Exhibit 10.3


 


BUSINESS
MANAGEMENT AGREEMENT


 


THIS
BUSINESS MANAGEMENT AGREEMENT (this “Agreement”)
is entered into effective as of [     ·     ] [·],
2009, by and between Government Properties Income Trust, a Maryland real estate
investment trust (the “Company”), and
Reit Management & Research LLC, a Delaware limited liability company
(the “Manager”).


 


WHEREAS,
the Company is engaged in the business of acquiring, owning and operating real
estate which is majority leased to Government Tenants (as defined herein);


 


WHEREAS,
the Manager is a limited liability company that provides management and
administrative services with respect to the ownership of real property;


 


WHEREAS,
in connection with the management of the Company, including its business,
operations, strategy and investments in real property, the Company desires to
make use of the advice and assistance of the Manager and certain sources of
information available to the Manager, and to have the Manager undertake the
duties and responsibilities hereinafter set forth; and


 


WHEREAS,
the Manager is willing to render such services on the terms and conditions
hereinafter set forth;


 


NOW,
THEREFORE, in consideration of the mutual agreements
herein set forth, the parties hereto agree as follows:


 


1.             Engagement.  Subject to the terms and conditions
hereinafter set forth, the Company hereby engages the Manager to provide the
management and real estate investment services contemplated by this Agreement
with respect to the Company’s business and real estate investments and the
Manager hereby accepts such engagement.


 


2.             General Duties of the Manager.  The Manager shall use its reasonable best
efforts to present to the Company a continuing and suitable real estate
investment program consistent with the real estate investment policies and
objectives of the Company.  Subject to
the management, direction and supervision of the Company’s Board of Trustees
(the “Trustees”), the Manager shall:


 

















 


(a)     provide research and economic and statistical data in
connection with the Company’s real estate investments and recommend changes in
the Company’s real estate investment policies when appropriate;


 


(b)     investigate, evaluate and negotiate contracts for the
investment in, or the  acquisition or
disposition of, real estate and related interests, financing and refinancing
opportunities and make recommendations concerning specific investments to the
Trustees, in each case, on behalf of the Company and in the furtherance of the
Company’s real estate financing objectives;


 


(c)     investigate, evaluate and negotiate the prosecution
and negotiation of any claims of the Company in connection with its real estate
investments;


 


(d)    administer bookkeeping and accounting functions as are
required for the management and operation of the Company, contract for audits
and prepare or cause to be prepared such reports and filings as may be required
by any governmental authority in connection with the ordinary conduct of the
Company’s business, and otherwise advise and assist the Company with its compliance
with applicable legal and regulatory requirements including without limitation,
periodic reports, returns or statements required under the Securities Exchange
Act of 1934, as amended, the Internal Revenue Code of 1986, as amended (said
Code, as in effect from time to time, together with any regulations and rulings
thereunder, being hereinafter referred to as the “Internal
Revenue Code”), the securities and tax statutes of any jurisdiction
in which the Company is obligated to file such reports, or the rules and
regulations promulgated under any of the foregoing;


 


(e)     advise
and assist in the preparation and filing of all offering documents (public and
private), and all registration statements, prospectuses or other documents
filed with the Securities and Exchange Commission (the "SEC")
or any state (it being understood that the Company shall be responsible for the
content of any and all of its offering documents and SEC filings (including
without limitation those filings referred to in Section 2(d) hereof), and
the Manager shall not be held liable for any costs or liabilities arising out
of any misstatements or omissions in the Company's offering documents or SEC
filings, whether or not material, and the Company shall promptly indemnify the
Manager from such costs and liabilities);


 


(f)      retain counsel, consultants and other third party
professionals on behalf of the Company;


 


(g)     provide internal audit services as hereinafter
provided;


 


(h)     advise
and assist with the Company's risk management and oversight function;


 


(i)      to
the extent not covered above, advise and assist the Company in the review and
negotiation of the Company's contracts and agreements, coordination and
supervision of all third party legal services and oversight of processing of
claims by or against the Company;


 


(j)      advise
and assist the Company with respect to the Company's public relations,
preparation of marketing materials, internet website and investor relations
services;


 


(k)     provide office space, office equipment and the use of
accounting or computing equipment when required; 


 


(l)            advise and assist with respect to:
the design, operation and maintenance of network infrastructure, including
telephone and data transmission lines, voice mail, facsimile machines, cellular
phones, pager, etc.; and local area network and wide area network
communications support; and


 


(m)    provide personnel necessary for the performance of the
foregoing services.


 


In performing its
services under this Agreement, the Manager may utilize facilities, personnel
and support services of various of its affiliates.  The Manager shall be responsible for paying
such affiliates for their personnel and support services and facilities out of
its own funds unless otherwise approved by a majority vote of the Independent
Trustees, (the “Independent Trustees”) as defined in the Company’s
Bylaws, as in effect from time to time (the “Bylaws”). Notwithstanding
the foregoing, fees, costs and expenses of any 
third party which is not an affiliate of the Manager retained as 


 


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permitted hereunder are to be paid by the Company.  Without limiting the foregoing sentence, any
such fees, cost or expenses referred to in the immediately preceding sentence
which may be paid by the Manager shall be reimbursed to the Manager by the
Company promptly following submission to the Company of a statement of any such
fees, costs or expenses by the Manager.


