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ck0001368757-ex101_136.htm

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Exhibit 10.1

GTJ REIT, INC.
2017 INCENTIVE AWARD PLAN
______________________

	
Section 1.
	
Purpose.

The purpose of the GTJ REIT, Inc. 2017 Incentive Award Plan (the “Plan”) is to provide an additional incentive for Directors, Key Employees and Consultants to further the growth, development and financial success of the Company and to enable the Company to attract and retain the services of Directors, Key Employees and Consultants considered essential to the long range success of the Company, in each case by offering them an opportunity to own Common Stock in the Company through the receipt of Awards.  

	
Section 2.
	
Definitions.

As used in the Plan, the following terms shall have the meanings set forth below:

2.1“Award” means any award or benefit granted under the Plan, which shall be a Stock Option, a Stock Award, a Stock Unit Award or an SAR Award. 

2.2“Award Agreement” means, as applicable, a Stock Option Agreement, Stock Award Agreement, Stock Unit Award Agreement or SAR Award Agreement evidencing an Award granted under the Plan.

2.3“Board” means the Board of Directors of the Company.

2.4“Change in Control” has the meaning set forth in Section 9.2 of the Plan.

2.5“Code” means the Internal Revenue Code of 1986, as amended from time to time.

2.6“Committee” means the Compensation Committee of the Board or such other committee as may be designated by the Board from time to time to administer the Plan.

2.7“Common Stock” means the Common Stock, par value $.0001 per share, of the Company.

2.8“Company” means GTJ REIT, Inc., a Maryland corporation.

2.9“Consultant” means a natural person who provides bona fide services to the Company or a Subsidiary and whose services are not in connection with a capital raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities.

2.10“Director” means a director of the Company who is not an employee of the Company or a Subsidiary.

2.11“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

 

 

2.12“Fair Market Value” means, as of any date, the price of a share of Common Stock as determined in good faith by the Committee.

2.13“Incentive Stock Option” or “ISO” means a Stock Option granted under Section 5 of the Plan that meets the requirements of Section 422(b) of the Code or any successor provision.

2.14“Key Employee” means an employee of the Company or any Subsidiary selected to participate in the Plan in accordance with Section 3.  

2.15“Non-Qualified Stock Option” or “NSO” means a Stock Option granted under Section 5 of the Plan that is not an Incentive Stock Option.

2.16“Participant” means a Key Employee, Director or Consultant selected to receive an Award under the Plan.

2.17“Plan” means this GTJ REIT, Inc. 2017 Incentive Award Plan.

2.18“Stock Appreciation Right” or “SAR” means a grant of a right to receive shares of Common Stock or cash under Section 8 of the Plan.

2.19“Stock Award” means a grant of shares of Common Stock under Section 6 of the Plan.

2.20“Stock Option” means an Incentive Stock Option or a Non-Qualified Stock Option granted under Section 5 of the Plan.

2.21“Stock Unit Award” means a grant of a right to receive shares of Common Stock or cash under Section 7 of the Plan.

2.22“Subsidiary” means an entity of which the Company is the direct or indirect beneficial owner of not less than 50% of all issued and outstanding equity interest of such entity.

	
Section 3.
	
Awards and Administration.

3.1Awards to Directors.

The Board, in its sole discretion, shall determine the Awards to be granted to Directors, including the time or times at which Awards will be granted, the form and amount of each Award, the expiration date of each Award, the time or times within which the Awards may be exercised, the cancellation of the Awards and the other limitations, restrictions, terms and conditions applicable to the grant of the Awards.  The terms and conditions of the Awards need not be the same with respect to each Participant or with respect to each Award.

3.2Awards to Key Employees and Consultants.

(a)The Committee, in its sole discretion, shall determine the Key Employees and Consultants to whom, and the time or times at which, Awards will be granted, the form and amount of each Award, the expiration date of each Award, the time or times within which the Awards may be exercised, the cancellation of the Awards and the other limitations, restrictions, terms and conditions applicable to the grant of the Awards.  The 

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terms and conditions of the Awards need not be the same with respect to each Participant or with respect to each Award.

(b)To the extent permitted by applicable law or regulation, the Committee may delegate to the Chief Executive Officer of the Company its authority to grant Awards to Key Employees and to determine the terms and conditions thereof, on such terms and conditions as it may impose, provided that such delegation sets forth the time period during which the Awards may be granted and the number of Awards that may be granted during such time period. 

3.3Administration.

(a)Subject to Section 3.1, the Plan shall be administered by the Committee, which shall be comprised of two or more Directors, at least two of which satisfy the “non-employee director” definition set forth in Rule 16b-3 under the Exchange Act and the “outside director” definition under Section 162(m) of the Code and the regulations thereunder, unless the Board otherwise determines.  Notwithstanding the foregoing, references to “Committee” in the context of determining Awards granted to Directors shall mean the Board.

(b)The Committee may, subject to the provisions of the Plan, establish such rules and regulations as it deems necessary or advisable for the proper administration of the Plan, and may make determinations and may take such other action in connection with or in relation to the Plan as it deems necessary or advisable.  Each determination or other action made or taken pursuant to the Plan, including interpretation of the Plan and the specific terms and conditions of the Awards granted hereunder, shall be final and conclusive for all purposes and upon all persons.  

(c)No member of the Board or the Committee (or the Chief Executive Officer, to the extent he acts pursuant to the authority delegated to him pursuant to Section 3.2(b)) shall be liable for any action taken or determination made hereunder in good faith.  Service on the Committee shall constitute service as a Director so that the members of the Committee shall be entitled to indemnification and reimbursement as Directors of the Company pursuant to the Company’s Certificate of Incorporation and By-Laws.

3.4Performance Goals.

(a)The Committee may, in its discretion, provide that any Award granted under the Plan shall be subject to performance goals, including those that qualify the Award as “performance-based compensation” within the meaning of Section 162(m) of the Code. Performance goals may be based on one or more business criteria, including, but not limited to:  (i) net income, (ii) pre-tax income, (iii) operating income, (iv) cash flow, (v) earnings per share, (vi) return on equity, (vii) return on invested capital or assets, (viii) cost reductions or savings, (ix) adjusted funds from operations, (x) appreciation in the Fair Market Value of Common Stock, (xi) completions of acquisitions or business expansion, (xii) debt reduction and (xiii) earnings before any one or more of the following items: interest, taxes, depreciation or amortization.  Performance goals shall be determined in accordance with generally accepted accounting principles, and they may be adjusted for any events or occurrences (including acquisition expenses, extraordinary charges, losses from discontinued operations, restatements and accounting charges and restructuring expenses, 

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asset write-downs, administrative costs associated with debt and equity refinancing, litigation or claims, judgments or settlements, effect of changes in tax laws and foreign exchange gains and losses) as may be determined by the Committee).  Performance goals may be absolute in their terms or measured against or in relationship to the performance of other companies or indices selected by the Committee.  Performance goals may be particular to one or more lines of business, divisions, operating units or Subsidiaries or may be based on the performance of the Company and its Subsidiaries as a whole.

(b)With respect to each performance period, the Committee shall establish such performance goals relating to one or more of the business criteria identified above and shall establish targets for Participants for achievement of performance goals.  Following the completion of each performance period, the Committee shall determine the extent to which performance goals for that performance period have been achieved and the related performance-based restrictions shall lapse in accordance with the terms of the applicable Award Agreement.

3.5Award Agreements.

(a)Each Award shall be evidenced by a written Award Agreement specifying the terms and conditions of the Award.  In the sole discretion of the Committee, the Award Agreement for a Participant who is a Key Employee or Consultant may condition the grant of an Award upon the Participant’s entering into one or more of the following agreements with the Company:  (i) an agreement not to compete with the Company and its Subsidiaries or solicit employees of the Company or its Subsidiaries, which shall become effective as of the date of the grant of the Award and remain in effect for a specified period of time following termination of the Participant’s employment with the Company; (ii) an agreement to cancel any employment agreement, fringe benefit or compensation arrangement in effect between the Company and the Participant; and (iii) an agreement to retain the confidentiality of certain information.  Such agreements may contain such other terms and conditions as the Committee shall determine.  

(b)If the Participant shall fail to enter into any such agreement at the request of the Committee, then the Award granted or to be granted to such Participant shall be forfeited and cancelled.

	
Section 4.
	
Shares of Common Stock Subject to Plan.

4.1Number of Shares.

(a)The total number of shares of Common Stock that may be issued under the Plan shall be 2,000,000.  Such shares may be either authorized but unissued shares or treasury shares, and shall be adjusted in accordance with the provisions of Section 4.3 of the Plan.  

(b)The number of shares of Common Stock delivered by a Participant or withheld by the Company on behalf of any such Participant as full or partial payment of an Award, including the exercise price of a Stock Option or of any withholding taxes, shall not again be available for issuance pursuant to subsequent Awards, and shall count towards the aggregate number of shares of Common Stock that may be issued under the Plan.  Any shares of Common Stock purchased by the Company with proceeds from a Stock Option 

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exercise shall not again be available for issuance pursuant to subsequent Awards, shall count against the aggregate number of shares that may be issued under the Plan and shall not increase the number of shares available under the Plan. 

(c)If there is a lapse, forfeiture, expiration, termination or cancellation of any Award for any reason, or if shares of Common Stock are issued under such Award and thereafter are reacquired by the Company pursuant to rights reserved by the Company upon issuance thereof, the shares of Common Stock subject to such Award or reacquired by the Company shall again be available for issuance pursuant to subsequent Awards and shall not count towards the aggregate number of shares of Common Stock that may be issued under the Plan.

4.2Shares Under Awards.

Of the shares of Common Stock authorized for issuance under the Plan pursuant to Section 4.1:

(a)The maximum number of shares of Common Stock as to which a Key Employee may receive Stock Options or SARs in any calendar year is 200,000, or, in the event the SAR is settled in cash, an amount equal to the Fair Market Value of such number of shares on the date on which the SAR is settled, except that the maximum number of shares of Common Stock as to which a Key Employee may receive Stock Options or SARs in the calendar year in which such Key Employee begins employment with the Company or its Subsidiaries is 300,000, or, in the event the SAR is settled in cash, an amount equal to the Fair Market Value of such number of shares on the date on which the SAR is settled. 

(b)The maximum number of shares of Common Stock that may be used for Stock Awards and/or Stock Unit Awards that are intended to qualify as “performance-based” in accordance with Section 162(m) of the Code that may be granted to any Key Employee in any calendar year is 250,000, or, in the event the Award is settled in cash, an amount equal to the Fair Market Value of such number of shares on the date on which the Award is settled.

(c)The maximum number of shares of Common Stock that may be subject to Stock Options (ISOs and/or NSOs) is 2,000,000.

(d)The Fair Market Value of shares of Common Stock that may be subject to Awards granted to any Director in any calendar year, together with the cash compensation paid to such Director in such calendar year, shall not exceed $150,000. 

