Document:

Exhibit 10.12

 

FORM OF JBG SMITH PROPERTIES

UNIT ISSUANCE AGREEMENT

 

UNIT ISSUANCE AGREEMENT (the “Agreement” or “Unit Issuance Agreement”) made as of ·, 2017 between JBG SMITH Properties, a Maryland real estate investment trust (the “Company”), its subsidiary JBG SMITH Properties LP, a Delaware limited partnership (the “Partnership”), and · (the “Unit Holder”).

 

RECITALS

 

A.                                    Vornado Realty Trust, a Maryland real estate investment trust and Vornado Realty L.P., a Delaware limited partnership (the “Vornado Parties”), and JBG Properties Inc. (“JBG Properties”), a Maryland corporation and JBG/Operating Partners, L.P. (“JBG LP”), a Delaware limited partnership, together with certain affiliated entities (the “JBG Parties”), and the Company and the Partnership, have entered into that certain Master Transaction Agreement (the “Transaction Agreement”), pursuant to which the Vornado Parties and the JBG Parties will effectuate a series of transactions resulting in the acquisition, transfer and contribution of certain assets and interests to the Company and the Partnership.

 

B.                                    In furtherance of the foregoing and pursuant to the limited partnership agreement of the Partnership, as it will be amended as of the “Closing Date” (as defined in the Transaction Agreement) pursuant to the “Partnership Agreement Amendment and Restatement” (as defined in the Transaction Agreement) and as it may be further amended from time to time (the “Partnership Agreement”), the parties hereto desire to enter into this Agreement in order to effect the [issuance of “Common Partnership Units” of the Partnership (as defined in the Partnership Agreement), having the rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption and conversion set forth herein and in the Partnership Agreement, to the Unit Holder in connection with the merger of JBG LP with and into a wholly owned limited liability subsidiary of the Partnership (the “Partnership Merger”) pursuant to the “JBG Partnership Merger Agreement” (as defined in the Transaction Agreement)] [contribution (the “JBG Properties Contribution”) by JBG Properties to the Partnership, pursuant to the “JBG Properties Contribution Agreement” (as defined in the Transaction Agreement) of all of its assets and the subsequent receipt of “Common Partnership Units” of the Partnership (as defined in the Partnership Agreement) having the rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption and conversion set forth herein and in the Partnership Agreement, by the Unit Holder] [contribution of all managing member interests in any “JBG Included Entity” (as defined in the Transaction Agreement) held by the Unit Holder (the “Contributed JBG Units”) to one or more wholly owned subsidiaries of the Partnership (the “JBG Contribution”) pursuant to one or more of the “JBG Managing Member Contribution Agreements” (as defined in the Transaction Agreement) and the subsequent receipt of “Common Partnership Units” of the Partnership (as defined in the Partnership Agreement) having the rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption and conversion set forth herein and in the Partnership Agreement.](1)

 

(1)  Note: This section to be filled out as necessary based on the transactions in which the Unit Holder is receiving OP Units.

 

 

NOW, THEREFORE, in consideration of good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Company, the Partnership and the Unit Holder hereby agree as follows:

 

AGREEMENT

 

1.                                      Issuance and Vesting of Common Partnership Units. In connection with (and conditioned on the occurrence of) [(i) the Partnership Merger pursuant to the Partnership Merger Agreement,] [(ii) the JBG Properties Contribution pursuant to the JBG Properties Contribution Agreement,] [(iii) the JBG Contribution pursuant to one or more of the JBG Managing Member Contribution Agreements,] and (iv) the execution and delivery to the Partnership by the Unit Holder of a counterpart to the Partnership Agreement, and on the terms and conditions set forth herein, the Partnership hereby agrees to issue to the Unit Holder · Common Partnership Units [as of the date hereof (the “Issuance Date”)](2), 50% of which shall be fully vested and non-forfeitable upon issuance and 50% of which shall be unvested, forfeitable pursuant to Section 2, and will vest in a number equal to 1/30 of the total unvested Common Partnership Units issued starting on the first day of the 31st month following the Issuance Date and on the first day of each subsequent month until the first day of the 60th month following the Issuance Date, at which time such Common Partnership Units shall be fully vested and non-forfeitable. Vested Common Partnership Units (whether vested at or subsequent to issuance) will be subject to the restrictions on transfer and redemption as set forth in Section 3. Except as permitted under Section 12 and subject to the terms of the Partnership Agreement, unvested Common Partnership Units may not be sold, assigned, transferred, pledged or otherwise disposed of or encumbered (whether voluntary or involuntary or by judgment, levy, attachment, garnishment or other legal or equitable proceeding).

 

The Unit Holder shall have the right to vote both vested and unvested Common Partnership Units if and when voting is allowed under the Partnership Agreement.

 

2.                                      Forfeiture of Unvested Common Partnership Units. If the employment of the Unit Holder by the Company or an affiliate terminates for any reason other than as described in the succeeding sentence, any unvested Common Partnership Units as of the date of such termination shall be forfeited and returned to the Company for delivery to the Partnership and cancellation. Upon termination of employment of the Unit Holder with the Company or its affiliates (a) upon the Unit Holder’s death or Disability, (b) by the Company (or its successor) without Cause, or (c) by the Unit Holder for Good Reason, or upon the occurrence of a Change in Control or on employment termination upon non-renewal of the Unit Holder’s employment agreement (if any) by the Company, then any unvested Common Partnership Units shall become immediately fully vested and non-forfeitable. Each of the terms in the preceding sentence shall be as defined in the Unit Holder’s employment agreement with the Company, or if there is no employment agreement, as defined below:

 

“Cause” means the Unit Holder’s: (a) conviction of, or plea of guilty or nolo contendere to, a felony, (b) willful and continued failure to use reasonable efforts to perform in all material respects his employment duties (other than such failure resulting from the Unit Holder’s incapacity due to physical or mental illness) that the Unit Holder fails to remedy within 30 days after written notice is delivered by the Company to the Unit

 

(2)  Note: This assumes that this Agreement will be signed on the Closing Date.

 

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Holder that specifically identifies in reasonable detail the manner in which the Company believes the Unit Holder has not used reasonable efforts to perform in all material respects his duties hereunder, or (c) willful misconduct (including, but not limited to, a willful breach of the provisions of Section 4) that is materially economically injurious to the Company.  For purposes of this paragraph, no act, or failure to act, by the Unit Holder will be considered “willful” unless committed in bad faith and without a reasonable belief that the act or omission was in the best interests of the Company.

 

A “Change in Control” of the Company means the occurrence of one of the following events:

 

(i)                                     Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (1) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this Section 2(i), the following acquisitions shall not constitute a Change of Control:  (a) any acquisition directly from the Company, (b) any acquisition by the Company, (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its affiliates or (d) any acquisition by any corporation pursuant to a transaction that complies with Sections 2(iii)(1), 2(iii)(2) and 2(iii)(3);

 

(ii)                                  Any time at which individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors of the Company (the “Board”); provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

 

(iii)                               Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation or other entity resulting from such Business Combination (including, without limitation, a corporation or other entity that, as a result of such transaction, owns the Company or all or substantially all of

 

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the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any corporation or other entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation or other entity resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding shares of common stock of the corporation or other entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation or other entity, except to the extent that such ownership existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors or similar governing body of the corporation or other entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

 

(iv)                              Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

 

“Disability” means a termination of employment by the Company or an affiliate as a result of the Unit Holder having been substantially unable to perform his duties for a continuous period of 180 days due to incapacity caused by physical or mental illness and within 30 days after receiving written Notice of such termination of employment after such 180-day period, the Unit Holder shall not have returned to the substantial performance of his duties on a full-time basis.

 

“Good Reason” means (a) a material reduction by the Company in the Unit Holder’s base salary, (b) a material diminution in the Unit Holder’s position, authority, duties or responsibilities, (c) a relocation of the Unit Holder’s location of employment to a location outside of the Washington D.C. metropolitan area, or (d) a material breach of the Agreement; provided, in each case, that the Unit Holder terminates employment within 90 days after the Unit Holder has actual knowledge of the occurrence, without the written consent of the Unit Holder, of one of the foregoing events that has not been cured within 30 days after written notice thereof has been given by the Unit Holder to the Company setting forth in reasonable detail the basis of the event (provided such notice must be given to the Company within 30 days of the Unit Holder becoming aware of such condition).

 

3.                                      Restrictions on Transfer and Redemption.

 

(i)                                     Notwithstanding any provision of the Partnership Agreement to the contrary, during the applicable Retention Period (as defined below) the Unit Holder will not (i) offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any Retained Units (as defined below), or any options or warrants to purchase any Retained Units, or any securities convertible into, exchangeable for or that represent the right to receive Retained Units, whether now owned or hereinafter acquired, owned directly by the Unit Holder (including holding as a custodian) or with respect to which the Unit Holder has beneficial ownership within the rules and regulations of the Securities and Exchange Commission, or (ii) exercise the “Redemption Right” (as defined in, and pursuant to, Section 8.6 of the Partnership Agreement) with respect to the Retained Units.  “Initial Retained Units” means 80% of the Common Partnership Units received

 

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pursuant to this Agreement that will be fully vested and non-forfeitable upon issuance. “Subsequent Retained Units” means 100% of the Common Partnership Units received pursuant to this Agreement that will be unvested and forfeitable at the time of issuance (together with the Initial Retained Units, the “Retained Units”).  “Retention Period” means (i) with respect to the Initial Retained Units, the period commencing from the Closing and ending on ·, 2020,(3) and (ii) with respect to the Subsequent Retained Units, the period commencing from the Closing and ending on ·, 2022(4); provided, however, that the applicable Retention Period shall terminate immediately upon (i) the termination of employment of the Unit Holder with the Company or its affiliates (a) by the Company (or its successor) without Cause, (b) by the Unit Holder for Good Reason or (c) upon the Unit Holder’s death or Disability, or (ii) the occurrence of a Change in Control.