 


Notwithstanding
anything herein, it is understood and agreed that the duties of, and services
to be provided by, the Manager pursuant to this Agreement shall not include any
investment management or related services with respect to any assets of the
Company as the Company may wish to allocate from time to time to investments in
“securities” (as defined in the Investment Advisers Act of 1940, as amended).


 


In performing its
services hereunder with respect to the Company, the Manager shall adhere to,
and shall require its officers and employees in the course of providing such
services to the Company to adhere to, the Company’s Code of Business Conduct
and Ethics, as in effect from time to time. 
In addition, the Manager shall make available to its officers and
employees providing such services to the Company the procedures for the receipt,
retention and treatment of complaints regarding accounting, internal accounting
controls or auditing matters relating to the Company and for the confidential,
anonymous submission by such officers and employees of concerns regarding
questionable accounting or auditing matters relating to the Company, as set
forth in the Company’s Procedures for Handling Concerns or Complaints about
Accounting, Internal Accounting Controls or Auditing Matters, as in effect from
time to time.


 


3.             Bank Accounts.  The Manager shall establish and maintain one
or more bank accounts in its own name or, at the direction of the Trustees, in
the name of the Company, and shall collect and deposit into such account or
accounts and disburse therefrom any monies on behalf of the Company, provided
that no funds in any such account shall be commingled with any funds of the
Manager or any other person or entity. 
The Manager shall from time to time, or at any time requested by the
Trustees, render an appropriate accounting of such collections and payments to the
Trustees and to the auditors of the Company.


 


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4.             Records.  The Manager shall maintain appropriate books
of account and records relating to this Agreement, which books of account and
records shall be available for inspection by representatives of the Company
upon reasonable notice during ordinary business hours.


 


5.             Information Furnished to Manager.  The Trustees shall at all times keep the
Manager fully informed with regard to the real estate investment policies of
the Company, the capitalization policy of the Company, and generally the
Trustees’ then-current intentions as to the future of the Company.  In particular, the Trustees shall notify the
Manager promptly of their intention to sell or otherwise dispose of any of the
Company’s real estate investments or to make any new real estate
investment.  The Company shall furnish
the Manager with such information with regard to its affairs as the Manager may
from time to time reasonably request. 
The Company shall retain legal counsel and accountants to provide such
legal and accounting advice and services as the Manager or the Trustees shall
deem necessary or appropriate to adequately perform the functions of the
Company, and shall have such legal or accounting opinions and advice as the
Manager shall reasonably request.


 


6.             REIT Qualification; Compliance with Law and
Organizational Documents. 
Anything else in this Agreement to the contrary notwithstanding, the
Manager shall refrain from any action (including, without limitation, the
furnishing or rendering of services to tenants of property or managing real
property) which, in its good faith judgment , or in the judgment of the
Trustees as transmitted to the Manager in writing, would (a) adversely
affect the qualification of the Company as a real estate investment trust as
defined and limited in the Internal Revenue Code or which would make the
Company subject to the Investment Company Act of 1940, as amended, (the “1940
Act”) (b) violate any law or rule, regulation or statement of policy of
any governmental body or agency having jurisdiction over the Company or over
its securities, or (c) not be permitted by the Declaration of Trust of the
Company, as in effect from time to time (the “Declaration of Trust”) or
Bylaws, except if such action shall be approved by the Trustees, in which event
the Manager shall promptly notify the Trustees of the Manager’s judgment that
such action would adversely affect such qualification, make the Company subject
to the 1940 Act or violate any such law, rule, regulation or policy, or the
Declaration of Trust or Bylaws and shall refrain from taking such action
pending further clarification or instructions from the Trustees.  In addition, the Manager shall take such
affirmative steps which, in its judgment made in good faith, or in the judgment
of the Trustees as transmitted to the Manager in writing, would prevent or cure
any action described in (a), (b) or (c) above.


 


7.             Self-Dealing.  Neither the Manager nor any affiliate of the
Manager shall sell any property or assets to the Company or purchase any
property or assets from the Company, directly or indirectly, except as approved
by a majority of the Independent Trustees (or otherwise pursuant to the
Declaration of Trust or Bylaws).  In
addition, except as otherwise provided in Section 2, 10, 11 or
12 hereof, or except as approved by a majority of the Independent
Trustees or otherwise pursuant to the Declaration of Trust or Bylaws, neither
the Manager nor any affiliate of the Manager shall receive any commission or
other remuneration, directly or indirectly, in connection with the activities
of the Company or any joint venture or partnership in which the Company is a
party.  Except for compensation received
by the Manager pursuant to Section 10 hereof, all
commissions or other remuneration proposed to be received by the Manager or an affiliate
of the Manager and not 


 


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approved by the Independent Trustees (or otherwise
pursuant to the Declaration of Trust or Bylaws) under Section 2,
11 or 12 hereof or this Section 7 shall be
promptly reported to the Company for consideration by the Independent Trustees.


 


8.             No Partnership or Joint Venture.  The Company and the Manager are not partners
or joint venturers with each other and neither the terms of this Agreement nor
the fact that the Company and the Manager have joint interests in any one or
more investments, ownership or other interests in any one or more entities or
may have common officers or employees or a tenancy relationship shall be
construed so as to make them such partners or joint venturers or impose any
liability as such on either of them.


 


9.             Fidelity Bond.  The Manager shall not be required to obtain
or maintain a fidelity bond in connection with the performance of its services
hereunder.


