., certain affiliates of JBG Properties Inc., the Company and the Operating Partnership (the “Combination Transactions” pursuant to which the Initial Holders have concurrently received, in exchange for their (or certain related parties’) respective interests in the entities participating in the Combination Transactions common shares of beneficial interest of the Company, par value $0.01 per share (the “Common Shares”); and

 

WHEREAS, as a condition to the Combination Transactions, the Company has agreed to grant the Initial Holders and their permitted assignees and transferees the registration rights set forth in Article II hereof.

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1.                                 Definitions.  The following terms, as used herein, have the following meanings:

 

Affiliate” of any Person means any other Person directly or indirectly controlling or controlled by or under common control with such Person.  For the purposes of this definition, “control” when used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

Agreement” means this Registration Rights Agreement, as it may be amended, supplemented or restated from time to time.

 

Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in The City of New York, New York are authorized by law to close.

 



 

Charter” means the Articles of Amendment and Restatement of the Company as filed with the Secretary of State of the State of Maryland on July 17, 2017, as the same may be amended, modified or restated from time to time.

 

Combination Transactions” has the meaning set forth in the recitals hereof.

 

Commission” means the Securities and Exchange Commission.

 

Common Shares” has the meaning set forth in the recitals hereof.

 

Company” has the meaning set forth in the preamble hereof.

 

End of Suspension Notice” has the meaning set forth in Section 2.9(a).

 

Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

Holder” means (i) any Initial Holder who is the record or beneficial owner of any Registrable Security or (ii) any assignee or transferee of such Initial Holder (including assignments or transfers of Registrable Securities to such assignees or transferees as a result of the foreclosure on any loans secured by such Registrable Securities) (x) to the extent permitted under the Charter, and (y) provided such assignee or transferee agrees in writing to be bound by all the provisions hereof.

 

Initial Holder” has the meaning set forth in the preamble hereof.

 

Notice and Questionnaire” has the meaning set forth in Section 2.1(d).

 

NYSE” means The New York Stock Exchange.

 

Person” means an individual or a corporation, partnership, limited liability company, association, trust, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

 

Registrable Securities” means with respect to any Holder, Common Shares owned, either of record or beneficially, by such Holder that were received by such Holder or an Initial Holder in the Combination Transactions and any additional Common Shares issued as a dividend or distribution on, in exchange for, or otherwise in respect of, such shares (including as a result of combinations, recapitalizations, mergers, consolidations, reorganizations or otherwise).

 

As to any particular Registrable Securities of a Holder, they shall cease to be Registrable Securities in respect of such Holder at the earliest time as one of the following shall have occurred:  (i) a registration statement (including a Resale Shelf Registration Statement) covering such shares shall have become effective and all such shares have been disposed of pursuant to such effective registration statement or unless such shares were issued pursuant to an effective registration statement, (ii) such shares have been publicly sold under Rule 144, (iii) all such shares may be sold in one transaction pursuant to Rule 144 or (iv) such shares have been otherwise transferred in a transaction that constitutes a sale thereof under the Securities Act, the

 

2



 

Company has delivered to the Holder’s transferee a new certificate or other evidence of ownership for such shares not bearing the Securities Act restricted stock legend and such shares subsequently may be resold or otherwise transferred by such transferee without registration under the Securities Act.

 

Registration Expenses” shall have the meaning set forth in Section 2.3.

 

Resale Shelf Registration Statement” shall have the meaning set forth in Section 2.1(a).

 

Rule 144” means Rule 144 promulgated under the Securities Act, as amended from time to time, or any similar successor rule thereto that may be promulgated by the Commission.

 

Securities Act” means the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.

 

Selling Holder” means a Holder who is selling Registrable Securities pursuant to a registration statement under the Securities Act pursuant to the terms hereof.

 

Suspension Notice” shall have the meaning set forth in Section 2.9(a).

 

ARTICLE II

 

REGISTRATION RIGHTS

 

Section 2.1.                                 Shelf Registration.

 

(a)                                 Subject to Section 2.9, the Company shall use commercially reasonable efforts to prepare and file, on or before the first Business Day that is sixty (60) days after the consummation date of the Combination Transactions, a “shelf” registration statement with respect to the resale of the Registrable Securities by the Holders thereof on an appropriate form that complies in all material respects with applicable Commission rules for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act (the “Resale Shelf Registration Statement”) and permitting registration of such Registrable Securities for resale by such Holders in accordance with the methods of distribution elected by the Holders and set forth in the Resale Shelf Registration Statement and shall use commercially reasonable efforts to cause such Resale Shelf Registration Statement to become effective as promptly as practicable thereafter. Subject to Sections 2.1(c) and 2.9, the Company shall keep such Resale Shelf Registration Statement continuously effective for a period ending when all Common Shares covered by the Resale Shelf Registration Statement are no longer Registrable Securities.

 

(b)                                 [Intentionally Omitted].

 

(c)                                  Subsequent Filing.  The Company shall prepare and file such additional registration statements as necessary every three (3) years and use its commercially reasonable efforts to cause such registration statements to become effective so that a Resale Shelf Registration Statement remains continuously effective, subject to Section 2.9, with respect to resales of Registrable Securities as and for the periods required under Sections 2.1(a), as

 

3



 

applicable (such subsequent registration statements to constitute a Resale Shelf Registration Statement hereunder).

 

(d)                                 Notice and Questionnaire.  At the request of the Company, each Holder shall deliver a duly completed and executed written notice (each such notice, a “Notice and Questionnaire”) to the Company (i) notifying the Company of such Holder’s desire to include Registrable Securities held by it in a Resale Shelf Registration Statement, (ii) containing all information about such Holder required to be included in such registration statement in accordance with applicable law, including Item 507 of Regulation S-K promulgated under the Securities Act, as amended from time to time, or any similar successor rule thereto, and (iii) pursuant to which such Holder agrees to be bound by the terms and conditions hereof. At the time a Resale Shelf Registration Statement becomes effective, each Holder that has delivered a duly completed and executed Notice and Questionnaire to the Company on or prior to the date ten (10) Business Days prior to such time of effectiveness shall be named as a selling securityholder in such Resale Shelf Registration Statement and the related prospectus in such a manner as to permit such Holder to deliver such prospectus to purchasers of Registrable Securities in accordance with applicable law. If required by applicable law, subject to the terms and conditions hereof, after effectiveness of the Resale Shelf Registration Statement, the Company shall file a supplement to such prospectus or amendment to the Resale Shelf Registration Statement not less than once a quarter as necessary to name as selling securityholders therein any Holders that provide to the Company a duly completed and executed Notice and Questionnaire and shall use commercially reasonable efforts to cause any post-effective amendment to such Resale Shelf Registration Statement filed for such purpose to be declared effective by the Commission as promptly as reasonably practicable after the filing thereof. Any Holder that has not delivered a duly completed and executed Notice and Questionnaire shall not be entitled to be named as a Selling Holder in, or have the Registrable Securities held by it covered by, a Resale Shelf Registration Statement.

 

Section 2.2.                                 Registration Procedures; Filings; Information.  Subject to Section 2.9 hereof, in connection with any Resale Shelf Registration Statement under Section 2.1(a), the Company will use its commercially reasonable efforts to effect the registration of the Registrable Securities covered thereby in accordance with the intended method of disposition thereof as quickly as practicable.  In connection with any Resale Shelf Registration Statement:

 

(a)                                 At the request of the Selling Holder, the Company will, prior to filing a Resale Shelf Registration Statement or prospectus or any amendment or supplement thereto, furnish without charge to each Selling Holder of the Registrable Securities covered by such registration statement copies of such registration statement as proposed to be filed, and thereafter furnish to such Selling Holder such number of conformed copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein, but excluding any documents to be incorporated by reference therein that are publicly available on the Commission’s EDGAR system) the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such Selling Holder may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Selling Holder.

 

4



 

(b)                                 After the filing of a Resale Shelf Registration Statement, the Company will promptly notify each Selling Holder of Registrable Securities covered by such registration statement of any stop order issued or threatened by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered.

 

(c)                                  The parties hereto hereby acknowledge that, generally, pursuant to Section 18 of the Securities Act, no state securities laws requiring, or with respect to, registration or qualification of securities or securities transactions will apply to a security that is a “covered security” (as defined therein). “Covered securities,” for purposes of Section 18 of the Securities Act, includes securities listed or authorized for listing on the NYSE (or certain other national securities exchanges) and securities of the same issuer that are equal in seniority or senior to such securities. In the event that the Shares cease to constitute covered securities, subject to the conditions set forth in this Agreement, the Company will use its commercially reasonable efforts to (i) register or qualify the Registrable Securities under such other securities or “blue sky” laws of such jurisdictions in the United States (where an exemption does not apply) as any Selling Holder reasonably (in light of such Selling Holder’s intended plan of distribution) requests and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable such Selling Holder to consummate the disposition of the Registrable Securities owned by such Selling Holder; provided that the Company will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (c), (B) subject itself to general taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction.  The Company will promptly notify each Selling Holder of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction or the initiation of any proceeding for such purpose.

 

(d)                                 The Company will immediately notify each Selling Holder of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of (i) the Company’s receipt of any notification of the suspension of the qualification of any Registrable Securities covered by a Resale Shelf Registration Statement for sale in any jurisdiction; or (ii) the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and promptly make available to each Selling Holder any such supplement or amendment.

 

(e)                                  The Company will use commercially reasonable efforts to cause all Registrable Securities covered by such Resale Shelf Registration Statement to be listed on each securities exchange on which similar securities issued by the Company are then listed.

 

(f)                                   In addition to the Notice and Questionnaire, the Company may require each Selling Holder of Registrable Securities to promptly furnish in writing to the Company such information regarding such selling Holder, the Registrable Securities held by it and the intended

 

5



 

method of distribution of the Registrable Securities as the Company may from time to time reasonably request and such other information as may be legally required in connection with such registration.  No Holder may include Registrable Securities in any registration statement pursuant to this Agreement unless and until such Holder has furnished to the Company such information.  Each Holder further agrees to furnish as soon as reasonably practicable to the Company all information required to be disclosed in order to make information previously furnished to the Company by such Holder not misleading in light of the circumstances in which they were made.

 

(g)                                  Each Selling Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Sections 2.2(b) or (d) or upon receipt of a Suspension Notice, such Selling Holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Selling Holder’s receipt of written notice from the Company that such disposition may be made and, if applicable, copies of any supplemented or amended prospectus contemplated by clause (ii) of Section 2.2(d) or, if applicable, prepared under Section 2.9(a), and, if so directed by the Company, such Selling Holder will deliver to the Company all copies, other than permanent file copies then in such Selling Holder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice.  Each Selling Holder of Registrable Securities agrees that it will immediately notify the Company at any time when a prospectus relating to the registration of such Registrable Securities is required to be delivered under the Securities Act of the happening of an event as a result of which information previously furnished by such Selling Holder to the Company in writing for inclusion in such prospectus contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made.

 

Section 2.3.                                 Registration Expenses.  In connection with any registration statement required to be filed hereunder, the Company shall pay the following registration expenses incurred in connection with the registration hereunder (the “Registration Expenses”), regardless whether such registration statement is declared effective by the Commission:  (i) all registration and filing fees, (ii) fees and expenses of compliance with securities or “blue sky” laws (including reasonable fees and disbursements of its counsel in connection with blue sky qualifications of the Registrable Securities), (iii) printing expenses, (iv) internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) the fees and expenses incurred in connection with the listing of the Registrable Securities, (vi) reasonable fees and disbursements of counsel for the Company, (vii) all fees and disbursements of the Company’s auditors, including in connection with the preparation of comfort letters, and any transfer agent and registrar fees, and (viii) the reasonable fees and expenses of any special experts retained by the Company in connection with such registration. Registration Expenses shall not include any brokerage and sales commission fees and disbursements of any counsel, accountants and other advisors of any Holder, and any transfer taxes relating to the sale or disposition of Common Shares by any Holder.

 

Section 2.4.                                 Indemnification by the Company.  The Company agrees to indemnify and hold harmless each Selling Holder of Registrable Securities, its officers, directors, agents, partners, members, employees, managers, advisors, sub-advisors, attorneys, representatives and

 

6



 

Affiliates, and each Person, if any, who controls such Selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against, as incurred, any and all losses, claims, damages, liabilities, judgments and expenses (or actions in respect thereof) that arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any registration statement, preliminary prospectus, prospectus, or free writing prospectus relating to the Registrable Securities (in each case, as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or that arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages, liabilities, judgments or expenses arise out of or are based upon any such untrue statement or omission or alleged untrue statement or omission included in reliance upon and in conformity with information furnished in writing to the Company by such Selling Holder or on such Selling Holder’s behalf expressly for inclusion therein.

 

Section 2.5.                                 Indemnification by Holders of Registrable Securities.  Each Selling Holder agrees, severally but not jointly or jointly and severally, to indemnify and hold harmless the Company, its officers, directors, agents, employees, attorneys, representatives and Affiliates and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Selling Holder, but only with respect to information relating to such Selling Holder included in reliance upon and in conformity with information furnished in writing by such Selling Holder or on such Selling Holder’s behalf expressly for use in any registration statement, preliminary prospectus, prospectus or free writing prospectus relating to the Registrable Securities, or any amendment or supplement thereto.  In case any action or proceeding shall be brought against the Company or its officers, directors or agents or any such controlling person, in respect of which indemnity may be sought against such Selling Holder, such Selling Holder shall have the rights and duties given to the Company, and the Company or its officers, directors or agents or such controlling person shall have the rights and duties given to such Selling Holder, by Section 2.6; provided, however, that the total obligations of such Selling Holder under this Agreement (including, but not limited to, obligations arising under Section 2.7 herein) will be limited to an amount equal to the net proceeds actually received by such Selling Holder (after deducting any discounts and commissions) from the disposition of Registrable Securities pursuant to such registration statement.

 

Section 2.6.                                 Conduct of Indemnification Proceedings.  In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 2.4 or 2.5, such person (an “Indemnified Party”) shall promptly notify the person against whom such indemnity may be sought (an “Indemnifying Party”) in writing and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the payment of all fees and expenses; provided, however, that the failure of any Indemnified Party to give such notice will not relieve such Indemnifying Party of any obligations under this Section 2, except to the extent such Indemnifying Party is materially prejudiced by such failure.  In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to

 

7



 

the retention of such counsel or (ii) representation of the Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate due to actual or potential differing interests between the Indemnified Party and the Indemnified Party.  It is understood that the Indemnifying Party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they are incurred.  In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by (i) in the case of Persons indemnified pursuant to Section 2.4 hereof, the Selling Holders which owned a majority of the Registrable Securities sold under the applicable registration statement and (ii) in the case of Persons indemnified pursuant to Section 2.5, the Company.  The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment.  No Indemnifying Party shall, without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such proceeding without any admission of liability by such Indemnified Party.

 

Section 2.7.                                 Contribution.  If the indemnification provided for in Section 2.4 or 2.5 hereof is held by a court of competent jurisdiction to be unavailable to an Indemnified Party or insufficient in respect of any losses, claims, damages, liabilities, judgments or expenses that otherwise would have been covered by Section 2.4 or 2.5 hereof, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages, liabilities, judgments or expenses in such proportion as is appropriate to reflect the relative fault of the Company, on the one hand, and of each Selling Holder, on the other hand, in connection with such statements or omissions which resulted in such losses, claims, damages, liabilities, judgments or expenses, as well as any other relevant equitable considerations.  The relative fault of the Company on the one hand and of each Selling Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party.

 

The Company and the Selling Holders agree that it would not be just and equitable if contribution pursuant to this Section 2.7 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph.  The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages, liabilities, judgments or expenses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 2.7, no Selling Holder shall be required to contribute any amount which in the aggregate

 

8



 

exceeds the amount by which the net proceeds actually received by such Selling Holder from the sale of its securities to the public exceeds the amount of any damages which such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.  The Selling Holder’s obligations to contribute pursuant to this Section 2.7, if any, are several in proportion to the proceeds of the offering actually received by such Selling Holder bears to the total proceeds of the offering received by all the Selling Holders and not joint.

 

Section 2.8.                                 Rule 144.  The Company covenants that it will (a) make and keep public information regarding the Company available as those terms are defined in Rule 144, (b) file in a timely manner any reports and documents required to be filed by it under the Securities Act and the Exchange Act, (c) furnish to any Holder forthwith upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, and (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (d) take such further action as any Holder may reasonably request, all to the extent required from time to time to enable Holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144.

 

Section 2.9.                                 Suspension of Use of Registration Statement.

 

(a)                                 Notwithstanding the provisions of Section 2.1(a), the Company shall be permitted to postpone the filing of any Resale Shelf Registration Statement, and from time to time to require Holders not to sell under the Resale Shelf Registration Statement or to suspend the use or effectiveness thereof, for such times as the Company reasonably may determine is necessary and advisable (but in no event shall the Company be entitled to exercise such right for more than an aggregate of 180 days in any rolling 12-month period commencing on the date of this Agreement, except as a result of a refusal by the Commission to declare any post-effective amendment to the Resale Shelf Registration Statement effective after the Company has used all commercially reasonable efforts to cause the post-effective amendment to be declared effective by the Commission, in which case, the Company must terminate the black-out period immediately following the effective date of the post-effective amendment), if any of the following events shall occur (each such circumstance a “Suspension Event”): (i) a majority of the Board of Directors of the Company determines in good faith that (A) the offer or sale of any Registrable Securities would materially impede, delay or interfere with any proposed financing, offer or sale of securities, acquisition, disposition, corporate reorganization or other material transaction involving the Company or any of its subsidiaries, (B) the sale of Registrable Securities pursuant to the Resale Shelf Registration Statement would require disclosure of non-public material information not otherwise required to be disclosed under applicable law, or (C) (x) the Company has a bona fide business purpose for preserving the confidentiality of a proposed transaction described in clause (A) above, (y) disclosure of such proposed transaction would have a material adverse effect on the Company or the Company’s ability to consummate such proposed transaction, or (z) such proposed transaction renders the Company unable to comply with Commission requirements, in each case under circumstances that would make it impractical or inadvisable to cause the Resale Shelf Registration Statement (or such filings) to

 

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become effective or to promptly amend or supplement a Resale Shelf Registration Statement on a post-effective basis, as applicable; or (ii) a majority of the Board of Directors of the Company determines in good faith that it is in the Company’s best interest or it is required by law, rule or regulation to supplement the Resale Shelf Registration Statement or file a post-effective amendment to the Resale Shelf Registration Statement in order to ensure that the prospectus included in the Resale Shelf Registration Statement (A) contains the information required under Section 10(a)(3) of the Securities Act; (B) discloses any facts or events arising after the effective date of a Resale Shelf Registration Statement (or of the most recent post-effective amendment) that, individually or in the aggregate, represents a fundamental change in the information set forth therein; or (C) discloses any material information with respect to the plan of distribution that was not disclosed in the Resale Shelf Registration Statement or any material change to such information. Upon the occurrence of any such suspension, the Company shall use its commercially reasonable efforts to cause the Resale Shelf Registration Statement to become effective or to promptly amend or supplement the Resale Shelf Registration Statement on a post-effective basis or to take such action as is necessary to permit resumed use of the Resale Shelf Registration Statement or filing thereof as soon as possible.

 

The Company will provide written notice (a “Suspension Notice”) to the Holders, if any, of the occurrence of any Suspension Event. If, as a result of a Suspension Event, the Resale Shelf Registration Statement or related prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the prospectus) not misleading, each Holder agrees that (i) it will immediately discontinue offers and sales of the Registrable Securities under the Resale Shelf Registration Statement until the Holder receives copies of a supplemental or amended prospectus (which the Company agrees to promptly prepare) that corrects the misstatement(s) or omission(s) referred to above and receives notice that any post-effective amendment has become effective or unless otherwise notified by the Company that it may resume such offers and sales, and (ii) it will maintain the confidentiality of any information included in the written notice delivered by the Company unless otherwise required by law or subpoena. If so directed by the Company, each Holder will deliver to the Company (at the expense of the Company) all copies of the prospectus covering the Registrable Securities at the time of receipt of the Suspension Notice, other than permanent file copies in the possession of such Holder’s counsel. The Holders may recommence effecting sales of the Registrable Securities pursuant to the Resale Shelf Registration Statement (or such filings) following receipt by the Holders of any prospectus contemplated by clause (ii) of this Section 2.9(a) and further written notice to such effect (an “End of Suspension Notice”) from the Company, which End of Suspension Notice shall be given by the Company to the Holders and to the Selling Holders’ counsel, if any, promptly following the conclusion of any Suspension Event and its effect.

 

(b)                                 In connection with any Registration Statement utilized by the Company to satisfy its obligations under this Agreement, each Holder agrees to cooperate with the Company in connection with the preparation of the Resale Shelf Registration Statement, and each Holder agrees that it will (i) respond within ten (10) Business Days to any written request by the Company to provide or verify information regarding the Holder or the Holder’s Registrable Securities (including the proposed manner of sale) that may be required to be included in such Resale Shelf Registration Statement and related prospectus pursuant to the rules and regulations

 

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of the Commission, and (ii) provide in a timely manner information regarding the proposed distribution by the Holder of the Registrable Securities and such other information as may be requested by the Company from time to time in connection with the preparation of and for inclusion in the Resale Shelf Registration Statement and related prospectus.

 

(c)           If all reports required to be filed by the Company pursuant to the Exchange Act have not been filed by the required date taking into account any permissible extension, upon written notice thereof by the Company to the Holders, the rights of the Holders to offer, sell or distribute any Registrable Securities pursuant to any Registration Statement or to require the Company take action with respect to the registration or sale of any Registrable Securities pursuant to any Registration Statement shall be suspended until the date on which the Company has filed such reports, and the Company shall use commercially reasonable efforts, taking into account the circumstances of the Company at such time, to file the required reports as promptly as commercially practicable, and shall notify the Holders as promptly as practicable when such suspension is no longer required.

 

Section 2.10.         Additional Shares.  The Company, at its option, may register under a Shelf Registration Statement and any filings with any state securities commissions filed pursuant to this Agreement, any number of unissued Common Shares or any Common Shares owned by any other shareholder or shareholders of the Company.

 

ARTICLE III

 

MISCELLANEOUS

 

Section 3.1.           Remedies.  In addition to being entitled to exercise all rights provided herein and granted by law, including recovery of damages, the Holders shall be entitled to specific performance of the rights under this Agreement.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

 

Section 3.2.           Amendments and Waivers.  The provisions of this Agreement may be amended or waived at any time only by the written agreement of the Company and the Holders of a majority of the Registrable Securities; provided, however, that the provisions of this Agreement may not be amended or waived without the consent of each Holder of Registrable Securities adversely affected by such amendment or waiver if such amendment or waiver adversely affects a portion of the Registrable Securities but does not so adversely affect all of the Registrable Securities; provided, further, that the provisions of the preceding provision may not be amended or waived except in accordance with this sentence. Any waiver, permit, consent or approval of any kind or character on the part of any such Holder of any provision or condition of this Agreement must be made in writing and shall be effective only to the extent specifically set forth in writing. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each Holder of Registrable Securities and the Company.  No failure or delay by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon any breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition.

 

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Section 3.3.           Notices.  All notices and other communications in connection with this Agreement shall be made in writing by hand delivery, registered first-class mail, telecopier, or air courier guaranteeing overnight delivery:

 

(1)           if to any Holder, initially to the address indicated in such Holder’s Notice and Questionnaire or, if no Notice and Questionnaire has been delivered, c/o 4445 Willard Avenue, Suite 400, Chevy Chase, Maryland 20815, Attention: W. Matthew Kelly, or to such other address and to such other Persons as any Holder may hereafter specify in writing; and

 

(2)           if to the Company, initially at 4445 Willard Avenue, Suite 400, Chevy Chase, Maryland 20815, Attention:  Chief Executive Officer, or to such other address as the Company may hereafter specify in writing.

 

All such notices and communications shall be deemed to have been duly given:  at the time delivered by hand, if personally delivered; when received if deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery.

 

Section 3.4.           Successors and Assigns; Assignment of Registration Rights.  This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties.  Any Holder may assign its rights under this Agreement without the consent of the Company in connection with a transfer of such Holder’s Registrable Securities; provided, that the Holder notifies the Company of such proposed transfer and assignment and the transferee or assignee of such rights assumes in writing the obligations of such Holder under this Agreement.

 

Section 3.5.           Counterparts.  This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  Each party shall become bound by this Agreement immediately upon affixing its signature hereto.

 

Section 3.6.           Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of Maryland, without giving effect to conflict of laws principles.

 

Section 3.7.           Severability.  In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

 

Section 3.8.           Entire Agreement.  This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein.  There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Registrable Securities.  This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

 

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Section 3.9.           Headings.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

Section 3.10.         Termination.  The obligations of the parties hereunder shall terminate with respect to a Holder when it no longer holds Registrable Securities and with respect to the Company when there are no longer Registrable Securities with respect to a Resale Shelf Registration Statement, except, in each case, for any obligations under Sections 2.3, 2.4, 2.5, 2.6, 2.7 and Article III.

 

Section 3.11.         Consent to Jurisdiction.

 

(a)           Each of the parties hereto hereby irrevocably submits to the exclusive jurisdiction of the courts of the State of Maryland and to the jurisdiction of the United States District Court for the State of Maryland, for the purpose of any action (whether based on contract, tort or otherwise), directly or indirectly, arising out of or relating to this Agreement or the actions of the parties hereto in the negotiation, administration, performance and enforcement thereof, and each of the parties hereto hereby irrevocably agrees that all claims in respect to such action may be heard and determined exclusively in any Maryland state or federal court.

 

(b)           Each of the parties hereto (i) irrevocably consents to the service of the summons and complaint and any other process in any other action relating to the transactions contemplated by this Agreement, on behalf of itself or its property, by personal delivery of copies of such process to such party and nothing in this Section 3.11 shall affect the right of any party to serve legal process in any other manner permitted by law, (ii) consents to submit itself to the personal jurisdiction of any United States federal court located in the State of Maryland or any Maryland state court in the event any dispute arises out of this Agreement or the transactions contemplated by this Agreement, (iii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (iv) agrees that it will not bring any action or proceeding relating to this Agreement or the transactions contemplated by this Agreement in any court other than any United States federal court located in the State of Maryland or any Maryland state court. Each of the Holders and the Company agrees that a final judgment in any action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

 

Section 3.12.         Waiver of Jury Trial.  The parties hereto (including any Initial Holder and any subsequent Holder) irrevocably waive any right to trial by jury.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.

 

 

JBG SMITH PROPERTIES

 

 

 

By:

/s/ Stephen Theriot

 

 

Name:

Stephen Theriot

 

 

Title:

Chief Financial Officer

 

 

 

 

 

W. Matthew Kelly

 

 

(as Attorney-in-Fact for the Initial Holders listed on Schedule I hereto)

 

 

 

 

By:

/s/ W. Matthew Kelly

 

[Signature Page to Registration Rights Agreement]

 


EX-10.6 18 a17-17912_1ex10d6.htm EX-10.6

Exhibit 10.6

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT is entered into as of July 18, 2017 by and among JBG Smith Properties, a Maryland real estate investment trust (the “Company”), and the holders listed on Schedule I hereto (each an “Initial Holder” and, collectively, the “Initial Holders”).

 

RECITALS

 

WHEREAS, the Company and JBG SMITH Properties LP, a Delaware limited partnership (the “Operating Partnership”), have concurrently engaged in certain combination transactions as more fully set forth in that certain Master Transaction Agreement dated as of October 31, 2016 by and among Vornado Realty Trust, Vornado Realty L.P., JBG Properties Inc., JBG/Operating Partners, L.P., certain affiliates of JBG Properties Inc., the Company and the Operating Partnership (the “Combination Transactions”), pursuant to which the Initial Holders have concurrently received, in exchange for their (or certain related parties’) respective interests in the entities participating in the Combination Transactions, common units of limited partnership interest in the Operating Partnership (“OP Units”);

 

WHEREAS, upon the terms and subject to the conditions contained in the Operating Partnership Agreement (as defined below), OP Units will be redeemable for cash or, at the Company’s option, exchangeable for shares of beneficial interest of the Company, par value $0.01 per share (the “Common Shares”); and

 

WHEREAS, as a condition to the Combination Transactions, the Company has agreed to grant the Initial Holders and their permitted assignees and transferees the registration rights set forth in Article II hereof.

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1.                                 Definitions.  The following terms, as used herein, have the following meanings:

 

Affiliate” of any Person means any other Person directly or indirectly controlling or controlled by or under common control with such Person.  For the purposes of this definition, “control” when used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 



 

Agreement” means this Registration Rights Agreement, as it may be amended, supplemented or restated from time to time.

 

Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in The City of New York, New York are authorized by law to close.

 

Charter” means the Articles of Amendment and Restatement of the Company as filed with the Secretary of State of the State of Maryland on July 17, 2017, as the same may be amended, modified or restated from time to time.

 

Combination Transactions” has the meaning set forth in the recitals hereof.

 

Commission” means the Securities and Exchange Commission.

 

Common Shares” has the meaning set forth in the recitals hereof.

 

Company” has the meaning set forth in the preamble hereof.

 

Effectiveness Period” has the meaning set forth in Section 2.1(b).

 

End of Suspension Notice” has the meaning set forth in Section 2.9(a).

 

Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

Holder” means (i) any Initial Holder who is the record or beneficial owner of any Registrable Security or (ii) any assignee or transferee of such Initial Holder (including assignments or transfers of Registrable Securities to such assignees or transferees as a result of the foreclosure on any loans secured by such Registrable Securities) (x) to the extent permitted under the Operating Partnership Agreement or the Charter, as applicable, and (y) provided such assignee or transferee agrees in writing to be bound by all the provisions hereof.

 

Initial Holder” has the meaning set forth in the preamble hereof.

 

Issuer Shelf Registration Statement” has the meaning set forth in Section 2.1(b).

 

Notice and Questionnaire” has the meaning set forth in Section 2.1(d).

 

NYSE” means The New York Stock Exchange.

 

OP Units” has the meaning set forth in the recitals hereof.

 

Operating Partnership” has the meaning set forth in the recitals hereof.

 

Operating Partnership Agreement” means the Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of July 17, 2017, as the same may be amended, modified or restated from time to time.

 

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Person” means an individual or a corporation, partnership, limited liability company, association, trust, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

 

Primary Shares” has the meaning set forth in Section 2.1(b).

 

Registrable Securities” means with respect to any Holder, Common Shares owned, either of record or beneficially, by such Holder that were issued or issuable upon exchange of OP Units and any additional Common Shares issued as a dividend or distribution on, in exchange for, or otherwise in respect of, such shares (including as a result of combinations, recapitalizations, mergers, consolidations, reorganizations or otherwise).

 

As to any particular Registrable Securities of a Holder, they shall cease to be Registrable Securities in respect of such Holder at the earliest time as one of the following shall have occurred:  (i) a registration statement (including a Resale Shelf Registration Statement) covering such shares shall have become effective and all such shares have been disposed of pursuant to such effective registration statement or unless such shares were issued pursuant to an effective registration statement, (ii) such shares have been publicly sold under Rule 144, (iii) all such shares may be sold in one transaction pursuant to Rule 144 or (iv) such shares have been otherwise transferred in a transaction that constitutes a sale thereof under the Securities Act, the Company has delivered to the Holder’s transferee a new certificate or other evidence of ownership for such shares not bearing the Securities Act restricted stock legend and such shares subsequently may be resold or otherwise transferred by such transferee without registration under the Securities Act.

 

Registration Expenses” shall have the meaning set forth in Section 2.3.

 

Registration Statement” shall have the meaning set forth in Section 2.9(a).

 

Resale Shelf Registration Statement” shall have the meaning set forth in Section 2.1(a).

 

Restricted Shares” means Common Shares issued under an Issuer Shelf Registration Statement which if sold by the holder thereof would constitute “restricted securities” as defined under Rule 144.

 

Rule 144” means Rule 144 promulgated under the Securities Act, as amended from time to time, or any similar successor rule thereto that may be promulgated by the Commission.

 

Securities Act” means the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.

 

Selling Holder” means a Holder who is selling Registrable Securities pursuant to a registration statement under the Securities Act pursuant to the terms hereof.

 

Shelf Registration Statement” means a Resale Shelf Registration Statement and/or an Issuer Shelf Registration Statement.

 

Suspension Notice” shall have the meaning set forth in Section 2.9(a).

 

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ARTICLE II

 

REGISTRATION RIGHTS

 

Section 2.1.                                 Shelf Registration.

 

(a)                                 Subject to Section 2.9, the Company shall use commercially reasonable efforts to prepare and file, on or before the first Business Day that is thirteen (13) months after the consummation of the Combination Transactions, a “shelf” registration statement with respect to the resale of the Registrable Securities by the Holders thereof on an appropriate form that complies in all material respects with applicable Commission rules for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act (the “Resale Shelf Registration Statement”) and permitting registration of such Registrable Securities for resale by such Holders in accordance with the methods of distribution elected by the Holders and set forth in the Resale Shelf Registration Statement and use commercially reasonable efforts to cause such Resale Shelf Registration Statement to become effective as promptly as practicable thereafter. Subject to Sections 2.1(c) and 2.9, the Company shall keep such Resale Shelf Registration Statement continuously effective for a period ending when all Common Shares covered by the Resale Shelf Registration Statement are no longer Registrable Securities.

 

(b)                                 The Company may, at its option, satisfy its obligation to prepare and file a Resale Shelf Registration Statement pursuant to Section 2.1(a) with respect to Common Shares issuable upon exchange of OP Units by preparing and filing a registration statement on an appropriate form that complies in all material respects with applicable Commission rules for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act (an “Issuer Shelf Registration Statement”) providing for (i) the issuance by the Company, from time to time, to the Holders of such OP Units, of Common Shares registered under the Securities Act (the “Primary Shares”) and (ii) to the extent such Primary Shares constitute Restricted Shares, the registered resale thereof by their Holders from time to time in accordance with the methods of distribution elected by the Holders and set forth therein (but not an underwritten offering) and using commercially reasonable efforts to cause such Issuer Shelf Registration Statement to be filed by the first Business Day that is thirteen (13) months after the consummation of the Combination Transactions, and to become effective as promptly as practicable thereafter. Subject to Sections 2.1(c) and 2.9, the Company shall keep such Issuer Shelf Registration Statement continuously effective for a period (the “Effectiveness Period”) expiring on the date all of the OP Units pursuant to which Registrable Securities may be issued have been redeemed for Common Shares or Registrable Securities shall cease to exist.  If the Company shall exercise its rights under this Section 2.1(b), Holders (other than Holders of Restricted Shares) shall have no right to have Common Shares issued or issuable upon exchange of OP Units included in a Resale Shelf Registration Statement pursuant to Section 2.1(a).

 

(c)                                  Subsequent Filing.  The Company shall prepare and file such additional registration statements as necessary every three (3) years and use its commercially reasonable efforts to cause such registration statements to become effective so that a Shelf Registration Statement remains continuously effective, subject to Section 2.9, with respect to resales of Registrable Securities as and for the periods required under Sections 2.1(a) or (b), as applicable

 

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(such subsequent registration statements to constitute a Resale Shelf Registration Statement or an Issuer Shelf Registration Statement, as the case may be, hereunder).

 

(d)                                 Notice and Questionnaire.  At the request of the Company, each Holder shall deliver a duly completed and executed written notice (each such notice, a “Notice and Questionnaire”) to the Company (i) notifying the Company of such Holder’s desire to include Registrable Securities held by it in a Resale Shelf Registration Statement, (ii) containing all information about such Holder required to be included in such registration statement in accordance with applicable law, including Item 507 of Regulation S-K promulgated under the Securities Act, as amended from time to time, or any similar successor rule thereto, and (iii) pursuant to which such Holder agrees to be bound by the terms and conditions hereof. At the time a Resale Shelf Registration Statement becomes effective, each Holder that has delivered a duly completed and executed Notice and Questionnaire to the Company on or prior to the date ten (10) Business Days prior to such time of effectiveness shall be named as a selling securityholder in such Resale Shelf Registration Statement and the related prospectus in such a manner as to permit such Holder to deliver such prospectus to purchasers of Registrable Securities in accordance with applicable law. If required by applicable law, subject to the terms and conditions hereof, after effectiveness of the Resale Shelf Registration Statement, the Company shall file a supplement to such prospectus or amendment to the Resale Shelf Registration Statement not less than once a quarter as necessary to name as selling securityholders therein any Holders that provide to the Company a duly completed and executed Notice and Questionnaire and shall use commercially reasonable efforts to cause any post-effective amendment to such Resale Shelf Registration Statement filed for such purpose to be declared effective by the Commission as promptly as reasonably practicable after the filing thereof. Any Holder that has not delivered a duly completed and executed Notice and Questionnaire shall not be entitled to be named as a Selling Holder in, or have the Registrable Securities held by it covered by, a Resale Shelf Registration Statement.

 

Section 2.2.                                 Registration Procedures; Filings; Information.  Subject to Section 2.9 hereof, in connection with any Resale Shelf Registration Statement under Section 2.1(a), the Company will use its commercially reasonable efforts to effect the registration of the Registrable Securities covered thereby in accordance with the intended method of disposition thereof as quickly as practicable, and, in connection with any Issuer Shelf Registration Statement under Section 2.1(b), the Company will use its commercially reasonable efforts to effect the registration of the Primary Shares (including for resale, to the extent provided in clause (ii) of Section 2.1(b)) as quickly as reasonably practicable.  In connection with any Shelf Registration Statement:

 

(a)                                 At the request of the Selling Holder, the Company will, prior to filing a Resale Shelf Registration Statement (or an Issuer Shelf Registration Statement providing for resales pursuant to clause (ii) of Section 2.1(b)) or prospectus or any amendment or supplement thereto, furnish without charge to each Selling Holder of the Registrable Securities covered by such registration statement copies of such registration statement as proposed to be filed, and thereafter furnish to such Selling Holder such number of conformed copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein, but excluding any documents to be

 

5



 

incorporated by reference therein that are publicly available on the Commission’s EDGAR system), the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such Selling Holder may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Selling Holder.

 

(b)                                 After the filing of a Resale Shelf Registration Statement (or an Issuer Shelf Registration Statement providing for resales pursuant to clause (ii) of Section 2.1(b)), the Company will promptly notify each Selling Holder of Registrable Securities covered by such registration statement of any stop order issued or threatened by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered.

 

(c)                                  The parties hereto hereby acknowledge that, generally, pursuant to Section 18 of the Securities Act, no state securities laws requiring, or with respect to, registration or qualification of securities or securities transactions will apply to a security that is a “covered security” (as defined therein). “Covered securities,” for purposes of Section 18 of the Securities Act, includes securities listed or authorized for listing on the NYSE (or certain other national securities exchanges) and securities of the same issuer that are equal in seniority or senior to such securities. In the event that the Shares cease to constitute covered securities, subject to the conditions set forth in this Agreement, the Company will use its commercially reasonable efforts to (i) register or qualify the Registrable Securities under such other securities or “blue sky” laws of such jurisdictions in the United States (where an exemption does not apply) as any Selling Holder reasonably (in light of such Selling Holder’s intended plan of distribution) requests and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable such Selling Holder to consummate the disposition of the Registrable Securities owned by such Selling Holder; provided that the Company will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (c), (B) subject itself to general taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction.  The Company will promptly notify each Selling Holder of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction or the initiation of any proceeding for such purpose.

 

(d)                                 The Company will immediately notify each Selling Holder of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of (i) the Company’s receipt of any notification of the suspension of the qualification of any Registrable Securities covered by a Resale Shelf Registration Statement (or an Issuer Shelf Registration Statement providing for resales pursuant to clause (ii) of Section 2.1(b)) for sale in any jurisdiction; or (ii) the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and promptly make available to each Selling Holder any such supplement or amendment.

 

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(e)                                  The Company will use commercially reasonable efforts to cause all Registrable Securities covered by such Resale Shelf Registration Statement or Primary Shares covered by such Issuer Shelf Registration Statement to be listed on each securities exchange on which similar securities issued by the Company are then listed.

 

(f)                                   In addition to the Notice and Questionnaire, the Company may require each Selling Holder of Registrable Securities to promptly furnish in writing to the Company such information regarding such selling Holder, the Registrable Securities held by it and the intended method of distribution of the Registrable Securities as the Company may from time to time reasonably request and such other information as may be legally required in connection with such registration.  No Holder may include Registrable Securities in any registration statement pursuant to this Agreement unless and until such Holder has furnished to the Company such information.  Each Holder further agrees to furnish as soon as reasonably practicable to the Company all information required to be disclosed in order to make information previously furnished to the Company by such Holder not misleading in light of the circumstances in which they were made.

 

(g)                                  Each Selling Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Sections 2.2(b) or (d) or upon receipt of a Suspension Notice, such Selling Holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Selling Holder’s receipt of written notice from the Company that such disposition may be made and, if applicable, copies of any supplemented or amended prospectus contemplated by clause (ii) of Section 2.2(d) or, if applicable, prepared under Section 2.9(a), and, if so directed by the Company, such Selling Holder will deliver to the Company all copies, other than permanent file copies then in such Selling Holder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice.  Each Selling Holder of Registrable Securities agrees that it will immediately notify the Company at any time when a prospectus relating to the registration of such Registrable Securities is required to be delivered under the Securities Act of the happening of an event as a result of which information previously furnished by such Selling Holder to the Company in writing for inclusion in such prospectus contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made.

 

Section 2.3.                                 Registration Expenses.  In connection with any registration statement required to be filed hereunder, the Company shall pay the following registration expenses incurred in connection with the registration hereunder (the “Registration Expenses”), regardless whether such registration statement is declared effective by the Commission:  (i) all registration and filing fees, (ii) fees and expenses of compliance with securities or “blue sky” laws (including reasonable fees and disbursements of its counsel in connection with blue sky qualifications of the Registrable Securities), (iii) printing expenses, (iv) internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) the fees and expenses incurred in connection with the listing of the Registrable Securities, (vi) reasonable fees and disbursements of counsel for the Company, (vii) all fees and disbursements of the Company’s auditors, including in connection with the preparation of

 

7



 

comfort letters, and any transfer agent and registrar fees, and (viii) the reasonable fees and expenses of any special experts retained by the Company in connection with such registration. Registration Expenses shall not include any brokerage and sales commission fees and disbursements of any counsel, accountants and other advisors of any Holder, and any transfer taxes relating to the sale or disposition of Common Shares by any Holder.

 

Section 2.4.                                 Indemnification by the Company.  The Company agrees to indemnify and hold harmless each Selling Holder of Registrable Securities, its officers, directors, agents, partners, members, employees, managers, advisors, sub-advisors, attorneys, representatives and Affiliates, and each Person, if any, who controls such Selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against, as incurred, any and all losses, claims, damages, liabilities, judgments and expenses (or actions in respect thereof) that arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any registration statement, preliminary prospectus, prospectus, or free writing prospectus relating to the Registrable Securities (in each case, as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or that arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages, liabilities, judgments or expenses arise out of or are based upon any such untrue statement or omission or alleged untrue statement or omission included in reliance upon and in conformity with information furnished in writing to the Company by such Selling Holder or on such Selling Holder’s behalf expressly for inclusion therein.

 

Section 2.5.                                 Indemnification by Holders of Registrable Securities.  Each Selling Holder agrees, severally but not jointly or jointly and severally, to indemnify and hold harmless the Company, its officers, directors, agents, employees, attorneys, representatives and Affiliates and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Selling Holder, but only with respect to information relating to such Selling Holder included in reliance upon and in conformity with information furnished in writing by such Selling Holder or on such Selling Holder’s behalf expressly for use in any registration statement, preliminary prospectus, prospectus or free writing prospectus relating to the Registrable Securities, or any amendment or supplement thereto.  In case any action or proceeding shall be brought against the Company or its officers, directors or agents or any such controlling person, in respect of which indemnity may be sought against such Selling Holder, such Selling Holder shall have the rights and duties given to the Company, and the Company or its officers, directors or agents or such controlling person shall have the rights and duties given to such Selling Holder, by Section 2.6; provided, however, that the total obligations of such Selling Holder under this Agreement (including, but not limited to, obligations arising under Section 2.7 herein) will be limited to an amount equal to the net proceeds actually received by such Selling Holder (after deducting any discounts and commissions) from the disposition of Registrable Securities pursuant to such registration statement.

 

Section 2.6.                                 Conduct of Indemnification Proceedings.  In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of

 

8



 

which indemnity may be sought pursuant to Section 2.4 or 2.5, such person (an “Indemnified Party”) shall promptly notify the person against whom such indemnity may be sought (an “Indemnifying Party”) in writing and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the payment of all fees and expenses; provided, however, that the failure of any Indemnified Party to give such notice will not relieve such Indemnifying Party of any obligations under this Section 2, except to the extent such Indemnifying Party is materially prejudiced by such failure.  In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) representation of the Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate due to actual or potential differing interests between the Indemnified Party and the Indemnified Party.  It is understood that the Indemnifying Party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they are incurred.  In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by (i) in the case of Persons indemnified pursuant to Section 2.4 hereof, the Selling Holders which owned a majority of the Registrable Securities sold under the applicable registration statement and (ii) in the case of Persons indemnified pursuant to Section 2.5, the Company.  The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment.  No Indemnifying Party shall, without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such proceeding without any admission of liability by such Indemnified Party.

 

Section 2.7.                                 Contribution.  If the indemnification provided for in Section 2.4 or 2.5 hereof is held by a court of competent jurisdiction to be unavailable to an Indemnified Party or insufficient in respect of any losses, claims, damages, liabilities, judgments or expenses that otherwise would have been covered by Section 2.4 or 2.5 hereof, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages, liabilities, judgments or expenses in such proportion as is appropriate to reflect the relative fault of the Company, on the one hand, and of each Selling Holder, on the other hand, in connection with such statements or omissions which resulted in such losses, claims, damages, liabilities, judgments or expenses, as well as any other relevant equitable considerations.  The relative fault of the Company on the one hand and of each Selling Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material

 

9



 

fact or the omission or alleged omission to state a material fact relates to information supplied by such party.

 

The Company and the Selling Holders agree that it would not be just and equitable if contribution pursuant to this Section 2.7 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph.  The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages, liabilities, judgments or expenses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 2.7, no Selling Holder shall be required to contribute any amount which in the aggregate exceeds the amount by which the net proceeds actually received by such Selling Holder from the sale of its securities to the public exceeds the amount of any damages which such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.  The Selling Holder’s obligations to contribute pursuant to this Section 2.7, if any, are several in proportion to the proceeds of the offering actually received by such Selling Holder bears to the total proceeds of the offering received by all the Selling Holders and not joint.

 

Section 2.8.                                 Rule 144.  The Company covenants that it will (a) make and keep public information regarding the Company available as those terms are defined in Rule 144, (b) file in a timely manner any reports and documents required to be filed by it under the Securities Act and the Exchange Act, (c) furnish to any Holder forthwith upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, and (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (d) take such further action as any Holder may reasonably request, all to the extent required from time to time to enable Holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144.

 

Section 2.9.                                 Suspension of Use of Registration Statement.

 

(a)                                 Notwithstanding the provisions of Section 2.1(a), the Company shall be permitted to postpone the filing of any Shelf Registration Statement (for purposes of this Section 2.9, the “Registration Statement”), and from time to time to require Holders not to sell under the Registration Statement or to suspend the use or effectiveness thereof, for such times as the Company reasonably may determine is necessary and advisable (but in no event shall the Company be entitled to exercise such right for more than an aggregate of 180 days in any rolling 12-month period commencing on the date of this Agreement, except as a result of a refusal by the Commission to declare any post-effective amendment to the Registration Statement effective after the Company has used all commercially reasonable efforts to cause the post-effective amendment to be declared effective by the Commission, in which case, the Company must terminate the black-out period immediately following the effective date of the post-effective amendment), if any of the following events shall occur (each such circumstance a “Suspension

 

10



 

Event”): (i) a majority of the Board of Directors of the Company determines in good faith that (A) the offer or sale of any Registrable Securities would materially impede, delay or interfere with any proposed financing, offer or sale of securities, acquisition, disposition, corporate reorganization or other material transaction involving the Company or any of its subsidiaries, (B) the sale of Registrable Securities pursuant to the Registration Statement would require disclosure of non-public material information not otherwise required to be disclosed under applicable law, or (C) (x) the Company has a bona fide business purpose for preserving the confidentiality of a proposed transaction described in clause (A) above, (y) disclosure of such proposed transaction would have a material adverse effect on the Company or the Company’s ability to consummate such transaction, or (z) such proposed transaction renders the Company unable to comply with Commission requirements, in each case under circumstances that would make it impractical or inadvisable to cause the Registration Statement (or such filings) to become effective or to promptly amend or supplement a Registration Statement on a post-effective basis, as applicable; or (ii) a majority of the Board of Directors of the Company determines in good faith that it is in the Company’s best interest or it is required by law, rule or regulation to supplement the Registration Statement or file a post-effective amendment to the Registration Statement in order to ensure that the prospectus included in the Registration Statement (A) contains the information required under Section 10(a)(3) of the Securities Act; (B) discloses any facts or events arising after the effective date of a Shelf Registration Statement (or of the most recent post-effective amendment) that, individually or in the aggregate, represents a fundamental change in the information set forth therein; or (C) discloses any material information with respect to the plan of distribution that was not disclosed in the Registration Statement or any material change to such information. Upon the occurrence of any such suspension, the Company shall use its commercially reasonable efforts to cause the Registration Statement to become effective or to promptly amend or supplement the Registration Statement on a post-effective basis or to take such action as is necessary to permit resumed use of the Registration Statement or filing thereof as soon as possible.

 

The Company will provide written notice (a “Suspension Notice”) to the Holders, if any, of the occurrence of any Suspension Event. If, as a result of a Suspension Event, the Registration Statement or related prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the prospectus) not misleading, each Holder agrees that (i) it will immediately discontinue offers and sales of the Registrable Securities under the Registration Statement until the Holder receives copies of a supplemental or amended prospectus (which the Company agrees to promptly prepare) that corrects the misstatement(s) or omission(s) referred to above and receives notice that any post-effective amendment has become effective or unless otherwise notified by the Company that it may resume such offers and sales, and (ii) it will maintain the confidentiality of any information included in the written notice delivered by the Company unless otherwise required by law or subpoena. If so directed by the Company, each Holder will deliver to the Company (at the expense of the Company) all copies of the prospectus covering the Registrable Securities at the time of receipt of the Suspension Notice, other than permanent file copies in the possession of such Holder’s counsel. The Holders may recommence effecting sales of the Registrable Securities pursuant to the Registration Statement (or such filings) following receipt by the Holders of any prospectus contemplated by clause (ii) of this Section 2.9(a) and further written

 

11



 

notice to such effect (an “End of Suspension Notice”) from the Company, which End of Suspension Notice shall be given by the Company to the Holders and to the Selling Holders’ counsel, if any, promptly following the conclusion of any Suspension Event and its effect.

 

(b)                                 In connection with any Registration Statement utilized by the Company to satisfy its obligations under this Agreement, each Holder agrees to cooperate with the Company in connection with the preparation of the Registration Statement, and each Holder agrees that it will (i) respond within ten (10) Business Days to any written request by the Company to provide or verify information regarding the Holder or the Holder’s Registrable Securities (including the proposed manner of sale) that may be required to be included in such Registration Statement and related prospectus pursuant to the rules and regulations of the Commission, and (ii) provide in a timely manner information regarding the proposed distribution by the Holder of the Registrable Securities and such other information as may be requested by the Company from time to time in connection with the preparation of and for inclusion in the Registration Statement and related prospectus.

 

(c)                                  If all reports required to be filed by the Company pursuant to the Exchange Act have not been filed by the required date taking into account any permissible extension, upon written notice thereof by the Company to the Holders, the rights of the Holders to offer, sell or distribute any Registrable Securities pursuant to any Registration Statement or to require the Company take action with respect to the registration or sale of any Registrable Securities pursuant to any Registration Statement shall be suspended until the date on which the Company has filed such reports, and the Company shall use commercially reasonable efforts, taking into account the circumstances of the Company at such time, to file the required reports as promptly as commercially practicable, and shall notify the Holders as promptly as practicable when such suspension is no longer required.

 

Section 2.10.                          Additional Shares.  The Company, at its option, may register under a Shelf Registration Statement and any filings with any state securities commissions filed pursuant to this Agreement, any number of unissued Common Shares or any Common Shares owned by any other shareholder or shareholders of the Company.

 

ARTICLE III

 

MISCELLANEOUS

 

Section 3.1.                                 Remedies.  In addition to being entitled to exercise all rights provided herein and granted by law, including recovery of damages, the Holders shall be entitled to specific performance of the rights under this Agreement.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

 

Section 3.2.                                 Amendments and Waivers.  The provisions of this Agreement may be amended or waived at any time only by the written agreement of the Company and the Holders of a majority of the Registrable Securities; provided, however, that the provisions of this Agreement may not be amended or waived without the consent of each Holder of Registrable

 

12



 

Securities adversely affected by such amendment or waiver if such amendment or waiver adversely affects a portion of the Registrable Securities but does not so adversely affect all of the Registrable Securities; provided, further, that the provisions of the preceding provision may not be amended or waived except in accordance with this sentence. Any waiver, permit, consent or approval of any kind or character on the part of any such Holder of any provision or condition of this Agreement must be made in writing and shall be effective only to the extent specifically set forth in writing. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each Holder of Registrable Securities and the Company.  No failure or delay by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon any breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition.

 

Section 3.3.                                 Notices. All notices and other communications in connection with this Agreement shall be made in writing by hand delivery, registered first-class mail, telecopier, or air courier guaranteeing overnight delivery:

 

(1)                                 if to any Holder, initially to the address indicated in such Holder’s Notice and Questionnaire or, if no Notice and Questionnaire has been delivered, c/o 4445 Willard Avenue, Suite 400, Chevy Chase, Maryland 20815, Attention: W. Matthew Kelly or to such other address and to such other Persons as any Holder may hereafter specify in writing; and

 

(2)                                 if to the Company, initially at 4445 Willard Avenue, Suite 400, Chevy Chase, Maryland 20815, Attention:  Chief Executive Officer, or to such other address as the Company may hereafter specify in writing.

 

All such notices and communications shall be deemed to have been duly given:  at the time delivered by hand, if personally delivered; when received if deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery.

 

Section 3.4.                                 Successors and Assigns; Assignment of Registration Rights.  This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties.  Any Holder may assign its rights under this Agreement without the consent of the Company in connection with a transfer of such Holder’s Registrable Securities permitted under the Operating Partnership Agreement; provided, that the Holder notifies the Company of such proposed transfer and assignment and the transferee or assignee of such rights assumes in writing the obligations of such Holder under this Agreement.

 

Section 3.5.                                 Counterparts.  This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  Each party shall become bound by this Agreement immediately upon affixing its signature hereto.

 

Section 3.6.                                 Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of Maryland, without giving effect to conflict of laws principles.

 

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Section 3.7.                                 Severability.  In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

 

Section 3.8.                                 Entire Agreement.  This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein.  There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Registrable Securities.  This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

 

Section 3.9.                                 Headings.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

Section 3.10.                          Termination.  The obligations of the parties hereunder shall terminate with respect to a Holder when it no longer holds Registrable Securities and with respect to the Company upon the end of the Effectiveness Period with respect to any Issuer Shelf Registration Statement and with respect to Resale Shelf Registration Statement when there are no longer Registrable Securities with respect to a Resale Shelf Registration Statement, except, in each case, for any obligations under Sections 2.3, 2.4, 2.5, 2.6, 2.7 and Article III.

 

Section 3.11.                          Consent to Jurisdiction.

 

(a)                                 Each of the parties hereto hereby irrevocably submits to the exclusive jurisdiction of the courts of the State of Maryland and to the jurisdiction of the United States District Court for the State of Maryland, for the purpose of any action (whether based on contract, tort or otherwise), directly or indirectly, arising out of or relating to this Agreement or the actions of the parties hereto in the negotiation, administration, performance and enforcement thereof, and each of the parties hereto hereby irrevocably agrees that all claims in respect to such action may be heard and determined exclusively in any Maryland state or federal court.

 

(b)                                 Each of the parties hereto (i) irrevocably consents to the service of the summons and complaint and any other process in any action relating to the transactions contemplated by this Agreement, on behalf of itself or its property, by personal delivery of copies of such process to such party and nothing in this Section 3.11 shall affect the right of any party to serve legal process in any other manner permitted by law, (ii) consents to submit itself to the personal jurisdiction of any United States federal court located in the State of Maryland or any Maryland state court in the event any dispute arises out of this Agreement or the transactions contemplated by this Agreement, (iii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (iv) agrees that it will not bring any action or proceeding relating to this Agreement or the transactions contemplated by this Agreement in any court other than any United States federal court located in the State of Maryland or any Maryland state court. Each of the Holders and the Company agrees that a final judgment in any action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

 

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Section 3.12.                          Waiver of Jury Trial.  The parties hereto (including any Initial Holder and any subsequent Holder) irrevocably waive any right to trial by jury.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.