 

(ii)                                  The restrictions set forth in this Section 3 are expressly agreed to preclude the Unit Holder, during the applicable Retention Period, from engaging in any hedging, swap, or other arrangement or transaction which is designed to or which reasonably could be expected to lead to or result in, in whole or in part, a sale or disposition of the Retained Units (even if such Retained Units would be disposed of by someone other than the Unit Holder) or in the transfer to another of any of the economic consequences of ownership of any of the Retained Units, whether such transaction is to be settled by delivery of the Retained Units, in cash or otherwise.  Such prohibited hedging or other transactions would include without limitation any short sale or sale or grant of any right (including without limitation any put or call option) with respect to any of the Retained Units or with respect to any security that includes, relates to, or derives any significant part of its value from such Retained Units.

 

(iii)                               Notwithstanding any provision of the Partnership Agreement to the contrary, the Unit Holder expressly agrees and consents to the refusal of the Company and the Partnership (unless they so elect to the contrary) to redeem any of the Retained Units pursuant to any attempted exercise by the Unit Holder of the Redemption Right during the applicable Retention Period.

 

(iv)                              The parties acknowledge and agree that any restrictions on transfer of the Common Partnership Units are in addition to, and not in lieu of, the transfer restrictions applicable to Common Partnership Units set forth in the Partnership Agreement.

 

4.                                      Non-Competition; Non-Solicitation.

 

(i)                                     Protection of Business. Except as set forth in an employment agreement with the Unit Holder and the Company or its affiliate, or as provided herein below, until the later of (i) the first day of the 31st month after the Closing Date and (ii) the first day of the seventh month after the date of termination of the Unit Holder’s employment with the Company or an affiliate for any reason the Unit Holder will not (x) engage in any Competing Business (as defined below) or pursue or attempt to develop any project known to the Unit Holder and which the Company is pursuing, developing or attempting to develop as of the date of termination of

 

(3)  Note: To be the day that is three years after the Closing.

 

(4)  Note: To be the day that is five years after the Closing.

 

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employment (a “Project”), directly or indirectly, alone, in association with or as a shareholder, principal, agent, partner, officer, director, employee or consultant of any other organization or (y) divert to any entity which is engaged in any business conducted by the Company any Project, corporate opportunity or any customer of the Company. Notwithstanding the preceding sentence, the Unit Holder shall not be prohibited from owning less than 1% percent of any publicly-traded corporation, whether or not such corporation is in competition with the Company or from owning any passive investment in a hedge fund, private equity fund or similar instrument that, at the time of the Unit Holder’s acquisition, did not to Unit Holder’s knowledge (after reasonable inquiry) hold any investment in any Competing Business (as defined below); provided, that, the Unit Holder shall be permitted to invest in mutual funds or ETFs so long as such funds or ETFs are not invested primarily in real estate investment trusts. [FOR SELECTED EXECUTIVES WHO ARE NOT SENIOR MANAGERS:  Notwithstanding the foregoing, if the Unit Holder’s employment by the Company or an affiliate is terminated by the Company without Cause or by the Unit Holder for Good Reason, then the restrictions above shall apply only until the first day of the seventh month after the date of termination of the Unit Holder’s employment.] “Competing Business” means any business the primary business of which is being engaged in by the Company in the Washington, D.C. metropolitan area as a principal business as of the date of termination of the Unit Holder’s employment with the Company or an affiliate (including, without limitation, the development, owning and operating of commercial real estate and the acquisition and disposition of commercial real estate for the purpose of development, owning and operating such real estate).

 

(ii)                                  Non-Solicitation. Except as set forth in an employment agreement with the Unit Holder and the Company or its affiliate, or as provided herein below, until the later of (i) the first day of the 31st month after the Closing Date and (ii) the first anniversary of the date of termination of the Unit Holder’s employment with the Company or an affiliate for any reason the Unit Holder will not solicit any officer, employee (other than secretarial staff) or exclusive or primary consultant of the Company to leave the employ of the Company.

 

(iii)                               Injunctive Relief and Enforcement. In addition to any other remedy available to the Company under applicable law, in the event of a breach or threatened breach of this Section 4, the Unit Holder agrees that the Company shall be entitled to seek injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, the Unit Holder acknowledging that damages would be inadequate and insufficient. If, at any time, the provisions of Sections 4(i) or (ii) shall be determined to be invalid or unenforceable, by reason of being vague or unreasonable as to duration or scope of activity, Sections 4(i) or (ii), as applicable, shall be considered divisible and shall become and be immediately amended to only such duration and scope of activity as shall be determined to be reasonable and enforceable by the court or other body having jurisdiction over the matter; and the Unit Holder agrees that Sections 4(i) and/or (ii) as so amended shall be valid and binding as though any invalid or unenforceable provision had not been included herein.

 

(iv)                              Forfeiture of Unvested Common Partnership Units.  In the event that the Unit Holder breaches Sections 4(i) or (ii), the Unit Holder will forfeit all unvested Common Partnership Units including his rights to payment or benefits or under any shares to be issued in respect thereof.

 

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5.                                      Clawback Policy. If the Company determines that grounds exist such that the Unit Holder’s employment could be terminated by the Company pursuant to clauses (a) or (c) of the “Cause” definition in Section 2 (or the analogous provisions to clauses (a) or (c) of an applicable employment agreement definition) and the event giving rise to such determination in either case (i) arises at any time within the three-year period immediately prior to the termination of the Unit Holder’s employment with the Company for any reason and (ii) causes material economic harm to the Company, then any Common Partnership Units that vested after the Issuance Date are subject to clawback and/or forfeiture as determined by the Company in its sole discretion (including the repayment to the Company by the Unit Holder of any realized gain on any disposition of such Common Partnership Units or shares issued in respect thereof).  [FOR ALL EXECUTIVE OFFICERS: The Company shall not take any action to claw back or forfeit any Common Partnership Units of a Unit Holder for Cause unless the Company has delivered to the Unit Holder a copy of a resolution duly adopted by a majority of the members of the Board, the Compensation Committee or Corporate Governance and Nominating Committee thereof (excluding, if applicable, the Unit Holder for purposes of determining such majority) at a meeting of the Board or such committee called and held for such purpose (after reasonable advance notice to the Unit Holder and an opportunity for the Unit Holder, together with his counsel, to be heard before the Board or such committee), finding that in the good faith opinion of the Board (or a committee thereof), the Unit Holder engaged in the conduct as set forth in the immediately preceding sentence, and specifying in sufficient detail the events or circumstances alleged to constitute Cause; provided, that if any such resolution was adopted by a committee of the Board, the determination of whether “Cause” exists shall be ratified by the Board.]  In the event that the Company adopts a general clawback policy or has a clawback policy in any other agreement applicable to the Unit Holder, it shall be superseded by the clawback provision contained in this Section 5 for purposes of applicability to the Common Partnership units provided hereunder.  For the avoidance of doubt, and notwithstanding any policy of the Company to the contrary (any such provision to be superseded by this provision unless otherwise required by applicable law), (a) those Common Partnership Units which were immediately vested on the Issuance Date are not subject to clawback under this Section 5 (nor shall any realized gain on any disposition of such Common Partnership Units or shares issued in respect thereof be subject to clawback) and (b) no Common Partnership Units shall be subject to clawback following the eighth anniversary of the Issuance Date.

 

6.                                      Certificates. Each certificate, if any, issued in respect of the Common Partnership Units issued under this Unit Issuance Agreement shall be registered in the Unit Holder’s name and with respect to any unvested Common Partnership Units, held by the Company until such Common Partnership Units vest. If certificates representing the Common Partnership Units are issued by the Partnership, on each date that Common Partnership Units vest, the Company shall deliver to the Unit Holder (or, if applicable, to the Unit Holder’s legal representatives, beneficiaries or heirs) certificates representing the number of such Common Partnership Units. The Unit Holder agrees that any resale of vested Common Partnership Units (or shares received upon redemption of or in exchange for Common Partnership) shall not occur during the “blackout periods” forbidding sales of Company securities, as set forth in the then-applicable Company employee manual or insider trading policy. In addition, any resale shall be made in compliance with the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), or an applicable exemption therefrom, including, without limitation, the exemption provided by Rule 144 promulgated thereunder (or any successor rule).

 

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7.                                      Certain Adjustments. Common Partnership Units shall be subject to adjustment as provided in the Partnership Agreement.

 

8.                                      No Right to Employment. Nothing herein contained shall affect the right of the Company or any affiliate to terminate the Unit Holder’s services, responsibilities and duties at any time for any reason whatsoever.