 


10.           Compensation.


 


(a)     The Manager shall be paid, for the services rendered
by it to the Company pursuant to this Agreement, an annual management fee (the “Management Fee”).  The Management Fee for each full fiscal year
shall equal the sum of one-half of one percent (0.5%) of the Annual Average
Invested Capital of the Transferred Assets (as defined below) computed as of
the last day of the Company’s fiscal year, plus seven tenths of one percent (0.7%)
of the Annual Average Invested Capital (as defined below), excluding the Annual
Average Invested Capital of the Transferred Assets, up to $250,000,000, plus
one half of one percent (0.5%) of the Annual Average Invested Capital,
excluding the Annual Average Invested Capital of the Transferred Assets,
exceeding $250,000,000.  The Management
Fee shall be prorated for any partial fiscal year of the Company during the
term of this Agreement.


 


(b)     In addition, the Manager shall be paid an annual
incentive fee (the “Incentive Fee”) for
each fiscal year of the Company, commencing with the Company’s fiscal year
ending December 31, 2010, consisting of a number of shares of the Company’s
common shares of beneficial interest (“Common Shares”)
with an aggregate value (determined as provided below) equal to fifteen percent
(15%) of the product of (i) the weighted average Common Shares of the
Company outstanding on a fully diluted basis during such fiscal year and (ii) the
excess if any of FFO Per Share (as defined below) for such fiscal year over the
FFO Per Share for the preceding fiscal year. 
In no event shall the aggregate value of the Incentive Fee (as
determined pursuant to the immediately preceding sentence) payable in respect
of any fiscal year exceed $.02 multiplied by the weighted average number of
Common Shares outstanding on a fully diluted basis during such fiscal
year.  For purposes of calculating any
Incentive Fee for the fiscal year ending December 31, 2010, the Company’s
2009 FFO per Share will equal (x) the annualized amount of the Company’s
FFO (which, for these purposes, shall be computed in accordance with clause (x) of
the definition of “FFO Per Share” provided below) for the period beginning on
the 


 


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completion of the Company’s initial public offering of its
Common Shares and ending on December 31, 2009 divided by (y) the
weighted average number of Common Shares outstanding on a fully diluted basis
during such period.  (The Management Fee
and Incentive Fee are hereinafter collectively referred to as the “Fees”).


 


(c)     For purposes of this Agreement:  (i) “Annual Average Invested Capital”
of the Company shall mean the average of the aggregate historical cost of the
consolidated assets of the Company and its subsidiaries invested, directly or
indirectly, in equity interests in or loans secured by real estate and personal
property owned in connection with such real estate (including acquisition
related costs and costs which may be allocated to intangibles or are
unallocated), all before reserves for depreciation, amortization, impairment
charges or bad debts or other similar noncash reserves, computed by taking the
average of such values at the end of each month during such period; provided,
however, “Annual Average Invested Capital of the Transferred Assets”
shall mean the average of the aggregate historical cost of the Transferred
Assets on the books of HRPT Properties Trust immediately prior to the contribution,
sale or other transfer of such property to the Company or its subsidiaries (including
acquisition related costs and costs which may be allocated to intangibles or
are unallocated), all before reserves for depreciation, amortization,
impairment charges or bad debts or other similar noncash reserves, computed by
taking the average of such values at the end of month during such period, and
all subsequent adjustments shall be based on such historical cost; and (ii) “FFO
Per Share” for any fiscal year shall mean (x) the Company’s
consolidated net income, computed in accordance with generally accepted
accounting principles in the United States, excluding gain or loss on sale of
properties, acquisition costs and extraordinary items, depreciation,
amortization, impairment charges and other non-cash items, including the
Company’s pro rata share of the funds from operations (determined in accordance
with this clause) for such fiscal year of (A) any unconsolidated
subsidiary and (B) any entity for which the Company accounts by the equity
method of accounting, with such resulting net income amount reduced by, if
applicable, the amount of any preferred shares dividends declared or otherwise
payable (without duplication) during such fiscal year, determined for these
purposes as of the date any such preferred shares dividend amounts are accrued
by the Company in accordance with generally accepted accounting principles in
the United States divided by (y) the weighted average number of Common
Shares outstanding on a fully diluted basis during such fiscal year; and (iii) “Transferred
Assets” shall mean the consolidated assets of the Company and its
subsidiaries invested, directly or indirectly, in equity interests in or loans
secured by real estate and personal property owned in connection with such real
estate previously or hereafter acquired by the Company or its subsidiaries from
HRPT Properties Trust or its subsidiaries (including acquisition related costs
and costs which may be allocated to intangibles or are unallocated and
including assets contributed by HRPT Properties Trust or its subsidiaries to
the Company or its subsidiaries or purchased by the Company or its subsidiaries
from HRPT Properties Trust or its subsidiaries); it being understood that
amounts invested in or with respect to any such Transferred Assets by the
Company or its subsidiaries following the acquisition of such assets by the
Company or its subsidiaries from HRPT Properties Trust or its subsidiaries
shall be included as part of the Transferred Assets to the extent such amounts
otherwise satisfy the standards included in the definition of Transferred
Assets.