 

 

JBG SMITH PROPERTIES

 

 

 

 

 

By:

/s/ Stephen Theriot

 

 

Name:

Stephen Theriot

 

 

Title:

Chief Financial Officer

 

 

 

 

 

W. Matthew Kelly

 

 

(as Attorney-in-Fact for the Initial Holders listed on Schedule I hereto)

 

 

 

 

 

By:

/s/ W. Matthew Kelly

 

[Signature Page to Registration Rights Agreement]

 


EX-10.7 19 a17-17912_1ex10d7.htm EX-10.7

Exhibit 10.7

 

On July 18, 2017, JBG SMITH Properties and JBG SMITH Properties LP entered into unit issuance agreements with each of the executive officers of JBG SMITH Properties listed below. The only material difference between the agreements was the number of common limited partnership units of JBG SMITH Properties LP subject to the agreement and listed in Section 1 of the agreement. A schedule of the executive officers that entered into unit issuance agreements and the number of units subject to each one’s agreement is listed below.

 

Executive Officer

 

Units

 

Brian P. Coulter

 

807,384

 

James Iker

 

886,130

 

W. Matthew Kelly

 

1,022,324

 

David Paul

 

454,198

 

Kevin P. Reynolds

 

341,903

 

Robert A. Stewart

 

807,384

 

 



 

 

FORM OF JBG SMITH PROPERTIES

UNIT ISSUANCE AGREEMENT

 

UNIT ISSUANCE AGREEMENT (the “Agreement” or “Unit Issuance Agreement”) made as of July 18, 2017 between JBG SMITH Properties, a Maryland real estate investment trust (the “Company”), its subsidiary JBG SMITH Properties LP, a Delaware limited partnership (the “Partnership”), and · (the “Unit Holder”).

 

RECITALS

 

A.                                    Vornado Realty Trust, a Maryland real estate investment trust and Vornado Realty L.P., a Delaware limited partnership (the “Vornado Parties”), and JBG Properties Inc. (“JBG Properties”), a Maryland corporation and JBG/Operating Partners, L.P. (“JBG LP”), a Delaware limited partnership, together with certain affiliated entities (the “JBG Parties”), and the Company and the Partnership, have entered into that certain Master Transaction Agreement (the “Transaction Agreement”), pursuant to which the Vornado Parties and the JBG Parties will effectuate a series of transactions resulting in the acquisition, transfer and contribution of certain assets and interests to the Company and the Partnership.

 

B.                                    In furtherance of the foregoing and pursuant to the limited partnership agreement of the Partnership, as it will be amended as of the “Closing Date” (as defined in the Transaction Agreement) pursuant to the “Partnership Agreement Amendment and Restatement” (as defined in the Transaction Agreement) and as it may be further amended from time to time (the “Partnership Agreement”), the parties hereto desire to enter into this Agreement in order to effect the [issuance of “Common Partnership Units” of the Partnership (as defined in the Partnership Agreement), having the rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption and conversion set forth herein and in the Partnership Agreement, to the Unit Holder in connection with the merger of JBG LP with and into a wholly owned limited liability subsidiary of the Partnership (the “Partnership Merger”) pursuant to the “JBG Partnership Merger Agreement” (as defined in the Transaction Agreement)] [contribution (the “JBG Properties Contribution”) by JBG Properties to the Partnership, pursuant to the “JBG Properties Contribution Agreement” (as defined in the Transaction Agreement) of all of its assets and the subsequent receipt of “Common Partnership Units” of the Partnership (as defined in the Partnership Agreement) having the rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption and conversion set forth herein and in the Partnership Agreement, by the Unit Holder](1)

 


(1)  Note: Language varies based on the transactions in which the Unit Holder is receiving OP Units.

 



 

NOW, THEREFORE, in consideration of good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Company, the Partnership and the Unit Holder hereby agree as follows:

 

AGREEMENT

 

1.                                      Issuance and Vesting of Common Partnership Units. In connection with (and conditioned on the occurrence of) [(i) the Partnership Merger pursuant to the Partnership Merger Agreement,] [(ii) the JBG Properties Contribution pursuant to the JBG Properties Contribution Agreement,] and (iii) the execution and delivery to the Partnership by the Unit Holder of a counterpart to the Partnership Agreement, and on the terms and conditions set forth herein, the Partnership hereby agrees to issue to the Unit Holder · Common Partnership Units as of the date hereof (the “Issuance Date”), 50% of which shall be fully vested and non-forfeitable upon issuance and 50% of which shall be unvested, forfeitable pursuant to Section 2, and will vest in a number equal to 1/30 of the total unvested Common Partnership Units issued starting on the first day of the 31st month following the Issuance Date and on the first day of each subsequent month until the first day of the 60th month following the Issuance Date, at which time such Common Partnership Units shall be fully vested and non-forfeitable. Vested Common Partnership Units (whether vested at or subsequent to issuance) will be subject to the restrictions on transfer and redemption as set forth in Section 3. Except as permitted under Section 12 and subject to the terms of the Partnership Agreement, unvested Common Partnership Units may not be sold, assigned, transferred, pledged or otherwise disposed of or encumbered (whether voluntary or involuntary or by judgment, levy, attachment, garnishment or other legal or equitable proceeding).

 

The Unit Holder shall have the right to vote both vested and unvested Common Partnership Units if and when voting is allowed under the Partnership Agreement.

 

2.                                      Forfeiture of Unvested Common Partnership Units. If the employment of the Unit Holder by the Company or an affiliate terminates for any reason other than as described in the succeeding sentence, any unvested Common Partnership Units as of the date of such termination shall be forfeited and returned to the Company for delivery to the Partnership and cancellation. Upon termination of employment of the Unit Holder with the Company or its affiliates (a) upon the Unit Holder’s death or Disability, (b) by the Company (or its successor) without Cause, or (c) by the Unit Holder for Good Reason, or upon the occurrence of a Change in Control or on employment termination upon non-renewal of the Unit Holder’s employment agreement (if any) by the Company, then any unvested Common Partnership Units shall become immediately fully vested and non-forfeitable. Each of the terms in the preceding sentence shall be as defined in the Unit Holder’s employment agreement with the Company, or if there is no employment agreement, as defined below:

 

Cause” means the Unit Holder’s: (a) conviction of, or plea of guilty or nolo contendere to, a felony, (b) willful and continued failure to use reasonable efforts to perform in all material respects his employment duties (other than such failure resulting from the Unit Holder’s incapacity due to physical or mental illness) that the Unit Holder fails to remedy within 30 days after written notice is delivered by the Company to the Unit

 

2



 

Holder that specifically identifies in reasonable detail the manner in which the Company believes the Unit Holder has not used reasonable efforts to perform in all material respects his duties hereunder, or (c) willful misconduct (including, but not limited to, a willful breach of the provisions of Section 4) that is materially economically injurious to the Company.  For purposes of this paragraph, no act, or failure to act, by the Unit Holder will be considered “willful” unless committed in bad faith and without a reasonable belief that the act or omission was in the best interests of the Company.

 

A “Change in Control” of the Company means the occurrence of one of the following events:

 

(i)                                     Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (1) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this Section 2(i), the following acquisitions shall not constitute a Change of Control:  (a) any acquisition directly from the Company, (b) any acquisition by the Company, (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its affiliates or (d) any acquisition by any corporation pursuant to a transaction that complies with Sections 2(iii)(1), 2(iii)(2) and 2(iii)(3);

 

(ii)                                  Any time at which individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors of the Company (the “Board”); provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

 

(iii)                               Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation or other entity resulting from such Business Combination (including, without limitation, a corporation or other entity that, as a result of such transaction, owns the Company or all or substantially all of

 

3



 

the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any corporation or other entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation or other entity resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding shares of common stock of the corporation or other entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation or other entity, except to the extent that such ownership existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors or similar governing body of the corporation or other entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

 

(iv)                              Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

 

Disability” means a termination of employment by the Company or an affiliate as a result of the Unit Holder having been substantially unable to perform his duties for a continuous period of 180 days due to incapacity caused by physical or mental illness and within 30 days after receiving written Notice of such termination of employment after such 180-day period, the Unit Holder shall not have returned to the substantial performance of his duties on a full-time basis.

 

Good Reason” means (a) a material reduction by the Company in the Unit Holder’s base salary, (b) a material diminution in the Unit Holder’s position, authority, duties or responsibilities, (c) a relocation of the Unit Holder’s location of employment to a location outside of the Washington D.C. metropolitan area, or (d) a material breach of the Agreement; provided, in each case, that the Unit Holder terminates employment within 90 days after the Unit Holder has actual knowledge of the occurrence, without the written consent of the Unit Holder, of one of the foregoing events that has not been cured within 30 days after written notice thereof has been given by the Unit Holder to the Company setting forth in reasonable detail the basis of the event (provided such notice must be given to the Company within 30 days of the Unit Holder becoming aware of such condition).

 

3.                                      Restrictions on Transfer and Redemption.

 

(i)                                     Notwithstanding any provision of the Partnership Agreement to the contrary, during the applicable Retention Period (as defined below) the Unit Holder will not (i) offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any Retained Units (as defined below), or any options or warrants to purchase any Retained Units, or any securities convertible into, exchangeable for or that represent the right to receive Retained Units, whether now owned or hereinafter acquired, owned directly by the Unit Holder (including holding as a custodian) or with respect to which the Unit Holder has beneficial ownership within the rules and regulations of the Securities and Exchange Commission, or (ii) exercise the “Redemption Right” (as defined in, and pursuant to, Section 8.6 of the Partnership Agreement) with respect to the Retained Units.  “Initial Retained Units” means 80% of the Common Partnership Units received

 

4



 

pursuant to this Agreement that will be fully vested and non-forfeitable upon issuance. “Subsequent Retained Unitsmeans 100% of the Common Partnership Units received pursuant to this Agreement that will be unvested and forfeitable at the time of issuance (together with the Initial Retained Units, the “Retained Units”).  “Retention Period” means (i) with respect to the Initial Retained Units, the period commencing from the Closing and ending on July 17, 2020, and (ii) with respect to the Subsequent Retained Units, the period commencing from the Closing and ending on July 17, 2022; provided, however, that the applicable Retention Period shall terminate immediately upon (i) the termination of employment of the Unit Holder with the Company or its affiliates (a) by the Company (or its successor) without Cause, (b) by the Unit Holder for Good Reason or (c) upon the Unit Holder’s death or Disability, or (ii) the occurrence of a Change in Control.

 

(ii)                                  The restrictions set forth in this Section 3 are expressly agreed to preclude the Unit Holder, during the applicable Retention Period, from engaging in any hedging, swap, or other arrangement or transaction which is designed to or which reasonably could be expected to lead to or result in, in whole or in part, a sale or disposition of the Retained Units (even if such Retained Units would be disposed of by someone other than the Unit Holder) or in the transfer to another of any of the economic consequences of ownership of any of the Retained Units, whether such transaction is to be settled by delivery of the Retained Units, in cash or otherwise.  Such prohibited hedging or other transactions would include without limitation any short sale or sale or grant of any right (including without limitation any put or call option) with respect to any of the Retained Units or with respect to any security that includes, relates to, or derives any significant part of its value from such Retained Units.

 

(iii)                               Notwithstanding any provision of the Partnership Agreement to the contrary, the Unit Holder expressly agrees and consents to the refusal of the Company and the Partnership (unless they so elect to the contrary) to redeem any of the Retained Units pursuant to any attempted exercise by the Unit Holder of the Redemption Right during the applicable Retention Period.

 

(iv)                              The parties acknowledge and agree that any restrictions on transfer of the Common Partnership Units are in addition to, and not in lieu of, the transfer restrictions applicable to Common Partnership Units set forth in the Partnership Agreement.

 

4.                                      Non-Competition; Non-Solicitation.

 

(i)                                     Protection of Business. Except as set forth in an employment agreement with the Unit Holder and the Company or its affiliate, or as provided herein below, until the later of (i) the first day of the 31st month after the Closing Date and (ii) the first day of the seventh month after the date of termination of the Unit Holder’s employment with the Company or an affiliate for any reason the Unit Holder will not (x) engage in any Competing Business (as defined below) or pursue or attempt to develop any project known to the Unit Holder and which the Company is pursuing, developing or attempting to develop as of the date of termination of

 

5



 

employment (a “Project”), directly or indirectly, alone, in association with or as a shareholder, principal, agent, partner, officer, director, employee or consultant of any other organization or (y) divert to any entity which is engaged in any business conducted by the Company any Project, corporate opportunity or any customer of the Company. Notwithstanding the preceding sentence, the Unit Holder shall not be prohibited from owning less than 1% percent of any publicly-traded corporation, whether or not such corporation is in competition with the Company or from owning any passive investment in a hedge fund, private equity fund or similar instrument that, at the time of the Unit Holder’s acquisition, did not to Unit Holder’s knowledge (after reasonable inquiry) hold any investment in any Competing Business (as defined below); provided, that, the Unit Holder shall be permitted to invest in mutual funds or ETFs so long as such funds or ETFs are not invested primarily in real estate investment trusts. “Competing Business” means any business the primary business of which is being engaged in by the Company in the Washington, D.C. metropolitan area as a principal business as of the date of termination of the Unit Holder’s employment with the Company or an affiliate (including, without limitation, the development, owning and operating of commercial real estate and the acquisition and disposition of commercial real estate for the purpose of development, owning and operating such real estate).

 

(ii)                                  Non-Solicitation. Except as set forth in an employment agreement with the Unit Holder and the Company or its affiliate, or as provided herein below, until the later of (i) the first day of the 31st month after the Closing Date and (ii) the first anniversary of the date of termination of the Unit Holder’s employment with the Company or an affiliate for any reason the Unit Holder will not solicit any officer, employee (other than secretarial staff) or exclusive or primary consultant of the Company to leave the employ of the Company.

 

(iii)                               Injunctive Relief and Enforcement. In addition to any other remedy available to the Company under applicable law, in the event of a breach or threatened breach of this Section 4, the Unit Holder agrees that the Company shall be entitled to seek injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, the Unit Holder acknowledging that damages would be inadequate and insufficient. If, at any time, the provisions of Sections 4(i) or (ii) shall be determined to be invalid or unenforceable, by reason of being vague or unreasonable as to duration or scope of activity, Sections 4(i) or (ii), as applicable, shall be considered divisible and shall become and be immediately amended to only such duration and scope of activity as shall be determined to be reasonable and enforceable by the court or other body having jurisdiction over the matter; and the Unit Holder agrees that Sections 4(i) and/or (ii) as so amended shall be valid and binding as though any invalid or unenforceable provision had not been included herein.

 

(iv)                              Forfeiture of Unvested Common Partnership Units.  In the event that the Unit Holder breaches Sections 4(i) or (ii), the Unit Holder will forfeit all unvested Common Partnership Units including his rights to payment or benefits or under any shares to be issued in respect thereof.

 

6



 

5.                                      Clawback Policy. If the Company determines that grounds exist such that the Unit Holder’s employment could be terminated by the Company pursuant to clauses (a) or (c) of the “Cause” definition in Section 2 (or the analogous provisions to clauses (a) or (c) of an applicable employment agreement definition) and the event giving rise to such determination in either case (i) arises at any time within the three-year period immediately prior to the termination of the Unit Holder’s employment with the Company for any reason and (ii) causes material economic harm to the Company, then any Common Partnership Units that vested after the Issuance Date are subject to clawback and/or forfeiture as determined by the Company in its sole discretion (including the repayment to the Company by the Unit Holder of any realized gain on any disposition of such Common Partnership Units or shares issued in respect thereof).  The Company shall not take any action to claw back or forfeit any Common Partnership Units of a Unit Holder for Cause unless the Company has delivered to the Unit Holder a copy of a resolution duly adopted by a majority of the members of the Board, the Compensation Committee or Corporate Governance and Nominating Committee thereof (excluding, if applicable, the Unit Holder for purposes of determining such majority) at a meeting of the Board or such committee called and held for such purpose (after reasonable advance notice to the Unit Holder and an opportunity for the Unit Holder, together with his counsel, to be heard before the Board or such committee), finding that in the good faith opinion of the Board (or a committee thereof), the Unit Holder engaged in the conduct as set forth in the immediately preceding sentence, and specifying in sufficient detail the events or circumstances alleged to constitute Cause; provided, that if any such resolution was adopted by a committee of the Board, the determination of whether “Cause” exists shall be ratified by the Board.  In the event that the Company adopts a general clawback policy or has a clawback policy in any other agreement applicable to the Unit Holder, it shall be superseded by the clawback provision contained in this Section 5 for purposes of applicability to the Common Partnership units provided hereunder.  For the avoidance of doubt, and notwithstanding any policy of the Company to the contrary (any such provision to be superseded by this provision unless otherwise required by applicable law), (a) those Common Partnership Units which were immediately vested on the Issuance Date are not subject to clawback under this Section 5 (nor shall any realized gain on any disposition of such Common Partnership Units or shares issued in respect thereof be subject to clawback) and (b) no Common Partnership Units shall be subject to clawback following the eighth anniversary of the Issuance Date.

 

6.                                      Certificates. Each certificate, if any, issued in respect of the Common Partnership Units issued under this Unit Issuance Agreement shall be registered in the Unit Holder’s name and with respect to any unvested Common Partnership Units, held by the Company until such Common Partnership Units vest. If certificates representing the Common Partnership Units are issued by the Partnership, on each date that Common Partnership Units vest, the Company shall deliver to the Unit Holder (or, if applicable, to the Unit Holder’s legal representatives, beneficiaries or heirs) certificates representing the number of such Common Partnership Units. The Unit Holder agrees that any resale of vested Common Partnership Units (or shares received upon redemption of or in exchange for Common Partnership) shall not occur during the “blackout periods” forbidding sales of Company securities, as set forth in the then-applicable Company employee manual or insider trading policy. In addition, any resale shall be made in compliance with the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), or an applicable exemption therefrom, including, without limitation, the exemption provided by Rule 144 promulgated thereunder (or any successor rule).

 

7



 

7.                                      Certain Adjustments. Common Partnership Units shall be subject to adjustment as provided in the Partnership Agreement.

 

8.                                      No Right to Employment. Nothing herein contained shall affect the right of the Company or any affiliate to terminate the Unit Holder’s services, responsibilities and duties at any time for any reason whatsoever.

 

9.                                      Notice. Any notice to be given to the Company shall be addressed to the General Counsel, JBG SMITH Properties, 4445 Willard Avenue, Suite 400, Chevy Chase, Maryland 20815, and any notice to be given the Unit Holder shall be addressed to the Unit Holder at the Unit Holder’s address as it appears on the records of the Partnership, or at such other address as the Company or the Unit Holder may hereafter designate in writing to the other.

 

10.                               Governing Law. This Unit Issuance Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without references to principles of conflict of laws.

 

11.                               Successors and Assigns. This Unit Issuance Agreement shall be binding upon and inure to the benefit of the parties hereto and any successors to the Company and any successors to the Unit Holder by will or the laws of descent and distribution, but this Unit Issuance Agreement shall not otherwise be assignable or otherwise subject to hypothecation by the Unit Holder.

 

12.                               Transfer; Redemption. None of the Common Partnership Units shall be sold, assigned, transferred, pledged or otherwise disposed of or encumbered (whether voluntarily or involuntarily or by judgment, levy, attachment, garnishment or other legal or equitable proceeding) (each such action, a “Transfer”), or redeemed in accordance with the Partnership Agreement (a) prior to vesting and (b) unless such Transfer is in compliance with all applicable securities laws (including, without limitation, the Securities Act), and such Transfer is in accordance with the applicable terms and conditions of the Partnership Agreement. Any attempted Transfer of Common Partnership Units not in accordance with the terms and conditions of this Section 12 shall be null and void, and the Partnership shall not reflect on its records any change in record ownership of any Common Partnership Units as a result of any such Transfer, and shall otherwise refuse to recognize any such Transfer.

 

13.                               Severability. If, for any reason, any provision of this Unit Issuance Agreement is held invalid, such invalidity shall not affect any other provision of this Unit Issuance Agreement not so held invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. If any provision of this Unit Issuance Agreement shall be held invalid in part, such invalidity shall in no way affect the rest of such provision not held so invalid, and the rest of such provision, together with all other provisions of this Unit Issuance Agreement, shall to the full extent consistent with law continue in full force and effect.

 

14.                               Headings. The headings of paragraphs hereof are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Unit Issuance Agreement.

 

15.                               Counterparts. This Unit Issuance Agreement may be executed in multiple counterparts with the same effect as if each of the signing parties had signed the

 

8



 

same document. All counterparts shall be construed together and constitute the same instrument.

 

16.                               Miscellaneous. This Unit Issuance Agreement may not be amended except in writing signed by the Company and the Unit Holder. Notwithstanding the foregoing, this Unit Issuance Agreement may be amended in writing signed only by the Company to: (a) correct any errors or ambiguities in this Unit Issuance Agreement; and/or (b) to make such changes that do not materially adversely affect the Unit Holder’s rights hereunder. In the event of a conflict between this Unit Issuance Agreement and the Partnership Agreement, the Partnership Agreement shall govern; provided that, in the event that the Partnership Agreement is amended following the date hereof in a manner that disproportionately and adversely affects the Unit Holder’s rights as a holder of Common Partnership Units, then, solely with respect to such affected rights, the terms of this Agreement shall control.

 

17.                               Status as a Partner. As of the Issuance Date, the Unit Holder shall be admitted as a partner of the Partnership with beneficial ownership of the number of Common Partnership Units issued to the Unit Holder as of such date pursuant to this Unit Issuance Agreement by: (A) signing and delivering to the Partnership a copy of this Agreement; and (B) signing, as a Limited Partner, and delivering to the Partnership a counterpart signature page to the Partnership Agreement (attached hereto as Exhibit A).

 

18.                               Status of Common Partnership Units. The Common Partnership Units are issued as equity securities of the Partnership. The Company will have the right at its option, as set forth in the Partnership Agreement, to issue shares of Company common stock in exchange for Common Partnership Units with respect to which the Unit Holder has exercised its Redemption Right pursuant to Section 8.6 of the Partnership Agreement, subject to certain limitations set forth in the Partnership Agreement. The Unit Holder must be eligible to receive the Common Partnership Units in compliance with applicable federal and state securities laws and to that effect is required to complete, execute and deliver certain covenants, representations and warranties (attached as Exhibit B). The Unit Holder acknowledges that the Unit Holder will have no right to approve or disapprove such determination by the Company.

 

19.                               Investment Representations; Registration. The Unit Holder hereby makes the covenants, representations and warranties as set forth on Exhibit B attached hereto. All of such covenants, warranties and representations shall survive the execution and delivery of this Unit Issuance Agreement by the Unit Holder. The Partnership will have no obligation to register under the Securities Act any Common Partnership Units or any other securities issued pursuant to this Unit Issuance Agreement or upon conversion or exchange of Common Partnership Units.

 

20.                               Section 83(b) Election. In connection with this Unit Issuance Agreement, the Unit Holder hereby agrees to make an election to include in gross income in the year of transfer the fair market value of the applicable Common Partnership Units over the amount paid for them pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, substantially in the form attached hereto as Exhibit C and to supply the necessary information in accordance with the regulations promulgated thereunder.

 

21.                               Acknowledgement.  The Unit Holder hereby acknowledges and agrees that this Unit Issuance Agreement and the Common Partnership Units issued hereunder shall constitute satisfaction in full of all obligations of the Company and the Partnership, if any, to issue to the Unit Holder Common Partnership Units pursuant to

 

9



 

the terms of any written agreement or letter or written offer with the Company and/or the Partnership executed prior to or coincident with the date hereof, including without limitation the Transaction Agreement, the JBG Managing Member Contribution Agreements, the JBG Properties Contribution Agreement and the Partnership Merger Agreement.

 

[signature page follows]

 

10



 

IN WITNESS WHEREOF, this Unit Issuance Agreement has been executed by the parties hereto as of the date and year first above written.

 

 

JBG SMITH PROPERTIES, a Maryland real estate investment trust

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

JBG SMITH PROPERTIES LP, a Delaware limited partnership

 

By:     JBG SMITH Properties, a Maryland real estate investment trust, its general partner

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

UNIT HOLDER

 

 

 

 

 

 

Name:

 

 



 

EXHIBIT A

 

FORM OF LIMITED PARTNER SIGNATURE PAGE

 

The Unit Holder, desiring to become one of the within named Limited Partners of JBG SMITH Properties LP (the “Partnership”), hereby accepts all of the terms and conditions of (including, without limitation, the provisions related to powers of attorney), and becomes a party to, the Limited Partnership Agreement, dated as of July 17, 2017, of JBG SMITH Properties LP, as it may be amended from time to time (the “Partnership Agreement”). The Unit Holder agrees that this signature page may be attached to any counterpart of the Partnership Agreement and further agrees as follows (where the term “Limited Partner” refers to the Unit Holder): Capitalized terms used but not defined herein have the meaning ascribed thereto in the Partnership Agreement.

 

1.                                      The Limited Partner hereby confirms that it has reviewed the terms of the Partnership Agreement and affirms and agrees that it is bound by each of the terms and conditions of the Partnership Agreement, including, without limitation, the provisions thereof relating to limitations and restrictions on the transfer of Partnership Units.

 

2.                                      The Limited Partner hereby confirms that it is acquiring the Partnership Units for its own account as principal, for investment and not with a view to resale or distribution, and that the Partnership Units may not be transferred or otherwise disposed of by the Limited Partner otherwise than in a transaction pursuant to a registration statement filed by the Partnership (which it has no obligation to file) or that is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and all applicable state and foreign securities laws, and the General Partner may refuse to transfer any Partnership Units as to which evidence of such registration or exemption from registration satisfactory to the General Partner is not provided to it, which evidence may include the requirement of a legal opinion regarding the exemption from such registration. If the General Partner delivers to the Limited Partner common Shares of beneficial interest of the General Partner (“Common Shares”) upon redemption of any Partnership Units, the Common Shares will be acquired for the Limited Partner’s own account as principal, for investment and not with a view to resale or distribution, and the Common Shares may not be transferred or otherwise disposed of by the Limited Partner otherwise than in a transaction pursuant to a registration statement filed by the General Partner with respect to such Common Shares (which it has no obligation under the Partnership Agreement to file) or that is exempt from the registration requirements of the Securities Act and all applicable state and foreign securities laws, and the General Partner may refuse to transfer any Common Shares as to which evidence of such registration or exemption from such registration satisfactory to the General Partner is not provided to it, which evidence may include the requirement of a legal opinion regarding the exemption from such registration.

 

3.                                      The Limited Partner hereby affirms that it has appointed the General Partner, any Liquidator and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead, in accordance with Section 2.4 of the Partnership Agreement, which section is hereby incorporated by reference. The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and not be affected by the death, incompetency, dissolution, disability, incapacity, bankruptcy or termination

 

Exhibit A-1



 

of the Limited Partner and shall extend to the Limited Partner’s heirs, executors, administrators, legal representatives, successors and assigns.

 

4.                                      The Limited Partner hereby confirms that, notwithstanding any provisions of the Partnership Agreement to the contrary, the Common Partnership Units shall not be redeemable by the Limited Partner pursuant to Section 8.6 of the Partnership Agreement if the exercise of the Limited Partner’s redemption right pursuant to Section 8.6 of the Partnership Agreement is prohibited by the terms of the Unit Issuance Agreement, dated as July 18, 2017, between JBG SMITH Properties, the Partnership and the Limited Partner.

 

5.                                      (a)                                 The Limited Partner hereby irrevocably consents in advance to any amendment to the Partnership Agreement, as may be recommended by the General Partner, intended to avoid the Partnership being treated as a publicly-traded partnership within the meaning of Section 7704 of the Internal Revenue Code, including, without limitation, (x) any amendment to the provisions of Section 8.6 of the Partnership Agreement intended to increase the waiting period between the delivery of a Notice of Redemption and the Specified Redemption Date and/or the Valuation Date to up to sixty (60) days or (y) any other amendment to the Partnership Agreement intended to make the redemption and transfer provisions, with respect to certain redemptions and transfers, more similar to the provisions described in Treasury Regulations Section 1.7704-1(f).

 

(b)                                 The Limited Partner hereby appoints the General Partner, any Liquidator and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead, to execute and deliver any amendment referred to in the foregoing paragraph 5(a) on the Limited Partner’s behalf. The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and not be affected by the death, incompetency, dissolution, disability, incapacity, bankruptcy or termination of the Limited Partner and shall extend to the Limited Partner’s heirs, executors, administrators, legal representatives, successors and assigns.

 

6.                                      The Limited Partner agrees that it will not transfer any interest in the Partnership Units (x) through (i) a national, non-U.S., regional, local or other securities exchange, (ii) PORTAL or (iii) an over-the-counter market (including an interdealer quotation system that regularly disseminates firm buy or sell quotations by identified brokers or dealers by electronic means or otherwise) or (y) to or through (a) a person, such as a broker or dealer, that makes a market in, or regularly quotes prices for, interests in the Partnership, (b) a person that regularly makes available to the public (including customers or subscribers) bid or offer quotes with respect to any interests in the Partnership and stands ready to effect transactions at the quoted prices for itself or on behalf of others, or (c) another readily available, regular, and ongoing opportunity to sell or exchange the interest through a public means of obtaining or providing information of offers to buy, sell or exchange the interest.

 

7.                                      The Limited Partner acknowledges that the General Partner shall be a third-party beneficiary of the representations, covenants and agreements set forth in Sections 4 and 6 hereof. The Limited Partner agrees that it will transfer, whether by assignment or otherwise, Partnership Units only to the General Partner or to transferees that provide the Partnership and the General Partner with the representations and covenants set forth in Sections 4 and 6 hereof.

 

Exhibit A-2



 

8.                                      This acceptance shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.

 

 

 

 

Signature Line for Limited Partner:

 

 

 

 

 

 

 

Name:

 

 

Date:

July 18, 2017

 

 

 

 

 

Address of Limited Partner:

 

Exhibit A-3



 

EXHIBIT B

 

THE UNIT HOLDER’S COVENANTS, REPRESENTATIONS AND WARRANTIES

 

The Unit Holder hereby represents, warrants and covenants as follows:

 

(a)                                 The Unit Holder has received and had an opportunity to review the following documents (the “Background Documents”):

 

(i)                                     The Company’s latest information statement filed with the Securities and Exchange Commission relating to the transactions contemplated by the Transaction Agreement;

 

(ii)                                  The latest confidential information statement provided by JBG Properties Inc. and/or its affiliates relating to the transactions contemplated by the Transaction Agreement; and

 

(iii)                               The Partnership Agreement.

 

The Unit Holder also acknowledges that any delivery of the Background Documents and other information relating to the Company and the Partnership prior to the determination by the Partnership of the suitability of the Unit Holder as a holder of Common Partnership Units shall not constitute an offer of Common Partnership Units until such determination of suitability shall be made.

 

(b)                                 The Unit Holder hereby represents and warrants that:

 

(i)                                     The Unit Holder either (A) is an “accredited investor” as defined in Rule 501(a) under the Securities Act of 1933, as amended (the “Securities Act”), or (B) by reason of the business and financial experience of the Unit Holder, together with the business and financial experience of those persons, if any, retained by the Unit Holder to represent or advise him with respect to the issuance of Common Partnership Units and the potential redemption of such Common Partnership Units for the Company’s Common Shares (“REIT Shares”), has such knowledge, sophistication and experience in financial and business matters and in making investment decisions of this type that the Unit Holder (I) is capable of evaluating the merits and risks of an investment in the Partnership and potential investment in the Company and of making an informed investment decision, (II) is capable of protecting his own interest or has engaged representatives or advisors to assist him in protecting his interests, and (III) is capable of bearing the economic risk of such investment.

 

(ii)                                  The Unit Holder understands that (A) the Unit Holder is responsible for consulting his own tax advisors with respect to the application of the U.S. federal income tax laws, and the tax laws of any state, local or other taxing jurisdiction to which the Unit Holder is or by reason of the issuance of Common Partnership Units may become subject, to his particular situation; (B) the Unit Holder has not received or relied upon business or tax advice from the Company, the Partnership or any of their respective employees, agents, consultants or advisors, in their capacity as such; and (C) an investment in the Partnership and/or the Company involves substantial risks. The Unit Holder has been given the opportunity to make a thorough investigation of matters relevant to the Common

 

Exhibit B-1



 

Partnership Units and has been furnished with, and has reviewed and understands, materials relating to the Partnership and the Company and their respective activities (including, but not limited to, the Background Documents). The Unit Holder has been afforded the opportunity to obtain any additional information (including any exhibits to the Background Documents) deemed necessary by the Unit Holder to verify the accuracy of information conveyed to the Unit Holder. The Unit Holder confirms that all documents, records, and books pertaining to his receipt of Common Partnership Units which were requested by the Unit Holder have been made available or delivered to the Unit Holder. The Unit Holder has had an opportunity to ask questions of and receive answers from the Partnership and the Company, or from a person or persons acting on their behalf, concerning the terms and conditions of the Common Partnership Units. The Unit Holder has relied upon, and is making its decision solely upon, the Background Documents and other written information provided to the Unit Holder by the Partnership or the Company.

 

(iii)                               The Common Partnership Units to be issued and any REIT Shares issued in connection with the redemption of any such Common Partnership Units will be acquired for the account of the Unit Holder for investment only and not with a current view to, or with any intention of, a distribution or resale thereof, in whole or in part, or the grant of any participation therein, without prejudice, however, to the Unit Holder’s right (subject to the terms of the Common Partnership Units and this Agreement) at all times to sell or otherwise dispose of all or any part of his Common Partnership Units or REIT Shares in compliance with the Securities Act, and applicable state securities laws, and subject, nevertheless, to the disposition of his assets being at all times within his control.

 

(iv)                              The Unit Holder acknowledges that (A) the Common Partnership Units to be issued have not been registered under the Securities Act or state securities laws by reason of a specific exemption or exemptions from registration under the Securities Act and applicable state securities laws and, if such Common Partnership Units are represented by certificates, such certificates will bear a legend to such effect, (B) the reliance by the Partnership and the Company on such exemptions is predicated in part on the accuracy and completeness of the representations and warranties of the Unit Holder contained herein, (C) such Common Partnership Units, therefore, cannot be resold unless registered under the Securities Act and applicable state securities laws, or unless an exemption from registration is available, (D) there is no public market for such Common Partnership Units and (E) neither the Partnership nor the Company has any obligation or intention to register such Common Partnership Units under the Securities Act or any state securities laws or to take any action that would make available any exemption from the registration requirements of such laws, except that, upon the redemption of the Common Partnership Units for REIT Shares, the Company may issue such REIT Shares and pursuant to a Registration Statement on Form S-8 under the Securities Act, to the extent that (I) the Unit Holder is eligible to receive such REIT Shares under the Partnership Agreement at the time of such issuance, (II) the Company has filed a Form S-8 Registration Statement with the Securities and Exchange Commission registering the issuance of such REIT Shares and (III) such Form S-8 is effective at the time of the issuance of such REIT Shares. The Unit Holder hereby acknowledges that because of the restrictions on transfer or assignment of such Common Partnership Units acquired hereby which are set forth in the Partnership Agreement or this Agreement, the Unit Holder may

 

Exhibit B-2



 

have to bear the economic risk of his ownership of the Common Partnership Units acquired hereby for an indefinite period of time.

 

(v)                                 The Unit Holder has determined that the Common Partnership Units are a suitable investment for the Unit Holder.

 

(vi)                              No representations or warranties have been made to the Unit Holder by the Partnership or the Company, or any officer, director, shareholder, agent or affiliate of any of them, and the Unit Holder has received no information relating to an investment in the Partnership or the Common Partnership Units except the information specified in paragraph (a) above.

 

(c)                                  So long as the Unit Holder holds any Common Partnership Units, the Unit Holder shall disclose to the Partnership in writing such information as may be reasonably requested with respect to ownership of Common Partnership Units as the Partnership may deem reasonably necessary to ascertain and to establish compliance with provisions of the Code applicable to the Partnership or to comply with requirements of any other appropriate taxing authority.

 

(d)                                 The Unit Holder hereby agrees to make an election under Section 83(b) of the Code with respect to the Common Partnership Units awarded hereunder, and has delivered with this Agreement a completed, executed copy of the election form attached hereto as Exhibit C. The Unit Holder agrees to file the election (or to permit the Partnership to file such election on the Unit Holder’s behalf) within thirty (30) days after the award of the Common Partnership Units hereunder with the IRS Service Center at which such Unit Holder files his personal income tax returns.

 

(e)                                  The address set forth on the signature page of this Agreement is the address of the Unit Holder’s principal residence, and the Unit Holder has no present intention of becoming a resident of any country, state or jurisdiction other than the country and state in which such residence is sited.

 

Exhibit B-3



 

EXHIBIT C

 

ELECTION TO INCLUDE IN GROSS INCOME IN YEAR OF TRANSFER OF PROPERTY PURSUANT TO SECTION 83(B) OF THE INTERNAL REVENUE CODE

 

The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:

 

1.                                      The name, address and taxpayer identification number of the undersigned are:

 

Name: (the “Taxpayer”)

 

Address:

 

Social Security No./Taxpayer Identification No.:

 

2.                                      Description of property with respect to which the election is being made:

 

The election is being made with respect to Common Partnership Units in JBG SMITH Properties LP (the “Partnership”).

 

3.                                      The date on which the Common Partnership Units were issued is         , 20  . The taxable year to which this election relates is calendar year 20  .

 

4.                                      Nature of restrictions to which the Common Partnership Units are subject:

 

(a)                                 With limited exceptions, until the Common Partnership Units vest, the Taxpayer may not transfer in any manner any portion of the Common Partnership Units without the consent of the Partnership.

 

(b)                                 The Taxpayer’s Common Partnership Units vest in accordance with the vesting provisions described in the Schedule attached hereto. Unvested Common Partnership Units are forfeited in accordance with the vesting provisions described in the Schedule attached hereto.

 

5.                                      The fair market value at time of transfer (determined without regard to any restrictions other than a nonlapse restriction as defined in Treasury Regulations Section 1.83-3(h)) of the Common Partnership Units with respect to which this election is being made was $· per Common Partnership Unit [EQUALS VALUE OF CONTRIBUTED JBG UNITS].

 

6.                                      The amount paid by the Taxpayer for the Common Partnership Units was $· per Common Partnership Unit [EQUALS AMOUNT FROM 5, ABOVE].

 

7.                                      A copy of this statement has been furnished to the Partnership and JBG SMITH Properties.

 

Dated:

 

 

 

 

Name:

 

Exhibit C-1



 

SCHEDULE TO EXHIBIT C

 

Vesting Provisions of Common Partnership Units

 

The unvested Common Partnership Units are subject to time-based vesting with a number of Common Partnership Units equal to 1/30 of the total unvested Common Partnership Units issued vesting on each of         , 20  , and on the 1st day of each subsequent month until     , 20  , provided that the Taxpayer remains an employee of JBG SMITH Properties or its affiliates through such dates, subject to acceleration in the event of certain extraordinary transactions or termination of the Taxpayer’s service relationship with JBG SMITH Properties (or its affiliate) under specified circumstances. Unvested Common Partnership Units are subject to forfeiture in the event of failure to vest based on the passage of time and continued employment.

 

 

JBG SMITH PROPERTIES, a Maryland real estate investment trust

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

 

 

Taxpayer

 

Exhibit C-2


EX-10.8 20 a17-17912_1ex10d8.htm EX-10.8

Exhibit 10.8

 

EXECUTION VERSION

 

JBG SMITH PROPERTIES

UNIT ISSUANCE AGREEMENT

 

UNIT ISSUANCE AGREEMENT (the “Agreement” or “Unit Issuance Agreement”) made as of July 18, 2017 between JBG SMITH Properties, a Maryland real estate investment trust (the “Company”), its subsidiary JBG SMITH Properties LP, a Delaware limited partnership (the “Partnership”), and Michael J. Glosserman (“MJG”) and Glosserman Family JBG Operating, L.L.C, a Maryland limited liability company (the “Trust” together with MJG, the “Unit Holder”).

 

RECITALS

 

A.                                    Vornado Realty Trust, a Maryland real estate investment trust and Vornado Realty L.P., a Delaware limited partnership (the “Vornado Parties”), and JBG Properties Inc. (“JBG Properties”), a Maryland corporation and JBG/Operating Partners, L.P. (“JBG LP”), a Delaware limited partnership, together with certain affiliated entities (the “JBG Parties”), and the Company and the Partnership, have entered into that certain Master Transaction Agreement (the “Transaction Agreement”), pursuant to which the Vornado Parties and the JBG Parties will effectuate a series of transactions resulting in the acquisition, transfer and contribution of certain assets and interests to the Company and the Partnership.

 

B.                                    In furtherance of the foregoing and pursuant to the limited partnership agreement of the Partnership, as it will be amended as of the “Closing Date” (as defined in the Transaction Agreement) pursuant to the “Partnership Agreement Amendment and Restatement” (as defined in the Transaction Agreement) and as it may be further amended from time to time (the “Partnership Agreement”), the parties hereto desire to enter into this Agreement in order to effect the issuance of “Common Partnership Units” of the Partnership (as defined in the Partnership Agreement), having the rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption and conversion set forth herein and in the Partnership Agreement, to the Unit Holder in connection with the merger of JBG LP with and into a wholly owned limited liability subsidiary of the Partnership (the “Partnership Merger”) pursuant to the “JBG Partnership Merger Agreement” (as defined in the Transaction Agreement) contribution (the “JBG Properties Contribution”) by JBG Properties to the Partnership, pursuant to the “JBG Properties Contribution Agreement” (as defined in the Transaction Agreement) of all of its assets and the subsequent receipt of “Common Partnership Units” of the Partnership (as defined in the Partnership Agreement) having the rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption and conversion set forth herein and in the Partnership Agreement, by the Unit Holder.

 

NOW, THEREFORE, in consideration of good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Company, the Partnership and the Unit Holder hereby agree as follows:

 

AGREEMENT

 

1.                                      Issuance and Vesting of Common Partnership Units. In connection with (and conditioned on the occurrence of) (i) the Partnership Merger pursuant to the Partnership Merger Agreement, (ii) the JBG Properties Contribution pursuant to the JBG Properties Contribution Agreement, and (iii) the execution and delivery to the Partnership

 



 

by the Unit Holder of a counterpart to the Partnership Agreement, and on the terms and conditions set forth herein, the Partnership hereby agrees to issue to the Unit Holder 596,850 Common Partnership Units as of the date hereof (the “Issuance Date”), 50% of which shall be fully vested and non-forfeitable upon issuance and 50% of which shall be unvested, forfeitable pursuant to Section 2, and will vest in a number equal to 1/30 of the total unvested Common Partnership Units issued starting on the first day of the 31st month following the Issuance Date and on the first day of each subsequent month until the first day of the 60th month following the Issuance Date, at which time such Common Partnership Units shall be fully vested and non-forfeitable.  Vested Common Partnership Units (whether vested at or subsequent to issuance) will be subject to the restrictions on transfer and redemption as set forth in Section 3. Except as permitted under Section 12 and subject to the terms of the Partnership Agreement, unvested Common Partnership Units may not be sold, assigned, transferred, pledged or otherwise disposed of or encumbered (whether voluntary or involuntary or by judgment, levy, attachment, garnishment or other legal or equitable proceeding).

 

The Unit Holder hereby agrees that MJG shall hold 447,638 of the Common Partnership Units and the Trust shall hold 149,212 of the Common Partnership Units.  Each of MJG and the Trust shall have the right to vote their respective Common Partnership Units, both vested and unvested, if and when voting is allowed under the Partnership Agreement.

 

2.                                      Forfeiture of Unvested Common Partnership Units. If MJG’s service as a member of the Board of Trustees of the Company (the “Board”) terminates for any reason other than as described in the succeeding sentence, any unvested Common Partnership Units as of the date of such termination shall be forfeited and returned to the Company for delivery to the Partnership and cancellation. Upon termination of MJG’s service as a member of the Board (a) upon MJG’s failure to be re-nominated to the Board, (b) upon MJG’s failure to be re-elected to the Board in a contested election, (c) upon MJG’s failing to receive a majority of the votes in an uncontested election, tendering his resignation from the Board (as required by the Company’s Governance Guidelines) and the acceptance by the Board of such resignation or (d) upon MJG’s death or Disability, or upon the occurrence of a Change in Control, then any unvested Common Partnership Units shall become immediately fully vested and non-forfeitable. Each of the terms in the preceding sentence shall be as defined below:

 

A “Change in Control” of the Company means the occurrence of one of the following events:

 

(i)                                     Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (1) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this Section 2(i), the following acquisitions shall not constitute a Change of Control:  (a) any acquisition directly from the Company, (b) any acquisition by the Company, (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its affiliates or (d) any acquisition by any

 

2



 

corporation pursuant to a transaction that complies with Sections 2(iii)(1), 2(iii)(2) and 2(iii)(3);

 

(ii)                                  Any time at which individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

 

(iii)                               Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation or other entity resulting from such Business Combination (including, without limitation, a corporation or other entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any corporation or other entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation or other entity resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding shares of common stock of the corporation or other entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation or other entity, except to the extent that such ownership existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors or similar governing body of the corporation or other entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

 

(iv)                              Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

 

Disability” means a termination of MJG’s service as a member of the Board as a result of his having been substantially unable to perform his duties as a member of

 

3



 

the Board for a continuous period of 180 days due to incapacity caused by physical or mental illness and within 30 days after receiving written Notice of such termination of service after such 180-day period, MJG shall not have returned to the substantial performance of his duties on a full-time basis.

 

For the avoidance of doubt, it is acknowledged that MJG is a non-employee member of the Board and that the service-based vesting condition described in this Section 2 is dependent solely on his service as a member of the Board and is not based on any employment or other service relationship with the Company.

 

3.                                      Restrictions on Transfer and Redemption.

 

(i)                                     Notwithstanding any provision of the Partnership Agreement to the contrary, during the applicable Retention Period (as defined below) the Unit Holder will not (i) offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any Retained Units (as defined below), or any options or warrants to purchase any Retained Units, or any securities convertible into, exchangeable for or that represent the right to receive Retained Units, whether now owned or hereinafter acquired, owned directly by the Unit Holder (including holding as a custodian) or with respect to which the Unit Holder has beneficial ownership within the rules and regulations of the Securities and Exchange Commission, or (ii) exercise the “Redemption Right” (as defined in, and pursuant to, Section 8.6 of the Partnership Agreement) with respect to the Retained Units.  “Initial Retained Units” means 80% of the Common Partnership Units received pursuant to this Agreement that will be fully vested and non-forfeitable upon issuance. “Subsequent Retained Units” means 100% of the Common Partnership Units received pursuant to this Agreement that will be unvested and forfeitable at the time of issuance (together with the Initial Retained Units, the “Retained Units”).  “Retention Period” means (i) with respect to the Initial Retained Units, the period commencing from the Closing and ending on July 17, 2020, and (ii) with respect to the Subsequent Retained Units, the period commencing from the Closing and ending on July 17, 2022; provided, however, that the applicable Retention Period shall terminate (and the limitations set forth above shall no longer be applicable) immediately upon (i) the termination of MJG’s service on the Board (a) upon MJG’s failure to be re-nominated to the Board, (b) upon MJG’s failure to be re-elected to the Board in a contested election, (c) upon MJG’s failing to receive a majority of the votes in an uncontested election, tendering his resignation from the Board (as required by the Company’s Governance Guidelines) and the acceptance by the Board of such resignation, (d) upon MJG’s death or Disability or (ii) the occurrence of a Change in Control.

 

(ii)                                  The restrictions set forth in this Section 3 are expressly agreed to preclude the Unit Holder, during the applicable Retention Period, from engaging in any hedging, swap, or other arrangement or transaction which is designed to or which reasonably could be expected to lead to or result in, in whole or in part, a sale or disposition of the Retained Units (even if such Retained Units would be disposed of by someone other than the Unit Holder) or in the transfer to another of any of the economic consequences of ownership of any of the Retained Units, whether such transaction is to be settled by delivery of the Retained Units, in cash or otherwise.  Such prohibited hedging or other transactions would include without limitation any short sale or sale or grant of any right (including without limitation

 

4



 

any put or call option) with respect to any of the Retained Units or with respect to any security that includes, relates to, or derives any significant part of its value from such Retained Units.

 

(iii)                               Notwithstanding any provision of the Partnership Agreement to the contrary, the Unit Holder expressly agrees and consents to the refusal of the Company and the Partnership (unless they so elect to the contrary) to redeem any of the Retained Units pursuant to any attempted exercise by the Unit Holder of the Redemption Right during the applicable Retention Period.

 

(iv)                              The parties acknowledge and agree that any restrictions on transfer of the Common Partnership Units are in addition to, and not in lieu of, the transfer restrictions applicable to Common Partnership Units set forth in the Partnership Agreement.

 

4.                                      Non-Competition; Non-Solicitation.

 

(i)                                     Protection of Business. Until the first day of the 60th month following the Issuance Date, MJG will not (x) engage in any Competing Business (as defined below) or pursue or attempt to develop any project known to MJG and which the Company is pursuing, developing or attempting to develop as of the date of termination of MJG’s service (a “Project”), directly or indirectly, alone, in association with or as a shareholder, principal, agent, partner, officer, director, employee or consultant of any other organization or (y) divert to any entity which is engaged in any business conducted by the Company any Project, corporate opportunity or any customer of the Company, except as set forth on Exhibit D attached hereto. Notwithstanding the preceding sentence, MJG shall not be prohibited from owning less than 1% percent of any publicly-traded corporation, whether or not such corporation is in competition with the Company or from owning any passive investment in a hedge fund, private equity fund or similar instrument that, at the time of MJG’s acquisition, did not to MJG’s knowledge (after reasonable inquiry) hold any investment in any Competing Business (as defined below); provided, that, MJG shall be permitted to invest in mutual funds or ETFs so long as such funds or ETFs are not invested primarily in real estate investment trusts.  “Competing Business” means any business the primary business of which is being engaged in by the Company in the Washington, D.C. metropolitan area as a principal business as of the date of termination of MJG’s service with the Company or an affiliate (including, without limitation, the development, owning and operating of commercial real estate and the acquisition and disposition of commercial real estate for the purpose of development, owning and operating such real estate).

 

(ii)                                  Non-Solicitation. Until the first day of the 60th month following the Issuance Date, MJG will not solicit any officer, employee (other than secretarial staff) or exclusive or primary consultant of the Company to leave the employ of the Company.

 

(iii)                               Injunctive Relief and Enforcement. In addition to any other remedy available to the Company under applicable law, in the event of a breach or threatened breach of this Section 4, MJG agrees that the Company shall be entitled to seek injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, MJG acknowledging that damages would be inadequate and insufficient. If, at any time, the provisions of Sections 4(i) or (ii)

 

5



 

shall be determined to be invalid or unenforceable, by reason of being vague or unreasonable as to duration or scope of activity, Sections 4(i) or (ii), as applicable, shall be considered divisible and shall become and be immediately amended to only such duration and scope of activity as shall be determined to be reasonable and enforceable by the court or other body having jurisdiction over the matter; and MJG agrees that Sections 4(i) and/or (ii) as so amended shall be valid and binding as though any invalid or unenforceable provision had not been included herein.

 

(iv)                              Forfeiture of Unvested Common Partnership Units.  In the event that MJG breaches Sections 4(i) or (ii), the Unit Holder will forfeit all unvested Common Partnership Units including all rights to payment or benefits or under any shares to be issued in respect thereof.

 

5.                                      Clawback Policy. If the Company determines that grounds exist such that MJG’s service as a member of the Board could be terminated either upon his (a) conviction of, or plea of guilty or nolo contendere to, a felony, or (b) willful misconduct (including, but not limited to, a willful breach of the provisions of Section 4) and the event giving rise to such determination in either case (i) arises at any time within the three-year period immediately prior to the termination of MJG’s service as a member of the Board and (ii) causes material economic harm to the Company, then any Common Partnership Units held by either MJG or the Trust and that vested after the Issuance Date are subject to clawback and/or forfeiture as determined by the Company in its sole discretion (including the repayment to the Company by MJG and the Trust, respectively, of any realized gain on any disposition of such Common Partnership Units or shares issued in respect thereof).  In the event that the Company adopts a general clawback policy or has a clawback policy in any other agreement applicable to MJG or the Trust, it shall be superseded by the clawback provision contained in this Section 5 for purposes of applicability to the Common Partnership units provided hereunder.  For the avoidance of doubt, and notwithstanding any policy of the Company to the contrary (any such provision to be superseded by this provision unless otherwise required by applicable law), (a) those Common Partnership Units which were immediately vested on the Issuance Date are not subject to clawback under this Section 5 (nor shall any realized gain on any disposition of such Common Partnership Units or shares issued in respect thereof be subject to clawback) and (b) no Common Partnership Units shall be subject to clawback following the eighth anniversary of the Issuance Date.

 

6.                                      Certificates. Each certificate, if any, issued in respect of the Common Partnership Units issued under this Unit Issuance Agreement shall be registered in the name of MJG and the Trust, as applicable, and with respect to any unvested Common Partnership Units, held by the Company until such Common Partnership Units vest. If certificates representing the Common Partnership Units are issued by the Partnership, on each date that Common Partnership Units vest, the Company shall deliver to MJG and the Trust, as applicable (or, if applicable, to such holder’s legal representatives, beneficiaries or heirs) certificates representing the respective number of such Common Partnership Units. The Unit Holder agrees that any resale of vested Common Partnership Units (or shares received upon redemption of or in exchange for Common Partnership) shall not occur during the “blackout periods” forbidding sales of Company securities, as set forth in the then-applicable Company insider trading policy. In addition, any resale shall be made in compliance with the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), or an applicable exemption therefrom, including,

 

6



 

without limitation, the exemption provided by Rule 144 promulgated thereunder (or any successor rule).

 

7.                                      Certain Adjustments. Common Partnership Units shall be subject to adjustment as provided in the Partnership Agreement.

 

8.                                      Notice. Any notice to be given to the Company shall be addressed to the General Counsel, JBG SMITH Properties, 4445 Willard Avenue, Suite 400, Chevy Chase, Maryland 20815, and any notice to be given the Unit Holder shall be addressed to the Unit Holder at the Unit Holder’s address as it appears on the records of the Partnership, or at such other address as the Company or the Unit Holder may hereafter designate in writing to the other.

 

9.                                      Governing Law. This Unit Issuance Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without references to principles of conflict of laws.

 

10.                               Successors and Assigns. This Unit Issuance Agreement shall be binding upon and inure to the benefit of the parties hereto and any successors to the Company and any successors to the Unit Holder by will or the laws of descent and distribution, but this Unit Issuance Agreement shall not otherwise be assignable or otherwise subject to hypothecation by the Unit Holder.

 

11.                               Transfer; Redemption. None of the Common Partnership Units shall be sold, assigned, transferred, pledged or otherwise disposed of or encumbered (whether voluntarily or involuntarily or by judgment, levy, attachment, garnishment or other legal or equitable proceeding) (each such action, a “Transfer”), or redeemed in accordance with the Partnership Agreement (a) prior to vesting and (b) unless such Transfer is in compliance with all applicable securities laws (including, without limitation, the Securities Act), and such Transfer is in accordance with the applicable terms and conditions of the Partnership Agreement. Any attempted Transfer of Common Partnership Units not in accordance with the terms and conditions of this Section 10 shall be null and void, and the Partnership shall not reflect on its records any change in record ownership of any Common Partnership Units as a result of any such Transfer, and shall otherwise refuse to recognize any such Transfer.

 

12.                               Severability. If, for any reason, any provision of this Unit Issuance Agreement is held invalid, such invalidity shall not affect any other provision of this Unit Issuance Agreement not so held invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. If any provision of this Unit Issuance Agreement shall be held invalid in part, such invalidity shall in no way affect the rest of such provision not held so invalid, and the rest of such provision, together with all other provisions of this Unit Issuance Agreement, shall to the full extent consistent with law continue in full force and effect.

 

13.                               Headings. The headings of paragraphs hereof are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Unit Issuance Agreement.

 

14.                               Counterparts. This Unit Issuance Agreement may be executed in multiple counterparts with the same effect as if each of the signing parties had signed the

 

7



 

same document. All counterparts shall be construed together and constitute the same instrument.

 

15.                               Miscellaneous. This Unit Issuance Agreement may not be amended except in writing signed by the Company and MJG and the Trust. Notwithstanding the foregoing, this Unit Issuance Agreement may be amended in writing signed only by the Company to: (a) correct any errors or ambiguities in this Unit Issuance Agreement; and/or (b) to make such changes that do not materially adversely affect the Unit Holder’s rights hereunder. In the event of a conflict between this Unit Issuance Agreement and the Partnership Agreement, the Partnership Agreement shall govern; provided that, in the event that the Partnership Agreement is amended following the date hereof in a manner that disproportionately and adversely affects the Unit Holder’s rights as a holder of Common Partnership Units, then, solely with respect to such affected rights, the terms of this Agreement shall control.

