EXHIBIT 10.1

 

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

 

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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

 

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(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

 

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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

 

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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,

 

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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

 

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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

 

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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

 

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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]

 

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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

 

 

 

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