The numbers of shares described herein shall be as adjusted in accordance with Section 4.3 of the Plan.

4.3Adjustment.

In the event of any reorganization, recapitalization, stock split, stock distribution, special or extraordinary dividend, merger, consolidation, split-up, spin-off, combination, subdivision, consolidation or exchange of shares, any change in the capital structure of the Company or any similar corporate transaction, the Committee shall make such adjustments as it deems appropriate, in its sole discretion, to preserve the benefits or intended benefits of the Plan and Awards granted under the Plan.  Such adjustments may include: (a) adjustment in the number and kind of shares 

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reserved for issuance under the Plan; (b) adjustment in the number and kind of shares covered by outstanding Awards; (c) adjustment in the exercise price of outstanding Stock Options or SARs or the price of Stock Awards or Stock Unit Awards under the Plan; (d) adjustments to any of the shares limitations set forth in Section 4.1 or 4.2 of the Plan; and (e) any other changes that the Committee determines to be equitable under the circumstances.

	
Section 5.
	
Grants of Stock Options.

5.1Grant.

Subject to the terms of the Plan, the Committee may from time to time grant Stock Options to Participants.  Unless otherwise expressly provided at the time of the grant, Stock Options granted under the Plan to Key Employees will be NSOs.  Stock Options granted under the Plan to Directors or Consultants will be NSOs.

5.2Stock Option Agreement.

The grant of each Stock Option shall be evidenced by a written Stock Option Agreement specifying the type of Stock Option granted, the exercise period, the exercise price, the terms for payment of the exercise price, the expiration date of the Stock Option, the number of shares of Common Stock to be subject to each Stock Option and such other terms and conditions established by the Committee, in its sole discretion, not inconsistent with the Plan; provided, however, that no Stock Option shall be credited with any  amounts equal to dividends and other distributions that a Participant would have received had he held the shares of Common Stock subject to an unexercised Stock Option.

5.3Exercise Price and Exercise Period.

With respect to each Stock Option granted to a Participant:

(a)The per share exercise price of each Stock Option shall not be less than the Fair Market Value of the Common Stock subject to the Stock Option on the date on which the Stock Option is granted.

(b)Each Stock Option shall become exercisable as provided in the related Stock Option Agreement; provided that notwithstanding any other Plan provision, the Committee shall have the discretion to accelerate the date as of which any Stock Option shall become exercisable in the event of the Participant’s termination of employment with the Company, or service on the Board, without cause (as determined by the Committee in its sole discretion).

(c)Each Stock Option shall expire, and all rights to purchase shares of Common Stock thereunder shall expire, on the date fixed by the Committee in the Stock Option Agreement, which shall not be later than ten years after the date of grant; provided however, if a Participant is unable to exercise a Stock Option because trading in the Common Stock is prohibited by law or the Company’s insider-trading policy, the Stock Option exercise date shall be extended to the date that is 30 days after the expiration of the trading prohibition.

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5.4Required Terms and Conditions of ISOs.

In addition to the foregoing, each ISO granted to a Key Employee shall be subject to the following specific rules:

(a)The aggregate Fair Market Value (determined with respect to each ISO at the time such Option is granted) of the shares of Common Stock with respect to which ISOs are exercisable for the first time by a Key Employee during any calendar year (under all incentive stock option plans of the Company and its Subsidiaries) shall not exceed $100,000.  If the aggregate Fair Market Value (determined at the time of grant) of the Common Stock subject to an ISO which first becomes exercisable in any calendar year exceeds the limitation of this Section 5.4(a), so much of the ISO that does not exceed the applicable dollar limit shall be an ISO and the remainder shall be a NSO; but in all other respects, the original Stock Option Agreement shall remain in full force and effect.

(b)Notwithstanding anything herein to the contrary, if an ISO is granted to a Key Employee who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (or its parent or subsidiaries within the meaning of Section 422(b)(6) of the Code): (i) the purchase price of each share of Common Stock subject to the ISO shall be not less than 110% of the Fair Market Value of the Common Stock on the date the ISO is granted; and (ii) the ISO shall expire, and all rights to purchase shares of Common Stock thereunder shall expire, no later than the fifth anniversary of the date the ISO was granted.

(c)No ISOs shall be granted under the Plan after ten years from the earlier of the date the Plan is adopted or approved by shareholders of the Company.

5.5Exercise of Stock Options.

(a)A Participant entitled to exercise a Stock Option may do so by delivering written notice in accordance with procedures established by the Committee specifying the number of shares of Common Stock with respect to which the Stock Option is being exercised and any other information the Committee may prescribe.  All notices or requests provided for herein shall be delivered to the Chief Financial Officer of the Company.

(b)The Committee in its sole discretion may make available one or more of the following alternatives for the payment of the Stock Option exercise price:  

(i)in cash; 

(ii)in cash received from a broker-dealer to whom the Participant has submitted an exercise notice together with irrevocable instructions to deliver promptly to the Company the amount of sales proceeds from the sale of the shares subject to the Stock Option to pay the exercise price; 

(iii)by directing the Company to withhold such number of shares of Common Stock otherwise issuable in connection with the exercise of the Stock Option having an aggregate Fair Market Value equal to the exercise price;

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(iv)by delivering previously acquired shares of Common Stock that have an aggregate Fair Market Value on the date of exercise equal to the Stock Option exercise price; or 

(v)by certifying to ownership by attestation of such previously acquired shares of Common Stock.

The Committee shall have the sole discretion to establish the terms and conditions applicable to any alternative made available for payment of the Stock Option exercise price.

	
Section 6.
	
Stock Awards.

6.1Grant.

The Committee may, in its discretion, (a) grant shares of Common Stock under the Plan to any Participant without consideration from such Participant or (b) sell shares of Common Stock under the Plan to any Participant for such amount of cash, Common Stock or other consideration as the Committee deems appropriate.  

6.2Stock Award Agreement.

Each share of Common Stock granted or sold hereunder shall be subject to such restrictions, conditions and other terms as the Committee may determine at the time of grant or sale, the general provisions of the Plan, the restrictions, terms and conditions of the related Stock Award Agreement, and the following specific rules:

(a)The related Stock Award Agreement shall specify whether the shares of Common Stock are granted or sold to the Participant and such other provisions, not inconsistent with the terms and conditions of the Plan, as the Committee shall determine.

(b)The restrictions to which the shares of Common Stock awarded hereunder are subject shall lapse as provided in the related Stock Award Agreement; provided that notwithstanding any other Plan provision, the Committee shall have the discretion to accelerate the date as of which the restrictions lapse with respect to any Award held by a Participant in the event of the Participant’s termination of employment with the Company, or service on the Board, without cause (as determined by the Committee in its sole discretion).

(c)Except as provided in this subsection (c) and unless otherwise set forth in the related Stock Award Agreement, the Participant receiving a grant of or purchasing Common Stock shall thereupon be a shareholder with respect to such shares and shall have the rights of a shareholder with respect to such shares, including the right to vote such shares and to receive dividends and other distributions paid with respect to such shares; provided the Committee shall have the discretion to have the Company accumulate and hold such dividends or distributions and to pay the same to the Participant only when the restrictions lapse.  In either case, any such dividends or other distributions held by the Company attributable to the portion of a Stock Award that is forfeited shall also be forfeited.

(d)The Secretary of the Company or such other escrow holder as the Committee may appoint shall retain physical custody of any certificate representing shares of Common 

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Stock subject to Stock Awards until all of the restrictions imposed under the Award Agreement with respect to such shares have lapsed.  In order to enforce the restrictions imposed upon Stock Awards, the Committee shall cause a legend to be placed on certificates representing all shares of Common Stock subject to Stock Awards, which legend shall make appropriate reference to the restrictions imposed thereby.

(e)A Participant may not make an election under Section 83(b) of the Code with respect to any shares subject to the Stock Award without the consent of the Company, which the Company may grant or withhold in its sole discretion.

	
Section 7.
	
Stock Unit Awards.

7.1Grant.

The Committee may, in its discretion, grant Stock Unit Awards to any Participant.  Each Stock Unit subject to the Award shall entitle the Participant to receive, on the date or the occurrence of an event (including the attainment of performance goals) as described in the Stock Unit Award Agreement, a share of Common Stock or cash equal to the Fair Market Value of a share of Common Stock on the date of such event as provided in the related Stock Unit Award Agreement.  

7.2Stock Unit Agreement.

Each Stock Unit Award shall be subject to such restrictions, conditions and other terms as the Committee may determine at the time of grant, the general provisions of the Plan, the restrictions, terms and conditions of the related Stock Unit Award Agreement and the following specific rules:

(a)The related Stock Unit Agreement shall specify such provisions, not inconsistent with the terms and conditions of the Plan, as the Committee shall determine.

(b)The restrictions to which the shares of Stock Units awarded hereunder are subject shall lapse as provided in the related Stock Unit Agreement; provided that notwithstanding any other Plan provision, the Committee shall have the discretion to accelerate the date as of which the restrictions lapse with respect to any Award held by a Participant in the event of the Participant’s termination of employment with the Company, or service on the Board, without cause (as determined by the Committee in its sole discretion).

(c)Except as provided in this subsection (c) and unless otherwise set forth in the related Stock Unit Agreement, the Participant receiving a Stock Unit Award shall have no rights of a shareholder, including voting or dividends or other distributions rights, with respect to any Stock Units prior to the date they are settled in shares of Common Stock.  The related Stock Unit Award Agreement may provide that until the Stock Units are settled in shares or cash, the Participant shall receive on each dividend or distribution payment date applicable to the Common Stock an amount equal to the dividends or other distributions that the Participant would have received had the Stock Units held by the Participant as of the related record date been actual shares of Common Stock; provided that the Committee shall have the discretion to have the Company accumulate and hold such amounts and to pay the same to the Participant only when the restrictions lapse.  In either case, such amounts held 

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by the Company attributable to the portion of the Stock Unit Award that is forfeited shall also be forfeited.

	
Section 8.
	
SARs.

8.1Grant.

The Committee may grant SARs to Participants.  Upon exercise, an SAR entitles the Participant to receive from the Company the number of shares of Common Stock having an aggregate Fair Market Value equal to the excess of the Fair Market Value of one share as of the date on which the SAR is exercised over the exercise price, multiplied by the number of shares with respect to which the SAR is being exercised.  The Committee, in its discretion, shall be entitled to cause the Company to elect to settle any part or all of its obligations arising out of the exercise of an SAR by the payment of cash in lieu of all or part of the shares it would otherwise be obligated to deliver in an amount equal to the Fair Market Value of such shares on the date of exercise.  Cash shall be delivered in lieu of any fractional shares.  The terms and conditions of any such Award shall be determined at the time of grant.

8.2SAR Agreement.