 

16.                               Status as a Partner. As of the Issuance Date, MJG and the Trust shall each be admitted as a partner of the Partnership with beneficial ownership of the number of Common Partnership Units issued to MJG and the Trust, respectively, as of such date pursuant to this Unit Issuance Agreement by: (A) signing and delivering to the Partnership a copy of this Agreement; and (B) signing, as a Limited Partner, and delivering to the Partnership a counterpart signature page to the Partnership Agreement (attached hereto as Exhibit A).

 

17.                               Status of Common Partnership Units. The Common Partnership Units are issued as equity securities of the Partnership. The Company will have the right at its option, as set forth in the Partnership Agreement, to issue shares of Company common stock in exchange for Common Partnership Units with respect to which MJG or the Trust, as applicable has exercised its Redemption Right pursuant to Section 8.6 of the Partnership Agreement, subject to certain limitations set forth in the Partnership Agreement. The Unit Holder must be eligible to receive the Common Partnership Units in compliance with applicable federal and state securities laws and to that effect is required to complete, execute and deliver certain covenants, representations and warranties (attached as Exhibit B). The Unit Holder acknowledges that the Unit Holder will have no right to approve or disapprove such determination by the Company.

 

18.                               Investment Representations; Registration. Each of MJG and the Trust hereby makes the covenants, representations and warranties as set forth on Exhibit B attached hereto. All of such covenants, warranties and representations shall survive the execution and delivery of this Unit Issuance Agreement by the Unit Holder. The Partnership will have no obligation to register under the Securities Act any Common Partnership Units or any other securities issued pursuant to this Unit Issuance Agreement or upon conversion or exchange of Common Partnership Units.

 

19.                               Section 83(b) Election. In connection with this Unit Issuance Agreement, the Unit Holder hereby agrees to make an election to include in gross income in the year of transfer the fair market value of the applicable Common Partnership Units over the amount paid for them pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, substantially in the form attached hereto as Exhibit C and to supply the necessary information in accordance with the regulations promulgated thereunder.

 

20.                               Acknowledgement.  Each of MJG and the Trust hereby acknowledges and agrees that this Unit Issuance Agreement and the Common Partnership Units issued

 

8



 

hereunder shall constitute satisfaction in full of all obligations of the Company and the Partnership, if any, to issue to each of MJG and the Trust, respectively, Common Partnership Units pursuant to the terms of any written agreement or letter or written offer with the Company and/or the Partnership executed prior to or coincident with the date hereof, including without limitation the Transaction Agreement, the JBG Managing Member Contribution Agreements, the JBG Properties Contribution Agreement and the Partnership Merger Agreement.

 

[signature page follows]

 

9



 

IN WITNESS WHEREOF, this Unit Issuance Agreement has been executed by the parties hereto as of the date and year first above written.

 

 

JBG SMITH PROPERTIES, a Maryland real estate investment trust

 

 

 

 

 

By:

/s/ Steven A. Museles

 

 

Name:

Steven A. Museles

 

 

Title:

Chief Legal Officer

 

 

 

 

 

JBG SMITH PROPERTIES LP, a Delaware limited partnership

 

 

 

 

By:   JBG SMITH Properties, a Maryland real estate investment trust, its general partner

 

 

 

 

 

 

 

By:

/s/ Steven A. Museles

 

 

Name:

Steven A. Museles

 

 

Title:

Chief Legal Officer

 

 

 

 

 

 

 

 

 

UNIT HOLDER:

 

 

 

 

 

GLOSSERMAN FAMILY JBG OPERATING, L.L.C., a Maryland limited liability company

 

 

 

 

 

 

 

 

 

By:

/s/ Robert Stewart

 

 

Name:

Robert Stewart

 

 

Title:

Manager

 

 

 

 

 

 

 

 

 

MICHAEL J. GLOSSERMAN

 

 

 

 

 

 

 

 

 

By:

/s/ Michael J. Glosserman

 



 

EXHIBIT A

 

FORM OF LIMITED PARTNER SIGNATURE PAGE

 

The Unit Holder, desiring to become one of the within named Limited Partners of JBG SMITH Properties LP (the “Partnership”), hereby accepts all of the terms and conditions of (including, without limitation, the provisions related to powers of attorney), and becomes a party to, the Limited Partnership Agreement, dated as of July 17, 2017, of JBG SMITH Properties LP, as it may be amended from time to time (the “Partnership Agreement”). The Unit Holder agrees that this signature page may be attached to any counterpart of the Partnership Agreement and further agrees as follows (where the term “Limited Partner” refers to the Unit Holder): Capitalized terms used but not defined herein have the meaning ascribed thereto in the Partnership Agreement.

 

1.                                      The Limited Partner hereby confirms that it has reviewed the terms of the Partnership Agreement and affirms and agrees that it is bound by each of the terms and conditions of the Partnership Agreement, including, without limitation, the provisions thereof relating to limitations and restrictions on the transfer of Partnership Units.

 

2.                                      The Limited Partner hereby confirms that it is acquiring the Partnership Units for its own account as principal, for investment and not with a view to resale or distribution, and that the Partnership Units may not be transferred or otherwise disposed of by the Limited Partner otherwise than in a transaction pursuant to a registration statement filed by the Partnership (which it has no obligation to file) or that is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and all applicable state and foreign securities laws, and the General Partner may refuse to transfer any Partnership Units as to which evidence of such registration or exemption from registration satisfactory to the General Partner is not provided to it, which evidence may include the requirement of a legal opinion regarding the exemption from such registration. If the General Partner delivers to the Limited Partner common Shares of beneficial interest of the General Partner (“Common Shares”) upon redemption of any Partnership Units, the Common Shares will be acquired for the Limited Partner’s own account as principal, for investment and not with a view to resale or distribution, and the Common Shares may not be transferred or otherwise disposed of by the Limited Partner otherwise than in a transaction pursuant to a registration statement filed by the General Partner with respect to such Common Shares (which it has no obligation under the Partnership Agreement to file) or that is exempt from the registration requirements of the Securities Act and all applicable state and foreign securities laws, and the General Partner may refuse to transfer any Common Shares as to which evidence of such registration or exemption from such registration satisfactory to the General Partner is not provided to it, which evidence may include the requirement of a legal opinion regarding the exemption from such registration.

 

3.                                      The Limited Partner hereby affirms that it has appointed the General Partner, any Liquidator and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead, in accordance with Section 2.4 of the Partnership Agreement, which section is hereby incorporated by reference. The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and not be affected by the death, incompetency, dissolution, disability, incapacity, bankruptcy or termination

 

Exhibit A-1



 

of the Limited Partner and shall extend to the Limited Partner’s heirs, executors, administrators, legal representatives, successors and assigns.

 

4.                                      The Limited Partner hereby confirms that, notwithstanding any provisions of the Partnership Agreement to the contrary, the Common Partnership Units shall not be redeemable by the Limited Partner pursuant to Section 8.6 of the Partnership Agreement if the exercise of the Limited Partner’s redemption right pursuant to Section 8.6 of the Partnership Agreement is prohibited by the terms of the Unit Issuance Agreement, dated as July 18, 2017, between JBG SMITH Properties, the Partnership and the Limited Partner.

 

5.                                      (a)                                 The Limited Partner hereby irrevocably consents in advance to any amendment to the Partnership Agreement, as may be recommended by the General Partner, intended to avoid the Partnership being treated as a publicly-traded partnership within the meaning of Section 7704 of the Internal Revenue Code, including, without limitation, (x) any amendment to the provisions of Section 8.6 of the Partnership Agreement intended to increase the waiting period between the delivery of a Notice of Redemption and the Specified Redemption Date and/or the Valuation Date to up to sixty (60) days or (y) any other amendment to the Partnership Agreement intended to make the redemption and transfer provisions, with respect to certain redemptions and transfers, more similar to the provisions described in Treasury Regulations Section 1.7704-1(f).

 

(b)                                 The Limited Partner hereby appoints the General Partner, any Liquidator and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead, to execute and deliver any amendment referred to in the foregoing paragraph 5(a) on the Limited Partner’s behalf. The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and not be affected by the death, incompetency, dissolution, disability, incapacity, bankruptcy or termination of the Limited Partner and shall extend to the Limited Partner’s heirs, executors, administrators, legal representatives, successors and assigns.

 

6.                                      The Limited Partner agrees that it will not transfer any interest in the Partnership Units (x) through (i) a national, non-U.S., regional, local or other securities exchange, (ii) PORTAL or (iii) an over-the-counter market (including an interdealer quotation system that regularly disseminates firm buy or sell quotations by identified brokers or dealers by electronic means or otherwise) or (y) to or through (a) a person, such as a broker or dealer, that makes a market in, or regularly quotes prices for, interests in the Partnership, (b) a person that regularly makes available to the public (including customers or subscribers) bid or offer quotes with respect to any interests in the Partnership and stands ready to effect transactions at the quoted prices for itself or on behalf of others, or (c) another readily available, regular, and ongoing opportunity to sell or exchange the interest through a public means of obtaining or providing information of offers to buy, sell or exchange the interest.

 

7.                                      The Limited Partner acknowledges that the General Partner shall be a third-party beneficiary of the representations, covenants and agreements set forth in Sections 4 and 6 hereof. The Limited Partner agrees that it will transfer, whether by assignment or otherwise, Partnership Units only to the General Partner or to transferees that provide the

 

Exhibit A-2



 

Partnership and the General Partner with the representations and covenants set forth in Sections 4 and 6 hereof.

 

8.                                      This acceptance shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.

 

 

 

Signature Line for Limited Partner:

 

 

 

 

 

 

 

Name:

/s/ Michael J. Glosserman

 

Date:

July 18, 2017

 

 

 

 

 

Address of Limited Partner:

 

Exhibit A-3



 

EXHIBIT B

 

THE UNIT HOLDER’S COVENANTS, REPRESENTATIONS AND WARRANTIES

 

The Unit Holder hereby represents, warrants and covenants as follows:

 

(a)                                 The Unit Holder has received and had an opportunity to review the following documents (the “Background Documents”):

 

(i)                                     The Company’s latest information statement filed with the Securities and Exchange Commission relating to the transactions contemplated by the Transaction Agreement;

 

(ii)                                  The latest confidential information statement provided by JBG Properties Inc. and/or its affiliates relating to the transactions contemplated by the Transaction Agreement; and

 

(iii)                               The Partnership Agreement.

 

The Unit Holder also acknowledges that any delivery of the Background Documents and other information relating to the Company and the Partnership prior to the determination by the Partnership of the suitability of the Unit Holder as a holder of Common Partnership Units shall not constitute an offer of Common Partnership Units until such determination of suitability shall be made.

 

(b)                                 The Unit Holder hereby represents and warrants that:

 

(i)                                     The Unit Holder either (A) is an “accredited investor” as defined in Rule 501(a) under the Securities Act of 1933, as amended (the “Securities Act”), or (B) by reason of the business and financial experience of the Unit Holder, together with the business and financial experience of those persons, if any, retained by the Unit Holder to represent or advise him with respect to the issuance of Common Partnership Units and the potential redemption of such Common Partnership Units for the Company’s Common Shares (“REIT Shares”), has such knowledge, sophistication and experience in financial and business matters and in making investment decisions of this type that the Unit Holder (I) is capable of evaluating the merits and risks of an investment in the Partnership and potential investment in the Company and of making an informed investment decision, (II) is capable of protecting its own interest or has engaged representatives or advisors to assist him in protecting its interests, and (III) is capable of bearing the economic risk of such investment.

 

(ii)                                  The Unit Holder understands that (A) the Unit Holder is responsible for consulting its own tax advisors with respect to the application of the U.S. federal income tax laws, and the tax laws of any state, local or other taxing jurisdiction to which the Unit Holder is or by reason of the issuance of Common Partnership Units may become subject, to its particular situation; (B) the Unit Holder has not received or relied upon business or tax advice from the Company, the Partnership or any of their respective employees, agents, consultants or advisors, in their capacity as such; and (C) an investment in the Partnership

 

Exhibit B-1



 

and/or the Company involves substantial risks. The Unit Holder has been given the opportunity to make a thorough investigation of matters relevant to the Common Partnership Units and has been furnished with, and has reviewed and understands, materials relating to the Partnership and the Company and their respective activities (including, but not limited to, the Background Documents). The Unit Holder has been afforded the opportunity to obtain any additional information (including any exhibits to the Background Documents) deemed necessary by the Unit Holder to verify the accuracy of information conveyed to the Unit Holder. The Unit Holder confirms that all documents, records, and books pertaining to its receipt of Common Partnership Units which were requested by the Unit Holder have been made available or delivered to the Unit Holder. The Unit Holder has had an opportunity to ask questions of and receive answers from the Partnership and the Company, or from a person or persons acting on their behalf, concerning the terms and conditions of the Common Partnership Units. The Unit Holder has relied upon, and is making its decision solely upon, the Background Documents and other written information provided to the Unit Holder by the Partnership or the Company.

 

(iii)                               The Common Partnership Units to be issued and any REIT Shares issued in connection with the redemption of any such Common Partnership Units will be acquired for the account of the Unit Holder for investment only and not with a current view to, or with any intention of, a distribution or resale thereof, in whole or in part, or the grant of any participation therein, without prejudice, however, to the Unit Holder’s right (subject to the terms of the Common Partnership Units and this Agreement) at all times to sell or otherwise dispose of all or any part of its Common Partnership Units or REIT Shares in compliance with the Securities Act, and applicable state securities laws, and subject, nevertheless, to the disposition of its assets being at all times within its control.

 

(iv)                              The Unit Holder acknowledges that (A) the Common Partnership Units to be issued have not been registered under the Securities Act or state securities laws by reason of a specific exemption or exemptions from registration under the Securities Act and applicable state securities laws and, if such Common Partnership Units are represented by certificates, such certificates will bear a legend to such effect, (B) the reliance by the Partnership and the Company on such exemptions is predicated in part on the accuracy and completeness of the representations and warranties of the Unit Holder contained herein, (C) such Common Partnership Units, therefore, cannot be resold unless registered under the Securities Act and applicable state securities laws, or unless an exemption from registration is available, (D) there is no public market for such Common Partnership Units and (E) neither the Partnership nor the Company has any obligation or intention to register such Common Partnership Units under the Securities Act or any state securities laws or to take any action that would make available any exemption from the registration requirements of such laws, except that, upon the redemption of the Common Partnership Units for REIT Shares, the Company may issue such REIT Shares and pursuant to a Registration Statement under the Securities Act, to the extent that (I) the Unit Holder is eligible to receive such REIT Shares under the Partnership Agreement at the time of such issuance, (II) the Company has filed a Registration Statement with the Securities and Exchange Commission registering the issuance of such REIT Shares and (III) such

 

Exhibit B-2



 

Registration Statement is effective at the time of the issuance of such REIT Shares. The Unit Holder hereby acknowledges that because of the restrictions on transfer or assignment of such Common Partnership Units acquired hereby which are set forth in the Partnership Agreement or this Agreement, the Unit Holder may have to bear the economic risk of its ownership of the Common Partnership Units acquired hereby for an indefinite period of time.

 

(v)                                 The Unit Holder has determined that the Common Partnership Units are a suitable investment for the Unit Holder.

 

(vi)                              No representations or warranties have been made to the Unit Holder by the Partnership or the Company, or any officer, director, shareholder, agent or affiliate of any of them, and the Unit Holder has received no information relating to an investment in the Partnership or the Common Partnership Units except the information specified in paragraph (a) above.

 

(c)                                  So long as the Unit Holder holds any Common Partnership Units, the Unit Holder shall disclose to the Partnership in writing such information as may be reasonably requested with respect to ownership of Common Partnership Units as the Partnership may deem reasonably necessary to ascertain and to establish compliance with provisions of the Code applicable to the Partnership or to comply with requirements of any other appropriate taxing authority.

 

(d)                                 The Unit Holder hereby agrees to make an election under Section 83(b) of the Code with respect to the Common Partnership Units awarded hereunder, and has delivered with this Agreement a completed, executed copy of the election form attached hereto as Exhibit C. The Unit Holder agrees to file the election (or to permit the Partnership to file such election on the Unit Holder’s behalf) within thirty (30) days after the award of the Common Partnership Units hereunder with the IRS Service Center at which such Unit Holder files his personal income tax returns.

 

(e)                                  The address set forth on the signature page of this Agreement is the address of the Unit Holder’s principal residence, and the Unit Holder has no present intention of becoming a resident of any country, state or jurisdiction other than the country and state in which such residence is sited.

 

Exhibit B-3



 

EXHIBIT C

 

ELECTION TO INCLUDE IN GROSS INCOME IN YEAR OF TRANSFER OF PROPERTY PURSUANT TO SECTION 83(B) OF THE INTERNAL REVENUE CODE

 

The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:

 

1.                                      The name, address and taxpayer identification number of the undersigned are:

 

Name: (the “Taxpayer”)

 

Address:

 

Social Security No./Taxpayer Identification No.:

 

2.                                      Description of property with respect to which the election is being made:

 

The election is being made with respect to Common Partnership Units in JBG SMITH Properties LP (the “Partnership”).

 

3.                                      The date on which the Common Partnership Units were issued is         , 20  . The taxable year to which this election relates is calendar year 20  .

 

4.                                      Nature of restrictions to which the Common Partnership Units are subject:

 

(a)                                 With limited exceptions, until the Common Partnership Units vest, the Taxpayer may not transfer in any manner any portion of the Common Partnership Units without the consent of the Partnership.

 

(b)                                 The Taxpayer’s Common Partnership Units vest in accordance with the vesting provisions described in the Schedule attached hereto. Unvested Common Partnership Units are forfeited in accordance with the vesting provisions described in the Schedule attached hereto.

 

5.                                      The fair market value at time of transfer (determined without regard to any restrictions other than a nonlapse restriction as defined in Treasury Regulations Section 1.83-3(h)) of the Common Partnership Units with respect to which this election is being made was $• per Common Partnership Unit [EQUALS VALUE OF CONTRIBUTED JBG UNITS].

 

6.                                      The amount paid by the Taxpayer for the Common Partnership Units was $• per Common Partnership Unit [EQUALS AMOUNT FROM 5, ABOVE].

 

7.                                      A copy of this statement has been furnished to the Partnership and JBG SMITH Properties.

 

Exhibit C-1



 

Dated:

 

 

 

 

 

 

 

 

 

 

Name:

 

 

Exhibit C-2



 

SCHEDULE TO EXHIBIT C

 

Vesting Provisions of Common Partnership Units

 

The unvested Common Partnership Units are subject to time-based vesting with a number of Common Partnership Units equal to 1/30 of the total unvested Common Partnership Units issued vesting on each of         , 20  , and on the 1st day of each subsequent month until     , 20  , provided that the Taxpayer remains a member of the Board of Trustees of JBG SMITH Properties through such dates, subject to acceleration in the event of certain extraordinary transactions or termination of the Taxpayer’s service relationship with JBG SMITH Properties (or its affiliate) under specified circumstances. Unvested Common Partnership Units are subject to forfeiture in the event of failure to vest based on the passage of time and continued service.

 

 

JBG SMITH PROPERTIES, a Maryland real estate investment trust

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

Taxpayer

 

Exhibit C-3



 

EXHIBIT C

 

ELECTION TO INCLUDE IN GROSS INCOME IN YEAR OF TRANSFER OF PROPERTY PURSUANT TO SECTION 83(B) OF THE INTERNAL REVENUE CODE

 

The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:

 

1.                                      The name, address and taxpayer identification number of the undersigned are:

 

Name: (the “Taxpayer”)

 

Address:

 

Social Security No./Taxpayer Identification No.:

 

2.                                      Description of property with respect to which the election is being made:

 

The election is being made with respect to Common Partnership Units in JBG SMITH Properties LP (the “Partnership”).

 

3.                                      The date on which the Common Partnership Units were issued is         , 20  . The taxable year to which this election relates is calendar year 20  .

 

4.                                      Nature of restrictions to which the Common Partnership Units are subject:

 

(a)                                 With limited exceptions, until the Common Partnership Units vest, the Taxpayer may not transfer in any manner any portion of the Common Partnership Units without the consent of the Partnership.

 

(b)                                 The Taxpayer’s Common Partnership Units vest in accordance with the vesting provisions described in the Schedule attached hereto. Unvested Common Partnership Units are forfeited in accordance with the vesting provisions described in the Schedule attached hereto.

 

5.                                      The fair market value at time of transfer (determined without regard to any restrictions other than a nonlapse restriction as defined in Treasury Regulations Section 1.83-3(h)) of the Common Partnership Units with respect to which this election is being made was $• per Common Partnership Unit [EQUALS VALUE OF CONTRIBUTED JBG UNITS].

 

6.                                      The amount paid by the Taxpayer for the Common Partnership Units was $• per Common Partnership Unit [EQUALS AMOUNT FROM 5, ABOVE].

 

7.                                      A copy of this statement has been furnished to the Partnership and JBG SMITH Properties.

 

Exhibit C-4



 

Dated:

 

 

 

 

 

 

 

 

 

 

Name:

 

 

Exhibit C-5



 

SCHEDULE TO EXHIBIT C

 

Vesting Provisions of Common Partnership Units

 

The unvested Common Partnership Units are subject to time-based vesting with a number of Common Partnership Units equal to 1/30 of the total unvested Common Partnership Units issued vesting on each of         , 20  , and on the 1st day of each subsequent month until     , 20  , provided that the Taxpayer remains a member of the Board of Trustees of JBG SMITH Properties through such dates, subject to acceleration in the event of certain extraordinary transactions or termination of the Taxpayer’s service relationship with JBG SMITH Properties (or its affiliate) under specified circumstances. Unvested Common Partnership Units are subject to forfeiture in the event of failure to vest based on the passage of time and continued service.

 

 

JBG SMITH PROPERTIES, a Maryland real estate investment trust

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

Taxpayer

 

Exhibit C-6

 



 

EXHIBIT D

 

The restriction set forth in Section 4(i)(y) shall not apply to Hill Country Hospitality or its affiliates, to the extent Hill Country Hospitality or its affiliates may become a customer or prospective customer of the Company.

 

Exhibit D-1


EX-10.9 21 a17-17912_1ex10d9.htm EX-10.9

Exhibit 10.9

 

JBG SMITH Properties

2017 Employee Share Purchase Plan

 

(As approved by the sole shareholder on July 10, 2017)

 

1.                                      Purpose.

 

The purpose of the 2017 Employee Share Purchase Plan of JBG SMITH Properties, as amended from time to time (the “Plan”), is to promote the financial interests of JBG SMITH Properties (the “Trust”), including its growth and performance, by providing eligible employees of the Trust and its subsidiaries the opportunity to purchase an ownership position in the Trust.  This Plan is not intended to qualify as an “employee stock purchase plan” as defined in Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”).

 

2.                                      Shares Available for Purchase.

 

Subject to adjustment as provided in Section 17, eligible employees may purchase in the aggregate up to a maximum of 2,066,000 common shares, par value $.01, of beneficial interest in the Trust (the “Shares”), plus the number of Shares that are automatically added on January 1 of each year prior to the tenth anniversary of the Effective Date, in an amount equal to the lesser of (A) 0.1% of the total number of Shares outstanding on December 31 of the preceding calendar year and (B) 206,600 Shares.  Notwithstanding the foregoing, the Committee (as defined below) may act prior to January 1 of any calendar year to provide that there will be no increase in the share reserve for that calendar year, or that the increase in the share reserve for that calendar year shall be less than the increase that would otherwise occur pursuant to the preceding sentence.  Shares may be issued upon exercise of an Option from authorized but unissued Shares, from Shares held in the treasury of the Trust, or from any other proper source.  If the total number of Shares specified in elections to be purchased under any Offering (as defined below) plus the number of Shares purchased under previous Offerings under this Plan exceeds the maximum number of Shares issuable under this Plan, the Committee will allot the Shares then available on a pro-rata basis.

 

3.                                      Administration.

 

The Plan shall be administered by the Compensation Committee (the “Committee”) of the Board of Trustees of the Trust (the “Board”).  A majority of the Committee shall constitute a quorum, and the acts of a majority shall be the acts of the Committee.  Notwithstanding anything to the contrary contained herein, the Board may, in its sole discretion, at any time and from time to time, grant awards or administer the Plan.  In any such case, the Board will have all of the authority and responsibility granted to the Committee herein.

 

The Committee shall have the authority to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any agreements entered into hereunder, and to make all other determinations necessary or advisable for the administration of the Plan, based on, among other things, information made available to the Committee by the management of the Trust.  The Committee may correct any defect, supply any omission or reconcile any

 



 

inconsistency in the Plan in the manner and to the extent it shall deem desirable to carry it into effect.  The determinations of the Committee in its administration of the Plan, as described herein, shall be final and conclusive.

 

4.                                      Eligibility.

 

All employees of the Trust and its majority-owned subsidiaries (each, a “Designated Subsidiary”), are eligible to participate in any one or more of the offerings of Options (as defined in Section 11) to purchase Shares under the Plan provided that:

 

(a)           they are customarily employed by the Trust or a Designated Subsidiary for more than twenty (20) hours a week on a regular basis; and

 

(b)           they are employees of the Trust or a Designated Subsidiary on the first day of the applicable Offering Period (as defined below).

 

An employee of the Trust or a Designated Subsidiary who meets the requirements set forth above is eligible to participate in any offerings of Options that commence after the month in which the employee commences employment with the Trust or a Designated Subsidiary.  No employee may be granted an Option hereunder if such employee, immediately after the Option is granted, owns 5% or more of the total combined voting power or value of all classes of shares of the Trust or any subsidiary.

 

5.                                      Offerings.

 

The Committee may from time to time make one or more offerings (“Offerings”) to eligible employees to purchase Shares under this Plan beginning on the date or dates selected by the Committee (the “Offering Commencement Dates”).  The provisions of separate Offerings need not be identical, but the period during which the Offering will be effective (an “Offering Period”) may not exceed 12 months beginning with the Offering Commencement Date.

 

6.                                      Participation.

 

An employee eligible to participate in the Plan on the Offering Commencement Date of any Offering may participate in such Offering by completing and forwarding either a written or electronic payroll deduction authorization form to the employee’s appropriate payroll office at least 5 days prior to the applicable Offering Commencement Date.  The form will authorize a regular payroll deduction from the Compensation received by the employee during the Offering Period.  Unless an employee files a new form or withdraws from the Plan, the employee’s deductions and purchases will continue at the same rate for future Offerings under the Plan as long as the Plan remains in effect.  The term “Compensation” means the employee’s base salary or wages that are actually paid to the employee and that are subject to withholding for Federal income tax purposes, and does not include incentive or bonus awards, commissions, allowances and reimbursements for expenses such as relocation allowances for travel expenses, income or gains associated with the grant or vesting of restricted stock, income or gains on the exercise of stock options or stock appreciation rights, and similar items.

 



 

7.                                      Deductions.

 

The Trust will maintain payroll deduction accounts for all participating employees. With respect to any Offering made under this Plan, an employee may authorize a payroll deduction from 1% to up to a maximum of 15% of the Compensation the employee receives during the Offering Period or such shorter period during which deductions from payroll are made (such deductions to be in whole percentages).  The Committee may, at its discretion, designate a lower maximum contribution rate for any Offering.

 

8.                                      Deduction Changes.

 

An employee may decrease or increase his payroll deduction at any time by filing either a written or electronic new payroll deduction authorization form.  Any such change will only be effective for the immediately succeeding Offering Period.  Notwithstanding the immediately preceding sentence, the Committee may, at its discretion, provide that changes to payroll deductions will be effective during the Offering Period then outstanding.  Any employee may discontinue his payroll deductions at any time by filing either a written or electronic new payroll deduction authorization form.  If an employee elects to discontinue his payroll deductions during an Offering Period, but does not elect to withdraw his funds pursuant to Section 10 hereof, funds deducted prior to his election to discontinue will be applied to the purchase of Shares on the Exercise Date (as defined below).

 

9.                                      Interest.

 

Interest will not be paid on any employee accounts, except to the extent that the Committee, in its sole discretion, elects to credit employee accounts with interest at such rate as it may from time to time determine.

 

10.                               Withdrawal of Funds.

 

An employee may at any time at least fourteen calendar days prior to the close of business on the last business day in an Offering Period, and for any reason, permanently draw out the balance accumulated in the employee’s account and thereby withdraw from participation in an Offering. Partial withdrawals are not permitted. The employee may not begin participation again during the remainder of the Offering Period during which the employee withdrew the employee’s balance. The employee may participate in any subsequent Offering in accordance with terms and conditions established by the Committee.

 

11.                               Purchase of Shares.

 

(a)           Number of Shares.  On the Offering Commencement Date of each Offering Period, the Trust will grant to each eligible employee who is then a participant in the Plan an option (an “Option”) to purchase on the last business day of such Offering Period (the “Exercise Date”) at the applicable purchase price (the “Option Price”) up to two-thousand (2000) Shares; provided, however, that no employee may be granted an Option which permits the employee’s rights to purchase Shares under this Plan to accrue at a rate which exceeds $25,000 of fair market value of such Shares (determined at the date such Option is granted) for each calendar year in which the Option is outstanding at any time.

 

(b)           Option Price.  The Committee shall determine the Option Price for each Offering Period, including whether such Option Price shall be determined based on the lesser of the closing price of the Shares on (i) the first business day of the Offering Period

 



 

or (ii) the Exercise Date, or shall be based solely on the closing price of the Shares on the Exercise Date; providedhowever, that such Option Price shall be at least 85% of the applicable closing price. In the absence of a determination by the Committee, the Option Price will be 85% of the lesser of the closing price of the Shares on (i) the first business day of the Offering Period or (ii) the Exercise Date.  The closing price shall be (a) the closing price (for the primary trading session) on any national securities exchange on which the Shares are listed or (b) the average of the closing bid and asked prices in the over-the-counter market, whichever is applicable, as published in The Wall Street Journal or another source selected by the Committee.  If no sales of Shares were made on such a day, the price of the Shares shall be the reported price for the next preceding day on which sales were made.

 

(c)           Exercise of Option.  Each employee who continues to be a participant in the Plan on the Exercise Date shall be deemed to have exercised his Option at the Option Price on such date and shall be deemed to have purchased from the Trust the number of whole Shares reserved for the purpose of the Plan that his accumulated payroll deductions on such date will pay for, but not in excess of the maximum numbers determined in the manner set forth above.

 

(d)           Return of Unused Payroll Deductions.  Any balance remaining in an employee’s payroll deduction account at the end of an Offering Period will be automatically refunded to the employee, except that any balance that is less than the purchase price of one Share will be carried forward into the employee’s payroll deduction account for the following Offering, unless the employee elects not to participate in the following Offering under the Plan, in which case the balance in the employee’s account shall be refunded.

 

12.                               Issuance of Certificates.

 

Certificates representing Shares purchased under the Plan may be issued only in the name of the employee, in the name of the employee and another person of legal age as joint tenants with rights of survivorship, or (in the Trust’s sole discretion) in the name of a brokerage firm, bank, or other nominee holder designated by the employee.  The Trust may, in its sole discretion and in compliance with applicable laws, authorize the use of book entry registration of Shares in lieu of issuing stock certificates.

 

13.                               Rights on Retirement, Death or Termination of Employment.

 

If a participating employee’s employment ends before the last business day of an Offering Period, no payroll deduction shall be taken from any pay then due and owing to the employee and the balance in the employee’s account shall be paid to the employee.  In the event of the employee’s death before the last business day of an Offering Period, the Trust shall, upon notification of such death, pay the balance of the employee’s account (a) to the executor or administrator of the employee’s estate or (b) if no such executor or administrator has been appointed to the knowledge of the Trust, to such other person(s) as the Trust may, in its discretion, designate.  If, before the last business day of the Offering Period, the Designated Subsidiary by which an employee is employed ceases to be a subsidiary of the Trust, or if the employee is transferred to a subsidiary of the Trust that is not a Designated Subsidiary, the employee shall be deemed to have terminated employment for the purposes of this Plan.

 



 

14.                               Optionees Not Stockholders.

 

Neither the granting of an Option to an employee nor the deductions from the employee’s pay shall make such employee a stockholder of the Shares covered by an Option under this Plan until the employee has purchased and received such Shares.

 

15.                               Options Not Transferable; Holding Period.

 

Options under this Plan are not transferable by a participating employee other than by will or the laws of descent and distribution, and are exercisable during the employee’s lifetime only by the employee.  Each employee agrees, by participating in the Plan, that Shares purchased under the Plan must be held for at least six (6) months from the applicable Exercise Date.

 

16.                               Application of Funds.

 

All funds received or held by the Trust under this Plan may be combined with other corporate funds and may be used for any corporate purpose.

 

17.                               Adjustment for Changes in Shares.

 

In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of Shares other than an ordinary cash dividend, (i) the number and class of securities available under this Plan, (ii) the share limitations set forth in Section 11, and (iii) the Option Price shall be equitably adjusted to the extent determined by the Committee.

 

18.                               Amendment and Termination of the Plan.

 

The Committee may at any time, and from time to time, amend or suspend this Plan or any portion thereof.  This Plan may be terminated at any time by the Committee.  Upon termination of this Plan all amounts in the accounts of participating employees shall be promptly refunded.

 

19.                               Governmental Regulations.

 

The Trust’s obligation to sell and deliver Shares under this Plan is subject to listing on a national stock exchange (to the extent the Shares are then so listed or quoted) and the approval of all governmental authorities required in connection with the authorization, issuance or sale of such stock.

 

20.                               Governing Law.

 

The Plan shall be governed by Maryland law except to the extent that such law is preempted by federal law.

 

21.                               Withholding.

 

If applicable tax laws impose a tax withholding obligation, each affected employee shall, no later than the date of the event creating the tax liability, make provision satisfactory to the Committee for payment of any taxes required by law to be withheld in connection with any transaction related to Options granted to or Shares acquired by such

 



 

employee pursuant to the Plan.  The Trust may, to the extent permitted by law, deduct any such taxes from any payment of any kind otherwise due to an employee.

 

22.          No Right to Employment.

 

The Plan shall not confer upon any employee of the Trust or a Designated Subsidiary any right to continue in the employ of the Trust or Designated Subsidiary, respectively.

 

23.                               Effective Date; Term.

 

The Plan was approved on June 22, 2017 by the Compensation Committee of the Board of Trustees of Vornado Realty Trust and on June 23, 2017 by the Board of Trustees of the Trust, in each case subject to the approval of Vornado Realty L.P. (as the sole shareholder of the Trust), and shall be effective as of the date the Trust is separated from Vornado Realty Trust (the “Effective Date”). Unless terminated earlier pursuant to Section 18, the Plan shall have a term of ten years, commencing as of the Effective Date.

 


EX-10.10 22 a17-17912_1ex10d10.htm EX-10.10

Exhibit 10.10

 

 

 

JBG SMITH Properties

 

2017 Omnibus Share Plan

 

(As approved by shareholders on July 10, 2017)

 

 

 



 

Table of Contents

 

1.

Purpose

2

 

 

 

2.

Shares Available for Awards

2

 

 

 

3.

Administration

3

 

 

 

4.

Eligibility

4

 

 

 

5.

Awards

4

 

 

 

6.

Stock Options

5

 

 

 

7.

Stock Appreciation Rights

5

 

 

 

8.

Performance Shares

6

 

 

 

9.

Restricted Stock

6

 

 

 

10.

Other Stock-Based Awards

6

 

 

 

11.

Operating Partnership Units

8

 

 

 

12.

Award Agreements

9

 

 

 

13.

Withholding

9

 

 

 

14.

Nontransferability

12

 

 

 

15.

No Right to Employment

12

 

 

 

16.

Adjustment of and Changes in Shares

12

 

 

 

17.

Amendment

13

 

 

 

18.

Section 409A

13

 

 

 

19.

Effective Date

13

 

1



 

1.                                      Purpose

 

The purpose of the 2017 Omnibus Share Plan of JBG SMITH Properties, as amended from time to time (the “Plan”), is to promote the financial interests of JBG SMITH Properties (the “Trust”), including its growth and performance, by encouraging employees of the Trust and its subsidiaries, including officers (together, the “Employees”), its non-employee trustees of the Trust and non-employee directors of its subsidiaries (together, the “Non-Employee Trustees”), and certain non-employee advisors and consultants that provide bona fide services to the Trust or its subsidiaries (together, the “Consultants”) to acquire an ownership position in the Trust, enhancing the ability of the Trust and its subsidiaries to attract and retain Employees, Non-Employee Trustees and Consultants of outstanding ability, and providing Employees, Non-Employee Trustees and Consultants with a way to acquire or increase their proprietary interest in the Trust’s success and to further align the interests of the Employees, Non-Employee Trustees and Consultants with shareholders of the Trust.

 

2.                                      Shares Available for Awards

 

Subject to the provisions of this Section 2 or any adjustment as provided in Section 18, awards may be granted under the Plan with respect to 10,330,200 Share Equivalents (as defined below), which, in accordance with the share counting provisions of this Section 2, would result in the issuance of up to a maximum of 10,330,200  common shares, par value $.01, of beneficial interest in the Trust (the “Shares”) if all awards granted under the Plan were Full Value Awards (as defined below) and 10,330,200  Shares if all awards granted under the Plan were not Full Value Awards.  No Participant (as defined in Section 3) who is an Employee shall be granted during any period of 12 consecutive months stock options, stock appreciation rights or any award intended to be “performance-based compensation” (as that term is used in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”)) with respect to more than 2,582,500 Shares (subject to adjustment as provided in Section 18).  The Shares issued under the Plan may be authorized and unissued Shares or treasury Shares, as the Trust may from time to time determine.  Any Shares that are subject to awards that are not Full Value Awards shall be counted against the number of Share Equivalents available for the grant of awards under the Plan, as set forth in the first sentence of this Section 2, as one Share Equivalent for every Share granted pursuant to an award; any Shares that are subject to awards that are Full Value Awards shall be counted as one Share Equivalent for every Share granted pursuant to an award.  “Full Value Award” means an award under the Plan other than a stock option, stock appreciation right or other award that does not deliver to a Participant on the grant date of such award the full value of the underlying Shares or underlying OP Units (as defined in Section 11).  “Share Equivalent” shall be the measuring unit for purposes of the Plan to determine the number of Shares that may be subject to awards hereunder, which number of Shares shall not in any event exceed 10,330,200, subject to the provisions of this Section 2 or any adjustment as provided in Section 18.

 

The Committee (as defined in Section 3) may, without affecting the number of Share Equivalents available pursuant to this Section 2, authorize the issuance or assumption of benefits under the Plan in connection with any merger, consolidation, acquisition of property or stock, reorganization or similar transaction upon such terms and conditions as it may deem appropriate, subject to compliance with Section 409A (as defined in Section 18) and any other applicable provisions of the Code.

 

2



 

Shares subject to an award granted under the Plan that expires unexercised, that is forfeited, terminated or cancelled, in whole or in part, or is paid in cash in lieu of Shares, shall thereafter again be available for grant under the Plan; provided, however, that the number of Share Equivalents that shall again be available for the grant under the Plan shall be increased by one Share Equivalent for each Share that is subject to a Full Value Award at the time such Full Value Award expires or is forfeited, terminated or cancelled and by one Share Equivalent for each Share that is subject to an award that is not a Full Value Award at the time such award expires or is forfeited, terminated or cancelled.  Awards that use Shares as a reference but that are paid or settled in whole or in part in cash shall not affect the number of Share Equivalents available under the Plan pursuant to this Section 2 to the extent paid or settled in cash.  The number of Share Equivalents available for the purpose of awards under the Plan shall be reduced by (i) one of the gross number of Shares for which stock options or stock appreciation rights are exercised, regardless of whether any of the Shares underlying such awards are not actually issued to the Participant as the result of a net settlement and (ii) one of any Shares withheld to satisfy any tax withholding obligation with respect to any award that is not a Full Value Award and one Share for each Share withheld to satisfy any tax withholding obligation with respect to any Full Value Award, as described further in Section 15.

 

The maximum aggregate number of Shares that may be issued under the Plan pursuant to the exercise of incentive stock options within the meaning of Section 422 of the Code shall not exceed 10,330,200 Shares (as adjusted pursuant to the provisions of Section 18).

 

3.                                      Administration

 

The Plan shall be administered by the Compensation Committee (the “Committee”) of the Board of Trustees of the Trust.  A majority of the Committee shall constitute a quorum, and the acts of a majority shall be the acts of the Committee.  Notwithstanding anything to the contrary contained herein, the Board of Trustees may, in its sole discretion, at any time and from time to time, grant awards or administer the Plan.  In any such case, the Board of Trustees will have all of the authority and responsibility granted to the Committee herein.

 

Subject to the provisions of the Plan, the Committee shall select the Employees, Non-Employee Trustees and Consultants who will be participants in the Plan (together, the “Participants”).  The Committee shall (i) determine the type of awards to be made to Participants, determine the Shares or share units subject to awards, and (ii) have the authority to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any agreements entered into hereunder, and to make all other determinations necessary or advisable for the administration of the Plan, based on, among other things, information made available to the Committee by the management of the Trust.  The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any award in the manner and to the extent it shall deem desirable to carry it into effect.  The determinations of the Committee in its administration of the Plan, as described herein, shall be final and conclusive.

 

3



 

4.                                      Eligibility

 

All Employees who have demonstrated significant management potential or who have the capacity for contributing in a substantial measure to the successful performance of the Trust, as determined by the Committee, and Non-Employee Trustees and Consultants, as determined by the Committee, are eligible to be Participants in the Plan.

 

5.                                      Awards

 

Awards under the Plan may consist of the following:  stock options (either incentive stock options within the meaning of Section 422 of the Code or non-qualified stock options), stock appreciation rights, performance shares, grants of restricted stock and other-stock based awards, including OP Units (as defined in Section 11).  Awards of performance shares, restricted stock or share units and other-stock based awards may provide the Participant with dividends or dividend equivalents and voting rights prior to vesting (whether based on a period of time or based on attainment of specified performance conditions).  Unless the Committee otherwise specifies in the award agreement, if dividends or dividend equivalent rights are granted, dividends and dividend equivalents shall be paid to the Participant at the same time as the Trust pays dividends to common shareholders (even if the Shares subject to the underlying award are held by the Trust) but not less than annually and not later than the fifteenth day of the third month following the end of the calendar year in which the dividends or dividend equivalents are credited (or, if later, the fifteenth day of the third month following the end of the calendar year in which the dividends or dividend equivalents are no longer subject to a “substantial risk of forfeiture” within the meaning of Section 409A (as defined in Section 18)); provided, however, that dividend and dividend equivalent payments in the case of an award that is subject to performance vesting conditions shall be treated as unvested so long as such award remains unvested, and any such dividend and dividend equivalent payments that would otherwise have been paid during the vesting period shall instead be accumulated (and, if paid in cash, reinvested in additional Shares based on the Surrender Value (as defined in Section 6) of the Shares on the date of reinvestment) and paid within 30 days following the date on which such award is determined by the Committee to have satisfied such performance vesting conditions.  Any dividends or dividend equivalents that are accumulated and paid after the date specified in the preceding sentence may be treated separately from the right to other amounts under the award.

 

Notwithstanding any other provision of the Plan to the contrary, Full Value Awards (a) that vest on the basis of the Participant’s continued employment or service shall be subject to a minimum vesting schedule of at least three years (with no more than one-third of the Shares subject thereto vesting earlier than a date 60 days prior to the first anniversary of the date on which such award is granted and on each of the next two anniversaries of such initial vesting date) and (b) that vest on the basis of the attainment of performance goals shall provide for a performance period that ends no earlier than 60 days prior to the first anniversary of the commencement of the period over which performance is evaluated; provided, however, that the foregoing limitations shall not preclude the acceleration of vesting of any such award upon the involuntary termination, death, disability or retirement of the Participant or upon an actual change in control (and not, for example, the commencement of a tender offer for the Trust’s shares or shareholder approval of a transaction that, if consummated, would result in an actual change in control).  Notwithstanding the foregoing, (i) Full Value Awards with respect to 5% of the

 

4



 

maximum aggregate number of Share Equivalents available for the purpose of awards under the Plan pursuant to Section 2 may be granted under the Plan to any one or more Participants without respect to such minimum vesting provisions and (ii) Full Value Awards granted in connection with the Spinoff (as defined in Section 21) shall not be subject to the provisions of this paragraph and shall not be counted against the 5% exception in clause (i).

 

6.                                      Stock Options

 

The Committee shall establish the option price at the time each stock option is granted, which price shall not be less than 100% of the Fair Market Value (as defined below) of the Shares on that date.  Stock options shall be exercisable for such period as specified by the Committee but in no event may options be exercisable more than ten years after their date of grant.  The option price of each Share as to which a stock option is exercised shall be paid in full at the time of such exercise.  Such payment shall be made (i) in cash, (ii) by tender of Shares owned by the Participant valued at Surrender Value as of the date of exercise, (iii) to the extent approved by the Committee in its sole discretion, by surrender of all or part of the Shares issuable upon exercise of the option by the largest whole number of Shares with a Surrender Value that does not exceed the aggregate exercise price; provided, however, that the Trust shall accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole Shares to be issued, (iv) in such other consideration as the Committee deems appropriate, or (v) by a combination of cash, Shares and such other consideration.

 

For purposes of the Plan, (i) “Fair Market Value” means, with respect to a Share, the average of the high and the low prices reported for the Shares on the applicable date as reported on the New York Stock Exchange or, if not so reported, as determined in accordance with a valuation methodology approved by the Committee in a manner consistent with Section 409A, unless determined as otherwise specified herein; provided that the “Fair Market Value” for purposes of any award granted in connection with the Spinoff pursuant to a legally binding right that existed prior to the Spinoff may be determined based on the volume-weighted average trading price of the Shares for up to 20 trading days following (but not including) the date of the Spinoff, and (ii) “Surrender Value” means, with respect to a Share, the closing price reported for the Shares on the applicable date as reported on the New York Stock Exchange or, if not so reported, as determined in accordance with a valuation methodology approved by the Committee in a manner consistent with Section 409A, unless determined as otherwise specified herein.  For purposes of the grant of any award, the applicable date will be the trading day on which the award is granted or, if the date the award is granted is not a trading day, the trading day immediately prior to the date the award is granted.  For purposes of the exercise of any award, the applicable date is the date a notice of exercise is received by the Trust or, if such date is not a trading day, the trading day immediately following the date a notice of exercise is received by the Trust.

 

7.                                      Stock Appreciation Rights

 

Stock appreciation rights may be granted in tandem with a stock option, in addition to a stock option, or may be freestanding and unrelated to a stock option.  Stock appreciation rights granted in tandem with or in addition to a stock option may be granted either at the same time as the stock option or at a later time.  The Committee shall

 

5



 

establish the grant price of each stock appreciation right granted at the time each such stock appreciation right is granted, which price shall not be less than 100% of the Fair Market Value of the Shares subject to such award on that date.  A stock appreciation right shall entitle the Participant to receive from the Trust an amount equal to the increase of the Fair Market Value of the Shares on the exercise of the stock appreciation right over the grant price.  The Committee, in its sole discretion, shall determine whether the stock appreciation right shall be settled in cash, Shares or a combination of cash and Shares.

 

8.                                      Performance Shares

 

Performance shares may be granted in the form of actual Shares or share units having a value equal to an identical number of Shares.  In the event that a certificate is issued in respect of Shares subject to a grant of performance shares, such certificate shall be registered in the name of the Participant but shall be held by the Trust until the time the Shares subject to the grant of performance shares are earned.  The performance conditions and the length of the performance period shall be determined by the Committee.  The Committee, in its sole discretion, shall determine whether performance shares granted in the form of share units shall be paid in cash, Shares, or a combination of cash and Shares.

 

Notwithstanding anything to the contrary herein, performance shares granted under this Section 8 may, at the discretion of the Committee, be granted in a manner which is intended to be deductible by the Trust under Section 162(m) of the Code.  In such event, the Committee shall follow procedures substantially equivalent to those set forth in Section 10 for Performance-Based Awards (as defined in Section 10).

 

9.                                      Restricted Stock

 

Restricted stock may be granted in the form of actual Shares or share units having a value equal to an identical number of Shares.  In the event that a certificate is issued in respect of Shares subject to a grant of restricted stock, such certificate shall be registered in the name of the Participant but shall be held by the Trust until the end of the restricted period.  The employment conditions and the length of the period for vesting of restricted stock shall be established by the Committee at time of grant.  The Committee, in its sole discretion, shall determine whether restricted stock granted in the form of share units shall be paid in cash, Shares, or a combination of cash and Shares.

 

Notwithstanding anything to the contrary herein, restricted stock granted under this Section 9 may, at the discretion of the Committee, be granted in a manner which is intended to be deductible by the Trust under Section 162(m) of the Code.  In such event, the Committee shall follow procedures substantially equivalent to those set forth in Section 10 for Performance-Based Awards.

 

10.                               Other Stock-Based Awards

 

Other types of equity-based or equity-related awards (including the grant or offer for sale of unrestricted Shares and performance stock and performance units settled in shares or cash) may be granted under such terms and conditions as may be determined by the Committee in its sole discretion.

 

6



 

Notwithstanding anything to the contrary herein, any other stock-based awards may, at the discretion of the Committee, be granted in a manner that is intended to be deductible by the Trust under Section 162(m) of the Code (a “Performance-Based Award”).  In such event, the Committee shall follow the following procedures:

 

A Participant’s Performance-Based Award shall be determined based on the attainment of written objective performance goals approved by the Committee for a performance period generally of one year established by the Committee (i) while the outcome for that performance period is substantially uncertain and (ii) no more than 90 days after the commencement of the performance period to which the performance goal relates or, if less, the number of days which is equal to 25% of the relevant performance period.  At the same time as the performance goals are established, the Committee will prescribe a formula to determine the amount of the Performance-Based Award that may be payable based upon the level of attainment of the performance goal during the performance period.

 

The performance goals shall be based on one or more of the following business criteria (either separately or in combination) with regard to the Trust (or a subsidiary, division, other operational unit or administrative department of the Trust):  (i) pre-tax income, (ii) after-tax income, (iii) net income (meaning net income as reflected in the Trust’s financial reports for the applicable period, on an aggregate, diluted and/or per share basis), (iv) operating income, (v) cash flow, (vi) earnings per share, (vii) return on equity, (viii) return on invested capital or assets, (ix) cash and/or funds available for distribution, (x) appreciation in the Fair Market Value of Shares, (xi) return on investment, (xii) total return to shareholders, (xiii) net earnings growth, (xiv) stock appreciation (meaning an increase in the price or value of the Shares after the date of grant of an award and during the applicable period), (xv) related return ratios, (xvi) increase in revenues, (xvii) net earnings, (xviii) changes (or the absence of changes) in the per share or aggregate market price of the Shares, (xix) number of securities sold, (xx) earnings before any one or more of the following items:  interest, taxes, depreciation or amortization for the applicable period, as reflected in the Trust’s financial reports for the applicable period, (xxi) total revenue growth (meaning the increase in total revenues after the date of grant of an award and during the applicable period, as reflected in the Trust’s financial reports for the applicable period), (xxii) total shareholder return, (xxiii) funds from operations, as determined and reported by the Trust in its financial reports and (xxiv) increase in net asset value per Share.

 

Performance criteria may be absolute amounts or percentages of amounts or may be relative to the performance of a peer group of real estate investment trusts or other corporations or indices.

 

Except as otherwise expressly provided, all financial terms are used as defined under Generally Accepted Accounting Principles (“GAAP”) and all determinations shall be made in accordance with GAAP, as applied by the Trust in the preparation of its periodic reports to shareholders.

 

In addition, the performance goals may be based upon the attainment of specified levels of Trust (or subsidiary, division, other operational unit or administrative department of the Trust) performance under one or more of the measures described above relative to the performance of other real estate investment trusts or the historic performance of the Trust.  To the extent permitted by Section 162(m) of the Code, unless the Committee

 

7



 

provides otherwise at the time of establishing the performance goals, for each fiscal year of the Trust, the Committee may (i) designate additional business criteria on which the performance goals may be based or (ii) provide for objectively determinable adjustments, modifications or amendments, as determined in accordance with GAAP, to any of the performance criteria described above for one or more of the items of gain, loss, profit or expense:  (A) determined to be extraordinary or unusual in nature or infrequent in occurrence, (B) related to the disposal of a segment of a business, (C) related to a change in accounting principle under GAAP, (D) related to discontinued operations that do not qualify as a segment of business under GAAP, and (E) attributable to the business operations of any entity acquired by the Trust during the fiscal year.

 

Following the completion of each performance period, the Committee shall have the sole discretion to determine, based on information made available to the Committee by the management of the Trust, whether the applicable performance goals have been met with respect to a given Participant and, if they have, shall so certify and ascertain the amount of the applicable Performance-Based Award.  No Performance-Based Awards will be paid for such performance period until such certification is made by the Committee.  The amount of the Performance-Based Award actually paid to a given Participant may be less (but not more) than the amount determined by the applicable performance goal formula, at the discretion of the Committee.  The amount of the Performance-Based Award determined by the Committee for a performance period shall be paid to the Participant at such time as determined by the Committee in its sole discretion, after the end of such performance period and after the Committee’s certification described above.

 

11.                               Operating Partnership Units

 

Awards may be granted under the Plan in the form of undivided fractional limited partnership interests in JBG SMITH Properties LP (together with any successor entity, the “Operating Partnership”), a Delaware limited partnership, the entity through which the Trust conducts its business and an entity that has elected to be treated as a partnership for federal income tax purposes, of one or more classes (“OP Units”) established pursuant to the Operating Partnership’s agreement of limited partnership, as amended from time to time.  Awards of OP Units shall be valued by reference to, or otherwise determined by reference to or based on, Shares.  OP Units awarded under the Plan may be (1) convertible, exchangeable or redeemable for other limited partnership interests in the Operating Partnership (including OP Units of a different class or series) or Shares, or (2) valued by reference to the book value, fair value or performance of the Operating Partnership.  Awards of OP Units are intended to qualify as “profits interests” within the meaning of IRS Revenue Procedure 93-27, as clarified by IRS Revenue Procedure 2001-43, with respect to a Participant in the Plan who is rendering services to or for the benefit of the Operating Partnership, including its subsidiaries.

 

For purposes of calculating the number of Shares underlying an award of OP Units relative to the total number of Share Equivalents available for issuance under the Plan, the Committee shall establish in good faith the maximum number of Shares to which a Participant receiving such award of OP Units may be entitled upon fulfillment of all applicable conditions set forth in the relevant award documentation, including vesting conditions, partnership capital account allocations, value accretion factors, conversion ratios, exchange ratios and other similar criteria.  If and when any such conditions are no longer capable of being met, in whole or in part, the number of Shares underlying such awards of OP Units shall be reduced accordingly by the Committee, and the number of

 

8



 

Share Equivalents shall be increased by one Share Equivalent for each Share so reduced.  Awards of OP Units may be granted either alone or in addition to other awards granted under the Plan.  The Committee shall determine the eligible Participants to whom, and the time or times at which, awards of OP Units shall be made; the number of OP Units to be awarded; the price, if any, to be paid by the Participant for the acquisition of such OP Units; and the restrictions and conditions applicable to such award of OP Units.  Conditions may be based on continuing employment (or other service relationship), computation of financial metrics (including with reference to the book value of the Operating Partnership or the value of shares of common stock of the Trust) and/or achievement of pre-established performance goals and objectives, with related length of the service period for vesting, minimum or maximum performance thresholds, measurement procedures and length of the performance period to be established by the Committee at the time of grant, in its sole discretion.  The Committee may allow awards of OP Units to be held through a limited partnership, or similar “look-through” entity, and the Committee may require such limited partnership or similar entity to impose restrictions on its partners or other beneficial owners that are not inconsistent with the provisions of this Section 11.  The provisions of the grant of OP Units need not be the same with respect to each Participant.

 

Notwithstanding Section 5 of the Plan, the award agreement or other award documentation in respect of an award of OP Units may provide that the recipient of an award under this Section 11 shall be entitled to receive, currently or on a deferred or contingent basis, dividends or dividend equivalents with respect to the number of Shares underlying the award or other distributions from the Operating Partnership prior to vesting (whether based on a period of time or based on attainment of specified performance conditions), as determined at the time of grant by the Committee, in its sole discretion, and the Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional Shares or OP Units.

 

OP Units awarded under this Section 11 may be issued for no cash consideration.

 

12.                               Award Agreements

 

Each award under the Plan shall be evidenced by an agreement setting forth the terms and conditions, as determined by the Committee, which shall apply to such award, in addition to the terms and conditions specified in the Plan.