 


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Unless the Company
and the Manager otherwise agree, the Management Fee shall be computed and
payable monthly by the Company on a year to date basis, with adjustments to
account for previous payments, within thirty (30) days following the end of
each fiscal month, and the Incentive Fee shall be computed and payable within
thirty (30) days following the public availability of the Company’s annual
audited financial statements for each fiscal year.  Such computations of the Management Fee shall
be based upon the Company’s monthly or quarterly financial statements, as the
case may be, and such computations of the Incentive Fee shall be based upon the
Company’s annual audited financial statements, and all such computations shall
be in reasonable detail.  A copy of such
computations shall promptly be delivered to the Manager accompanied by payment
of the Fees shown thereon to be due and payable.


 


The payment of the
aggregate annual Fees payable for any fiscal year shall be subject to
adjustment as of the end of each fiscal year. On or before the 30th day after
public availability of the Company’s annual audited financial statements for
each fiscal year, the Company shall deliver to the Manager an officer’s
certificate (a “Certificate”) reasonably
acceptable to the Manager and certified by an authorized officer of the Company
setting forth (i) the Annual Average Invested Capital of the Transferred
Assets, Annual Average Invested Capital and FFO Per Share for the Company’s
fiscal year ended upon the immediately preceding December 31 (and, for
purposes of any Incentive Fee for the year ending December 31, 2010,
setting forth the Company’s FFO for the applicable period in 2009, the
annualized amount of the Company’s FFO for 2009 and the FFO Per Share for such
annualized 2009 FFO), and (ii) the Company’s computation of the Fees
payable for said fiscal year.


 


If the aggregate
annual Fees payable for said fiscal year as shown in such Certificate exceed
the aggregate amounts previously paid with respect thereto by the Company, the
Company shall include its check for such deficit and deliver the same to the
Manager with such Certificate.


 


If the aggregate
annual Fees payable for said fiscal year as shown in such Certificate are less
than the aggregate amounts previously paid with respect thereto by the Company,
the Company shall specify in such Certificate whether the Manager should (i) remit
to the Company its check in an amount equal to such difference or (ii) grant
the Company a credit against the Fees next coming due in the amount of such
difference until such amount has been fully paid or otherwise discharged.


 


Payment of the
Incentive Fee shall be made by issuance of Common Shares under the Company’s
2009 Incentive Share Award Plan, as the same may be amended from time to time.  The number of shares to be issued in payment
of the Incentive Fee shall be the whole number of shares (disregarding any
fraction) equal to the value of the Incentive Fee, as provided above, divided
by the average closing price of the Company’s Common Shares on the New York
Stock Exchange (or such other stock exchange upon which the Common Shares are
principally listed for trading) during the month of December in the year
for which the computation is made.


 


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11.           Internal Audit Services.    The Manager shall provide to the Company an
internal audit function meeting applicable requirements of the New York Stock
Exchange and the Securities and Exchange Commission and otherwise in scope
approved by the Company’s Audit Committee. 
In addition to the Fees, the Company agrees to reimburse the Manager,
within 30 days of the receipt of the invoice therefor, the Company’s pro rata
share (as reasonably agreed to by the Independent Trustees from time to time)
of the following:


 


(a)     employment expenses of the Manager’s internal audit
manager and other employees of the Manager actively engaged in providing internal
audit services, including but not limited to salary, wages, payroll taxes and
the cost of employee benefit plans; and


 


(b)     the reasonable travel and other out-of-pocket expenses
of the Manager relating to the activities of the Manager’s internal audit
manager and other of the Manager’s employees actively engaged in providing
internal audit services and the reasonable third party expenses which the
Manager incurs in connection with its provision of internal audit services.


 


12.           Additional Services.   If, and to the extent that, the Company
shall request the Manager to render services on behalf of the Company other
than those required to be rendered by the Manager in accordance with the terms
of this Agreement, such additional services shall be compensated separately on
terms to be agreed upon between the Manager and the Company from time to time.


 


13.           Expenses of the Manager.  Without regard to and without limiting the
compensation received by the Manager from the Company pursuant to this
Agreement and except to the extent provided by Sections 2, 11
or 12, the Manager shall bear the following expenses incurred in
connection with the performance of its duties under this Agreement:


 


(a)     employment expenses of the personnel employed by the
Manager, including but not limited to, salaries, wages, payroll taxes and the
cost of employee benefit plans;


 


(b)     fees and travel and other expenses
paid to directors, officers and employees of the Manager, except fees
and travel and other expenses of such persons who are Trustees or officers of
the Company incurred in their capacities as Trustees or officers of the Company
;


 


(c)     rent,
telephone, utilities, office furniture, equipment and machinery (including
computers, to the extent utilized) and other office expenses of the Manager, 


 


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except to the extent such expenses relate solely to an office
maintained by the Company separate from the office of the Manager; and


 


(d)     miscellaneous administrative expenses relating to performance
by the Manager of its obligations hereunder.