(a)Each SAR shall be evidenced by a written SAR Agreement specifying the terms and conditions of the SAR as the Committee may determine, including the SAR exercise price, expiration date of the SAR, the number of shares of Common Stock to which the SAR pertains, the form of settlement and such other terms and conditions established by the Committee, in its sole discretion, not inconsistent with the Plan; provided, however, that no SAR shall be credited with any  amounts equal to dividends and other distributions that a Participant would have received had he held the shares of Common Stock subject to an unexercised SAR.  

(b)The per Share exercise price of each SAR shall not be less than 100% of the Fair Market Value of a Share on the date the SAR is granted.

(c)Each SAR shall expire and all rights thereunder shall cease on the date fixed by the Committee in the related SAR Agreement, which shall not be later than the ten years after the date of grant; provided however, if a Participant is unable to exercise an SAR because trading in the Common Stock is prohibited by law or the Company’s insider-trading policy, the SAR exercise date shall be extended to the date that is 30 days after the expiration of the trading prohibition.

(d)Each SAR shall become exercisable as provided in the related SAR Agreement; provided that notwithstanding any other Plan provision, the Committee shall have the discretion to accelerate the date as of which any SAR shall become exercisable in the event of the Participant’s termination of employment, or service on the Board, without cause (as determined by the Committee in its sole discretion). 

(e)A person entitled to exercise an SAR may do so by delivery of a written notice in accordance with procedures established by the Committee specifying the number of shares of Common Stock with respect to which the SAR is being exercised and any other information the Committee may prescribe.  As soon as reasonably practicable after the exercise of an SAR, the Company shall (i) issue, in the name of the Participant, stock 

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certificates representing the total number of full shares of Common Stock to which the Participant is entitled and cash in an amount equal to the Fair Market Value, as of the date of exercise, of any resulting fractional share, and (ii) if the Committee causes the Company to elect to settle all or part of its obligations arising out of the exercise of the SAR in cash, deliver to the Participant an amount in cash equal to the Fair Market Value, as of the date of exercise, of the shares it would otherwise be obligated to deliver.

	
Section 9.
	
Change in Control.

9.1Effect of a Change in Control.

(a)Notwithstanding any of the provisions of the Plan or any outstanding Award Agreement, upon a Change in Control of the Company (as defined in Section 9.2), the Committee is authorized and has sole discretion to provide that (i) all outstanding Awards shall become fully exercisable, (ii) all restrictions applicable to all Awards shall terminate or lapse and (iii) performance goals applicable to any Awards shall be deemed satisfied at the highest level, as applicable, in order that Participants may fully realize the benefits thereunder.  

(b)In addition to the Committee’s authority set forth in Section 3, upon such Change in Control of the Company, the Committee is authorized and has sole discretion as to any Award, either at the time such Award is granted hereunder or any time thereafter, to take any one or more of the following actions:  (i) provide for the purchase of any outstanding Stock Option or SAR, for an amount of cash equal to the difference between the exercise price and the then Fair Market Value of the Common Stock covered thereby had such Stock Option been currently exercisable; (ii) make such adjustment to any such Award then outstanding as the Committee deems appropriate to reflect such Change in Control; and (iii) cause any such Award then outstanding to be assumed by the acquiring or surviving corporation after such Change in Control.

9.2Definition of Change in Control.

“Change in Control” of the Company shall be deemed to have occurred if at any time during the term of an Award granted under the Plan any of the following events occurs:

(a)any person (or more than one person acting as a group) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition) beneficial ownership of the Company’s Common Stock possessing 50% or more of the total voting power of the Common Stock of the Company (“person” and “beneficial ownership” being defined in Rule 13d-3 under the Exchange Act);

(b)a majority of the members of the Board are replaced during any 12-month period with directors whose appointment or election is not endorsed by a majority of the Board before the date of appointment or election; 

(c)any consolidation or merger of the Company or any Subsidiary that would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation representing (either by remaining outstanding or by being converted into voting securities of the surviving entity) less than 50% percent of the total voting power of the voting securities of the surviving entity outstanding immediately after such merger or 

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consolidation or ceasing to have the power to elect at least a majority of the board of directors or other governing body of such surviving entity; or

(d)the sale, lease, exchange or transfer of all or substantially all of the Company’s assets to an unaffiliated entity.

	
Section 10.
	
Payment of Taxes.

In connection with any Award, and as a condition to the issuance or delivery of any shares of Common Stock to the Participant in connection therewith, the Company shall require the Participant to pay the Company an amount equal to the minimum amount for federal, state, local or foreign taxes required to be withheld, and in the Company’s sole discretion, the Company may permit the Participant to pay the Company up to the maximum statutory rate of applicable withholding.  The Committee in its sole discretion may make available one or more of the following alternatives for the payment of such taxes: 

(a)in cash; 

(b)in cash received from a broker-dealer to whom the Participant has submitted notice together with irrevocable instructions to deliver promptly to the Company the amount of sales proceeds from the sale of the shares subject to the Award to pay the withholding taxes; 

(c)by directing the Company to withhold such number of shares of Common Stock otherwise issuable in connection with the Award having an aggregate Fair Market Value equal to the minimum amount of tax required to be withheld; 

(d)by delivering previously acquired shares of Common Stock of the Company that have an aggregate Fair Market Value equal to the amount required to be withheld; or 

(e)by certifying to ownership by attestation of such previously acquired shares of Common Stock.

The Committee shall have the sole discretion to establish the terms and conditions applicable to any alternative made available for payment of the required withholding taxes.

	
Section 11.
	
Stock Certificates.

Once a Participant becomes entitled to receive unrestricted shares of Common Stock in connection with an Award under the Plan, the Company shall either issue, in the name of the Participant, stock certificates representing the total number of such shares, or in lieu of issuing stock certificates, reflect the issuance of such shares on a non-certificated basis, with the ownership of such shares evidenced solely by book entry in the records of the Company’s transfer agent.  

	
Section 12.
	
Postponement.

The Board may postpone any grant or settlement of an Award or exercise of a Stock Option or SAR for such time as the Committee in its sole discretion may deem necessary in order to permit the Company:  (a) to effect, amend or maintain any necessary registration of the Plan or the shares of Common Stock issuable pursuant to an Award, including  upon the exercise of an Option, under the Securities Act of 1933, as amended, or the securities laws of any applicable jurisdiction; or (b) 

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to determine that such shares of Common Stock and the Plan are exempt from such registration; and the Company shall not be obligated by virtue of any terms and conditions of any Award or any provision of the Plan to sell or issue shares of Common Stock in violation of the Securities Act of 1933 or the law of any government having jurisdiction thereof.

Any such postponement shall not extend the term of an Award and neither the Company nor its Directors or officers shall have any obligation or liability to a Participant, the Participant’s successor or any other person with respect to any shares of Common Stock as to which the Award shall lapse because of such postponement.

	
Section 13.
	
Nontransferability.

Awards granted under the Plan, and any rights and privileges pertaining thereto, may not be transferred, assigned, pledged or hypothecated in any manner, or be subject to execution, attachment or similar process, by operation of law or otherwise, other than: (a) by will or by the laws of descent and distribution; (b) pursuant to the terms of a domestic relations order to which the Participant is a party that meets the requirements of any relevant provisions of the Code; or (c) as permitted by the Committee with respect to a NSO transferable by the Participant during his or her lifetime.  In each case, the transfer shall be for no value, and the other terms and conditions applicable to the transferability of the Award shall be established by the Committee.

	
Section 14.
	
Termination or Amendment of Plan and Award Agreements.

14.1Termination or Amendment of Plan.

(a)Except as described in Section 14.3 below, the Board may terminate, suspend, or amend the Plan, in whole or in part, from time to time, without the approval of the shareholders of the Company, unless such approval is required by applicable law or regulation.  No amendment or termination of the Plan shall adversely affect the right of any Participant under any outstanding Award in any material way without the written consent of the Participant, unless such amendment or termination is required by applicable law or regulation.  Subject to the foregoing, the Committee may correct any defect or supply an omission or reconcile any inconsistency in the Plan or in any Award granted hereunder in the manner and to the extent it shall deem desirable, in its sole discretion, to effectuate the Plan.

(b)The Board shall have the authority to amend the Plan to the extent necessary or appropriate to comply with applicable law, regulation or accounting rules in order to permit Participants who are located outside of the United States to participate in the Plan.

14.2Amendment of Award Agreements.

The Committee shall have the authority to amend any Award Agreement at any time; provided however, that no such amendment shall adversely affect the right of any Participant under any outstanding Award Agreement in any material way without the written consent of the Participant, unless such amendment is required by applicable law or regulation.

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14.3No Repricing of Stock Options.

Notwithstanding the foregoing, and except as described in Section 4.3, there shall be no amendment to the Plan or any outstanding Stock Option Agreement or SAR Agreement that results in the repricing of Stock Options or SARs without shareholder approval.  For this purpose repricing includes a reduction in the exercise price of the Stock Option or SAR or the cancellation of a Stock Option or SAR in exchange for cash, Stock Options or SARs with an exercise price less than the exercise price of the cancelled Options or SARs, Stock Awards or any other consideration provided by the Company, but does not include any adjustments described in Section 4.3.

	
Section 15.
	
No Contract of Employment.

Neither the adoption of the Plan nor the grant of any Award under the Plan shall be deemed to obligate the Company or any Subsidiary to continue the employment of any Participant for any particular period, nor shall the granting of an Award constitute a request or consent to postpone the retirement date of any Participant.

	
Section 16.
	
Applicable Law.

All questions pertaining to the validity, construction and administration of the Plan and all Awards granted under the Plan shall be determined in conformity with the laws of the State of Maryland, without regard to the conflict of law provisions of any state, and, in the case of Incentive Stock Options, Section 422 of the Code and regulations issued thereunder.

	
Section 17.
	
Restrictions on Awards.

This Plan shall be interpreted and construed in a manner consistent with the Company's intended status as a real estate investment trust ("REIT"), within the meaning of Sections 856 through 860 of the Code. No Award shall be granted or awarded, and with respect to an Award already granted under the Plan, such Award shall not vest, or be exercisable, distributable or payable:

(a)to the extent such Award could cause the Participant to own more than five percent of the outstanding shares of Common Stock; or

(b)if, in the discretion of the Committee, such Award could impair the Company's status as a REIT.

	
Section 18.
	
Effective Date and Term of Plan.

18.1Effective Date.

(a)The Plan has been adopted by the Board, and is effective, as of April 24,  2017, subject to the approval of the Plan by the shareholders of the Company at the Company’s annual meeting of shareholders held on June 8, 2017 and any adjournment or postponement thereof.

(b)In the event the Plan is not approved by shareholders of the Company at its 2017 annual meeting, (i) the Plan shall have no effect, and (ii) any Awards granted on or after April 24, 2017 shall be cancelled.

14

 

18.2Term of Plan.

Notwithstanding anything to the contrary contained herein, no Awards shall be granted on or after the 10th anniversary of the Plan’s effective date set forth in Section 18.1(a) above.