 

13.                               Change in Control

 

In the event of a Change in Control, a Participant’s award will be treated as set forth in the applicable award agreement, or, in the case of OP Units, shall also be governed by the applicable agreement of the limited partnership of the Operating Partnership and any exhibits thereto.  In addition, notwithstanding the foregoing, in the event of a Change in Control, to the extent determined by the Committee to be permitted under Section 409A, the Committee may take one or more of the following actions with respect to outstanding awards, in its sole discretion: (i) settle such awards for an amount (as determined in the sole discretion of the Committee) of cash or securities, where in the case of stock options and stock appreciation rights, the value of such amount, if any, will be equal to the in-the-money spread value (if any) of such awards; (ii) provide for the assumption of or the issuance of substitute awards that will substantially preserve the otherwise applicable terms of any affected Awards previously granted under the Plan, as

 

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determined by the Committee in its sole discretion; (iii) modify the terms of such awards to add events, conditions or circumstances (including termination of employment within a specified period after a Change in Control) upon which the vesting of such Awards or lapse of restrictions thereon will accelerate; (iv) deem any performance conditions satisfied at target, maximum or actual performance through closing or provide for the performance conditions to continue (as is or as adjusted by the Committee) after closing or (v) provide that for a period of at least 20 days prior to the Change in Control, any stock options or stock appreciation rights that would not otherwise become exercisable prior to the Change in Control will be exercisable as to all Shares subject thereto (but any such exercise will be contingent upon and subject to the occurrence of the Change in Control and if the Change in Control does not take place within a specified period after giving such notice for any reason whatsoever, the exercise will be null and void) and that any stock options or stock appreciation rights not exercised prior to the consummation of the Change in Control will terminate and be of no further force and effect as of the consummation of the Change in Control.  For the avoidance of doubt, in the event of a Change in Control where all stock options and stock appreciation rights are settled for an amount (as determined in the sole discretion of the Committee) of cash or securities, the Committee may, in its sole discretion, terminate any stock option or stock appreciation right for which the exercise price is equal to or exceeds the per share value of the consideration to be paid in the Change in Control transaction without payment of consideration therefor.

 

Unless otherwise set forth in an award agreement, a “Change in Control” of the Trust means the occurrence of one of the following events:

 

(i)            Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (1) the then-outstanding Common Shares (the “Outstanding Trust Common Stock”) or (2) the combined voting power of the then-outstanding voting securities of the Trust entitled to vote generally in the election of directors (the “Outstanding Trust Voting Securities”); provided, however, that, for purposes of this Section 13(i), the following acquisitions shall not constitute a Change of Control:  (a) any acquisition directly from the Trust, (b) any acquisition by the Trust, (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Trust or any of its affiliates or (d) any acquisition by any entity pursuant to a transaction that complies with Sections 13(iii)(1), (2) and (3);

 

(ii)           Any time at which individuals who, as of the date hereof, constitute the Board of Directors of the Trust (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors of the Trust (the “Board”); provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Trust’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

 

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(iii)          Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Trust or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Trust, or the acquisition of assets or stock of another entity by the Trust or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Trust Common Stock and the Outstanding Trust Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Trust or all or substantially all of the Trust’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Trust Common Stock and the Outstanding Trust Voting Securities, as the case may be, (2) no Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Trust or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding shares of common stock of the entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity, except to the extent that such ownership existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

 

(iv)          Approval by the stockholders of the Trust of a complete liquidation or dissolution of the Trust.

 

14.                               Clawback/Forfeiture

 

Awards granted under the Plan will be subject to the requirement that the awards be repaid to the Trust after they have been distributed to the Participant (x) to the extent set forth in this Plan or an award agreement or (y) to the extent the Participant is, or in the future becomes, subject to (1) any Trust clawback or recapture policy, including any such policy that is adopted to comply with the requirements of any applicable laws, or (2) any applicable laws which impose mandatory recoupment, under circumstances set forth in such applicable laws.

 

15.                               Withholding

 

The Trust shall have the right to deduct from any payment to be made pursuant to the Plan, or to require prior to the issuance or delivery of any Shares or the payment of cash under the Plan, any taxes required by law to be withheld therefrom.  The Committee, in its sole discretion, may permit a Participant who is an employee of the Trust or its subsidiaries to elect to satisfy such withholding obligation by having the Trust retain the number of Shares whose Fair Market Value equals the minimum statutory amount of taxes required by applicable law to be withheld.  Any fraction of a Share required to satisfy

 

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such obligation shall be disregarded, and the amount due shall instead be paid in cash to or by the Participant, as the case may be.

 

16.                               Nontransferability

 

No award under the Plan shall be assignable or transferable except by will or the laws of descent and distribution, and no right or interest of any Participant shall be subject to any lien, obligation or liability of the Participant.  Notwithstanding the foregoing, the Committee may determine, at the time of grant or thereafter, that an award (other than stock options intended to be incentive stock options within the meaning of Section 422 of the Code) is transferable by the Participant to such Participant’s immediate family members (or trusts, partnerships, or limited liability companies established for such immediate family members).  For this purpose, immediate family member means, except as otherwise defined by the Committee, the Participant’s children, stepchildren, grandchildren, parents, stepparents, grandparents, spouse, siblings (including half brothers and sisters), in-laws and persons related by reason of legal adoption.  Such transferees may transfer an award only by will or the laws of descent or distribution.  An award transferred pursuant to this Section 16 shall remain subject to the provisions of the Plan, and shall be subject to such other rules as the Committee shall determine.  Upon transfer of a stock option, any related stock appreciation right shall be canceled.  Except in the case of a holder’s incapacity, an award shall be exercisable only by the holder thereof.

 

17.                               No Right to Employment

 

No person shall have any claim or right to be granted an award, and the grant of an award shall not be construed as giving a Participant any right to continue his or her service to the Trust or its subsidiaries as an Employee, Non-Employee Trustee or Consultant.  Further, the Trust and its subsidiaries expressly reserve the right at any time to dismiss a Participant free from any liability, or any claim under the Plan, except as provided herein or in any agreement entered into hereunder.

 

18.                               Adjustment of and Changes in Shares

 

In the event of any change in the outstanding Shares by reason of any share dividend or split, reverse split, recapitalization, merger, consolidation, spinoff, combination or exchange of Shares or other corporate change, or any distributions to common shareholders other than regular cash dividends, the Committee shall make such substitution or adjustment, if any, as it deems to be equitable, as to (i) the number of Share Equivalents for which awards may be granted under the Plan, (ii) the number or kind of Shares or other securities issued or reserved for issuance pursuant to outstanding awards, (iii) the individual Participant limitation set forth in Section 2, and (iv) the number of Shares set forth in Section 2 that can be issued through incentive stock options within the meaning of Section 422 of the Code; provided, however, that no such substitution or adjustment shall be required if the Committee determines that such action could cause an award to fail to satisfy the conditions of an applicable exception from the requirements of Section 409A of the Code (“Section 409A”) or otherwise could subject a Participant to the additional tax imposed under Section 409A in respect of an outstanding award; and further provided that no Participant shall have the right to require the Committee to make any adjustment or substitution under this Section 18 or have any claim or right whatsoever against the Trust or any of its subsidiaries or affiliates or any of their

 

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respective trustees, directors, officer or employees in respect of any action taken or not taken under this Section 18.

 

19.                               Amendment

 

The Committee may amend or terminate the Plan or any portion thereof from time to time, provided that no amendment shall be made without shareholder approval if such amendment (i) would increase the maximum aggregate number of Shares that may be issued under the Plan (other than pursuant to Section 18), (ii) would materially modify the requirements for participation in the Plan, (iii) would result in a material increase in the benefits accrued to Participants under the Plan, (iv) would reduce the exercise price of outstanding stock options or stock appreciation rights or cancel outstanding stock options or stock appreciation rights in exchange for cash, other awards or stock options or stock appreciation rights with an exercise price that is less than the exercise price of the original stock options or stock appreciation rights (other than pursuant to Section 18) or (v) requires shareholder approval to comply with any applicable laws, regulations or rules, including the rules of a securities exchange or self-regulatory agency.  Notwithstanding anything contrary in this Plan, if there is a change in applicable tax law such that OP Units become taxable to the holder of such OP Units as ordinary income, the Operating Partnership, at any time at the election of the general partner of the Operating Partnership, may cause the OP Units to be restructured and/or substituted for other awards in a way that permits a tax deduction to the Operating Partnership or the Trust while preserving substantially similar pre-tax economics to the holder of such OP Units.

 

20.                               Section 409A

 

It is the Trust’s intent that awards under the Plan be exempt from, or comply with, the requirements of Section 409A, and that the Plan be administered and interpreted accordingly.  If and to the extent that any award made under the Plan is determined by the Trust to constitute “non-qualified deferred compensation” subject to Section 409A and is payable to a Participant by reason of the Participant’s termination of employment, then (a) such payment or benefit shall be made or provided to the Participant only upon a “separation from service” as defined for purposes of Section 409A under applicable regulations and (b) if the Participant is a “specified employee” (within the meaning of Section 409A and as determined by the Trust), such payment or benefit shall not be made or provided before the date that is six months after the date of the Participant’s separation from service (or the Participant’s earlier death).

 

21.                               Effective Date

 

The Plan was adopted on June 23, 2017 by the Board of Trustees of the Trust, subject to the approval of Vornado Realty Trust (as the sole shareholder of the Trust), and shall be effective as of the date the Trust is separated (the “Spinoff”) from Vornado Realty Trust (the “Effective Date”).  Subject to earlier termination pursuant to Section 19, the Plan shall have a term of ten years from the Effective Date; provided, however, that all awards made under the Plan before its termination, and the Committee’s authority to administer the terms of such awards, will remain in effect until such awards have been satisfied or terminated in accordance with the terms and provisions of the Plan and the applicable award agreements.

 

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EX-10.11 23 a17-17912_1ex10d11.htm EX-10.11

EXHIBIT 10.11

 

EXECUTION VERSION

 

EMPLOYMENT AGREEMENT

 

Employment Agreement (the “Agreement”), dated as of July 17, 2017, by and between JBG SMITH Properties, a Maryland real estate investment trust (together with its affiliates, the “Company”), with its principal offices in Chevy Chase, Maryland and Stephen W. Theriot (“Executive”).

 

Recitals

 

The Company and Executive desire to set forth the terms upon which Executive will enter into employment with the Company;

 

Vornado Realty Trust, a Maryland real estate investment trust and Vornado Realty L.P., a Delaware limited partnership (the “Vornado Parties”), and JBG Properties Inc., a Maryland corporation and JBG/Operating Partners, L.P., a Delaware limited partnership, together with certain JBG entities (the “JBG Parties”), and the Company, have entered into the Master Transaction Agreement, dated as of October 31, 2016 (the “Transaction Agreement”), pursuant to which the Vornado Parties and the JBG Parties will effectuate a series of transactions resulting in the acquisition, transfer and contribution of assets and interests to JBG SMITH Properties and JBG SMITH LP, a Delaware limited partnership; and

 

Executive and the Company are entering into this Agreement, which will become effective contingent upon and as of the Closing Date (as defined in the Transaction Agreement).

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth below, the parties hereby agree as follows:

 

Agreement

 

1.                                      Employment.  The Company hereby agrees to employ Executive, and Executive hereby accepts such employment, on the terms and conditions hereinafter set forth.

 

2.                                      Term. The term of Executive’s employment hereunder by the Company will commence on the Closing Date (the “Effective Date”) and will continue for three years thereafter (the “Initial Period”).  On the third anniversary of the Effective Date, the term will automatically renew for one year periods unless either party notifies in writing the other party of nonrenewal at least 180 days prior to the renewal date (the Initial Period and any subsequent renewal periods, the “Employment Period”).  The effectiveness of this Agreement is contingent on the occurrence of the Closing (as defined in the Transaction Agreement).  If the Transaction Agreement terminates in accordance with its terms or the Closing does not occur for any reason, this Agreement will be void ab initio.

 

3.                                      Position and Duties. During the Employment Period, Executive will serve as Chief Financial Officer of the Company and will report to the Company’s Chief Executive Officer. Executive will have those powers and duties normally associated with the position of Chief Financial Officer and such other powers and duties as may be reasonably prescribed by or at the direction of the Chief Executive Officer or the board of trustees of the Company (the “Board”), provided that such other powers and duties are consistent with Executive’s position as Chief Financial Officer of the Company. Executive will devote

 



 

substantially all of his working time, attention and energies during normal business hours (other than absences due to illness or vacation) to the performance of his duties for the Company and its affiliates. Without the consent of the Board, during the Employment Period, Executive will not serve on the board of directors, trustees or any similar governing body of more than one for-profit entity (with the exception of any entity which has been disclosed to the Company on a list provided to the Company by Executive coincident with the execution of this Agreement).  Notwithstanding the above, Executive will be permitted, to the extent such activities do not substantially interfere with the performance by Executive of his duties and responsibilities hereunder or violate Section 11(a), (b) or (c) of this Agreement, to (i) manage Executive’s (and his immediate family’s) personal, financial and legal affairs, and (ii) serve on civic or charitable boards or committees (it being expressly understood and agreed that Executive’s continuing to serve on the board and/or committees on which Executive is serving, or with which Executive is otherwise associated, as of the Effective Date (each of which has been disclosed to the Company on a list provided to the Company by Executive coincident with the execution of this Agreement), will be deemed not to interfere with the performance by Executive of his duties and responsibilities under this Agreement).

 

4.                                      Place of Performance. The place of employment of Executive will be at the Company’s offices in the Washington D.C. metropolitan area.

 

5.                                      Compensation and Related Matters.

 

(a)                                 Base Salary.  During the Employment Period, the Company will pay Executive a base salary at the rate of not less than $550,000 per year (“Base Salary”). Executive’s Base Salary will be paid in approximately equal installments in accordance with the Company’s customary payroll practices. Executive’s Base Salary shall be reviewed at least annually for possible increase, but not decrease. If Executive’s Base Salary is increased by the Company, such increased Base Salary will then constitute the Base Salary for all purposes of this Agreement.

 

(b)                                 Annual Bonus. During the Employment Period, Executive will be entitled to receive an annual bonus (“Annual Bonus”) of 100% of Base Salary at target performance, with the actual amount earned payable in cash. Such bonus shall be paid no later than March 15th of the year following the year in which it was earned.

 

(c)                                  Annual Long-Term Incentive Awards.

 

(i)                                     As soon as reasonably practicable after the Effective Date, Executive will receive a grant under the Company’s long-term incentive compensation plan (the “LTI Plan”) of a number of equity awards equal to $1,000,000, divided by the volume-weighted average price of the Company’s stock on the NYSE for the 10 trading days immediately preceding the grant date, comprised of 50% long-term incentive partnership units (the “2017 LTIP Units”), and 50% outperformance plan units (assuming the achievement of target-level performance), (the “2017 OPP Units”) which will have such terms and conditions as set forth in the applicable award agreements issued pursuant to the LTI Plan.  The 2017 LTIP Units will vest in equal annual installments on the 1st through 4th anniversary of the Effective Date, subject to continued employment with the Company through each vesting date except as provided herein. The 2017 OPP Units (if earned pursuant to the terms and conditions of the award agreement), will vest 50% on each of the 3rd and 4th anniversaries of the Effective Date, subject to continued employment with the Company through the vesting date except as provided herein.

 

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(ii)                                  The amount of future grants and the terms of such grants will be determined in the sole discretion of the Compensation Committee of the Board.

 

(d)                                 Initial Formation Award.  On or as soon as reasonably practicable after the Effective Date, the Company will grant Executive a number of initial formation partnership units (in the form of profits interests which provide for a share of appreciation above the fair market value on the grant date) equal to $4,000,000, divided by the volume-weighted average price of the Company’s stock on the NYSE on the grant date (the “Initial Formation Award”).  The Initial Formation Award will have such terms and conditions as set forth in the applicable award agreement issued pursuant to the LTI Plan.  The Initial Formation Award will vest 25% on each of the 3rd and 4th anniversaries and 50% on the 5th anniversary, of the Effective Date, subject to continued employment with the Company through each vesting date.  Notwithstanding this paragraph 5(d), if applicable tax laws change such that the Initial Formation Award becomes taxable to Executive as ordinary income, the Initial Formation Award may be restructured by the Company in a way that permits the Company a tax deduction while preserving substantially similar pre-tax economics to Executive.

 

(e)                                  Welfare, Pension and Incentive Benefit Plans.  During the Employment Period, Executive will be entitled to participate in such 401(k) and employee welfare and benefit plans and programs of the Company as are made available to the Company’s senior level executives or to its employees generally, as such plans or programs may be in effect from time to time, including, without limitation, health, medical, dental, long-term disability and life insurance plans.

 

(f)                                   Expenses. The Company will promptly reimburse Executive for all reasonable business expenses upon the presentation of reasonably itemized statements of such expenses in accordance with the Company’s policies and procedures now in force or as such policies and procedures may be modified with respect to all senior executive officers of the Company.

 

(g)                                  Vacation.  Executive will be entitled to vacation in accordance with the Company’s vacation policy as in effect from time to time.

 

(h)                                 Relocation Expenses. The Company will reimburse Executive for all reasonable relocation expenses incurred by him in the course of his relocation to the Washington, DC area (the “Relocation Expenses”), subject to the Company’s requirements with respect to reporting and documentation of such expenses. To the extent that the reimbursement of any Relocation Expenses results in taxable income to Executive (without any offsetting deduction), the Company shall pay to Executive an additional amount (the “Relocation Gross-Up”) such that the net after-tax proceeds to Executive of the reimbursement of his Relocation Expenses and the Relocation Gross-Up (at his then-current combined state and federal marginal income tax rates, taking into account the deductibility of state and local income taxes for federal income tax purposes) is equal to Executive’s reimbursable Relocation Expenses. If the Executive resigns with or without Good Reason prior to the second anniversary of the Effective Date or the Company terminates the Executive’s employment for Cause prior to the first anniversary of the Effective Date, Executive shall repay the Company all amounts reimbursed by the Company pursuant to this Section 5(h).

 

6.                                      Reasons for Termination. Executive’s employment hereunder may or will be terminated during the Employment Period under the following circumstances:

 

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(a)                                 Death. Executive’s employment hereunder will terminate upon his death.

 

(b)                                 Disability. If, as a result of Executive’s incapacity due to physical or mental illness, Executive shall have been substantially unable to perform his duties hereunder for a continuous period of 180 days, and within 30 days after written Notice of Termination is given after such 180-day period, Executive shall not have returned to the substantial performance of his duties on a full-time basis, the Company may terminate Executive’s employment hereunder for “Disability”. During any period that Executive fails to perform his duties hereunder as a result of incapacity due to physical or mental illness, Executive will continue to receive his full Base Salary set forth in Section 5(a) until his employment terminates.

 

(c)                                  Cause. The Company may terminate Executive’s employment for Cause. For purposes of this Agreement, the Company will have “Cause” to terminate Executive’s employment upon Executive’s:

 

(i)                                     conviction of, or plea of guilty or nolo contendere to, a felony;

 

(ii)                                  willful and continued failure to use reasonable best efforts to substantially perform his duties hereunder (other than such failure resulting from Executive’s incapacity due to physical or mental illness) that Executive fails to remedy within 30 days after written notice is delivered by the Company to Executive that specifically identifies in reasonable detail the manner in which the Company believes Executive has not used reasonable efforts to perform in all material respects his duties hereunder; or

 

(iii)                               willful misconduct (including, but not limited to, a willful breach of the provisions of Section 11) that is materially economically injurious to the Company.

 

For purposes of this Section 6(c), no act, or failure to act, by Executive will be considered “willful” unless committed in bad faith and without a reasonable belief that the act or omission was in the best interests of the Company.

 

(d)                                 Good Reason. Executive may terminate his employment with “Good Reason” within 120 days after Executive has actual knowledge of the occurrence, without the written consent of Executive, of one of the following events that has not been cured within 30 days after written notice thereof has been given by Executive to the Company setting forth in reasonable detail the basis of the event (provided that such notice must be given to the Company within 60 days of Executive becoming aware of such condition):

 

(i)                                     a reduction by the Company in Executive’s Base Salary or target Annual Bonus under this Agreement;

 

(ii)                                  a material diminution in Executive’s position, authority, duties or responsibilities or the assignment of duties materially and adversely inconsistent with Executive’s position as Chief Financial Officer;

 

(iii)                               a relocation of Executive’s location of employment to a location outside of the Washington D.C. metropolitan area; or

 

(iv)                              the Company’s material breach of any provision of this Agreement or any equity agreement, which will be deemed to include (a) Executive not holding the title of Chief Financial Officer of the Company, (b) failure of a successor to the Company to

 

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assume this Agreement in accordance with Section 13(a) below and (c) a material change in Executive’s reporting relationship such that Executive no longer reports directly to the Company’s Chief Executive Officer.

 

Executive’s continued employment during the 90-day period referred to above in this paragraph (d) shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. Executive’s right to terminate his employment hereunder for Good Reason shall not be affected by his incapacity due to physical or mental illness.

 

(e)                                  Without Cause. The Company may terminate Executive’s employment hereunder without Cause by providing Executive with a Notice of Termination (as defined in Section 7). This means that, notwithstanding this Agreement, Executive’s employment with the Company will be “at will.”

 

(f)                                   Without Good Reason. Executive may terminate his employment hereunder without Good Reason by providing the Company with a Notice of Termination.

 

7.                                      Termination Procedure.

 

(a)                                 Notice of Termination. Any termination of Executive’s employment by the Company or by Executive during the Employment Period (other than termination pursuant to Section 6(a)) will be communicated by written Notice of Termination to the other party hereto in accordance with Section 14. For purposes of this Agreement, a “Notice of Termination” means a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated if the termination is based on Sections 6(b), (c) or (d).

 

(b)                                 Date of Termination. “Date of Termination” means (i) if Executive’s employment is terminated by his death, the date of his death, (ii) if Executive’s employment is terminated pursuant to Section 6(b) (Disability), 30 days after Notice of Termination (provided that Executive shall not have returned to the substantial performance of his duties on a full-time basis during such 30-day period), (iii) upon notice to Executive of the Company’s intention to not renew the term of this Agreement, pursuant to Section 2, the last day of the Employment Period, and (iv) if Executive’s employment terminates for any other reason, the date on which a Notice of Termination is given or any later date (within 30 days after the giving of such notice) set forth in such Notice of Termination; provided, however, that if such termination is due to a Notice of Termination by Executive, the Company shall have the right to accelerate such notice and make the Date of Termination the date of the Notice of Termination or such other date prior to Executive’s intended Date of Termination as the Company deems appropriate, which acceleration shall in no event be deemed a termination by the Company without Cause or constitute Good Reason.

 

(c)                                  Removal from any Boards and Position. Upon the termination of Executive’s employment with the Company for any reason, he shall be deemed to resign (i) from the board of trustees or directors of any subsidiary of the Company and/or any other board to which he has been appointed or nominated by or on behalf of the Company (including the Board), and (ii) from any position with the Company or any subsidiary of the Company, including, but not limited to, as an officer and trustee or director of the Company and any of its subsidiaries.

 

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8.                                      Compensation upon Termination. This Section provides the payments and benefits to be paid or provided to Executive as a result of his termination of employment. Except as provided in this Section 8, Executive shall not be entitled to anything further from the Company as a result of the termination of his employment, regardless of the reason for such termination.

 

(a)                                 Termination for Any Reason. Following the termination of Executive’s employment, regardless of the reason for such termination and including, without limitation, a termination of his employment by the Company for Cause or by Executive without Good Reason or upon expiration of the Employment Period, the Company will:

 

(i)                                     pay Executive (or his estate in the event of his death) as soon as practicable following the Date of Termination (A) any earned but unpaid Base Salary and (B) any accrued and unused vacation pay to the extent provided by the Company’s vacation policy as in effect from time to time, through the Date of Termination;

 

(ii)                                  reimburse Executive as soon as practicable following the Date of Termination for any amounts due Executive pursuant to Section 5(f) (unless such termination occurred as a result of misappropriation of funds); and

 

(iii)                               provide Executive with any compensation and/or benefits as may be due or payable to Executive in accordance with the terms and provisions of any employee benefit plans or programs of the Company.

 

Upon any termination of Executive’s employment hereunder, except as otherwise provided herein, Executive (or his beneficiary, legal representative or estate, as the case may be, in the event of his death) shall be entitled to such rights in respect of any equity awards theretofore made to Executive, and to only such rights, as are provided by the plan or the award agreement pursuant to which such equity awards have been granted to Executive or other written agreement or arrangement between Executive and the Company, provided that all vested profits interests (including any vested portion of the Initial Formation Award) shall remain exchangeable for common partnership units and all vested stock options shall remain exercisable for 60 days following the Date of Termination (or if earlier, through the expiration of the scheduled term of such award).

 

(b)                                 Termination by Company without Cause or by Executive for Good Reason. If Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason, Executive will be entitled to the payments and benefits provided in Section 8(a) hereof and, in addition, the Company will, subject to the following paragraph, pay to Executive (i) the Severance Amount, (ii) the Pro Rata Bonus, (iii) the Medical Benefits, (iv) the Equity Vesting Benefits, and (v) any unpaid Annual Bonus for the year preceding the year of termination if the relevant measurement period for such bonus concluded prior to the Date of Termination (the “Unpaid Prior Year Bonus”).

 

(i)                                     The “Severance Amount” will be equal to:

 

(A)                               if such termination is following the execution of a definitive agreement the consummation of which would result in, or within two years following, a Change in Control of the Company (and such Change in Control does in fact occur) (a “Qualifying CIC Termination”), two times the sum of Executive’s: (x) current Base Salary, and (y) target Annual Bonus, payable in a lump sum within 60 days after the Date of Termination; or

 

6



 

(B)                               if such termination is not a Qualifying CIC Termination, one times the sum of Executive’s (x) current Base Salary, and (y) target Annual Bonus, payable in equal installments over 12 months in accordance with the Company’s regular payroll procedures, commencing within 60 days after the Date of Termination.

 

(ii)                                   The “Pro Rata Bonus” will be equal to:

 

(A)                               if such termination is a Qualifying CIC Termination, Executive’s target Annual Bonus for the year of termination, paid in a lump sum within 60 days after the Date of Termination; or

 

(B)                               if such termination is not a Qualifying CIC Termination, Executive’s Annual Bonus earned in the year of termination based on actual performance, paid at the time bonuses are paid to similarly situated employees of the Company;

 

in either case such amount will be prorated based on the number of days in the year up to and including the Date of Termination and divided by 365.

 

(iii)                               The “Medical Benefits” require the Company to provide Executive medical insurance coverage substantially identical to that provided to other senior executives of the Company (which may be provided pursuant to the Consolidated Omnibus Budget Reconciliation Act) for (A) if such termination is a Qualifying CIC Termination, two years following the Termination Date or (B) if such termination is not a Qualifying CIC Termination, 18 months following the Termination Date. If this agreement to provide benefits continuation raises any compliance issues or impositions of penalties under the Patient Protection and Affordable Care Act or other applicable law, then the parties agree to modify this Agreement so that it complies with the terms of such laws without impairing the economic benefit to Executive.

 

(iv)                              The “Equity Vesting Benefits” mean

 

(A)                               if such termination is a Qualifying CIC Termination, vesting of all outstanding unvested equity-based awards (including the Initial Formation Award) on the Date of Termination (with OPP Units and other awards with performance-vesting conditions measured at performance specified in the applicable award agreement); or

 

(B)                               if such termination is not a Qualifying CIC Termination, (i) vesting of any outstanding unvested portion of the Initial Formation Award, (ii) vesting of a prorated portion of any OPP Units and other performance-based awards scheduled to vest on the next vesting date based on the number of days completed in the vesting cycle then in process for such awards up to and including the Date of Termination divided by the total number of days in such vesting cycle, with performance-vesting conditions measured at performance specified in the award agreement (e.g., if 300 units are granted on January 1, 2018, the award vests in three annual installments, and the Date of Termination is July 1, 2019, then 50% of the 100 units that would vest on January 1, 2020 will vest (if earned based on performance) and the remaining unvested units will be forfeited) and (iii) full vesting of any outstanding unvested LTIP Units and other equity awards

 

7



 

without performance-vesting conditions (excluding the Initial Formation Award);

 

(v)                                  and, in either case, all vested profits interests shall remain exchangeable for common partnership units and all vested stock options shall remain exercisable for 60 days following the Date of Termination (or if earlier, through the expiration of the scheduled term of such award).

 

(vi)                              Change in Control” shall mean:

 

(A)                               Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (1) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of trustees (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this Section 8(b)(v), the following acquisitions shall not constitute a Change of Control:  (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its affiliates or (iv) any acquisition by any corporation pursuant to a transaction that complies with Sections 8(b)(v)(C)(1), 8(b)(v)(C)(2) and 8(b)(v)(C)(3);

 

(B)                               Any time at which individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a trustee subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the trustees then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of trustees or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

 

(C)                               Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors or trustees, as the case may be, of the corporation

 

8



 

resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors or trustees of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

 

(D)                               Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

 

As a condition to the payments and other benefits pursuant to Section 8(b), Executive must execute a separation and general release agreement in the form attached hereto as Exhibit A (the “Release”), which must become effective within 55 days following the Date of Termination; provided, however, that if Executive’s Date of Termination occurs on or after November 1 of a given calendar year, any such payments (except as provided in Section 8(b)(ii)(B)) shall, subject to Section 9 hereof, be paid (or commence to be paid) in January of the immediately following calendar year.

 

(c)                                  Disability. In the event Executive’s employment is terminated for Disability pursuant to Section 6(b), Executive will be entitled to the payments and benefits provided in Section 8(a) hereof and (i) vesting of any outstanding unvested portion of the Initial Formation Award, (ii) vesting of a prorated portion of any outstanding unvested OPP Units scheduled to vest on the next vesting date (if earned pursuant to the terms and conditions of the award agreement) based on the number of days completed in the vesting cycle then in process for such awards up to and including the Date of Termination divided by the total number of days in such vesting cycle, (iii) vesting of all outstanding unvested LTIP Units, (iv) the Pro Rata Bonus and (v) the Unpaid Prior Year Bonus (collectively, the “Death and Disability Vesting Benefits”).

 

(d)                                 Death. If Executive’s employment is terminated by his death, Executive’s beneficiary, legal representative or estate, as the case may be, will be entitled to the payments and benefits provided in Section 8(a) hereof and the Death and Disability Vesting Benefits.

 

(e)                                  Nonrenewal of the Agreement by the Company.  Upon notice to Executive of the Company’s intention to not renew the term of this Agreement, pursuant to Section 2, and conditioned upon the execution by Executive of the Release, which must become effective within 55 days following the Date of Termination, Executive shall be entitled to receive (i) an amount equal to one times the sum of Executive’s (x) current Base Salary,

 

9



 

and (y) target Annual Bonus, payable in equal installments over 12 months in accordance with the Company’s regular payroll procedures, commencing within 60 days after the Date of Termination, (ii) the Pro Rata Bonus, (iii) the Equity Vesting Benefits and (iv) the Unpaid Prior Year Bonus.  Notwithstanding the foregoing, if upon mutual agreement with Executive to continue Executive’s employment with the Company, the Company repudiates the notice described in the preceding sentence, Executive shall not be entitled to any payments described in this Section 8(e). For the avoidance of doubt, following a nonrenewal of the Agreement by the Company, Executive shall continue to be subject to those provisions that survive the termination of this Agreement, including without limitation, those provided in Section 11.

 

9.                                      409A and Termination. Notwithstanding the foregoing, if necessary to comply with the restriction in Section 409A(a)(2)(B) of the Internal Revenue Code of 1986, as amended (the “Code”) concerning payments to “specified employees” (as defined in Section 409A of the Code and applicable regulations thereunder, “Section 409A”) any payment on account of Executive’s separation from service that would otherwise be due hereunder within six months after such separation shall nonetheless be delayed until the first business day of the seventh month following Executive’s date of termination and the first such payment shall include the cumulative amount of any payments that would have been paid prior to such date if not for such restriction, together with interest on such cumulative amount during the period of such restriction at a rate, per annum, equal to the applicable federal short-term rate (compounded monthly) in effect under Section 1274(d) of the Code on the Date of Termination. Notwithstanding anything contained herein to the contrary, Executive shall not be considered to have terminated employment with the Company for purposes of Section 8 hereof unless he would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A.

 

10.                               Section 280G. In the event that any payments or benefits otherwise payable to Executive, whether or not pursuant to this Agreement, (1) constitute “parachute payments” within the meaning of Section 280G of the Code, and (2) but for this Section 10, would be subject to the excise tax imposed by Section 4999 of the Code, then such payments and benefits will be either (x) delivered in full, or (y) delivered as to such lesser extent that would result in no portion of such payments and benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income and employment taxes and the excise tax imposed by Section 4999 of the Code (and any equivalent state or local excise taxes), results in the receipt by Executive on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such payments and benefits may be taxable under Section 4999 of the Code. Unless the Company and Executive otherwise agree in writing, any determination required under this Section 10 will be made in writing by a nationally-recognized accounting or consulting firm selected by the Company in its discretion (the “Accountants”), whose determination will be conclusive and binding upon Executive and the Company for all purposes, other than in the event of manifest error. The Company shall request the Accountants to perform all necessary calculations promptly in connection with the applicable Change in Control or termination of employment. For purposes of making the calculations required by this Section 10, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive agree to furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this provision. The Company will bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by

 

10



 

this provision. Any reduction in payments and/or benefits required by this provision will occur in the following order: (1) reduction of cash payments; (2) reduction of vesting acceleration of equity awards; and (3) reduction of other benefits paid or provided to Executive. In the event that acceleration of vesting of equity awards is to be reduced, such acceleration of vesting will be cancelled in the reverse order of the date of grant for equity awards. If two or more equity awards are granted on the same date, each award will be reduced on a pro-rata basis.  To the extent requested by Executive, the Company shall cooperate with Executive in good faith in valuing, and the Accountants shall take into account the value of, services to be provided by Executive (including Executive agreeing to refrain from performing services pursuant to a covenant not to compete) before, on or after the date of the transaction which causes the application of Section 280G of the Code such that payments in respect of such services may be considered to be “reasonable compensation” within the meaning of Q&A-9 and Q&A-40 to Q&A 44 of the final regulations under Section 280G of the Code and/or exempt from the definition of the term “parachute payment” within the meaning of Q&A-2(a) of such final regulations in accordance with Q&A-5(a) of such final regulations.

 

11.                               Confidential Information, Ownership of Documents; Non-Competition; Non-Solicitation.

 

(a)                                 Confidential Information. During the Employment Period and thereafter, Executive shall hold in a fiduciary capacity for the benefit of the Company all trade secrets and confidential information, knowledge or data relating to the Company and its businesses and investments, which shall have been obtained by Executive during Executive’s employment by the Company and which is not generally available public or industry knowledge (other than by acts by Executive in violation of this Agreement). Except as may be required or appropriate in connection with his carrying out his duties under this Agreement, Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or any legal process, any statutory obligation or order of any court or statutory tribunal of competent jurisdiction, or as requested by a governmental or administrative agency, or as is necessary in connection with any adversarial proceeding against the Company (in which case Executive shall use his reasonable best efforts in cooperating with the Company (at the Company’s expense) in obtaining a protective order against disclosure by a court of competent jurisdiction), communicate or divulge any such trade secrets, information, knowledge or data to anyone other than the Company and those designated by the Company or on behalf of the Company in the furtherance of its business or to perform duties hereunder.  For the avoidance of doubt, nothing in this Agreement is intended to impair Executive’s rights to make disclosures under any applicable Federal whistleblower law.

 

(b)                                 Removal of Documents; Rights to Products. Executive may not remove any records, files, drawings, documents, models, equipment, and the like relating to the Company’s business from the Company’s premises without its written consent, unless such removal is in the furtherance of the Company’s business or is in connection with Executive’s carrying out his duties under this Agreement and, if so removed, they will be returned to the Company promptly after termination of Executive’s employment hereunder, or otherwise promptly after removal if such removal occurs following termination of employment. Executive shall and hereby does assign to the Company all rights to trade secrets and other products relating to the Company’s business developed by him alone or in conjunction with others at any time while employed by the Company. In the event of any conflict between the provision of this paragraph and of any applicable

 

11



 

employee manual or similar policy of the Company, the provisions of this paragraph will govern.

 

(c)                                  Protection of Business. During the Employment Period and until the later of (1)(i) the third anniversary of the Effective Date and (ii) the first anniversary of the applicable Date of Termination, Executive will not (x) engage in any Competing Business (as defined below) or pursue or attempt to develop any project known to Executive and which the Company is pursuing, developing or attempting to develop as of the Date of Termination (a “Project”), directly or indirectly, alone, in association with or as a shareholder, principal, agent, partner, officer, director, employee or consultant of any other organization or (y) divert to any entity which is engaged in any business conducted by the Company any Project, corporate opportunity or any customer of the Company; and (2)(A) the third anniversary of the Effective Date and (B) the second anniversary of the applicable Date of Termination, Executive will not solicit any officer, employee (other than secretarial staff) or exclusive or primary consultant of the Company to leave the employ of the Company. Notwithstanding the preceding sentence, Executive shall not be prohibited from owning less than 1% percent of any publicly-traded corporation, whether or not such corporation is in competition with the Company or from owning any passive investment in a hedge fund, private equity fund or similar instrument that, at the time of Executive’s acquisition, did not to Executive’s knowledge (after reasonable inquiry) hold any investment in any Competing Business (as defined below); provided, that, Executive shall be permitted to invest in mutual funds or ETFs so long as such funds or ETFs are not invested primarily in real estate investment trusts. If, at any time, the provisions of this Section 11(c) shall be determined to be invalid or unenforceable, by reason of being vague or unreasonable as to duration or scope of activity, this Section 11(c) shall be considered divisible and shall become and be immediately amended to only such duration and scope of activity as shall be determined to be reasonable and enforceable by the court or other body having jurisdiction over the matter; and Executive agrees that this Section 11(c) as so amended shall be valid and binding as though any invalid or unenforceable provision had not been included herein. “Competing Business” means any business the primary business of which is being engaged in by the Company in the Washington, D.C. metropolitan area as a principal business as of the Date of Termination (including, without limitation, the development, owning and operating of commercial real estate and the acquisition and disposition of commercial real estate for the purpose of development, owning and operating such real estate).

 

(d)                                 Injunctive Relief. In addition to any other remedy available to the Company under applicable law, in the event of a breach or threatened breach of this Section 11, Executive agrees that the Company shall be entitled to seek injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, Executive acknowledging that damages would be inadequate and insufficient.

 

(e)                                  Forfeiture of Unvested Equity Awards.  In the event that Executive breaches Section 11(a), 11(b) or 11(c), Executive will forfeit his rights to payment or benefits under all outstanding unvested equity awards including any shares, partnership equity or profits interests to be issued in respect thereof.

 

(f)                                   Continuing Operation. Except as specifically provided in this Section 11, the termination of Executive’s employment or of this Agreement shall have no effect on the continuing operation of this Section 11.

 

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12.                               Indemnification.

 

(a)                                 The Company agrees that if Executive is made a party to or threatened to be made a party to or is requested to be made a witness in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that Executive is or was a trustee, director or officer of the Company or is or was serving at the request of the Company or any subsidiary or either thereof as a trustee, director, officer, member, employee or agent of another corporation or a partnership, joint venture, trust or other enterprise, including, without limitation, service with respect to employee benefit plans, whether or not the basis of such Proceeding is alleged action in an official capacity as a trustee, director, officer, member, employee or agent while serving as a trustee, director, officer, member, employee or agent, Executive shall be indemnified and held harmless by the Company to the fullest extent authorized by applicable law (including the advancement of applicable, reasonable legal fees and expenses), as the same exists or may hereafter be amended, against all liabilities, costs, fees and other expenses incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if Executive has ceased to be an officer, director, trustee or agent, or is no longer employed by the Company and shall inure to the benefit of his heirs, executors and administrators.

 

(b)                                 Executive will be entitled to coverage under the Company’s directors’ and officers’ liability insurance policy on substantially the same terms as for the Company’s other officers.

 

13.                               Successors; Binding Agreement.

 

(a)                                 Company’s Successors. No rights or obligations of the Company under this Agreement may be assigned or transferred except that the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

 

(b)                                 Executive’s Successors. No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to payments or benefits hereunder, which may be transferred only by will or the laws of descent and distribution. If Executive should die following his Date of Termination while any amounts would still be payable to him hereunder if he had continued to live, all such amounts unless otherwise provided herein shall be paid in accordance with the terms of this Agreement to such person or persons so appointed in writing by Executive, or otherwise to his legal representatives or estate.

 

14.                               Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered either personally or by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:

 

If to Executive:

 

Address on file with the Company

 

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If to the Company:

 

JBG SMITH Properties

4445 Willard Avenue, Suite 400

Chevy Chase, Maryland 20815
Attention:  General Counsel

 

15.                               Resolution of Differences Over Breaches of Agreement. The parties shall use good faith efforts to resolve any controversy or claim arising out of, or relating to this Agreement or the breach thereof, first in accordance with the Company’s internal review procedures, except that this requirement shall not apply to any claim or dispute under or relating to Section 11 of this Agreement. If despite their good faith efforts, the parties are unable to resolve such controversy or claim through the Company’s internal review procedures, then such controversy or claim shall be resolved by arbitration in Maryland, in accordance with the rules then applicable of the American Arbitration Association (provided that the Company shall pay the filing fee and all hearing fees, arbitrator expenses and compensation fees, and administrative and other fees associated with any such arbitration), and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.  If any contest or dispute shall arise between the Company and Executive regarding any provision of this Agreement, the Company shall reimburse Executive for all legal fees and expenses reasonably incurred by Executive in connection with such contest or dispute, but only if Executive is successful in respect of substantially all of Executive’s claims brought and pursued in connection with such contest or dispute.

 

16.                               Miscellaneous.

 

(a)                                 Amendments. No provisions of this Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing signed by Executive and by a duly authorized officer of the Company, and such waiver is set forth in writing and signed by the party to be charged. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

(b)                                 Full Settlement. The Company’s obligations to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder will not (absent fraud or willful misconduct or a termination for Cause) be affected by any set-offs, counterclaims, recoupment, defense, or other claim, right or action that the Company may have against Executive or others. After termination of the Employment Period, in no event will Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and such amounts will not be reduced whether or not Executive obtains other employment.

 

(c)                                  Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Maryland without regard to its conflicts of law principles.

 

17.                               Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, term sheets, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or

 

14



 

representative of any party hereto in respect of such subject matter, including, for the avoidance of doubt, the Employment Agreement by and between Vornado Realty Trust and the Executive, dated June 1, 2013 (the “2013 Agreement”). Any other prior agreement of the parties hereto in respect of the subject matter contained herein, including the 2013 Agreement, is hereby terminated and cancelled, other than any equity agreements or any compensatory plan or program in which Executive is a participant on the Effective Date.  For the avoidance of doubt, nothing in this Agreement addresses or impacts in any way the terms of the Common Partnership Units to be issued to Executive under a Unit Issuance Agreement to be entered into in connection with the closing of the transactions contemplated by the Transaction Agreement.

 

18.                               409A Compliance.

 

(a)                                 This Agreement is intended to comply with the requirements of Section 409A. To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A or to the extent any provision in this Agreement must be modified to comply with Section 409A (including, without limitation, Treasury Regulation 1.409A-3(c)), such provision shall be read, or shall be modified (with the mutual consent of the parties, which consent shall not be unreasonably withheld), as the case may be, in such a manner so that all payments due under this Agreement shall comply with Section 409A. For purposes of Section 409A, each payment made under this Agreement shall be treated as a separate payment. In no event may Executive, directly or indirectly, designate the calendar year of payment.

 

(b)                                 All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.

 

(c)                                  Executive further acknowledges that any tax liability incurred by Executive under Section 409A of the Code is solely the responsibility of Executive.

 

19.                               Representations. Executive represents and warrants to the Company that he is under no contractual or other binding legal restriction which would prohibit his from entering into and performing under this Agreement or that would limit the performance his duties under this Agreement.

 

20.                               Withholding Taxes. The Company may withhold from any amounts or benefits payable under this Agreement income taxes and payroll taxes that are required to be withheld pursuant to any applicable law or regulation.

 

21.                               Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. Photographic, faxed or PDF copies of such signed counterparts may be used in lieu of the originals for any purpose.

 

[signature page follows]

 

15



 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written.

 

COMPANY:

 

EXECUTIVE:

 

 

 

JBG SMITH Properties, a Maryland real estate investment trust

 

 

 

 

 

 

 

 

 

By:

/s/ Mitchell Schear

 

/s/ Stephen W. Theriot

 

Name: Mitchell Schear

 

 

 

Title: Vice President and Secretary

 

 

 


EX-10.12 24 a17-17912_1ex10d12.htm EX-10.12

Exhibit 10.12

 

INDEMNIFICATION AGREEMENT

 

THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is entered into as of [  ], 2017, by and among JBG SMITH Properties, a Maryland real estate investment trust (the “Company” or the “Indemnitor”) and [                  ] (the “Indemnitee”).

 

WHEREAS, the Indemnitee is an officer [or][and] a member of the Board of Trustees of the Company and in such [capacity][capacities] is performing a valuable service for the Company;

 

WHEREAS, Maryland law permits the Company to enter into contracts with its officers or members of its Board of Trustees with respect to indemnification of, and advancement of expenses to, such persons;

 

WHEREAS, the Articles of Amendment and Restatement of the Declaration of Trust of the Company (the “Declaration of Trust”) provide that the Company shall indemnify and advance expenses to its trustees and officers to the maximum extent permitted by Maryland law in effect from time to time;

 

WHEREAS, the Amended and Restated Bylaws of the Company (the “Bylaws”) provide that each trustee and officer of the Company shall be indemnified by the Company to the maximum extent permitted by Maryland law in effect from time to time and shall be entitled to advancement of expenses consistent with Maryland law; and

 

WHEREAS, to induce the Indemnitee to provide services to the Company as an officer [or][and] a member of the Board of Trustees, and to provide the Indemnitee with specific contractual assurance that indemnification will be available to the Indemnitee regardless of, among other things, any amendment to or revocation of the Declaration of Trust or the Bylaws, or any acquisition transaction relating to the Company, the Indemnitor desires to provide the Indemnitee with protection against personal liability as set forth herein.

 

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Indemnitor and the Indemnitee hereby agree as follows:

 



 

1.                                      DEFINITIONS

 

For purposes of this Agreement:

 

(A)                               Change in Control” shall have the definition set forth in the JBG SMITH Properties 2017 Omnibus Share Plan as of the date hereof.

 

(B)                               Corporate Status” describes the status of a person who is or was a trustee or officer of the Company or is or was serving at the request of the Company as a director, trustee, officer, partner (limited or general), manager, member, fiduciary, employee or agent of any other foreign or domestic corporation, real estate investment trust, partnership, joint venture, limited liability company, trust, other enterprise (whether conducted for profit or not for profit) or employee benefit plan. For clarification and without limiting the circumstances in which Indemnitee may be serving at the request of the Company, the Company shall be deemed to have requested the Indemnitee to serve: (i) as a director, trustee, officer, partner (limited or general), manager, member, fiduciary, employee or agent of any other foreign or domestic corporation, real estate investment trust, partnership, joint venture, limited liability company, trust, or other enterprise (whether conducted for profit or not for profit) (1) of which a majority of the voting power or equity interest is or was owned directly or indirectly by the Company or (2) the management of which is controlled directly or indirectly by the Company and (ii) an employee benefit plan where the performance of the Indemnitee’s duties to the Company also imposes or imposed duties on, or otherwise involves or involved services by, the Indemnitee to the plan or participants or beneficiaries of the plan, including as deemed fiduciary thereof.

 

(C)                               Expenses” shall include all reasonable and out-of-pocket attorneys’ and paralegals’ fees, disbursements retainers, court costs, arbitration and mediation costs, transcript costs, fees of experts, accounting fees, witness fees, travel expenses, deposition expenses, expenses of investigations, duplicating costs, document production costs, printing and binding costs, telephone charges, postage, delivery service fees, federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, ERISA excise taxes and penalties and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in or otherwise participating in a Proceeding. Expenses shall also include Expenses incurred in connection with any appeal resulting from any Proceeding including, without limitation, the premium, security for and other costs relating to any cost bond, supersedeas bond or other appeal bond or its equivalent.

 

(D)                               Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation (including any formal or informal internal investigation to which the Indemnitee is made a party by reason of the Corporate Status of the Indemnitee), inquiry, administrative

 

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hearing, claim, demand, discovery request or any other proceeding, including appeals therefrom, whether brought by or in the right of the Company or otherwise and whether civil (including intentional or unintentional tort claims), criminal, administrative, or investigative, except one initiated by the Indemnitee pursuant to Section 8 of this Agreement to enforce such Indemnitee’s rights under this Agreement.

 

(E)                                Special Legal Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporate law and neither currently is, or in the past five years has been, retained to represent (i) the Indemnitor or the Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement or of other indemnitees under similar indemnification agreements), or (ii) any other party to or participant or witness in the Proceeding giving rise to a claim for indemnification or advance of Expenses hereunder. Notwithstanding the foregoing, the term “Special Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

 

2.                                      INDEMNIFICATION

 

The Indemnitee shall be entitled to the rights of indemnification provided in this Section 2 and under applicable law, the Declaration of Trust, the Bylaws, any other agreement, a vote of shareholders or resolution of the Board of Trustees or otherwise if, by reason of such Indemnitee’s Corporate Status, such Indemnitee is, or is threatened to be made, a party to any threatened, pending, or contemplated Proceeding, including a Proceeding by or in the right of the Company.  Unless prohibited by Section 13 hereof and subject to the other provisions of this Agreement, the Indemnitee shall be indemnified hereunder, to the maximum extent permitted by Maryland law in effect from time to time, against judgments, penalties, fines and settlements and reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection with such Proceeding or any claim, issue or matter therein; provided, however, that in the case of amounts paid in settlement, any settlement of such proceeding is approved in advance by the Company in writing, which approval shall not be unreasonably withheld, delayed or applied in an inconsistent manner; provided, further, that no change in Maryland law shall have the effect of reducing the benefits available to Indemnitee hereunder based on Maryland law as in effect on the date hereof.  For purposes of this Section 2, excise taxes assessed on the Indemnitee with respect to an employee benefit plan pursuant to applicable law shall be deemed fines.

 

3.                                      INDEMNIFICATION FOR EXPENSES IN CERTAIN CIRCUMSTANCES

 

(A)                               Without limiting the effect of any other provision of this Agreement (including the Indemnitee’s rights to indemnification under Section 2 and advancement of expenses under Section 4), without regard to whether the Indemnitee is entitled to indemnification under Section 2 and without regard to the provisions of Section 6 hereof, to the extent that the Indemnitee is successful, on the merits or otherwise,

 

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in any Proceeding to which the Indemnitee is a party by reason of such Indemnitee’s Corporate Status, such Indemnitee shall be indemnified against all reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection therewith.

 

(B)                               If the Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues, or matters in such Proceeding, the Indemnitor shall indemnify the Indemnitee against all reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection with each successfully resolved claim, issue or matter, allocated on a reasonable and proportionate basis.

 

(C)                               For purposes of this Section 3 and without limitation, the termination of any claim, issue or matter in such Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

(D)                               Notwithstanding any other provision of this Agreement, a court of appropriate jurisdiction, upon application of Indemnitee and such notice as the court shall require, may order indemnification of Indemnitee by the Company in the following circumstances: (i) if such court determines that Indemnitee is entitled to reimbursement under Section 2-418(d)(1) of the Maryland General Corporation Law (“MGCL”), the court shall order indemnification, in which case Indemnitee shall be entitled to recover the Expenses of securing such reimbursement; or (ii) if such court determines that Indemnitee is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not Indemnitee (i) has met the standards of conduct set forth in Section 2-418(b) of the MGCL or (ii) has been adjudged liable for receipt of an improper personal benefit under Section 2-418(c) of the MGCL, the court may order such indemnification as the court shall deem proper without regard to any limitation on such court-ordered indemnification contemplated by Section 2-418(d)(2)(ii) of the MGCL.

 

4.                                      ADVANCEMENT OF EXPENSES

 

Notwithstanding anything in this Agreement to the contrary, but subject to Section 13 hereof, if the Indemnitee is or was or becomes a party to or is otherwise involved in any Proceeding (including as a witness), or is or was threatened to be made a party to or a participant (including as a witness) in any such Proceeding, by reason of the Indemnitee’s Corporate Status, or by reason of (or arising in part out of) any actual or alleged event or occurrence related to the Indemnitee’s Corporate Status, or by reason of any actual or alleged act or omission on the part of the Indemnitee taken or omitted in or relating to the Indemnitee’s Corporate Status, then the Indemnitor shall advance all reasonable Expenses incurred by the Indemnitee in connection with any such Proceeding within ten (10) days after the receipt by the Indemnitor of a statement from the Indemnitee requesting such advance from time to time, whether prior to or after final disposition of such Proceeding, which advance may be in the form of, in the reasonable discretion of the Indemnitee (but without duplication) (a) payment of such Expenses directly to

 

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third parties on behalf of Indemnitee, (b) advance of funds to Indemnitee in an amount sufficient to pay such Expenses or (c) reimbursement to Indemnitee for Indemnitee’s payment of such Expenses; provided that, such statement shall reasonably evidence the Expenses incurred or to be incurred by the Indemnitee and shall include or be preceded or accompanied by (i) a written affirmation by the Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Indemnitor as authorized by this Agreement has been met and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amounts advanced if it should ultimately be determined that the standard of conduct has not been met.  To the extent that Expenses advanced to Indemnitee do not relate to a specific claim, issue or matter in the Proceeding, such Expenses shall be allocated on a reasonable and proportionate basis.  The undertaking required by clause (ii) of the immediately preceding sentence shall be an unlimited general obligation of the Indemnitee but shall be unsecured, shall not bear interest and may be accepted without reference to financial ability to make the repayment.

 

5.                                      WITNESS EXPENSES

 

Notwithstanding any other provision of this Agreement, to the extent that the Indemnitee is or may be, by reason of such Indemnitee’s Corporate Status, a witness (or is forced or asked to respond to discovery requests or is otherwise asked to participate in any Proceeding or is called upon to produce documents) for any reason in any Proceeding to which such Indemnitee is not a named defendant or respondent, the Indemnitor shall advance all Expenses actually incurred by or on behalf of such Indemnitee, on an as-incurred basis in accordance with Section 4 of this Agreement, in connection therewith and indemnify the Indemnitee therefor.

 

6.                                      DETERMINATION OF ENTITLEMENT TO AND AUTHORIZATION OF INDEMNIFICATION

 

(A)                               To obtain indemnification under this Agreement, the Indemnitee shall submit to the Indemnitor a written request, including therewith such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification. Indemnitee may submit one or more such requests from time to time and at such time(s) as Indemnitee deems appropriate in Indemnitee’s sole discretion.  The officer of the Company receiving any such request from Indemnitee shall, promptly upon receipt of such a request for indemnification, advise the Board of Trustees in writing that Indemnitee has requested indemnification.

 

(B)                               The Indemnitor agrees that the Indemnitee shall be indemnified to the fullest extent permitted by law.  Indemnification under this Agreement may not be made unless authorized for a specific Proceeding after a determination has been made in accordance with this Section 6(B) that indemnification of the Indemnitee is permissible in the circumstances because the Indemnitee has met the following standard of conduct: the Indemnitor shall indemnify the Indemnitee in accordance with the provisions of Section 2 hereof, unless it is established in a final adjudication of the Proceeding not subject to further appeal that: (a) the act or

 

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omission of the Indemnitee was material to the matter giving rise to the Proceeding and (x) was committed in bad faith or (y) was the result of active and deliberate dishonesty; (b) the Indemnitee actually received an improper personal benefit in money, property or services; or (c) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful.  Upon receipt by the Indemnitor of the Indemnitee’s written request for indemnification pursuant to paragraph 6(A), a determination as to whether the applicable standard of conduct has been met shall be made within the period specified in paragraph 6(E):  (i) if a Change in Control shall have occurred, by Special Legal Counsel in a written opinion to the Board of Trustees, a copy of which shall be delivered to the Indemnitee, which Special Legal Counsel shall be selected by the Indemnitee (the Indemnitee shall give prompt written notice to the Indemnitor advising the Indemnitor of the identity of the Special Legal Counsel so selected) and approved by the Board of Trustees in accordance with Section 2-418(e)(2)(ii) of the MGCL, which approval shall not be unreasonably withheld or delayed; or (ii) if a Change in Control shall not have occurred, (A) by the Board of Trustees by a majority vote of a quorum consisting of trustees not, at the time, parties to the proceeding, or, if such quorum cannot be obtained, then by a majority vote of a committee of the Board of Trustees consisting solely of two or more trustees not, at the time, parties to such proceeding and who were duly designated to act in the matter by a majority vote of the full Board of Trustees in which the designated trustees who are parties may participate, (B) if the requisite quorum of the full Board of Trustees cannot be obtained therefor and the committee cannot be established (or, even if such quorum is obtainable or such committee can be established, if such quorum or committee so directs), by Special Legal Counsel in a written opinion to the Board of Trustees, a copy of which shall be delivered to Indemnitee, which Special Legal Counsel shall be selected by the Board of Trustees or a committee of the Board of Trustees by vote as set forth in clause (ii)(A) of this paragraph 6(B) (or, if the requisite quorum of the full Board of Trustees cannot be obtained therefor and the committee cannot be established, by a majority of the full Board of Trustees in which trustees who are parties to the Proceeding may participate) (if the Indemnitor selects Special Legal Counsel to make the determination under this clause (ii), the Indemnitor shall give prompt written notice to the Indemnitee advising him or her of the identity of the Special Legal Counsel so selected) in accordance with Section 2-418(e)(2)(ii) of the MGCL and approved by the Indemnitee, which approval shall not be unreasonably withheld or delayed or (C) if so directed by a majority of the members of the Board of Trustees, by the shareholders of the Company, other than trustees or officers who are parties to the Proceeding.  If it is so determined that the Indemnitee is entitled to indemnification, payment to the Indemnitee shall be made within ten (10) days after such determination. Authorization of indemnification and determination as to reasonableness of Expenses shall be made in the same manner as the determination that indemnification is permissible. However, if the determination that indemnification is permissible is made by Special Legal Counsel under clause (ii)(B) above, authorization of indemnification and determination as to

 

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reasonableness of Expenses shall be made in the manner specified under clause (ii)(B) above for the selection of such Special Legal Counsel.