 


14.           Expenses of the Company.  Except as expressly otherwise provided in
this Agreement, the Company shall pay all its expenses not payable by the
Manager, and, without limiting the generality of the foregoing, it is
specifically agreed that the following expenses of the Company shall be paid by
the Company and shall not be paid by the Manager:


 


(a)     the cost of borrowed money;


 


(b)     taxes on income and taxes and assessments on real
property, if any, and all other taxes applicable to the Company;


 


(c)     legal, auditing, accounting,  underwriting, 
brokerage, listing, 
reporting,  registration and other
fees, and printing, engraving and other expenses and taxes incurred in
connection with the issuance, distribution, transfer, trading, registration and
stock exchange listing of the Company’s securities, including transfer agent’s,
registrar’s and indenture trustee’s fees and charges;


 


(d)     expenses of organizing, restructuring, reorganizing or
terminating the Company, or of revising, amending, converting or modifying the
Company’s organizational documents;


 


(e)     fees and travel and other expenses paid to Trustees
and officers of the Company in their capacities as such (but not in their
capacities as officers or employees of the Manager) and fees and travel and
other expenses paid to advisors, contractors, mortgage services, consultants,
and other agents and independent contractors employed by or on behalf of the
Company;


 


(f)      expenses directly connected with the investigation,
acquisition, disposition or ownership of real estate interests or other
property (including third party property diligence costs, appraisal reporting,
the costs of foreclosure, insurance premiums, legal services, brokerage and
sales commissions, maintenance, repair, improvement and local management of
property), other than expenses with respect thereto of employees of the
Manager, to the extent that such expenses are to be borne by the Manager
pursuant to Section 13 above;


 


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(g)     all insurance costs incurred in connection with the
Company (including officer and trustee liability insurance) or in connection
with any officer and trustee indemnity agreement to which the Company is a
party;


 


(h)     expenses connected with payments of dividends or
interest or contributions in cash or any other form made or caused to be made
by the Trustees to holders of securities of the Company;


 


(i)      all expenses connected with communications to holders
of securities of the Company and other bookkeeping and clerical work necessary
to maintaining relations with holders of securities, including the cost of
preparing, printing, posting, distributing and mailing certificates for
securities and proxy solicitation materials and reports to holders of the Company’s
securities;


 


(j)      legal, accounting and auditing fees and expenses,
other than those described in subsection (c) above;


 


(k)     filing and recording fees for regulatory or
governmental filings, approvals and notices to the extent not otherwise covered
by any of the foregoing items of this Section 14;


 


(l)     expenses relating to any office or office facilities
maintained by the Company separate from the office of the Manager; and


 


(m)    the costs and expenses of all equity award or
compensation plans or arrangements established by the Company, including the
value of awards made by the Company to the Manager or its employees, if any.


 


15.           Limits of Manager Responsibility; Indemnification;
Company Remedies.  The Manager
assumes no responsibility other than to render the services described herein in
good faith and shall not be responsible for any action of the Trustees in
following or declining to follow any advice or recommendation of the
Manager.  The Manager, its shareholders,
directors, officers, employees and affiliates will not be liable to the
Company, its shareholders, or others, except by reason of willful bad faith or
gross negligence in the performance of its obligations hereunder.  The Company shall reimburse, indemnify and
hold harmless the Manager, its shareholders, directors, officers and employees
and its affiliates for and from any and all expenses, losses, damages,
liabilities, demands, charges and claims of any nature whatsoever (including
without limitation all reasonable attorneys’, accountants’ and experts’ fees
and expenses) in respect of or arising from any acts or omissions of the
Manager with respect to the provision of services by it or performance of its
obligations in connection with this Agreement or 


 


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performance of other matters pursuant to specific
instruction by the Trustees, except to the extent such provision or performance
was in willful bad faith or grossly negligent. 
Without limiting the foregoing, the Company shall promptly advance
expenses incurred by the indemnitees referred to in this section for matters
referred to in this section, upon request for such advancement.


 


16.           Other Activities of Manager.  Nothing herein shall prevent the Manager from
engaging in other activities or businesses or from acting as the Manager to any
other person or entity (including other real estate investment trusts) even
though such person or entity has investment policies and objectives similar to
those of the Company; provided, however, that the Manager
agrees not to provide, without the consent of the Independent Trustees,
business management services to any other business which is principally engaged
in the business of owning properties which are majority leased or occupied
(determined by rentable square footage, excepting common areas) to one or more
Governmental Authorities (as defined below) or which are reasonably expected to
be majority leased to one or more Governmental Authorities within twelve (12)
months of such time (such lessees and occupants hereinafter referred to as “Government
Tenants”).  For purposes of this
Agreement, “Governmental Authorities” means any nation or government,
any state or other political subdivision thereof, any federal, state, local or
foreign entity or organization exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including any governmental authority, agency, department, board, commission or
instrumentality of the United States, any state of the United States or any
political subdivision thereof, and any tribunal.  The Manager shall notify the Company in
writing in the event that it does so act as a manager to another business.  The Manager shall not present other
businesses that it now or in the future manages with opportunities to invest in
properties that are majority leased to Government Tenants unless the
Independent Trustees have determined that the Company will not invest in the
opportunity.  The Company acknowledges
that the Manager manages real estate investment trusts and other entities
(including, as of the date of this Agreement, HRPT, Hospitality Properties
Trust, Senior Housing Properties Trust, Five Star Quality Care, Inc. and
TravelCenters of America LLC) and that the Manager is not required to present
the Company with opportunities to invest in properties that are primarily of a
type that are the investment focus of another person or entity now or in the
future managed by the Manager.  In
addition, nothing herein shall prevent any shareholder or affiliate of the
Manager from engaging in any other business or from rendering services of any
kind to any other person or entity (including competitive business
activities).  The Company acknowledges
and agrees that the Manager has certain interests that may be divergent from
those of the Company.  The parties agree
that these relationships and interests shall not affect either party’s rights
and obligations under this Agreement; provided, however, the
Company further acknowledges and agrees that whenever any conflicts of interest
arise resulting from the relationships and interests described or referred to
in this Section 16 or any such relationship or interest as
may arise or be present in the future by and between the Company and the Manager
or their respective affiliates or any entity with whom the Manager has a
relationship or contract, the Manager will act on its own behalf and/or on
behalf of any such entity and not on the Company’s behalf, and the Company
shall make its own decisions and require and obtain the advice and assistance
of independent third parties at its own cost, as it may deem necessary.  Without limiting the foregoing provisions,
the Manager agrees, upon the request of any Trustee, to disclose certain real
estate investment information concerning the Manager or certain of its affiliates;
provided, however, that such disclosure shall 


 


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be required only if it does not constitute a breach of
any fiduciary duty or obligation of the Manager and the Company shall be
required to keep such information confidential.