 

 

15Exhibit 10.2

 

 

TRANSITION SERVICES AGREEMENT

 

DATED AS OF [·], 2017

 

BETWEEN

 

VORNADO REALTY TRUST

 

AND

 

JBG SMITH PROPERTIES

 

 

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
ARTICLE I
    	
 
    
	
 
    	
 
    	
SERVICES
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Section 1.01.
    	
 
    	
General
    	
1
    
	
Section 1.02.
    	
 
    	
Quality of Services
    	
2
    
	
Section 1.03.
    	
 
    	
Level of Service
    	
2
    
	
Section 1.04.
    	
 
    	
Duration of Services
    	
2
    
	
Section 1.05.
    	
 
    	
Third-Person Services
    	
2
    
	
Section 1.06.
    	
 
    	
Responsible Personnel
    	
2
    
	
Section 1.07.
    	
 
    	
Consultation
    	
3
    
	
Section 1.08.
    	
 
    	
Monitoring and Reports;   Books and Records; Audit Right
    	
3
    
	
Section 1.09.
    	
 
    	
Changes to Services
    	
4
    
	
Section 1.10.
    	
 
    	
Service Increases
    	
4
    
	
Section 1.11.
    	
 
    	
New Services
    	
4
    
	
Section 1.12.
    	
 
    	
Amendments to Schedule   A
    	
5
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
ARTICLE II
    	
 
    
	
 
    	
 
    	
COMPENSATION;   BILLING
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Section 2.01.
    	
 
    	
Service Fees
    	
5
    
	
Section 2.02.
    	
 
    	
Expenses
    	
5
    
	
Section 2.03.
    	
 
    	
Taxes
    	
5
    
	
Section 2.04.
    	
 
    	
Invoices
    	
5
    
	
Section 2.05.
    	
 
    	
Payment Delay; Finance   Charges
    	
5
    
	
Section 2.06.
    	
 
    	
No Right to Set-Off
    	
6
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
ARTICLE III
    	
 
    
	
 
    	
 
    	
COOPERATION AND   CONSENTS
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Section 3.01.
    	
 
    	
General
    	
6
    
	
Section 3.02.
    	
 
    	
Transition
    	
6
    
	
Section 3.03.
    	
 
    	
Consents
    	
6
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
ARTICLE IV
    	
 
    
	
 
    	
 
    	
CONFIDENTIALITY
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Section 4.01.
    	
 
    	
Recipient Confidential   Information
    	
7
    
	
Section 4.02.
    	
 
    	
Provider Confidential   Information
    	
7
    
	
Section 4.03.
    	
 
    	
Limitations on   Confidential Information
    	
8
    
	
Section 4.04.
    	
 
    	
Required Disclosure
    	
9
    
	
Section 4.05.
    	
 
    	
Third-Person   Confidential Information
    	
9
    

 

i

 

	
 
    	
 
    	
ARTICLE V
    	
 
    
	
 
    	
 
    	
INTELLECTUAL   PROPERTY
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Section 5.01.
    	
 
    	
Recipient Intellectual   Property
    	
10
    
	
Section 5.02.
    	
 
    	
Provider Intellectual   Property
    	
10
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
ARTICLE VI
    	
 
    
	
 
    	
 
    	
REMEDIES AND   LIMITATION OF LIABILITY
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Section 6.01.
    	
 
    	
Remedies
    	
10
    
	
Section 6.02.
    	
 
    	
Limitation of Liability
    	
10
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
ARTICLE VII
    	
 
    
	
 
    	
 
    	
INDEMNIFICATION
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Section 7.01.
    	
 
    	
General
    	
11
    
	
Section 7.02.
    	
 
    	
Indemnification   Procedures
    	
12
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
ARTICLE VIII
    	
 
    
	
 
    	
 
    	
INDEPENDENT   CONTRACTOR
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
ARTICLE IX
    	
 
    
	
 
    	
 
    	
COMPLIANCE WITH   LAWS
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
ARTICLE X
    	
 
    
	
 
    	
 
    	
TERM AND   TERMINATION
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Section 10.01.
    	
 
    	
Term
    	
12
    
	
Section 10.02.
    	
 
    	
Termination of this   Agreement
    	
13
    
	
Section 10.03.
    	
 
    	
Effect
    	
14
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
ARTICLE XI
    	
 
    
	
 
    	
 
    	
NOTICES
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
ARTICLE XII
    	
 
    
	
 
    	
 
    	
DISPUTE   RESOLUTION
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Section 12.01.
    	
 
    	
Dispute Resolution
    	
15
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
ARTICLE XIII
    	
 
    
	
 
    	
 
    	
MISCELLANEOUS
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Section 13.01.
    	
 
    	
Amendment
    	
15
    
	
Section 13.02.
    	
 
    	
Waiver
    	
15
    
	
Section 13.03.
    	
 
    	
Governing Law;   Jurisdiction
    	
16
    
	
Section 13.04.
    	
 
    	
Assignability
    	
16
    
	
Section 13.05.
    	
 
    	
Subcontracting
    	
16
    

 

ii

 

	
Section 13.06.
    	
 
    	
No Third-Person   Beneficiaries
    	
16
    
	
Section 13.07.
    	
 
    	
Severability
    	
17
    
	
Section 13.08.
    	
 
    	
Intentionally Left   Blank
    	
17
    
	
Section 13.09.
    	
 
    	
Counterparts
    	
17
    
	
Section 13.10.
    	
 
    	
Disclaimer of   Representations and Warranties
    	
17
    
	
Section 13.11.
    	
 
    	
Remedies
    	
17
    
	
Section 13.12.
    	
 
    	
Force Majeure
    	
18
    
	
Section 13.13.
    	
 
    	
Specific Performance
    	
18
    
	
Section 13.14.
    	
 
    	
Construction
    	
18
    
	
Section 13.15.
    	
 
    	
Waiver of Jury Trial
    	
19
    
	
Section 13.16.
    	
 
    	
Entire Agreement
    	
19
    
	
 
    	
 
    
	
SCHEDULE   A TO TRANSITION SERVICES AGREEMENT
    	
A-1
    

 

iii

 

TRANSITION SERVICES AGREEMENT

 

This Transition Services Agreement (this “Agreement”) is entered into and effective as of [·], 2017 (the “Effective Date”), by and between Vornado Realty Trust, a Maryland real estate investment trust (“Provider”), and JBG SMITH Properties, a Maryland real estate investment trust (“Recipient”). Provider and Recipient may each be referred to herein as a “Party,” and are collectively referred to as the “Parties.”

 

RECITALS

 

WHEREAS, Provider, as general partner of its operating partnership, Vornado Realty L.P. (“VRLP”), has determined that it is in the best interests of VRLP to distribute to Provider and the other holders of common limited partnership units of VRLP all of the common limited partnership interests in JBG SMITH Properties LP (“JBG SMITH LP”), a newly formed company that will hold, directly or indirectly, certain assets and liabilities associated with Provider’s Washington D.C. real estate portfolio, and the board of trustees of Provider has determined that it is in the best interests of Provider to (i) contribute to Recipient all of the common limited partnership interests in JBG SMITH LP it receives in the distribution by VRLP in exchange for common shares of Recipient and (ii) distribute to holders of Provider common shares all of the common shares of Recipient to be received by Provider in exchange for such contribution (the “Separation”);

 

WHEREAS, Provider, VRLP, JBG SMITH LP and Recipient have entered into that certain Separation and Distribution Agreement, dated as of [·], 2017 (the “Separation Agreement”), to carry out, effect, and consummate the Separation; and

 

WHEREAS, the Parties have agreed that Provider will, or will cause one or more of its Subsidiaries (as defined below) to, provide to Recipient or one or more of its Subsidiaries, and Recipient and/or its Subsidiaries will receive, the transition services described in Article I on a transitional basis following the Separation and in accordance with the terms of, and subject to, the conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and mutual promises, covenants, agreements, representations and warranties contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

 

ARTICLE I
 SERVICES

 

Section 1.01.                                    General. In accordance with the provisions hereof, Provider shall provide, or cause to be provided, to Recipient and/or its Subsidiaries, and Recipient and/or its Subsidiaries shall receive, the services described in Schedule A attached hereto, (each such service, a “Service” and, collectively, the “Services”).  Schedule A may be amended from time to time by written agreement of the Parties. For purposes of this Agreement, a “Subsidiary” of any Party means a corporation or other entity of which at least a majority of the voting power or value of equity securities is owned, directly or indirectly, by such Party;  for the avoidance of

 

 

doubt, “Subsidiary” shall include VRLP, when used with respect to Provider, and JBG SMITH LP, when used with respect to Recipient.

 

Section 1.02.                                    Quality of Services. Provider shall perform the Services (i) in a workmanlike and professional manner, (ii) with the same degree of care as it exercises in performing its own functions of a like or similar nature and to a standard that is materially consistent to that provided by Provider with respect to Provider’s business during the twelve (12) months immediately prior to the Separation, (iii) utilizing persons of suitable experience, training and skill, and (iv) in a timely manner in accordance with the provisions of this Agreement.

 

Section 1.03.                                    Level of Service. The Service levels requested by Recipient (the “Service Levels”) shall be as set forth in Schedule A.  Subject to Section 1.10, Service Levels may not be increased, including the enhancement of any Services or addition of any new Services, without the written agreement of the Parties.

 

Section 1.04.                                    Duration of Services. Subject to the terms of this Agreement, Provider will provide (or cause to be provided) the Services to Recipient until the earlier of, with respect to each such Service, (i) the expiration of the period of the maximum duration for such Service set forth in Schedule A (as may be extended in accordance with the terms of this Agreement), or (ii) the date upon which such Service is terminated under Section 10.02; provided, however, that Recipient shall use its commercially reasonable efforts in good faith to transition from using the Services during the term of this Agreement; and provided, further, that to the extent that Provider’s ability to provide a Service is dependent on the continuation of a related Service (and such dependence is reflected on Schedule A (including any amendments to Schedule A in connection with a New Service pursuant to Section 1.11 or an amendment pursuant to Section 1.12)), as the case may be, Provider’s obligation to provide such dependent Service shall terminate automatically with the termination of such related Service.

 

Section 1.05.                                    Third-Person Services. Each Party acknowledges and agrees that certain of the Services to be provided under this Agreement may be provided to Recipient by third Persons (as defined below) designated by Provider (“Third-Party Service Providers”) provided that (i) such Third-Party Service Provider as of the Effective Time is providing the applicable services to Provider or to Recipient (whether directly or through Provider), (ii) Provider engages such Third-Party Service Provider to provide to Provider one or more of the same or similar services as are being provided to Recipient under this Agreement or (iii) Recipient consents in writing. A “Person” means any individual, corporation, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company, governmental authority or other entity. To the extent so provided, Provider shall use commercially reasonable efforts to cause such Third-Party Service Providers to continue to provide such Services to Recipient, consistent with the manner in which such Services had been provided historically to Recipient; provided, however, that if any such Third-Party Service Provider notifies Provider or its Subsidiaries that it is unable or unwilling to provide any such Services, Provider shall promptly notify Recipient in writing, and shall use its commercially reasonable efforts to determine the manner in which such Services can best be provided, and, if there is any change to the Services provided as a result, including the level or cost thereof, Provider and Recipient shall negotiate in good faith to amend Schedule A as appropriate.