 

(C)                               The Indemnitee shall cooperate with the person or entity making such determination with respect to the Indemnitee’s entitlement to indemnification, including providing upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination.  Any reasonable costs or expenses (including reasonable attorneys’ fees and disbursements) incurred by the Indemnitee in so cooperating shall be borne by the Indemnitor (irrespective of the determination as to the Indemnitee’s entitlement to indemnification) and the Indemnitor hereby indemnifies and agrees to hold the Indemnitee harmless therefrom.

 

(D)                               In the event the determination of entitlement to indemnification is to be made by Special Legal Counsel pursuant to Section 6(B) hereof, the Indemnitee, or the Indemnitor, as the case may be, may, within seven days after such written notice of selection shall have been given, deliver to the Indemnitor or to the Indemnitee, as the case may be, a written objection to such selection.  Such objection may be asserted only on the grounds that the Special Legal Counsel so selected does not meet the requirements of “Special Legal Counsel” as defined in Section 1 of this Agreement.  If such written objection is made, the Special Legal Counsel so selected may not serve as Special Legal Counsel until a court has determined that such objection is without merit.  If, within twenty (20) days after submission by the Indemnitee of a written request for indemnification pursuant to Section 6(A) hereof, no Special Legal Counsel shall have been selected or, if Special Legal Counsel shall have been selected, shall have been objected to, either the Indemnitor or the Indemnitee may petition a court for resolution of any objection which shall have been made by the Indemnitor or the Indemnitee to the other’s selection of Special Legal Counsel and/or for the appointment as Special Legal Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom an objection is so resolved or the person so appointed shall act as Special Legal Counsel under Section 6(B) hereof.  The Indemnitor shall pay all reasonable fees and expenses of Special Legal Counsel incurred in connection with acting pursuant to Section 6(B) hereof, and all reasonable fees and expenses incident to the selection of such Special Legal Counsel pursuant to this Section 6(D).  In the event that a determination of entitlement to indemnification is to be made by Special Legal Counsel and such determination shall not have been made and delivered in a written opinion within ninety (90) days after the receipt by the Indemnitor of the Indemnitee’s request in accordance with Section 6(A), upon the due commencement of any judicial proceeding in accordance with Section 8(A) of this Agreement, Special Legal Counsel shall be discharged and relieved of any further responsibility in such capacity.

 

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(E)                                If the person or entity making the determination whether the Indemnitee is entitled to indemnification shall not have made a determination within forty-five (45) days after receipt by the Indemnitor of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and the Indemnitee shall be entitled to such indemnification, absent:  (i) a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.  Such 45-day period may be extended for a reasonable time, not to exceed an additional fifteen (15) days, if the person or entity making said determination in good faith requires additional time for the obtaining or evaluating of documentation and/or information relating thereto.  The foregoing provisions of this paragraph 6(E) shall not apply: (i) if the determination of entitlement to indemnification is to be made by the shareholders and if within fifteen (15) days after the receipt by the Indmenitor of the request for such determination the Board of Trustees resolves to submit such determination to the shareholders for consideration at an annual or special meeting thereof to be held within seventy-five (75) days after such receipt and such determination is made at such meeting or (ii) if the determination of entitlement to indemnification is to be made by Special Legal Counsel pursuant to paragraph 6(B) of this Agreement.

 

7.                                      PRESUMPTIONS

 

(A)                               It shall be presumed that the Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 6 of this Agreement, and the Indemnitor or any other person or entity challenging such right shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.

 

(B)                               The termination of any Proceeding by conviction, or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the Indemnitee did not meet the requisite standard of conduct described herein for indemnification.

 

(C)                               The knowledge and/or actions, or failure to act, of any other trustee, officer, employee or agent of the Company or any other director, trustee, officer, partner (limited or general), manager, member, fiduciary, employee or agent of any other foreign or domestic corporation, real estate investment trust, partnership, joint venture, limited liability company, trust, other enterprise (whether conducted for profit or not for profit) or employee benefit plan shall not be imputed to Indemnitee for purposes of determining any other right to indemnification under this Agreement.

 

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8.                                      REMEDIES

 

(A)                               In the event that:  (i) a determination is made in accordance with the provisions of Section 6 that the Indemnitee is not entitled to indemnification under this Agreement, or (ii) advancement of reasonable Expenses is not timely made pursuant to this Agreement, or (iii) payment of indemnification due the Indemnitee under this Agreement is not timely made, the Indemnitee shall be entitled to an adjudication in an appropriate court of competent jurisdiction of such Indemnitee’s entitlement to such indemnification or advancement of Expenses.

 

(B)                               In the event that a determination shall have been made pursuant to Section 6 of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 8 shall be conducted in all respects as a de novo trial, or arbitration, on the merits. The fact that a determination has been made earlier pursuant to Section 6 of this Agreement that the Indemnitee was not entitled to indemnification shall not be taken into account in any judicial proceeding commenced pursuant to this Section 8 and (i) the Indemnitee shall not be prejudiced in any way by reason of that determination, (ii) the Indemnitee shall be entitled to have such Expenses advanced by the Indemnitor in accordance with Section 4 of this Agreement and applicable law and (ii) the Indemnitor shall have the burden of proving that the Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be. If the Indemnitee fails to challenge a determination within ninety (90) days, or if Indemnitee challenges a determination and such determination has been upheld by a final judgment of a court of competent jurisdiction from which no appeal can be made, then, to the extent and only to the extent required by such determination or final judgment, the Indemnitor shall not be obligated to indemnify the Indemnitee under this Agreement.

 

(C)                               If a determination shall have been made or deemed to have been made pursuant to Section 6 of this Agreement that the Indemnitee is entitled to indemnification, the Indemnitor shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 8, absent: (i) a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

 

(D)                               The Indemnitor shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 8 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Indemnitor is bound by all the provisions of this Agreement.

 

(E)                                In the event that the Indemnitee, pursuant to this Section 8, seeks a judicial adjudication of such Indemnitee’s rights under, or to recover damages for breach of, this Agreement, if successful on the merits or otherwise as to all or less than

 

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all claims, issues or matters in such judicial adjudication, the Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all Expenses actually and reasonably incurred by Indemnitee in connection with each successfully resolved claim, issue or matter.

 

(F)                                 Interest shall be paid by the Company to Indemnitee at the maximum rate allowed to be charged for judgments under the Courts and Judicial Proceedings Article of the Annotated Code of Maryland for amounts which the Company pays or is obligated to pay for the period (i) commencing with either the tenth day after the date on which the Company was requested to advance Expenses in accordance with Sections 4 or 5 or the 60th day after the date on which the Company was requested to make the determination of entitlement to indemnification under Section 6, as applicable, and (ii) ending on the date such payment is made to Indemnitee by the Company.

 

(G)                               Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of the Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

 

9.                                      NOTIFICATION AND DEFENSE OF CLAIMS

 

The Indemnitee agrees promptly to notify the Indemnitor in writing upon being served with any summons, citation, subpoena, complaint, indictment, request, information, or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder and shall include with such notice a description of the nature of the Proceeding and a summary of the facts underlying the Proceeding, but the failure so to notify the Indemnitor will not relieve the Indemnitor from any liability that the Indemnitor may have to Indemnitee under this Agreement unless the Indemnitor can establish that such omission to notify resulted in actual and material prejudice to the ability of the Company to defend in such Proceeding or to obtain proceeds under any insurance policy which cannot be reversed or otherwise eliminated without any material adverse effect on the Indemnitor.  With respect to any such Proceeding as to which Indemnitee notifies the Indemnitor of the commencement thereof:

 

(A)                              The Indemnitor will be entitled to participate therein at its own expense.

 

(B)                               Except as otherwise provided below, the Indemnitor will be entitled to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee.  After notice from the Indemnitor to Indemnitee of the Indemnitor’s election to assume the defense thereof, the Indemnitor will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below.  The Indemnitee shall have the right to employ Indemnitee’s own counsel in such Proceeding, but the fees and disbursements of such counsel incurred after notice from the Indemnitor of the Indemnitor’s assumption of the defense thereof shall be at the expense of the Indemnitee unless

 

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(a) the employment of counsel by the Indemnitee has been authorized by the Indemnitor, (b) the Indemnitee shall have reasonably concluded, based upon an opinion of counsel approved by the Indemnitor, which approval shall not be unreasonably withheld or delayed, that there may be a conflict of interest between the Indemnitor and the Indemnitee in the conduct of the defense of such action, (c) the Indemnitee shall have reasonably concluded, based upon an opinion of counsel approved by the Indemnitor, which approval shall not be unreasonably withheld or delayed, that Indemnitee may have separate defenses or counterclaims to assert with respect to any issue which may not be consistent with other defendants in such Proceeding, (d) such Proceeding seeks penalties or other relief against the Indemnitee with respect to which the Indemnitor could not provide monetary indemnification to the Indemnitee (such as injunctive relief or incarceration) or (e) the Indemnitor shall not in fact have employed counsel to assume the defense of such action in a timely manner, in each of which cases the fees and disbursements of counsel (which counsel shall be subject to the prior approval of the Indemnitor, which approval shall not be unreasonably withheld or delayed) shall be at the expense of the Indemnitor (subject to Section 3(B).  In addition, if the Company fails to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any Proceeding to deny or to recover from Indemnitee the benefits intended to be provided to Indemnitee hereunder, Indemnitee shall have the right to retain counsel of Indemnitee’s choice, subject to the prior approval of the Company, which approval shall not be unreasonably withheld or delayed, at the expense of the Company (subject to Section 3(B)), to represent Indemnitee in connection with any such matter.  The Indemnitor shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Indemnitor, or as to which the Indemnitee shall have reached the conclusion specified in clause (b) above, or which involves penalties or other relief against the Indemnitee of the type referred to in clause (c) above.

 

(C)                                The Indemnitor shall not be liable to indemnify the Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without the Indemnitor’s written consent.  The Indemnitor shall not settle any action or claim in any manner that would (i) include an admission of fault of Indemnitee, (ii) not include, as an unconditional term thereof, the full release of Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to Indemnitee, or (iii) impose any penalty or limitation on the Indemnitee without the Indemnitee’s written consent.  Neither the Indemnitor nor Indemnitee will unreasonably withhold or delay consent to any proposed settlement.

 

10.                               NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE SUBROGATION

 

(A)                               The rights of indemnification and to receive advancement of reasonable Expenses as provided by this Agreement shall not be deemed exclusive of any other rights

 

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to which the Indemnitee may at any time be entitled under applicable law, the Declaration of Trust, the Bylaws, any other agreement, a vote of shareholders, a resolution of the Board of Trustees or otherwise, except that any payments otherwise required to be made by the Indemnitor hereunder shall be offset by any and all amounts received by the Indemnitee from any other indemnitor or under one or more liability insurance policies maintained by an indemnitor or otherwise and shall not be duplicative of any other payments received by an Indemnitee from the Indemnitor in respect of the matter giving rise to the indemnity hereunder.  No amendment, alteration or repeal of this Agreement or of the Declaration of Trust or Bylaws of the Company, or any provision hereof or thereof, shall be effective as to the Indemnitee with respect to any action taken or omitted by the Indemnitee prior to such amendment, alteration or repeal.  No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right or remedy shall be cumulative and in addition to every other right or remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion of any right or remedy hereunder, or otherwise, shall not prohibit the concurrent assertion or employment of any other right or remedy.

 

(B)                               The Company will use its reasonable best efforts to acquire directors and officers liability insurance, on terms and conditions deemed appropriate by the Board of Trustees, with the advice of counsel, covering Indemnitee or any claim made against Indemnitee by reason of Indemnitee’s Corporate Status and covering the Company for any indemnification or advancement of Expenses made by the Company to Indemnitee for any claims made against Indemnitee by reason of Indemnitee’s Corporate Status.  In the event of a Change in Control, the Company shall maintain in force any and all directors and officers liability insurance policies that were maintained by the Company immediately prior to the Change in Control for a period of six years with the insurance carrier or carriers and through the insurance broker in place at the time of the Change in Control,  including through purchase of a “tail” policy for such six year period; provided, however, (i) if the carriers will not offer the same policy and an expiring policy needs to be replaced, a policy substantially comparable in scope and amount shall be obtained and (ii) if any replacement insurance carrier is necessary to obtain a policy substantially comparable in scope and amount, such insurance carrier shall have an AM Best rating that is the same or better than the AM Best rating of the existing insurance carrier; provided, further, however, in the event a tail policy is purchased to fulfill the Company’s obligations in this Section 10(B), in no event shall the Company be required to expend in the aggregate in excess of 300% of the annual premium or premiums paid by the Company for directors and officers liability insurance in effect on the date of the Change in Control in order to purchase such tail policy.  In the event that 300% of the annual premium paid by the Company for such existing directors and officers liability insurance is insufficient to purchase a tail policy providing such coverage, the Company shall spend up to that amount to purchase a tail policy providing such lesser coverage as may be obtained with such amount.

 

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(C)                               Without in any way limiting any other obligation under this Agreement, the Company shall indemnify Indemnitee for any payment by Indemnitee which would otherwise be indemnifiable hereunder arising out of the amount of any deductible or retention and the amount of any excess of the aggregate of all judgments, penalties, fines, settlements and Expenses incurred by Indemnitee in connection with a Proceeding over the coverage of any insurance referred to in Section 10(B).  The purchase, establishment and maintenance of any such insurance shall not in any way limit or affect the rights or obligations of the Company or Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and the Indemnitee shall not in any way limit or affect the rights or obligations of the Company under any such insurance policies.  If, at the time the Company receives notice from any source of a Proceeding to which Indemnitee is a party or a participant (as a witness or otherwise) the Company has trustee and officer liability insurance in effect, the Company shall give prompt notice of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies.

 

(D)                               The Indemnitee shall cooperate with the Company or any insurance carrier of the Company with respect to any Proceeding.

 

(E)                                In the event of any payment under this Agreement, the Indemnitor shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and take all actions necessary to secure such rights, including execution of such documents as are necessary to enable the Indemnitor to bring suit to enforce such rights.

 

(F)                                 The Indemnitor shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that the Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement, or otherwise.

 

11.                               CONTINUATION OF INDEMNITY

 

(A)                               All agreements and obligations of the Indemnitor contained herein shall continue during the period the Indemnitee is an officer or a member of the Board of Trustees of the Company or is serving at the request of the Company as a director, trustee, officer, partner (limited or general), manager, member, fiduciary, employee or agent of any other foreign or domestic corporation, real estate investment trust, partnership, joint venture, limited liability company, trust, other enterprise (whether conducted for profit or not for profit) or employee benefit plan and shall continue thereafter so long as the Indemnitee shall be subject to any threatened, pending or completed Proceeding by reason of such Indemnitee’s Corporate Status and during the period of statute of limitations for any act or omission occurring during the Indemnitee’s term of Corporate Status.  This

 

13



 

Agreement shall be binding upon the Indemnitor and its respective successors and assigns and shall inure to the benefit of the Indemnitee and such Indemnitee’s heirs, executors and administrators.

 

(B)                               The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance reasonably satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place, and the Company shall not permit any such succession (purchase of assets or business, acquisition of securities or merger or consolidation) to occur until such written agreement has been executed and delivered. No such assumption and agreement shall relieve the Company of any of its obligations hereunder, and this Agreement shall not otherwise be assignable by the Company.

 

(C)                               The Company and Indemnitee agree that a monetary remedy for breach of this Agreement, at some later date, may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm.  Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which Indemnitee may be entitled.  Indemnitee shall further be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertakings in connection therewith.  The Company acknowledges that, in the absence of a waiver, a bond or undertaking may be required of Indemnitee by a court, and the Company hereby waives any such requirement of such a bond or undertaking.

 

12.                               SEVERABILITY

 

If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality, and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law, (ii) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto and (iii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal

 

14



 

or unenforceable that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provisions held invalid, illegal or unenforceable.

 

13.                               EXCEPTIONS TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF EXPENSES

 

Notwithstanding any other provisions of this Agreement, the Indemnitee shall not be entitled to indemnification or advancement of reasonable Expenses under this Agreement with respect to (i) any Proceeding initiated by such Indemnitee against the Indemnitor other than (x) a proceeding commenced pursuant to Section 8 hereof or (y) any proceeding authorized by the Company’s Declaration of Trust or Bylaws, a resolution of the shareholders entitled to vote generally in the election of trustees or of the Board of Trustees or an agreement approved by the Board of Trustees to which the Company is a party expressly provides otherwise, or (ii) any Proceeding for an accounting of profits arising from the purchase and sale by Indemnitee of securities of the Company in violation of Section 16(b) of the Exchange Act, rules and regulations promulgated thereunder, or any similar provisions of any federal, state or local statute.

 

14.                               NOTICE TO THE COMPANY SHAREHOLDERS

 

To the extent required by the MGCL, any indemnification of, or advancement of reasonable Expenses to, an Indemnitee in accordance with this Agreement, if arising out of a Proceeding by or in the right of the Company, shall be reported in writing to the shareholders of the Company with the notice of the next Company shareholders’ meeting following the date of the payment of any such indemnification or advance of Expenses or prior to such meeting.

 

15.                               SECTION 409A

 

If the Indemnitee’s right to payment of indemnification pursuant to Section 6 or right to the advancement of Expenses under Sections 4 or 5 would not be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) pursuant to Final Treasury Regulation 1.409A-1(b)(10), then (i) the payment of indemnification and Expenses provided or advanced to or for Indemnitee pursuant to this Agreement in one taxable year shall not affect the amount of indemnification and Expenses provided or advanced to or for Indemnitee in any other taxable year, (ii) any reimbursement to Indemnitee of Expenses under this Agreement shall be paid to Indemnitee on or before the last day of Indemnitee’s taxable year following the taxable year in which the Expense was incurred and (iii) the right to advancement, reimbursement or payment of indemnification and Expenses under this Agreement may not be liquidated or exchanged for any other benefit. In addition, to the extent that this Agreement is subject to Section 409A of the Code, the parties agree to cooperate and work together in good faith to timely amend this Agreement to comply with Section 409A of the Code.

 

15



 

16.                               HEADINGS

 

The headings of the Sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

 

17.                               MODIFICATION AND WAIVER

 

No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

18.                               NOTICES

 

All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand or by a nationally recognized overnight delivery service and received by the party to whom said notice or other communication shall have been directed, on the day of such delivery, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, if so delivered or mailed, as the case may be, to the following addresses:

 

If to the Indemnitee, to the address set forth in the records of the Company.

 

If to the Indemnitor, to:

 

JBG SMITH Properties

4445 Willard Avenue, Suite 400

Chevy Chase, MD 20815

Attention:  Chief Legal Officer

 

or to such other address as may have been furnished to the Indemnitee by the Indemnitor or to the Indemnitor by the Indemnitee, as the case may be.

 

19.                               CONTRIBUTION

 

(A)                               To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, other than for failure to satisfy the standard of conduct set forth in Sections 4 or due to the provisions of Section 6(B), the Company, in lieu of indemnifying Indemnitee, shall pay the entire amount actually incurred by Indemnitee, whether for judgments, penalties, fines and settlements and reasonable Expenses actually incurred by or on behalf of an Indemnitee, in connection with any claim relating to an indemnifiable event under this Agreement, without requiring Indemnitee to contribute to such payment, and the Company hereby waives and relinquishes any right of contribution it may have at any time against Indemnitee

 

16



 

20.                               GOVERNING LAW

 

The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without application of the conflict of laws principles thereof.

 

21.                               NO ASSIGNMENTS

 

The Indemnitee may not assign its rights or delegate obligations under this Agreement without the prior written consent of the Indemnitor.  Any assignment or delegation in violation of this Section 21 shall be null and void.

 

22.                               NO THIRD-PARTY RIGHTS

 

Nothing expressed or referred to in this Agreement will be construed to give any person other than the parties to this Agreement any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions are for the sole and exclusive benefit of the parties to this Agreement and their successors and permitted assigns.

 

23.                               COUNTERPARTS

 

This Agreement may be executed in one or more counterparts (delivery of which may be by facsimile, or via e-mail as a portable document format (.pdf) or other electronic format), each of which shall be deemed an original, but all of which together constitute an agreement binding on all of the parties hereto.

 

[Signature page follows]

 

17



 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

 

JBG SMITH Properties

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

INDEMNITEE:

 

 

 

 

 

By:

 

 

Name:

 


EX-10.13 25 a17-17912_1ex10d13.htm EX-10.13

Exhibit 10.13

 

EXECUTION VERSION

 


 

FIRST AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT

 

OF

 

JBG SMITH PROPERTIES LP

 

Dated as of:  July 17, 2017

 


 

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS.

 

IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED.  THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.  FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT.  ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

ARTICLE I

 

DEFINED TERMS

 

 

 

Section 1.1

Definitions

2

 

 

 

“704(c) Value”

2

“2015 Budget Act Partnership Audit Rules”

2

“Act”

2

“Additional Limited Partner”

2

“Adjusted Capital Account”

2

“Adjusted Capital Account Deficit”

2

“Adjusted Property”

2

“Affiliate”

3

“Agreed Value”

3

“Agreement”

3

“Applicable Year”

3

“Assignee”

3

“Bankruptcy”

3

“Book-Up Target”

4

“Book-Tax Disparities”

4

“Business Day”

4

“Capital Account”

4

“Capital Contribution”

4

“Carrying Value”

4

“Cash Amount”

4

“Certificate”

5

“Code”

5

“Common Partnership Unit”

5

“Common Partnership Unit Economic Balance”

5

“Consent”

5

“Consent of the Outside Limited Partners”

5

“Constructive Ownership” and “Constructively Own”

5

“Contributed Property”

5

“Conversion Factor”

5

“Convertible Funding Debt”

7

“Covered Person”

7

“Current Partnership Audit Rules”

7

“Debt”

7

“Declaration of Trust”

7

“Depreciation”

7

“Economic Capital Account Balance”

8

 



 

“EDGAR”

8

“ERISA”

8

“Excluded Units”

8

“Exchange Act”

8

“Extraordinary Transaction”

8

“final adjustment”

8

“Formation Unit”

8

“Funding Debt”

8

“GAAP”

8

“General Partner”

8

“General Partner Entity”

8

“General Partner Payment”

8

“General Partnership Interest”

9

“Immediate Family”

9

“Incapacity” or “Incapacitated”

9

“Indemnitee”

9

“IRS”

9

“Limited Partner”

9

“Limited Partnership Interest”

9

“Liquidating Event”

10

“Liquidating Gains”

10

“Liquidating Losses”

10

“Liquidator”

10

“LTIP Distribution Amount”

10

“LTIP Unit”

10

“LTIP Unit Initial Sharing Percentage”

10

“LTIP Unitholder”

10

“Majority in Interest”

10

“Master Transaction Agreement”

10

“Net Income”

10

“Net Loss”

11

“New Securities”

11

“Nonrecourse Built-in Gain”

11

“Nonrecourse Deductions”

11

“Nonrecourse Liability”

11

“Notice of Redemption”

11

“Partner”

11

“Partner Minimum Gain”

11

“Partner Nonrecourse Debt”

11

“Partner Nonrecourse Deductions”

11

“Partner Registry”

12

“Partnership”

12

“Partnership Approval”

12

“Partnership Interest”

12

“Partnership Minimum Gain”

12

“Partnership Record Date”

12

 



 

“Partnership Unit” or “Unit”

12

“Partnership Year”

12

“Percentage Interest”

12

“Person”

13

“Predecessor Entity”

13

“Pro Rata Portion”

13

“Publicly Traded”

13

“Qualified REIT Subsidiary”

13

“Recapture Income”

13

“Redeeming Partner”

13

“Redemption Amount”

13

“Redemption Right”

13

“Regulations”

13

“REIT”

13

“REIT Expenses”

13

“REIT Requirements”

14

“Required Cash Payment”

14

“Required Denominator Shares”

14

“Safe Harbors”

14

“SEC”

14

“Securities Act”

14

“Share”

14

“Shareholder Approval”

14

“Shareholder Vote”

14

“Shares Amount”

14

“Specified Redemption Date”

15

“Stock Option Plan”

15

“Subsidiary”

15

“Substituted Limited Partner”

15

“Successor Entity”

15

“Tender Offer”

15

“Terminating Capital Transaction”

15

“Trading Days”

15

“Unit Equivalent”

15

“Unvested LTIP Unit”

15

“Valuation Date”

16

“Value”

16

“Vested LTIP Unit”

16

“Vesting Agreement”

16

“Voting Percentage Interest”

16

“Voting Units”

16

 

ARTICLE II
ORGANIZATIONAL MATTERS

 

Section 2.1

Organization

16

Section 2.2

Name

17

 



 

Section 2.3

Registered Office and Agent; Principal Office

17

Section 2.4

Power of Attorney

17

Section 2.5

Term

19

Section 2.6

Admission of Limited Partners

19

 

ARTICLE III
PURPOSE

 

Section 3.1

Purpose and Business

19

Section 3.2

Powers

19

Section 3.3

Representations and Warranties by the Parties

20

Section 3.4

Partnership Only for Purposes Specified

21

 

ARTICLE IV
CAPITAL CONTRIBUTIONS AND ISSUANCES
OF PARTNERSHIP INTERESTS

 

Section 4.1

Capital Contributions of the Partners

21

Section 4.2

Issuances of Partnership Interests

22

Section 4.3

Contribution of Proceeds of Issuance of Securities by the General Partner Entity

25

Section 4.4

No Preemptive Rights

26

Section 4.5

Other Contribution Provisions

26

Section 4.6

No Interest on Capital

26

 

ARTICLE V
DISTRIBUTIONS

 

Section 5.1

Requirement and Characterization of Distributions

26

Section 5.2

Amounts Withheld

27

Section 5.3

Distributions Upon Liquidation

27

Section 5.4

Restricted Distributions

27

Section 5.5

Revisions to Reflect Issuance of Additional Partnership Interests

27

Section 5.6

Non-Pro Rata Distribution

27

 

ARTICLE VI
ALLOCATIONS

 

Section 6.1

Allocations for Capital Account Purposes

28

Section 6.2

Revisions to Allocations to Reflect Issuance of Additional Partnership Interests

31

 

ARTICLE VII
MANAGEMENT AND OPERATIONS OF BUSINESS

 

Section 7.1

Management

31

Section 7.2

Certificate of Limited Partnership

37

Section 7.3

Restrictions on General Partner Authority

38

 



 

Section 7.4

Reimbursement of the General Partner

38

Section 7.5

Outside Activities of the General Partner

41

Section 7.6

Transactions with Affiliates

43

Section 7.7

Indemnification

43

Section 7.8

Liability of the Covered Persons

46

Section 7.9

Other Matters Concerning the General Partner

47

Section 7.10

Title to Partnership Assets

48

Section 7.11

Reliance by Third Parties

48

Section 7.12

Loans by Third Parties

49

 

ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

 

Section 8.1

Limitation of Liability

49

Section 8.2

Management of Business

49

Section 8.3

Outside Activities of Limited Partners

49

Section 8.4

Return of Capital

50

Section 8.5

Rights of Limited Partners Relating to the Partnership

50

Section 8.6

Redemption Right

51

 

ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS

 

Section 9.1

Records and Accounting

55

Section 9.2

Fiscal Year

55

Section 9.3

Reports

55

 

ARTICLE X
TAX MATTERS

 

Section 10.1

Preparation of Tax Returns

56

Section 10.2

Tax Elections

56

Section 10.3

Tax Matters Partner

57

Section 10.4

Organizational Expenses

60

Section 10.5

Withholding

60

 

ARTICLE XI
TRANSFERS AND WITHDRAWALS

 

Section 11.1

Transfer

61

Section 11.2

Transfers of Partnership Interests of General Partner and General Partner Entity

61

Section 11.3

Limited Partners’ Rights to Transfer

63

Section 11.4

Substituted Limited Partners

66

Section 11.5

Assignees

67

Section 11.6

General Provisions

67

 



 

ARTICLE XII
ADMISSION OF PARTNERS

 

Section 12.1

Admission of Successor General Partner

69

Section 12.2

Admission of Additional Limited Partners

70

Section 12.3

Amendment of Agreement and Certificate of Limited Partnership

70

 

ARTICLE XIII
DISSOLUTION AND LIQUIDATION

 

Section 13.1

Dissolution

71

Section 13.2

Winding Up

72

Section 13.3

Compliance with Timing Requirements of Regulations

73

Section 13.4

Deemed Distribution and Recontribution

73

Section 13.5

Rights of Limited Partners

74

Section 13.6

Notice of Dissolution

74

Section 13.7

Termination of Partnership and Cancellation of Certificate of Limited Partnership

74

Section 13.8

Reasonable Time for Winding Up

74

Section 13.9

Waiver of Partition

74

Section 13.10

Liability of Liquidator

74

 

ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS

 

Section 14.1

Amendments

75

Section 14.2

Meetings of the Partners

77

 

ARTICLE XV
GENERAL PROVISIONS

 

Section 15.1

Addresses and Notice

78

Section 15.2

Titles and Captions

78

Section 15.3

Pronouns and Plurals

79

Section 15.4

Further Action

79

Section 15.5

Binding Effect

79

Section 15.6

Creditors; Other Third Parties

79

Section 15.7

Waiver

79

Section 15.8

Counterparts

79

Section 15.9

Applicable Law

79

Section 15.10

Invalidity of Provisions

80

Section 15.11

Entire Agreement

80

Section 15.12

No Rights as Shareholders

80

Section 15.13

Limitation to Preserve REIT Status

80

 



 

EXHIBIT A

FORM OF PARTNER REGISTRY

 

EXHIBIT B

CAPITAL ACCOUNT MAINTENANCE

 

EXHIBIT C

SPECIAL ALLOCATION RULES

 

EXHIBIT D

NOTICE OF REDEMPTION

 

EXHIBIT E

DESIGNATION OF THE PREFERENCES, CONVERSION
AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS,
LIMITATIONS AS TO DISTRIBUTIONS, QUALIFICATIONS AND TERMS
AND CONDITIONS OF REDEMPTION
OF THE
LTIP UNITS

 

EXHIBIT F

DESIGNATION OF THE PREFERENCES, CONVERSION
AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS,
LIMITATIONS AS TO DISTRIBUTIONS, QUALIFICATIONS AND TERMS
AND CONDITIONS OF REDEMPTION
OF THE
FORMATION UNITS

 

EXHIBIT G

CONSTRUCTIVE OWNERSHIP DEFINITION

 

EXHIBIT H

SCHEDULE OF PARTNERS’ OWNERSHIP
WITH RESPECT TO TENANTS

 

vii



 

FIRST AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
JBG SMITH PROPERTIES LP

 

THIS FIRST AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF JBG SMITH Properties LP (this “Agreement”), dated as of July 17, 2017, is entered into by and among JBG SMITH Properties, a Maryland real estate investment trust (the “General Partner”), as the general partner of and a limited partner in the Partnership, and the General Partner, on behalf of and as attorney in fact for each of the persons and entities identified in the Partner Registry as a Limited Partner in the Partnership, together with any other Persons who become Partners in the Partnership as provided herein.

 

WHEREAS, the Partnership was formed under the name “Vornado DC Spinco GP LLC” on October 28, 2016;

 

WHEREAS, on November 29, 2016, the general partner of the Partnership changed the Partnership’s name to “JBG SMITH Properties LP” and, in connection therewith, caused the Amended and Restated Certificate of Limited Partnership of the Partnership to be filed in the office of the Delaware Secretary of State on November 29, 2016;

 

WHEREAS, the Partnership is a party to the Master Transaction Agreement, dated as of October 31, 2016, by and among Vornado Realty Trust, Vornado Realty L.P., JBG Properties Inc., JBG/Operating Partners, L.P., certain affiliates of JBG Properties Inc. and JBG/Operating Partners, L.P., JBG SMITH Properties and the Partnership;

 

WHEREAS, in accordance with the transactions contemplated by the Master Transaction Agreement, the general partner of the Partnership caused the Limited Partnership Agreement of the Partnership to be amended (the “First Amendment”);

 

WHEREAS, in connection with the transactions contemplated by the Master Transaction Agreement, including the admission of JBG SMITH Properties as successor general partner, the General Partner desires to amend and restate the Limited Partnership Agreement, as amended by the First Amendment (the “Amended LPA”);

 

WHEREAS, Section 14.1.B of the Amended LPA grants the General Partner power and authority to amend the Amended LPA without the consent of any of the Partnership’s limited partners if the amendment does not adversely affect or eliminate any right granted to a limited partner pursuant to any of the provisions of the Amended LPA specified in Section 14.1.C or Section 14.1.D of the Amended LPA as requiring a particular minimum vote; and

 

WHEREAS, the amendments effected hereby do not adversely affect or eliminate any of the limited partner rights specified in Section 14.1.C or Section 14.1.D of the Amended LPA.

 

NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the General Partner hereby amends and restated the Amended LPA in its entirety as follows:

 



 

ARTICLE I
DEFINED TERMS

 

Section 1.1                                    Definitions.

 

The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

 

704(c) Value” of any Contributed Property means the fair market value of such property or other consideration at the time of contribution, as determined by the General Partner using such reasonable method of valuation as it may adopt.  Subject to Exhibit B hereof, the General Partner shall, in its sole and absolute discretion, use such method as it deems reasonable and appropriate to allocate the aggregate of the 704(c) Values of Contributed Properties in a single or integrated transaction among the separate properties on a basis proportional to their respective fair market values.

 

2015 Budget Act Partnership Audit Rules” means the provisions of Subchapter C of Subtitle F, Chapter 63 of the Code, as amended by P.L. 114-74, the Bipartisan Budget Act of 2015 (together with any subsequent amendments thereto, Regulations promulgated thereunder, published administrative interpretations thereof, any guidance issued thereunder and any successor provisions) or any similar procedures established by a state, local, or non-U.S. taxing authority.

 

Act” means the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §17-101, et seq., as it may be amended from time to time, and any successor to such statute.

 

Additional Limited Partner” means a Person admitted to the Partnership as a Limited Partner pursuant to Section 12.2 hereof and who is shown as such on the books and records of the Partnership.

 

Adjusted Capital Account” means the Capital Account maintained for each Partner as of the end of each Partnership Year (i) increased by any amounts which such Partner is obligated to restore pursuant to any provision of this Agreement or is treated as obligated to restore to the Partnership pursuant to the provisions of Section 1.704-1(b)(2)(ii)(c) of the Regulations or is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii) decreased by the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6).  The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

 

Adjusted Capital Account Deficit” means, with respect to any Partner, the deficit balance, if any, in such Partner’s Adjusted Capital Account as of the end of the relevant Partnership Year.

 

Adjusted Property” means any property the Carrying Value of which has been adjusted pursuant to Exhibit B hereof.

 

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Affiliate” means, (a) respect to any individual Person, any member of the Immediate Family of such Person or a trust established for the benefit of such member, or (b) with respect to any Person who is not an individual, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any Person owning or controlling ten percent (10%) or more of the outstanding voting interests of such Person, (iii) any Person of which such Person owns or controls ten percent (10%) or more of the voting interests or (iv) any officer, director, general partner or trustee of such Person or any Person referred to in clauses (i), (ii), and (iii) above.  For purposes of this definition, “control,” when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

Agreed Value” means (i) in the case of any Contributed Property as of the time of its contribution to the Partnership, the 704(c) Value of such property, reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed; and (ii) in the case of any property distributed to a Partner by the Partnership, the Partnership’s Carrying Value of such property at the time such property is distributed, reduced by any indebtedness either assumed by such Partner upon such distribution or to which such property is subject at the time of distribution as determined under Section 752 of the Code and the Regulations thereunder.

 

Agreement” means this Limited Partnership Agreement, as it may be amended, supplemented or restated from time to time.

 

Applicable Year” means the second calendar year that begins after the calendar year in which the Vornado Distribution (as that term is defined in the Master Transaction Agreement) occurs.

 

Assignee” means a Person to whom one or more Partnership Units have been transferred in a manner permitted under this Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5 hereof.

 

Bankruptcy” with respect to any Person shall be deemed to have occurred when (a) the Person commences a voluntary proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect, (b) the Person is adjudged as bankrupt or insolvent, or a final and nonappealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the Person, (c) the Person executes and delivers a general assignment for the benefit of the Person’s creditors, (d) the Person files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Person in any proceeding of the nature described in clause (b) above, (e) the Person seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Person or for all or any substantial part of the Person’s properties, (f) any proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within one hundred twenty (120) days after the commencement thereof, (g) the appointment without the Person’s consent or acquiescence of a trustee, receiver of liquidator has not been

 

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vacated or stayed within ninety (90) days of such appointment or (h) an appointment referred to in clause (g) is not vacated within ninety (90) days after the expiration of any such stay.

 

Book-Up Target” for each LTIP Unit means the lesser of (i) the Common Partnership Unit Economic Balance as determined on the date such LTIP Unit was granted and as reduced (not to less than zero) by allocations of Liquidating Gains pursuant to Section 6.1.E(i) and reallocations of Economic Capital Account Balances to such LTIP Unit as a result of a forfeiture of an LTIP Unit, as determined by the General Partner and (ii) the amount required to be allocated to such LTIP Unit for the Economic Capital Account Balance, to the extent attributable to such LTIP Unit, to be equal to the Common Partnership Unit Economic Balance. Notwithstanding the foregoing, the Book-Up Target shall be equal to zero for any LTIP Unit for which the Economic Capital Account Balance attributable to such LTIP Unit has, at any time, reached an amount equal to the Common Partnership Unit Economic Balance determined as of such time.

 

Book-Tax Disparities” means, with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date.  A Partner’s share of the Partnership’s Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Partner’s Capital Account balance as maintained pursuant to Exhibit B hereof and the hypothetical balance of such Partner’s Capital Account computed as if it had been maintained, with respect to each such Contributed Property or Adjusted Property, strictly in accordance with federal income tax accounting principles.

 

Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close.

 

Capital Account” means the Capital Account maintained for a Partner pursuant to Exhibit B hereof.

 

Capital Contribution” means, with respect to any Partner, any cash, cash equivalents or the Agreed Value of Contributed Property which such Partner contributes or is deemed to contribute to the Partnership pursuant to Section 4.1, 4.2 or 4.3 hereof.

 

Carrying Value” means (i) with respect to a Contributed Property or Adjusted Property, the 704(c) Value of such property reduced (but not below zero) by all Depreciation with respect to such Contributed Property or Adjusted Property, as the case may be, charged to the Partners’ Capital Accounts following the contribution of or adjustment with respect to such property; and (ii) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination.  The Carrying Value of any property shall be adjusted from time to time in accordance with Exhibit B hereof, and to reflect changes, additions or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the General Partner.

 

Cash Amount” means an amount of cash equal to the Value on the Valuation Date of the Shares Amount.

 

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Certificate” means the Amended and Restated Certificate of Limited Partnership of the Partnership as filed in the office of the Delaware Secretary of State on November 29, 2016, as amended and/or restated from time to time in accordance with the terms hereof and the Act.

 

Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder.  Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law.

 

Common Partnership Unit” means any Partnership Unit other than any series of units of limited partnership interest issued in the future and designated as preferred or that is otherwise different from the Common Partnership Units, including, but not limited to, with respect to the payment of distributions, including distributions upon liquidation.

 

Common Partnership Unit Economic Balance” means (i) the Capital Account balance of the General Partner, plus the amount of the General Partner’s share of any Partner Minimum Gain or Partnership Minimum Gain, in either case to the extent attributable to the General Partner’s ownership of Common Partnership Units and computed on a hypothetical basis after taking into account all allocations through the date on which any allocation is made under Section 6.1.E, divided by (ii) the number of the General Partner’s Common Partnership Units.

 

Consent” means the consent or approval of a proposed action by a Partner given in accordance with Section 14.2 hereof.

 

Consent of the Outside Limited Partners” means the Consent of Limited Partners (excluding for this purpose, to the extent any of the following holds Partnership Units, (i) the General Partner or the General Partner Entity, (ii) any Person of which the General Partner or the General Partner Entity directly or indirectly owns or controls more than fifty percent (50%) of the voting interests and (iii) any Person directly or indirectly owning or controlling more than fifty percent (50%) of the outstanding voting interests of the General Partner or the General Partner Entity) holding Voting Units representing more than fifty percent (50%) of the Voting Percentage Interest of Voting Units of all Limited Partners which are not excluded pursuant to (i), (ii) and (iii) of the parenthetical above.

 

Constructive Ownership” and “Constructively Own” mean ownership under the constructive ownership rules described in Exhibit G.

 

Contributed Property” means each property or other asset, in such form as may be permitted by the Act (but excluding cash), contributed or deemed contributed to the Partnership.  Once the Carrying Value of a Contributed Property is adjusted pursuant to Exhibit B hereof, such property shall no longer constitute a Contributed Property for purposes of Exhibit B hereof, but shall be deemed an Adjusted Property for such purposes.

 

Conversion Factor” means, as of the date of this Agreement, 1.0; provided that in the event that (x) the General Partner Entity (i) declares (and the applicable record date has passed or will have passed before a redeeming Partner would receive cash or common Shares in respect of the Partnership Units being redeemed) or pays a dividend on its outstanding Shares in

 

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Shares or makes a distribution to all holders of its outstanding Shares in Shares, (ii) subdivides or reclassifies its outstanding Shares or (iii) combines its outstanding Shares into a smaller number of Shares, and (y) in connection with any such event described in clauses (i), (ii) or (iii) above does not cause the Partnership to make a comparable distribution of additional Units to all holders of the Partnership’s outstanding Common Partnership Units (and to all holders of Units of any other class issued by the Partnership after the date hereof which are, by their terms, redeemable for cash or, at the General Partner’s election, common Shares as set forth in Section 8.6), or a subdivision or combination of the Partnership’s outstanding Common Partnership Units (and of all Units of any other class issued by the Partnership after the date hereof which are, by their terms, redeemable for cash or, at the General Partner’s election, common Shares as set forth in Section 8.6) in any such case so that the number of Common Partnership Units held directly or indirectly by the General Partner Entity after such distribution, subdivision or combination is equal to the number of the General Partner Entity’s then-outstanding Shares, then upon completion of such declaration, subdivision or combination the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of Shares issued and outstanding on the record date for such dividend, distribution, subdivision or combination (assuming for such purposes that such dividend, distribution, subdivision or combination has occurred as of such time) and the denominator of which shall be the actual number of Shares (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, subdivision or combination; and provided further that in case the General Partner Entity (w) shall issue rights or warrants to all holders of Shares entitling them to subscribe for or purchase Shares at a price per share less than the daily market price per Share on the date fixed for the determination of shareholders entitled to receive such rights or warrants, (x) shall not issue similar rights or warrants to all holders of Common Partnership Units entitling them to subscribe for or purchase Shares or Partnership Units at a comparable price (determined, in the case of Partnership Units, by reference to the Conversion Factor), and (y) cannot issue such rights or warrants to a Redeeming Partner as required by the definition of “Shares” set forth in this Article I, then the Conversion Factor in effect at the opening of business on the day following the date fixed for such determination shall be increased by multiplying such Conversion Factor by a fraction of which the numerator shall be the number of Shares outstanding at the close of business on the date fixed for such determination plus the number of Shares so offered for subscription or purchase, and of which the denominator shall be the number of Shares outstanding at the close of business on the date fixed for such determination plus the number of Shares which the aggregate offering price of the total number of Shares so offered for subscription would purchase at such daily market price per share, such increase of the Conversion Factor to become effective immediately after the opening of business on the day following the date fixed for such determination; and provided further that in the event that an entity shall cease to be the General Partner Entity (the “Predecessor Entity”) and another entity shall become the General Partner Entity (the “Successor Entity”), the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which is the Value of one Share of the Predecessor Entity, determined as of the time immediately prior to when the Successor Entity becomes the General Partner Entity, and the denominator of which is the Value of one Share of the Successor Entity, determined as of that same date.  (For purposes of the second proviso in the preceding sentence, in the event that any shareholders of the Predecessor Entity will receive consideration in connection with the transaction in which the Successor Entity

 

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becomes the General Partner Entity, the numerator in the fraction described above for determining the adjustment to the Conversion Factor (that is, the Value of one Share of the Predecessor Entity) shall be the sum of the greatest amount of cash and the fair market value of any securities and other consideration that the holder of one Share in the Predecessor Entity could have received in such transaction (determined without regard to any provisions governing fractional shares).)  Except as noted above, any adjustment to the Conversion Factor shall become effective immediately after the effective date of such event retroactive to the record date, if any, for the event giving rise thereto; it being intended that (x) adjustments to the Conversion Factor are to be made in order to avoid unintended dilution or anti-dilution as a result of transactions in which Shares are issued, redeemed or exchanged without a corresponding issuance, redemption or exchange of Partnership Units and (y) if a Specified Redemption Date shall fall between the record date and the effective date of any event of the type described above, that the Conversion Factor applicable to such redemption shall be adjusted to take into account such event.

 

Convertible Funding Debt” has the meaning set forth in Section 7.5.D hereof.

 

Covered Person” has the meaning set forth in Section 7.8.A hereof.

 

Current Partnership Audit Rules” means Subchapter C of Subtitle F, Chapter 63 of the Code as in effect on November 1, 2015, and as subsequently amended prior to the effective date of the 2015 Budget Act Partnership Audit Rules.

 

Debt” means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds and other similar instruments guaranteeing payment or other performance of obligations by such Person, (iii) all indebtedness for borrowed money or for the deferred purchase price of property or services secured by any lien on any property owned by such Person, to the extent attributable to such Person’s interest in such property, even though such Person has not assumed or become liable for the payment thereof, and (iv) obligations of such Person incurred in connection with entering into a lease which, in accordance with GAAP, should be capitalized.

 

Declaration of Trust” means the Declaration of Trust or other similar organizational document governing the General Partner Entity, as amended, supplemented or restated from time to time.

 

Depreciation” means, for each taxable year, an amount equal to the federal income tax depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such year, except that if the Carrying Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Carrying Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such year bears to such beginning adjusted tax basis; provided, however, that if the federal income tax depreciation, amortization, or other cost recovery deduction for such year is zero, Depreciation shall be

 

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determined with reference to such beginning Carrying Value using any reasonable method selected by the General Partner.

 

Economic Capital Account Balance” means, with respect to LTIP Unitholders and Holders of Formation Units, their Capital Account balances, plus the amount of their shares of any Partner Minimum Gain or Partnership Minimum Gain, in either case to the extent attributable to their ownership of LTIP Units or Formation Units, respectively.

 

EDGAR” means the Electronic Data Gathering, Analysis and Retrieval System or any successor system for filing information, documents or reports with the SEC.

 

ERISA” means the Employee Retirement Income Security Act of 1974, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder. Any reference herein to a specific section or Title of ERISA shall be deemed to include a reference to any corresponding provision of future law.

 

Excluded Units” shall have the meaning set forth in Section 11.2.C.

 

Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

Extraordinary Transaction” shall have the meaning set forth in Section 11.2.B.

 

final adjustment” shall have the meaning set forth in Section 10.3.B.

 

Formation Unit” means a Partnership Unit which is designated as a Formation Unit and which has the rights, preferences and other privileges designated in Exhibit F hereof. The allocation of Formation Units among the Partners shall be set forth in the Partner Registry.

 

Funding Debt” means any Debt incurred by or on behalf of the General Partner for the purpose of providing funds to the Partnership.

 

GAAP” means U.S. generally accepted accounting principles.

 

General Partner” means JBG SMITH Properties, a Maryland real estate investment trust, or any Person who becomes a successor general partner of the Partnership.

 

General Partner Entity” means the General Partner; provided, however, that if (i) the common shares of beneficial interest (or other comparable equity interests) of the General Partner are at any time not Publicly Traded and (ii) the shares of common stock (or other comparable equity interests) of an entity that owns, directly or indirectly, all of the common shares of beneficial interest (or other comparable equity interests) of the General Partner are Publicly Traded, the term “General Partner Entity” shall refer to such entity whose shares of common stock (or other comparable equity securities) are Publicly Traded.  If both requirements set forth in clauses (i) and (ii) above are not satisfied, then the term “General Partner Entity” shall mean the General Partner.

 

General Partner Payment” has the meaning set forth in Section 15.13 hereof.

 

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General Partnership Interest” means a Partnership Interest held by the General Partner in its capacity as general partner of the Partnership.  A General Partnership Interest may be (but is not required to be) expressed as a number of Partnership Units.

 

Immediate Family” means, with respect to any natural Person, such natural Person’s spouse, parents, descendants, nephews, nieces, brothers and sisters.

 

Incapacity” or “Incapacitated” means, (i) as to any individual Partner, death, total physical disability or entry by a court of competent jurisdiction adjudicating such Partner incompetent to manage his or her Person or estate, (ii) as to any corporation which is a Partner, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter, (iii) as to any partnership or limited liability company which is a Partner, the dissolution and commencement of winding up of such partnership or limited liability company, (iv) as to any estate which is a Partner, the distribution by the fiduciary of the estate’s entire interest in the Partnership, (v) as to any trustee of a trust which is a Partner, the termination of the trust (but not the substitution of a new trustee) or (vi) as to any Partner, the Bankruptcy of such Partner.

 

Indemnitee” means (i) any Person made a party to a proceeding or threatened with being made a party to a proceeding by reason of (A) his or its status as the General Partner, or as a trustee, director, officer, shareholder, partner, member, employee, representative or agent of the General Partner or as an officer, employee, representative or agent of the Partnership; (B) his or its status as a Limited Partner; or (C) his or its status as a trustee, director or officer of any Subsidiary or other entity in which the Partnership owns an equity interest or any Subsidiary or other entity in which the General Partner owns an equity interest (so long as the General Partner’s ownership of an interest in such entity is not prohibited by Section 7.5.A) or for which the General Partner, acting on behalf of the Partnership, requests the trustee, director, officer or shareholder to serve as a director, officer, trustee or agent, including serving as a trustee of an employee benefit plan; and (ii) such other Persons (including Affiliates of the General Partner, a Limited Partner or the Partnership) as the General Partner may designate from time to time (whether before or after the event giving rise to potential liability), in its sole and absolute discretion.

 

IRS” means the Internal Revenue Service, which administers the internal revenue laws of the United States.

 

Limited Partner” means any Person named as a Limited Partner of the Partnership as set forth in the Partner Registry, or any Substituted Limited Partner or Additional Limited Partner, in such Person’s capacity as a Limited Partner in the Partnership.

 

Limited Partnership Interest” means a Partnership Interest of a Limited Partner in the Partnership representing a fractional part of the Partnership Interests of all Limited Partners and includes any and all benefits to which the holder of such a Partnership Interest may be entitled, as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement.  A Limited Partnership Interest may be (but is not required to be) expressed as a number of Partnership Units.

 

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Liquidating Event” has the meaning set forth in Section 13.1 hereof.

 

Liquidating Gains” means any net capital gain realized in connection with the actual or hypothetical sale of all or substantially all of the assets of the Partnership, including but not limited to net capital gain realized in connection with an adjustment to the Carrying Value of Partnership assets under Section 1.D of Exhibit B of this Agreement.

 

Liquidating Losses” means any net capital loss realized in connection with the actual or hypothetical sale of all or substantially all of the assets of the Partnership, including but not limited to net capital gain realized in connection with an adjustment to the Carrying Value of Partnership assets under Section 1.D of Exhibit B of this Agreement.

 

Liquidator” has the meaning set forth in Section 13.2.A hereof.

 

LTIP Distribution Amount” has the meaning set forth in Exhibit E attached hereto.

 

LTIP Unit” means a Partnership Unit which is designated as an LTIP Unit and which has the rights, preferences and other privileges designated in Exhibit E hereof and elsewhere in this Agreement with respect to holders of LTIP Units. The allocation of LTIP Units among the Partners shall be set forth in the Partner Registry.  For the avoidance of doubt, a Vested LTIP Unit that has been converted from a Formation Unit is an LTIP Unit, and will be treated as an LTIP effective as of the date of such conversion.

 

LTIP Unit Initial Sharing Percentage” means such percentage as set forth in the related Vesting Agreement or other applicable documentation pursuant to which such LTIP Unit is awarded or, if no such percentage is stated, one hundred percent (100%).

 

LTIP Unitholder” means a holder of LTIP Units.

 

Majority in Interest” means Partners who hold more than fifty percent (50%) of the outstanding Common Partnership Units; provided, however, with respect to any matter to be voted on by the Partners, there shall be included in both the numerator and the denominator of the computation all (x) preferred Partnership Units of any class or series and (y) any other class or series of Partnership Units which, in each case, are expressly entitled to vote thereon pursuant to the terms of such Partnership Unit or this Agreement.

 

Master Transaction Agreement” means the Master Transaction Agreement, dated as of October 31, 2016, by and among Vornado Realty Trust, Vornado Realty L.P., JBG Properties Inc., JBG/Operating Partners, L.P., certain affiliates of JBG Properties Inc. and JBG/Operating Partners, L.P., the General Partner and the Partnership.

 

Net Income” means, for any taxable period, the excess, if any, of the Partnership’s items of income and gain for such taxable period over the Partnership’s items of loss and deduction for such taxable period.  The items included in the calculation of Net Income shall be determined in accordance with federal income tax accounting principles, subject to the specific adjustments provided for in Exhibit B hereof.  If an item of income, gain, loss or deduction that has been included in the initial computation of Net Income is subjected to the

 

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special allocation rules in Exhibit C hereof, Net Income or the resulting Net Loss, whichever the case may be, shall be recomputed without taking such item into account.

 

Net Loss” means, for any taxable period, the excess, if any, of the Partnership’s items of loss and deduction for such taxable period over the Partnership’s items of income and gain for such taxable period.  The items included in the calculation of Net Loss shall be determined in accordance with federal income tax accounting principles, subject to the specific adjustments provided for in Exhibit B hereof.  If an item of income, gain, loss or deduction that has been included in the initial computation of Net Loss is subjected to the special allocation rules in Exhibit C hereof, Net Loss or the resulting Net Income, whichever the case may be, shall be recomputed without taking such item into account.

 

New Securities” means (i) any rights, options, warrants or convertible or exchangeable securities having the right to subscribe for or purchase shares of beneficial interest (or other comparable equity interest) of the General Partner, excluding grants under any Stock Option Plan, or (ii) any Debt issued by the General Partner that provides any of the rights described in clause (i).

 

Nonrecourse Built-in Gain” has the meaning set forth in Regulations Section 1.752-3(a)(2).

 

Nonrecourse Deductions” has the meaning set forth in Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership Year shall be determined in accordance with the rules of Regulations Section 1.704-2(c).

 

Nonrecourse Liability” has the meaning set forth in Regulations Section 1.752-1(a)(2).

 

Notice of Redemption” means a Notice of Redemption substantially in the form of Exhibit D attached hereto.

 

Partner” means the General Partner or a Limited Partner, and “Partners” means the General Partner and the Limited Partners collectively.

 

Partner Minimum Gain” means an amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3).

 

Partner Nonrecourse Debt” has the meaning set forth in Regulations Section 1.704-2(b)(4).

 

Partner Nonrecourse Deductions” has the meaning set forth in Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a Partnership Year shall be determined in accordance with the rules of Regulations Section 1.704-2(i)(2).

 

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Partner Registry” means the Partner Registry maintained by the General Partner in the books and records of the Partnership, which contains substantially the same information as would be necessary to complete the form of the Partner Registry attached hereto as Exhibit A.

 

Partnership” means the limited partnership heretofore formed and continued under the Act and pursuant to this Agreement, and any successor thereto.

 

Partnership Approval” has the meaning set forth in Section 11.2.C.

 

Partnership Interest” means a Limited Partnership Interest or the General Partnership Interest, as the context requires, and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement.  A Partnership Interest may be (but is not required to be) expressed as a number of Partnership Units.

 

Partnership Minimum Gain” has the meaning set forth in Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net increase or decrease in Partnership Minimum Gain, for a Partnership Year shall be determined in accordance with the rules of Regulations Section 1.704-2(d).

 

Partnership Record Date” means the record date established by the General Partner either (i) for the making of any distribution pursuant to Section 5.1 hereof, which record date shall be the same as the record date established by the General Partner Entity for a distribution to its shareholders of some or all of its portion of such distribution received by the General Partner if the shares of common stock (or comparable equity interests) of the General Partner Entity are Publicly Traded, or (ii) if applicable, for determining the Partners entitled to vote on or consent to any proposed action for which the consent or approval of the Partners is sought pursuant to Section 14.2 hereof.