 

9.                                      Notice. Any notice to be given to the Company shall be addressed to the General Counsel, JBG SMITH Properties, 4445 Willard Avenue, Suite 400, Chevy Chase, Maryland 20815, and any notice to be given the Unit Holder shall be addressed to the Unit Holder at the Unit Holder’s address as it appears on the records of the Partnership, or at such other address as the Company or the Unit Holder may hereafter designate in writing to the other.

 

10.                               Governing Law. This Unit Issuance Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without references to principles of conflict of laws.

 

11.                               Successors and Assigns. This Unit Issuance Agreement shall be binding upon and inure to the benefit of the parties hereto and any successors to the Company and any successors to the Unit Holder by will or the laws of descent and distribution, but this Unit Issuance Agreement shall not otherwise be assignable or otherwise subject to hypothecation by the Unit Holder.

 

12.                               Transfer; Redemption. None of the Common Partnership Units shall be sold, assigned, transferred, pledged or otherwise disposed of or encumbered (whether voluntarily or involuntarily or by judgment, levy, attachment, garnishment or other legal or equitable proceeding) (each such action, a “Transfer”), or redeemed in accordance with the Partnership Agreement (a) prior to vesting and (b) unless such Transfer is in compliance with all applicable securities laws (including, without limitation, the Securities Act), and such Transfer is in accordance with the applicable terms and conditions of the Partnership Agreement. Any attempted Transfer of Common Partnership Units not in accordance with the terms and conditions of this Section 12 shall be null and void, and the Partnership shall not reflect on its records any change in record ownership of any Common Partnership Units as a result of any such Transfer, and shall otherwise refuse to recognize any such Transfer.

 

13.                               Severability. If, for any reason, any provision of this Unit Issuance Agreement is held invalid, such invalidity shall not affect any other provision of this Unit Issuance Agreement not so held invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. If any provision of this Unit Issuance Agreement shall be held invalid in part, such invalidity shall in no way affect the rest of such provision not held so invalid, and the rest of such provision, together with all other provisions of this Unit Issuance Agreement, shall to the full extent consistent with law continue in full force and effect.

 

14.                               Headings. The headings of paragraphs hereof are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Unit Issuance Agreement.

 

15.                               Counterparts. This Unit Issuance Agreement may be executed in multiple counterparts with the same effect as if each of the signing parties had signed the

 

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same document. All counterparts shall be construed together and constitute the same instrument.

 

16.                               Miscellaneous. This Unit Issuance Agreement may not be amended except in writing signed by the Company and the Unit Holder. Notwithstanding the foregoing, this Unit Issuance Agreement may be amended in writing signed only by the Company to: (a) correct any errors or ambiguities in this Unit Issuance Agreement; and/or (b) to make such changes that do not materially adversely affect the Unit Holder’s rights hereunder. In the event of a conflict between this Unit Issuance Agreement and the Partnership Agreement, the Partnership Agreement shall govern; provided that, in the event that the Partnership Agreement is amended following the date hereof in a manner that disproportionately and adversely affects the Unit Holder’s rights as a holder of Common Partnership Units, then, solely with respect to such affected rights, the terms of this Agreement shall control.

 

17.                               Status as a Partner. As of the Issuance Date, the Unit Holder shall be admitted as a partner of the Partnership with beneficial ownership of the number of Common Partnership Units issued to the Unit Holder as of such date pursuant to this Unit Issuance Agreement by: (A) signing and delivering to the Partnership a copy of this Agreement; and (B) signing, as a Limited Partner, and delivering to the Partnership a counterpart signature page to the Partnership Agreement (attached hereto as Exhibit A).

 

18.                               Status of Common Partnership Units. The Common Partnership Units are issued as equity securities of the Partnership. The Company will have the right at its option, as set forth in the Partnership Agreement, to issue shares of Company common stock in exchange for Common Partnership Units with respect to which the Unit Holder has exercised its Redemption Right pursuant to Section 8.6 of the Partnership Agreement, subject to certain limitations set forth in the Partnership Agreement. The Unit Holder must be eligible to receive the Common Partnership Units in compliance with applicable federal and state securities laws and to that effect is required to complete, execute and deliver certain covenants, representations and warranties (attached as Exhibit B). The Unit Holder acknowledges that the Unit Holder will have no right to approve or disapprove such determination by the Company.

 

19.                               Investment Representations; Registration. The Unit Holder hereby makes the covenants, representations and warranties as set forth on Exhibit B attached hereto. All of such covenants, warranties and representations shall survive the execution and delivery of this Unit Issuance Agreement by the Unit Holder. The Partnership will have no obligation to register under the Securities Act any Common Partnership Units or any other securities issued pursuant to this Unit Issuance Agreement or upon conversion or exchange of Common Partnership Units.

 

20.                               Section 83(b) Election. In connection with this Unit Issuance Agreement, the Unit Holder hereby agrees to make an election to include in gross income in the year of transfer the fair market value of the applicable Common Partnership Units over the amount paid for them pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, substantially in the form attached hereto as Exhibit C and to supply the necessary information in accordance with the regulations promulgated thereunder.

 

21.                               Acknowledgement.  The Unit Holder hereby acknowledges and agrees that this Unit Issuance Agreement and the Common Partnership Units issued hereunder shall constitute satisfaction in full of all obligations of the Company and the Partnership, if any, to issue to the Unit Holder Common Partnership Units pursuant to

 

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the terms of any written agreement or letter or written offer with the Company and/or the Partnership executed prior to or coincident with the date hereof, including without limitation the Transaction Agreement, the JBG Managing Member Contribution Agreements, the JBG Properties Contribution Agreement and the Partnership Merger Agreement.

 

[signature page follows]

 

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IN WITNESS WHEREOF, this Unit Issuance Agreement has been executed by the parties hereto as of the date and year first above written.

 

	
 
    	
JBG SMITH PROPERTIES,   a Maryland real estate investment trust
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
JBG SMITH PROPERTIES LP,   a Delaware limited partnership

 

By:     JBG   SMITH Properties, a Maryland real estate investment trust, its general   partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
UNIT HOLDER
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
				

 

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EXHIBIT A

 

FORM OF LIMITED PARTNER SIGNATURE PAGE

 

The Unit Holder, desiring to become one of the within named Limited Partners of JBG SMITH Properties LP (the “Partnership”), hereby accepts all of the terms and conditions of (including, without limitation, the provisions related to powers of attorney), and becomes a party to, the Limited Partnership Agreement, dated as of ·, 2017, of JBG SMITH Properties LP, as it may be amended from time to time (the “Partnership Agreement”). The Unit Holder agrees that this signature page may be attached to any counterpart of the Partnership Agreement and further agrees as follows (where the term “Limited Partner” refers to the Unit Holder): Capitalized terms used but not defined herein have the meaning ascribed thereto in the Partnership Agreement.

 

1.                                      The Limited Partner hereby confirms that it has reviewed the terms of the Partnership Agreement and affirms and agrees that it is bound by each of the terms and conditions of the Partnership Agreement, including, without limitation, the provisions thereof relating to limitations and restrictions on the transfer of Partnership Units.

 

2.                                      The Limited Partner hereby confirms that it is acquiring the Partnership Units for its own account as principal, for investment and not with a view to resale or distribution, and that the Partnership Units may not be transferred or otherwise disposed of by the Limited Partner otherwise than in a transaction pursuant to a registration statement filed by the Partnership (which it has no obligation to file) or that is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and all applicable state and foreign securities laws, and the General Partner may refuse to transfer any Partnership Units as to which evidence of such registration or exemption from registration satisfactory to the General Partner is not provided to it, which evidence may include the requirement of a legal opinion regarding the exemption from such registration. If the General Partner delivers to the Limited Partner common Shares of beneficial interest of the General Partner (“Common Shares”) upon redemption of any Partnership Units, the Common Shares will be acquired for the Limited Partner’s own account as principal, for investment and not with a view to resale or distribution, and the Common Shares may not be transferred or otherwise disposed of by the Limited Partner otherwise than in a transaction pursuant to a registration statement filed by the General Partner with respect to such Common Shares (which it has no obligation under the Partnership Agreement to file) or that is exempt from the registration requirements of the Securities Act and all applicable state and foreign securities laws, and the General Partner may refuse to transfer any Common Shares as to which evidence of such registration or exemption from such registration satisfactory to the General Partner is not provided to it, which evidence may include the requirement of a legal opinion regarding the exemption from such registration.

 

3.                                      The Limited Partner hereby affirms that it has appointed the General Partner, any Liquidator and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead, in accordance with Section 2.4 of the Partnership Agreement, which section is hereby incorporated by reference. The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and not be affected by the death, incompetency, dissolution, disability, incapacity, bankruptcy or termination

 

Exhibit A-1

 

of the Limited Partner and shall extend to the Limited Partner’s heirs, executors, administrators, legal representatives, successors and assigns.

 

4.                                      The Limited Partner hereby confirms that, notwithstanding any provisions of the Partnership Agreement to the contrary, the Common Partnership Units shall not be redeemable by the Limited Partner pursuant to Section 8.6 of the Partnership Agreement if the exercise of the Limited Partner’s redemption right pursuant to Section 8.6 of the Partnership Agreement is prohibited by the terms of the Unit Issuance Agreement, dated as ·, 2017, between JBG SMITH Properties, the Partnership and the Limited Partner.