 

Section 1.06.                                    Responsible Personnel. The Parties shall each designate a point of contact for each Service listed in Schedule A to whom any questions related to the Services provided may be directed. The personnel (including Third-Party Service Providers) who will provide the Services for and on behalf of Provider shall be (a) the Persons so designated by the Parties in writing on or prior to the date of this Agreement whether on Schedule A or otherwise and (b) the Persons agreed by the Parties in writing after the date of this Agreement (the Persons described in clauses (a) and (b) the “Transition Team”). From time to time after the date of this Agreement, so long as there is no resulting increase in costs, or decrease in the level of service for Recipient, Provider will have the right, in its reasonable discretion, to (i)

 

2

 

designate which of its personnel will be involved in providing Services to Recipient, and (ii) remove and replace any such personnel, provided, that Provider may remove existing personnel from the Transition Team who are providing significant Services to Recipient or its Subsidiaries only with the prior written consent of Recipient or if such personnel are no longer employed by Provider or its affiliates (which, for the avoidance of doubt, does not include Provider terminating the engagement of a Third-Party Service Provider unless Provider also terminates the provision of services by such Third-Party Provider to Provider) or such personnel or such Third-Party Service Provider become unable to perform the applicable Services for reasons outside the control of Provider and its affiliates. To the extent that any Provider personnel who is performing Services hereunder leaves the employ of Provider, becomes disabled or otherwise becomes unavailable to perform the Services for reasons outside the control of Provider or its affiliates, the Parties shall cooperate in good faith to determine how to provide replacement Services to Recipient. Provider will use its commercially reasonable efforts to limit disruption of the provision of Services to Recipient in the transition of any Services to different personnel.  In the event that the provision of any Service by Provider requires the cooperation and services of applicable personnel of Recipient, Recipient will make available to Provider such personnel as may be necessary for Provider to provide such Service. Recipient will have the right, in its reasonable discretion, to (i) designate which of its personnel it will make available to Provider in connection with the receipt of such Service, and (ii) remove and replace any such personnel, so long as there is no resulting increase in costs to Provider in providing such Service or adverse effect on Provider’s ability to provide such Service; provided, however, that Recipient will use its commercially reasonable efforts to limit disruption of the provision of services by Provider in the transition of such personnel.

 

Section 1.07.                                    Consultation. The Parties agree to review Schedule A and the Services provided thereunder no less often than quarterly to discuss the Services and Service Levels provided during the preceding quarter and expected to be provided during the subsequent quarter.

 

Section 1.08.                                    Monitoring and Reports; Books and Records; Audit Right.

 

(a)                                 Provider shall maintain books and records in reasonable and customary detail pertaining to the provision of Services pursuant to this Agreement. Provider shall make such books and records available for inspection by Recipient, or its authorized representatives, during normal business hours and upon reasonable notice, and shall retain such books and records for periods consistent with the retention policies applicable to Provider’s business.

 

(b)                                 Upon thirty (30) days’ advance written notice to Provider, Recipient may audit (or cause an independent third Person auditor to audit), during regular business hours and in a manner that complies with the confidentiality, building and security requirements of Provider, the books, records and facilities of Provider pertaining to the provision of Services pursuant to this Agreement to the extent necessary to determine Provider’s compliance with this Agreement or as may otherwise be required to ensure compliance with applicable laws or regulations. Recipient shall have the right to audit such books, records and facilities of Provider until the end of the sixth (6th) month after the termination of this Agreement, provided Recipient may only audit once in any twelve (12)-month period (or on other occasions to the extent agreed to by the Parties). Any audit under this Section 1.08(b) shall not interfere unreasonably with the operations of Provider. Recipient shall reimburse Provider for any reasonable, documented, out-of-pocket costs incurred in connection with such audit unless the amount of the overcharge or overpayment disclosed by such audit exceeds $25,000 with respect to one or more of the following categories, each considered separately from the others: (i) the Information Technology Services, (ii) the Tax Services or (iii) all other Services set forth on Schedule A. The amount of any overcharge or overpayment disclosed in an audit shall be promptly refunded to Recipient, and the amount of any undercharge or underpayment disclosed in an audit shall be promptly paid by Recipient to Provider.

 

3

 

Section 1.09.                                    Changes to Services. It is understood and agreed that Provider may from time to time modify, change or enhance the manner, nature and/or quality of any Service provided to Recipient to the extent Provider is making a similar change in the performance of the same services provided by or on behalf of Provider to itself and its Subsidiaries; provided that any such modification, change or enhancement will not reasonably be expected to negatively affect such Service (including the timing, scope or nature thereof) in any material respect. Provider shall furnish to Recipient substantially the same notice (in content and timing), if any, as Provider furnishes to its own organization with respect to such modifications, changes or enhancements (but in no event less than thirty (30) days’ notice).

 

Section 1.10.                                    Service Increases. After the date of this Agreement, if (i) Recipient requests, or Provider reasonably determines that Recipient’s business requires, that Provider increase, relative to historical levels prior to the Separation, the volume, amount, level or frequency, as applicable, of any Service provided by Provider, and (ii) such increase is reasonably determined by Recipient as necessary for Recipient to operate its businesses (such increase, a “Service Increase”), then Provider shall provide such Service Increase in accordance with such request and subject to the Parties agreeing to an amendment to Schedule A to address such Service Increase; provided, however, that Provider shall not be obligated to provide any Service Increase if it does not, in its reasonable judgment, have adequate resources to provide such Service Increase or if the provision of such Service Increase would significantly disrupt the operation of its own business. In connection with any request for a Service Increase in accordance with this Section 1.10, the Parties shall in good faith negotiate the terms of an amendment to Schedule A, which amendment shall be consistent with the terms of, and the pricing methodology used for, the applicable Service.

 

Section 1.11.                                    New Services.

 

(a)                                 From time to time during the term of this Agreement, Recipient may request that Provider provide additional or different services which Provider is not expressly obligated to provide under this Agreement (“New Services”). Provider shall consider such requests in good faith and shall use commercially reasonable efforts to provide any such New Services; provided, however, that Provider shall not be obligated to provide any New Services if it does not, in its reasonable judgment, have adequate resources to provide such New Services or if the provision of such New Services would significantly disrupt the operation of its own business, or if, after negotiations between the Parties pursuant to Section 1.11(b), the Parties fail to reach an agreement with respect to the terms (including the Service Fees and Expenses (as defined below)) applicable to the provision of such New Services.

 

(b)                                 In connection with any request for New Services, except as otherwise provided in Section 1.11(a), the Parties shall in good faith (i) negotiate the applicable Service Fee and the terms of an amendment to Schedule A, which amendment shall describe in reasonable detail the nature, scope, service period(s), termination provisions, the applicable Service Fee and other terms applicable to such New Services, and (ii) determine any costs and expenses, including any start-up costs and expenses that would be incurred by Provider, in connection with the provision of such New Services, which costs and expenses shall be borne solely by Recipient to the extent reflected on the amended Schedule A.

 

4

 

Section 1.12.                                    Amendments to Schedule A. Each amendment to Schedule A, as agreed to in writing by the Parties, shall be deemed part of this Agreement and any changes to Services, Service Increases, unintentionally omitted services and/or New Services set forth therein shall be subject to the terms and conditions of this Agreement.

 

ARTICLE II
 COMPENSATION; BILLING

 

Section 2.01.                                    Service Fees. In consideration for providing the Services, Provider will charge Recipient the fees indicated for each Service listed in Schedule A (each, a “Service Fee” and collectively, the “Service Fees”).

 

Section 2.02.                                    Expenses. Except to the extent provided otherwise in Schedule A, in addition to the Service Fee, Provider shall also be entitled to charge Recipient for any reasonable, documented, out-of-pocket costs and expenses incurred by Provider in providing the Services (“Expenses”); provided that Expenses (other than reasonable travel costs) greater than $25,000 in the aggregate that are not otherwise identified on Schedule A must be pre-approved in writing by Recipient.

 

Section 2.03.                                    Taxes. In addition to any amounts otherwise payable by Recipient pursuant to this Agreement, Recipient shall pay, be responsible, and promptly reimburse Provider, for any sales, use, value added, goods and services, excise, transfer, recording or similar taxes, including any interest, penalties or additional amounts imposed with respect thereto, imposed with respect to, or in connection with, the provision of Services or payment of any Service Fees hereunder.

 

Section 2.04.                                    Invoices. Within thirty (30) days after the end of each calendar month, Provider shall send Recipient an invoice that includes in reasonable detail, with such supporting documentation as Recipient may reasonably request, the Service Fees and Expenses due for Services provided to Recipient for such month. Payments of invoices shall be made by check or wire transfer of immediately available funds to one or more accounts specified in writing by Provider. Payment shall be made within thirty (30) days after the date of receipt of Provider’s invoice. All amounts payable to Provider hereunder shall be paid without set-off, deduction, abatement or counterclaim. Recipient may dispute an invoice by providing written notice of such dispute and the basis therefor to Provider. Recipient shall pay any undisputed portion of an Invoice in accordance herewith.

 

Section 2.05.                                    Payment Delay; Finance Charges.

 

(a)                                 If Recipient fails to make any payment or payments that exceed $100,000 individually or in the aggregate within thirty (30) days of the date such payment was due to Provider with respect to one or more Services and has not disputed the applicable payment or payments, Provider shall have the right, at its sole option, upon ten (10) business days’ prior written notice (such notice, a “Suspension Notice”), to suspend performance of such Service or Services until payment has been received.

 

5

 

(b)                                 If Recipient fails to make any payment within thirty (30) days of the date such payment was due to Provider, a finance charge of twelve percent (12%) per annum, payable from the date of the invoice to the date such payment is received and levied upon the balance of any such payment, shall be due and payable to Provider. In addition, subject to Section 2.05(c), Recipient shall indemnify Provider for its costs, including reasonable attorneys’ fees and disbursements incurred to collect any unpaid amount.

 

(c)                                  Recipient shall not be liable for the payment of any finance charges or attorneys’ fees and disbursements pursuant to this Section 2.05, and Provider shall not be authorized to suspend performance pursuant to this Section 2.05, to the extent, but only to the extent, that Recipient is in good faith disputing Service Fees or Expenses incurred under Sections 2.01 and 2.02.

 

Section 2.06.                                    No Right to Set-Off. Recipient shall pay the full amount of all Service Fees and shall not set off, counterclaim or otherwise withhold any amount owed to Provider under this Agreement on account of any obligation owed by Provider to Recipient (other than agreed-upon credits, as contemplated herein).