 


Directors,
officers, employees and agents of the Manager or of its affiliates may serve as
Trustees, officers, employees, agents, nominees or signatories of the Company.  When executing documents or otherwise acting
in such capacities for the Company, such persons shall use their respective
titles in the Company.  Such persons
shall receive no compensation from the Company for their services to the
Company in any such capacities, except that the Company may make awards to the
employees of the Manager and others under the Company’s 2009 Incentive Share
Award Plan or any equity plan adopted by the Company from time to time.


 


17.           Term, Termination.  This Agreement shall continue in force and
effect until December 31, 2010, and is renewable annually thereafter by
the Company, upon such terms and conditions as may be approved by a majority of
the Independent Trustees serving on the Compensation Committee of the Trustees.


 


Notwithstanding
any other provision of this Agreement to the contrary, this Agreement, or any
extension thereof, may be terminated (a) by either party thereto upon
sixty (60) days’ written notice to the other party, which termination, if by
the Company, must be approved by a majority vote of the Independent Trustees
serving on the Compensation Committee of the Trustees, or if by the Manager,
must be approved by a majority vote of the directors of the Manager; and (b) by
the Manager upon five (5) business days written notice to the Company if
there is a Change of Control.


 


For purposes of
this Agreement, a “Change of Control” shall mean: (a) the
acquisition by any person or entity, or two or more persons or entities acting
in concert, of beneficial ownership (such term, for purposes of this Section 17,
having the meaning provided such term in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of 9.8% or more, or rights, options or
warrants to acquire 9.8% or more, or any combination thereof, of the
outstanding Common Shares or other voting interests of the Company, including
voting proxies for such shares, or the power to direct the management and
policies of the Company, directly or indirectly (excluding, with respect to the
Company, the Manager and its affiliates and persons or entities that
beneficially own 9.5% or more of the Company’s outstanding Common Shares as of
immediately prior to the execution and delivery of this Agreement by the
parties hereto); (b) the merger or consolidation of the Company with or
into any other entity (other than the merger or consolidation of any entity
into the Company that does not result in a Change in Control of the Company
under clauses (a), (c), or (d); of this definition), (c) any one or
more sales or conveyances to any person or entity of all or any material
portion of the assets (including capital stock or other equity interests) or
business of the Company and its subsidiaries taken as a whole provided, however,
that, with respect to the Company, the acquisition of Transferred Assets by the
Company or any of its subsidiaries shall not constitute a Change of Control
pursuant to this clause (c); or (d) the cessation, for any reason, of the
individuals who at the beginning of any 36 consecutive month period constituted
the Trustees (together with any new trustees whose election by the Trustees or
whose nomination for election by the shareholders of the Company was approved
by a vote of a majority of the trustees then still in office who were either
trustees at the beginning of any such period or whose election or nomination
for election was previously so approved) to constitute a majority of the
Trustees then in office.


 


12

















 


Section 18
hereof shall govern the rights, liabilities and obligations of the parties upon
termination of this Agreement; and, except as provided in Section 18,
such termination shall be without further liability of either party to the
other, other than for breach or violation of this Agreement prior to
termination.


 


18.           Action Upon Termination.  From and after the effective date of any
termination of this Agreement pursuant to Section 17 hereof,
the Manager shall be entitled to no compensation for services rendered
hereunder for the pro-rata remainder of the then-current term of this
Agreement, but shall be paid, on a pro rata basis as set forth in this Section 18,
all compensation due for services performed prior to the effective date of such
termination, including without limitation, a pro-rata portion of the current
year’s Incentive Fee. Upon such termination, the Manager shall as promptly as
practicable:


 


(a)     pay over to the Company all monies collected and held
for the account of the Company by it pursuant to this Agreement, after
deducting therefrom any accrued Fees  and
reimbursements for its expenses to which it is then entitled;


 


(b)     deliver to the Trustee a full and complete accounting,
including a statement showing all sums collected by it and a statement of all
sums held by it for the period commencing with the date following the date of
its last accounting to the Trustees; and


 


(c)     deliver to the Trustees all property and documents of
the Company then in its custody or possession.


 


The amount of Fees
paid to the Manager upon termination shall be subject to adjustment pursuant to
the following mechanism.  On or before
the 30th day after public availability of the Company’s annual audited
financial statements for the fiscal year in which termination occurs, the
Company shall deliver to the Manager a Certificate reasonably acceptable to the
Manager and certified by an authorized officer of the Company setting forth (i) the
Annual Average Invested Capital of the Transferred Assets, Annual Average
Invested Capital and FFO Per Share for the Company’s fiscal year ended upon the
immediately preceding December 31, and (ii) the Company’s computation
of the Fees payable upon the date of termination.