 

5.                                      (a)                                 The Limited Partner hereby irrevocably consents in advance to any amendment to the Partnership Agreement, as may be recommended by the General Partner, intended to avoid the Partnership being treated as a publicly-traded partnership within the meaning of Section 7704 of the Internal Revenue Code, including, without limitation, (x) any amendment to the provisions of Section 8.6 of the Partnership Agreement intended to increase the waiting period between the delivery of a Notice of Redemption and the Specified Redemption Date and/or the Valuation Date to up to sixty (60) days or (y) any other amendment to the Partnership Agreement intended to make the redemption and transfer provisions, with respect to certain redemptions and transfers, more similar to the provisions described in Treasury Regulations Section 1.7704-1(f).

 

(b)                                 The Limited Partner hereby appoints the General Partner, any Liquidator and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead, to execute and deliver any amendment referred to in the foregoing paragraph 5(a) on the Limited Partner’s behalf. The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and not be affected by the death, incompetency, dissolution, disability, incapacity, bankruptcy or termination of the Limited Partner and shall extend to the Limited Partner’s heirs, executors, administrators, legal representatives, successors and assigns.

 

6.                                      The Limited Partner agrees that it will not transfer any interest in the Partnership Units (x) through (i) a national, non-U.S., regional, local or other securities exchange, (ii) PORTAL or (iii) an over-the-counter market (including an interdealer quotation system that regularly disseminates firm buy or sell quotations by identified brokers or dealers by electronic means or otherwise) or (y) to or through (a) a person, such as a broker or dealer, that makes a market in, or regularly quotes prices for, interests in the Partnership, (b) a person that regularly makes available to the public (including customers or subscribers) bid or offer quotes with respect to any interests in the Partnership and stands ready to effect transactions at the quoted prices for itself or on behalf of others, or (c) another readily available, regular, and ongoing opportunity to sell or exchange the interest through a public means of obtaining or providing information of offers to buy, sell or exchange the interest.

 

7.                                      The Limited Partner acknowledges that the General Partner shall be a third-party beneficiary of the representations, covenants and agreements set forth in Sections 4 and 6 hereof. The Limited Partner agrees that it will transfer, whether by assignment or otherwise, Partnership Units only to the General Partner or to transferees that provide the Partnership and the General Partner with the representations and covenants set forth in Sections 4 and 6 hereof.

 

Exhibit A-2

 

8.                                      This acceptance shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.

 

 

	
 
    	
 
    	
Signature Line for   Limited Partner:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Date:
    	
, 2017
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Address of Limited   Partner:
    

 

Exhibit A-3

 

EXHIBIT B

 

THE UNIT HOLDER’S COVENANTS, REPRESENTATIONS AND WARRANTIES

 

The Unit Holder hereby represents, warrants and covenants as follows:

 

(a)                                 The Unit Holder has received and had an opportunity to review the following documents (the “Background Documents”):

 

(i)                                     The Company’s latest information statement filed with the Securities and Exchange Commission relating to the transactions contemplated by the Transaction Agreement;

 

(ii)                                  The latest confidential information statement provided by JBG Properties Inc. and/or its affiliates relating to the transactions contemplated by the Transaction Agreement; and

 

(iii)                               The Partnership Agreement.

 

The Unit Holder also acknowledges that any delivery of the Background Documents and other information relating to the Company and the Partnership prior to the determination by the Partnership of the suitability of the Unit Holder as a holder of Common Partnership Units shall not constitute an offer of Common Partnership Units until such determination of suitability shall be made.

 

(b)                                 The Unit Holder hereby represents and warrants that:

 

(i)                                     The Unit Holder either (A) is an “accredited investor” as defined in Rule 501(a) under the Securities Act of 1933, as amended (the “Securities Act”), or (B) by reason of the business and financial experience of the Unit Holder, together with the business and financial experience of those persons, if any, retained by the Unit Holder to represent or advise him with respect to the issuance of Common Partnership Units and the potential redemption of such Common Partnership Units for the Company’s Common Shares (“REIT Shares”), has such knowledge, sophistication and experience in financial and business matters and in making investment decisions of this type that the Unit Holder (I) is capable of evaluating the merits and risks of an investment in the Partnership and potential investment in the Company and of making an informed investment decision, (II) is capable of protecting his own interest or has engaged representatives or advisors to assist him in protecting his interests, and (III) is capable of bearing the economic risk of such investment.

 

(ii)                                  The Unit Holder understands that (A) the Unit Holder is responsible for consulting his own tax advisors with respect to the application of the U.S. federal income tax laws, and the tax laws of any state, local or other taxing jurisdiction to which the Unit Holder is or by reason of the issuance of Common Partnership Units may become subject, to his particular situation; (B) the Unit Holder has not received or relied upon business or tax advice from the Company, the Partnership or any of their respective employees, agents, consultants or advisors, in their capacity as such; and (C) an investment in the Partnership and/or the Company involves substantial risks. The Unit Holder has been given the opportunity to make a thorough investigation of matters relevant to the Common

 

Exhibit B-1

 

Partnership Units and has been furnished with, and has reviewed and understands, materials relating to the Partnership and the Company and their respective activities (including, but not limited to, the Background Documents). The Unit Holder has been afforded the opportunity to obtain any additional information (including any exhibits to the Background Documents) deemed necessary by the Unit Holder to verify the accuracy of information conveyed to the Unit Holder. The Unit Holder confirms that all documents, records, and books pertaining to his receipt of Common Partnership Units which were requested by the Unit Holder have been made available or delivered to the Unit Holder. The Unit Holder has had an opportunity to ask questions of and receive answers from the Partnership and the Company, or from a person or persons acting on their behalf, concerning the terms and conditions of the Common Partnership Units. The Unit Holder has relied upon, and is making its decision solely upon, the Background Documents and other written information provided to the Unit Holder by the Partnership or the Company.

 

(iii)                               The Common Partnership Units to be issued and any REIT Shares issued in connection with the redemption of any such Common Partnership Units will be acquired for the account of the Unit Holder for investment only and not with a current view to, or with any intention of, a distribution or resale thereof, in whole or in part, or the grant of any participation therein, without prejudice, however, to the Unit Holder’s right (subject to the terms of the Common Partnership Units and this Agreement) at all times to sell or otherwise dispose of all or any part of his Common Partnership Units or REIT Shares in compliance with the Securities Act, and applicable state securities laws, and subject, nevertheless, to the disposition of his assets being at all times within his control.

 

(iv)                              The Unit Holder acknowledges that (A) the Common Partnership Units to be issued have not been registered under the Securities Act or state securities laws by reason of a specific exemption or exemptions from registration under the Securities Act and applicable state securities laws and, if such Common Partnership Units are represented by certificates, such certificates will bear a legend to such effect, (B) the reliance by the Partnership and the Company on such exemptions is predicated in part on the accuracy and completeness of the representations and warranties of the Unit Holder contained herein, (C) such Common Partnership Units, therefore, cannot be resold unless registered under the Securities Act and applicable state securities laws, or unless an exemption from registration is available, (D) there is no public market for such Common Partnership Units and (E) neither the Partnership nor the Company has any obligation or intention to register such Common Partnership Units under the Securities Act or any state securities laws or to take any action that would make available any exemption from the registration requirements of such laws, except that, upon the redemption of the Common Partnership Units for REIT Shares, the Company may issue such REIT Shares and pursuant to a Registration Statement on Form S-8 under the Securities Act, to the extent that (I) the Unit Holder is eligible to receive such REIT Shares under the Partnership Agreement at the time of such issuance, (II) the Company has filed a Form S-8 Registration Statement with the Securities and Exchange Commission registering the issuance of such REIT Shares and (III) such Form S-8 is effective at the time of the issuance of such REIT Shares. The Unit Holder hereby acknowledges that because of the restrictions on transfer or assignment of such Common Partnership Units acquired hereby which are set forth in the Partnership Agreement or this Agreement, the Unit Holder may

 

Exhibit B-2

 

have to bear the economic risk of his ownership of the Common Partnership Units acquired hereby for an indefinite period of time.

 

(v)                                 The Unit Holder has determined that the Common Partnership Units are a suitable investment for the Unit Holder.

 

(vi)                              No representations or warranties have been made to the Unit Holder by the Partnership or the Company, or any officer, director, shareholder, agent or affiliate of any of them, and the Unit Holder has received no information relating to an investment in the Partnership or the Common Partnership Units except the information specified in paragraph (a) above.

 

(c)                                  So long as the Unit Holder holds any Common Partnership Units, the Unit Holder shall disclose to the Partnership in writing such information as may be reasonably requested with respect to ownership of Common Partnership Units as the Partnership may deem reasonably necessary to ascertain and to establish compliance with provisions of the Code applicable to the Partnership or to comply with requirements of any other appropriate taxing authority.

 

(d)                                 The Unit Holder hereby agrees to make an election under Section 83(b) of the Code with respect to the Common Partnership Units awarded hereunder, and has delivered with this Agreement a completed, executed copy of the election form attached hereto as Exhibit C. The Unit Holder agrees to file the election (or to permit the Partnership to file such election on the Unit Holder’s behalf) within thirty (30) days after the award of the Common Partnership Units hereunder with the IRS Service Center at which such Unit Holder files his personal income tax returns.

 

(e)                                  The address set forth on the signature page of this Agreement is the address of the Unit Holder’s principal residence, and the Unit Holder has no present intention of becoming a resident of any country, state or jurisdiction other than the country and state in which such residence is sited.