 

ARTICLE III
 COOPERATION AND CONSENTS

 

Section 3.01.                                    General. Each Party shall reasonably cooperate with and provide assistance to the other Party in carrying out the provisions of this Agreement. Such cooperation shall include, but not be limited to, exchanging information, providing access to electronic systems used in connection with the Services, making adjustments and obtaining all consents, licenses, sublicenses or approvals necessary to permit each Party to perform its obligations hereunder; provided, however, that neither Party shall be required to disclose confidential, proprietary, privileged or competitively sensitive information to the other Party.

 

Section 3.02.                                    Transition. At the request of Recipient in contemplation of the termination of any Services hereunder, in whole or in part, Provider shall cooperate with Recipient, at Recipient’s expense, in transitioning such Services to Recipient or to any Third-Party Service Provider designated by Recipient.

 

Section 3.03.                                    Consents. Provider will use commercially reasonable efforts to obtain, and to keep and maintain in effect, any third-Person licenses and consents necessary to provide the Services (the “Consents”). The costs relating to obtaining any such licenses or Consents obtained solely for the benefit of Recipient shall be borne by Recipient; provided that Provider shall not incur any such costs without the prior written consent of Recipient. If any such consent is not obtained or maintained, Provider shall promptly notify Recipient in writing, and the Parties will reasonably cooperate with one another to achieve a reasonable alternative arrangement with respect thereto.

 

6

 

ARTICLE IV
 CONFIDENTIALITY

 

Section 4.01.                                    Recipient Confidential Information. From and after the Effective Date, subject to Section 4.04, and except as contemplated by or otherwise provided for under this Agreement or the Separation Agreement, Provider shall not, and shall cause its affiliates and its own and its affiliates’ officers, trustees, directors, employees, and other agents and representatives, including attorneys, agents, customers, suppliers, contractors, consultants and other representatives (collectively, “Representatives”), to not, directly or indirectly, disclose, reveal, divulge or communicate to any Person, other than to Recipient and its affiliates (collectively, the “Recipient Group”) and their respective Representatives, and to Provider and its affiliates (collectively, the “Provider Group”) and their respective Representatives who reasonably need to know such information in connection with the provision of Services under this Agreement, or use or otherwise exploit for its own benefit or for the benefit of any third Person (other than members of the Recipient Group), any Recipient Confidential Information (as defined below).  For the purposes of this Agreement, “Group” shall mean the Provider Group or the Recipient Group, as the context requires. If any disclosures are made by members of the Recipient Group to members of the Provider Group in connection with the provision of Services under this Agreement, then the Recipient Confidential Information so disclosed shall be used by the Provider Group only as required to perform the Services. Provider shall use the same degree of care to prevent and restrain the unauthorized use or disclosure of the Recipient Confidential Information by any member of the Provider Group or its Representatives as it uses for its own confidential information of a like nature, but in no event less than a reasonable standard of care. For purposes of this Agreement, any information, material or documents relating to the businesses currently or formerly conducted, or proposed to be conducted, by the Recipient Group that is furnished to, or in possession of, any member of the Provider Group, in each case in connection with the Services provided under this Agreement and irrespective of the form of communication, and all notes, analyses, compilations, forecasts, data, translations, studies, memoranda or other documents prepared by members of the Provider Group, that contain, or otherwise reflect, such information, material or documents is hereinafter referred to as “Recipient Confidential Information.” Recipient Confidential Information does not include, and there shall be no obligation hereunder, with respect to information that (i) is or becomes generally available to the public, other than as a result of a disclosure by a member of the Provider Group or its Representatives not otherwise permissible hereunder, (ii) Provider can demonstrate was or became available to the Provider Group from a source other than the Recipient Group or its Representatives, or (iii) is developed independently by the Provider Group without reference to the Recipient Confidential Information; provided, however, that, in the case of clause (ii), the source of such information was not known by Provider to be bound by a confidentiality or non-disclosure agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, any member of the Recipient Group with respect to such information.  The Parties acknowledge and agree that, from and after the Effective Time (as defined in the Separation Agreement), all information about the DC Business (as defined in the Separation Agreement) shall be Recipient Confidential Information for purposes of this Agreement.

 

Section 4.02.                                    Provider Confidential Information. From and after the Effective Date, subject to Section 4.04, and except as contemplated by or otherwise provided for under this

 

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Agreement or the Separation Agreement, Recipient shall not, and shall cause the members of the Recipient Group and their respective Representatives to not, directly or indirectly, disclose, reveal, divulge or communicate to any Person other than members of the Provider Group and its Representatives, or members of the Recipient Group and its Representatives, who reasonably need to know such information in connection with the provision of services under this Agreement, or use or otherwise exploit for its own benefit or for the benefit of any third Person (other than members of the Provider Group), any Provider Confidential Information (as defined below). If any disclosures are made by members of the Provider Group to members of the Recipient Group in connection with the provision of Services under this Agreement, then the Provider Confidential Information (as defined below) so disclosed shall be used by the Recipient Group only as required to receive the Services. Recipient shall use the same degree of care to prevent and restrain the unauthorized use or disclosure of the Provider Confidential Information by any member of the Recipient Group or its Representatives as it uses for its own confidential information of a like nature, but in no event less than a reasonable standard of care. For purposes of this Agreement, any information, material or documents relating to the businesses currently or formerly conducted (except as set forth in the last sentence of Section 4.01), or proposed to be conducted, by the Provider Group that is furnished to, or in possession of, any member of the Recipient Group, in each case in connection with the Services provided under this Agreement and irrespective of the form of communication, and all notes, analyses, compilations, forecasts, data, translations, studies, memoranda or other documents prepared by members of the Recipient Group, that contain, or otherwise reflect, such information, material or documents, is hereinafter referred to as “Provider Confidential Information,” and, together with the Recipient Confidential Information, “Confidential Information.” Provider Confidential Information does not include, and there shall be no obligation hereunder with respect to, information that (i) is or becomes generally available to the public, other than as a result of a disclosure by any member of the Recipient Group or its Representatives not otherwise permissible hereunder, (ii) Recipient can demonstrate was or became available to the Recipient Group from a source other than the Provider Group or its Representatives, or (iii) is developed independently by the Recipient Group without reference to the Provider Confidential Information; provided, however, that, in the case of clause (ii), the source of such information was not known by Recipient to be bound by a confidentiality or non-disclosure agreement with, or other contractual, legal or fiduciary obligation of confidentiality to, any member of the Provider Group with respect to such information.

 

Section 4.03.                                    Limitations on Confidential Information. For the duration of this Agreement, Provider agrees that access to Recipient Confidential Information that is received from any member of the Recipient Group during the course of the performance of this Agreement shall be (i) limited to only those employees of the Provider Group that are providing Services under this Agreement and who have been informed of the obligations and restrictions under this Article IV; (ii) used only for the purpose of providing Services pursuant to this Agreement; and (iii) shall otherwise be kept strictly confidential by all members of the Provider Group, except that Provider may share, to the extent necessary to provide Services pursuant to this Agreement, such information to any member of the Provider Group or to any third Person who may have a need to know such information for purposes of providing the Services; provided, that any such member of the Provider Group or Third-Party Service Provider shall have agreed to be bound by this Article IV and Provider shall be liable for any breaches of this

 

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Article IV by any member of the Provider Group or Third-Party Service Provider. Notwithstanding anything in this Section 4.03 to the contrary, the obligations under this Section 4.03 shall not apply to (i) information that becomes generally available to the public other than as a result of a disclosure, directly or indirectly, by any member of the Provider Group or (ii) information that becomes available to any member of the Provider Group on a non-confidential basis from a source other than any member of the Recipient Group; provided, that such source is not known by any member of the Provider Group, after reasonable inquiry, to be subject to an obligation of confidentiality or other obligation of secrecy to Recipient.

 

Section 4.04.                                    Required Disclosure. Either Party may disclose Confidential Information to the extent reasonably necessary in connection with the enforcement of this Agreement or as required by law or legal, regulatory or self-regulatory process (including to the extent requested by any governmental authority, stock exchange or other self-regulatory organization in connection with any such law or legal, regulatory or self-regulatory process), including any tax audit or litigation. If either Group, or any third Person with whom Provider has shared Recipient Confidential Information received from any member of the Recipient Group during the course of the performance of this Agreement, is requested or required (by oral question, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process) by any governmental authority, stock exchange or other self-regulatory organization or pursuant to applicable law, to disclose or provide any Confidential Information, the Party or third Person receiving such request or demand shall use commercially reasonable efforts to provide the Party whose Confidential Information is subject to such request or demand with written notice of such request or demand as promptly as practicable, under the circumstances, so that such relevant Party shall have an opportunity to seek an appropriate protective order. The Party or third Person receiving such request or demand agrees to take, and to cause its Representatives to take, at the expense of the Party whose Confidential Information is subject to such request or demand, all other reasonable steps necessary to obtain confidential treatment of the Confidential Information in question. Subject to the foregoing, the Party or third Person that receives such a request or demand may thereafter disclose or provide Confidential Information, to the extent required by law (as so advised by counsel), or by lawful process of such governmental authority, stock exchange or other self-regulatory organization.

 

Section 4.05.                                    Third-Person Confidential Information. Each Party acknowledges that it and the other members of its Group may have in their possession confidential or proprietary information of third Persons (such information, “Third-Person Confidential Information”) that was received under confidentiality or non-disclosure agreements with such third Persons. Each Party agrees that it will hold, and will cause the other members of its Group and their respective Representatives to hold, in strict confidence, any Third-Person Confidential Information to which it or any other member of its respective Group has access, in accordance with the terms of any agreements entered into between or among one (1) or more members of the applicable Party’s Group and such third Persons; provided, that each Party has been provided with a copy of such confidentiality or non-disclosure agreement and informed by the other Party of the confidential and proprietary nature of the information.

 

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ARTICLE V
 INTELLECTUAL PROPERTY

 

Section 5.01.                                    Recipient Intellectual Property. Except as otherwise agreed by the Parties, all data, software, or other property or assets owned or created by Recipient, including, without limitation, derivative works thereof, and new data or software created by Recipient at Recipient’s expense, in connection with its receipt of Services and all intellectual property rights therein (the “Recipient Property”), shall remain the sole and exclusive property and responsibility of Recipient. Provider shall not acquire any rights in any Recipient Property pursuant to this Agreement.

 

Section 5.02.                                    Provider Intellectual Property. Except as otherwise agreed by the Parties, all data, software or other property or assets owned or created by Provider, including, without limitation, derivative works thereof, and new data or software created by Provider at Provider’s expense, in connection with the provision of Services and all intellectual property rights therein (the “Provider Property”), shall be the sole and exclusive property and responsibility of Provider. Recipient shall not acquire any rights in any Provider Property pursuant to this Agreement.