 


If the annual Fees
owed upon termination as shown in such Certificate exceed the Fees paid by the
Company upon termination, the Company shall include its check for such deficit
and deliver the same to the Manager with such Certificate.  If the annual Fees owed upon termination as
shown in such Certificate are less than the Fees paid by the Company upon termination,
the Manager shall remit to the Company its check in an amount equal to such
difference.


 


The Incentive Fee
for any partial fiscal year will be determined by multiplying the Incentive Fee
for such year (assuming this Agreement were in effect for the entire year) by a



 


13

















 


fraction, the numerator of which is the number of days in the portion
of such year during which this Agreement was in effect, and the denominator of
which shall be 365.


 


19.           Trustee Action.  Wherever action on the part of the Trustees
is contemplated by this Agreement, action by a majority of the Trustees,
including a majority of the Independent Trustees, shall constitute the action
provided for herein.


 


20.           TRUSTEES AND SHAREHOLDERS NOT LIABLE.  THE DECLARATION OF TRUST OF THE COMPANY, A
COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS, IS DULY FILED IN THE OFFICE OF THE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND PROVIDES THAT
THE NAME GOVERNMENT PROPERTIES INCOME TRUST REFERS TO THE TRUSTEES COLLECTIVELY
AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY.  NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR
AGENT OF THE COMPANY SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY.  ALL PERSONS DEALING WITH THE COMPANY, IN ANY
WAY, SHALL LOOK ONLY TO THE ASSETS OF THE COMPANY FOR THE PAYMENT OF ANY SUM OR
THE PERFORMANCE OF ANY OBLIGATION.


 


21.           Notices.  Any notice, report or other communication
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given when delivered in person, upon confirmation of
receipt when transmitted by facsimile transmission, on the next business day if
transmitted by a nationally recognized overnight courier or on the third
business day following mailing by first class mail, postage prepaid, in each
case as follows (or at such other United States address or facsimile number for
a party as shall be specified by like notice):


 


If to the Company:


 


Government Properties
Income Trust

400 Centre Street

Newton, Massachusetts 02458

Attention:  President 

Facsimile No.:  (617) 219-1441


 


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If to the Manager:


 


Reit Management &
Research LLC

400 Centre Street

Newton, Massachusetts 02458

Attention:  President 

Facsimile No.:  (617) 928-1305


 


22.           Amendments.  This Agreement shall not be amended, changed,
modified, terminated, or discharged in whole or in part except by an instrument
in writing signed by each of the parties hereto, or by their respective
successors or assigns, or otherwise as provided herein.


 


23.           Assignment.  Neither party may assign this Agreement or
its rights hereunder or delegate its duties hereunder without the written
consent of the other party, except in the case of an assignment by the Manager
to a corporation, partnership, limited liability company, association, trust,
or other successor entity which may take over the property and carry on the
affairs of the Manager.


 


24.           Successors and
Assigns. 
This Agreement shall be binding upon any successors or permitted assigns
of the parties hereto as provided herein.


 


25.           No Third Party Beneficiary.  No person or entity other than the parties
hereto and their successors and permitted assigns is intended to be a
beneficiary of this Agreement.


 


26.           Governing Law.  The provisions of this Agreement shall be
governed by and construed in accordance with the laws of The Commonwealth of
Massachusetts.


 


27.           Arbitration.


 


(a)     Any disputes, claims or controversies between the
parties (i) arising out of or relating to this Agreement or the provision of
services by the Manager pursuant to this Agreement, or (ii) brought by or on
behalf of any shareholder of the Company (which, for purposes of this Section 27,
shall mean any shareholder of record or any beneficial owner of shares of the
Company, or any former shareholder of record or beneficial owner of shares of
the Company), either on its own behalf, on behalf of the Company or on behalf
of any series or class of shares of the Company or shareholders of the Company
against the Company or any trustee, officer, manager (including Reit Management
& Research LLC or its successor), agent or employee of the Company,
including disputes, claims or controversies relating to the meaning,
interpretation, effect, validity, performance or enforcement of this Agreement,
the Declaration of Trust or the Bylaws (all of which are referred to as “Disputes”)
or relating in any way to such a Dispute or Disputes, shall on the demand of any
party to such Dispute be resolved through binding and final arbitration in
accordance with the Commercial Arbitration Rules (the “Rules”) of
the American Arbitration Association (“AAA”) then in effect, except as
modified herein.  For the avoidance of doubt,
and not as a limitation, Disputes are intended to include derivative actions
against trustees, officers or managers of the Company and class actions by the
Manager in its capacity as a shareholder against those individuals or entities
and the Company.


 


15

















 


(b)     There shall be three arbitrators.  If there are (i) only two parties to the
Dispute, each party shall select one arbitrator within 15 days after receipt by
respondent of a copy of the demand for arbitration and (ii) more than two
parties to the Dispute, all claimants, on the one hand, and all respondents, on
the other hand, shall each select, by the vote of a majority of the claimants
or the respondents, as the case may be, one arbitrator.  The two party-nominated arbitrators shall
jointly nominate the third and presiding arbitrator within 15 days of the
nomination of the second arbitrator.  If
any arbitrator has not been nominated within the time limit specified herein,
then the AAA shall provide a list of proposed arbitrators in accordance with
the Rules and the arbitrator shall be appointed by the AAA in accordance
with a listing, striking and ranking procedure, with each party having a
limited number of strikes, excluding strikes for cause.   For the avoidance of doubt, the arbitrators
appointed by the parties to such Dispute may be affiliates or interested
persons of such parties but the third arbitrator elected by the party
arbitrators or by the AAA shall be unaffiliated with either party.