 

Exhibit B-3

 

EXHIBIT C

 

ELECTION TO INCLUDE IN GROSS INCOME IN YEAR OF TRANSFER OF PROPERTY PURSUANT TO SECTION 83(B) OF THE INTERNAL REVENUE CODE

 

The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:

 

1.                                      The name, address and taxpayer identification number of the undersigned are:

 

Name: (the “Taxpayer”)

 

Address:

 

Social Security No./Taxpayer Identification No.:

 

2.                                      Description of property with respect to which the election is being made:

 

The election is being made with respect to Common Partnership Units in JBG SMITH Properties LP (the “Partnership”).

 

3.                                      The date on which the Common Partnership Units were issued is         , 20  . The taxable year to which this election relates is calendar year 20  .

 

4.                                      Nature of restrictions to which the Common Partnership Units are subject:

 

(a)                                 With limited exceptions, until the Common Partnership Units vest, the Taxpayer may not transfer in any manner any portion of the Common Partnership Units without the consent of the Partnership.

 

(b)                                 The Taxpayer’s Common Partnership Units vest in accordance with the vesting provisions described in the Schedule attached hereto. Unvested Common Partnership Units are forfeited in accordance with the vesting provisions described in the Schedule attached hereto.

 

5.                                      The fair market value at time of transfer (determined without regard to any restrictions other than a nonlapse restriction as defined in Treasury Regulations Section 1.83-3(h)) of the Common Partnership Units with respect to which this election is being made was $· per Common Partnership Unit [EQUALS VALUE OF CONTRIBUTED JBG UNITS].

 

6.                                      The amount paid by the Taxpayer for the Common Partnership Units was $· per Common Partnership Unit [EQUALS AMOUNT FROM 5, ABOVE].

 

7.                                      A copy of this statement has been furnished to the Partnership and JBG SMITH Properties.

 

	
Dated:
    	
 
    	
 
    

 

A-1

 

	
 
    	
Name:
    

 

Exhibit B-2

 

SCHEDULE TO EXHIBIT C

 

Vesting Provisions of Common Partnership Units

 

The unvested Common Partnership Units are subject to time-based vesting with a number of Common Partnership Units equal to 1/30 of the total unvested Common Partnership Units issued vesting on each of         , 20  , and on the 1st day of each subsequent month until     , 20  , provided that the Taxpayer remains an employee of JBG SMITH Properties or its affiliates through such dates, subject to acceleration in the event of certain extraordinary transactions or termination of the Taxpayer’s service relationship with JBG SMITH Properties (or its affiliate) under specified circumstances. Unvested Common Partnership Units are subject to forfeiture in the event of failure to vest based on the passage of time and continued employment.

 

	
 
    	
JBG SMITH PROPERTIES,   a Maryland real estate investment trust
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Taxpayer
    

 

Exhibit B-3Exhibit 10.13

 

INDEMNIFICATION AGREEMENT

 

THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is entered into as of [  ], 2017, by and among JBG SMITH Properties, a Maryland real estate investment trust (the “Company” or the “Indemnitor”) and [                  ] (the “Indemnitee”).

 

WHEREAS, the Indemnitee is an officer [or][and] a member of the Board of Trustees of the Company and in such [capacity][capacities] is performing a valuable service for the Company;

 

WHEREAS, Maryland law permits the Company to enter into contracts with its officers or members of its Board of Trustees with respect to indemnification of, and advancement of expenses to, such persons;

 

WHEREAS, the Articles of Amendment and Restatement of the Declaration of Trust of the Company (the “Declaration of Trust”) provide that the Company shall indemnify and advance expenses to its trustees and officers to the maximum extent permitted by Maryland law in effect from time to time;

 

WHEREAS, the Amended and Restated Bylaws of the Company (the “Bylaws”) provide that each trustee and officer of the Company shall be indemnified by the Company to the maximum extent permitted by Maryland law in effect from time to time and shall be entitled to advancement of expenses consistent with Maryland law; and

 

WHEREAS, to induce the Indemnitee to provide services to the Company as an officer [or][and] a member of the Board of Trustees, and to provide the Indemnitee with specific contractual assurance that indemnification will be available to the Indemnitee regardless of, among other things, any amendment to or revocation of the Declaration of Trust or the Bylaws, or any acquisition transaction relating to the Company, the Indemnitor desires to provide the Indemnitee with protection against personal liability as set forth herein.

 

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Indemnitor and the Indemnitee hereby agree as follows:

 

1.                                      DEFINITIONS

 

For purposes of this Agreement:

 

(A)                             “Change in Control” shall have the definition set forth in the JBG SMITH Properties 2017 Omnibus Share Plan as of the date hereof.

 

 

(B)                               “Corporate Status” describes the status of a person who is or was a trustee or officer of the Company or is or was serving at the request of the Company as a director, trustee, officer, partner (limited or general), manager, member, fiduciary, employee or agent of any other foreign or domestic corporation, real estate investment trust, partnership, joint venture, limited liability company, trust, other enterprise (whether conducted for profit or not for profit) or employee benefit plan. For clarification and without limiting the circumstances in which Indemnitee may be serving at the request of the Company, the Company shall be deemed to have requested the Indemnitee to serve: (i) as a director, trustee, officer, partner (limited or general), manager, member, fiduciary, employee or agent of any other foreign or domestic corporation, real estate investment trust, partnership, joint venture, limited liability company, trust, or other enterprise (whether conducted for profit or not for profit) (1) of which a majority of the voting power or equity interest is or was owned directly or indirectly by the Company or (2) the management of which is controlled directly or indirectly by the Company and (ii) an employee benefit plan where the performance of the Indemnitee’s duties to the Company also imposes or imposed duties on, or otherwise involves or involved services by, the Indemnitee to the plan or participants or beneficiaries of the plan, including as deemed fiduciary thereof.

 

(C)                               “Expenses” shall include all reasonable and out-of-pocket attorneys’ and paralegals’ fees, disbursements retainers, court costs, arbitration and mediation costs, transcript costs, fees of experts, accounting fees, witness fees, travel expenses, deposition expenses, expenses of investigations, duplicating costs, document production costs, printing and binding costs, telephone charges, postage, delivery service fees, federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, ERISA excise taxes and penalties and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in or otherwise participating in a Proceeding. Expenses shall also include Expenses incurred in connection with any appeal resulting from any Proceeding including, without limitation, the premium, security for and other costs relating to any cost bond, supersedeas bond or other appeal bond or its equivalent.

 

(D)                               “Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation (including any formal or informal internal investigation to which the Indemnitee is made a party by reason of the Corporate Status of the Indemnitee), inquiry, administrative hearing, claim, demand, discovery request or any other proceeding, including appeals therefrom, whether brought by or in the right of the Company or otherwise and whether civil (including intentional or unintentional tort claims), criminal, administrative, or investigative, except one initiated by the Indemnitee pursuant to Section 8 of this Agreement to enforce such Indemnitee’s rights under this Agreement.

 

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(E)                                “Special Legal Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporate law and neither currently is, or in the past five years has been, retained to represent (i) the Indemnitor or the Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement or of other indemnitees under similar indemnification agreements), or (ii) any other party to or participant or witness in the Proceeding giving rise to a claim for indemnification or advance of Expenses hereunder. Notwithstanding the foregoing, the term “Special Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

 

2.                                      INDEMNIFICATION

 

The Indemnitee shall be entitled to the rights of indemnification provided in this Section 2 and under applicable law, the Declaration of Trust, the Bylaws, any other agreement, a vote of shareholders or resolution of the Board of Trustees or otherwise if, by reason of such Indemnitee’s Corporate Status, such Indemnitee is, or is threatened to be made, a party to any threatened, pending, or contemplated Proceeding, including a Proceeding by or in the right of the Company.  Unless prohibited by Section 13 hereof and subject to the other provisions of this Agreement, the Indemnitee shall be indemnified hereunder, to the maximum extent permitted by Maryland law in effect from time to time, against judgments, penalties, fines and settlements and reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection with such Proceeding or any claim, issue or matter therein; provided, however, that in the case of amounts paid in settlement, any settlement of such proceeding is approved in advance by the Company in writing, which approval shall not be unreasonably withheld, delayed or applied in an inconsistent manner; provided, further, that no change in Maryland law shall have the effect of reducing the benefits available to Indemnitee hereunder based on Maryland law as in effect on the date hereof.  For purposes of this Section 2, excise taxes assessed on the Indemnitee with respect to an employee benefit plan pursuant to applicable law shall be deemed fines.

 

3.                                      INDEMNIFICATION FOR EXPENSES IN CERTAIN CIRCUMSTANCES

 

(A)                             Without limiting the effect of any other provision of this Agreement (including the Indemnitee’s rights to indemnification under Section 2 and advancement of expenses under Section 4), without regard to whether the Indemnitee is entitled to indemnification under Section 2 and without regard to the provisions of Section 6 hereof, to the extent that the Indemnitee is successful, on the merits or otherwise, in any Proceeding to which the Indemnitee is a party by reason of such Indemnitee’s Corporate Status, such Indemnitee shall be indemnified against all reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection therewith.

 

(B)                             If the Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues, or

 

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matters in such Proceeding, the Indemnitor shall indemnify the Indemnitee against all reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection with each successfully resolved claim, issue or matter, allocated on a reasonable and proportionate basis.