 

ARTICLE VI
 REMEDIES AND LIMITATION OF LIABILITY

 

Section 6.01.                                    Remedies. In the event that any Service performed by Provider hereunder is not performed in accordance with the provisions of Article I, then, except in the event of (A) the gross negligence or willful misconduct of Provider or (B) any infringement by Recipient of third-Person intellectual property in connection with the receipt of any Service from Provider, the sole remedy of Recipient shall be (i) to require Provider to re-perform such Service in accordance with Article I without obligation on the part of Recipient to make additional payments for such performance, (ii) to obtain from Provider a credit in an equivalent amount towards the future purchase of any Services that are contemplated by and under the terms of this Agreement, or (iii) to replace such Service with service provided by a Third-Party Service Provider. In the event that Recipient elects to replace any Services with a Third-Party Service Provider, Provider shall be forever released from any liability arising on account of such Service and shall not be entitled to any Service Fees in respect of services provided by such Third-Party Service Provider to Recipient.

 

Section 6.02.                                    Limitation of Liability.

 

(a)                                 No member of the Provider Group or their respective controlling persons, trustees, directors, officers, employees, agents and permitted assigns (each, a “Provider Party”) shall be liable to any member of the Recipient Group or their respective controlling persons, directors, officers, employees, agents and permitted assigns (each, a “Recipient Party”) for any liabilities, claims, demands, damages, judgments, losses, costs and expenses (including, but not limited to, court costs, reasonable attorneys’ fees and/or amounts paid in settlement) of any kind or nature, whether direct or indirect (collectively referred to as “Damages”), of any Recipient Party resulting from, relating to or arising in connection with, this Agreement or any of the Services provided hereunder, except for any liability of Provider to the extent that such Damages resulted from (i) any acts or omissions of any Provider Party, which acts or omissions are the result of gross negligence, willful misconduct or bad faith by such Provider Party, or (ii) Provider’s breach of its obligations under Article IV or Article VII of this Agreement; it being

 

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understood that nothing in this Section 6.02(a) shall impact the rights of the Parties under Section 13.13 of this Agreement.

 

(b)                                 No Recipient Party shall be liable to any Provider Party for any Damages to any Provider Party resulting from, relating to or arising in connection with this Agreement, or any of the Services provided hereunder, except for any liability of Recipient to the extent that such Damages resulted from (i) acts or omissions of any Recipient Party, which acts or omissions are the result of gross negligence, willful misconduct or bad faith by such Recipient Party, or (ii) Recipient’s breach of its obligations under Article IV or Article VII of this Agreement; it being understood that nothing in this Section 6.02(b) shall impact the rights of the Parties under Section 13.13 of this Agreement.

 

(c)                                  IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY) OR OTHERWISE, AT LAW OR EQUITY, FOR ANY SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE, EXEMPLARY, REMOTE, SPECULATIVE, CONSEQUENTIAL OR SIMILAR DAMAGES (INCLUDING LOST PROFITS OR DAMAGES CALCULATED ON MULTIPLES OF EARNINGS APPROACHES) IN EXCESS OF COMPENSATORY DAMAGE, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT.

 

(d)                                 Each Party agrees that it shall, in all circumstances, use commercially reasonable efforts to mitigate, and to otherwise minimize its Damages, and those of all members of its Group and their respective controlling persons, directors, officers, employees, agents and permitted assigns, whether direct or indirect, resulting from, or arising in connection with, any failure by the other Party to comply fully with its obligations under this Agreement.

 

(e)                                  In no event, whether as a result of breach of contract, indemnity, warranty, tort (including negligence), strict liability, or otherwise, shall the liability of any Party to the other Party for any loss or damage arising out of, or resulting from, this Agreement or the furnishing of Services hereunder exceed (i) if twelve months have elapsed since the Effective Date, the aggregate Service Fees actually paid pursuant to this Agreement during the twelve (12)-month period immediately preceding the applicable claim for losses or damages or (ii) if twelve months have not elapsed since the Effective Date, the aggregate Service Fees actually paid pursuant to this Agreement, annualized.

 

ARTICLE VII
 INDEMNIFICATION

 

Section 7.01.                                    General.

 

(a)                                 Provider shall indemnify and hold harmless any Recipient Party against and from all Damages payable to third Persons arising out of or relating to (i) a breach of Article IV of this Agreement by Provider, (ii) the gross negligence or willful misconduct of Provider, and (iii) any infringement by Provider of third-Person intellectual property in the performance of any Service, in each case, except to the extent that such Damages are a result of the breach of this Agreement, gross negligence, or willful misconduct on the part of any Recipient Party.

 

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(b)                                 Recipient shall indemnify and hold harmless any Provider Party against and from all Damages payable to third Persons arising out of or relating to (i) a breach of Article IV of this Agreement by Recipient, (ii) the gross negligence or willful misconduct of Recipient, and (iii) any infringement by Recipient of third-Person intellectual property in connection with the receipt of any Service, in each case except to the extent that such Damages are a result of the breach of this Agreement, gross negligence, or willful misconduct on the part of any Provider Party.

 

Section 7.02.                                    Indemnification Procedures. The provisions of Article IV of the Separation Agreement shall govern, mutatis mutandis, claims for indemnification under this Article VII.

 

ARTICLE VIII
 INDEPENDENT CONTRACTOR

 

In performing the Services hereunder, each Group shall operate as, and have the status of, an independent contractor. No Party’s employees shall be considered employees or agents of the other Party, nor shall the employees of either Party be eligible or entitled to any benefits, perquisites, or privileges given or extended to any of the other Party’s employees. Nothing contained in this Agreement shall be deemed or construed to create a joint venture or partnership between the Parties. No Party shall have any power or authority to bind or commit any other Party.

 

ARTICLE IX
 COMPLIANCE WITH LAWS

 

In the performance of its duties and obligations under this Agreement, each Party shall comply with all applicable laws in all material respects. The Parties shall cooperate fully in obtaining and maintaining in effect all permits and licenses that may be required for the performance of the Services.

 

ARTICLE X
 TERM AND TERMINATION

 

Section 10.01.                             Term. The term of this Agreement shall commence on the Effective Date and end on the expiration or termination of the final Service on Schedule A, unless terminated earlier as provided in Section 10.02. Except as may be otherwise set forth in Schedule A, and subject to the last proviso of Section 1.04, Recipient may terminate the Information Technology Services prior to the scheduled expiration date thereof set forth on Schedule A by giving Provider not less than sixty (60) days’ prior written notice, or such less time as may be agreed upon by the Parties. For the avoidance of doubt, none of the other Services listed on Schedule A may be terminated prior to the scheduled expiration date thereof set forth on Schedule A. To the extent there are any break-up costs (including commitments made to, or in respect of, personnel or third Persons due to the requirement to provide the Services, prepaid expenses related to the Services or costs related to terminating such commitments) reasonably incurred by Provider as a result of any early

 

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termination of a Service by Recipient, Provider shall use its reasonable best efforts to mitigate such costs, and Recipient shall bear such costs and reimburse Provider in full for the same.

 

Section 10.02.                             Termination of this Agreement. This Agreement may be terminated:

 

(a)                                 by the written agreement of the Parties;

 

(b)                                 by Provider in the event that it delivers a Suspension Notice to Recipient and suspends delivery of one or more Services in accordance with Section 2.05(a), and such Suspension Notice is not the subject of a good faith dispute and is not satisfied within thirty (30) days of the date of delivery of such Suspension Notice, provided, that Provider may only terminate the Service or Services covered by such Suspension Notice;

 

(c)                                  by either Party upon a material breach (other than non-payment of Service Fees or Expenses) by the other Party that is not cured within thirty (30) days after delivery of written notice of such breach from the non-breaching Party;

 

(d)                                 immediately by either Party, if the other Party: (i) commences a voluntary case or other proceeding seeking bankruptcy protection, liquidation, reorganization or similar relief, or seeks the appointment of a trustee, receiver, liquidator or other similar official or the taking of possession by any such official in any involuntary case or other proceeding commenced against it, or makes a general assignment for the benefit of creditors or fails generally to pay its debts as they become due; or (ii) has an involuntary case or other proceeding commenced against it seeking bankruptcy protection, liquidation, reorganization, or other relief with respect to it or substantially all of its debts, or seeks the appointment of a trustee, receiver, liquidator, custodian or other similar official for such Party or any substantial part of such Party’s property, and such involuntary case or other proceeding remains undismissed for a period of sixty (60) days;

 

(e)                                  by either Party if all of the Services have been terminated early in accordance with Section 10.01; or

 

(f)                                   by either Party, upon a Change in Control (as defined below) of the other Party; it being agreed that notice of a Change of Control will be provided by the Party undergoing a Change in Control to the other Party not later than ten (10) days prior to signing a definitive agreement and, in any event, not later than sixty (60) days prior to consummation of such Change in Control.  For the purposes of this Agreement, “Change in Control” shall mean, with respect to a Party, the occurrence after the Effective Date of any of the following: (i) the sale, conveyance or disposition, in one or a series of related transactions, of all or substantially all of the assets of such Party and its Group (taken as a whole) to a third Person that is not a member of such Party’s Group prior to such transaction or the first of such related transactions; (ii) the consolidation, merger or other business combination of a Party with or into any other Person, immediately following which the then-current shareholders of the Party, as such, fail to own, in the aggregate, at least majority voting power of the surviving Party in such consolidation, merger or business combination, or of its ultimate publicly traded parent; (iii) a transaction or series of transactions in which any Person or “group” (as the term “group” is used in Sections 13(d) and 14(d) of the United States Securities Exchange Act of 1934, as amended,

 

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together with the rules and regulations promulgated thereunder) acquires majority voting power of such Party (other than a reincorporation or similar corporate transaction in which each of such Party’s shareholders owns, immediately thereafter, interests in the new parent company in substantially the same percentage as such shareholder owned in such Party immediately prior to such transaction); or (iv) a majority of the board of trustees of such Party ceases to consist of individuals who have become trustees as a result of being nominated or elected by a majority of such Party’s trustees.

 

Section 10.03.                             Effect. In the event of termination of this Agreement in its entirety pursuant to this Article X, or upon the expiration of the term of this Agreement, this Agreement shall cease to have further force or effect, and neither Party shall have any liability to the other Party with respect to this Agreement; provided that:

 

(a)                                 termination or expiration of this Agreement for any reason shall not release a Party from any liability or obligation that already has accrued as of the effective date of such termination or expiration, and shall not constitute a waiver or release of, or otherwise be deemed to adversely affect, any rights, remedies or claims which a Party may have hereunder at law, equity or otherwise or which may arise out of or in connection with such termination or expiration;

 

(b)                                 as promptly as practicable, following termination of this Agreement in its entirety or with respect to any Service to the extent applicable, and the payment by Recipient of all amounts owing hereunder, Provider shall return all reasonably available material, inventory and other property of Recipient held by Provider, and shall deliver copies of all of Recipient’s records maintained by Provider with regard to the Services in Provider’s standard format and media. Provider shall deliver such property and records to such location or locations, as reasonably requested by Recipient. Arrangements for shipping, including the cost of freight and insurance, and the reasonable cost of packing incurred by Provider shall be borne by Recipient; and

 

(c)                                  Section 1.08, Articles IV, V, VI, VII, IX, XI, XII and XIII, and this Section 10.03, shall survive any termination or expiration of this Agreement and remain in full force and effect.