 


(c)     The place of arbitration shall be Boston,
Massachusetts unless otherwise agreed by the parties.


 


(d)     There shall be only limited documentary discovery of
documents directly related to the issues in dispute, as may be ordered by the
arbitrators.


 


(e)     In rendering an award or decision (the “Award”),
the arbitrators shall be required to follow the laws of The Commonwealth of
Massachusetts.  Any arbitration
proceedings or Award rendered hereunder and the validity, effect and
interpretation of this arbitration agreement shall be governed by the Federal
Arbitration Act, 9 U.S.C. §1 et seq.  The
Award shall be in writing and shall briefly state the findings of fact and
conclusions of law on which it is based.


 


(f)      Except to the extent expressly provided by this Agreement
or as otherwise agreed between the parties, each party involved in a Dispute
shall bear its own costs and expenses (including attorneys’ fees) and the
arbitrators shall not render an award that would include shifting of any such
costs or expenses (including attorneys’ fees) or, in a derivative case by the
Manager as a shareholder of the Company, award any portion of the Company’s
award to the claimant or the claimant’s attorneys.


 


(g)     The Award shall be final and binding upon the parties
there to and shall be the sole and exclusive remedy between such parties
relating to the Dispute, including any claims, counterclaims, issues or
accounting presented to the arbitrators. 
Judgment upon the Award may be entered in any court having jurisdiction.  To the fullest extent permitted by law, no
application or appeal to any court of competent jurisdiction may be made in
connection with any question of law arising in the course of arbitration or
with respect to any award made except for actions relating to enforcement of
this agreement to arbitrate or any arbitral award issued hereunder and except
for actions seeking interim or other provisional relief in aid of arbitration
proceedings in any court of competent jurisdiction.


 


(h)     Any monetary award shall be made and payable in U.S.
dollars free of any tax, deduction or offset. 
The party against which the Award assesses a monetary 


 


16

















 


obligation shall pay that obligation on or before the 30th
day following the date of the Award or such other date as the Award may
provide.


 


(i)      This
Section 27 is intended to benefit and be enforceable by the
trustees, officers, manager (including Reit Management & Research LLC or
its successor), agents and employees of the Company and shall be binding on the
shareholders of the Company and the Company, as applicable, and shall be in
addition to, and not in substitution for, any other rights to indemnification
or contribution that such individuals or entities may have by contract or otherwise.


 


28.           Consent to Jurisdiction and Forum.  This Section 28 is subject
to, and shall not in any way limit the application of, Section 27;
in case of any conflict between this Section 28 and Section 27, Section 27
shall govern.  The exclusive jurisdiction
and venue in any action brought by any party hereto pursuant to this Agreement
shall lie in any federal or state court located in Boston, Massachusetts.  By execution and delivery of this Agreement,
each party hereto irrevocably submits to the jurisdiction of such courts for
itself and in respect of its property with respect to such action. The parties
irrevocably agree that venue would be proper in such court, and hereby waive
any objection that such court is an improper or inconvenient forum for the resolution
of such action.  The parties further
agree and consent to the service of any process required by any such court by
delivery of a copy thereof in accordance with Section 21 and
that any such delivery shall constitute valid and lawful service of process
against it, without necessity for service by any other means provided by
statute or rule of court.


 


29.           Captions.  The captions included herein have been
inserted for ease of reference only and shall not be construed to affect the
meaning, construction or effect of this Agreement.


 


30.           Entire Agreement.              This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and supersedes and cancels any pre-existing agreements
with respect to such subject matter.


 


31.           Severability.         If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair
the benefits of the remaining provisions hereof.


 


32.           Survival.  The provisions of Sections 2
(limited to the obligation of the Company to indemnify the Manager for matters
provided thereunder), 15, 16 (limited to the obligations of
the Company to keep information provided to the Company by the Manager
confidential as provided in the last proviso in such Section), 17
(limited to the last paragraph of such Section), 18, 20, 21, 25, 26, 27, 28
and 32 of this Agreement shall survive the termination hereof.


 


33.          Other Agreements.             The parties hereto are also parties
to a Property Management Agreement, dated as of the date hereof, as in effect
from time to time (the “Property Management Agreement”).  The parties agree that this Agreement does
not include or otherwise address the rights and obligations of the parties
under the Property Management Agreement and that the Property Management
Agreement provides for its own separate rights and obligations of the parties
thereto, including without limitation separate compensation payable by the
Company and the other Owners (as defined in the Property Management Agreement)
to the Manager thereunder for services to be provided by the Manager pursuant
to the Property Management Agreement.


 


17

















 


IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers, under seal, as of
the day and year first above written.


 


 


	
   

  	
  GOVERNMENT
  PROPERTIES INCOME TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
    Name: David Blackman

  
	
   

  	
   

  	
    Title: Treasurer and Chief Financial
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  REIT MANAGEMENT & RESEARCH LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
    Name:

  
	
   

  	
   

  	
    Title:

  



 


 


[Signature Page to
Business Management Agreement]


 


18