 

(C)                             For purposes of this Section 3 and without limitation, the termination of any claim, issue or matter in such Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

(D)                             Notwithstanding any other provision of this Agreement, a court of appropriate jurisdiction, upon application of Indemnitee and such notice as the court shall require, may order indemnification of Indemnitee by the Company in the following circumstances: (i) if such court determines that Indemnitee is entitled to reimbursement under Section 2-418(d)(1) of the Maryland General Corporation Law (“MGCL”), the court shall order indemnification, in which case Indemnitee shall be entitled to recover the Expenses of securing such reimbursement; or (ii) if such court determines that Indemnitee is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not Indemnitee (i) has met the standards of conduct set forth in Section 2-418(b) of the MGCL or (ii) has been adjudged liable for receipt of an improper personal benefit under Section 2-418(c) of the MGCL, the court may order such indemnification as the court shall deem proper without regard to any limitation on such court-ordered indemnification contemplated by Section 2-418(d)(2)(ii) of the MGCL.

 

4.                                      ADVANCEMENT OF EXPENSES

 

Notwithstanding anything in this Agreement to the contrary, but subject to Section 13 hereof, if the Indemnitee is or was or becomes a party to or is otherwise involved in any Proceeding (including as a witness), or is or was threatened to be made a party to or a participant (including as a witness) in any such Proceeding, by reason of the Indemnitee’s Corporate Status, or by reason of (or arising in part out of) any actual or alleged event or occurrence related to the Indemnitee’s Corporate Status, or by reason of any actual or alleged act or omission on the part of the Indemnitee taken or omitted in or relating to the Indemnitee’s Corporate Status, then the Indemnitor shall advance all reasonable Expenses incurred by the Indemnitee in connection with any such Proceeding within ten (10) days after the receipt by the Indemnitor of a statement from the Indemnitee requesting such advance from time to time, whether prior to or after final disposition of such Proceeding, which advance may be in the form of, in the reasonable discretion of the Indemnitee (but without duplication) (a) payment of such Expenses directly to third parties on behalf of Indemnitee, (b) advance of funds to Indemnitee in an amount sufficient to pay such Expenses or (c) reimbursement to Indemnitee for Indemnitee’s payment of such Expenses; provided that, such statement shall reasonably evidence the Expenses incurred or to be incurred by the Indemnitee and shall include or be preceded or accompanied by (i) a written affirmation by the Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Indemnitor as authorized by this Agreement has been met and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amounts advanced if

 

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it should ultimately be determined that the standard of conduct has not been met.  To the extent that Expenses advanced to Indemnitee do not relate to a specific claim, issue or matter in the Proceeding, such Expenses shall be allocated on a reasonable and proportionate basis.  The undertaking required by clause (ii) of the immediately preceding sentence shall be an unlimited general obligation of the Indemnitee but shall be unsecured, shall not bear interest and may be accepted without reference to financial ability to make the repayment.

 

5.                                      WITNESS EXPENSES

 

Notwithstanding any other provision of this Agreement, to the extent that the Indemnitee is or may be, by reason of such Indemnitee’s Corporate Status, a witness (or is forced or asked to respond to discovery requests or is otherwise asked to participate in any Proceeding or is called upon to produce documents) for any reason in any Proceeding to which such Indemnitee is not a named defendant or respondent, the Indemnitor shall advance all Expenses actually incurred by or on behalf of such Indemnitee, on an as-incurred basis in accordance with Section 4 of this Agreement, in connection therewith and indemnify the Indemnitee therefor.

 

6.                                      DETERMINATION OF ENTITLEMENT TO AND AUTHORIZATION OF INDEMNIFICATION

 

(A)                             To obtain indemnification under this Agreement, the Indemnitee shall submit to the Indemnitor a written request, including therewith such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification. Indemnitee may submit one or more such requests from time to time and at such time(s) as Indemnitee deems appropriate in Indemnitee’s sole discretion.  The officer of the Company receiving any such request from Indemnitee shall, promptly upon receipt of such a request for indemnification, advise the Board of Trustees in writing that Indemnitee has requested indemnification.

 

(B)                             The Indemnitor agrees that the Indemnitee shall be indemnified to the fullest extent permitted by law.  Indemnification under this Agreement may not be made unless authorized for a specific Proceeding after a determination has been made in accordance with this Section 6(B) that indemnification of the Indemnitee is permissible in the circumstances because the Indemnitee has met the following standard of conduct: the Indemnitor shall indemnify the Indemnitee in accordance with the provisions of Section 2 hereof, unless it is established in a final adjudication of the Proceeding not subject to further appeal that: (a) the act or omission of the Indemnitee was material to the matter giving rise to the Proceeding and (x) was committed in bad faith or (y) was the result of active and deliberate dishonesty; (b) the Indemnitee actually received an improper personal benefit in money, property or services; or (c) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful.  Upon receipt by the Indemnitor of the Indemnitee’s written request for indemnification pursuant to paragraph 6(A), a determination as

 

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to whether the applicable standard of conduct has been met shall be made within the period specified in paragraph 6(E):  (i) if a Change in Control shall have occurred, by Special Legal Counsel in a written opinion to the Board of Trustees, a copy of which shall be delivered to the Indemnitee, which Special Legal Counsel shall be selected by the Indemnitee (the Indemnitee shall give prompt written notice to the Indemnitor advising the Indemnitor of the identity of the Special Legal Counsel so selected) and approved by the Board of Trustees in accordance with Section 2-418(e)(2)(ii) of the MGCL, which approval shall not be unreasonably withheld or delayed; or (ii) if a Change in Control shall not have occurred, (A) by the Board of Trustees by a majority vote of a quorum consisting of trustees not, at the time, parties to the proceeding, or, if such quorum cannot be obtained, then by a majority vote of a committee of the Board of Trustees consisting solely of two or more trustees not, at the time, parties to such proceeding and who were duly designated to act in the matter by a majority vote of the full Board of Trustees in which the designated trustees who are parties may participate, (B) if the requisite quorum of the full Board of Trustees cannot be obtained therefor and the committee cannot be established (or, even if such quorum is obtainable or such committee can be established, if such quorum or committee so directs), by Special Legal Counsel in a written opinion to the Board of Trustees, a copy of which shall be delivered to Indemnitee, which Special Legal Counsel shall be selected by the Board of Trustees or a committee of the Board of Trustees by vote as set forth in clause (ii)(A) of this paragraph 6(B) (or, if the requisite quorum of the full Board of Trustees cannot be obtained therefor and the committee cannot be established, by a majority of the full Board of Trustees in which trustees who are parties to the Proceeding may participate) (if the Indemnitor selects Special Legal Counsel to make the determination under this clause (ii), the Indemnitor shall give prompt written notice to the Indemnitee advising him or her of the identity of the Special Legal Counsel so selected) in accordance with Section 2-418(e)(2)(ii) of the MGCL and approved by the Indemnitee, which approval shall not be unreasonably withheld or delayed or (C) if so directed by a majority of the members of the Board of Trustees, by the shareholders of the Company, other than trustees or officers who are parties to the Proceeding.  If it is so determined that the Indemnitee is entitled to indemnification, payment to the Indemnitee shall be made within ten (10) days after such determination. Authorization of indemnification and determination as to reasonableness of Expenses shall be made in the same manner as the determination that indemnification is permissible. However, if the determination that indemnification is permissible is made by Special Legal Counsel under clause (ii)(B) above, authorization of indemnification and determination as to reasonableness of Expenses shall be made in the manner specified under clause (ii)(B) above for the selection of such Special Legal Counsel.

 

(C)                             The Indemnitee shall cooperate with the person or entity making such determination with respect to the Indemnitee’s entitlement to indemnification, including providing upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and

 

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which is reasonably available to the Indemnitee and reasonably necessary to such determination.  Any reasonable costs or expenses (including reasonable attorneys’ fees and disbursements) incurred by the Indemnitee in so cooperating shall be borne by the Indemnitor (irrespective of the determination as to the Indemnitee’s entitlement to indemnification) and the Indemnitor hereby indemnifies and agrees to hold the Indemnitee harmless therefrom.

 

(D)                             In the event the determination of entitlement to indemnification is to be made by Special Legal Counsel pursuant to Section 6(B) hereof, the Indemnitee, or the Indemnitor, as the case may be, may, within seven days after such written notice of selection shall have been given, deliver to the Indemnitor or to the Indemnitee, as the case may be, a written objection to such selection.  Such objection may be asserted only on the grounds that the Special Legal Counsel so selected does not meet the requirements of “Special Legal Counsel” as defined in Section 1 of this Agreement.  If such written objection is made, the Special Legal Counsel so selected may not serve as Special Legal Counsel until a court has determined that such objection is without merit.  If, within twenty (20) days after submission by the Indemnitee of a written request for indemnification pursuant to Section 6(A) hereof, no Special Legal Counsel shall have been selected or, if Special Legal Counsel shall have been selected, shall have been objected to, either the Indemnitor or the Indemnitee may petition a court for resolution of any objection which shall have been made by the Indemnitor or the Indemnitee to the other’s selection of Special Legal Counsel and/or for the appointment as Special Legal Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom an objection is so resolved or the person so appointed shall act as Special Legal Counsel under Section 6(B) hereof.  The Indemnitor shall pay all reasonable fees and expenses of Special Legal Counsel incurred in connection with acting pursuant to Section 6(B) hereof, and all reasonable fees and expenses incident to the selection of such Special Legal Counsel pursuant to this Section 6(D).  In the event that a determination of entitlement to indemnification is to be made by Special Legal Counsel and such determination shall not have been made and delivered in a written opinion within ninety (90) days after the receipt by the Indemnitor of the Indemnitee’s request in accordance with Section 6(A), upon the due commencement of any judicial proceeding in accordance with Section 8(A) of this Agreement, Special Legal Counsel shall be discharged and relieved of any further responsibility in such capacity.