 

Partnership Unit” or “Unit” means a fractional, undivided share of the Partnership Interests of all Partners issued pursuant to Sections 4.1 and 4.2 hereof, and includes Common Partnership Units, LTIP Units, Formation Units and any other classes or series of Partnership Units established after the date hereof.  The number of Partnership Units outstanding and the Percentage Interests in the Partnership represented by such Partnership Units are set forth in the Partner Registry.  The ownership of Partnership Units shall be evidenced by such form of certificate for Partnership Units as the General Partner adopts from time to time unless the General Partner determines that the Partnership Units shall be uncertificated securities.

 

Partnership Year” means the fiscal year of the Partnership.

 

Percentage Interest” means, as to a Partner, its interest in the Partnership as determined by dividing the total number of Common Partnership Units (and LTIP Units  other than to the extent provided in the applicable LTIP Unit designation) owned by such Partner by the total number of Common Partnership Units (and LTIP Units, other than to the extent provided in the applicable LTIP Unit designation) then outstanding as specified in the Partner Registry (and, when used with respect to a specified class of Partnership Interests, its interest in such class as determined by dividing the total number of units or interests, as the case may be,

 

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owned by such Partner in such class by the total number of units or interests, as the case may be, of such class then outstanding as specified in in the Partner Registry).

 

Person” means an individual or a real estate investment trust, corporation, partnership, limited liability company, trust, estate, unincorporated organization, association or other entity.

 

Predecessor Entity” has the meaning set forth in the definition of “Conversion Factor” herein.

 

Pro Rata Portion” has the meaning set forth in Section 8.6.A hereof.

 

Publicly Traded” means listed or admitted to trading on the New York Stock Exchange or another national securities exchange or designated for quotation on the NASDAQ National Market, or any successor to any of the foregoing.

 

Qualified REIT Subsidiary” means any Subsidiary of the General Partner that is a “qualified REIT subsidiary” within the meaning Section 856(i) of the Code.  Except as otherwise specifically provided herein, a Qualified REIT Subsidiary of the General Partner that holds as its only assets direct and/or indirect interests in the Partnership will not be treated as an entity separate from the General Partner.

 

Recapture Income” means any gain recognized by the Partnership upon the disposition of any property or asset of the Partnership, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken with respect to such property or asset.

 

Redeeming Partner” has the meaning set forth in Section 8.6.A hereof.

 

Redemption Amount” means either the Cash Amount or the Shares Amount, as determined by the General Partner in its sole and absolute discretion; provided, however, that if the Shares are not Publicly Traded at the time a Redeeming Partner exercises its Redemption Right, the Redemption Amount shall be paid only in the form of the Cash Amount unless the Redeeming Partner, in its sole and absolute discretion, consents to payment of the Redemption Amount in the form of the Shares Amount.  A Redeeming Partner shall have no right, without the General Partner’s consent, in its sole and absolute discretion, to receive the Redemption Amount in the form of the Shares Amount.

 

Redemption Right” has the meaning set forth in Section 8.6.A hereof.

 

Regulations” means the Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

 

REIT” means a real estate investment trust under Section 856 of the Code.

 

REIT Expenses” shall mean (i) costs and expenses relating to the continuity of existence of the General Partner and any Person in which the General Partner owns an equity

 

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interest, to the extent not prohibited by Section 7.5.A, other than the Partnership (which Persons shall, for purposes of this definition, be included within the definition of “General Partner”), including taxes, fees and assessments associated therewith (other than federal, state or local income taxes imposed upon the General Partner as a result of the General Partner’s failure to distribute to its shareholders an amount equal to its taxable income), any and all costs, expenses or fees payable to any trustee or director of the General Partner or such Persons, (ii) costs and expenses relating to any offer or registration of securities by the General Partner (the proceeds of which will be contributed or advanced to the Partnership) and all statements, reports, fees and expenses incidental thereto, (iii) costs and expenses associated with the preparation and filing of any periodic reports by the General Partner under federal, state or local laws or regulations, including filings with the SEC, (iv) costs and expenses associated with compliance by the General Partner with laws, rules and regulations promulgated by any regulatory body, including the SEC, and (v) all other operating or administrative costs of the General Partner incurred in the ordinary course of its business; provided, however, that any of the foregoing expenses that are determined by the General Partner to be expenses relating to the ownership and operation of, or for the benefit of, the Partnership shall be treated as reimbursable expenses under Section 7.4.B hereof rather than as “REIT Expenses”.

 

REIT Requirements” has the meaning set forth in Section 5.1.A hereof.

 

Required Cash Payment” has the meaning set forth in Section 8.6.A hereof.

 

Required Denominator Shares” has the meaning set forth in Section 11.2.C.

 

Safe Harbors” has the meaning set forth in Section 11.6.F hereof.

 

SEC” means the Securities and Exchange Commission.

 

Securities Act” means the Securities Act of 1933, as amended.

 

Share” means a share of beneficial interest (or other comparable equity interest) of the General Partner Entity.  Shares may be issued in one or more classes or series in accordance with the terms of the Declaration of Trust (or, if the General Partner is not the General Partner Entity, the organizational documents of the General Partner Entity).  In the event that there is more than one class or series of Shares, the term “Shares” shall, as the context requires, be deemed to refer to the class or series of Shares that correspond to the class or series of Partnership Interests for which the reference to Shares is made.  When used with reference to Common Partnership Units, the term “Shares” refers to common shares of beneficial interest (or other comparable equity interest) of the General Partner Entity.

 

Shareholder Approval” has the meaning set forth in Section 11.2.B(1).

 

Shareholder Vote” has the meaning set forth in Section 11.2.B(1).

 

Shares Amount” means a number of Shares equal to the product of the number of Partnership Units offered for redemption by a Redeeming Partner times the Conversion Factor; provided, that in the event the General Partner Entity issues to all holders of Shares rights, options, warrants or convertible or exchangeable securities entitling such holders to

 

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subscribe for or purchase Shares or any other securities or property (collectively, the “rights”), then the Shares Amount shall also include such rights that a holder of that number of Shares would be entitled to receive.

 

Specified Redemption Date” means (i) prior to January 1, 2020, the date that is sixty-one (61) days after the date of receipt by the General Partner of a Notice of Redemption, or, if such day is not a Business Day, the first Business Day thereafter, unless, and to the extent, the General Partner determines, in its sole and absolute discretion, that a period of sixty (60) days from receipt by the General Partner of a specific Notice of Redemption is not required in order for the redemption that is to occur pursuant to such Notice of Redemption to qualify for one of the Safe Harbors, in which case the Specified Redemption Date with respect to such Notice of Redemption shall be such number of days (but not less than ten (10) business days) after receipt by the General Partner of such Notice of Redemption as determined by the General Partner; and (ii) after the Applicable Year, the tenth Business Day after receipt by the General Partner of a Notice of Redemption, unless the General Partner, pursuant to its authority in Sections 11.3.F and 11.6.F that the Partnership should continue to seek to qualify for one of the Safe Harbors, in which event the Specified Redemption Date shall continue to be the date specified in clause (i) (taking into account the exception set forth therein) and the General Partner shall give notice of such determination to the holders of Units.

 

Stock Option Plan” means any share or stock incentive plan or similar compensation arrangement of the General Partner Entity, the Partnership or any Affiliate of the Partnership or the General Partner Entity, as the context may require.

 

Subsidiary” means, with respect to any Person, any real estate investment trust, corporation, partnership, limited liability company or other entity of which a majority of (i) the voting power of the voting equity securities; or (ii) the outstanding equity interests, is owned, directly or indirectly, by such Person.

 

Substituted Limited Partner” means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 11.4 hereof.

 

Successor Entity” has the meaning set forth in the definition of “Conversion Factor” herein.

 

Tender Offer” has the meaning set forth in Section 11.2.B(2).

 

Terminating Capital Transaction” means any sale or other disposition of all or substantially all of the assets of the Partnership for cash or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of the Partnership for cash.

 

Trading Days” means days on which the primary trading market for Shares, if any, is open for trading.

 

Unit Equivalent” has the meaning set forth in Section 8.6.A hereof.

 

Unvested LTIP Unit” has the meaning set forth in Exhibit E attached hereto.

 

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Valuation Date” means the date of receipt by the General Partner of a Notice of Redemption or, if such date is not a Business Day, the first Business Day thereafter.

 

Value” means, with respect to any outstanding Shares of the General Partner Entity that are Publicly Traded, the average of the daily market price for the ten (10) consecutive trading days immediately preceding the date with respect to which value must be determined or, if such day is not a Business Day, the immediately preceding Business Day.  The market price for each such trading day shall be the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day.  In the event that the outstanding Shares of the General Partner Entity are Publicly Traded and the Shares Amount includes rights that a holder of Shares would be entitled to receive, then the Value of such rights shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.  In the event that the Shares of the General Partner Entity are not Publicly Traded, the Value of the Shares Amount per Partnership Unit offered for redemption (which will be the Cash Amount per Partnership Unit offered for redemption payable pursuant to Section 8.6.A hereof) means the amount that a holder of one Partnership Unit would receive if each of the assets of the Partnership were to be sold for its fair market value on the Specified Redemption Date, the Partnership were to pay all of its outstanding liabilities, and the remaining proceeds were to be distributed to the Partners in accordance with the terms of this Agreement.  Such Value shall be determined by the General Partner, acting in good faith and based upon a commercially reasonable estimate of the amount that would be realized by the Partnership if each asset of the Partnership (and each asset of each partnership, limited liability company, joint venture or other entity in which the Partnership owns a direct or indirect interest) were sold to an unrelated purchaser in an arms’ length transaction where neither the purchaser nor the seller were under economic compulsion to enter into the transaction (without regard to any discount in value as a result of the Partnership’s minority interest in any property or any illiquidity of the Partnership’s interest in any property).

 

Vested LTIP Unit” has the meaning set forth in Exhibit E attached hereto.

 

Vesting Agreement” has the meaning set forth in Exhibit E attached hereto.

 

Voting Percentage Interest” means, as to a Partner, its voting interest in the Partnership as determined by dividing the total number of Voting Units owned by such Partner by the total number of Voting Units then outstanding as specified in in the Partner Registry.

 

Voting Units” means Common Partnership Units, LTIP Units and any other Partnership Units that vote together with the Common Partnership Units as a single class.

 

ARTICLE II
ORGANIZATIONAL MATTERS

 

Section 2.1                                    Organization.

 

The Partnership is a limited partnership under, and has been formed pursuant to, the Act and upon the terms and conditions set forth herein.  The Partners hereby confirm and agree to their status as partners of the Partnership.  Except as expressly provided herein to the

 

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contrary, the rights and obligations of the Partners and the administration and termination of the Partnership shall be governed by the Act.  The Partnership Interest of each Partner shall be personal property for all purposes.

 

Section 2.2                                    Name.

 

The name of the Partnership is JBG SMITH Properties LP.  The Partnership’s business may be conducted under any other name or names deemed advisable by the General Partner, including the name of the General Partner or any Affiliate thereof.  The words “Limited Partnership,” “LP,” “Ltd.” or similar words or letters shall be included in the Partnership’s name where necessary for the purposes of complying with the laws of any jurisdiction that so requires.  The General Partner in its sole and absolute discretion may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners.

 

Section 2.3                                    Registered Office and Agent; Principal Office.

 

The address of the registered office of the Partnership in the State of Delaware shall be located at Corporation Trust Center, 1209 Orange Street, Wilmington, County of New Castle, Delaware, 19801, and the registered agent for service of process on the Partnership in the State of Delaware at such registered office shall be Corporation Trust Company.  The General Partner may, from time to time, designate a new registered agent and/or registered office for the Partnership and, notwithstanding any provision in this Agreement, may amend this Agreement and the Certificate to reflect such designation without the consent of the Limited Partners or any other Person.  The principal office of the Partnership shall be JBG SMITH Properties LP, 4445 Willard Avenue, Suite 400, Chevy Chase, Maryland 20815, or such other place as the General Partner may from time to time designate by notice to the Limited Partners.  The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems advisable.

 

Section 2.4                                    Power of Attorney.

 

A.                                    General.  Each Limited Partner and each Assignee hereby constitutes and appoints the General Partner, any Liquidator, and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to:

 

(1)                                 execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (a) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate and all amendments or restatements thereof) that the General Partner or any Liquidator deems appropriate or necessary to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the Limited Partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may or plans to conduct business or own property; (b) all instruments that the General Partner or any Liquidator deems appropriate or necessary to

 

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reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (c) all conveyances and other instruments or documents that the General Partner or any Liquidator deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation; (d) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Article XI, XII or XIII hereof or the Capital Contribution of any Partner; and (e) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of a Partnership Interest; and

 

(2)                                 execute, swear to, seal, acknowledge and file all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the sole and absolute discretion of the General Partner or any Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Partners hereunder or is consistent with the terms of this Agreement or appropriate or necessary, in the sole and absolute discretion of the General Partner or any Liquidator, to effectuate the terms or intent of this Agreement.

 

Nothing contained herein shall be construed as authorizing the General Partner or any Liquidator to amend this Agreement except in accordance with Article XIV hereof or as may be otherwise expressly provided for in this Agreement.

 

B.                                    Irrevocable Nature.  The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, in recognition of the fact that each of the Partners will be relying upon the power of the General Partner or any Liquidator to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive and not be affected by the subsequent Incapacity of any Limited Partner or Assignee and the transfer of all or any portion of such Limited Partner’s or Assignee’s Partnership Units and shall extend to such Limited Partner’s or Assignee’s heirs, successors, assigns and personal representatives.  Each such Limited Partner or Assignee hereby agrees to be bound by any representation made by the General Partner or any Liquidator, acting in good faith pursuant to such power of attorney; and each such Limited Partner or Assignee hereby waives any and all defenses which may be available to contest, negate or disaffirm the action of the General Partner or any Liquidator, taken in good faith under such power of attorney.  Each Limited Partner or Assignee shall execute and deliver to the General Partner or the Liquidator, within fifteen (15) days after receipt of the General Partner’s or Liquidator’s request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator, as the case may be, deems necessary to effectuate this Agreement and the purposes of the Partnership.

 

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Section 2.5                                    Term.

 

The term of the Partnership commenced on the date that the Certificate was filed with the Secretary of State of the State of Delaware and shall continue until it is dissolved pursuant to the provisions of Article XIII hereof or as otherwise provided by law.

 

Section 2.6                                    Admission of Limited Partners.

 

On the date hereof, and subsequently upon the execution of this Agreement or a counterpart of this Agreement, each of the Persons identified as a limited partner of the Partnership in the Partner Registry is hereby admitted to the Partnership as a limited partner of the Partnership.  Notwithstanding the foregoing, (i) Vornado Realty L.P. (“VRLP”) shall be admitted as a limited partner upon the issuance to VRLP of Common Partnership Units in connection with the Pre-Combination Transactions (as defined in the Master Transaction Agreement) and (ii) any person who receives Common Partnership Units from VRLP in the Vornado OP Distribution of OP Units (as defined in the Master Transaction Agreement) shall be identified as a limited partner of the Partnership in the Partnership Registry, shall be admitted to the Partnership as a limited partner of the Partnership upon receipt of such Common Partnership Units and shall be subject to the terms of this Agreement and shall have all the rights and powers, and be subject to all the restrictions and liabilities, of a Limited Partner under this Agreement.

 

ARTICLE III
PURPOSE

 

Section 3.1                                    Purpose and Business.

 

The purpose and nature of the business to be conducted by the Partnership is (i) to conduct any business that may be lawfully conducted by a limited partnership formed pursuant to the Act; (ii) to enter into any corporation, partnership, joint venture, trust, limited liability company or other similar arrangement to engage in any of the foregoing or to own interests in any entity engaged, directly or indirectly, in any of the foregoing; (iii) to continue the active management and operation of the “Vornado Included Interests” and the “JBG Included Interests” (as those terms are defined in the Master Transaction Agreement); and (iv) to do anything necessary, convenient or incidental to the foregoing; provided, however, that any such business shall be limited to and conducted in such a manner as to permit the General Partner Entity (or the General Partner, as applicable) at all times to qualify as a REIT, unless the General Partner Entity (or the General Partner, as applicable) ceases to qualify as a REIT for reasons other than the conduct of the business of the Partnership or voluntarily revokes its election to be a REIT.

 

Section 3.2                                    Powers.

 

The Partnership is empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Partnership, and shall have, without limitation, any and all of the powers that may be exercised on behalf of the Partnership by the General Partner pursuant to this Agreement including, without limitation, full power and authority, directly or through its ownership interest

 

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in other entities, to enter into, perform and carry out contracts of any kind, borrow money and issue evidences of indebtedness whether or not secured by mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and develop real property, and lease, sell, transfer and dispose of real property; provided, however, that the Partnership (i) shall not take, or shall refrain from taking, any action which, in the judgment of the General Partner, in its sole and absolute discretion, (x) could adversely affect the ability of the General Partner Entity (or the General Partner, as applicable) to qualify and continue to qualify as a REIT, (y) could subject the General Partner Entity (or the General Partner, as applicable) to any additional taxes under Section 857 or Section 4981 of the Code or any other related or successor provision of the Code or (z) could violate any law or regulation of any governmental body or agency having jurisdiction over the General Partner Entity (or the General Partner, if different) its securities or the Partnership, unless such action (or inaction) shall have been specifically consented to by the General Partner in writing, (ii) until December 31, 2020 shall not, without the approval of the board of trustees of the General Partner, contribute any of the “Vornado Included Interests” and the “JBG Included Interests” (as those terms are defined in the Master Transaction Agreement) to any REIT or other entity that is not a partnership or a disregarded entity for United States federal income tax purposes, and (iii) none of the employees of the Partnership or any of its Subsidiaries shall render services for Hotco, L.L.C. or any of its Subsidiaries or successors.

 

Section 3.3                                    Representations and Warranties by the Parties.

 

A.                                    Each Partner that is an individual represents and warrants to each other Partner that (i) such Partner has the legal capacity to enter into this Agreement and perform such Partner’s obligations hereunder, (ii) the consummation of the transactions contemplated by this Agreement to be performed by such Partner will not result in a breach or violation of, or a default under, any agreement by which such Partner or any of such Partner’s property is or are bound, or any statute, regulation, order or other law to which such Partner is subject, (iii) such Partner is a “United States person” within the meaning of Section 7701(a)(30) of the Code, and (iv) this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms.

 

B.                                    Each Partner that is not an individual represents and warrants to each other Partner that (i) its execution and delivery of this Agreement and all transactions contemplated by this Agreement to be performed by it have been duly authorized by all necessary action, including without limitation, that of its general partner(s), committee(s), trustee(s), beneficiaries, director(s) and/or shareholder(s), as the case may be, as required, (ii) the consummation of such transactions shall not result in a breach or violation of, or a default under, its certificate of limited partnership, partnership agreement, trust agreement, limited liability company operating agreement, declaration of trust, charter or bylaws, as the case may be, any agreement by which such Partner or any of such Partner’s properties or any of its partners, beneficiaries, trustees or shareholders, as the case may be, is or are bound, or any statute, regulation, order or other law to which such Partner or any of its partners, trustees, beneficiaries or shareholders, as the case may be, is or are subject, (iii) such Partner is a “United States person” within the meaning of Section 7701(a)(30) of the Code and (iv) this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms.

 

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C.                                    Each Partner represents, warrants and agrees that it has acquired and continues to hold its interest in the Partnership for its own account for investment only and not for the purpose of, or with a view toward, the resale or distribution of all or any part thereof, nor with a view toward selling or otherwise distributing such interest or any part thereof at any particular time or under any predetermined circumstances.  Each Partner further represents and warrants that it is a sophisticated investor, able and accustomed to handling sophisticated financial matters for itself, particularly real estate investments, and that it has a sufficiently high net worth that it does not anticipate a need for the funds it has invested in the Partnership in what it understands to be a highly speculative and illiquid investment.

 

D.                                    Each Partner further represents, warrants, covenants and agrees as follows; and

 

(1)                                 Upon request of the General Partner, it will promptly disclose to the General Partner the amount of Shares or other capital shares of the General Partner that it actually owns or Constructively Owns.

 

E.                                     The representations and warranties contained in this Section 3.3 shall survive the execution and delivery of this Agreement by each Partner and the dissolution and winding up of the Partnership.

 

F.                                      Each Partner hereby acknowledges that no representations as to potential profit, cash flows, funds from operations or yield, if any, in respect of the Partnership or the General Partner or, if different, the General Partner Entity have been made by any Partner or any employee or representative or Affiliate of any Partner, and that projections and any other information, including, without limitation, financial and descriptive information and documentation, which may have been in any manner submitted to such Partner shall not constitute any representation or warranty of any kind or nature, express or implied

 

Section 3.4                                    Partnership Only for Purposes Specified.

 

The Partnership shall be a partnership only for the purposes specified in Section 3.1 above, and this Agreement shall not be deemed to create a partnership among the Partners with respect to any activities whatsoever other than the activities within the purposes of the Partnership as specified in Section 3.1 above.

 

ARTICLE IV
CAPITAL CONTRIBUTIONS AND ISSUANCES
OF PARTNERSHIP INTERESTS

 

Section 4.1                                    Capital Contributions of the Partners.

 

A.                                    Capital Contributions.  At the time of their respective execution of this Agreement, the Partners shall make or shall have made Capital Contributions as set forth in the Partner Registry. The Partners shall own Partnership Units of the class or series and in the amounts set forth in the Partner Registry and shall have a Percentage Interest in the Partnership which shall be set forth in the Partner Registry, which Percentage Interest shall be adjusted in the Partner Registry from time to time by the General Partner to the extent necessary to reflect

 

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accurately exchanges, redemptions, additional Capital Contributions, the issuance of additional Partnership Units (pursuant to any merger or otherwise), or similar events having an effect on any Partner’s Percentage Interest in accordance with the terms of this Agreement. Except as provided in Sections 4.2, 7.5 and 10.5, the Partners shall have no obligation to make any additional Capital Contributions or loans to the Partnership. Each Limited Partner that contributes any Contributed Property shall promptly provide the General Partner with any information regarding such Contributed Property that is requested by the General Partner, including for Partnership tax return reporting purposes. Cash Capital Contributions by the General Partner or the General Partner Entity will be deemed to equal the cash contributed by the General Partner or the General Partner Entity, as the case may be, plus (a) in the case of cash contributions funded by an offering of any equity interests in or other securities of the General Partner or, if different, the General Partner Entity, the offering costs attributable to the cash contributed to the Partnership, and (b) in the case of Partnership Units issued pursuant to Section 7.5.C hereof, an amount equal to the difference between the Value of the Shares sold pursuant to any Stock Option Plan and the net proceeds of such sale.

 

B.                                    General Partnership Interest.  A number of Partnership Units held by the General Partner equal to one percent (1%) of all outstanding Partnership Units shall be deemed to be the General Partner Partnership Units and shall be the General Partnership Interest.  All other Partnership Units held by the General Partner shall be Limited Partnership Interests and shall be held by the General Partner in its capacity as a Limited Partner in the Partnership.

 

C.                                    Capital Contributions By Merger.  To the extent the Partnership acquires any property by the merger of any other Person into the Partnership, Persons who receive Partnership Interests in exchange for their interests in the Person merging into the Partnership shall become Limited Partners and shall be deemed to have made Capital Contributions as provided in the applicable merger agreement and as set forth in the Partner Registry, as amended to reflect such deemed Capital Contributions.

 

Section 4.2                                    Issuances of Partnership Interests.

 

A.                                    General.  The General Partner is hereby authorized, without the need for any vote or approval of any Partner or any other Person who may hold Partnership Units or Partnership Interests, to cause the Partnership from time to time to issue to any existing Partner (including the General Partner and the General Partner Entity) or to any other Person, and to admit such Person as a limited partner in the Partnership, Partnership Units (including, without limitation, Common Partnership Units and preferred Partnership Units), in each case in exchange for the contribution by such Person of property or other assets, in one or more classes, or in one or more series of any of such classes, or otherwise with such designations, preferences, redemption and conversion rights and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to one or more other classes of Limited Partnership Interests, all as shall be determined by the General Partner in its sole and absolute discretion subject to Delaware law, including, without limitation, (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Interests, (ii) the right of each such class or series of Partnership Interests to share in Partnership distributions, (iii) the rights of each such class or series of Partnership Interests upon dissolution and liquidation of the Partnership, (iv) the rights, if any, of each such class to vote on

 

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matters that require the vote or Consent of the Limited Partners, and (v) the consideration, if any, to be received by the Partnership; provided that, no such Partnership Units shall be issued to the General Partner Entity or, if different, the General Partner unless either (a)(1) the additional Partnership Interests are issued in connection with the grant, award or issuance of Shares or other securities by the General Partner Entity, which securities have designations, preferences and other rights such that the economic interests attributable to such securities are substantially similar to the designations, preferences and other rights (except voting rights) of the additional Partnership Interests issued to the General Partner Entity in accordance with this Section 4.2.A, and (2) the General Partner Entity shall make a Capital Contribution to the Partnership in an amount equal to the proceeds, if any, raised in connection with such issuance, (b) the additional Partnership Interests are issued to all Partners holding Partnership Interests in the same class in proportion to their respective Percentage Interests in such class, or (c) the additional Partnership Interests are issued in connection with a contribution of property to the Partnership by the General Partner Entity. In addition, the General Partner Entity may acquire Units from other Partners pursuant to this Agreement. In the event that the Partnership issues Partnership Interests pursuant to this Section 4.2.A, the General Partner shall make such revisions to this Agreement (including but not limited to the revisions described in Section 5.6, Section 6.2 and Section 8.6 hereof) as it deems necessary to reflect the issuance of such additional Partnership Interests.

 

B.                                    Issuances and Repurchases of Shares.

 

(i)                                     In accordance with, and subject to the terms of Section 4.3 hereof, the General Partner Entity shall not issue any Shares (other than Shares issued pursuant to Section 8.6 or pursuant to a dividend or distribution (including any share split) of Shares to all of its shareholders that results in an adjustment to the Conversion Factor pursuant to subclause (i), (ii) or (iii) of clause (x) of the definition thereof), unless (i) the General Partner shall cause, pursuant to Section 4.2.A hereof, the Partnership to issue to the General Partner Entity or the General Partner Partnership Interests or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights, all such that the economic interests are substantially similar to those of such additional Shares, other equity securities, New Securities or Convertible Funding Debt, as the case may be; and (ii) in exchange therefor, the General Partner Entity contributes or lends, as the case may be, or otherwise causes to be contributed or lent, as the case may be, to the Partnership the proceeds, if any, from the grant, award or issuance of such Shares, other equity securities, New Securities or Convertible Funding Debt, as the case may be, and, if applicable, from the exercise of rights contained in such Shares, other equity securities, New Securities or Convertible Funding Debt, as the case may be (or, in the case of an acquisition described in Section 7.4.F in which all or a portion of the cash required to consummate such acquisition is to be obtained by the General Partner Entity through an issuance of Shares described in Section 4.2, the General Partner Entity complies with such Section 7.4.F).  Without limiting the foregoing, the General Partner Entity is expressly authorized to issue Shares, other equity securities, New Securities or Convertible Funding Debt, as the case may be, for less than fair market value, and the General Partner is expressly authorized to cause the Partnership to issue to the General Partner Entity corresponding Partnership Interests, so long as (x) the General Partner concludes in good faith that such issuance is in the interests of the General Partner and the Partnership (for example, and not by way of limitation, the issuance of Shares and corresponding Partnership Units pursuant to an employee share purchase plan providing for employee purchases of Shares at a discount from

 

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fair market value or employee share options that have an exercise price that is less than the fair market value of the Shares, either at the time of issuance or at the time of exercise, or in order to comply with the REIT share ownership requirements set forth in Section 856(a)(5) of the Code); and (y) the General Partner Entity contributes all proceeds from such issuance and exercise to the Partnership.

 

(ii)                                  If the General Partner Entity exercises its rights under its organizational documents to purchase Shares or otherwise elects to purchase from the holders thereof Shares, other equity securities of the General Partner Entity, New Securities or Convertible Funding Debt, then the General Partner Entity shall cause the Partnership to purchase from the General Partner Entity (a) in the case of a purchase of Shares, that number of Partnership Units of the appropriate class (rounded to the nearest whole Partnership Unit) held by the General Partner Entity equal to the product obtained by multiplying the number of Shares purchased by the General Partner Entity times a fraction, the numerator of which is one and the denominator of which is the Conversion Factor, or (b) in the case of the purchase of any other securities, Partnership Units or other corresponding interest in the Partnership on the same terms and for the same aggregate price that the General Partner Entity purchased such securities.

 

C.                                    Classes of Partnership Units.  Subject to Section 4.2.A above, the Partnership shall have one class of Common Partnership Units entitled “Common Partnership Units” which shall be issued to the General Partner in respect of its General Partnership Interest and the General Partner Entity and, if different, the General Partner in respect of their respective Limited Partnership Interests. The General Partner may, in its sole and absolute discretion, issue to newly admitted Partners Common Partnership Units or Partnership Units of any other class established by the Partnership in accordance with Section 4.2.A in exchange for the contribution by such Partners of cash, real estate partnership interests, stock, notes or any other assets or consideration; provided that any Partnership Unit that is not specifically designated by the General Partner as being of a particular class shall be deemed to be a Common Partnership Unit unless the context clearly requires otherwise.

 

D.                                    Issuance of LTIP Units.  The Partnership shall be authorized to issue Partnership Units of a series designated as “LTIP Units.” From time to time the General Partner may issue LTIP Units to Persons providing services to or for the benefit of the Partnership. LTIP Units are intended to qualify as profits interests in the Partnership and, for the avoidance of doubt, the provisions of Section 4.5 shall not apply to the issuance of LTIP Units.  LTIP Units shall have the terms set forth in Exhibit E attached hereto and made part hereof.  Distributions made with respect to LTIP Units shall be adjusted as necessary to ensure that the amount apportioned to each LTIP Unit does not exceed the amount attributable to the LTIP Unit’s share of Partnership net income or gain realized after the date such LTIP Unit was issued by the Partnership (including in connection with an adjustment to the Carrying Value of Partnership assets under Section 1.D of Exhibit B of this Agreement).  If distributions are reduced in accordance with the preceding sentence for a taxable year due to insufficient net income or gain for such year, distributions shall be made up in subsequent taxable years when there is sufficient net income or gain.  The intent of this Section 4.2.D is to ensure that any LTIP Units qualify as “profits interests” under Revenue Procedure 93-27, 1993-2 C.B. 343 (June 9, 1993) and Revenue Procedure 2001-43, 2001-2 C.B. 191 (August 3, 2001), and this Section 4.2.D shall be interpreted and applied consistently therewith.  The General Partner at its discretion may amend

 

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this Section 4.2.D and Exhibit E to ensure that any LTIP Units will qualify as “profits interests” under Revenue Procedure 93-27, 1993-2 C.B. 343 (June 9, 1993) and Revenue Procedure 2001-43, 2001-2 C.B. 191 (August 3, 2001) (and any other similar rulings or regulations that may be in effect at such time).

 

E.                                     Issuance of Formation Units.  The Partnership shall be authorized to issue Partnership Units of a series designated as “Formation Units” in connection with the transactions described in the Master Transaction Agreement. Formation Units are intended to qualify as profits interests in the Partnership and, for the avoidance of doubt, the provisions of Section 4.5 shall not apply to the issuance of Formation Units. Formation Units shall have the terms set forth in Exhibit F attached hereto and made part hereof.  Distributions made with respect to Formation Units shall be adjusted as necessary to ensure that the amount apportioned to each Formation Unit does not exceed the amount attributable to the Formation Unit’s share of Partnership net income or gain realized after the date such Formation Unit was issued by the Partnership (including in connection with an adjustment to the Carrying Value of Partnership assets under Section 1.D of Exhibit B of this Agreement).  If distributions are reduced in accordance with the preceding sentence for a taxable year due to insufficient net income or gain for such year, distributions shall be made up in subsequent taxable years when there is sufficient net income or gain.  The intent of this Section 4.2.E is to ensure that any Formation Units qualify as “profits interests” under Revenue Procedure 93-27, 1993-2 C.B. 343 (June 9, 1993) and Revenue Procedure 2001-43, 2001-2 C.B. 191 (August 3, 2001), and this Section 4.2.E shall be interpreted and applied consistently therewith.  The General Partner at its discretion may amend this Section 4.2.E and Exhibit F to ensure that any Formation Units will qualify as “profits interests” under Revenue Procedure 93-27, 1993-2 C.B. 343 (June 9, 1993) and Revenue Procedure 2001-43, 2001-2 C.B. 191 (August 3, 2001) (and any other similar rulings or regulations that may be in effect at such time).

 

Section 4.3                                    Contribution of Proceeds of Issuance of Securities by the General Partner Entity.

 

In connection with any primary offering by the General Partner Entity of its Shares and any other issuance of Shares, other equity securities of the General Partner Entity, New Securities or Convertible Funding Debt pursuant to Section 4.2, the General Partner Entity shall contribute to the Partnership any proceeds (or a portion thereof) raised in connection with such issuance in exchange for Partnership Interests or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights, all such that the economic interests are substantially similar to those of the Shares, other equity securities of the General Partner Entity, New Securities or Convertible Funding Debt contributed to the Partnership; provided, that, in each case, if the proceeds actually received by the General Partner Entity are less than the gross proceeds of such issuance as a result of any underwriter’s discount or other expenses paid or incurred in connection with such issuance, then the General Partner Entity shall be deemed to have made a Capital Contribution to the Partnership in the amount equal to the sum of the net proceeds of such issuance plus the amount of such underwriter’s discount and other expenses paid by the General Partner Entity (which discount and expense shall be treated as an expense for the benefit of the Partnership in accordance with Section 7.4). In the case of employee purchases of New Securities at a discount from fair market value, the amount of such discount representing compensation to the employee, as determined by the General Partner, shall be treated as an expense of the issuance of such New Securities.

 

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Section 4.4                                    No Preemptive Rights.

 

Except to the extent expressly granted by the General Partner (on behalf of the Partnership) pursuant to another agreement, no Person shall have any preemptive, preferential or other similar right with respect to (i) additional Capital Contributions or loans to the Partnership or (ii) issuance or sale of any Partnership Units or other Partnership Interests.

 

Section 4.5                                    Other Contribution Provisions.

 

In the event that any Partner is admitted to the Partnership and is given a Capital Account in exchange for services rendered to the Partnership, such transaction shall be treated by the Partnership and the affected Partner as if the Partnership had compensated such Partner in cash for the fair market value of such services, and the Partner had contributed such cash to the capital of the Partnership.

 

Section 4.6                                    No Interest on Capital.

 

No Partner shall be entitled to interest on its Capital Contributions or its Capital Account.

 

ARTICLE V
DISTRIBUTIONS

 

Section 5.1                                    Requirement and Characterization of Distributions.

 

A.                                    General.  The General Partner shall have the exclusive right and authority to declare and cause the Partnership to make distributions as and when the General Partner deems appropriate or desirable in its sole discretion.  Notwithstanding anything to the contrary contained herein, in no event may a Partner receive a distribution with respect to a Partnership Unit for a quarter or shorter period if such Partner is entitled to receive a distribution for such quarter or shorter period with respect to a Share for which such Partnership Unit has been redeemed or exchanged.  Unless otherwise expressly provided for herein or in an agreement at the time a new class of Partnership Interests is created in accordance with Article IV hereof, no Partnership Interest shall be entitled to a distribution in preference to any other Partnership Interest.  For so long as the General Partner Entity or the General Partner elects to qualify as a REIT, the General Partner shall make such reasonable efforts, as determined by it in its sole and absolute discretion and consistent with the qualification of the General Partner Entity or the General Partner (as applicable) as a REIT, to make distributions to the Partners in amounts such that the General Partner Entity or General Partner will receive amounts sufficient to enable the General Partner Entity or the General Partner (as applicable) to pay shareholder dividends that will (1) satisfy the requirements for qualification as a REIT under the Code and the Regulations (the “REIT Requirements”) and (2) avoid any federal income or excise tax liability for the General Partner Entity or the General Partner (as applicable).

 

B.                                    Method.  When, as and if declared by the General Partner, the Partnership will make distributions to the General Partner Entity in any amount necessary to enable the General Partner Entity to pay REIT Expenses, and thereafter as follows:

 

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(i)                                     First, to the holders of Partnership Interests of each class, if any, that is entitled to any preference in distribution in accordance with the rights of such class of Partnership Interests (and, within such class, pro rata in proportion to the respective Percentage Interests in such class on such Partnership Record Date); and

 

(ii)                                  second, to the holders of Partnership Interests of each class that are not entitled to any preference in distribution pro rata to each such class in accordance with the terms of such class (and, within each such class, pro rata in proportion to the respective Percentage Interests in such class on such Partnership Record Date).

 

In making distributions pursuant to this Section 5.1.B, the General Partner shall take into account the provisions of Paragraph 2 of Exhibit E to this Agreement.

 

Section 5.2                                    Amounts Withheld.

 

All amounts withheld pursuant to the Code or any provisions of any state or local tax law and Section 10.5 hereof with respect to any allocation, payment or distribution to the Partners or Assignees shall be treated as amounts distributed to the Partners or Assignees pursuant to Section 5.1 for all purposes under this Agreement.

 

Section 5.3                                    Distributions Upon Liquidation.

 

Proceeds from a Terminating Capital Transaction and any other cash received or reductions in reserves made after commencement of the liquidation of the Partnership shall be distributed to the Partners in accordance with Section 13.2.

 

Section 5.4                                    Restricted Distributions.

 

Notwithstanding any provision to the contrary contained in this Agreement, the Partnership, and the General Partner on behalf of the Partnership, shall not make a distribution to any Partner on account of its interest in the Partnership if such distribution would violate Section 17-607 of the Act or other applicable law.

 

Section 5.5                                    Revisions to Reflect Issuance of Additional Partnership Interests.

 

If the Partnership issues additional Partnership Interests to the General Partner Entity or any Additional Limited Partner pursuant to Article IV hereof, the General Partner shall make such revisions to this Article V as it deems necessary to reflect the issuance of such additional Partnership Interests.

 

Section 5.6                                    Non-Pro Rata Distribution.

 

Notwithstanding anything in this Agreement to the contrary, the General Partner is expressly authorized, in its sole discretion, to declare and cause the Partnership to make a non-pro rata distribution, with no other Limited Partners receiving any portion of such distribution, to Vornado Realty Trust or JBG SMITH Properties of 100% of the Partnership’s ownership interests in JBG SMITH Properties GP LLC; provided that Vornado Realty Trust or JBG SMITH Properties, as applicable, is a Partner of the Partnership at the time of such distribution.

 

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ARTICLE VI
ALLOCATIONS

 

Section 6.1                                    Allocations for Capital Account Purposes.

 

For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership’s items of income, gain, loss and deduction (computed in accordance with Exhibit B hereof) shall be allocated among the Partners in each taxable year (or portion thereof) as provided herein below.

 

A.                                    Net Income.  After giving effect to the special allocations set forth in Section 1 of Exhibit C attached hereto, Net Income shall be allocated (i) first, to the General Partner to the extent that Net Losses previously allocated to the General Partner pursuant to Section 6.1.B(iii) below exceed Net Income previously allocated to the General Partner pursuant to this clause (i) of Section 6.1.A; (ii) second, to the General Partner and the Limited Partners, in proportion to the amount of Net Losses allocated to each such Partner pursuant to Section 6.1.B(ii), to the extent Net Losses previously allocated to each such Partner pursuant to such Section 6.1.B(ii) exceed Net Income previously allocated to each such Partner pursuant to this Section 6.1.A(ii); (iii) third, to the General Partner and the Limited Partners, in proportion to the amount of Net Losses allocated to each such Partner pursuant to Section 6.1.B(i), to the extent Net Losses previously allocated to such Partner pursuant to Section 6.1.B(i) exceed Net Income previously allocated to each such Partner pursuant to this Section 6.1.A(iii); (iv) fourth, to the holders of any Partnership Interests that are entitled to any preference in distributions, in accordance with the rights of such class of Partnership Interests, until each has been allocated, on a cumulative basis pursuant to this Section 6.1.A(iv), Net Income equal to the amount of distributions received which are attributable to the preference of such class or Partnership Interest (and, within such class, pro rata in proportion to the respective Percentage Interest in such class as of the last day of the period for which such allocation is being made); and (v) fifth, with respect to Partnership Interests that are not entitled to any preference in distributions, pro rata to each such class in accordance with the terms of such class as set forth in this Agreement (and, within such class, pro rata in proportion to the respective Percentage Interest in such class as of the last day of the period for such allocation is being made).

 

B.                                    Net Losses.  After giving effect to the special allocations set forth in Section 1 of Exhibit C attached hereto, Net Losses shall be allocated:

 

(i)                                     first, to each Partner who holds Partnership Interests not entitled to any preference in distributions, pro rata to each such class in accordance with the terms of such class as set forth in this Agreement (and, within such class, pro rata to each Partner in proportion to the respective Percentage Interests held by such Partner in such class as of the last day of the period for which the allocation is being made), until the Adjusted Capital Account (ignoring for this purpose any amounts a Partner is obligated to contribute to the capital of the Partnership under state law as described in Regulation Section 1.704-1(b)(2)(ii)(c)(2) and reduced by the Partner’s share of capital attributable to its interest in a class entitled to any preference in distribution) of each such Partner is zero;

 

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(ii)                                  second, to each Partner who holds Partnership Interests entitled to any preference in distributions, pro rata to each such class in accordance with the terms of such class as set forth in this Agreement (and, within such class, pro rata to each Partner in proportion to the respective Percentage Interests held by such Partner in such class as of the last day of the period for which the allocation is being made), until the Adjusted Capital Account (ignoring for this purpose any amounts a Partner is obligated to contribute to the capital of the Partnership under state law as described in Regulation Section 1.704-1(b)(2)(ii)(c)(2)) of each such Partner is zero; and

 

(iii)                               third, to the General Partner.

 

C.                                    Allocation of Nonrecourse Debt.  For purposes of Regulations Section 1.752-3(a), the Partners agree that Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the amount of Partnership Minimum Gain and (ii) the total amount of Nonrecourse Built-in Gain shall be allocated among the Partners in accordance with any permissible method determined by the General Partner, except that such excess Nonrecourse Liabilities shall be allocated first (under the fifth sentence of Treasury Regulations Section 1.752-3(a)(3)) to each Partner up to the amount of built-in gain that is allocable to the Partner on “section 704(c) property” (as defined under Regulations Section 1.704-3(a)(3)(ii)) or property for which “reverse section 704(c) allocations” are applicable as described in Regulations Section 1.704-3(a)(6)(i), where such property is subject to the excess Nonrecourse Liabilities to the extent that such built-in gain exceeds Nonrecourse Built-in Gain with respect to such property.

 

D.                                    Recapture Income.  Any gain allocated to the Partners upon the sale or other taxable disposition of any Partnership asset shall, to the extent possible after taking into account other required allocations of gain pursuant to Exhibit C hereof, be characterized as Recapture Income, as required by Regulations Section 1.1245-1(e).

 

E.                                     Special Allocations with Respect to LTIP Units.

 

(i)                                     After giving effect to the special allocations set forth in Section 1 of Exhibit C hereto, and notwithstanding the provisions of Sections 6.1.A and 6.1.B above, but subject to the prior allocation of income and gain under Subsections 6.1.A(i) through (iv) above, any remaining Liquidating Gains shall first be allocated to the holders of LTIP Units until the Economic Capital Account Balances of such holders, to the extent attributable to their ownership of LTIP Units, are equal to (i) the Common Partnership Unit Economic Balance, multiplied by (ii) the number of their LTIP Units; provided that no such Liquidating Gains will be allocated with respect to any particular LTIP Unit unless and to the extent that such Liquidating Gains, when aggregated with other Liquidating Gains realized since the issuance of such LTIP Unit, exceed Liquidating Losses realized since the issuance of such LTIP Unit.

 

(ii)                                  Liquidating Gain allocated to an LTIP Unitholder under this Section 6.1.E will be attributed to specific LTIP Units of such LTIP Unitholder for purposes of determining (i) allocations under this Section 6.1.E, (ii) the effect of the forfeiture or conversion of specific LTIP Units on such LTIP Unitholder’s Economic Capital Account Balance and (iii) the ability of such LTIP Unitholder to convert specific LTIP Units into Common Partnership Units. Such Liquidating Gain will be attributed to LTIP Units in the following order: (i) first, to

 

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Vested LTIP Units that have been converted from Formation Units, (ii) second, to Vested LTIP Units held for more than two years, (iii) third, to Vested LTIP Units held for two years or less, (iv) fourth, to Unvested LTIP Units that have remaining vesting conditions that only require continued employment or service to the Partnership, the General Partner, the General Partner Entity or an Affiliate of either for a certain period of time (with such Liquidating Gains being attributed in order of vesting from soonest vesting to latest vesting), and (v) fifth, to other Unvested LTIP Units (with such Liquidating Gains being attributed in order of issuance from earliest issued to latest issued). Within each such category, Liquidating Gain will be allocated serially (i.e., entirely to the first unit in the category, then entirely to the next unit in the category, and so on, until a full allocation is made to the last unit in the category) in the order of smallest Book-Up Target to largest Book-Up Target until the Economic Capital Account Balance of such LTIP Unitholder attributable to such LTIP Unitholder’s ownership of each LTIP Unit in the category is equal to the Common Partnership Unit Economic Balance; provided, however, that if there is not sufficient Liquidating Gain for the Economic Capital Account Balance of such LTIP Unitholder attributable to such LTIP Unitholder’s ownership of each LTIP Unit to be equal to the Common Partnership Unit Economic Balance and the Book-Up Target for any LTIP Unit is less than the amount required to be allocated to the LTIP Unit for the Economic Capital Account attributable to the LTIP Unit to equal the Common Partnership Unit Economic Balance, then Liquidating Gains shall be allocated pursuant to the waterfall set forth in 6.1.E(ii)(i)—(v) above until the Book-Up Target of each such LTIP Unit in each category has been reduced to zero and, thereafter, any remaining Liquidating Gain shall be further allocated pursuant to such waterfall until the Economic Capital Account Balance of an LTIP Unitholder attributable to such LTIP Unitholder’s ownership of each LTIP Unit in the category is equal to the Common Partnership Unit Economic Balance.

 

(iii)                               After giving effect to the special allocations set forth in Section 1 of Exhibit C hereto, and notwithstanding the provisions of Sections 6.1.A and 6.1.B above, in the event that, due to distributions with respect to Common Partnership Units in which the LTIP Units do not participate or otherwise, the Economic Capital Account Balance of any present or former holder of LTIP Units, to the extent attributable to the holder’s ownership of LTIP Units, exceeds the target balance specified above, the amount of such excess shall be re-allocated to such LTIP Unitholder’s remaining LTIP Units to the same extent and in the same manner as would apply pursuant to Section 6.1.E(iv) below in the event of a forfeiture of LTIP Units. To the extent such excess may not be re-allocated, any remaining Liquidating Losses shall be allocated to such LTIP Unitholder to the extent necessary to reduce or eliminate the disparity; provided, however, that if Liquidating Losses are insufficient to completely eliminate all such disparities, such losses shall be allocated among the LTIP Unitholders as reasonably determined by the General Partner.

 

(iv)                              If an LTIP Unitholder forfeits any LTIP Units to which Liquidating Gain has previously been allocated under this Section 6.1.E, the Capital Account associated with such forfeited LTIP Units will be re-allocated to that LTIP Unitholder’s remaining LTIP Units using a methodology similar to that described in Section 6.1.E(ii) above to the extent necessary to cause such LTIP Unitholder’s Economic Capital Account Balance attributable to each LTIP Unit to equal the Common Partnership Unit Economic Balance.

 

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(v)                                 In the event that Liquidating Gains or Liquidating Losses are allocated under this Section 6.1.E, Net Income allocable under Section 6.1.A(v) and any Net Losses shall be recomputed by excluding the Liquidating Gains or Liquidating Losses so allocated.

 

(vi)                              The parties agree that the intent of this Section 6.1.E is to make the Capital Account balance associated with each LTIP Unit economically equivalent to the Capital Account balance associated with the General Partner Entity’s Common Partnership Units (on a per-unit basis), but only if the Partnership has recognized cumulative net gains with respect to its assets since the issuance of the relevant LTIP Unit.

 

F.                                      Special Allocations with Respect to Formation Units.  The principles of Section 6.1.E shall apply in respect of allocation of Liquidating Gains and Liquidating Losses to unvested Formation Units as if they were unvested LTIP Units, until the Economic Capital Account Balance per Formation Unit is, as nearly as possible, equal to the product of (x) the number of Common Partnership Units into which such Formation Unit is convertible (as if such Formation Unit were vested), and (y) the Common Partnership Unit Economic Balance, applying correlative changes to the Book-Up Target for this purpose. The parties agree that the intent of this Section 6.1.F is to make the Capital Account balance associated with each Formation Unit economically equivalent to the Capital Account balance associated with the General Partner Entity’s Common Partnership Units (on an “as converted” basis), but only if the Partnership has recognized cumulative net gains with respect to its assets since the issuance of the relevant Formation Unit, and to achieve the economic result consistent with Exhibit F.

 

G.                                    Allocations to Ensure Intended Results.  Recognizing the complexity of the allocations pursuant to this Article VI, the General Partner is authorized to modify these allocations (including by making allocations of gross items of income, gain, loss or deduction rather than allocations of net items) to ensure that they achieve the intended results, to the extent permitted by Section 704(b) of the Code and the Regulations thereunder.

 

Section 6.2                                    Revisions to Allocations to Reflect Issuance of Additional Partnership Interests.

 

If the Partnership issues additional Partnership Interests to the General Partner Entity or any Additional Limited Partner pursuant to Article IV hereof, the General Partner shall make such revisions to this Article VI and to the Partner Registry hereof as it deems necessary to reflect the terms of the issuance of such additional Partnership Interests, including making preferential allocations to classes of Partnership Interests that are entitled thereto. Such revisions shall not require the consent or approval of any other Partner.

 

ARTICLE VII
MANAGEMENT AND OPERATIONS OF BUSINESS

 

Section 7.1                                    Management.

 

A.                                    Powers of General Partner.  Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership are and shall be exclusively vested in the General Partner, and no Limited Partner shall have any right to participate in or exercise control or management power over the business and affairs of the

 

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Partnership.  The General Partner may not be removed by the Limited Partners with or without cause.  In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or which are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to Sections 7.3 and 7.6.A hereof, shall have full power and authority to do all things deemed necessary, desirable or convenient by it to conduct the business of the Partnership, to exercise all powers set forth in Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1 hereof, including, without limitation:

 

(1)                                 the making of any expenditures, the lending or borrowing of money (including, without limitation, making prepayments on loans and borrowing money to permit the Partnership to make distributions to its Partners in such amounts as will permit the General Partner Entity or the General Partner (as applicable) (as long as the General Partner Entity or the General Partner chooses to attempt to qualify as a REIT) to avoid the payment of any U.S. federal income tax (including, for this purpose, any excise tax pursuant to Section 4981 of the Code) and to make distributions to its shareholders sufficient to permit the General Partner Entity or the General Partner (as applicable) to satisfy the REIT Requirements), the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, including without limitation, the assumption or guarantee of the debt of the General Partner, its Subsidiaries or the Partnership’s Subsidiaries, the issuance of evidences of indebtedness (including the securing of same by mortgage, deed of trust or other lien or encumbrance on the Partnership’s assets) and the incurring of any obligations the General Partner deems necessary or desirable for the conduct of the activities of the Partnership;

 

(2)                                 the making of tax, regulatory and other filings or elections, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership;

 

(3)                                 the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any or all of the assets of the Partnership (including the acquisition of any new assets, the exercise or grant of any conversion, option, privilege, or subscription right or other right available in connection with any assets at any time held by the Partnership) or the merger, consolidation, reorganization or other combination of the Partnership or any Subsidiary of the Partnership with or into another entity (all of the foregoing subject to any prior approval only to the extent required by Section 7.3 hereof);

 

(4)                                 the mortgage, pledge, encumbrance or hypothecation of any assets of the Partnership, the use of the assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with the terms of this Agreement and on any terms that it sees fit, including, without limitation, the financing of the conduct of the operations of the Partnership, the General Partner, the General Partner Entity or any of the Partnership’s or

 

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the General Partner Entity’s Subsidiaries, the lending of funds to other Persons (including, without limitation, the Subsidiaries of the Partnership and/or the General Partner Entity) and the repayment of obligations of the Partnership and its Subsidiaries and any other Person in which it has an equity investment, and the making of capital contributions to, and equity investments in, its Subsidiaries;

 

(5)                                 the management, operation, leasing, landscaping, repair, alteration, demolition, disposition or improvement of any real property or improvements owned by the Partnership or any Subsidiary of the Partnership or any Person in which the Partnership has made a direct or indirect equity investment;

 

(6)                                 the negotiation, execution, delivery and performance of any contracts, conveyances or other instruments that the General Partner considers useful or necessary or convenient to the conduct of the Partnership’s operations or the implementation of the General Partner’s powers under this Agreement, including, without limitation, contracting with contractors, developers, consultants, accountants, legal counsel, other professional advisors and other agents and the payment of their expenses and compensation out of the Partnership’s assets;

 

(7)                                 the distribution of Partnership cash or other Partnership assets in accordance with this Agreement;

 

(8)                                 holding, managing, investing and reinvesting cash and other assets of the Partnership;

 

(9)                                 the collection and receipt of revenues and income of the Partnership;

 

(10)                          the establishment of one or more divisions of the Partnership, the selection and designation of powers, authority and duties and the dismissal of employees of the Partnership (including, without limitation, employees who may be designated as officers with titles such as “president,” “vice president,” “secretary” and “treasurer” of the Partnership), and agents, outside attorneys, accountants, consultants and contractors of the Partnership, and the determination of their compensation and other terms of employment or hiring, including waivers of conflicts of interest and the payment of their expenses and compensation out of the Partnership’s assets;

 

(11)                          the maintenance of such insurance (including, without limitation, directors, trustees and officers insurance) for the benefit of the Partnership and the Partners (including, without limitation, the General Partner Entity) and the directors, trustees and offers thereof as the General Partner deems necessary or appropriate;

 

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(12)                          the formation of, or acquisition of an interest (including non-voting interests in entities controlled by Affiliates of the Partnership or the General Partner Entity or third parties) in, and the contribution of property to, any further limited or general partnerships, joint ventures, limited liability companies, real estate investment trusts, corporations, entities that are treated as REITs, “taxable REIT subsidiaries” or as foreign corporations for federal income tax purposes, joint ventures or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of funds or property or the making of loans to its, or the General Partner Entity’s Subsidiaries and any other Person in which it has an equity investment from time to time or the incurrence of indebtedness on behalf of such Persons or the guarantee of obligations of such Persons and the making of any tax, regulatory or other filing or election with respect to any of the foregoing Persons); provided, however, that as long as the General Partner Entity has determined to attempt to continue to qualify as a REIT, the Partnership may not engage in any such formation, acquisition or contribution that would cause the General Partner Entity to fail to qualify as a REIT;

 

(13)                          the control of any matters affecting the rights and obligations of the Partnership or any Subsidiary of the Partnership, including the settlement, compromise, submission to arbitration or any other form of dispute resolution, or abandonment of, any claim, cause of action, liability, debt or damages, due or owing to or from the Partnership or any Subsidiary of the Partnership, the commencement or defense of suits, legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the representation of the Partnership or any Subsidiary of the Partnership in all suits or legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the incurrence of legal expense, and the indemnification of any Person against liabilities and contingencies to the extent permitted by law;

 

(14)                          the undertaking of any action in connection with the Partnership’s direct or indirect investment in any Subsidiary or any other Person (including, without limitation, the contribution or loan of funds by the Partnership to such Persons);

 

(15)                          the determination of the fair market value of any Partnership property distributed in kind using such reasonable method of valuation as the General Partner may adopt;

 

(16)                          the enforcement of any rights against any Partner pursuant to representations, warranties, covenants and indemnities relating to such Partner’s contribution of property or assets to the Partnership;

 

(17)                          the exercise, directly or indirectly, through any attorney-in-fact acting under a general or limited power of attorney, of any right, including the

 

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right to vote, appurtenant to any asset or investment held by the Partnership or any Subsidiary of the Partnership;

 

(18)                          the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of or in connection with any Subsidiary of the Partnership or any other Person in which the Partnership has a direct or indirect interest, individually or jointly with any such Subsidiary or other Person;

 

(19)                          the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of any Person in which the Partnership does not have an interest pursuant to contractual or other arrangements with such Person;

 

(20)                          the making, execution, delivery and performance of any and all deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust, security agreements, conveyances, contracts, guarantees, warranties, indemnities, waivers, releases or other legal instruments or agreements in writing necessary, appropriate or convenient, in the judgment of the General Partner, for the accomplishment of any of the powers of the General Partner enumerated in this Agreement;

 

(21)                          the issuance of additional Partnership Units and other partnership interests, as appropriate and in the General Partner’s sole discretion, in connection with Capital Contributions by Additional Limited Partners and additional Capital Contributions by Partners pursuant to Article IV hereof;

 

(22)                          the distribution of cash to acquire Partnership Units held by a Limited Partner in connection with a Limited Partner’s exercise of its Redemption Right under Section 8.6 hereof;

 

(23)                          the amendment and restatement of the Partner Registry to reflect at all times the Capital Contributions and Percentage Interests of the Partners as the same are adjusted from time to time to the extent necessary to reflect redemptions, Capital Contributions, the issuance and transfer of Partnership Units, the admission of any Additional Limited Partner or any Substituted Limited Partner or otherwise, which amendment and restatement, notwithstanding anything in this Agreement to the contrary, shall not be deemed an amendment of this Agreement, as long as the matter or event being reflected in the Partner Registry hereof otherwise is authorized by this Agreement;

 

(24)                          the registration of any class of securities under the Securities Act or the Exchange Act, and the listing of any debt securities of the Partnership on any exchange;

 

(25)                          the taking of any and all acts and things necessary or prudent, as determined by the General Partner, to ensure that the Partnership will not be classified as an association taxable as a corporation for U.S. federal

 

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income tax purposes or a “publicly traded partnership” for purposes of Section 7704 of the Code, including but not limited to imposing restrictions on transfers, restrictions on the number of Partners and restrictions on redemptions if reasonably necessary to avoid the Partnership being classified as an association taxable as a corporation for U.S. federal income tax purposes; provided, however, that the General Partner shall impose restrictions on transfers and restrictions on redemptions through the end of  the Applicable Year to ensure that the Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Code;

 

(26)                          the filing of applications, communicating and otherwise dealing with any and all governmental agencies having jurisdiction over, or in any way affecting, the Partnership’s assets or any other aspect of the Partnership business;

 

(27)                          taking of any action necessary or appropriate to comply with all regulatory requirements applicable to the Partnership in respect of its business, including preparing or causing to be prepared all financial statements required under applicable regulations and contractual undertakings and all reports, filings and documents, if any, required under the Exchange Act, the Securities Act, or by any national securities exchange requirements;

 

(28)                          the enforcement of any rights against any Partner pursuant to representations, warranties, covenants and indemnities relating to such Partner’s contribution of property or assets to the Partnership;

 

(29)                          the approval and/or implementation of any merger (including a triangular merger), consolidation or other combination between the Partnership and another person that is not prohibited under this Agreement, whether with or without Consent; the terms of Section 17-211(g) of the Act shall be applicable such that the General Partner shall have the right to effect any amendment to this Agreement or effect the adoption of a new partnership agreement for a limited partnership if it is the surviving or resulting limited partnership on the merger or consolidation (except as may be expressly prohibited by this Agreement, including Article XIV with respect to amendments requiring Consent of Limited Partners);

 

(30)                          the taking of any action necessary or appropriate to enable the General Partner Entity to qualify as a REIT;

 

(31)                          to take such other action, execute, acknowledge, swear to or deliver such other documents and instruments, and perform any and all other acts that the General Partner deems necessary or appropriate for the formation, continuation and conduct of the business and affairs of the Partnership (including, without limitation, all actions consistent with allowing the General Partner Entity at all times to qualify as a REIT) and to possess and

 

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enjoy all the rights and powers of a general partner as provided by the Act; and

 

(32)                          the taking of any and all actions necessary or desirable in furtherance of, in connection with or incidental to the foregoing.