 

ARTICLE XI
 NOTICES

 

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

 

If to Provider, to:

 

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Vornado Realty Trust
    	
 
    
	
888 Seventh Avenue
    	
 
    
	
New York, New York   10019
    	
 
    
	
Attention: Corporation   Counsel
    	
 
    
	
Facsimile: (212)   894-7996
    	
 
    
	
Email: arice@vno.com
    	
 
    
	
 
    	
 
    
	
If to Recipient, to:
    	
 
    
	
 
    	
 
    
	
JBG SMITH Properties
    	
 
    
	
4445 Willard Avenue   Suite 400
    	
 
    
	
Chevy Chase, Maryland   20815
    	
 
    
	
Attention: Chief Legal   Officer
    	
 
    
	
Email: smuseles@jbg.com
    	
 
    

 

ARTICLE XII
 DISPUTE RESOLUTION

 

Section 12.01.                             Dispute Resolution. The provisions of Article VII of the Separation Agreement shall apply, mutatis mutandis, to all disputes, controversies or claims (whether arising in contract, tort or otherwise) that may arise out of or relate to, or arise under or in connection with this Agreement or the transactions contemplated hereby.

 

ARTICLE XIII
 MISCELLANEOUS

 

Section 13.01.                             Amendment. No provision of this Agreement, including Schedule A, may be amended, supplemented or modified except by a written instrument signed by both of the Parties and making specific reference to this Agreement or to Schedule A, as applicable.

 

Section 13.02.                             Waiver.

 

(a)                                 Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the Party or the Parties entitled to the benefit thereof. Any such waiver shall be validly and sufficiently given for the purposes of this Agreement if, as to any Party, it is executed by a writing signed by an authorized representative of such Party.

 

(b)                                 Waiver by any Party of any default by the other Party of any provision of this Agreement shall not be construed to be a waiver by the waiving Party of any subsequent or

 

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other default, nor shall it in any way affect the validity of this Agreement or prejudice the rights of the other Party, thereafter, to enforce each and every such provision. No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof, or the exercise of any other right, power or privilege.

 

Section 13.03.                             Governing Law; Jurisdiction. This Agreement, and the legal relations between the Parties hereto, shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws rules thereof, to the extent such rules would require the application of the law of another jurisdiction. In addition, each of the Parties hereto (a) consents to submit itself to the exclusive personal jurisdiction and venue of the Supreme Court of the State of New York, New York County and the United States District Court for the Southern District of New York (the “Applicable Courts”) with respect to any suit (whether at law, in equity, in contract, in tort or otherwise) relating to or arising out of this Agreement (other than arbitrable Disputes (as defined in the Separation Agreement) governed by Article XII), (b) agrees that it will not, directly or indirectly, attempt to defeat or deny such personal jurisdiction or venue by motion or otherwise, (c) agrees that it will not, and it will cause its subsidiaries not to, bring or support any such suit in any court other than the Applicable Courts, (d) irrevocably agrees that any such suit (whether at law, in equity, in contract, in tort or otherwise) will be heard and determined exclusively in the Applicable Courts, and (e) agrees to service of process in any such action in any manner prescribed by the laws of the State of New York.

 

Section 13.04.                             Assignability. This Agreement shall be binding upon, and inure to the benefit of, the Parties, and their respective successors and permitted assigns; provided, however, that no Party may assign, delegate or transfer (by operation of law or otherwise) its respective rights, or delegate its respective obligations, under this Agreement without the express prior written consent of the other Party. Notwithstanding the foregoing, either Party may assign its rights and obligations under this Agreement to (i) any member of such Party’s Group; provided, however, that each Party shall at all times remain liable for the performance of its obligations under this Agreement by any such Group member, or (ii) any successor by merger, consolidation, reorganization, recapitalization, acquisition or person acquiring all or substantially all of the assets of such Party, subject to Section 10.02(f). Any attempted assignment or delegation in violation of this Section 13.04 shall be null and void.

 

Section 13.05.                             Subcontracting. To the extent expressly permitted under Section 1.05, Provider may hire or engage one or more subcontractors to perform any or all of its obligations under this Agreement; provided, that (i) Provider shall use the same degree of care in selecting any subcontractors as it would if such subcontractor was being retained to provide similar services to Provider, (ii) the use of such subcontractor will not increase the Service Fees or Expenses payable by Recipient or result in a decrease in the level of service for Recipient in connection with such Services, and (iii) Provider shall, in all cases, remain responsible for ensuring that obligations with respect to the standards of services set forth under this Service Agreement are satisfied with respect to any Service provided by a subcontractor hired or engaged by Provider.

 

Section 13.06.                             No Third-Person Beneficiaries. Except for the indemnification provisions in Article VII, this Agreement is for the sole benefit of the Parties and their successors

 

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and assigns, and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Agreement.

 

Section 13.07.                             Severability. If any provision of this Agreement, or the application thereof to any Person or circumstance, is determined by a court of competent jurisdiction to be invalid, null and void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid, null and void or unenforceable, shall remain in full force and effect, and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any Party. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.

 

Section 13.08.                             Intentionally Left Blank.

 

Section 13.09.                             Counterparts. This Agreement may be executed in one or more counterparts, each of which, when so executed and delivered or transmitted by facsimile, e-mail or other electronic means, shall be deemed to be an original, and all of which taken together shall constitute but one and the same instrument. A facsimile or electronic signature is deemed an original signature for all purposes under this Agreement.

 

Section 13.10.                             Disclaimer of Representations and Warranties. EXCEPT FOR THE REPRESENTATIONS, WARRANTIES AND COVENANTS EXPRESSLY MADE IN THIS AGREEMENT OR IN ANY OF THE “TRANSACTION DOCUMENTS” (AS DEFINED IN THE MASTER TRANSACTION AGREEMENT, DATED AS OF OCTOBER 31, 2016, BY AND AMONG VORNADO REALTY TRUST, VORNADO REALTY L.P., JBG PROPERTIES INC., JBG/OPERATING PARTNERS, L.P., THE JBG PARTIES SET FORTH ON SCHEDULE A THEREOF, JBG SMITH PROPERTIES AND JBG SMITH PROPERTIES LP), NEITHER PARTY HAS MADE, NOR DOES EITHER PARTY HEREBY MAKE, ANY EXPRESS OR IMPLIED REPRESENTATIONS, WARRANTIES OR COVENANTS, STATUTORY OR OTHERWISE, OF ANY NATURE, INCLUDING WITH RESPECT TO THE WARRANTIES OF MERCHANTABILITY, QUALITY, QUANTITY, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. ALL OTHER REPRESENTATIONS, WARRANTIES, AND COVENANTS, EXPRESS OR IMPLIED, STATUTORY, COMMON LAW OR OTHERWISE, OF ANY NATURE, INCLUDING WITH RESPECT TO THE WARRANTIES OF MERCHANTABILITY, QUALITY, QUANTITY, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE ARE HEREBY DISCLAIMED BY EACH PARTY.

 

Section 13.11.                             Remedies. The rights and remedies provided herein shall be cumulative and not exclusive of any rights or remedies provided by law.

 

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Section 13.12.                             Force Majeure.

 

(a)                                 Neither Party (nor any Person acting on its behalf) shall have any liability or responsibility for failure to fulfill any obligation (other than a payment obligation) under this Agreement so long as, and to the extent to which, the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure (as defined in the Separation Agreement); provided that (i) such Party (or such Person) shall have exercised commercially reasonable efforts to minimize the effect of Force Majeure on its obligations, and (ii) the nature, quality and standard of care that Provider shall provide in delivering a Service after a Force Majeure shall again comply with Section 1.03. In the event of an occurrence of a Force Majeure, the Party whose performance is affected thereby shall give notice of suspension as soon as reasonably practicable to the other stating the date and extent of such suspension and the cause thereof, and such Party shall resume the performance of such obligations as soon as reasonably practicable after the removal of such cause.

 

(b)                                 During the period of a Force Majeure, Recipient shall be entitled to seek an alternative service provider with respect to such Service(s) (and shall be relieved of the obligation to pay Service Fees for such Service(s) throughout the duration of such Force Majeure) and shall be entitled to permanently terminate such Service(s) if a Force Majeure shall continue to exist for more than thirty (30) consecutive days, it being understood that Recipient shall provide advance notice of such termination to Provider.

 

Section 13.13.                             Specific Performance. Subject to the provisions of Article XII, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party or Parties who are or are to be thereby aggrieved shall have the right to seek specific performance and injunctive or other equitable relief (on an interim or permanent basis), in addition to any and all other rights and remedies at law or in equity. The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, may be inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by each of the Parties to this Agreement.

 

Section 13.14.                             Construction. Any uncertainty or ambiguity with respect to any provision of this Agreement shall not be construed for or against any party based on attribution of drafting by either Party. The headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. In this Agreement, unless the context requires or a clear contrary intention appears:

 

(a)                                 the singular number includes the plural number and vice versa;

 

(b)                                 reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

 

(c)                                  reference to any gender includes each other gender;

 

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(d)                                 reference to any agreement, document or instrument means such agreement, document or instrument, as amended, modified, supplemented or restated, and in effect from time to time in accordance with the terms thereof, subject to compliance with the requirements set forth herein;

 

(e)                                  reference to any applicable law means such applicable law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any applicable law means that provision of such applicable law, from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

 

(f)                                   “herein,” “hereby,” “hereunder,” “hereof,” “hereto” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular article, section or other provision hereof;

 

(g)                                  “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term;

 

(h)                                 with respect to the determination of any period of time, “from” means “from and including” and “to” means “to but excluding;” and

 

(i)                                     references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

 

Section 13.15.                             Waiver of Jury Trial. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER; AND (ii) ACKNOWLEDGES THAT IT AND THE OTHER PARTY TO THIS AGREEMENT HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER TRANSACTION AGREEMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 13.15.

 

Section 13.16.                             Entire Agreement. This Agreement and Schedule A hereto, as well as any other agreements and documents referred to herein (including the Separation Agreement, to the extent applicable), constitute the entire agreement between the Parties with respect to the subject matter hereof, and supersede all previous agreements, negotiations, discussions, understandings, writings, commitments and conversations between the Parties with respect to such subject matter. No agreements or understandings exist between the Parties other than those set forth or referred to herein.

 

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized officers or representatives as of the date first written above.

 

	
 
    	
VORNADO REALTY TRUST
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
JBG SMITH PROPERTIES
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

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Schedule A

 

Services

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