 

(E)                              If the person or entity making the determination whether the Indemnitee is entitled to indemnification shall not have made a determination within forty-five (45) days after receipt by the Indemnitor of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and the Indemnitee shall be entitled to such indemnification, absent:  (i) a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such

 

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indemnification under applicable law.  Such 45-day period may be extended for a reasonable time, not to exceed an additional fifteen (15) days, if the person or entity making said determination in good faith requires additional time for the obtaining or evaluating of documentation and/or information relating thereto.  The foregoing provisions of this paragraph 6(E) shall not apply: (i) if the determination of entitlement to indemnification is to be made by the shareholders and if within fifteen (15) days after the receipt by the Indmenitor of the request for such determination the Board of Trustees resolves to submit such determination to the shareholders for consideration at an annual or special meeting thereof to be held within seventy-five (75) days after such receipt and such determination is made at such meeting or (ii) if the determination of entitlement to indemnification is to be made by Special Legal Counsel pursuant to paragraph 6(B) of this Agreement.

 

7.                                      PRESUMPTIONS

 

(A)                             It shall be presumed that the Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 6 of this Agreement, and the Indemnitor or any other person or entity challenging such right shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.

 

(B)                             The termination of any Proceeding by conviction, or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable a presumption that the Indemnitee did not meet the requisite standard of conduct described herein for indemnification.

 

(C)                             The knowledge and/or actions, or failure to act, of any other trustee, officer, employee or agent of the Company or any other director, trustee, officer, partner (limited or general), manager, member, fiduciary, employee or agent of any other foreign or domestic corporation, real estate investment trust, partnership, joint venture, limited liability company, trust, other enterprise (whether conducted for profit or not for profit) or employee benefit plan shall not be imputed to Indemnitee for purposes of determining any other right to indemnification under this Agreement.

 

8.                                      REMEDIES

 

(A)                             In the event that:  (i) a determination is made in accordance with the provisions of Section 6 that the Indemnitee is not entitled to indemnification under this Agreement, or (ii) advancement of reasonable Expenses is not timely made pursuant to this Agreement, or (iii) payment of indemnification due the Indemnitee under this Agreement is not timely made, the Indemnitee shall be entitled to an adjudication in an appropriate court of competent jurisdiction of

 

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such Indemnitee’s entitlement to such indemnification or advancement of Expenses.

 

(B)                             In the event that a determination shall have been made pursuant to Section 6 of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 8 shall be conducted in all respects as a de novo trial, or arbitration, on the merits. The fact that a determination has been made earlier pursuant to Section 6 of this Agreement that the Indemnitee was not entitled to indemnification shall not be taken into account in any judicial proceeding commenced pursuant to this Section 8 and (i) the Indemnitee shall not be prejudiced in any way by reason of that determination, (ii) the Indemnitee shall be entitled to have such Expenses advanced by the Indemnitor in accordance with Section 4 of this Agreement and applicable law and (ii) the Indemnitor shall have the burden of proving that the Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be. If the Indemnitee fails to challenge a determination within ninety (90) days, or if Indemnitee challenges a determination and such determination has been upheld by a final judgment of a court of competent jurisdiction from which no appeal can be made, then, to the extent and only to the extent required by such determination or final judgment, the Indemnitor shall not be obligated to indemnify the Indemnitee under this Agreement.

 

(C)                             If a determination shall have been made or deemed to have been made pursuant to Section 6 of this Agreement that the Indemnitee is entitled to indemnification, the Indemnitor shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 8, absent: (i) a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

 

(C)                             The Indemnitor shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 8 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Indemnitor is bound by all the provisions of this Agreement.

 

(E)                              In the event that the Indemnitee, pursuant to this Section 8, seeks a judicial adjudication of such Indemnitee’s rights under, or to recover damages for breach of, this Agreement, if successful on the merits or otherwise as to all or less than all claims, issues or matters in such judicial adjudication, the Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all Expenses actually and reasonably incurred by Indemnitee in connection with each successfully resolved claim, issue or matter.

 

(F)                               Interest shall be paid by the Company to Indemnitee at the maximum rate allowed to be charged for judgments under the Courts and Judicial Proceedings Article of

 

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the Annotated Code of Maryland for amounts which the Company pays or is obligated to pay for the period (i) commencing with either the tenth day after the date on which the Company was requested to advance Expenses in accordance with Sections 4 or 5 or the 60th day after the date on which the Company was requested to make the determination of entitlement to indemnification under Section 6, as applicable, and (ii) ending on the date such payment is made to Indemnitee by the Company.

 

(G)                               Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of the Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

 

9.                                      NOTIFICATION AND DEFENSE OF CLAIMS

 

The Indemnitee agrees promptly to notify the Indemnitor in writing upon being served with any summons, citation, subpoena, complaint, indictment, request, information, or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder and shall include with such notice a description of the nature of the Proceeding and a summary of the facts underlying the Proceeding, but the failure so to notify the Indemnitor will not relieve the Indemnitor from any liability that the Indemnitor may have to Indemnitee under this Agreement unless the Indemnitor can establish that such omission to notify resulted in actual and material prejudice to the ability of the Company to defend in such Proceeding or to obtain proceeds under any insurance policy which cannot be reversed or otherwise eliminated without any material adverse effect on the Indemnitor.  With respect to any such Proceeding as to which Indemnitee notifies the Indemnitor of the commencement thereof:

 

(A)                             The Indemnitor will be entitled to participate therein at its own expense.

 

(B)                             Except as otherwise provided below, the Indemnitor will be entitled to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee.  After notice from the Indemnitor to Indemnitee of the Indemnitor’s election to assume the defense thereof, the Indemnitor will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below.  The Indemnitee shall have the right to employ Indemnitee’s own counsel in such Proceeding, but the fees and disbursements of such counsel incurred after notice from the Indemnitor of the Indemnitor’s assumption of the defense thereof shall be at the expense of the Indemnitee unless (a) the employment of counsel by the Indemnitee has been authorized by the Indemnitor, (b) the Indemnitee shall have reasonably concluded, based upon an opinion of counsel approved by the Indemnitor, which approval shall not be unreasonably withheld or delayed, that there may be a conflict of interest between the Indemnitor and the Indemnitee in the conduct of the defense of such action, (c) the Indemnitee shall have reasonably concluded, based upon an opinion of counsel approved by the Indemnitor, which approval shall not be unreasonably

 

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withheld or delayed, that Indemnitee may have separate defenses or counterclaims to assert with respect to any issue which may not be consistent with other defendants in such Proceeding, (d) such Proceeding seeks penalties or other relief against the Indemnitee with respect to which the Indemnitor could not provide monetary indemnification to the Indemnitee (such as injunctive relief or incarceration) or (e) the Indemnitor shall not in fact have employed counsel to assume the defense of such action in a timely manner, in each of which cases the fees and disbursements of counsel (which counsel shall be subject to the prior approval of the Indemnitor, which approval shall not be unreasonably withheld or delayed) shall be at the expense of the Indemnitor (subject to Section 3(B).  In addition, if the Company fails to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any Proceeding to deny or to recover from Indemnitee the benefits intended to be provided to Indemnitee hereunder, Indemnitee shall have the right to retain counsel of Indemnitee’s choice, subject to the prior approval of the Company, which approval shall not be unreasonably withheld or delayed, at the expense of the Company (subject to Section 3(B)), to represent Indemnitee in connection with any such matter.  The Indemnitor shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Indemnitor, or as to which the Indemnitee shall have reached the conclusion specified in clause (b) above, or which involves penalties or other relief against the Indemnitee of the type referred to in clause (c) above.

 

(C)                              The Indemnitor shall not be liable to indemnify the Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without the Indemnitor’s written consent.  The Indemnitor shall not settle any action or claim in any manner that would (i) include an admission of fault of Indemnitee, (ii) not include, as an unconditional term thereof, the full release of Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to Indemnitee, or (iii) impose any penalty or limitation on the Indemnitee without the Indemnitee’s written consent.  Neither the Indemnitor nor Indemnitee will unreasonably withhold or delay consent to any proposed settlement.

 

10.                               NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE SUBROGATION

 

(A)                             The rights of indemnification and to receive advancement of reasonable Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which the Indemnitee may at any time be entitled under applicable law, the Declaration of Trust, the Bylaws, any other agreement, a vote of shareholders, a resolution of the Board of Trustees or otherwise, except that any payments otherwise required to be made by the Indemnitor hereunder shall be offset by any and all amounts received by the Indemnitee from any other indemnitor or under one or more liability insurance policies maintained by an indemnitor or otherwise and shall not be duplicative of any other payments received by an Indemnitee

 

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from the Indemnitor in respect of the matter giving rise to the indemnity hereunder.  No amendment, alteration or repeal of this Agreement or of the Declaration of Trust or Bylaws of the Company, or any provision hereof or thereof, shall be effective as to the Indemnitee with respect to any action taken or omitted by the Indemnitee prior to such amendment, alteration or repeal.  No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right or remedy shall be cumulative and in addition to every other right or remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion of any right or remedy hereunder, or otherwise, shall not prohibit the concurrent assertion or employment of any other right or remedy.