 

B.                                    No Approval by Limited Partners.  Each of the Limited Partners agrees that the General Partner is authorized to execute, deliver and perform the above-mentioned agreements and transactions on behalf of the Partnership without any further act, approval or vote of the Partners, notwithstanding any other provision of this Agreement (except as provided in Section 7.3), the Act or any applicable law, rule or regulation, to the fullest extent permitted under the Act or other applicable law, rule or regulation.  The execution, delivery or performance by the General Partner or the Partnership of any agreement authorized or permitted under this Agreement shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement or of any duty stated or implied by law or equity.

 

C.                                    Insurance.  At all times from and after the date hereof, the General Partner may cause the Partnership to obtain and maintain (i) casualty, liability and other insurance on the properties of the Partnership and its Subsidiaries and, (ii) liability insurance for the Indemnitees hereunder and (iii) such other insurance as the General Partner, in its sole and absolute discretion, determines to be necessary.

 

D.                                    Working Capital and Other Reserves.  At all times from and after the date hereof, the General Partner may cause the Partnership to establish and maintain working capital reserves and other cash or similar balances in such amounts as the General Partner, in its sole and absolute discretion, deems appropriate and reasonable from time to time, including upon liquidation of the Partnership pursuant to Section 13.2 hereof.

 

E.                                     Tax Consequences of General Partner Entity and Limited Partners.  The Limited Partners expressly acknowledge that the General Partner, in considering whether to dispose of any of the Partnership assets, shall take into account the tax consequences to the General Partner Entity of any such disposition and shall have no liability whatsoever to the Partnership or any Limited Partner for decisions that are based upon or influenced by such tax consequences.  In addition, in exercising its authority under this Agreement with respect to other matters, the General Partner may, but shall be under no obligation to, take into account the tax consequences to any Partner (including the General Partner Entity) of any action taken (or not taken) by the General Partner taken pursuant to its authority under this Agreement and in accordance with the terms of Section 7.3.

 

Section 7.2                                    Certificate of Limited Partnership.

 

The General Partner has filed the Certificate with the Secretary of State of the State of Delaware as required by the Act.  The General Partner shall use all reasonable efforts to cause to be filed such other certificates or documents as may be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and

 

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any other state, or the District of Columbia, in which the Partnership may elect to do business or own property. To the extent that such action is determined by the General Partner to be reasonable and necessary or appropriate or convenient, the General Partner shall file amendments to and restatements of the Certificate and do all of the things to maintain the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) under the laws of the State of Delaware and each other state, or the District of Columbia, in which the Partnership may elect to do business or own property. Subject to the terms of Section 8.5.A(4) hereof, the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate or any amendment thereto or restatement thereof to any Limited Partner.

 

Section 7.3                                    Restrictions on General Partner Authority.

 

The General Partner may not take any action in contravention of an express prohibition or limitation of this Agreement without the written Consent of (i) all Partners adversely affected or (ii) such lower percentage of the Limited Partnership Interests as may be specifically provided for under a provision of this Agreement or the Act.

 

Section 7.4                                    Reimbursement of the General Partner.

 

A.                                    No Compensation.  Except as provided in this Section 7.4 and elsewhere in this Agreement (including the provisions of Articles V and VI hereof regarding distributions, payments and allocations to which it may be entitled), the General Partner shall not be compensated for its services as general partner of the Partnership.

 

B.                                    Responsibility for Partnership Expenses.  The Partnership shall be responsible for and shall pay all expenses relating to the Partnership’s organization, the ownership of its assets and its operations.  The General Partner and, if different, the General Partner Entity shall be reimbursed on a monthly basis, without duplication, or on such other basis as the General Partner may determine in its sole and absolute discretion, for all expenses it directly or indirectly incurs relating to the ownership and operation of the Partnership, or for the benefit of the Partnership, including, without limitation, (i) expenses relating to the ownership of interests in and operation of the Partnership, (ii) compensation of the officers and employees including, without limitation, payments under any stock option or incentive plan that provides for stock units, or other phantom stock, pursuant to which employees will receive payments based upon dividends on or the value of Shares, (iii) auditing expenses, (iv) director fees and expenses of the General Partner Entity, (v) all costs and expenses of the General Partner Entity being a public company, including costs of filings with the Securities and Exchange Commission, reports and other distributions to its shareholders, (vi) all costs and expenses associated with litigation involving the General Partner and the General Partner Entity, the Partnership or any Subsidiary, (vii) all expenses associated with compliance by the General Partner with laws, rules and regulations promulgated by any regulatory body, (viii) expenses related to the operations of the General Partner and the General Partner Entity and to the management and administration of any Subsidiaries of the General Partner Entity or the Partnership or Affiliates of the Partnership, such as auditing expenses and filing fees and (ix) any and all salaries, compensation and expenses of officers and employees of the General Partner and General Partner Entity; provided that (x), the amount of any such reimbursement shall be

 

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reduced by (i) any interest earned by the General Partner or General Partner Entity with respect to bank accounts or other instruments or accounts held by it as permitted in Section 7.5.A below (which interest is considered to belong to the Partnership and shall be paid over to the Partnership to the extent not applied to reimburse the General Partner for expenses hereunder), (ii) any amount derived by the General Partner or General Partner Entity from any investments permitted in Section 7.5.A below; (iii) if the General Partner or General Partner Entity qualifies as a REIT, the Partnership shall not be responsible for any taxes that the General Partner Entity would not have been required to pay if that entity qualified as a REIT for federal income tax purposes or any taxes imposed on the General Partner or General Partner Entity by reason of that entity’s failure to distribute to its shareholders an amount equal to its taxable income (provided that the funds to make such distributions were in fact available to the General Partner or the General Partner Entity therefor); (iv) the Partnership shall not be responsible for expenses or liabilities incurred by the General Partner or General Partner Entity in connection with any business or assets of the General Partner or General Partner Entity other than its ownership of Partnership Interests or operation of the business of the Partnership or ownership of assets to the extent permitted in Section 7.5.A; and (v) the Partnership shall not be responsible for any expenses or liabilities of the General Partner or General Partner Entity that are excluded from the scope of the indemnification provisions of Section 7.7.A by reason of the provisions of clause (i), (ii) or (iii) thereof; and (y) REIT Expenses shall not be treated as Partnership expenses for purposes of this Section 7.4.B.  The General Partner shall determine in good faith the amount of expenses incurred by it related to the ownership and operation of, or for the benefit of, the Partnership.  If certain expenses are incurred for the benefit of the Partnership and other entities (including the General Partner or General Partner Entity), such expenses will be allocated to the Partnership and such other entities in such a manner as the General Partner in its sole and absolute discretion deems fair and reasonable.  Such reimbursements shall be in addition to any reimbursement to the General Partner pursuant to Section 10.3.C hereof and as a result of indemnification pursuant to Section 7.7 below.  All payments and reimbursements hereunder shall be characterized for federal income tax purposes as expenses of the Partnership incurred on its behalf, and not as expenses of the General Partner or General Partner Entity.

 

C.                                    Partnership Interest Issuance Expenses.  The General Partner and, if different, the General Partner Entity shall also be reimbursed, without duplication, for all expenses it directly or indirectly incurs relating to any issuance of additional Partnership Interests, Shares, Debt of the Partnership, Funding Debt of the General Partner or the General Partner Entity or rights, options, warrants or convertible or exchangeable securities pursuant to Article IV hereof (including, without limitation, all costs, expenses, damages and other payments resulting from or arising in connection with litigation related to any of the foregoing), all of which expenses are considered by the Partners to constitute expenses of, and for the benefit of, the Partnership.

 

D.                                    Purchases of Shares by the General Partner Entity.  In the event that the General Partner Entity shall elect to purchase from its shareholders Shares in connection with a share repurchase or similar program or for the purpose of delivering such Shares to satisfy an obligation under any distribution reinvestment or share purchase program adopted by the General Partner Entity, any employee share purchase plan adopted by the General Partner Entity or any similar obligation or arrangement undertaken by the General Partner Entity in the future, the purchase price paid by the General Partner Entity for such Shares and any other expenses

 

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incurred by the General Partner Entity in connection with such purchase shall be considered REIT Expenses and shall be reimbursed to the General Partner Entity, subject to the conditions that:  (i) if such Shares subsequently are to be sold by the General Partner Entity, the General Partner Entity pays to the Partnership any proceeds received by the General Partner Entity for such Shares (which sales proceeds shall include the amount of distributions reinvested under any distribution reinvestment or similar program; provided that a transfer of Shares for Partnership Units pursuant to Section 8.6 hereof would not be considered a sale for United States federal, state and local income tax purposes); and (ii) if such Shares are not retransferred by the General Partner Entity within thirty (30) days after the purchase thereof, the General Partner Entity shall cause the Partnership to cancel a number of Partnership Units of the appropriate class (rounded to the nearest whole Partnership Unit) held by the General Partner Entity or the General Partner equal to the product attained by multiplying the number of such Shares by a fraction, the numerator of which is one and the denominator of which is the Conversion Factor in effect on the date of such cancellation (in which case such reimbursement shall be treated as a distribution in redemption of Partnership Units held by the General Partner Entity or the General Partner, as the case may be).

 

E.                                     Reimbursement not a Distribution.  Except as set forth in the succeeding sentence, if and to the extent any reimbursement made pursuant to this Section 7.4 is determined for U.S. federal income tax purposes not to constitute a payment of expenses of the Partnership, the amount so determined shall constitute a guaranteed payment with respect to capital within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the Partnership and all Partners and shall not be treated as a distribution for purposes of computing the Partners’ Capital Accounts.  Amounts deemed paid by the Partnership to the General Partner Entity in connection with redemption of Partnership Units pursuant to Section 7.4.D shall be treated as a distribution for purposes of computing the Partner’s Capital Accounts.

 

F.                                      Funding for Certain Capital Transactions. In the event that the General Partner Entity shall undertake to acquire (whether by merger, consolidation, purchase, or otherwise) the assets or equity interests of another Person and such acquisition shall require the payment of cash by the General Partner Entity (whether to such Person or to any other selling party or parties in such transaction or to one or more creditors, if any, of such Person or such selling party or parties), (a) the Partnership shall advance to the General Partner Entity the cash required to consummate such acquisition if, and to the extent that, such cash is not to be obtained by the General Partner Entity through an issuance of Shares described in Section 4.2, (b) the General Partner Entity shall, upon consummation of such acquisition, transfer to the Partnership (or cause to be transferred to the Partnership), in full and complete satisfaction of such advance, the assets or equity interests of such Person acquired by the General Partner Entity in such acquisition (or equity interests in Persons owning all of such assets or equity interests), and (c) pursuant to and in accordance with Section 4.2, the Partnership shall issue to the General Partner Entity, Partnership Interests and/or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights that are substantially similar to those of any additional Shares, other equity securities, New Securities and/or Convertible Funding Debt, as the case may be, issued by the General Partner Entity in connection with such acquisition (whether issued directly to participants in the acquisition transaction or to third parties in order to obtain cash to complete the acquisition).  In addition to, and without limiting, the foregoing, in the event that the General Partner Entity engages in a

 

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transaction in which (x) the General Partner Entity (or a wholly owned direct or indirect Subsidiary of the General Partner Entity) merges with another entity (referred to as the “Parent Entity”) that is organized in the UPREIT form (i.e., where the Parent Entity holds substantially all of its assets and conducts substantially all of its operations through a partnership, limited liability company or other entity (referred to as an “Operating Entity”)) (“UPREIT”) and the General Partner Entity survives such merger, (y) such Operating Entity merges with or is otherwise acquired by the Partnership in exchange in whole or in part for Partnership Interests, and (z) the General Partner Entity is required or elects to pay part of the consideration in connection with such merger involving the Parent Entity in the form of cash and part of the consideration in the form of Shares, the Partnership shall distribute to the General Partner Entity with respect to its existing Partnership Interest an amount of cash sufficient to complete such transaction and the General Partner Entity shall cause the Partnership to cancel a number of Partnership Units (rounded to the nearest whole number) held by the General Partner Entity equal to the product attained by multiplying the number of additional Shares that the General Partner Entity would have issued to the Parent Entity or the owners of the Parent Entity in such transaction if the entire consideration therefor were to have been paid in Shares by a fraction, the numerator of which is one and the denominator of which is the Conversion Factor. It is understood and agreed among the Partners that this Section 7.4.F shall be construed and implemented in a manner that is consistent with the General Partner Entity’s REIT status.

 

Section 7.5                                    Outside Activities of the General Partner.

 

A.                                    General.  The General Partner Entity shall not directly or indirectly enter into or conduct any material business other than in connection with the ownership, acquisition and disposition of Partnership Interests and the management of the business of the Partnership, and such activities as are incidental thereto. The General Partner Entity and any Affiliates of the General Partner Entity may acquire Limited Partnership Interests and shall be entitled to exercise all rights of a Limited Partner relating to such Limited Partnership Interests.  Without the Consent of the Outside Limited Partners, the assets of the General Partner Entity and, if different, the General Partner shall be limited to Partnership Interests and permitted debt obligations of the Partnership (as contemplated by Section 7.5.D below) and permitted assets of the Partnership (as contemplated in Section 7.10), so that Shares and Partnership Units are completely fungible except as otherwise specifically provided herein; provided, that the General Partner Entity and, if different, the General Partner shall be permitted to hold, directly or indirectly, (i) interests in entities, including Qualified REIT Subsidiaries, that hold no material assets; (ii) interests in Qualified REIT Subsidiaries (or other entities that are not taxed as corporations for federal income tax purposes) that own only interests in the Partnership and/or interests in other Qualified REIT Subsidiaries (or other entities that are not taxed as corporations for federal income tax purposes) that either hold no assets or hold only interests in the Partnership; (iii) assets and/or interests in entities, including Qualified REIT Subsidiaries, that hold assets, having an aggregate value not greater than five percent (5%) of the total market value of the General Partner Entity (determined by reference to the value of all outstanding equity securities of the General Partner Entity), provided that (X) the General Partner Entity or General Partner, as the case may be, will apply the net income from such assets (other than net income derived as a result of a Qualified REIT Subsidiary’s ownership of an interest in the Partnership) to offset REIT Expenses before utilizing the distribution provisions of Section 5.1.B, (Y) the General Partner Entity or General Partner, as the case may be, will contribute or cause to be contributed all net income generated

 

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by such assets and/or interests (other than net income derived as a result of a Qualified REIT Subsidiary’s ownership of an interest in the Partnership) to the Operating Partnership (after taking into account REIT Expenses as described in clause (X) above), and (Z) the General Partner Entity or General Partner, as the case may be, will use commercially reasonable efforts to transfer or cause to be transferred such assets and interests (other than interests in Qualified REIT Subsidiaries and the Partnership) to the Operating Partnership or an entity controlled by the Operating Partnership as soon as such a transfer can be made without causing the General Partner Entity, the General Partner or the Operating Partnership to incur any material expenses in connection therewith; (iv) such bank accounts or similar instruments or account in its own name as it deems necessary to carry out its responsibilities and purposes as contemplated under this Agreement and its organizational documents; (v) cash held for payment of administrative expenses or pending distribution to security holders of the General Partner Entity or any wholly owned Subsidiary thereof or pending contribution to the Partnership; and (vi) other tangible and intangible assets that, taken as a whole, are de minimis in relation to the net assets of the Partnership and its Subsidiaries; and, provided, further, that the General Partner Entity and, if different, the General Partner shall be permitted to acquire, directly or through a Qualified REIT Subsidiary (or other entities that are not taxed as corporations for federal income tax purposes), up to a one percent (1%) interest in any partnership or limited liability company at least ninety-nine percent (99%) of the equity of which is owned directly or indirectly by the Partnership.  The General Partner Entity and any of its Affiliates may acquire Limited Partnership Interests and shall be entitled to exercise all rights of a Limited Partner relating to such Limited Partnership Interests.

 

B.                                    Forfeiture of Shares.  In the event the Partnership or the General Partner Entity acquires Shares as a result of the forfeiture of such Shares under a restricted or similar share plan, then the General Partner Entity shall cause the Partnership to cancel that number of Partnership Units of the appropriate class equal to the number of Shares so acquired divided by the Conversion Factor, and, if the Partnership acquired such Shares, it shall transfer such Shares to the General Partner Entity for cancellation.

 

C.                                    Stock Option Plan.  If at any time or from time to time, the General Partner Entity sells Shares pursuant to any Stock Option Plan, the General Partner Entity shall transfer the net proceeds of the sale of such Shares to the Partnership as an additional Capital Contribution in exchange for an amount of additional Partnership Units equal to the number of Shares so sold divided by the Conversion Factor.

 

D.                                    Funding Debt.  The General Partner Entity, the General Partner or a wholly owned subsidiary of either of them may incur a Funding Debt, including, with respect to the General Partner Entity, a Funding Debt that is convertible into Shares or otherwise constitutes a class of New Securities (“Convertible Funding Debt”), subject to the condition that the borrowing entity lends to the Partnership the net proceeds of such Funding Debt; provided, that Convertible Funding Debt shall be issued pursuant to Section 4.2.B above; and, provided, further, that the General Partner Entity shall not be obligated to lend the net proceeds of any Funding Debt to the Partnership in a manner that would be inconsistent with the General Partner Entity’s ability to remain qualified as a REIT.  If the General Partner Entity, the General Partner or a wholly owned subsidiary of either of them enters into any Funding Debt, the loan to the Partnership shall be on comparable terms and conditions, including interest rate, repayment

 

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schedule and costs and expenses, as are applicable with respect to or incurred in connection with such Funding Debt.

 

Section 7.6                                    Transactions with Affiliates.

 

A.                                    The Partnership may lend or contribute funds or other assets to its or the General Partner Entity’s Subsidiaries or other Persons in which it or the General Partner Entity has an equity investment and such Persons may borrow funds from the Partnership, on terms and conditions established in the sole and absolute discretion of the General Partner Entity. The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any other Person

 

B.                                    Except as provided in Section 7.5.A, the Partnership may transfer assets to joint ventures, other partnerships, limited liability companies, real estate investment trusts, corporations or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions consistent with this Agreement and applicable law as the General Partner, in its sole and absolute discretion, believes are advisable.

 

C.                                    Except as expressly permitted by this Agreement (i) neither the General Partner Entity nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from, the Partnership, directly or indirectly, and (ii) the Partnership shall not, directly or indirectly, sell, transfer or convey any property to, or purchase any property from, or borrow funds form, or lend funds to, any Partner or any Affiliate of the Partnership that is not also a Subsidiary of the Partnership, except in the case of each of clauses (i) and (ii) pursuant to transactions that are determined by the General Partner in good faith to be on terms that are fair and reasonable.

 

D.                                    The General Partner, in its sole and absolute discretion and without the approval of the Limited Partners, may propose and adopt, on behalf of the Partnership, employee benefit plans, stock option plans, and similar plans funded by the Partnership for the benefit of employees of the General Partner Entity, the Partnership, Subsidiaries of the Partnership or any Affiliate of any of them in respect of services performed, directly or indirectly, for the benefit of the Partnership, the General Partner or any Subsidiaries of the Partnership.

 

E.                                     The General Partner is expressly authorized to enter into, in the name and on behalf of the Partnership, and without the approval of the Limited Partners, a right of first opportunity arrangement, a non-competition arrangement and other conflict avoidance agreements with various Affiliates of the Partnership and the General Partner, on such terms as the General Partner, in its sole and absolute discretion, believes are advisable.

 

Section 7.7                                    Indemnification.

 

A.                                    General.  To the fullest extent permitted by law, the Partnership shall indemnify each Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, attorneys’ fees and other legal fees and expenses), judgments, fines, settlements, and other amounts arising from or in connection with any and all claims, demands, subpoenas, requests for information, formal or informal investigations, actions, suits or proceedings, whether civil, criminal, administrative or

 

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investigative, incurred by the Indemnitee and relating to the Partnership, the General Partner or the General Partner Entity or the direct or indirect operations of, or the direct or indirect ownership of property by, the Partnership or the General Partner or the General Partner Entity as set forth in this Agreement, in which such Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, unless it is established by a final determination of a court of competent jurisdiction that (i) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty, (ii) the Indemnitee actually received an improper personal benefit in money, property or services, or (iii) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful.  Without limitation, the foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to a loan guaranty or otherwise for any indebtedness of the Partnership or any Subsidiary of the Partnership (including without limitation, any indebtedness which the Partnership or any Subsidiary of the Partnership has assumed or taken subject to), and the General Partner is hereby authorized and empowered, on behalf of the Partnership, to enter into one or more indemnity agreements consistent with the provisions of this Section 7.7 in favor of any Indemnitee having or potentially having liability for any such indebtedness. The termination of any proceeding by judgment, order or settlement does not create a presumption that the Indemnitee did not meet the requisite standard of conduct set forth in this Section 7.7.A.  The termination of any proceeding by conviction or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the Indemnitee acted in a manner contrary to that specified in this Section 7.7.A with respect to the subject matter of such proceeding.  Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership and any insurance proceeds from the liability policy covering the General Partner and any Indemnitee, and neither the General Partner nor any Limited Partner shall have any obligation to contribute to the capital of the Partnership, or otherwise provide funds, to enable the Partnership to fund its obligations under this Section 7.7.

 

B.                                    Advancement of Expenses.  To the fullest extent permitted by law, reasonable expenses expected to be incurred by an Indemnitee shall be paid or reimbursed by the Partnership in advance of the final disposition of any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, made or threatened to be made against an Indemnitee, upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Partnership as authorized in Section 7.7.A has been met and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met.

 

C.                                    No Limitation of Rights.  The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity unless otherwise provided in a written agreement pursuant to which such Indemnitee is indemnified.

 

D.                                    Insurance.  The Partnership may, but shall not be obligated to, purchase and maintain insurance, on behalf of the Indemnitees and such other Persons as the General

 

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Partner shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnership’s activities, regardless of whether the Partnership would have the power to indemnify such Indemnitee or Person against such liability under the provisions of this Agreement.

 

E.                                     Benefit Plan Fiduciary.  For purposes of this Section 7.7, (i) the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan, (ii) excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute fines within the meaning of this Section 7.7 and (iii) actions taken or omitted by the Indemnitee with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the Partnership.

 

F.                                      No Personal Liability for Limited Partners.  In no event may an Indemnitee subject any of the Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.

 

G.                                    Interested Transactions.  An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

 

H.                                   Benefit.  The provisions of this Section 7.7 are also for the benefit of the Indemnitees, their employees, officers, directors, trustees, heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons.  Any amendment, modification or repeal of this Section 7.7 or any provision hereof shall be prospective only and shall not in any way affect the limitation on the Partnership’s liability to any Indemnitee under this Section 7.7, as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or related to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

 

I.                                        Indemnification Payments Not Distributions.  If and to the extent any payments to the General Partner or the General Partner Entity pursuant to this Section 7.7 constitute gross income to the General Partner or the General Partner Entity (as opposed to the repayment of advances made on behalf of the Partnership), such amounts shall constitute guaranteed payments within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the Partnership and all Partners, and shall not be treated as distributions for purposes of computing the Partners’ Capital Accounts.

 

J.                                        Exception to Indemnification of the General Partner.  Notwithstanding anything to the contrary in this Agreement, the General Partner shall not be entitled to indemnification hereunder for any loss, claim, damage, liability or expense for which the General

 

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Partner is obligated to indemnify the Partnership under any other agreement between the General Partner and the Partnership.

 

Section 7.8                                    Liability of the Covered Persons.

 

A.                                    General.  Notwithstanding anything to the contrary set forth in this Agreement, to the fullest extent permitted by law, none of the General Partner, its Affiliates, or any of their respective officers, trustees, directors, shareholders, partners, members, employees, representatives or agents or any officer, employee, representative or agent of the Partnership and its Affiliates (individually, a “Covered Person” and collectively, the “Covered Persons”) shall be liable or accountable for monetary damages or otherwise to the Partnership, any Partners or any Assignees for losses sustained or liabilities incurred or benefits not derived as a result of errors in judgment or mistakes of fact or law or of any act or omission if the Covered Person’s conduct did not constitute bad faith, gross negligence or willful misconduct.

 

B.                                    No Obligation to Consider Separate Interests of Limited Partners or Shareholders.  The Limited Partners expressly acknowledge that the General Partner is acting on behalf of the Partnership, the Limited Partners and the shareholders of the General Partner collectively, that the General Partner is under no obligation to consider or give priority to the separate interests of the Limited Partners (including, without limitation, the tax consequences to Limited Partners or Assignees or to such shareholders) in deciding whether to cause the Partnership to take (or decline to take) any actions.  Any decisions or actions taken or not taken in accordance with the terms of this Agreement shall not constitute a breach of any duty owed to the Partnership or the Limited Partners by law or equity, fiduciary or otherwise.  The General Partner shall not be liable for monetary damages or otherwise for losses sustained, liabilities incurred or benefits not derived by Limited Partners in connection with such decisions, provided that the General Partner has acted in good faith.

 

C.                                    Actions of Agents.  Subject to its obligations and duties as General Partner set forth in Section 7.1.A hereof, the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its employees and agents.  The General Partner shall not be liable to the Partnership or any Partner for any misconduct or negligence on the part of any such employee or agent appointed by the General Partner in good faith.

 

D.                                    Effect of Amendment.  Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the Covered Person’s liability to the Partnership and the Limited Partners under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

 

E.                                     Limitations of Fiduciary Duty.  Sections 7.1.B, 7.1.E and this Section 7.8 and any other Section of this Agreement limiting the liability of the General Partner and/or its trustees, directors and officers shall constitute an express limitation of any duties, fiduciary or otherwise, that they would owe the Partnership or the Limited Partners if such duty would be imposed by any law, in equity or otherwise.

 

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F.                                      Good Faith Reliance on Agreement.  To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or to the Partners, any Covered Person acting under this Agreement or otherwise shall not be liable to the Partnership or to any Partner for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict or eliminate the duties and liabilities of a Covered Person under the Act or otherwise existing at law or in equity, are agreed by the Partners to replace such other duties and liabilities of such Covered Person to the maximum extent permitted by law.

 

G.                                    General Partner’s Discretion.  Whenever in this Agreement the General Partner or the General Partner Entity is permitted or required to make a decision (i) in its “sole discretion” or “discretion,” or under a similar grant of authority or latitude, the General Partner or General Partner Entity, as the case may be, shall be entitled to consider such interests and factors as it desires and may consider its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Partnership or the Limited Partners, or (ii) in its “good faith” or under another express standard, the General Partner or General Partner Entity, as the case may be, shall act under such express standard and shall not be subject to any other or different standards imposed by this Agreement or by law or any other agreement contemplated herein.

 

Section 7.9                                    Other Matters Concerning the General Partner.

 

A.                                    Reliance on Documents.  The General Partner may rely and shall be protected in acting or refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties.

 

B.                                    Reliance on Advisors.  The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers, architects, engineers, environmental consultants and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion of such Persons as to matters which the General Partner reasonably believes to be within such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.

 

C.                                    Action Through Agents.  The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and a duly appointed attorney or attorneys-in-fact.  Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform all and every act and duty which is permitted or required to be done by the General Partner hereunder.

 

D.                                    Actions to Maintain REIT Status or Avoid Taxation of the General Partner Entity or the General Partner (as applicable).  Notwithstanding any other provisions of this Agreement (other than the limitations on the General Partner’s and General Partner Entity’s authority set forth in Sections 7.3, 7.5 and 7.6.A) or the Act, any action of the General Partner or

 

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General Partner Entity on behalf of the Partnership or any decision of the General Partner or General Partner Entity to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect the ability of the General Partner Entity or the General Partner (as applicable) to continue to satisfy the REIT Requirements or (ii) to avoid the General Partner Entity or the General Partner (as applicable) incurring any taxes under Section 337(d), 857, 1374 or 4981 of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.

 

Section 7.10                             Title to Partnership Assets.

 

Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partners, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof.  Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine in its sole and absolute discretion, including Affiliates of the General Partner.  The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by the General Partner (or such other entity) for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use its commercially reasonable efforts to cause beneficial and record title to such assets to be vested in the Partnership as soon as reasonably practicable. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held.

 

Section 7.11                             Reliance by Third Parties.

 

Notwithstanding anything to the contrary in this Agreement (other than the limitations on the General Partner’s and General Partner Entity’s authority set forth in Sections 7.3, 7.5 and 7.6.A), any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority, without consent or approval of any other Partner or Person, to encumber, sell or otherwise use in any manner any and all assets of the Partnership, to enter into any contracts on behalf of the Partnership and to take any and all actions on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if the General Partner were the Partnership’s sole party in interest, both legally and beneficially.  Each Limited Partner hereby waives any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing, in each case except to the extent that such action imposes, or purports to impose, liability on the Limited Partner.  In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives.  Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to

 

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do so for and on behalf of the Partnership, and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.

 

Section 7.12                             Loans by Third Parties.

 

The Partnership may incur Debt, or enter into similar credit, guarantee, financing or refinancing arrangements for any purpose (including, without limitation, in connection with any acquisition of property and any borrowings from, or guarantees of Debt of the General Partner Entity or any of its Affiliates) with any Person upon such terms as the General Partner determines appropriate; provided, that the Partnership shall not incur any Debt that is recourse to the General Partner unless, and then only to the extent that, the General Partner has expressly agreed.

 

ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

 

Section 8.1                                    Limitation of Liability.

 

The Limited Partners, including the General Partner Entity, in its capacity as a Limited Partner, shall have no liability under this Agreement except as expressly provided in this Agreement, including Section 10.5 hereof, or under the Act.

 

Section 8.2                                    Management of Business.

 

No Limited Partner or Assignee (other than the General Partner, any of its Affiliates or any officer, trustee, director, member, employee, partner or agent of the General Partner, the Partnership or any of their Affiliates, in their capacity as such) shall take part in the operation, management or control (within the meaning of the Act) of the Partnership’s business, transact any business in the Partnership’s name or have the power to sign documents for or otherwise bind the Partnership.  The transaction of any such business by the General Partner, any of its Affiliates or any officer, trustee, director, member, employee, partner or agent of the General Partner, the Partnership or any of their Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partners or Assignees under this Agreement.

 

Section 8.3                                    Outside Activities of Limited Partners.

 

Subject to any agreements entered into pursuant to Section 7.6.E hereof and any other agreements entered into by a Limited Partner or its Affiliates with General Partner, the Partnership or any of their respective Subsidiaries, any Limited Partner (other than the General Partner) and any officer, trustee, director, member, employee, agent, Affiliate or shareholder of any Limited Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities that are in direct or indirect competition with the Partnership or that are enhanced by the activities of the Partnership.  Neither the Partnership nor any Partners shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner, officer, director, manager, employee, agent, trustee, Affiliates, member, shareholder or Assignee of any Limited

 

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Partner.  None of the Limited Partners (other than the General Partner) nor any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby in any business ventures of any other Person (other than the General Partner to the extent expressly provided herein), and no such Person (other than the General Partner) shall have any obligation pursuant to this Agreement to offer any interest in any such business ventures to the Partnership, any Limited Partner or any such other Person, even if such opportunity is of a character which, if presented to the Partnership, any Limited Partner or such other Person, could be taken by such Person.

 

Section 8.4                                    Return of Capital.

 

Except pursuant to the right of redemption set forth in Section 8.6, no Limited Partner shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent of distributions made pursuant to this Agreement or upon termination of the Partnership as provided herein. Except to the extent provided by Exhibit C hereof or as otherwise expressly provided in this Agreement, no Limited Partner or Assignee shall have priority over any other Limited Partner or Assignee, either as to the return of Capital Contributions or as to profits, losses, distributions or credits.

 

Section 8.5                                    Rights of Limited Partners Relating to the Partnership.

 

A.                                    General.  In addition to other rights provided by this Agreement or by the Act, and except as limited by Section 8.5.D below, each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner’s interest as a limited partner in the Partnership, upon written demand with a statement of the purpose of such demand and at such Limited Partner’s own expense (including such copying and administrative charges as the General Partner may establish from time to time):

 

(1)                                 to obtain a copy of the most recent annual and quarterly reports prepared by the General Partner Entity and distributed to shareholders, including annual and quarterly reports filed with the SEC by the General Partner Entity pursuant to the Exchange Act;

 

(2)                                 to obtain a copy of the Partnership’s U.S. federal, state and local income tax returns for each Partnership Year;

 

(3)                                 to obtain a current list of the name and last known business, residence or mailing address of each Partner as reflected in the Partnership’s records;

 

(4)                                 to obtain a copy of this Agreement and the Certificate and all amendments thereto, together with copies of all powers of attorney pursuant to which this Agreement, the Certificate and all amendments thereto have been executed; and

 

(5)                                 to obtain true and full information regarding the amount of cash and a description and statement of the Agreed Value of any other property or services contributed by each Partner and which each Partner has agreed to contribute in the future, and the date on which each became a Partner.

 

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B.                                    Notice of Conversion Factor.  The Partnership shall notify each Limited Partner, upon request, of the then current Conversion Factor.

 

C.                                    Notice of Extraordinary Transaction of the General Partner Entity.  The General Partner Entity shall not make any extraordinary distributions of cash or property to its shareholders or effect an Extraordinary Transaction without notifying the Limited Partners of its intention to make such distribution or effect such merger, sale or other extraordinary transaction not later than the time, if any, at which the General Partner Entity is required to provide notice of such transaction to its shareholders (or, if earlier, at least (20) days prior to the record date to determine shareholders eligible to receive such distribution or to vote upon the Extraordinary Transaction (or, if no such record date is applicable, at least twenty (20) days before consummation of such Extraordinary Transaction)).  This provision for such notice shall not be deemed (i) to permit any transaction that otherwise is prohibited by this Agreement or requires a Consent of the Partners or (ii) to require a Consent of the Limited Partners to a transaction that does not otherwise require Consent under this Agreement.  Each Limited Partner agrees, as a condition to the receipt of the notice pursuant hereto, to keep confidential the information set forth therein until such time as the General Partner Entity has made public disclosure thereof and to use such information during such period of confidentiality solely for purposes of determining whether or not to exercise the Redemption Right (if applicable) and to execute a confidentiality agreement provided by the General Partner Entity; provided, however, that a Limited Partner may disclose such information to its attorney, accountant and/or financial advisor for purposes of obtaining advice with respect to such exercise so long as such attorney, accountant and/or financial advisor agrees to receive and hold such information subject to this confidentiality requirement.

 

D.                                    Confidentiality.  Notwithstanding any other provision of this Section 8.5, the General Partner may keep confidential from the Limited Partners, for such period of time as the General Partner determines in its sole and absolute discretion to be reasonable, any information that (i) the General Partner reasonably believes to be in the nature of trade secrets or other information, the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership or could damage the Partnership or its business; or (ii) the Partnership is required by law or by agreements with an unaffiliated third party to keep confidential, provided, however, that this Section 8.5.D shall not affect the notice requirements set forth in Section 8.5.C.

 

Section 8.6                                    Redemption Right.

 

A.                                    General.  (i) Subject to Sections 8.6.B and 8.6.C hereof, on or after the date that is one (1) year after the later of (x) the beginning of the first full calendar month following July 18, 2017, and (y) the date of the issuance of a Common Partnership Unit to a Limited Partner pursuant to Article IV hereof, which one-year period shall commence upon the issuance of such Partnership Unit regardless of whether such Partnership Unit is designated upon issuance as a Common Partnership Unit or otherwise, or on or after such date prior to the expiration of such one-year period as the General Partner, in its sole and absolute discretion, designates with respect to any or all Partnership Units then outstanding, the holder of a Partnership Unit (if other than the General Partner or the General Partner Entity or any Subsidiary of either the General Partner or the General Partner Entity) shall have the right (the

 

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Redemption Right”) to require the Partnership to redeem on a Specified Redemption Date such Partnership Unit (provided that such Partnership Unit is a Common Partnership Unit) at a redemption price equal to and in the form of the Cash Amount to be paid by the Partnership. The Redemption Right shall be exercised pursuant to a Notice of Redemption delivered to the Partnership (with a copy to the General Partner and the General Partner Entity) by the Limited Partner who is exercising the redemption right (the “Redeeming Partner”); provided, however, a Limited Partner may not exercise the Redemption Right for less than one thousand (1,000) Partnership Units at any one time or, if such Limited Partner holds less than one thousand (1,000) Partnership Units, all of the Partnership Units held by such Partner; provided further that, with respect to a Limited Partner which is an entity, such Limited Partner may exercise the Redemption Right for fewer than one thousand (1,000) Partnership Units without regard to whether or not such Limited Partner is exercising the Redemption Right for all of the Partnership Units held by such Limited Partner as long as such Limited Partner is exercising the Redemption Right on behalf of one or more of its equity owners in respect of one hundred percent (100%) of such equity owners’ interests in such Limited Partner. The Redeeming Partner shall have no right, with respect to any Partnership Units so redeemed, to receive any distributions paid on or after the Specified Redemption Date unless the record date for such distribution was a date prior to the Specified Redemption Date. The Assignee of any Limited Partner may exercise the rights of such Limited Partner pursuant to this Section 8.6, and such Limited Partner shall be deemed to have assigned such rights to such Assignee and shall be bound by the exercise of such rights by such Assignee. In connection with any exercise of such rights by an Assignee on behalf of a Limited Partner, the Cash Amount shall be paid by the Partnership directly to such Assignee and not to such Limited Partner. Any Partnership Units redeemed by the Partnership pursuant to this Section 8.6.A shall be cancelled upon such redemption.

 

(ii)                                  [RESERVED].

 

(iii)                               Notwithstanding the foregoing, if the General Partner Entity provides notice to the Limited Partners pursuant to Section 8.5.C hereof, the Redemption Right shall be exercisable, without regard to whether the Partnership Units have been outstanding for any specified period, during the period commencing on the date on which the General Partner Entity provides such notice and ending on the record date to determine shareholders eligible to receive such distribution or participate in such Extraordinary Transaction (or if none, ending on the date of consummation of such distribution or Extraordinary Transaction).  If this subparagraph (iii) applies, the Specified Redemption Date is the date on which the Partnership and the General Partner receive notice of exercise of the Redemption Right, rather than ten (10) Business Days after receipt of the Notice of Redemption.

 

B.                                    General Partner Entity Assumption of Right.  (i) Notwithstanding the provisions of Section 8.6.A, a Limited Partner that exercises the Redemption Right shall be deemed to have offered to sell the Partnership Units described in the Notice of Redemption to the General Partner Entity, and the General Partner Entity may, in its sole and absolute discretion (subject to any limitations on ownership and transfer of Shares set forth in the Declaration of Trust), elect to assume directly and satisfy a Redemption Right by paying to the Redeeming Partner either the Cash Amount or the Shares Amount, as the General Partner Entity determines in its sole and absolute discretion, on the Specified Redemption Date, whereupon the General Partner Entity shall acquire the Partnership Units offered for redemption by the Redeeming

 

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Partner and shall be treated for all purposes of this Agreement as the owner of such Partnership Units. Payment of the Redemption Amount in the form of Shares shall be in Shares (i) duly authorized, validly issued, fully paid and nonassessable, free and clear of any pledge, lien, encumbrance or restriction, other than those provided in the organizational documents of the General Partner Entity, the Securities Act, relevant state securities or blue sky laws and any applicable registration rights agreement with respect to such Shares entered into by the Redeeming Partner, and shall bear a legend in form and substance determined by the General Partner Entity, and (ii) registered under Section 12 of the Exchange Act and listed for trading on the exchange or national market on which the Shares are Publicly Traded; provided, that in the event that the Shares are not Publicly Traded at the time a Redeeming Partner exercises its Redemption Right, the Redemption Amount shall be paid only in the form of the Cash Amount unless the Redeeming Partner, in its sole and absolute discretion, consents to payment of the Redemption Amount in the form of the Shares Amount.  Unless the General Partner Entity (in its sole and absolute discretion) shall exercise its right to assume and directly satisfy the Redemption Right, the General Partner Entity shall not have any obligation to the Redeeming Partner or the Partnership with respect to the Redeeming Partner’s exercise of the Redemption Right. In the event the General Partner Entity shall exercise its right to assume and directly satisfy the Redemption Right, the Partnership shall have no obligation to pay any amount to the Redeeming Partner with respect to such Redeeming Partner’s exercise of such Redemption Right, and each of the Redeeming Partner, the Partnership and the General Partner Entity shall treat the transaction between the General Partner Entity and the Redeeming Partner, for federal income tax purposes, as a sale of the Redeeming Partner’s Partnership Units to the General Partner Entity.

 

(ii)                                  In the event that the General Partner Entity determines to pay the Redeeming Partner the Redemption Amount in the form of Shares, the total number of Shares to be paid to the Redeeming Partner in exchange for the Redeeming Partner’s Partnership Units shall be the applicable Shares Amount.  In the event this amount is not a whole number of Shares, the Redeeming Partner shall be paid (i) that number of Shares which equals the nearest whole number less than such amount plus (ii) an amount of cash which the General Partner Entity determines, in its reasonable discretion, to represent the fair value of the remaining fractional Share which would otherwise be payable to the Redeeming Partner.

 

(iii)                               Each Redeeming Partner agrees to execute such documents or provide such information or materials as the General Partner Entity may reasonably require in connection with the issuance of Shares upon exercise of the Redemption Right.

 

C.                                    Exceptions to Exercise of Redemption Right.  Notwithstanding the provisions of Section 8.6.A and Section 8.6.B, a Partner shall not be entitled to exercise the Redemption Right pursuant to Section 8.6.A to the extent that the delivery of Shares to such Partner on the Specified Redemption Date by the General Partner pursuant to Section 8.6.B (regardless of whether or not the General Partner Entity would in fact exercise its rights under Section 8.6.B) would (i) be prohibited, as determined in the sole discretion of the General Partner Entity, under the Declaration of Trust, (ii) cause the acquisition of Shares by such Partner to be “integrated” with any other distribution of Shares for purposes of complying with the Securities Act, (iii) otherwise be prohibited under applicable federal or state securities laws or regulations, or (iv) violate restrictions imposed by the General Partner pursuant to Section 11.6.E and/or

 

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Section 11.6.F.  Notwithstanding the foregoing, the General Partner Entity may, in its sole and absolute discretion, waive such prohibition set forth in this Section 8.6C.

 

D.                                    No Liens on Partnership Units Delivered for Redemption.  Each Limited Partner covenants and agrees with the General Partner that all Partnership Units delivered for redemption shall be delivered to the Partnership or the General Partner Entity, as the case may be, free and clear of all liens, and, notwithstanding anything contained herein to the contrary, neither the General Partner Entity nor the Partnership shall be under any obligation to acquire Partnership Units which are or may be subject to any liens.  Each Limited Partner further agrees that, in the event any state or local property transfer tax is payable as a result of the transfer of its Partnership Units to the Partnership or the General Partner Entity, such Limited Partner shall assume and pay such transfer tax.

 

E.                                     Additional Partnership Interests; Modification of Holding Period.  In the event that the Partnership issues Partnership Interests to any Additional Limited Partner pursuant to Article IV hereof, the General Partner shall make such amendments to this Section 8.6 as it determines are necessary to reflect the issuance of such Partnership Interests (including setting forth any restrictions on the exercise of the Redemption Right with respect to such Partnership Interests); provided, however, that no such revisions shall materially adversely affect the rights of any other Limited Partner to exercise its Redemption Right without that Limited Partner’s prior written consent.  In addition, the General Partner may, with respect to any holder or holders of Partnership Units, at any time and from time to time, as it shall determine in its sole and absolute discretion, (i) reduce or waive the length of the period prior to which such holder or holders may not exercise the Redemption Right or (ii) reduce or waive the length of the period between the exercise of the Redemption Right and the Specified Redemption Date.

 

F.                                      LTIP Unit Exception and Redemption of Common Partnership Units Issued Upon Conversion of LTIP Units.  Subject to Section 8.6.G hereof, holders of LTIP Units shall not be entitled to the Redemption Right provided for in Section 8.6.A of this Agreement, unless and until such LTIP Units have been converted into Common Partnership Units (or any other class or series of Partnership Units entitled to such Redemption Right) in accordance with their terms.  Notwithstanding the foregoing, and except as otherwise permitted by Section 8.6.G or the award, plan or other agreement pursuant to which an LTIP Unit was issued, the Redemption Right shall not be exercisable with respect to any Common Partnership Unit issued upon conversion of an LTIP Unit until on or after the date that is two years after the date on which the LTIP Unit was issued, provided however, that the foregoing restriction shall not apply if the Redemption Right is exercised by an LTIP Unitholder in connection with a transaction that falls within the definition of a “change of control” under the agreement or agreements pursuant to which the LTIP Units were issued to him or her and provided further that the one (1) year requirement set forth in the first sentence of Subsection 8.6.A(i) shall not apply with respect to Common Partnership Units issued upon conversion of LTIP Units.

 

G.                                    Formation Unit Exception and Redemption of Common Partnership Units Issued Upon Conversion of LTIP Units Into Which Formation Units Were Converted.  Holders of Formation Units shall not be entitled to the Redemption Right provided for in Section 8.6.A of this Agreement, unless and until such Formation Units (i) have been converted into LTIP Units and (ii) such LTIP Units have subsequently been converted into Common Partnership Units (or

 

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any other class or series of Partnership Units entitled to such Redemption Right), in each case in accordance with their terms. Notwithstanding the foregoing, and except as otherwise permitted by the award, plan or other agreement pursuant to which a Formation Unit was issued, the Redemption Right shall not be exercisable with respect to any Common Partnership Unit issued upon conversion of an LTIP Unit into which a Formation Unit was previously converted until on or after the date that is two years after the date on which the Formation Unit was issued, provided however, that the first sentence of Subsection 8.6.A(i) shall not apply with respect to Common Partnership Units issued upon conversion of LTIP Units into which Formation Units were previously converted.  For the avoidance of doubt, the foregoing prohibition shall no longer apply upon (i) the termination of employment of the applicable holder of Formation Units with the General Partner or its affiliates (a) by the General Partner (or its successor) without Cause (as defined in the applicable Formation Unit agreement) or (b) the applicable holder of Formation Units for Good Reason (as defined in the applicable Formation Unit agreement) or (ii) the occurrence of a Change in Control (as defined in the applicable Formation Unit agreement).

 

ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS

 

Section 9.1                                    Records and Accounting.

 

The General Partner shall keep or cause to be kept at the principal office of the Partnership those records and documents required to be maintained by the Act and other books and records deemed by the General Partner to be appropriate with respect to the Partnership’s business, including, without limitation, all books and records necessary to provide to the Limited Partners any information, lists and copies of documents required to be provided pursuant to Section 9.3 hereof. Any records maintained by or on behalf of the Partnership in the regular course of its business may be kept on, or be in the form of, punch cards, magnetic tape, photographs, micrographics or any other information storage device; provided, that the records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial and tax reporting purposes, on an accrual basis in accordance with GAAP, or such other basis as the General Partner determines to be necessary or appropriate.

 

Section 9.2                                    Fiscal Year.

 

The fiscal year of the Partnership shall be the calendar year.

 

Section 9.3                                    Reports.

 

A.                                    Annual Reports.  As soon as practicable, but in no event later than the date on which the General Partner Entity mails its annual report to its shareholders, the General Partner shall cause to be mailed to each Limited Partner as of the close of the Partnership Year, an annual report containing financial statements of the Partnership, or of the General Partner if such statements are prepared solely on a consolidated basis with the General Partner, for such Partnership Year, presented in accordance with GAAP, such statements to be audited by a nationally recognized firm of independent public accountants selected by the General Partner.

 

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B.                                    Quarterly Reports.  If and to the extent that the General Partner Entity mails quarterly reports to its shareholders, as soon as practicable, but in no event later than the date on which such reports are mailed, the General Partner shall cause to be mailed to each Limited Partner as of the last day of the calendar quarter, a report containing unaudited financial statements of the Partnership, or of the General Partner Entity, if such statements are prepared solely on a consolidated basis with the General Partner Entity, and such other information as may be required by applicable law or regulation, or as the General Partner determines to be appropriate.

 

C.                                    Other Reports.  The Partnership shall also cause to be prepared such reports and/or information as are necessary for the General Partner or the General Partner Entity to determine its qualification as a REIT and its compliance with the REIT Requirements, but only for so long as such entity elects to remain qualified as a REIT.

 

D.                                    Delivery Method.  Notwithstanding the foregoing, the General Partner may deliver to the Limited Partners each of the reports described above, as well as any other communications that it may provide hereunder, by e-mail or by any other electronic means, provided that if a report is filed with the SEC via EDGAR it shall be deemed to have been delivered to each Limited Partner.

 

ARTICLE X
TAX MATTERS

 

Section 10.1                             Preparation of Tax Returns.

 

The General Partner shall arrange for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items required of the Partnership for U.S. federal and state income tax purposes and shall furnish by July 31 of the year immediately following each taxable year, or as soon as reasonably practicable thereafter, the tax information reasonably required by Limited Partners for federal and state income tax reporting purposes.  If required under the Code or applicable state or local income tax law, the General Partner shall also arrange for the preparation and timely filing of all returns of income, gains, deductions, losses and other items required of the Subsidiaries of the Partnership for U.S. federal income tax purposes and shall use all reasonable efforts to furnish, by July 31 of the year immediately following each taxable year, or as soon as reasonably practicable thereafter, the tax information required by the Limited Partners for U.S. federal and state income tax reporting purposes.

 

Section 10.2                             Tax Elections.

 

A.                                    Except as otherwise provided herein, the General Partner shall, in its sole and absolute discretion, determine whether to make any available election pursuant to the Code; provided, that the General Partner shall make the election under Section 754 of the Code in accordance with applicable regulations thereunder.  The General Partner shall have the right to seek to revoke any such election (including, without limitation, the election under Section 754 of the Code) upon the General Partner’s determination in its sole and absolute discretion that such revocation is in the best interests of the Partners.

 

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B.                                    To the extent provided for in Regulations, revenue rulings, revenue procedures and/or other IRS guidance issued after the date hereof, the Partnership is hereby authorized to, and at the direction of the General Partner shall, elect a safe harbor under which the fair market value of any Partnership Interests issued after the effective date of such Regulations (or other guidance) will be treated as equal to the liquidation value of such Partnership Interests (i.e., a value equal to the total amount that would be distributed with respect to such interests if the Partnership sold all of its assets for their fair market value immediately after the issuance of such Partnership Interests, satisfied its liabilities (excluding any non-recourse liabilities to the extent the balance of such liabilities exceeds the fair market value of the assets that secure them) and distributed the net proceeds to the Partners under the terms of this Agreement). In the event that the Partnership makes a safe harbor election as described in the preceding sentence, each Partner hereby agrees to comply with all safe harbor requirements with respect to transfers of such Partnership Interests while the safe harbor election remains effective.

 

Section 10.3                             Tax Matters Partner.

 

A.                                    General.  The General Partner shall be the “tax matters partner” of the Partnership for federal income tax purposes pursuant to Section 6231(a)(7) of the Code under the Current Partnership Audit Rules and the “partnership representative” pursuant to Section 6223(a) of the Code under the 2015 Budget Act Partnership Audit Rules.  So long as Section 6230(e) of the Current Partnership Audit Rules is in effect, upon receipt of notice from the IRS of the beginning of an administrative proceeding with respect to the Partnership, the General Partner shall furnish the IRS with the name, address, taxpayer identification number and profit interest of each of the Limited Partners and any Assignees; provided, however, that such information is provided to the Partnership by the Limited Partners and the Assignees.

 

B.                                    Powers.  The General Partner is authorized, but not required (and the Partners hereby consent to the tax matters partner and the partnership representative, as relevant, taking the following actions):

 

(1)                                 to elect out of the 2015 Budget Act Partnership Audit Rules, if available;

 

(2)                                 to enter into any settlement with the IRS with respect to any administrative or judicial proceedings for the adjustment of Partnership items required to be taken into account by a Partner for income tax purposes (such administrative proceedings being referred to as a “tax audit” and such judicial proceedings being referred to as “judicial review”), and in the settlement agreement the General Partner may expressly state that such agreement shall bind the Partnership and all Partners, except that, so long as the Current Partnership Audit Rules are in effect, such settlement agreement shall not bind any Partner (i) who (within the time prescribed pursuant to the Code and Regulations under the Current Partnership Audit Rules) files a statement with the IRS providing that the tax matters partner shall not have the authority to enter into a settlement agreement on behalf of such Partner or (ii) who is a “notice partner” (as defined in Section 6231(a)(8) of the Current Partnership Audit Rules) or a member of

 

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a “notice group” (as defined in Section 6223(b)(2) of the Current Partnership Audit Rules);

 

(3)                                 in the event that a notice of a final administrative adjustment assessed by the IRS or any other tax authority, at the Partnership level of any item required to be taken into account by a Partner for tax purposes (a “final adjustment”) is mailed to the General Partner, to seek judicial review of such final adjustment, including the filing of a petition for readjustment with the United States Tax Court or the filing of a complaint for refund with the United States Claims Court or the District Court of the United States for the district in which the Partnership’s principal place of business is located;

 

(4)                                 to intervene in any action brought by any other Partner for judicial review of a final adjustment;

 

(5)                                 to file a request for an administrative adjustment with the IRS or other tax authority at any time and, if any part of such request is not allowed by the IRS or other tax authority, to file an appropriate pleading (petition or complaint) for judicial review with respect to such request;

 

(6)                                 to enter into an agreement with the IRS or other tax authority to extend the period for assessing any tax which is attributable to any item required to be taken into account by a Partner for tax purposes, or an item affected by such item; and

 

(7)                                 to take any other action on behalf of the Partners or the Partnership in connection with any tax audit or judicial review proceeding to the extent permitted by applicable law or regulations, including, without limitation, the following actions to the extent that the 2015 Budget Act Partnership Audit Rules apply to the Partnership and its current or former Partners:

 

a.                                      electing to have the alternative method for the underpayment of taxes set forth in Section 6226 of the Code, as included in the 2015 Budget Act Partnership Audit Rules, apply to the Partnership and its current or former Partners; and

 

b.                                      for Partnership level assessments under Section 6225 of the Code, as included in the 2015 Budget Act Partnership Audit Rules, determining apportionment of responsibility for payment among the current or former Partners, setting aside reserves from available funds of the Partnership, withholding of distributions to the Partners, and requiring current or former Partners to make cash payments to the Partnership for their share of the Partnership level assessments; and

 

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(8)                                 to take any other action required or permitted by the Code and Regulations in connection with its role as the tax matters partner and the partnership representative, as relevant.