 

(B)                             The Company will use its reasonable best efforts to acquire directors and officers liability insurance, on terms and conditions deemed appropriate by the Board of Trustees, with the advice of counsel, covering Indemnitee or any claim made against Indemnitee by reason of Indemnitee’s Corporate Status and covering the Company for any indemnification or advancement of Expenses made by the Company to Indemnitee for any claims made against Indemnitee by reason of Indemnitee’s Corporate Status.  In the event of a Change in Control, the Company shall maintain in force any and all directors and officers liability insurance policies that were maintained by the Company immediately prior to the Change in Control for a period of six years with the insurance carrier or carriers and through the insurance broker in place at the time of the Change in Control,  including through purchase of a “tail” policy for such six year period; provided, however, (i) if the carriers will not offer the same policy and an expiring policy needs to be replaced, a policy substantially comparable in scope and amount shall be obtained and (ii) if any replacement insurance carrier is necessary to obtain a policy substantially comparable in scope and amount, such insurance carrier shall have an AM Best rating that is the same or better than the AM Best rating of the existing insurance carrier; provided, further, however, in the event a tail policy is purchased to fulfill the Company’s obligations in this Section 10(B), in no event shall the Company be required to expend in the aggregate in excess of 300% of the annual premium or premiums paid by the Company for directors and officers liability insurance in effect on the date of the Change in Control in order to purchase such tail policy.  In the event that 300% of the annual premium paid by the Company for such existing directors and officers liability insurance is insufficient to purchase a tail policy providing such coverage, the Company shall spend up to that amount to purchase a tail policy providing such lesser coverage as may be obtained with such amount.

 

(D)                             Without in any way limiting any other obligation under this Agreement, the Company shall indemnify Indemnitee for any payment by Indemnitee which would otherwise be indemnifiable hereunder arising out of the amount of any deductible or retention and the amount of any excess of the aggregate of all judgments, penalties, fines, settlements and Expenses incurred by Indemnitee in connection with a Proceeding over the coverage of any insurance referred to in

 

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Section 10(B).  The purchase, establishment and maintenance of any such insurance shall not in any way limit or affect the rights or obligations of the Company or Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and the Indemnitee shall not in any way limit or affect the rights or obligations of the Company under any such insurance policies.  If, at the time the Company receives notice from any source of a Proceeding to which Indemnitee is a party or a participant (as a witness or otherwise) the Company has trustee and officer liability insurance in effect, the Company shall give prompt notice of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies.

 

(D)                             The Indemnitee shall cooperate with the Company or any insurance carrier of the Company with respect to any Proceeding.

 

(E)                              In the event of any payment under this Agreement, the Indemnitor shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and take all actions necessary to secure such rights, including execution of such documents as are necessary to enable the Indemnitor to bring suit to enforce such rights.

 

(F)                               The Indemnitor shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that the Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement, or otherwise.

 

11.                               CONTINUATION OF INDEMNITY

 

(A)                             All agreements and obligations of the Indemnitor contained herein shall continue during the period the Indemnitee is an officer or a member of the Board of Trustees of the Company or is serving at the request of the Company as a director, trustee, officer, partner (limited or general), manager, member, fiduciary, employee or agent of any other foreign or domestic corporation, real estate investment trust, partnership, joint venture, limited liability company, trust, other enterprise (whether conducted for profit or not for profit) or employee benefit plan and shall continue thereafter so long as the Indemnitee shall be subject to any threatened, pending or completed Proceeding by reason of such Indemnitee’s Corporate Status and during the period of statute of limitations for any act or omission occurring during the Indemnitee’s term of Corporate Status.  This Agreement shall be binding upon the Indemnitor and its respective successors and assigns and shall inure to the benefit of the Indemnitee and such Indemnitee’s heirs, executors and administrators.

 

(B)                             The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written

 

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agreement in form and substance reasonably satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place, and the Company shall not permit any such succession (purchase of assets or business, acquisition of securities or merger or consolidation) to occur until such written agreement has been executed and delivered. No such assumption and agreement shall relieve the Company of any of its obligations hereunder, and this Agreement shall not otherwise be assignable by the Company.

 

(C)                             The Company and Indemnitee agree that a monetary remedy for breach of this Agreement, at some later date, may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm.  Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which Indemnitee may be entitled.  Indemnitee shall further be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertakings in connection therewith.  The Company acknowledges that, in the absence of a waiver, a bond or undertaking may be required of Indemnitee by a court, and the Company hereby waives any such requirement of such a bond or undertaking.

 

12.                               SEVERABILITY

 

If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality, and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law, (ii) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto and (iii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provisions held invalid, illegal or unenforceable.

 

13.                               EXCEPTIONS TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF EXPENSES

 

Notwithstanding any other provisions of this Agreement, the Indemnitee shall not be entitled to indemnification or advancement of reasonable Expenses under this Agreement with

 

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respect to (i) any Proceeding initiated by such Indemnitee against the Indemnitor other than (x) a proceeding commenced pursuant to Section 8 hereof or (y) any proceeding authorized by the Company’s Declaration of Trust or Bylaws, a resolution of the shareholders entitled to vote generally in the election of trustees or of the Board of Trustees or an agreement approved by the Board of Trustees to which the Company is a party expressly provides otherwise, or (ii) any Proceeding for an accounting of profits arising from the purchase and sale by Indemnitee of securities of the Company in violation of Section 16(b) of the Exchange Act, rules and regulations promulgated thereunder, or any similar provisions of any federal, state or local statute.

 

14.                               NOTICE TO THE COMPANY SHAREHOLDERS

 

To the extent required by the MGCL, any indemnification of, or advancement of reasonable Expenses to, an Indemnitee in accordance with this Agreement, if arising out of a Proceeding by or in the right of the Company, shall be reported in writing to the shareholders of the Company with the notice of the next Company shareholders’ meeting following the date of the payment of any such indemnification or advance of Expenses or prior to such meeting.

 

15.                               SECTION 409A

 

If the Indemnitee’s right to payment of indemnification pursuant to Section 6 or right to the advancement of Expenses under Sections 4 or 5 would not be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) pursuant to Final Treasury Regulation 1.409A-1(b)(10), then (i) the payment of indemnification and Expenses provided or advanced to or for Indemnitee pursuant to this Agreement in one taxable year shall not affect the amount of indemnification and Expenses provided or advanced to or for Indemnitee in any other taxable year, (ii) any reimbursement to Indemnitee of Expenses under this Agreement shall be paid to Indemnitee on or before the last day of Indemnitee’s taxable year following the taxable year in which the Expense was incurred and (iii) the right to advancement, reimbursement or payment of indemnification and Expenses under this Agreement may not be liquidated or exchanged for any other benefit. In addition, to the extent that this Agreement is subject to Section 409A of the Code, the parties agree to cooperate and work together in good faith to timely amend this Agreement to comply with Section 409A of the Code.

 

16.                               HEADINGS

 

The headings of the Sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

 

17.                               MODIFICATION AND WAIVER

 

No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

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18.                               NOTICES

 

All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand or by a nationally recognized overnight delivery service and received by the party to whom said notice or other communication shall have been directed, on the day of such delivery, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, if so delivered or mailed, as the case may be, to the following addresses:

 

If to the Indemnitee, to the address set forth in the records of the Company.

 

If to the Indemnitor, to:

 

JBG SMITH Properties

4445 Willard Avenue, Suite 400

Chevy Chase, MD 20815

Attention:  Chief Legal Officer

 

or to such other address as may have been furnished to the Indemnitee by the Indemnitor or to the Indemnitor by the Indemnitee, as the case may be.

 

19.                               CONTRIBUTION

 

(A)                             To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, other than for failure to satisfy the standard of conduct set forth in Sections 4 or due to the provisions of Section 6(B), the Company, in lieu of indemnifying Indemnitee, shall pay the entire amount actually incurred by Indemnitee, whether for judgments, penalties, fines and settlements and reasonable Expenses actually incurred by or on behalf of an Indemnitee, in connection with any claim relating to an indemnifiable event under this Agreement, without requiring Indemnitee to contribute to such payment, and the Company hereby waives and relinquishes any right of contribution it may have at any time against Indemnitee

 

20.                               GOVERNING LAW

 

The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without application of the conflict of laws principles thereof.

 

21.                               NO ASSIGNMENTS

 

The Indemnitee may not assign its rights or delegate obligations under this Agreement without the prior written consent of the Indemnitor.  Any assignment or delegation in violation of this Section 21 shall be null and void.

 

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22.                               NO THIRD-PARTY RIGHTS

 

Nothing expressed or referred to in this Agreement will be construed to give any person other than the parties to this Agreement any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions are for the sole and exclusive benefit of the parties to this Agreement and their successors and permitted assigns.

 

23.                               COUNTERPARTS

 

This Agreement may be executed in one or more counterparts (delivery of which may be by facsimile, or via e-mail as a portable document format (.pdf) or other electronic format), each of which shall be deemed an original, but all of which together constitute an agreement binding on all of the parties hereto.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

	
 
    	
JBG SMITH Properties
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
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Name:
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
INDEMNITEE:
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:

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