 

The taking of any action and the incurring of any expense by the General Partner in connection with any such audit or proceeding, except to the extent required by law, is a matter in the sole and absolute discretion of the General Partner and the provisions relating to indemnification of the General Partner set forth in Section 7.7 of this Agreement shall be fully applicable to the tax matters partner and the partnership representative, as relevant, in its capacity as such.  In addition, the General Partner shall be entitled to indemnification set forth in Section 7.7 for any liability for tax imposed on the Partnership under the 2015 Budget Act Partnership Audit Rules that is collected from the General Partner.

 

The current and former Partners agree to provide the following information and documentation to the Partnership and the tax partner to the extent that the 2015 Budget Act Partnership Audit Rules apply to the Partnership and its current or former Partners:

 

(1)                                 information and documentation to determine and prove eligibility of the Partnership to elect out of the 2015 Budget Act Partnership Audit Rules;

 

(2)                                 information and documentation to reduce the Partnership level assessment consistent with Section 6225(c) of the Code, as included in the 2015 Budget Act Partnership Audit Rules; and

 

(3)                                 information and documentation to prove payment of the attributable liability under Section 6226 of the Code, as included in the 2015 Budget Act Partnership Audit Rules.

 

In addition to the foregoing, and notwithstanding any other provision of this Agreement, including, without limitation, Section 14.1 of this Agreement, the General Partner is authorized (without any requirement of the consent or approval of any other Partners) to make all such amendments to this Section 10.3 as it shall determine, in its sole judgment, to be necessary, desirable or appropriate to implement the 2015 Budget Act Partnership Audit Rules and any regulations, procedures, rulings, notices, or other administrative interpretations thereof promulgated by the U.S. Treasury Department.

 

C.                                    Reimbursement.  The tax matters partner and the partnership representative shall receive no compensation for their services.  All third-party costs and expenses incurred by the tax matters partner and the partnership representative in performing their respective duties as such (including legal and accounting fees and expenses) shall be borne by the Partnership.  Nothing herein shall be construed to restrict the Partnership from engaging an accounting and/or law firm to assist the tax matters partner and the partnership representative in discharging their respective duties hereunder, so long as the compensation paid by the Partnership for such services is reasonable.

 

D.                                    Survival.  The obligations of each Partner under this Section 10.3 shall survive such Partner’s withdrawal from the Partnership, and each Partner agrees to execute such documentation requested by the Partnership at the time of such Partner’s withdrawal from the

 

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Partnership to acknowledge and confirm such Partner’s continuing obligations under this Section 10.3.

 

Section 10.4                             Organizational Expenses.

 

The Partnership shall elect to deduct expenses, if any, incurred by it in organizing the Partnership ratably over a one hundred eighty (180) month period as provided in Section 709 of the Code.

 

Section 10.5                             Withholding.

 

Each Limited Partner hereby authorizes the Partnership to withhold from or pay on behalf of or with respect to such Limited Partner any amount of U.S. federal, state, local, or foreign taxes (including any interest, penalties, additions to tax or additional amounts) that the General Partner determines that the Partnership is required to withhold or pay with respect to any cash or property distributable, allocable or otherwise transferred to such Limited Partner pursuant to this Agreement, including, without limitation, any taxes required to be withheld or paid by the Partnership pursuant to Section 1441, 1442, 1445, or 1446 of the Code.  Any amount withheld with respect to a Limited Partner pursuant to this Section 10.5 shall be treated as paid or distributed, as applicable, to such Limited Partner for all purposes under this Agreement to the extent that the Partnership is contemporaneously making distributions against which such amount can be offset. Any amount paid on behalf of or with respect to a Limited Partner, in excess of any such amount of contemporaneous distributions against which such amount paid can be offset, shall constitute a loan by the Partnership to such Limited Partner, which loan shall be repaid by such Limited Partner within fifteen (15) days after notice from the General Partner that such payment must be made unless (i) the Partnership withholds such payment from a distribution which would otherwise be made to the Limited Partner or (ii) the General Partner determines, in its sole and absolute discretion, that such payment may be satisfied out of the available funds of the Partnership which would, but for such payment, be distributed to the Limited Partner.  Any amounts withheld pursuant to the foregoing clause (i) or (ii) shall be treated as having been distributed or otherwise paid to such Limited Partner.  Each Limited Partner hereby unconditionally and irrevocably grants to the Partnership a security interest in such Limited Partner’s Partnership Interest to secure such Limited Partner’s obligation to pay to the Partnership any amounts required to be paid pursuant to this Section 10.5.  In the event that a Limited Partner fails to pay any amounts owed to the Partnership pursuant to this Section 10.5 when due, the General Partner may, in its sole and absolute discretion, elect to make the payment to the Partnership on behalf of such defaulting Limited Partner, and in such event shall be deemed to have loaned such amount to such defaulting Limited Partner and shall succeed to all rights and remedies of the Partnership as against such defaulting Limited Partner.  Without limitation, in such event the General Partner shall have the right to receive distributions that would otherwise be distributable to such defaulting Limited Partner until such time as such loan, together with all interest thereon, has been paid in full, and any such distributions so received by the General Partner shall be treated as having been distributed to the defaulting Limited Partner and immediately paid by the defaulting Limited Partner to the General Partner in repayment of such loan.  Any amounts payable by a Limited Partner hereunder shall bear interest at the lesser of (A) the base rate on corporate loans at large United States money center commercial banks, as published from time to time in The Wall Street Journal, plus four (4) percentage points or (B) the

 

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maximum lawful rate of interest on such obligation, such interest to accrue from the date such amount is due (i.e., fifteen (15) days after demand) until such amount is paid in full.  Each Limited Partner shall take such actions as the Partnership or the General Partner shall request in order to perfect or enforce the security interest created hereunder. Upon a Limited Partner’s complete withdrawal from the Partnership (including pursuant to Section 13.2 hereof), such Limited Partner shall be required to restore funds to the Partnership to the extent that the cumulative amount of taxes withheld from or paid on behalf of, or with respect to, such Limited Partner exceeds the sum of such amounts (i) repaid to the Partnership by such Limited Partner, (ii) withheld from distributions to such Limited Partner and (iii) paid by the General Partner on behalf of such Limited Partner.

 

ARTICLE XI
TRANSFERS AND WITHDRAWALS

 

Section 11.1                             Transfer. Definition.  The term “transfer,” when used in this Article XI with respect to a Partnership Interest or a Partnership Unit, shall be deemed to refer to a transaction by which the General Partner purports to assign all or any part of its General Partnership Interest to another Person or by which a Limited Partner purports to assign all or any part of its Limited Partnership Interest to another Person, and includes a transfer, sale, merger, consolidation, combination, assignment, bequest, conveyance, devise, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition, whether voluntary or involuntary, by operation of law or otherwise.  The term “transfer” when used in this Article XI does not include (i) any redemption or repurchase of Partnership Units by the Partnership from a Partner (including the General Partner), (ii) any acquisition of Partnership Units from a Limited Partner by the General Partner Entity pursuant to Section 8.6 hereof or otherwise or (iii) any distribution of Partnership Units by a Limited Partner to its beneficial owners.  When used in this Article XI, the verb “transfer” shall have correlative meaning.  No part of the interest of a Limited Partner shall be subject to the claims of any creditor, any spouse (for alimony, support or otherwise), or to legal process, and no part of the interest of a Limited Partner may be voluntarily or involuntarily alienated or encumbered except as may be specifically provided for in this Agreement or consented to in writing by the General Partner, in its sole and absolute discretion.

 

B.                                    General.  No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article XI.  Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article XI shall be null and void ab initio.

 

Section 11.2                             Transfers of Partnership Interests of General Partner and General Partner Entity.

 

A.                                    Neither the General Partner nor the General Partner Entity shall transfer any of its Partnership Interests (including both its Limited Partnership Interests and its General Partnership Interests), and, if the General Partner Entity is not the General Partner, the General Partner Entity may not transfer any of its direct or indirect interests in the General Partner, or withdraw from the Partnership, except (i) in connection with a transaction permitted under Section 11.2.B, (ii) in connection with any merger (including a triangular merger), consolidation or other combination with or into another Person following the consummation of which the equity holders of the surviving entity are substantially identical to the shareholders of the

 

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General Partner Entity, (iii) with the Consent of the Outside Limited Partners; or (iv) to any Person that is, at the time of such transfer, an Affiliate of the General Partner Entity that is controlled by the General Partner Entity, including any Qualified REIT Subsidiary.

 

B.                                    Extraordinary Transactions.  Notwithstanding the restrictions set forth in Section 11.2.A or any other provision of this Agreement, the General Partner Entity shall not engage in any merger (including, without limitation, a triangular merger), consolidation or other combination with or into another Person, sale of all or substantially all of its assets or any reclassification, recapitalization or other change in outstanding Shares (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination as described in the definition of Conversion Factor) (each, an “Extraordinary Transaction”), unless, in connection with such Extraordinary Transaction:

 

(1)                                 the General Partner shall have obtained Partnership Approval of the Extraordinary Transaction, as set forth below, if (x) the Extraordinary Transaction would result in the Partners receiving consideration for their Partnership Units pursuant to clause (2) below and the General Partner Entity is required to seek the approval of its common shareholders of the Extraordinary Transaction (“Shareholder Approval”) in a shareholder vote (a “Shareholder Vote”), or (y) the General Partner Entity would be required to obtain Shareholder Approval of the Extraordinary Transaction but for the fact that a Tender Offer shall have been accepted with respect to a sufficient number of Shares to permit consummation of the Extraordinary Transaction without Shareholder Approval, and

 

(2)                                 all Partners either will receive, or will have the right to receive, for each Partnership Unit cash, securities or other property in the same form as, and equal in amount to the product of the Conversion Factor and the greatest amount of, the cash, securities or other property paid to a holder of Shares, if any, corresponding to such Partnership Unit in consideration of one such Share at any time during the period from and after the date on which the Extraordinary Transaction is consummated; provided, however, that if in connection with the Extraordinary Transaction, a purchase, tender or exchange offer (a “Tender Offer”) shall have been made to and accepted by the holders of the percentage required for the approval of the merger under the organizational documents of the General Partner Entity, each holder of Partnership Units shall receive, or shall have the right to receive, the greatest amount of cash, securities, or other property which such holder would have received had it exercised the Redemption Right and received Shares in exchange for its Partnership Units immediately prior to the expiration of such purchase, tender or exchange offer and had thereupon accepted such purchase, tender or exchange offer.

 

C.                                    Partnership Approval.  As used above, “Partnership Approval” means Consent of the Limited Partners holding Voting Units representing a Voting Percentage Interest that equals or exceeds, as applicable, either the percentage of (x) the Shares outstanding or (y) the Shares cast in the Shareholder Vote ((x) or (y), as applicable, the “Required Denominator Shares”) required to be voted in favor of the Extraordinary Transaction in the Shareholder Vote, provided that, for purposes of determining whether Partnership Approval has been obtained, the Voting Percentage Interest of Limited Partners consenting to the Extraordinary Transaction shall

 

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be calculated as follows:  Such Voting Percentage Interest shall be equal to the sum of (i) the Voting Percentage Interest of the Voting Units held by Limited Partners consenting to the Extraordinary Transaction (excluding for this purpose any Partnership Units held by (1) the General Partner or the General Partner Entity, (2) any Person of which the General Partner or the General Partner Entity directly or indirectly owns or controls more than fifty percent (50%) of either the voting interests or economic interests and (3) any Person directly or indirectly owning or controlling more than fifty percent (50%) of the outstanding voting interests of the General Partner or the General Partner Entity (collectively, the “Excluded Units”)), plus (ii) the product of (1) the Voting Percentage Interest attributable to the Excluded Units, multiplied by (2) either (x) the percentage of the Required Denominator Shares voted in favor of the Extraordinary Transaction by the General Partner Entity’s shareholders in the Shareholder Vote to obtain Shareholder Approval, or (y) in the event a Tender Offer shall have been accepted with respect to a sufficient number of Shares to permit consummation of the Extraordinary Transaction without Shareholder Approval, the percentage of outstanding Shares with respect to which such Tender Offer shall have been accepted.

 

D.                                    Except with Consent of the Outside Limited Partners or pursuant to an Extraordinary Transaction effected pursuant to Section 11.2.B above, the General Partner shall not enter into an agreement or other arrangement providing for or facilitating the creation of a general partner of the Partnership other than the General Partner, unless the successor general partner (i) is a direct or indirect controlled Affiliate of the General Partner, and (ii) executes and delivers a counterpart to this Agreement in which such successor general partner agrees to be fully bound by all of the terms and conditions contained herein that are applicable to the General Partner.

 

E.                                     Notwithstanding the restrictions set forth in Sections 11.2.A, 11.2.D and 12.1.A, or any other provision of this Agreement, JBG SMITH Properties GP LLC is expressly authorized, in its sole discretion, to transfer its Partnership Interests (including its General Partnership Interest) to JBG SMITH Properties, whether by contribution, merger, consolidation, dissolution or otherwise, and JBG SMITH Properties shall be admitted as successor General Partner effective upon such transfer.

 

Section 11.3                             Limited Partners’ Rights to Transfer.

 

A.                                    General.  Except as provided in Section 11.3.B or in connection with the exercise of a Redemption Right pursuant to Section 8.6, no Limited Partner shall transfer all or any portion of its Partnership Interest to any transferee without the written consent of the General Partner, which consent may be withheld in its sole and absolute discretion; provided, however, that if a Limited Partner is subject to Incapacity, such Incapacitated Limited Partner may transfer all or any portion of its Partnership Interest;

 

B.                                    Transfers to Affiliates.  Subject to Sections 11.3.E, 11.3.F, 11.3.G, 11.4, 11.5 and 11.6, a Limited Partner (other than the General Partner and the General Partner Entity, in their capacities as a Limited Partner) may transfer all or any portion of its Partnership Interest to any of its Affiliates, all without obtaining the consent of the General Partner.

 

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C.                                    Incapacitated Limited Partners.  If a Limited Partner is subject to Incapacity, the executor, administrator, trustee, committee, guardian, conservator or receiver of such Limited Partner’s estate shall have all the rights of a Limited Partner, but not more rights than those enjoyed by other Limited Partners for the purpose of settling or managing the estate and such power as the Incapacitated Limited Partner possessed to transfer all or any part of its interest in the Partnership.  The Incapacity of a Limited Partner, in and of itself, shall not dissolve or terminate the Partnership.

 

D.                                    Permitted Transfers. Subject to Sections 11.3.E, 11.3.F, 11.3.G, 11.4, 11.5 and 11.6, a Limited Partner (other than the General Partner and the General Partner Entity, in their capacities as a Limited Partner) may transfer, with or without the consent of the General Partner, all or a portion of its Partnership Interest (i) in the case of a Limited Partner who is an individual, to a member of his Immediate Family, any trust formed for the benefit of himself and/or members of his Immediate Family, or any partnership, limited liability company, joint venture, corporation or other business entity comprised only of himself and/or members of his Immediate Family and entities the ownership interests in which are owned by or for the benefit of himself and/or members of his Immediate Family, (ii) in the case of a Limited Partner which is a trust, to the beneficiaries of such trust, (iii) in the case of a Limited Partner which is a partnership, limited liability company, joint venture, corporation or other business entity to which Partnership Units were transferred pursuant to clause (i) above, to its partners, owners or shareholders, as the case may be, who are members of the Immediate Family of or are actually the Person(s) who transferred Partnership Units to it pursuant to clause (i) above, (iv) in the case of a Limited Partner which acquired Partnership Units as of the date hereof and which is a partnership, limited liability company, joint venture, corporation or other business entity, to its partners, owners, shareholders or Affiliates thereof, as the case may be, or the Persons owning the beneficial interests in any of its partners, owners or shareholders or Affiliates thereof (it being understood that this clause (iv) will apply to all of each Person’s Partnership Interests whether the Partnership Units relating thereto were acquired on the date hereof or hereafter), (v) in the case of a Limited Partner which is a partnership, limited liability company, joint venture, corporation or other business entity other than any of the foregoing described in clause (iii) or (iv), in accordance with the terms of any agreement between such Limited Partner and the Partnership pursuant to which such Partnership Interest was issued, (vi) pursuant to a gift or other transfer without consideration, (vii) pursuant to applicable laws of descent or distribution, (viii) to another Limited Partner, and (ix) pursuant to a grant of security interest or other encumbrance thereof effectuated in a bona fide pledge transaction with a bona fide financial institution as a result of the exercise of remedies related thereto, subject to the provisions of Section 11.3.G hereof.  A trust or other entity will be considered formed “for the benefit” of a Partner’s Immediate Family even though some other Person has a remainder interest under or with respect to such trust or other entity.

 

E.                                     No Transfers Violating Securities Laws.  Without limiting the generality of Section 11.3.A hereof, the General Partner may prohibit any transfer by a Limited Partner of its Partnership Interest if, in the opinion of legal counsel to the Partnership, such transfer would require filing of a registration statement under the Securities Act or Exchange Act or would otherwise violate any federal or state securities laws or regulations applicable to the Partnership or the Partnership Units.

 

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F.                                      No Transfers Affecting Tax Status of Partnership.  No transfer of Partnership Units by a Limited Partner (including a redemption or exchange pursuant to Section 8.6 hereof) may be made to any Person if (i) in the opinion of legal counsel for the Partnership, it could result in the Partnership being treated as an association taxable as a corporation for federal income tax purposes or would result in a termination of the Partnership for federal income tax purposes (except as a result of the redemption or exchange for Shares of all Partnership Units held by all Limited Partners other than the General Partner or the General Partner Entity or any Subsidiary of either the General Partner or the General Partner Entity or pursuant to a transaction not prohibited under Section 11.2 hereof), (ii) in the opinion of legal counsel for the Partnership, it would adversely affect the ability of the General Partner Entity or the General Partner (as applicable) to continue to qualify as a REIT or would subject the General Partner Entity or the General Partner (as applicable) to any additional taxes under Section 857 or Section 4981 of the Code, (iii) such transfer would cause the Partnership to become, with respect to any employee benefit plan subject to Title I of ERISA, a “party-in-interest” (as defined in Section 3(14) of ERISA) or a “disqualified person” (as defined in Section 4975(e) of the Code), (iv) such transfer would, in the opinion of legal counsel for the Partnership, cause any portion of the assets of the Partnership to constitute assets of any employee benefit plan pursuant to Department of Labor Regulations Section 2510.3-101, (v) such transfer would subject the Partnership to regulation under the Investment Company Act of 1940, as amended, the Investment Advisors Act of 1940, as amended, or the fiduciary responsibility provisions of ERISA, or (vi) such transfer (x) is effectuated through an “established securities market” or a “secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code, (y) otherwise could cause the Partnership to be treated as a “publicly traded partnership” within the meaning of Section 7704(b) of the Code and the regulations promulgated thereunder, or (z) is not described in one of the Safe Harbors; provided, however, that this clause (vi) shall cease to apply after the end of the Applicable Year if (1) the classification of the Partnership as a “publicly traded partnership” within the meaning of Section 7704(b) of the Code and the regulations promulgated thereunder could not reasonably be expected to cause the Partnership to be taxable as a corporation for federal income tax purposes and (2) the General Partner receives an opinion of nationally recognized counsel at the beginning of the relevant taxable year (i.e., the first taxable year after the end of the Applicable Year) to the effect that, based on its actual and proposed methods of operation, the Partnership will meet the gross income requirements of Section 7704(c)(2) with respect to such taxable year, which opinion will be subject to customary exceptions, assumptions and qualifications and based on customary representations contained in an officer’s certificate from the Partnership, executed by a person with the knowledge necessary to make the representations contained therein.

 

G.                                    No Transfers to Holders of Nonrecourse Liabilities.  No pledge or transfer of any Partnership Units may be made to a lender to the Partnership or any Person who is related (within the meaning of Section 1.752-4(b) of the Regulations) to any lender to the Partnership whose loan constitutes a Nonrecourse Liability without the consent of the General Partner, in its sole and absolute discretion; provided, that as a condition to such consent the lender will be required to enter into an arrangement with the Partnership and the General Partner to exchange or redeem for the Redemption Amount any Partnership Units in which a security interest is held simultaneously with the time at which such lender would be deemed to be a partner in the Partnership for purposes of allocating liabilities to such lender under Section 752 of the Code.

 

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H.                                   Register.  The General Partner shall keep a register for the Partnership on which the transfer, pledge or release of Partnership Units shall be shown and pursuant to which entries shall be made to effect all transfers, pledges or releases as required by the applicable sections of Article 8 of the Uniform Commercial Code, as amended, in effect in the State of Delaware.  The General Partner shall (i) place proper entries in such register clearly showing each transfer and each pledge and grant of security interest and the transfer and assignment pursuant thereto, such entries to be endorsed by the General Partner, and (ii) maintain the register and make the register available for inspection by all of the Partners and their pledgees at all times during the term of this Agreement.  Nothing herein shall be deemed a consent to any pledge or transfer otherwise prohibited under this Agreement.

 

Section 11.4                             Substituted Limited Partners.

 

A.                                    Consent of General Partner.  No Limited Partner shall have the right to substitute a transferee as a Limited Partner in his or its place (including any transferees permitted by Section 11.3). The General Partner shall, moreover, have the right to consent to the admission of a transferee of the interest of a Limited Partner pursuant to this Section 11.4 as a Substituted Limited Partner, which consent may be given or withheld by the General Partner in its sole and absolute discretion.  The General Partner’s failure or refusal to permit a transferee of any such interests to become a Substituted Limited Partner shall not give rise to any cause of action against the Partnership, the General Partner or any Partner. A Person shall be admitted to the Partnership as a Substituted Limited Partner only upon the aforementioned consent of the General Partner and the furnishing to the General Partner of (i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 hereof and (ii) such other documents of the General Partner in order to effect such Person’s admission as a Substituted Limited Partner. The admission of any Person as a Substituted Limited Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership, following the consent of the General Partner to such admission.  The General Partner hereby grants its consent to the admission as a Substituted Limited Partner to any bona fide financial institution that loans money or otherwise extends credit to a holder of Partnership Units and thereafter becomes the owner of such Partnership Units pursuant to the exercise by such financial institution of its rights under a pledge of such Partnership Units granted in connection with such loan or extension of credit.

 

B.                                    Rights of Substituted Limited Partner.  A transferee who has been admitted as a Substituted Limited Partner in accordance with this Article XI shall have all the rights and powers and be subject to all the restrictions and liabilities of a Limited Partner under this Agreement.

 

C.                                    Amendment and Restatement of the Partner Registry.  Upon the admission of a Substituted Limited Partner, the General Partner shall amend and restate the Partner Registry to reflect the name, address, Capital Account, number of Partnership Units, and Percentage Interest of such Substituted Limited Partner and to eliminate or adjust, if necessary, the name, address, Capital Account, number of Partnership Units and Percentage Interest of the predecessor of such Substituted Limited Partner.

 

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Section 11.5                             Assignees.

 

If the General Partner, in its sole and absolute discretion, does not consent to the admission of any permitted transferee as a Substituted Limited Partner, as described in Section 11.4, such transferee shall be considered an Assignee for purposes of this Agreement.  An Assignee shall be deemed to have had assigned to it, and shall be entitled to receive distributions from the Partnership and the share of Net Income, Net Losses, Recapture Income, and any other items, gain, loss, deduction and credit of the Partnership attributable to the Partnership Interest assigned to such transferee, but shall not be deemed to be a holder of a Partnership Interest for any other purpose under this Agreement, and shall not be entitled to vote such Partnership Interest in any matter presented to the Limited Partners for a vote (such Partnership Interest being deemed to have been voted on such matter in the same proportion as all other Partnership Interest held by Limited Partners are voted). In the event any such transferee desires to make a further assignment of any such Partnership Interest, such transferee shall be subject to all of the provisions of this Article XI to the same extent and in the same manner as any Limited Partner desiring to make an assignment of his or its Partnership Interest.

 

Section 11.6                             General Provisions.

 

A.                                    Withdrawal of Limited Partner.  No Limited Partner may withdraw from the Partnership other than as a result of a permitted transfer of all of such Limited Partner’s Partnership Interest in accordance with this Article XI and the transferee of such Partnership Interest being admitted to the Partnership as a Substituted Limited Partner or pursuant to redemption of all of its Partnership Units, or the acquisition thereof by the General Partner Entity, under Section 8.6.

 

B.                                    Termination of Status as Limited Partner.  Any Limited Partner who shall transfer all of its Partnership Interest in a transfer permitted pursuant to this Article XI or pursuant to redemption of all of its Partnership Units under Section 8.6 hereof shall cease to be a Limited Partner upon the admission of all Assignees of such Partnership Interest as Substituted Limited Partners. Similarly, any Limited Partner who shall transfer all of its Partnership Units pursuant to a redemption of all of its Partnership Units, or the acquisition thereof by the General Partner Entity, under Section 8.6 shall cease to be a Limited Partner.

 

C.                                    Timing of Transfers.  Transfers pursuant to this Article XI may only be made upon ten (10) Business Days prior notice to the General Partner, unless the General Partner otherwise agrees.

 

D.                                    Allocations.  If any Partnership Interest is transferred during any quarterly segment of the Partnership’s fiscal year in compliance with the provisions of this Article XI or redeemed or transferred pursuant to Section 8.6 on any day other than the first day of a Partnership Year, then Net Income, Net Losses, each item thereof and all other items attributable to such interest for such Partnership Year shall be divided and allocated between the transferor Partner and the transferee Partner by taking into account their varying interests during the Partnership Year in accordance with Section 706(d) of the Code and the corresponding Regulations, using the interim closing of the books method (unless the General Partner, in its sole and absolute discretion, elects to adopt a daily, weekly, or a monthly proration period, in

 

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which event Net Income, Net Losses, each item thereof and all other items attributable to such interest for such Partnership Year shall be prorated based upon the applicable method selected by the General Partner).  Solely for purposes of making such allocations, at the discretion of the General Partner, each of such items for the calendar month in which the transfer or redemption occurs shall be allocated to the Person who is a Partner as of midnight on the last day of said month.  All distributions attributable to such Partnership Interest with respect to which the Partnership Record Date is before the date of such transfer, assignment or redemption shall be made to the transferor Partner or the Redeeming Partner, as the case may be, and, in the case of a transfer or assignment other than a redemption, all distributions thereafter attributable to such Partnership Interest shall be made to the transferee Partner.

 

E.                                     Additional Restrictions.  Notwithstanding anything to the contrary herein, and in addition to any other restrictions on transfer herein contained, including without limitation the provisions of this Article XI, in no event may any transfer or assignment of a Partnership Interest by any Partner (including pursuant to Section 8.6 hereof) be made without the express consent of the General Partner, in its sole and absolute discretion, (i) to any person or entity who lacks the legal right, power or capacity to own a Partnership Interest; (ii) in violation of applicable law; (iii) of any component portion of a Partnership Interest, such as the Capital Account, or rights to distributions, separate and apart from all other components of a Partnership Interest; (iv) if in the opinion of legal counsel to the Partnership such transfer would cause a termination of the Partnership for U.S. federal or state income tax purposes (except as a result of the redemption or exchange for Shares of all Partnership Units held by all Limited Partners other than the General Partner, or pursuant to a transaction not prohibited under Section 11.2 hereof); (v) if in the opinion of counsel to the Partnership, such transfer would cause the Partnership to cease to be classified as a partnership for U.S. federal income tax purposes (except as a result of the redemption or exchange for Shares of all Partnership Units held by all Limited Partners other than the General Partner, or pursuant to a transaction not prohibited under Section 11.2 hereof); (vi) if such transfer would cause the Partnership to become, with respect to any employee benefit plan subject to Title I of ERISA, a “party-in-interest” (as defined in Section 3(14) of ERISA) or a “disqualified person” (as defined in Section 4975(c) of the Code); (vii) if such transfer would, in the opinion of counsel to the Partnership, cause any portion of the assets of the Partnership to constitute assets of any employee benefit plan pursuant to Department of Labor Regulations Section 2510.1-101; (viii) if such transfer requires the registration of such Partnership Interest pursuant to any applicable federal or state securities laws; (ix) if such transfer is effectuated through an “established securities market” or a “secondary market” (or the substantial equivalent thereof) within the meaning of Section 7704 of the Code or such transfer causes the Partnership to become a “publicly traded partnership,” as such term is defined in Section 469(k)(2) or Section 7704(b) of the Code; (x) if such transfer subjects the Partnership to regulation under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or the Employee Retirement Income Security Act of 1974, each as amended; (xi) if such transfer could adversely affect the ability of the General Partner Entity or the General Partner (as applicable) to remain qualified as a REIT; or (xii) if in the opinion of legal counsel for the Partnership, such transfer would adversely affect the ability of the General Partner Entity or the General Partner (as applicable) to continue to qualify as a REIT or subject the General Partner Entity or the General Partner (as applicable) to any additional taxes under Section 857 or Section 4981 of the Code.

 

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F.                                      Avoidance of “Publicly Traded Partnership” Status.  The General Partner shall (a) use commercially reasonable efforts (as determined by it in its sole discretion exercised in good faith) to monitor the transfers of interests in the Partnership to determine (i) if such interests are being traded on an “established securities market” or a “secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code and (ii) whether additional transfers of interests would result in the Partnership being unable to qualify for at least one of the “safe harbors” set forth in Regulations Section 1.7704-1 (or such other guidance subsequently published by the IRS setting forth safe harbors under which interests will not be treated as “readily tradable on a secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code) (the “Safe Harbors”) and (b) take such steps as it believes are commercially reasonable and appropriate (as determined by it in its sole discretion exercised in good faith) to prevent any trading of interests or any recognition by the Partnership of transfers made on such markets and, except as otherwise provided herein, to insure that at least one of the Safe Harbors is met; provided, however, that this clause (b) shall cease to apply after the end of the Applicable Year if (1) the classification of the Partnership as a “publicly traded partnership” within the meaning of Section 7704(b) of the Code and the regulations promulgated thereunder could not reasonably be expected to cause the Partnership to be taxable as a corporation for federal income tax purposes and (2) the General Partner receives an opinion of nationally recognized counsel at the beginning of the relevant taxable year (i.e., the first taxable year after the end of the Applicable Year) to the effect that, based on its actual and proposed method of operation, the Partnership will meet the gross income requirements of Section 7704(c)(2) with respect to such taxable year, which opinion will be subject to customary exceptions, assumptions and qualifications and based on customary representations contained in an officer’s certificate from the Partnership, executed by a person with the knowledge necessary to make the representations contained therein.  Pursuant to its authority under this Section 11.6.F, if the General Partner determines that there is a reasonable possibility that the requirement to comply with one of the Safe Harbors during the period that clause (b) of this Section 11.6.F is in effect could result in not all requests for redemption of Partnership Units pursuant to Section 8.6 being honored for any taxable year, then the General Partner may (but shall not be required to) implement such measures as it determines appropriate (as determined by it in its sole discretion exercised in good faith) to apportion the available opportunities to redeem Partnership Units during such year in a manner that would qualify for one or more of the Safe Harbors among those Limited Partners desiring to redeem Partnership Units during taxable year.

 

ARTICLE XII
ADMISSION OF PARTNERS

 

Section 12.1                             Admission of Successor General Partner.

 

A successor to all of the General Partner’s General Partnership Interest pursuant to Section 11.2 hereof who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective upon such transfer.  Any such successor shall carry on the business of the Partnership without dissolution.  In each case, the admission shall be subject to the successor General Partner’s executing and delivering to the Partnership an acceptance of all of the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission. In the case of such admission on any day other than the first day of a Partnership Year, all items attributable to the

 

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General Partnership Interest for such Partnership Year shall be allocated between the transferring General Partner and such successor as provided in Section 11.6.D hereof.

 

Section 12.2                             Admission of Additional Limited Partners.

 

A.                                    General.  A Person who makes a Capital Contribution to the Partnership in accordance with this Agreement shall be admitted to the Partnership as an Additional Limited Partner only upon furnishing to the General Partner (i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 hereof and (ii) such other documents or instruments as may be required in the discretion of the General Partner in order to effect such Person’s admission as an Additional Limited Partner.

 

B.                                    General Partner’s Consent.  No Person shall be admitted as an Additional Limited Partner without the consent of the General Partner, which consent shall be given or withheld in the General Partner’s sole and absolute discretion.  The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership, following the consent of the General Partner to such admission.  Regardless of the means by which any Additional Limited Partner is admitted to the Partnership, such Additional Limited Partner shall, automatically upon such admission, become subject to and bound by all of the terms and conditions of this Agreement, including, without limitation, the provisions of Section 2.4 hereof.

 

C.                                    Allocations to Additional Limited Partners.  If any Additional Limited Partner is admitted to the Partnership on any day other than the first day of a Partnership Year, then Net Income, Net Losses, each item thereof and all other items allocable among Partners and Assignees for such Partnership Year shall be allocated among such Additional Limited Partner and all other Partners and Assignees by taking into account their varying interests during the Partnership Year in accordance with Section 706(d) of the Code and the corresponding Regulations, using the interim closing of the books method (unless the General Partner, in its sole and absolute discretion, elects to adopt a daily, weekly or monthly proration method, in which event Net Income, Net Losses, and each item thereof would be prorated based upon the applicable period selected by the General Partner).  Solely for purposes of making such allocations, at the discretion of the General Partner, each of such items for the calendar month in which an admission of any Additional Limited Partner occurs shall be allocated among all the Partners and Assignees including such Additional Limited Partner.  All distributions with respect to which the Partnership Record Date is before the date of such admission shall be made solely to Partners and Assignees other than the Additional Limited Partner, and all distributions thereafter shall be made to all the Partners and Assignees including such Additional Limited Partner.

 

Section 12.3                             Amendment of Agreement and Certificate of Limited Partnership.

 

For the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate under the Act to amend the records of the Partnership and, if necessary, to prepare as soon as practical an amendment of this Agreement (including an amendment and restatement of the Partner Registry) and, if required by law, shall prepare and

 

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file an amendment to the Certificate and may for this purpose exercise the power of attorney granted pursuant to Section 2.4 hereof.

 

ARTICLE XIII
DISSOLUTION AND LIQUIDATION

 

Section 13.1                             Dissolution.

 

The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement.  Upon the withdrawal of the General Partner, any successor General Partner shall continue the business of the Partnership without dissolution.  The Partnership shall dissolve, and its affairs shall be wound up, upon the first to occur of any of the following (each a “Liquidating Event”) :

 

(i)                                     an event of withdrawal of the General Partner, as defined in the Act (other than an event of Bankruptcy), unless, (a) at the time of the occurrence of such event there is at least one remaining general partner of the Partnership who is hereby authorized to and does carry on the business of the Partnership, or (b) within ninety (90) days after such event of withdrawal a Majority in Interest of the remaining Partners (or such greater percentage as may be required by the Act and determined in accordance with the Act) Consent in writing to continue the business of the Partnership and to the appointment, effective as of the date of withdrawal, of a substitute General Partner;

 

(ii)                                  from and after the date of this Agreement through December 31, 2067, an election to dissolve the Partnership made by the General Partner with the Consent of a Majority in Interest;

 

(iii)                               on or after January 1, 2068, an election to dissolve the Partnership made by the General Partner, in its sole and absolute discretion;

 

(iv)                              entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Act;

 

(v)                                 ninety (90) days after the sale of all or substantially all of the assets and properties of the Partnership for cash or for marketable securities; or

 

(vi)                              a final and nonappealable judgment is entered by a court of competent jurisdiction ruling that the General Partner is bankrupt or insolvent, or a final and nonappealable order for relief is entered by a court with appropriate jurisdiction against the General Partner, in each case under any federal or state bankruptcy or insolvency laws as now or hereafter in effect, unless prior to or within ninety days after of the entry of such order or judgment a Majority in Interest of the remaining Partners Consent in writing to continue the business of the Partnership and to the appointment, effective as of a date prior to the date of such order or judgment, of a substitute General Partner.

 

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Section 13.2                             Winding Up.

 

A.                                    General.  Upon the occurrence of a Liquidating Event, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners.  No Partner shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Partnership’s business and affairs.  The General Partner (or, in the event there is no remaining General Partner, any Person elected by a Majority in Interest of the Limited Partners (the “Liquidator”)) shall be responsible for overseeing the winding up and dissolution of the Partnership and shall take full account of the Partnership’s liabilities and property and the Partnership property shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the General Partner, include equity or other securities of the General Partner or any other entity) shall be applied and distributed in the following order:

 

(1)                                 First, in satisfaction of all of the Partnership’s debts and liabilities to creditors other than the Partners (whether by payment or the making of reasonable provision for payment thereof);

 

(2)                                 Second, to the payment and discharge of all of the Partnership’s debts and liabilities to the General Partner;

 

(3)                                 Third, to the payment and discharge of all of the Partnership’s debts and liabilities to the other Partners;

 

(4)                                 Fourth, to the holders of Partnership Interests of any class or series that is entitled to any preference in distribution upon liquidation in accordance with the rights of any such class or series of Partnership Interests (and, within each such class or series, to each holder thereof pro rata based on its Percentage Interest in such class); and

 

(5)                                 The balance, if any, to the General Partner and Limited Partners in accordance with their Capital Accounts, after giving effect to all contributions, distributions, and allocations for all periods.

 

The General Partner shall not receive any additional compensation for any services performed pursuant to this Article XIII, other than reimbursement of its expenses as provided in Section 7.4.

 

B.                                    Deferred Liquidation.  Notwithstanding the provisions of Section 13.2.A hereof which require liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership the Liquidator determines that an immediate sale of part or all of the Partnership’s assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its sole and absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (including to those Partners as creditors) and/or distribute to the Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.2.A hereof, undivided interests in such Partnership assets as the Liquidator deems not suitable for liquidation.  Any such distributions in kind shall be made only if, in the good faith

 

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judgment of the Liquidator, such distributions in kind are in the best interest of the Partners, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time.  The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt.

 

C.                                    Deferred Liquidation.  In the discretion of the Liquidator, a pro rata portion of the distributions that would otherwise be made to the General Partner and Limited Partners pursuant to this Article XIII may be:

 

(1)                                 distributed to a trust established for the benefit of the General Partner and Limited Partners for the purposes of liquidating Partnership assets, collecting amounts owed to the Partnership, and paying any contingent or unforeseen liabilities or obligations of the Partnership or the General Partner arising out of or in connection with the Partnership. The assets of any such trust shall be distributed to the General Partner and Limited Partners from time to time, in the reasonable discretion of the Liquidator, in the same proportions as the amount distributed to such trust by the Partnership would otherwise have been distributed to the General Partner and Limited Partners pursuant to this Agreement; or

 

(2)                                 withheld or escrowed to provide a reasonable reserve for Partnership liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Partnership; provided, that such withheld or escrowed amounts shall be distributed to the General Partner and Limited Partners in the manner and order of priority set forth in Section 13.2.A as soon as practicable.

 

Section 13.3                             Compliance with Timing Requirements of Regulations.

 

Subject to Section 13.4 below, in the event the Partnership is “liquidated” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this Article XIII to the General Partner and Limited Partners who have positive Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2).  If any Partner has a deficit balance in his or its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which such liquidation occurs), such Partner shall have no obligation to make any contribution to the capital of the Partnership with respect to such deficit, and such deficit shall not be considered a debt owed to the Partnership or to any other Person for any purpose whatsoever.

 

Section 13.4                             Deemed Distribution and Recontribution.

 

Notwithstanding any other provision of this Article XIII, in the event the Partnership is “liquidated” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the Partnership’s property shall not be liquidated, the Partnership’s liabilities shall not be paid or discharged and the Partnership’s affairs shall not be wound up.  Instead, for federal income tax purposes and for purposes of maintaining Capital

 

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Accounts pursuant to Exhibit B hereto, the Partnership shall be deemed to have contributed all Partnership property and liabilities to a new limited partnership in exchange for an interest in such new limited partnership and immediately thereafter, the Partnership will be deemed to liquidate by distributing interests in the new limited partnership to the Partners.

 

Section 13.5                             Rights of Limited Partners.

 

Except as otherwise provided in this Agreement, each Limited Partner shall look solely to the assets of the Partnership for the return of its Capital Contributions and shall have no right or power to demand or receive property other than cash from the Partnership. Except as otherwise expressly provided in this Agreement, no Limited Partner shall have priority over any other Limited Partner as to the return of its Capital Contributions, distributions, or allocations.

 

Section 13.6                             Notice of Dissolution.

 

In the event a Liquidating Event occurs or an event occurs that would, but for provisions of an election or objection by one or more Partners pursuant to Section 13.1, result in a dissolution of the Partnership, the General Partner shall, within thirty (30) days thereafter, provide written notice thereof to each of the Partners and to all other parties with whom the Partnership regularly conducts business (as determined in the discretion of the General Partner) and shall publish notice thereof in a newspaper of general circulation in each place in which the Partnership regularly conducts business (as determined in the discretion of the General Partner).

 

Section 13.7                             Termination of Partnership and Cancellation of Certificate of Limited Partnership.

 

Upon the completion of the winding up of the Partnership and liquidation of its assets, as provided in Section 13.2 hereof, the Partnership shall be terminated by filing a certificate of cancellation with the Secretary of State of the State of Delaware, canceling all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware and taking such other actions as may be necessary to terminate the Partnership.

 

Section 13.8                             Reasonable Time for Winding Up.

 

A reasonable time shall be allowed for the orderly winding-up of the business and affairs of the Partnership and the liquidation of its assets pursuant to Section 13.2 hereof, in order to minimize any losses otherwise attendant upon such winding-up, and the provisions of this Agreement shall remain in effect among the Partners during the period of liquidation.

 

Section 13.9                             Waiver of Partition.

 

Each Partner hereby waives any right to partition of the Partnership property.

 

Section 13.10                      Liability of Liquidator.

 

The Liquidator shall be indemnified and held harmless by the Partnership in the same manner and to the same degree as an Indemnitee may be indemnified pursuant to Section 7.7 hereof.

 

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ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS

 

Section 14.1                             Amendments.

 

A.                                    General.  Amendments to this Agreement may be proposed only by the General Partner.  Following such proposal (except an amendment pursuant to Section 14.1.B below), the General Partner shall submit any proposed amendment to the Limited Partners and shall seek the written vote of the Partners on the proposed amendment or shall call a meeting to vote thereon and to transact any other business that it may deem appropriate.  For purposes of obtaining a written vote, the General Partner may require a response within a reasonable specified time, but not less than fifteen (15) days, and failure to respond in such time period shall constitute a vote which is consistent with the General Partner’s recommendation with respect to the proposal. Except as otherwise provided in this Agreement, a proposed amendment shall be adopted and be effective as an amendment hereto if it is approved by the General Partner and it receives the Consent of a Majority in Interest.

 

B.                                    Amendments Not Requiring Limited Partner Approval.  Subject to Section 14.1.C and 14.1.D, the General Partner shall have the power, without the Consent of the Limited Partners, to amend this Agreement as may be required to reflect any changes to this Agreement that the General Partner deems necessary or appropriate in its sole discretion.  Without limitation, the General Partner shall have the power, without the Consent of the Limited Partners, to amend this Agreement as may be required to facilitate or implement any of the following purposes:

 

(i)                                     to add to the obligations of the General Partner or surrender any right or power granted to the General Partner or any Affiliate of the General Partner for the benefit of the Limited Partners;

 

(ii)                                  to reflect the issuance of additional Partnership Units or the admission, substitution, termination, or withdrawal of Partners in accordance with this Agreement;

 

(iii)                               to set forth or amend the designations, rights (including redemption rights that differ from those specified in Section 8.6), powers, duties, and preferences of Partnership Units issued pursuant to Section 4.2.A hereof;

 

(iv)                              to reflect a change that is of an inconsequential nature and does not adversely affect the Limited Partners in any material respect, or to cure any ambiguity or correct any provision in this Agreement not inconsistent with law or with other provisions;

 

(v)                                 to reflect such changes as are reasonably necessary for the General Partner to maintain its status as a REIT, including changes which may be necessitated due to a change in applicable law (or an authoritative interpretation thereof) or a ruling of the IRS;

 

(vi)                              to include provisions in this Agreement that may be referenced in any rulings, regulations, notices, announcements, or other guidance regarding the federal income tax treatment of compensatory partnership interests issued and made effective after the date

 

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hereof or in connection with any elections that the General Partner determines to be necessary or advisable in respect of any such guidance. Any such amendment may include, without limitation, (a) a provision authorizing or directing the General Partner to make any election under the such guidance, (b) a covenant by the Partnership and all of the Partners to agree to comply with the such guidance, (c) an amendment to the capital account maintenance provisions and the allocation provisions contained in this Agreement so that such provisions comply with (I) the provisions of the Code and the Regulations as they apply to the issuance of compensatory partnership interests and (II) the requirements of such guidance and any election made by the General Partner with respect thereto, including, a provision requiring “forfeiture allocations” as appropriate. Any such amendments to this Agreement shall be binding upon all Partners; and

 

(vii)                           to satisfy any requirements, conditions, or guidelines contained in any order, directive, opinion, ruling or regulation of a federal or state agency or contained in federal or state law.

 

The General Partner shall notify the Limited Partners when any action under this Section 14.1.B is taken.

 

C.                                    Amendments Requiring Certain Limited Partner Approval.  Notwithstanding Sections 14.1.A and 14.1.B hereof, this Agreement shall not be amended with respect to any Partner adversely affected without the Consent of such Partner adversely affected if such amendment would (i) convert a Limited Partner’s interest in the Partnership into a General Partnership Interest; (ii) modify the limited liability of a Limited Partner in a manner adverse to such Limited Partner; (iii) impose on the Limited Partners any obligation to make additional Capital Contributions to the Partnership; (iv) alter or modify Article V or Article XIII (including the related definitions) or the rights of such Partner to receive distributions pursuant to such Articles, or Article VI (including the related definitions) or the allocations specified in Article VI (except as permitted pursuant to Section 4.2, Section 5.6, Section 6.2 and Section 14.1.B(iii) hereof), in each case in a manner adverse to such Partner; (v) alter or modify Section 8.6 (including the related definitions), including the Redemption Right and Shares Amount as set forth in Section 8.6, in a manner adverse to such Partner (except as permitted in Section 8.6.E); (vi) cause the termination of the Partnership prior to the time set forth in Section 2.5 or 13.1; or (vii) amend this Section 14.1.C; provided, however, that for the avoidance of doubt, Consent of a majority of the holders of Formation Units shall be required for any amendment or action that disproportionately and adversely affects holders of Formation Units (including without limitation any amendments to or impacting Sections 6.1.E.2, 6.1.F and 6.1.G) and Consent of a majority of the LTIP Unitholders shall be required for any amendment or action that disproportionately and adversely affects holders of LTIP Units. Any amendment consented to by any Partner shall be effective as to that Partner, notwithstanding the absence of such Consent by any other Partner. For the avoidance of doubt, any amendment that would require the Consent of Partners adversely affected pursuant to this Section 14.1.C shall be effective with respect to all Partners who are not adversely affected thereby without the Consent of such Partners.

 

D.                                    Other Amendments Requiring Limited Partner Approval.  Notwithstanding Section 14.1.A or Section 14.1.B hereof, the General Partner shall not amend Sections 4.2.A, 4.2.B, 7.5, 7.6, 11.2, 11.3, 14.1.D or 14.2 without the Consent of the Outside Limited Partners.

 

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E.                                     Amendment and Restatement of the Partner Registry Not An Amendment.  Notwithstanding anything in this Article XIV or elsewhere in this Agreement to the contrary, any amendment and restatement of the Partner Registry by the General Partner to reflect events or changes otherwise authorized or permitted by this Agreement, whether pursuant to Section 7.1.A(20) hereof or otherwise, shall not be deemed an amendment of this Agreement and may be done at any time and from time to time, as necessary by the General Partner without the Consent of the Limited Partners.

 

F.                                      Amendment by Merger.  In the event that the Partnership participates in any merger (including a triangular merger), consolidation or combination with another entity in a transaction not otherwise prohibited by this Agreement and as a result of such merger, consolidation or combination this Agreement is to be amended (or a new agreement for a limited partnership or limited liability company, as applicable, is to be adopted for the surviving entity) and any of the Limited Partners will hold equity interests in the continuing or surviving entity, then any such amendments to this Agreement (or changes from this Agreement reflected in the new agreement for the surviving entity) that would have required the consents provided in Section 14.1.C and 14.1.D shall require such consents.

 

Section 14.2                             Meetings of the Partners.

 

A.                                    General.  Meetings of the Partners may be called only by the General Partner.  The call shall state the nature of the business to be transacted.  Notice of any such meeting shall be given to all Partners not less than seven (7) days nor more than thirty (30) days prior to the date of such meeting; provided that a Partner’s attendance at any meeting of Partners shall be deemed a waiver of the foregoing notice requirement with respect to such Partner (except where such attendance is to object to the holding of such meeting).  Partners may vote in person or by proxy at such meeting.  Whenever the vote or Consent of Partners is permitted or required under this Agreement, such vote or Consent may be given at a meeting of Partners or may be given in accordance with the procedure prescribed in Section 14.1.A above.  Except as otherwise expressly provided in this Agreement, the Consent of holders of a Majority in Interest shall control.

 

B.                                    Actions Without a Meeting.  Except as otherwise expressly provided by this Agreement, any action required or permitted to be taken at a meeting of the Partners may be taken without a meeting if a written consent setting forth the action so taken is signed by a Majority in Interest (or such other percentage as is expressly required by this Agreement).  Such consent may be in one instrument or in several instruments, and shall have the same force and effect as a vote of a Majority in Interest (or such other percentage as is expressly required by this Agreement).  Such consent shall be filed with the General Partner.  An action so taken shall be deemed to have been taken at a meeting held on the effective date so certified.

 

C.                                    Proxy.  Each Limited Partner may authorize any Person or Persons to act for such Limited Partner by proxy on all matters in which a Limited Partner is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting.  Every proxy must be signed by the Limited Partner or his or its attorney-in-fact.  No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy.  Every proxy shall be revocable at the pleasure of the Limited Partner

 

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executing it, such revocation to be effective upon the Partnership’s receipt of written notice of such revocation from the Limited Partner executive such proxy.

 

D.                                    Conduct of Meeting.  Each meeting of Partners shall be conducted by the General Partner or such other Person as the General Partner may appoint pursuant to such rules for the conduct of the meeting as the General Partner or such other Person deems appropriate. Without limitation, meetings of Partners may be conducted in the same manner as meetings of the shareholders of the General Partner.

 

E.                                     Record Date.  The General Partner may set, in advance, the Partnership Record Date for the purpose of determining the Partners (i) entitled to Consent to any action, (ii) entitled to receive notice of or vote at any meeting of the Partners or (iii) in order to make a determination of Partners for any other proper purpose. Such date, in any case, (x) shall not be prior to the close of business on the day the Partnership Record Date is fixed and shall be not more than ninety (90) days and, in the case of a meeting of the Partners, not less than ten (10) days, before the date on which the meeting is to be held or Consent is to be given and (y) shall be, with respect to the determination of the existence of Partnership Approval, the record date established by the General Partner Entity for the approval of its shareholders for the event constituting an Extraordinary Transaction.  If no record date is fixed, the record date for the determination of Partners entitled to notice of or to vote at a meeting of the Partners shall be at the close of business on the day on which the notice of the meeting is sent, and the record date for any other determination of Partners shall be the effective date of such Partner action, distribution or other event. When a determination of the Partners entitled to vote at any meeting of the Partners has been made as provided in this section, such determination shall apply to any adjournment thereof.

 

ARTICLE XV
GENERAL PROVISIONS

 

Section 15.1                             Addresses and Notice.

 

Any notice, demand, request or report required or permitted to be given or made to a Partner or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication to such Partner or Assignee at the address set forth in the Partner Registry or such other address of which such Partner or Assignee shall notify the General Partner in writing.  Notwithstanding the foregoing, the General Partner may elect to deliver any such notice, demand, request or report by e-mail or by any other electronic means, in which case such communication shall be deemed given or made one day after being sent.

 

Section 15.2                             Titles and Captions.

 

All article or section titles or captions in this Agreement are for convenience only.  They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof.  Except as specifically provided otherwise, references to “Articles” and “Sections” are to Articles and Sections of this Agreement.

 

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Section 15.3                             Pronouns and Plurals.

 

Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

 

Section 15.4                             Further Action.

 

The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.

 

Section 15.5                             Binding Effect.

 

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.

 

Section 15.6                             Creditors; Other Third Parties.

 

Other than as expressly set forth herein with regard to any Indemnitee, none of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership or other third party having dealings with the Partnership, it being understood and agreed that the provisions of this Agreement shall be solely for the benefit of, and may be enforced solely by, the parties hereto and their respective successors and assigns.

 

Section 15.7                             Waiver.

 

No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or any other covenant, duty, agreement or condition.

 

Section 15.8                             Counterparts.

 

This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all of the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart.  Each party shall become bound by this Agreement immediately upon affixing his or its signature hereto.

 

Section 15.9                             Applicable Law.

 

This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.

 

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Section 15.10                      Invalidity of Provisions.

 

If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

 

Section 15.11                      Entire Agreement.

 

This Agreement and all Exhibits attached hereto (which Exhibits are incorporated herein by reference as if fully set forth herein) contains the entire understanding and agreement among the Partners with respect to the subject matter hereof and supersedes any prior written or oral understandings or agreements among them with respect thereto.

 

Section 15.12                      No Rights as Shareholders.

 

Nothing contained in this Agreement shall be construed as conferring upon the holders of the Partnership Units any rights whatsoever as shareholders of the General Partner Entity or the General Partner (if different), including, without limitation, any right to receive dividends or other distributions made to shareholders of the General Partner Entity or the General Partner (if different) or to vote or to consent or receive notice as shareholders in respect to any meeting of shareholders for the election of directors of the General Partner Entity or the General Partner (if different) or any other matter.

 

Section 15.13                      Limitation to Preserve REIT Status.

 

To the extent that any amount paid or credited to the General Partner or the General Partner Entity or its officers, directors, employees or agents pursuant to Section 7.4 or Section 7.7 hereof would constitute gross income to the General Partner Entity or the General Partner (if it is to be qualified as a REIT) for purposes of Section 856(c)(2) or 856(c)(3) of the Code (a “General Partner Payment”) then, notwithstanding any other provision of this Agreement, the amount of such General Partner Payments for any fiscal year shall not exceed the lesser of:

 

(i)                                     an amount equal to the excess, if any, of (a) 5% of the General Partner Entity’s or the General Partner’s (if it is to be qualified as a REIT) total gross income (but not including the amount of any General Partner Payments) for the fiscal year over (b) the amount of gross income (within the meaning of Section 856(c)(2) of the Code) derived by the General Partner Entity or the General Partner (if it is to be qualified as a REIT) from sources other than those described in subsections (A) through (H) of Section 856(c)(2) of the Code (but not including the amount of any General Partner Payments); or

 

(ii)                                  an amount equal to the excess, if any of (a) 25% of the General Partner Entity’s or the General Partner’s (if it is to be qualified as a REIT) total gross income (but not including the amount of any General Partner Payments) for the fiscal year over (b) the amount of gross income (within the meaning of Section 856(c)(3) of the Code) derived by the General Partner Entity or the General Partner (if it is to be qualified as a REIT) from sources other than those described in subsections (A) through (I) of Section 856(c)(3) of the Code (but not including the amount of any General Partner Payments);

 

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provided, however, that General Partner Payments in excess of the amounts set forth in subparagraphs (i) and (ii) above may be made if the General Partner Entity or the General Partner (if it is to be qualified as a REIT), as a condition precedent, obtains an opinion of tax counsel that the receipt of such excess amounts would not adversely affect the General Partner Entity’s or the General Partner’s (if it is to be qualified as a REIT) ability to qualify as a REIT.  To the extent General Partner Payments may not be made in a year due to the foregoing limitations, such General Partner Payments shall carry over and be treated as arising in the following year, provided, however, that such amounts shall not carry over for more than five years, and if not paid within such five year period, shall expire; provided, further, that (i) as General Partner Payments are made, such payments shall be applied first to carry over amounts outstanding, if any, and (ii) with respect to carry over amounts for more than one Partnership Year, such payments shall be applied to the earliest Partnership Year first.

 

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IN WITNESS WHEREOF, the General Partner has executed this Agreement as of the date first written above.

 

 

JBG SMITH PROPERTIES

 

 

 

 

 

 

 

By:

/s/ Stephen W. Theriot

 

 

Name:

Stephen W. Theriot

 

 

Title:

Chief Financial Officer

 

[Signature Page to JBG SMITH Properties LP Partnership Agreement]